DATE: 20020930
DOCKET: C36726

COURT OF APPEAL FOR ONTARIO

RE: IN THE MATTER OF THE BANKRUPTCY OF GRAHAM DAVID BLYTH a.k.a. SAM BLYTH OF THE CITY OF TORONTO IN THE PROVINCE OF ONTARIO

BEFORE: MORDEN, BORINS and SIMMONS JJ.A.

COUNSEL: Anthony J. O’Brien for the bankrupt

Catherine Francis and Rachel Moses for Royal Bank

HEARD: September 25-26, 2002

RELEASED ORALLY: September 26, 2002

On appeal from an order of Justice Sidney N. Lederman dated July 18, 2001.

E N D O R S E M E N T

[1] [1] We are satisfied that there is ample evidence supporting the trial judge’s finding that the appellant had failed to pay debts in excess of $1000 due to the respondent and other creditors and that he had committed an act of bankruptcy within six months preceding the petition by ceasing to meet his liabilities generally as they became due. Further, there is ample support in the record (which includes evidence of the appellant’s inconsistent net worth statements which he created to suit his own purposes and of his general evasiveness and self-contradiction as to his assets) for the trial judge’s finding that the appellant was not able to meet his obligations. The appeal, accordingly, is dismissed.

[2] [2] With respect to the cross-appeal against the costs order (which provided that the respondent receive no costs and that it pay to the appellant his costs relating to a part of the trial) we are obliged to conclude that the learned judge, who decided the question without having heard submissions from counsel, exceeded the proper bounds of his discretion. According to s. 45(1) of the Bankruptcy and Insolvency Act the respondent was presumptively entitled to costs subject to the court ordering otherwise.

[1] [3] The trial judge based the exercise of his discretion on one aspect of the conduct of the respondent relating to the authenticity of a promissory note. The note was not necessary for the proof of the petition. He did not take into account any aspect of the appellant’s conduct, which included evasiveness, a failure to obey orders requiring disclosure, and the undue prolongation of the hearing. Further, he did not take into account that the respondent was acting on behalf of other creditors in addition to itself. For these reasons, we are obliged to conclude that the exercise of the discretion in such an extreme manner was unreasonable.

[2] [4] In our view, the bank’s conduct can properly be taken into account but only to reduce the presumptive entitlement of the respondent to costs by the amount of 10%.

[3] [5] Accordingly, leave to appeal the costs order is granted, the cross-appeal is allowed, paragraphs 4 and 5 in the receiving order are set aside, and in their place an order is made providing that the respondent receive full indemnity for 90% of its costs payable out of the estate to be taxed by the registrar as provided in s. 45(1) in the Bankruptcy and Insolvency Act.

[4] [6] The costs referred to in Catzman J.A.’s order of June 26, 2002 are further reserved to the court determining the entitlement to the proceeds of the sale of the Hazelton property.

[5] [7] The respondent is entitled to the costs of the appeal and of the cross-appeal to be taxed by the registrar under s. 45(1) of the Bankruptcy and Insolvency Act.

“J.W. Morden J.A.”

“S. Borins J.A.”

“Janet Simmons J.A.”