A creditor commenced a bankruptcy application alleging fraud but sought a stay pending the respondent’s criminal trial and ultimately withdrew the application when evidence of fraud was unavailable.
The court was asked to determine the appropriate costs consequences of the withdrawal.
Although the respondent sought substantial indemnity costs exceeding $50,000, the court held that such an award was not justified.
The court considered the applicant’s impecuniosity, the respondent’s alleged involvement in a Ponzi scheme that led to the applicant’s losses, and the policy considerations of the Bankruptcy and Insolvency Act.
Balancing these factors, the court concluded that a modest sanction was appropriate because the applicant should have given earlier notice of withdrawal to avoid wasted trial preparation.
