COURT FILE NO.: 32-1419159

DATE: 20120103

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

BETWEEN:

In the Matter of the Bankruptcy of Euro Moulds Inc.

Alex Ilchenko, for the Trustee in Bankruptcy, Schwartz Levitsky Feldman Inc.

P. Callahan, for the Claimant, Dezinecorp Inc.

G. McHale and Jacob van Halteren, representatives of the Claimant, Maple Creek Manufacturing & Marketing Inc.

HEARD: June 20, September 19 and October 27, 2011; subsequent written cost submissions.

D. M. Brown J.

I. Costs of trial of issues under section 81 of the Bankruptcy and Insolvency Act

[1] Following an application and trial of issues spread over four hearing days, but consuming less than two days hearing time, by Reasons for Judgment dated December 5, 2011:

(i) I found that the Disputed Moulds were the property of Dezinecorp and I granted the declaration sought by Dezinecorp to that effect. I dismissed Maple Creek’s motion for a declaration that it owned the Disputed Moulds;

(ii) I granted, in part, Maple Creek’s motion with respect to the Two Machines, and declared that it was entitled to the proceeds from the sale of the NPM Machine; and,

(iii) I approved the conduct and activities of the Trustee as set forth in the affidavits filed by James Graham on behalf of the Trustee.[^1]

[2] The parties have filed written cost submissions.

II. Positions of the parties on costs

A. Claim by DezineCorp for costs

[3] DezineCorp Inc. seeks substantial indemnity costs of $37,840.72 from Maple Creek Manufacturing and Marketing Inc. arguing that (i) it succeeded fully on its claim to the Disputed Moulds and (ii) the Court expressed reservations about the testimony of Mr. van Halteren, the principal of Maple Creek. DezineCorp filed detailed dockets of its counsel’s work in support of its claim for costs.

[4] In response to DezineCorp’s claim, Maple Creek argued that:

(i) Costs incurred by DezineCorp for the period prior to the Trustee denying its ownership claim ($3,983.00) were part of the ordinary process of claiming property from a Trustee and should not be allowed as against Maple Creek;

(ii) The delay of the original June 20 trial date was caused by the Trustee’s failure to identify which moulds it actually possessed, not through any conduct of Maple Creek;

(iii) DezineCorp had failed to indentify properly which Disputed Moulds it owned;

(iv) DezineCorp did not comply with the directions regarding the conduct of the trial;

(v) DezineCorp unduly prolonged the proceeding by engaging in a line of questioning designed to show that Mr. van Halteren broke into the Bankrupt’s premises and removed some moulds;

(vi) All costs incurred by DezineCorp after June 20 should be disallowed;

(vii) DezineCorp improperly sought to recover costs in this proceeding relating to time it spent pursuing a civil claim against the Trustee;

(viii) All the costs of the proceeding resulted from the Trustee’s decision to seek directions from the court instead of simply granting DezineCorp’s claim, leaving it to Maple Creek to elect whether to take the matter to court.

(ix) The only proper costs claimable by DezineCorp are $14,681, of which Maple Creek should only be responsible for 25%, or $3,670.25.

B. Claim by Maple Creek for costs

[5] Maple Creek sought to recover fully indemnity costs in the amount of $35,008.86 from the Trustee arguing that it had succeeded with respect to one part of its claim in respect of the Two Machines and that much of the length of the trial was due to the conduct of the Trustee in failing to identify which moulds were in its possession until ordered to do so by the Court and in raising a late objection to Maple Creek’s claim to ownership for the Two Machines. Part of the costs claimed involve amounts invoiced by Maple Creek’s counsel, Lawrence Fine, for the period October 27, 2010 through March 21, 2011 ($8,474.20), and thereafter the sum of $23,240.00 representing 116.20 hours of time spent by two principals of Maple Creek, Messrs. Van Halteren and McHale, employing a notional hourly rate of $200.00. Maple Creek was not represented by counsel on the trial date attendances before me.

[6] The Trustee submitted that Maple Creek’s claim for costs should be denied arguing that, at best, Maple Creek had mixed success in respect of its claim for the Two Machines, succeeding only in obtaining the $5,000 in auction proceeds for the NPM Machine. The Trustee contended that it properly invoked the mechanism of seeking directions from the Court in order to resolve the claim of Maple Creek regarding the Two Machines in the face of the position taken by the CRA that it enjoyed priority to the proceeds of the auction of the Bankrupt’s assets.

III. Analysis

A. General principles

[7] In considering the two claims for costs, I have taken into account the factors enumerated under Rule 57 of the Ontario Rules of Civil Procedure[^2], including the time spent, the result achieved, and the complexity of the matter, as well as the application of the principle of proportionality: Rule 1.04(1). In addition, I have considered the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.) and Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

B. Claim for costs by DezineCorp

[8] DezineCorp succeeded fully on the trial of an issue regarding the ownership of the Disputed Moulds and is entitled to some costs as against the competing claimant, Maple Creek. I see nothing in the litigation conduct of Maple Creek which would merit sanction by the imposition of an award of elevated costs; partial indemnity costs is the appropriate scale.

[9] I find that DezineCorp is entitled to an award of partial indemnity costs against Maple Creek.

[10] In terms of the objections made by Maple Creek to some of the costs claimed by DezineCorp, I reject its overarching argument that the costs of the proceeding actually were caused by the Trustee’s conduct and the Trustee should bear most of the costs. The Trustee was faced with competing claims to property in the possession of the Bankrupt. The Trustee properly sought directions from the court. The proceeding was caused by the competing claims asserted by Maple Creek and DezineCorp, not any improper conduct by the Trustee.

[11] With one exception, which I state below, I accept Maple Creek’s submission that the costs recoverable in this proceeding relate to work incurred after the Trustee disallowed both claimants’ claims and sought the Court’s direction on the dispute.

[12] I reject Maple Creeks’ submission that the delay in proceeding on June 20 was the fault of the Trustee alone. All parties were to blame for that delay since all parties somehow thought that they could appear in court without evidence showing which moulds in fact were in the possession of the Trustee. I still remain baffled by that collective decision.

[13] I also reject Maple Creek’s submission that DezineCorp and the Trustee failed to comply with the directions of the court regarding the conduct of the trial of issues. All parties benefited from my flexibility in administering the prescribed time limits on examinations so that a fair hearing could be held.

[14] I accept Maple Creek’s submission that DezineCorp cannot claim in this proceeding costs it may have incurred in initiating a separate action against the Trustee.

[15] I have reviewed the Costs Outline of DezineCorp. This trial could have been conducted in a day. The proceeding originated as a motion for directions using some of the affidavits previously filed by the claimants. Further affidavits were filed and used at trial as part of the evidence in chief; DezineCorp is entitled to recover some costs of work on those affidavits (even though one of the affidavits was filed as part of its initial claim to the Trustee). Accordingly, I allow DezineCorp a counsel fee of $3,000 for one day of trial time, 20 hours time for the preparation of the evidence used at trial and 20 hours time for the review of materials filed by Maple Creek and the preparation of the cross-examination of Maple Creek’s witness and the representative of the Trustee. I consider the $300/hour rate used for Mr. Callahan (a 1993 call) to be reasonable. That results in an award of costs for legal fees totaling $15,000.00 ($3,000 counsel fee + $6,000 preparation of evidence + $6,000 preparation of cross-examination, etc.).

[16] DezineCorp seeks $983.36 in disbursements. I have reviewed the list of disbursements and consider them to be reasonable.

[17] Consequently, I conclude that DezineCorp is entitled to an award of partial indemnity costs of $15,983.36, inclusive of disbursements and H.S.T., and I order Maple Creek to pay DezineCorp that amount within 30 days of the date of this order.

C. Claim for costs by Maple Creek

[18] In my view Maple Creek is not entitled to any award of costs in respect of the Two Machines issue. Although it succeeded at trial in respect of the proceeds of sale for one of the machines, in paragraphs 40 through 48 of my Reasons I set forth the contradictory and incomplete positions taken by Maple Creek about the Two Machines prior to their auction. In the face of such conduct by Maple Creek the Trustee quite properly sought this Court’s directions on the issue once Maple Creek made it clear that it was pursuing its claim to the Two Machines.

[19] Simply put, it was open to Maple Creek to provide the Trustee with clear evidence of its ownership of the NPM Machine prior to the auction, which it failed to do. Maple Creek can only look to itself as the cause of the subsequent proceeding to establish the ownership of the auction proceeds for the Two Machines.

IV. Summary

[20] By way of summary, I order Maple Creek to pay DezineCorp costs fixed at $15,983.36 within 30 days of the date of this order. I deny Maple Creek’s claim for costs.

D. M. Brown J.

Released: January 3, 2012

COURT FILE NO.: 32-1419159

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

In the Matter of the Bankruptcy of Euro Moulds Inc.

SUPPLEMENTARY REASONS FOR JUDGMENT - COSTS

D. M. Brown J.

Released: January 3, 2012

[^1]: 2011 ONSC 7202

[^2]: As per section 3 of the Bankruptcy and Insolvency General Rules.```