Riddell v. Lenssen, 2015 ONSC 7953
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jonathan Riddell, Applicant
AND
Michelle Lenssen, Respondent
BEFORE: Mr. Justice Pierre E. Roger
COUNSEL: Theresa Van Luven, Counsel for the Applicant
Karinda L. Dockrill Counsel, for the Respondent
HEARD: December 2, 2015 at Belleville
ENDORSEMENT
1The motion is over a previous costs award and, particularly, whether it survived the bankruptcy of the applicant.
2The parties have three children (residing with the respondent mother). They went through a six‑day trial in 2009. The trial decision was rendered July 17, 2009. On March 10, 2010, Justice Pedlar made an order that the respondent be entitled to her costs to be fixed on a partial indemnity basis. The parties could not agree on the amount of costs and costs were ultimately fixed by Justice Pedlar in the amount of $25,280. Both parties agree that his costs order is dated March 10, 2010 (it was signed May 3, 2012). It provides for costs of “$25,280 such costs being attributable to the maintenance to the question of support or maintenance which survive the Applicant/Father’s bankruptcy and are not discharged by it pursuant to s. 178(1)(b)(c) of the Bankruptcy Act”.
3Both parties agree that the order of Justice Pedlar was a claim provable in bankruptcy under s. 121(4) of the Bankruptcy and Insolvency Act. That is not in dispute. What is in dispute is what is the effect or impact on s. 178 that this was a claim provable in bankruptcy for which the creditor (the respondent) did not file a proof of claim as provided by s. 124(1)?
4The applicant is a medical specialist and his employment was apparently terminated shortly after trial. He made an assignment in bankruptcy on July 7, 2010. I have not been provided with a copy of his assignment in bankruptcy or with a copy of his statement of affairs. Similarly, I have not been provided with a copy of the notice of bankruptcy that would have been sent out to creditors by the trustee. However, it is agreed that the debt created by the order was disclosed to the trustee and it is agreed that the respondent did not file a proof of claims for that debt. The issue is whether it matters or whether this impacts the debt not otherwise being released under s. 178(1)(c) of the Act?
5The applicant argues that if she had filed a proof of claims, she would have shared in the bankruptcy as did the FRO. He believes she could have received about $14,000 in the bankruptcy as such amounts were paid to other creditors. Post‑bankruptcy, the applicant paid to the respondent $11,500 towards the balance of costs and he, therefore, argues that nothing would now be owing if she had filed a proof of claim and that this is unfair.
6The respondent indicates that the applicant placed $25,000 in trust with his lawyer, as part of the negotiations that were supposed to occur. The respondent wrote a number of letters in 2012 and 2013 seeking to deal with the payment of these costs. She advises that the applicant never took the position he is taking now (that the costs be dealt with in the bankruptcy) which, she says, is why he placed the $25,000 in trust with his lawyer. She says that he never took this position until after he was discharged from bankruptcy (at which time, she notes, it was too late for her to put in a claim).
7The applicant argues that as a result of ss. 121 and 124 of the Act, the costs award was a claim provable in bankruptcy, that she should have filed a proof of claims and that a creditor who does not prove his or her claim is not entitled to share in any distribution to be made in the bankruptcy. He argues that by failing to realize upon the funds available in the bankruptcy, it operated or resulted in a waiver of her entitlement to those funds. He also argues s. 178(f) and relies upon Re Wright, 1926 350 (ON SC), 1926 3 DLR 333 and Re Jones, 2012 BCSC 1146. As indicated, the respondent agrees that it was a claim provable in bankruptcy and agrees that she could have filed a proof of claims. She did not.
8I have been provided with no case or law that supports the position of the applicant. Section 178 is clear. No provision is made therein or in the Act for what is argued by the applicant. Consequently the relief sought is granted.
9The applicant’s position confuses claims provable in bankruptcy and debts not released by an order of discharge, under s. 178(1) of the Act. A proof of claims, by its implication, is an important document. It provides for the distribution of the estate of a bankrupt to qualified creditors and it also operates a system through which the bankrupt may obtain a discharge from his liabilities. It is a fundamental principle of bankruptcy that following his or her discharge, the bankrupt is freed from the burden of his or her debts except for those limitations set out in s. 178 (Debts not released by order of discharge). Since amendments in 1997 (see: Bankruptcy in Canada, fourth edition, Canada Law Book, at pp. 389 and 397), support claimants have a claim not released on discharge (s. 178) and, in addition, have the right to prove a claim for support (see : s. 121(4)).
10None of the cases referred to by the applicant dealt with s. 178. Re Wright did not deal with debts that survived the bankruptcy. Similarly, Re Jones did not deal with debts that survived the bankruptcy under s. 178. The findings in those cases are not applicable to s. 178.
11Section 178 is quite clear. It provides that an order of discharge does not release the bankrupt from what is provided at (a) to (h). Paragraphs (b) and (c) are clearly applicable. Nothing in section 178 supports the arguments of the applicant that a section 178 debt is released or waived if such a creditor does not file a proof of claims. Paragraph 178(2) only reinforces my interpretation. The order at issue is both a claim provable in bankruptcy and, in addition, is not released by the discharge (see: Bankruptcy in Canada, p. 389 and Sait v. Thorne, 2006 44280).
12The fact that the respondent did not file a proof of claims resulted, pursuant to ss. 121(4) and 124(1) in the respondent not being entitled to share in any distribution made in the bankruptcy. I have been provided with no authority that this would also impact s. 178 debts and prevent the respondent from pursuing this debt post‑bankruptcy. There is no such provision in the Act. Further, such an argument runs contrary to the purpose of s. 178 which is to ensure that such debts are not released by the bankruptcy. You would expect clear language to do away with this protection if a creditor did not file a proof of claim. Arguing s. 178(f) does not assist the applicant as that paragraph is meant to protect creditors who are not aware of the bankruptcy in circumstances where the liability for the dividend that a creditor would have been entitled to was not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his or her claim – it is meant to address non‑disclosure by the bankrupt.
13Consequently:
The costs order of Justice Pedlar dated March 10, 2010 is not released by the discharge of the bankrupt, the applicant in this matter.
This matter shall now proceed with the second motion, as outlined in the consent of the parties dated October 22, 2015 (the order of Kershman J. dated Oct. 22).
Costs of this motion are payable to the respondent by the applicant within the next 30 days in the all‑inclusive amount of $1,500.
14On the issue of costs, the respondent was successful and I see no reason to depart from the ordinary practice that costs of a motion be payable forthwith. The amounts sought of $1,500 are reasonable and certainly within the reasonable expectations of the Applicant. My assessment of reasonable partial indemnity costs for this motion is for that same amount.
Mr. Justice Pierre E. Roger
Date: December 2, 2015
CITATION: Riddell v. Lenssen, 2015 ONSC 7953
COURT FILE NO.: FS-06-1718-00
DATE: 2015/12/02
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Jonathan Riddell, Applicant
AND
Michelle Lenssen, Respondent
BEFORE: Mr. Justice Pierre E. Roger
COUNSEL: Theresa Van Luven, Counsel for the Applicant
Karinda L. Dockrill Counsel, for the Respondent
ENDORSEMENT
Roger J.
Released: December 2, 2015