CITATION: David Brook (Re), 2017 ONSC 4918

COMMERCIAL LIST COURT FILE NO.: CV-15-11006-00CL
BANKRUPTCY COURT FILE NO. 32-1774278

DATE: 20170908

SUPERIOR COURT OF JUSTICE – ONTARIO IN BANKRUPTCY

IN THE MATTER OF THE BANKRUPTCY OF DAVID BROOK, OF THE CITY OF MISSISSAUGA, IN THE REGIONAL MUNICIPALITY OF PEEL, IN THE PROVINCE OF ONTARIO

RE: GLOBAL ROYALTIES LIMITED AND BENCHMARK CONVERSION INTERNATIONAL LIMITED O/A BCI, Plaintiff

AND:

DAVID BROOK, ANNA BROOK, 2323593 ONTARIO INC., GEOFFREY BLACK aka GEOFF BLACK, GRIFFIN & HIGHBURY INC., DARIO BERIC aka DARIO BERIC – MASKAREL, DIKRAN KHATCHERIAN aka DIKO KHATCHERIAN aka DANNY MATAR, LESLIE FROHLINGER aka LES FROHLINGER, DIVERSITY WEALTH MANAGEMENT INC. and DIVERSITY WEALTH MANAGEMENT HOLDINGS INC. and BDO CANADA LIMITED IN ITS CAPACITY AS TRUSTEE OF THE ESTATE OF THE BANKRUPT DAVID BROOK, Defendants

AND BETWEEN:

DAVID BROOK, Plaintiff by Counterclaim

AND:

GLOBAL ROYALTIES LIMITED AND BENCHMARK CONVERSION INTERNATIONAL LIMITED O/A BCI, BRANDON HALL, CHRISTINE HALL and CASH INTERNATIONL INC.

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL: Harvey Stone, for the Moving Parties, Global Royalties Limited and Benchmark Conversion International Limited,

Jules Berman, for the Respondent, BDO Canada Limited.

Frank Bennett, for the Bankrupt, David Brook

HEARD: In Writing

COSTS ENDORSEMENT

[1] On this motion, Global Royalties Limited (“Global”), Benchmark Conversion International o/a BCI (“BCI”), Brandon Hall (“Brandon”), Christine Hall (“Christine”) and Cash International Inc. (“Cash”) (collectively, the “Moving Parties”) sought an order under section 37 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) setting aside certain assignments dated May 6, 2016 of certain causes of action to the bankrupt David Brook (“Brook”) by BDO Canada Limited, the trustee in bankruptcy of Brook (the “Trustee”), and directing a tender or auction process for the sale of such causes of action.

[2] The motion was dismissed on the basis that none of the Moving Parties is an “aggrieved” person for the purposes of section 37 of the BIA. Further, the Court found the decision of the Trustee to enter into the assignments was not procedurally unfair and was reasonable on the basis of the absence of a superior financial offer. Accordingly, the Court concluded that, even if the Moving Parties were aggrieved persons for the purposes of section 37 of the BIA, the Court would not exercise its discretion under that provision to grant the relief sought on this motion.

[3] Brook seeks costs of the motion in the amount of $17,944.40 including legal fees in the amount of $15,765 on a full indemnity basis. He says that he was a successful party.

[4] I am not, however, persuaded that Brook has any entitlement to costs in the circumstances of this motion. The proceeding involved a challenge to the action of the Trustee in entering into the assignments with Brook. The issue before the Court was, therefore, the validity of the Trustee’s action. The relief sought – being the invalidation of the assignments – was based on allegations directed toward the Trustee, being an alleged lack of authority or, alternatively, a lack of procedural or substantive fairness as a result of the Trustee’s actions. While Brook was entitled to participate if he so chose as the debtor and a party with an interest in the outcome, his involvement was not necessary and did not add anything to the argument of the Trustee. In particular, it was not “critical” for Brook to support the Trustee’s position that it had the power to sell Brook’s counterclaim back to him. Accordingly, Brook’s claim for costs is dismissed.

[5] The Trustee seeks costs in the amount of $20,323, including legal fees in the amount of $17,500 on a substantial indemnity basis. I note that the costs submission duplicates the time for the hearing of the motion and should be adjusted accordingly.

[6] As the successful party, the Trustee is entitled to its costs of the motion. I find that costs on a substantial indemnity basis are appropriate for two reasons. First, the Court held that none of the Moving Parties was an “aggrieved” person for the purposes of section 37 of the BIA. As such, none of the Moving Parties was entitled to bring the motion. Second, although the Moving Parties did not explicitly impugn the Trustee’s actions, their submissions engaged the integrity of the Trustee. In addition, in earlier communications between the parties, the Moving Parties also alleged a breach of the Trustee’s duty to the Court in respect of production of certain documents which the Moving Parties pursued without bringing a motion and which was not relevant to the principal issues on the motion. Third, there is no basis for effectively imposing any costs on Brook’s creditors in respect of a motion in which the Moving Parties were entirely unsuccessful.

[7] The Moving Parties suggest that costs should be awarded in the cause for the reason that the Trustee did not raise the issue of costs at the hearing. While it would have been preferable for the Trustee to have done so, the Moving Parties do not suggest that they were prejudiced in any way by the delayed request to make costs submissions. More significantly, there is no reasonable principle that would support such a conditional award in favour of a trustee in bankruptcy who is acting on behalf of the creditors of the bankrupt.

[8] With respect to the quantum of costs, the Moving Parties raised a number of issues of reasonable complexity. The motion also involved, as mentioned, a challenge to the probity of the Trustee’s actions that invited a robust response on the part of the Trustee. The rate charged by counsel for the Trustee is reasonable notwithstanding that it exceeds that charged by counsel for the Moving Parties. Further the number of hours spent by the Trustee was not unreasonable, given the issues on the motion. Most importantly, although the fees sought by the Moving Parties in their costs outline were less, I think they should reasonably have expected that costs would be in the range sought by the Trustee given the number and complexity of the issues raised by them.

[9] Accordingly, costs are awarded in favour of the Trustee in the amount of $18,500 payable forthwith.

Wilton-Siegel J.

Date: September 8, 2017