Court File and Parties
COURT FILE NO.: BK-18-02436472-0031 DATE: 2019/03/25 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF ACCOUNTABLE SOLUTIONS ACCOUNTING PROFESSIONAL CORPORATION OF THE TOWNSHIP OF NEWMARKET IN THE PROVINCE OF ONTARIO
BEFORE: Master Alexandre Kaufman Registrar in Bankruptcy
HEARD: March 15, 2019
APPEARANCES: Randy Schliemann, counsel for the Bank of Montreal Bryan Gelman, Trustee for Albert Gelman Inc. Tim Long Chang, representing himself;
COSTS ENDORSEMENT
1Mr. Chang is angry about these bankruptcy proceedings. He borrowed money from the Bank of Montreal in order to purchase the bankrupt corporation, Accountable Solutions Accounting Professional Corporation (“ASAPC”). Shortly after acquiring ASAPC, he alleged that the vendor, Ms. Rader, took ASAPC’s clients with her, causing it to lose money. He commenced an action against Ms. Rader and her corporation, but that action was eventually dismissed with costs on August 10, 2018.
2Mr. Chang believes that he could have averted his personal bankruptcy by selling ASAPC, but that he lost a ready buyer when the Bank of Montreal applied for a bankruptcy order against ASAPC. His refusal to cooperate in the bankruptcy proceedings, and his compelled examination pursuant to s. 163 of the Bankruptcy and Insolvency Act (“BIA”) give rise to this endorsement on costs.
Background
3On September 6, 2018, the Bank of Montreal initiated ASAPC’s bankruptcy by filing an application for a Bankruptcy Order. The Order was granted on October 23, 2018, which appointed Albert Gelman Inc. (“AGI”) as trustee of the bankrupt. Chang is ASAPC’s sole officer and director.
4AGI first contacted Mr. Chang on October 24, 2018. On October 25, 2018, it requested ASAPC’s Statement of Affairs. AGI provided Mr. Chang with blank forms as well as a document listing a bankrupt’s duties. It requested a host of financial documents relating to ASAPC.
5On October 31, 2018, the trustee sent Mr. Chang a copy of the Notice of Bankruptcy and First Meeting of Creditors, along with Form 68, the Notice of the First Meeting of the Creditors. The meeting was scheduled for November 22, 2018. Mr. Chang responded on the same day that he had no money to travel to Newmarket, but that he would attend if the meeting was near Braeside, Ontario.
6On November 7, 2018 the trustee provided Mr. Chang instructions to attend the meeting by video or teleconference. He followed up on November 17, 2018 with a request for documents.
7The first meeting of the creditors was held on November 22, 2018. Mr. Chang was not in attendance. In its report to the creditors, the trustee noted that Mr. Chang failed to provide information regarding ASAPC’s assets, books and records and a sworn Statement of Affairs.
8On December 10, 2018, the trustee advised Mr. Chang that, in light of his failure to provide the required information, AGI would be making an application to a judge to compel his attendance at an examination under oath.
9On December 13, 2018, Mr. Chang sent the trustee a letter which he addressed to the Court. He advised that he did not have funds to travel to Toronto or Newmarket, and that he was suffering from depression. He re-iterated that he was prepared to attend an examination at a location close to his home.
10On December 16, 2018, Mr. Chang wrote another letter advising that Legal Aid would not be providing him with a lawyer, and that he would not answer any questions unless he had a lawyer.
11On January 24, 2019, AGI informed Mr. Chang that it was scheduling a motion for contempt or, in the alternative, for an order compelling him to carry out his duties as an officer of the bankrupt. On the same day, Mr. Chang wrote another letter to the Court (delivered to the trustee) advising that he was prepared to accept an order to attend an examination in Ottawa and to carry out his duties. However, his consent to the order was conditional on the Court appointing a lawyer to represent him.
12On January 31, 2019, counsel for AGI advised Mr. Chang that a one hour motion had been scheduled on February 28, 2019 before Justice Hainey. He also advised that the trustee would not be moving for contempt at this time, that the trustee would seek an order to have him examined before a court official to ensure fairness to the parties, and that the Bank of Montreal would pay Mr. Chang’s return airfare to Toronto as well as taxis to and from the airport.
13On February 1, 2019, Mr. Chang replied that he was prepared to be examined in Ottawa on any day in March with the examination to be conducted in the presence of a judge.
14On February 28, 2019, Justice Hainey ordered Mr. Chang to deliver the books and records of the bankrupt, to swear a Statement of Affairs and to attend an examination to be held before a judge of the Commercial List in Toronto on April 2, 2019. In his written endorsement, Justice Hainey noted that counsel for the trustee had obtained a date for Mr. Chang’s examination in Ottawa on March 15, 2019 but that Mr. Chang had not confirmed his availability on that date. As a result, Justice Hainey wrote that he ordered the examination to be held in Toronto, but that he would amend his Order if Mr. Chang confirmed before March 5, 2019 that he would attend in Ottawa on March 15, 2019.
15Mr. Chang confirmed before the deadline. Justice Hainey amended his Order to require Mr. Chang to attend before a judge or registrar in bankruptcy in Ottawa on March 15, 2019. Justice Hainey ordered that costs be determined by the judge or registrar in bankruptcy hearing the matter on March 15, 2019.
16Mr. Chang appeared on March 15, 2019 and was examined by counsel for three and a half hours.
Decision
17Having regard to the factors listed in Rule 57.01 of the Rules of Civil Procedure, I consider that the trustee should be entitled to costs. I am of the view that the motion and the examination were necessary. Mr. Chang had a legal obligation to comply with his duties as an officer of the bankrupt and the trustee had every right to obtain the bankrupt’s book and records and Statement of Affairs. Despite several requests for ASAPC’s assets, books and records, Mr. Chang refused to provide them. He alleges that his computer hard drive was destroyed as a result of a computer virus.
18I find that Mr. Chang failed to comply because he blamed the trustee for his bankruptcy. After the first creditors meeting, and noting that Mr. Chang was absent and failed to provide the required documents and sworn Statement of Affairs, the trustee did the only thing it could to secure Mr. Chang’s compliance with his obligations.
19The trustee handed me two costs outlines after Mr. Chang’s examination. The first one is signed on February 28, 2019 and relates to the motion before Justice Hainey. The second one is dated March 14, 2019 and relates to Mr. Chang’s examination of March 15, 2019 in Ottawa.
20The first costs outline totals $10,249 on a partial indemnity basis. I fix costs at $5,500 because:
a. Of the $10,249 amount, $1,500 represents the estimated counsel fee for appearing before Justice Hainey. This would have been a short appearance without Mr. Chang’s attendance. I cannot imagine that it would have lasted 4 hours; b. I am also discounting some of the hours spent preparing for the argument before Justice Hainey in view of the fact that the motion was not complex; c. Finally, I am of the view that $5,500 accords with Mr. Chang’s expectation of what he could reasonably be expected to pay, and the principle of proportionality.
21The second costs outline is for $11,140.46, also on a partial indemnity scale. I reduce this amount to $5,500 because of the hours spent, 19 hours relate to an examination of Melany Rader (the person who sold the bankrupt corporation to Mr. Chang). I do not believe that Mr. Chang should be responsible for the costs relating to this separate examination.
22Costs are awarded to the trustee, payable by Mr. Chang, in the amount of $11,000 inclusive of disbursements and HST. It bears interest at the rate of 5% per annum.
Master Alexandre Kaufman, Registrar in Bankruptcy
Date: March 25, 2019