Smoljan (Bankruptcy Trustee of) v. Musiala, 2020 ONSC 778

COURT FILE NO.: CV-16-390

DATE: 2020-02-10

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

J.P. GRACI & ASSOCIATES LTD., in its capacity as the Bankruptcy Trustee of Jela Smoljan aka Helen Smoljan

• and -

RYSZARD MUSIALA and GRZEGORZ PIETRYKOWSKI

D. Touesnard, Counsel for the Plaintiff

S. Turgeon, Counsel for the Defendant Musiala

No one appearing for Grzegorz Pietrykowski, having been noted in default

HEARD: In writing

The Honourable Madam Justice Catrina D. Braid

COSTS ENDORSEMENT

I. OVERVIEW

1This is an action arising out of a trust agreement between Ryszard Musiala and Helen Smoljan regarding a residential property. Four years after they entered into the trust agreement, Smoljan was declared bankrupt. The Bankruptcy Trustee brought an action to secure Smoljan’s beneficial interest in the property on behalf of her creditors. During that litigation, Musiala brought a motion seeking an order requiring the Trustee to pay security for costs.

2For the reasons set out in Smoljan (Bankruptcy Trustee of) v. Musiala, 2019 ONSC 6776, 74 C.B.R. (6th) 78, I ordered the plaintiff to pay $25,000 in security for costs. The facts are set out in detail in that decision and will not be repeated here.

3For the reasons that follow, I award $15,000 in costs for the motion, all inclusive.

II. ANALYSIS

A. What Is the Appropriate Quantum of Costs to be Paid?

4The defendant, Musiala, was entirely successful on the motion and is entitled to costs. Musiala submits that he is entitled to partial indemnity costs in the amount of $16,605.88, inclusive of HST and disbursements.

5The plaintiff, the Bankruptcy Trustee, argues that the quantum of costs sought by the defendant is excessive.

6The Bankruptcy Trustee provided its own Bill of Costs on a partial indemnity scale totalling $4,409.12, all-inclusive. That Bill of Costs only included an all-inclusive number for preparation time and “estimated” lawyer’s fee for attendance at the motion, without any actual breakdown of the time or work done. It is difficult to compare the two Bills of Costs or to determine what the reasonable expectation of the Bankruptcy Trustee would have been regarding costs, without a proper breakdown of its expenses incurred on the motion.

7In determining quantum, the court is to consider the factors set out in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as well as s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. Those factors include the principle of indemnity, the reasonable expectations of the parties, the complexity of the proceeding, the importance of the proceeding, and the conduct of the parties in litigation. I have considered these factors.

8I have also considered the principles in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). The fixing of costs should reflect what the court views as a fair and reasonable amount to be paid, rather than any exact measure of the actual costs to the successful litigant.

9In support of the motion, the parties filed factums and books of authorities. The motion was heard over two days. The factual and legal issues were of moderate complexity. The issues were of high importance to the parties. The two most important factors are the principle of indemnity, and the amount of costs that the unsuccessful party could reasonably have expected to pay in the event he was unsuccessful.

10I have reviewed the detailed Bills of Costs, the written submissions of the parties and the case provided. I find that a fair and reasonable award of costs is $15,000, inclusive of HST and disbursements.

B. Should the Costs be Fixed but Payable After Trial?

11The Bankruptcy Trustee submits that payment of costs should be reserved pending the final disposition of the action. The Trustee states that payment of costs by the defendant on the summary judgment motion was deferred until after trial; and that deferring payment of costs on this motion would essentially put the plaintiff in a similar position with respect to costs of interim steps in the action.

12I decline to defer the payment of costs until the trial is complete. The following factors favour an order requiring payment of costs within a short period of time:

i. The court ordered security for costs, in part because the Bankruptcy Trustee is a nominal plaintiff who is not impecunious.

ii. The court considered the fairness of the Trustee’s conduct; and found that equity favours Musiala’s motion for security for costs.

iii. The court set the quantum of security for costs at a lower amount than defence counsel’s estimated trial costs. If the payment of costs on this motion is deferred until after trial, the costs of this motion would be more than half the security posted. That result would defeat the purpose of the security for costs order.

13In these circumstances, it would be counterintuitive to defer the payment of costs on this motion until the end of trial. I decline to do so.

C. Should the Costs be Paid Personally by the Bankruptcy Trustee?

14Musiala asks that the court order the costs to be paid personally by the Bankruptcy Trustee, in accordance with section 197(3) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. Section 197(3) states that, where an action is brought by a Bankruptcy Trustee, he is not personally liable for costs unless the court otherwise directs. Unfortunately, the Trustee has not addressed this issue in his responding submissions.

15Musiala relies on the case of Touche Ross Ltd. v. Weldwood of Canada Sales Ltd. (1984), 1984 CanLII 2103 (ON SC), 49 C.B.R. (N.S.) 284 (Ont. S.C.), to argue that the Bankruptcy Trustee should pay costs personally. In that case, the court held that there is discretion to order that costs be paid personally by the Bankruptcy Trustee, even when it appears that the litigation had merit.

16I decline to order that the Bankruptcy Trustee pay the costs personally. However, for the same reasons that the payment of costs should not be deferred until the end of trial, these costs must be paid before the plaintiff takes any further steps in this action.

III. CONCLUSION

17This court orders that the plaintiff shall pay costs to the defendant for the motion for security for costs in the amount of $15,000 inclusive of HST and disbursements. These costs are to be paid by March 11, 2020. These costs must be paid before the plaintiff takes any further steps in the action.

Braid, J.