Court File and Parties

COURT FILE NO.: 31-2675583

DATE: 20221118

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: IN THE MATTER OF THE PROPOSAL TO CREDITORS OF CONFORTI HOLDINGS LIMITED, A CORPORATION INCORPORATED UNDER THE ONTARIO BUSINESS CORPORATIONS ACT, R.S.O. 1990, C. B.16

BEFORE: Justice Cavanagh

COUNSEL: R. Brendan Bissell, for Crowe Soberman Inc. in its capacity as trustee to the proposal to creditors proceeding of Conforti Holdings Ltd.

Bobby Sachdeva and Erin Craddock, for Conforti Holdings Limited

Clifton P. Prophet and Thomas Gertner, for Moroccanoil, Inc.

HEARD: By written submissions

Costs Endorsement

[1] Crowe Soberman Inc., in its capacity as proposal trustee (the “Proposal Trustee”) to the proposal to creditors of Conforti holdings Limited (“CHL”), brought a motion for approval of the proposal made by CHL. The motion was opposed by Morrocanoil, Inc. (“Morrocanoil”).

[2] The Proposal Trustee was successful in the motion. The Proposal Trustee seeks costs of the motion from Morrocanoil on a partial indemnity scale in the amount of $20,000. The amount claimed by the Proposal Trustee is less than the amount in its Costs Outline for the motion ($24,544.73) to account for the fact that some work for a motion for proposal approval would have been required whether or not Morrocanoil opposed the motion. CHL supported the motion and seeks costs of the motion on a partial indemnity scale in the amount of $20,226.44.

[3] The Proposal Trustee submits that the costs claimed on this motion are proportional and reasonable. The Proposal Trustee submits that the motion had an above average level of legal complexity. The Proposal Trustee submits that the issues on the motion were of paramount importance in CHL’s restructuring proceedings and that the degree of effort involved in this case was much greater due to the singular opposition by Morrocanoil.

[4] CHL submits that the motion was of moderate complexity but required extensive research given that the BIA provisions upon which Morrocanoil relied have not received a great deal of judicial consideration.

[5] Morrocanoil submits that no costs should be awarded against it (as a creditor in an insolvency proceeding) on policy grounds including that creditors in insolvency proceedings (a) are involuntary parties compelled to participate by reason of a debtor seeking protection under insolvency legislation; and (b) face the likelihood of not recovering in full on amounts validly owed to them by the debtor. Morrocanoil submits that these policy reasons exist in this case and are compounded by the claims of both the Proposal Trustee and CHL for costs in circumstances where the Proposal Trustee’s costs are indemnified by CHL.

[6] In addition, Morrocanoil submits that because there was a finding that section 173 facts existed, the success of the Proposal Trustee and CHL was mixed and that this further justifies no costs being awarded in the circumstances. Morrocanoil submits that many of the costs associated with the approval motion would have been incurred regardless of Morrocanoil’s opposition because the Proposal Trustee was required to bring the motion under section 58 of the BIA whether or not Morrocanoil opposed the amended proposal. Morrocanoil submits that it would be inequitable for it to be liable for costs on this motion given the Court’s finding that CHL knowingly excluded Morrocanoil from CHL’s initial creditor list in breach of its obligations under the BIA.

[7] Morrocanoil was the only creditor of CHL to oppose the motion for approval of the proposal. In the circumstances of this motion, I am not satisfied that Morrocanoil should be relieved on policy grounds from paying costs after it unsuccessfully opposed the motion for approval of CHL’s proposal. I do not agree that the result of the motion was mixed. CHL was successful in obtaining court approval for the proposal. I do not agree that the fact that a finding was made that section 173 facts existed justifies denial of costs to CHL and the Proposal Trustee. Both CHL and the Proposal Trustee were entitled to file materials and make submissions on this motion. Their submissions were complementary and not duplicative.

[8] I accept that the motion would have been required whether or not Morrocanoil opposed. The Proposal Trustee has taken this fact into account and reduced its claim for costs accordingly.

[9] I am satisfied that the claims for costs by the Proposal Trustee and by CHL are for amounts that are reasonable and proportionate having regard to the factors in rule 57.01.

[10] I fix cost to be paid by Morrocanoil to the Proposal Trustee in the amount of $20,000. I fix cost to be paid by Morrocanoil to CHL in the amount of $20,226.44.

Cavanagh J.

Date: November 18, 2022