Court File and Parties

Court File No.: BK-23-2922356-33 Date: 2024 09 12 Superior Court of Justice In Bankruptcy and Insolvency

Re: IN THE MATTER OF THE PROPOSAL OF NORTH HOUSE FOODS LTD. OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO

Before: C. MacLeod, Regional Senior Justice

Counsel: David Debenham, for Seabrook Bros. Mechanical Ltd. (Moving Party) John Siwiec, for North House Foods Ltd. (Debtor) Patrick Shea, for Doyle Salewski Inc. (Proposal Trustee)

Heard: Submissions made in writing

Costs Award

Introduction

[1] This is my ruling on costs in relation to the Application heard on June 14, 20024 (See 2024 ONSC 3567). Costs submissions were made in writing.

[2] The Application was pursuant to s. 50.1 (4) of the Bankruptcy Insolvency Act (“BIA”) and dealt with valuation of the security of a sub-trade lien claimant over leasehold interest. The proposal trustee had valued the security at $0 and the Applicant (Seabrook) sought to challenge that. The Applicant was unsuccessful and the Application was dismissed.

[3] Although the valuation that was under appeal was the value attributed to the security by the proposal trustee, the principal burden of resisting the application was that of the debtor (North House Foods). The proposal trustee was a necessary party and played an important role in the Application. The proposal trustee seeks nominal costs of $5,000 for its participation because it argues that the unsecured creditors should not bear the burden of contesting this matter. I agree and I consider the request for costs to be entirely reasonable. The Applicant shall pay costs to the Proposal Trustee fixed at $5,000.

[4] North House was ostensibly the successful party in resisting the application. It seeks partial indemnity costs of $23,413.72 (inclusive of disbursements and HST).

[5] The Applicant resists this amount for a number of reasons. Firstly, the responding party did not deliver a Costs Outline (57B) in advance of the hearing as required by Rule 57.01 (6). As Mr. Debenham points out, this requirement is intended to exert a certain moderating discipline on requests for costs because parties are expected to exchange the amount they will be requesting before they know which party has been successful. He refers to various cases in which costs have been denied for failure to comply with the Rule. Seabrook on the other hand did comply. Its own 57B reveals that it would have requested $12,231.12 on a partial indemnity scale had it been successful and discloses that full indemnity would have been $20,385.20. It is submitted that the Court should treat the delivery of Form 57B, in advance, as a condition precedent to awarding costs.

[6] Secondly, the Applicant relies on 39.02 (4) (b) for the proposition that the costs of cross-examining on the Applicant’s affidavits should be an offsetting amount. Finally, the Applicant submits that the costs sought by North House are disproportionate and again relies on Seabrook’s own Form 57B.

[7] Briefly, I agree that in an appropriate case, the failure of a party to serve a 57B in advance may be justification for the Court to exercise its discretion to deny costs. At the very least, a 57B delivered after the decision has been rendered should be regarded with scepticism. This is not however an inflexible rule. I however mindful of the fact that North House is the debtor and Seabrook is the unpaid sub contractor attempting to enforce its lien rights. The Applicant would find it harsh if the court makes a significant costs award in those circumstances.

[8] Rule 39.02 (4) (b) applies only to Motions (other than summary judgment or contempt) and not to Applications. It is intended to discourage unnecessary cross-examinations. In this case, however, even if the Rule applied, the cross-examination of the experts was important.

[9] On the question of proportionality and having regard to the late delivery of the 57B, I am in agreement that the costs claimed by the Respondent, North House are high in contrast to those incurred by the Applicant. In addition, it was largely the evidence and argument of the Proposal Trustee which the Court found persuasive.

[10] In consideration of these factors, I fix the costs payable to North House at $8,000 on a partial indemnity scale.

[11] In conclusion, the Applicant shall pay costs to the Proposal Trustee fixed at $5,000 and costs to North House fixed at $8,000.

Justice C. MacLeod Date: September 11, 2024