Re 1896841, 2026 ONSC 3931

Re 1896841, 2026 ONSC 3931

CITATION: Re 1896841, 2026 ONSC 3931

COURT FILE NO.: 31-3150277

DATE: July 6, 2026

ONTARIO SUPERIOR COURT OF JUSTICE

IN BANKRUPTCY AND INSOLVENCY

IN THE MATTER OF THE AMENDED PROPOSAL OF

1896841 ONTARIO LIMITED

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

COUNSEL: Cameron Wetmore (“Wetmore”) and Rajiv Joshi (“Joshi”) for the Debtor 1896841 Ontario Limited (the “Debtor”)

Michael Citak (“Citak”) for Creditor Gardiner Roberts LLP (“GR”);

Jonathan Rosenstein (“Rosenstein”) for RosensteinLaw Professional

Corporation (“RLPC”)

Philip Gennis, LIT (“Gennis”) for MSI Spergel Inc., the Proposal Trustee of the Debtor for its Approved Division 1 Bankruptcy Proposal (the “Trustee”)- Trustee not opposing the relief sought by the Debtor

HEARD: Argument for Expungement of GR Proof Claim heard on January 15, 2026, and Argument for Expungement of RLPC Claim heard on January 29, 2026, each by Zoom Videoconference for a full day. Further written submissions to be provided by March 18, 2026.

ENDORSEMENT

I. Overview

1These hearings dealt with two concurrent Expungement Appeals brought by the Debtor to expunge or reduce the proofs of claim filed by its former counsel GR and RLPC.

2The factual context of these expungement motions arises out of a Division 1 Proposal (the “Proposal”) made by the Debtor under the Bankruptcy and Insolvency Act, R.S.C. 1985 c.B-3 (the "BIA") which the Trustee describes in its Report to the Court on Proposal dated February 25^th, 2025 (the “Proposal Report”) as:

“17. The Proposal process has brought some calm to an otherwise acrimonious set of circumstances which has been the subject matter of protracted litigation for a number of years.”

3The Proposal was approved by me on April 23, 2025, after amendments were made relating to the Directors Release. The Debtor had commenced the Proposal Proceedings on November 6, 2024, by lodging a Notice of Intention to Make a Proposal.

4The Proposal provides that the “Proven Claims” of “Ordinary Creditors” are to be paid in full, after payment of administrative fees and expenses, secured claims and preferred claims. The source of funding of the Proposal and payments to creditors is the sale or refinancing of an asset of the Debtor, a building at 950 Dupont Avenue (the “Property”) and use of the Proceeds of that sale or refinancing to fund the payments to be made under the Proposal.

5The Proposal arose as a result of the Debtor losing a lawsuit in Action CV-17-568431-0000 (the “Bellwoods Action”) by Bellwoods Brewery Inc. (“Bellwoods”) at Trial before Centa, J. in Bellwoods Brewery Inc. v. 1896841 Ontario Limited (the “Trial Decision”) [1] and the Appeal in Bellwoods Brewery Inc. v. 1896841 Ontario Limited (the “Appeal Decision”)[2].

6As, inter alia, Centa, J. awarded to Bellwoods damages in the amount of $6,110,000, as well as interest and costs, Bellwoods had commenced proceedings to enforce the Judgment, including the sale of the Property.

7The Proposal was lodged by the Debtor to have an orderly sale or refinancing of the Property serve as the basis of payments to Creditors, including Bellwoods. The Meeting of Creditors was adjourned several times to allow negotiations with creditors, and principally Bellwoods, and led to an amended Proposal being voted on and approved by the Creditors voting, unanimously.

8Bellwoods, with a Declared Claim of $7.5 Million voted in favor of the Proposal. The total declared unsecured claims in the Proposal Proceedings totaled $8,706,129 on the sworn Statement of Affairs.

9The Trustee argued that given the circumstances and the tenuous relationship between the Debtor and its largest creditor Bellwoods, whose sale of the Property by the Sheriff was stayed by the filing of the NOI, the Trustee was of the view that a sale of the Property within the proposal proceedings conducted with the oversight of the Trustee, the estate inspectors and the Court, would result in optimum recovery for all stakeholders.

10The Trustee estimated in its Proposal Report that the Property has as value of $22-27 Million.

11The following paragraphs of the Proposal, as approved unanimously by the Creditors (including GR and RLPC) and the Court, are particularly relevant to these motions:

1.1(f) “Claim” means any right of any Person against the Debtor in connection with any indebtedness, liability or obligation of any kind of the Debtor which indebtedness, liability or obligation is in existence at the Date of Filing, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present, future, known, unknown, by guarantee, by surety or otherwise and whether or not such a right is executory in nature including, without limitation, the right or ability of any Person to advance a claim for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future based in whole or in part on facts which exist prior to or at the time of the Date of Filing including, without limitation any, claims that would have been claims provable in bankruptcy had the Debtor become bankrupt on the Date of Filing;

(m) “Implementation Date” means the date upon which the conditions set forth in Article 8.4 have been satisfied;

(x) “Proven Claim” of a Creditor means the amount of the Claim of such Creditor finally determined in accordance with the provisions of the BIA;

4.3 Ordinary Creditors

Subject to Articles 4.1 and 4.2, the Proven Claims of the Ordinary Creditors are to be paid by the Trustee in full. For greater certainty, the amounts referred to in paragraph 1.1(u) (ii) shall be paid within thirty (30) days of the receipt by the Trustee of the Proposal Fund.

5.1 Allowance or Disallowance of Claims by the Trustee

Upon receipt of a completed Proof of Claim, the Trustee shall examine the Proof of Claim and shall deal with each claim in accordance with the provisions of the BIA.

6.8 Valuation of Claims

The procedure for valuing Claims of Unsecured Creditors and resolving disputes with respect to such Claims will be as set forth in Article 5 and the BIA. The Debtor and/or the Trustee reserve the right to seek the assistance of the Court in valuing the Claim of any Unsecured Creditor, if required, to ascertain the result of any vote on the Proposal or the amount payable or to be distributed to such Unsecured Creditor under the Proposal, as the case may be.

7.1 …

The Trustee shall make a distribution to Creditors in accordance with the provisions of the BIA.

7.6 Discharge of Trustee

Upon payment by the Trustee of the amounts contemplated in this Article, the Trustee shall have discharged its duties as Trustee, the Trustee’s obligations under the Proposal shall be fully performed and the Trustee shall be entitled to apply for its discharge as Trustee hereunder. For greater certainty, the Trustee will not be responsible or liable for any obligations of the Debtor and will be exempt from any personal liability in fulfilling any duties or exercising any powers conferred upon it by this Proposal unless such acts have been carried out in bad faith and constitute a wilful or wrongful act or default.

8.4 Conditions Precedent to Proposal Implementation

The implementation of the Proposal by the Debtor will be conditional upon the fulfilment or satisfaction of the following conditions:

(a) acceptance of the Proposal by the Unsecured Creditors;

(b) approval of the Proposal by the Court pursuant to a final Order and the expiry of ten (10) day appeal period under the BIA with no appeal having been filed within said ten (10) day period; and,

(c) either the re-financing or the sale of the Real Property

8.5 Effect of Proposal Generally

As at 12:01 p.m. on the Implementation Date, the treatment of all Claims under the Proposal shall be final and binding on the Debtor and all Creditors, (along with their respective heirs, executors, administrators, legal personal representatives, successors and assigns) and the Proposal shall constitute (i) a full, final and absolute settlement of all rights of the holders of the Claims affected hereby; and (ii) an absolute release and discharge of all indebtedness, liabilities and obligations of the Debtor of or in respect of such Claims.

12Gennis confirmed that the Proposal was approved by the Creditors and the Court, that the Property was refinanced, and the proceeds of the financing was received by the Trustee, and those proceeds have been distributed to creditors, other than GR and RLPC. It would appear that the “Implementation Date” has passed for the purposes of paragraph 8.5 of the Proposal.

13GR has filed a Proof of Claim in the Proposal in the amount of $93,994.13 which the Trustee admitted as a proven claim (the “GR Claim”). This claim is for the remaining unpaid legal fees incurred by GR to represent the Debtor in the Appeal of the Trial Decision. Citak, who appeared on this Motion for GR was one of three inspectors of the Proposal appointed at the Meeting of Creditors at which the Proposal was approved, including by GR.

14RLPC has filed a Proof of Claim in the Proposal in the amount of $66,779.26 admitted as a proven claim (the “RLPC Claim”). This claim is mostly for the unpaid legal fees incurred by RLPC to represent the Debtor in the Bellwoods Action leading to the Trial Decision, with some less significant disbursements to get RLPC off the record in some other litigation that RLPC was handling for the Debtor. But the overwhelming majority of the RLPC claim relates to the representation of the Debtor in the Bellwoods Action.

15The Debtor takes two different approaches to the adjudication of the expungement of the GR Claim and the RLPC Claim:

1. With the GR Claim the parties are content with the Bankruptcy Court dealing with the expungement of the GR Claim as a substitute for the proceedings that had previously been commenced by GR before the Assessment Officer, prior to the commencement of the Proposal Proceedings, which stayed that assessment.

2. With the RLPC Claim, as the Debtor has commenced a Negligence Action against RLPC and Rosenstein (CV-25-00742901-0000 commenced on June 9, 2025 - defended by RLPC September 12, 2025) (the “Negligence Action”), and the Debtor is requesting that the Bankruptcy Court should cede jurisdiction to the Civil Court in that Negligence Action, and have the claim of RLPC dealt with as part of the Negligence Action with the amounts owing to and by the Debtor and RLPC being determined after the claims of Negligence are determined. RLPC is opposing this request, arguing that the expungement motion should determine the RLPC Claim in Proposal Proceedings, that as there is no negligence determination to date it there is nothing to set off, and RLPC should be paid its dividend in the Proposal, prior to the completion of the Negligence Action. Then if RLPC is determined to be negligent in the future, that damages assessment would result in the payment of the Damages award, or disgorgement of fees paid.

Receivership of the Debtor

16In a factual twist, while these reasons were being written, on March 24, 2026 Extend Financial Ltd. (“Extend”), a secured creditor of the Debtor (as well as other corporate and individual respondents) issued a Notice of Application for (inter alia) the appointment of a Receiver over the real properties and undertaking of the Debtor and the other Respondents, initially returnable on April 22, 2026.

17On that date Steele, J. granted a consent adjournment, in circumstances in which the Respondents represented that they had a deal pending which would provide funds to pay out the Applicant.

18On May 21, 2026 Black, J. granted a Receivership Order (the “Receivership Order”) over the property described in the Order, including the 950 Dupont Property owned by the Debtor, when the conditions of the prior adjournment were not met. Albert Gelman Inc. was appointed as Receiver (the “Receiver”).

19From the Application Record filed by Extend, and the Affidavit of Rafael Alter sworn April 7, 2026 (the “Alter Affidavit”), it appears that Extend refinanced the Debtor’s Property while the Proposal was pending by advancing $18,000,000 to the Debtor.

20It did not appear from the Statement of Affairs that Extend was a secured creditor of the Debtor before the Proposal Proceedings were commenced on November 6, 2024.

21Gennis confirmed in his Oral Report at the hearing of the GR Expungement Motion (which has the same evidentiary value as a written Report, and is admissible per the rule in Goldfinger[3]) that the Debtor chose to refinance the Property, and other properties, and that the proceeds of the refinancing by Extend were paid to the Trustee to fund payments under the Proposal, including to Bellwoods.

22Gennis confirmed all payments to Proven Creditors, including Bellwoods, were made by the Trustee under the Proposal, other than to GR and RLPC.

23At the time of the release of these Reasons, no notice has been provided to the Court that the Proposal is in default or that the Proposal Trustee has become the Trustee in Bankruptcy of the Debtor.

24Accordingly the determination of the expungement motions brought by the Debtor is not moot, and whether the Proposal Trustee or the Receiver ultimately will deal with the Orders issued on these motions is for them to decide, as it is not clear whether the secured creditor Extend has comprehensive security over all of the assets of the Debtor, real and personal, including the choses in action affected here.

25The Receiver and Counsel for Extend will be provided with copies of these reasons if they are unaware of these expungement motions.

II) Law and Analysis- Common Issues to expungement of both GR Claim and RLPC Claim

26The Court has considered all materials and arguments raised by all parties on these Motions. Any failure by the court to refer to specific arguments and materials raised does not reflect that the Court has not considered those arguments. Where quotations or documents are underlined in these reasons, that emphasis has been added by me.

27Although the Debtor is proposing differing methods for determining whether the GR Claim and the RLPC Claim should be expunged, the statutory and jurisprudential tests are the same for both under the BIA.

A. Legislation and Jurisdiction:

28S. 135 of the BIA reads:

Trustee shall examine proof

135(1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence in support of the claim or security.

Determination of provable claims

(1.1) The trustee shall determine whether any contingent claim or unliquidated claim is a provable claim, and, if a provable claim, the trustee shall value it, and the claim is thereafter, subject to this section, deemed a proved claim to the amount of its valuation.

Disallowance by trustee

(2) The trustee may disallow, in whole or in part,

(a) any claim;

(b) any right to a priority under the applicable order of priority set out in this Act; or

(c) any security.

Notice of determination or disallowance

(3) Where the trustee makes a determination under subsection (1.1) or, pursuant to subsection (2), disallows, in whole or in part, any claim, any right to a priority or any security, the trustee shall forthwith provide, in the prescribed manner, to the person whose claim was subject to a determination under subsection (1.1) or whose claim, right to a priority or security was disallowed under subsection (2), a notice in the prescribed form setting out the reasons for the determination or disallowance.

Determination or disallowance final and conclusive

(4) A determination under subsection (1.1) or a disallowance referred to in subsection (2) is final and conclusive unless, within a thirty day period after the service of the notice referred to in subsection (3) or such further time as the court may on application made within that period allow, the person to whom the notice was provided appeals from the trustee’s decision to the court in accordance with the General Rules.

Expunge or reduce a proof

(5) The court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trustee declines to interfere in the matter.

29The relevant parts of s.192 of the BIA read:

92 (1) The registrars of the courts have power and jurisdiction, without limiting the powers otherwise conferred by this Act or the General Rules,

(h) to hear and determine matters relating to proofs of claims whether or not opposed;

(k) to hear and determine any matter relating to practice and procedure in the courts;

(n) to hear and determine appeals from the decision of a trustee allowing or disallowing a claim.

Onus of Proof and Standard of Proof on Motion to Expunge:

30The Debtor, RLPC and GR cited different jurisprudential formulations of the tests for expungement of a proven claim.

31The Debtor and RLPC both cite the decision of Osborne, J. (as he then was) in Re Malhotra (“Malhotra”)[4] as setting out the test for expungement of a proven claim under s.135 of the BIA:

“68 The onus of proof on a motion to expunge is on the party seeking to have the claim expunged: Badger, Re,, (1929), 1929 CanLII 129 (SK CA), [1930] 2 D.L.R. 88 (Sask. C.A.).

69 It is unnecessary for the Bankrupt to show that the trustee acted unreasonably or improperly in allowing the claim. The Bankrupt must prove on the merits that the claim should not be allowed: Re Marsuba Holding Ltd., (1998) 1998 CanLII 5248 (BC SC), 8 C.B.R. (4th) 268 (“Marsuba”).

70 The standard of proof on a motion to expunge is that of the balance of probabilities: Re Karataglidis, (2003), 2003 CanLII 64281 (ON SC), 47 C.B.R. (4th) 241, and Marsuba at para. 19.”

32Counsel for GR chiefly cites Royal Bank of Canada v. Insley, (“RBC v. Insley”) [5]for these tests, and specifically the following formulation of the test, which I do not see as being markedly different from the Malhotra formulation:

30The application before me is one to expunge two claims filed and admitted by the trustee. The onus rests with RBC to establish error on the part of the trustee, or in keeping with the approach taken in Marsuba, to establish these were not “legitimate” claims. In my view there is no need to explore the contours of what is or is not a legitimate claim, or other collateral issues arising on appeal (issues not argued by the parties) for the simple reason that RBC abandoned its initial argument that the impugned claims were not filed prior to Insley’s discharge or disclosed by the trustee. In any event, no argument was advanced nor evidence presented concerning the underlying validity of the claims or their allowance. There is no suggestion whatsoever that the trustee improperly interpreted the law, ignored crucial facts, exercised its discretion improperly or acted outside of its authority in the course of exercising its function under s. 135. For all of these reasons, RBC’s initial argument fails.”

33However, as I noted in my affirmed Malhotra decision (“Malhotra-Registrar”)[6], the highlighted wording of paragraph 30 of RBC v Insley above indicates that there are TWO different roads that a Court can follow under s.135.

34The combined jurisprudence in Malhotra, Malhotra-Registrar, Marsuba Holdings Ltd., Re (“Marsuba”) [7] and RBC v Insley, under s.135(5) the court may expunge or reduce a proof of claim or a proof of security on the application of a creditor, or of the debtor, if the trustee declines to interfere in the matter, where the Moving Party satisfies it’s onus to prove, on the balance of probabilities, that:

1. the claim was admitted through error on the part of the Trustee; OR

2. in keeping with the approach taken in Marsuba and RBC v Insley, to establish these were not “legitimate” claims.

3. It is not necessary for the Moving Party to show that the trustee acted unreasonably or improperly in allowing the claim, instead the Moving Party must prove on the merits that the claim should not be allowed.

B. Onus of proof on expungement motion relating to claims by lawyers against former clients:

35The Debtor argues that as the Debtor and GR agreed to have the Court conduct the expungement hearing as an assessment, that the onus of proof shifts to GR as solicitor to prove the reasonableness of its bills that make up the GR Claim.

36Onus of proof was not a specific issue that was argued at any length with respect to the RLPC Claim expungement motion.

37However, this is not an assessment proceeding, which is a proceeding at first instance by an Assessment Officer. As stated by Osborne, J. (as he was then) in Malhotra:

68 The onus of proof on a motion to expunge is on the party seeking to have the claim expunged: Badger, Re,, (1929), 1929 CanLII 129 (SK CA), [1930] 2 D.L.R. 88 (Sask. C.A.).

38As a Registrar in Bankruptcy I only have statutory jurisdiction. The provisions of s.135(5) and the binding jurisprudence interpreting it, such as Malhotra, provide me with only one statutory methodology to deal with the expungement of proofs of claim that have been admitted by the Trustee, such as the proof of claim of GR in this case.

39As stated by Osborne, J. (as he was then) in Malhotra:

“97 In my view, that is consistent with the nature of the two provisions: whereas s. 135(4) is an appeal from a decision of the trustee and is therefore generally a true appeal (albeit with residual discretion in the court to consider the matter de novo to avoid an injustice), s.135(5) is an application by a creditor or the debtor to expunge or reduce a claim where the trustee declines to interfere in the matter. It seems reasonable, therefore, that the intention of Parliament is that such an application would generally proceed as a hearing de novo.

98 The fundamental objective is to balance the legislative objectives of the bankruptcy regime to maximize efficiency and the expeditious determination of claim with the requirement that an injustice or unfairness to the parties not be brought about by refusing to hear the matter de novo or consider relevant evidence.”

40I permitted both GR and the Debtor to file materials in addition to the GR Proof of Claim on this motion.

41The Trustee did not file a report or other evidence dealing specifically with the Trustee’s evaluation of the GR Proof of Claim and its admission. However Gennis provided oral evidence at the hearing as to his review of the GR Claim and the RLPC Claim. The Trustee has declined to interfere with these expungement motions.

42This is a Proposal proceeding and not a bankruptcy, and the Debtor has retained its ability to access its documents relating to the Bellwoods Action, and its representation by GR in the Appeal in order to provide evidence as to why the GR Proof of Claim should be expunged.

43Consequently, I enabled the Debtor and GR to file additional materials relating to the expungement, as to do otherwise would result in an injustice or unfairness to the parties to be brought about by refusing to hear the matter de novo or consider relevant evidence.

44However at its base level, as the Debtor has brought this motion, the onus stays with the Debtor to prove that the GR Proof of Claim must be expunged.

45As recently confirmed by Myers, J., Subsection 135 (4) of the BIA provides that the trustee’s disallowance decision is “final and conclusive” unless the claimant brings an “appeal” to the court.[8] This same mechanism also functions for the expungement of “allowances” by Trustees of proofs of claim under subsection 135(5).

46A trial de novo permitting additional evidence to be filed than what the Proposal Trustee initially reviewed and admitted, does not reverse the onus of proof on an expungement motion, whether or not on a regular assessment of fees by an Assessment Officer, outside of the bankruptcy/insolvency context, the onus is on the lawyer.

47To do otherwise would remove any role for the Trustee in reviewing admitting and allowing or disallowing the claims of lawyers in Bankruptcy and Proposal proceedings, would have the Court usurp the role of the Trustee for this fundamental duty of the Trustee in administering the estate, and ignores the expertise of the Trustee in managing the insolvency proceedings and estate.

48The test in Malhotra etc. for s.135(5) of determining whether the claim was admitted as a result of the “error” of the Trustee, or that the claim that was admitted was not “legitimate”, is premised on the Court reviewing a prior decision of the Trustee, not redoing that decision making from scratch.

49The Court on motions for the expungement of all claims under s.135, including the claims of lawyers against its former clients, will continue to fulfill an appellate function for the allowances and disallowances of claims by Trustees.

C. The “Single Proceeding Model” and Expungement Motions:

50The Debtor in this case is requesting relief that the expungement of the GR and the RLPC proofs of claim be dealt with in different ways.

51The Debtor was initially requesting that the Bankruptcy Court send the adjudication of the GR Claim to the Assessment Officer, but at the Case Conference stage I advised that I could not see what jurisdiction a Civil Assessment Officer, who was not a Registrar in Bankruptcy, could have to make decisions binding on the Bankruptcy Court with respect to expungement of a Proof of Claim filed in a Bankruptcy.

52With the agreement of GR, the expungement of the GR Claim is being dealt with by this Court using assessment principles for the determination of the GR Claim, so this issue no longer specifically arises with respect to the GR Claim.

53The Debtor is requesting that the expungement of the RLPC Claim be dealt with in the Negligence Action that the Debtor has commenced against RLPC and Rosenstein. In this case the Debtor is seeking to use the separate action as a means of expunging the RLPC Claim as a set off claim against the larger claim by the Debtor against RLPC and Rosenstein.

54RLPC is opposing this request, requesting that its claim for fees in the RLPC Proof of Claim be determined in the Proposal Proceedings, in part arguing that payment of a dividend in the proposal should be made after determination on the current facts, where no finding of negligence exists, and not be dependent on years of likely litigation between the Debtor, RLPC Rosenstein and their insurer, LawPro.

55This requires an analysis of the “Single Proceeding Model” for determination of claims in insolvency proceedings.

56In Mundo Media Ltd. Re (“Mundo Media”)[9], the Court of Appeal described the policy basis for the “Single Proceeding Model”:

“[6] The single proceeding model applies to insolvency proceedings. This model favours litigation concerning an insolvent company to be dealt with in a single jurisdiction rather than fragmented across separate proceedings. A creditor “who cannot claim to be a ‘stranger to the bankruptcy’, has the burden of demonstrating ‘sufficient cause’” to have the proceedings fragmented across multiple jurisdictions: Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978, at para. 76.”

57The procedural twist in this case is that unlike in most “single proceeding model” cases it is not the creditor that is seeking a transfer of the proceeding outside of the Bankruptcy Proposal proceeding, it is the Debtor.

58Also, in this case there are not multiple geographic “jurisdictions” only the issue of whether the allegations made by the Debtor on this motion to expunge the RLPC Proof of Claim should be effectively dealt with in the context of the Proposal Proceeding, prior to the Negligence Action being determined, or as part of the Negligence Action.

59The Single Proceeding Model was found applicable to BIA Proposals in Tron Construction & Mining Ltd. Partnership, Re (“Tron”) [10]in the context of whether construction disputes in Ontario should be determined in the Proposal Proceeding in Saskatchewan or by Ontario Courts under the Ontario Construction Act:

“48 In 2001, the single proceeding model was invoked by the Supreme Court of Canada in Sam Lévy . Citing Stewart and s. 183(1) of the BIA, the Court in Sam Lévy described the BIA as "a federal statute that prima facie establishes one command centre or 'single control' ... for all proceedings related to the bankruptcy": Sam Lévy at para 76.

51 Thus, the single proceeding model, which has long been applied in bankruptcies, receiverships and CCAA restructurings, is extremely well-established.

52 Counsel advised that they were aware of no instance of something similar to the LR Order having been applied in a BIA proposal. Nor was the Court able to locate any such precedent. However, a corollary to the single proceeding model is that courts should seek to minimize differences between different insolvency regimes even where the provisions are not identical, as is the case with the BIA and CCAA.

The single proceeding model and the concept of harmony and consistency (except where statutorily precluded of course) thus work together to enhance efficiency and predictability for creditors and debtors alike.

55 Tron was able to disclaim the Contracts because it invoked the BIA by filing the NOI. Having done so, Tron must accept the entirety of that regime. Given the statement in Century Services that the single proceeding model applies prima facie, in my view it rests on Tron to establish that the single proceeding model should not be utilized here.”

60Tron was issued before the Supreme Court decided Peace River Hydro Partners v. Petrowest Corp. (“Petrowest”) [11] (judgement issued 3 months after Mundo Media) which set out the basis for favoring the “single proceeding model” for resolution of disputes in, inter alia, bankruptcy, in the context of determining whether a dispute should be determined within Bankruptcy, or through an outside arbitration regulated under the BC Arbitration Act that had been contractually agreed to by the Debtor:

“54 The central role of courts in ensuring the equitable and orderly resolution of insolvency disputes is reflected in the “single proceeding model”.

55 This model favours the enforcement of stakeholder rights through a centralized judicial process. The legislative policy in favour of “single control” is reflected in Canadian bankruptcy, insolvency, and winding-up legislation (Century Services , at paras. 22-23). The single proceeding model is intended to mitigate the inefficiency and chaos that would result if each stakeholder in an insolvency initiated a separate claim to enforce its rights. In other words, the single proceeding model protects the clear “public interest in the expeditious, efficient and economical clean-up of the aftermath of a financial collapse” (Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978, at para. 27, citing Stewart v. LePage, (1916), 1916 CanLII 626 (SCC), 53 S.C.R. 337). This Court has held that s. 183(1) of the BIA confers a “broad scope of authority” on superior courts to deal with most bankruptcy disputes, as “[a]nything less would unnecessarily complicate and undermine the economical and expeditious winding up of the bankrupt’s affairs” (Sam Lévy , at para. 38).”

61The Supreme Court then set out the following tests for determining whether the arbitration proceeding should continue within the Bankruptcy and Insolvency “single proceeding” or should be determined through the contractually agreed to arbitration proceeding:

“155 As I have explained, a court may find an arbitration agreement “inoperative” within the meaning of s. 15(2) of the Arbitration Act where enforcing it would compromise the orderly and efficient resolution of insolvency proceedings, including a court-ordered receivership under s. 243 of the BIA. The following non-exhaustive list of factors may be relevant in determining whether a particular arbitration agreement is inoperative in this context:

(a) The effect of arbitration on the integrity of the insolvency proceedings. Party autonomy and freedom of contract must be balanced with the need for an orderly and equitable distribution of the debtor’s assets to creditors. An arbitration agreement may therefore be inoperative if it would lead to an arbitral process that would compromise the objective of the insolvency proceedings, namely the orderly and expeditious administration of the debtor’s property. The court should have regard to the role and expertise of the court-appointed creditor representative, if any, in managing the insolvency proceedings.

(b) The relative prejudice to the parties from the referral of the dispute to arbitration. The court should override the parties’ agreement to arbitrate their dispute only where the benefit of doing so outweighs the prejudice to them.

(c) The urgency of resolving the dispute. The court should generally prefer the more expeditious procedure. If the effect of a stay in favour of arbitration would be to postpone the resolution of the dispute and hinder the insolvency proceedings, this militates in favour of a finding of inoperability.

(d) The applicability of a stay of proceedings under bankruptcy or insolvency law. Bankruptcy or insolvency legislation may impose a stay that precludes any proceedings, including arbitral proceedings, against the debtor. If such a stay applies, the debtor cannot rely on an arbitration agreement to avoid the bankruptcy or insolvency; the agreement becomes inoperative.

(e) Any other factor the court considers material in the circumstances.”

62Petrowest details the tests to be used for evaluating whether the dispute should be determined by a different type of proceeding than the Bankruptcy Proposal proceeding, instead of determining whether the dispute should be determined in a different jurisdiction.

63In this case the Negligence Action commenced by the Debtor against RLPC is not brought in a provincial Arbitration Act context like the competing arbitration proceeding in Petrowest, but the tests set out in Petrowest for determining when an outside proceeding should be permitted to determine an issue in a Bankruptcy proceeding are applicable to this case.

64What is different about expungement motions, as opposed to motions appealing from the disallowance by a Trustee, is that the Trustee, as the Court Officer having made the initial decision in the Bankruptcy, generally doesn’t play a role. The parties are generally the creditor/bankrupt/debtor seeking to expunge the claim, and the Creditor seeking to uphold its claim.

65This raises the issue as to whether in the circumstances of expungement, where the Trustee is by definition in s.135(5) not an active participant (“…if the trustee declines to interfere in the matter”), the factors in Tron/Sam Levy/Mundo Media/Petrowest jurisprudence that “…establishes one command centre or 'single control' ... for all proceedings related to the bankruptcy” as the determinative model, are as applicable.

III) EXPUNGEMENT MOTION FOR GR CLAIM

Preliminary Issue- Can the Bankruptcy Court on an Expungement Motion only deal with the GR Claim in the Proposal alone or can it also reduce all of the legal accounts issued by GR – paid and unpaid

66One major issue is that the Debtor is requesting that the Court review all of the GR invoices, and make a global determination of all of the invoices for reasonableness, and reduce all of the accounts of GR issued the Debtor, paid and unpaid.

67As I have set out in the general overview of the law relating to expungement motions under s.135(5), this is not a de novo re-examination of the entirety of the billing history between the Debtor and GR, to make reductions to prior accounts not included in the GR Proof of Claim.

68The GR Claim was for a finite unpaid amount of $93,994.13 for the period September to December 2023. There was an additional $900 account that was found later and did not form part of the GR Claim reviewed by the Trustee.

69That amount is the amount that GR appears to have voted in favour of the Proposal. That is the amount upon which any dividend can be payable under the Proposal.

70GR in argument raised the defence that a client can only seek to have a prior paid invoice assessed:

1. in exceptional circumstances of either a contractual or equitable nature could lead a court to find that an assessment is necessary or essential, and that those “special circumstances” relate to the underlying principle that payment of the account implies that the client accepted that the account was proper and reasonable, and therefore

2. “special circumstances” will tend to either undermine the presumption that the account was accepted as proper or show that the account was excessive or unwarranted, and

3. support a broader test for “Special circumstances” as those in which the importance of protecting the interests of the client and/or public confidence in the administration of justice, demand an assessment, citing Clatney v. Quinn Thiele Mineault Grodzki LLP, [12] (“Clatney”)

71GR also argues that the Debtor cannot assess any of the accounts other than those in the GR Claim as the time period for the Debtor to assess accounts under the provisions of s.3(b) and 4 of the Solicitors Act R.S.O. 1990 c. S.15 have long passed, and no “special circumstances” exist per s.4(1), which GR cites as the following additional factors applying Clatney:

(a) the sophistication of the client;

(b) the adequacy of communications between the client and the lawyer;

(c) whether there is evidence of increasing lack of satisfaction by the client regarding the lawyer’s services;

(d) whether there is evidence of overcharging;

(e) the extent of the details of the bills;

(f) whether the lawyer and client relationship has terminated or is ongoing; and

(g) whether the payments could be characterized as involuntary;

72GR submits none of these “special circumstances” are present. I will deal with the application of the facts to the issue of “special circumstances” when I deal with the general criteria for the assessment of accounts.

73However, as I advised counsel during the hearing, this Court can only deal with the GR Proof of Claim within the context of an expungement motion under s.135(5) of the BIA.

74There is no jurisprudence in the Factum of the Debtor that supports the argument that this Court or a Registrar in Bankruptcy can as part of the expungement motion go back to determine prior paid accounts not included in the GR Claim, issued prior to the date of the Proposal or the filing of the GR Claim, and which the Trustee had not reviewed and allowed.

75Under s.192 of the BIA, a Registrar in Bankruptcy has specific limited powers. Specifically, s.192(1)(h) reads:

“(h) to hear and determine matters relating to proofs of claims whether or not opposed;

“to hear and determine appeals from the decision of a trustee allowing or disallowing a claim”

76I was not provided by counsel, and could not find independently, any case where the expanded power of the Registrar in Bankruptcy that the Debtor is requesting me to employ, namely to look beyond the specific claim that had been allowed by the Trustee and being sought to be expunged to the overall total accounts of GR to the Debtor, and make a determination that on an overall basis the fees charged were excessive, and for the Bankruptcy Court to make an Order that GR should refund amounts not claimed in the GR Claim, but previously paid by the Debtor to GR.

77All counsel agreed that there is no jurisprudence that is factually similar to this case, dealing with the expungement by the Bankrupt of a proof of claim filed by counsel for the Bankrupt, prior to the Bankruptcy. I could not independently find any such jurisprudence prior to or after the hearing.

78I also could not find any jurisprudence where a Registrar in Bankruptcy conducted a formal assessment of accounts using the same procedures as usually employed by Assessment Officers.

79s.135(5) states specifically:

“(5) The court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trustee declines to interfere in the matter.

80The section does not say “and any other prior amounts paid”. I have found no interpretive principle that has interpreted s.135(5), or s.135 generally, to allow the Bankruptcy Court, and particularly a Registrar in Bankruptcy, to look at the entirety of all prior dealings between the Debtor and the Creditor, and order that the Creditor refund previously paid amounts not included in the proof of claim filed in Bankruptcy that had been Disallowed by the Trustee (or “allowed” and the subject of an Expungement Motion under s.135(5)).

81There are specific remedies in s.95-101 of the BIA allowing the Trustee to obtain judgment from creditors for preferences and transactions at under-value, but I have not been directed to, and cannot find, any prior decision where this has occurred in the s.135 context.

82To the knowledge of the Court the Debtor is not currently Bankrupt, and retains whatever choses in action it had with respect to GR, the same way it is making claims of Negligence and set-off against RLPC in its Negligence Action.

83There is the ability in this section to reduce or reduce to zero (expunge) the amount claimed under a proof of claim. There does not appear in this section any suggestion that the Court under s.135(5) can grant what the Bankrupt is requesting, which is a reduction beyond the amount in the GR Proof of Claim, and an Order that amounts already paid by the Debtor to GR be refunded, if the reduction ordered exceeds the amount claimed in the GR Claim, effectively a Civil Judgment against GR in favor of the Debtor.

84As stated by Registrar Shwann in RBC v Insley, as cited by GR in its Factum:

“[33] Although EnerNorth dealt with an attack in bankruptcy proceedings of an otherwise valid and enforceable judgment, the decision, in my view, stands for the broad principle that s. 135(5) does not confer on creditors an unqualified right of challenge to proven claims. Something more is required apart from the trustee merely declining to interfere in the matter.

34Neither, in my judgment, should s. 135(5) be used as an entry point to overturn or disrupt other processes or decisions made by the trustee in the course of estate administration. Section 135(5) constitutes a right of challenge limited to allowed or disallowed claims and should not be viewed more broadly than that. The right to challenge other decisions made by the trustee in the course of estate administration is available through s. 37 of the Act where an aggrieved person seeks court oversight over those decisions.”

85Therefore I concur, that in addition my lack of jurisdiction as Registrar to grant that specific relief sought by the Debtor under s.192, the construction of s.135(5) limits the relief sought on the expungement motion to the expungement of the amounts claimed by a Creditor under GR Proof of Claim in question, and not to all amounts previously paid by the Debtor to GR.

86However, I believe that the Debtor is correct that the overall context of the amounts previously paid has relevance to the determination of whether the remaining amounts owing to GR under the GR Claim that are subject to expungement under s.135(5) of the GR Claim, and that the ordinary jurisprudence relating to the assessment of accounts by an Assessment Officer may be relevant tests to determine whether the GR Claim should be expunged, in whole or in part, on the binding tests in Malhotra, Malhotra-Registrar, Marsuba and RBC v Insley, to determine whether the GR Claim was admitted in error by the Trustee, or whether the GR Claim in the context of all of the accounts rendered by GR, was “legitimate”.

87“Legitimate” appears to be deliberately chosen in the jurisprudence, as word with a broader ambit than simply “legally enforceable”

88I will therefore also make an assessment of whether the “Special Circumstances” described in Clatney exist in this case to enable the reopening of the paid accounts to review, as argued by the Debtor.

Methodology used by Trustee to evaluate GR Claim and RLPC Claim

89Osborne, J. (as he then was) indicated in Malhotra (at 52-53) that a Report of the Trustee on an expungement motion is helpful, particularly where the Trustee is not taking a position.

90There is no written evidence before the Court from the Trustee that sets out what it reviewed with respect to the GR Proof of Claim, or the RLPC Claim, or the assessment process it employed.

91However Gennis reported to the Court at the hearing that the Trustee received the GR Claim and the RLPC Claim and then requested further documentation from each of GR and RLPC to substantiate their claims.

92In each case the Trustee confirmed he reviewed the accounts and dockets of GR and RLPC that have been filed in evidence on these Motions, as well as the retainer letter of GR and that the Trustee admitted the claims on the basis that there was a contract, the accounts were provided to the Debtor, the Trustee reviewed the accounts and as stated by the Trustee at the hearing:

“You have invoice –I don't treat this any differently than – than a manufacturer who's - one of his suppliers gives me an invoice for goods delivered and attached his invoices. As long as they appear to be legitimate, I will approve the claim”

93There is no mention in the Reports of the Trustee to Creditors, or the Proposal Report to the Court filed for the Approval of the Proposal dated February 25, 2025 (the “Trustee Report”) (which was the evidence reviewed by me to approve the Proposal) of there being a dispute with the legal accounts of GR and RLPC at the time of the approval of the Proposal by the Creditors, unanimously, including by GR and RLPC.

94The GR Assessment of the GR Claim commenced on May 3, 2024 and the Debtor commenced the Proposal Proceedings on November 6, 2024 by filing of a Notice of Intention to Make A Proposal (the “NOI”). The Assessment proceeding is not mentioned in any Report.

95An extension to the NOI stay period was granted by Conway, J. on December 4, 2024 and the first meeting of Creditors was scheduled for February 14, 2025, which was then adjourned to February 18, 2025 where an amended Proposal was unanimously approved by the creditors including GR and RLPC and Citak was elected inspector. I granted the approval Order for the Proposal on April 23^rd, 2025.

96There is no evidence that the votes of GR or RLPC in the proposal under the GR Claim and the RLPC Claim were ever deemed “objected to” for the purpose of voting and distribution until the Proposal was approved by the Court.

97At Exhibit H to the Johnson GR Claim Affidavit are letters from counsel for the Debtor dated April 24^th, 2025 (RLPC) (the day after I approved the Proposal) and June 10, 2025 (GR) copied to the Trustee relating to each of the GR Claim and the RLPC Claim where counsel for the Debtor states:

RLPC letter:

“It is 1896841 Ontario Limited’s position that this Claim should not be accepted, or

alternatively, should not be paid in any distribution. 1896841 Ontario Limited is presently

investigating allegations of negligence with respect to the Firm’s representation of

1896841 Ontario Limited in the action with Bellwoods Brewery Inc.

You have not allowed us access to the file, but from a review of the client’s file we are of

the view that there is a valid claim [sic?]. We are advised that you were paid a significant

amount of money for fees. There are special circumstances that may entitle 1896841 Ontario Limited to assess the accounts, and 1896841 Ontario Limited may seek to assess the accounts and, if necessary seek to set off damages for the negligence.”

GR Letter:

“Further to my letter of April 24, 2025, and the Proof of Claim submitted by Gardiner

Roberts LLP (the “Firm”) in the Proposal;

It is 1896841 Ontario Limited’s position that this Claim should not be accepted, or alternatively,

should not be paid in distribution. 1896841 Ontario Limited takes the position that the account for the appeal of the Bellwoods’ trial was excessive.

We also understand that there is an assessment outstanding bearing Court File No. CV- 24-00719750.

Our client disputes the Proof of Claim of Gardiner Roberts LLP.

On a without prejudice basis, it is our proposal that the monies be paid into our trust account, to bear interest, less the levy due under the Proposal pending the determination of the Assessment and either order of the Court or consent. In this way, the matter is taken out of the Proposal and is dealt with in the Assessment.”

98The Trustee responded to counsel for the Debtor on June 11, 2025:

“Further to your call this morning, I confirm your intention, on behalf of 1896, to commence a proceeding in Bankruptcy Court under S. 135(5) of the Bankruptcy and Insolvency Act (“BIA”) for an order that both the Gardiner Roberts and Rosenstein Law claims filed in the Proposal be expunged or reduced.

In light of your proposed course of action, I am obliged to advise you, based upon my review of these claims and the back-up provided by each firm, that both are in fact claims provable under S. 121 of the BIA and have been admitted as such. We have found no issues with either claim and accordingly are not prepared to disallow them.

Please be advised, that we will continue holding the funds to pay these claims pending a decision of the Court on your S. 135(5) proceeding. That having been said, we must insist that your proceeding be commenced on or before June 20, 2025, failing which, we shall have no other alternative but to pay the dividends.

Please confirm my understanding of your intentions by return email. I would also suggest, that you advise the creditors of your intention.”

99I note that the Debtor, as an “insolvent person” under the provisions of s.66(1) and s.158(n) has a duty:

“in case any person has to his knowledge filed a false claim, disclose the fact immediately to the trustee;”

I also note that the first of the letters dated April 24^th advising the Trustee, GR and RLPC of the Debtor’s intention to bring expungement motions for the GR Claim and the RLPC Claim appears to have arrived the day after I approved the Proposal. I also note that the Negligence Action was commenced on June 9, 2026, the day after the second letter was sent.

100Unlike Malhotra, in this case the Trustee has provided the methodology the Trustee used to evaluate the proofs of claim filed by GR and RLPC. In both cases it does not appear that the Debtor is arguing that the admission of the GR Claim and the RLPC Claim was an “error” by the Trustee for the first “Malhotra/Marsuba/RBC v. Insley” tests.

101This leaves the “legitimacy” criterion for expungement, which goes toward the assessment of the enforceability and quantification of the GR Claim and the RLPC Claim, rather than an assessment of the Trustee’s review of the claim to determine error.

102Each of GR and the Debtor offer differing assessment jurisprudence as the proper lens through which the Court should assess the accounts of GR. They differ on the issue of whether the Court should go beyond the accounts claimed under the GR Claim, to prior accounts.

103As no applicable jurisprudence had been provided or located at the time of the GR Expungement Motion hearing regarding prior determinations made by Trustees regarding the allowance or disallowance of legal bills filed by counsel for a Debtor or Bankrupt, where different tests were used, it would appear that the various tests used to assess accounts of solicitors in ordinary Civil Litigation should be employed by Trustees and the Court, to the extent that these tests are applicable to the context of an expungement/allowance/disallowance of a Proof of Claim.

104The Debtor cites the Court of Appeal in Cohen v. Kealey & Blaney [13] (“Cohen v. Kealey”) as setting out the general tests for the assessment of the reasonableness of solicitor accounts:

(a) the time expended by the solicitor;

(b) the legal complexity of the matters to be dealt with;

(c) the degree of responsibility assumed by the solicitor;

(d) the monetary value of the matters in issue:

(e) the importance of the matter to the client;

(f) the degree of skill and competence demonstrated by the solicitor;

(g) the results achieved;

(h) the ability of the client to pay; and

(i) the client's expectation as to the amount of the fee.

105GR also cites the Cohen v. Kealey factors in its arguments, as well as the Clatney “Special Circumstances” criteria.

106The Debtor also cites the approach to be used in a quantum meruit assessment of a solicitors bill in the Court of Appeal decision of Newell v. Sax, [14](“Newell v. Sax”) at 39-43, where a quantum meruit assessment had to be done because the Real Estate solicitor had not kept time dockets:

1. Since the purpose of a quantum meruit assessment is clearly to assess the reasonable value of a solicitor’s account, it is an error in principle for an assessment to focus principally on the mechanical application of an hourly rate to a given number of hours rather than meaningfully address all relevant factors to determine the value of a solicitor’s account;

2. The quantity of time spent does not solely determine the fairness or reasonableness of the account;

3. Since time is only one factor to consider in determining the reasonableness of the bill, a fee, although reduced, may nevertheless be allowed even if not all time is docketed, provided there is other evidence available, as there was here, to support the fairness and reasonableness of the bill. That said, the failure of a solicitor to keep proper time dockets may justify a significant reduction in the assessed account.

107The Debtor also cited the following cases, which have the following relevant reasoning:

a) The Solicitor is obliged to show that the fees were reasonable considering such things as the time expended, the legal complexity of the matters, the monetary value of the matters, the degree of responsibility assumed by the Solicitor, the skill and competence demonstrated by the Solicitor, the results achieved, the importance of the matters to the Client, the Client's ability to pay and the reasonable expectations of the Client as to the amount of the fee. Where the solicitor adduced no evidence at all during the assessment, the solicitor cannot meet this test: Speciale Law Professional Corporation v. Shrader Canada Limited[15] (“Speciale v. Schrader”);

b) a written agreement as to fees and payment will not oust the assessment process of the Court. With respect to an unwritten agreement between a solicitor and his client as to fees and their payment and, although an oral agreement is not the equivalent of a written agreement, a solicitor may have a bill rendered pursuant to such an agreement assessed on a quantum meruit basis, and that the Court always has the right to determine the amount due. Schwisberg v. Kennedy [16](“Schwisberg v. Kennedy”);

c) with respect to whether the Court can assess all of the accounts GR has rendered, public confidence in the administration of justice requires the court to intervene where necessary to protect the client's right to a fair procedure for the assessment of a solicitor's bill. As a general matter, if a client objects to a solicitor's account, the solicitor should facilitate the assessment process, rather than frustrating the process. The courts should interpret legislation and procedural rules relating to the assessment of solicitors' accounts in a similar spirit. The court has an inherent jurisdiction to control the conduct of solicitors and its own procedures. This inherent jurisdiction may be applied to ensure that a client's request for an assessment is dealt with fairly and equitably despite procedural gaps or irregularities. (“Price v Sonsini”[17])

108GR also relies on these cases, albeit with different interpretations of the underlying facts and the application of reasoning to those facts of those cases, than those presented by the Debtor.

Application of Factual Evidence to Cohen v. Kealey and Clatney tests

109As many of the Clatney criteria cited by GR for determining whether “special circumstances” exist to consider whether to consider previously paid accounts are also similar to the Cohen v. Kealey criteria cited by the Debtor to determine the reasonableness of a legal account, I will combine that analysis where it is applicable. Both sets of factors are applicable to this Motion.

110For the purposes of this Motion to expunge the GR Claim, the Debtor is relying on the Affidavit of Rajiv Joshi, (counsel for the Debtor) sworn July 4, 2025 (the “Joshi Affidavit”) and the Affidavit of Patrick Johnson (“Johnson”) (principal of the Debtor) sworn November 7, 2025 (the “Johnson GR Claim Affidavit”). GR responded with the Affidavit of Michael Citak sworn December 5, 2026 (the “Citak Affidavit”).

111I have reviewed each of these Affidavits and the attached exhibits, including emails and texts between Citak, Johnson and Rosenstein in the Citak Affidavit, and the actual accounts forming both the GR Claim, and the Accounts that the Debtor did pay.

112The Debtor’ argument with respect to the expungement of the GR Claim cites the following facts, its argument organized chiefly on the Cohen v Kealey factors:

a) The debtor had already paid approximately $163,823.50 to GR;

b) GR was claiming a further $93,994.13, for a total of $257,817.63 for arguing the appeal.

c) This amount was grossly disproportionate to the result achieved and inconsistent with the reasonable expectations of the Debtor.

d) GR’s’ time dockets reflect excessive and disproportionate hours, totaling approximately 431.5 hours.

e) No reduction in respect of time spent is noted anywhere in the GR accounts.

f) As a comparison RLPC charged approximately $113,591.89 for the five-day trial that lead to the Appeal handled by GR, less than half the amount now claimed by GR.

g) The $34,500 in costs awarded by the Court of Appeal to the successful Respondent on agreement of the parties is another objective indicator of the excessive and disproportionate amount being claimed by the Lawyers.

h) The Debtor was never provided by GR either an estimate of the Appeal costs nor any opinion as to the prospects of a successful appeal.

h) The Court should determine the reasonable value of the GR’s services, for the paid and unpaid accounts, and reduce or disallow the accounts accordingly, with a direction that any overpayment be repaid to the Debtor.

113GR opposes the reduction of the GR Claim on the following factual basis, their argument chiefly organized on the Clatney factors:

a) That Johnson the principal of the Debtor is a sophisticated businessman with approximately 55 years of experience.

b) The Debtor asserts that it was not informed of the merits of the appeal, which GR denies stating the Debtor was involved throughout in the decision making in the Appeal, but the Debtor has not argued that there was inadequate communication from GR overall or with respect to its fees.

c) There is no evidence suggesting that the Debtor was increasingly dissatisfied with GR’s work during its retainer, but only that it became dissatisfied upon the release of the appeal decision.

d) The Debtor has only made bald allegations of overcharging, or has relied on unfair comparisons to try and argue overcharging.

e) GR submits that its invoices were detailed and the Debtor has not raised any issue with the detail of the invoices

f) At the time GR rendered its invoices, the solicitor-client relationship was ongoing.

g) There is no evidence that the payments were involuntary, and the majority of the invoices rendered by GR to the Debtor were paid, and even when there was a balance owing on its remaining invoices, GR continued to prepare for and argue the appeal notwithstanding the amounts being owing.

h) The debtor is seeking an assessment of all invoices rendered by GR during its retainer, including the invoices that the Debtor has already paid of $163,823.50.

i) In an ordinary assessment, an order for assessment after payment of an invoice is the exception, rather than the rule, and the payment of solicitors’ accounts signifies an implied acceptance of its reasonableness.

114No cross-examinations were conducted on the Affidavits filed on behalf of the Debtor or the Citak Affidavit filed on behalf of GR.

Application of evidence to the Clatney “special circumstances” factors:

(a) the sophistication of the client;

115From the evidence I conclude Johnson is a sophisticated client. There is no evidence before the Court to the contrary. At paragraph 4 of the Joshi Affidavit it is stated:

“Patrick Johnson (“Mr. Johnson”) is 79 years old and has been a businessman for approximately 55 years”

116There is nothing in the record that establishes that Johnson would not fit within the definition of “sophisticated” for the purposes of this test, and there are no findings of fact in the Trial Decision or the Appeal Decision to the contrary. If the Debtor had evidence to the contrary, it did not present it.

(b) the adequacy of communications between the client and the lawyer and (c) whether there is evidence of increasing lack of satisfaction by the client regarding the lawyer’s services;

117This motion is not a full assessment by an Assessment Officer with viva-voce evidence. There was no cross-examination of any of the witnesses on their Affidavits prior to the hearing. The only evidence of communications between Johnson and Citak are in the Joshi Affidavit and the Citak Affidavit. The Johnson GR Claim Affidavit contains no exhibits relating to communications between Johnson and GR.

118It appears from the emails at Exhibit E to the Joshi Affidavit- the GR Claim, that there was correspondence relating to the June 30, 2023 account (at least) with an email string between Citak and Johnson extending from July 18, 2023 to September 6, 2023.

119In those emails Citak repeatedly requests that Johnson pay the June Account. Johnson responds with a number of answers including:

“I was away for a few days. Our accountant pays all our bills at the end of the month. He will courier you a cheque.” (July 26)

And (August 22 - After a cheque was sent but the amount of $30,000 was withheld)

“We will send you the Thirty Thousand on September 1, when we collect the rents from the tenants.”

I note no such cheque for $30,000 was sent on September 1 according to the Debtor’s reconciliation of payments at Exhibit F to the Johnson GR Claim Affidavit

120In a series of texts appended as at Exhibit I to the Citak Affidavit Johnson had the following answers to inquiries by Citak for non or payment of less than the full amount:

(Sept 7 Text ) “we’re ending a cheque tomorrow. We are waiting for responses for Bellwoods permit and liquor license application from our city contact. You will hear from me shortly”

(Sept 8 texts) “We will courier the next cheque 9/15/23 as our funds come in every second Friday” and “We should be able to clear August by the end of the Month”

121Similar “cheque will be couriered” type responses were made by Johnson in texts on September 18 October 5, October 19, October 24, October 27, November 2, November 8, November 17, November 28, December 7, December 8, and December 11, in response to further enquiries by Citak wanting to have all of the accounts cleared by the December 15 appeal date, which in a November 17 text from Citak totaled $96,509.23 unpaid on that date.

122After the reasons are released and Citak advises Johnson on December 21, 2023 that appealing to the Supreme Court of Canada was an unrealistic option, there are no further responses in the materials by Johnson to further texts by Citak requesting payment.

123What is also apparent from this correspondence, which is the only correspondence in the record before me, produced by any party, between Citak and Johnson directly- that there are no communications in the record where Johnson himself expresses dissatisfaction with the legal representation of GR or the quantum of the accounts.

124If there were conversations between the parties regarding the accounts, that evidence is not in the Joshi Affidavit, the Johnson GR Claim Affidavit or the Citak Affidavit. In fact as I noted previously, in a December 15, 2023 text (after all but one small account had been sent to Johnson by GR) Johnson writes a text to Citak that states:

“Unfortunately; I’m not feeling well so I’ll not be attending the appeal; notwithstanding good luck today and thank you for all your hard work”

125I note that the Appeal was actually heard by the Court of Appeal on December 15, 2023 and the reasons released orally the same day.

126So it appears from the GR Claim that all of the accounts that comprise the GR Claim were incurred in the period from June to December 2023 while GR was still working on the appeal, and appearing before the Court of Appeal. Payments were being made it appears, but not the complete amounts owing, leading to the amounts being claimed by GR in the GR Claim.

127From the other texts surrounding Citak’s repeated requests for payment were requests for further documentation required by GR for the Appeal, and for other evidence required for the hearing of the appeal. There is no evidence before me that GR did not adequately communicate about the case with the Debtor or Johnson.

128There is no evidence before me about the dissatisfaction of Johnson with the services or accounts of GR prior to December 15, 2023, the date the Appeal was heard and reasons issued.

129I will deal with the issue of the communication of the costs and the prospects of the appeal within the Cohen v. Kealey criteria analysis, where the Debtor made most of these arguments.

(d) whether there is evidence of overcharging;

130I will deal with the issue of alleged overcharging within the Cohen v. Kealey criteria analysis and the specific issues raised by the Debtor with the GR Claim, and prior invoices from GR it had partially paid.

(e) the extent of the details of the bills;

131The Bills as set out in the record in both the Joshi Affidavit, the Johnson GR Claim Affidavit and the Citak Affidavit are appropriately detailed, with appropriately detailed docket entries, and breakdowns of timekeeper hours and hourly rates.

(f) whether the lawyer and client relationship has terminated or is ongoing; and

132In this case it appears that GR continued to prepare for and argue the appeal, notwithstanding growing arrears in payment of accounts as they were being rendered. It does not appear from the correspondence in the evidence that there was correspondence from Johnson complaining about the accounts, apart from one text by Johnson on November 10, 2023 that states “Please forward a complete reconciliation of your account. Thanking You in Advance”. Otherwise there were promises of cheques being couriered both before and after this text.

(g) whether the payments could be characterized as involuntary;

133There is no evidence the payments made were involuntary. It appears from the texts and emails in the record that GR continued to prepare for and argue the Appeal despite not being paid in full on an invoice by invoice basis, and despite many requests by Citak to Johnson directly for payment in full of the outstanding balance on existing invoices, and there is no evidence before me that GR made any threats to cease work until payment in full, or actually did so. In fact the evidence is quite the opposite.

134With the remaining Clatney factors cited by GR:

1. in exceptional circumstances of either a contractual or equitable nature could lead a court to find that an assessment is necessary or essential, and that those “special circumstances” relate to the underlying principle that payment of the account implies that the client accepted that the account was proper and reasonable, and therefore

2. “special circumstances” will tend to either undermine the presumption that the account was accepted as proper or show that the account was excessive or unwarranted, and

3. support a broader test for “Special circumstances” as those in which the importance of protecting the interests of the client and/or public confidence in the administration of justice, demand an assessment;

I will deal with those factors in my analysis of the jurisprudence cited by the Debtor.

135The Debtor in addition cited several cases with additional “special circumstances” tests of a more general nature, such as summarized in Gowling Lafleur Henderson LLP v Springer [18] (“Gowling v Springer”)

“30 In Mark M. Orkin's text, The Law of Costs, 2nd ed., looseleaf, (Aurora, Ont: Canada Law Book Inc., 2004), Orkin defined "special circumstances" at 3-22 as follows:

It is not possible to give an exact definition of the term "special circumstances" as used in the Solicitors Act. Formerly the term meant either pressure on the part of the solicitor or gross overcharges amounting to fraud, but the term has been interpreted as including any circumstances of an exceptional nature affecting the matter of costs or the liability of a client which a judge, in the exercise of judicial discretion in each particular case, may consider as justifying an assessment.

31 In Rooney v. Jasinski, 1952 CanLII 115 (ON CA), [1953] 1 D.L.R. 225 (Ont. C.A.) at para. 15, "special circumstances" was interpreted to include "any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor's client which a judge, in the exercise of his judicial discretion in each particular case, may consider to justify a taxation."

32 In the case of Davies, Ward & Beck v. Union Industries, 2000 CanLII 5722 (ON CA), [2000] O.J. No. 1769 (C.A.), the Court of Appeal wrote at paras. 23-4 about "special circumstances":

In my view, the payment of accounts is a factor to be considered in deciding whether or not there are "special circumstances". The totality of the circumstances must be considered. No single factor needs to be a special circumstance by itself. I find support for this conclusion in the wording of s. 11 of the Act which specifically deals with the payment of bills and special circumstances.

The phrase "special circumstances", as it appears in s. 3 of the Solicitors Act was

considered by this court in Rooney et al. v. Jasinki, 1952 CanLII 115 (ON CA), [1952] O.R. 869 (C.A.). It was said to include "any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor's client which a judge, in the exercise of his judicial discretion in each particular case, may consider and justify a taxation." As the court noted, if special Springer circumstances are present, the solicitor (or the client) may apply to the court, on notice, for an order for assessment.”

I will take these Gowling v Springer tests into account in my overall determination of whether “special circumstances” exist, and whether these tests are applicable in an expungement motion of the GR Claim under the BIA.

Application of evidence to the Cohen v. Kealey Factors

(a) the time expended by the solicitor;

136The Debtor’s central claim is that the results achieved in the Appeal, namely that it was rejected in short oral reasons issued on the date of the hearing, without Bellwoods being asked to provide oral submissions, were “grossly disproportional” to the total of $257,817.63 in accounts issued by GR for the entirety of the appeal, of which the GR Claim of $93,994.13 remained unpaid.

137The GR Claim at Exhibit L to the Citak Affidavit indicates that the total claimed outstanding is $93,994.13. The Debtor’s reconciliation at Exhibit F to the Johnson Affidavit appears to show that the amount outstanding is $89,723.59.

138The Debtor claims that the total amounts of fees and disbursements for all of the accounts total $253,547.09 at Exhibit F to the Johnson GR Claim Affidavit, but the total amount of fees and disbursements charged are $257,817.63 by GR in the text of the Johnston GR Claim Affidavit and the Debtor’s Factum.

139The Citak Affidavit doesn’t actually state what the total fees and disbursements of GR were in the Appeal. As a result I have reviewed all of the Accounts issued by GR to the Debtor as to the hours and rates charged to come to my own conclusions.

140Neither GR nor the Debtor have broken down in their materials the hours spent by timekeeper. I have done so. The Debtor in its Factum uses the figure of 431.5 total hours docketed by GR without reference to evidence as to where that number is located or how it was calculated. I could not replicate that number, adding up the docketed hours to 421.5 so I will use that number.

141From the accounts it appears that GR used the “team approach” with Citak coordinating the appeal and juniors doing the drafting and document review with differing hourly rates. Since the entirety of the GR engagement occurred over a 6 month period, the hourly rates stayed consistent:

Citak (Partner - 2004 Call) charged $685 per hour,

Dara Hirbod (“Hirbod”) (Partner- 2016 Call) charged $480 per hour,

Stephen Thiel (“Thiel”) (Partner – Research 1992 Call) charged $495 per hour; and

Neesa Craven (“Craven”) and Stephanie Mayaki (“Mayaki”) (law clerks) charged $315 per hour.

Those were all of the timekeepers docketing time on the Appeal.

Preliminary Evidentiary Issue

142As one preliminary issue, the Debtor raised that there is no direct evidence from any of these other lawyers that they had done the work, only Citak, and no “Evidence Act Notices” were issued by GR to enter the accounts into evidence.

143But Johnson attached the accounts in issue to his Johnson GR Claim Affidavit as exhibits, and nowhere in that Affidavit is there any issue made of the authenticity of the Accounts that he attaches as “business records”, and had previously paid. Also, with respect to the preliminary endorsements I made to timetable these motions, no issue was raised that GR had provided insufficient evidence. Counsel for the Debtor referred throughout their written and Oral submissions to these accounts which they wished to reduce or expunge.

144Given that Gennis had confirmed that he had reviewed the GR accounts relating to the GR Claim, and under s.135(5) it is the decision to admit the GR Claim that is being sought to be expunged, I don’t see how this admissibility argument can succeed.

145In any event, to allay any doubt, I find that the accounts of GR in the Johnson GR Claim Affidavit are admissible evidence for the work done by GR for the Debtor on the Appeal, and get to the substance of the issue.

Comparison of GR Appeal costs and RLPC Trial Costs

146GR is a Bay street law firm with over 100 lawyers. Given the subject matter and the complexity of the appeal and the years of call of the counsel, I do not find that the rates charged are unreasonable for lawyers with that experience and expertise, in a firm of that size and of that reputation.

147The Debtor puts forward as evidence of overcharging by GR, the rates charged by Rosenstein for the 5 day trial which totaled $113,591.89. For the RLPC Motion Rosenstein filed his unpaid accounts for the Trial. His hourly rate was $525 per hour. He is a sole practitioner, and a Certified Specialist in Civil Litigation with more than 25 years of experience.

148It is not clear to me what the total hours docketed by Rosenstein for the Trial were, and that amount was nowhere in evidence on this expungement motion for the GR Claim. It is also not clear from the submissions by the Debtor and Rosenstein whether the fee amount quoted for Rosenstein by Johnson reflects the trial alone or other costs of the Action.

149Rosenstein would have done most of the work with the assistance of a law clerk docketing at a rate of $150 per hour, but all of the lawyer work would have been done by Rosenstein at his hourly rate, rather than the mix of lower rates and higher rates at GR.

150I do not see how Rosenstein can be an “apples to apples ”comparator of his trial work to GR’s appellate work, where not only is there an apparent difference between RLPC and GR as law firms, but the nature of the work in each engagement is fundamentally different.

151Use by the Debtor of RLPC as a proposed comparator is even odder given the context of the two motions before me, where I am aware the Debtor is suing RLPC in the Negligence Action for its alleged negligent representation of the Debtor at Trial, necessitating the Appeal.

152Does the fact that the Debtor commenced the Negligence Action against RLPC, alleging negligence in the Trial that caused the loss, not make the task of GR in appealing from the Trial Decision MORE difficult and therefore MORE expensive?

153How is a comparator of the costs of RLPC doing so in the trial context, at all comparable to the representation by GR of the Debtor on the Appeal, where the Debtor is not seeking to have the GR Claim expunged on the basis of competence issues by GR, but rather that “…the high costs compared to the ultimate decision were wholly disproportionate to the result achieved”?

Comparison of GR Appeal Costs to Norton Rose Trial Costs

154It appears from Exhibit K to the Citak Affidavit that counsel for Bellwoods, Norton Rose was billing at a blended reduced rate of $466 for the trial and that his actual rate was $750 per hour, but that was not the rate used in the Bill of Costs. Counsel for Bellwoods confirms to Citak in an email attached to the Citak Affidavit that he was using a discounted rate for the Trial and that his usual rate was $750.

155What is nowhere in evidence is the actual costs of Norton Rose for representing Bellwoods on the Appeal, and how many hours were spent. That would have been a more useful comparator of the two large firms on the Appeal, albeit with Norton Rose having less to do on the Appeal as counsel for the Respondent, than GR representing the Appellant on the Appeal, having far more tasks to complete.

156Also it is of note that for the Trial, the total “actual” trial costs of Norton Rose (in their Bill of Costs at Exhibit K to the Citak Affidavit), even on the “reduced” rates were $259,627 in fees and totaled $517,260.56 with disbursements (of which approx. $200,000 was paid to experts).

Comparison of GR Appeal Costs to settled costs “award” to Norton Rose

157The argument of the Debtor that the $35,000 in costs “awarded” by the Court of Appeal to Bellwoods was also evidence of the disproportionate amounts billed by GR, being “nearly 7.5 times the costs awarded” is also not a useful argument. This was a consensual agreement on costs, that Citak confirmed was made on the date of the Appeal hearing.

158Again, there is no evidence what the actual costs incurred by Bellwoods on the Appeal were that Norton Rose “settled” for, so this is not a useful comparator for the Court.

159Also, Norton Rose represented Bellwoods at Trial. Not having been trial counsel GR had to download and learn all of the facts and evidence from the Trial within the two weeks GR had to file the Notice of Appeal, and then prepare the other appeal documentation and argue the Appeal on an expedited basis. Again, I am not convinced that the “settled” costs award for Norton Rose in the Appeal provides any kind of useful comparator.

Rates and hours charged by GR and timekeeper work mix

160Given the differences in overhead between RLPC and GR, and the rates charged by Norton Rose for the Trial, it would appear to me that based on experience and size of firm selected by the Debtor to handle the Appeal, that the hourly rates charged by GR lawyers are reasonable.

161As a result, the real issue on this motion is the hours billed and not the rates charged I have reviewed all of the dockets charged by GR on the Appeal. By my calculation, the hours docketed by timekeeper are:

Timekeeper

Total hours

Citak

87.1

Hirbod

245.3

Thiel

69.5

Craven -law clerk

16.9

Mayaki – law clerk

2.7

421.5

162Citak appeared for the hearing of the Appeal and conducted all communications with Johnson. Of Citak’s total time, 18.6 of his total 87.1 hours were on December 13, 14 and 15 preparing for and arguing the Appeal.

163Hirbod did much of the preliminary review of the Trial Decision and Trial Transcripts and other trial documentation and exhibits, and much of the drafting with contributions from Citak, and particularly Thiel, with respect to research and preparation of the Appeal Factum, and reviewing the Responding Factum and preparing responding arguments. The law clerks arranged for filing of Appellate Materials as well as Craven obtaining trial transcripts and preparing hyperlinks for all of the Appellate Materials.

164Contrary to the Debtor’s arguments, many hours were spent by Citak and Hirbod dealing with the Motion to Expedite brought by Bellwoods before that motion was agreed to on consent, which consumed much of the time in the late June and July dockets. I cannot agree that this was excessive time spent, particularly given Johnson’s initial instructions on the Motion to Expedite to “Please drag out as long as possible” with respect to the Appeal (Exhibit G to Citak Affidavit).

165There is nothing in the arguments of the Debtor that point to any particular timekeeper docketing an inordinate amount of time, but rather the Debtor’s arguments are in the context of GR allegedly not providing estimates of fees or opinions on outcomes, and that the aggregate time spent was not reflected in the results achieved.

166I also cannot fault GR for having both Hirbod and Citak attend several on-site meetings with Johnson and his son, given that Hirbod was preparing the majority of the documentation and Citak was dealing with the majority of the communications with clients, and responsible for overall strategy. Hirbod was dealing with the preparation of documents and reviewed all of the Trial transcripts and evidence.

167In August Hirbod spent 57.2 hours chiefly preparing the Factum, preparing the Compendium and reviewing trial transcripts to enable him to do so. In September he continued to do so for 81.8 hours, with assistance on the research side by Thiel with 43.4 hours. Through September both spent a great deal of time drafting and finalizing the factum and other Appellate documents. Both had approximately similar rates.

168From the dockets I cannot discern whether Hirbod dealt with the Facts and Thiel dealt with the preparing the law, given their specialties. I cannot make the determination, and the Debtor did not argue, that Hirbod and Thiel duplicated duties in the preparation of the Factum and related documentation.

Quality of GR Work product

169Having reviewed the 31 ground Notice of Appeal, the 132 paragraph Factum citing 36 authorities, and the 33 paragraph Reply Factum (all appended as exhibits to the Citak Affidavit) I cannot conclude that any one of those documents was technically legally deficient, or deficient from a technical advocacy perspective, or that the result of the dismissal of the Appeal was as a result of those deficiencies. The Appeal Decision makes no mention of documentary deficiencies.

170From the docketing, I can find no specific instance of over-docketing by any individual timekeeper that would seem to be on their face unreasonable, in the circumstances of the Appeal the complexity of the documentation prepared, or the arguments made.

171The real issue argued by the Debtor is whether on an overall basis, due to the dismissal of the appeal, the results do not justify the fee charged, without some discount.

(b) the legal complexity of the matters to be dealt with;

172The Notice of Appeal and the Factum filed on behalf of the Debtor by GR are exhibits to the Citak Affidavit.

173The Trial Decision of Centa, J. is lengthy (187 paragraphs), very detailed and very factually complex.

174Much of the decision making by Centa, J. on liability and damages was based on a review of the extensive expert evidence adduced at trial, and the testimony and cross-examination of the expert witness. Those decisions by Centa J. on admission and reliability of expert testimony were the basis of many of the grounds of appeal.

175The Trial Decision made many explicit findings of fact and law that were well supported in the reasoning of Centa, J. as found by the Court of Appeal in the Appeal Decision. The Appeal factum had to be lengthy and detailed in order to deal with the 31 specific grounds of Appeal.

176The Debtor argues that GR has presented no evidence of complexity, just “bald assertions”, as there was no motion for fresh evidence, the specific performance issue was resolved on consent, and that the motion for an expedited appeal was not opposed. Most particularly the Debtor argues that as the Appeal was dismissed summarily, it could not have been complex.

177However, does the fact that the Debtor commenced the Negligence Action against RLPC and Rosenstein, alleging negligence in the Trial that caused the loss, not make the task of GR in appealing from the Trial Decision MORE complex and therefor MORE expensive?

178The Debtor cites Bales Beall LLP v. Fingrut, [19] (“Bales Beall”) for the proposition that that complexity must be supported by evidence, not self-serving assertions. But nowhere in paragraphs 16-18 cited by the Debtor can I find the Court making that statement. It was evaluating the Assessment Officer’s decision of simplicity, not the specific evidence of the client in that case. The Court then reviewed the evidence and the proceeding to determine whether the Assessment Officers conclusion of “not legally or factually complex” and then disagreeing with it.

179In any event GR does provide evidence beyond “bald assertions” regarding the complexity of the Appeal. Citak provides in paragraph 26 of the Citak Affidavit a listing of the documentation that needed to be reviewed, assessed and drafted to perfect and argue the Appeal:

“ (a) The Trial Record;

(b) Joint Document Brief with over 326 pages of evidence;

(c) Joint Financial Brief with over 276 pages of evidence;

(d) Over 54 Exhibits tendered as evidence to court, which amounted to several hundred pages of documents;

(e) Five Expert Reports of Bellwoods which totalled 361 pages;

(f) Approximately 747 pages of transcripts from trial;

(g) An Agreed Statement of Facts;

(h) Bellwoods' Closing Submissions;

(i) Bellwoods' Brief of Authorities;

(j) 189's Closing Submissions;

(k) 189's Brief of Authorities;

(l) Bill of Costs for Bellwoods;

(m) The 36 page Decision of Justice Centa;

(n) Consider fresh evidence to be introduced, including reviewing current lease agreements for the premises and whether they could be terminated, as well as attempting to obtain evidence from municipal experts and staff on whether the premises could be used as proposed by Bellwoods including obtaining a liquor license;

(o) Case law and jurisprudence for the appeal regarding liability and damages;

(p) Draft appellant compendium;

(q) Draft factum and legal argument for Court of Appeal regarding liability, damages and specific performance;

(r) Draft brief of authorities for Court of Appeal;

(s) Prepare submissions for Court of Appeal;

(t) Review Responding Appeal Materials;

(u) Review Responding Factum;

(v) Review Responding Brief of Authorities;

(w) Draft Reply Factum to Responding Factum;

(x) preparing for the Appeal; and

(y) Attend and argue the Appeal.”

Many of these steps would be expected in any Appeal, but in this case Citak and his team at GR were not the Trial Counsel. Rosenstein, advised the Debtor that on appeal “You would almost certainly lose”.

180Initially, in the evidence is an email from Johnson requesting that Citak not contact Rosenstein with respect to the Appeal, claiming to have all of the documents on his computer. In an email at Exhibit C to the Citak Affidavit, Citak advises Johnson on June 6, 2023:

“In the circumstances, given the enormous evidentiary record and the limited time to get an appeal put together, we would request we speak with Rosenstein directly in order to get his sense of any errors from the judge on the decision and the facts that were known and unknown to the judge at the time, including whether he was aware the premises was re­ rented to new tenants during the lawsuit. Certainly Bellwoods' lawyer is aware of this as he refers to it in his email to Jonathan, but we are unsure, based on the judge's long ruling, whether it was before the court.”

181Rosenstein was first contacted in June, a week into the GR retainer which appears to have commenced on May 30. It appears that the Notice of Appeal was filed by GR on or about June 14, 2023 a week later. Johnson’s initial instructions on May 31 (Exhibit D to Citak Affidavit) not to involve Rosenstein in the Appeal could not have reduced the complexity or expense of the task facing GR in Appealing the Trial Decision and filing the Notice of Appeal 2 weeks after the date of initial retention.

182Citak and the GR team, in the context of an expedited appeal that lasted less than 6 ½ months from retainer to hearing, had to master all of the Trial evidence which Citak described to Johnson as “enormous”, the extensive findings of Centa, J. on that evidence, and then issue a Notice of Appeal, and prepare the legal arguments to perfect the Appeal.

183The argument by the Debtor that because the motion to expedite was consented to by the Debtor, and there was no Fresh Evidence Motion, that this was not a “complex” matter simply ignores the fact that the motion to expedite was brought by Bellwoods, and needed to be dealt with, with it appears the ultimate decision being to consent.

184From the dockets it appears there was consideration of bringing a Fresh Evidence Motion but ultimately the decision was made not to do so. I do not see how making determinations that these motions should be consented to or not brought because of determinations of their likelihood to succeed makes this matter less complex.

185I also fail to see how these apparent decisions support the Debtor’s excessive fees contention. If GR was determined to run up the bill, would it not have recommended to Johnson that both of these motions should be stridently argued, opposing the Motion to Expedite and arguing the Fresh Evidence Motion?

186There is no indication in the materials that the consent to the Expedited Appeal Motion, and GR not bringing the Fresh Evidence Motion were decisions made by a rogue GR without instructions from Johnson. This would appear to support GR’s argument that Johnson was being kept in the loop of all decisions being made in the appeal, which the dockets also appear to support.

187The argument by the Debtor that the Court of Appeal did not call on Bellwoods or released its reasons the same day dismissing the Appeal is a positive assessment by the Court of Appeal of Centa, J.s Trial Decision. It does not somehow make the Appeal being argued less complex. The strength of Centa, J’s Trial Decision made the Appeal MORE complex, not less.

188Having reviewed the documentation filed on this Motion, I cannot agree with the Debtor’s position that this Appeal was not “complex”. There is no reasonable basis for the Debtor to argue that this Appeal was a simple one. For these reasons and for the reasons set out below, I find that the appeal was legally complex.

(b) the degree of responsibility assumed by the solicitor;

189The Debtor cites Holmes v. Lerners LLP, 20 to support its position for this Cohen v. Kealy factor and several other factors. In Holmes Chiappeta J. applied the Mok v Abbass, [21]test as setting the criteria for the “degree of responsibility assumed by the solicitors” factor from Cohen v Kealy:

“Generally speaking and subject to the particular circumstances of each solicitor-client relationship, this factor encompasses a number of responsibilities, including but not limited to:

(a) Ensuring that the client understands the terms of the retainer agreement;

(b) Keeping the client apprised of the status of the litigation and the costs thereof, and maintaining control of the costs;

(c) Providing the client with sufficient information in order to enable the client to make informed decisions;

(d) Obtaining the client's instructions on the various steps and ensuring that the client understands the implications and possible consequences of those steps;

(e) Exploring the possibility of a settlement at an early stage and at every stage;

(f) Delegating work to the least expensive timekeeper who possesses the necessary skills and competence; and

(g) Providing sufficient particularity on bills and/or reporting letters to enable the client to know what services have been rendered.”

190The Debtor argues that GR met none of these Mok v Abbass criteria as applied in Holmes, based on the testimony of Johnson, and the alleged “bald assertions” in the Citak Affidavit.

191The Debtor’s chief argument regarding this Cohen v Kealy factor specifically (as interpreted in Holmes) and most of the other Cohen v Kealy factors, is that that GR never provided to the Debtor an analysis of the merits of the appeal and that GR never provided an estimate of the possible costs of the Appeal.

192However in reading the decision of Chiappetta, J. in Holmes, it appears that she is setting out a variety of criteria for the analysis of this particular Cohen v. Kealey factor, and is not requiring the lawyer at the time of retainer to provide a written opinion on likely outcomes, and an ironclad written estimate of fees to achieve the goals of the retainer, to be a prerequisite for the Court to determine whether an account was fair and reasonable or should be reduced.

Evidence of the Debtor on this issue

193In paragraphs 7, 8, 10, 11, 19, 20, 21, and 22 of the Johnson GR Affidavit, the Debtor testifies that GR:

provided no written cost estimate,

no written merits assessment,

no proportionality analysis, and

no documented advice enabling the Client to make informed decisions about the Appeal and the costs to be incurred in respect of it.

Johnson was not sufficiently informed to make meaningful decisions about the Appeal.

There was no written communication from the Lawyers to the Client about these issues.

194In particular in paragraph 10 Johnson testifies:

“At no time prior to or during the retainer did I have discussions with Mr. Citak or anyone at GR regarding the anticipated costs of the appeal or the merits of pursuing it. I assumed and relied upon the advice of counsel/Mr. Citak that there were strengths to the Appeal, and nothing to the contrary was ever communicated to me from the commencement of the Appeal until its dismissal”

And at paragraph 20:

20. At no time did Mr. Citak, or anyone at GR, provide me with any written or oral assessment of te [sic] merits of the Appeal or the likelihood of success.”

195The Debtor cites Steen v. Gibsons LLP[22] (“Steen v Gibsons”) as supporting its position with respect to this factor, and in particular:

“[27] In my view, to counsel a lawsuit in the circumstances was ill advised. In their evidence both Mr. Gibson and Mr. Dutrizac were unable to satisfactorily explain why this course was followed, other than to please the client. They did not attempt to dissuade him. They did not seriously consider passing the accounts. There is no letter of opinion to the client warning of the risks, as there surely should have been.

41In the present case, the client has satisfied me on the balance of probabilities that he

received very poor legal advice on how to address certain accounting problems which arose in the administration of this estate. I am satisfied that the only real issue dividing the parties when the client was advised to proceed with a lawsuit was a dispute about the quantum of executor’s compensation and the amount of estate legal fees. Tax liability and other accounting issues were essentially resolved and the brothers had paid over their share of these liabilities.

42This law firm never wrote opinion letters or memoranda or other communications to their client discussing the risks or the economics of the proposed litigation or the alternative courses of action such as passing the estate’s accounts before the court and having the court fix the executor’s legal fees and legal costs.

43The motion on which legal fees of over $73,000 were incurred was ill advised, unlikely

to succeed and was, I find, of no value to the client. Although Mr. Steen was obviously a very challenging client whose preferences were to pursue litigation rather than compromise or negotiate and who had serious personal issues of his own and concerning his brothers, this, in itself, is not unusual. He had the right to take the actions he did but there was a significant professional onus on the law firm to counsel their client on the risks, the financial implications and the alternative courses of action together with their analysis and recommendations. The evidence satisfies me that this did not happen. I note parenthetically that the brothers’ final offer could have been accepted subject to a judge fixing the executor’s compensation and estate fees under the estate rules.

44I am not persuaded that the law firm’s time in preparing the action (rather than the motion) was of no value to the client. While a passing of accounts would have been the preferable course, the court would ultimately have had the jurisdiction in an ordinary action to decide the substantive issue as to the proper characterization of the joint accounts, see Brian Schnurr, Estate Litigation, 2nd ed. vol. 3 at page 26-15. The action led to a mediation in which the matter was nearly settled and it provided some pressure which seemed to facilitate the negotiations carried on by Mr. Gibson which, it seems, resulted in near settlement.”

196However, as pointed out by GR, in this case there is no evidence before me of communications or other documentation, such as there are in Steen v Gibsons, that suggest or enable me to determine that the Appeal was “ill advised” legally.

197Counsel for the Debtor when asked by me confirmed that they are not alleging that GR handled the appeal in a negligent fashion, or even that the appeal was “ill advised” in terms of the likely outcome.

198I have read the Trial Decision, as well as the extensive Notice of Appeal and the Facta on the Appeal prepared by GR and I cannot conclude, simply by reading those documents, that the Appeal was “ill advised”.

199The issue is whether GR provided a formal written estimate of costs and a formal written opinion on outcome.

200Johnson is correct, that there is no documentary evidence in the record where GR provided a written estimate of the costs of the Appeal or a formal written opinion about the prospects of succeeding on the Appeal. Citak acknowledged in argument that none were prepared.

201However at paragraph 18 Johnson testifies:

“18. I confirm that the earlier invoices issued by GR were paid as rendered because I believed, at the time, that the high costs made sense in relation to the strength of the Appeal arguments. I relied on the assumption that the appeal had merit and that the fees being charged were proportionate to the work required. However, a significant portion of the fees incurred leading up to the hearing, together with invoices sent in January of 2025, proved otherwise. In light of the Appeal being dismissed within minutes of commencement, the high costs compared to the ultimate decision were wholly disproportionate to the result achieved.”

202It is true that there are no specific documents in the record that corroborate Citak’s testimony that GR fulfilled these Holmes factors, and that Johnson understood the terms of the retainer agreement, that GR kept the client apprised of the status of the litigation and the maintenance and control of costs, and that sufficient information was provided in order enable the client to make informed decisions and confirmation of the clients instructions to take various steps.

203But equally, there is even less corroboration for the “bald assertions” by Johnson that he was kept in the dark and did not understand the costs of the Appeal and the likelihood of success, that would contradict Citak’s testimony that Johnson was fully informed of the risks and prospects of appeal and the growing legal fees.

204I could not find in Johnson’s evidence any clear statement to the effect “Had I known the chances were low I would not have brought the Appeal”.

205If there was growing dissatisfaction by Johnson that the costs of the Appeal were rising too high, as the accounts rolled in, why is there no evidence of any complaint by Johnson?

206Even in the Johnson GR Claim Affidavit, Johnson never actually states he complained about the accounts either before or after the Appeal was dismissed. He states that:

“18. I confirm that the earlier invoices issued by GR were paid as rendered because I believed, at the time, that the high costs made sense in relation to the strength of the Appeal arguments. I relied on the assumption that the appeal had merit and that the fees being charged were proportionate to the work required.”

207It appears that the catalyst for the change in that belief was the release of the Appeal Decision on December 15, 2024.

Evidence of GR on this issue:

208GR denies Johnson’s allegations in the Citak Affidavit. In paragraphs 5, 6, 8, 9, 10, 11, 12, 15, 16, 18, 19, 20, 21, 30, 31, 37, and 39 Citak provides repeated testimony that Johnson:

1. Was aware of the costs involved in the nature of the time-sensitive appeal and the scope of GR's engagement, and accepted same throughout the engagement;

2. Reviewed and acknowledged those costs with Citak;

3. Johnson was provided the monthly invoices in total transparency throughout our retainer.

4. At no time took issue with the time or costs associated with the appeal;

5. Johnson was made aware of the invoices and such costs on a monthly basis, took no issue with the amounts billed and accepted same, until the final invoices constituting the GR Claim were not paid.

6. Citak and Johnson had many phone calls and meetings where the voluminous nature of the evidentiary record and substantial costs of the appeal were discussed.

7. Citak specifically advised Johnson that the appeal was extremely complex with numerous moving pieces, and would be very challenging given the detailed reasoning of Justice Centa in the Decision, and the possibility of success on appeal would be difficult to say the least.

8. Citak had been provided with correspondence from Rosenstein to Johnson attached at Exhibit E to the Citak Affidavit where Rosenstein advised Johnson that:

“Attached is the trial decision. As we discussed was possible, the judge was not happy with you. …While we could, of course, appeal, my advice to you would be to think carefully before doing that. You would almost certainly lose.”

209Citak’s most relevant testimony on the issue was:

“9. There was no practical way that we could have provided any level of assurances and/or guarantees as to the success of an appeal at that time, and advised Johnson that this type of appeal was extremely complex with numerous moving pieces. Furthermore, I reiterated that this appeal would be very challenging given the detailed reasoning of Justice Centa in the Decision, and the possibility of success on appeal would be difficult to say the least.

10. Johnson said to me that he was familiar with the general litigation process and involved, and needed to just ensure the Decision was appealed as best as possible.

11. In paragraph 9 of Johnson's November 7, 2025 affidavit, Johnson states that GR did not provide him with an assessment of the strengths of the appeal prior to 189 engaging GR. It would have been impossible at this early stage to have formed any opinion on the merits of the appeal….

12. Overall, Johnson was aware of the costs involved in the nature of the time-sensitive appeal and the scope of GR's engagement, and accepted same. Johnson was made aware of the invoices and such costs on a monthly basis, took no issue with the amounts billed and accepted same. Moreover, on at least one occasion, I specifically recall Johnson telling me during a phone call that I need not focus on receiving timely payments as he owns many buildings and payments will never be an issue.

13. As stated herein, Johnson was advised on several instances of the complexity, risk(s), and consequences of the appeal (and not appealing) and accepted same….”

Similar evidence is also provided in paragraphs 4,5,6,7,8, 11, 18, 19, 20, 24 and 31 of the Citak Affidavit.

210In particular, Citak testifies:

“16. In paragraph 10 of Johnson's November 7, 2025 affidavit, he states that at no time prior to or during the retainer did he have discussions with me regarding the costs of the appeal or the merits of pursuing it. This is unequivocally untrue. We had numerous discussions regarding the substantial costs as well as the difficulty of a successful appeal, especially considering Johnson's suggestion to us that important evidence was not before Justice Centa.”

211There are exhibits to the Citak Affidavit that suggest that Johnson was kept in the decision making loop. The email to Johnson at Exhibit C is quite detailed regarding the difficulties of issuing the Notice of Appeal on an expedited basis to obtain the stay of proceedings, but that the Specific Performance ordered by Centa J. would not be stayed and would require a stay motion or an agreement with Bellwoods. The evidentiary record that would have to be reviewed to prepare the Notice of Appeal is described in that email as “enormous”.

212At Exhibit G to the Citak Affidavit is an email where Citak requested instructions from Johnson regarding a response to the Motion by Bellwoods to expedite the appeal. The instructions by Johnson were:

“Please drag this as far as possible.”

213The texts at Exhibit I to the Citak Affidavit are mostly about payment of outstanding accounts, but also includes requests for further information to file as fresh evidence and regarding the filing of a reply factum. There is the last text from Johnson before the hearing of the Appeal on December 15,2023 that reads:

“…good luck today and thank you for all of your hard work”

214I have reviewed all of the dockets in all of the GR accounts in the Record, which are attached as exhibit E to the Johnson GR Claim Affidavit, including the Accounts that had been previously paid by the Debtor and not included in the GR Claim.

215From the call with Johnson on May 30, 2023 (the retainer letter is dated May 31, 2023) to the hearing of the appeal by the Court of Appeal on December 15, 2023, the entire retainer of GR to conduct the Appeal lasted 199 days, as the Appeal appears to have been expedited at the insistence of Bellwoods.

216The accounts that had been paid were sent to Johnson on

July 12, 2023 (June 30 Account - $58,823.56)- After Notice of Appeal had been filed and Certificate of Ordering Transcripts was filed,

August 21, 2023 (July 31 Account- $8042.10) - After Transcripts received and Motion to Expedite Appeal received

September 22, 2023 (August 31 account- $45,485.61) – After motion for Expediting Appeal heard

October 13, 2023 (Sept. 30 Account- $87,981.52) - Factum completed and Appeal perfected

November 9 (Oct 31 Account- $1646.98) – After Responding factum received

December 22 (November 30 Account - $3585.49)- After hearing date confirmed and zoom instructions issued

January 16, 2024 (December 31 Account - $45,705.68) – After appeal heard

217The accounts were more or less for monthly periods, and appear to have been sent several weeks after the end of the month. It does not appear that there was one large “surprise” account at the end of the Appeal.

218Also, it appears that from Exhibit F to the Johnson Affidavit, which is an in-house reconciliation of the accounts and payments prepared by the Debtor, that notwithstanding the actual amount of the accounts, the Debtor paid an initial retainer of $30,000 under the agreement, paid another $28,823 on August 8, 2023, then proceeded to pay 7 cheques of $15,000 per month from September 8 to December 11, notwithstanding the actual amounts of the accounts issued by GR.

219In that period, by my count Citak (who was the only lawyer on the file to speak to Johnson) spoke to Johnson in person or by telephone at least 8 times with further correspondence being sent by Citak to Johnson on 13 occasions, mostly when either there were discussions with opposing counsel that Citak was reporting on or there was additional Appeal Materials were served by opposing counsel, or where information was required.

220So when Johnson states that:

“18 I confirm that the earlier invoices issued by GR were paid as rendered because I believed, at the time, that the high costs made sense in relation to the strength of the Appeal arguments. I relied on the assumption that the appeal had merit and that the fees being charged were proportionate to the work required”

That is not actually true, that statement being cross-examined by the Debtor’s own internal reconciliation.

221The Debtor accounted for “payment” of the first $30,000 by counting the $30,000 retainer paid and then an additional $28823 paid on August 8.

222As pointed out in a text to Johnson by Citak, the Engagement Letter signed by Johnson (at Exhibit B to the Citak Affidavit) reads:

“6. Retainer

We require a retainer in the amount of $30.000.00 in Canadian funds. The retainer will be placed in our trust account and will serve as a source of payment of your final account with us. Monthly accounts are to be paid upon receipt. Any unused portion of the retainer will he returned to you upon the completion or termination of our services. We reserve the right to request additional retainer funds at various stages of the appeal should we deem it necessary.”

223So it appears that the Debtor did NOT pay the accounts “…when rendered”, as:

-Crediting the retainer amount that the Engagement Letter explicitly stated was to be applied to the final account, to approximately half of the first account rendered with a top up of $28,823 paid on August 8, 2023, and then

-paying flat monthly amounts of $15,000 from September to December 23, totaling $163,823.50 (by the reconciliation of the Debtor at Exhibit F of the Johnson GR Claim Affidavit) notwithstanding the actual amount of the accounts rendered by GR

was not following the terms of either the Engagement Letter or the individual accounts.

224From his own reconciliation it appears that NONE of invoices issued by GR were actually “paid as rendered”, that is “paid in full as they were sent”. This conduct breached the terms of the Engagement Letter, but GR nevertheless continued to represent the Debtor on the Appeal

225There is no explanation in either the Joshi Affidavit of the Johnson GR Claim Affidavit as to why the Debtor failed to pay the accounts of GR “when rendered” and whether these underpayments were as a result of an inability to pay, or another reason.

226It was incumbent on the Debtor to provide this evidence, given the entire premise of his expungement motion was that GR failed to provide an estimate of the fees, and Johnson assumed the “…that the fees being charged were proportionate to the work required”, when he appears to have consistently underpaid the accounts “when rendered” by GR.

(d) the monetary value of the matters in issue;

227The monetary value of the matters in issue was at least $6,110,000 (as well as interest and costs) owing to Bellwoods in the Bellwoods Action. This was a very significant amount. The inability to pay the amount of the Judgment by the Debtor and the Specific Performance ordered by Centa, J. were existential issues for the Debtor, as Johnston acknowledges in the Johnston GR Claim Affidavit.

228The Specific Performance was particularly problematic, given that Centa, J. ordered the Debtor to allow Bellwoods to move into the Property that was already tenanted by other tenants with leases with the Debtor for the same space.

(e) the importance of the matter to the client;

229This matter was very important to the client. The dismissal of the appeal, and the resulting enforcement activity commenced by Bellwoods to collect the of $6,110,000 (as well as interest and costs) owing to Bellwoods in the Bellwoods Action, was the cause of the filing of the Proposal by the Debtor to forestall that enforcement.

230This litigation could be described as “bet the company” litigation for the Debtor.

231The Debtor in its arguments and evidence states that the Appeal was of great importance to the Debtor due to the size of the judgment in favour of Bellwoods and the Specific Performance ordered by Centa, J. of the lease with Bellwoods.

232The Debtor admits this at paragraph 11 of the Johnson GR Claim Affidavit.

“11.At the time of retaining GR, 189 was under significant pressure, given the Judgment of approximately $6,100,000 million rendered in favour of Bellwood Brewery Inc. This financial exposure heightened the importance of receiving candid advice on the merits and costs of the appeal, which was not provided.”

(f) the degree of skill and competence demonstrated by the solicitor; and (g) the results achieved;

233Throughout the hearing, from questioning by me, counsel for the Debtor was at some pains to state that the Debtor was not alleging that GR was negligent in its representation of the Debtor on the Appeal, but that the overall bill was grossly disproportionate to the results achieved.

234Neither GR or the Debtor disputed that the Appeal was not successful, but from GR’s argument that does not mean that every failed appeal, given the success rate of appeals to the Court of Appeal, necessitates a reduction in fees.

235From my review of the documentation prepared for the Appeal by GR I could not conclude that it was not prepared with skill and competence. The central issue was the costs and the results.

(h) the ability of the client to pay;

236There is no specific evidence before the Court linking the fee charged by GR and the Debtor’s ability to pay. The ability of the Debtor to pay the amount of the GR Claim does not seem to be in issue as the Debtor is paying in full all proven unsecured claims in the Proposal, with Bellwoods being the most significant proven claim in excess of $6 Million.

237The amounts to pay the GR Claim in full are in the Trustee’s account. There was evidence in the Trustee’s Report that the Property may be worth between $20-27 million.

(i) the client's expectation as to the amount of the fee.

238This was also a central argument of the Debtor, but nowhere in the materials is there any evidence from the Debtor of what fee it would consider appropriate for the Appeal. There is also no evidence of what the Debtor “expected” the fee to be at the time of the engagement, as opposed to after the Appeal concluded.

239There is no evidence before me that the Debtor requested an estimate of fees prior to the appeal work commencing and that such estimate was refused or not answered by GR.

240From the request for expungement of the GR Claim of $93,994.13, and a request that the prior amounts paid of $163,823.50 be refunded, it appears that the Debtor is arguing that the Court expunge the entirety of the $93,994.13, and then, in addition, order the reimbursement of some portion of the $163,823.50 paid.

241The expungement of $93,994.13 of the total fee charged, alleged by the Debtor to be $253,547.09 would be a reduction of 37% if no further amounts are ordered refunded. The Debtor in its Factum requests that the fees charged by GR be “substantially reduced”.

242In argument counsel for the Debtor stated that the “sweet spot” for the fee that was reasonable for the Appeal in the view of the Debtor was in the range of $140,000 to $170,000 which would have the practical result of having the $93,994.13 GR Claim expunged in full, and up to another $20,000 being Ordered to be repaid by GR. At the $140,000 total fee amount, the maximum reduction requested would be in the range of 45%.

243Much of the argument for this factor is also linked to the “degree of skill and competence demonstrated by the solicitor”; and “the results achieved” are linked by the Debtor with this criterion.

244It is clear from his evidence that the key issue was the failure of the appeal, and how little time it took for the Court of Appeal to come to its decision, in the Debtor’s estimation. Had the Appeal been successful on the same materials, would the Debtor have complained about the same accounts?

245However, looking at the Appeal decision, the Court of Appeal made many findings in rejecting the Appeal that were clearly supportive of the factual findings of Centa, J. at Trial:

“[2] On the basis of overwhelming evidence, the trial judge found that the appellant had breached the commercial lease of the Dupont premises by inexplicably and inexcusably refusing to vacate the leased premises and failing to leave it free of all inventory and debris as required under the plain and clear language of s. 6.1 of the parties’ lease agreement. And this notwithstanding that the respondent gave the appellant numerous opportunities to do so. The trial judge rejected, correctly in our view, the appellant’s principal argument that the respondent could have simply worked around the appellant’s presence in the premises to complete its plans for the renovation of the premises. As he was entitled to do, the trial judge accepted the respondent’s evidence that the leased premises were unique and granted specific performance of the lease. Finally, as was also open to him, the trial judge accepted the expert evidence of the business valuator called by the respondent and awarded the low end of the damages calculation to take into account various contingencies and risks, and awarded the time value of the damages incurred by the respondent as a result of the delay caused by the appellant’s breach of the lease.

3The appellant essentially repeats the arguments that the trial judge rejected and submits new arguments that were not put to the trial judge. The appellant effectively asks this court to retry the case. We see no error in the trial judge’s careful and thorough reasons. He properly adverted to and applied the governing legal principles, his assessment of the evidence was without error, and his findings are firmly grounded in the evidence before him.

6We do not accept these submissions. The appellant called no expert evidence on damages nor did it challenge the expert’s methodology at trial but accepted in principle that it was sound. Nor has the appellant persuaded us that there is any error in the expert’s methodology or calculation that did discount the damages for risks and contingencies. Moreover, the trial judge specifically addressed and took into account the contingencies raised by the appellant. This, and other contingencies, led the trial judge to accept the low end of the expert’s damages calculation.”

246Counsel for GR argued that there was no evidence of an agreement between the Debtor and GR as to a maximum amount of fees to be incurred, or that representations were made that lesser fees would be charged if the appeal was unsuccessful.

247It was Citak’s evidence that Johnson was advised on several instances of the complexity, risk(s), and consequences of the appeal (and not appealing) and accepted same. There was no evidence presented by the Debtor, other than the “bald assertions” made by Johnson in the Johnson GR Claim Affidavit, that would corroborate that Johnson was unaware of the complexity or risks of appeal or the likely costs of the appeal.

248GR argued that given that there was no evidence that the Debtor objected to the accounts prior to the hearing date of the Appeal, even offering a “thank you for all of your hard work” text to Citak on the hearing date of the Appeal,

249It was the position of GR that the failure to pay the accounts and then the Debtor bringing this expungement motion was a “tit-for-tat” response for the results of the Appeal, rather than a true complaint on the fees charged.

250Supporting this argument, GR cited Coventree Inc. v. Stockwoods LLP [23]Kantana v. Dockrill, [24] and Lamoureux et al. v. Vice & Hunter LLP et al., [25]all of which deal with the distinction between interim and final bills for the purposes of determining whether special circumstances” exist to allow the prior paid bills to be assessed, and whether this was a “tit for tat” response to a lack of success.

251Most factually relevant to this case was Sullivan, Mahoney LLP v. Gaspich, 2007 ONCA 886 (cited by GR) where the Court of Appeal stated:

“[3] Perhaps more importantly, and contrary to the appellant’s submission before this court, the trial judge found that the appellant made no complaint about the quality of the solicitors’ work or the amount of their accounts until many months after the settlement of the action. He also found that:

(i) the solicitors delivered regular interim accounts, most of which were paid;

(ii) the solicitors voluntarily discounted many of their accounts having regard to the appellant’s financial circumstances;

(iii) the solicitors took the appellant’s ability to pay into consideration; and

(iv) the appellant acquiesced in the amount of the solicitors’ fees as evidenced by her ongoing partial payment of the accounts for many months after the resolution of the litigation and her failure to object to the quantum of the accounts until she ran into financial difficulties.

4These findings, which were open to the trial judge on the evidence, are dispositive of this appeal. The appellant has not demonstrated any palpable or overriding error with respect to them. Accordingly, appellate intervention is precluded.

5Finally, we note that, on the findings of the trial judge, this was difficult and hard fought litigation. As sometimes happens, the length of the trial exceeded that originally anticipated by the parties. However, that does not mean that the appellant was freed of the obligation to pay her solicitors for services properly rendered.”

252Counsel for the Debtor and for GR debated in their facta and produced dueling case law in the Debtor’s Supplementary Book of Authorities relating to whether the limitation period under the Solicitor’s Act had passed or not for the prior paid accounts prior to the commencement of the Assessment by GR, and whether accounts were “final” or “interim”, but in reality much of this argument still proceeded on the “special circumstances” test from Clatney, and the inherent jurisdiction of the Courts to ensure that assessments are dealt with fairly and equitably, despite procedural gaps and irregularities per Price v Sonsini.

253I am not sure how, other in a general sense, this jurisprudence applies, given the separate tests under jurisprudence dealing with expungement of a proof of claim under the BIA, particularly where I am already dealing with the “special circumstances” criteria as set out in Clatney, and other cases to determine whether I can order that the prior paid accounts, not in the GR Claim, can also be reduced on a Expungement Motion in the Bankruptcy Court, and that the Bankruptcy Court would order a refund.

254I have no evidence before me, that is not contradicted by evidence from Citak or corroborated by other documentary evidence, that the Debtor:

i) objected to any of the accounts of GR when they were rendered, or at any point prior to the Appeal date, with evidence before me that Johnson promised inter alia to pay them when his tenants paid or when his accountant would issue the cheques;

ii) ever requested an estimate of fees;

iii) ever requested a discount of fees;

iv) ever advised GR of an inability to pay the fees as rendered;

v) ever requested a discount of fees rendered;

vi) ever agreed with or advised GR of a maximum fee amount that the Debtor would pay for the Appeal;

vii) ever insisted on a formal written legal opinion on likely outcomes in the Appeal prior to retaining GR, or during the representation of the Debtor by GR in the Appeal.

Conclusions on Expungement Motion for GR Claim:

255Having reviewed all of the evidence before me, including all of the Affidavit materials filed by the Debtor and by GR, and all of the facta, arguments and jurisprudence cited by the Debtor and GR, in considering all of the circumstances, and in exercising my discretion as Registrar under the BIA, I conclude that:

1. my lack of jurisdiction as Registrar to grant that relief sought by the Debtor under s.192, and the construction of s.135(5), limits the relief sought on the expungement motion under the BIA to the expungement of the amounts actually claimed under the GR Claim in question, and not to all amounts previously paid by the Debtor to GR prior to the Proposal, not included in the GR Claim being sought to be expunged;

2. If I am not correct on that jurisdictional analysis under the BIA of s.135(5) and my powers as Registrar under the BIA, from my analysis of the evidence before the Court on the Expungement Motion, and the application of the Clatney factors, as well as the tests set out in Gowling v Springer, on the totality of the evidence before me the Debtor has not met its onus to prove that there exist “Special Circumstances” or “circumstances of an exceptional nature” that permit the Court to assess as part of this expungement motion any of the GR accounts previously paid by the Debtor, and that are not included in the GR Claim

3. In particular, I find that for the purposes of the Clatney and Gowling v Springer tests that:

a) On the facts before me on this motion, that the accounts of GR, including those paid by the Debtor, DO NOT contain evidence of overcharging, that they were NOT “excessive and unwarranted” “gross overcharges amounting to fraud” or that the conduct of GR in issuing all of the accounts on the appeal was conduct that would undermine the public confidence in the administration of justice, requiring the intervention of the Court to review all of the GR accounts issued to the Debtor, paid and unpaid;

b) That based on the evidence before I cannot conclude that there were inadequate communications between GR and the Debtor, and the Debtor was kept apprised of the status of litigation and the costs thereof, and that GR obtained instructions from Johnson on various steps in the litigation as described in Holmes, and that the lack of written estimates or written opinions on the merits of the appeal is not a bar to the payment of the GR accounts, including the unpaid accounts that constitute the GR Claim;

4. That GR has adduced sufficient evidence that the total amount charged was fair and reasonable in all of the circumstances of the Appeal, and that GR has met the evidentiary tests in Speciale v Schrader and Bales Beall;

5. That on a quantum meruit basis, the totality of the fee charged by GR for the Appeal, including the paid and unpaid accounts, is reasonable per the Newell v Sax, Cohen v Kealey and the Schwisberg v. Kennedy tests cited by the Debtor, notwithstanding the lack of a written estimate as to fees, given the complexity of the Appeal, the expedited nature of the Appeal, and the strength of the decision of Centa, J. decision, with the additional complication of the alleged negligence of RLPC in the representation of the Debtor at trial made GR’s task more difficult if the Debtor was correct, and GR was required to learn all of the nuances of the evidence at Trial from scratch in Order to represent the Debtor on Appeal;

6. I cannot conclude on the evidence before me that the Appeal was “ill advised” or that GR was unable to explain why the Appeal was pursued, that the Appeal not being successful is not evidence of the lack of merit to the grounds of Appeal and the prosecution of the Appeal by GR, and that communications with Johnson continued throughout the GR engagement per Steen v Gibsons;

7. For these reasons, after specifically applying to the evidence before the Court the tests in Cohen v Kealey, Clatney, Holmes, Gowling v Springer, Bales Beall, Steen v Gibsons, Coventree v. Stockwoods Kantana v. Dockrill, Lamoureux v. Vice & Hunter, Sullivan Mahoney v Gaspich, Speciale v. Schrader, Schwisberg v. Kennedy as well as all of the other jurisprudence cited by the Debtor and GR, I find that the Debtor has not met its onus to prove under the Malhotra, Malhotra-Registrar, Marsuba and RBC v Insley tests for the expungement of the GR Claim that:

8. the GR Claim was admitted through error on the part of the Trustee; OR

9. to establish that the GR Claim was not a “legitimate” claim.

256Therefore the Expungement Motion brought by the Debtor with respect to the GR Claim is dismissed. The Trustee shall proceed to make the distributions required to be made to GR under the GR Claim as required under the BIA and the terms of the Proposal.

IV) EXPUNGEMENT MOTION FOR RLPC CLAIM

257The relief sought by the Debtor for the RLPC Claim is entirely different. In the Notice of Motion the Debtor requests the following specific relief:

1. An order expunging the Proof of Claim in the amount of $66,779.26 dated February 13^th, 2025 (the “Proof of Claim”) filed by the creditor, RosensteinLaw Professional Corporation (the “Lawyer”), in this bankruptcy proposal proceeding, without prejudice to the determination in the proceeding in the Ontario Superior Court of Justice bearing Court File No. CV-25-00742901-0000 (the “Negligence Action”) of any amounts owing as between the Client and the Lawyer;

2. An order that the Proposal Trustee be permitted to pay the amount of the Proof of Claim into Court, to the Accountant of the Superior Court, to the credit of the Negligence Action to be paid out of Court either on the agreement of the parties to the Negligence Action in accordance with the Rules of Civil Procedure or as ordered by the Court in the Negligence Action;

3. In the alternative, an order to stay any payment pursuant to the Proof of Claim until the Negligence Action is adjudicated on the merits or until further directions are provided by the Court;

4. In the further alternative, an order setting a procedure and schedule if this Honourable Court determines that the issue of the Lawyer’s alleged negligence on the value of the services underlying the Proof of Claim should be determined on a s. 135(5) motion in this Bankruptcy proceeding; and,

Preliminary Issue- Can the Bankruptcy Court on an Expungement Motion Order that monies payable under the Proposal be paid into Court in the Civil Court

258I advised counsel for the Debtor that I saw no authority under the BIA or the terms of the Debtor’s own Proposal that permitted the Court to Order the distribution of payments to Creditors under the Proposal to be performed in any other way than the Proposal and BIA state, that:

7.1 …The Trustee shall make a distribution to Creditors in accordance with the provisions of the BIA

259To do otherwise would prevent the Trustee from being to fulfill its mandatory duties of making distributions, remitting Superintendent’s Levy on all distributions, certifying that the Debtor has fulfilled all of its duties under the Proposal and the BIA, and that the Trustee, having fulfilled its duties, can be discharged.

260Unfortunately, under the terms of Paragraph 7.5 of the Proposal, the Trustee cannot be discharged until it has made all distributions under the Proposal to Creditors with Proven Claims, and Proven Claims means “…the amount of the Claim of such Creditor finally determined in accordance with the provisions of the BIA”

261So the Proposal cannot be completed until the GR and RLPC claims are “finally determined”.

262This is a relevant issue for the Tor/Mundo Media/Petrowest “single proceeding” analysis.

Relief Sought

263From the assorted relief initially sought by the Debtor, the Debtor and RLPC argued the motion on the following basis:

1. The Debtor sought to have the expungement of the RLPC Claim determined in the Negligence Action, after determination of the claim for Negligence against RLPC for the Bellwoods Trial and if negligence is found, the determination of damages as a set off against the RLPC Claim. The Debtor argues that given that the alleged financial losses incurred by the Debtor were allegedly caused by the legal representation and advice provided by RLPC, it is both inequitable and prejudicial to permit the recovery of fees through the proof of claim process, and that the Negligence Action is the most just and efficient proceeding to determine amounts owing between the Debtor and RLPC, because the scope of the Negligence Action includes amounts outside of the Proof of Claim and will avoid the risk of inconsistent findings;

2. RLPC argued that as there is no determination of negligence now there is nothing to set-off against the RLPC Claim, only allegations made in the Statement of Claim in the Negligence Action that has not proceeded past the Pleadings stage. As a result the Expungement Motion should be dismissed, the distribution paid to RLPC, and if in the fullness of time a finding of negligence and damages is made against RLPC, the Debtor can pursue him then. But on a legal basis there are no grounds not to pay RLPC now, as there is no evidence before the Court, other than the allegations made by the Debtor, that there is any basis for the Trustee or the Court to find that a legal or equitable set off exists.

264Unlike the GR Claim, from the materials before me the Debtor is not objecting to the quantum or reasonableness of the RLPC Claim at this point, it is arguing that the summary processes under the BIA are insufficient for dealing with the claims made by the Debtor against RLPC in the Negligence Action, and that only the Negligence Action can determine whether the Debtor owes RLPC anything when damages for negligence are set off.

265Gennis confirmed that the Trustee admitted the RLPC Claim based on its review of the Proof of Claim on formal grounds, and a review of the accounts of RLPC for the unpaid amounts by the Debtor with respect to the representation of the Debtor at Trial. The Trustee did not review, and had no evidence whatsoever to evaluate, whether the claims made by the Debtor against RLPC in the Negligence Action were legitimate, or what damages the Debtor suffered from the alleged negligence.

266The Debtor argues that as a result, the review of the RLPC Claim and its admission by the Trustee for voting and distribution purposes could not determine whether the RLPC Claim, was “legitimate” without evaluating the alleged negligence claim and damages being set off.

Pleadings in Negligence Action

267To date the Debtor has issued a Statement of Claim on June 9, 2025, after the Negligence Action was commenced by Notice of Action on May 9, 2025. RLPC and Rosenstein personally filed a Statement of Defence on September 12, 2025, after serving a Notice of Intent to Defend on June 25, 2025. There are no Counter-Claims or Third Party Claims issued.

268The parties have confirmed that other than the exchange of Pleadings, no further steps have been taken in the Negligence Action. Leigh Youd of BYLDS Litigation has been appointed by LawPro to represent RLPC and Rosenstein, with respect to the Negligence Action, but not this expungement Motion.

269The Statement of Claim of the Debtor (the “Statement of Claim”) is at Exhibit E to the separate Affidavit of Rajiv Joshi sworn July 4, 2025 for the RLPC Expungement Motion (the “Joshi RLPC Affidavit”).

270The Statement of Claim, with respect to the specific issue of the RLPC Claim, states:

“36. The Plaintiff/189 paid the Defendants substantial professional fees for the provisions of legal services and advice pleaded herein, which fees were not warranted and for which Plaintiff/189 did not receive value. Plaintiff/189 seeks the disgorgement of the professional fees paid to the Defendants in relation to the advice, guidance and services provided by them.

38. The Defendants put forwarded a Proof of Claim for their legal fees in the Proposal. These fees should not be paid in the Proposal.”

Set-Off is not specifically plead, but the Debtor does plead:

42. As a result of these failures, the Plaintiff suffered damages, including financial losses in excess of $7,000,000 (seven million) in damages, interests and costs awarded to Bellwoods Brewery Inc. The Plaintiff has also suffered damages in the amount of legal fees paid to the Defendant and for the unsuccessful appeal. The Plaintiff further states it owes no further amount to the Defendant. The Plaintiff also had to pay $1,250,000 to Bellwoods to mitigate its losses and settle the judgment for specific performance of the Lease Agreement. The particulars of all of these damages will be provided prior to the trial of this Action.

271The Statement of Defence (the “Statement of Defence”) is at Exhibit A to the Affidavit of Morgan Webb sworn October 6, 2025 (the “Webb Affidavit”). with respect to the specific issue of the RLPC Claim, states:

“36. It was only after the approval by the trustee in bankruptcy (appointed under the Proposal in bankruptcy filed by the plaintiff) of the fees and disbursements of the defendants, that the plaintiff raised any criticism of the defendants.

37. As such, the claim should be seen for what it is, a naked and meritless attempt to avoid the obligations to pay counsel for defending vigorously a claim, for which they were instructed to defend but which ultimately had little hope of succeeding.”

Set-Off is not specifically plead in the Statement of Defence, and there is no specific counterclaim issued for the unpaid fees.

Further Supplementary Materials Required

272At the hearing, after considerable argument, I determined that although the parties were arguing general principles in their Facta, there was not a lot of jurisprudential backup to what was being specifically argued on general principles.

273Rosenstein ably argued that in these circumstances, there is a slippery slope in Bankruptcy proceedings if the simple allegation being made of Negligence in an outside Statement of Claim would require that the Bankruptcy Court to cede jurisdiction to other outside Courts, delaying the determination of the filed proof of claim, and the completion of the Bankruptcy proceedings until those outside proceedings culminate years later. He argued Proofs of Claim should be dealt with in the Bankruptcy Proceeding, using the summary procedure available, and based on the equities that existed at the time of the filing of the Bankruptcy proceeding, in this case, a year before the allegations of Negligence being made in the Statement of Claim immediately after the Proposal was approved by me.

274As I noted to counsel at the hearing, what Rosenstein was effectively arguing was the “single proceeding” theory, the jurisprudential basis for which I have summarized in these reasons.

275Wetmore for the Debtor also ably argued that in the circumstances the summary nature of the Expungement Proceedings under the BIA make determination of complex issues such as solicitors negligence claims impossible, requiring the provision of expert evidence of the alleged negligence in order to determine whether the claim in negligence exists and should be set off against the RLPC claim. To attempt to make the determination in the Bankruptcy proceeding on a summary basis would be prejudicial to the Debtor, in that the regular Civil Action process has all of the tools necessary to make that determination, which the summary Bankruptcy process lacks.

276Having adjudicated several complex appeals from disallowance and expungement motions where I had made substantial determinations of the underlying enforceability of the claims at issue[26], I felt that there had to have been some jurisprudential guidance as to when and how significant contingent and unliquidated counterclaims that affect proofs of claim filed in insolvency proceedings should be adjudicated by the Bankruptcy Court, particularly where expert evidence would be required to proved the set-off.

277I also advised at the hearing of the possible applicability of the jurisprudence under s.69.4 of the BIA for lifting stays of proceedings to allow complex matters to be better adjudicated in the Civil Courts, instead of the summary Bankruptcy procedure, applying the tests in Re Ma[27] and Re Advocate Mines[28].

278Under the classic formulation in Re Advocate Mines by Registrar Ferron of the types of proceedings where leave under s.69.4 can be granted to lift the stay to conduct proceedings outside of Bankruptcy are:

“2 The court may, however, remove the stay of proceedings prescribed by that section in appropriate cases and has done so in the following circumstances:

1. Actions against the bankrupt for a debt to which a discharge would not be a defence.

2. Actions in respect of a contingent or unliquidated debt, the proof of which and valuation has that degree of complexity which makes the summary procedure prescribed by s. 95(2) of the Bankruptcy Act inappropriate.

3. Actions in which the bankrupt is a necessary party for the complete adjudication of the matters at issue involving other parties.

4. Actions brought to establish judgment against the bankrupt to enable the plaintiff to recover under a contract of insurance or indemnity or under compensatory legislation.

5. Actions in Ontario which, at the date of bankruptcy, have progressed to a point where logic dictates that the action be permitted to continue to judgment.”

279I adjourned the hearing for further written submissions to be provided, without the need for another day of hearings.

Farb v Centurion Capital (“Farb”)[29]

280In its Supplementary submissions the Debtor cites Farb, a decision of Registrar Ferron. Farb was a lawyer who filed a Proposal. The debtor, Farb, acted for the appellants Centurion in connection with certain litigation. In September, 1997, Centurion terminated the retainer under somewhat strained circumstances and refused to pay the balance which the solicitor alleged was owing for professional services rendered.

281Farb had sued his client Centurion, and Centurion defended, denying the fees owing, requesting disgorgement of $80,000 in fees paid to Farb and counterclaimed for Negligence and breach of contract in the amount of $300,000. As in this case, pleadings had closed, but discovery had not commenced.

282Centurion filed an unliquidated proof of claim for the alleged negligence claim which was valued at $0 by the Trustee in its disallowance and Centurion Appealed from the Trustee’s disallowance.

283Registrar Ferron, in granting an Order that the stay of proceedings would be lifted and Centurion could proceed to value its negligence claim against Farb in the Civil Court, stated:

“6 This brief recital of the litigation indicates that the claim is complicated and not, in my opinion, a matter for valuation within the contemplation of s. 135, in that in order to properly value the claim it will be necessary for the Bankruptcy Court to conduct a full-blown trial such as would have occurred if Farb, the plaintiff, had not filed a proposal.

7 It is important to know that in the affidavit of Ernest McMurray, President of the Creditor Centurion, it is stated at paragraph 11 the following:

As Mr. Farb is a practicing Barrister and Solicitor, Centurion seeks to access the professional indemnity insurance that presumably is available if the solicitor was found to have been negligent in the exercise of his or her duties and responsibilities. In order for Centurion to be able to access the insurance indemnification, it is necessary that leave be granted to allow the Counterclaim to proceed.

8 Clearly, a valuation of the Centurion claim by the Bankruptcy Court would be of no use in pressing the creditor’s claim for recovery under the policy mentioned. The creditor, in order to do so, would have to proceed, in any event to judgment in the Civil Court under its counterclaim and this would be an obvious duplication of judicial effort as well as presenting the risk of inconsistent findings. In cases such as this the Bankruptcy Court defer to the Civil Court other than Bankruptcy in the interest of judicial economy and out of respect for that court’s expertise in such matters.

9 I appreciate that in deferring the valuation of the creditor’s claim that the creditor is deprived of its vote in the proposal. I suppose the court could defer consideration of the proposal until the litigation is completed but this would frustrate the proposal process which the court is bound to foster. Such a course would not only prevent the debtor from compromising his debts in order to get back into a productive financial position but also unduly delay creditors from receiving payment, at least, in part of their claims. Accordingly, the second branch of the creditor’s request is allowed and there will be an order authorizing Centurion Capital Corporation to proceed, nunc pro tunc with its counterclaim against Gary Sheldon Farb for which purpose the section 69 stay is lifted.”

284Although not precisely on point, given that the Debtor in this case is raising the negligence claim against a creditor in an expungement, rather than a creditor disallowance context, the decision is otherwise factually very similar.

285Applying the reasoning of Farb to these facts:

a) The Negligence Action is “complicated”. Each of the Debtor and RPLC make contradictory factual allegations, particularly with respect to the issue of whether Rosenstein advised Johnson that the defence of the Bellwoods Action would be a “slam dunk” at trial, which RLPC denies, and which evidentiary dispute would require a credibility analysis by the trier of fact;

b) The Negligence Action would need to have expert evidence for both sides, particularly on the issue of whether expert evidence should have been led by RPLC for the Debtor, and the alleged deficiencies of the cross-examination by Rosenstein of the Bellwoods’ experts, and the preparation of Johnson for his testimony;

c) With RLPC and Rosenstein having plead contributory negligence as a defence, the Court would have to make a determination as whether any portion of the alleged damages resulted from the conduct of the Debtor and Johnson, and how to value and apportion those alleged contributory negligence damages;

d) In this case clearly LawPro is defending RLPC and Rosenstein in the Action as a source of repayment for Debtor, should it succeed;

e) If the Bankruptcy Court proceeded to determine the alleged negligence of RLPC as a set off to the RLPC Claim, this would be an obvious duplication of judicial effort, as independent of that, the Civil Trial court would also have to perform the same evaluation for the purposes of the Negligence Action, which would also present the risk of inconsistent findings;

f) I note that the Negligence Action is against both RLPC and Rosenstein personally, while the RLPC Claim in the Proposal is by RLPC alone. Accordingly a determination of Negligence with respect to the negligence of RLPC, to determine whether the RLPC Claim should be reduced, would not be dispositive of all of the issues in the Negligence Action.

g) The consideration of whether to defer the vote on the Proposal pending the determination of the claim is no longer an issue, due to the amendments to the BIA, and as the value of the RLPC Claim, allowed or disallowed, would have no effect on the acceptance or rejection of the Proposal, given that the massive Bellwoods claim, now paid, would still have the effect of maintaining the approval of the Proposal, whatever the outcome of the Negligence Action.

286Registrar Ferron’s analysis in Farb is harmonious with his analysis in Re Advocate Mines in the s.69.4 leave context for claims involving a Debtor or Bankrupt. Applying that analysis the determination of the RLPC Claim, and the set-off alleged of the Negligence claims in the Negligence Action fit within these Re Advocate Mines factors:

2. The Negligence Action relates to a claim for a contingent or unliquidated debt, which is the basis for the set-off claim in the Expungement Motion, the proof of which and valuation has that degree of complexity which makes the summary procedure prescribed by the BIA inappropriate.

3. In the Negligence Action the Debtor is a necessary party for the complete adjudication of the matters at issue involving other parties, as is Rosenstein who is a defendant to the Negligence Action, but is not personally a claimant to the RLPC claim, and LawPro is involved in defending the Negligence Action, but is not involved in resolving the negligence allegations as a set-off to the RLPC Claim in the Expungement Motion.

4. Because the Negligence Action involves LawPro as the insurer for RLPC and Rosenstein, the Expungement Claim for negligence is effectively a claim by the Debtor, RLPC and Rosenstein to determine recovery under a contract of insurance or indemnity if negligence is found.

Other cases cited by Debtor

287In Re Farrow[30], Associate Justice Perron remitted the hearing of a residential landlord and tenant dispute to the Landlord and Tenant Board for determination of the amounts owing between the landlord who had filed a proof of claim in the Tenant’s Proposal, citing the specialized statutory jurisdiction of that Tribunal, and the lack of evidence before the Court supporting the proof of claim, and that the Landlord would suffer prejudice if his claim were not valued by the specialist tribunal, the LTB.

In Poitras[31] the Quebec Court of Appeal suspended the proof of claim adjudication proceedings in the Quebec Bankruptcy, to allow a pending judgment in Ontario Civil Proceedings to determine set-offs, as the large claims by Sears against the Debtor would extinguish any accounts receivable owing to the Estate of the Bankrupt by Sears, and a determination of the Proof of Claim in the Bankruptcy, could not order Sears to pay the amount of receivables allegedly payable, without a determination being made in the Ontario action. Schrager, J.S.C. determined:

“[27] By way of summary, the two (2) lawsuits are identical in that the issues overlap. There is accordingly a possibility of contradictory judgments should both lawsuits go forward. The Québec suit may not put an end to the dispute between the parties. The only prejudice to National Bank and the Trustee is the passage of time. Consequently, the Québec proceedings will be stayed.”

“Single Proceeding Model” Analysis

288To the “Single Proceeding Model” analysis the Debtor added the decision of Cavanagh, J. in In the Matter of the Proposal to Creditors of Conforti Holdings Limited, [32](commonly called “Morrocanoil”)

289In that case Moroccanoil, Inc. filed a proof of claim with the Proposal Trustee for a claim against the Company based on alleged breaches of a settlement agreement made in U.S. litigation. Litigation in the U.S. in respect of this claim was brought and is pending. The Company has brought a cross-motion in the U.S. litigation claiming damages from Moroccanoil.

290The Proposal Trustee brought a motion for directions that it should not determine the Morrocanoil claim under s.135, but that the claim should be determined in litigation in the United States. The Creditor Morrocanoil opposed and requested the Canadian Bankruptcy Court to value the claim.

291In rejecting the Trustee’s request, Cavanagh, J. states:

“[44] I read s. 135(1.1) of the BIA as unambiguously providing that the Proposal Trustee is required to determine whether Moroccanoil’s claim is a provable claim and, if it is, that the Proposal Trustee value it. In Re Nortel Networks Corporation et al., 2015 ONSC 1354, Justice Newbould, at para. 35, held, in the context of an insolvency under the CCAA, that a court should not lightly lose control of the process whereby claims against the debtor are to be determined. The requirement for claims to be determined and valued through a single claims process under the supervision of a single Bankruptcy Court is consistent with the scheme and objects of the insolvency process under the BIA.

45I conclude that the inherent jurisdiction of this Court under s. 183(1) of the BIA does not extend to displacing the claims process mandated by s. 135(1.1) of the BIA.

46If I am in error in this regard, I address whether this is one of the clear cases where the court’s inherent jurisdiction should be exercised to displace the process for valuation of claims provided for in the BIA.

47The Proposal Trustee submits that adjudication of the Moroccanoil Claim through the BIA proceedings would be impractical, unreasonable and unworkable. The Proposal Trustee contends that the valuation exercise would be one of disproportionate difficulty, scale, time, and cost, which would be borne by the estate of the Company rather than the litigants to the private disputes. The Proposal Trustee cites the complexity of the issues, the voluminous evidentiary record, the existence of issues of credibility, the choice of law and jurisdiction provisions in the settlement agreement, the likelihood of an appeal, the need to determine the Company’s cross-motion, and the stage of the New Jersey litigation as factors that support the requested direction.

48Morrocanoil submits that any appeal of the Proposal Trustee’s valuation of its claim should proceed to a judge of the Commercial List under s. 192(2) of the BIA to be heard as a trial of an issue by way of a streamlined process based on largely paper record and supplemented by viva voce evidence, as needed.

49I accept that valuation of the Moroccanoil Proof of Claim may be an exercise of some complexity. It is expected that there will be an appeal of the Proposal Trustee’s valuation. Nevertheless, on the materials before me, I am not satisfied that the adjudication of Moroccanoil’s Proof of Claim cannot be completed in this Court through process that, with the benefit of case management, will not be materially longer, less efficient, or more costly than continuing the civil proceedings in the New Jersey Court.

50If there is jurisdiction for this Court to give the requested direction, I am not satisfied that the Proposal Trustee has shown that this is one of the clear cases that justifies the exercise of discretion to depart from the usual process for valuation of claims under the BIA.”

292The Debtor argues that Morrocanoil is distinguishable on its very specific facts, namely in this case the real issue was that the Trustee was seeking direction not to fulfill its statutory duties, while the Trustee here had fulfilled those duties with respect to the admission of the RLPC Claim, the issue is the forum for the expungement.

293The reasoning of Morrocanoil fits into the more general tests in Tron/Sam Levy/Mundo Media/Petrowest under the “Single Proceeding” theory, so I will analyze on the basis of all of those tests.

294I note that the central concern in Petrowest, is that (at 55):

“This model favours the enforcement of stakeholder rights through a centralized judicial process. The legislative policy in favour of “single control” is reflected in Canadian bankruptcy, insolvency, and winding-up legislation (Century Services , at paras. 22-23). The single proceeding model is intended to mitigate the inefficiency and chaos that would result if each stakeholder in an insolvency initiated a separate claim to enforce its rights.”

295In this case, with my disposition of the Expungement Motion for the GR Claim, the RLPC Claim is the last undetermined claim in the Proposal, with all other Proven Claims having already been determined and paid. As a result, the concern for the “inefficiency and chaos” which is the premise behind the “Single Proceeding Model” is not as acute in this case.

296Applying the other Petrowest factors to these facts:

a) The effect of arbitration on the integrity of the insolvency proceedings:

In this case the concern in Petrowest that there be an “orderly and equitable distribution” or “orderly and expedition administration of the debtor’s property” is also not as acute here, as the Proposal provides for a 100% payment to Proven Creditors, all of whom (other than GR and RLPC) have been paid to date, and no other creditor is being prejudiced by the RLPC Claim not being determined through the Proposal Proceedings.

b) The relative prejudice to the parties from the referral of the dispute to an alternate proceeding:

In this case the benefit, for both parties frankly, is that the Civil Court has the complete set of tools to determine the fundamental issue of Negligence, particularly through the use of the regular tools relating to the admissibility and evaluation of expert evidence, which the summary Bankruptcy process lacks.

RLPC will not be paid its $66,779.26 immediately through the Proposal, pending determination of the Negligence Action, but there would have to be some kind of adjudication of the RLPC Claim, and on sheer practical terms, that adjudication may require some expert evidence relating negligence the costs of which reports and testimony, the costs of which may absorb any benefit to RLPC.

If the Debtor was not able to lead expert evidence to support his set-off claim for Negligence, I do not see how it would not be prejudiced.

With respect to the Trustee, it would not be able to complete its duties under the BIA pending the determination, but other that reconciling the Trust account where the remaining proposal fund amounts would be deposited, its only role in the Negligence Action is to await its outcome.

c) The urgency of resolving the dispute.

In this case the concern in Petrowest that the resolution of the dispute by an outside proceeding would be to “…postpone the resolution of the dispute and hinder the insolvency proceedings” is again, not present here as the resolution of the RLPC dispute is not hindering the distributions to any of the other creditors, as those have already occurred (other than GR). The only other parties affected by the continuation of the dispute is the Trustee, whose future role I have discussed, and the Debtor, whose Proposal has not been technically completed until a final determination is made of the RLPC Claim, but it is the party asking for the relief.

d) Existence of Stay

This factor is not that relevant because the Debtor is the one seeking the outside proceeding, not a creditor, and to date RLPC and Rosenstein have not asserted a counter-claim that they wish to continue against the Debtor.

This also stands on its head the concern in Sam Levy and Mundo Media of “strangers to the Bankruptcy” and creditors having to demonstrate why their actions should “fragment” the insolvency proceedings across separate proceedings in multiple jurisdictions.

Supplementary Submissions of RLPC

297The Supplementary Submissions of RLPC focused on the issue of the availability of set-off under s.97(3) of the BIA, and the chief argument made by RLPC was that at this time, as there has been an allegation of negligence made in the Negligence Action against RLPC and Rosenstein, but no actual legal finding, that RLPC currently owes nothing to the Debtor that the Debtor could set off against the RLPC Claim under s.97(3). RLPC also argues that even if the amounts alleged by the Debtor to be owing by RLPC and Rosenstein in the Negligence Action are determined, that the claim would be one of abatement and not equitable set-off, and therefore s.97(3) could not apply.

298In this regard RLPC cites Citibank Canada v Confederation Life Insurance Co (Liquidator of),[33] King Insurance Finance (Wines) Inc v 1557359 Ontario Inc (cob Willowdale Autobody Inc), [34], Canada (Attorney General) v Confederation Life Insurance Co, [35]Cam-Net Communications v Vancouver Telephone Co, [36] and The Prince Albert Co-operative Association Ltd v Nagy (Trustee of), [37] on the issues as to whether legal or equitable set-off is available to the Debtor.

299There is no question that currently the Debtor has no liquidated set-off claim, legal or equitable, that arises from the Negligence Action to set-off against the RLPC Claim.

300The issue that these cases do not answer, per the Farb and Petrowest analysis, is how a determination of those set-off claims will be made, when, and by what Court.

301In the Supplementary Submissions RLPC argues that the Trustee “declined” to consider the Negligence Action to determine whether it should impact the RLPC Claim through a set-off claim. But on the evidence before me it appears that the Trustee was first informed of the objections of the Debtor to distributions being made to GR and RLPC shortly after my approval of the Proposal, and well after the admission of the GR and RLPC claims for the purposes of voting and distribution.

302With the Debtor bringing these expungement motions, this raised the issue of set off with respect to the RLPC Claim, which appears from the evidence not within the decision making of the Trustee when the RLPC Claim was admitted.

303Either way, a Court needs to determine the validity of the alleged negligence claim against RLPC (for the purposes of the expungement) or RLPC and Rosenstein (for the purposes of the Negligence Action and the pleading of disgorgement of fees paid), to determine whether the legal or equitable set off exists (for expungement purposes) or disgorgement should be ordered (for the purposes of the Negligence Action).

304The question is whether the Bankruptcy Court deal with one of these two issues, for one of the two Defendants, or should the Civil Court be permitted to determine those issues, with the expungement motion for the RLPC Claim being adjourned pending an overall determination of the issues, to give direction to the Bankruptcy Court.

305The Farb and Petrowest analysis indicates that in these circumstances the Bankruptcy Court should adjourn the expungement motion pending the determination of the Negligence Action, on proper expert evidence and with proper safeguards and procedures available under the Civil Rules of Civil Procedure. If there is an abatement vs set-off argument that is available to make s.97(3) inapplicable, it is premised on there being liability determined against RLPC in the Negligence Action. Once that liability issue is determined, that argument can be revisited on the resumption of the Expungement Motion for the RLPC Claim.

306As noted in the submissions of RLPC, this is a unique insolvency situation where the other Proven Creditors are not involved in the outcome of the Negligence Action, having already been paid in full, so the “slippery slope” arguments about the reference of matters to other Courts fragmenting the “control centre” of the insolvency estate per Sam Levy do not hold the same sway.

V. SUMMARY OF ORDERS GRANTED

307For all of the reasons set out above on the individual issues dealt with in my Reasons, and in exercising my discretion generally and in also exercising my discretion as Registrar under the provisions of the BIA and the BIA Rules, I hereby Order that:

1. The Expungement Motion for the GR Claim is dismissed and the Trustee shall proceed to make the distribution to GR of the amount payable under the Proposal for the GR Claim;

2. The Expungement Motion for the RLPC Claim is adjourned, pending determination of the Negligence Action to determine whether a set-off claim exists by the Debtor against the RLPC Claim, and the Trustee shall retain the amount of the RLPC claim in the Estate Account pending further Order of the Court regarding distribution under the RLPC Claim.

COSTS

308If GR and the Debtor cannot agree on the disposition of the costs of the GR Claim Expungement Motion, they may make written submissions, not exceeding three pages each, GR within 40 days and the Debtor within 60 days.

309With respect to the RLPC Claim Expungement Motion, due to the novelty of the issues in this case, and the referral of this issue of the determination of the possible set-off against the RLPC Claim to the Civil Court for adjudication in the Negligence Action, the issue of costs for this Motion I will remit to the Civil Court dealing with the Negligence Action.

Associate Justice Ilchenko

Registrar in Bankruptcy

Superior Court of Justice

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