Ontario Civil

Bankruptcy and Insolvency

Practice and Procedure in Courts


Lawyer personally liable for causing costs to be incurred unnecessarily

Against lawyer personally. Mining company (bankrupt) was placed in receivership. Notice of appeal of appointment of receiver was quashed and request for leave to appeal was refused. Receiver filed assignment in bankruptcy on behalf of bankrupt and trustee was appointed. Trustee refused to pursue leave motion. Lawyer purporting to act on behalf of bankrupt and its directors and officers filed materials for motion to set aside bankruptcy, raise constitutional question, seek intervenor status on behalf of Aboriginal community, and to seek order prohibiting receiver from acting due to alleged conflict of interest. Motion judge dismissed motion as res judicata, abuse of court’s process and collateral attack on prior orders, and awarded each of receiver, numbered company and trustee costs of $5,000. Hearing was held to determine liability for costs. Lawyer, directors and officers of bankrupt were jointly and severally liable for costs. Due to appointment of trustee, neither bankrupt, officers, directors nor lawyer had authority to bring motion since all authority to do so vested exclusively in trustee. Court had discretion under s. 197(1) of Bankruptcy and Insolvency Act to award costs against non-party where there was fraud or abuse of court’s process in general and bankruptcy process in particular. Motion was waste of time and money and abuse of court’s process and of bankruptcy process. Bankrupt was incapable of paying costs. Lawyer’s conduct fell within R. 57.07(1) and (2) of Rules of Court as he caused costs to be incurred unnecessarily and costs against him personally were warranted. As former director, lawyer represented bankrupt throughout bankruptcy and knew bankrupt was insolvent, had been assigned into bankruptcy and lacked standing to bring any motion or to instruct him to do so. As solicitor and officer of court, lawyer knew motion was improper and that he could not receive instructions to bring motion on its behalf. Lawyer knew or ought to have known that motion was frivolous and that issues were res judicata and that motion was collateral attack on court’s decisions and abuse of court’s process. Lawyer contravened R. 15.02 by failing to deliver required notice informing trustee and opposing counsel of capacity in which he had standing and who authorized bringing of motion.

2403177 Ontario Inc. v. Bending lake Iron Group Limited (2017), 2017 CarswellOnt 10037, 2017 ONSC 3566, Patrick Smith J. (Ont. S.C.J.); additional reasons (2016), 2016 CarswellOnt 2673, 2016 ONSC 199, D.C. Shaw J. (Ont. S.C.J.).


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