Bankrupt ordered to pay trustee costs on partial indemnity basis

Ontario civil | Bankruptcy and Insolvency | Discharge of bankrupt | Practice and procedure

Bankrupt declared bankruptcy after marriage ended. Bankrupt’s discharge was annulled for failure to disclose disposition of foreign property. Bankrupt defaulted on proposal to creditors despite having received approximately same amount of money from matrimonial settlement and sale of shares. Registrar noted failure to disclose assets, failure to perform consumer proposal, and failure to account for loss of assets to meet liabilities, determined bankrupt could not be absolutely discharged, and ordered payment of $61,000 as condition of discharge. Bankrupt’s appeal and motion to admit fresh evidence almost three years later was dismissed. Registrar was found to have weighed all relevant factors and correctly concluded that unconditional discharge would undermine integrity of bankruptcy system, that mental illness was not shown to have bearing on issue, that there was no explanation for dissipation of funds, and that fresh evidence was neither sufficiently credible nor probative to have likely affected result. Hearing was held to determine costs. Bankrupt was ordered to pay trustee costs on partial indemnity basis of $4,250. Bankrupt had to be taken to have known that appealing included risk of increasing his burden. Bankrupt’s request to take trustee’s costs from $61,000 he was ordered to pay estate was not fair to creditors. Bankrupt blamed everyone else and it was appropriate that he bear responsibility for decisions and natural outcome of advice upon which he chose to act. That said, substantial indemnity costs were not warranted as bankrupt’s allegations impugning trustee’s conduct were not of sufficient severity or made with sufficient particularity to put trustee’s reputation at risk. Costs of $6,915.31 trustee claimed were modest in comparison to costs of lawyer. Trustee performed work counsel would have been expected to perform and saved estate and bankrupt significant legal fees.

Kuczera (2017), 2017 CarswellOnt 15086, 2017 ONSC 5699, F.L. Myers J. (Ont. S.C.J. [Commercial List]); additional reasons (2017), 2017 CarswellOnt 13306, 2017 ONSC 5140, F.L. Myers J. (Ont. S.C.J. [Commercial List]).

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