• Post category:Court Cases

Rideout (Re), 2022 ABKB 653

What factors will a court consider when the OSB contests a trustee’s fees?

The Office of the Superintendent of Bankruptcy contested the Trustee’s Final Statement of Receipts and Disbursements of $30,155.11, as against a recovery of the same amount. The OSB suggested a reduction of $8,893.38. After the R&D was submitted to the OSB for comment, and, while waiting to hear from the OSB, a new creditor (CMHC) emerged to claim a shortfall in their mortgage action in the amount of $209,348.18. To that point, total admitted unsecured claims totaled $138,896.11.

While the matter awaited a hearing date, the Trustee called a meeting of creditors, which CMHC attended. The Trustee put the R&D and the OSB’s comment materials before CMHC at the meeting, and the latter approved them as tendered, without reduction. The Court took notice that CMHC was a sophisticated litigant. The materials before the Court also suggested that CMHC wanted to accelerate the Trustee’s discharge so that the bankrupt would no longer enjoy the protection of the Act and the CMHC’s rights would be restored.

Section 39(1) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA) permits the Trustee’s renumeration to be approved by the creditors. This, typically, is given great weight by the Court. It does not affect the right of the OSB to comment, or the Court to tax. The motives of the approving creditor are largely irrelevant. However, Creditors cannot approve charges that are not permitted by the Act.

The Court considered the Trustee’s submissions, the OSB’s comments and the fact of approval of the Trustee’s accounts by the majority creditor. The R&D was taxed as submitted subject to the following reductions: fax, internet and e-mail charges in the amount of $60 were to be removed, as well as counseling charges (1.1 hours beyond the amount permitted by the tariff). ‘Bank fees’ claimed as a disbursement were also to be removed as there were no charges payable to any financial institution that corresponded to this amount. The Trustee could obtain its discharge upon submission of a revised R&D.

In respect of costs, the Court noted that they are in its sole discretion. Costs may be awarded against the Trustee personally for an ill-advised motion for advice and directions, in favor of the OSB, or even against the OSB for intervening in a matter as a ‘test case’ in order to settle conflicting authorities.

This was not a test case, but rather a taxation at the Registrar’s level. This taxation was about conflicting opinions: the Trustee’s opinion about what certain tasks were worth, and the OSB’s opinion that, in the circumstances of this estate, those costs should be less. The OSB had a right to comment and request taxation, which is afforded by sections 5(3)(g), 28(1)(c), 152(3), 152(4) of the BIA and r. 63. This is part of the OSB’s supervisory function and should not be impaired in any way by the threat of costs.

At this level, costs should not be awarded against the OSB for exercising its statutory function unless there is an element of bad faith, or improper purpose. The OSB, in issuing their letter of comment, merely exercised their supervisory function and their right to review and comment as afforded by the Act.

Judge: W.S. Schlosser, Registrar in Bankruptcy

Professionals: Kathleen Jacob, LIT and James Moses, LIT for the Applicant/Trustee; Jennifer Kidd and Scott Guertin, OSB

Fullcase: https://canlii.ca/t/js6nw

By Matilda Lici