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Supreme Court of Canada

Practice—Costs—Bankruptcy—Company—Receiving order—Appeal by debtor—Absence of interest—Solicitors ordered to pay costs personally—Code of Civil Procedure, arts. 55, 59.

Re Lingen Trailer (1969), C.B.R. (n.s.) 197; Re F. & W. Stereo Pacific Ltd. (1976), 22 C.B.R. (n.s.) 84; Myers v. Elman, [1940] A.C. 282, referred to.

MOTION for leave to appeal from a judgment of the Court of Appeal affirming a judgment of the Superior Court declaring the applicant bankrupt as of October 24, 1977. Motion dismissed with costs against solicitors for applicant personally.

Jacques Rossignol, for the applicant.

Pierre Jolin, for the respondents.

The judgment of the Court was delivered by

PIGEON J.—After hearing counsel for the applicant on this motion for leave to appeal under the Bankruptcy Act, we announced our unanimous conclusion that this was not a case in which leave to appeal should be given. Counsel for the respondents and for the applicant were then invited to submit argument on the question of costs. Having heard their submissions and asked counsel for the applicant to say why the solicitors should not be ordered to pay costs personally, we so ordered. I find it desirable to state the reasons for this decision.

On October 24, 1977, respondent, Hunter Douglas Canada Limited (“Hunter Douglas”), filed in the office of the Clerk of the Superior Court at Drummondville a petition in bankruptcy against applicant, Pacific Mobile Corporation

[Page 843]

(“the debtor”). By order made the same day, respondent Gérald Robitaille was appointed interim receiver. The debtor did not oppose the petition, but it applied for and was granted adjournments repeatedly. On November 8, in ordering the first postponement to December 8, the judge took care to say: [TRANSLATION] “if there is a proposal … it must be filed in this district and in this case”. However, after a second postponement to January 10, 1978, the debtor filed a proposal in Montreal on the eve of that date. This proposal was refused at a meeting of the creditors on January 27, and on the 31st the official receiver issued a certificate of assignment. Subsequently, however, on March 22, 1978, the judge of the Superior Court sitting at Drummondville rendered judgment on the Hunter Douglas petition; the first paragraph of his judgment stated:

[TRANSLATION] Having before it the petition for a receiving order, having examined the exhibits and evidence and heard counsel, and deliberated on the whole:

and the conclusions were:

[TRANSLATION] FOR THESE REASONS:

DOTH MAKE a receiving order against the debtor, Pacific Mobile Corporation;

DOTH DECLARE the debtor bankrupt as of October 24, 1977; …

An appeal from this judgment was dismissed by the Court of Appeal on January 16, 1979. The reasons stated by Owen J.A. mention, inter alia, the following cases to the same effect:

Re LINGEN TRAILER[1];

Re F. & W. STEREO PACIFIC LTD.[2]

The following observations were also made:

In dealing with a bankruptcy, it is necessary to keep in mind the underlying philosophy that matters should be dealt with and the assets realized and distributed as expeditiously and economically as possible. Bankruptcy proceedings are primarily for the benefit of the creditors and are not intended to be dragged out by technicalities, procedural and otherwise, for the advantage of the debtor and the friends of the debtor.

[Page 844]

It is clear that in this case the debtor has no interest in a further appeal from the judgment of the Superior Court affirmed by the Court of Appeal. It does not in any way deny that it is insolvent and bankrupt; all it disputes is the date from which it must be regarded as being so. This date is unquestionably of great importance to some other persons, but these are not before the Court and the debtor may not act as a dummy or as a screen for them. The rules of the Code of Civil Procedure apply in bankruptcy matters unless otherwise provided, and arts. 55 and 59 provide:

55. Whoever brings an action at law, whether for the enforcement of a right which is not recognized or is jeopardized or denied, or otherwise to obtain a pronouncement upon the existence of a legal situation, must have a sufficient interest therein.

59. A person cannot use the name of another to plead, except the Crown through authorized representatives. …

It should be noted that the debtor is a body corporate, a company which will be dissolved by judicial winding-up. It therefore is not in the same legal position as a natural person, who is expected on discharge to resume the full exercise of his rights and, in the interim, retains some legal capacity.

Counsel for the debtor suggested that this Court make the same order as the Court of Appeal, namely, costs against the estate. It is true that this Court often follows the decision of the Court of Appeal in this matter. In this case, however, we felt we should make a different order. We do not consider it fair to make the debtor’s creditors bear the cost of proceedings which were not instituted in their interest: quite the contrary. Furthermore such a decision, far from appropriately discouraging unnecessary appeals occasioning costly delays, tends on the contrary to favour them. It is in view of such considerations that we concluded that, in the circumstances, the only fair decision was to make the costs payable by the solicitors for the applicant personally. In effect, the latter are in the position of solicitors without a proper mandate. The debtor has not yet lost its legal existence

[Page 845]

because the winding-up of its estate has not been completed, but this estate is wholly in the hands of the trustee, and he alone has the authority to bind it to the payment of costs. These proceedings were instituted, not in the interest of the debtor but, in fact, in the interest of undisclosed third parties.

In such circumstances the Court should make use of its power to order costs payable by solicitors personally, in accordance with principles which were fully stated by the House of Lords in Myers v. Elman[3], and need not be restated here.

Motion dismissed with costs against solicitors for applicant personally.

Solicitors for the applicant: Lapointe & Rosenstein, Montreal.

Solicitors for the respondents: Dorion, Jolin & Associés, Quebec.

 



[1] (1969), 13 C.B.R. (n.s.) 197.

[2] (1975), 22 C.B.R. (n.s.) 84.

[3] [1940] A.C. 282.

 

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