Court costs awarded against trustee in bankruptcy personally

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The general rule in court proceedings is that the losing party must pay the successful party’s costs: not their actual legal costs, but a contribution to those costs based on a tariff of charges.

Where one of the combatants is a trustee in bankruptcy, the Bankruptcy and Insolvency Act provides that the trustee is not personally liable for such costs; any award of costs against the trustee must be satisfied from the assets in the bankruptcy estate.

There are exceptions, and in a recent BC case the trustee was held personally liable for costs: Asian Concepts Franchising. In Asian Concepts, the court decided that the trustee had unreasonably allowed a creditor’s claim, and then unreasonably opposed another creditor’s application to question that allowance. The court held that the trustee had abandoned its neutral role and taken an adversarial approach, justifying an award of costs against the trustee personally (there were not sufficient assets in the bankruptcy estate to reimburse the trustee).

The trustee’s woes did not stop there. The court went on to decide that an increased level of costs was appropriate, and awarded “special costs” in favour of the objecting creditor, effectively full payment of all the creditor’s legal costs, payable by the trustee personally.

Bankruptcies frequently involve battles between creditors, or between creditors and the trustee in bankruptcy, and fully protecting your rights often requires experienced legal advice.

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