“In my endorsement dated December 18, 2017, I indicated that I intended to strike the respondent’s pleadings if he had not paid the cost award by January 31, 2018. However, on January 16, 2018, the respondent made an assignment in bankruptcy.
The legal effect of the respondent filing an assignment in bankruptcy is that all enforcement of the cost decision of Justice Sheard is stayed by the operation of section 69.3(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, which provides that, on bankruptcy, no creditor has any remedy against the debtor or the debtor’s property or shall commence or continue any action for the recovery of a claim provable in bankruptcy until the trustee has been discharged.
Section 69.4 of the Bankruptcy and Insolvency Act reads as follows:
69.4 A creditor who is affected by the operation of sections 69 to 69.31 or any other person affected by the operation of section 69.31 may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied:
(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or
(b) that it is equitable on other grounds to make such a declaration.
The stay of enforcement by the operation of the Bankruptcy and Insolvency Act can be lifted where a creditor or other person is likely to be materially prejudiced by the continuous operation of section 69.3 or where it is equitable on other grounds. There is no application for stay before me.
The applicant submits that this matter is akin to the situation in Carpenter v. Carpenter, 2016 ONCA 313, where the Court of Appeal upheld the striking of a party’s pleadings for non-payment of costs. This case is distinguishable from Carpenter on its facts. The difference in that case was that the defaulting party went bankrupt after the decision to strike pleadings was made. In this case, the bankruptcy occurred before this motion to strike his pleadings was decided
The actions of the respondent, in making an assignment in bankruptcy when he had consented to the costs of $6,500, are highly suspicious. He never advised the applicant of his intention to make an assignment but the effect of the bankruptcy is that the enforcement of the cost award of Justice Sheard is stayed.
However, the applicant may participate in the respondent’s bankruptcy and oppose his discharge. Where costs survive a bankruptcy, courts have ordered the discharged bankrupt to pay the outstanding costs and/or deposit a security for costs on new applications (see Martin (Shore) v. Shore, 2004 CanLII 5060 (Ont. S.C.), Kordic v. Bernachi, 2006 CanLII 38875 (Ont. S.C.), Backman v. Backman (1998), 7 C.B.R. (4th) 55 (Ont. Gen. Div.)).”