In the Matter Of KANG

This matter concerned an application for costs by the respondent, the Official Trustee in Bankruptcy, following the withdrawal or dismissal of applications by the applicants to be substituted as petitioning creditors in bankruptcy proceedings against a debtor. The applications for substitution were made after the original petitioning creditor had sought to withdraw its bankruptcy petition.

The primary legal issue before the Court was whether the applicants, who had sought to step into the shoes of the original petitioning creditor, should be ordered to pay the costs incurred by the Official Trustee in relation to their unsuccessful substitution applications. This involved considering the principles governing costs in bankruptcy proceedings, particularly where a party seeks to pursue a bankruptcy petition that the original creditor no longer wishes to continue.

Judge Barnes determined that the applicants had failed to establish a sufficient basis for their applications to be substituted as petitioning creditors. The Court applied the general principle that costs follow the event, meaning the unsuccessful party typically bears the costs of the successful party. In this instance, the applicants' applications were unsuccessful, and the Official Trustee had incurred costs in responding to these applications.

Consequently, the Court ordered that the applicants pay the costs of the Official Trustee in relation to the applications for substitution.