Executive Summary: Key Legal and Evidentiary Issues

• The Court held that the objecting creditor, Nikathan Developments Ltd., is not required to pay costs to either the proposal proponent, Tannis Shirley Davidson, or the proposal trustee in relation to its unsuccessful objection to approval of the Division I proposal.

• Ms. Davidson’s request for solicitor-client costs, or alternatively 40–50% of her actual legal costs, was rejected because the Court found no misconduct, undue delays, attempts to hinder the proceedings, improper or unethical conduct by counsel, or misconduct by Nikathan.

• Relying on case law and commentary, the Court treated this as a situation where a creditor acted bona fide in opposing a proposal, comparable to Re Rideau Carleton Raceway Holdings Ltd. and Re Alberta Western Wholesale Lumber Ltd., and not as a case like Re Economopoulos where improper purpose justified costs against the objecting creditor.

• The Court found that Nikathan’s objections, including questions about equity in Ms. Davidson’s companies and personal residence and its information requests, raised legitimate issues and led to materially helpful disclosure and detailed exploration of equity points in the main judgment.

• The proposal trustee’s request for full indemnity costs of $8,414.17 against Nikathan, based on work it attributed to the objection, was refused, as there were no cited authorities awarding such costs against a non-vexatious, non-frivolous, and non-materially-delaying creditor in a proposal-approval setting.

• The trustee was instead held entitled to claim the identified objection-related expenses, together with all other proper expenses, from the proposal estate funded by payments made and to be made by Ms. Davidson under her approved proposal.

Background and central issue on costs
This decision is a costs endorsement of the Court of King’s Bench of Alberta in the matter of the bankruptcy of Tannis Shirley Davidson. The underlying Division I proposal had already been approved, for reasons set out in Davidson (Re), 2025 ABKB 528. The costs question arose because a creditor, Nikathan Developments Ltd., had objected unsuccessfully to court approval of the proposal. Justice Michael J. Lema was asked to decide what costs, if any, should be payable by that objecting creditor in light of its unsuccessful opposition.

Positions of the proposal maker on costs
Ms. Davidson, through her counsel, sought costs against Nikathan. She asked for solicitor-client-level costs, arguing that she was a vulnerable person who could not afford enhanced trustee fees and legal counsel fees required to respond to what she characterized as unreasonable and unsubstantiated positions taken by the objecting creditor. She relied on several specific points:

• She emphasized her vulnerable position as a person who could not afford additional professional fees in the face of the objection. The Court held that this was not a costs-driving factor because all proposal makers are, by definition, insolvent persons.

• She pointed to delay, asserting that Nikathan had first sought an adjournment, then raised vague objections about accounting, and that its principal had been warned by the Registrar about possible costs consequences because the objection meant the matter would need to go before a Justice rather than be approved by the Registrar under s. 192(1)(a) of the Bankruptcy and Insolvency Act. She also noted that, after the Registrar hearing, Nikathan had almost four months to obtain a real estate appraisal but did not do so and later tried to argue real estate values at the July 25, 2025 approval hearing.

• She further relied on a proposed side arrangement, alleging that at the July 25, 2025 hearing Ms. Davidson and the trustee referred to a proposal by Nikathan to withdraw its vote against the proposal in exchange for a particular payment, which Nikathan objected to as being subject to settlement privilege.

In the alternative to solicitor-client costs, Ms. Davidson argued for an award of 40–50 per cent of her actual legal costs. She cited McAllister v Calgary (City), 2021 ABCA 25, and characterized herself as the successful party because her proposal had been approved. She did not, however, cite any cases in which costs were awarded against a creditor merely for unsuccessfully objecting to a proposal under the Bankruptcy and Insolvency Act.

Court’s assessment of the proposal maker’s costs claim
Justice Lema analyzed each of Ms. Davidson’s asserted grounds. On the issue of vulnerability, he concluded that the fact she was an insolvent person did not distinguish her situation from that of other proposal makers and therefore did not justify a special costs award.
Regarding alleged delay, the Court noted that Nikathan’s request for an adjournment of the creditors’ meeting was denied. On the complaint of “vague objections about accounting,” the Court observed that the proposal trustee treated those objections as legitimate inquiries and provided the requested, though voluminous, material. Nikathan had complained to the Office of the Superintendent of Bankruptcy about, among other matters, the trustee’s responses to its information requests, but the OSB dismissed that complaint and did not state that the information requests were disproportionate or vexatious or that the trustee acted unreasonably in responding. The Court further stated that the mere fact of objecting, and the resulting need for a Justice-level hearing, are not by themselves reasons to award costs. It also found that the failure to pursue a real estate appraisal before the July 25, 2025 hearing did not cause incremental delay.
On the alleged side agreement, Justice Lema recalled that, in the main decision, he had offered general comments on the “dim view” taken by bankruptcy courts of arrangements aimed at changing statutory distributions to creditors and on the possible inapplicability of settlement privilege in such circumstances, referring to paras. 98 and 99 of that decision. In this costs ruling, however, he found it unnecessary to determine whether such an arrangement had in fact been proposed and noted there was no evidence that any priorities-changing agreement was actually made, unlike in Cicoria (Re), 2000 CanLII 22483 (ONSC). On that basis, the possible side arrangement was not treated as a costs factor.
After considering these points, the Court explicitly declined to characterize Nikathan’s objection or its overall litigation conduct as misconduct. Justice Lema found no undue delays, no attempts to hinder the proceedings, no improper or unethical conduct on the part of counsel, and no misconduct by Nikathan such as deceitful behaviour or obstructive tactics. He therefore concluded that there was no reason to award solicitor-client-level costs and, more broadly, no compelling reason to award costs against Nikathan in Ms. Davidson’s favour.

Use of authorities and commentary on proposal costs
The Court placed Ms. Davidson’s and Nikathan’s conduct within the established framework governing costs in proposal proceedings. It referred to the commentary in Bankruptcy and Insolvency Law of Canada, 4th ed. (online), which states that if a creditor has acted bona fide in unsuccessfully opposing a proposal, the objecting creditor should not be ordered to pay costs, and that costs should be ordered only where the opposition is without merit or based on an improper motive. The commentary also discusses cases where courts limited costs payable by opposing creditors to costs occasioned by the opposition or, conversely, where improper purpose and significantly increased work justified ordering the objecting creditor to pay most of the costs.
Justice Lema cited three specific decisions to illustrate these principles. In Re Rideau Carleton Raceway Holdings Ltd., the proposal was approved, the creditor was found to have acted bona fide, and the applicant was entitled to its costs out of the bankrupt estate, with no order as to costs against the opposing creditor. In Re Alberta Western Wholesale Lumber Ltd., the objections were described as not frivolous and largely in good faith; the trustee was to have its costs from the estate, and there was to be no other order. In Re Economopoulos, by contrast, the Court determined that the objecting creditor’s motive was self-interest in separate civil litigation rather than the interests of the general body of creditors and that its interventions dramatically increased the amount of work required to have the proposal approved. There, most of the costs were ordered payable by the opposing creditor, with only a small amount from the estate, and the judge emphasized the improper purpose behind the opposition.
Justice Lema held that the present case is akin to Rideau and Re Alberta Western and not akin to Economopoulos. As summarized in the main judgment, it was not obvious that Ms. Davidson had no material equity in her companies or in her personal residence. The Court found that Nikathan raised legitimate questions, which led to materially helpful information disclosure by the trustee and, in turn, to a detailed exploration of the equity issues in the judgment. The endorsement also noted, by way of broader context, that in bankruptcies, frivolous or vexatious creditor oppositions to discharge may attract costs under s. 197(7) of the Bankruptcy and Insolvency Act, and that in Alberta commercial insolvencies the general approach tends to be that parties bear their own costs absent subpar conduct or materially unusual circumstances, referring to Goldenkey Oil Inc (Re), 2023 ABKB 365.

The proposal trustee’s separate claim for costs
The Court then addressed the proposal trustee’s own costs claim against Nikathan. The trustee prepared a bill of costs isolating items he regarded as related to Nikathan’s objection, which included correspondence with Nikathan and its counsel, communications with Ms. Davidson, her counsel, and the OSB about responding to Nikathan’s requests for further information, and review of materials provided to Nikathan. With disbursements of $149.50 and GST of $400.67 included, the trustee sought a total of $8,414.17 on a full-indemnity basis from Nikathan.
In his costs brief, the trustee relied largely on the same factors cited by Ms. Davidson: delay, the volume and nature of information requests, and the side-arrangement issue. However, he did not cite any cases where a court had awarded costs to a trustee in a proposal-approval setting against a creditor whose conduct was not vexatious, frivolous, or materially delaying. Applying the same reasoning used in relation to Ms. Davidson’s request, Justice Lema declined to order costs against Nikathan in favour of the trustee.

Final disposition and treatment of the trustee’s expenses
The Court concluded that there was no compelling reason to order costs against Nikathan in favour of either Ms. Davidson or the proposal trustee. It expressly refused to award solicitor-client costs or elevated party-and-party costs to Ms. Davidson, and it rejected the trustee’s request for full indemnity of $8,414.17 directly from Nikathan. Instead, the Court held that the trustee is entitled to claim the identified expenses, along with all other proper expenses, from the proposal estate—that is, from the payments made and to be made by Ms. Davidson under her approved proposal. The endorsement closes by noting that the matter was heard by way of written submissions received in October 2025 and by thanking the parties for their helpful written submissions, with appearances recorded for counsel representing Ms. Davidson, Nikathan Developments Ltd., and the licensed insolvency trustee. No monetary award, costs award, or damages ordered against any party.