Alberta Treasury Branches v Chocolaterie Bernard Callebaut Partnership, 2016 ABQB 3

Court of Queen ’ s Bench of Alberta Citation: Alberta Treasury Branches v Chocolaterie Bernard Callebaut Partnership, 2016 ABQB 3 Date: 20160202 Docket: 1001 11456 Registry: Calgary Between: Alberta Treasury Branches Plaintiff - and - Chocolaterie Bernard Callebaut Partnership, by its Managing Partner, Chocolaterie Bernard Callebaut Ltd., 1013988 Alberta Ltd., Chocolaterie Bernard Callebaut Ltd., 1054796 Alberta Ltd., Bernard Callebaut and Francesca Callebaut Defendants _______________________________________________________ Reasons for Decision of the Honourable Madam Justice B.E.

Romaine _______________________________________________________ Introduction [ 1 ] In this prolonged insolvency, Bernard and Francesca Callebaut failed to purge themselves of contempt by paying the last

portion of an outstanding penalty imposed by order dated March 24, 2011 until the day before a hearing with respect to variation of the contempt order. At that hearing, they faced the possibility of further penalties. In the circumstances, certain creditors of the bankrupt estates have applied to have their costs and the costs of the Trustee in bankruptcy attributable to enforcing the contempt order paid by the Callebauts.

Background [ 2 ] Deloitte & Touche Inc. was appointed the receiver and manager of Chocolaterie Bernard Callebaut Partnership (the “Callebaut Partnership”), 1013988 Alberta Ltd., (“101”) Chocolaterie Bernard Callebaut Ltd. (“CBCL”) and 1054796 Alberta Ltd. (“105") (collectively “Callebaut”) on August 9, 2010. [ 3 ] On August 18, 2010, Callebaut Partnership, CBCL and 105 made assignments in bankruptcy and Deloitte was appointed as trustee of the estates of the bankrupts (the “Trustee”).

None of 101, CBCL or 105 had independent operations outside of the Callebaut Partnership. [ 4 ] Under the receivership, land owned by Callebaut was sold. In addition, the assets of the Callebaut chocolate business were sold to 1563181 Alberta Ltd., now known as Cococo Chocolatiers Inc.

As a result of events that arose during the sale of the chocolate business, this Court granted an order dated March 24, 2011 declaring Bernard and Francesca Callebaut in contempt of the receivership order and ordering them to pay financial penalties and costs of $99,150 plus an additional $50,000 (the “Damages Portion”) for the benefit of unsecured creditors within six months of the order having been granted. [ 5 ] The financial penalties and costs included $81,150 related to products belonging to the companies in receivership that had been removed and used by the Callebauts, costs of the Receiver and its counsel related to the contempt application and $18,500 payable to Cococo. [ 6 ] On March 8, 2012, the Receiver was discharged.

The issue of the contempt costs and penalties was taken up by the Trustee. [ 7 ] Until February 24, 2015, the Callebauts had not voluntarily paid anything with respect to the contempt order other than $960 collected by the Trustee. The unpaid contempt fines and penalties interfered with the resolution of the bankruptcies. On May 3, 2012, at the request of the Trustee, I granted an order that, among other things, provided that the Trustee could set-off the contempt costs other than the Damages Portion of $50,000 against any dividend that Mr.

Callebaut or Invesco (a creditor that at that point was entitled to any dividends that would be owed to Mr. Callebaut) may ultimately be entitled to receive. [ 8 ] After lengthy negotiations and a proposal that failed to obtain court approval, the parties reached a global settlement agreement among the creditors, which I approved in January, 2015. [ 9 ] However, the settlement required some variance of the contempt orders, as they remained a bar to settlement. Cococo was prepared to support the variance of the contempt penalties if such variance was conditional on an order:

a) requiring the Callebauts to pay the Damages Portion of $50,000 within 30 days;

b) in default of such payment, imprisoning each of the Callebauts for three months; and

c) requiring the Callebauts to write letters of apology to be filed with the Court, addressed to the Court, the Trustee and the creditors. [ 10 ] Although the settlement, which was advantageous to the creditors, was approved, the issue of the variance of the contempt orders was set over to a hearing about a month later. The day before the hearing, the Trustee received $50,000 from the Callebauts to be applied to the Damages Portion. [ 11 ] The creditors were understandably frustrated and upset.

The global settlement provided the best outcome in the circumstances, but this was only achieved by having various creditors contribute, by set-off or otherwise, roughly $100,000 towards the fines and penalties in order to allow the settlement to proceed. Some of the creditors were also unsatisfied with the evidence of Mr. Callebaut with respect to his current financial circumstances, given what they knew of his life-style and expenditures, and were suspicions about the structure of Mr.

Callebaut’s new business. [ 12 ] However, the last minute payment of the Damages Portion rendered Cococo’s proposal for variance moot. [ 13 ] The creditors were anxious that the bankruptcy be terminated and that no further steps be left to the Trustee to administer, at a cost to the estate.

The Trustee took no position, other than to point out that the collection of any further monetary sanctions by the Trustee would be difficult and costly. [ 14 ] Therefore, some of the creditors submit that the contempt order be varied to substitute an award equal to the solicitor-client costs and disbursements that have been incurred by Deloitte as Receiver and Trustee attributable to the failure of Mr. and Mrs. Callebaut to pay the fines, as well as the solicitor-client costs incurred by Cococo for the same purpose.

The Trustee’s costs and disbursements are roughly $56,000, and Cococo’s costs and disbursements are roughly $16,500. They propose that these new cost sanctions would be collected by Invesco and Cococo. [ 15 ] As a result of the order of May 3, 2012 and the settlement that I have approved, the Callebauts were no longer liable to pay the financial penalties and costs of $99,150 levied in the contempt order. Unfortunately in order to facilitate the settlement and put an end to this almost five-year insolvency, the Callebauts were relieved of this obligation on the backs of the creditors of the estate and Mr.

Callebaut’s former dealers. However, technically, the Callebauts have purged their contempt with respect to that portion of the contempt order.

[ 16 ] They have also purged their contempt by the last-minute payment of the Damages Portion. [ 17 ] While I understand the frustration expressed by the creditors in the face of the Callebauts’ continuing disregard for their interests, I lack the jurisdiction to award solicitor-client costs of the Trustee in a manner that benefits selected creditors of the estate, rather than the estate as a whole. I am therefore unable to direct that the costs of the Trustee be collected by Invesco and Cococo.

I am, however, able to award Cococo its solicitor-client costs of $16,542.02 (inclusive of GST and disbursements) incurred in addressing the Callebauts’ failure to pay the Damages Portion of the contempt fine in a timely manner, in addition to the $18,500 for costs awarded to Cococo.

Solicitor-client costs are appropriate in this case given the failure of Callebauts to address even the greatly-reduced Damages Portion of the contempt order until faced with more serious penalties, together with their public criticism of the contempt procedures until forced to comply by the threat of further penalties. [ 18 ] The costs awarded by this decision are directly related to the Damages Portion of the contempt penalty, which arose from the fact that the Callebauts obtained property from the estate in receivership by false pretences. Dated at Calgary, Alberta this 2 nd day of February, 2016. B.E.

Romaine J.C.Q.B.A. Appearances: Kelly J. Bourassa and T. Wagner for the Receiver and Trustee Howard H. Gorman Q.C. and Aaron Stephenson for Cococo Chocolatiers Inc. Peter Jull, Q.C. for Invesco Matthew Farrell and Robert Schuett for the Callebauts