They sued the bank, then tried to run the insolvency. It cost them.
Bank of Montreal will recover half its legal costs from a car dealer's guarantors, an Alberta court has ruled, in an uncommon insolvency cost award.
The Court of King's Bench of Alberta issued the costs decision on July 3, 2026, closing out a creditor-driven insolvency that BMO had bankrolled from the start.
The case began as a routine wind-down. BMO, the senior secured creditor, drove four related companies operating as Coast Automotive Group into proceedings under the Companies' Creditors Arrangement Act to realize on its security. By October 2025, the group's main assets, two Stellantis dealerships in North Vancouver, BC and Drayton Valley, Alberta, had been sold through a court-supervised process, and the court-appointed monitor, BDO Canada Limited, applied to end the proceeding.
That is where it turned. The dealership group and its principals opposed the termination and filed their own cross-application to take control of the insolvency, keep it alive, and replace BDO as monitor. They had also launched a separate $25 million lawsuit against BMO, alleging the bank wrongfully forced them into insolvency.
Justice Douglas Mah dismissed the cross-application in a May 11, 2026 decision. In the costs ruling that followed, he found the opposition was designed to give the group leverage in that separate suit, not to serve any purpose recognized under the insolvency law. He did not find bad faith or misconduct, but described the group's positions as unmeritorious and its steps as unusual, unreasonable and unnecessary.
The numbers show why the fight mattered. Coast Automotive Group owed BMO more than $36 million at the outset. Even after every asset was sold, the bank was left roughly $16 million short. Because BMO was funding the insolvency, it was paying its own lawyers and the monitor's while the group's claim against it continued.
The court ordered the group and its guarantors to pay 50 percent of the actual legal fees run up by both BMO and the monitor, jointly and severally. If the parties cannot agree on a final figure, an assessment officer will set it. A $100,000 security deposit already posted by the group will be released to BMO's counsel.
For lenders and their advisers, the ruling is a reminder that guarantors stay exposed even after the collateral is gone, and that courts will shift costs when insolvency proceedings are used for tactical advantage. But Mah drew a firm line. Cost awards should stay rare in these matters, he wrote, and the threat of costs should not be "wielded as a cudgel" against stakeholders who challenge a monitor in good faith.
The bank's underlying conduct remains untested. The guarantors' wrongful-insolvency claim is still before the courts, and the judge was careful to say nothing about its merits.
