Bankruptcy and Insolvency Law

The City of Toronto sought the appointment of a receiver and manager over the property, assets, and undertaking of Harry Sherman Crowe Housing Co-operative Inc. due to operational, financial, and governance challenges.

The court addresses the Receiver’s motion for approval of its activities, fees, and a proposed process (RFEIQ) for identifying and qualifying future board members to transition the Co-op out of receivership.

The court approves the Receiver’s activities and fees, and partially approves the RFEIQ process, requiring further reporting and court oversight before any subjective vetting of board candidates.

1000093910 Ontario Inc., a company in receivership, appealed the motion judge’s decision to decline hearing its cross-motion and to grant the receiver’s proposal for a public auction of its primary asset.

The cross-motion sought to vary the receivership order and enforce an earlier agreement of purchase and sale (APS).

The Court of Appeal dismissed the appeal, finding that the motion judge's discretionary decision not to hear the cross-motion was not erroneous, given the appellant's late service of materials and the low chance of success for the earlier APS.

The court also found no error in principle in the motion judge's approval of the receiver's proposed sales process, which included a "stalking horse" agreement, as it was fair, transparent, and aimed at optimizing the asset's price.

The Bank of Montreal sought to set aside a property transfer from Samira Bibi to her mother, Hanifan Bibi, as a fraudulent conveyance and unlawful preference under the Fraudulent Conveyances Act and the Assignments and Preferences Act.

The court found that the transfer was made with intent to defeat creditors, that the mother was complicit, and that the consideration was inadequate.

The transfer was set aside.

The court approved the sale of real property by the Receiver but reserved decision on the Receiver's and its counsel's fees.

The Debtor sought a 50% reduction in fees.

The court applied factors from Re Bakemates International Inc. to assess fairness and reasonableness.

While the Receiver's and counsel's fees to January 2020 were deemed reasonable, the estimated additional fees to close the file were reduced from $16,950 to $10,000 due to the Receiver's initial motion record lacking sufficient evidence for the property sale approval.

The Moving Parties (10313033 Canada Inc., Madeleine Bonhomme, and Sameh Mansour) brought a motion to strike the counterclaim filed by Antranik Kechichian.

The counterclaim sought over $21M in damages, alleging conspiracy and other misconduct related to two changes in ownership of the Laurier Optical franchise system.

The Moving Parties argued the counterclaim was a collateral attack on Quebec Superior Court vesting orders, disclosed no reasonable cause of action, and was frivolous, vexatious, an abuse of process, and duplicative of other proceedings.

The court found the counterclaim to be a collateral attack on the vesting orders and frivolous, vexatious, and an abuse of process.

It also found no reasonable cause of action against Bonhomme and Mansour in their personal capacities, except for specific claims related to unpaid rent.

The counterclaim was struck in its entirety against 10313033 Canada Inc. and largely against Bonhomme and Mansour, with the claims for unpaid rent against the individuals adjourned for further determination.

The debtors, Eureka 93 Inc. and its subsidiaries, sought administrative consolidation of four related notices of intention to make a proposal, an extension of time to file proposals, and approval for interim priority financing (DIP financing) under the Bankruptcy and Insolvency Act.

The motion was opposed by Dominion Capital LLC, representing a group of noteholders, who argued there was no viable business to rehabilitate.

The Proposal Trustee supported the plan.

The court granted the motion, finding that immediate liquidation would have dire effects, while the extension and interim financing offered a prospect of increased value and a successful proposal, despite inherent risks in the cannabis industry.

The court imposed bi-weekly reporting requirements.

The Receiver of two insolvent real estate brokerages (TRP and TRP Realty) sought the court's advice and direction on whether approximately $3.7 million in commissions owed to the brokerages' agents were held in trust for the agents or formed part of the general assets available to secured creditors.

The court applied the "three certainties" test for a valid trust, focusing on certainty of intention.

Despite some ambiguous indicators like bank account names and standard form documents, the court found that the agents' contracts and the brokerages' audited financial statements did not objectively demonstrate an intention to create a trust.

Consequently, the commissions were deemed unsecured debts, not trust funds, and thus available to the secured creditors.

The applicant, Mr. Flowerday, brought a motion seeking enforcement of child support, section 7 expenses, and other payments from the respondent, Ms. Flowerday, a contempt order, and disgorgement of family photos.

The court addressed significant arrears for Family Bridges/Dr. Parnell invoices, spousal support, child support, and section 7 expenses, clarifying set-offs and the impact of Ms. Flowerday's bankruptcy.

The court also varied future section 7 obligations due to changed economic circumstances and to reduce ongoing litigation between the self-represented parties.

A court-appointed receiver sought directions regarding the distribution of proceeds from the sale of a property.

The Applicants, who held a second mortgage, claimed priority over the alleged first mortgagee, Pillar Capital Corporation, arguing that the first mortgage had been paid in full and therefore the subsequent assignment to Pillar Capital was a nullity.

The court found that the first mortgage was indeed paid in full on August 15, 2014, and there was no contemporaneous agreement to assign it.

Consequently, the May 5, 2015, assignment of charge to Pillar Capital was deemed a nullity.

The Applicants' claim for priority was upheld, and the Receiver was directed to pay the remaining amount due on the second mortgage from the sale proceeds.

Claims by Pillar Capital for property management fees, maintenance fees, and certain legal fees were rejected due to lack of proof and contractual basis.

Phillips and Moulds sought to recover costs awarded against Petrelli Construction and Mr. Petrelli personally, bringing a motion for orders including striking Petrelli Construction's defence to counterclaim, compelling undertakings, and substituted service for an examination in aid of execution.

Petrelli Construction brought a cross-motion seeking a declaration that the costs order against Mr. Petrelli was unenforceable due to a consumer proposal in bankruptcy, or a referral to Bankruptcy Court, and dismissal of the counterclaim.

The court found the counterclaim discontinued under Rule 24.03, dismissing Phillips and Moulds' related requests.

The issue of the costs order's enforceability against Mr. Petrelli personally was referred to a judge in Bankruptcy Court.

Substituted service on Petrelli Construction for examination was granted, but denied for Mr. Petrelli personally.

The Monitor of the Canadian Debtors of Nortel Networks sought court approval for two environmental property settlement agreements concerning the Belleville and Brockville properties under the Companies’ Creditors Arrangement Act (CCAA).

These settlements aimed to resolve significant environmental liabilities, crystallize claims, and facilitate further distributions to creditors.

The court granted the motion, approving both the MECP Belleville Settlement and the Brockville Settlement, finding them fair, reasonable, beneficial to stakeholders, and consistent with the CCAA's objectives, including the provision of third-party releases.

This motion addressed whether a joint consumer proposal is annulled when one of the debtors files for bankruptcy.

Nickolas James Crepeau and Sarah Jane Crepeau filed a joint consumer proposal.

Mrs. Crepeau subsequently faced financial difficulties and intended to file for bankruptcy.

The Administrator and Mr. Crepeau sought to continue the proposal for Mr. Crepeau.

The Office of the Superintendent of Bankruptcy (OSB) argued that Mrs. Crepeau's bankruptcy would automatically annul the entire joint proposal.

The court ruled that an assignment in bankruptcy by any debtor in a joint consumer proposal annuls the entire proposal, regardless of the other debtor's ability or desire to continue payments.

The motion brought by the Administrator and Mr. Crepeau was dismissed.

The respondent Picture Perfect Film Assets, LLC (PPFA) brought a motion to stay an application by the MacLaren Art Centre (MAC) concerning the ownership and sale of Rodin bronze sculptures.

PPFA argued for a stay based on forum non conveniens, issue estoppel, res judicata, abuse of process, and the 'good case management rule,' favouring a broader, earlier-filed Washington action.

MAC contended that its Ontario application, rooted in local bankruptcy proceedings and involving Ontario parties and law, was appropriate.

The court dismissed PPFA's motion, finding that Ontario was an appropriate forum and PPFA failed to demonstrate that Washington was 'clearly more appropriate' under the forum non conveniens analysis.

The court also declined to apply equitable doctrines or the good case management rule to stay the Ontario proceedings.

The court-appointed receiver, Grant Thornton Limited, brought a motion to disallow approximately $105.5 million in claims made by companies owned or controlled by Enzo Mizzi (the "Claimants") against the Silverfern Secured Mortgage Fund and GTA Private Capital Income Fund (the "Mortgage Investment Funds").

The Claimants alleged damages for loss of profit due to the Mortgage Investment Funds' failure to advance loan amounts and for costs of development services.

The court determined that the motion should proceed summarily, with the onus on the Claimants to prove the Receiver made an error of law or palpable and overriding error of fact.

The court found no evidence that the Mortgage Investment Funds were parties to the loan agreements or had an obligation to advance funds, nor any agreement to pay for development costs.

Consequently, all disputed claims were disallowed.

The moving defendants sought an order for security for costs against the Estate of Gaetano Lo Faso under Rule 56.01(1)(d), arguing the Estate was a nominal plaintiff due to its status as a section 38 plaintiff under the Bankruptcy and Insolvency Act and its lack of assets.

The court dismissed the motion, finding that the Estate, as the sole judgment creditor pursuing a claim assigned by the trustee, had a substantial interest in the litigation and was not a nominal plaintiff.

The court also considered access to justice, noting that denying the Estate the right to litigate due to lack of assets would be unjust.

The plaintiff, a law firm, moved for leave to amend its statement of claim to add a defendant and claims for a certificate of pending litigation (CPL) regarding a property.

The CPL was sought on the basis that a second mortgage granted by the defendant to her brother-in-law was a fraudulent conveyance or an unjust preference.

The court granted leave to amend the claim but denied the motion for a CPL, finding that the plaintiff failed to demonstrate a "high probability" of fraudulent intent or unjust preference, as required when judgment has not yet been obtained.

The court found sufficient consideration for the mortgage and no clear evidence of insolvency or intent to defraud.

The defendant, Ryszard Musiala, brought a motion for summary judgment seeking to dismiss the plaintiff Trustee's claim, lift a Certificate of Pending Litigation on a property, and declare no interest for the bankrupt or Trustee in the property.

The plaintiff, J.P. Graci & Associates Ltd., as Bankruptcy Trustee, opposed the motion, arguing that genuine issues requiring a trial existed regarding the beneficial ownership of the property and the legal impact of a lump-sum mortgage payment made by Musiala.

The court found significant inconsistencies in Musiala's evidence and insufficient facts to confidently determine the parties' interests or the application of equitable remedies like subrogation.

Consequently, the motion for summary judgment was dismissed, as a trial was deemed necessary to resolve the complex factual and legal disputes and avoid inconsistent findings.

The applicants, a group of Essar Steel Algoma entities, brought a motion under the Companies' Creditors Arrangement Act (CCAA) for approval of an Asset Purchase Agreement (APA) and related relief.

GIP and PortCo objected to certain aspects of the APA and the orders sought.

The court approved the APA and the Sale Transaction, finding it to be in the best interests of Algoma and its stakeholders.

The approval was granted without prejudice to the rights of GIP and PortCo to raise further objections regarding the Approval and Vesting Order at a later date.

Several other motions, including those by GIP, PortCo, and Garden River First Nations, were adjourned.

The court also ordered certain cross-examination transcripts and exhibits to be sealed based on the principles from the Sierra Club of Canada case.

The Receiver for the Paramount Group sought an order to appoint itself as receiver over Virk Hospitality Corp.'s assets due to alleged defaults on a $21 million loan.

The court found Virk in default for failing to repay the loan on its two-year maturity date, breaching a postponement agreement by misdirecting funds, and failing to pay property taxes.

The court granted the motion, finding it just and convenient to appoint the Receiver over Virk's property, assets, and undertakings.

The Debtor appealed a Master's order lifting a stay of proceedings under the Bankruptcy and Insolvency Act (BIA), which had arisen upon the Debtor's filing of a proposal.

The Master found that the Respondent creditor would be materially prejudiced by the continued stay and that it was equitable to lift it, allowing the Respondent's $1 million claim to be quantified in a civil action rather than through the summary procedure under s. 135 of the BIA.

The appeal court upheld the Master's decision, finding no error in concluding that the Respondent had established some chance of success in its civil action and that the civil action was the appropriate forum for determining the complex, credibility-dependent claim against both the Debtor and a co-defendant, thereby avoiding inconsistent findings and prejudice.