Asim Iqbal

The applicant bank brought a motion to appoint an interim receiver over the respondent companies' assets pursuant to section 47(1) of the Bankruptcy and Insolvency Act and section 101 of the Courts of Justice Act.

The companies had defaulted on their obligations under a master purchase and servicing agreement, failed to secure refinancing, and admitted to transferring funds from a blocked trust account following a fraudulent cheque incident.

The court found that the appointment of an interim receiver was necessary to protect the debtor's estate and the interests of the bank, and granted the motion with limited scope to preserve assets pending further resolution.

The SMA 2 Unitholders sought a declaration that substantive consolidation does not apply to Bridging SMA 2 LP and approval for a second interim distribution.

The Receiver and Unitholder Representative Counsel opposed, arguing the motion was premature as various distribution issues, including the full economic impact of consolidation, remained unresolved.

The court dismissed the motion, deferring to the Receiver's position that a determination on substantive consolidation and further distributions was premature given the incomplete factual record and outstanding distribution issues.

In the receivership of the Bridging Funds, the Receiver brought a motion to determine whether unitholders with Potential Statutory Rescission Claims (based on misrepresentations in offering memoranda) or Potential Redemption Claims (based on unfulfilled redemption requests) were entitled to priority over General Unitholder Claims.

The court held that Potential Redemption Claims were not entitled to priority because the redemption requests had not been completed prior to the receivership.

However, the court held that Potential Statutory Rescission Claims were entitled to priority, finding that the statutory right of rescission under s. 130.1(1) of the Securities Act creates a de facto priority and justifies the imposition of a constructive trust over the invested funds.

Hazleton Development Corporation, an insolvent company constructing a condominium complex, applied for an initial order under the Companies’ Creditors Arrangement Act (CCAA).

The application sought a stay of proceedings, approval of Grant Thornton Limited as Monitor, permission for pre-filing payments to critical trades, approval of a Debtor-in-Possession (DIP) financing facility, an administration charge, and a directors’ charge.

The court granted the initial order, finding the company met the CCAA's statutory requirements, the stay was appropriate for a 10-day period, the Monitor was qualified, pre-filing payments were beneficial to stakeholders, the DIP facility was essential and reasonably necessary, and both the administration and directors’ charges were warranted.

The order was granted without prejudice to the secured creditors' rights for a subsequent hearing.

In a priority dispute under the Construction Lien Act, the court determined the relative priorities of several mortgagees and construction lien claimants.

The court held that professional fees incurred by a first mortgagee to protect its security constituted an 'advance' under section 78(6) of the Act, granting it priority.

The court also found that a $10 million advance made jointly to two borrowers under a second mortgage was an advance in respect of that mortgage, giving it priority over the lien claimants.

However, the court ruled that an advance made under a loan agreement to a third party was not an advance in respect of a collateral mortgage given by the developer as guarantor, meaning the lien claimants had priority over the collateral mortgage.

Following dismissal of a trustee’s motion seeking directions to terminate certain condominium purchase agreements, the court addressed costs.

The purchasers sought costs against the trustee or alternatively against mortgagees who supported the trustee’s position.

The court held that although the mortgagees were not formal parties to the motion, they actively participated and had a direct financial interest in the outcome, making it appropriate to hold them responsible for costs.

The court also considered principles governing costs for self-represented litigants and limited recovery to proven disbursements where no foregone remunerative activity was demonstrated.

Costs were awarded to the purchasers and made payable jointly and severally by the mortgagees.

The court-appointed Trustee of an insolvent condominium development brought a motion for advice and directions, seeking permission to terminate pre-sale purchase agreements for buyers who had purchased two parking units, due to a shortage of parking spaces in the building.

The Trustee proposed that these buyers relinquish one parking space for a price reduction, or face termination of their agreements.

The court applied the test of balancing the equitable considerations of all stakeholders.

Finding that the mortgagees had accepted the risk of the parking shortage and that the purchasers would suffer significant financial hardship and loss of equity if their agreements were terminated, the court dismissed the Trustee's motion.

In bankruptcy proceedings arising from non-payment under a promissory note tied to the sale of a New York condominium, the court interpreted the note's limited recourse clause as capping recovery at one-third of sale proceeds rather than restricting recourse solely to identifiable sale proceeds in specie.

On that interpretation, the creditor remained an unsecured creditor after the debtor received the sale proceeds and therefore had standing to pursue a bankruptcy order.

The creditor's motion for a Rule 39.03 examination was dismissed because no further factual inquiry was necessary to answer the debtor's legal motion.

The debtor's motion to dismiss or strike the bankruptcy application was also dismissed, and the application was adjourned by agreement pending further materials and cross-examinations.

On an application for an initial order under the Companies’ Creditors Arrangement Act, the court considered whether an insolvent group of residential development companies should obtain CCAA protection, including a stay, monitor appointment, DIP financing, and priority charges.

A secured creditor opposed inclusion of one raw-land project and sought instead to realize through a receiver.

The court held that, on the specific facts, the prejudice to that secured creditor was not materially greater in a CCAA claims process than in a receivership, particularly given the undertaking to pay out the first mortgage in the amount ultimately determined by the court.

The initial order was granted, including the stay, monitor appointment, DIP facility, and administrative and directors’ charges.

On a motion by a major contingent creditor to set aside an Initial Order under the CCAA, the court held that the applicant corporation, whose only asset was its partnership interest in an insolvent accounting partnership facing massive legacy negligence claims, was insolvent when contingent liabilities and defence costs were properly considered.

The court declined to deny CCAA relief based on allegations about historical litigation misconduct, holding that the relevant good faith inquiry concerns conduct within the CCAA proceeding itself.

The stay was properly extended to the partnership and its insurers because their affairs were inextricably intertwined with the debtor and a global resolution of the Castor litigation would be significantly impaired without that protection.

The court also upheld the creditors’ committee and CLCA’s ability to fund its reasonable legal fees as part of the negotiated restructuring framework.

Minatura brought a motion to remove Aburi Goldfields Ghana Ltd. from the CCAA proceedings of the applicants, arguing lack of disclosure, that Aburi was not a debtor, and that the dispute over control of Aburi should be litigated in Ghana.

The court dismissed the motion, finding that Aburi was a debtor, that there was no material non-disclosure, and that staying the CCAA proceedings would likely cause the restructuring to fail.

Applying the Van Breda framework and giving weight to a forum selection clause in the parties' shareholders' agreement, the court held that Ontario had jurisdiction and that Minatura failed to establish that Ghana was a more appropriate forum.