D. Magisano

The Judgment Creditors brought a motion within a receivership proceeding seeking a declaration that they held valid, independent unsecured debt claims against two insolvent corporations, 230 and MM, arising from a consent order and minutes of settlement.

The Receiver and a preferred shareholder opposed, arguing the claims were equity claims.

The court applied the Van Laun principle to look behind the consent order and found that the obligations to purchase the shares and pay accrued dividends contravened the solvency and cross-holding provisions of the Business Corporations Act.

Consequently, the claims were unenforceable as debt, except for the costs component, which was remitted to the Receiver for a reasonableness review.

In a receivership-related motion arising from alleged fraudulent investment activities, the receiver sought authorization to utilize frozen funds held by entities subject to prior court orders to pay ongoing investigation costs.

The court held that the circumstances differed from typical insolvency proceedings because many affected entities were not parties and no specific allegations had been pleaded against them.

Exercising discretion under the prior freezing order, the court declined to allow prepayment of the receiver’s investigative expenses from the frozen funds.

The court also rejected a request for a sealing order due to the strong presumption of open courts but granted a confidentiality order restricting the receiver from voluntarily providing information to tax or criminal authorities.

Costs were not awarded due to divided success.

In supplementary reasons addressing costs following earlier reasons under the Companies’ Creditors Arrangement Act, the applicant mortgage lender sought full indemnity costs based on contractual mortgage provisions.

The court confirmed that while contractual entitlement to full indemnity costs exists, the court retains supervisory authority to ensure the amounts claimed are fair and reasonable.

The applicant’s bill of costs was reduced for inefficiencies, including excessive research time and the use of senior counsel for work that could have been delegated or billed at a lower rate.

Additional reductions were made for excessive preparation time on reply materials.

The court ultimately fixed reasonable full indemnity costs and rejected arguments for further reductions based on partial success or for awarding costs to another resisting respondent.

Following a commercial receivership application, the court determined entitlement and quantum of costs.

The moving party had been substantially successful in enforcing its security and was presumptively entitled to costs against the debtor respondents.

Relying on the security agreement, the court held that the contractual provision requiring payment of “solicitor and own client costs” justified an award on a substantial indemnity basis against the corporate debtors and one individual debtor.

However, a separate individual respondent who was not party to the security agreement was ordered to pay costs only on a partial indemnity basis.

Mortgagee respondents who successfully narrowed the scope of the receivership order were ordered to bear their own costs in relation to the issues between them and the applicant.

The plaintiff, an involuntary creditor due to overdrawn accounts, sought the appointment of a receiver over the corporate debtors' receivables and the individual debtors' real property after the debtors defaulted on a demand loan.

The motion was opposed by the debtors and by prior mortgagees who argued the receiver's mandate should not extend to the real property.

The court found it just and convenient to appoint a receiver over both the receivables and the real property to ensure a fair, transparent, and efficient realization process for all creditors, while respecting the mortgagees' priorities.