Domenico N. Magisano

The applicant bank sought the appointment of a receiver over the respondent debtors and judgment against the individual guarantor following defaults on credit facilities totaling over $2 million.

The debtors failed to provide required reporting and did not cure the default after demands and notices under the Bankruptcy and Insolvency Act were issued.

The court found the bank was contractually entitled to appoint a receiver and enforce the guarantee.

The application was granted, a receiver was appointed, and judgment was entered against the guarantor for $1,988,777.37 plus full indemnity costs.

The Receiver brought a motion seeking a declaration that certain transfers made by the debtor to third-party creditors were transfers at undervalue under section 96 of the Bankruptcy and Insolvency Act, and an order for repayment.

The debtor's principal had breached a preservation order by using a tax refund to pay personal and corporate debts owed to the third parties, who received the funds in good faith without knowledge of the receivership or the court order.

The court found that while the transfers met the criteria for transfers at undervalue, the exceptional circumstances of the case warranted exercising discretion to not require the third parties to repay the funds.

The Receiver's reports and fees were approved.

In a CCAA proceeding, the court determined the entitlement to $337,390.62 held in escrow.

Prior to insolvency, the debtor (Earth Boring) and a creditor (Tulloch) entered into an escrow agreement pending judicial review of a construction adjudication order in favour of the creditor.

Two days before the judicial review was dismissed, the debtor commenced insolvency proceedings.

The court held that the escrow agreement did not create a trust.

Applying section 70(1) of the BIA, the court concluded that because the judgment was not fully executed prior to insolvency, the funds remained the property of the debtor's estate and were ordered released to the debtor's successor entity.

The court granted the Monitor's application to assign John Aquino into bankruptcy and continued the Mareva order against him.

The decision addresses the requirements for a bankruptcy order under the Bankruptcy and Insolvency Act, the discretion to dismiss or stay such an application, and the standards for continuing a Mareva injunction post-judgment.

The court found that John Aquino had committed an act of bankruptcy, was unable to pay his debts, and that there was no bona fide dispute with the Monitor.

The court also rejected arguments that the application was brought for a collateral purpose and found the continuation of the Mareva order appropriate.

This endorsement addresses two motions within a Companies' Creditors Arrangement Act (CCAA) proceeding concerning 2039882 Ontario Limited, a modular home community developer.

The Monitor sought approval of its reports, fees, and the termination of the CCAA proceedings.

The Receiver sought approval of a sale agreement (a credit bid by KHL Investments USA Inc.), authorization to disclaim certain Homebuyer Contracts due to unresolved water/sewage issues preventing construction, and approval of its reports and fees.

The court granted both motions, finding the sale transaction to be the best available outcome and the disclaimer of contracts necessary, despite the unfortunate impact on prospective purchasers who lost their deposits.

The court also approved sealing certain confidential exhibits.

In the context of CCAA proceedings for a land lease community, the senior secured lender brought a motion to appoint a receiver.

The CCAA stay of proceedings was expiring, DIP financing was exhausted, and no viable restructuring plan or purchaser had emerged.

The court found it just and convenient to appoint a receiver to stabilize the community, ensure continuation of essential water and sewage services, and facilitate a credit bid by the secured lender.

A separate unopposed motion to lift the stay to allow repossession of unused modular homes was also granted.

The applicant, a secured creditor for an equipment loan, sought the appointment of a receiver over the assets of two related debtor companies: one operating a cannabis facility and the other owning the real estate.

The mortgagees opposed the appointment over the real estate, arguing the applicant had no security interest in it and preferring to sell under power of sale.

The court found it just and convenient under section 101 of the Courts of Justice Act to appoint a receiver over all assets of both entities to prevent fragmented sales, maximize recovery, and maintain a court-supervised process, appointing the receiver nominated by the mortgagees.

Trade Capital Finance Corp. (TC) and Buduchnist Credit Union Limited (BCU) filed opposing motions in an insolvency appeal.

TC sought an extension of time and leave to appeal a lower court's final disposition order concerning the distribution of receivership proceeds, arguing the order allowed BCU to enforce judgments arising from transactions in breach of a Mareva order.

BCU sought to lift the automatic stay of proceedings and security for costs.

The Court of Appeal granted TC's motions for extension of time and leave to appeal, finding the appeal prima facie meritorious and raising issues of general importance regarding Mareva orders and creditor enforcement in insolvency.

The court denied BCU's motions to lift the stay and for security for costs, concluding that the BIA governed the appeal and that lifting the stay would render TC's appeal moot, and that security for costs was not fitting given BCU was the applicant below and TC's insolvency stemmed from the alleged fraud.

The Receiver of Bridging Finance Inc. sought court approval to terminate a sale and investment solicitation process (SISP) and proceed with an orderly liquidation ("Status Quo Option"), and to seal confidential appendices.

An unnamed unitholder opposed, requesting further consultation, a unitholder vote, and a new solicitation process for liquidation management.

The court denied the unitholder's adjournment request, finding no evidence to support it.

The court granted the Receiver's requests, deferring to the Receiver's business judgment, which was supported by Representative Counsel and a substantial majority of unitholders.

The Bank of Montreal applied for a receiver over a group of fitness clubs (the Crunch Group) following defaults on credit facilities.

The parties reached an agreement where the debtors' nominee would purchase the debt and security.

The Bank accepted the offer but subsequently refused to provide a fully executed copy of the agreement, causing the purchaser to lose financing and fail to close on the scheduled date.

The court found the Bank's actions, including abruptly closing the debtors' bank accounts and unreasonably refusing to deliver the executed agreement, breached the duty of good faith.

The court ordered the Bank to close the transaction.

The applicant brought a motion to enforce personal guarantees executed by the respondents, a husband and wife who were directors of the debtor corporation.

The husband did not oppose the motion.

The wife argued she was released from her guarantee due to an undisclosed material change in the principal amount of the indebtedness, lack of independent legal advice, and that the applicant had released her through its conduct during restructuring negotiations.

The court found that the guarantee explicitly allowed for changes in the amount of obligations, the wife was a sophisticated business owner who did not require independent legal advice, and the applicant had not provided an express written waiver as required by the guarantee.

The motion was granted and both respondents were found liable.

The appellant, acting as estate trustee for the late Sophia De Jonge, appealed the disallowance of a property claim by the bankruptcy trustee of the estate of Jeffrey Wilson.

Jeffrey, who was the executor of Sophia's estate, had transferred real property to himself without satisfying a significant tax liability owed by Sophia's estate.

Jeffrey subsequently died bankrupt.

The court found that Jeffrey breached his fiduciary duty as executor by failing to pay the estate's debts before distributing assets to himself.

The court imposed a constructive trust over the real property in favour of Sophia's estate to remedy the unjust enrichment of Jeffrey's bankrupt estate, allowing the appellant to trace the beneficial interest into the net sale proceeds.

The Second Mortgagees (Janodee Investments Ltd. and Meadowshire Investments Ltd.) brought a motion seeking an order for 1482241 Ontario Limited to pay an over-holding fee of $63,900, as stipulated in a second mortgage agreement.

The fee was triggered because the mortgage was not repaid or renewed by its maturity date. 1482241 Ontario Limited, which had filed a notice of intention to file a proposal under the Bankruptcy and Insolvency Act, argued that the fee constituted an interest penalty contrary to section 8 of the Interest Act.

The court, applying principles from Dunlop Pneumatic Tyre Co. v. New Garage & Motor Co., found the over-holding fee to be an unenforceable penalty.

The court reasoned that the fee was arbitrary, not a genuine pre-estimate of damage, and would overcompensate the Second Mortgagees while depleting assets available to other creditors.

Consequently, the motion was dismissed.

The appellant appealed from a motion judge's order denying her motion to set aside a summary judgment award of $466,420.22 granted against her for fraud and theft.

The appellant argued she was not properly served with the Statement of Claim and therefore lacked an opportunity to defend.

The Court of Appeal upheld the motion judge's decision to deny the motion to set aside, finding the appellant was responsible for failing to update her address for service and had actual notice of the proceedings.

However, the Court of Appeal found merit in the appellant's challenge to the quantification of damages and reduced the award to $289,740.39 by correcting three calculation errors relating to the appellant's fractional ownership interest in property and personal expense claims.

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.

The plaintiff brought a motion to stay the defendant's motion to set aside a default judgment until the defendant paid outstanding costs orders and posted security for costs.

The defendant had made an assignment in bankruptcy, staying the enforcement of pre-bankruptcy costs orders.

The only remaining costs order, made by a registrar in bankruptcy, was under appeal.

The court held that the appeal automatically stayed the registrar's costs order under Rule 63.01 of the Rules of Civil Procedure.

As no costs were currently payable, the plaintiff's motion for a stay and security for costs was dismissed.

The applicant obtained a default judgment for fraud against the respondents regarding a tax loss allocation scheme.

He subsequently obtained an ex parte order under s. 101 of the Courts of Justice Act appointing a receiver over the respondents' assets.

Through further ex parte applications, the receivership was expanded into a broad investigative receivership freezing the assets of 43 additional non-party individuals and entities to protect the interests of thousands of other investors.

The Court of Appeal set aside the orders, holding that while s. 101 permits investigative receiverships in appropriate circumstances, the orders here were unjustifiably overreaching and went beyond protecting the applicant's judgment recovery.

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.

The plaintiffs appealed an order of a Master dismissing their action for delay at a status hearing.

The plaintiffs argued the Master failed to apply the correct test and failed to undertake a contextual assessment of the delay, which they attributed to corporate bankruptcies, the death of a plaintiff, and a threatened motion for security for costs.

The Divisional Court dismissed the appeal, finding the Master correctly applied the conjunctive test from Faris v. Eftimovski and made no palpable and overriding errors in concluding the plaintiffs failed to provide an acceptable explanation for the delay.