Harvey G. Chaiton

The Applicants, Nordstrom Canada Retail, Inc. and related entities, sought an Amended and Restated Initial Order (AIRO) under the Companies’ Creditors Arrangement Act (CCAA).

The motion, unopposed and supported by the Monitor, requested an extension of the stay period, approval of a Key Employee Retention Plan (KERP) and its associated charge, and increases to the Administration and Directors' Charges.

The court granted the AIRO, finding the stay extension appropriate given the applicants' good faith and diligence in pursuing an orderly wind-down, the KERP reasonable and necessary for restructuring, and the charge increases modest and well-supported.

In the context of CCAA proceedings for Carillion Canada Holdings Inc. and related entities, the affected parties reached an agreement on a Directors and Officers (D&O) Claims Process Order.

The Monitor supported the order to finally resolve D&O claims and complete the administration of the proceedings.

The court found the proposed order reasonable and granted the requested relief, noting that the D&O Insurers' participation does not constitute an admission of coverage or liability.

The appellants, a group of subcontractors and a bank, appealed an application judge's decision that rescission of surety bonds might be possible even if it affects innocent third parties.

The bonds were issued by Zurich Insurance Company Ltd. for a large construction project, but Zurich later discovered alleged fraudulent misrepresentations and collusion that induced it to issue the bonds.

The appellants sought a declaration that rescission was unavailable as a matter of law due to the involvement of innocent third parties.

The Court of Appeal dismissed the appeal, affirming that prejudice to third parties is not an absolute bar to rescission, especially in cases of fraudulent misrepresentation, and that such a determination requires a full factual record at trial.

This endorsement addresses the costs arising from an appeal and cross-appeal concerning a dispute between appellant investors and a respondent trustee in bankruptcy of a failed financial company involved in a Ponzi scheme.

The main appeal was dismissed, and the trustee's cross-appeal was allowed in part.

The trustee sought $85,000 in partial indemnity costs, citing case complexity and novelty of arguments.

The appellants argued this was excessive, proposing $30,000.

Applying the principle that costs must be fair and reasonable, the court considered the trustee's partial success on the cross-appeal and the disparity in costs, ultimately awarding the trustee $40,000, all inclusive.

This appeal concerned the standing of a defendant to challenge a s. 38 order under the Bankruptcy and Insolvency Act (BIA).

Traders General Insurance Co. appealed the dismissal of its motion to set aside a s. 38 order that allowed the Carrolls to commence a bad faith action against Traders.

The Court of Appeal affirmed that a proposed defendant generally lacks standing to challenge a s. 38 order, except in limited circumstances like abuse of process or misrepresentation, which were not found here.

The court also addressed, obiter, arguments regarding whether the Carrolls were creditors and whether the bad faith claim was property of the bankrupt estate, concluding these were not determinative issues for the s. 38 order itself, but rather for the merits of the assigned action.

The appeal was dismissed.

This appeal concerned the enforceability and priority of a judgment creditor's writ of seizure and sale against a beneficial interest in land held by a bare trustee under an unregistered trust agreement.

The appellant, a judgment creditor of Fortress Wismer (beneficial owner), sought declarations that its writ was binding on Pace Mark (registered owner/bare trustee) and had priority over subsequent advances under a previously registered construction financing charge held by the respondents (Firm Capital and MarshallZehr).

The Court of Appeal dismissed the appeal, affirming that the Execution Act is procedural and does not grant substantive rights to judgment creditors beyond seizing the debtor's interest.

The court held that the writ did not bind the legal owner (Pace Mark) and that actual notice of the writ did not grant priority over prior registered charges under s. 93(4) of the Land Titles Act, as that section does not apply to execution creditors.

On appeal from a motion judge's decision, the Court of Appeal considered whether real estate sales commissions collected by a receiver of an insolvent brokerage firm constitute trust funds for the real estate salespersons who effected the sales, or form part of the assets available to creditors.

The motion judge found no trust existed, concluding that certainty of intention to create a trust had not been established.

The appellants (agents and their insurer) challenged this conclusion on two bases: that the motion judge erred in attaching significance to evidence weighing against a trust, and that he failed to attach sufficient significance to evidence supporting a trust.

The Court of Appeal upheld the motion judge's decision, finding no palpable and overriding error in his weighing of evidence.

The court affirmed that formal trust agreements are not required for an implied trust to arise, but the absence of such provisions in the agent agreements, combined with financial statements showing commissions as assets rather than trust funds, supported the conclusion that no trust was intended.

Her Majesty the Queen in right of Ontario sought to lift a stay on its $330 billion health care cost recovery action against three tobacco companies (JTI-Macdonald Corp., Imperial Tobacco, Rothmans, Benson & Hedges Inc.) and eleven co-defendants, which was imposed under CCAA proceedings.

Ontario proposed to temporarily stay the effects of any judgment.

The court dismissed the motion, emphasizing the need to preserve the status quo in CCAA proceedings to facilitate a global resolution of significant claims.

Allowing Ontario's action to proceed would alter the level playing field, distract from restructuring efforts, and impose significant costs, prejudicing other stakeholders.

The applicants, JTI-Macdonald Corp., Imperial Tobacco Canada Limited, Imperial Tobacco Company Limited, and Rothmans, Benson & Hedges Inc., sought protection under the Companies' Creditors Arrangement Act (CCAA) following a $13.5 billion judgment from the Quebec Court of Appeal and other ongoing litigation.

JTI-Macdonald Corp. and Rothmans, Benson & Hedges Inc. moved for orders to file Supreme Court of Canada (SCC) leave applications but suspend further proceedings.

Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited sought a blanket stay of all proceedings and limitation periods.

The Quebec class action plaintiffs opposed the motions and sought to partially lift the stay.

The court affirmed its broad jurisdiction under CCAA s. 11 to stay all actions, including appellate proceedings and limitation periods.

The court dismissed the motion by JTI-Macdonald Corp. and Rothmans, Benson & Hedges Inc., and granted Imperial Tobacco's motion, finding that a blanket stay best preserved the status quo and facilitated a global resolution for all stakeholders.

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 Court allowed the appeal, adopted the dissenting reasons from the Federal Court of Appeal, and reinstated the Federal Court order answering the stated legal question in the affirmative, with costs throughout in favour of the appellant.

The Court expressly declined to comment on the scope of the deemed trust or liability under s. 222 of the Excise Tax Act before bankruptcy.

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 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 respondent sought leave to appeal a bankruptcy proposal order.

The court found the appeal moot because the debt to the moving party had been paid in full, eliminating the subject matter of the bankruptcy proceeding.

The court also determined there was no right of appeal under the relevant provisions of the Bankruptcy and Insolvency Act.

The respondent's argument regarding prospective effect of the order was rejected, as counsel for the moving party acknowledged that the relevant provision was spent and could not be relied upon for future indebtedness.

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 Receiver sought a declaration that a claimant did not hold an equitable mortgage against a property and had no claim against two related companies.

The claimant asserted an equitable mortgage, arguing his investment was intended for a pooled mortgage on the property.

The court found no objective evidence of a common intention between the claimant and the company's president to secure the investment with a mortgage on the property.

The claimant's request for an equitable mortgage or an equitable lien was denied, as there was no evidence that the funds reached the property-owning company.

The Receiver's motion was granted.

The Receiver brought a motion seeking a determination on whether the estates of Redstone Investment Corporation (RIC), Redstone Capital Corporation (RCC), and 1710814 Ontario Inc. o/a Redstone Management Services (RMS) should be substantively consolidated.

RIC and RMS Investors argued for consolidation, while RCC Investors opposed it, citing a General Security Agreement (GSA) granting RCC priority over RIC's assets.

The court found the founder's (Mr. So) evidence unreliable and dismissed subjective investor state of mind as irrelevant to the consolidation analysis.

Applying the Northland factors, the court determined that the elements of consolidation were not present, as assets were segregable, financial statements were separate, and significant prejudice would result to RCC Investors if consolidation were ordered.

The motion for substantive consolidation was denied.

Nortel Networks Corporation and its Canadian debtor affiliates brought a summary judgment motion to dismiss claims by SNMP Research International, Inc. and SNMP Research Inc. for breach of contract, breach of confidence, and copyright infringement.

SNMP's claims arose from Nortel's post-CCAA filing sales of its business segments (LOBs), during which SNMP's proprietary software source code was allegedly transferred to purchasers without authorization.

The court dismissed SNMP's claim for disgorgement of Nortel's profits, finding no evidence that Nortel received revenue derived from the copyright infringement, as purchasers knew they were not acquiring rights to SNMP software and negotiated separate licenses.

However, the court held SNMP's damage claim in abeyance for six months, acknowledging ongoing discovery in a related U.S. proceeding and the possibility of future evidence regarding LOB purchasers' use of unlicensed SNMP software.

The moving party brought a motion to determine whether the appellant required leave to appeal an order dismissing a claim for occupation rent against a receiver.

The Court of Appeal held that the appellant had an automatic right of appeal under s. 193(c) of the Bankruptcy and Insolvency Act because the appeal directly involved property exceeding $10,000 in value.

The motion was dismissed, and the appeal was permitted to proceed without leave.

In a receivership, the court gave advice and directions on competing claims to a travel lift between an owner-lessor and a secured lender with a general perfected security interest.

The court held that the lease was, in substance, a financing arrangement that secured payment for the equipment and therefore fell within s. 2(a) of the Personal Property Security Act.

Because the lessor failed to perfect its security interest, its claim was subordinate to the lender's perfected security interest under s. 20(1)(a)(i).

Any alleged pre-receivership termination of the lease, or contractual language purporting to end the debtor's rights on default, did not displace the prior-ranking secured creditor's rights under Part V of the PPSA.