Third party lenders sought declarations in CCAA proceedings that funds, brokered payday loans, and receivables advanced through the debtor company were their property and not assets of the debtor estate.
The court examined the written broker agreements and the parties’ actual practices, including commingling of funds, guaranteed returns to lenders, and capital protection arrangements that insulated lenders from loan losses.
The evidence showed the lenders received fixed 17.5% returns irrespective of customer loan performance and that all loan proceeds and repayments flowed through the debtor’s general accounts.
The court held that the parties’ conduct varied the broker agreements and created a debtor–creditor relationship rather than a trust or agency relationship.
The lenders’ motions for declarations of ownership were dismissed and the disputed receipts were held to belong beneficially to the debtor.