Mryam Sarkis

The court heard competing motions by a court-appointed receiver and a third-party purchaser (BJC) regarding the sale of a commercial property.

The property was subject to a mortgage that fell into default, prompting the mortgagee to exercise its statutory power of sale and enter into an agreement with BJC.

Subsequently, a receiver was appointed over the mortgagor corporation in an oppression action and sought to sell the same property en bloc with another property to a different purchaser.

The court held that the receivership order under the Business Corporations Act and Courts of Justice Act did not suspend or supersede the mortgagee's pre-existing statutory power of sale under the Mortgages Act.

The receiver's motion to approve its sale was dismissed, and the mortgagee was permitted to complete its sale to BJC.

The trustee in bankruptcy moved for a phase-one determination that profit payments made by Douglas Grozelle to net winners in a fraudulent Ponzi scheme were void as against creditors and recoverable for the estate.

The court found the hallmarks of a Ponzi scheme, held insolvency and fraudulent intent could be inferred globally, and concluded the payments were void under the Fraudulent Conveyances Act and not saved by good-faith or good-consideration defences.

The court approved a two-stage insolvency process: common liability issues resolved summarily now, with individualized quantum determinations in phase two.

The winners’ cross-motion for broad directions attacking the trustee’s process and authority was dismissed.

The Monitor and the Van Iersel Parties brought motions for security for costs against Kenneth Schaller, a former shareholder of three debtor companies in a CCAA proceeding.

Schaller filed a wide-ranging motion seeking to reopen the CCAA proceedings, set aside the approval and reverse vesting order, and replace the Monitor, alleging fraud and misconduct.

The court found that Schaller appeared to be ordinarily resident outside Ontario and that there was good reason to believe the motion was frivolous and vexatious.

The court ordered Schaller to post security for costs totalling $400,000 ($250,000 to the Monitor and $150,000 to the Van Iersel Parties).

The decision also addressed Schaller's submission of AI-hallucinated case citations, finding this to be a serious breach of his obligation to verify authorities submitted to the court.