Court of Appeal for Ontario

Date: 2025-06-23
Docket: M56051 (COA-25-CV-0645)
Judge: Elizabeth Gomery (Motions Judge)

Parties

Between:
Ontario Securities Commission
Applicant (Respondent/Responding Party)

and
Cacoeli Asset Management Inc., Cacoeli Capital Inc., Cacoeli Duke Wellington Lp, Cacoeli Linnwood-Lowther Lp, Cacoeli Heiman Lp, Cacoeli Arlington Rental Lp, Cacoeli Holborn-Chicopee Lp, Holborn Chicopee Lp, Cacoeli Bloor Ossington Lp, Cacoeli Ys High Yield Finance Lp, Cacoeli Kennedy Steeles Lp, Cacoeli Fixed Income Fund Lp, 11530704 Canada Inc., Cacoeli Gp Inc., 10138851 Canada Inc., 11089480 Canada Inc., Holborn Chicopee Gp Inc., Cacoeli Real Estate Opp Gp Inc., 11889702 Canada Inc., 2778754 Ontario Ltd.
Respondents (Appellants/Moving Parties)

Counsel:

• Cameron Rempel and Caroline Harrell, for the Appellants/Moving Parties
• Erin Hoult, for the respondent, Ontario Securities Commission
• Ian Aversa and Miranda Spence, for the Receiver, Grant Thornton Limited
• Samuel M. Robinson and Stephen Aylward, for MCAP Financial Corporation
• Heather Fisher, for CMLS Financial Ltd.

Heard: 2025-06-17

Endorsement

Background

[1] The appellants move for a stay of Steele J.’s order dated June 5, 2025, appointing a receiver under s. 129 of the Securities Act, RSO 1990, c S.5 (the “Receivership Order”).[^1] For the reasons that follow, the motion is dismissed.

[2] Companies and partnerships under the Cacoeli banner are involved in the purchase and redevelopment of residential real estate properties. Cacoeli Asset Management Inc. (“CAM”) provides asset management services. Cacoeli Capital Inc. focuses on marketing and raising capital. The remaining appellant entities are in the business of acquiring, holding and managing residential projects in southern Ontario through limited partnerships. Another related company, Cacoeli Living Inc. (“CLI”), provides services to other Cacoeli entities, but it was not subject to the Receivership Order and is not a party to this proceeding.

[3] A corporation serves as the general partner for each of the limited partnerships. Jedidiah Kit Wah Liu and Kasey Ho-Cheung Wong are CAM’s shareholders and the directors and/or officers for each general partner. Ms. Liu is also the president and chief executive officer of CAM, as well as the principal of each limited partnership. Mr. Wong is the chief operations officer of the appellants and an employee of CLI.

[4] Cacoeli obtains some of its financing for real estate development projects from private investors. Since 2015, about 53 investors have collectively invested at least $13 million towards the purchase and redevelopment of real estate projects through various limited partnerships.

[5] In December 2023, the respondent Ontario Securities Commission (“OSC”) received a complaint from Cacoeli’s former chief financial officer about the appellants’ activities and began an investigation into the appellants, Ms. Liu and Mr. Wong. To date, the OSC investigators have interviewed 2 former Cacoeli CFOs, 2 former business partners, and 12 investors in various Cacoeli projects, but not Ms. Liu or Mr. Wong. The investigation is ongoing.

[6] In February 2025, the OSC applied for the appointment of a receiver over Cacoeli, alleging that its investigators had discovered evidence of the fraudulent diversion of investor funds. The OSC application was supported by some holders of first and second mortgages against properties being developed by Cacoeli, including MCAP Financial Corporation (“MCAP”) and CMLS Financial Ltd (“CMLS”). The application was adjourned on terms, including the appointment of the proposed receiver, Grant Thornton Limited, as Monitor.

[7] On April 14, 2025, the Monitor submitted its first report to the court. It identified several concerns:

a) Ms. Liu and Mr. Wong had provided incomplete answers to the Monitor’s questions or taken an extended period of time to respond to its requests for information;
b) Ms. Liu and Mr. Wong made payments to related parties without notice to the Monitor and repeatedly declined to explain the basis for such payments. By early April, these related-party payments totaled $61,000, or 21.7% of receipts collected over a 60-day period;
c) These payments were made while mortgages on Cacoeli properties were unpaid or underpaid, with some payments returned due to insufficient funds. Some mortgages were in default;
d) Ms. Liu and Mr. Wong had been using a bank account they personally control, referred to in the report as “Account 526”, to receive and handle Cacoeli funds. They told the Monitor that they established Account 526 to permit them to lend money to CAM and CLI to fund operations as required, after the Canada Revenue Agency issued a garnishment order against CAM’s corporate accounts due to delayed corporate tax and HST filings for 2023 and 2024 and an outstanding payroll tax balance. Ms. Liu and Mr. Wong denied any co-mingling of company funds and personal funds in Account 526.

[8] On April 22 and 29, Steele J. heard the parties’ submissions on the OSC’s application for a receiver. On May 23, 2025, she granted a receivership order over all the appellants.

[9] Steele J. found that the OSC had satisfied s. 129(2) of the Securities Act, which requires that the court find the appointment of a receiver is in the best interests of its subject’s creditors, or that the appointment is appropriate for the due administration of Ontario securities law.

[10] Steele J. held that the OSC does not have to prove a breach of the Act to get a s. 129(2) order. It must merely persuade the court that there are serious concerns that there have been possible breaches. She found that the applicable evidentiary standard was a “serious issue to be tried” rather than a “prima facie case”.

[11] Steele J. concluded that the OSC had shown that there were serious concerns that Cacoeli might have breached the Securities Act. She found evidence that the appellants repeatedly diverted investor funds from some limited partnerships to other Cacoeli entities and investments. She found that this was not a permitted use of funds insofar as the marketing materials and subscription agreements signed by investors did not contemplate such diversion.

[12] The appellants appealed the Receivership Order and sought an interim stay. On June 9, 2025, Monahan J.A. issued an interim stay on terms to remain in effect until a full determination of the appellants’ stay motion. For the duration of this interim stay, he ordered that the monitorship would continue; he prohibited any payments from the appellants to CAM or other related parties without the Monitor’s prior authorization; and he ordered the disclosure of statements for Account 526.

[13] On June 16, 2025, the Monitor issued a second report. In this report, it stated that:

a) The percentage of related party transactions against Cacoeli’s rental revenue had increased; these payments accounted for over 27% of all such receipts from April 14 to June 9, 2025 and totaled over $160,000. Over the same time period, these same limited partnerships had not made all mortgage payments and/or had otherwise defaulted on mortgage terms. The Monitor concluded that the related-party transactions “diverted significant funds from each of the Real Properties, jeopardizing or restricting each corresponding LP’s ability to make mortgage payments on time and in full”.

b) A review of the statements for Account 526 disclosed to the Monitor pursuant to Monahan J.A.’s order revealed that personal and corporate funds may have been comingled, contrary to earlier representations to the contrary by Ms. Liu and Mr. Wong. Moreover, in their description of the disbursements of this account between February 14 and June 6, 2025, they acknowledged that, of just over $187,000 in total receipts deposited into Account 526, primarily from Cacoeli limited partnerships, almost $123,000 (roughly 66% of receipts) had been disbursed as “personal” payments to Ms. Liu or Mr. Wong. As of June 6, the account balance was $196.80.

[14] On June 12, 2025, the Monitor refused a request by Ms. Liu to authorize payments by the limited partnerships to CAM and CLI for their management and other services.

The Test for a Stay

[15] The parties agree that the test for a stay is set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, at p. 334. I should consider whether the moving party has shown that: (1) there is a serious issue to be determined; (2) if a stay is not granted, the moving party will suffer irreparable harm; and (3) the balance of convenience favours a stay. After considering these factors, I must determine whether the overall interests of justice call for a stay: Longley v. Canada (Attorney General), 2007 ONCA 149, 223 O.A.C. 102, at para. 15; Zafar v. Saiyid, 2017 ONCA 919, at para. 18. The strength of the moving parties’ argument on one factor may compensate for its weakness on another: Circuit World Corp. v. Lesperance, 33 O.R. (3d) 674 (C.A.), at p. 677.

(1) Is There a Serious Issue to Be Tried?

[16] The threshold for finding that there is a serious issue to be determined on appeal is low. As held in RJR-MacDonald, at pp. 337-38:
“Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.”

[17] The appellants contend that Steele J. erred in her finding that the OSC did not need to demonstrate a prima facie case to obtain the Receivership Order. Although it takes the position that Steele J. did not so err, the OSC concedes that the appellants have met the first prong of the RJR-MacDonald test.

(2) Have the Appellants Proved That They Will Suffer Irreparable Harm if a Stay Is Not Granted?

[18] Irreparable harm is “harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other”: RJR-MacDonald, at p. 341. A permanent loss of market share may constitute irreparable harm. An applicant for a stay cannot, however, rely on speculative evidence about irreparable harm. Their evidence must establish that there is a high degree of probability that permanent and non-compensable harm will in fact occur: Operation Dismantle Inc. v. Canada, [1985] 1 S.C.R. 441, at p. 458; Syntex Inc. v. Novopharm Ltd., 36 C.P.R. (3d) 129 (F.C.A.), at p. 135, leave to appeal refused, [1991] S.C.C.A. No. 309.

[19] To establish irreparable harm, the appellants rely on two affidavits of Ms. Liu. They have also filed affidavits from six investors, but the appellants’ counsel advised at the hearing of this motion that they were not relying on this evidence to prove irreparable harm.

[20] In her first affidavit, Ms. Liu asserts that, absent a stay, Cacoeli’s business “will be at an end”, and she will lose her family’s sole source of livelihood and income. She states that business contacts from commercial lenders questioned her about the appointment of a monitor after this news was posted on Grant Thornton’s website. She believes that, if they learn that a receivership appointment has been made, these contacts will assume that Cacoeli is guilty of fraud as alleged in the OSC application, and prospective investors or lenders are unlikely to advance money to her or businesses that she may operate in the future.

[21] In her second affidavit, Ms. Liu reiterates that her family relies on income from Cacoeli, specifically management fees paid by Cacoeli entities to CAM and CLI. She states that, since the Monitor refused to approve further payment of invoices for these fees on June 12, going forward CAM and CLI will be unable to provide critical services to the limited partnerships.

[22] I do not find the appellants’ evidence on irreparable harm compelling.

[23] The evidence does not establish a high degree of probability that the Receivership Order will put an end to Cacoeli’s business. Counsel for the Receiver emphasized at the stay hearing that it has no interest in shutting Cacoeli down, assuming its ongoing operations are viable. The appellants’ counsel conceded at the stay hearing that Grant Thornton has not said that it intends to liquidate Cacoeli, but maintained that there would be nothing to prevent it from doing so, given the extensive powers given to it under the terms of the Receivership Order.

[24] The appellants’ fears are speculative. As stated in Re Regal Constellation Hotel Ltd. (2004), 71 O.R. (3d) 255 (C.A.), at para. 26, a court-appointed receiver “has a fiduciary duty to act honestly and fairly on behalf of all claimants with an interest in the debtor's property, including the debtor (and, where the debtor is a corporation, its shareholders)” (emphasis added). There is no indication, on the evidence before me, that the Receiver has concluded the interests of stakeholders would be better served by winding up Cacoeli’s activities, as opposed to attempting to conduct ongoing operations so that outstanding obligations are met.

[25] Moreover, the Receivership Order does not authorize the Receiver to sell, convey, transfer, lease or assign any of the appellants’ property out of the ordinary course of business without prior court approval. This is unusual. Receivership orders typically empower receivers to alienate property without court approval up to a certain maximum threshold.

[26] The Receiver may well have to make difficult choices. The need to make such choices is not the result of the Receivership Order but rather liquidity issues which predate the OSC investigation and have already resulted in mortgage defaults, tax issues, and unanticipated inter-party transfers.

[27] The appellants rely on Ontario v. Shehrazad Non Profit Housing Inc., 2007 ONCA 267, 85 O.R. (3d) 81. In that case, MacPherson J.A. granted a stay of an order obtained by the Ministry of Municipal Affairs and Housing appointing a receiver over a not-for-profit social housing corporation. He found that the corporation would suffer irreparable harm if the stay was not granted as it would lose the two housing projects that were its primary assets and, as a result, its sources of income and its reason for being.

[28] Shehrazad is distinguishable. It involved a receivership order made not for regulatory purposes but based on the appellant’s potential insolvency (which was disputed). The explicit purpose of obtaining a receivership order in Shehrazad was to empower the receiver to take steps to sell the corporation’s housing projects to another not-for-profit corporation. In light of this, MacPherson J.A. found that the risk of irreparable harm, in the absence of a stay, was very real.

[29] There is no comparable evidence here.

[30] Ms. Liu’s assertion that she and her family rely entirely on income from CAM and CLI is not supported by any disclosure of assets or income. The mere possibility of financial harm, and even bankruptcy, is not enough to satisfy the irreparable harm test: see Therriault v. United Freight Services Ltd., 2006 ABCA 350, at paras. 2, 7; Kitmitto et al. v. Ontario Securities Commission, 2023 ONSC 1739 (Div. Ct.), at para. 19.

[31] Ms. Liu has furthermore not explained the use of almost $123,000 in “personal” payments from Account 526 over the past four months, even though she swore her reply affidavit after providing records showing these withdrawals to Grant Thornton pursuant to Monahan J.A.’s order.

[32] The appellants’ evidence about potential reputational harm is weak. In her first affidavit, Ms. Liu asserts that, if unnamed prospective investors or lenders learn about the Receivership Order, it is unlikely that they will advance money to her or to businesses that she operates in the future. I can give little weight to such unparticularized assertions. But even if I accepted that the appointment of a receiver could cause Ms. Liu to suffer reputational harm, this harm has already occurred. The Receivership Order has been made. It is on the public record. In the affidavits that the appellants have filed from six investors, each says that they are aware of the Receiver’s appointment.

[33] The appellants’ counsel argued that investors would be reassured by a stay order. There is no evidence to support this nor evidence that the announcement that the Receiver has assumed control of Cacoeli would be viewed by third parties as an additional element of reputational harm.

[34] The appellants further argue that they will suffer irreparable harm if a stay is not granted because they will ultimately have to assume the costs of the receivership and they will have no right to recover these amounts through a claim for damages against the OSC or the Receiver even if they prevail on the appeal. On this argument, irreparable harm would automatically be established in every appeal of a receivership order granted in favour of the OSC. The lack of availability of damages was not considered a controlling factor in RJR-MacDonald.

[35] Finally, the appellants argue that, if a stay is not granted, the appeal may be rendered moot, because the Receiver may in the interim fire employees, sell assets and compel Cacoeli’s management to produce information and records that it would otherwise not have to disclose. There is again no evidence to support the argument that the Receivership Order imperils Cacoeli’s existence as a going concern, assuming it is viable. I cannot see how requiring Cacoeli’s management to disclose records and information to the Receiver will irreparably harm the appellants.

[36] I agree with the appellants that the appeal can be heard on an expedited basis, since no transcripts need to be prepared. The respondent’s counsel advised that the OSC would agree to a hearing date in September 2025. I am not persuaded that, in the intervening two-to-three months, the appellants will suffer any significant irreparable harm through the operation of the Receivership Order.

(3) What Does the Balance of Convenience Favour?

[37] In considering the balance of convenience, I must determine which of the parties will suffer greater harm from the granting or refusal of a stay pending a decision on the merits of the appeal: Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1 S.C.R. 110, at p. 129.

[38] The appellants rely on six affidavits from investors, sworn and signed between May 28 and June 4, 2025, who have collectively invested $1,700,000 in Cacoeli. Each affidavit states that:

• The affiant is an investor in one of the Cacoeli limited partnerships, either directly or through a company;
• The affiant has never alleged that Cacoeli is in breach of the limited partnership agreement; and
• The affiant is aware of the Receivership Order and does not support the appointment of a receiver.

[39] I give these affidavits little weight. Beyond a description of each affiant’s particular investment, they contain identical, undetailed, boilerplate assertions. There is no evidence that the affiants are aware of the investigators’ findings or the disclosures in the Monitor’s reports, or that they understand the effect of the Receivership Order. Even if I gave these affidavits weight, this would leave 47 other investors whose interests presumptively favour the enforcement of the Receivership Order.

[40] The appellants rely on Fraser v. Nova Scotia Barristers’ Society, 2024 NSCA 26, in which the Chief Justice of Nova Scotia, sitting in chambers, granted a stay of an order suspending a lawyer’s right to practice. Fraser involved a very different situation than this. The suspension order in Fraser was made by the provincial bar association’s complaints committee on an ex parte basis. In contrast, the Receivership Order was made following a two-day contested hearing at the Superior Court of Justice on four months’ notice before an experienced commercial list judge, at which voluminous records, including transcripts of cross-examinations of Ms. Liu, were adduced in evidence and counsel for the appellants had a full opportunity to make submissions. Also, the receiver appointed to administer Mr. Fraser’s law practice following his suspension recommended that a partial stay of the suspension be granted so that Mr. Fraser could continue to represent two clients. Here, in contrast, the Monitor’s second report provides additional support for the immediate implementation of the Receivership Order.

[41] Where the authority of a law enforcement agency is challenged, “no interlocutory injunction or stay should issue to restrain that authority from performing its duties to the public unless, in the balance of convenience, the public interest is taken into consideration and given the weight it should carry”: Metropolitan Stores, at p. 149.

[42] I find that the public interest will be harmed if a stay is granted. The OSC obtained the Receivership Order in furtherance of its duties under the Securities Act as the regulator of capital markets, after an ongoing investigation found concerns about improper inter-party transfers. As observed in Kitmitto, at para. 33, “The public must have confidence in the integrity of the capital markets, and confidence that the laws regulating the markets will be rigorously enforced”.

[43] The interests of third parties are also a relevant consideration at this stage: Ducharme v. Hudson, 2021 ONCA 151, 155 O.R. (3d) 281, at para. 25. I find that mortgagees, including MCAP and CMLS, will be affected by a stay. The mortgagees cannot take steps to enforce their security interests under the terms of the monitorship order. During the monitorship, Cacoeli’s principals have remained in charge, and Cacoeli limited partnerships have continued to default on their mortgage obligations. As of June 9, 2025, the arrears on MCAP’s mortgages exceeded $250,000. Since the mortgage loans are securitized into mortgage-backed securities under the National Housing Act, RSC 1985, c N-11, MCAP is required to make payments equivalent to the principal and interest owed to certificate-holders even when it does not receive payments from mortgagors when due. Had it not been for the OSC’s application, MCAP would have commenced mortgage enforcement proceedings. Although the Receivership Order would still preclude mortgagees from taking such steps, it nonetheless places them in a better position because the Receiver is required to protect the interests of all stakeholders, including creditors.

[44] I conclude that the balance of convenience does not favour a stay.

Conclusion

[45] Weighing the RJR-MacDonald factors, I conclude that the interests of justice do not favour a stay of the Receivership Order. Although there is a serious question to be tried on appeal, there is little evidence that the appellants will suffer irreparable harm if a stay is not granted. The balance of convenience weighs against a stay.

[46] The appellants suggested that I might alternatively order a partial stay. Pursuant to the terms they propose, the Receiver would be directed to authorize (1) the payment of management services fees to CLI and CAM, as provided in the parties’ asset management and property management agreements, in turn allowing CAM and CLI to pay salaries to their employees; and (2) the repayment of shareholder loans to Ms. Liu and Mr. Wong in the amount of $7,500 per month, as this is their only source of income. In return for this carveout, the appellants would undertake to perfect the appeal by early July and to seek an expedited hearing date as early as August 2025.

[47] I do not find that the proposed partial stay would be in the interests of justice, particularly in light of the statements in the Monitor’s second report regarding an increased rate of related-party transfers and personal payments from Account 526. Under the proposed terms of the partial stay, repayment of the shareholder’s loans would have priority over repayment of secured debt. There is no justification for this.

Disposition

[48] The motion for a stay is dismissed.

“Elizabeth Gomery”

[^1]: With reasons for decision released May 23, 2025: Ontario Securities Commission v. Cacoeli Asset Management, 2025 ONSC 3012.