SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Goodwood Inc., Applicant

AND:

Cathay Forest Products Corp., Respondent

BEFORE: D. M. Brown J.

COUNSEL: E. Marques, for the Applicant K. Richard, for the Stephen Miller, a director of the respondent J. Teskey, for Norton Rose Canada LLP N. Baker, for the representative plaintiff in the Mac Killoran class action J. Salmo, for a proposed interim receiver, Deloitte & Touche LLP

HEARD: June 19, 2012

REASONS FOR DECISION

[1] In my Reasons of June 17, 2012 (2012 ONSC 3548) I directed that the parties, Goodwood Inc. and Cathay Forest Products Corp., appear before me today with a proposal for the appointment of a specific person or entity to act as the temporary receiver/manager of Cathay until the completion of the elections to be held at the July 30, 2012 shareholder meeting which I ordered.

[2] Both parties submitted proposals. I appreciate their efforts given the time constraints.

[3] Goodwood has proposed a form of order which would see the appointment of a “light” interim receiver: see Exhibit “C” to the affidavit of Michael Woollcombe sworn June 18, 2012. Mr. Miller, a director of Cathay, does not quarrel with the form of the order. Having reviewed the proposed order I conclude that it captures the sort of powers which I envisaged an interim receiver/manager would exercise during the weeks leading up to the July 30 shareholder meeting. I approve the powers set out in the proposed order.

[4] Goodwood proposes the appointment of Duff + Phelps Canada Restructuring Inc. as interim receiver. Mr. Miller, a director of Cathay, proposes Deloitte & Touche LLP. I have reviewed the information about each firm contained in the affidavits of Mr. Woollcombe and Mr. Paul Casey. Both firms are qualified to discharge the duties of an interim receiver. Both have a presence in China. Neither party took issue with the professional qualifications of either firm.

[5] While I have no doubt that both firms would discharge their court-appointed duties in an independent and even-handed fashion, in the circumstances of this case the appearance of independence is just as important as independence-in-fact. In my June 17 Reasons, at paragraphs 40 and 41, I reviewed the evidence of the prior contact between one of Cathay’s directors, Mr. Miller, and a representative of Deloittes in Shanghai, Mr. Ling. That prior contact, when coupled with the apparent expectation of some future involvement by Mr. Ling in the interim receiver mandate,[^1] makes it prudent, in my view, to decline to appoint Deloitte & Touche as interim receiver in order to avoid any appearance of lack of independence. Accordingly, I appoint Duff + Phelps as the interim receiver of Cathay.

[6] I am satisfied that paragraph 2(b) of the order authorizes the interim receiver to instruct Cathay’s class action counsel, Norton Rose Canada, for the purposes of next week’s case conference before Rady J.

[7] I have signed the draft order.

D. M. Brown J.

Date: June 19, 2012

[^1]: Affidavit of Paul Casey sworn June 19, 2012, para. 8.