COURT FILE NO.: CV-11-9463-00CL
DATE: 20120123
SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)
RE: BUSINESS DEVELOPMENT BANK OF CANADA, Applicant
AND:
ROYAL GREEN ENTERPRISES LTD. AND 2019899 ONTARIO LIMITED, Respondents
BEFORE: MORAWETZ J.
COUNSEL: R. Fisher, for the Applicant
P. Welsh, for Royal Green Enterprises Ltd.
HEARD &:
ENDORSED: January 16, 2012
REASONS: January 23, 2012
ENDORSEMENT
[1] This matter was heard January 16, 2012. At the conclusion of the hearing, the record was endorsed: “Application granted. Reasons will follow.” These are the reasons.
[2] The Applicant, Business Development Bank of Canada (“BDC”), brought this application under s. 243 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (“BIA”) for the appointment of a receiver and manager. The Respondents oppose the application, being of the view that the appointment is not necessary at this time and is not just and convenient from the point of view of stakeholders and interested parties.
[3] In addition to the affidavit of Mr. Robert Furtney sworn November 9, 2011, there is a reply affidavit of Mr. Furtney sworn November 28, 2011, as well as responding affidavits from the representative of the Respondents, Mr. Miao dated November 17, 2011, December 5, 2011 and January 12, 2012. Additionally, there are cross-examination transcripts of each affiant.
[4] The matter was scheduled to be heard on December 8, 2011 but was adjourned to December 13, 2011. At that time, Wilton-Siegel J. endorsed the record as follows:
On consent, application is adjourned to January 16, 2012 (1-1/2 hours) before Spence J. on the following terms:
Royal Green to pay the Applicant’s firm $40,000 by close of business on December 15, 2011 to be paid to BDC;
Royal Green to pay the Applicant’s firm a further $24,000 by close of business on January 5, 2012 to be paid to BDC; and
The Applicant to be entitled to seek an earlier hearing date in the event either of such amounts is not paid in accordance with this schedule.
“Wilton-Siegel J.”
[5] BDC is currently owed approximately $5.3 million, which amount is not in dispute. As security, BDC holds mortgage security, GSAs and the personal guarantee of Mr. Miao.
[6] It is not disputed that the terms and conditions of the GSA provide for the appointment of a receiver.
[7] Property tax arrears are in excess of $650,000.
[8] The last scheduled loan payment made by the Respondents was in December 2009.
[9] Subsequent to December 2009, there have been some payments of interest totalling $96,799.33. Outstanding interest owed to BDC at this time is in excess of $756,000.
[10] The real property is currently listed for sale at the sum of $5,990,000. If the property is sold for the listing price, after payment of property taxes and commission, BDC will be in a deficiency position.
[11] Although Royal Green made the payment of $40,000 in December 2011, as referenced in the endorsement of Wilton-Siegel J., it failed to make the required $24,000 payment by close of business on January 5, 2012 as the cheque was returned for insufficient funds. Further, Royal Green did not make the scheduled payment of $40,000 which was due on January 15, 2012.
[12] During argument, counsel to Royal Green indicated that a replacement cheque for $24,000 was available. The cheque was not certified.
[13] In his affidavit of January 12, 2012, Mr. Miao provides certain information with respect to the status of the sale of the building located at 5 Copper Road, Brampton, Ontario. The building is currently listed with Coldwell Banker, as requested by BDC and, as Mr. Miao states, the listing agreement is specifically directed towards the expeditious sale of the building.
[14] Mr. Miao gives limited information about certain prospective purchasers. The affidavit is extremely vague, providing no detail about the identity of the prospective purchasers, nor any details with respect to the consideration that is being proposed.
[15] Mr. Miao maintains that, if the buildings were sold and smaller premises leased at current market rates, the cash saving to Royal Green would exceed $50,000 per month.
[16] Counsel to Royal Green submits that a receiver ought not to be appointed and that Royal Green should be given more time to address the issue of the outstanding demand for payment and it is premature to place Royal Green into receivership.
[17] Counsel referenced the earlier affidavit of Mr. Miao sworn November 17, 2011 which highlights certain revenue opportunities. Counsel submits that the opportunity for the “eight-week turnover” could not be realized as a result of Royal Green not having sufficient funds to fill certain back orders.
[18] Counsel also submitted that a receivership order would be premature as it would not permit Royal Green the opportunity to participate in certain spring trade shows, for which Royal Green had already paid for a booth.
[19] I cannot give effect to the submissions of Royal Green.
[20] Demand was made on behalf of BDC on May 27, 2011. Royal Green has acknowledged that it is in default. The last scheduled loan payment made by Royal Green was in December 2009.
[21] The application was adjourned on December 13, 2011 on terms. Royal Green is in default of these terms.
[22] Based on the current listing price for the property, it appears that, on any sale of the property, BDC will be in a shortfall position after taking into account property taxes and commission. BDC will then have to look to the remaining assets to cover any shortfall. The business has been losing money for several years. The position of BDC continues to erode.
[23] I have not been persuaded that, if additional time is provided to Royal Green, it will improve the situation. On the contrary, given the inability of Royal Green to make agreed upon payments to BDC arising out of the December 13, 2011 attendance before Wilton-Siegel J., one can only conclude that the situation will get worse.
[24] The test under s. 243 of the BIA for the appointment of a receiver is that it must be just or convenient to do so. With the inability of Royal Green to make agreed upon payments, the eroding position of BDC, the continued default by Royal Green, and no evidence of an alternative position to be put forth to satisfy its obligations to BDC, I have concluded that it is both just and convenient to appoint a receiver.
[25] The application is granted. BDO Canada Limited, having filed its consent to act, is appointed as a receiver and manager. An order shall issue based on the Model Order developed by the Commercial List Users’ Committee.
MORAWETZ J.
Date: January 23, 2012