COURT FILE NO.: CV-13-10152-00CL

DATE: 20140619

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Trent Akagi, Applicant

AND:

Synergy Group (2000) Inc. et al., Respondents

BEFORE: Penny J.

COUNSEL:
Ruth Promislow and R. Sahani for the Receiver

Terry Corsianos for the Applicant

William McDowell and Jamie Spotswood for Integrated Business Concepts Inc. and V. Villanti

Scott Rosen for Student Housing Canada Inc. and R.V. Inc.

D. Magisano and S. Pudister for R. Chaudhary

J. Sereda and Prentice Smith for Synergy Group

HEARD: June 13, 2014

ENDORSEMENT

[1] This motion began as a motion to compel Mr. Villanti to produce additional requested information, for payment of the Receiver’s fees for the costs of its investigation from certain alleged “Additional Debtors” and other collateral relief.

[2] After a short adjournment, the production issue was, for purposes of the June 13, 2014 hearing at least, resolved. The Receiver proceeded with its request for the release of certain Frozen Funds in order to pay the Receiver’s ongoing costs of investigation.

[3] During the adjournment, counsel for IBC and Villanti also brought a motion seeking a sealing/confidentiality order governing all information produced to the Receiver by the parties to these proceedings.

[4] The Receiver took the position that this latter issue was non-controversial as it had neither in the past provided, nor proposed in the future to provide, information to the RCMP, which is conducting its own investigation and has charged Mr. Villanti and others involved in these proceedings with certain offences.

[5] Thus, there are two issues to be determined:

(1) should Frozen Funds be released to the Receiver for payment of its ongoing costs of investigation? And

(2) should an order be made sealing the court file and prohibiting the Receiver from providing any information produced to non-parties?

Payment of Receiver’s Costs

[6] The June 4, 2013 order of C. Campbell J. directed the Receiver to receive and collect all monies and accounts of the “Debtors,” that the Receiver’s costs are a first charge on the property of the Debtors, that the Receiver shall pass its accounts from time to time and that the Receiver is at liberty to apply reasonable amounts out of the monies in its hands against its fees and disbursements as advances against its remuneration as and when approved by the Court.

[7] The August 2, 2013 order of C. Campbell J. expanded the earlier order to include Additional Debtors, and imposed a freezing order on all accounts of the debtors or additional debtors. Paragraph 10 of that order, however, provides:

THIS COURT ORDERS that the Receiver is not entitled to directly utilize any of the Frozen Funds pursuant to paragraph 9 above until further order of this Court to be addressed at a hearing scheduled by the Receiver pursuant to paragraph 18 hereof.

[8] While the orders of C. Campbell J. utilize, by and large, the language of the standard Commercial List receivership order, as recognized by C. Campbell J, this is anything but a standard receivership. The language quoted above from paragraph 10 of the August 2, 2013 order makes this clear.

[9] The law relating to the prepayment of a receiver’s expenses generally arises in the context of normal insolvency proceedings where money is clearly and unambiguously owed by a debtor to a creditor. I do not find this line of authority helpful in the context of this case. The Receiver concedes that its mandate is, in essence, to conduct an investigation into alleged fraudulent activity. Most of the entities persons and entities subject to the prior orders of the Court are not even parties to these proceedings. No specific allegations have been pleaded in any originating process against most of the affected persons and entities.

[10] The evidence before me is that, at the moment, the only entity with any cash on hand is Student Housing Canada Inc. It is not a named party and there are no specific allegations pleaded against it in any action or application.

[11] The Receiver has not brought any specific application for the passing of its accounts. Rather, it seeks the determination of an issue of principle as to whether it is entitled to utilize Frozen Funds by way of pre-payment of expenses, subject to the passing of its accounts.

[12] In the circumstances, I am not prepared to permit the Receiver to utilize any Frozen Funds for the purposes of the payment of the costs of its investigation. In this regard, I rely on the discretion conferred upon the Court in paragraph 10 of the August 2, 2013 order. It would be my expectation that the Receiver come forward in the near future with a proposed plan of action which would, of necessity, include recommendations as to the commencement of civil proceedings against some or all of the “Debtors” or “Additional Debtors.” At that time, it would be appropriate for the Receiver to pass its accounts and seek whatever reimbursement it deems reasonable.

[13] For these reasons, the Receiver’s motion for a declaration that it is entitled to utilize the Frozen Funds by way of interim payment of its investigation costs is dismissed.

Sealing/Confidentiality Order

[14] I am not satisfied that a sealing order has been justified. There is a high threshold to overcome the presumption in favour of open courts. The evidence does not, in my view, reach that threshold.

[15] I am, however, satisfied that a confidentiality order is appropriate. I therefore order that the Receiver not voluntarily provide to CRA or to the RCMP any information obtained in the course of this proceeding. Should CRA or the RCMP wish to have information in the possession of the Receiver for the purposes of investigating legitimate tax or criminal-related charges, their proper course is to seek a search warrant and have the propriety of their application tested in the usual way.

Costs

[16] Counsel are to be commended for their mutual efforts in narrowing the issues and dealing with those issues efficiently. In view of the divided success, I make no order as to costs.

Penny J.

Date: June 19, 2014