Court File and Parties
COURT FILE NO.: 18-77720 DATE: 20181101 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ROBERT HANSON and 1382869 ONTARIO LTD., Applicants -and- ESTATE OF STEPHAN MAISONNEUVE, deceased, 2510552 ONTARIO INC., CORD MASTER INTERNATIONAL INC., and CAISSE POPULAIRE RIDEAU-VISION D’OTTAWA INC., Respondents
BEFORE: Mr. Justice Robert N. Beaudoin
COUNSEL: Jason Dutrizac, for the Applicants Mark Gallagher, for the Respondent Robert De Toni, for the Interim Receiver, Raymond Chabot Inc.
HEARD: October 30, 2018
Endorsement
[1] On September 7, 2018, on consent, I appointed Raymond Chabot Inc. (RCI) as Interim Receiver of Cord Master International Inc. (“Cord Master”) and 2510552 Ontario Inc. (251) pursuant to s. 47(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as amended the (“BIA”) and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 as amended (the “CJA”). The Application was the adjourned to October 5, 2018.
[2] The Applicant, Robert Hanson (“Hanson”), then served a Notice of Motion seeking to extend the interim receivership and to vary my existing Order to remove RCI as Interim Receiver and replace RCI with Doyle Salewski Inc. (“DSI”) as Interim Receiver. The Applicants sought to terminate the interim receivership and appoint DSI as Receiver. This motion was opposed by the Respondent, Caisse Populaire Rideau-Vision D’Ottawa Inc. (the “Caisse”) and RCI who both argued for an order confirming RCI as the Receiver. RCI filed its first two Interim Reports which I ordered sealed.
[3] In his affidavit of September 24, 2018, Hanson took issue with RCI’s actions and expressed his belief that RCI could not continue as “an independent, unbiased court officer”. He added that “if this interim receivership is converted to a full blown receivership, the assets of the business will likely be sold, hopefully through a sale process blessed by the Court.” He also advised that there is an issue as to the ownership of the trademarks of the business that will have to be resolved prior to any sale.
[4] In its second report, RCI recommends at p. 13:
The appointment of a Receiver is a logical continuation of the ongoing process and will allow the implementation of the sale process to the benefit of all stakeholders.
[5] On the return of the motion, Hanson sought a brief adjournment so that his counsel could cross-examine a representative of the Caisse. I granted the request and directed the cross-examinations be completed by October 23, 2018.
[6] The parties scheduled cross-examinations for Friday, October 19, 2018. There were settlement discussions on that date so the parties elected not to proceed. Settlement discussions broke down and no cross-examinations took place. The Applicants sought a conference call with me on Wednesday, October 24, seeking to adjourn the motion date of October 30, 2018. I was unable to decide the issue based on the conflicting submissions that were made. I directed the Applicants to renew their request for adjournment on October 30, 2018.
[7] On October 26, 2018, the Applicants delivered an Amended Notice of Motion wherein they withdrew their request to remove RCI as Interim Receiver. The Applicants then sought to appoint MBG Finance Limited (MBG) to conduct a sales process on behalf of the Interim Receiver and the debtors.
[8] In support of the motion, the Applicants state that MBG carries on business as an asset based lender and investment banker and was previously engaged by the late Stephan Maisonneuve for the purpose of securing financing for the business. As part of its due diligence process, it is stated that MBG attended the business premises, met key employees, and has working knowledge and understanding of the business of the debtors. There is no affidavit evidence filed, although I was advised that a representative of MBG was in the courtroom.
[9] I was advised that Hanson continues to seek a postponement of the appointment of a Receiver. Although he no longer has a motion before the Court to remove RCI, he states that he continues to oppose RCI’s continued appointment. Hanson, maintains that there is no urgency for the appointment of a Receiver, although that was the relief he himself sought when he requested that DSI be appointed. At the same time, the Applicant suggests that key employees will quit the business if RCI is appointed the Receiver and that this will affect the viability of an ongoing sale.
[10] Indeed, there were a number of Cord Master employees in the courtroom but there is no evidence before the Court that any of these employees will actually quit their employment if RCI is appointed as Receiver. The interim reports of RCI indicate that the business is ongoing, the employees continue in their employment, and their wages are being paid. At the present time, there is no motion to remove RCI. There is no evidence that the appointment of a Receiver as opposed to an Interim Receiver would somehow damage the value of the business. The need for further cross–examinations is no longer apparent and a further adjournment will only further delay matters.
[11] Everyone agrees that some certainty for the business is required and it is agreed that the implementation of the sales process as an ongoing concern will be to the benefit of all stakeholders.
[12] The relevant statutory provisions of the BIA are as follows:
Appointment of Interim Receiver
47 (1) If the court is satisfied that a notice is about to be sent or was sent under subsection 244(1), it may, subject to subsection (3), appoint a trustee as interim receiver of all or any part of the debtor’s property that is subject to the security to which the notice relates until the earliest of
(a) the taking of possession by a receiver, within the meaning of subsection 243(2), of the debtor’s property over which the interim receiver was appointed,
(b) the taking of possession by a trustee of the debtor’s property over which the interim receiver was appointed, and
(c) the expiry of 30 days after the day on which the interim receiver was appointed or of any period specified by the court.
Directions to Interim Receiver
(2) The court may direct an interim receiver appointed under subsection (1) to do any or all of the following:
243 (1) Subject to subsection (1.1), on application by a secured creditor, a court may appoint a receiver to do any or all of the following if it considers it to be just or convenient to do so:
(a) take possession of all or substantially all of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt;
(b) exercise any control that the court considers advisable over that property and over the insolvent person’s or bankrupt’s business; or
(c) take any other action that the court considers advisable.
[13] I am unable to conclude that the Cord Master business is “perishable” property or property that “is likely to depreciate rapidly.” Moreover, given the dispute over the trademarks, no summary disposal seems possible.
[14] Hanson argues that RCI now has all the power it needs to manage the business including the authority to sell the business. I am satisfied that an Interim Receiver has no right to sell the property of the debtor in the absence of a court order expressly conferring on it that express power. [^1] Hanson originally took a narrow view of RCI’s powers under the interim receivership and the parties were required to obtain a further order from Justice Hackland authorizing the Receiver to borrow further funds from the Caisse on its existing operating line of credit.
[15] The proposed agent is not a court-appointed official. There is no evidence before the Court to justify the order sought. Receivers are officers of the Court and have obligations to the Court to act honestly and in good faith towards all stakeholders. RCI can consult with MBG if it is determined that MBG can assist in the sale process and, in any event, RCI will have to seek further directions from the Court and obtain the Court’s approval for any sale.
[16] The current situation requires certainty which can be best addressed by confirming RCI as the Receiver. The Applicants’ request to adjourn the motion is dismissed as well as their request to have MBG appointed as sales agent to conduct the sales. RCI is confirmed as the Receiver. The parties are to submit a draft order for my signature.
[17] Brief costs submissions (not exceeding 5 pages) are to submitted with 20 days of this decision.
Mr. Justice Robert N. Beaudoin Date: November 01, 2018