Court File and Parties

Court File No.: CV-17-11827-00CL Date: 2020-09-09 Superior Court of Justice - Ontario

Re: Duca Financial Services Credit Union Ltd., Applicant And: 2203284 Ontario Inc., Respondent

Before: C. Gilmore, J.

Counsel: Lawrence Hansen, for the Receiver Brett D. Moldaver, for the Moving Party Defendant

Heard: September 2, 2020

Endorsement on motion

Overview

[1] This is the Respondent 2203284 Ontario Inc.’s motion (“220”) directing the Receiver’s immediate compliance with the Order of Justice Dietrich dated June 19, 2020 (“the Dietrich Order”) and requiring the Receiver to distribute the remaining funds as set out in the Dietrich Order.

[2] The Receiver seeks an Order for Directions approving its fees and disbursements in its Fifth Report, making an advance payment to the Respondent and dismissing the Respondent’s motion.

[3] The Respondent takes the position that the Receiver cannot proceed with its motion as it is not in compliance with the Dietrich Order, which is a final issued and entered Order. As there is no mistake, fraud or appeal taken, the Receiver cannot now seek to vary or amend the Dietrich Order.

Factual Background

[4] On June 22, 2017 Justice Conway issued an Order appointing msi Spergel as the Receiver in this matter. The Order contained the usual provisions. In particular it stated in paragraph 18 that “the Receiver’s Charge shall form a first charge in priority to all security interests, trusts, liens, charges and encumbrances, statutory or otherwise, in favour of any Person….”

[5] In November 2019 the Receiver brought a motion before Justice Dietrich to approve its Fourth Report and Supplementary Fourth Report. 220 objected to the Receiver’s proposal to pay the claims of the unsecured creditors claiming they were statute barred.

[6] Justice Dietrich sought further written submissions from the parties which were received on March 16 and 31, 2020. Justice Dietrich released her endorsement on this matter on June 19, 2020. The Dietrich Order dated June 19, 2020 is based on those reasons.

[7] The Dietrich Order approved the Receiver’s Fourth Report and Supplementary Fourth Report and authorized the payment to the Receiver of its fees in the amount of $373,960.75 plus HST plus an accrual of $25,000 plus HST to complete the administration of the estate. The Order also approved the Receiver’s legal fees in the amount of $85,218.23 plus HST and an accrual of $15,000 plus HST for completion of the administration of the estate.

[8] The Dietrich Order required payment to the unsecured creditors in the amount of $190,800.71. Those payouts were made promptly by the Receiver and even before the appeal period of the Order was expired. The remaining funds were to be paid out to the Respondent as per its direction. The remaining funds, which exceed $1M, have not been paid out to the Respondent to date.

[9] The last two paragraphs of the Dietrich Order contain the usual provisions with respect to the Receiver’s Certificate of Discharge and the release and discharge of the Receiver from liability.

[10] The Dietrich Order was settled and entered with the consent of counsel. Subsequent to the Dietrich Order being entered, the Receiver requested additional fees, legal fees, HST and accruals totalling close to $100,000 as set out in paragraphs 72 and 73 of its factum. The Receiver then delivered a Fifth Report setting out the additional fees requested and documenting an additional HST Refund and accrued interest. The Receiver concedes that it made an error and should have included these additional fees and accruals either by way of additional written submissions in March 2020 or during the course of settling the Order.

[11] A 9:30 appointment was held before Justice Dietrich on August 18, 2020. The Respondent sought a motion date for payout of the funds owing and an Order confirming that no further fees were owing to the Receiver on grounds that the Dietrich Order was final and could not be varied except on appeal.

The Issues

Does the Receivership Order “Trump” the Dietrich Order with Respect to the Receiver’s Fees and First Charge?

[12] The Receiver submits that the Receivership Order is clear that unless the Court orders otherwise, the Receiver shall receive its reasonable fees and legal fees and disbursements by way of a first ranking charge on the estate and before distribution of the estate.

[13] The Receiver submits that the Conway Receivership Order and the Dietrich Order are in conflict and the Receiver seeks direction from the Court in that regard.

[14] The cases provided by the Receiver in this regard are not necessarily helpful. Sub-Prime Mortgage Corp v. Phoenix Apartments Ltd., 2010 ONSC 6535 involved the assessment of whether a Receiver’s accounts were “fair and reasonable.” That is not this case. All fees contemplated in the Dietrich Order were paid out to the Receiver and its counsel without any contest as to whether they were fair or reasonable.

[15] It is this court’s view that the Dietrich Order is intended to be final and therefore subsumes the provisions of the Conway Order. That is, it is open to this court to find that the Receiver has no ability to request further fees or accruals given the clear intention of the Dietrich Order to finalize all issues between the parties including the termination of the Receivership.

Can the Dietrich Order be Amended or Varied?

[16] The Receiver submits it is not asking for a variation of the Dietrich Order. It is simply seeking directions from the Court as it is entitled to do under the Receivership Order.

[17] Of note is that the Receiver did not bring an earlier motion. Its Motion for Directions was only served in response to the Respondent’s motion and not by way of cross-motion.

[18] The Receiver submits that if it were seeking a variation of the Dietrich Order it would be entitled to do so on the basis that there are particulars on which the Court had not previously adjudicated and which were discovered after the original Order was made. The Receiver is not seeking to re-argue the case, it is simply asking for relief based on a clear error.

[19] The Receiver relies on Gray Estate v. Winkfield, 1992 CarswellOnt 4060. In that case the Court allowed the moving party to amend an entered judgment in relation to the disposition of costs. Specifically, the moving party sought to make the executor personally responsible, jointly and severally with the estate, for the payment of costs. The Court permitted the amendment because it was an issue which, through oversight, should have been dealt with by the trial judge (para 52). The Court also reviewed the well-known law which does not allow a court to amend an entered judgment unless there has been a drafting slip or a judgment given on a mistaken view of the facts (para 56).

[20] It is this Court’s view that in fact the Receiver is asking the Court to amend the judgment but there are no grounds to do so. First, while the Receiver concedes it made an error in not providing all of fees and disbursements prior to the entering of the Order, Rule 59.06(1) relates to an accidental slip or error in the judgment itself, not an error made by a party. Second, there can be no mistaken view of the facts here. All of the facts necessary to make the decision were before Justice Dietrich. In fact, further written submissions were requested and received. No appeal of the Dietrich Order was taken.

[21] The remaining issue to be determined is whether the Receiver should be allowed the requested fees based on facts arising or discovered after the original Order was made as per Rule 59.06(1)(a) of the Rules of Civil Procedure. I find that that this exception also does not apply. The Receiver has conceded that the information related to the additional fees was available at the time the Order was entered and thereafter, but it took no specific steps to request them before the Order was entered or put them before the Court at any time prior to the settlement of the Order. The only step taken was a Motion for Directions delivered in response to the Respondent’s motion.

[22] The Receiver has admittedly made an error. Who should pay for it? It is this Court’s view that it should not be the Respondent who settled the final Order understanding that its terms were clear and that it had the right to rely on it.

Orders

[23] The Respondent’s motion is allowed. The funds owing to the Respondent inclusive of interest shall be paid out within five days of the date of this Endorsement, as the Respondent directs.

[24] Neither the Receiver nor its counsel are entitled to any further fees, disbursements, HST, or accruals, the June 19, 2020 Order being final.

[25] Given the conceded error on the part of the Receiver, there shall be no costs.

C. Gilmore, J.

Date: September 9, 2020