2022 ONSC 7127
COURT FILE NO.: CV-21-00000240
DATE: 2022-12-16
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Bending Lake Iron Ore Corporation
Henry Wetelainen Jr.
Henry Wetelainan Jr. as a Shareholder in
Bending Lake Iron Group Limited
Clayton Wetelainen
Plaintiffs
- and -
Ambershaw Metallics Inc.
Fladgate Exploration Consulting Corporation
Alen Raoul
D.P.S. Rajan
A. Farber & Partners Inc.
Legacy Hill Resources Ltd.
Defendants
Robert McRae, counsel of record for the Plaintiffs (not appearing)
Douglas Stewart and Kristin AuCoin for the Defendants, A. Farber & Partners Inc.
HEARD: September 29, 2022 at Thunder Bay, Ontario
Mr. Justice J.S. Fregeau
Endorsement on Motion to Dismiss
INTRODUCTION
[1] Bending Lake Iron Group Limited (“BLIG”) is an early-stage iron ore mine development company whose major asset was a mine site located northwest of Thunder Bay, Ontario in the Kenora Mining Division (the “Mine Site”). BLIG owned 100% of the iron ore deposit at the Mine Site.
[2] BLIG was founded by Henry Wetelainen Jr., who was at all material times the President, CEO and a major shareholder of BLIG. Clayton Wetelainen was at all material times a director and officer of BLIG. Mr. Wetelainen Jr. incorporated Bending Lake Iron Ore Corporation (“BLIOC”).
[3] By Order dated September 11, 2014 (the “Receivership Order”), the defendant, A. Farber & Partners Inc. (“Farber” or the “Receiver”), was appointed as receiver of all the assets, undertakings and properties of BLIG.
[4] In this action, initiated by Statement of Claim dated July 5, 2021 (the “Action”), the plaintiffs claim, among other claims for relief, “an interim order…requiring the Defendants to pay to the Plaintiffs $20,000,000.00”.
[5] On this motion, Farber requests a dismissal of the action as against Farber and its costs of the motion on a substantial indemnity basis.
[6] The plaintiffs have not filed any responding materials on this motion. Counsel for the plaintiffs has not communicated with counsel for Farber subsequent to service of the motion record. Counsel of record for the plaintiffs has not appeared at the hearing of this motion.
[7] Mr. Wetelainen Jr. appeared today, advised the court that Mr. MacRae was in the hospital and requested an adjournment of the motion to retain alternate counsel. This adjournment request was denied.
BACKGROUND
[8] On July 22, 2014, a secured creditor of BLIG brought an application, with the consent of Farber, requesting that Farber be appointed as receiver of all assets, undertakings and properties of BLIG. BLIG was represented by Mr. MacRae at the hearing of the motion to appoint Farber as receiver of BLIG. This application resulted in the issuance of the September 11, 2014, Receivership Order referred to above.
[9] The Receivership Order expressly prohibits anyone from commencing any proceedings against Farber without leave of the Court or Farber’s written consent.
[10] Throughout the receivership proceedings, all actions undertaken by Farber in its capacity as receiver were approved by and subject to numerous Court Orders and Decisions, including but not limited to:
The November 27, 2014, Order of Pierce J. approving the First Report of the Receiver and proposed sales and investor solicitation process for the sale of BLIG’s assets, undertakings and properties;
The January 8, 2016, Decision of Shaw J. approving, among other things, an asset purchase agreement for the purchase by the defendant Legacy Hill Resources LTD. (“Legacy”) of BLIG’s assets, undertakings and properties (the “Asset Purchase Agreement”) and the transaction contemplated therein, vesting title in the purchased assets, authorizing Farber to file an assignment into bankruptcy on behalf of BLIG and approving the Second and Third Reports of the Receiver.
The January 8, 2016, Order of Shaw J. approving, among other things, (i) the transaction and ratifying the execution of the Asset Purchase Agreement by Farber with respect to the purchase by Legacy of BLIG’s assets, (ii) vesting all rights, interest and title to the purchased assets to Legacy, and (iii) authorizing Farber to file an assignment into bankruptcy on behalf of BLIG;
The January 8, 2016, Order of Shaw J. dismissing two motions brought by BLIG seeking orders (i) opposing the Asset Purchase Agreement, (ii) prohibiting Farber from further dealings with Legacy, and (iii) striking out or amending portions of the Supplemental Report of the Receiver; and
The February 23, 2017, Order of Smith J. approving the fifth Report of the Receiver and the activities contained therein and Discharging the Receiver (the “Discharge Order”). The Discharge Order prohibited the initiation of any proceedings against the Receiver without leave of the court or the Receiver’s written consent. The Discharge Order also contained a full release in favour of Farber.
[11] Farber filed its Discharge Certificate with the court on April 24, 2018, on notice to the plaintiffs.
[12] The plaintiffs commenced this action against Farber, Legacy and the other defendants by Statement of Claim dated July 5, 2021. The action stems from the 2014 Receivership Application and related receivership proceedings. As against Farber, the plaintiffs allege Farber intentionally or negligently discharged its role as Receiver of BLIG with respect to the sale of BLIG’s assets.
[13] The actions of Farber that the plaintiffs impugn in this action were all subject to and approved in the various Receivership Orders. BLIG’s opposition to these actions of the Receiver were also previously dismissed by this court in BLIG’s various motions opposing the Asset Purchase Agreement and the sale of BLIG’s assets to Legacy as contemplated in the Asset Purchase Agreement.
[14] The plaintiffs did not obtain leave of the court or Farber’s written consent prior to commencing this action against Farber.
DISCUSSION
[15] Section 215 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) provides as follows:
Except by leave of the court, no action lies against the Superintendent, an official receiver, an interim receiver or a trustee with respect to any report made under, or any action taken pursuant to, this Act.
[16] Section 215 of the BIA has been held to apply equally to court appointed receivers. See: Crate Marine Sales Ltd., 2017 ONSC 178 at paras. 1, 22.
[17] Paragraph 8 of the Receivership Order states the following:
This Court orders that no proceeding…in any court…shall be commenced…against the Receiver except with the written consent of the Receiver or with leave of this Court.
[18] Paragraph 9 of the Discharge Order provides as follows:
This Court orders that upon filing the Receiver’s Discharge Certificate, Farber shall be released and discharged from any and all liability that Farber has or may hereafter have by reason of, or in any way arising out of, the acts or omissions of Farber while acting in its capacity as Receiver herein, save and except for any gross negligence or wilful misconduct on the Receiver’s part. Without limiting the generality of the foregoing, Farber shall be forever released and discharged from any and all liability relating to matters that were raised, or which could have been raised, in the within receivership proceedings, safe and except for any gross negligence or wilful misconduct on the Receiver’s part.
[19] I accept the submission of Farber that the claims advanced against the Receiver in this action fall within the protective scope of s. 215 of the BIA, the Receivership Order and the Discharge Order. The combined effect of these provisions prohibits Farber from being sued for actions undertaken in its role as Receiver without first obtaining Farber’s written consent or leave of the court.
[20] The only allowable claims against the Receiver would be for gross negligence or wilful misconduct in its role as Receiver. The claim does not allege gross negligence or wilful misconduct on the part of Farber in discharging its role as Receiver.
[21] Obtaining leave of the court is a condition precedent to bringing an action against a receiver. Courts do not have jurisdiction, inherent or otherwise, to displace the express statutory requirement that leave be granted prior to commencing any claim against a receiver. See: Sigurdson v. Reid (1980), 1980 CanLII 381 (BC CA), 26 BCLR 336 at para. 8.
[22] Pursuant to the above, the claims in this action as against Farber are dismissed.
COSTS
[22] Three separate motions, comprising all defendants, have been brought in this action and heard one after the other. The decisions on the three motions have disposed of the plaintiffs’ claims against all defendants and all defendants have sought their costs on a substantial indemnity basis in various amounts, jointly and severally as against all defendants.
[23] The three motions all sought similar and related relief and were, in my view, of similar complexity. It is obvious to me that a significant amount of time was required by all counsel in drafting the comprehensive and well-organized materials for this motion. It is appropriate in these circumstances that the costs awarded to the moving parties be in similar amounts.
[24] I order that the plaintiffs pay to Farber, on a joint and several basis, the costs of this motion fixed in the amount of $9,000.00, inclusive of fees, disbursements and HST.
The Honourable Mr. Justice J.S. Fregeau
Released: December 16, 2022
2022 ONSC 7127
COURT FILE NO.: CV-21-00000240
DATE: 2022-12-16
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Bending Lake Iron Ore Corporation et al
Plaintiffs
- and –
Ambershaw Metallics Inc. et al
Defendants
ENDORSEMENT ON MOTION TO DISMISS
Fregeau J.
Released: December 16, 2022
dg/