Court File and Parties

Court File No.: CV-25-00737069-00CL
Date: 2025-04-28
Court: Superior Court of Justice – Ontario (Commercial List)

Between:
Aggregated Investments Inc., Applicant
-and-
Pace Group Holdings Inc., Pace Group Investment Inc., Pace Developments Inc., Urban North On The Go Ltd., Gerardo Sciavilla (also known as Gerald Sciavilla, also known as Dino Sciavilla), and Yvonne Sciavilla (also known as Ivonne Scivilla), Respondents

Before: Jane Dietrich
Counsel:

• Alexander Soutter, Andrew Nesbitt for the Applicant
• Haddon Murray, James Aston for the Respondents
  Heard: 2025-04-23

Reasons for Decision

Introduction

[1] Aggregated Investments Inc. (“Aggregated”) seeks an order appointing PricewaterhouseCoopers Inc. as receiver of certain assets, undertakings, and property of the Respondents pursuant to s. 101 of the Courts of Justice Act and s. 243 of the Bankruptcy and Insolvency Act.

[2] Defined terms not otherwise defined herein have the meaning provided for in the factum of Aggregated filed on this application.

[3] At a high level, Aggregated takes the position that the Respondents owe Aggregated over $22 million pursuant to a Guarantee which is supported by general security agreements in favour of Aggregated. The general security agreements contain a contractual right to seek the appointment of a receiver, demand has been made, notices of intention to enforce security pursuant to s. 244 of the BIA have been delivered and no payments have been received by Aggregated. Accordingly, Aggregated seeks the appointment of a receiver over the property acquired for, or used in relation to a business carried on by the Respondents as well as the real properties municipally known as 3314 Buckhorn Road, Buckhorn, Ontario and as 8 Thornhill Avenue, Vaughan, Ontario (collectively, the “Real Property”).

[4] Dino and Yvonne Sciavilla take the position that the appointment of a receiver is not just and equitable because, among other things, there is a bona fide defense to the claim under the Guarantee, such that it is not clear that any amounts are owing by the Sciavillas to Aggregated.

[5] The Respondents other than Dino and Yvonne Sciavilla did not appear or take any position on the application.

[6] For the reasons below, the application by Aggregated is dismissed.

Background

[7] The Sciavillas are the beneficial owners of the Pace Group.

[8] The Pace Group and MarshallZehr were involved in the development and construction of a real estate project in Barrie, Ontario (the “Project”). In connection with the Project, MarshallZehr made an original Loan to Mapleview Developments Ltd. (“Mapleview”) in 2019.

[9] The Loan was amended a number of times such that pursuant to the 2021 Commitment Letter, as amended, the Loan facility was eventually increased to $47.56 million. In connection with the 2021 Commitment Letter, the Respondents provided a fresh Guarantee dated July 15, 2021, and an acknowledgment that existing general security agreements they had executed constituted continuing security for the obligations under the Guarantee.

[10] The Sciavillas allege certain misrepresentations by MarshallZehr in connection with Mapleview and the related financing. Those allegations may form the basis of a separate action by the Sciavillas, but an analysis of those allegations is not proper on the record before me.

[11] MarshallZehr was bare trustee of the Loan in favour of third parties. From the 2021 Commitment Letter forward, Aggregated (or an affiliate) was the beneficiary of the Loan, the Guarantee and the GSAs. On August 22, 2024, MarshallZehr transferred the 2021 Commitment Letter (including the remaining indebtedness of approximately $22 million), the Guarantee and the GSAs to Aggregated.

[12] On March 21, 2024, an order was made appointing a receiver (the “Mapleview Receiver”) over the Project lands. On May 9, 2024, the Mapleview Receiver entered into a stalking-horse agreement of purchase and sale (the “APS”) with Dunsire Homes Inc. (“Dunsire”) as purchaser.

[13] Dunsire and Aggregated are affiliates and both ultimately controlled by Allan Drewlo. The APS provided that Dunsire would pay, as part of the purchase price, an amount equal to the Loan or that the Purchaser would assume the Loan. If such transaction had closed, in effect, this would have resulted in no liability for the Guarantors in respect of the Loan.

[14] No better bids were received by the Mapleview Receiver and the Mapleview Receiver brought a motion seeking an approval and vesting order in respect of the APS.

[15] Certain construction lien claim holders, however, objected and the hearing was adjourned until August 16, 2024. The construction lien claimants and another creditor alleged that collectively they should be paid approximately $22 million from the purchase price in priority to the Loan.

[16] Certain amendments were made to the APS at this point, which resulted in the $22 million deficiency claim which Aggregated now seeks to enforce against the Respondents. Aggregated did not object to these amendments and that failure to do so is what the Sciavillas say is at the heart of the issue now before me.

[17] Specifically, on August 16, 2024, the Mapleview Receiver and Dunsire agreed to amend the APS to provide for reserves for the disputed priority amounts of approximately $22 million and to reduce the amount of the Loan which was to be assumed by Dunsire as part of the purchase price by the same amount. On August 16, 2024, the amended APS was approved by the Court over the objections of counsel to Mapleview.

[18] The evidence of Jerry Drennan, the Chief Financial Officer of Aggregated, when cross-examined on his affidavits sworn in this matter, was that the amendment was worse for Aggregated. He admitted that the only reason that Aggregated did not object to the amendment to the APS, was because decisions were made on a group level and overall the amendment was better for Mr. Drewlo.

[19] Dunsire had already agreed under the APS to assume priority payables. The reserves which were created as part of the amended APS were eventually, in large part, released to Dunsire. The specific amount released to Dunsire is not in evidence before me, however, the parties agree it was substantial. Accordingly, Dunsire ended up with the value from substantially all of the $22 million in reserves while assuming $22 million less in debt. At the same time, Aggregated was left with a $22 million deficiency under the Loan that it intended to pursue against the Respondents under the Guarantee.

Issue

[20] The issue to be determined is whether it is just or convenient to appoint a receiver over the property of the Respondents, including the Real Property and if so, whether the terms of the receivership order proposed by Aggregated are appropriate.

Analysis

[21] There is no dispute about the relevant law. The test for the appointment of a receiver under s. 243 of the BIA or s. 101 of the CJA is whether it is just or convenient.

[22] The Court must have regard to all of the circumstances, but in particular, the nature of the property and the rights and interests of all parties in relation thereto when considering whether it is just or convenient to appoint a receiver. The circumstances include the rights of the secured creditor pursuant to its security: Bank of Nova Scotia v. Freure Village on the Clair Creek, 1996 O.J. No. 5088 (“Freure Village”).

[23] As noted in Bank of Montreal v. Sherco Properties Inc., 2013 ONSC 7023 at para. 42, although the appointment of a receiver is generally an extraordinary equitable remedy, where the relevant security permits the appointment, and as a result the applicant is merely seeking to enforce a term of an agreement already made by both parties, courts do not regard the nature of the remedy as extraordinary. However, the presence of a contractual entitlement to a receiver is not determinative of the issue.

[24] As observed by Justice Osborne in Canadian Equipment Finance and Leasing Inc. v. The Hypoint Company Limited, 2022 ONSC 6186, the Supreme Court of British Columbia in Maple Trade Finance Inc. v. CY Oriental Holdings Ltd., 2009 BCSC 1527 at para. 25, citing Bennett on Receivership, 2nd ed. (Toronto, Carswell, 1999), numerous factors have been historically taken into account in the determination of whether it is appropriate to appoint a receiver. These include:

• (a) whether irreparable harm might be caused if no order is made, although as stated above, it is not essential for a creditor to establish irreparable harm if a receiver is not appointed where the appointment is authorized by the security documentation;
• (b) the risk to the security holder taking into consideration the size of the debtor’s equity in the assets and the need for protection or safeguarding of assets while litigation takes place;
• (c) the nature of the property;
• (d) the apprehended or actual waste of the debtor’s assets;
• (e) the preservation and protection of the property pending judicial resolution;
• (f) the balance of convenience to the parties;
• (g) the fact that the creditor has a right to appointment under the loan documentation;
• (h) the enforcement of rights under a security instrument where the security-holder encounters or expects to encounter difficulties with the debtor;
• (i) the principle that the appointment of a receiver should be granted cautiously;
• (j) the consideration of whether a court appointment is necessary to enable the receiver to carry out its duties efficiently;
• (k) the effect of the order upon the parties;
• (l) the conduct of the parties;
• (m) the length of time that a receiver may be in place;
• (n) the cost to the parties;
• (o) the likelihood of maximizing return to the parties; and
• (p) the goal of facilitating the duties of the receiver.

[25] I agree that these are relevant factors to consider, and as set out in Wang v. Jing, 2025 ONSC para 31, the factors are not a checklist, but should be viewed holistically to determine whether, in all the circumstances, the appointment of a receiver is just or convenient.

[26] In applying these principles to the present case, is it just or convenient that a receiver be appointed? In my view it is not.

[27] There is no dispute that the relevant security agreements provide Aggregated with the right to seek the appointment of a receiver if Aggregated is properly owed amounts under the Guarantee.

[28] However, the central issue in dispute is whether Aggregated discharged the obligations of the Respondents under the Guarantee by Aggregated breaching its duty of good faith in voluntarily accepting a materially reduced recovery and shifting value to a related party. Where there exists a triable issue as to whether the underlying debt is proper, the appointment of a receiver may not be appropriate: see M & K Construction Limited et al. v. Kingdom Covenant International, 2015 ONSC 2241 at para 6.

[29] As noted by the Ontario Court of Appeal in Bank of Montreal v. Javed, 2016 ONCA 49, at para 20:
“... only the most serious misconduct on the part of the creditor will discharge a guarantee. Some examples from the cases include: a creditor acting in bad faith toward the surety; the creditor concealing material information at the inception of the guarantee; where the creditor causes or connives the default of the principal debtor; or where there is a variation in the terms of the contract between the creditor and the principal debtor of a type that would prejudice the interests of the surety” [references omitted].

[30] Aggregated, however, takes the position that the Respondents have contracted out of any guarantee defenses by the clear wording of the Guarantee. Aggregated relies on ClearFlow Commercial Finance Corp. v. Trigger Wholesale Inc., 2021 ONSC 34321 to argue that here the Respondents contracted out of all potential defenses under the Guarantee.

[31] It may be that the Respondents have contracted out of a number of guarantee defenses. However, a violation of the duty of good faith in contractual performance is a different type of defense and parties are not free to contract out of it: See Bhasin v. Hrynew, 2014 SCC 71, para 75.

[32] Accordingly, a bona fide defense to the Guarantee exists.

[33] Aggregated also submits that the Sciavilla’s position is essentially a collateral attack on the Order of Justice Cavanagh made on August 16, 2024 (the “Mapleview AVO”) approving the amended APS in the Mapleview Receivership. I do not agree. The conduct complained of by the Sciavillas is not that of the Mapleview Receiver – but rather of Aggregated in not opposing the amendment to the APS. There was no release of Aggregated provided for in the Mapleview AVO.

[34] There is no question that the Mapleview AVO remains valid. Rather it is the inequitable conduct of Aggregated that is at issue.

[35] The evidence is that the amended APS was worse for Aggregated but was not opposed by Aggregated as it was in the interest of the Drewlo group of companies as a whole and permitted Aggregated to pursue the Respondents on the Guarantee. Aggregated does not dispute this.

[36] Nor does Aggregated dispute that the Drewlo group of companies received substantially the full economic benefit that was intended by the original APS while at the same time purporting to be able to pursue the Guarantee deficiency claim for $22 million against the respondents.

[37] Aggregated says the amendment to the APS and the reduction in the amount of the Loan assumed by Dunsire was to compensate for the additional risk that Dunsire assumed at closing, given the higher level of priority payables being asserted. The problem with that argument is that the risk assumed by Dunsire, if there was any additional risk, was paid for by Aggregated as a reduction in the Loan amount assumed by Dunsire. Dunsire also then retained the benefit of reserves. In essence, the benefit of the reserves was value transferred from Aggregated to Dunsire which then created the Guarantee deficiency claim. The conduct of Aggregated in this regard is something that weighs against the appointment of a receiver.

[38] The property at issue consists of equity rights in various members of the Pace Group as well as the Real Property. I am not persuaded on the record before me that the potential prejudice that Aggregated may suffer if it was first required to obtain a judgment under the Guarantee prior to the appointment of a receiver outweighs the potential prejudice to the Respondents if a receiver is appointed and in fact no amounts are properly owed to Aggregated under the Guarantee.

[39] Accordingly, I am not persuaded that it is just or convenient to appoint a receiver in these circumstances.

Disposition

[40] Counsel to the Sciavillas suggested that it may be appropriate to convert the proceeding into an action to determine the underlying claim. However, counsel to Aggregated submitted that if I were to find that the appointment of a receiver was not just or convenient that Aggregated’s application should simply be dismissed, and the parties could then move forward in whatever manner they chose. Accordingly, Aggregated’s application to appoint a receiver is dismissed.

[41] If the parties are not able to resolve costs of this matter, the Sciavillas may email a costs submission of no more than three double-spaced pages to the Commercial List office within 15 days of the date of this endorsement.

Aggregated may deliver responding submissions of no more than three double-spaced pages within 15 days following the delivery of the Sciavillas submissions. No reply submissions are to be delivered without leave.

Jane Dietrich
Date: 2025-04-28