CITATION: The Vancor Group Inc v. 2744364 ONTARIO LIMITED et al, 2026 ONSC 1199
SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)
RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c.C-36, AS AMENDED
AND:
IN THE MATTER OF THE COMPROMISE OR ARRANGEMENT OF 1001235542 ONTARIO INC.
BEFORE: Justice J. Dietrich
COUNSEL: Patrick Corney, Counsel, for The Vancor Group Inc.
David Ullmann, Alexandra Teodorescu, for the Monitor, Deloitte Restructuring Inc,
Dylan Gibbs, for Garas Family Holdings Inc.
Kenneth Schaller, in-person / self represented
HEARD: February 18, 2026
REASONS FOR DECISION
Introduction
1Kenneth Schaller, by notice of motion dated December 10, 2025 (the “Notice of Motion”), sought an order varying or rectifying a security for costs order that I made in these proceedings dated October 28, 2025 (the “Security Order”). Mr. Schaller moves pursuant to Rule 59.06(2)(a) and (c) of the Rules of Civil Procedure R.R.O. 1990, Reg 194 (the “Rules”) and s. 11 of the Companies’ Creditors Arrangement Act R.S.C. 1985, c. C-36, as amended (the “CCAA”).
2The Notice of Motion stated that (i) new facts had arisen since the Security Order was granted; and (ii) additional material facts existed at the time of the Security Order but could not, with reasonable diligence, have been placed before the Court.
3However, as the matter progressed, Mr. Schaller described the relief he sought in his Reply Factum and during oral submissions as “not grounded on newly discovered merits evidence.” Rather, he submitted, it is grounded in “implementation consequences that crystallized” following the release of my reasons for decision in support of the Security Order: see The Vancor Group Inc. v. 2744364 Ontario Limited et al, 2025 ONSC 5925 [Security Decision]. Mr. Schaller says that his review of the Security Decision caused him to more closely examine a promissory note received as part of a transaction approved by the Court during the CCAA proceedings. He now seeks an order that the Security Order does not prevent him from bringing a motion for directions in the CCAA proceeding confirming the intended 'post-closing obligor and performance pathway' of the promissory note.
4Deloitte Restructuring Inc., in its capacity as the Court-appointed monitor in the CCAA proceedings (the “Monitor”) opposes the relief sought by Mr. Schaller, as do Corry Van Iersel, The Vancor Group Inc. (“Vancor”), 2744364 Ontario Limited (“TNCC”), 2668905 Ontario Inc. (“Bamboo Blaze”), and 2767888 Ontario Inc. (“888” and together with TNCC and Bamboo Blaze, the “Former Debtors”).
5For the reasons set out below, I dismiss Mr. Schaller’s motion.
Background
The CCAA Proceedings
6Background regarding the CCAA proceedings and Mr. Schaller's claims are set out in the Security Decision. Only a summary of the relevant background is set out herein.
7Mr. Schaller, partially through PICI Investments Incorporated (“PICI”) – a company controlled by Mr. Schaller - held shares in and had claims against certain of the Former Debtors. Mr. Schaller was also a director of certain of the Former Debtors.
8The CCAA proceedings began as a creditor-initiated application. The applicant, Vancor, sought an initial order under the CCAA in respect of the Former Debtors. Vancor was a creditor of the Former Debtors.
9On January 24, 2025, the Court granted an initial order (the “Initial Order”). The comeback hearing took place on February 3, 2025, and the Court granted an amended and restated initial order.
10The CCAA proceedings have substantially run their course. On March 3, 2025, an order approving a sale and investment solicitation process was granted, as was a claims procedure order. On May 21, 2025, the Court also granted an approval and reverse vesting order (the “ARVO”).
11The transaction approved by the ARVO (the “Transaction”) closed on May 27, 2025, at which point, the Former Debtors ceased to be subject to the CCAA proceedings and 1001235542 Ontario Inc. (“ResidualCo.”) became the debtor in these CCAA proceedings.
12Under the Transaction, claimants with proven unsecured claims received unsecured promissory notes (the “Promissory Notes”) to be paid by the applicable Former Debtor in accordance with their terms. PICI received a Promissory Note from 888 in respect of a proven, outstanding shareholder loan in the amount of $1,432,359.75 (the “PICI Promissory Note”).
The Security Order
13Mr. Schaller brought a motion in the CCAA Proceedings as set out in an amended notice of motion dated July 28, 2025 (the “Schaller Motion”).
14The Monitor as well as Corry Van Iersel, Vancor and the Former Debtors (the “Van Iersel Parties”) both brought motions seeking Mr. Schaller be required to post security for costs prior to the Schaller Motion proceeding.
15As explained in my Security Decision and as set out in the Security Order, I:
a. granted the motions by the Monitor and the Van Iersel Parties;
b. held that in order for Mr. Schaller to proceed with Schaller Motion or the relief claimed therein, he was first required to post security for costs in favour of the Monitor in the amount of $250,000 and in favour of the Van Iersel Parties in the amount of $150,000; and
c. declined to accept Mr. Schaller’s submission that the PICI Promissory Note was sufficient security and noted that I was not persuaded the note was an exigible asset for purposes of Rule 56.01(e).
16Mr. Schaller did not seek leave to appeal the Security Order.
17The Security Order does not prevent Mr. Schaller from taking any step in the CCAA Proceeding without first posting security for costs as set out therein. Rather, pursuant to paragraph 2 of the Security Order, Mr. Schaller is not to take any step to pursue the Schaller Motion or otherwise request the relief claimed therein in another format.
18The relief set out in the Schaller Motion is wide ranging and includes a request to reopen the CCAA proceedings to address claims by Mr. Schaller of fraud, misrepresentation, and procedural unfairness, as well as an order staying the ARVO. With respect to the PICI Promissory Note, the Schaller Motion specifically seeks:
An Order compelling the production and disclosure of all records and communications related to … Promissory note deliberations and known intent to deny payment;
A declaration that the $1.4 million promissory note issued to Kenneth Max Schaller was done in bad faith, with advance intent not to pay;
An Order declaring that the promissory note issued to Kenneth Max Schaller shall be secured retroactively or compensated in full;
The Current Motion to Vary the Security Order
19Mr. Schaller’s current Notice of Motion seeks an order that he can proceed, without posting the required security for costs, with a motion (the “Rectification Motion”) rectifying the PICI Promissory Note and declaring that 888 did not hold sufficient assets to perform under the note which constitutes what he refers to as an implementation defect.
20In particular, he describes the underlying Rectification Motion as one for an order that the PICI Promissory Note be re-issued as an obligation of the ‘Purchaser Group’ (see para. 3 of the Notice of Motion) or that the note be secured against assets of the Purchaser Group or otherwise collateralized on terms proportionate to the security for costs required of Mr. Schaller (see para 4. of the Notice of Motion).
21In support of the Notice Motion, Mr. Schaller relies on an affidavit he swore on December 10, 2025. In that affidavit, Mr. Schaller makes certain statements regarding the effect of the ARVO and what was vested in ResidualCo and what remains in 888. He states 888 is an empty shell with no meaningful assets. As a side note, I am concerned that his understanding of the retained assets of 888 is not complete, however, that is not a matter before me today.
22In that affidavit, Mr. Schaller also references a transcript of a January 29, 2025 meeting between, among others, Nash Garras and Cory Van Iersel, alleged text messages regarding debates about certain revenue of the Former Debtors, a purportedly newly entered into lease showing residency in Richmond Hill, Ontario, an Ontario driver license, corporate records purporting to show he is the directing mind behind certain companies, emails between Mr. Schaller and his former counsel from May 12 to June 12, 2025, and a settlement proposal from Mr. Van Iersel from December of 2025. I note that Mr. Schaller has refused to provide certain of the information, including the purported new lease and Ontario driver’s license to the Monitor or the Van Iersel Parties because he expressed concerns about what use they would make of that information.
23In oral submissions, Mr. Schaller claimed that his concerns regarding the PICI Promissory Note crystallized after reviewing the Security Decision and the comments therein that the PICI Promissory Note was not an exigible asset for purposes of that motion.
Issue
24The only issue to be determined by the Court is whether the Security Order should be varied so as to allow Mr. Schaller to proceed with the Rectification Motion without posting security for costs.
Analysis
25Finality is an important feature of our justice system – litigation by installment is not tolerated: see Tsaoussis v. Baetz (1998), 1998 5454 (ON CA), 41 O.R. (3d) 257 (Ont. C.A.) [Baetz], at para. 18.
26Although there are limitations on the res judicata doctrine and the power to set aside previous judgments, these limitations are exceptions to the general rule that final judgments mark the end of litigation: see Baetz, at para. 19.
27Rule 50.96 provides that:
(2) A party who seeks to,
(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;
(b) suspend the operation of an order;
(c) carry an order into operation; or
(d) obtain other relief than that originally awarded,
may make a motion in the proceeding for the relief claimed. R.R.O. 1990, Reg. 194, r. 59.06 (2).
28As noted in Baetz, Rule 59.06 does not articulate a test to be applied, but rather provides a party wishing to vary or set aside an order a streamlined motion procedure for doing so: at para. 39. In Baetz, the Court of Appeal at para. 41 quoted with approval page 350 of Glatt v. Glatt, 1937 8 (SCC), [1937] S.C.R. 347, (S.C.C), which remains applicable:
“It is well established law that a judgment cannot be set aside on such a ground unless it is proved that the evidence relied upon could not have been discovered by the party complaining by the exercise of due diligence. The importance of this rule is obvious and it is equally obvious that the finality of judgments generally would be gravely imperilled unless the rule were applied with the utmost strictness.”
29Along with the requirement that the new evidence could not have been found by the reasonable exercise of diligence, the new evidence if accepted, must also be found to probably affect the result: see Mehedi v. 2057161 Ontario Inc., 2015 ONCA 670, 391 D.L.R. (4th) 374, at para. 15. I am not satisfied that Mr. Schaller meets this test.
30The PICI Promissory Note which forms the basis of Mr. Schaller’s concerns was part of the record before me in the original motion on which I made the Security Order. Moreover, concerns with the note are expressed in the Schaller Motion. Mr. Schaller may have examined the note more closely following the release of the Security Decision, but that does not make the note newly discovered evidence under the test. Similarly, the underlying documents for the Transaction were part of the record before the Court at the hearing for the ARVO months earlier in May of 2025.
31Mr. Schaller was represented by counsel at that May 2025 hearing. I appreciate he raises concerns with his counsel’s conduct, but again, that was a matter he also raised at the hearing of the original motion for security for costs and in the Schaller Motion itself. The emails with his counsel he now puts forward are dated well before the hearing for the Security Order.
32Similarly, the transcript of the January 29, 2025, recording was also before me at the original hearing of the motion for the Security Order. Although, Mr. Schaller claims he did not receive the text messages related to revenue allocation of CannaCloud until after the hearing of the motion for the Security Order, he admitted that purported text messages (which are not dated) pre-dated that motion and he did not provide evidence as to why the texts could not have been previously obtained by a reasonable exercise of diligence. I am also not persuaded that those texts would have had a probable effect on the outcome on the request for security for costs. The texts may go to underlying issues in the Schaller Motion, but have limited, if any, probative value regarding the motion for security for costs.
33Much of the other evidence Mr. Schaller now relies on existed prior to the hearing of the security for costs motion. The appraisals and articles of incorporation for various companies all existed at the time of the motion and Mr. Schaller offers no evidence as to why they could not have reasonably been put forward earlier.
34With respect to the purported new lease and a copy of Mr. Schaller’s driver’s licence, I note that, these documents were not properly before me as evidence as they were not publicly filed nor was a request for a sealing order made or evidence to support a sealing order provided. The Monitor noted in its factum that it requested a copy of the lease, but Mr. Schaller refused to provide it. Accordingly, I am not prepared to rely on this documentation as evidence given that the Monitor did not have an opportunity to review or cross examine Mr. Schaller on it. Further, Mr. Schaller’s residency was just one factor in the Security Decision, and it would not have impacted my analysis under Rule 56.01(1)(e). Accordingly, I am not persuaded that this evidence, even if accepted ‘would probably’ affect the result: Mehedi, at para. 15.
35Finally, Mr. Schaller relies on an email that was sent to him in December of 2025 as part of settlement discussions between Mr. Van Iersel and Mr. Schaller. I am not persuaded that a potential settlement offer satisfies the criteria necessary to set aside or vary the Security Order.
36Mr. Schaller also seeks relief under s. 11 of the CCAA which provides the supervising CCAA judge with broad discretion to make any order considered appropriate in the circumstances. As noted in 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, [2020] 1 S.C.R. 521 [Callidus], at para. 49:
The discretionary authority conferred by the CCAA, while broad in nature, is not boundless. This authority must be exercised in furtherance of the remedial objectives of the CCAA, … Additionally, the court must keep in mind three “baseline considerations”, which the applicant bears the burden of demonstrating: (1) that the order sought is appropriate in the circumstances, and (2) that the applicant has been acting in good faith and (3) with due diligence. [Citations omitted.]
37I am not persuaded that re-opening a final order in these circumstances is in furtherance of the remedial objectives of the CCAA. Rather, it would encourage litigation by installment, which is contrary to fundamental principals of our justice system. Further, I am not persuaded that Mr. Schaller has satisfied the baseline consideration of moving with due diligence as explained in para. 51 of Callidus. Accordingly, I decline to exercise my discretion as suggested by Mr. Schaller to permit him to move forward with the Rectification Motion absent posting of costs as required by the Security Order.
Disposition
38For the reasons set out above, the motion by Mr. Schaller is dismissed.
39If the parties are not able to resolve costs of this matter, the Monitor and Van Iersel Parties 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. Mr. Schaller may deliver responding submissions of no more than three double-spaced pages within 15 days following the delivery of the later of the Monitor or the Van Iersel Parties’ submissions. No reply submissions are to be delivered without leave.
The Honourable Justice J. Dietrich
Date: February 26, 2026