Court File and Parties

Court File No.: CV-25-101333 Date: 2026-03-24 Ontario Superior Court of Justice (East Region Commercial List)

Re: CMLS Financial Ltd., Applicant And: Ashcroft Development Inc., HP ABL Fund 1 GP Inc. and HP ABL Fund 1 Limited Partnership, Respondents

Before: C. MacLeod RSJ

Counsel: Josh Suttner and Calvin Horsten, for the Applicant Alexander Bissonette and Justin Novick-Faille, for the Respondent Ashcroft J. F. Lalonde, for the HP ABL Fund Respondents

Heard: March 24, 2026

Decision and Reasons

[1] Ashcroft Urban Developments Inc. (AUDI) is indebted to the Applicant for approximately $65 million. That loan is in default and is the subject of a separate Receivership application. Ashcroft Development Inc. (ADI) is a separate legal entity which guaranteed $10 million in debt as part of a Forbearance Agreement signed in 2024. The guarantee limits the recourse of the lender against the guarantor to three parcels of vacant land owned by ADI and located in Ottawa.

[2] The Applicant now seeks a court appointed Receiver over the lands owned by ADI for the purpose of conducting a sale. This order is resisted by the Respondent ADI and by the HP Respondents who hold the first mortgage (charge) over the lands in question.

[3] As I will discuss, it does not appear to me that a Receivership is necessary at this time. I am of the view that the Respondent ADI should be permitted a reasonable period of time to effect a sale but the Applicant will be at liberty to return to court for further relief or to exercise its remedies under its security which I have found to be valid.

[4] The application was divided into two parts. The first part concerned the validity of the Applicant's mortgages, and the second part concerned the need for a Receiver. I will address each in turn but in light of the need for an immediate decision, I am providing only summary reasons.

The Second Mortgages

[5] As noted above, AUDI was in breach of its obligations to the Applicant under its loan agreements. In February of 2024 a Forbearance Agreement was signed pursuant to which David Choo, the principal of the Ashcroft companies inter alia agreed to the $10 million guarantee by ADI which was to be enforceable against the lands owned by ADI and secured by a registered second mortgage or charge over those lands.

[6] The Forbearance Agreement contained certain conditions precedent which were identified as such and had to be fulfilled before the agreement would come into effect. Those terms are set out in Article 3 of the Forbearance Agreement and are not in issue because they were fulfilled. The Forbearance agreement also required the provision of additional security set out in Article 6.4.

[7] Included in that obligation was "a collateral charge/mortgage in the amount of $10,000,000, in a form acceptable to the Lender" over certain properties including the properties in question located in Ottawa. That paragraph concluded with the phrase "which charge shall rank behind only to any existing charge held by Pillar Capital Corp. charging the Additional Properties, subject to the consent of Pillar Capital Corp".

[8] Pillar was the first mortgagee. Its consent was required because under the term of its mortgage, it would be an act of default for ADI to register an additional charge without Pillar's consent. It appears this condition was included in the Forbearance Agreement for the benefit of ADI so that it would not be "offside with Pillar".

[9] It appears that ADI requested the consent of Pillar but it was never explicitly granted. Ultimately Mr. Choo executed an authorization and direction authorizing the Applicant to register the charges and binding ADI to the terms of the mortgage including the standard charge terms incorporated by reference. All parties seem to have been aware that Pillar had not consented and although Pillar did describe the registration of these mortgages as an act of default when it finally took its own enforcement proceedings under the first mortgage, it seems that Pillar must have been aware that the mortgages had been registered.[^1]

[10] The Respondents argue that the consent of Pillar was a condition precedent to the registration of the second mortgage and seek a declaration from this court invalidating the registration.

[11] I decline to grant that relief for a number of reasons. Firstly, ADI is not itself a party to the Forbearance Agreement and the direction sent to the Applicant on behalf of ADI was unequivocal and unconditional. Secondly, I do not consider the requirement for consent to be a true condition precedent. There is no question that the Forbearance Agreement went into effect and AUDI took the benefit of the agreement. Indeed, there was a subsequent extension agreement. In my view the charges as registered are valid and without them the guarantee which is explicitly limited to enforcement against the subject lands would have little value.

[12] For purposes of this Application, the most significant result of that finding is the fact that the standard charge terms permit the Applicant to seek the appointment of a Receiver. That is relevant to the criteria the court must consider in determining if it is "just and convenient" to make such an order but it is not conclusive. The court need not grant a discretionary order automatically simply because a party is contractually entitled to it and even if there is no such term, the court is still at liberty to appoint a Receiver under the Courts of Justice Act.

[13] The second significance of that finding is the possibility of invoking the Receivership provisions of the Bankruptcy and Insolvency Act. That provision may only be invoked by a secured creditor.

[14] Finally, of course, by declining to invalidate the mortgages, the Applicant continues to have access to its mortgage remedies under the terms of the Charge and under the Mortgages Act.

Appointment of a Receiver

[15] The primary objection to the appointment of a Receiver seems to be the question of whether a Receiver is necessary and whether or not it is reasonable to inflict the potential cost of a Receivership if the sole objective is to sell the vacant parcels of land. There is no business to carry on, no employees and no ongoing expenses other than property tax and maintenance.

[16] In argument, the Respondents conceded that the guarantee itself is valid and that ADI is indebted to the Applicant for $10 million. They ask that ADI be allowed to continue to seek a buyer privately under the current listing agreements or alternatively that the court impose a judicially supervised sale process.

[17] This is an entirely reasonable position although it does not seem to be the position that was taken when affidavits were filed or cross examination took place. In any event, the court has discretion to provide relief short of a full fledged receivership and in my view, given the limited remedies available and the lack of demonstrated need to operate or preserve any business operation, a private sale process is more appropriate than a receivership.

[18] Accordingly, in addition to leaving the second mortgages in place, I am authorizing ADI to continue to list the properties for sale for the next 90 days. This is without prejudice to the rights of the first mortgagee and without prejudice to the right of the Applicant to return to court for further direction in the event it is not satisfied with the sale process.

[19] The Respondents will keep the Applicant advised of the listing arrangements and of any offers that are received. They will also provide the Applicant with an up to date accounting of all amounts owing under the first mortgage.

[20] In the event of a sale, the net proceeds of sale may be used to retire the first mortgage and the balance of the sale proceeds shall be used to pay the amount guaranteed by ADI and secured by the second mortgages. In the event of any disagreement, the parties may return to court for further direction.

[21] If the parties are unable to cooperate to achieve a private sale on satisfactory terms in a timely manner, any of the parties may seek an order for sale under a stricter form of court supervision.

Costs

[22] I did not hear submissions regarding the costs of this Application. I invite the parties to reach agreement on costs. I am advised that the lenders have the usual provisions in their agreements that the costs of enforcement are to be added to the debt but that may or may not be fair and reasonable. The court will provide further direction should that be required.

March 24, 2026 Justice C. MacLeod

[^1]: The HP Respondents subsequently provided financing to retire the Pillar loan and took an assignment of the mortgages.