Steven Leonard Graff

The Court of Appeal for Ontario denied leave to appeal from an order appointing a receiver over the property of 11977636 Canada Inc. at the request of the Bank of Montreal.

The debtor argued that the application judge made a factual error regarding the closing date of a property sale, which allegedly affected the decision to refuse an adjournment and appoint a receiver.

The Court found that the error was not determinative, as the appointment was justified by the debtor’s lack of accountability and transparency.

None of the three "Pine Tree" considerations for granting leave to appeal under s. 193(e) of the Bankruptcy and Insolvency Act were met.

The decision addresses two competing motions for the appointment of representative counsel for investors in a receivership proceeding involving Sussman Mortgage Funding Inc. The court reviews the procedural background, the need for representative counsel, and the competing proposals from Aird & Berlis LLP and Paliare Roland Rosenberg Rothstein LLP.

The court ultimately appoints Aird & Berlis LLP as representative counsel, finding their approach and fee structure preferable for efficiency, transparency, and certainty.

The applicant, Waygar Capital Inc., as agent for Ninepoint Canadian Senior Debt Master Fund LP, sought the appointment of a receiver over the property of the respondents, El Mocambo Entertainment Inc. and related companies, under section 243 of the Bankruptcy and Insolvency Act and section 101 of the Courts of Justice Act.

The court reviewed the legal test and relevant factors for appointing a receiver, including the rights of secured creditors and the conduct of the parties.

Although the respondents did not oppose the application, the court, with the parties' agreement, adjourned the receivership to allow the proposed receiver to act as monitor for a short interim period to explore the possibility of maintaining the business as a going concern.

The application may be brought back on an urgent basis if necessary.

In a CCAA proceeding, the Applicants sought three orders: approval of a factoring portfolio purchase agreement, approval for distribution of proceeds from a property sale, and permission for a creditor to sell certain vehicles.

The court approved the distribution of Chehalis property proceeds to Roynat.

For the Regions vehicles, the court granted the order allowing Regions to take possession, setting a 30-day retrieval period and approving storage costs of $35/day.

The motion for approval of the JD Factors Purchase Agreement was adjourned to a later date, as Mitsubishi HC Capital Canada Inc. objected, claiming ownership of the receivables and requiring more time to prepare its position.

This motion concerned the interpretation of the Wage Earner Protection Program Act (WEPPA) regarding Service Canada's subrogation rights to recover payments made to employees from an insolvent employer's distribution.

Metroland Media Group Ltd. made a proposal to its creditors, entitling unsecured creditors to a 17% distribution.

Service Canada had approved payments to former non-unionized employees under WEPPA for unpaid severance pay.

The issue was whether Service Canada was entitled to recover these payments on a dollar-for-dollar basis from the employees' distribution or only a pro-rata share (17 cents on the dollar) as an unsecured creditor.

The court held that Service Canada is entitled to a dollar-for-dollar recovery, up to the amount of the WEPP payment, from the employee's distribution before the employee receives any balance.

This motion addressed a receiver's application for an approval and vesting order (AVO) for the sale of properties, which was opposed by the debtors asserting their equitable right of redemption.

The debtors sought to delay the sale to secure financing, but their efforts were deemed highly conditional and uncertain.

The court applied the Soundair test, finding that the receiver conducted a robust and fair marketing process that yielded the best price.

The court emphasized that the debtors' inability to present a complete and unconditional financing package at the time of the motion was fatal to their request, distinguishing this case from precedents where redemption was allowed due to the debtor's immediate ability to pay.

The receiver's motion for the AVO was granted, and the debtors' cross-motion was dismissed.

This is a costs endorsement following an application where the applicants sought a declaration that a s. 244 BIA Notice was void due to the respondent taking an enforcement step (sending Notices of Sale under the Mortgages Act) contemporaneously.

The court previously found that the respondent's action contravened s. 244 BIA, but declined to void the notice due to a lack of demonstrated prejudice to the applicants.

In this costs decision, both parties sought costs.

The applicants claimed partial success, while the respondent claimed full success.

The court, exercising its discretion under s. 131 of the Courts of Justice Act and Rule 57, determined that neither party should be awarded costs, considering the respondent's contravention of the BIA and the applicants' failure to provide evidence of prejudice.

The applicants sought a declaration that the respondent's Notice of Intention to Enforce Security under s. 244 of the Bankruptcy and Insolvency Act (BIA) was void because the respondent concurrently issued Notices of Sale under the Mortgages Act.

The applicants argued that the Notices of Sale constituted an enforcement step taken within the BIA's ten-day notice period, which is prohibited.

The court found that the issuance of the Notices of Sale was indeed an enforcement step taken in contravention of s. 244(2) of the BIA.

However, the court declined to declare the s. 244 BIA Notice void, as there is no statutory prescription for such an outcome and no evidence of actual prejudice to the borrowers was demonstrated.

The court emphasized that the best practice is to issue notices of sale only after the BIA's ten-day notice period expires.

The SMA 2 Unitholders sought a declaration that substantive consolidation does not apply to Bridging SMA 2 LP and approval for a second interim distribution.

The Receiver and Unitholder Representative Counsel opposed, arguing the motion was premature as various distribution issues, including the full economic impact of consolidation, remained unresolved.

The court dismissed the motion, deferring to the Receiver's position that a determination on substantive consolidation and further distributions was premature given the incomplete factual record and outstanding distribution issues.

The applicant, Original Traders Energy Ltd. (OTE Group), brought a motion for a Mareva injunction against former executives, Glenn Page and Mandy Cox, and their corporate entity, 2658658 Ontario Inc., to freeze a yacht allegedly purchased with OTE funds through fraudulent means.

The court granted the injunction, finding a strong prima facie case of fraud, a serious risk of asset dissipation given the yacht's movement after notice, and that the balance of convenience favored the applicant.

The requirement for an undertaking as to damages was dispensed with due to the applicant's insolvency and the strength of their case.

The order included directing the respondents to facilitate the yacht's return to Florida.

The applicant, 908593 Ontario Limited (Eagle Travel Plaza) by its receiver, brought a motion seeking coverage under a credit risk insurance policy issued by Atradius.

The core dispute was the interpretation of Article 23300 of the policy, specifically whether a $100,000 maximum liability limit for "Discretionary Credit Limit" (DCL) Buyers applied per DCL Buyer or as an aggregate limit for all DCL Buyers per insurance year.

The court found the policy language clear and unambiguous, concluding that the $100,000 limit was an aggregate for all DCL Buyers per insurance year, not per individual DCL Buyer.

The applicant's motion was dismissed.

The Superior Court of Justice considered a motion by BCIMC and Otera Capital to approve a Sale and Investor Solicitation Process (SISP) for three condominium projects (Yorkville, Clover, Halo) under receivership.

The court approved the SISP for the Yorkville project.

For the Clover project, the court declined to approve the SISP, affirming the debtor's right of redemption after Concord Land Developments acquired the debtor's shares and offered to pay out all BCIMC debt and receivership costs.

For the Halo project, the SISP was approved, but without a stalking horse bid and without restrictions on communication between bidders and stakeholders, as the debtor was not yet able to pay out the debt.

This proceeding involved competing applications for the appointment of a receiver and manager under the Bankruptcy and Insolvency Act and the Courts of Justice Act, and an application for protection under the Companies’ Creditors Arrangement Act (CCAA).

The applicants, secured creditors, sought receivership over three residential condominium projects (The Clover, Halo, and 33 Yorkville) due to significant financial irregularities, lack of transparency, and loss of confidence in the debtors' management.

The debtors opposed receivership and sought CCAA protection, proposing a share sale to Concord Group Developments and a plan to disclaim existing purchase agreements.

The court dismissed the CCAA application and granted the receivership application, finding that receivership was the preferable route.

The court emphasized the secured creditors' blocking position, the absence of a concrete CCAA plan, and the debtors' deliberate financial misconduct, which outweighed any potential benefits of a CCAA proceeding.

A motion to set aside orders of a chambers judge denying leave to appeal.

The core issue was whether an appeal from a decision denying leave to sue a court-appointed receiver is governed by the Bankruptcy and Insolvency Act (BIA) or the Courts of Justice Act (CJA).

The receiver was appointed under both statutes.

The applicant argued that since the leave to sue provision could be grounded in provincial law under the CJA, the appeal should follow the CJA route, which permits appeals as of right within 30 days.

The respondent argued that the BIA governs because the receivership proceedings are BIA proceedings and the appeal provisions are in operational conflict.

The court held that the BIA governs the appeal route because the leave to sue provision is authorized by the BIA through necessary implication of section 243(1), and federal paramountcy applies to the conflicting appeal provisions.

The City of Sault Ste.

Marie moved for immediate payment of Essar Steel Algoma Inc.'s outstanding and future post-filing property tax obligations, totaling approximately $10.8 million post-filing.

The court considered Algoma's precarious financial position, volatility of steel prices, and upcoming capital expenditures, including a significant blast furnace stove replacement.

While dismissing the City's motion for immediate payment of arrears, the court ordered Algoma to pay $350,000 per month for ongoing property taxes, acknowledging the City's difficulties and Algoma's assessment appeal.

GIP Primus, L.P. and Brightwood Loan Services LLC ("GIP"), along with Portco, brought motions seeking orders for Essar Steel Algoma Inc. ("Algoma") to resume payments under a Cargo Handling Agreement, including arrears, and for a priority charge in the alternative.

The motions were based on section 11.01(a) of the CCAA, arguing that Portco provided critical services or licensed property.

The court dismissed the motions, reiterating previous findings that Portco did not provide services or a license, and that the arguments were previously decided.

The court also declined to grant a critical supplier charge under section 11.4 or the general discretion of section 11 of the CCAA, citing lack of application by the debtor, prior rulings, and potential breach of DIP loan terms and prejudice to other creditors.