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Civil Litigation - Receivers. Stevens v. Hutchens
In Stevens v. Hutchens (Ont CA, 2022) the Court of Appeal characterizes the nature of a receivership proceeding:(1) The respondents had standing
[13] Without citing any authority, the appellant says that, in the context of a receivership, only the receiver, and not a creditor in the receivership, can bring a motion affecting the rights of another creditor in the receivership.
[14] Like the motion judge, we reject this argument.
[15] A receivership proceeding has a time sensitive and multi-stakeholder nature: Ontario Securities Commission v. Money Gate Mortgage Investment Corporation, 2020 ONCA 812, 153 O.R. (3d) 225, at para. 10. The mortgagor corporations were included in the scope of the receivership order, and the appellant and the respondents were creditors in the receivership. The respondents’ motion involved a priority dispute between two creditors asserting claims against the assets of the receivership. The motion judge found, and the appellants do not dispute, that the receiver deferred to the respondents to bring the motion for cost efficiency reasons. Moreover, the appellants do not point to any prejudice to them resulting from the respondents proceeding in the manner that they did. . Bogue v. Miracle
In Bogue v. Miracle (Ont CA, 2022) the Court of Appeal consider the interaction between provisions of the Indian Act that prohibit seizure of native assets and a receivership order made under CJA 101.
. Buduchnist Credit Union Limited v. 2321197 Ontario Inc.
In Buduchnist Credit Union Limited v. 2321197 Ontario Inc. (Ont CA, 2022) the Court of Appeal considered whether an insolvency receivership order was governed under the BIA 243 or CJA 101:A. Does the BIA or the CJA govern TC’s Appeal?
[19] The BIA governs this appeal, not the CJA.
[20] This court has repeatedly found that “[w]here a receivership order is made pursuant to both BIA s. 243 and CJA s. 101, the more restrictive appeal provisions of BIA s. 193 govern the rights of appeal and appeal routes”: KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2022 ONCA 479, 100 C.B.R. (6th) 218 at para. 16, citing Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13, at paras. 66 and 67; Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, 72 C.B.R. (6th) 245, at paras. 10 and 11. TC submits that this is generally the case, but where the order appealed from “substantively does not engage a BIA receivership”, the BIA appeal routes do not apply. Relying on RREF II BHB IV Portofino, LLC. v. Portofino Corporation, 2015 ONCA 906, 33 C.B.R. (6th) 9, at paras. 11-12, TC argues that “the jurisdiction of the court is governed by the substance of the order made.”
[21] In Astoria, this court addressed the test to be applied to determine jurisdiction where a receiver has been appointed under s. 243(1) of the BIA and under provincial law. The question is “whether the order under appeal is one granted in reliance on the jurisdiction of the Bankruptcy and Insolvency Act”: Astoria, at para. 29, citing Industrial Alliance Insurance and Financial Services Inc. v. Wedgemount Power Limited Partnership, 2018 BCCA 283, 61 C.B.R. (6th) 196, at para. 21. Where there is an appeal route under both the BIA and provincial law, the doctrine of paramountcy applies, such that the BIA governs jurisdiction in the case: Dal Bianco v. Deem Management Services Limited, 2020 ONCA 585, 82 C.B.R. (6th) 161, at para. 6.
[22] I am satisfied that jurisdiction to make the orders that are the subject of this appeal is available under the BIA. As I have indicated, TC seeks to appeal the motion judge’s denial of its request to grant an order requiring the receiver to hold the proceeds of sale as security for the Mareva Order, and the motion judge’s direction to the receiver to pay those proceeds to the sheriff. Those orders purport to direct a receiver, appointed pursuant to the authority of the BIA, in the management of the receivership. It is clear that the orders, to use the language employed by TC, “substantively” engage the receivership. The fact that TC’s purported appeal also addresses orders governing creditors’ rights issues relating to the distribution of the proceeds of sale does not change this. The BIA governs. . Ontario Securities Commission v. Money Gate Mortgage Investment Corporation
In Ontario Securities Commission v. Money Gate Mortgage Investment Corporation (Ont CA, 2020) the Court of Appeal considered the appropriateness of summary judgment procedures in receivership proceedings, here in a motion seeking 'advice and directions' of the court. The court addresses the use of summary judgment in both the context of receivership proceedings and in a motion other than one for summary judgment:[8] It is important, given the exigencies of receivership proceedings, that a court supervising the receivership decide issues on a summary basis, rather than pursuant to the costlier and more time consuming process of a trial, in cases where a summary process can determine the merits of a dispute fairly and justly. The motion judge did not err, in deciding that this matter could be dealt with summarily, by borrowing from the approach applied on motions for summary judgment, an approach designed to ensure that a case is disposed of without a trial only where to do so will result in its fair and just determination.
[9] The factual findings the motion judge made were available on the record and her rejection of the appellant’s argument of invalidity based on an unfulfilled condition of consent was free of legal error.
[10] The principles that inform when a court should decline to grant what would be a partial summary judgment ought to be applied in the receivership context with due consideration for the time sensitive and multi-stakeholder nature of a receivership proceeding. The motion judge did not infringe any principle against granting partial summary judgment in the context of this case.
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[13] The OSC has the power to apply to the Superior Court for the appointment of a receiver of a company where the appointment is in the best interests of the company’s creditors, security holders, or subscribers, or is appropriate for the due administration of Ontario securities law: Securities Act, R.S.O. 1990, c. S.5, ss. 129 (1) and (2).
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[41] First, the summary judgment process is designed to be a means to adjudicate and resolve disputes without undue process and protracted trials, and thus avoid unnecessary expense and delay: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. A receivership signals that creditors and other stakeholders are in need of protection. Unnecessary expense and delay can further imperil their positions.
[42] Second, summary judgment is designed to be a fair and just process to resolve a dispute and apply the relevant legal principles to the facts as found: Hryniak, at para. 28. The interests of the third party—the stranger to the receivership—are therefore respected.
[43] Third, the dividing line between a case that can be disposed of summarily and one where there should be a trial—the genuine issue requiring a trial test—has been the subject of authoritative jurisprudence and is dealt with regularly by Superior Court judges. The same is true of the surrounding features of the test which address how the record is developed and whether it is adequate to make summary judgment the proportionate, expeditious and less expensive means of achieving a fair result. It is preferable to use an established test than to try to construct a new one. In motions seeking a final decision that are not formally motions for summary judgment, the summary judgment procedure provides useful assistance by analogy: Polywheels Inc. (Re), 2010 ONSC 1265, at paras. 6-7.
[44] I therefore conclude that the motion judge did not err in entertaining the matter although it was raised by a motion for advice and directions, and in analogizing it to a motion for summary judgment.
[45] Nor was there unfairness to the appellant in the motion judge proceeding this way. The Money Gate receiver had been directed to hold the Sale Proceeds pending a distribution motion. The Money Gate receiver’s material on the motion described the history of the 254 Mortgage, noted the appellant’s position that it was asserting a claim to the Sale Proceeds, and set out the receiver’s position that the appellant was aware of and supported 254 borrowing funds and providing a second mortgage. It was clear that the receiver was seeking a final disposition of the appellant’s claim by motion, not by a trial. It was equally clear that the appellant was required, if it wished to oppose the receiver’s request, to support its position as to the merits of its claim and the appropriate process to determine it, on the basis of evidence, which it had the opportunity to file. . Ontario Securities Commission v. Money Gate Mortgage Investment Corporation
In Ontario Securities Commission v. Money Gate Mortgage Investment Corporation (Ont CA, 2020) the Court of Appeal discusses the role of, and what may be ordered within, a motion for 'advice and directions' in a receivership proceeding:[32] The motion below was for advice and directions, brought in a receivership proceeding. In my view, this gave the motion judge the power to decide the merits of the dispute about the validity of the 254 Mortgage, and the entitlement to the Sale Proceeds, in a summary way without a trial, following an approach modelled upon that used on motions for summary judgment. The context and purpose of the receivership support that conclusion.
[33] The Money Gate receiver was appointed under statutory authority that aims at the protection of the best interests of a company’s creditors and security holders. The receiver’s broad powers, to bring in Money Gate’s assets and to hold them for distribution, are in the service of that purpose.
[34] It is clearly foreseeable that, in seeking to collect the company’s assets with a view to maximizing what will be available to creditors and security holders, the receiver’s efforts may come into collision with positions taken by third parties who dispute the company’s ownership or entitlement, and assert their own. Resolving such disputes in a timely way can be key to the effective fulfillment of the object of the receivership.
[35] I see no reason in principle why the receiver’s right to apply to the court for advice and directions, a right specifically provided for in the receivership order, cannot be used to resolve a dispute of the type presented here. The asset in question, the 254 Mortgage, was ostensibly an asset of Money Gate, as it was given in its favour. The Sale Proceeds had been paid over to the Money Gate receiver. The question as to entitlement was being raised by the appellant, who was otherwise an outsider to the receivership. The Money Gate receiver was entitled to advice and directions of the court as to whether the asset—the Sale Proceeds representing a recovery under the 254 Mortgage—was properly available for distribution in light of the appellant’s claim.
[36] In support of its position that there are severe limits on what can be done under a motion for advice and directions, the appellant relies on Re Urbancorp Cumberland 2 GP Inc., 2017 ONSC 7649, 56 C.B.R. (6th) 86, a case in which a motion for advice and directions by a company’s Monitor, appointed under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”), was dismissed. Myers J. held that the Monitor was not truly seeking advice and directions, but was seeking under that guise to assert a claim of the CCAA debtor against a third party for monetary relief: at para. 19.
[37] In Urbancorp, however, the Monitor had not been given the power to bring proceedings on behalf of the CCAA debtor. The issue in Urbancorp was therefore not about whether a summary determination of rights between a third party and the debtor’s estate could ever be accomplished by a motion for advice and directions. It was about whether the Monitor actually had the power to assert the type of claim it was advancing. Myers J. observed that if the Monitor had the power to bring proceedings, “they can be brought summarily”: at paras. 18-22.
[38] Here, the Money Gate receiver was expressly given the power, in the receivership order, to initiate, prosecute and defend proceedings with respect to Money Gate or its assets. The Money Gate receiver is not simply attempting, under the guise of a motion for advice and directions, to exercise a power it does not have.
[39] Accordingly, Urbancorp does not support the appellant’s position. . Paulpillai Estate v. Yusuf
In Paulpillai Estate v. Yusuf (Ont CA, 2020) the Court of Appeal considered s.101(1) of the Courts of Justice Act, where the appointment of a receiver is authorized:[19] Although the order does not refer to the specific statutory basis to appoint the monitor, the motion judge’s reasons noted the court had “authority to appoint a receiver and manager by an interlocutory order where it appears to be just or convenient to do so: Courts of Justice Act, s. 101”: at para. 59. Section 101(1) of the Courts of Justice Act provides:101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory order may be granted or a receiver or receiver and manager may be appointed by an interlocutory order, where it appears to a judge of the court to be just and convenient to do so. [20] Section 101(1) authorizes the court to appoint a receiver with investigative powers to protect the parties’ interests pending the resolution of the claims and to mitigate risk posed to the plaintiff’s right to recovery. A receiver with investigative powers is often appointed to gather information and determine the true state of affairs about the parties: see Akagi v. Synergy Group (2000) Inc., 2015 ONCA 368, 125 O.R. (3d) 401, at paras. 65-66, 90.
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[22] This court has accepted that the appointment of a receiver on an interlocutory motion under s. 101(1) of the Courts of Justice Act (rather than on application) is interlocutory: see e.g., Illidge (Trustee of) v. St. James Securities Inc. (2002), 2002 CanLII 44971 (ON CA), 60 O.R. (3d) 155 (C.A.), at para. 4; Ontario v. Shehrazad Non Profit Housing Inc., 2007 ONCA 267, 85 O.R. (3d) 81, at paras. 15-17.
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