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THE CANADIAN MOTOR FREIGHT LTD. SAD RECEIVERSHIP SAGA: OUR COMPLETE GUIDE ON WHAT HAPPENS WHEN YOU DON’T FOLLOW COURT ORDERS

canadian motor freight ltd

Canadian Motor Freight Ltd. Introduction

Have you ever wondered what happens when a company can’t pay its debts? In the case of Canadian Motor Freight Ltd., a Mississauga, Ontario-based logistics company providing seamless transportation solutions, the situation became a legal drama that teaches us important lessons about following court orders.

What Happened to Canadian Motor Freight Ltd.?

Canadian Motor Freight Ltd. was a logistics company that ran into serious money problems. By October 2024, the company owed over $20 million to Canadian Western Bank (CWB) and couldn’t keep up with payments. This financial crisis led to a court process called “receivership,” in which a licensed insolvency trustee is appointed to take control of a company’s assets to sell the assets to help pay back all or a portion of what is owed.

The Road to Receivership

The court put Canadian Motor Frleight Ltd. into interim receivership on October 8, 2024, and then full receivership on November 15, 2024. This interim receiver appointment happened because:

  • The company stopped making loan payments to CWB
  • The company gave false financial information to the bank
  • The business had consistent losses
  • Beyond the CWB debt, they owed around $1.7 million to equipment financing companies
  • They were selling their accounts receivable to another company (REV Capital) without telling CWB
  • The City of Mississauga had started the tax sale proceedings process to sell CMF’s property due to unpaid taxes

Because of these serious issues, the court went from an interim receiver to a full receiver. The Receiver’s job was to take control of all Canadian Motor Freight Ltd.‘s assets and manage them to pay back creditors as fairly as possible.canadian motor freight ltd

The Missing Trucks Mystery

One of the most valuable things Canadian Motor Freight Ltd. owned was its fleet of trucks. These vehicles were essential assets that could be sold to help pay back some of the debt. However, instead of cooperating with the receiver as required by law, management made a fateful decision.

Rather than turning over the trucks to the receiver, company managers moved all the vehicles to a different location – a yard owned by a company called United Group of Companies. This move directly violated the court’s receivership order.

Trying to Recover the Assets

When the receiver discovered the trucks were missing, they tried to talk with United Group to gain access to the vehicles. When these discussions failed, the receiver had to return to court to get a specific “Asset Recovery Order” that directed United Group to allow the receiver onto their property to take possession of the trucks.

Unfortunately, this didn’t solve the problem. United Group and its management refused to comply with this new court order. They wouldn’t let the receiver take the trucks as directed by the court. This direct defiance of a court order is considered very serious in the Canadian legal system.

When Ignoring Court Orders Leads to Contempt

Because both Canadian Motor Freight Ltd.’s management and United Group weren’t following the court’s instructions, the receiver took further legal action. The receiver asked the court to hold both companies and their management in contempt of court for disobeying both the original Receivership Order and the Asset Recovery Order.

The evidence showed a clear pattern of defiance:

  • Debtor company’s management deliberately moved the trucks to United Group’s yard despite knowing about the Receivership Order
  • United Group refused to allow the receiver access to take the trucks
  • United Group demanded payments they weren’t entitled to before they would cooperate
  • After being specifically ordered to provide access, United Group secretly moved the trucks again to unknown locations

The judge strongly criticized these actions, saying the parties were playing a “shell game” with the company’s assets and “thumbing their nose” at the court. This kind of behaviour undermines the entire legal system.canadian motor freight ltd

The Contempt Ruling

The judge found that both Canadian Motor Freight Ltd.‘s management and United Group’s management were guilty of civil contempt. In Canada, three main elements must be proven for civil contempt:

  1. The court orders must be clear and understandable
  2. The people accused must have known about the orders
  3. The violation of the orders must have been intentional

The judge determined that all three conditions were met in this case. United Group claimed they were just “negotiating” with the receiver, but the judge dismissed this excuse, seeing it as just a delay tactic.

The judge then scheduled a sentencing date, giving the parties a chance to fix the situation before final penalties were decided. It is very normal for courts to allow those accused of contempt of court to take the right steps to purge their contempt. Most people take advantage of that opportunity so that they are no longer running afoul of court orders.

Because of these actions, the judge sentenced the leader of United Group to spend four days in jail. This person was considered the “directing mind” of the company, meaning they were the main decision-maker. The judge also ordered several other individuals involved in the case to pay different amounts of money to cover legal costs.

United Group itself received a much larger financial penalty, having to pay a significantly higher amount in costs than the individuals. These penalties show how seriously the court took the failure to follow orders in the Canadian Motor Freight Ltd. case.

Taking It to a Higher Court

Not accepting the contempt findings, both Canadian Motor Freight Ltd. and United Group (along with their management) appealed to the Court of Appeal for Ontario. They hoped the higher court would overturn the original judge’s decision.

However, on April 8, 2025, the Court of Appeal dismissed both appeals, fully supporting the original judge’s findings. The Court of Appeal explained their reasoning:

  • The original judge had provided detailed and clear reasons for the contempt finding
  • The so-called “negotiations” were correctly identified as delay tactics
  • The companies and their management failed to show that the original judge made any serious errors
  • The Receivership Order clearly stated that all of the company’s property had to be turned over to the receiver
  • Management knew about this order and intentionally disobeyed it
  • The sentences given by the original judge were appropriate and possibly even “on the lenient side.”

The Court of Appeal concluded with a powerful statement:

“It is a fundamental principle that orders of a court are to be obeyed. They are not to be stalled, and they are not to be negotiated. Serious consequences are to be expected by anyone who wilfully fails to obey a court order.”

canadian motor freight ltd

The Wider Financial Problems at Canadian Motor Freight Ltd.

The case of Canadian Motor Freight Ltd. reveals a company facing enormous financial challenges. Online industry forums like InsideTransport.com had threads discussing CMF’s situation starting in October 2024, showing that people in the trucking industry were aware of the company’s troubles.

Documents from the receivership process provide more details about the company’s financial state. A Motion Record includes various documents related to the receivership, including:

  • Examination of company officials to gather information about assets
  • Lists of company receivables and customers
  • Communications between the receiver and legal representatives
  • Evidence of returned checks due to insufficient funds from earlier in 2024
  • Financial statements showing significant expenses against their revenue

The 2023 financial statements for the company showed sales of over $21 million but also revealed major expenses.

All these factors contributed to the company’s inability to meet its financial obligations, ultimately leading to receivership.

How Receivership Works in Canada

To better understand the Canadian Motor Freight Ltd. case, it helps to know how receivership works in Canada. Receivership is a legal process used when a company can’t pay its debts and creditors need help recovering their money.

The Receivership Process

  1. Court Appointment: A creditor (like a bank) asks the court to appoint a receiver, usually when a company has defaulted on loans.
  2. Taking Control: Once appointed, the receiver takes control of the company’s assets. Company management must cooperate and turn over all property and records.
  3. Asset Management: The receiver evaluates assets, may continue running the business temporarily, and eventually sells assets to generate funds.
  4. Debt Repayment: Money from asset sales goes toward paying creditors according to legal priorities.

For Canadian Motor Freight Ltd., this process began when Canadian Western Bank sought the court’s help to recover their $20+ million. The receiver was appointed to manage the company’s assets, including the valuable truck fleet that later became the center of the contempt case.canadian motor freight ltd

Why Court Orders Must Be Followed

The Canadian Motor Freight Ltd. case highlights a crucial aspect of our legal system: court orders aren’t suggestions – they’re commands that must be obeyed. There are several reasons why following court orders is essential:

Legal Consequences

As seen with Canadian Motor Freight Ltd. and United Group, failing to follow court orders can lead to:

  • Being found in contempt of court
  • Financial penalties
  • Potential jail time for individuals
  • Damage to business and personal reputations

System Integrity

Our legal system works only if people respect court authority. If people could pick and choose which orders to follow, the entire system would break down. The Court of Appeal emphasized this point in its ruling on this case.

Fair Resolution of Disputes

Court orders ensure that conflicts are resolved fairly. In receivership cases like Canadian Motor Freight Ltd., the process helps ensure that creditors are treated according to established legal priorities rather than allowing some parties to gain unfair advantages.

The Impact on the Trucking Industry

While the Canadian Motor Freight Ltd. case focuses on one company’s struggles, it raises questions about the broader Ontario trucking industry. The trucking sector faces numerous challenges:

Rising Costs

The financial documents from Canadian Motor Freight Ltd. highlight the significant costs of running a trucking operation:

  • Fuel costs in the millions
  • High insurance premiums
  • Equipment financing payments
  • Maintenance expenses

Thin Profit Margins

Trucking companies often operate on slim profit margins, making them vulnerable when costs rise or when economic downturns reduce shipping demand.

Competitive Pressures

The logistics industry is highly competitive, with companies often underbidding each other to win contracts, sometimes at unsustainable rates.

Regulatory Requirements

Trucking companies must comply with numerous regulations regarding safety, driver hours, vehicle maintenance, and environmental standards, all of which add to operational costs.

While we can’t say from this single case whether the entire Ontario trucking industry faces similar problems, the Canadian Motor Freight Ltd. situation highlights the financial pressures that can push logistics companies to the breaking point.canadian motor freight ltd

Lessons from the Canadian Motor Freight Ltd. Case

The story of Canadian Motor Freight Ltd. offers several important lessons for businesses and individuals:

1. Court Orders Are Non-Negotiable

The primary lesson is that court orders must be followed. The Court of Appeal made it clear that orders “are not to be stalled, and they are not to be negotiated.”

2. Transparency with Creditors is Essential

Canadian Motor Freight Ltd.‘s provision of false financial information to CWB contributed to its problems. Being honest with lenders about financial difficulties might lead to workable solutions before receivership becomes necessary.

3. Legal Problems Compound When Ignored

What started as financial difficulties for Canadian Motor Freight Ltd. escalated into contempt of court findings when company leadership tried to hide assets rather than comply with the receivership process.

4. Expert Help is Valuable During Financial Distress

Companies facing financial problems should seek qualified legal and financial advice early. Professional guidance can help navigate difficult situations and potentially avoid the more severe consequences of receivership.

Conclusion: Respect for the Legal Process

The Canadian Motor Freight Ltd. receivership saga demonstrates the serious consequences that can follow when court orders are ignored. From the initial financial troubles to the contempt findings and appeals, this case reinforces a fundamental principle of our legal system: court orders must be respected and obeyed.

For businesses facing financial difficulties, the case serves as a cautionary tale about the importance of transparency, cooperation, and compliance with legal processes. While financial problems are challenging, attempting to hide assets or obstruct court-appointed receivers only makes the situation worse.

The Court of Appeal’s firm stance in upholding the contempt findings against Canadian Motor Freight Ltd. and United Group sends a clear message about the importance of court authority in ensuring that financial disputes are resolved fairly and according to established legal procedures.

As we follow developments in the trucking and logistics industry, the Canadian Motor Freight Ltd. case will likely be remembered as an important example of how not to handle a company’s financial crisis and the serious consequences that can follow when court orders are defied.

I hope you’ve found this Canadian Motor Freight Ltd. Brandon’s Blog helpful. If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.canadian motor freight ltd

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Brandon Blog Post

BIA: 2 PEOPLE’S CHALLENGE SUING A CANADIAN LICENSED INSOLVENCY TRUSTEE

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Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA): Introduction

On April 13, 2023, the Supreme Court of Canada (SCC) dismissed the application by the legal counsel of a former bankrupt and his wife for leave to appeal the costs awarded against them in a decision of the Court of Appeal for Ontario. As is the usual case, the SCC did not give any reasons for the dismissal. The Court of Appeal for Ontario’s decision dealt with what is required under section 215 of the Bankruptcy and Insolvency Act (Canada) (BIA) to sue a licensed insolvency trustee.

In this Brandon’s Blog, I provide a comprehensive guide to the Court of Appeal for Ontario decision and everything you need to know about section 215 of the BIA. Using this real court decision as an example, we’ll explore the ins and outs of Section 215 of the BIA to give you a clear understanding of its purpose, how it applies, and the potential consequences of non-compliance.

Overview of BIA Section 215

Section 215 of the BIA requires that permission of the court be obtained to bring an action against the Office of the Superintendent of Bankruptcy Canada, an official receiver, an interim receiver or a licensed insolvency trustee with respect to any report made under, or any action taken, under the BIA.

The purpose of this section is to ensure that the court must first decide if a proposed action has on its surface a legitimate purpose relating to the administration of insolvency matters in Canada and to avoid frivolous actions that have no chance of success.

Regular readers of Brandon’s Blog know that I have been following and writing about the case of the former bankrupt, Mr. Wayne Flight and his wife, Amber Nicole Flight. In my November 2021 blog titled: TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION, I detailed a decision of the Ontario court where the motion judge decided that notwithstanding section 215 of the BIA, the Flights did not need to first obtain authorization from the Court in order to initiate their legal proceeding.

Then in July 2022, I wrote that the licensed insolvency trustee (formerly called a bankruptcy trustee) had appealed this lower court decision and gave an overview of the appeal and other related issues in my blog titled: INSOLVENCY TRUSTEE: TURNS OUT CERTAIN ACTIONS AGAINST THE TRUSTEE CANNOT BE UNLEASHED WITHOUT COURT PERMISSION.

As stated above, this Brandon’s Blog will provide a comprehensive guide to the Court of Appeal for Ontario decision and everything you need to know about section 215 of the BIA.bia

BIA: The Motion Judge’s Decision

The motion judge decided that the Flights did not require the permission of the court, under s. 215 of the BIA, to bring an action against the Trustee, relating to the administration of four bankruptcies of Brian Wayne Flight! The same corporate trustee was the Trustee in each of his bankruptcy proceedings. The lower court judge rendered a decision that negates the applicability of the clause in dispute, deeming the action to be levied against the individual Trustee in a personal capacity, and further alleging omissions as a mitigating factor. She did not assess whether section 215 of the BIA did apply and if it did, should permission to proceed with the action be granted.

Upon due consideration of the arguments presented, the Court of Appeal for Ontario has granted the Trustee in Bankruptcy leave to appeal and has subsequently set aside the order of the motion judge. In rendering its decision, the appellate court has determined that pursuant to section 215 of the BIA, permission to bring the civil action must be obtained and has thus directed the matter back to the bankruptcy court to assess whether such permission should be granted.

It is noteworthy that, despite the Flights’ appeal of this ruling to the SCC, said appeal has been dismissed. Consequently, the matter will now be remanded to the bankruptcy court for further deliberations.

The BIA case background

Mr. Flight filed for bankruptcy on four separate occasions – specifically in the years 2004, 2006, 2011, and 2016. The same corporate trustee was the Trustee in respect of each of these bankruptcies. The same individual licensed insolvency trustee was the individual at the corporate trustee with carriage of Mr. Flight’s bankruptcies.

The total of the proven claims in the first three bankruptcies was $324,800. The total amount distributed to creditors of those bankruptcies was about $3,200. Proven claims in the fourth bankruptcy were $127,870.

In the year 2018, amidst his fourth bankruptcy, Mr. Flight uncovered the fact that substantial amounts had been unlawfully appropriated from his business operations between 2003 and 2018. The perpetrator of this offence was none other than Julie LeBlanc, his former spouse, his bookkeeper, and authorized agent. Ultimately, Mr. Flight determined that the amount of the misappropriations was approximately $206,000.

Mr. Flight successfully retrieved a sum of approximately $30,300 from Ms. LeBlanc, however, it was not submitted to the Trustee. Subsequently, in April 2018, Mr. Flight lodged a complaint with the Office of the Superintendent of Bankruptcy regarding the Trustee’s inability to identify Ms. LeBlanc’s actions. Following the formal complaint, the Trustee was made aware of Ms. LeBlanc’s illicit activities and the funds secured by Mr. Flight.

Disputes then arose between the Trustee and Mr.Flight concerning whether and on what terms he would be discharged from bankruptcy and how the payments from Ms. LeBlanc should be treated. In August 2019, Mr. Flight was granted a conditional discharge on terms that, if complied with, allowed him to receive an absolute discharge after twelve months. The Trustee and Mr. Flight did not agree as to whether those conditions were met.

In September 2019, Mr. Flight and his current spouse, Amber Nicole Flight, commenced an action against the individual licensed trustee, seeking relief (the “Action”). The Action does not name, or refer to, the corporate trustee, but it treats the individual trustee as though he were the Trustee. The central allegation in the Action is that the individual trustee, as the“Licensed Insolvency Trustee” for each of the bankruptcies, ought to have detected Ms. LeBlanc’s misappropriations and, once told about them, ought to have taken steps including suing Ms. LeBlanc.

As Mr. Flight states in his affidavit:

“At the heart of this action is the Trustee’s failure to detect, prevent, and once he became aware of it, to litigate, the theft and fraud committed by my former Accountant, Bookkeeper, and Power of Attorney, JulieLeBlanc”.bia

Did the undischarged bankrupt have the right to launch the Action under the BIA?

Both the individual trustee and the corporate trustee objected to the Action on the basis that at the time of its commencement, (i) Mr. Flight was an undischarged bankrupt person, and (ii) no permission was obtained under s. 215 of the BIA to bring the Action.

Mr. Flight brought a motion, in his bankruptcy proceeding, seeking directions with respect to whether he had the right to commence the Action as an undischarged bankrupt and, if required, seeking leave to do so under section 215 of the BIA.

In September 2020, and before the motion for directions was heard, Mr. Flight launched but did not proceed with, a motion for an absolute discharge. In October 2020, working with a different insolvency professional, he filed a consumer proposal under the BIA. It was accepted by Mr. Flight’s sole significant creditor in February 2021. The acceptance of the consumer proposal resulted in his bankruptcy being deemed annulled.

Following acceptance of the consumer proposal the motion judge heard the motion for directions with respect to the Action.

The Court of Appeal for Ontario’s analysis

The motion judge, sitting in the bankruptcy court, determined that permission was not required under section 215 of the BIA to commence the Action. She expressly did not determine whether, if permission were required, should it be granted. She did not address whether Mr. Flight’s status as an undischarged bankrupt at the time the Action was started prevented him from bringing it.

The motion judge described the Action as one seeking “a declaration that the defendant engaged in misfeasance, negligence, fraud and breach of fiduciary duty in his personal capacity and that the defendant was unjustly enriched.” She described the claims in the Action as alleging a theft (by Ms. LeBlanc) that caused Mr. Flight’s repeated bankruptcies, and as alleging that the individual trustee was liable since the“defendant trustee ought to have detected this fraud in the administration of the four bankruptcies”.

The motion judge described the Action as claiming damages flowing from the individual trustee’s alleged failure to: “take any meaningful action to address the alleged fraud and its impact on the fourth bankruptcy after its discovery”; “diligently commence an action against the former bookkeeper”; “investigate the fraud”; “adjust the plaintiff’s surplus income”; “recommend a consumer proposal in alternative to bankruptcy”; and “have the plaintiff promptly discharged from his fourth bankruptcy”.

The motion judge gave two reasons for finding that the Action did not require permission under section 215 of the BIA. According to her perspective, seeking recourse against trustees in their individual capacity does not necessitate prior authorization. Furthermore, it is noteworthy that the pursuit of legal recourse pertaining to omissions does not necessitate getting prior authorization.bia

The Court of Appeal for Ontario’s decision

The Court of Appeal for Ontario found that the motion judge erred in concluding that the capacity in which the Trustee was sued made section 215 of the BIA inapplicable. An action does not fall outside of section 215 of the BIA because it names an individual rather than the corporate trustee as the defendant, where the action alleges that the individual owed the duties of a Trustee and is liable as if he were the Trustee. Nor does an action fall outside of section 215 of the BIA because the claim asserts that it is brought against the Trustee in a personal capacity, where the gist of the claim is wrongdoing in the performance of the Trustee’s role.

The appellate court stated that the motion judge also erred in holding that an action that makes any allegation of an omission falls outside of section 215 of the BIA. Although section 215 does not apply to an action premised on the failure of a Trustee to do an act specifically and expressly mandated by the BIA, that is not the core allegation in the Flight’s claim. Section 215 applies to the Action, which alleges common law wrongdoing in the performance of the Trustee’s role, even if an aspect of that wrongdoing is described as an omission to act.

The Court of Appeal for Ontario granted the Trustee’s leave to appeal, allowed the appeal, and returned the matter to the bankruptcy court to determine whether the Flights should be granted permission to sue the individual trustee. The individual and corporate trustees were entitled to the costs of the appeal, fixed in the amount of $13,000, inclusive of disbursements and applicable taxes. Now that the SCC appeal is dismissed, the lower court will have to decide the real issues as determined by the Court of Appeal for Ontario

BIA: Conclusion

I hope you enjoyed this section 215 BIA Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

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