If you are reading this while navigating a complex financial restructuring or managing the pressures placed on your company by your secured lender and are fearful of corporate insolvency, please know that you are not alone. At Ira Smith Trustee & Receiver Inc., we understand that legal jargon and courtroom battles can feel overwhelming when you are simply trying to find a path forward. We are here to guide you through these technical waters with clarity and compassion.
Secured Lender Key Takeaways
A Landmark Question: The Ontario Court of Appeal is set to decide if a secured lender can use their debt to “buy” a lawsuit that a Licensed Insolvency Trustee could file against it.
Credit Bidding vs. Cash: Traditionally, credit bidding allows a secured lender to bid the value of their debt. The case discussed below begins to question if that applies to assets that aren’t part of their original security.
The Avida Case: A judge on the Ontario Commercial List recently allowed Bank of Montreal (BMO) to participate in an auction to be run by the Trustee and credit-bid to purchase a cause of action (a legal claim) against BMO, but that decision is now being appealed.
Why It Matters: The final ruling will impact how receivers and trustees recover money for creditors and whether lenders can effectively “neutralize” legal claims without paying cash.
Secured Lender Highlights
What is a Credit Bid?
The Case of Avida 2015 Inc. (Re)
The Conflict: Can a Lender Bid Debt for a Lawsuit?
Why the Court of Appeal is Stepping In
Comparison: Credit Bidding vs. Cash Bidding
What This Means for You and Your Business
Frequently Asked Questions (FAQ)
Secured Lender: What is a Credit Bid?
Before we dive into the details of the Avida 2015 Inc. (Re), 2026 ONCA 478 (CanLII) case, let’s define a term that is central to this debate. In the world of insolvency, a credit bid occurs when a secured creditor, someone who has a legal claim over specific assets, uses the money they are already owed as “currency” to buy those assets in a receiver’s or trustee’s Sale and Investment Solicitation Process (SISP).
Normally, if a business goes bankrupt, the Licensed Insolvency Trustee (the person appointed to manage the bankruptcy) tries to sell the business assets for cash. However, a secured lender often has the right to say, “Instead of you selling my collateral to someone else for cash, I will bid on all or part of the debt I am owed to take ownership of it myself.”
Assets of this type are often physical, like equipment or real estate. But what happens when the asset is a cause of action, essentially, the right to sue someone? And what happens when that someone to be sued is the secured lender itself?
Secured Lender: The Case of Avida 2015 Inc. (Re)
The story of Avida 2015 Inc. brings this technical question into sharp focus. In this bankruptcy proceeding, the Trustee identified a valuable asset: a cause of action against the Bank of Montreal (BMO). In simpler terms, the Trustee believed the estate had a legal claim to sue BMO for money.
The Trustee decided to put this lawsuit up for auction. BMO, being a secured lender and a major creditor in the bankruptcy, wanted to participate in the auction. They didn’t want to bid cash, though; they wanted to use a credit bid based on the secured debt they were already owed by Avida.
On September 22, 2025, a bankruptcy judge made a significant ruling: BMO was permitted to bid in the auction using a credit bid up to the face value of its secured debt.
This caused immediate concern for other stakeholders. If BMO could buy the lawsuit against itself using its own debt, it could effectively end the litigation without ever having to write a cheque. The appellant in this case, David Reale, argued that BMO should be required to pay cold, hard cash like any other bidder.
The Conflict: Can a Secured Lender Bid Debt for a Lawsuit?
The core of the dispute is whether a credit bid can be used to acquire an asset that does not actually fall under the lender’s security agreement.
Think of it this way: if a bank has a mortgage on a building, it makes sense that they can credit-bid for that building. But does that bank also have the right to credit-bid for a legal claim that isn’t part of that mortgage?
The appellant argues that allowing a secured lender to do this “chills” the auction. Who would want to bid cash against a bank that can bid millions of dollars in “debt” that it already holds? This could prevent the Trustee from getting the best possible value for the estate’s creditors.
Secured Lender: Why the Court of Appeal is Stepping In
This isn’t just a minor disagreement over a single auction. On June 17, 2026, a judge of the Court of Appeal for Ontario granted leave to appeal the original judge’s decision. They noted that this is “a matter of importance… to bankruptcy proceedings more generally.”
As of June 29, 2026, Justice Zarnett issued a case management ruling (2026 ONCA 478) to set the stage for the full hearing. We now have a timeline for when these big questions will be answered:
July 15, 2026: Deadline for the appellant to perfect the appeal.
July 31, 2026: BMO’s opportunity to file its response.
August 19, 2026: Deadline for other interested parties to intervene.
This case will likely set a major precedent for how a secured lender interacts with receivership and bankruptcy estates in Ontario for years to come. We will keep an eye on this case and update you in a future Brandon’s Blog.
Secured Lender Comparison: Credit Bidding vs. Cash Bidding
To help you understand why this battle is so fierce, we have put together a comparison of the two bidding methods:
Feature
Credit Bidding
Cash Bidding
Payment Method
Offsetting the secured debt owed by the estate.
Liquid cash payment into the estate.
Liquidity for Estate
Low (does not provide cash for other creditors).
High (provides immediate cash to the trustee).
Primary Advantage
Protects the lender’s security value.
Maximizes cash recovery for unsecured creditors.
Legal Status
Common practice, but subject to court discretion.
Standard procedure for all bankruptcy auctions.
Controversy
Disputed when used to buy a lawsuit against the bidder.
Generally undisputed if the price is fair.
Secured Lender: What This Means for You and Your Business
Whether you are a business owner facing a corporate restructuring or a creditor trying to recover what you are owed, the Avida decision matters.
If the Court of Appeal rules that credit bidding is restricted to only the assets specifically listed in a security agreement, it gives Trustees more power to raise cash by selling the unsecured assets. This could lead to higher payouts for unsecured creditors.
On the other hand, if the court supports BMO’s position, a secured lender will have a powerful tool to protect itself from litigation costs during an insolvency administration, such as a receivership or bankruptcy proceeding. It essentially allows them to use all or a portion of the “value” of their unpaid debt to “buy” their way out of a lawsuit.
We know the tension put upon you when these legal battles occur. Our goal is to ensure you have the information you need to make practical decisions during a financial crisis.
Secured Lender Frequently Asked Questions (FAQ)
1. Can any creditor use a credit bid? Typically, only secured creditors can credit-bid. Unsecured creditors (those without a specific lien or charge on an asset) have to pay cash if they want to buy something from a receivership or bankruptcy estate. They have no credit to bid!
2. Why would a Trustee sell a lawsuit? Lawsuits are expensive and time-consuming. If a Trustee doesn’t have the funds to pay lawyers to fight a case, they might sell the cause of action to a third party who is willing to take the risk and pay cash upfront for the right to pursue it.
3. Is this decision final? No. As of late June 2026, the Ontario Court of Appeal has only set the schedule for the case. We will likely not have a final decision until late 2026 or early 2027.
4. What does “perfecting an appeal” mean? Perfecting an appeal is the technical process of filing all the necessary documents, transcripts, and legal arguments with the court so that the appeal is ready to be heard by the judges.
Secured Lender: The Path Forward
Navigating the world of bankruptcy and corporate insolvency is rarely straightforward. Cases like Avida 2015 Inc. remind us that the law is constantly evolving to find a balance between the rights of lenders and the need for a fair process for everyone.
At Ira Smith Trustee & Receiver Inc., we don’t just see numbers and legal files; we see people and businesses looking for a fresh start. We are committed to staying at the forefront of these legal developments so we can provide you with the best possible advice.
Starting Over, Starting Now
Don’t let financial uncertainty dictate your future. If you or your business is struggling with debt, losing sleep, or facing legal action, contact Ira Smith Trustee & Receiver Inc. today.
We offer a free, confidential consultation to discuss your situation, explain your options in plain language, and help you develop a clear, actionable plan. Our team of Licensed Insolvency Trustees is dedicated to providing the compassionate, professional support you need to regain control and achieve a debt-free life.
Take the first step towards a brighter financial future, call us now.
Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy. Ira and Brandon Smith are members of the Canadian Association of Insolvency and Restructuring Professionals.
Disclaimer: This analysis is for educational purposes only and is based on the cited sources and professional expertise as a Licensed Insolvency Trustee. The information provided does not constitute legal or financial advice for your specific circumstances. Every situation is unique; the outcomes discussed may not apply to your particular case. Please contact Ira Smith Trustee & Receiver Inc. to discuss your specific needs.
About the Author:
Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a Licensed Insolvency Trustee serving clients across Ontario. His experience includes consumer insolvency and complex court-ordered receivership and corporate bankruptcy administration, giving him practical insight into navigating challenging financial situations to achieve optimal outcomes for businesses, creditors, and professionals. Brandon stays current with landmark developments in Canadian insolvency law, ensuring his clients benefit from a cutting-edge understanding of their rights and options.
As Brandon Smith, Senior Vice-President of Ira Smith Trustee & Receiver Inc., I understand the stress and confusion that comes with financial difficulty and legal proceedings. My goal is to provide clear, actionable, and compassionate advice to help you navigate these challenging times. This Brandon’s Blog post will demystify the complex world of seeking leave to appeal a receivership order in Ontario, using a real-world example to highlight the critical steps and why early professional guidance is essential.
Leave To Appeal Key Takeaways
A receivership order means a third party takes control of a business’s assets, often leading to their sale. It’s a serious step, usually initiated by a creditor.
Courts consider strict legal tests, including whether there’s a serious question to be tried, if irreparable harm would occur, and the balance of convenience.
Strict deadlines apply, often as short as 10 days for insolvency-related appeals, making immediate action crucial.
Proactive measures, like Bankruptcy and Insolvency ActDivision I proposals or Companies’ Creditors Arrangement Act Plans of Arrangement, are often a better solution than waiting until receivership.
Seeking expert advice from a Licensed Insolvency Trustee (LIT) like Ira Smith Trustee & Receiver Inc.early can help you explore options and avoid the receivership process entirely.
Leave to Appeal Introduction: When Control Slips Away
Imagine building a business from the ground up, pouring your heart, time, and money into it. Then, suddenly, financial pressures mount, and a powerful creditor, normally the senior secured lender, steps in, asking a court to appoint a licensed insolvency trustee as the “receiver.” This receiver takes control, manages the company’s assets, and sells them off. The feeling of losing control can be devastating. It’s a moment when everything you’ve worked for feels like it’s slipping away.
This is the harsh reality of a receivership order. It’s a powerful legal tool for creditors in Ontario. Many business owners, understandably, want to fight back, to appeal the decision. But what does that really mean, and what are your chances of success?
We’ll dive into the complexities of appealing an Ontario receivership order, using the important case of Royal Bank of Canada v. 2339366 Ontario Inc., 2026 ONSC 327 as a guide. This case highlights just how tough it is to get “leave to appeal” a receivership order. More importantly, we’ll discuss how to avoid reaching this point, and why expert advice from Ira Smith Trustee & Receiver Inc. is your best defence. We believe that understanding your options before a crisis hits is the key to protecting your financial future.
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Understanding Receivership: What It Is and Why It Happens
A receivership is a legal process where a court appoints a neutral licensed insolvency trustee third party, called a receiver, to take control of a company’s assets or business operations. The receiver’s main job is to preserve the value of these assets and, usually, sell them to repay creditors. This is a serious step, often considered a last resort by a secured creditor seeking to recover their funds.
Why does it happen? Receiverships usually happen when a business is in severe financial trouble and can no longer pay its debts, especially to a secured creditor like a bank. This creditor will then ask the court to appoint a receiver to protect their interests. Common reasons include:
Defaulting on loans: The business fails to make agreed-upon payments on its bank loans or other secured debts.
Breaching loan agreements: Even if payments are being made, other terms of the loan agreement might be broken, such as not providing financial statements or selling key assets without permission.
Mismanagement or fraud: If there are concerns about how the business is being run, or if there’s suspected fraud, a court might appoint a receiver to ensure assets are protected.
Disputes among owners: Sometimes, conflicts between business partners or shareholders can threaten the company’s financial health, leading to a creditor seeking receivership.
Risk of asset loss: If there’s a risk that valuable assets might be wasted, sold off improperly, or disappear, a receiver can step in to secure them.
The impact on a business is immediate and severe. Once a receiver is appointed, the original owners lose all control over daily operations and decision-making. The receiver steps in to manage everything – from selling inventory and equipment, to collecting money owed to the business, to dealing with employees and suppliers. They make all decisions that affect the business and its assets. The goal is liquidation and repayment, not usually continued operation or rehabilitation.
It’s important to understand that only a Licensed Insolvency Trustee (LIT) can be appointed as a receiver. While a LIT is a Canadian insolvency professional experienced in all insolvency processes, including receivership, their primary role in other insolvency processes, like corporate financial restructuring or corporate bankruptcies, is different. In those cases, LITs focus more on helping debtors restructure or liquidate in an orderly, debtor-focused manner. Receivership, by contrast, is often a creditor-driven process, putting the secured creditor’s interests first, but not exclusively, without regard to the interests of all other stakeholders.
Royal Bank of Canada v. 2339366 Ontario Inc., 2026 ONSC 327 Case: A Closer Look At Leave To Appeal
This Ontario Superior Court of Justice decision, released January 16, 2026, Royal Bank of Canada v. 2339366 Ontario Inc., is a clear example of the challenges involved in trying to stall or overturn a receivership order. It demonstrates the high legal hurdle faced by debtors seeking to appeal such a decision.
What Happened in the Case? In this specific case, Royal Bank of Canada (RBC) had successfully obtained a receivership order against 2339366 Ontario Inc. and other related parties. The statutes relied upon to gain the appointment were the Ontario Courts of Justice Act and the Bankruptcy and Insolvency Act. This meant the court had agreed with RBC that a receiver was needed to take control of the assets of the debtor company and its related parties. The debtor, understandably wanting to retain control, challenged this decision by seeking “leave to appeal” that receivership order. They were asking for permission from the Court of Appeal for Ontario to challenge the original decision that put their business into receivership.
What is “Leave to Appeal”? In many legal matters, especially those involving the Bankruptcy and Insolvency Act (BIA), including the appointment of court-appointed receivers, you don’t have an automatic right to appeal a court’s decision. This is a critical distinction. Instead, you must first ask a judge of the Court of Appeal for Ontario for leave to appeal, which means asking for permission to bring the appeal forward. It’s a vital first hurdle, a gate that must be passed before the actual appeal can even be heard. The court looks at whether there’s enough merit or public importance to justify the time and resources of a higher Ontario Court of Appeal.
The Legal Threshold: Criteria for Granting Leave to Appeal
To get leave to appeal, the court typically looks at several strict factors. In insolvency cases, and specifically when trying to appeal a receivership order, these often include:
Is there a serious question to be tried? This isn’t just about disagreeing with the decision. It means, is there a real, important legal issue that needs to be addressed by a higher court, not just a minor disagreement about facts or a desire to re-argue the case? The potential appellant must show that their appeal has “arguable merit” and a reasonable chance of success.
Will the applicant suffer irreparable harm if the leave is refused? Would they face damage that cannot be fixed later, even if they were to eventually win the appeal? For example, if assets are being sold off by a receiver, the “harm” of losing those assets is often already happening, making it hard to argue future irreparable harm.
Does the balance of convenience favour granting the leave? The court weighs who would be more negatively affected by granting or refusing the leave – the party wanting to appeal (the debtor), or the other parties (like the creditors and the Canadian insolvency professional receiver who is working to recover funds)? In receivership, delaying the receiver’s work can cause more harm to creditors, who are trying to recover their money and mitigate further losses.
Is there an error in principle? Receivership orders are often considered “discretionary.” This means the original judge had some choice in making the order, based on the specific facts and legal principles. To successfully appeal a discretionary order, you usually need to show that the judge made a mistake in applying a legal principle, rather than just disagreeing with how they used their discretion.
In the RBC case, the debtors argued that since appealing an insolvency order invokes the stay of proceedings, applying for leave to appeal the receivership order must also stay the actions and activities of the receiver. They further argued that therefore, they did not have to cooperate with the receiver, including delivering the books and records and the assets of the company.
The court determined that the debtor’s and the other moving parties’ argument was without merit. The court said that seeking leave to appeal is not the same as an active appeal and did not impose an automatic stay. This meant their attempt to challenge the validity of the receivership order was stopped before it could even begin. The original decision to appoint a receiver under Canadian insolvency law stood at that time. This case highlights how robust the initial evidence for a receivership must be, and why it is in force until a higher court says it was stayed or is no longer valid.
leave to appeal
Navigating An Appeal: What “Leave to Appeal” Really Means in Ontario
The RBC v. 2339366 Ontario Inc., 2026 ONSC 327 case underscores a crucial point for anyone facing such a situation: simply disagreeing with a receivership order is not enough to have it stayed (or get an appeal heard). The bar for getting leave to appeal in Ontario, especially for insolvency matters under the Bankruptcy and Insolvency Act (BIA), is very high. It’s designed to prevent endless litigation and allow the insolvency process to move forward efficiently.
Why is it so difficult to obtain leave to appeal an Ontario receivership order?
It’s difficult because courts want to ensure that appeals don’t unduly delay the administration of an insolvent estate, which can cause further losses for creditors. The legal system aims for finality and efficiency in insolvency proceedings. For a receivership order, this means letting the receiver do their job of securing and selling assets as quickly and effectively as possible.
The Strict Legal Tests Courts Apply:
When deciding whether to grant leave to appeal, courts apply several strict legal tests. These are not easy to meet:
Arguable Merit (Serious Question to be Tried):
You must show that your proposed appeal is not frivolous or simply a delay tactic. It must raise a genuine insolvency law legal issue that has a reasonable chance of success if fully argued.
This often means identifying a clear error of insolvency law or otherwise by the original judge, a misinterpretation of a statute, or a significant factual error that led to an incorrect legal conclusion. It’s not enough to say the judge “got it wrong”; you need to show how they got it wrong according to legal principles.
For example, you might argue that the original judge did not properly apply the specific conditions required under insolvency law for a receivership under the BIA, or that there was insufficient evidence to prove the debt existed.
Irreparable Harm:
You need to convince the court that if the appeal isn’t allowed to proceed, you will suffer harm that cannot be fixed later, even if you eventually win the appeal.
This is incredibly challenging in a receivership case because the core “harm” – losing control of your assets and having them sold – is usually already in motion by the receiver. Once assets are sold, reversing that is often impossible. The court will question whether the harm is truly “irreparable” if it could be compensated with money if you were to win the appeal. In many cases, the harm is financial, and the court may see that as reparable by damages, even if that’s a difficult outcome for the debtor.
Balance of Convenience:
The court weighs the potential negative impact on you if leave to appeal is denied against the potential negative impact on the other parties (primarily the creditors and the receiver) if leave is granted.
In insolvency law, courts often prioritize the interests of creditors and the efficient administration of the estate. Delaying a receivership through an appeal can increase costs, devalue assets, and frustrate creditors’ efforts to recover their money.
The court asks: Who will suffer more if the process is stalled? Often, the creditors’ need for timely recovery outweighs the debtor’s desire to appeal a decision already made.
Public Importance (Less Common for Individual Cases):
Sometimes, the court will consider whether the case raises a novel or important question of law that has significance beyond the parties involved. This is less common for typical receivership orders, which usually hinge on the specific facts of a debt.
Unless your case sets a new legal precedent or clarifies a significant area of insolvency law, this factor is unlikely to swing the decision in your favour.
Tight Deadlines: An Unforgiving Reality One of the most unforgiving aspects of insolvency appeals, especially those related to receivership orders, is the strict timeline. Under the Bankruptcy and Insolvency Act (BIA) Rules, you often have only 10 days from the date of the order to file your notice of appeal or your application for leave to appeal. Missing this deadline can be fatal to your appeal, regardless of how strong your arguments might otherwise be. The courts are very reluctant to extend these short deadlines in insolvency matters, especially if the appeal lacks general importance in insolvency law, as noted by legal experts.
This highlights why time is truly of the essence and why professional guidance is not just helpful, but essential from the very first sign of financial trouble. Delaying action to address debt issues can close doors to crucial legal avenues, making a difficult situation even harder to resolve.
The Proactive Path: Alternatives to Receivership for Businesses and Individuals
The challenging reality of appealing a receivership order emphasizes one critical truth: prevention is far better than reaction. Waiting until a creditor has obtained a receivership order, and then trying to appeal it is often too late to truly save your business or regain control of your assets. By that point, the legal and financial damage is usually significant.
Instead, businesses and individuals facing financial distress should explore proactive restructuring options. This is where the expertise of a Licensed Insolvency Trustee (LIT) like the Ira Smith Team becomes invaluable. We can help you understand and navigate solutions designed to avoid the drastic measures of receivership or bankruptcy. We offer guidance that allows you to take control before others step in.
Key Alternatives to Avoid Receivership:
Consumer Proposals: A Lifeline for Individuals and Small Proprietorships
What it is: A Consumer Proposal is a formal, legally binding offer that an individual (or a small business owner with personal guarantees) makes to their unsecured creditors. You propose to pay back a portion of what you owe, over a period of up to five years, without interest. It’s a structured debt settlement overseen by a Licensed Insolvency Trustee.
How it helps:
Stops collection calls and legal actions: Once filed, a “stay of proceedings” comes into effect. This means creditors cannot call you, garnish your wages, or pursue other legal actions.
Reduces debt: You often end up paying back only a fraction of your original unsecured debt.
No interest: All interest charges are frozen once the proposal is filed.
You keep your assets: Unlike receivership or bankruptcy, you generally keep all your assets, including your home, car, and business property.
Avoids bankruptcy: It’s a powerful alternative to personal bankruptcy, allowing you to settle your debts while protecting your credit rating more quickly than bankruptcy.
Who it’s for: Individuals with debts of up to $250,000 (not counting a mortgage on a principal residence). It’s an excellent option for consumers and small business owners whose personal guarantees are a significant burden.
Division I Proposals: Restructuring for Larger Consumer Debts and Corporations
What it is: Similar to a Consumer Proposal but designed for larger debts, corporations, or individuals with debts over $250,000 (excluding a mortgage on a principal residence). A Division I Proposal allows a company (or a high-debt individual) to propose a restructuring plan to all of its creditors (generally only those who are unsecured). This plan is administered by the LIT, who acts as the Proposal Trustee.
How it helps:
Business continuity: If accepted, the business can often continue operating, avoid bankruptcy, and repay its debts under new, manageable terms. This is a crucial difference from receivership, which usually means the end of the business.
Stops creditor actions: Like a Consumer Proposal, it imposes a “stay of proceedings,” stopping all legal actions, including potential receivership requests, from creditors.
Comprehensive restructuring: It can be tailored to address various types of debt and allow for more complex negotiations with creditors, including secured creditors.
Preserves value: It allows for the orderly winding down or sale of parts of a business, or the full rehabilitation of a viable business, often preserving more value than a receivership.
Who it’s for: Corporations struggling with significant debt, or individuals whose unsecured debt exceeds the Consumer Proposal limit. It’s a powerful tool for business rescue.
Understanding Bankruptcy: When It’s the Right Option
What it is: While often seen as a last resort, bankruptcy is a formal legal process that can provide a fresh financial start by clearing most unsecured debts. For businesses, it involves the orderly liquidation of assets to pay creditors. An LIT oversees this process, ensuring all legal requirements are met. It is governed by federal law, specifically the Bankruptcy and Insolvency Act.
How it helps:
Debt discharge: For individuals, it legally eliminates most unsecured debts, offering a true fresh start. Corporate bankruptcy does not give the company a fresh start.
Stops creditor action: Immediately stops all collection calls, lawsuits, and wage garnishments.
Orderly asset liquidation: For businesses, it provides a structured way to close down, sell assets, and distribute funds to creditors fairly, rather than a chaotic dismantling.
No more interest: All interest on unsecured debts stops.
Who it’s for: Individuals or corporations who cannot meet their financial obligations, and for whom a proposal is not feasible or desirable. It’s a powerful tool when other options are exhausted, and a complete reset (consumer) or shut down (corporate) is needed.
These alternatives empower you to take control of your financial situation, often preserving assets, stopping legal actions, and offering a clear path forward. This is incredibly difficult to achieve once a receivership order has been imposed by the court and a receiver is already at work. By speaking with a Licensed Insolvency Trustee early, you gain the knowledge and support to make informed decisions that protect your future. Ira Smith Trustee & Receiver Inc. is here to help you explore these options with dignity and professionalism.
leave to appeal
The Real-World Impact: What This Means for You
The lessons from cases like Royal Bank of Canada v. 2339366 Ontario Inc., 2026 ONSC 327 are clear and profound. They highlight the significant consequences of delaying action when facing financial distress.
For Business Owners: If your business is struggling, waiting until a secured creditor initiates receivership proceedings means:
You have not recognized the danger signals early enough.
Therefore, you did not have the time where you could have taken remedial action.
Your options are severely limited.
Once a receiver is appointed, you lose control of your operations, your assets, and often your entire business. This can lead to a complete loss of the value you’ve built, damage to your reputation, and immense personal stress. Proactive engagement with a Licensed Insolvency Trustee can open doors to solutions that keep you in control and your business viable, or at least allow for an orderly wind-down on your terms, not a creditor’s.
For Individuals with Personal Guarantees: Many small and medium-sized business debts, especially to a secured lender, are backed by personal guarantees from the owner. Further, corporate directors are liable for unpaid salary, wages and vacation pay, unremitted source deductions and unremitted HST.
If your company goes into receivership, those personal guarantees don’t disappear. They can lead to personal financial ruin, putting your home, savings, and future at risk. Understanding options like consumer proposals for your personal debts, or a Division I Proposal for you or your business, is crucial to protect your personal finances.
For Creditors: While receivership is a powerful tool to recover debt, it can be costly and time-consuming. The receiver’s fees and legal costs can eat into the recovered funds, sometimes leaving less for creditors than expected. Understanding the alternatives and how a debtor might proactively offer a proposal can sometimes lead to a quicker, more efficient recovery of funds and a less adversarial process.
The stress and emotional toll of financial uncertainty cannot be overstated. I’ve witnessed it countless times. Knowing your options and having a clear plan of action provides not just practical solutions but also immense peace of mind. Taking early action with expert guidance can transform a seemingly hopeless situation into a manageable path forward.
Comparison Table: Receivership vs. Proposal vs. Bankruptcy
Understanding the differences between these insolvency processes is key to making an informed decision. Here’s a quick comparison:
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Leave To Appeal FAQ Section
Q1: What does “leave to appeal an Ontario receivership order” mean, and why is it so difficult to obtain?
A: “Leave to appeal” means you must ask the court for permission to bring an appeal; it’s not an automatic right. It’s difficult to obtain because courts want to prevent delays in insolvency proceedings and require you to meet strict criteria. You must show there’s a serious legal question, that you’d suffer irreparable harm, and that the balance of convenience favours hearing the appeal.
Q2: What are the specific legal tests courts apply when deciding whether to grant leave to appeal a receivership order in Ontario?
A: Courts typically apply a three-part test: (1) Is there a serious question to be tried (meaning your appeal has arguable merit)? (2) Will you suffer irreparable harm if leave is refused? (3) Does the balance of convenience favour granting leave? For a discretionary order like receivership, you often also need to show an error in legal principle by the original judge.
Q3: How is a receivership different from bankruptcy?
A: A receivership is usually initiated by a secured creditor to seize and sell specific assets to recover a debt; the business owner loses control. Bankruptcy, on the other hand, is a broader insolvency process. For individuals, it aims to discharge most debts and provide a fresh start. For corporations, it involves the liquidation of all assets to pay creditors, in priority, leading to the company’s cessation. A Licensed Insolvency Trustee (LIT) administers both personal and corporate bankruptcies.
Q4: What should I do if my business is facing financial trouble?
A: Act immediately. The most crucial step is to seek professional advice from a Licensed Insolvency Trustee (LIT) as early as possible. An LIT can assess your situation, explain all your options (like consumer proposals or Division I proposals), and help you develop a strategy to avoid receivership or bankruptcy.
Q5: How can Ira Smith Trustee & Receiver Inc. help me?
A: The Ira Smith Team specializes in helping individuals and businesses facing financial distress in Ontario. We are Licensed Insolvency Trustees, which means we are licensed by the federal government to administer all insolvency processes. We offer a free, confidential consultation to evaluate your specific situation, explain all your options in plain language, and guide you toward the best solution to gain control of your financial future. We focus on providing clear, actionable, and empathetic advice.
Brandon’s Take On Leave To Appeal
As a Senior Vice-President at Ira Smith Trustee & Receiver Inc., I’ve seen firsthand the stress and heartache that financial problems can cause. The Royal Bank of Canada v. 2339366 Ontario Inc., 2026 ONSC 327 case is a stark reminder that once a receivership order is in place, your options become severely limited. Trying to get leave to appeal is often a long, costly, and very difficult battle with a low chance of success. It’s a fight most people can and should avoid.
My experience tells me that most companies that end up in receivership could have found a better, less disruptive solution if they had sought help sooner. The emotional toll of waiting, hoping the problem will just go away, is immense. But financial problems rarely resolve themselves; they usually get worse, piling on more stress, more debt, and fewer options.
That’s why I strongly advocate for proactive measures. Don’t wait until a creditor is at your door, or a receiver is being appointed. Explore alternatives like consumer proposals or Division I proposals. These options allow you to take charge, protect your assets where possible, and restructure your debts in a way that provides real relief. We are here to listen without judgment and guide you through every step of that journey. Our goal is to empower you to make informed decisions and find the best path to financial recovery.
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Leave To Appeal Conclusion: Don’t Face Financial Challenges Alone – Take Control Today
The legal landscape surrounding receivership orders and appeals in Ontario is complex and unforgiving. The lessons from cases like Royal Bank of Canada v. 2339366 Ontario Inc., 2026 ONSC 327 clearly demonstrate that appealing a receivership order is an uphill battle, fraught with strict legal tests and tight deadlines. By the time you’re considering an appeal, a significant amount of control and potential value has likely already been lost.
Your best strategy against financial distress is not to fight a receivership order after it’s been granted, but to prevent it from happening in the first place. Early intervention, comprehensive understanding of your options, and expert guidance are your most powerful tools. With the right information and professional support, you can explore viable alternatives that allow you to regain control, manage your debts, and secure a more stable financial future.
Don’t let financial uncertainty dictate your future. If you or your business is struggling with debt, losing sleep, or facing the possibility of legal action, contact Ira Smith Trustee & Receiver Inc. today. We offer a free, confidential consultation to discuss your situation, explain your options in plain language, and help you develop a clear, actionable plan. Our team of Licensed Insolvency Trustees is dedicated to providing the compassionate, professional support you need to regain control and achieve a debt-free life. Take the first step towards a brighter financial future – call us now.
Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy and is a member of the Canadian Association of Insolvency and Restructuring Professionals.
Phone: 905.738.4167
Toronto line: 647.799.3312
Website: https://irasmithinc.com/
Email: brandon@irasmithinc.com
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Disclaimer:This analysis is for educational purposes only and is based on the cited sources and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances.
Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Situations are fact-specific and depend on the particular circumstances of each case.
Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court-ordered receivership administration and corporate insolvency & restructuring proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes.
Brandon stays current with landmark developments in Canadian insolvency law. He brings this cutting-edge knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.
In October 2025, the Court of Appeal for Ontario delivered a landmark decision that fundamentally changes how a court ordered receivership sale works in Ontario. As further discussed below, this is not unique to Ontario. The case answered a critical question that haunts receivers, creditors, and buyers:
Can a judge reject a perfectly executed receivership sale simply because someone offers substantially more money at the last minute?
The answer, according to Ontario’s highest court, is a resounding yes. Section 243 of the Bankruptcy and Insolvency Act provides the authority in Canada for the court to appoint a receiver. Once the court is involved, it is the judge who ultimately drives the process through its court officer, the court-appointed receiver.
In Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc., 2025 ONCA 732(CanLII), the court ruled that even when a receiver runs a flawless eight-month sales process, the judge can—and should—reopen bidding if a late offer is substantially higher. In this case, that threshold was 37% more than the accepted bid, representing approximately $3.5 million in additional recovery for creditors.
This isn’t an isolated decision. Courts across Canada, particularly in British Columbia, have been moving in this same direction for years. Together, these cases signal a new era in Canadian insolvency law: maximizing creditor recovery now trumps process certainty.
If you’re involved in a —as a creditor, business owner, receiver, potential buyer or legal counsel for any of these parties—understanding this shift could mean the difference between losing millions and capturing every available dollar.
Court Ordered Receivership Sale: Why This Case Matters to You Right Now
Before we dive into the legal details, here’s why the Cameron Stephens decision demands your immediate attention:
If You’re a Creditor:
Courts will now aggressively intervene to protect your right to maximum recovery
Even “late” competing offers will be considered if they’re substantially higher
The 37% threshold provides clear guidance about when judges will reopen bidding
If You’re a Business Owner Facing Receivership:
Higher asset values mean less shortfall and reduced personal liability
The process isn’t over until the judge signs the approval order
You may have opportunities to challenge sales that seem too low
If You’re Buying Assets in Receivership:
Your accepted offer isn’t final until court approval
Courts may reopen competitive bidding even at the approval hearing
You need to bid your true maximum value from the start
If You’re a Receiver or Insolvency Professional:
Running a perfect process no longer insulates you from judicial intervention
Price gaps of 30%+ will trigger intense scrutiny
Courts expect aggressive value maximization strategies
The Cameron Stephens Court Ordered Receivership Case: A Deep Dive into Ontario’s Landmark Decision
The Background: A Textbook Receivership Process
The facts of Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc. began routinely enough. A Toronto property was subject to a court-appointed receivership, secured by a $15,600,000 mortgage held by Cameron Stephens Mortgage Capital Ltd.
The receiver did everything by the book:
Eight-Month Professional Marketing Campaign:
Comprehensive marketing materials prepared and distributed
Property is widely advertised to qualified buyers
Multiple showings conducted
Professional broker engaged
Extensive outreach to potential purchasers
Serious Negotiations:
Multiple offers received and evaluated
Good faith negotiations with qualified buyers
Financial due diligence conducted
Terms and conditions carefully reviewed
Agreement Reached:
The receiver negotiated an Agreement of Purchase and Sale (APS) with Arjun Anand
The only condition: court approval
Price and terms deemed fair and reasonable by the receiver
All standard protections included
The receiver brought this agreement to the Ontario Superior Court of Justice for approval, expecting a routine hearing. The receiver’s conduct throughout the entire process was later described by the motion judge as “unassailable”—meaning it was beyond criticism, flawless, and professionally executed at every stage.
Everything appeared ready for the judge to simply approve the sale and allow it to close.
The Bombshell: Three Escalating Late Offers
Then, just before the scheduled court approval hearing, something dramatic happened.
A company called 100 Inc.—which was actually a subsidiary of the property owner—submitted not one, but eventually three competing offers:
First Late Offer: 6.7% higher than Anand’s accepted price Second Late Offer: 14.2% higher than Anand’s accepted price Third Late Offer (after adjournment):37% higher than Anand’s accepted price
That final 37% differential represented approximately $3.5 million in additional value that would flow to creditors if the higher offer was accepted instead of Anand’s deal.
The motion judge faced an agonizing dilemma that strikes at the heart of every court ordered receivership sale:
Option 1: Approve the Original Deal (Protect Process Integrity)
Arguments in favour:
The receiver ran a perfect eight-month process
Anand negotiated in good faith and had an accepted agreement
Accepting late bids undermines the integrity of receivership processes
Future buyers won’t participate seriously if deals can be overturned
The late offer appears genuine, not a manipulative tactic
The Motion Judge’s Controversial Decision
After considering extensive submissions from all parties, the motion judge made a bold choice that shocked many that day.
Even though he explicitly found:
The receiver’s conduct was “unassailable”
The sales process was “without flaws”
The receiver had acted properly at every stage
The judge refused to approve Anand’s deal.
His reasoning was straightforward:
The 37% price difference was so substantial that it qualified as “substantially higher.” Approving the lower offer in the face of such a large differential would risk being improvident—meaning unwise and harmful to creditors.
The judge couldn’t ignore $3.5 million that could flow to creditors simply to protect a process that, while perfect, had inadvertently missed the property’s true market value.
The Judge’s Creative Solution:
Rather than simply rejecting Anand’s deal and accepting the 100 Inc. offer (which would be grossly unfair to Anand), the motion judge crafted a balanced remedy:
Six-Day Bidding Extension: Reopened the bidding process for six additional days
All Prior Bidders Invited: Both Anand and 100 Inc. could submit new, higher bids
Level Playing Field: Both parties had equal information and opportunity
Cost Protection for Anand: If Anand wasn’t the successful bidder, the property owner would reimburse his reasonable legal costs incurred to date.
This solution aimed to:
Maximize value for creditors (the paramount goal)
Treat both bidders fairly (maintaining process integrity)
Compensate Anand for his good faith participation (preventing unfairness)
Critical Insight: This decision shows that even perfect receivership processes can be disrupted when significantly higher offers emerge. Process integrity, while important, takes a back seat to maximizing creditor recovery when millions are at stake. The judge essentially turned Anand’s APS into a stalking horse bid.
Court ordered receivership sale
Court Ordered Receivership Sale: The Appeal Tested the Limits of Judicial Discretion
Understandably, Arjun Anand was unhappy with this outcome. He had negotiated in good faith, secured an accepted agreement, and now faced having to re-bid against a competitor in a court-ordered auction.
He appealed to the Ontario Court of Appeal, raising important legal arguments that would determine how a court ordered receivership sale would function going forward.
Anand’s Main Arguments on Appeal
1. The Soundair Test Was Misapplied
Anand argued that the motion judge incorrectly interpreted the famous Soundair case. According to Anand, Soundair requires a court to find both:
A significantly higher price, AND
A compromised process integrity
He contended that because the receiver’s process was flawless (unassailable), the judge had no authority to reject the sale, regardless of the price differential.
2. Judicial Discretion Has Limits
Anand argued that allowing judges to reopen bidding whenever a higher offer appears—even after a proper process—would:
Create chaos in the commercial marketplace
Discourage serious buyers from participating
Turn every receivership sale into an unwanted courtroom auction
Undermine the authority and expertise of professional receivers
3. Good Faith Parties Must Be Protected
Anand emphasized that he negotiated in good faith with the receiver, spent considerable time and legal fees on due diligence, and reached an agreement. The Soundair case emphasizes protecting bona fide purchasers. Rejecting his deal, he argued, violated this fundamental principle.
The Court of Appeal for Ontario Groundbreaking Ruling
In the October 27, 2025, appellate court decision, the court dismissed Anand’s appeal and upheld the motion judge’s decision to reopen bidding.
The court’s reasons are crucially important for understanding how a court ordered receivership sale will work going forward:
Key Finding #1: The 37% Price Gap Alone Was Sufficient
The court ruled that the motion judge was correct to focus heavily on the magnitude of the price differential.
The court held:
A 37% higher offer (approximately $3.5 million more) was “substantially higher” and alone created a serious risk that approving the lower offer would be improvident.
Improvidence means approving a sale that is unwise and fails to adequately protect creditors’ interests. When the price gap is this large, it suggests the original offer doesn’t reflect true market value, even if the process was perfect.
The court emphasized: The receiver’s job is to obtain the highest price possible for creditors. When a substantially higher offer emerges—even late—the court must take it seriously to fulfill this mandate.
Practical Implication: The 37% threshold now provides concrete guidance. If you’re involved in a receivership and a late offer exceeds the accepted bid by 30%+, expect the court to seriously consider reopening the process.
Key Finding #2: Soundair Factors Are Flexible, Not Rigid
The Ontario Court of Appeal explicitly rejected Anand’s argument that courts must find both a significantly higher price and compromised process integrity to justify intervention.
The court stated:
The four Soundair factors are flexible and case-specific. They’re not a checklist where all boxes must be ticked. Courts must weigh all circumstances and exercise discretion based on the particular facts.
No single factor is determinative. Different cases will emphasize different factors depending on circumstances.
What this means:
A flawed process with a moderate price gap might justify rejection
A perfect process with a massive price gap might also justify rejection
Courts evaluate the totality of circumstances
Judicial discretion is broad and entitled to deference
For Receivers: You can’t rely on process perfection alone to guarantee approval. You must also be prepared to justify why your recommended price represents maximum market value.
Key Finding #3: Maximizing Recovery Is Paramount
The three-judge panel reaffirmed what has become increasingly clear across Canadian courts: the paramount objective of any court ordered receivership sale is to maximize recovery for creditors.
The court emphasized that the BIA exists primarily to:
Preserve and liquidate assets efficiently
Ensure liquidation results in maximum return
Benefit creditors who are owed money
When the goal of maximum recovery conflicts with other considerations (like protecting a negotiated agreement), maximum recovery takes priority if the circumstances warrant it.
The court noted that while protecting good faith purchasers is important, it cannot override the fundamental duty to creditors when the price differential is substantial.
For Creditors: This ruling provides powerful protection for your interests. Courts will actively intervene to prevent you from receiving less than maximum value.
Key Finding #4: Deference to the Motion Judge’s Discretion
Finally, the Court of Appeal for Ontario emphasized that the motion judge’s decision was discretionary and therefore entitled to substantial deference on appeal.
Appellate courts don’t second-guess discretionary decisions unless the judge made a clear error in law or reached an unreasonable conclusion.
Here, the appellate court found:
The motion judge properly considered all relevant factors
He balanced competing interests appropriately
His exercise of discretion was reasonable, given the 37% price gap
The creative solution (reopening bidding with cost protection) was a proper exercise of judicial authority
The bottom line: Judges have broad authority to craft creative solutions in a court ordered receivership sale when necessary to maximize creditor recovery.
Court Ordered Receivership Sale: What the Cameron Stephens Decision Means in Practice
The 37% Threshold: New Guidance for All Parties
Cameron Stephens establishes that a 37% price differential is substantial enough to justify judicial intervention, even when the receiver’s process is beyond criticism.
For a property whose value justified a mortgage loan of millions of dollars, the 37% difference is not a trivial amount. For many creditors, this additional recovery represents:
The difference between a substantial or full recovery and a significant shortfall
Avoiding deficiency claims against personal guarantors
Business survival versus bankruptcy
Personal financial security versus personal insolvency
Open Question: While 37% clearly justifies intervention, what about lower differentials?
Would 30% be enough? Probably.
Would 20% be enough? Maybe, depending on other factors.
Would 10% be enough? Perhaps, depending on all the circumstances of the particular case.
The Cameron Stephens decision doesn’t establish a bright-line rule, but it provides important guidance about the magnitude of price differential that triggers judicial scrutiny.
Process Perfection Is No Longer Sufficient Protection
For decades, receivers believed that if they ran a thorough, professional process following all best practices, courts would defer to their recommendations and approve their chosen deals.
Cameron Stephens fundamentally changes this assumption.
What This Means for Receivers:
Even when you:
Obtain a professional appraisal
Market extensively for many months
Engage professional brokers
Conduct comprehensive outreach
Receive and evaluate multiple offers
Negotiate terms professionally
Document everything meticulously
You can still face court intervention if:
A substantially higher offer emerges (30%+ above your accepted bid)
The court questions whether your accepted offer reflects true market value
The judge believes creditors would be better served by reopening competition
New Best Practices:
Obtain professional appraisals for significant assets to support your pricing
Document market testing thoroughly to demonstrate that the accepted offer reflects market reality
Consider stalking horse structures with break fees to encourage early, strong bids
Build flexibility into timelines to accommodate potential competing offers
Prepare for potential bidding reopening by having contingency procedures ready
At Ira Smith Trustee & Receiver Inc., we’ve administered receivership processes where both a late higher offer emerges or when there is opposition to a recommended sale but there was no competing offer. We always anticipate potential challenges and build in protections from the start.
Buyers Should Bid Their True Maximum Early
Cameron Stephens sends a clear message to potential purchasers in a court ordered receivership sale: don’t lowball and expect to have the last word.
The New Reality for Buyers:
Your accepted agreement with the receiver is not final until:
The court approval hearing occurs
No substantially higher offers emerge
The judge signs the approval order
What You Should Do:
Bid aggressively from the start,, realizing the maximum you are prepared to pay
Don’t negotiate down, expecting no competition
Budget for legal costs that might not be recoverable
Be prepared to re-bid if the court reopens the process
Understand timing risk because approval isn’t guaranteed
The Good News: If you submit a strong initial offer and someone submits a late, higher bid, you’ll have the opportunity to increase your bid through a reopened process. The highest bidder ultimately wins.
The Risk: If you lowball initially and someone else is prepared to offer closer to the property’s true value, you may end up losing the deal entirely or paying more than you would have if you’d bid fairly from the start.
Creditors Have Powerful New Tools
If you’re a creditor in a court ordered receivership sale, Cameron Stephens is excellent news.
Your New Rights:
Courts will actively protect your right to maximum recovery
You can challenge sales that appear improvident
Late offers that are substantially higher (30%+) will be seriously considered
Judges will use creative solutions to capture additional value
What You Should Do:
Monitor the receivership process closely from the beginning
Review the receiver’s reports and ask questions about pricing
Conduct your own market research to assess whether proposed prices seem reasonable
If you become aware of potentially higher offers, bring this to the receiver’s and court’s attention
Attend court hearings to voice concerns about inadequate pricing
Consider retaining your own advisor if significant money is at stake
Court ordered receivership sale
This Is Not an Isolated Case: B.C. Supreme Courts Have Been Leading the Way in Court Ordered Receivership Sale Process
The Cameron Stephens decision might seem revolutionary, but it’s actually part of a broader trend across Canadian courts. The British Columbia Court of Appeal has been issuing similar rulings for several years, establishing that courts will use creative interventions to maximize creditor recovery in court ordered receivership sales.
Ontario’s highest court has now aligned with this approach, confirming that this is the new Canadian standard, not a regional anomaly.
The BC Trend: Three Landmark Cases
Case #1: The Versante Hotel Live Courtroom Auction (2025)
What Happened:
I would like to express thanks to Eamonn Watson of Dentons Canada LLP in Vancouver, who provided us with information regarding the currently unreported Court ordered receivership sale in the Versante Hotel case.
In International Trade Center Properties Ltd. (the Versante Hotel case), a Richmond, BC receiver had negotiated a $48 million sale of a luxury hotel with Citation Properties. At the court approval hearing, a competing party (Silverport Properties) appeared with a sealed bid higher than $48 million.
The BC Supreme Court judge faced the same dilemma as the Cameron Stephens judge: approve the negotiated deal or pursue the higher offer?
The Court’s Creative Solution:
Justice Fitzpatrick ordered an unprecedented live auction in the courtroom the following day. Both Citation (the original buyer) and Silverport would compete on equal footing with transparent bidding.
The Result:
The bidding was “lively,” going back and forth multiple times. Citation ultimately won but had increased its offer to $51.5 million—a $3.5 million gain for creditors achieved in mere minutes.
Key Parallels to Cameron Stephens:
Both involved late competing offers
Both courts prioritized maximizing recovery over protecting negotiated deals
Both judges created creative solutions (live auction vs. reopened bidding)
Both resulted in approximately $3.5 million in additional creditor recovery
Both show courts will intervene dramatically when a substantially higher value is available
The Lesson: When immediate opportunities to capture significantly more value arise, courts have the power and willingness to create extraordinary processes to realize that value quickly and transparently.
Case #2: QRD (Willoughby) Holdings – When Process Flaws and Price Gaps Combine (2024)
However, a competing proposal from Foundation Residence Society offered $64 million—a staggering $29 million difference, though with significant conditions and a longer closing timeline.
The Court’s Findings:
The BC Court of Appeal found the chambers judge erred by:
Insufficient weight to the massive price gap: The $29 million differential suggested the receiver hadn’t adequately tested the market
No professional appraisal: The absence of a valuation undermined confidence that $35 million represented the best value
Markedly short marketing period: Less than 2.5 months was inadequate for a major development property
The Result:
While the Court of Appeal criticized the process and found it flawed, they still dismissed the appeal because by the time of the appeal, the higher bidder still hadn’t firmed up their conditional offer. Continuing delays would have cost even more in mounting debt.
Key Parallels to Cameron Stephens:
Price gap signals improvidence: Both courts held that large price differentials (37% in Cameron Stephens, 83% in Willoughby) raise serious concerns about whether the accepted offer represents market value
Court scrutiny is intense: Even though Willoughby involved process flaws while Cameron Stephens didn’t, both cases show that courts will heavily scrutinize pricing when competing offers differ substantially
Timing matters: Both cases emphasize the tension between capturing higher value and managing time/cost pressures
The Key Difference:
Cameron Stephens shows that process perfection doesn’t insulate you from intervention when the price gap is substantial. Willoughby shows that process deficiencies combined with price gaps will definitely attract court criticism.
The Lesson: Whether your process is perfect or flawed, substantial price gaps will trigger judicial intervention to prevent improvident sales that shortchange creditors.
Case #3: Peakhill Capital – Creative Structures to Maximize Recovery (2024)
What Happened:
In British Columbia v. Peakhill Capital Inc., 2024 BCCA 246 (CanLII) (Peakhill)the , a receiver was selling valuable real property in a court ordered receivership sale. Rather than a traditional sale, the receiver structured the transaction using a Reverse Vesting Order (RVO).
An RVO is a complex legal structure that:
Moves unwanted liabilities out of the debtor company
Leaves the core assets in place
Sells the company’s shares instead of transferring the land title
The Purpose:
This complicated structure had one clear goal: to avoid approximately $3.5 million in BC property transfer tax (PTT), thereby maximizing the net recovery for creditors.
The Province of BC challenged this, arguing courts don’t have jurisdiction to approve structures designed solely to avoid tax.
The Court’s Decision:
The BC Court of Appeal upheld the RVO, ruling that:
The of gives courts broad authority to approve creative solutions
Structuring commercial transactions to avoid unnecessary taxes is legitimate outside of insolvency
Therefore, using an RVO to achieve this in receivership is appropriate
Maximizing creditor recovery is a proper purpose under the BIA
Saving $3.5 million in tax means $3.5 million more for creditors
Key Parallels to Cameron Stephens:
Maximizing recovery is paramount: Both courts emphasized that the primary purpose of receivership is maximizing creditor returns
Creative solutions are acceptable: Just as Peakhill approved a novel legal structure, Cameron Stephens approved reopened bidding—both are creative judicial interventions
Courts have broad discretion: Both decisions emphasize the wide authority courts have under the BIA to achieve optimal outcomes
The $3.5 million parallel: Interestingly, both Peakhill and Cameron Stephens involved capturing approximately $3.5 million in additional value
The Lesson: Courts will approve unconventional approaches—whether creative deal structures or creative bidding processes—if the goal is to lawfully maximize what creditors receive.
The Emerging Court Ordered Receivership Sale Canadian Consensus: Maximizing Recovery Above All
When we look at Cameron Stephens alongside the BC Court of Appeal decisions, a clear pattern emerges:
Common Principles Across All Cases:
1. Creditor Recovery Is The Top Priority
Every case—Cameron Stephens, Versante, Willoughby, Peakhill—emphasizes that the paramount objective of any court ordered receivership sale is maximizing what creditors recover.
When this goal conflicts with other important values (process integrity, protecting negotiated deals, following traditional procedures), maximizing recovery wins if the circumstances warrant it.
2. Courts Will Intervene Creatively When Necessary
Canadian courts have shown remarkable willingness to create extraordinary solutions:
Live courtroom auctions (Versante)
Reopened competitive bidding (Cameron Stephens)
Novel legal structures (Peakhill)
Extensions of marketing time (Willoughby—though ultimately denied for other reasons)
The days of rigid, formalistic receivership processes are over. Judges will craft pragmatic solutions tailored to specific circumstances to achieve optimal outcomes.
37% higher (Cameron Stephens – approximately $3.5M)
7.3% higher (Versante – $3.5M on $48M)
83% higher (Willoughby – $29M differential)
Courts treat significant price differentials as red flags suggesting the accepted offer may not reflect true market value and may be improvident.
4. Process Perfection Is Necessary But Not Sufficient
Cameron Stephens definitively establishes that running a flawless receivership process doesn’t guarantee approval if substantially higher offers emerge.
You need both:
A thorough, professional process (necessary)
Pricing that reflects maximum market value (also necessary)
One without the other isn’t enough.
5. Flexibility Over Rigidity
All these cases emphasize that the Soundair factors are flexible and case-specific, not a rigid checklist. Courts evaluate the totality of circumstances and exercise broad discretion to achieve outcomes that serve the BIA’s core purposes.
What This Means: A New Era for the Court Ordered Receivership Sale Process
Taken together, these cases signal that Canadian court ordered receivership sales have entered a new era characterized by:
✓ Greater judicial activism in protecting creditor interests ✓ Less deference to receivers when pricing seems questionable ✓ More creative interventions to maximize recovery ✓ Heightened scrutiny of price, even when the process is perfect ✓ Willingness to disrupt negotiated deals when a substantially higher value is available ✓ Emphasis on outcomes (maximum recovery) over process (following procedures)
For everyone involved in receiverships, this means:
Uncertainty until court approval is actually granted
Higher ultimate recoveries for creditors
More competitive pressure on buyers
Greater need for professional expertise to navigate complex proceedings
Increased importance of documentation to justify pricing recommendations
[Need expert guidance navigating these new realities? Contact us to schedule your free consultation.]
Court ordered receivership sale
Court Ordered Receivership Sale Practical Implications: What You Must Do Now
If You’re a Creditor in a Court Ordered Receivership Sale:
Your Rights Are Stronger Than Ever:
The Cameron Stephens decision, combined with the BC cases, provides powerful tools to protect your interests.
Action Steps:
Monitor the process actively from the beginning—don’t just wait for the receiver’s reports
Question pricing if you have doubts about whether the accepted offer reflects market value
Conduct independent research to assess comparable sales and market conditions
If you become aware of potentially higher offers, bring this immediately to the receiver’s and the court’s attention before the approval hearing
Attend court hearings and consider retaining counsel if significant money is at stake
Don’t assume the receiver’s recommendation is automatically optimal—you have the right to challenge it
What Cameron Stephens Confirms:
Courts will protect your right to maximum recovery, even if that means disrupting processes and negotiated deals. Don’t hesitate to advocate for your interests.
If You’re a Business Owner or Guarantor Facing Receivership:
There’s Both Risk and Opportunity:
Cameron Stephens shows that receivership sales can be unpredictable, but courts actively work to maximize asset values.
What This Means for You:
The Good News:
Courts will push for higher asset values, reducing deficiency amounts
Larger recoveries mean less personal liability under guarantees
You have grounds to challenge sales that seem improvident
The Challenges:
Process uncertainty can delay resolution
You have limited control once a receiver is appointed
Understand your rights to participate in and observe the receivership process
Monitor asset sales and question pricing that seems low
Consider whether alternatives to receivership (proposals, refinancing, restructuring) might be available
Cooperate with the receiver—obstruction reduces values and increases costs
Critical Timing:
The earlier you engage an experienced licensed insolvency trustee, the more options you’ll have to protect your interests.
[Facing potential receivership? Contact us so that we may provide you with a free, confidential consultation before it’s too late.]
If You’re Buying Assets in a Court Ordered Receivership Sale:
The Rules Have Changed:
Your accepted agreement isn’t final until court approval, and that approval is no longer a formality.
Key Realities:
Bid closer to your true maximum early—don’t expect to lowball and win
Budget for uncertainty—approval timelines are unpredictable
Prepare to re-bid—courts may reopen competitive processes
Understand cost risks—your legal fees might not be recoverable
Factor in delay—closing may take longer than anticipated
Strategic Considerations:
Early participation protects you—engage in the official process from the start
Due diligence matters—understand true market value before bidding
Financial readiness is crucial—be prepared to increase your bid quickly
Relationship with receiver helps—serious, professional buyers get respect
The Upside:
If you bid fairly based on true value, you’ll likely succeed. The Cameron Stephens approach actually rewards buyers who recognize and are willing to pay for true asset value.
If You’re a Receiver or Insolvency Trustee:
Your Job Just Got Harder:
Cameron Stephens raises the bar for what courts expect from receivers conducting court ordered receivership sales.
Requirements:
Professional Valuations: Obtain appraisals for significant assets to support pricing recommendations
Enhanced Documentation: Meticulously document marketing efforts, offer comparisons, and provide pricing justification
Market Testing: Ensure marketing periods are adequate (Willoughby warns against “markedly short” timelines)
Contingency Planning: Build flexibility into processes to handle late competing offers
Price Justification: Be prepared to explain why your recommended price represents maximum market value
Creative Solutions: Consider stalking horse structures, auction mechanisms, or other approaches that maximize competition
The Reality:
Even if you do everything perfectly, courts may still intervene if substantially higher offers emerge. Your role is to:
Run the best process possible
Document everything thoroughly
Recommend the highest supportable price
Be prepared to adapt to judicial intervention
At Ira Smith Trustee & Receiver Inc., we understand these lessons from our past receivership administrations. We understand what courts expect and how to structure processes that satisfy Cameron Stephens’ requirements.
Frequently Asked Questions (FAQ) About Cameron Stephens and The Court Ordered Receivership Sale Process
Q: Does the 37% threshold mean courts won’t intervene for smaller price gaps?
Not necessarily. Cameron Stephens establishes that 37% is clearly sufficient, but doesn’t set a floor. The Versante case shows courts may intervene for smaller differentials (around 7%) depending on circumstances. Each case is evaluated on its facts. Generally, price gaps of 30%+ will almost certainly trigger scrutiny, while gaps under 10% are less likely to justify intervention absent other issues.
Q: Can receivers prevent late bids from disrupting approved sales?
Not entirely. Courts have ultimate authority over sale approvals. However, receivers can use strategies to minimize disruption:
Auction mechanisms are built into the process from the start
Professional appraisals supporting the accepted offer
These don’t prevent courts from considering late bids, but they structure processes that make late challenges less likely to succeed.
Q: What if the late higher offer has conditions that might not be satisfied?
Courts will consider the reliability and certainty of competing offers. In Willoughby, the $64 million offer had extensive conditions, which was one reason for skepticism. However, if the conditions are reasonable and the price gap is substantial, courts may grant time extensions to allow the bidder to satisfy conditions. The judge will balance:
The magnitude of the price increase
The reasonableness of conditions
The likelihood conditions will be satisfied
The cost of delay to the estate
Q: As a creditor, how do I know if I should challenge a receiver’s recommended sale?
Key warning signs that a sale might be improvident:
The accepted offer is significantly lower than you expected based on market research
The marketing period was very short (under 3 months for a major sale of assets)
No professional appraisal was obtained
You’re aware of other potential buyers who weren’t contacted
The receiver’s report doesn’t adequately justify the pricing
A competing offer exists that’s substantially higher (30%+)
Q: If I’m the original buyer and the court reopens bidding, am I protected?
Cameron Stephens shows courts will try to balance fairness. The motion judge ordered reimbursement of Anand’s legal costs if he wasn’t the successful bidder. However, this protection isn’t guaranteed in every case. You should:
Negotiate cost protection into your initial agreement if possible
Budget for the risk of non-recoverable costs
Be prepared to increase your bid to remain competitive
Understand that court approval is required and not automatic
Q: How long does a typical court ordered receivership sale take now?
It varies widely, but Cameron Stephens and the BC cases suggest timelines are becoming less predictable:
Marketing period: 2-6 months typically (though Willoughby warns against being “markedly short”)
Negotiation to court hearing: 4-8 weeks usually
Court approval: Previously routine, now potentially extended if challenges arise
Total process: 3-12 months, depending on complexity and whether issues arise
The key change is that court approval is no longer a formality—it’s now a substantive hearing where pricing will be scrutinized and competing offers may be entertained.
Q: Does Cameron Stephens apply outside of real estate receiverships?
Yes. While Cameron Stephens, Versante, and Willoughby all involved real property, the legal principles apply to all court ordered receivership sales regardless of asset type:
Business operations and equipment
Intellectual property
Shares and securities
Inventory and accounts receivable
Any other assets sold through court-supervised receivership
The Soundair principles, which Cameron Stephens interprets, were established in an airline sale case. The duty to maximize creditor recovery applies universally across all asset types.
[Have questions about your company’s specific financial situation? Contact us for expert answers.]
Court ordered receivership sale
Court Ordered Receivership Sale: Take Action Now
Don’t wait until you’re in the middle of a receivership crisis to seek professional help. Whether you’re:
A creditor is concerned about an ongoing receivership process
A business owner facing potential receivership
A buyer interested in distressed assets
A professional needing guidance on complex insolvency matters
The time to act is now.
Contact Ira Smith Trustee & Receiver Inc. today:
905,738.4167
Toronto line: 647.799.3312 brandon@irasmithinc.com or ira@irasmithinc.com https://irasmithinc.com/
Disclaimer:This analysis is for educational purposes only and is based on the cited legal decisions (Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc., 2025 ONCA 732, and the other identified cases) and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances.
Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Court decisions are fact-specific and depend on the particular circumstances of each case.
Please contact Ira Smith Trustee & Receiver Inc. or consult with qualified legal or financial professionals regarding your specific matter before making any decisions.
About the Author:
Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court ordered receivership sales, corporate restructuring, and insolvency proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes.
Brandon stays current with landmark developments in Canadian insolvency law, including the recent Cameron Stephens decision and BC Court of Appeal cases that are reshaping receivership practice. He brings this cutting-edge legal knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.
An important decision was rendered by the Court of Appeal for Ontario on April 26, 2023. It is in a recent case concerning the sale of a matrimonial home through family law proceedings. In this case, the court considered the division of net family property between Subhathini Senthillmohan (wife) and her separated husband Sockalingam Senthillmohan (husband) the claims of the wife and a creditor of the husband.
This ruling carries significant weight for couples, irrespective of whether they are happily married or going through a divorce. The ramifications of this verdict extend to couples who jointly own a property as tenants in common, regardless of their marital status or if family law matters are in play.
In this Brandon’s Blog, I explore the recent Ontario Court of Appeal ruling on a wife’s claim over her husband’s creditor in the sale of the matrimonial home. I discuss the implications of the ruling for couples going through a divorce and how it can protect a spouse’s interest in the home.
As you will see below, even If you’re not going through family law issues in Ontario, this Brandon’s Blog shows how the Court of Appeal for Ontario ruling provides important information on your rights and obligations under the law.
This Brandon’s Blog is not a substitute for legal counsel experienced in family law, as we are not lawyers. However, if you are in a similar situation as the joint tenants described below, or even if you are not involved in family court proceedings or a contentious family law matter, it is possible that you may encounter similar legal issues concerning joint ownership of property where your joint property owner is an insolvent debtor. It is essential to communicate your situation to your legal representative and obtain sound advice and legal representation to ensure you are fully aware of your legal rights.
Family law: Background of the case
The case is Senthillmohan v. Senthillmohan, 2023 ONCA 280. The parties were married still but separated, and in January 2020, the wife brought an application seeking an unequal division of the net family property. Alternatively, she sought an equalization of net family property and the sale of their matrimonial home. Even though they were going through family law proceedings for divorce, the wife remained living in the home, which was jointly owned by both of them as joint tenants.
The default judgment held by the third-party creditor, 2401242 Ontario Inc., was the result of a civil suit. However, they later agreed to lift the order to aid in the smooth sale of the matrimonial home. Meanwhile, the wife sought an urgent family law court order to dissolve their joint ownership of the property, and a ruling that they now held title to the matrimonial home as tenants in common.
The creditor’s default judgment came from a civil lawsuit. The creditor filed a writ of seizure and sale in September 2021. The husband and wife entered into an Agreement of Purchase and Sale to sell the home in October 2021, and the home ultimately sold for $1.9M. The creditor agreed to lift the judgment to facilitate the sale of the matrimonial home.
The net sale proceeds, after the discharge of secured encumbrances, were approximately $925,000. In the interim, the wife took immediate legal action by seeking a court order to terminate the couple’s joint ownership of the property and to establish their title to the matrimonial home as tenants in common. The order was obtained with the consent of the husband. The order was silent on the effective date of the severance and does not address the claim of the third-party creditor or its default judgment against the husband.
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Family law: The lower court decision
The lower court made an order for the sale of the matrimonial home, with the funds being held in trust until a mutual agreement is entered into or a court order is made regarding equalization. In making its order, the lower court changed the ownership from joint tenants to tenants in common.
She claimed that her very interest in the matrimonial home took precedence over that of the creditor. After considering every one of the arguments provided by both sides, the Ontario Superior Court of Justice inevitably ruled in favour of the wife. The court stated that the wife’s ownership interest was in priority to that of the creditor.
In February 2022, the wife filed a motion seeking the release of her 50% share of the net sale proceeds. The judgment creditor contended that the husband and wife were joint tenants at the time of the default judgment and writ filing, hence it had priority over the wife’s interest in the sale proceeds.
Nevertheless, the motion judge dismissed this argument and determined that the joint tenancy had been severed by the time the third-party creditor acquired the default judgment against the husband.
The third-party creditor was dissatisfied with the ruling and proceeded to appeal the decision to the Ontario Court of Appeal with the intention of having it reversed.
Family law: The OCA ruling
The creditor lodged an appeal before the Court of Appeal for Ontario, asserting that the Ontario Superior Court of Justice judge had erred in ruling that the joint tenancy of the marital home had been retroactively divided and that the wife possessed entitlement over the creditor’s writ. Additionally, the creditor contended that the judge had neglected to take into account the writ affixed to the total net proceeds of a voluntary sale of the jointly-owned property.
The creditor contended that joint tenants are, for all intents and purposes, a single owner until the joint tenancy is dissolved, thereby affording a creditor the entitlement to make a claim against the entire interest. However, the Court of Appeal for Ontario duly rejected the creditor’s appeal, concluding that a creditor is unable to lay hold of the interest of a joint tenant who is not indebted.
The court went on to say that the creditor was fundamentally mistaken with respect to the law governing creditors’ remedies vis-à-vis jointly-held assets, where only one of the owners had liability for the debt.
The court explained the process of seizure and sale in Ontario. They stated that the execution registered on title can only be against the debtor’s exigible interest in the land held in joint tenancy. Additionally, the court held that in the case of joint property ownership, in the event of one joint tenant’s death, the remaining tenant inherits the entire interest in the property due to their right of survivorship.
The court’s ruling is a beacon of hope for partners or couples who hold property together jointly. It reinforces the idea that no creditor can take away the rights of a non-debtor joint tenant who acquires a property through the right of survivorship.
The Court of Appeal in Ontario nodded in agreement with the motion judge’s decision and ultimately dismissed the appeal. In their ruling, the court explicitly stated that the motion judge applied the proper legal principles of joint tenancy, including its severance and the priority of interests.
Despite the order being silent on the effective date of severance, the court ultimately found that the motion judge was correct in his decision to sever the joint tenancy in the matrimonial home. Interestingly, the creditor did not seek clarification of the order, leaving room for speculation as to why. Furthermore, the court emphasized that the Ontario Superior Court of Justice judge had taken into consideration the unique facts and circumstances surrounding the case and determined that there was indeed enough evidence to support the severance of the joint tenancy.
The court firmly rejected the argument put forward by the third-party creditor, which claimed that the motion judge did not have the necessary jurisdiction to hear the case. Furthermore, the court determined that the motion judge had effectively and properly exercised his discretion in denying the creditor’s request for an adjournment.
The lawyer representing the wife made cost submissions and achieved a favourable outcome in securing costs. The Ontario Court of Appeal recognized the wife’s entitlement to compensation and granted an award of $20,000, which includes HST and other expenses incurred during the legal proceedings.
family law
Family law: Implications of the ruling
The court’s ruling has far-reaching consequences, not only for couples undergoing divorce proceedings in Ontario but also for any joint owners of the property where one of them has outstanding debts or judgments while the other does not. Essentially, the non-debtor partner’s right to the property takes precedence over any claims by creditors in most situations. This decision offers much-needed protection for joint owners who may be at risk of losing their property due to their partner’s debts.
It’s worth noting that this ruling applies exclusively to the sale of the matrimonial home and has no impact on a creditor’s ability to seize other assets or property owned solely by the debtor who owes the money. It’s important to bear in mind that this ruling does not affect the rights of mortgagees in any way. As stated previously, the mortgages were paid off, and the legal dispute concerned only the net sale proceeds.
This court ruling is applicable not only to married couples going through divorce proceedings but also to joint owners of real property where one of the owners has unpaid personal income tax or owes money for director liability, such as unpaid corporate HST or unremitted employee source deductions, to the Canada Revenue Agency (CRA). If the debtor does not make satisfactory arrangements with the CRA for repayment, the tax authority can obtain a judgment against that person from a federal court without serving notice to them.
Following that, the CRA can register the judgment against the joint owner’s interest in the real estate, a process known as registering a Memorial. This registration can affect only the joint owner who owes the debt and not the other joint owner who is not indebted to the CRA. It is not related to family law and is applicable even if there are no divorce proceedings underway.
This court ruling not only benefits family law proceedings but also reinforces our position in insolvency proceedings that the non-bankrupt, non-insolvent joint owner’s stake in the property is not impacted by the other joint owner’s insolvency or bankruptcy case. In the event of personal bankruptcy, the licensed insolvency trustee who is overseeing the bankruptcy would take control of the bankrupt joint owner’s interest in the property. While there may only be one buyer for that interest, the other joint owner would be the logical purchaser. However, these are economic concerns rather than legal issues.
Family law conclusion
I hope you enjoyed this family law Brandon’s Blog. Managing your personal or business financial affairs in today’s ever-challenging and changing business landscape is no small feat, but with the right plan in place, it’s possible to stay or get back on track.
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.
The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.
It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy proceedings. We can get you debt relief now.
We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.
We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.
The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.
Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.
If you would prefer to listen to the audio version of this BANKRUPTCY LAW, A SHOE STORE CHAIN AND GOLF: WHAT DO THEY HAVE IN COMMON? Brandon’s Blog, please scroll down to the bottom and click on the podcast.
Introduction
I am writing this Brandon’s Blog more as an interesting story for those that live in the GTA and enjoy golf. Although as you will see, bankruptcy law does play a major role in this tale, it really is a story about what is probably the most famous Canadian golf course.
Bankruptcy and Insolvency Canada
Before getting into the interesting Greater Toronto Area golf course story, by way of background to it, I will first describe the bankruptcy law aspect.
A bankrupt shoe store chain workers lost their jobs when a Receiving Order (as a Bankruptcy Order was then called) was made putting an Ontario shoe store chain, Rizzo & Rizzo Shoes Ltd., into bankruptcy. All salaries, wages, commissions and vacation pay were paid to the date of bankruptcy. The province’s Ministry of Labour audited the company’s payroll books and records.
The Ministry’s audit determined that although the employees were all paid up to date, liability for termination or severance pay was owing to former employees under the Employment Standards Act (ESA). The Ministry delivered a proof of claim to the bankruptcy trustee (now called a Licensed Insolvency Trustee) (Trustee).
The Trustee disallowed the claim under the provisions of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). The Trustee’s disallowance was based on the ground that the bankruptcy of an employer acts to terminate the employment of the workers. This does not constitute termination by an employer. Therefore, no such liability for severance or termination pay exists.
The appeal of the Trustee’s disallowance
The Ministry successfully appealed the Trustee’s disallowance to the Ontario Court (General Division). The Trustee appealed to the Ontario Court of Appeal. The appellate court restored the Trustee’s decision. The Ministry sought leave to appeal to the Supreme Court of Canada but ultimately terminated that application.
After the discontinuance of the appeal, the Trustee paid a dividend to Rizzo’s creditors, therefore leaving much fewer funds in the bankruptcy estate.
After that, five previous staff members of Rizzo applied to set aside the discontinuance, add themselves as applicants to the Supreme Court of Canada leave to appeal. An order was made approving them to continue the appeal.
The Supreme Court of Canada decision
In a 1998 decision, the Supreme Court of Canada ultimately decided that the bankruptcy of an employer does terminate the employment of the workers. However, the Court felt that it was necessary to take a wider view of the ESA. The Court felt that one of the objects of the ESA was to protect the rights of employees when they lost their job. A finding that the severance and termination pay sections of the ESA to not apply in bankruptcy circumstances is incompatible with both the object of the ESA.
The Court went on to find that the legislature does not intend to generate ridiculous results if employees dismissed before the bankruptcy of an employer would generate a completely different result than those employees who lost their job by the bankruptcy of an employer.
Therefore, the Supreme Court of Canada found that employee rights to severance pay or termination pay is a claim provable in bankruptcy even if the dismissal occurred by the bankruptcy of the employer. This claim is an ordinary unsecured claim and does not have any priority.
The broader effect of the Supreme Court of Canada Rizzo & Rizzo decision
The obvious effect of the Rizzo & Rizzo decision is the bankruptcy law decision. However, the decision also stands for the concept that a statue must be looked at in a broader context. The Supreme Court decision in paragraph 21 states that “…statutory interpretation cannot be founded on the wording of the legislation alone”.
It goes on to say that “Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.”. This codified what can be called a modern approach to the interpretation of legislation.
So what does this have to do with a golf course?
Looking at the title of this Brandon’s Blog, I think I have now covered off the first two parts, namely, bankruptcy law and shoe store. Now for golf! On October 23, 2019, the Court of Appeal for Ontario released its decision in Oakville (Town) v. Clublink Corporation ULC, 2019 ONCA 826.
All golfers in the GTA know that Clublink owns and operates a chain of golf clubs in Ontario and Quebec, as well as Florida. The most famous and iconic golf course in the Clublink family and all of Canada is Glen Abbey in Oakville, ON. Clublink purchased this golf course in 1999.
Glen Abbey was the initial golf course solely created by Jack Nicklaus, one of the greatest professional golfers of all-time. The style of the course shows a specific focus on the viewer experience. Along with this value, the Town of Oakville believes Glen Abbey has substantial historical value. Glen Abbey has held the Canadian Open 30 times – 3 times greater than any other course in Canada. It, therefore, is connected with some of the most memorable events in Canadian golf history.
The 18th hole is significant as a result of its connection to Tiger Woods. In the final round of the 2000 Canadian Open, he hit a six-iron shot 218 yards from a bunker on the right side of the fairway to about 18 feet from the hole. The shot had to fly over a huge pond protecting the green.
On October 22, 2015, Clublink told the Town that they plan to redevelop Glen Abbey into a residential and mixed-use neighbourhood. Clublink proposed to develop 3,000 to 3,200 residences and 140,000 to 170,000 square feet of office and retail space. If Clublink’s plan to build succeeds, the word “four” will no longer be yelled out on the property!
The Court case
In November 2016, Clublink submitted applications to change the Town’s Official Plan and zoning by-laws and looked for authorization of a plan of subdivision, in connection with its redevelopment plan of Glen Abbey. In 2017, the Town recognized Glen Abbey as a considerable cultural heritage property under s. 29 of the Ontario Heritage Act (OHA). This notification stated the property’s cultural heritage value according to the provincial requirements of the OHA.
Clublink did not object to the heritage designation. Rather, they made an application to the Town under section 34 of the OHA to demolish and remove Glen Abbey. The Town alerted Clublink that their s. 34 application was legally beyond the range of a section 34 OHA application but was correctly within the range of s. 33 of the OHA which permits an owner to relate to altering a designated property.
Clublink commenced its very own application in the Superior Court for an affirmation that they could make an application under s. 34 of the OHA “for the demolition and removal of buildings and structures on the lands municipally known as 1313 and 1333 Dorval Drive … including but not limited to the tees, greens, hazards, fairways and cart paths”. Clublink was successful in its application and the Town of Oakville appealed the decision to the Ontario Court of Appeal.
What is the difference?
A study of the OHA is not why I am writing this Brandon’s Blog. The important point to know is that under s. 33 of the OHA, the owner may appeal to the Conservation Review Board. The Conservation Review Board holds a hearing and produces a report, in which it is to recommend whether the application must or ought to not be authorized. The Conservation Review Board’s report is not binding on the metropolitan council.
Unlike s. 33, if the metropolitan council rejects the owner’s application under s. 34, the owner of the property can appeal to the Local Planning Appeal Tribunal (LPAT). The local council is bound by the LPAT decision.
So as you can see, Clublink needs the Court ruling to stand that its s. 34 application is the correct one.
Is a golf course a structure?
In order to be successful, Clublink needs to prove that a golf course is a structure. The application judge found that Glen Abbey is both composed of structures as well as the golf course itself is a structure for the objective of s. 34 of the OHA. Clublink had actually correctly mounted its application under s. 34.
The application judge reached this decision because of the uncontroverted evidence before him was that Glen Abbey was the product of substantial engineering, design and construction. Relying on judicial and also administrative decisions from other contexts, he decided up that a golf course fits within the meaning of a “structure” as being a “thing constructed”.
After a very lengthy analysis, the Ontario Court of Appeal, with one Judge dissenting, confirmed the lower court’s decision.
So what does this have to do with Canadian bankruptcies laws?
The majority decision relied upon the Rizzo & Rizzo case. The Ontario Court of Appeal followed the confirmation in the bankruptcy law case by the Supreme Court of Canada that a strict dictionary or common usage interpretation of the word “structure” was inappropriate. A “…statutory interpretation cannot be founded on the wording of the legislation alone”.
Rather, a wider modern law approach must be used. The “…words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention…”. Therefore, finding that a golf course has detailed engineering, design and construction, it is a structure and Clublink was correct.
This is how bankruptcy law ties into a bankrupt Ontario shoe store chain and a golf course. It took a bit of a journey to piece it all together, but I am so glad that you stuck with me.
Summary
As you can see, not everything necessarily is how it appears at first blush. When I look out onto a golf course, I would never say, “what a marvellous structure”, but it is.
In the same way, financial decisions that we make along the way do not always turn out as we once thought it would be. Sometimes these decisions are forced upon us by life getting in the way, and sometimes they are voluntary. Nevertheless, when financial hardships strike, you need to find a way to solve your financial problems.
Do you have way too much debt? Before you reach the phase where you can’t stay afloat and where financial restructuring is no longer a viable alternative, contact the Ira Smith Team. We know full well the discomfort and tension excessive debt can create. We can help you to eliminate that pain and address your financial issues supplying timely, realistic and easy to implement action steps in finding the optimal strategy created just for you.
Call Ira Smith Trustee & Receiver Inc. today. Make a free appointment to visit with one of the Ira Smith Team for a totally free, no-obligation assessment. You can be on your path to a carefree life Starting Over, Starting Now. Give us a call today so that we can help you return to an anxiety-free and pain-free life, Starting Over, Starting Now.
I want to highlight a provincial statute that is also important for the administration of a deceased estate; the Trustee Act, R.S.O. 1990, c. T.23 (Trustee Act Ontario). This blog continues my blog series to show how it would be proper to appoint a licensed insolvency trustee (LIT or bankruptcy trustee) (formerly known as a bankruptcy trustee) as the estate trustee (formerly called an executor or executrix) of a solvent deceased estate.
As always, since we are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.
My prior estate blogs
In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I looked at some essential matters when it involves a deceased estate and why a LIT would be extremely knowledgable and competent to act as an estate trustee of a deceased estate with those basic requirements.
In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I explained why many times parents try doing the proper thing by appointing their children as estate trustees and how many times it just turns out all wrong.
In ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, I describe how the requirements and provisions of the Estates Act are already very familiar to a bankruptcy trustee. In fact, most of the duties required by the Estates Act are already performed in the insolvency context by a LIT.
In this and my next blog, I will focus on two more Ontario statutes that impact the administration of a deceased estate by an estate trustee. The three statutes are:
As you have by now correctly guessed, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of this provincial legislation.
Things an estate trustee must be aware of
There are various sections of the Trustee Act Ontario that affects the duties and responsibilities of an estate trustee in administering a deceased estate. All the concepts are very familiar to a LIT.
Power of court to appoint new trustees
Section 5(1) of this statute gives the Ontario Superior Court of Justice the authority to make an Order for the appointment of a new trustee. This is the same Court that we attend for Court-appointed receivership and bankruptcy matters. So, a LIT is very familiar with the workings and requirements of this Court.
Who may apply for the appointment of a new trustee, or vesting order
Section 16(1) of this provincial statute says that anyone who has a beneficial interest in the property of the trust can apply for the appointment of a new trustee. This is very similar to how a Court-appointed Receiver is appointed. Although it is normally a secured creditor who makes the application, in theory, it could be any party that has an interest. Section 101(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 states that a receivership Order may be made “…where it seems to a judge of the court to be just or convenient to do so.”. It is the “just and convenient” clause that was relied upon by the judge when we were appointed Receiver and Manager of the assets, properties and undertakings of The Suites at 1 King West condo strata hotel back in August 2007.
For this reason, as a LIT, we are very familiar with this aspect of appointing a trustee.
Power and discretion of trustee for sale
In my blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I referred to sections 16 and 17 of the Estates Administration Act. Section 17 in particular, provides the estate trustee with the power to pay off the debts of the deceased. It also allows a trustee to distribute or divide the estate among the beneficiaries.
Section 17 of the provincial Act provides the trustee with the authority to sell, but subject to the requirements of the Estates Administration Act.
A LIT, either in receivership or bankruptcy, is extremely acquainted and experienced in the sale of real and personal property. The LIT likewise makes certain that the creditors are paid in the correct order of priority.
Sales by trustees not impeachable on certain grounds
Section 18(1) deals with a certain aspect of the sale of the property. It states that unless it is proven that there was an inadequate sales price, a sale properly made cannot be impeached by any beneficiary. Any beneficiary wanting to try to impeach a sale must prove that the process used resulted in a sales price at less than fair market value.
Similarly, in a Court-appointed receivership or bankruptcy, the LIT must be able to prove that both the conditions of the sales process and the sales price achieved, was right for the types of assets in the circumstances.
The leading case is the Ontario Court of Appeal decision in Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). The process a LIT must follow is known as the “Soundair principles”. This is the test used when deciding whether a receiver or trustee applying for Court approval of a sales process and the authority to sell assets has acted properly. The Court must decide whether the receiver or trustee has:
made a sufficient effort to get the best price and has not acted improvidently;
considered the interests of all parties;
Devised a fair process that has integrity by which offers were obtained; and
Introduced any element of unfairness in the working out of the process.
Therefore, I submit, that a LIT is very experienced in devising a sales process and selling assets in a way that is fair to all stakeholders or beneficiaries to attempt to maximize sales proceeds.
Trust funds and investing
Section 26 of the Act deals with the area of the requirement for a trustee to maintain trust accounts and to invest trust property in a way that will maximize the return while not putting the capital at risk to swings in investment pricing, inflation or income tax.
The LIT is very familiar and experienced in trust accounts and the investing of trust funds. Section 25 of the Bankruptcy and Insolvency Act (Canada) (BIA) deals with the requirement of a trustee to establish trust accounts. Also, the Superintendent of Bankruptcy Directive no. 5R5 deals with Estate funds and banking. The Superintendent also monitors the banking of trust funds by all LITs across Canada.
Therefore a LIT is very knowledgeable and experienced in the banking, investing and protection of trust funds.
Security by the person appointed
If letters of administration were granted under the Estates Act, R.S.O. 1990, c. E.21, section 37(2) of the provincial legislation requires every trustee to post security.
Section 38(1) of the provincial statute gives authority to an estate trustee of a deceased person to maintain an action for all torts and injuries to the deceased person or his or her property, except in cases of libel and slander. Any recovery forms part of the deceased’s personal estate. Section 38(3) provides for a limitation on such actions. The action cannot be brought after the expiration of two years from the date of death.
As a LIT, this is a familiar concept to us. When a person or company is insolvent and has a chose in action against one or more parties, such action can be started or continued by a receiver or bankruptcy trustee. In fact, in a bankruptcy, the action actually vests in the trustee.
The receiver or trustee has to make sure that they have a legal opinion on the likelihood of success. The receiver or trustee also has to make sure that they can afford to fund the litigation. The litigation cost cannot reduce the value of the assets under administration. This includes the issue of costs if the action proves unsuccessful.
Distribution of assets under trust deeds for benefit of creditors, or of the assets of the intestate
Section 53(1) of the Act lays out the requirements of a trustee to make a distribution for the general benefit of creditors. As I have described in previous blogs, Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.
A LIT is an expert at sorting out creditor claims and could certainly do so under the Trustee Act also.
Trustee Act Ontario: Summary
I hope that this blog reveals to you how the provisions of this provincial statute, detailing the duties of a trustee or estate trustee tracks really close to how a LIT performs in either a Court-appointed receivership or bankruptcy administration.
Therefore, the LIT is used to acting as a Court officer and could very easily perform the requirements and duties of a trustee as described in this provincial legislation.
If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.
In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Succession Law Reform Act and how a LIT is most familiar with it also.
