Tag: Ontario Superior Court of Justice

INSOLVENCY TRUSTEE COURT ORDER: THE FULL POWER OF THE COURT IN ONTARIO REGULATORY PROCEEDINGS

Post author By Brandon Smith
Post date October 6, 2025

Insolvency Trustee Court Order: Introduction

As a Licensed Insolvency Trustee (formerly called a trustee in bankruptcy) at Ira Smith Trustee & Receiver Inc. in the Greater Toronto Area, I meet with people and business owners every day who feel overwhelmed by debt. Many believe we only handle bankruptcies. The truth is, our role goes much deeper. We act as a bridge between financial trouble and the Canadian legal system.

From our Vaughan office at 167 Applewood Crescent, Suite 6, we help clients find a secure path through their financial challenges. One of the most powerful tools in this process is the insolvency trustee court order.

These court orders form the backbone of fairness and legality in Canadian insolvency cases. Whether you’re a small business owner looking for a way to save or safely close your business, or dealing with a multi-million-dollar corporate restructuring, court orders protect everyone involved.

Let me share a very recent Ontario court decision. In 2025, the Ontario Securities Commission (OSC) took action against Cacoeli Asset Management and related entities (Cacoeli). This case shows exactly how an insolvency trustee court order can stop improper conduct and protect investors.

In this post, I’ll explain:

What happened in the Cacoeli case and why it matters
How the court decided to appoint a receiver
What a Licensed Insolvency Trustee does under a court order
When you need a court order in insolvency proceedings

Let’s start with the case that brought these issues to light.

The Superior Court’s Insolvency Trustee Court Order Appointing the Receiver

In the recent Ontario court case of, Ontario Securities Commission v. Cacoeli Asset Management, 2025 ONSC 3012, the OSC asked the Ontario Superior Court of Justice for urgent help. They wanted an insolvency trustee court order to take control of the Cacoeli assets before their investigation was even finished. This is a serious step that requires strong reasons.

The Problem: Misused Investor Money

The OSC found that Cacoeli had raised at least $13 million from about 53 investors. Each investor thought their money was going to buy and manage a specific property. Different limited partnerships were created for each unique property.

However, the investigation revealed something troubling. Money meant for one property was allegedly being moved to support completely different properties. This is called “fund diversion.”

Investors who thought their money was buying Property A discovered it might have been used for Properties B, C, or D instead.

What Standard of Proof Was Needed?

Cacoeli’s lawyers argued that appointing a receiver is extremely serious. It takes away the company’s control over its own business. They said the OSC needed to prove a “strong prima facie case” – meaning very strong evidence that laws were broken.

Justice Steele disagreed. She confirmed that for protective orders under Ontario’s Securities Act, the OSC only needs to show “serious concern that there have been possible breaches.”

Why does this matter? It means courts can act quickly to protect investors. They don’t have to wait months or years for a full trial when people’s money is at risk.

Reading the Partnership Agreements

Cacoeli argued that their partnership agreements allowed them to move money around. They pointed to clauses that gave the General Partner power to “invest funds” and “engage in any transaction with affiliates.”

Justice Steele carefully read the agreements. She found that the “Purpose” section was crystal clear. Each partnership existed for one specific reason: to acquire and manage that particular property only.

The broad powers mentioned elsewhere in the agreement could only be used to support that specific purpose. They couldn’t be used to break the fundamental promise made to investors.

This finding confirmed that the fund diversion was serious and possibly illegal.

Why Include All Properties Under One Receiver?

Certain secured creditors held mortgages on specific Cacoeli properties. Some of them asked the court to exclude their properties from the receivership. They wanted to seize and sell those properties themselves.

Justice Steele said no. She ordered the insolvency trustee court order to cover all Cacoeli properties and companies.

Why? Excluding properties would create chaos:

Different creditors would fight over different assets
Multiple court cases would overlap and contradict each other
Costs would skyrocket
Small creditors would get nothing

Appointing one Licensed Insolvency Trustee as the court-appointed receiver guaranteed central oversight, coordination, and fairness for everyone.

Insolvency Trustee Court Order: The Court of Appeal Upholds Investor Protection

Cacoeli appealed Justice Steele’s decision. The case went to the Court of Appeal for Ontario. A panel of three justices – Hourigan, Zarnett, and Pomerance – reviewed the lower court decision in Ontario Securities Commission v. Cacoeli Asset Management Inc., 2025 ONCA 654 (CanLII).

The Main Argument on Appeal

Cacoeli made the same argument again. They insisted that appointing a receiver was so powerful that courts should require the higher “strong prima facie case” standard of proof.

The Court of Appeal’s Strong Response

The Court of Appeal rejected this argument completely. Their reasoning matters for anyone dealing with financial regulation:

Public protection comes first: Requiring a high standard of proof would “impede the public protection mandate of the OSC”
Early action is essential: A high standard would make it “impossible for the OSC to obtain receivership at the early stages of an investigation when the facts are not fully known.”

This is a clear message from Ontario’s highest court: when protecting the public is the priority, courts will allow regulators to act fast using an insolvency trustee court order – even before every detail is fully investigated.

The receivership order acts as a protective shield, not a final punishment.

The Final Decision

The Court of Appeal found “no question that the OSC has established a serious concern” about possible legal breaches.

The appeal was dismissed. The original insolvency trustee court order appointing the receiver remained in force.

Cacoeli was ordered to pay the OSC $15,000 for the costs of the appeal.

The Foundational Role of a Licensed Insolvency Trustee in Canada

Who Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is the only professional in Canada authorized to administer bankruptcies and consumer proposals. In addition, only LITs can act as a receiver, be it private or court-appointed under an insolvency trustee court order.

We are not lawyers. We are officers of the court.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in the field
Pass demanding written and oral examinations
Demonstrate expertise in financial assessment, accounting, and insolvency law

This high standard allows us to act as impartial administrators of insolvency estates. Think of us as neutral referees. Our job is to balance the rights of:

The debtor (the person or company owing money)
The creditors (the people or companies owed money)

The Law That Guides Everything We Do

The first piece of legislation that covers every action a Licensed Insolvency Trustee takes is the federal law: the Bankruptcy and Insolvency Act Canada (BIA).

The BIA is the ultimate authority for virtually all consumer and corporate insolvency proceedings in Canada. It:

Lays out the rules for debt relief
Sets the framework for proposals (which help restructure debt)
Defines the powers and duties of trustees

Very large corporate restructurings are usually done under a different federal law, the Companies’ Creditors Arrangement Act (CCAA).

The BIA and CCAA are our playbooks. The courts are the referees who make the final calls. Provincial laws also apply, but the federal BIA governs all Licensed Insolvency Trustees.

Federal Oversight: The Office of the Superintendent of Bankruptcy

Unlike most private professionals, Licensed Insolvency Trustees are constantly supervised by a federal regulator: the Office of the Superintendent of Bankruptcy Canada (OSB).

The OSB’s job is to ensure that Canada’s insolvency system is fair, efficient, and that trustees perform their duties with integrity.

This creates two layers of oversight:

The OSB (administrative supervision)
The Courts (judicial supervision)

This dual oversight gives the public and creditors confidence in the system. We must report all significant actions to the OSB. For many major decisions, we seek court approval through an insolvency trustee court order.

Our Core Responsibilities

Whether helping an individual consumer get a financial fresh start through a personal insolvency process or managing a complex corporate wind-down, our core responsibilities stay the same:

Secure Assets: Take possession and control of all assets belonging to the debtor (subject to provincial exemptions for individuals and the rights of trust claimants and secured creditors)

Investigate Financial Affairs: Examine the debtor’s finances, including transactions before the insolvency filing, to ensure fairness

Realize Value: Sell assets in a way that maximizes returns for creditors

Distribute Funds: Distribute money collected to creditors according to the priority rules in the BIA and/or as approved by the court through an insolvency trustee court order

Report: Provide detailed financial reports to creditors, the OSB, and the court

Understanding the Necessity of an Insolvency Trustee Court Order in Insolvency Proceedings

What Is an Insolvency Trustee Court Order?

A court order is a written ruling by a judge that must be followed. In insolvency, an insolvency trustee court order is an official directive that either:

Grants the Licensed Insolvency Trustee specific powers, or
Approves a significant decision or action

In the Cacoeli case, the Ontario Superior Court of Justice issued an insolvency trustee court order appointing a receiver. This order gave the receiver legal authority to seize control over all assets and properties of the Cacoeli companies.

Why Court Involvement Is Essential

Courts aren’t involved just to follow bureaucratic procedure. They serve two critical purposes:

Neutrality and Impartiality: Insolvency creates conflict. A judge provides a neutral, binding decision that everyone must respect. This ensures no single party unfairly benefits.

Legal Compliance: By reviewing the Trustee’s requests and issuing an order, the court confirms that proposed actions follow the BIA and other relevant laws strictly.

What Requires Court Approval?

Not every action a Licensed Insolvency Trustee takes requires a judge’s approval. The insolvency trustee court order appointing the receiver gives certain discretionary powers, such as handling routine matters, including administrative disbursements.

However, any major decision that impacts the fundamental rights of debtors or creditors must be sanctioned by an insolvency trustee court order. This creates a clear line between day-to-day administration and actions requiring judicial authority.

Key Scenarios Requiring a Licensed Insolvency Trustee to Obtain an Insolvency Trustee Court Order

Many actions taken by a Licensed Insolvency Trustee in a court-supervised receivership require court permission through an insolvency trustee court order. Here are the most common situations:

Approval of Trustee Fees and Administrative Costs

Our fees are strictly regulated through a process called “taxation.” The ultimate fees and costs must be approved by the court through an insolvency trustee court order.

This is a critical check to ensure the estate isn’t being overcharged. It protects creditors from excessive fees eating into their recovery.

Authorizing Unusual or Complex Transactions and Asset Sales

A key duty of a Licensed Insolvency Trustee is to liquidate (sell) assets. However, court approval is required when the transaction is:

Unusual: Selling a non-standard asset or unique piece of real estate

Complex: Selling an entire business as a “going concern” (a live business that continues operating)

Controversial: When one or more stakeholders object to the sale price or terms

In these cases, the Trustee must provide sufficient evidence to a judge for an insolvency trustee court order to approve the transaction.

Resolving Disputes Among Stakeholders

The Trustee may face disputes such as:

A party claiming ownership of an asset under the receiver’s control
A dispute over the validity or priority of different security interests
Creditors disagreeing about distribution

When these disputes can’t be settled through negotiation, the Trustee brings a motion to court. A judge issues an insolvency trustee court order that settles the matter legally and definitively.

In the Cacoeli case, secured creditors wanted their properties excluded from the receivership. Justice Steele rejected this request. She stated the receivership must cover all properties to prevent chaos among creditors. This is a prime example of the court resolving a major stakeholder dispute.

Approving Debtor Proposals and Restructuring Plans

The goal of a business proposal under a BIA Division I Proposal or major corporate restructuring under the CCAA is to financially restructure the company to save it and as many jobs as possible.

A significant insolvency trustee court order is always required for final approval of a Division I restructuring proposal or restructuring plan. The court confirms that the plan is fair, reasonable, viable and calculated for the general benefit of all creditors.

Modifying, Annulling, or Terminating Insolvency Proceedings

Sometimes a debtor’s situation changes. They may need to alter their original plan based on changed circumstances. Or the Trustee may discover an issue that warrants ending the insolvency proceeding entirely, as the original plan is no longer viable.

A judge must review the facts and issue an insolvency trustee court order to modify, annul, or terminate the proceeding.

Addressing Trustee Liability or Allegations of Misconduct

If any stakeholder alleges that a LIT has breached their duties or acted improperly, the matter goes before a judge.

The court must issue an order to investigate the claim. If necessary, the court can order compensation or disciplinary action against the Trustee. This ensures absolute accountability.

The Far-Reaching Significance of Judicial Oversight in Insolvency

Protecting the Interests of All Parties

Judicial oversight is about trust. By demanding an insolvency trustee court order for critical actions, the system provides comfort to all parties:

Debtors know the process is being handled legally

Creditors know assets can’t be sold cheaply or favour one creditor over another

The Public knows the integrity of capital markets is being enforced, as the Court of Appeal confirmed in the Cacoeli case

Ensuring Transparency, Accountability, and Due Process

Every court motion becomes part of a public record. This transparency ensures every stakeholder can review the trustee’s actions.

The process also provides due process – the right to be heard. Any party can attend a hearing and object to a proposed action.

Upholding Public Confidence in the Canadian Insolvency System

Canada’s entire economy relies on:

The ability of businesses to take risks
The ability of creditors to enforce their rights

According to Industry Canada’s publication “Fresh Start: A Review of Canada’s Insolvency Laws“:

Insolvency legislation is a key component of Canada’s marketplace framework legislation that governs commercial relationships for both consumers and businesses. Certain and reliable rules provide security for investors and lenders that, in turn, influences the cost and availability of credit in the Canadian marketplace.

When the system fails, the court restores order. They are the clear, final legal instrument that upholds the integrity of the process and ensures public faith in financial markets and debt restructuring.

The Ultimate Framework for All Decisions

Regardless of the unique facts of any case, every judicial decision is rooted in federal and provincial law. Judges interpret the law to deliver their orders, making it the ultimate framework for every action taken by a Licensed Insolvency Trustee.

Consequences of Acting Without a Necessary Insolvency Trustee Court Order

Potential Ramifications for the Licensed Insolvency Trustee

A trustee who ignores the need for an insolvency trustee court order faces serious consequences:

Personal Liability: The trustee could be held personally responsible for any financial loss to the estate caused by unauthorized action

Disciplinary Action: The court and the OSB could impose sanctions, fines, or, in severe cases, the OSB could revoke the LIT’s license

Voided Actions: The action itself (such as an asset sale) could be reversed or voided by a subsequent court decision, creating chaos and cost

Adverse Impacts on the Insolvency Estate and Stakeholders

When a Licensed Insolvency Trustee acts outside the BIA or without proper authorization, the entire estate suffers:

Increased Costs: The estate incurs significant costs fighting legal challenges and correcting unauthorized actions

Delayed Proceedings: Disputes and legal challenges drag out the process, delaying final distribution of funds to creditors

Loss of Confidence: Creditors and debtors lose faith in the insolvency administration, leading to an unnecessarily hostile environment

Section 37 of the BIA provides that any person aggrieved by any act or decision of a Licensed Insolvency Trustee can apply to court to reverse or alter that act or decision. The court also has the authority to sanction the trustee.

Frequently Asked Questions: Insolvency Trustee Court Order

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is the only professional in Canada who can legally administer receiverships, bankruptcies and consumer proposals. We used to be called trustee in bankruptcy, but the name changed to better reflect our broader role.

Think of us as a bridge between your financial troubles and the Canadian legal system. We’re officers of the court, which means we have a legal duty to be fair and impartial.

Only Licensed Insolvency Trustees can act as receivers, whether privately appointed or through an insolvency trustee court order.

To become an LIT, you must:

Complete rigorous education requirements
Gain practical experience in insolvency work
Pass demanding national examinations
Demonstrate expertise in insolvency law, accounting, and financial assessment

This ensures that every LIT has the knowledge and skills to handle complex financial situations fairly.

What does a Licensed Insolvency Trustee actually do?

Whether we’re helping someone with personal debt or managing a complex corporate restructuring or bankruptcy, our core responsibilities stay the same:

Secure Assets: We take control of all assets belonging to the debtor. This protects them from being hidden or sold improperly. (Some assets are exempt, and trust claimants and secured creditors keep their rights.)

Investigate Financial Affairs: We carefully examine the debtor’s financial transactions made before filing for insolvency.

Realize Value: We sell assets in a way that gets the best possible return for creditors. This might mean selling items individually or selling a business as a going concern.

Distribute Funds: We distribute the money we collect to creditors following the strict priority rules in the Bankruptcy and Insolvency Act. Sometimes, an insolvency trustee court order determines the distribution.

Report: We provide detailed financial reports to the court, creditors, and the Office of the Superintendent of Bankruptcy. Transparency is essential.

What law governs Licensed Insolvency Trustees in Canada?

The primary law that guides almost everything we do is the federal Bankruptcy and Insolvency Act. This is Canada’s main insolvency legislation.

The BIA covers:

Rules for debt relief and bankruptcy
The framework for consumer proposals and corporate proposals
The powers and duties of Licensed Insolvency Trustees
Priority rules for paying creditors
When court orders are required

For very large corporate restructurings (typically companies with debts over $5 million), the federal Companies’ Creditors Arrangement Act often applies instead. The CCAA allows for more flexible restructuring options.

Both laws work together with provincial legislation to create Canada’s comprehensive insolvency system.

Who oversees Licensed Insolvency Trustees?

Licensed Insolvency Trustees operate under two layers of oversight. This dual supervision ensures the system works fairly:

The Courts: Provide judicial supervision and make final decisions on major actions. Courts issue insolvency trustee court orders that authorize significant steps in the process.

The Office of the Superintendent of Bankruptcy Canada: This federal regulator provides administrative supervision. The OSB ensures:

Canada’s insolvency system remains fair and efficient
Trustees perform their duties with integrity
Trustees follow all rules and regulations
Any complaints against trustees are investigated

This two-level oversight gives the public, debtors, and creditors confidence that the process will be handled properly.

What is an insolvency trustee court order?

An insolvency trustee court order is a written ruling issued by a judge that must be followed. It’s a legally binding document.

In insolvency cases, these court orders serve two main purposes:

Grant the Licensed Insolvency Trustee specific legal powers
Approve a significant decision or action that the LIT plans to take

These orders form the backbone of fairness and legality in Canadian insolvency cases. They ensure that major decisions have judicial approval and oversight.

For example, when a receiver is appointed (like in the Cacoeli case discussed in our blog), the insolvency trustee court order gives that receiver the legal authority to take control of assets and manage the insolvency process.

Why do courts get involved in insolvency proceedings?

Courts aren’t just following bureaucratic procedure. They serve two critical purposes in insolvency:

Ensuring Neutrality and Impartiality: Insolvency creates conflict. Creditors want their money. Debtors need protection. The judge provides a neutral, binding decision that everyone must respect. This prevents any single party from benefiting unfairly at the expense of others.

Confirming Legal Compliance: Before issuing an insolvency trustee court order, the court reviews the Applicant’s request carefully. This confirms that the proposed actions strictly follow the BIA and other relevant laws. If something doesn’t comply with the law, the judge won’t approve it.

This judicial oversight protects everyone’s rights and maintains public confidence in Canada’s insolvency system.

When does a Licensed Insolvency Trustee need a court order?

Not every action requires an insolvency trustee court order. We have discretionary powers for routine administrative matters – like paying regular administrative expenses or communicating with creditors.

However, any major decision that impacts the fundamental rights of creditors or debtors must be sanctioned by a court order. Here are the most common scenarios:

Approval of Fees and Costs: Our fees and administrative costs must be approved by the court through a process called “taxation.” This protects creditors from excessive charges eating into their recovery.

Authorizing Complex Transactions: Court approval is required for asset sales that are:

Unusual (non-standard assets or unique properties)
Complex (selling an entire business as a going concern)
Controversial (stakeholders object to the sale price or terms)

Resolving Disputes: When disputes arise – such as someone claiming ownership of an asset, or secured creditors disagreeing about distribution priorities – we bring a motion to court. The judge issues an order that settles the matter legally and definitively.

Approving Restructuring Plans: Final approval of a BIA Division I restructuring proposal or a CCAA corporate restructuring plan always requires a significant insolvency trustee court order. The court must confirm that the plan is fair, reasonable, and has a realistic chance of success.

Modifying Proceedings: If circumstances change and the insolvency proceedings need to be modified, annulled, or otherwise terminated, a court order is required.

Addressing Trustee Issues: If anyone alleges the LIT has breached their duties, the matter goes before a judge who can investigate and order appropriate remedies.

What happens if a trustee acts without getting a required court order?

Ignoring the requirement for an insolvency trustee court order leads to serious consequences for the Licensed Insolvency Trustee:

Personal Liability: The LIT may be held personally responsible for any financial loss to the estate caused by the unauthorized action. This means paying out of their own pocket.

Disciplinary Action: The court or the OSB can impose:

Sanctions
Significant fines
Suspension from practice
In severe cases, complete revocation of the LIT’s license

Voided Actions: The unauthorized action itself – such as an improper asset sale – could be reversed or voided by a subsequent court decision. This creates chaos and additional costs.

Negative Impact on Everyone: Unauthorized actions harm the entire insolvency estate:

Increased legal costs
Delayed proceedings
Loss of creditor confidence
Potential loss of asset value

Section 37 of the BIA specifically allows any person who is aggrieved by an LIT’s decision to apply to court to reverse or alter that decision. The court has full authority to sanction the trustee.

What standard of proof is needed to appoint a receiver in regulatory cases?

This is one of the most important takeaways from the Cacoeli case about insolvency trustee court orders.

When a regulator like the Ontario Securities Commission asks the court for urgent protection, they only need to show “serious concern that there have been possible breaches.”

This is a lower standard than criminal cases or even most civil cases. The court doesn’t need:

Absolute proof of fraud
Complete evidence
A finished investigation

The Court of Appeal for Ontario specifically rejected the argument that regulators must meet a higher “strong prima facie case” standard.

Why does this matter?

This lower standard allows courts and regulators to act quickly through an insolvency trustee court order to:

Protect investors from ongoing harm
Freeze assets before they disappear
Stop improper conduct immediately
Preserve evidence

The insolvency trustee court order appointing a receiver acts as a protective shield, not a final punishment. Full investigations and trials can happen later, but the immediate protection comes first.

Why did the Cacoeli court order cover all properties, even those with secured creditors?

In the Cacoeli case, some secured creditors held mortgages on specific properties. They asked the court to exclude their properties from the receivership so they could seize and sell those properties themselves.

Justice Steele refused this request. The insolvency trustee court order covered all Cacoeli assets and properties without exception.

The Court of Appeal upheld this decision. Here’s why centralized control under one Licensed Insolvency Trustee as receiver was essential:

Prevents Creditor Chaos: If different creditors could seize different assets, they would fight over everything. The process would become a free-for-all with no coordination.

Avoids Multiple Court Cases: Excluding properties would lead to numerous separate legal proceedings, all overlapping and potentially contradicting each other.

Controls Costs: Multiple proceedings mean multiplied legal costs. A single insolvency trustee court order with one receiver keeps costs manageable.

Protects Small Creditors: When secured creditors grab assets first, unsecured creditors and small suppliers are not given a forum. Centralized control ensures everyone is treated fairly according to their legal priority.

Enables Efficient Administration: One receiver can see the whole picture, make coordinated decisions, and maximize value for all stakeholders.

This principle applies to most complex insolvency cases: centralized control through an insolvency trustee court order produces better outcomes than fragmented, competing proceedings.

Insolvency Trustee Court Order Final Thoughts: The Licensed Insolvency Trustee’s Role in a Regulatory Receivership

The insolvency trustee court order is an instrument of authority, protection, and fairness. As Licensed Insolvency Trustees, our job – whether in a standard bankruptcy, a financial restructuring or a specialized receivership like the Cacoeli case – is to impose order and protect stakeholders.

The Cacoeli decisions confirmed two critical points:

Lower Standard for Protection: Courts won’t wait for proof of fraud to a certainty. The “serious concern” standard is enough to appoint an LIT as a receiver quickly. This is essential to freeze assets and prevent further investor harm.

Centralized Control Is Key: The court agreed that the entire portfolio of assets must be placed under one receiver’s control – even properties secured by third parties. This centralized approach, ordered by the court, prevents a fragmented, costly, and unfair outcome for all stakeholders.

Need Help With Debt or Insolvency Issues?

If you’re facing financial challenges – whether personal or business-related – understanding the role of an insolvency trustee court order is just the beginning. At Ira Smith Trustee & Receiver Inc., we’ve helped many individuals and businesses in the Greater Toronto Area find their path to financial recovery.

From our Vaughan office, we provide:

Free, confidential consultations
Expert guidance on bankruptcy alternatives
Consumer proposals that can reduce your debt
Corporate restructuring solutions
Court-supervised receiverships

Contact us today to discuss your situation. Let us help you understand your options and find the best solution for your financial future.

Brandon Smith, Licensed Insolvency Trustee
Senior Vice-President
Ira Smith Trustee & Receiver Inc.
167 Applewood Crescent, Suite 6
Vaughan, Ontario
Greater Toronto Area

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

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., serving individuals and businesses throughout the Greater Toronto Area. With years of experience in insolvency cases, including financial restructuring, Brandon helps clients navigate complex financial challenges and find sustainable solutions, Starting Over Starting Now.

Tags administrative disbursements, Bankruptcy and Insolvency Act, Cacoeli Asset Management, Companies’ Creditors Arrangement Act, Consumer Proposal, court approval, Court of Appeal for Ontario, court orders, court permission, Division I restructuring proposal, insolvency law, insolvency trustee court order, licensed insolvency trustee, Office of the Superintendent of Bankruptcy Canada, Ontario court decision, Ontario Securities Commission, Ontario Superior Court of Justice, personal insolvency process, trustee in bankruptcy

Brandon Blog Post

ONTARIO ESTATE ADMINISTRATION: WHY ONTARIO ESTATE LAWYERS CHOOSE INDEPENDENT ESTATE TRUSTEES

Post author By Brandon Smith
Post date August 11, 2025

Ontario Estate Administration has become more complex. The recent Stewart Estate case shows why smart estate lawyers choose independent trustees. This protects clients and ensures smooth management of the deceased person’s estate.

Ontario Estate Administration: Role and Responsibilities of an Executor

In Ontario Estate Administration, the person who manages an estate is called an “estate trustee” (formerly called an “executor”). This role comes with important legal duties that many people don’t fully understand when they accept the position.

Gathering and Protecting Assets

The first job of an estate trustee is to find and secure all the deceased person’s property. This includes:

Bank accounts and investments – Contact all financial institutions
Real estate – Secure properties and arrange insurance
Personal belongings – Inventory valuable items like jewelry, art, or collections
Business interests – Identify any company shares or partnerships
Digital assets – Access online accounts, cryptocurrencies, or digital files

Estate trustees must act quickly to protect these assets. Leaving a house empty without insurance or failing to secure bank accounts can lead to losses. If assets are lost due to poor protection, the trustee may be personally responsible for the value.

Applying for Probate

Most estates need a Certificate of Appointment (probate) from the Ontario Superior Court. This legal document proves the trustee has authority to act for the estate.

The probate process involves:

Filing the original will with the court
Completing detailed court forms about the estate’s value
Paying probate fees (1.5% of estate value over $50,000)
Notifying all beneficiaries and potential creditors

Getting probate can be a lengthy exercise, depending on the estate’s complexity and whether it is the extremely busy Toronto court or elsewhere in Ontario. During this time, many assets remain frozen, creating cash flow problems for the estate.

Managing Estate Finances

Estate trustees become responsible for all the deceased person’s financial debts. This includes:

Paying Debts and Bills

Funeral expenses (priority payment)
Outstanding credit card balances
Utility bills and property taxes
Medical expenses and care facility costs

Tax Responsibilities

File the deceased’s final and any other outstanding income tax returns
File estate tax returns if income is earned after death
Pay all income taxes, capital gains taxes, and penalties
Obtain CRA Clearance Certificate before final distributions

Investment Management Estate assets may need professional management, especially if the estate remains open for months or years. Poor investment decisions or leaving money in low-interest accounts can reduce the estate’s value.

Communicating with Beneficiaries

Estate trustees must keep beneficiaries informed throughout the process. This legal duty includes:

Initial notification – Tell beneficiaries about their inheritance within a reasonable time
Regular updates – Provide progress reports on estate administration
Financial reporting – Share detailed accounts of income, expenses, and distributions
Final accounting – Present complete financial records before closing the estate

Poor communication is one of the biggest sources of estate disputes. Beneficiaries who feel left in the dark often become suspicious and may challenge the trustee’s actions in court.

Ontario Estate Administration: Probate Process in Ontario

The probate process in Ontario can be complex and time-consuming. Understanding each step helps estate lawyers advise their clients about potential challenges and when professional trustee services might be needed.

Initiating the Process

The probate process begins when someone dies and leaves a will. The named estate trustee must decide if probate is required. Not all estates need probate, but most do if they include:

Real estate owned solely by the deceased
Bank accounts or investments over $25,000
Assets that require court authority to transfer

Timeline Considerations Estate trustees should start the probate process within weeks of death. Delays can cause problems with:

Asset protection and insurance coverage
Bill payments and property maintenance
Beneficiary expectations and family relationships

Required Documents Before starting, trustees need:

Original will and any codicils
Death certificate (multiple certified copies)
Complete list of estate assets and their values
List of all debts and liabilities

Evaluating Assets

Accurate asset valuation is crucial for probate fees and tax planning. Estate trustees must obtain current market values for all estate property.

Real Estate Valuation

Hire qualified appraisers for property assessments
Consider recent comparable sales in the area
Account for any unique features or conditions
Remember that tax assessments are usually lower than market value

Financial Assets

Get statements showing balances on the date of death
Value investment portfolios at market prices
Include all registered accounts (RRSPs, TFSAs, pensions)
Don’t forget about foreign assets or accounts

Personal Property

Obtain professional appraisals for valuable items
Include vehicles, jewelry, art, and collectibles
Consider both insurance value and fair market value
Document everything with photos and written descriptions

Filing the Application

The probate application goes to the Ontario Superior Court of Justice. This legal process involves several steps and strict requirements.

Court Forms and Fees

Complete Form 74.4 (Application for Certificate of Appointment of Estate Trustee With A Will) or Form 74.20 (Application for Certificate of Appointment of Estate Trustee Without A Will)
Pay probate fees: 1.5% of estate value over $50,000
Submit required affidavits and supporting documents
Provide notice to all beneficiaries and potential creditors

Review Process The court registrar reviews applications for:

Completeness and accuracy of all forms
Proper valuations of estate assets
Valid signatures and witness requirements
Compliance with notice requirements

Processing Time Simple estates typically take 6-8 weeks for probate approval. Complex estates with disputes or missing information can take several months.

Distributing Assets

Once probate is granted, estate trustees can begin distributing assets to beneficiaries. However, this must be done carefully to avoid personal liability.

Payment Priority Debts must be paid in this order:

Funeral and burial expenses
Estate administration costs
Secured debts (mortgages, car loans)
Unsecured debts (credit cards, personal loans)
Gifts to beneficiaries

Timing Considerations

Wait for the creditor claim period to expire (usually 6 months)
Obtain CRA Clearance Certificate before final distributions
Keep sufficient funds for unexpected expenses or claims
Document all payments with detailed records

Distribution Methods Assets can be distributed as:

Cash payments from estate bank accounts
Transfer of specific property items
Sale of assets with proceeds distributed
A combination of cash and property transfers

Handling Taxes and Disputes

Tax obligations and family disputes are two of the biggest challenges estate trustees face. Both can create significant personal liability.

Tax Responsibilities Estate trustees must handle multiple tax filings:

Final tax return for the deceased (due April 30 or 6 months after death)
Estate tax returns for income earned after death
Clearance certificate application to CRA
Provincial tax obligations and filings

Common Tax Pitfalls

Missing filing deadlines (results in penalties and interest)
Incorrect valuation of assets for capital gains
Failing to claim available deductions or credits
Distributing assets before tax clearance

Managing Disputes Family conflicts often arise during estate administration:

Beneficiaries questioning trustee decisions
Disputes over asset valuations or distributions
Challenges to will validity or interpretation
Complaints about communication or transparency

When Disputes Escalate Estate litigation can be expensive and time-consuming. Common issues include:

Beneficiaries seeking trustee removal
Claims for financial compensation from trustee personally
Court applications for direction on will interpretation
Family members blocking estate administration

The Growing Problem: When Ontario Estate Administration Goes Wrong

Being an estate trustee in Ontario carries serious legal and financial risks. Many people don’t realize they can be personally liable for estate debts, tax bills, and administration mistakes. This personal liability can cost trustees thousands of dollars from their own pockets.

The Stewart Estate case, decided by the Ontario Superior Court of Justice and Court of Appeal for Ontario in 2025, perfectly illustrates these risks. What started as a simple will became a 30-year legal nightmare involving:

$462,000 in unexpected tax bills
Family property disputes
Questions about trustee personal liability
Massive legal costs

This case shows why estate lawyers across Ontario are increasingly recommending independent estate trustees for complex files.

The Stewart Estate: A Case Study in Estate Complications

The Original Plan

William Stewart wrote his will in 1989. His plan seemed straightforward:

His wife Edith would receive a life interest in his property
After Edith’s death, two sons would buy the family farms at fixed low prices
One son’s mortgage would be forgiven

What Went Wrong

Life threw curveballs that William couldn’t predict:

The Mortgage Assignment (1994)
The estate transferred Robert’s mortgage to Edith. This simple administrative task later stopped the mortgage forgiveness William had planned.

Unexpected Death (2018)
Robert died before his mother Edith. Since Robert had no children, his wife Lynn inherited his rights to the farm.

Changed Circumstances
Edith lived 24.5 years after William died. During this time:

The Winfield Farm value jumped from $90,000 to $1,120,000
The Robert Farm increased from $50,000 to $617,500
These price increases created a massive capital gains tax bill

The Tax Crisis
When Edith died, the estate faced a $462,000 tax bill. The estate didn’t have enough cash to pay. The farms meant as gifts to family might need to be sold to pay the Canada Revenue Agency (CRA).

Ontario Estate Administration Court Decisions: Key Lessons for Estate Lawyers

Ontario Superior Court Ruling (2025 ONSC 2275)

Gift Timing Matters
The court ruled that Robert’s gifts became legally his when William died, not when Edith died. This decision used the “presumption of early vesting” – a legal principle that gifts usually take effect when the will-maker dies.

Administrative Actions Have Consequences
The mortgage forgiveness failed because the mortgage was assigned to Edith. Once she owned it, William’s estate couldn’t forgive it. This shows how administrative choices can override a will’s original intentions.

Estates Must Pay Debts First
The court gave the estate trustee power to sell the farms at current market value, not the outdated prices in the will. The estate’s debts had priority over specific gifts to beneficiaries.

Personal Liability Remains Unclear
Most importantly for trustees, the court didn’t rule on whether the trustee was personally liable for tax decisions. This uncertainty creates ongoing risk for estate trustees.

Ontario Estate Administration: Court of Appeal Decision (2025 ONCA 575)

The Court of Appeal quickly denied the beneficiaries’ request to stop the farm sales. The court prioritized:

Efficient estate administration
Paying the estate’s debts
Preventing CRA seizure of assets

This decision strongly supports estate trustees who make difficult but necessary decisions to protect estate solvency.

Ontario Estate Administration: The Hidden Risks Estate Trustees Face

Fiduciary Duties

Estate trustees must:

Act in all beneficiaries’ best interests
Avoid conflicts of interest
Manage assets carefully
Keep detailed records
Communicate clearly with beneficiaries

Personal Liability Risks

Trustees can be personally responsible for:

Asset mismanagement – Poor investment or property decisions
Ignoring professional advice – Trying to handle complex issues alone
Premature distributions – Paying beneficiaries before clearing all debts
Tax mistakes – Missing deadlines or making poor tax decisions
Poor communication – Failing to keep beneficiaries informed
Unnecessary litigation – Pursuing costly legal battles

The CRA Clearance Certificate

Before making final distributions, trustees must obtain a Clearance Certificate from the CRA. Without this certificate, trustees remain personally liable for any unpaid estate taxes up to the value of assets they distributed.

High-Risk Situations

Complex assets – Farms, businesses, or valuable real estate requiring specialized management
Significant tax liabilities – Large estates with potential CRA issues
Family conflicts – Beneficiaries already disagreeing or threatening litigation
Outdated wills – Old documents that don’t reflect current circumstances
Reluctant trustees – Named trustees who lack time, capacity, or willingness
Conflict of interest – Trustees who are also major beneficiaries

Benefits of Independent Estate Trustees

Neutrality
Independent trustees have no family relationships or personal interests. They can make difficult decisions without bias or favouritism.

Professional Expertise
Estate trustees understand:

Complex estate laws and tax laws and elections
Asset valuation and management
Legal procedures and deadlines
Negotiation with government agencies

Risk Protection
Professional trustees assume personal liability, protecting your clients from financial risk.

Efficiency
Independent trustees can move estates forward even when beneficiaries disagree or try to delay administration.

Court Preference
Courts often prefer independent trustees in contentious matters, showing your proactive approach to conflict resolution.

Why Estate Lawyers Partner with Smith Estate Trustee Ontario

At Smith Estate Trustee Ontario, we understand the challenges estate lawyers face. Our experience includes:

Many years of handling complex insolvency and estate matters
Licensed by the Office of the Superintendent of Bankruptcy
Extensive experience with high-value and contentious estates
Strong relationships across Ontario
Proven track record in complex tax and asset management situations

Our Approach

We work collaboratively with estate lawyers to:

Assume trustee liability and responsibilities
Handle day-to-day estate administration
Manage beneficiary communications and conflicts
Navigate complex tax situations
Allow lawyers to focus on legal strategy and advice

Results for Your Practice

Partnering with us means:

Protected clients who avoid personal liability
Efficient estate administration even in complex cases
Reduced stress on grieving family members
More time for you to focus on legal work rather than administration
Enhanced reputation for providing comprehensive solutions

Frequently Asked Questions About Independent Estate Trustees and Ontario Estate Administration

What is the difference between an estate trustee and an executor in Ontario Estate Administration?

In Ontario Estate Administration, “estate trustee” is the legal term that replaced “executor” in 1995. They mean the same thing – the person responsible for managing someone’s estate after death. Many people still use “executor,” but the courts and legal documents use “estate trustee.”

Estate lawyers should consider recommending independent trustees when:

The estate has complex assets like businesses or farms
Family members are already fighting or threatening legal action
The named trustee lacks time, skills, or willingness to serve
There are significant tax liabilities or CRA issues
The trustee is also a major beneficiary (creating a conflict of interest)
The estate involves multiple provinces or countries

How much does an independent estate trustee cost?

Professional trustee fees in Ontario typically range from 2.5% to 5% of the estate’s total value. The exact fee depends on:

Estate size and complexity
Time required for administration
Level of family conflict or disputes
Special skills needed (tax planning, business management)
Court involvement or litigation

While this seems expensive, it often saves money by avoiding costly mistakes, family litigation, and personal liability claims.

Can family members remove an independent trustee once appointed?

Removing an estate trustee requires a court application and valid legal grounds, such as:

Breach of fiduciary duty
Conflict of interest
Inability to perform duties
Loss of required qualifications

Simply disagreeing with trustee decisions is not enough. Courts prefer to keep qualified trustees in place rather than create delays and additional costs.

What happens if an estate trustee makes a mistake that costs the estate money?

Estate trustees can be personally liable for losses caused by their mistakes or negligence. Common examples include:

Distributing assets before paying all debts and taxes
Making poor investment decisions without proper advice
Missing important tax deadlines or elections
Failing to properly maintain estate property
Not obtaining required court approvals

Professional trustees carry insurance to protect against these risks, while individual trustees usually don’t.

How long does estate administration typically take in Ontario Estate Administration?

Simple estates with few beneficiaries and no disputes typically take 12-18 months. Complex estates can take several years, especially if they involve:

Business valuations and sales
Real estate in multiple locations
Family litigation or will challenges
Tax disputes with CRA
Foreign assets or beneficiaries

Independent trustees often complete administration faster because they work full-time on estate matters and have experience with complex issues.

What is a CRA Clearance Certificate, and why is it important?

A CRA Certificate of Clearance confirms that an estate has paid all its income taxes. Without this certificate, estate trustees remain personally liable for any unpaid taxes up to the value of assets they distributed to beneficiaries.

Getting clearance typically takes 4-6 months after filing all required tax returns. Many trustees make the mistake of distributing estate assets before receiving clearance, creating personal financial risk.

Can an independent trustee be appointed if the will names someone else?

Yes, courts can appoint independent trustees even when the will names family members. This happens when:

The named trustee declines to serve
The named trustee becomes incapacitated
Conflicts of interest arise
Family disputes make neutral administration necessary
The estate becomes too complex for the named trustee

Estate lawyers can apply to court for trustee replacement or can work with named trustees to bring in professional assistance.

What qualifications should estate lawyers look for in an independent trustee?

Key qualifications include:

Professional licensing (Licensed Insolvency Trustee, lawyer, or accountant)
Specific estate administration experience
Knowledge of Ontario estate administration and recognizing tax issues
Professional liability insurance
Bonding and regulatory oversight
Experience with similar estate types and values
Strong references from other lawyers and clients

How do independent trustees handle beneficiary disputes?

Professional trustees use several strategies to manage conflicts:

Neutral communication
– No family relationships or emotional involvement
Clear documentation
– Detailed records of all decisions and transactions
Regular reporting
– Frequent updates to keep everyone informed
Professional mediation
– Early intervention to resolve disputes
Court applications
– Seeking judicial direction when needed

Their neutrality often helps de-escalate family tensions and allows estates to move forward efficiently.

Ontario Estate Administration Conclusion: Protecting Your Clients and Your Practice

The Stewart Estate case demonstrates that even simple wills can become complex nightmares. Personal liability for estate trustees is real and growing. Smart estate lawyers now recommend independent trustees to protect clients and ensure smooth estate management.

Don’t wait for your clients to face a Stewart Estate situation. Consider recommending Smith Estate Trustee Ontario for your challenging files. We provide the expertise, neutrality, and risk protection your clients need.

Contact Smith Estate Trustee Ontario today. We can support your estate practice and protect your clients from hidden risks in estate administration.

About the Author
Brandon Smith is a Licensed Insolvency Trustee with years of experience handling complex financial and estate matters in Ontario. Smith Estate Trustee Ontario is part of Ira Smith Trustee & Receiver Inc. We provide independent estate trustee services to lawyers and families across Ontario

Contact Information
Smith Estate Trustee Ontario
Part of Ira Smith Trustee & Receiver Inc.

167 Applewood Crescent #6, Concord, ON L4K 4K

P: (647) 799-3312

E: brandon@irasmithinc.com

Brandon Blog Post

DEFAULTING ON A MORTGAGE: THE BEST COURT-APPROVED WAY TO DEBT FREEDOM IN 2020 & BEYOND

Post author By Brandon Smith
Post date September 23, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Defaulting on a mortgage introduction

I just finished reading a defaulting on a mortgage decision of the Ontario Superior Court of Justice released on September 15, 2020. It had to do with a person who had filed a proposal under the Bankruptcy and Insolvency Act (Canada) (BIA). The court case is about the debtor who could not afford to pay all the mortgages on her home. The home was sold on a conditional basis, and a dispute occurred between two potential purchasers. I describe below how the court dealt with the dispute.

That case highlighted for me three things:

what we advise everyone who comes to us for a no-cost initial consultation who cannot afford to keep paying a loan registered against an asset, normally a vehicle or house;
how sometimes a strategic default on a mortgage or vehicle loan can help someone in dealing with all of their debts when they are about to file either a proposal or for bankruptcy; and
the appropriate manner (in my view) the court decided to resolve the dispute between the two potential purchasers.

Defaulting on a mortgage: What we advise debtors

Whenever someone comes to us for a no-cost consultation, we first get financial information from them. We want to understand the nature of their assets and liabilities and their household income and expenses. Through our analysis and discussion, we determine if the person can afford to keep paying that loan or mortgage. We also ask them, if appropriate, are they happy with the asset if it seems that they are paying too much based on the level of secured debt and the market value of the asset.

If the person says they would love to get rid of the asset, that they have no or little equity in, then we look at the impact of using defaulting on a mortgage as a strategic default so that any shortfall experienced by the lender will be an ordinary unsecured debt which can be discharged through either a proposal or bankruptcy.

Obviously, the person has to have a realistic option to replace that asset or have an alternate plan:

Can they lease a different vehicle at a lesser cost before filing which they can afford and therefore will not default on?
Is public transit a realistic option as opposed to having their own vehicle for the time being?
Is there a relative who will co-sign for them so that they can lease or buy a more reasonable cost vehicle?
Can they rent somewhere that they can afford for much less than what they have been paying on their home and then look at buying something after they are through their debt restructuring when they are back on their feet?

As I said, we do this all the time when working with people to look at all of their options for financial restructuring. We especially look at in the case of a home, does defaulting on a mortgage make financial sense?

Defaulting on a mortgage: What is a strategic default?

When the market value of your home is less than the amount owed on the mortgage, that mortgage debt is underwater. To put it simply, an underwater home mortgage loan has a higher remaining principal balance than the value of the house.

Homeowners with little or negative home equity can find themselves in this situation when housing prices fall, even if they are current on all their payments. It’s also described as being “upside-down” or having “negative equity” in the residence.

When it doesn’t make sense to keep using your cash to stay current on that underwater mortgage, rather than using that money for other necessary expenses, defaulting on a mortgage as a strategic default may be your only option. After establishing that you can’t see your property rising in value in a reasonable period to restore some of your equity, you may plan to just stop making mortgage repayments. You’ll default and eventually, the lender will enforce on its mortgage, take over the property and sell it.

Even if you have equity in the home, but you can no longer afford to keep up the payments, you may find that putting your home up for sale is your best option. Again, you need to have a realistic plan in place on where you will live once your home sells. Depending on the situation, you might decide to also create a strategic default by defaulting on a mortgage at the same time you list your home for sale. Once sold, the net proceeds of the sale, representing the equity in the home, can be used to help fund the proposal.

During the financial crisis in the United States, a strategic default on underwater homes by defaulting on a mortgage became progressively typical. Such home loans came to a head at 26 percent of all mortgaged homes in 2009. Many house owners did the math and made the agonizing however rational decision to leave the home and let the lender deal with the property and its underwater mortgage.

As I explain in the next section, in most cases, you can just walk away from such a loan in the United States. Unfortunately, it is not so easy for Canadians to walk away from their homes and defaulting on a mortgage. But there is one way to do it in Ontario.

Defaulting on a mortgage: Walking away from a mortgage in Canada is not simple

In the United States, it is normal for a mortgage to be “non-recourse“. What this means is that the lender can only look to the value of the property it has mortgage security against to repay the mortgage loan. If the lender suffers a shortfall, unless there is a separate guarantee given, the lender cannot sue the mortgagor, the borrower, for any shortfall. So if you have negative equity, defaulting on a mortgage may be the right decision for such a US resident.

In Canada, it is normal for a mortgage to be “full recourse“. This means that if the lender suffers a shortfall on the mortgage debt, the terms of the mortgage loan automatically allows the mortgagee, the lender, to go to court and get a judgment against the borrower for the amount of the shortfall. So defaulting on a mortgage needs to be done in conjunction with a plan to deal with the shortfall debt.

For this reason, walking away from a mortgage in Canada is not simple. However, there is one way to do it. Once the shortfall is known and, either before or right after the lender gets a judgment, the debtor can file a proposal under the BIA to restructure all their unsecured debt. If that is not practical, then bankruptcy is the other option.

Now the shortfall is caught in the insolvency proceeding. The filing invokes an automatic stay of proceedings so that the lender cannot take action to try to execute against any of the assets or income of the debtor who has filed. The debt is caught in the insolvency proceeding and will be dealt with in that forum.

Defaulting on a mortgage: The first sale

The court case deals with a woman in Ontario who had begun a proposal process under the BIA. The debtor owned (at least) two residential properties. The property in question had 4 mortgages registered against it. The other property had multiple mortgages against it, including a mortgage as additional security for the 4th mortgage loan against the property in question. To make matters worse, there was also a lien registered against the same residential property in favour of the Canada Revenue Agency (CRA) in the amount of $308,258.

The 4th mortgage was totally underwater. The debtor entered into an agreement of purchase and sale. The sale of the home would result in a shortfall of over $700,000. It would not provide any funds for the 4th mortgage. It would only partially repay the 3rd mortgage. So, one of the conditions of sale was that the vendor would either get a discharge of all of the mortgages or a court order vesting title in the home to the purchaser clear of all mortgages and other registrations against the title. The 4th mortgagee’s charge against the other home, which was also in 4th position, was also totally underwater.

As part of the proposal proceedings, the debtor brought a motion to the court to approve the sale (supported by appraisals) and get the vesting order to vest title clear of all registrations against the title. The debtor was not only going to be defaulting on a mortgage but on at least 2 of them!

Defaulting on a mortgage: The 4th mortgagee opposes the sale approval motion

The 4^th mortgagee appeared at the motion with her lawyer to get an adjournment in order to oppose the authorization and vesting order and enable her to acquire the home on the same terms but also for even more money. This would enable the 4^th mortgagee to possibly recover something on her outstanding mortgage loan at a later date.

The purchaser or the purchaser’s lawyer was not told in advance that there was going to be an opposition to the application. Therefore, the purchaser’s lawyer did not attend the hearing.

At the hearing, the court authorized the sale and vesting order yet suspended its issuance for 9 days to allow the 4^th mortgagee the chance to make an offer. She did, on the very same terms yet $5,000 greater than the approved offer. She also had the deposit funds put into her lawyer’s trust account. She then made a motion for the approval of her offer and vesting order. Not surprisingly, and as to be expected, the first purchaser objected to her motion.

Defaulting on a mortgage: What the court decided

The 4^th mortgagee’s lawyer argued that the first purchaser’s agreement of purchase and sale is nullified since there was neither discharges provided nor a binding court order vesting title free and clear from all mortgages and the CRA registration by the closing date. Therefore, it cannot now come to court and try to extend the closing of a deal that is already dead.

Legal counsel for the first purchaser argued that if the court approves the 4^th mortgagee as the buyer, the sales procedure will be unfair. The first purchaser was not notified that there would be any type of objection to its motion for the approval and vesting order of its deal. Although the first purchaser can be criticized for not keeping up with what was happening both before and on the date of its court motion, it is still a good-faith buyer who took part in a fair sales process. The 4^th mortgagee had every right to bid on the subject property when it was initially listed and did not do so.

The court decided that ultimately, this situation boils down to the process being fair and seen as being fair. So given all of this, the court decided:

All previous agreements of purchase and sale for the subject property are terminated.
A new sales process will be carried out where any of the interested parties, being the first purchaser and the 4^th mortgagee, can send their best offers to the Trustee, on a confidential basis.
The offers are to be submitted and evaluated by the Trustee by September 18, 2020, with the closing of September 25, 2020.
In the event, the winning bid is not able to close on September 25, 2020, the other party may purchase the property.
If court approval of the successful offer and a vesting order is needed, a draft order may be provided to the court.
The proceeds of the sale, presumably net of the realtor commission, the vendor’s real estate legal fees, and any HST that may be applicable on the sale, are to be paid into court in order to figure out the proper amount and priority of the charges against the property.

As neither side was totally successful, the court did not award costs to any party. This seems to be the fairest outcome to all concerned.

Defaulting on a mortgage: A proposal is your best option

So as you can see, it is possible to use the proposal process under the BIA either to sell a home you can no longer afford to keep which has equity. The net sales proceeds can be used to partially fund the proposal. A proposal under the BIA is the only government-approved debt settlement plan.

Alternatively, you can use the proposal process to sell the home where you are defaulting on a mortgage where there are one or more mortgages underwater. The proposal process will compromise the resulting ordinary unsecured debt arising from the shortfall claim of underwater mortgage lenders. An application can be made to the court for an order approving the sales process, the sale, and obtaining a vesting order to complete the sale.

We have helped many people and companies do exactly that when defaulting on a mortgage.

Defaulting on a mortgage summary

I hope you have enjoyed this defaulting on a mortgage Brandon’s Blog. Hopefully, you have better insight now into the fact that there is a way to get out of a secured loan, especially a mortgage. It will require an insolvency proceeding to settle all your debts, including any shortfall on the sale of the secured asset.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges.
It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Tags Bankruptcy, Bankruptcy and Insolvency Act, BIA, court, court order, defaulting on a mortgage, financial information, full recourse mortgage, Ira Smith Trustee, market value, negative equity, non recourse, Ontario Superior Court of Justice, proposal, sale approval, sales process approval', strategic default, underwater mortgage, vesting order

Brandon Blog Post

ZOOMING RULES OF CIVIL PROCEDURE FOR SUPERIOR COURT OF JUSTICE TORONTO BANKRUPTCY COURT

Post author By Brandon Smith
Post date July 13, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to an audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast.

Rules of civil procedure introduction

Today’s blog is taking a lighter look at new rules of civil procedure for a Zooming video conference world. These are my somewhat tongue in cheek suggestions for the Superior Court of Justice Toronto bankruptcy court.

I did not make these up. I am taking it from an actual Standing Order For The Conduct of Evidentiary Video Conference Hearings. It was issued by the Honourable D. H. Lester, Circuit Judge in the Circuit Court of the Fourth Judicial Circuit, Clay County Florida. It was sent to me by a Florida bankruptcy attorney friend of mine. I have just amended them for the Ontario Superior Court of Justice Toronto bankruptcy court context.

I have not seen any such pronouncements from the Ontario Superior Court of Justice Toronto Bankruptcy Court (and doubt that I will!). Below would be my proposed amendments to the R.R.O. 1990, Reg. 194: RULES OF CIVIL PROCEDURE (Rules of Civil Procedure) under the Courts of Justice Act, R.S.O. 1990, c. C.43. Everything I am suggesting below was actually in the Florida Standing Order.

New rules of civil procedure 46.02

Rules of civil procedure 46 through 51, sets out the rules of civil procedure for pre-trial procedures. I propose a new rule, number 46.02, to read:

46.02 Prior to any video conference hearing, all counsel, parties and witnesses shall familiarize themselves with the operation of Zoom and its capabilities. Instructions on Zoom operation may be found at https://zoom.us/resources. The following procedure will be followed:

(a) Enter your name on your Zoom profile so that you can be identified by the Judge.

(b) Devices must be fully charged prior to the hearing with a charger accessible in the event it becomes necessary.

(c) Devices must remain muted unless the participant is speaking. All participants must be in a location that is free of extraneous noise or visual distraction.

(d) A virtual background is not permitted.

(e) Hearings are court proceedings. Appropriate courtroom attire for counsel, parties and witnesses is expected.

It is too bad that virtual backgrounds would not be allowed in the Toronto bankruptcy court. I personally would want to attend a bankruptcy court hearing with this background:

rules of civil procedure superior court of justice toronto bankruptcy court — Photo courtesy of Zoom.us rules of civil procedure

As far as appropriate courtroom attire, I asked my friend if a judge has made him stand up yet to see what he was wearing below the waist. He said he has not yet been asked to do so, but it could happen.

New Superior Court of Justice rules of civil procedure for witness testimony

Rule 53 of the Rules of Civil Procedure deals with evidence at trial. I propose a new rule 53.01.1 which would go something like:

53.01.1 (a) At least three business days prior to hearing, the parties shall e-mail to the court a list of all witnesses expected to be called, with full names, e-mail addresses and cell phone numbers. Real names must be used. Court reporters are meeting participants. If a court reporter will be present, the reporter’s name and e-mail address shall be provided along with the witness list.

(b) After any opening statements, when a witness is called, the judge will admit the witness from the waiting room. After testifying, the witness will be removed electronically from the hearing.

(c) Witnesses must be alone. Prior to testifying and after testifying, witnesses shall scan the room to confirm they are the only person in the room. However, if an interpreter is necessary, interpreters may be either in the room with a witness or a meeting participant. The parties list of witnesses should indicate whether a witness will be testifying through an interpreter. The interpreter’s name and e-mail address must be provided to the judge in the list of witnesses.

(d) Passing of electronic notes during testimony and recording of the proceedings is forbidden.

(e) All other electronic devices must be turned off.

(f) A lawyer and a party may be in the same room. However, the camera must capture both. No one else may be present in the room.

New rules of civil procedure for documents in writing in Superior Court of Justice proceedings

I propose new rules of civil procedure number 4.01.1:

4.01.1 (a) At least five days prior to hearing, the lawyers shall confer

to disclose exhibits and other documents in writing expected to be used and to stipulate to as many as possible.

(b) All documents in writing must be delivered, e-mailed to the judge or e-filed at least three business days prior to the hearing. They should be pre-marked, identifying the party and exhibit number. Exhibits over ten pages in the number of pages shall be either delivered to the judge or e-filed in searchable PDF format with computer-generated page numbers. The parties must also provide an index that includes the number of pages.

(c) All lawyers, the judge and the court reporter must have a copy of all documents in writing. Witnesses must have a copy of all documents in writing to which they will testify or for which they will lay the predicate for admission.

(d) Documents in writing can be shared during the video hearing using a shared screen on Zoom.

Rules of civil procedure for the Superior Court of Justice

So this is what was in the Florida Standing Order for a Zooming video environment. I hope you enjoyed this somewhat light-hearted Brandon’s Blog.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags bankruptcy court, courts of justice act, Ira Smith Trustee, Ontario Superior Court of Justice, rules of civil procedure, Superior Court of Justice, toronto bankruptcy court, witness testimony

Brandon Blog Post

CANADA BANKRUPTCY AND INSOLVENCY ACT GRANTS STAY OF EXECUTION

Post author By Brandon Smith
Post date August 28, 2019

canada bankruptcy and insolvency act

Canada bankruptcy and insolvency act introduction

The Canada Bankruptcy and Insolvency Act is a federal statute. It attempts to balance the rights of an insolvent debtor with the rights of creditors to get paid. One of those balancing acts is that when you file under the statute, the person filing is granted a stay of proceedings. What that means is that debt collection and enforcement activities are stopped and cannot continue without the prior permission of the Court.

I recently read a very interesting decision of the Ontario Superior Court of Justice out of Ottawa, ON. What that case also shows is that if the insolvent and the then bankrupt person just told the truth, he would have been much better off.

Before getting into the actual case, there are a few questions that I am regularly asked that I would also like to answer. I think those answers will also help with understanding this case.

**What is the purpose of the Canada Bankruptcy and Insolvency Act?**

The main purpose of the Canada Bankruptcy and Insolvency Act is to help the honest but unfortunate debtor. It is designed to allow a person or a company to get financial rehabilitation through financial restructuring. It also allows a person the same opportunity to shed their debts through bankruptcy.

As mentioned above, at the same time, the rights of the creditors to get paid are also balanced. So that is why in a true restructuring, the creditors must receive more money than if the person or company went bankrupt. That is also why in a bankruptcy, the debtor must give up all their assets to the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee). The only assets not given up are those for which there is an exemption under either provincial or federal law. That is also why there is the concept of surplus income payments in a personal bankruptcy filing.

The presumption is that the debtor is honest but unfortunate. That is both before and during their insolvency process. As you will see from the case description below, the debtor was not honest and it is his lies that got him into trouble.

The insolvency process begins with the requirement that in order to obtain relief from debt, the insolvent debtor will be truthful. That is why a filing is initiated by a sworn statement of affairs.

Is insolvency a criminal offence?

As you may recall from some of my prior Brandon’s Blog posts, being insolvent is a financial condition. It is that:

your debts are greater than your assets;
if you liquidated your assets there would not be enough money to pay off your debts in full; and
you have generally ceased paying your debts when they come due.

So becoming insolvent is not a criminal offence.

Similarly, filing for either a consumer proposal, Division I Proposal or for bankruptcy is not a criminal offence. However, if you really are not the honest part of the honest but unfortunate person the Canada Bankruptcy and Insolvency Act is designed to help, you must seek the advice of a lawyer before filing anything.

There are also certain offences a person could commit under the actual bankruptcy statute. Some are quasi-criminal in nature. Again, if you think you are in trouble, you need the advice of a lawyer.

canada bankruptcy and insolvency act

Now for the case – ***Re Brennan*, 2019 ONSC 4712 (CanLII)**

On August 8, 2019, this decision of The Honourable Mr. Justice Kershman was released. The case involved the bankruptcy of Mr. Lawrence Brennan (Mr. Brennan) and his creditor, Mr.André Robert (Mr. Robert).

Mr. Robert made an application to the Court to lift the stay of proceedings stopping Mr. Robert from enforcing his judgment against Mr. Brennan’s asset. Mr. Robert said that Mr. Brennan supplied incorrect and deceptive details relating to the presence of a Registered Retirement Savings Plan (RRSP) throughout a judgment debtor exam on July 10, 2018.

Mr. Robert brought this motion for:

An Order stating that the stay of proceedings according to sections 69 to 69.31 of the Canada Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 does not apply in regard to Mr. André Robert, yet is restricted to the seizure of Mr. Brennan’s RRSP with the Lawyers Financial Investment Program.
An Order proclaiming that Mr. Robert will be qualified to proceed with his enforcement process for repayment of his judgment, plus interest and the cost of enforcement restricted to Mr. Brennan’s above-noted RRSP.
Indemnification for the costs of this motion.

Mr. Robert’s argument was that, had it not been for Mr. Brennan’s bankruptcy, there would be no stay of proceedings and he would have the ability to take Mr. Brennan’s RRSP according to the Execution Act, R.S.O. 1990, c. E.24.

The honest but unfortunate debtor

Mr. Robert is a lawyer. Mr. Brennan and others sought and obtained his legal advice. Mr. Robert then billed Mr. Brennan and each of his colleagues for the legal work. They thanked Mr. Robert by not paying him.

Mr. Robert went to Court to claim his legal fees and won. He then sent the Sheriff to seize any assets that could be found belonging to the defendants, including Mr. Brennan. That exercise awarded Mr. Robert with the princely sum of just under $65. So, Mr. Robert then notified Mr. Brennan that he was required to attend a judgment debtor examination. The purpose of this exam was for Mr. Brennan to answer questions, truthfully under oath, as to the nature, extent and location of all of his assets.

Throughout the judgment debtor exam, Mr. Robert asked Mr. Brennan if he possessed any kind of RRSPs. Mr. Brennan said, under oath, that he did not. This response was substantiated by Mr. Brennan’s written financial form, which was finished by Mr. Brennan as a component of the examination under oath.

It turns out that Mr. Brennan lied under oath to Mr. Robert. Seventeen days later, Mr. Brennan filed for bankruptcy. In his sworn statement of affairs completed as part of his bankruptcy filing, Mr. Brennan attested that he owned an RRSP in the amount of $13,017.00 held by the Lawyers Financial Investment Program.

Mr. Brennan may have been unfortunate, but prior to his assignment in bankruptcy, he was not honest.

Seizure of an RRSP – in bankruptcy and no bankruptcy

The evidence before the Court was that there were no contributions to Mr. Brennan’s RRSP in the 12 months prior to his date of bankruptcy. There was also evidence that there was no insurance element to the RRSP either.

This is important for 2 reasons:

If there is an insurance element to an RRSP, and the beneficiary is what is called a “designated beneficiary”, normally a spouse, parent, child or grandchild, then the RRSP is exempt from seizure under Ontario law.
In bankruptcy, an RRSP is exempt from seizure under federal law. The only amount that can be recouped by a Trustee is any contributions made to the RRSP within the 12 months prior to the date of bankruptcy.

So in this case, none of those conditions existed. The issue before the Court was because under Ontario Law, absent a bankruptcy, a judgment creditor can execute against a defendant’s RRSP. In other words, if there is no bankruptcy, in Ontario, the judgment creditor can seize the RRSP.

canada bankruptcy and insolvency act

Mr. Brennan’s defence

Mr. Brennan represented himself in Court. His defence consisted of that he:

Did not understand that he had any RRSPs in his name.
Informed Mr. Robert around one month prior to the examination that he would certainly need to go bankrupt.
Needs the Court to have pity for his circumstances.

Certainly not the most compelling defence in the circumstances.

The Court agrees with Mr. Robert

The Court went through an analysis of the Canada Bankruptcy and Insolvency Act as well as the relevant Ontario laws. The Court concluded that:

The RRSP currently in this bankruptcy is exempt from seizure but was available to be seized before the bankruptcy. If Mr. Brennan had been truthful in his examination under oath, Mr. Robert would have seized the RRSP through the Sheriff in enforcing his judgment.
Therefore, the Court lifted the stay according to section 69.4 of the Canada Bankruptcy and Insolvency Act to be equitable so that Mr. Andre can seize them.
To alleviate any kind of tax obligation effects, the Court ordered that 30% of the RRSP should be subtracted at source and also to the Canada Revenue Agency to the credit of Mr. Brennan’s current year income tax account. The remaining amount of the RRSP is to be paid to the Sheriff of the Judicial District of Ottawa, who will disperse it in conformity to the Execution Act and the Creditors Relief Act.

The moral to Mr. Brennan’s story

Although the Court decision does not say it, Mr. Brennan must have not obtained any legal advice before participating in the judgment debtor examination. Any lawyer hearing his story would have told him exactly what I tell every person who comes to my office to talk about an insolvency proceeding. Be honest and truthful.

Mr. Brennan did a really dumb thing. Part of the evidence that came out in Court is that he went to see the Trustee who did his bankruptcy filing six weeks prior to the July 10, 2018 judgment debtor examination to discuss his financial situation. He must have talked about the RRSP then.

If Mr. Brennan was honest and truthful at his judgment debtor examination, he could have filed for bankruptcy before the Sheriff managed to seize his RRSP. In that case, Mr. Brennan would have told the truth and his RRSP would have been exempt from seizure in his bankruptcy.

So instead of telling the truth and keeping his RRSP after bankruptcy, Mr. Brennan lied and therefore lost his RRSP, notwithstanding his bankruptcy.

That is the moral of Mr. Brennan’s story. By telling the truth and then becoming the honest but unfortunate debtor, the Canadian bankruptcy system will protect you.

Canada Bankruptcy and Insolvency Act summary

Are you an honest but unfortunate person in financial trouble? Have you run your company in an honest fashion but through various circumstances, the company’s debts are greater than its assets. Is there just not enough cash to pay all the bills?

If so, you need to call me today. As a licensed insolvency trustee (formerly called trustee in bankruptcy) we are the only professionals licensed, recognized as well as supervised by the federal government to give insolvency assistance. We are also the only authorized party in Canada to apply remedies under the Bankruptcy and Insolvency Act (Canada). I can definitely help you to choose what is best for you to free you from your financial debt issues.

Call the Ira Smith Team today so we can get free you from the stress, anxiety, and discomfort that your cash issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Starting Now.canada bankruptcy and insolvency act

Tags 2019 ONSC 4712 (CanLII), Bankruptcy, bankruptcy trustee, canada bankruptcy and insolvency act, Consumer Proposal, honest but unfortunate, insolvent debtor, Ira Smith Trustee, is insolvency a criminal offence, licensed insolvency trustee, Ontario Superior Court of Justice, Re Brennan, restructuring, RRSP, statement of affairs, surplus income, trustee, what is the purpose of the bankruptcy act

Brandon Blog Post

MOVE FAST TO OBJECT TO AN ONTARIO RECEIVERSHIP COURT ORDER

Post author By Brandon Smith
Post date April 24, 2019

What is a receiver in insolvency?

A recent case heard in the Court of Appeal for Ontario clarifies what the time limit is to object to an order made in a Court-appointed receivership of a company in Ontario. The bottom line is you better move fast. Before I describe this very interesting decision, I should first remind newer readers on some receiver 101 basics.

What is it?

A receivership is a remedy for secured creditors to enforce their security. In the event, the company defaults on its loan agreement, normally by non-payment, the secured creditor. There are two types of these proceedings in Canada; 1) privately appointed or; 2) court appointed. A receiver might additionally be selected in an investor dispute to complete a task, liquidate assets or market a business.

Typically, the process begins with the secured creditor consulting with a Receiver. If it is decided that there should be a receiver appointed, the secured creditor then makes a choice. They can either appoint the receiver by written appointment letter (privately appointed) or make a motion to the Court for an Order appointing the receiver (court-appointed).

The Bankruptcy and Insolvency Act (Canada) (BIA) states that only a licensed insolvency trustee (formerly called a bankruptcy trustee) can act as a receiver. A privately appointed receiver acts on behalf of the appointing secured creditor. A court-appointed receiver has a duty of care to all creditors.

What are the duties of a receiver?

The receiver’s first duty is to take possession and control of the assets covered by the secured creditor’s security in a private appointment, or all the assets indicated in the court order in a court appointment. The receiver must decide whether it can get a higher value for the assets if it operates the business. Alternatively, the receiver may decide that the risk of operating the business is not worth it in terms of any meaningful increase in the value of the assets.

The receiver then develops a plan to on the running of the business and for the eventual sale of the assets. The type of business and the nature of the assets will dictate what approach the receiver will take. In the meantime, the receiver must inventory all the assets, protect them and make sure there is adequate insurance in place for what the receiver wishes to do in terms of running the business and selling the assets.

In a private appointment, the receiver needs to get the approval of the secured creditor before embarking on the business and asset plan. In a court appointment, the receiver requires the approval of the court.

What happens when a company goes into receivership?

When the company goes into receivership, senior management and the Directors lose most of their authority for decision making. The Directors’ general corporate duty of maintaining corporate records continues, but any decision-making about the running of the business or its assets will not be effective. This is especially true in a court appointment. The subject of Director liability is too broad to start mentioning in this Brandon’s Blog. i am planning to soon write a blog on that topic.

Management’s and employees’ responsibilities about the business in a practical sense will stop upon the appointment of the receiver. Their advice and help are only required if requested by the receiver. They certainly will not be paid for any efforts unless the receiver agrees in writing to make money available for their pay.

Court of Appeal for Ontario says you better move fast

Why the confusion? Isn’t the process for an appeal of a court order straightforward? The confusion comes about because, in the standard model Appointment Order of the Commercial List of the Ontario Superior Court of Justice, the court-appointed receiver is appointed under two statutes:

Section 101 of the provincial Ontario Courts of Justice Act, RSO 1990, c C.43 (CJA).
The federal BIA, section 243(1).

The applicant, in this case, was the purchaser of assets from a court-appointed receiver of a company. One of the standard provisions in the Appointment Order is that anyone wishing to take legal action against the receiver must first get the approval of the court to do so.

They brought an application for authorization to sue the receiver over a disagreement arising from the purchase of the assets from the receiver under the asset purchase agreement. On May 17, 2018, the lower court judge dismissed the application, finding that their allegations were not supported by the evidence. On November 8, 2018, the same judge refused their demand to resume the application based on new evidence.

The applicant filed appeals from both decisions. Its notices of appeal were on time under the provincial CJA, under which there is a 30-day time limit for commencing an appeal. They were late under the federal BIA, which imposes a 10-day time limit.

The lower court judge dismissed the appeals. He held that the BIA was the governing authority for the appeal, not the CJA. He stated that the origin of authority under which the receiver was appointed was section 243( 1) of the BIA and therefore appeals are governed by the BIA, not the CJA. He further went on to say that the appointment also under the CJA did not have the result of ousting the BIA as the source of authority. He further held that it also cannot supersede the federal BIA holds paramountcy over the provincial CJA.

receivership

Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269

The Court of Appeal for Ontario decision was released on April 8, 2019. The appeal court found that this was a very narrow issue to decide so that it did not have to get into the merits of the case of the purchaser wanting to sue the receiver over a disagreement arising from the purchase of the assets from the receiver under the asset purchase agreement.

The Court of Appeal rejected the applicant’s appeal and did not find that the chambers judge made any errors. They said that when the order sought to be appealed was made in reliance on jurisdiction under the BIA, the proper appeal path is the BIA.

The lower court, the Ontario Superior Court Justice Commercial List, rejected the purchaser’s demand to sue the receiver, which is the decision the applicant wishes to appeal. The requirement to get leave of the court to sue the receiver comes from the Appointment Order. The court’s authority to include that arrangement order comes from the statutory power to appoint a receiver under s. 243( 1) of the BIA.

The Court of Appeal agreed that the legal power to appoint a receiver is also found in s. 101 of the CJA. But considering that authority for the leave to take legal action against the receiver comes from the BIA in spite of that the receiver was appointed under both laws, the appeal is governed by the BIA as a matter of paramountcy.

Therefore the Court of Appeal for Ontario dismissed the applicant’s appeal and awarded costs against them.

Does your company need to move fast?

Does your company have way too much debt? Is your company’s cash flow not enough to meet all of its financial obligations? Are you afraid that your company’s main secured creditor is about to demand repayment of its loan in full and you just can’t move fast enough to save your company?

If you answered yes, call the Ira Smith Team today so we can end the tension and anxiousness that these financial problems have triggered. We will develop a plan special for your company, to save it from extinction.

Call the Ira Smith Team today. We have years and generations of experience restructuring and saving companies looking for financial restructuring or a debt settlement approach. As a licensed insolvency trustee, we are the only professionals acknowledged, accredited and supervised by the federal government to provide insolvency advice to save companies.

You can have a no-cost analysis to aid you so we can repair your company’s debt problems. Call the Ira Smith Team today. This will certainly allow you to get back to Starting Over Starting Now.

Tags Bankruptcy, Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, cja, commercial list, company goes into receivership, court appointed, court appointed receiver ontario, courts of justice act, duties of a receiver, licensed insolvency trustee, Ontario Superior Court of Justice, privately appointed receiver ontario, receiver in insolvency, receivership, receivership court order, standard model receivership order

Brandon Blog Post

TRUSTEE ACT ONTARIO BY A TORONTO BANKRUPTCY TRUSTEE

Post author By Brandon Smith
Post date February 20, 2019

Trustee Act Ontario: Introduction

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.

My blog ADMINISTRATION OF ESTATES ACT CANADA: EASY FOR TORONTO BANKRUPTCY TRUSTEE TO DO, I explained why a LIT is a right professional to lead the administration of Estates Act Canada.

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.

I discussed in my blog ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET, the experience of a LIT in the posting of security by way of an insurance company bond.

Actions for torts

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.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

trustee act ontario

Tags Bankruptcy and Insolvency Act, bankruptcy trustee, BIA, court appointed receiver, estate administration act ontario, estate trustee, estate trustee ontario, estates act ontario, executor, Ira Smith, licensed insolvency trustee, LIT, Ontario Court of Appeal, Ontario Superior Court of Justice, section 38 trustee act ontario, Soundair Corp., Toronto bankruptcy trustee, trustee, trustee act ontario

Brandon Blog Post

ESTATES ACT ONTARIO: TORONTO BANKRUPTCY TRUSTEE REVEALS HIDDEN SECRET

Post author By Brandon Smith
Post date February 13, 2019

Estates Act Ontario: Introduction

I am continuing my series of blogs to show how it would be very natural 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 under the Estates Act Ontario. In this blog, I am going to focus on that piece of provincial legislation that guides the activities of an estate trustee.

In my blog TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I set the stage by going over some basics when it comes to a deceased estate and why a LIT would be very comfortable with those basic requirements for an administration of a deceased estate. In the blog, TRUSTEE OF PARENTS ESTATE: DO I REALLY HAVE TO?, I described why in some cases parents trying to do the right thing by making all their children an estate trustee could turn out very wrong.

In this and the next two blogs, I want to focus on the three main Ontario statutes that govern the conduct, duties and responsibilities of an estate trustee of a deceased estate. The three statutes that I will talk about are:

As you have probably guessed by now, in this blog, I will show how a bankruptcy trustee would be very familiar with the workings of the Estates Act.

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.

Provisions a LIT is familiar with

Jurisdiction

Section 5 of the Estates Act Ontario states that letters of administration shall not be granted to a person not residing in Ontario. Similarly, a bankruptcy trustee must be licensed by the Superintendent of Bankruptcy in each province the LIT wishes to practice in.

Posting of security

Section 14(2) of the Estates Act Ontario requires that the administrator appointed to administer a deceased estate may be required to post security as the court might require.

Section 5(3)(c) of the Bankruptcy and Insolvency Act (Canada) (BIA) states that the Superintendent of Bankruptcy can:

“…require the deposit of one or more continuing guaranty bonds or continuing suretyships as security for the due accounting of all property received by trustees and for the due and faithful performance by them of their duties in the administration of estates to which they are appointed, in any amount that the Superintendent may determine…”

The posting of security is another common area that a LIT understands well.

Court can appoint

Section 29 of the Estates Act Ontario deals with the appointment of an estate trustee. This section gives the Ontario Superior Court of Justice the authority to appoint an estate trustee where:

a person dies intestate;
the estate trustee named in the will refuses to prove the will;
where the named estate trustee(s) ask another person be appointed to administer the deceased’s estate; or
where there are special circumstances.

Section 243(1) of the BIA gives the Court the power to appoint a receiver. So, assessing the appropriateness of acting as a Court officer and providing consent to do so is something a LIT is quite familiar with.

Accounts to be rendered

Section 39 of the Estates Act Ontario requires the estate trustee to “…render a just and full account…” of the estate trustee’s activities. The LIT is fully familiar with this process. In both a Court-appointed receivership and a bankruptcy administration, the LIT must submit full and detailed accounts showing its activities, fees and disbursements for approval by the Court. This approval process is called taxation. This is another common area between the duties of an estate trustee administering a solvent deceased’s estate and the duties of a LIT.

Admitting and disallowing claims

Sections 44 and 45 of the Estates Act Ontario deals with the rules to be followed in contesting claims made against the deceased’s estate. The LIT is very familiar with this process. Section 135 of the BIA deals with the admission and disallowance of proofs of claim and proofs of security.

The LIT is a perfect party to be able to decipher claims made against a deceased’s estate and follow the provincial statute in the allowance and disallowance of claims.

Disputes as to ownership

Section 46 of the Estates Act Ontario describes the process for handling the claim by any third party to ownership of personal property in the estate not exceeding $800 in value. There are steps in the BIA that a LIT must follow when faced with claims of ownership of property by a third party in the possession of the bankrupt. So resolving such disputes is very familiar to the LIT.

Summary

I hope that in this blog I have successfully made the case that the provisions of the Estates Act Ontario outlining the responsibilities of an estate trustee tracks very closely what a LIT does 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 an estate trustee as described in the Estates Act Ontario.

In my next blog, I am going to write a similar comparison. It will be about the requirements outlined in the Estates Administration Act and how a LIT is most familiar with them also.

In the meantime, if you have any questions at all, contact the Ira Smith Team.

Tags Administrator, Bankruptcy, Bankruptcy and Insolvency Act (BIA), bankruptcy trustee, Canada, court appointed receiver, Debt, estate trustee, estates act ontario, estates administration act, Ira Smith, LIT, Ontario Superior Court of Justice, Superintendent of Bankruptcy, Toronto bankruptcy trustee, Trust law, trustee, trustee act

Insolvency Trustee Court Order: Introduction

The Superior Court’s Insolvency Trustee Court Order Appointing the Receiver

The Problem: Misused Investor Money

What Standard of Proof Was Needed?

Reading the Partnership Agreements

Why Include All Properties Under One Receiver?

Insolvency Trustee Court Order: The Court of Appeal Upholds Investor Protection

The Main Argument on Appeal

The Court of Appeal’s Strong Response

The Final Decision

The Foundational Role of a Licensed Insolvency Trustee in Canada

Who Is a Licensed Insolvency Trustee?

The Law That Guides Everything We Do

Federal Oversight: The Office of the Superintendent of Bankruptcy

Our Core Responsibilities

Understanding the Necessity of an Insolvency Trustee Court Order in Insolvency Proceedings

What Is an Insolvency Trustee Court Order?

Why Court Involvement Is Essential

What Requires Court Approval?

Key Scenarios Requiring a Licensed Insolvency Trustee to Obtain an Insolvency Trustee Court Order

Approval of Trustee Fees and Administrative Costs

Authorizing Unusual or Complex Transactions and Asset Sales

Resolving Disputes Among Stakeholders

Approving Debtor Proposals and Restructuring Plans

Modifying, Annulling, or Terminating Insolvency Proceedings

Addressing Trustee Liability or Allegations of Misconduct

The Far-Reaching Significance of Judicial Oversight in Insolvency

Protecting the Interests of All Parties

Ensuring Transparency, Accountability, and Due Process

Upholding Public Confidence in the Canadian Insolvency System

The Ultimate Framework for All Decisions

Consequences of Acting Without a Necessary Insolvency Trustee Court Order

Potential Ramifications for the Licensed Insolvency Trustee

Adverse Impacts on the Insolvency Estate and Stakeholders

Frequently Asked Questions: Insolvency Trustee Court Order

What is a Licensed Insolvency Trustee?

What does a Licensed Insolvency Trustee actually do?

What law governs Licensed Insolvency Trustees in Canada?

Who oversees Licensed Insolvency Trustees?

What is an insolvency trustee court order?

Why do courts get involved in insolvency proceedings?

When does a Licensed Insolvency Trustee need a court order?

What happens if a trustee acts without getting a required court order?

What standard of proof is needed to appoint a receiver in regulatory cases?

Why does this matter?

Why did the Cacoeli court order cover all properties, even those with secured creditors?

Insolvency Trustee Court Order Final Thoughts: The Licensed Insolvency Trustee’s Role in a Regulatory Receivership

Need Help With Debt or Insolvency Issues?

Ontario Estate Administration: Role and Responsibilities of an Executor

Gathering and Protecting Assets

Applying for Probate

Managing Estate Finances

Paying Debts and Bills

Communicating with Beneficiaries

Ontario Estate Administration: Probate Process in Ontario

Initiating the Process

Evaluating Assets

Real Estate Valuation

Filing the Application

Court Forms and Fees

Distributing Assets

Payment Priority Debts must be paid in this order:

Handling Taxes and Disputes

Tax Responsibilities Estate trustees must handle multiple tax filings:

The Growing Problem: When Ontario Estate Administration Goes Wrong

The Stewart Estate: A Case Study in Estate Complications

The Original Plan

What Went Wrong

Ontario Estate Administration Court Decisions: Key Lessons for Estate Lawyers

Ontario Superior Court Ruling (2025 ONSC 2275)

Ontario Estate Administration: Court of Appeal Decision (2025 ONCA 575)

Ontario Estate Administration: The Hidden Risks Estate Trustees Face

Fiduciary Duties

Personal Liability Risks

The CRA Clearance Certificate

Ontario Estate Administration: When Estate Lawyers Should Recommend Independent Trustees

High-Risk Situations

Benefits of Independent Estate Trustees

Why Estate Lawyers Partner with Smith Estate Trustee Ontario

Our Approach

**What is the purpose of the Canada Bankruptcy and Insolvency Act?**

Now for the case – ***Re Brennan*, 2019 ONSC 4712 (CanLII)**