Coverage of the latest Canadian insolvency filings, court cases, news and more
68 Belgrave Avenue, a property in Toronto, Ontario on which a single-family dwelling is being built, was placed in receivership on December 4 on application by Owemanco, a mortgage broker based in Toronto. Ontario Wealth Management Corporation (“OWMC”), a related entity to Owemanco had agreed to fund a $1.1MM construction loan to the property’s owner, Mr. De Silva. The initial advance of funds occurred in August 2017, while the balance of the loan was to be advanced in stages to complete the construction project. However, after Owemanco’s inspections in late 2017 revealed that little progress was being made on the construction of the house, it advised Mr. De Silva that no further advances would be made. After Mr. De Silva defaulted on the Owemanco mortgage in September 2018, Owemanco took possession of the property a month later, retaining a property manager and setting up hydro and gas accounts for the property. Currently, Mr. De Silva does not appear to have the equity or other financial means to advance construction of the house beyond its current state, which is about 80% complete. Because he is no longer in possession of the property, there is no construction occurring nor is the house listed for sale. The unfinished state of the house significantly reduces the pool of buyers available, further reducing the likelihood that Mr. De Silva will be able to sell the property in a timely manner. In addition to the Owemanco mortgage, there is a second mortgage and two certificates of pending litigation registered on title to the property. Owemanco is only prepared to proceed through a court-appointed receiver, as a receivership would permit clear title as well as simplify and unify in one proceeding the competing claims of subsequent encumbrancers relating to the property. Further, a receiver, as an officer of the court, is better positioned than the debtor, or Owemanco under a power of sale, to consider and make recommendations as to the disposition of any surplus proceeds. Rosen Goldberg was appointed receiver and will consider either expediting the sale of the property as is, or completing the construction of the property and selling it afterwards. Counsel is Andrew Pigott Professional Corporation for the applicant and GSNH for the receiver.
Laplante Welding of Cornwall, an Alexandria, Ontario-based construction services company, filed for bankruptcy on December 3, listing $6.3MM in liabilities, including $1.1MM to Kimco Steel and $1.9MM to RBC. Raymond Chabot is the bankruptcy trustee.
Forme Development Group, a Markham, Ontario-based commercial and residential real estate development group specializing in low-rise, high-rise, mixed-use and hospitality developments, had its NOI proceedings converted into a single CCAA proceeding on November 30, listing over $220.0MM in mortgage debt. The company, which currently owns 18 development projects primarily located in the GTA, has been experiencing increased stress on its cash flows for the last year, which has led to occasional late and missed debt payments. In recent months, however, the company has encountered serious liquidity issues due to a slowdown in the real estate market in the GTA, as well as delays in planning and development of several projects resulting from municipal delays. Consequently, the company can no longer advance its projects since it does not have the liquidity to pay development costs. KingSett Mortgage Corporation will be providing the company with $5.0MM in advance interim financing for certain of the projects. The company intends to finalize a sales process for the projects. KSV Advisory was appointed monitor. Counsel is GSNH for the company, Bennett Jones for the monitor and Goodmans for KingSett Mortgage Corporation.
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“Study the past if you would define the future.” Confucius’ quote is a favourite of Michael Rotsztain, who has been practising insolvency and restructuring law for over 40 years. Beginning his career at the legendary insolvency firm of Harries Houser, where he had the good fortune of being mentored by a bankruptcy law dream team, Michael spent the major part of his career at a leading Bay Street firm and since 2014 has been the chair of GSNH’s five-lawyer Restructuring and Insolvency Group. Michael recounts how insolvencies and restructurings have evolved over his career and shares what he thinks are the next steps in the evolution.
Supreme Court of Canada Decides Federal Crown’s Deemed Trust Priority for Unremitted GST/HST Doesn’t Survive Bankruptcy in Canada v. Callidus Capital Corporation
Romain Viel of McInnes Cooper explains that the Supreme Court’s hesitation to comment on the scope of a Crown’s deemed trust before a tax debtor’s bankruptcy in the Callidus case is likely because there is ongoing litigation about this issue (Canada v. Toronto-Dominion Bank)