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2615333 Ontario Inc. v. Central Park Ajax Developments et al., (May 27, 2021), Toronto, CV-20-00651299-00CL

Is a receivership order stayed on the filing of a notice of appeal?

The Court appointed RSM as Receiver of certain properties (the “Property”). The respondents served a Notice of Appeal in respect of the appointment order. The Receiver and the applicant jointly brought a motion for, among other things, a declaration confirming the Receiver’s authority to take the necessary steps to preserve and protect the Property, notwithstanding the pending appeal. The respondents opposed the measures proposed by the moving parties on the basis that they were not conservatory nor necessary.

The moving parties relied on s. 247(b) of the Bankruptcy and Insolvency Act and submitted that the Receiver had the power and authority to take necessary conservatory measures to preserve and protect the Property notwithstanding the appeal of the appointment order. When appointed, the Receiver had a duty to take possession of the Property and to care for it in a commercially reasonable manner, and this obligation was ongoing.

The Court disagreed that s. 247(b) authorizes a receiver to deal generally with the property of the insolvent or bankrupt person, even in a commercially reasonable manner, when an appeal stays all proceedings under the appointment order. For example, while it may be commercially reasonable for a receiver to sell property that is subject to a receivership order in a declining market, where the appointment order is stayed pending appeal, the receiver is not permitted to do so without an order lifting or varying the stay.

The language of s. 195 of the BIA is clear that, unless the exception for “provisional execution” applies, “all proceedings under an order appealed from shall be stayed until the appeal is disposed of”, unless the Court of Appeal or a judge thereof orders otherwise. If a receiver considers it to be necessary to take conservatory actions in relation to the property while a stay is in effect, the proper procedure is for the receiver to seek an order varying or cancelling the stay for such reason as may be deemed proper.

The Court’s jurisdiction to provide for “provisional execution” in a receivership order that is subject to an appeal should be exercised sparingly and with caution. On the evidence before it, the Court was not satisfied that the measures that the Receiver wished to take to receive, preserve, and protect the Property while the stay was in effect—including obtaining adequate insurance, securing vacant units, addressing health and safety risks at the Property, collecting rent from commercial tenants, and making satisfactory arrangements for funding to pay the costs of such measures—should be authorized. The proper procedure was for the moving parties to seek judicial approval for the actions the Receiver proposed to take through a motion to a judge of the Court of Appeal with jurisdiction to lift or vary the stay of proceedings under s. 195 of the BIA.

The Court dismissed the moving parties’ motion.

Judge: Justice Cavanagh

Counsel: Rebecca Kennedy and Alexander Soutter of TGF for the Receiver; Wendy Greenspoon-Soer of Garfinkle Biderman for the Applicant; Mervyn Abramowitz of Blaney McMurtry for the Respondents; Edmond Lamek of DLA Piper for Ajax Master Holding Inc.; John R. Hart of Ritchie Ketcheson Hart & Biggart for The Corporation of the Town of Ajax

Fullcase: https://mcusercontent.com/a3e2039936cbf8a31bda45ab3/files/06d02bd0-b55c-5946-ad9c-2def2b8dc775/2021_05_27_Endorsement_of_Justice_Cavanagh_from_May_26_motion_1_2_.pdf