Can a receiver be privately prosecuted?
BDO Canada Limited was appointed as receiver of Astoria in April 2017. It occupied and took control of Astoria’s biosolids waste treatment facility. In the course of the receivership proceedings, BDO sold the biosolids waste facility to SusGlobal, and the transaction closed in September 2017.
Months after closing, SusGlobal sought leave to sue BDO for damages for gross negligence or wilful misconduct. SusGlobal alleged that BDO had, at the time of the sale, allowed the volume of raw organic waste stored at the facility to exceed the permitted amount prescribed by an Environmental Compliance Approval issued by the Ontario Ministry of the Environment and Climate Change. It sought damages of over $600,000 arising out of its direct and indirect costs of disposing of the excess raw organic waste.
SusGlobal’s motion and subsequent appeal were both dismissed. In July 2019, SusGlobal laid an information against BDO, alleging that it had committed an offence contrary to s. 186(3) of the Environmental Protection Act (the “EPA“). In other words, it made exactly the same allegation as the one contained in the motion for leave to sue BDO, which was dismissed after a three-day hearing and appeals to four judges of Court of Appeal for Ontario.
On the basis of this information, a justice of the peace issued a summons to BDO to appear before the Belleville Provincial Court. BDO brought a motion to stay the private prosecution on the basis that commencing the private prosecution was, inter alia, an abuse of process.
The receivership Order provided that no proceeding or enforcement process in any court or tribunal shall be commenced or continued against BDO except with written consent or with leave of the Court. SusGlobal argued that a private prosecution under the EPA was not caught by the term “proceeding” in the Order because its interpretation was not so broad as to capture the prosecution of a criminal or quasi-criminal offence.
In essence, SusGlobal argued that interpreting the word “proceeding” in the receivership Order to include a private prosecution under the EPA would be an unwarranted and improper interference with the prosecution of wrongdoers in the public interest. It would frustrate the purposes and processes of penal offences and environmental protection.
A “leave to sue” provision is essential to a receivership; it is required to preserve the integrity of the court’s role as supervisor of the receivership. A receiver directed by the court to take possession and control of property and to sell it, for example, may be subject to claims by those with whom the court has directed or authorized the receiver to deal. This is a central reason for the necessity of the leave to sue provision.
It was evident that SusGlobal, by bringing a private prosecution, sought to recover its alleged costs of “remediation”. Section 190.1 of the EPA permits the provincial court, following a successful prosecution, to order that compensation for the cost of remediation be paid by the convicted person to any person who reasonably incurred expenses in the remediation of problems connected to the offence.
The Superior Court of Justice appointed BDO as receiver of the property and undertaking of Astoria. The Court had the jurisdiction and responsibility to supervise the conduct of that receivership. The justice of the peace who received the information had no connection to or responsibility for the receivership whatsoever. The gatekeeping purpose of the leave requirement is to prevent the trustee or receiver “from having to respond to actions which are frivolous or vexatious or from claims which do not disclose a “cause of action” so that the bankruptcy process is not made unworkable. On the other hand, it ensures that legitimate claims can be advanced. Thus, interpreting the leave to sue provision as capturing SusGlobal’s private prosecution did not result in BDO being immunized from the enforcement of Ontario’s environmental protection laws.
As such, the Court concluded that the institution of a private prosecution was a “proceeding” within the meaning of the leave to sue requirement under the Order. Leave was required in order to proceed with the private prosecution. The threshold for leave is not a high one. It is designed to protect the receiver against frivolous or vexatious actions or actions without basis in fact. The party seeking leave must only show a reasonable cause of action with some evidentiary basis. In other words, the evidence must disclose a prima facie case.
In this case, leave was not granted because the private prosecution constituted an abuse of process on the part of SusGlobal. The Court stayed the private prosecution.
Counsel: Scott Hutchison and Peter Grbac of Henein Hutchison LLP for SusGlobal Energy Belleville Ltd. and Gerald Hamaliuk, Moving Parties and Steven Graff and Miranda Spence of Aird & Berlis LLP for BDO Canada Limited, Receiver of Astoria, Responding Party