KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2022 ONCA 479

July 06, 2022

Does a debtor have an appeal as of right from a receivership order?

KingSett advanced a non-revolving demand loan to 30 Roe of $1.875 million, which was secured, in part, by a second mortgage on nine residential condominium units owned by 30 Roe in a 397-unit condominium building (the “Real Property”). The loan facility was extended several times, with the final maturity date set for December 1, 2021. After 30 Roe defaulted on its interest payment, KingSett issued a demand letter and gave notice of intention to enforce security in accordance with s. 244 of the BIA.

In January 2022, KingSett applied for the appointment of a receiver and manager of the Real Property pursuant to s. 243(1) of the BIA and s. 101 of the Courts of Justice Act. The Court granted the Receivership Order, and 30 Roe delivered a notice of appeal. KingSett then moved to quash the appeal, while 30 Roe opposed the motion on the basis that it had an appeal as of right from the Receivership Order under s. 193(c) of the BIA.

Where a receivership order is made pursuant to both s. 243 of the BIA and s. 101 of the CJA, the more restrictive appeal provisions of the BIA govern the rights of appeal and appeal routes. No appeal as of right exists under ss. 193(a) or (c) of the BIA from an order appointing a receiver.

Two recent panel decisions of the Court of Appeal, Buduchnist and Hillmount Capital, confirmed the Court’s jurisprudence that no appeal as of right exists under s. 193(c) of the BIA from an order appointing a receiver. Here, the Receivership Order was made under s. 243(1) of the BIA; therefore, s. 193 of the BIA governed the availability of appeals. Accordingly, pursuant to s. 193(e) of the BIA, 30 Roe was required to seek leave to appeal.

The test for leave to appeal under s. 193(e) is well-established:

  1. Does the proposed appeal raise an issue of general importance to the practice in bankruptcy/insolvency matters or to the administration of justice as a whole and therefore is one that an appellate court should consider and address?

  2. Is the proposed appeal prima facie meritorious and does it involve a point that is of significance to the proceeding?

  3. Would the proposed appeal unduly hinder the progress of the bankruptcy/insolvency proceedings?

With respect to the first question, the Court found that the proposed appeal did not raise an issue of general importance to insolvency practice or to the administration of justice as a whole. The grounds of appeal were rooted in the specifics of the relationship between a mortgagor and a mortgagee.

With respect to the second question, the Court found that the notice of appeal did not disclose a prima facie meritorious appeal. There was nothing premature or disproportionate about the application judge’s appointment of a receiver. While 30 Roe did not agree with how the application judge weighed the various factors relevant to whether a receiver should be appointed, the application judge’s decision was not unreasonable given 30 Roe’s default and inability to cure its default.

Finally, the proposed appeal would unduly hinder the progress of the administration of the receivership. Granting leave would trigger the automatic stay contained in s. 195 of the BIA, thereby preventing the receiver from exercising its power under the Receivership Order to market and sell the Real Property. No purpose would be served by such a delay. 30 Roe had been unable to secure third party financing to take out the KingSett second mortgage notwithstanding several extensions of the mortgage maturity date and the lapse of almost half a year since KingSett initiated its receivership application. To delay the ability of KingSett to enforce its second mortgage would be unfair.

Accordingly, the Court of Appeal did not grant 30 Roe leave to appeal the Receivership Order, and granted KingSett’s motion to quash 30 Roe’s appeal.

Judges: Brown, Roberts and Paciocco JJ.A.

Counsel: Richard Swan and Sean Zweig of Bennett Jones for KingSett Mortgage Corporation; Nancy Tourgis and Laney Paddock of Solmon Rothbart Tourgis Slodovnick for 30 Roe Investments Corp.; Mark Dunn of Goodmans for KSV as receiver; and Darren Marr of Chaitons for CIBC

By Matilda Lici