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Pandion Mine Finance Fund LP v Otso Gold Corp., 2022 BCSC 136 (CanLII)

What factors will a court consider in determining whether to assign a CCAA debtor into receivership?

Otso is a Canadian company that owns a gold mine in Finland. The mine is Otso’s only substantial asset. The petitioners (“Pandion”) loaned money to Otso and its subsidiaries beginning in late 2017. The parties disagreed about how much Pandion was owed, but there was no dispute that Otso had defaulted on its obligations and was not in a position to pay.

Pandion sought the appointment of a receiver of Otso’s assets and undertaking pursuant to s. 243(1) of the Bankruptcy and Insolvency Act. The appointment of a receiver is extraordinary relief which should be granted cautiously and sparingly. The purpose of a court-ordered receivership, generally, is to preserve and protect property pending the resolution of issues between the parties. The factors to be taken into account in determining whether the appointment of a receiver is just or convenient include:

  1. the nature of the property;
  2. the conduct of the parties;
  3. the length of time that a receiver may be in place;
  4. the cost to the parties;
  5. the likelihood of maximizing return to the parties; and
  6. the goal of facilitating the duties of the receiver.

These factors are not a checklist, but rather a collection of considerations to be viewed holistically in an assessment as to whether, in all the circumstances, the appointment of a receiver is just or convenient. Several considerations favoured the appointment of a receiver in this case.

First, a continuing expenditure of funds was necessary to preserve the value of the mine and prevent it from becoming a wasting asset. Otso did not have the funds required to keep the mine in “care and maintenance” mode. Pandion was willing to fund the necessary expenditure in the context of a receivership, but not otherwise.

Second, Pandion had contracted for the right to appoint a receiver. Pandion was the party with the greatest economic stake.  It had first call on the assets, even though it was not clear that there was sufficient value such that Pandion would be paid in full, and the value of its security was deteriorating. The appointment of a receiver would facilitate preservation of the assets and the orderly marketing of the mine for the benefit of all of Otso’s creditors by stabilizing the situation. The receivership would also prevent the assertion of lawsuits against Otso without leave of the court and prevent a free for all of litigation that would deteriorate a wasting asset.

A court-appointed receiver is objective and neutral, characteristics of particular importance in a case involving competing claims and factual disputes. The receiver may seek assistance from the court. In the context of a receivership, the court may give directions for the resolution of contentious issues.

Accordingly, the Court concluded that it was just and convenient that a receiver be appointed.

Judge: The Honourable Mr. Justice Gomery

CounselMary Buttery, QCJared EnnsMorgan BurrisNatalie Levine and J. Atamian of Cassels for the Petitioners, Rebecca Morse and Tim Louman-Gardiner of Farris LLP for Otso Gold Corp.Ken McEwan and William Stransky of McEwan Cooper Dennis LLP for Brunswick Gold Ltd.Lisa Hiebert of Borden Ladner Gervais LLP for Deloitte Restructuring Inc.Marc Wasserman and Kathryn Esaw of Osler, Hoskin & Harcourt LLP for Blackrock and Vicki Tickle of McMillan LLP for Lionsbridge Pty. Ltd. and Westech International Pty. Ltd.

Fullcase: https://canlii.ca/t/jm1ft

By Matilda Lici