COURT OF APPEAL FOR ONTARIO
CITATION: KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2023 ONCA 219
DATE: 20230329
DOCKET: M54133 (COA-23-CV-0215)
Brown, Trotter and Paciocco JJ.A.
BETWEEN
KingSett Mortgage Corporation
Applicant
(Respondent/Responding Party)
and
30 Roe Investments Corp.
Respondent
(Appellant/Responding Party)
Mark Dunn, for the moving party Receiver, KSV Restructuring Inc.
Mervyn Abramowitz and Lou Brzezinski, for the responding party 30 Roe Investments Corp.
Richard Swan, for the respondent KingSett Mortgage Corporation
Darren Marr, for the Canadian Imperial Bank of Commerce
Raymond Zar, acting in person in his capacity as a guarantor of the responding party’s debt
Heard: March 27, 2023
On appeal from the orders of Justice Jana Steele of the Superior Court of Justice, dated February 7, 2023.
REASONS FOR DECISION
I. OVERVIEW
[1] The court-appointed receiver, KSV Restructuring Inc., moves for: (i) an order quashing the February 23, 2023 appeal initiated by the respondent debtor, 30 Roe Investments Corp. (“30 Roe”), from the two February 7, 2023 approval and vesting orders made by Steele J. (the “Approval Orders”); (ii) alternatively, an order expediting the appeal; (iii) in the further alternative, an order denying 30 Roe leave to appeal the Approval Orders under s. 193(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”); and (iv) in the further alternative, an order pursuant to BIA s. 195 lifting any automatic stay of the proceedings.
[2] The Approval Orders authorized the Receiver to complete sale transactions for two of the nine units owned by 30 Roe at the Minto 30 Roe condominium building, specifically units PH04 and PH09.
[3] Although the agreements for purchase and sale of those two units between the receiver and the purchasers contemplated an end of February closing, amending agreements filed in the motion record extended the closing dates for both transactions to the end of this week, Friday, March 31, 2023.
[4] A personal guarantor of the company’s indebtedness, Raymond Zar, who is also the principal of 30 Roe, opposes the Receiver’s motion.
II. KEY EVENTS CONCERNING THE RECEIVERSHIP
[5] The events leading up to the appointment of a receiver over 30 Roe were described by this court in its decision quashing the company’s appeal from the May 9, 2022 Receivership Order: 2022 ONCA 479.
[6] Since that time, the Receiver obtained from McEwen J. a July 18, 2022 Sale Process Approval Order, which authorized the Receiver to proceed with an individual-unit sales process described in s. 4.0 of its First Report (the “July Sales Order”). In approving that marketing and sales approach, McEwen J. rejected 30 Roe’s submission that the nine units should “be sold en masse, essentially as an income producing hospitality-type of model akin to a hotel.” No appeal was taken from the July Sales Order.
[7] McEwen J. subsequently authorized the Receiver to change listing agents for the sale of the units in his December 14, 2022 order (the “December Sales Order”). No appeal was taken from the December Sales Order.
[8] Earlier this year, the Receiver negotiated sale agreements for PH04 and PH09. The Receiver provided details of the events leading up to those agreements, including the listing history for the two units, in s. 4.0 of its Third Report dated January 26, 2023. In s. 4.5 of that report, the Receiver addressed the debtor’s continued insistence that the nine units be sold as a block. In s. 4.5(6) the Receiver stated: “Based on its own review of the information available to it, the Receiver continues to believe there is no merit to the suggestion that the Units could be sold as a going concern hospitality business for a premium relative to the individual resale value of the Units”.
[9] The Receiver moved before Steele J. for approval of the two sale transactions.
[10] The day before the return of that motion, 30 Roe filed an affidavit from Mr. Zar that repeated the company’s criticism of the Receiver’s plan to market the units individually. Mr. Zar contended that individual sales would not realize the units’ optimum value. He deposed, at paras. 12 and 13 of his affidavit, that an income approach was more suitable for determining the aggregate value of the units (which he described as a business). Mr. Zar deposed that he valued the units on a “going concern” basis at approximately $12.476 million as of February 6, 2023.
[11] Steele J. was not persuaded by Mr. Zar’s personal valuation and advocacy of an en bloc sale. She noted in her February 7, 2023 endorsement that:
• McEwen J. had rejected the “same argument” when he made the July Sales Approval Order;
• The Receiver had asked 30 Roe several times for evidence supporting the debtor’s view that a going concern sale would be preferable but 30 Roe did not provide such information; and
• The Receiver challenged the reliability of the valuation proffered by Mr. Zar, observing that 30 Roe had not provided up-to-date financial statements or information about the market for the type of business it contended was operated using the nine condominium units.
[12] Steele J. was satisfied that the criteria enumerated by this court in Royal Bank of Canada v. Soundair Corporation (1991), 83 D.L.R. (4th) 76 (Ont. C.A.) had been met. She approved the two sale transactions and granted the Approval Orders.
[13] On February 23, 2023, 30 Roe served a notice of appeal from the Approval Orders (the “Notice of Appeal”).
III. PROCEDURAL ISSUES
[14] Before dealing with the relief sought by the Receiver in its notice of motion, we wish to recount several procedural issues raised by Mr. Zar during this appeal.
[15] On the initial return of the motion on Monday, March 27, 2023 before a slightly differently constituted panel, Mr. Zar asked Lauwers J.A. to recuse himself from the panel. The previous week, Lauwers J.A. had heard and denied a motion by 30 Roe’s counsel of record, Blaney McMurtry LLP, to remove itself from the record: 2023 ONCA 196. Lauwers J.A. acceded to Mr. Zar’s request and recused himself. As a result, one of the scheduled duty judges, Brown J.A., joined the panel.
[16] Upon the resumption of the hearing before the reconstituted panel, Mr. Zar requested a 24-hour adjournment of the hearing to permit the filing of a responding factum. By way of background, on Friday, March 24, 2023, Blaneys had sent a letter to the court advising that “our client has instructed us to not to file any responding material” on the Receiver’s motion to quash. As a result, no responding materials were before the panel.
[17] When this correspondence was brought to Mr. Zar’s attention, he orally changed his instructions to Blaneys in open court. Mr. Zar wanted Blaneys to make submissions on behalf of 30 Roe as they were still on the record. Counsel from Blaneys was not prepared to do so.
[18] From the interaction between counsel from Blaneys and Mr. Zar, it was clear to the panel that a complete breakdown had occurred between the law firm and its client. In those circumstances, the panel had no confidence that if we were to compel Blaneys to make submissions, Mr. Zar as the principal of 30 Roe or on his own behalf would accept the adequacy or appropriateness of those submissions or their faithfulness to instructions he had given Blaneys. Consequently, we informed Mr. Zar that we would not call on Blaneys but would hear submissions from him on behalf of 30 Roe.
[19] We advised Mr. Zar that if he wished to file with our court registrar a draft respondent’s factum that he was holding in his hands, we would have the registrar make copies for the panel so that we could review it before the continuation of the hearing. We granted Mr. Zar a 30-minute adjournment to decide whether he would file the factum and send electronic copies to the other parties. We thereupon recessed for 30 minutes.
[20] Upon resuming, the panel learned that Mr. Zar had not filed a factum for the panel’s consideration or provided copies to the other parties.
[21] Instead, Mr. Zar requested that Brown J.A. recuse himself because, according to Mr. Zar, some familial relationship created a conflict of interest. When questioned, Mr. Zar was not prepared to name the person who allegedly had some familial relationship with Brown J.A. that might create a conflict. Consequently, the panel called on the moving party Receiver’s counsel to make his submissions on the motion.
[22] When the panel called upon Mr. Zar to make responding submissions, he advised that a medical condition of his was making it difficult for him to formulate submissions. The panel offered, and Mr. Zar accepted, a 10-minute recess to allow him to collect his thoughts. Upon reconvening, argument of the motion proceeded to its conclusion, with the panel taking the matter under reserve.
[23] Throughout the hearing Mr. Zar took the position that the submissions he made were solely in his capacity as a guarantor of the corporate debt of 30 Roe and not on behalf of the company, although the substance of his submissions certainly conveyed a response by the debtor corporation to the Receiver’s motion.
IV. ANALYSIS
The Receiver’s motion to quash
[24] Although in a factum filed on a provisional execution motion below 30 Roe agreed that an appeal in the matter could only proceed with leave, apparently it “walked back” that admission during the course of argument. Consequently, we will examine whether in the specific circumstances of this case an appeal as of right lies under s. 193 from the Approval Orders.
[25] Consideration of the Receiver’s motion to quash must begin with an examination of the order sought to be appealed and the grounds of appeal pleaded by 30 Roe in its Notice of Appeal.
[26] The Approval Orders follow the form of standard Commercial List approval and vesting orders: they approve the sale transactions; authorize the Receiver to execute the sale agreements “with such minor amendments as the Receiver may deem necessary” and to “execute such additional documents as may be necessary or desirable for the completion” of the transactions; and provide that upon the delivery of a Receiver’s Certificate all of the debtor’s right, title, and interest in the purchased units shall vest absolutely in the purchaser free and clear from all security interests. The Approval Orders make no provision for the distribution of the sale proceeds. Pursuant to para. 12 of the initial Receivership Order, the Receiver must deposit those funds into an account and hold the monies “to be paid in accordance with the terms of this Order or any further Order of this Court.”
[27] The grounds of appeal advanced by 30 Roe in its Notice of Appeal reflect the debtor’s repeatedly expressed view that the nine units should be sold en bloc, not individually. The Notice of Appeal alleges that:
• the Receiver ought not to have marketed the units as separate properties;
• the evidence on the motion was clear that the units were part of a larger commercial “Enterprise”, a term 30 Roe and Mr. Zar use to describe a hospitality business they contend the nine units collectively supported;
• the failure to market the units for sale together led to a marked diminution in the value of the Enterprise;
• the motion judge “failed to appreciate the entire concept of the Enterprise and the loss in value of the Enterprise, if the Units were sold off separately”;
• the motion judge failed to apply the Soundair test “as the Units ought not to have been marketed or offered for sale in the first place”; and
• the motion judge “failed to find that the marketing and offering of the Units for sale here, on their own, would not be in the best interests of the creditors or other stakeholders here.”
[28] The Notice of Appeal states that 30 Roe has an appeal as of right pursuant to BIA ss. 193(a)-(c). We shall consider each provision.
[29] As to BIA s. 193(a), 30 Roe’s Notice of Appeal from the Approval Orders does not raise any “point in issue [that] involves future rights”. The narrow scope of the concept of future rights was described in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at para. 15: “‘Future rights’ are future legal rights, not procedural rights or commercial advantages or disadvantages that may accrue from the order challenged on appeal. They do not include rights that presently exist but that may be exercised in the future”.
[30] In the present case, the Notice of Appeal challenges the Approval Orders on the basis of the methodology, or procedure, followed by the Receiver for the unit sale process and alleged commercial disadvantages caused by that process. 30 Roe’s appeal concerns rights that presently exist, not ones that may be exercised in the future. Consequently, the appeal of the Approval Orders does not engage BIA s. 193(a).
[31] Under BIA s. 193(c), an appeal as of right lies “if the property involved in the appeal exceeds in value ten thousand dollars.” There is no dispute that the sale price for both units exceeds $10,000. However, the jurisprudence on BIA s. 193(c), as summarized by this court in Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at paras. 36-39, identifies three types of orders that do not fall within the ambit of that section:
• an order that does not result in a loss or does not “directly involve” property exceeding $10,000 in value;
• an order that does not bring into play the value of the debtor’s property; or
• an order that is procedural in nature.
[32] To determine whether an order sought to be appealed falls within BIA s. 193(c), a court must analyze the economic effect of the order: Hillmount, at para. 41. As stated in Hillmount, at para. 42:
What is required in any consideration of whether the appeal of an order falls within BIA s. 193(c) is a critical examination of the effect of the order sought to be appealed. Such an examination requires scrutinizing the grounds of appeal that are advanced in respect of the order made below, the reasons the lower court gave for the order, and the record that was before it. The inquiry into the effect of the order under appeal therefore is a fact-specific one; it is also an evidence-based inquiry, which involves more than merely accepting any bald allegations asserted in a notice of appeal: Bending Lake [infra], at para. 64. [MNP Ltd. v. Wilkes, 2020 SKCA 66, 449 D.L.R. (4th) 439] concurs on this point, holding, at para. 64, that the loss claimed must be “sufficiently grounded in the evidence to the satisfaction of the Court determining whether there is a right of appeal,” a point repeated in the subsequent chambers decision in Re Harmon International Industries [Inc., 2020 SKCA 95, 81 C.B.R. (6th) 1], at para. 32.
[33] In the present case, the Approval Orders authorized the Receiver to proceed with sale transactions for two units. Section 4.0 of the Receiver’s Third Report detailed the listing history (including listing prices) for both units. Unredacted copies of the negotiated agreements of purchase and sale were provided to the debtor and were before the motion judge. No evidence was put before the motion judge that the sale prices for both transactions were unreasonable or not reflective of prevailing market conditions. Accordingly, there was no basis to suggest that approval of the two transactions would result in a “loss” of value for the properties when compared to available market prices.
[34] Instead, 30 Roe sought to oppose the sale transactions by repeating the “en bloc sale” argument it had made at the time of the July Sales Order but which McEwen J. had rejected. On its face, the evidence 30 Roe filed before Steele J. carried virtually no weight, consisting as it did of a bald assertion by Mr. Zar about the possible value of an en bloc transaction that was not supported by an independent valuation and was advanced against a history of 30 Roe refusing requests by the Receiver for financial information about the “Enterprise”.
[35] Moreover, the position taken by 30 Roe before Steele J. amounted to a collateral attack on the July and December Sales Orders, which it had not appealed. 30 Roe repeated its en bloc arguments before McEwen J. in December and then before Steele J., taking the position that it had “reserved” its right to object to future sales on the basis that an en bloc sale would generate more value. That unilateral reservation of rights did not alter the legal effect of the July and December Sales Orders under which the court authorized the Receiver to market and sell the units individually, which the Receiver did.
[36] By failing to appeal and set aside the July and December Sales Orders, 30 Roe lost the legal basis to advance an argument that the Approval Orders would create a loss of value by reason of the individual-unit marketing and sales methodology used by the Receiver as compared to an “en bloc” sales process. It was the July Sales Order, not the Approval Orders, that put in jeopardy any difference in value of the property that might arise from an “individual-unit” sales approach as compared to an “en bloc” sales approach. Given that 30 Roe’s Notice of Appeal asserts no other basis on which to reverse the Approval Orders, in the circumstances of this case its appeal from the Approval Orders does not fall within the ambit of BIA s. 193(c).
[37] Finally, 30 Roe’s appeal does not fall within the ambit of BIA s. 193(b), which provides an appeal as of right “if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings.” The jurisprudence has consistently interpreted BIA s. 193(b) as meaning that a right of appeal will lie where “the decision in question will likely affect another case raising the same or similar issues in the same bankruptcy proceedings” as the provision concerns “real disputes” likely to affect other cases raising the same or similar issues in the same bankruptcy or receivership proceedings: see 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 396 D.L.R. (4th) 635, at para. 32.
[38] As mentioned, by failing to appeal and set aside the July and December Sales Orders, 30 Roe lost the legal basis to advance an argument that the Approval Orders – or subsequent approval orders for other individual units – would create a loss of value by reason of the individual-unit marketing and sales methodology used by the Receiver. Further, subsequent motions by the Receiver for the approval of sale transactions for other units will be decided upon the evidence related to those sale transactions, not the transactions for PH04 and PH09 authorized by the Approval Orders.
[39] For these reasons, we conclude that 30 Roe’s appeal does not fall within the ambit of BIA ss. 193(a)-(c). Accordingly, we quash its appeal.
Leave to appeal
[40] Although 30 Roe did not file a notice of motion seeking leave to appeal the Approval Orders pursuant to BIA s. 193(e), it did seek such alternative relief in its Notice of Appeal. As well, several of the submissions made by Mr. Zar during the hearing dealt with elements of the leave to appeal test. Accordingly, we will consider whether leave should be granted to 30 Roe to appeal the Approval Orders.
[41] In considering whether to grant leave to appeal an order under BIA s. 193(e) a court will look to whether the proposed appeal: (i) raises an issue that is of general importance to the practice in bankruptcy/insolvency matters or to the administration of justice as a whole, and is one that this court should therefore consider and address; (ii) is prima facie meritorious; and (iii) would unduly hinder the progress of the bankruptcy/insolvency proceedings: Pine Tree Resorts, at para. 29; Impact Tool & Mould Inc. v. Impact Tool & Mould Inc. Estate, 2013 ONCA 697, at para. 3.
[42] 30 Roe’s proposed appeal does not raise an issue of general importance, based as it is on the fact-specific sales process approved in its receivership. Its proposed appeal is not prima facie meritorious: as discussed, it amounts to nothing more than a collateral attack on the July and December Sales Orders. Finally, its appeal would unduly hinder the progress of the receivership. Granting leave to appeal probably would put in jeopardy the pending closings of the sales of PH04 and PH09. 30 Roe has not filed any evidence of equivalent or superior offers for those two units or of its present ability to satisfy the claims of its creditors. One therefore is left with the distinct impression that its attempt to appeal the Approval Orders is nothing more than a delay tactic.
[43] For these reasons, we deny 30 Roe leave to appeal the Approval Orders.
Lifting the automatic stay
[44] Since we have quashed 30 Roe’s appeal and denied it leave to appeal, there is no need to consider the Receiver’s alternative request for an order lifting the automatic stay under BIA s. 195.
V. DISPOSITION
[45] For the reasons set out above, we grant the Receiver’s motion. The appeal of 30 Roe from the Approval Orders is quashed. We deny 30 Roe leave to appeal the Approval Orders.
[46] The Receiver is entitled to seek its costs of this motion when it applies in the ordinary course for the approval of the supervising judge below of its activities and accounts.
“David Brown J.A.”
“Gary Trotter J.A.”
“David M. Paciocco J.A.”