I want to chat with you today about the independence of a licensed insolvency trustee acting as a court-appointed
receiver.
The decision of the court of appeal of Alberta released on February 4th, 2019 and Jacob Financial limited be snowed in
Block Incorporated 2019, Africa, 47 cap highlights the issue.
To better understand the decision. I want to talk about a few basic points.
Can a private receivership the receivers primary Duties are to act?
On behalf of and have a duty of care primarily to the secured creditor who appointed the receiver.
commercially reasonable manner
lawfully
Court appointment the court-appointed receiver
Acts on behalf of the court is a court officer.
B&B seem to be independent of all stakeholders
What was the duty of care to all stakeholders?
Must act in a commercially reasonable and lawful manner.
Various practices have evolved over time to indicate the independence of the court-appointed receiver.
Necessarily rules or laws. However, they are indicators that the court looks to in determining if it's normally secured
creditors.
examples of these indicators are
The court-appointed receiver has its own legal counsel and does not rely upon legal counsel for one of the secured
creditors.
The courts receiver has obtain sufficient independent appraisals of the assets. It has not taken the word of her prior
appraisals commission by a secured creditor.
Sales process being recommended by the court-appointed receiver is fair to all parties and does not favor one or more
stakeholders over others.
The analysis performed by a court-appointed receiver and making its recommendations to the corded seem to be free from
undue influence.
The court-appointed receiver has not shared its appraisal or other information which could influence the outcome of the
receivership Administration with any of the stakeholders.
The court-appointed receiver has not treated some stakeholders differently than others any information shared by the
court-appointed receiver of meetings held to share information has been done with all secured creditors. Not just a senior
secured credit secured creditor who made the court application to appoint the receiver.
The receiver was appointed by the court as receiver and manager of Snowden block Incorporated Snowden in February 2016.
The only material possession of Snowden was Landon building in Calgary.
Jacob was the primary lender of Snowden was funding it.
receivership
Jacob became interested in camping the increasing costs and safeguarding its Financial investment.
The receiver advised Jacob that accredited would be a feasible option to get title to the real estate and bring the
receivership.
jkap submitted an agreement of purchase and sale which the court approved
The receiver that went back to court with a different agreement indicating. There was a mutual mistake made in the first
application.
I'm in the first APS. There was no shortfall in there for the guarantors had no liability under the second APS. There was
a shortfall and excessive $1000000 that the guarantors would be responsible for.
The guarantors appealed the approval of the second APS specifying that the quartered and finding there was a mutual
mistake.
Further the guarantor say that the receivers conduct cast doubt on the honesty of the process.
They say that the receiver did not discharge its independent obligation and was following guidelines and instructions from
Jacob that had a change of mind about the transaction and wanted to minimize the price.
Their position was that the second approval investing order needs to be vacated the first APS on to be reinstated and the
guarantor should be alleviated of their responsibilities under the guarantee.
The court of appeal of Albert agreed with a guarantor is that the evidence did not support a mutual mistake was made.
As far as that a conductive the receiver, the appeal court said that while insolvency proceedings undergo special
procedural rules and are not surprisingly time delicate and nature these considerations do not relieve the receiver from
its basic responsibilities to the stakeholders in the court. Also, it does not excuse the receiver from supplying proof to
fulfill its requirement to provide sufficient evidence to the requisite standard for each application that it brings.
The appeal court went on to say that.
a quarter point receiver is an officer of the court appointed to
discharge certain duties listed in the appointment order
What a court-appointed receiver is appointed. The receiver manager is given exclusive control over the assets of the
company. And in this regard the board of directors is displaced.
The significance of a receiver's power is to clear up liabilities and sell off assets.
It is well developed that a court-appointed receiver has a duty of care not just to the court but likewise to all parties
who they have an interest in the debtor's assets.
This includes competing secured creditors guarantors unsecured creditors contingent predators and shareholders.
The receiver has the duty to work out such reasonable treatment supervision and control of a debtor's property as a
regular person would give to his or her very own.
Our receivers duty is to perform the receivers Powers truthfully and in good faith.
Are receivers responsibilities of a fiduciary to all interested stakeholders involved with a borrower's asset properties.
The appeal court was harsh in its criticism of both the receiver and Jacob.
The court found that the absence of details about what occurred in the method to receiver and Jacob used to skirt around
the issues and its application materials definitely did not assist in showing the receivers Independence.
The Optics of the circumstances most likely added to the guarantors uncertainty that what had taken place warranted even
more inquiries in that the receiver was following jcaps instructions to conceal from the guarantors the real State of
Affairs.
Jacob and the receiver were jointly represented by the same legal counsel before the Alberta Court of Appeal, which was
unhelpful and was in the Court's view highly unusual.
Jacob could not address questions. The receiver would be anticipated to know.
Throughout the hearing the panel discovered that the guarantors arguments were convincing.
The appeal was allowed and an order was made returning the matter to the lower court for a rehearing before a different
judge.
Does your company have too much data is in danger of shutting down?
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Is the pain and stress of financial problems now negatively affecting your health.
If so, contact the Irish Smith team today.
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