Royal Bank of Canada v. Ramco Sales Inc., 2010 ABQB 298

Court of Queen ’ s Bench of Alberta Citation: Royal Bank of Canada v. Ramco Sales Inc., 2010 ABQB 298 Date: 20100505 Docket: 0901 09630 Registry: Calgary Between: Royal Bank of Canada Plaintiff - and - Ramco Sales Inc. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.A. Kent _______________________________________________________ [ 1 ] Earlier this year I issued a judgment with respect to the PMSI security held by Canadian Western Bank (CWB) on equipment in the possession of the Receiver of Ramco Sales Inc. (Ramco).

The relevant issue to this decision is explained in my reasons as follows: [3] The fourth and most difficult issue is what is to be done with any equity left after the sale of each piece of equipment. CWB takes the position that if there is equity from one piece of equipment that equity first is applied against the deficiency, if any, of any of the other three pieces of equipment and if the indebtedness with respect to those pieces of equipment is paid in full, then any equity that is left goes next to pay off the balance owing on the entire CWB loan.

The receiver would only receive funds if the entire balance of the CWB loan is paid off and there are still funds available.

[4] The Receiver and the Royal Bank take the position that each piece of equipment is discrete. If the sale of the equipment results insurplus funds, those surplus funds go to the receiver. They cannot be applied to any deficit with respect to other pieces of equipment orthe loan agreement itself. I decided in favour of the Receiver and the Royal Bank. [2] Two issues have now arisen. First is the question of CWB’s legal costs in enforcing its security.

It argues that it is entitled toits legal costs from the time that Ramco stopped meeting its obligations up to and including the court application regarding thedisposition of the equity. It says that the PMSI entitled the CWB to solicitor/client costs. It concedes that the amount would be reducedby the party/party costs to which the Receiver would be entitled because it was successful on the application. [3] The second issue is the Receiver’s Administration Charge. The Receiver argues that by virtue of paragraph 12 of thereceivership order which reads as follows: 12.

A pro rata portion of the Receiver’s Charge to be determined by the Receiver (the “Administration Fee”) which relates to theReceiver’s activity in relation to Personal Property claimed by a Third Party Claimant shall be charged against such Personal Propertyand no Personal Property will be released or disposed of by the Receiver without payment of the Administration Fee. CWB is responsible for paying a portion of the Administration Fee. That fee includes some storage costs, insurance premiums and legalfees incurred by the receiver.

The portions of the Administration Charge which CWB takes exception to are the legal fees which includethe fees for reviewing CWB’s security and the fees for the court application referred to above. The Receiver argues that the othercreditors have paid their appropriate share and CWB ought to pay its share. [4] CWB argues that this case is governed by the principles set forth in Royal Bank v. Vulcan Machinery & Equipment Ltd., (AB KB), [1992] 6 WWR 307 (Alta. Q.B.). Those principles are: 1. Where the court appoints a receiver, it should ensure that the receiver is paid its reasonable costs. 2.

The court should not give priority for receivers’ costs to the receiver in priority to security of secured creditors unless:

a) the receiver has been appointed at the request of or with the consent or acquiescence of the creditor;

b) the receiver was appointed to preserve and realize assets for the benefit of all interested parties including the secured creditors;

c) the receiver expended money for the necessary preservation or improvement of the property. [5] CWB also provided me with the decision of Romaine, J. in Toronto Dominion Bank v. RNG Group Inc., 2003 ABQB 722,where she said at para. 4: ... While it is common in applications regarding priorities that the professional charges of the Interim Receiver and its counsel be paidout of the estate in receivership, this application [to determine responsibility for severance obligations for certain employees] had someunusual aspects.

Given the positions taken by the parties affected, the Interim Receiver had no choice but to participate in theapplication. The non-transferred employees requested information from the Interim Receiver that required the Interim Receiver toundertake extensive investigation and to prepare an additional report to the Court that may otherwise not have been necessary.

[ 6 ] Applying those principles to this case, the legal fees of CWB in enforcing its security should be paid, subject to one exception. I disagree that the bank’s fees should be reduced only by the party/party costs of the Receiver for the application regarding the PMSI security. The Receiver was successful in that application so that the bank should take full responsibility for its legal costs. [ 7 ] Second, the Receiver’s fees to CWB for reviewing the bank’s security are allowed.

In my view, performing that task was akin to the second exception cited in Vulcan , namely realizing assets for all interested parties. For the Receiver to determine priority and entitlement to assets, he needed to first determine whether each security was enforceable. [ 8 ] With respect to the legal fees for the application referred to above, CWB is also responsible. These facts create another exception to the general rule that receivers’ costs should not take priority over secured creditors. The application was dealing with the extent of CWB’s security. The receiver was successful.

In such a case, the secured creditor cannot argue that it is losing its priority; rather its priority is being determined. That determination was necessary. Heard on the 28 th day of April, 2010. Dated at the City of Calgary, Alberta this 5 th day of May, 2010. C.A. Kent J.C.Q.B.A. Appearances: Karen L. Fellowes Parlee McLaws LLP for the Receiver Terry L. Czechowskyj Miles Davison LLP for Canadian Western Bank