Bank of Montreal v. Calgary West Hospitality Inc., 2011 ABQB 293

Court of Queen ’ s Bench of Alberta Citation: Bank of Montreal v. Calgary West Hospitality Inc., 2011 ABQB 293 Date: 20110429 Docket: 0903 12151 Registry: Edmonton Between: Bank of Montreal Plaintiff - and - Calgary West Hospitality Inc., Gamehost Limited Partnership, Gamehost Management Inc., Darcy Will and David Will Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice J.E. Topolniski _______________________________________________________ I.

Introduction [ 1 ] A consent receivership order granted on August 13, 2009 (the Receivership Order) appointed Deloitte & Touche Inc. the receiver and manager (Receiver) of the assets and undertakings of Calgary West Hospitality Inc. (Calgary West). [ 2 ] There are two interconnected applications now before the court:

1. The Defendants’ application for leave to commence litigation (Cause of Action) against the Calgary Exhibition and Stampede Limited (CES), which they say they are entitled to pursue at their own cost and for their own benefit under an agreement made with the Plaintiff Bank of Montreal (BMO). The Receiver and BMO oppose the application on the basis that there is potential value in the Cause of Action, which should be monetized for the benefit of the creditors of Calgary West. 2. The Receiver’s application for directions concerning marketing the Cause of Action.

The Receiver suggests a closed auction involving BMO, the Defendants and CES. The Defendants oppose the application, urging that any bidding process for the Cause of Action should exclude BMO and CES. II. Background [ 3 ] The Defendant Calgary West is a private company that was involved in the operation of a casino on the Calgary Stampede grounds. The casino and grounds are owned by CES.

BMO provided a commercial debt facility to Calgary West, secured by assignments of rents and leases and a charge against all of its present and after acquired property, including “choses in action of every kind or nature.” The Defendants Gamehost Limited Partnership, Darcy Will and David Will all gave limited guarantees of Calgary West’s obligations to BMO. The Defendant Gamehost Management Inc. is the general partner of Gamehost Limited Partnership.

After February or March 2009, Calgary West’s account was under the management of BMO’s special accounts handling unit. [ 4 ] On July 27, 2009, Calgary West informed BMO that it could no longer fund casino operations and intended to cease operations by August 7, 2009 - two days before the opening of the Calgary Stampede. [ 5 ] BMO commenced action against the Defendants on August 6, 2009.

It claims that Calgary West owed it $41,245,554.80 at the time. [ 6 ] Counsel for BMO and the Defendants started negotiating a form of receivership order while their clients engaged in simultaneous settlement discussions that included Calgary West proposing to “hand over the casino keys” to BMO and to waive the notice requirement under s. 244 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (“ BIA ”), and the guarantors proposing a payment on the guarantees in satisfaction of their obligations. [ 7 ] The following is a

summary of the pertinent events (taken in part from certain “without prejudice” correspondence relating to the settlement discussions entered into evidence on this application by BMO, without objection by the Defendants): (

a) On July 31, 2009, the Defendants offered to resolve matters with BMO in part by making a deferred $20,500,000 cash payment in satisfaction of the guarantors’ obligations, entering into a management agreement with the receiver, co-operating with the receiver, and sharing with BMO in any surplus at the end of the receivership. (

b) On August 6, 2009, BMO responded with a counter-proposal that referred to a receiver and potential for a management agreement with the receiver, but pointing out that any surplus would be paid to other creditors in priority to the Defendants. (

c) On August 10, 2009, BMO’s counsel presented a draft receivership order to Defendants’ counsel that provided in clause 3(

j) of the order for the usual power of a receiver to prosecute, defend and settle litigation. That provision also required the receiver to investigate the Cause of Action and to report to the court on its investigation on notice to BMO and the Defendants if it chose not to seek court approval to sue CES. (

d) Defendants’ counsel responded on August 10, 2009 by e-mail (the letter is incorrectly dated July 30, 2009) seeking a change to

clause 3(j) (the Requested Change) to “ … reflect that the Defendants are at liberty, at their cost, to pursue the claim against Calgary Exhibition & Stampede Limited in the event that the Receiver elects not to do so...” (

e) The Defendants made another settlement offer on August 11, 2009 for $20,500,000 to be paid by the guarantors by installments, the last of which would occur by September 20, 2009. This offer also spoke of a management agreement with the receiver. (

f) BMO’s counsel responded on August 11, 2009, accepting the money payment offered by the guarantors and offering this comment about the proposed management agreement: “ … BMO cannot fetter the discretion of the Court and the entering into any Management Agreement by Deloitte & Touche would be subject to Court approval.

That said, if BMO, as the largest creditor of Calgary West and Deloitte, as the Receiver support entering into a Management Contract with your client’s management company, we are hopeful that the Court would be persuaded that entering into a Management Contract was in the best interests of all parties.” Aspects of BMO’s letter of August 6 th referencing the receivership also were incorporated by reference. (

g) On August 12, 2009, a revised draft receivership order incorporating the Requested Change was circulated by counsel for BMO to counsel for the Alberta Gaming and Liquor Commission, Deloitte & Touche, the Defendants and CES (the August 12 th Draft). Clause 3(

j) of the August 12 th Draft read, in part: … In respect to potential for commencement for proceedings as against (CES), the Receiver shall investigate the commencement of such proceedings and shall report to this Court in respect thereto upon notice to BMO and the Defendants and in the event that the Receiver does not seek the approval of the Court to commence such proceedings, some or all of the Defendants shall be authorized to commence such proceedings . The Receiver shall not settle or compromise any claim against CES without first obtaining the approval of the Defendants and failing such approval, the Order of this Court .” [Emphasis added.] (

h) Deloitte & Touche’s counsel indicated that leave of the court would be required before the Defendants could pursue the Cause of Action. On being advised of that, Defendants’ counsel sent a letter to BMO’s counsel on August 12 th (the “August 12 th Letter”) saying: You have advised that the solicitor for the Receiver has requested a further change to paragraph 3(

j) of the Receivership Order. I do not see the need for the change. However, I also do not see the need for incurring additional costs for the Receiver’s solicitor to attend in Court to argue the matter. It does not make economical sense. Having said this, please provide me with a revised form of Receivership Order that includes the change requested for the solicitor for the Receiver. (

i) The August 12 th Draft was amended to reflect the Receiver’s request, signed by the Defendants’ counsel, and returned to BMO’s counsel later in the day on August 12, 2009. (

j) The Receivership Order was granted on August 13, 2009. The relevant portion of clause 3(

j) of the Receivership Order reads as follows: … In respect to potential for commencement for proceedings as against (CES), the Receiver shall investigate the commencement of such proceedings and shall report to this Court in respect thereto upon notice to BMO and the Defendants and in the event that the Receiver does not seek the approval of the Court to commence such proceedings, some or all of the Defendants may seek leave of the Court to commence such proceedings. The Receiver shall not settle or compromise any claim against CES without first obtaining the approval of the Defendants and falling such approval, the Order of this Court .” [Emphasis added.] (

k) The guarantors’ settlement with BMO was concluded in October 2009. Monies were paid and releases given. (

l) Since its appointment, the Receiver has carried out its mandate, including operating the casino while it was being marketed, and investigating the proposed litigation. A broad marketing effort resulted in sale of the casino for nine million dollars to corporate and trust vehicles controlled by CES. [The Receiver’s Third Report to the Court indicates that it had been proposed that concurrent with the sale,

CES would acquire all or a portion of the debt and security held by BMO over Calgary West’s present and after acquired property. It is unknown whether that occurred.] The sale was approved by the court in May 2010. (

m) Even with the monies paid on the guarantees and the net proceeds from the casino sale, BMO has sustained a shortfall of more than thirty million dollars. The Receiver reported in May 2010 that it anticipated there would be no funds available for distribution to the unsecured creditors. [ 8 ] The Receiver has not sought the approval of the court to pursue the Cause of Action against CES itself. As a result, the present cross-applications have been brought. The Cause of Action is a chose in action which, subject to any agreement between BMO and the Defendants and the effect of clause 3(

j) of the Receivership Order, is captured by the security made in BMO’s favour. III. The Issues [ 9 ] The interconnected issues in relation to the cross-applications are: A. Should the Defendants be granted leave to pursue the Cause of Action at their own cost and for their own benefit? B. If not, how should the Receiver realize on the value of the Cause of Action? IV.

The Parties’ Positions [ 10 ] The Defendants assert that it would be unfair and constitute a miscarriage of justice to deny them leave to pursue the Cause of Action at their own cost and for their own benefit, since BMO agreed that they could do so. [ 11 ] Alternatively, they argue that if leave is denied and the Cause of Action is put to auction, BMO and CES should be excluded from the bidding process; BMO because of the alleged agreement and CES because it is not a known creditor of Calgary West. [ 12 ] BMO contends that the wording of clause 3(

j) of the Receivership Order is sufficient evidence of it having reserved the right to argue against the Defendants being allowed to pursue the Cause of Action if the Receiver elected not to do so itself. BMO takes the position that there was no agreement between it and the Defendants. It says that it did not require a consent receivership order as a condition of the settlement with the guarantors and was merely deferring decision-making. It says that it only consented to the final Receivership Order and that the August 12 th Draft was just that, a draft.

It asserts that it has not released its security in the Cause of Action and wants to bid on it. [ 13 ] The Receiver submits that the Defendants’ leave application supports a finding that the Cause of Action is an asset of some value that should not be given away for free. It contends that even if the alleged agreement between BMO and the Defendants exists, it cannot override the Receiver’s fiduciary duty to maximize recovery for the creditors or derogate from the court’s jurisdiction.

The Receiver wants to put the Cause of Action to a bidding process involving the Defendants, CES and BMO as the “most interested” parties. V. Analysis

A. Should the Defendants be Granted Leave to Pursue the Cause of Action at Their Own Cost and for their Own Benefit? [ 14 ] The Defendants’ leave application hinges on whether they can establish in this

summary hearing that they should be allowed to pursue the Cause of Action at their own cost and for their own benefit because: 1. all interested parties agreed that they could do so; or 2. the Cause of Action has no value for the estate; or 3. there is some reason why the estate should not benefit from realizing on the value of the Cause of Action. 1.

Is there an agreement by all interested parties? [ 15 ] The Defendants contend that BMO agreed that they could pursue the Cause of Action at their own cost and for their own benefit if the Receiver elected not to do so, as evidenced by the August 12 th Draft. [ 16 ] However, while the Cause of Action remains the property of Calgary West and while BMO has security in the Cause of Action, neither has control over that property. It is the Receiver which has possession and control over the Cause of Action.

There is no dispute that the Receiver refused to agree to the August 12 th Draft and insisted that the Defendants would have to seek court approval to commence the litigation. [ 17 ] The Defendants do not allege any agreement on the part of the Receiver to consent to their leave application.

Indeed, Victor Kroeger, who swore an affidavit on behalf of the Receiver, deposed that at no time was the Receiver a party to any agreement with the Defendants or any other party to the effect that the Defendants could proceed, for their own benefit, with a claim against CES should the Receiver elect not to pursue such a claim. [ 18 ] Even if BMO did enter into the agreement alleged by the Defendants, that agreement would bind only those two parties. At most, BMO could have agreed to compromise only its own position, not that of Calgary West’s other creditors.

If the implication of the alleged agreement is that BMO would relinquish its security in the Cause of Action or not take any benefit from it, the Cause of Action would remain the property of the Defendants. That property would still fall under the receivership and should be available to benefit the other creditors. The Defendants do not allege that Calgary West’s other creditors agreed that the Defendants could pursue the Cause of Action if the Receiver decided not to do so. [ 19 ] The Receivership Order speaks for itself. The language of clause 3(

j) is clear. Leave is required before the Defendants can pursue the Cause of Action. For their own reasons and based on their own perceptions of the consequences, the Defendants agreed to that language. It is a valid, subsisting and binding order. It is also a sensible order as it properly recognizes and preserves the functions of the Receiver and the court. [ 20 ] A court-appointed receiver is an officer of the court with fiduciary obligations to the estate ( Bennett on the PPSA (Ontario) , 3rd ed. (Markham, Ont.: Butterworths, 2006) at p. 53).

A court appointed receiver is not subject to control by the party appointing it or by anyone other than the court. [ 21 ] The Receiver here has not sought the approval of the court to pursue the Cause of Action at the expense of the estate, but rather is proposing a limited sales process which it believes could result in the estate obtaining maximum value and realization on the Cause of Action. 2. Does the Cause of Action have some value for the estate?

[ 22 ] I agree with the Receiver that the Defendants’ leave application and BMO’s support for the Receiver’s proposal to allow the Defendants, BMO and CES to bid on the Cause of Action are evidence that the Cause of Action has some value. As a result, the potential exists for the creditors to benefit from a sale of this property. [ 23 ] Having investigated the Cause of Action, the Receiver has elected not to pursue it.

Presumably, if the Receiver was of the view that the Cause of Action might have a value of over 30 million dollars, it would have decided otherwise. [ 24 ] As BMO is Calgary West’s principal secured creditor (unless its security has been assigned to CES) and as it is still owed over 30 million dollars, the reality is that it is the only creditor which could benefit from the proceeds received from a sale of the Cause of Action, unless the Defendants can prove that BMO agreed to relinquish its security in that asset and/or agreed not to take any benefit from the Cause of Action, in which case the other creditors of Calgary West might receive a benefit. 3.

Is there some reason why the estate should not benefit from realizing on the value of the Cause of Action? [ 25 ] No contractual, equitable or other reason has been cited by the Defendants why its creditors, other than BMO, should not benefit from a sale of the Cause of Action. [ 26 ] The Defendants may have a cause of action against BMO if they can prove that the bank impliedly agreed not to contest their leave application. However, that need not be decided now.

The Defendants can file a statement of claim against BMO if they choose to do so. [ 27 ] The Defendants contend that the court should not allow a process that could result in BMO reneging on its agreement to allow them to pursue the Cause of Action at their own cost and for their own benefit. [ 28 ] I agree that it would be inequitable to allow BMO (and presumably any assignee of its security in the property of Canada West) to participate in the bidding and/or to benefit from a sale of the Cause of Action if the Defendants can prove that BMO expressly or impliedly agreed not to do so.

That issue can be addressed in relation to the Receiver’s application. However, as I have stated previously, even if the Defendants can prove the alleged agreement with BMO, that agreement cannot prejudice the rights of other creditors. [ 29 ] The Defendants’ application for leave to pursue the Cause of Action at their own cost and for their own benefit is denied. B. How Should the Receiver Realize on the Value of the Cause of Action? 1. Bidding process [ 30 ]

Section 247 of the BIA specifies that a receiver must act honestly and in good faith and deal with the property of the insolvent company in a commercially reasonable manner. [ 31 ] The Receiver here is of the view that more can be realized for the estate by putting the Cause of Action up for bidding by the Defendants and CES (the most interested parties to the proposed litigation) and by BMO (the “most interested” creditor), than by pursuing the Cause of Action itself at the expense of the estate.

[32] There is case law which supports the Receiver’s proposal to put the Cause of Action up for bids. In Re Katz (1991), 6 C.B.R.(3d) 211 (Ont. Ct. (Gen. Div.)), Farley J. considered an application to set aside the sale of a lawsuit by a trustee in bankruptcy who hadsold a piece of litigation after seeking sealed bids from the only two likely bidders, the “parties friendly to the two sides of the action.”The highest and successful bidder was a company owned by the defendants to the litigation, which beat out the bankrupt. Mr.

JusticeFarley observed that the result of the sale was a settlement of the lawsuit for the price of the assignment, concluding that the process andresult were legitimate. [33] Farley J. compared (at para. 5) the trustee’s duty to that of a receiver. Citing Royal Bank of Canada v. Soundair Corporation(1991), (ON CA), 4 O.R. (3d) 1 (C.A.)), he considered the following to be factors relevant to assessing the proprietyof a receiver’s action in selling assets: (

i) whether the receiver has made a sufficient effort to get the best price and has not acted improvidently; (ii) the interests of all parties; (iii) the efficacy and integrity of the process; and (iv) whether there has been unfairness in the working out of the process. [34] In my view, these considerations also apply to a receiver’s intended sale process. [35] There are many ways that a receiver can go about selling an asset. Where, as here, the asset is an unusual one, the courtshould be open to creative processes to maximize recovery for the estate.

In ascertaining whether a suggested process is appropriate, thecourt’s concern (as on an application to approve a sale completed by a receiver) should be whether the process is reliable, transparent,efficient, fair and one which guards the parties’ interests. [36] The Defendants do not suggest that the proposed bidding process would constitute champerty and maintenance. Given thecommercial interests at stake, I agree (1239745 Ontario Ltd. v. Bank of America Canada, ([1999] 0.J. No. 3178 at para. 67 (S.C.J.)(QL)). They simply take the position that neither BMO nor CES should participate in the bidding.

They offer no alternatives, presumablyas they wish to be the only bidder. [37] Like Farley J. in Re Katz, I consider the process of calling for tenders one that invites fairness (at para.12). A bid process orauction involving the only directly interested parties, the Defendants, CES and BMO would provide an efficient and commerciallyreasonable approach to monetizing the asset. The question is whether it would be fair and one which guards the parties’ interests. 2. Who should be invited to participate? [38] The Defendants argue that it would make no sense to include CES in the bidding process.

However, as the intendeddefendant in the Cause of Action, CES may well have an interest in bidding as a sale to it would constitute a settlement of the lawsuit. [39] BMO, assuming it has not assigned its security to some other entity, is the principal secured creditor of Canada West and hasan interest in recovering as much as possible on the debt owed to it. [40] As previously stated, the Defendants urge that it would be unfair to allow BMO (and presumably any assignee of its securityin the property of Canada West) to participate in the bidding and/or to benefit from a sale of the Cause of Action since it agreed that the

Defendants could pursue the Cause of Action for their own benefit if the Receiver elected not to do so. The Defendants, in bringing theirown application and in opposing BMO’s right to bid on the Cause of Action, in essence are seeking a form of

summary judgment. [41] It is helpful in framing the analysis to consider the following principles governing

summary judgment: 1. The party who applies for

summary judgment bears the evidentiary burden of proving all facts necessary to establish its claim ona balance of probabilities (Pioneer Exploration Inc. (Trustee of) v. Euro-Am Pacific Enterprises Ltd., 2003 ABCA 298, 339 A.R. 165);Bank of Montreal v. Kalin (1992), 1992 ABCA 278 , 131 A.R. 397 (C.A.)). The evidentiary burden then shifts to the otherparty to prove that there is a genuine issue for trial, although the ultimate burden remains with the moving party. 2. It must be beyond doubt that no genuine issue for trial exists (Dow Chemical Canada Inc. v.

Shell Chemicals Canada Ltd., 2010ABCA 126 at para. 14, citing Tottrup v.Clearwater (Municipal District No. 99), 2006 ABCA 380 at paras. 9-10, 401 A.R. 88). 3. If the outcome of the case depends on the

interpretation of a statute or document or some other issue of law arising fromundisputed facts, the test is whether the issue of law can fairly be decided on the record before the court.

It may be necessary to have afull trial if the legal issue is unsettled, complex or fact dependent, in order to provide a proper foundation for the decision (Tottrup atpara. 11). [42] As to consideration for the agreement alleged by the Defendants, David Will, one of the Defendant guarantors and a directorof Calgary West, deposed that: At the same time as the proposed Consent Receivership Order the Defendants proposed a settlement on the Guarantees which wasaccepted by the Plaintiff. The settlement included a Consent Receivership Order as well as the payment of $20,500,00.00 on theGuarantees.

However, included in this settlement was the agreement of the Bank of Montreal that the Defendants could proceed with aclaim for their own benefit, against the Calgary Exhibition and Stampede Limited in the event that the Receiver elected not to do so. [43] While it is not entirely clear, this statement seems to suggest that it was a condition of the Defendants’ agreement to consentto a receivership order and to reach a settlement on the guarantees that BMO would allow the Defendants to pursue the Cause of Actionfor their own benefit if the Receiver elected not to do so. [44] The “without prejudice” correspondence entered into evidence does not disclose an express requirement by BMO for aconsent receivership order as a condition of its settlement with the guarantors, nor an express requirement by the guarantors that theDefendants be allowed to pursue the Cause of Action as a condition of their settlement with the bank.

However, there were repeatedreferences to receivership that began with the Defendants’ opening offer of July 31, 2009 and continued until the parties’ attentionsturned to drafting the receivership order. [45] BMO contends that a consent receivership order was not a condition of BMO’s settlement with the Defendants, but ratherarose from Calgary West’s notification of its intention to “hand over the keys” to BMO and its advice that BMO could “continueoperations under its security.” [46] David Ross, the lead special accounts manager at BMO assigned to this loan, swore an affidavit in opposition to theDefendants’ application.

In questioning on that affidavit, he confirmed that settlement discussions with the guarantors and discussionsconcerning a consent receivership order were being held within the same time frame. However, he denied that the two were a packagedeal.

He reluctantly acknowledged that he had had “no objection” to the Defendants’ Requested Change, but later added that the August 12th Draft was a draft order which had to be agreed to by other counsel. [47] As to the terms of the alleged agreement, the Defendants maintain that BMO’s August 12th Draft included their RequestedChange and accurately reflects the intentions of BMO and the Defendants and what actually was agreed to by them. It stresses that it wasthe Receiver and not BMO which sought amendment of clause 3(j).

[ 48 ] On August 10, 2009, counsel for the Defendants requested an amendment to the initial draft of the receivership order to “ … reflect that the Defendants are at liberty, at their cost, to pursue the claim against Calgary Exhibition & Stampede Limited in the event that the Receiver elects not to do so...” No mention was made of who was to receive the benefit if the Cause of Action was successfully litigated. [ 49 ] The August 12 th Draft stated: “... in the event that the Receiver does not seek the approval of the Court to commence such proceedings, some or all of the Defendants shall be authorized to commence such proceedings...” Again, no mention was made of who was to receive the benefit of pursuing the Cause of Action.

Nor was mention made as to who would bear the cost of the litigation. [ 50 ] In its submissions, BMO states that: “[o]n August 12, 2009, the Receivership Order was revised to reflect the changes requested by RMRF to paragraph 3(

j) and was circulated ... for comment and agreement thereto.” At most then, BMO appears to be acknowledging that the August 12 th Draft was intended to reflect the Requested Change that the Defendants be at liberty, at their cost, to pursue the Cause of Action. [ 51 ] Murray Sutherland, a special accounts manager with BMO, deposed that: 1. Before the Receivership Order, BMO deferred making a decision about who would benefit from the proposed litigation as it was unnecessary to do so earlier; 2. Clause 3(

j) of the Receivership Order allowed the parties to defer their decisions and advance all available arguments on a leave application; 3. There was no discussion about selling the proposed litigation before the Receivership Order or about BMO releasing its security in it. 4. BMO never entered into the agreement alleged by the Defendants. [ 52 ] BMO is a sophisticated lender. It involved its special accounts branch and veteran insolvency counsel to deal with the Defendants and this receivership.

Given the experience of those involved, I would have expected BMO to respond to the Defendants’ Requested Change with a clear statement that it wished to defer any decision on who should benefit from the Cause of Action, if that in fact was its intention. Instead, BMO’s counsel prepared and circulated the August 12 th Draft, which incorporated the Requested Change. In doing so, BMO ran the risk that the Receiver would agree to the August 12 th Draft. If BMO’s counsel had no objection to the Defendants’ Requested Change but questioned whether the Receiver might, why was that not communicated clearly?

If BMO was concerned about fettering the court’s discretion and the need for court approval, why did it not provide for that in the April 12 th Draft? [ 53 ] I note that in communications dated August 11, 2009, the Defendants sought a management contract with the receiver as part of the settlement. BMO’s counsel responded, advising that BMO could not agree as it would fetter the court’s jurisdiction and that court approval was needed.

He went on to say “ … we are hopeful that the Court would be persuaded that entering into a Management Contract was in the best interests of all parties.” This is an unequivocal statement of position. If BMO had decided that it could not accede to the Defendants’ Requested Change without the receiver’s approval and, ultimately, court approval, it is surprising that it did not make a similarly clear statement of position.

Rather, BMO’s counsel simply circulated the August 12 th Draft. [ 54 ] BMO’s explanation for the August 12 th Draft, the position which it now takes, and the conflict in the evidence with respect to consideration for the alleged agreement raise questions of credibility, which cannot be determined summarily.

In my view, there is a genuine issue for trial as to whether there was an agreement (aside from any reflected in the Receivership Order) between the Defendants and BMO concerning the Defendants’ pursuit of the Cause of Action and, if there was such an agreement, what the express and implied terms of that agreement were.

[55] I am directing a trial of those issues. Counsel are to appear before me within the next 30 days in order to discuss the mannerof proceeding. [56] Should BMO be precluded from bidding on the Cause of Action in the interim? The tripartite test for an injunction is whetherthe applicant can demonstrate: (1) there is a serious question to be tried; (2) the applicant would suffer irreparable harm if the stay wererefused; and (3) the balance of convenience favours the stay: Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., (SCC), [1987] 1 S.C.R. 110, 38 D.L.R. (4th) 321; RJR-MacDonald Inc. v.

Canada (A.G.), (SCC), [1994] 1S.C.R. 311, 111 D.L.R. (4th) 385; Harper v. Canada (Attorney General), 2000 SCC 57; [2000] 2 S.C.R. 764. [57] I have already concluded that there is a serious issue to be tried. The parties did not make submissions on the other parts ofthe tripartite test. Given that there may be a limitation period approaching in terms of the Cause of Action, I conclude that it would bemore appropriate as an interim measure to direct the Receiver to file a claim in respect to the Cause of Action in order to preserve therights of the Defendants and BMO.

The Cause of Action can be put up for bidding after the trial of the issues between the Defendantsand BMO, if appropriate. If no bids are received, the Receiver may discontinue the litigation. The Receiver may apply to the court fordirections as to whether the estate or some other party should be responsible for any costs incurred by the Receiver in commencing theaction. [58] The Receiver and BMO are to have their costs of the Defendants’ leave application. If the parties cannot agree on costs of theReceiver’s application, they may speak to me on issue within the next 30 days.

Heard on the 24th day of March, 2011. Dated at the City of Edmonton, Alberta this 29th day of April, 2011. J.E. Topolniski J.C.Q.B.A. Appearances: Richard J. Cotter Q.C. for the Bank o Montreal Douglas N. Tkachuk for Gamehost Limited Partnership, Gamehost Management Inc., Darcy Will and David Will Steven H. Leitl

for Deloitte & Touche Inc.