CANADIAN WESTERN BANK APPLICANT - v. -, 2023 SKKB 162

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 162 Date: 20 23 08 02 Docket: KBG-RG-01228-2023 Judicial Centre: Regina BETWEEN: CANADIAN WESTERN BANK APPLICANT - and - GOSHEN PROFESSIONAL CARE INC. RESPONDENT Counsel: Michael W. Milani, K.C. for the applicant Aziz Aboudheir for the respondent JUDGMENT BERGBUSCH J.

August 2, 202 3 Introduction [ 1 ] Canadian Western Bank [CWB] applies for an order pursuant to s. 243 of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 [ BIA ], s. 65(1) of The Queen’s Bench Act, 1998 , SS 1998, c Q-1.01 (repealed by The King’s Bench Act , SS 2023, c 28 [ KBA ]), and s. 64(8) of The Personal Property Security Act, 1993 , SS 1993, c P-6.2 [ PPSA ], appointing MNP Ltd. [MNP] the receiver- manager of the assets, properties, and undertakings [Property] of Goshen Professional Care Inc. [Goshen].

In the alternative, CWB seeks an order pursuant to ss. 47(1) and (3) of the BIA , s. 10 - 15(1) of the KBA , and s. 64(8) of the PPSA appointing MNP the interim receiver of the Property of Goshen. Given the recent enactment of the KBA , I will consider the orders sought by CWB under the applicable provisions of that statute. [ 2 ] Goshen resists any order, taking the position that it is diligently seeking an alternate lender by August 31, 2023, and that CWB will be repaid in full once new financing is in place.

Goshen says that CWB is fully secured as the appraised value of the Property far exceeds the outstanding debt. [ 3 ] CWB has established that the appointment of an interim receiver is necessary pursuant to s. 47 of the BIA . Such appointment is required so that MNP can review Goshen’s income, liabilities, and business plans and can ensure that the security is adequately preserved. An interim receiver will have more limited authority than a receiver-manager appointed under s. 243 of the BIA and is likely to have a less disruptive effect on the operations of the business.

Depending upon the findings of the interim receiver and the outcome of Goshen’s efforts to secure new financing, CWB may renew its application for the appointment of a receiver-manager with broader authority if warranted. Background [ 4 ] Goshen is a business corporation that operates an 80-unit care home [Care Home] on 5.61 acres of land [Land] located in Emerald Park, Saskatchewan.

The Care Home is a two-storey, 55,074 square foot building completed in 2019. [ 5 ] Before the Care Home was built, Goshen obtained an appraisal report dated March 7, 2017 [First Appraisal Report], valuing the Land at approximately $2,000,000. If the Care Home were constructed and fully occupied, the market value of the business as a going concern was estimated to be $17,650,000 (based on $220,625/suite x 80 suites). [ 6 ] After reviewing the First Appraisal Report, CWB provided a commitment letter to Goshen, whereby CWB agreed to lend Goshen the sum of $13,312,000 [Loan].

The Care Home had a total construction budget of $18,304,756. CWB made the final advance of funds to Goshen on or about April 17, 2019.

[ 7 ] As security for the Loan, Goshen executed and delivered to CWB several agreements, namely a general security agreement [GSA] over all or substantially all of the property of Goshen, a collateral mortgage, and a general assignment of leases and rents. Under s. 9(

e) of the mortgage and s. 9(

f) of the GSA, Goshen agreed that CWB would be entitled to appoint a receiver over Goshen’s real and personal property in the event of default.

Adebunmi Onasanya (the sole director and officer of Goshen), Olandrewaju Onasanya, Anu-Oluwa PO Care Home Ltd., and Ibukun-Oluwa Holding Company Ltd. also executed full liabilities guarantees in favour of CWB, agreeing to repay the indebtedness owing by Goshen to CWB in full. [ 8 ] In accordance with the commitment letter, CWB issued two letters of credit [LOCs] to and in favour of the Ministry of Health on April 18, 2019, and January 9, 2020, in the total amount of $150,000. [ 9 ] At some point once the project was completed, Goshen entered into an agreement with the Saskatchewan Health Authority [SHA] whereby the SHA agreed to pay Goshen to house and provide services to long-term residents of the Care Home [SHA Contract] as part of a pilot project. [ 10 ] CWB provided to Goshen a commitment letter dated February 23, 2022 [Commitment Letter], replacing the previous commitment letter (as amended and restated). [ 11 ] As of September 2022, most of the 80 rooms were occupied by residents. [ 12 ] In October 2022, the SHA announced that it would not renew the SHA Contract with Goshen and that all long- term residents whose costs were covered by the SHA would have to move out of the Care Home. [ 13 ] On November 14, 2022, CWB requested from Goshen information regarding Goshen’s operations and financial situation.

This request was but the latest inquiry from CWB for more information regarding: (

a) the status of the SHA Contract and a request for proposals process commenced by the SHA; (

b) contingency plans for Goshen should the SHA Contract not be extended or a new contract not be offered to Goshen; (

c) projections for the next fiscal year; and (

d) an explanation regarding outstanding property taxes and a utilities bill. Goshen did not provide the information requested. [ 14 ] The SHA’s decision had a drastic and immediate effect on the Care Home’s business. On November 25, 2022, Ms. Onasanya advised Bill Randall, CWB’s assistant vice president, special asset management, that only 7 out of 80 units in the Care Home were occupied. [ 15 ] On November 30, 2022, Mr. Randall informed Ms. Onasanya that CWB viewed the non-renewal of the SHA Contract as a material adverse change, constituting an event of default under the Commitment Letter.

He stated that CWB intended to demand payment of Goshen’s debt and Goshen should consider selling the Care Home or refinancing the Loan. Goshen did not respond. [ 16 ] On December 12, 2022, Mr. Randall requested additional information from Ms. Onasanya, such as the number of rooms rented, steps taken by Goshen to cut costs, how Goshen planned to increase revenues, the status of any discussions regarding a sale of the business, and a six-month income statement forecast from January 2023. After a second request, Ms. Onasanya provided a partial response on January 4, 2023. [ 17 ] On January 5, 2023, Mr.

Randall advised that Goshen’s response was unsatisfactory and CWB had instructed its lawyers to demand repayment of the indebtedness owed to CWB. CWB also requested a detailed plan outlining how Goshen intended to increase revenues and reduce expenses, including a projected cash flow statement. [ 18 ] On January 11, 2023, Ms. Onasanya responded that Goshen would be seeking alternate financing to pay out the Loan. She advised Mr. Randall that Goshen would require until August 31, 2023 to complete a refinancing. In reply, Mr.

Randall reiterated on January 16, 2023 that CWB would be formally demanding repayment. [ 19 ] CWB served on Goshen a demand letter [Demand Letter] and notice of intention to enforce security pursuant to s. 244 of the BIA on January 19, 2023. In the Demand Letter, CWB demanded payment from Goshen in full, alleging that an event of default had occurred under the Commitment Letter. The Demand Letter alleged adverse changes to Goshen’s financial position resulting from the cancellation of the SHA Contract and the reduction in the number of residents of the Care Home.

CWB sent demand letters concurrently to the guarantors of Goshen’s indebtedness. [ 20 ] On March 3, 2023, the Loan reached maturity.

In consequence, the entire balance became due and payable for a reason unrelated to CWB’s position that Goshen was in default under the Commitment Letter. [ 21 ] The amount owing by Goshen to CWB as of March 17, 2023 was $12,516,405.73, comprising a principal balance of $12,444,345.42, interest of $31,563.28, and costs of $40,497.03. [ 22 ] On April 10, 2023, CWB’s solicitors sent a letter to Goshen indicating that CWB intended to engage MNP to conduct a business review of Goshen and seeking confirmation that Goshen would cooperate and would provide authorizations to facilitate MNP contacting various third parties for information.

Goshen’s solicitors requested a short extension of the time to respond, but ultimately Goshen did not provide any answer. [ 23 ] CWB commenced this proceeding by originating application returnable on June 6, 2023. At Goshen’s request, the application was adjourned to June 26, 2023.

[ 24 ] On June 11, 2023, CWB’s solicitors renewed their request for a financial and operational update from Goshen, seeking proof of insurance, information regarding occupancy, current financial statements, a six-month income and expense forecast, the status of Goshen’s obligations to government agencies and employees, and so on. Goshen’s solicitors provided some of this information on June 16, 2023, including a copy of an insurance policy, confirmation that Goshen had the necessary equipment to operate at full capacity, and confirmation that Goshen was current on payments to employees and government agencies.

However, CWB claims that the following information has not been provided despite its requests: (

a) Existing tenancy agreements; (

b) A rent-roll for January to June 2023; (c) 2023 financial statements or a statement of assets and liabilities; (

d) A six-month income and expense forecast; and (

e) Information concerning the number of employees, a copy of their employment contracts, and any union involvement. [ 25 ] On June 16, 2023, Goshen retained Colliers International Realty Advisors Inc. [Colliers] to complete a full narrative appraisal and feasibility study. At some point Goshen also engaged a consultant, Dynamic Leadership Group Ltd. [Dynamic], to seek refinancing opportunities. The president of Dynamic, Kelly Dennis, was formerly employed by CWB and is familiar with Goshen and its relationship to CWB. According to Ms. Onasanya, Mr.

Dennis has received positive interest and feedback from potential lenders, although they were awaiting a new appraisal report for the Care Home. [ 26 ] As of June 22, 2023, the Care Home had 10 residents with care levels ranging from level 2 to level 4. [ 27 ] On June 26, 2023, the parties agreed to a further adjournment of CWB’s application, as Goshen anticipated receipt of the Colliers’ appraisal which it intended to provide to CWB and prospective lenders. [ 28 ] On June 30, 2023, the Saskatchewan Ministry of Health notified CWB that Goshen had decreased its authorized capacity from 80 to 20 residents.

As a result, at Goshen’s request the LOCs were returned to CWB. [ 29 ] On July 10, 2023, Goshen provided to CWB a copy of a “Feasibility Study and Full Narrative Appraisal” [Second Appraisal Report] prepared by Colliers for the Care Home and the Land. Effective June 29, 2023, Colliers opined that the market value of the Care Home as a going concern was $20,070,000. The Second Appraisal Report assumed an exposure time of nine months and was based upon the Care Home’s “probable financial performance for the forthcoming twelve months.” (Supplemental Affidavit of Rod Randal sworn July 11, 2023, Exhibit

B) The Second Appraisal Report noted that the Care Home had recently lost eligibility to receive public funding for residents, in consequence of a funding decision by the SHA, leading to the departure of residents for seniors’ homes in the City of Regina. As a result, the Care Home was transitioning to a privately funded long-term care facility that includes palliative and end-of-life services. The Second Appraisal Report noted that the Care Home presently had 68 vacant units, for an 85% vacancy rate.

However, for the purposes of the opinion of value, the Second Appraisal Report assumed a “vacancy and collection loss allowance” of 10%, based upon historical seniors’ residence vacancy levels in Saskatchewan ranging from 5% - 15%. As CWB’s counsel aptly noted, the Second Appraisal Report describes what might be, rather than what is. [ 30 ] In a supplemental affidavit sworn July 12, 2023 at para. 4, Ms. Onasanya reiterated that Goshen remains on track “to meet the August 31, 2023 deadline for repayment of the indebtedness to CWB”.

She also confirmed that Goshen has property insurance in place, with CWB named as first loss payee. [ 31 ] Ms. Onasanya averred that Goshen is current with its obligations to its employees and to government agencies, including Canada Revenue Agency, Saskatchewan Finance, and the Workers’ Compensation Board. [ 32 ] CWB’s application was heard on July 14, 2023. During the hearing, CWB sought the appointment of a receiver- manager for Goshen or, in the alternative, an interim receiver.

Goshen requested an adjournment until after August 31, 2023, its target date for completing a refinancing. [ 33 ] Between January 19 and May 18, 2023, Goshen made payments to CWB totalling $364,854.84. In June and July, Goshen made two additional payments of $91,213.71. In short, Goshen has continued to make the monthly payments of principal and interest to CWB since CWB demanded repayment of the Loan in full. Goshen intends to continue making these monthly payments until it completes the refinancing.

Issues [ 34 ] The issue to be determined is whether the court should adjourn CWB’s application, as Goshen requests, or appoint either a receiver-manager or an interim receiver. Applicable Law [ 35 ] CWB applies for the appointment of a receiver under s. 243 of the BIA on the ground that such appointment would be just and convenient.

Section 243 reads: 243

(1) Subject to subsection (1.1), on application by a secured creditor, a court may appoint a receiver to do any or all of the following if it considers it to be just or convenient to do so: (

a) take possession of all or substantially all of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt;

(

b) exercise any control that the court considers advisable over that property and over the insolvent person’s or bankrupt’s business; or (

c) take any other action that the court considers advisable. … [ 36 ] On the application of a secured creditor pursuant to s. 243 , the court may appoint a receiver over all of the property of an insolvent person or a bankrupt and may, inter alia , authorize the receiver to “take any other action that the court considers advisable.” [ 37 ] While CWB is a secured creditor of Goshen, Goshen is not a bankrupt, as it has not made an assignment in bankruptcy and a bankruptcy order has not been made against it.

Accordingly, before making an order under s. 243 of the BIA , the court must find that Goshen is an “insolvent person,” defined at s. 2 of the BIA as follows: insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and (

a) who is for any reason unable to meet his obligations as they generally become due, (

b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or (

c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due; [ 38 ] If this condition is met, the court must decide whether it is just and convenient to appoint a receiver. This is a discretionary decision.

The non-exhaustive factors to be considered on such an application were recently summarized by Rothery J. in Affinity Credit Union 2013 v The Lighthouse Supported Living Inc ., 2023 SKKB 82 at para 13 : [13] Affinity applies to have MNP Ltd. appointed as receiver-manager over all the assets of The Lighthouse as provided by s. 243(1) of the BIA . Affinity argues that it is “just and convenient” for the Court to make the receivership appointment.

Factors to be considered by the Court in exercising the judicial discretion include those referred to in Lemare Lake Logging Ltd. v 3L Cattle Company Ltd. , 2014 SKCA 35 at paras 98-100 , 371 DLR (4th) 663 (rev’d on constitutional grounds 2015 SCC 53 , [2015] 3 SCR 419), and citing from Bennett on Receiverships , 2d ed (Toronto: Carswell, 1999): 98 The case law relating to the appointment of receivers has identified a broad range of considerations that can bear on the issue of whether an appointment is appropriate.

A number of decisions refer to the list of factors found in the second edition of Bennett on Receiverships, supra at pp. 130-132.

These include matters such as: * Whether irreparable harm might result if the order is not made; * The risk to the security holder taking into consideration the size of the debtor’s equity in the collateral; * The nature of the property or collateral; * The need to protect or safeguard the debtor’s assets while litigation takes place; * The need to prevent waste of the debtor’s assets; * The balance of convenience as between the parties; * The fact that the creditor has a right to appoint a receiver under the loan agreement in question; * The conduct of the parties; * The impact of the order on the parties; * The cost of the receivership to the parties; * The likelihood of maximizing return to the parties.

See, for example: Maple Trade Finance Inc. v. CY Oriental Holdings Ltd. , 2009 BCSC 1527 , 60 C.B.R. (5th) 142 at para. 25 . 99 The third edition of Bennett on Receiverships , (Toronto: Carswell, 2011), at pp. 155-162, suggests that the following factors are typically taken into consideration in deciding whether to appoint a receiver: (

a) whether irreparable harm might be caused if no order is made; (

b) whether the security holder’s position will be prejudiced if no receivership order is made; (

c) whether it is necessary to apprehend or stop waste of the debtor’s assets; (

d) whether it is necessary to preserve and protect property pending a judicial resolution of matters outstanding; and (

e) the balance of convenience between the parties. See also: Houlden, et al, The 2013 Annotated Bankruptcy and Insolvency Act (Toronto: Carswell, 2013) at p. 1005. 100 These sorts of factors will inform judicial reasoning on an application such as the one brought by Lemare Lake in this case but, of course, the bottom-line issue remains the one specified in s. 243(1) of the BIA : Is the appointment of a receiver “just or convenient”? … [ 39 ] CWB argues that it does not need to show irreparable harm, given that Goshen agreed to the appointment of a receiver in the GSA and the mortgage.

I agree: see Affinity Credit Union 2013 v Vortex Drilling Ltd. , 2017 SKQB 228 at para 19 , 50 CBR (6th) 220. [ 40 ] In Norcon Marine Services Ltd., (Re) , 2019 NLSC 238 at paras 48-51 , Justice Orsborn considered how a

creditor’s contractual right to appoint a private receiver over the debtor’s property should factor into the court’s decision to appoint areceiver: [47] In this analysis, of what relevance is it that the applicant – here, BDC [Business Development Bank of Canada] – has the ability andcontractual authority to appoint a receiver and manager without enlisting the aid of the Court? [48] In Bank of Montreal v.

Sherco Properties Inc., 2013 ONSC 7023, the Court said this at paragraph 42: 42 Where the security instrument governing the relationship between the debtor and the secured creditor provides for a right to appoint areceiver upon default, this has the effect of relaxing the burden on the applicant seeking to have the receiver appointed. While theappointment of a receiver is generally regarded as an extraordinary equitable remedy, courts do not regard the nature of the remedy asextraordinary or equitable where the relevant security document permits the appointment of a receiver.

This is because the applicant ismerely seeking to enforce a term of an agreement that was assented to by both parties. See Textron Financial Canada Ltd. v. ChetwyndMotels Ltd., 2010 BCSC 477 (B.C. S.C. [In Chambers]); Freure Village [Bank of Nova Scotia v Freure Village on Clair Creek, (ON SC), 40 CBR (3d) 274 (Ont Sup Ct], supra; Canadian Tire Corp. v. Healy, 2011 ONSC 4616 (Ont. S.C.J.[Commercial List]) and Bank of Montreal v. Carnival National Leasing Ltd., 2011 ONSC 1007 (Ont. S.C.J.). [Emphasis added.] [49] Blair J. of the Ontario Superior Court expressed it slightly differently in Bank of Nova Scotia v.

Freure Village on Clair Creek, (ON SC), [1996] O.J. No. 5088, 40 C.B.R. (3d) 274 (Ct.

J.) when he said at paragraphs 11 and 13: 11 The Court has the power to appoint a receiver or receiver and manager where it is “just or convenient” to do so: … In decidingwhether or not to do so, it must have regard to all of the circumstances but in particular the nature of the property and the rights andinterests of all parties in relation thereto. … The fact that the moving party has a right under its security to appoint a receiver is animportant factor to be considered but so, in such circumstances, is the question of whether or not an appointment by the Court isnecessary to enable the receiver-manager to carry out its work and duties more efficiently; … … 13 While I accept the general notion that the appointment of a receiver is an extraordinary remedy, it seems to me that where the securityinstrument permits the appointment of a private receiver … and where the circumstances of default justify the appointment of a privatereceiver, the “extraordinary” nature of the remedy sought is less essential to the inquiry.

Rather, the “just or convenient” questionbecomes one of the Court determining, in the exercise of its discretion, whether it is more in the interests of all concerned to have thereceiver appointed by the Court or not.

This, of course, involves an examination of all the circumstances … including the potential costs,the relationship between the debtor and the creditors, the likelihood of maximizing the return on and preserving the subject property andthe best way of facilitating the work and duties of the receiver-manager. [Emphasis added.] [50] I note his use of the word “necessary” when referring to a court appointment.

Thus, while the fact of a party’s prior consent to aprivate contractual appointment may lessen or eliminate the need for caution because of the intrusive nature of the appointment of areceiver, the threshold of just or convenient must still be met.

Particularly when considering whether an appointment would beconvenient – an element which incorporates the practical and protective nature of the appointment – my view is that a court mustconsider whether court supervision of the receiver is necessary to protect and preserve the assets in question and to manage any unduecomplexity in the functioning of the receivership. … [Emphasis in original] [41] I find these comments instructive.

In this case, as CWB has a contractual right to appoint a receiver, theextraordinary and intrusive nature of a receivership order weighs less heavily, but court appointment of a receiver must nonetheless be a“just and convenient” remedy for the purpose of protecting and preserving the insolvent person’s assets. [42] In the alternative, CWB applies for the appointment of an interim receiver pursuant to s. 47 of the BIA, whichreads: 47

(1) If the court is satisfied that a notice is about to be sent or was sent under subsection 244(1), it may, subject to subsection (3),appoint a trustee as interim receiver of all or any part of the debtor’s property that is subject to the security to which the notice relatesuntil the earliest of (

a) the taking of possession by a receiver, within the meaning of subsection 243(2), of the debtor’s property over which the interimreceiver was appointed, (

b) the taking of possession by a trustee of the debtor’s property over which the interim receiver was appointed, and (

c) the expiry of 30 days after the day on which the interim receiver was appointed or of any period specified by the court.

(2) The court may direct an interim receiver appointed under subsection (1) to do any or all of the following: (

a) take possession of all or part of the debtor’s property mentioned in the appointment; (

b) exercise such control over that property, and over the debtor’s business, as the court considers advisable; (

c) take conservatory measures; and

(

d) summarily dispose of property that is perishable or likely to depreciate rapidly in value.

(3) An appointment of an interim receiver may be made under subsection (1) only if it is shown to the court to be necessary for the protection of (

a) the debtor’s estate; or (

b) the interests of the creditor who sent the notice under subsection 244(1).

(4) An application under subsection (1) is to be filed in a court having jurisdiction in the judicial district of the locality of the debtor. [Emphasis added] [ 43 ] Before appointing an interim receiver, the court must be satisfied that: (

a) Notice of intention to enforce security is about to be sent or was sent; and (

b) The appointment is necessary for the protection of the debtor’s estate or the creditor’s interests. [ 44 ] Notably, the test for appointment of an interim receiver is whether it is “necessary” not whether it is “just and convenient”, although the factors relevant to both tests overlap: see PricewaterhouseCoopers Inc. v Canada Fluorspar (NL) Inc. , 2022 NLSC 25 at para 19 , 98 CBR (6th) 108. [ 45 ] The authority conferred on the court in appointing an interim receiver under s. 47 is more limited than the receivership regime established by s. 243 of the BIA .

For example, the court cannot authorize an interim receiver to “take such other action as the court considers advisable,” which has been interpreted as giving the court the power to do what “justice dictates” and “practicality demands”: see discussion in Third Eye Capital Corporation v Ressources Dianor Inc./Dianor Resources Inc. , 2019 ONCA 508 at paras 48 – 58 , 435 DLR (4th) 416. [ 46 ] Evidence of dissipation of assets is not necessary for the appointment of an interim receiver: CWB Maxium Financial Inc v 2026998 Alberta Ltd , 2020 ABCA 118 . [ 47 ] CWB also relies on additional statutory authority in support of the requested orders.

Section 10 - 15 of the KBA authorizes a judge to appoint a receiver on an interlocutory application if it appears “appropriate or convenient”. Section 64(8) of the PPSA also empowers the court to appoint a receiver on the application of an interested person. Analysis [ 48 ] As required by s. 243 of the BIA , I will first address whether Goshen is an “insolvent person.” CWB served the Demand Letter on January 19, 2023, claiming that Goshen had committed

an act of default under the Commitment Letter by permitting a material adverse change to occur with respect to its financial position. CWB accelerated repayment of the entire indebtedness under the Loan, demanding payment within 10 days. In its materials filed in response to the present application, Goshen does not dispute that CWB was entitled to accelerate repayment and make demand when it did.

Obviously, Goshen did not repay CWB by the stipulated deadline. [ 49 ] In any event, CWB’s Loan to Goshen matured on March 3, 2023, and so, irrespective of the prior demand made by CWB, the entire balance was inarguably due and payable on the maturity date.

As at March 17, 2023, Goshen owed to CWB the total sum of $12,516,405.73. [ 50 ] Before CWB served the Demand Letter, Goshen had requested CWB to forbear from taking any steps until August 31, 2023, so that Goshen could obtain a new appraisal and updated financial statements for itself and related companies, and thereafter secure alternate financing in order to repay CWB in full.

Subsequently, Goshen continued to make monthly payments of principal and interest in the amount of $91,213.71, as though the Loan had not matured. [ 51 ] The ongoing monthly payments may be a sign of good faith on Goshen’s part, but by accepting them CWB did not acquiesce in Goshen’s request to delay proceedings. [ 52 ] CWB also points to a builders’ lien claiming $416,128.65, registered against title to the Land on May 14, 2019, by Westridge Construction Ltd.

Pursuant to s. 4.2 of the amended Commitment Letter, Goshen was required to “seek urgent resolution for the removal of that lien” from title to the Land (exhibit E to the affidavit of Ron Randall sworn May 18, 2023). According to the affidavit of Ron Randall, Goshen did not fulfil this obligation and it also neglected to provide CWB with updates regarding the dispute in a timely or satisfactory manner.

Similarly, Goshen’s responding evidence to the present application does not address the merits or status of the outstanding lien dispute. [ 53 ] Given the large overdue debt due and owing to CWB, I conclude that Goshen is an “insolvent person” within the meaning of the BIA . [ 54 ] With that precondition satisfied, the question remains whether this is an appropriate circumstance to appoint a receiver pursuant to s. 243 of the BIA . [ 55 ] In support of its application, CWB relies upon the following factors: (

a) CWB has the contractual right to appoint a receiver. (

b) While CWB is not required to show irreparable harm, CWB says that Goshen’s repeated failure to provide requested information regarding its finances and operations has left CWB unable to assess whether its security is impaired.

(

c) CWB is concerned about possible waste. In particular, CWB is concerned that the market value of its security will be impaired if the Care Home and Land cannot be sold as a going concern. CWB was also initially concerned that a new appraisal had not been obtained by Goshen. Now that Goshen has obtained the Second Appraisal Report, CWB submits that the $20.7 million estimated market value of the Care Home provides no reassurance as it assumes 90% occupancy, when the Care Home has had only 10%-15% occupancy for roughly nine months.

While the low occupancy is a valid concern, I do note that the report depicts the Property to be in very good condition and there is no evidence that any of the equipment needed to operate the Care Home has been disposed of. (

d) CWB argues that the nature of the Property and the need for preservation also favour court appointment of a receiver- manager or an interim receiver. CWB argues that the Care Home’s residents need ongoing care and assistance, and a receiver-manager or interim receiver will ensure that they receive the care they need and will have access to funds to support ongoing operations. Further, if a receiver is authorized to sell the Care Home as a going concern, this will also benefit its residents. Goshen responds that its management and staff have the professional qualifications and expertise to care for residents and established relationships with them, while MNP does not. (

e) As for the conduct of the parties and the balance of convenience, CWB says that it has lost confidence in Goshen’s management for multiple reasons related to non-disclosure of requested financial information and plans, failure to disclose the non- renewal of the SHA Contract, failure to find replacement financing, failure to obtain an updated appraisal in a timely manner, and failure to provide CWB with a commercially realistic business plan to attract new residents to the Care Home. Goshen also refused to cooperate with CWB’s proposed business review.

CWB says that, without such information, it is unable to properly assess the value of its security and the prospects for preserving its value. CWB also points to the fact that it first warned Goshen in November 2022 that it should seek refinancing or a purchaser for the Care Home. (

f) CWB says that maximizing the return to all stakeholders is likelier if a receiver-manager is appointed. If MNP is appointed receiver, it will be able to operate the business with a view to retaining or enhancing the value of the Property. (

g) CWB says that the proposed draft receivership orders are consistent with the Saskatchewan Template Receivership Order and are reasonable and necessary so that MNP can fulfil its mandate. The proposed interim receivership order has been crafted so that the interim receiver can obtain information and report to the court while limiting interference with Goshen’s operations. (

h) Both draft orders contemplate additional borrowings to fund the receivership, $100,000 if the receivership order is granted and $50,000 for an interim receivership. MNP may apply for approval of additional borrowing if needed. CWB submits that these amounts are reasonable given Goshen’s indebtedness and the nature of the business. [ 56 ] CWB submits that it has been patient with Goshen but Goshen has not been forthcoming with the requested financial information and has had ample opportunity to find alternate financing or a purchaser for its business.

CWB asserts that the status quo cannot continue. [ 57 ] For the most part, I agree. In response to CWB’s requests for specific information during the last nine months, Goshen has not responded promptly or adequately. Even after sending the Demand Letter and after the Loan matured, CWB did not apply immediately to court.

Rather, CWB made reasonable requests for information, such as copies of lease agreements for current residents, monthly rent-roll statements, monthly financial statements, a six-month income forecast, confirmation that Goshen’s remittances to government agencies are current, and a list of current employees and particulars regarding terms of their employment. This information should be readily available and easy to disclose.

CWB also attempted to conduct a review of Goshen’s business, but Goshen disregarded this request. [ 58 ] The evidence filed by Goshen in response to CWB’s application is similarly lacking in detail. [ 59 ] CWB has satisfied the requirements for appointment of an interim receiver set out in s. 47 of the BIA . First, CWB provided notice of its intention to enforce its security. Second, CWB has established that the appointment of an interim receiver is necessary for the protection of the debtor’s estate and the creditor’s interests.

Goshen’s failure to provide disclosure of financial information to CWB had made it impossible for CWB to ascertain whether its security is at risk. It is appropriate to appoint an interim receiver to preserve the Property on a temporary basis so that MNP can determine the true state of Goshen’s finances and business plans and monitor Goshen’s revenues and disbursements, while allowing Goshen to conduct day-to-day business and continue with its efforts to secure alternate financing. [ 60 ] At this time, I am not satisfied that it is just and convenient to appoint a receiver under s. 243 of the BIA .

I say this for three reasons. First, the evidence does not demonstrate that MNP has the expertise to manage the Care Home for the benefit of the residents. The main point established by both appraisals is that the Care Home has significantly greater value as a going concern than if it were to cease business operations and its property were sold. Goshen suggests that current management and staff have the necessary professional skills to operate the Care Home, which MNP lacks.

While MNP could work with the existing staff, how it would oversee the day-to-day operations of a seniors’ residence with several levels of care has not been shown. [ 61 ] Second, it does not appear necessary for MNP to have operational control of the Care Home in order for it to carry out its investigations of the income, liabilities, and business prospects of the Care Home. [ 62 ] Third, Goshen is belatedly taking steps to find alternate financing for the Care Home. Goshen has obtained the Second Appraisal Report and has engaged a consultant to assist it in its efforts.

While Goshen could have provided significantly more detail about the status of these efforts, Goshen does claim to be on track to complete a refinancing by August 31, 2023. The condition of the Care Home does not appear to be deteriorating, so allowing Goshen to pursue these efforts to completion is appropriate. [ 63 ] For these reasons, I have decided to grant the proposed draft interim receivership order and to adjourn CWB’s application for appointment of a receiver pursuant to s. 243 of the BIA , s. 10 - 15 of the KBA , and s. 64(8) of the PPSA sine die , to be returnable to chambers on 14 days’ notice.

I will remain seized of this matter should a further application or further directions be required.

Conclusion [ 64 ] For the foregoing reasons, the interim receivership order is granted in the form filed, with costs. J. P.T. BERGBUSCH