J. W. Mason & Sons Ltd. (Re), 2014 NSSC 409

SUPREME COURT OF NOVA SCOTIA IN BANKRUPTCY AND INSOLVENCY Citation: J. W. Mason & Sons Ltd. (Re), 2014 NSSC 409 Date: 2014/11/21 Docket: Hfx B-36645 Registry: Halifax District of Nova Scotia Division No. 1 Court No. 36645 Estate Nos. 51-1656051, 51-1656062 and 51-1656052 IN THE MATTER OF THE PROPOSAL OF J.W.

MASON & SONS LIMITED - AND - IN THE MATTER OF THE PROPOSAL OF MOUNTAIN CREST FARM LIMITED - AND - IN THE MATTER OF THE PROPOSAL OF SOLAR VALE FARM LIMITED __________________________________________________________________ D E C I S I O N __________________________________________________________________ Registrar: Richard W. Cregan, Q.C. Heard: October 31, 2014, in Halifax, Nova Scotia Counsel: Brian W. Stilwell, for Burchell MacDougall Michael T. Pugsley, for Nova Scotia Farm Loan Board Mark S. Rosen, for BDO Canada Limited

By the Court : [ 1 ] This is an application by BDO Canada Limited (BDO) and Burchell MacDougall for the taxation of their accounts as Trustee and Solicitors respectively for services provided to J. W. Mason & Sons Limited, Mountain Crest Farm Limited and Solar Vale Farm Limited which were related companies engaged in the business of growing, processing and marketing apples. [ 2 ] In the summer of 2012 these companies were experiencing financial difficulties which would affect their ability to pick the current crop.

Without some financial relief, the apples would be left to rot on the trees. [ 3 ] They engaged BDO and Burchell MacDougall. A plan was developed whereby with the aid of DIP financing and a contract to sell the apples to Bay Growers Inc. ( BGI ) , a marketing cooperative in Ontario, they would be able to make a Division I Proposal under the Bankruptcy and Insolvency Act , R.S.C. 1985, c.

B-3 ( BIA). [ 4 ] On September 6, 2012, an Order was granted by this Court which, among other things, approved an Administrative Charge in the amount of $200,000 and a DIP charge pursuant to Sections 64.2 and 50.6 of the BIA respectively. [ 5 ] The following paragraphs from this Order are relevant: 2.

BDO Canada Limited, the Trustee in these proceedings (the “Trustee”), and the law firm Burchell MacDougall, legal counsel to the Companies, shall be paid their reasonable fees and disbursements for their professional services in relation to these proceedings both before and after the date of this Order (collectively, the “Administration Costs”). The Companies are authorized and directed to pay the accounts of the Trustee and Burchell MacDougall on a monthly basis or as agreed to between the Companies and the Trustee or Burchell MacDougall, as the case may be. 3.

The Trustee and Burchell MacDougall shall pass their accounts from time to time, and, for this purpose, the accounts of the Trustee and Burchell MacDougall will be referred to the taxing officer under the Bankruptcy and Insolvency Act . 4. Pursuant to

section 64.2 of the Bankruptcy and Insolvency Act , RSC 1985, c B-3, as amended (the “ BIA ”), the Trustee and Burchell MacDougall are hereby granted a mortgage, charge, lien and security interest (the “Administration Charge”) in the total aggregate amount of $200,000 on all present and after-acquired property of the Companies, both real and personal, (the “Property”) as security for the Administration Costs.

The Administration Charge shall have the priority set out in paragraph 10 of this Order. [ 6 ] Paragraph 10 of the Order provides a charge on the property of the companies in priority to all other charges except for any DIP financing advanced but unexpended. [ 7 ] Proposals were prepared for the first two companies. They were presented to the creditors who rejected them. The companies were deemed to have made assignments on December 4, 2012. A proposal was not prepared for the third company, Solar Vale Farm Limited.

It was thus similarly deemed to have made an assignment when its notice of intention expired sometime earlier. [ 8 ] Notice of this Application was served on the secured creditors who might be affected by the payment of these accounts, namely: Business Development Bank of Canada Bank of Montreal

Nova Scotia Business Inc. Nova Scotia Farm Loan Board [ 9 ] Mr. Stilwell advised the Court that the first three creditors had confirmed that they had no objection to these accounts. [ 10 ] Mr. Pugsley on behalf the Nova Scotia Farm Loan Board submitted a number of objections. Mr. Stilwell and Mr. Rosen responded. [ 11 ] No exception was taken to the legitimacy of the services billed nor to the hourly rates applied. Rather, the issue is the extent the work billed is of the nature contemplated in the clauses from the Order quoted above. [ 12 ] The specific interest of Mr.

Pugsley ’ s client is that it held a mortgage on real property owned by Mountain Crest Farm Limited. It had no claim against the assets of the other two companies. [ 13 ] Mr. Pugsley raised three points to be considered in determining the appropriateness of these accounts. [ 14 ] First, he observes that the taxation is for work of the Trustee and the Solicitors in preparing proposals. This is what was contemplated to be covered by the paragraphs quoted above from the Order . However, he says that in reviewing the entries on the accounts there is work recorded which is other than directed to preparing proposals.

Specifically, he refers to the DIP financing, litigation with BGI and what might be considered as routine management. [ 15 ] Mr. Stilwell and Mr. Rosen respond by saying that what they did was beyond the simple drafting of proposals on the instructions of the owners of the companies. They were working on putting together not a liquidating proposal, but rather a restructuring proposal. This required their constant supervision.

They had to be involved with the activities of the company in harvesting and marketing the apples, overseeing cash flow, and other matters so that they could design a proposal that would be attractive to the creditors. These activities were inseparable from their work in preparing a proposal. Also, Mr. Rosen advised the Court of the standards imposed on him by the Trustee ’ s professional organization.

These required a significant participation on the part of a Trustee in the current activities of the debtor. [ 16 ] I am satisfied that the work covered in these accounts was work properly required for preparing the proposals for the three companies. It is all work done by the Trustee and the Solicitors for the purpose of making proposals. [ 17 ] Second, Mr. Pugsley notes that his client had been required to pay BDO fees for acting for it in the sale of real property on which it held security. He was concerned that it would be paying double for having these accounts also taxed against it.

This may be, but there will be further proceedings to determine the allocation of the Administration Charge and access to the DIP financing. This is thus a question for a later day. [ 18 ] Third, Mr. Pugsley notes that the proposals were not accepted and suggests overall failure. He submits that because of this failure, these accounts should be reduced. Put another way, he suggests that the accounts should be proportionate to the success. [ 19 ] The Trustee and the Solicitors were engaged when the Companies were in significant financial stress.

The engagement was not to do a liquidating proposal, but a restructuring proposal. They did not take it on a contingency basis; they took it on the fee basis as stated in Paragraph 2 of the Order. The integrity of their work is not questioned. [ 20 ] I am thus satisfied that the accounts are proper. BDO and Burchell MacDougall are entitled to have them taxed as presented.

R. Halifax, Nova Scotia November 21, 2014