



COURT OF APPEAL FOR ONTARIO

CITATION: DBDC Spadina Ltd. v. Walton, 2014 ONCA 428

DATE: 20140526

DOCKET: C58024 and C58804

Doherty, Simmons and Tulloch JJ.A.

BETWEEN

DBDC Spadina Ltd., and Those Corporations Listed
    on Schedule A Hereto

Applicants (Respondents in Appeal)

and

Norma Walton, Ronauld Walton, The Rose &
    Thistle Group Ltd., and Eglinton Castle Inc.

Respondents (Appellants)

and

Those Corporations Listed
    on Schedule B Hereto, To Be Bound by the Result

Norma Walton, appearing in person

Howard C. Cohen, for the respondents (appellants)

Peter H. Griffin and P.E. Veel, for the applicants (respondents)

Heard and released orally:  May 21, 2014

On appeal from the order of Justice Frank J.C. Newbould
    of the Superior Court of Justice, dated November 5, 2013.

ENDORSEMENT

[1]

Ms. Walton represented herself on the appeal.  She is obviously very
    knowledgeable about the matters underlying this appeal.  Mr. Cohen represented
    the other appellants.  Not surprisingly, Ms. Waltons arguments differed to
    some degree from those her former counsel had advanced in their factum.  We
    will address the arguments made by Ms. Walton.  Mr. Cohen, for the other
    appellants, joined in and to some extent augmented Ms. Waltons arguments.

Issue #1  Did the application judge err in failing to require
    that secured creditors be given notice of the motion to appoint a Receiver
    Manager?

[2]

Ms. Walton argues that the mortgagees should have been given notice of
    the application to appoint a Receiver Manager in light of the potential impact
    of that appointment on the properties and their security in the properties. 
    Ms. Walton notes for example that the appointment of a Receiver Manager would
    automatically put the mortgages into default under the terms of those
    mortgages.

[3]

Ms. Walton correctly, in our view, does not argue that the application
    judge had no jurisdiction to make the order absent notice to the secured
    creditors.  She does argue that the application judge should have exercised discretion
    in favour of requiring notice to them.

[4]

The application judge was not asked to require that notice be given to
    the secured creditors and specifically the mortgagees.  Ms. Walton and the
    other appellants were certainly aware of the potential impact of the
    appointment of a Receiver Manager on the status of the mortgages.  They were
    well positioned to ask the application judge to give the necessary notification
    if they thought it prudent or necessary to a proper hearing.  Ms. Walton and
    the other appellants were all represented by counsel on the application.  No
    such request was made by anyone.  We cannot say that the motion judge erred in
    principle or acted unreasonably in failing to make an order he was never asked
    to make.

[5]

We also note that no attempt has been made by any secured creditor to
    intervene on the appeal and take up the argument that the secured creditors
    should have received notice of the application.

[6]

We are told that some mortgagees have participated in some of the many
    proceedings that have been taken since the appointment of the Receiver
    Manager.  The nature of those proceedings and the positions advanced on behalf
    of some of the mortgagees in respect of either the appointment of the Receiver
    Manager or the conduct of the Receiver Manager since its appointment are not
    before this court and are not germane to the appeal.  As Mr. Griffin put it,
    this appeal is about the appointment of the Receiver Manager not the conduct of
    the Receiver Manager since the appointment.

Issue #2  Did the application judge improperly exercise his
    discretion in favour of the appointment of a Receiver Manager?

[7]

Ms. Walton forthrightly accepts that on the material before the application
    judge, a finding of oppression under the
Ontario Business Corporations Act
was open to the application judge.  We agree with that concession.  Ms. Walton
    submits, however, that the application judge was still required to consider the
    competing interests of Dr. Bernstein, the Waltons and the other creditors in
    deciding whether the appointment of a Receiver Manager was the appropriate
    order.  She maintains that the appointment of a Receiver Manager is an extreme
    remedy to be granted sparingly.  She further argues that the appointment of the
    inspector about a month earlier was enough to fully protect Dr. Bernsteins
    interests and that the application judge should have simply continued that
    order perhaps with modifications as needed to meet specific issues.

[8]

Ms. Walton points to two specific errors which she claims taint the
    exercise of the application judges discretion.  First, she says he failed to
    take into account the inevitable and disastrous consequences to the business
    affairs of the named companies that would flow from the appointment of a
    Receiver Manager.  Second, she says that the application judge mischaracterized
    her conduct in relation to two of the properties as theft or having the
    appearance of theft.  Ms. Walton submits that this mischaracterization led the
    application judge to the overkill remedy of a Receiver Manager.

[9]

We have reviewed the application judges reasons.  He accurately set out
    the legal principles relevant to the appointment of a Receiver Manager under
    either the
Courts of Justice Act
or the
Ontario Business
    Corporations Act
:  see paras. 41-44.  The application judge considered
    whether an order continuing the inspectorship would suffice to protect Dr.
    Bernsteins interests:  see para. 52.  The application judge determined that
    given the difficulties the inspector had encountered in the month since his
    appointment and given the problems the inspector had identified in respect of
    the records of the corporations, the appointment of the Receiver Manager was necessary
    in that Dr. Bernsteins interests could not be adequately protected by a simple
    continuation of the inspectorship.  We see no misapprehension of the relevant
    evidence.  Indeed the evidence relating to the conduct of the inspectorship was
    unchallenged.  Nor can we characterize the application judges assessment of
    that evidence as unreasonable.  That is as far as our review goes.  It is not
    for this court to engage in a
de novo
review of the material.

[10]

The
    application judge also addressed the potential commercial implications of the
    appointment of a Receiver Manager:  see paras. 49-51.  We were told in the
    course of oral submissions that the order has had serious financial
    repercussions for the Waltons and the companies.  What may have happened after
    the order appointing a Receiver Manager was made and perhaps, more importantly,
    why those events happened are not before this court.  If the application judge
    did not err in the exercise of his discretion based on the record before him,
    it cannot be that subsequent events render the exercise of that discretion
    improper.  Problems that may have arisen in the course of the receivership or
    changes in circumstances subsequent to the appointment of the Receiver Manager
    are matters that are properly addressed in the context of the courts ongoing
    supervision of the Receiver Manager and are not matters to be addressed in an
    appeal which challenges the appointment of the Receiver Manager.

[11]

We
    also note that no stay of the application judges order was sought.  The
    applicants chose to accept the appointment of the Receiver Manager pending the
    outcome of this appeal.  That position seems inconsistent with an argument that
    the appointment of the Receiver Manager would inevitably lead to dire
    consequences for the corporations.  Were that the position one would have
    expected an effort to stay the order pending a challenge of the receivership.

[12]

We
    also do not accept that the application judges use of the word theft is
    necessarily a mischaracterization of some of the conduct of Ms. Walton. 
    However, even if the word theft is considered inappropriate given its
    criminal connotation, Ms. Waltons own affidavit acknowledges a knowing
    misappropriation of funds in respect of at least one property.  Whatever one
    might choose to call that conduct, it provided powerful evidence that Dr.
    Bernsteins interests in the property were being unfairly prejudiced by the
    conduct of the Waltons.  The application judges use of the word theft does
    not, in our view, taint his factual findings or the manner in which he
    exercised his discretion.

[13]

We
    have also reviewed the various features of the management of the affairs of the
    companies relied on by the application judge to support his findings and his
    order appointing the Receiver Manager.  In our view, all of his findings are
    supported by the record before the application judge and justify the conclusion
    that Dr. Bernsteins interests in the companies were significantly prejudiced by
    the ongoing activities of the Waltons.  The remedy ordered by the application
    judge, while undoubtedly one that should not be easily granted, was, in our
    view, fully justified in these circumstances.

[14]

The
    appeal is dismissed.  A number of related appeals that were transferred to this
    court from the Divisional Court on the order of Strathy J.A. are also
    dismissed.

[15]

The
    respondents are entitled to costs in the amount of $20,000, inclusive of
    relevant taxes and disbursements.

Doherty J.A.

Janet Simmons J.A.

M. Tulloch J.A.


