



COURT OF APPEAL FOR ONTARIO

CITATION: Reciprocal Opportunities Incorporated v. Sikh Lehar
    International Organization, 2018 ONCA 713

DATE: 20180831

DOCKET: C65109

Hoy A.C.J.O., van Rensburg and Pardu JJ.A.

BETWEEN

Reciprocal Opportunities Incorporated

Plaintiff (Respondent)

and

Sikh Lehar International Organization
,
    Narinderjit Singh Mattu, Rajwant Kaur Nijjar, Manjit Singh Mangat, Kamaljit
    Kaur Mangat, Suchet Singh Saini, Kamaljit Kaur Saini, Gurdev Singh Gill,
    Kanwaljit Kaur Gill, Inderjeet Singh Saini, Jatinder Kaur Saini, Harjeet Singh
    Thabal, Jaswinder Thabal, Hardeep Singh Dhoot, Raminder Dhoot, Daljit Singh
    Jammu, Parnpal Jammu, Harkanwal Singh, Kanwaljit Singh, Ramandeep Singh Athwal,
    Harnish Mangat, Sikanderjit Singh Dhaliwal, Sukhinder Dhaliwal, Gurdish Singh
    Mangat, Satinderjit Kaur Mangat and Guru Nanak Property Management Ltd.

Defendants (
Respondent
)

Paul J. Pape, for the appellant Sukhinder Sandhu

Dennis Touesnard, for the receiver JP Graci &
    Associates Ltd.

Ted R. Laan, for the respondent Sikh Lehar International
    Organization

Jonathan Piccin, for the respondent Community Trust
    Company and 2283435 Ontario Inc.

Heard: July 18, 2018

On appeal from the order of Justice R.J. Harper of the Superior
    Court of Justice, dated February 28, 2018.

Hoy A.C.J.O.:

[1]

The appellant, Sukhinder Sandhu, appeals the
    February 28, 2018 order of the motion judge, declining to approve the sale by a
    court-appointed receiver of the property known as 79 Bramsteele Road, Brampton,
    Ontario (the Property) to him.

[2]

For the following reasons, I would allow the appeal,
    set aside the order of the motion judge, and direct a new hearing.

Background

[3]

Sikh Lehar International Organization (SLIO) was established as a
    religious, private charitable organization to buy the Property and establish,
    manage and operate a Gurdwara (a Sikh temple). The Gurdwara is a tenant, but
    not the sole tenant, of the Property.

[4]

By 2014, SLIO was insolvent.

[5]

The Property has been the subject of litigation. The trustees of SLIO
    all wanted to sell the Property, and purported to sell it to different
    purchasers.  Disagreements about selling the Property led to the departure of
    some of the trustees and litigation about the amounts owing to the departing
    trustees: see
Sikh Lehar International Organization v. Saini
, 2018 ONSC
    2839. It also gave rise to litigation between SLIO, its two remaining trustees,
    Manjit Mangat and Harkanwal Singh, and the appellant, who had sought to
    purchase the Property: see
Sandhu v. Sikh Lehar International Organization
,
    2017 ONSC 5680.
[1]
Further, Canadian Convention Centre Inc. (CCC), a tenant of the Property, is
    seeking damages for alleged breaches of its lease in the amount of $2 million.
[2]



[6]

On September 1, 2017, at the instance of the first mortgagee of the
    Property,
[3]
Reciprocal Opportunities Incorporated (ROI), the motion judge granted an
    order appointing J.P. Graci and Associates Ltd. (the Receiver) as receiver of
    all the assets, undertakings and property of SLIO. The order authorized the
    Receiver to sell the Property, subject to the approval of the court.

[7]

The Receiver proceeded to have the Property appraised on September 15,
    2017 and contacted persons who had expressed an interest in purchasing the Property.

[8]

However, in an email on October 4, 2017, SLIO advised the Receiver that
    it had a firm commitment from a lender to take an assignment of your mortgage
    (presumably referring to the first mortgage), with the transaction to close in
    the next two weeks. The Receiver responded by email on October 5, 2017. It
    advised that the payout on the first mortgage was $4,092,745.31, the per diem
    rate was $1,114.51, and the Receivers fees and legal fees were $80,000. The
    Receiver further advised that if the mortgage amount and outstanding expenses
    were paid, it would apply to the court to approve the assignment of the
    mortgage and to be discharged. The Receiver also stated it anticipated having
    the information necessary to begin marketing the Property by November 1, 2017.
    The Receiver copied its counsel and SLIOs real estate counsel with its
    response, and separately forwarded its response (together with SLIOs October
    4, 2017 email) to, among others, counsel for the appellant.

[9]

There is no indication in the record that SLIO  or the proposed
    assignee  was in funds and prepared to close within two weeks of its October
    4, 2017 email to the Receiver.

[10]

The
    Receiver retained the services of a commercial real estate broker, who listed
    the Property for sale and put it on MLS as of October 31, 2017. The real estate
    broker also opined that the current value of the Property was significantly
    less than the appraised value, as the appraisal obtained by the Receiver
    assumed that the Propertys roof structures were in good working order, but in
    fact a significant portion of the roof required immediate replacement.

[11]

By
    letter dated October 31, 2017 to real estate counsel for SLIO, counsel for the
    Receiver confirmed that provided [SLIO] buys out the first mortgage on the
    property on or before November 14, 2017, then the Receiver will move for an
    Order having itself discharged. He advised that, as of that date, the payout
    of the first mortgage was in the amount of $4,121,722.50, with a per diem rate
    of $1,114.51. He further advised that provided payment was made before November
    14, 2017, the Receivers fees and legal fees would be capped at $80,000 plus
    HST.

[12]

The
    Receiver received three offers to purchase the Property. It entered into an
    agreement (the Agreement) to sell the Property to the appellant on November
    2, 2017.
[4]


[13]

Under
    the Agreement, the appellant agrees to purchase the Property on an as is where
    is basis, and to complete the transaction 15 business days after the Receiver
    obtains an approval and vesting order. With the exception of the requirement
    for an approval and vesting order, the appellants obligation to complete the
    purchase is essentially unconditional. The Agreement provides for a purchase
    price that exceeds the current value of the Property as assessed by the
    commercial real estate broker retained by the Receiver, and that approximates
    the appraised value of the Property.

[14]

In
    an affidavit sworn December 22, 2017, Mr. Mangat, one of the remaining trustees
    of SLIO, deposed that the appellant was aware of the Receivers intention to
    assign the first mortgage upon payment of the amounts owing. Mr. Mangat was
    not cross-examined on his affidavit.

[15]

The
    buy out of the first mortgage did not proceed by November 14, 2017.

[16]

In
    an email to the Receiver on November 23, 2017, real estate counsel for SLIO
    confirmed that SLIO had secured financing from a lender that was prepared to
    pay out all amounts owed to the Receiver in exchange for an assignment of the
    first mortgage. He advised that, among other items, the lender required a
    corporate resolution of ROI authorizing the assignment, the consent of the
    Receiver to the discharge of the certificate of pending litigation (CPL)
    registered on title to the Property by the appellant, and the Receivers
    undertaking to obtain a court order discharging the receivership upon payment
    of all amounts owing, in order to complete the assignment.

[17]

In
    an email later the same day, counsel for the Receiver clarified that while the
    Receiver could undertake to move for an order discharging the Receiver, the
    court would have discretion to grant the relief. He asked that counsel for the
    lender confirm that the lender was in funds. He indicated that the Receiver and
    its counsel could confirm their fees, and the Receiver could prepare a summary
    of its receipts and disbursements. He stated he trusted that the information he
    had previously provided regarding the amount owing on the first mortgage was
    satisfactory. He inquired as to the closing date.

[18]

In
    an email from counsel for the Receiver to real estate counsel for SLIO dated
    November 24, 2017, counsel for the Receiver seems to suggest the proposed
    lender would have to work out the discharge of the CPL and, if it could not,
    would have to decide whether or not to take the assignment without the CPL
    being discharged.
[5]
Counsel for the Receiver cautioned that, [i]f we cannot move forward with your
    proposal, I will be moving on January 5, 2018 for an order approving a sale
    agreement signed by the Receiver.

[19]

In
    an email later that day to SLIOs litigation counsel, counsel for the Receiver
    indicated that, [i]f your client can get financing and the CPL issue can be
    dealt with, we will deal with you as per [SLIOs real estate counsels]
    original email to the receiver. (This presumably refers to the November 23,
    2017 email, which is the earliest email in the record from SLIOs real estate
    counsel). He cautioned, [t]hat said, we will keep moving towards the sale of
    the property and I intend to bring the motion on January 5, 2018 for approval
    if the mortgage is not assigned beforehand.

[20]

In
    an email on November 29, 2017 to both SLIOs real estate and litigation
    counsel, counsel for the Receiver characterized their prior exchanges as
    without prejudice settlement discussions. He indicated that, as an officer of
    the court, the Receiver must have its actions approved by the court. He
    explained that the Receiver could not assign ROIs mortgage, but SLIO has a
    right to redeem the mortgage.

[21]

He
    further outlined the Receivers position on the proposed assignment of the
    first mortgage:

As you also know, prior to receipt of [the
    November 23 proposal] the receiver signed an agreement to sell the property to
    a third party. A motion will be served returnable January 5, 2017 [sic] for
    approval of that sale.

If your client wishes to redeem the mortgage
    and have the receiver discharged, it can bring a motion for [sic] in my action
    on notice to all affected parties for an order allowing it to redeem, and, on
    redemption, an order that the receiver be discharged. The Receiver will consent
    to leave to bring the motion and will not oppose that relief if sought.

[22]

In an email to counsel for the Receiver on
    November 30, 2017, litigation counsel for SLIO asked who ROIs representative
    was for the purpose of assigning the first mortgage.

[23]

Counsel for the Receiver provided the identity
    of ROIs counsel in a responding email on the same date. ROIs counsel is with
    the same law firm as Receivers counsel.

[24]

By email dated December 5, 2017, counsel for the
    Receiver provided his fees and those of the Receiver to date to real estate
    counsel for SLIO.

[25]

Real estate counsel for SLIO contacted counsel
    for ROI by email dated December 5, 2017. He advised of the documents the
    proposed assignee was requesting from ROI, including an accounting of all
    monies owed to ROI under the mortgage. He asked counsel for ROI to confirm that
    ROI was prepared to deliver the assignment and the other requested documents.
    He stated that [t]he solicitor for the proposed assignor [sic] confirms he is
    in funds.

[26]

The First Report of the Receiver is dated
    December 6, 2017. The Receiver prepared it in support of its motion for court
    approval of the Agreement and sale of the Property. The Report details the
    sales process the Receiver undertook with respect to the Property, leading it
    to seek court approval of the Agreement. The Report makes no reference to
    SLIOs attempts to arrange an assignment of the first mortgage held by ROI.

[27]

In his affidavit of December 6, 2017, real
    estate counsel for SLIO deposed that SLIO was concerned that if counsel for ROI
    did not respond quickly to the requisitions referred to in his email of
    December 5, 2017, the Property would be lost to a third-party purchaser in
    January 2018.

[28]

In his supplementary affidavit of December 21,
    2017, filed in response to the Receivers motion for approval of the Agreement,
    real estate counsel for SLIO further deposed that:

-    On December 8, 2017, counsel for ROI
    delivered a draft mortgage statement to counsel for SLIO.

-    He advised counsel for ROI that counsel
    for the proposed lender took the position that the default interest rate
    charged by ROI was contrary to s. 8 of the
Interest Act
, R.S.C 1985, c.
    I-15

and the proposed lender would not pay it. Counsel for ROI suggested
    that some amount in excess of the rate charged on the principal balance of the
    mortgage may have been the result of extension agreements entered into by SLIO
    and ROI.

-    On December 19, 2017, counsel for ROI
    delivered various documents setting out revised amounts required for the payout
    of the first mortgage. These amounts differed from those set out in the
    original Notice of Sale, dated May 17, 2017, and from other amounts provided by
    ROI in the interim.

-    The delay in effecting the assignment of
    the first mortgage was entirely the responsibility of ROI because of its
    failure to provide appropriate calculations of the amount owing.

-    The requisitions required by the proposed
    assignee from the Receiver or ROI had otherwise been substantially complied with.

[29]

In his affidavit sworn December 22, 2017, Mr.
    Mangat deposed that the emails of October 5, November 23 and 24, 2017 and the
    letter of October 31, 2017, referred to above, led SLIO to believe that upon
    payment of the proper amounts owing under the First Mortgage, the Receiver
    would arrange the assignment of the First Mortgage. As a result [SLIO] took
    steps to secure the proper financing of that assignment and incurred substantial
    costs in the process. Mr. Mangat then detailed borrowings from five individuals
    totaling approximately $396,268.87 incurred since the beginning of September
    2017, which he says are or will be debts of SLIO. He deposed that of those
    borrowings:

-        $207,000 was paid to the broker who
    had been trying to arrange financing for SLIO since September 2017, in part
    payment of his brokerage fee;

-        $24,518 was paid to the second
    mortgagee on October 14, 2017 to bring that mortgage into good standing, as
    required by the proposed assignee of the first mortgage;
[6]


-        $ 91,617.36 was paid to the City of
    Brampton on November 24, 2017 on account of tax arrears, again a condition of
    the proposed assignee of the first mortgage; and

-        $73,133.51 was paid on or after
    November 21, 2017 to obtain the discharge of a CRA lien for HST arrears, again
    a condition of the proposed assignee of the first mortgage.

[30]

Mr. Mangat further deposed that SLIO was unaware
    of the Agreement until the Receiver delivered its motion materials. The Receivers
    motion materials are dated December 6, 2017.

[31]

Neither Mr. Mangat nor SLIOs real estate
    counsel deposed that all the proposed assignees conditions of closing had been
    satisfied and that, but for the determination of the payout amount, the
    proposed assignee was prepared to close the assignment transaction.

The January 5, 2018 attendance before the
    motion judge

[32]

In its notice of motion dated December 6, 2017,
    filed in connection with the January 5, 2018 attendance before the motion judge,
    the Receiver sought an order approving the sale of the Property to the
    appellant.

[33]

SLIO opposed the Receivers motion. In response,
    SLIO brought its own motion seeking: (1) an order requiring ROI to assign the
    first mortgage, upon payment of all amounts owed to the Receiver or ROI; and (2)
    an order discharging the Receiver upon payment of such amounts.

[34]

In its factum filed on the motion, the Receiver indicated
    that it was prepared to be discharged  but only on the condition that the
    court be satisfied that it had discharged its duties, and on approval of the
    activities and accounts of the Receiver and its counsel. It stated that it
    entered into the Agreement prior to the conditional request to take an
    assignment of the first mortgage of ROI. It noted that the effect of the
    discharge sought by SLIO, as a condition of the assignment of the first mortgage,
    was that the sale transaction would not be approved and that the Receiver would
    seek, as part of the discharge order, a release from any potential liability to
    the appellant. The Receiver noted that the appellant and CCC opposed its
    discharge. In the event that the court was unwilling to exercise its discretion
    to discharge the Receiver, it sought an order approving the sale of the
    Property to the appellant.

[35]

The appellant appeared and filed a factum. Among
    other arguments, the appellant submitted that SLIO had not said how it would
    make future payments to its mortgagees or creditors if the assignment
    transaction proceeded, or even that it would. The appellant argued that the
    sale to him should be approved and a vesting order issued.

[36]

CCC filed a responding motion record opposing
    the form of vesting order sought because that order purported to vest the
    Property in the appellant free and clear of all encumbrances, including CCCs
    lease.

The motion judges reasons

[37]

The motion judge declined to approve the sale of
    the Property to the appellant and, instead, established a process that would permit
    the assignment of the first mortgage:
Reciprocal Opportunities
    Incorporated v. Sikh Lehar International Organization et al.
, 2018 ONSC 227.

[38]

In his reasons, the motion judge briefly
    reviewed SLIOs financial position. He noted that the first, second and third
    mortgages on the Property remained in default; a construction lien was registered
    in the amount of $406,500; the Ministry of Revenue had a tax lien in the amount
    of $108,156; the City of Brantford [sic] was in a position to put the Property
    up for sale for tax arrears in the amount of $433,818.59; CCC was seeking
    damages in the amount of $2 million for breach of its lease; there was a
    judgment in favour of the appellant in the amount of $2,206,729.01; and that
    there were numerous other debts.

[39]

At para. 18, the motion judge instructed
    himself on the four duties which
Royal Bank of Canada v. Soundair
    Corp.
(1991)
, 4 O.R. (3d) 1, 83 D.L.R. (4th)

76 (C.A.) directs a
    court must perform when deciding whether to approve a sale of a property by a
    receiver:

1.

The court should consider whether the receiver has made a sufficient
    effort to get the best price and has not acted improvidently.

2.

The court should consider the interests of all parties.

3.

The court should consider the efficacy and integrity of the process
    by which the offers are obtained.

4.

The court should consider whether there has been unfairness in the
    working out of the process.

[40]

The motion judge found that the Receiver took
    reasonable steps to obtain the best price for the Property. The motion judge
    noted, at para. 22, that interest was accruing rapidly on both the first
    mortgage and SLIOs other debts:

The [first] mortgage has been in arrears since
    September 2, 2016. There are substantial other debts that have also been in
    arrears for lengthy periods of time. Interest on the first mortgage and other
    debts has been accruing and escalating at a rate that the receiver must
    consider when acting in a manner that is efficient and fair to all interested
    parties.

[41]

Then, at para. 23, the motion judge stated he
    would not approve the sale, explaining: [e]xcept for the conduct of the
    Receiver/Plaintiff relative to the Defendant SLIO, I would have approved the
    sale.

[42]

At para. 26, the motion judge found that central
    to the communications from October 5, 2017 to the end of December 2017 between
    counsel for the Receiver, counsel for SLIO, and counsel for the intended
    assignee were inconsistent representations of what the pay-out amount would be
    in order to effect the proposed assignment of the first mortgage.

[43]

He found, at para. 30:

It is clear that as of the end of December, 2017,
    the Receiver/Plaintiff was prepared to accept payment of the outstanding
    balance of the first mortgage and assign the mortgage to a third party. The
    only thing that had not been established was the proper payout.

[44]

He concluded, at para. 32:

Having regard to the final consideration of
Royal Bank of Canada v. Soundair Corp
,
    I find the manner in which the process was conducted resulted in an unfairness
    to the Defendant SLIO and the prospective assignee of the first mortgage.

[45]

In his order dated February 28, 2018, the motion
    judge ordered that the proposed sale was not approved. He ordered ROI and the
    Receiver to provide a statement that they intend to rely on for purposes of the
    payout of the first mortgage and adjourned the matter to a further hearing
    before him, in order to fix the payout and set the terms of closing the payout
    and assignment of the first mortgage. He specifically ordered that the Receiver
    was
not
discharged.

The parties submissions on appeal

(a)

The appellants submissions

[46]

The appellant does not challenge the motion
    judges finding that the manner in which the process was conducted resulted in
    an unfairness to SLIO and the prospective assignee of the first mortgage.
    Rather, the appellant argues that the motion judge provided insufficient
    reasons because he did not explain why the unfairness to SLIO and the
    prospective assignee of the first mortgage should trump the unfairness to the
    appellant of not having the sale approved.

[47]

Further, the appellant argues that the motion
    judge erred in his application of the second
Soundair
duty by failing
    to consider the interests of creditors and the interests of the appellant,
qua
purchaser. He submits that this court should set aside the order of the motion
    judge and approve the sale of the Property to him. Alternatively, he asks that
    the order be set aside and new hearing ordered.

[48]

The appellant does not argue that that SLIOs
    right of redemption or assignment terminated when the Receiver entered into the
    Agreement.

(b)

The Receivers submissions

[49]

On appeal, the Receiver supports the position of
    the appellant. It argues that the motion judge erred in his application of the
    second
Soundair
duty by failing to consider the interests of all
    parties and by focusing solely on the interests of SLIO. It says that not
    approving the sale leaves SLIOs creditors in limbo as to when and by what
    means the Property will be sold to satisfy their debts.

[50]

It also argues that the motion judge failed to
    consider the third
Soundair
factor  namely, the efficacy and
    integrity of the process by which offers were obtained. It argues that this
    factor weighs in favour of approving the sale.

[51]

Finally, the Receiver argues that the fourth
Soundair
duty only requires an inquiry into the fairness of the sale process, and does
    not contemplate an inquiry into the fairness of other aspects of the
    receivership. In its submission, any unfairness resulting from the Receivers
    conduct in relation to SLIO and the proposed assignment is unrelated to the
    sale process undertaken with respect to the Property. Its position is that
    unfairness in the broader receivership is relevant only to an analysis of the
    interests of the parties under the second
Soundair
duty.

(c)

SLIOs submissions

[52]

SLIO argues that the motion judge correctly
    identified the test in
Soundair
, identified the appellant as a
    creditor, and considered the creditors interests. It states that there is
    sufficient equity in the Property such that the appellants position as a
    creditor is not at risk.

[53]

SLIO argues that it was treated unfairly because
    the Receiver breached its written consent to permit the redemption/assignment
    of the first mortgage and to obtain an order for discharge. In SLIOs
    submission, it is implicit in the motion judges reasons that he found that the
    unfairness to SLIO was the most important factor in the circumstances and the
    motion judges reasons were sufficient in this regard. SLIO notes that, in any
    event, insufficiency of reasons is not automatically fatal to a decision.

Analysis

(a)

The motion
    judge erred in his performance of the second
Soundair
duty

[54]

The motion judges order was discretionary in
    nature. An appeal court will interfere only where the judge considering the
    receivers motion for approval of a sale has erred in law, seriously misapprehended
    the evidence, exercised his or her discretion based upon irrelevant or
    erroneous considerations, or failed to give any or sufficient weight to
    relevant considerations: see
HSBC Bank of Canada v. Regal Constellation
    Hotel (Receiver of)
(2004), 71 O.R. (3d) 355, 242 D.L.R. (4th) 689 (C.A.),
    at para 22.


[55]

I agree with the appellant and the Receiver that
    the motion judge erred in performing the second
Soundair
duty: first,
    by failing to properly consider and give sufficient weight to the interests of
    the creditors; and second, by failing to consider the interests of the
    appellant,
qua
purchaser.

[56]

I begin by acknowledging that while the primary
    interest is that of the creditors of the debtor, the interests of the creditors
    is not the only or overriding consideration. The interests of a person who has
    negotiated an agreement with a court-appointed receiver ought also to be taken
    into account. And in appropriate cases, the interests of the debtor must also
    be taken into account: see
Soundair
, at paras. 39-40.

[57]

Although the motion judge noted that there were
    substantial debts in arrears and interest was accruing on those debts, he did
    not consider how declining to approve the sale, so that the assignment of the
    first mortgage might proceed, would affect the creditors interests.

[58]

If the sale proceeded, the creditors could be
    repaid. On the other hand, the assignment of the first mortgage would simply
    replace one creditor with another. It would not permit SLIO to repay the other
    substantial debts which the motion judge indicated were in arrears. It is also
    not clear that SLIO would be in a position to service the first mortgage, if
    assigned to a new mortgagee.

[59]

Further, according to Mr. Mangats evidence, if
    the assignment proceeds SLIO will assume additional debt in respect of the
    brokerage fees payable for arranging the assignment, thus worsening SLIOs
    financial position. While Mr. Mangat deposed that certain debts had been repaid
    (at least in part) to satisfy the prospective assignees conditions of closing,
    it is intended that SLIO will assume debts incurred to facilitate those
    repayments. It also appears that the Property is deteriorating and urgently
    requires repair. There is no indication as to how those repairs will be funded.
[7]


[60]

The receivership was triggered by SLIOs
    insolvency. The motion judge did not engage in any analysis of the continued
    viability of SLIO and SLIOs ability to pay the creditors if the sale did not
    proceed. He did not consider whether declining to approve the sale transaction would
    merely delay the inevitable. Given that
Soundair

directs the primary interest to be considered is that of the
    creditors of the debtor, this was an error.

[61]

Moreover, the motion judge did not give any
    consideration to the interests of the appellant,
qua
purchaser. He did
    not consider the potential prejudice that would result to the appellants
    interests if the sale was not approved. Significantly, while the motion judge
    declined to approve the sale based on the conduct of the Receiver and first
    mortgagee vis-à-vis SLIO, he did not find that the appellant was implicated in
    this conduct.

[62]

As a result, I conclude that the motion judge
    erred in his application of the second
Soundair

duty. In light of this conclusion, it is unnecessary to address the
    appellants argument that the motion judge provided insufficient reasons or the
    Receivers arguments regarding the application of the third and fourth
Soundair

factors.

(b)

The appropriate remedy is to set aside the order
    below and direct a new hearing

[63]

As I have concluded that the motion judge erred
    in principle, the next question is whether this court should consider whether
    to approve the sale transaction
de novo

or set aside the order below and order a new hearing. For several
    reasons, I would set aside the order below and order a new hearing, on notice
    to all persons with an interest in the Property, including the lessees, and any
    execution creditors.

[64]

First, the circumstances are unusual. Contrary
    to what is suggested by the Receivers notice of motion filed below, and to
    what I had understood at the hearing of the appeal, this is not a case where
    the Receiver unequivocally recommended that the sale be approved. Rather, its
    factum below indicates that it did not oppose the assignment, provided it was
    discharged and released from any potential liability to the appellant. It
    recommended the sale only in the event that the motion judge was unwilling to
    insulate it from liability to the appellant. A re-hearing would permit the
    motion judge to obtain clarity on the Receivers position.

[65]

Second, the First Report of the Receiver does
    not provide an update on SLIOs financial position, indicate how the assignment
    option would affect creditors other than ROI, explain what it told the
    appellant about the proposed assignment before entering into the Agreement and
    what it told SLIO about the proposed sale, or describe what role it took in
    determining the amount outstanding under the first mortgage. A re-hearing would
    permit the Receiver to provide a further report and assist the motion judge in
    balancing the interests of the creditors, the appellant, SLIO, and the proposed
    assignee. If the motion judge were inclined to discharge the Receiver, an updated
    report would also assist the motion judge in determining the terms of its
    discharge.

[66]

Third, it is not clear that the proposed
    assignee is ready, willing and able to close the assignment upon determination
    by the motion judge of the payout amount under the first mortgage. Among other
    things, the discharge of the Receiver, which the motion judge declined to
    grant, at least at this juncture, appears to be a condition of the proposed
    assignment.

[67]

Mr. Mangat deposed that SLIO has borrowed money
    to discharge certain debts, as required by the proposed assignee of the first
    mortgage. But, based on the amounts owing to those creditors as set out in the
    motion judges reasons, the amounts Mr. Mangat says have been repaid are less
    than the amounts owing to those creditors. Moreover, despite Mr. Mangats
    evidence that the arrears on the second mortgage had been repaid, the motion
    judges reasons indicate, and counsel for the second mortgagee advised this
    court in oral argument, that the second mortgage is in arrears. SLIOs overture
    to the Receiver also followed on the heels of unsuccessful attempts by SLIO to
    refinance the first mortgage before the Receiver was appointed. A re-hearing
    should permit the motion judge to determine whether the assignment transaction
    could proceed without delay.

[68]

Fourth, a number of factual determinations may
    need to be made in order to permit the balancing of the interests of the
    creditors, the appellant, SLIO and the proposed assignee, to determine whether
    or not the sale should be approved and, if the motion judge is inclined to
    order the discharge of the Receiver, the terms of its discharge.

[69]

For example, as indicated above, Mr. Mangat
    deposed that the appellant was aware of the Receivers intention to assign the
    first mortgage upon payment of the amounts owing. I understand that his
    allegation is based on the fact that counsel for the Receiver forwarded its
    October 5, 2017 email, and SLIOs email of October 4, 2017, to counsel for the
    appellant. However, as I have stated, the motion judge made no finding as to
    what the appellant knew, and when. The emails of October 4 and 5, 2017 seemed
    to contemplate that the assignment would close by October 18, 2017 (i.e. in
    the next two weeks). It is unclear what the appellant knew about the proposed
    assignment transaction thereafter. There may also be credibility issues at play,
    as Mr. Mangat has been previously censured for his serious failure to disclose
    material facts to the court on a motion for an injunction involving the
    Property:
Sikh Lehar International Organization v. Suchet Saini et
    al.
, (28 January 2016), Brampton, CV-15-1855-00 (Ont.
    S.C.).

[70]

Nor did the motion judge make any findings about
    what SLIO knew, and when. In his affidavit of December 22, 2017, Mr. Mangat
    deposes SLIO did not know of the Agreement until the delivery of the Receivers
    motion materials on the motion to approve the sale of the Property. The
    Receivers motion materials are dated December 6, 2017. However, counsel for
    the Receiver advised both SLIOs litigation counsel and real estate counsel by
    emails dated November 24, 2017 that he intended to bring a motion to approve
    the sale of the property returnable January 5, 2018 if the assignment did not
    proceed. Counsel for the Receiver repeated this caution in his email of
    November 29, 2017. Indeed, as early as October 5, 2017, the Receiver had told
    SLIO that it would likely be in a position to market the Property by November
    1, 2017. It may be that Mr. Mangat incurred at least some  and perhaps most 
    of the costs he did, purportedly on behalf of SLIO, with fair warning that,
    in the appellants words, the Receiver was riding two horses.

[71]

Also, in terms of the unfairness to SLIO, the
    motion judge made no findings about what the Receiver knew about Mr. Mangat incurring
    indebtedness in connection with the assignment, purportedly on behalf of SLIO.
    The motion judge also did not make any finding as to whether Mr. Mangat incurred
    these debts contrary to the receivership order, which empowers and authorizes
    the Receiver, to the exclusion of SLIO and all other persons, to manage SLIOs
    business and incur obligations.

[72]

Similarly, while the motion judge referred to
    what he described as inconsistent representations about the payout amount
    between counsel for the Receiver, counsel for SLIO, and counsel for the
    intended assignee as creating the unfairness to SLIO and the prospective
    assignee of the first mortgage, the evidence of SLIOs real estate counsel was
    that the delay was 
entirely
the responsibility of ROI because of its failure to provide
    appropriate payout calculations of the amount owing [emphasis added]. More
    detailed findings may be required about the cause of the delay in settling the
    payout amount.

[73]

To be clear, I do not purport to make any of
    these factual findings; that is a matter for the motion judge on the new
    hearing, to the extent necessary to resolve the motion.

[74]

Fifth and finally, the issue raised by CCC
    regarding the form of the vesting order contemplated by the Agreement remains
    to be resolved.

Disposition

[75]

For these reasons, I would allow the appeal, set
    aside the order below, and order a re-hearing, on notice to all persons with an
    interest in the Property, including the lessees, and any execution creditors.

[76]

Subject to any further directions that the
    motion judge may provide, I would also direct that, for the re-hearing: (1) the
    Receiver provide a further report, detailing SLIOs current financial position,
    indicating how the sale and assignment options would affect SLIOs creditors, explaining
    what it told the appellant about the proposed assignment before entering into
    the Agreement, explaining what it told SLIO about the proposed sale, explaining
    what role it took in determining the amount outstanding under the first
    mortgage, and clarifying its position; (2) ROI provide a statement of the
    amounts owing under the first mortgage, indicating the extent to which interest
    on arrears has been calculated at a rate greater than the pre-default interest
    rate; and (3) SLIO provide a copy of its agreement with the proposed assignee
    of the first mortgage and evidence from the prospective assignee of the first
    mortgage, confirming what (if any) conditions to closing remain outstanding and
    that it is in funds and willing and able to close upon satisfaction of those
    conditions.

[77]

I would order that the appellant be entitled to
    his costs of the appeal, fixed in the amount of $19,100, inclusive of HST and
    disbursements.

Released: AH AUG 31 2018

Alexandra Hoy A.C.J.O.

I agree K.M. van Rensburg J.A.

I agree G. Pardu J.A.





[1]

In that action, the trial judge found that neither party was
    ready, willing and able to close the transaction, as at the contemplated
    closing date, and ordered SLIO and its two remaining trustees to pay a total of
    $2,206,729.07 to the appellant. An appeal of the decision is pending to this
    court.



[2]

CCCs action has been stayed by the receivership order in
    these proceedings.



[3]

While at the instance of the first mortgagee, ROI, the
    appointment ultimately proceeded with the consent of SLIO and CCC.



[4]
The Receiver received offers from: (1) the appellant; (2) 2207190 Ontario Inc.;
    and (3) Sukhmeet S. Sandhu. 2207190 Ontario Inc. is controlled by the appellant
    and is a judgment creditor in the action relating to the appellants prior
    attempt to purchase the Property: see
Sandhu v. Sikh Lehar International
    Organization
, 2017 ONSC 5680. In his affidavit dated December 22, 2017,
    Mr. Mangat deposes that Sukhmeet S. Sandhu is the appellants son.



[5]
In his affidavit sworn December 21, 2017, real estate counsel to SLIO advised
    that
the CPL was discharged before the hearing date on the
    motion below.



[6]

Counsel for the second mortgagee (who is also counsel for the
    proposed assignee of the first mortgage) advised at the hearing of the appeal
    that, as of that date, the second mortgage was in arrears.



[7]
In a letter dated October 31, 2017, the commercial real estate broker retained
    by the Receiver notes that there are visible roof leaks and a portion of the
    tar-gravel roof needs to be replaced immediately. The broker estimated that
    half of the HVAC units and a portion of the parking lot will need to be
    replaced. The broker also indicated that the exterior of the building requires
    immediate attention.


