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CREDITORS AND CLAIMS - Priorities

Thursday, April 18, 2019 @ 8:57 AM  


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Appeal by the court-appointed Receiver from an order refusing to grant priority to the Receiver’s charge for fees and disbursements over the city’s claim for unpaid property taxes. The debtor was a residential home builder. The Receiver had applied for an order granting it the authority to repair, maintain and complete the debtor’s properties and a corresponding first priority charge as against each specific property for any expenses incurred, including the Receiver’s claim for fees and disbursements. While the chambers judge refused to grant priority to mortgage and lien holders over the Receiver’s Charge, he granted a declaration that the City’s special lien for unpaid property taxes ranked ahead of the Receiver’s Charge.

HELD: Appeal allowed. While the chambers judge reasonably applied the applicable principles in declining to give priority to the claims of mortgage and lien holders over the Receiver’s charge, he erred in approaching the city’s application differently. There was no principled reason for drawing a distinction between the city’s position and that of the mortgage and lien holders. The chambers judge’s conclusion that there was a less convincing case for secured creditors to participate in the Receiver’s costs when the intent was to liquidate was not supported by the law. There was nothing on the record to suggest that the city would receive no benefit from the process undertaken by the Receiver on behalf of all creditors. The Receiver had a super priority for its fees and disbursements in accordance with the original receivership order. As was noted by the chambers judge, the amount of those costs to be paid by the city and the other secured creditors would ultimately be the subject of an apportionment exercise.

Royal Bank of Canada v. Reid-Built Homes Ltd., [2019] A.J. No. 345, Alberta Court of Appeal, M.S. Paperny, S.J. Greckol and R. Khullar JJ.A., March 25, 2019. Digest No. TLD-April152019010