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RECEIVERS - Appointment of receiver - Liability of receiver

Wednesday, November 06, 2019 @ 6:24 AM  


Lexis Advance® Quicklaw®
Appeal by Deltro Electric from a decision ordering the appellant to repay the respondent, $2 million USD and that, failing repayment, a receiver be appointed over the appellant’s assets, undertakings and property. The litigation arose out of the parties’ failed business relationship in relation to the development of a ground-mount solar project in Barbados and a renewable energy project in the Dominican Republic. The appellant, as part of a group of the Deltro Group of Companies, entered into several obligations with the respondent to finance and complete the Barbados project, as set out in a letter of intent, an amended letter of intent, and a General Security Agreement. In accordance with those agreements, the respondent advanced $2 million USD to the appellant in 2016. In 2017, the appellant advised the respondent that because of the latter’s alleged misconduct in relation to an unrelated solar project, the appellant was no longer under any contractual or other obligation in any project under any agreement between the parties. The respondent accepted the appellant’s repudiation of all agreements, including the Barbados project, and demanded repayment of the $2 million USD that it had advanced. The appellant subsequently advised that it had obtained final approval of the Barbados project, as required under the parties’ agreements, and demanded that the General Security Agreement be discharged. The respondent did not accept that the appellant provided proper proof of the requisite final approval and advised that, in any event, it was not obligated to discharge the General Security Agreement in light of the appellant’s repudiation that the respondent had accepted. The application judge rejected the appellant’s argument that final approval of the Barbados project had been obtained and concluded that the appellant breached and repudiated its obligations and was therefore required to repay the respondent the equivalent of $2 million USD and appointed KSV as interim receiver.

HELD: Appeal dismissed. The application judge had jurisdiction to hear and determine the respondent’s application and to grant the requested relief. While the respondent should have stated the rule or statute under which the application was brought, this was a procedural, not a substantive, requirement. The General Security Agreement specifically allowed the respondent to appoint a receiver, manager or a receiver and manager or institute proceedings in any court of competent jurisdiction for the appointment of a receiver upon the appellant’s default. It was open to the application judge to conclude that the documents proffered by the appellant, including the proposed fresh evidence, fell far short of demonstrating that final approval had been granted. His interpretation was reasonable and was owed deference. There was no basis for interfering with the application judge’s refusal to re-open the application based on the fresh evidence of the former ministers’ affidavits. The judge’s conclusion that the fresh evidence would not have affected the outcome was reasonable. The application judge’s decision appointing KSV as receiver and limiting the receiver’s liability to gross negligence or wilful misconduct in the formal order represented a reasonable exercise of the application judge’s discretion as a case management judge of the Commercial List. He properly exercised his discretion to include the impugned provisions based on the circumstances of the case before him. KSV’s limited liability permitted the orderly execution of its duties without the concern that it would be subject to needless litigation, especially in the circumstances of this case, with a recalcitrant debtor who had already objected to KSV’s appointment.

Potentia Renewables Inc. v. Deltro Electric Ltd., [2019] O.J. No. 4964, Ontario Court of Appeal, M.H. Tulloch, L.B. Roberts and B. Miller JJ.A., October 2, 2019. Digest No. TLD-November42019009