Receivership Orders in Nova Scotia: Case Law Update

A decision was recently released from Justice Wood of the Nova Scotia Supreme Court in ECBC v Crown Jewel Resort Ranch Inc. and I.N.K. Real Estate (2014 NSSC 420) regarding receivership sales and the issuance of vesting orders on sale approval.  Very few written decisions are issued in receivership proceedings in this Province so the ruling should be carefully considered and followed in future receivership proceedings and motions.
A few key points:

1. Justice Wood was unsatisfied with the evidence presented in the motion.  Although there were two affidavits from the Court appointed receiver and one from a creditor, the following matters were not addressed (para 5):
   • There were no abstract of title or PPSA searches which would show existing encumbrances on the assets to be sold.
   • There was no affidavit of service confirming who had received the motion documents and when.
   • The affidavit of the receiver referred to an appraisal of the real estate to be sold, but did not attach a copy.
   • The affidavit of the receiver noted that the tender had been advertised in three newspapers and a number of websites, but did not attach copies of the notices. There was no evidence of the date or number of newspaper insertions.
   • The affidavit of the receiver did not explain why the Receiver concluded that sale by public tender was the best option. There was also no explanation as to why the three newspapers in question (Ottawa Citizen, Toronto Star and Chronicle Herald) were selected.

   This decision reinforces the importance of comprehensive evidence to support a motion in receivership for sale of real property, including as to title, service, the reasonableness of the enforcement process undertaken, and the reasonableness of the sale sought to be approved.

2. Justice Wood refused to issue the vesting order in the form presented (although he did approve the sale).  Based on the decision, the wording in that proposed form of order was substantially similar to the form presently used by many insolvency counsel in this Province, and which have been issued in a number of proceedings over the past few years by judges in Halifax.  He held that the Court lacked the authority to issue such an order since Nova Scotia does not have an equivalent provision to the Courts of Justice Act (Ontario) s. 100.  He did not consider the general provisions of the Bankruptcy and Insolvency Act or Judicature Act to be sufficient.

Justice Wood’s comments regarding vesting orders may imply a shift of opinion in the NS Court.  The Court may in future prefer that sale orders incorporate wording similar to that used in NS foreclosure orders, which explicitly foreclose out the interest of any party claiming through the defendant/ respondent but do not purport to vest clear title in the purchaser.  Following the foreclosure wording therefore is the more conservative approach and likely appropriate in time sensitive motions until such time as further direction from the Court is given.