Bank of Montreal v. Calgary West Hospitality Inc. et al., (2011) 514 A.R. 329 (QB)

• Judge: Topolniski, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: March 24, 2011
• Citations: (2011), 514 A.R. 329 (QB);2011 ABQB 293

Bk. of Mtrl. v. Calgary West Hospitality Inc. (2011), 514 A.R. 329 (QB)

MLB headnote and full text

Temp. Cite: [2011] A.R. TBEd. MY.016

Bank of Montreal (plaintiff) v. Calgary West Hospitality Inc., Gamehost Limited Partnership, Gamehost Management Inc., Darcy Will and David Will (defendants)

(0903 12151; 2011 ABQB 293)

Indexed As: Bank of Montreal v. Calgary West Hospitality Inc. et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Topolniski, J.

April 29, 2011.

Summary:

Calgary West operated a casino on the Calgary Stampede grounds. The casino and grounds were owned by Calgary Exhibition and Stampede Ltd. (CES). Bank of Montreal (BMO) provided a commercial debt facility to Calgary West. When Calgary West informed BMO that it intended to cease operations, BMO sued Calgary West, claiming that it was owed $41 million by Calgary West. BMO and the defendants (Calgary West and four others who provided limited guarantees of Calgary West's obligations to BMO) entered into a consent receivership order. The defendants applied for leave to commence an action against CES at their own cost and for their own benefit. The defendants asserted that BMO had agreed to this. The receiver and BMO opposed the application, asserting that there was potential value in the cause of action, which should be monetized for the benefit of Calgary West's creditors. The receiver applied for directions concerning marketing the cause of action.

The Alberta Court of Queen's Bench dismissed the defendants' application and held that a "bid process or auction involving the only directly interested parties [the defendants, CES and BMO] would provide an efficient and commercially reasonable approach to monetizing the asset".

Receivers - Topic 2884

Property - Sale of property - Duties of receiver - [See Receivers - Topic 2890 ].

Receivers - Topic 2890

Property - Sale of property - Court approval - Calgary West operated a casino on the Calgary Stampede grounds - The casino and grounds were owned by Calgary Exhibition and Stampede Ltd. (CES) - Bank of Montreal (BMO) provided a commercial debt facility to Calgary West - When Calgary West informed BMO that it intended to cease operations, BMO sued Calgary West, claiming that it was owed $41 million by Calgary West - BMO and the defendants (Calgary West and four others who provided limited guarantees of Calgary West's obligations to BMO) entered into a consent receivership order - The defendants applied for leave to commence an action against CES at their own cost and for their own benefit - The defendants asserted that BMO had agreed to this - The receiver and BMO opposed the application, asserting that there was potential value in the cause of action, which should be monetized for the benefit of Calgary West's creditors - The Alberta Court of Queen's Bench dismissed the defendants' application - The receivership order was clear that the defendants required leave before they could pursue the cause of action - This was sensible, as it properly recognized and preserved the functions of the receiver and the court - A court-appointed receiver was not subject to control by the party appointing it or anyone other than the court - The receiver here had not sought the court's approval to pursue the cause of action at the estate's expense, but rather was proposing a limited sales process - See paragraphs 15 to 29.

Receivers - Topic 5805

Duties of receiver - General - To commence or continue actions - [See Receivers - Topic 2890 ].

Receivers - Topic 5805

Duties of receiver - General - To commence or continue actions - Calgary West operated a casino on the Calgary Stampede grounds - The casino and grounds were owned by Calgary Exhibition and Stampede Ltd. (CES) - Bank of Montreal (BMO) provided a commercial debt facility to Calgary West - When Calgary West informed BMO that it intended to cease operations, BMO sued Calgary West, claiming that it was owed $41 million by Calgary West - BMO and the defendants (Calgary West and four others who provided limited guarantees of Calgary West's obligations to BMO) entered into a consent receivership order - The defendants applied for leave to commence an action against CES at their own cost and for their own benefit - The defendants asserted that BMO had agreed to this - The receiver and BMO opposed the application, asserting that there was potential value in the cause of action, which should be monetized for the benefit of Calgary West's creditors - The Alberta Court of Queen's Bench dismissed the defendants' application - Having determined that a bid process or auction was appropriate, the court rejected the defendants' assertion that it would be unfair to allow BMO to participate in the bidding or to benefit from the sale where it had agreed that the defendants could pursue the cause of action - There was a genuine issue for trial as to whether there was an agreement as alleged by the defendants - The court directed the receiver to file a claim in the cause of action in order to preserve the rights of the defendants and BMO - If appropriate, bidding would take place after the trial - See paragraphs 38 to 57.

Receivers - Topic 5813

Duties of receiver - General - Duty to deal with property in a commercially reasonable manner - Calgary West operated a casino on the Calgary Stampede grounds - The casino and grounds were owned by Calgary Exhibition and Stampede Ltd. (CES) - Bank of Montreal (BMO) provided a commercial debt facility to Calgary West - When Calgary West informed BMO that it intended to cease operations, BMO sued Calgary West, claiming that it was owed $41 million by Calgary West - BMO and the defendants (Calgary West and four others who provided limited guarantees of Calgary West's obligations to BMO) entered into a consent receivership order - The defendants applied for leave to commence an action against CES at their own cost and for their own benefit - The defendants asserted that BMO had agreed to this - The receiver and BMO opposed the application, asserting that there was potential value in the cause of action, which should be monetized for the benefit of Calgary West's creditors - The receiver applied for directions concerning marketing the cause of action - The Alberta Court of Queen's Bench, having dismissed the defendants' application, held that a "bid process or auction involving the only directly interested parties [the defendants, CES and BMO] would provide an efficient and commercially reasonable approach to monetizing the asset" - See paragraphs 30 to 37.

Cases Noticed:

Katz, Re (1991), 6 C.B.R.(3d) 211 (Ont. Gen. Div. Bktcy.), refd to. [para. 32].

Royal Bank of Canada v. Soundair Corp. et al. (1991), 46 O.A.C. 321; 4 O.R.(3d) 1 (C.A.), refd to. [para. 33].

1239745 Ontario Ltd. et al. v. Bank of America Canada et al., [1999] O.T.C. 58 (Sup. Ct.), refd to. [para. 36].

Pioneer Exploration Inc. Estate (Bankrupt) v. Euro-Am Pacific Enterprises Ltd. (2003), 339 A.R. 165; 312 W.A.C. 165; 2003 ABCA 298, refd to. [para. 41].

Bank of Montreal v. Kalin (1992), 131 A.R. 397; 25 W.A.C. 397 (C.A.), refd to. [para. 41].

Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd. et al. (2010), 477 A.R. 112; 483 W.A.C. 112; 2010 ABCA 126, refd to. [para. 41].

Tottrup et al. v. Clearwater No. 99 (Municipal District) (2006), 401 A.R. 88; 391 W.A.C. 88; 2006 ABCA 380, refd to. [para. 41].

Metropolitan Stores (MTS) Ltd. v. Manitoba Food and Commercial Workers, Local 832 and Labour Board (Man.), [1987] 1 S.C.R. 110; 73 N.R. 341; 46 Man.R.(2d) 241; 38 D.L.R.(4th) 321, refd to. [para. 56].

RJR-MacDonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général), [1994] 1 S.C.R. 311; 164 N.R. 1; 60 Q.A.C. 241, refd to. [para. 56].

Harper v. Canada (Attorney General), [2000] 2 S.C.R. 764; 262 N.R. 201; 271 A.R. 201; 234 W.A.C. 201; 2000 SCC 57, refd to. [para. 56].

Authors and Works Noticed:

Bennett, Frank, Bennett on the PPSA (Ontario) (3rd Ed. 2006), p. 53 [para. 20].

Counsel:

Richard J. Cotter, Q.C., for the Bank of Montreal;

Douglas N. Tkachuk, for Gamehost Limited Partnership, Gamehost Management Inc., Darcy Will and David Will;

Steven H. Leitl, for Deloitte & Touche Inc.

These applications were heard on March 24, 2011, by Topolniski, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following reasons for judgment on April 29, 2011.