D. Grounds for Appointment

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 481-482

Page 481

In order for the private appointment of a receiver to be valid, there must be a default, the notification requirements must have been satisfied, and the security agreement must give the secured creditor the power to appoint a receiver. Beyond this, a secured creditor does not need to demonstrate any additional grounds for the private appointment of a receiver.

A court may appoint a receiver where it appears to the judge that it is just and convenient to do so. This traditional test has not been substantially altered by any of the statutory regimes governing receiverships. Courts have been prepared to make such orders where it is necessary for the protection or preservation of the secured creditor’s security interest in the debtor’s property. Courts will also appoint a receiver to preserve the property pending realization where ordinary legal remedies are defective, or to preserve property from some danger that threatens it.³⁹In deciding whether or not to appoint a receiver, the court may consider such matters as the nature of the property, the likelihood of maximizing return to the parties, and the costs associated with the appointment.⁴⁰Some courts have refused to make an order appointing a receiver if the secured creditor has the power to appoint a receiver under the security agreement.⁴¹The order will be granted only if the secured creditor can demonstrate that the powers of the privately appointed receiver are inadequate in some respect. Other courts have been more willing to grant an order appointing a receiver despite the fact that the secured creditor has the power to appoint a privately appointed receiver. It is not necessary to show that a private appointment is inadequate; it is sufficient to demonstrate that a court appointment would enable the

Page 482

receiver to carry out his or her duties more effectively and efficiently.⁴²

A court may also refuse to appoint a receiver where it appears that no substantial benefit would result from the appointment, where the appointment would cause irreparable harm to a debtor who might succeed at the hearing, or when adequate protection can be afforded to the applicant through some other means.⁴³

[39] Tim v. Lai (1984), 53 C.B.R. (N.S.) 80 (B.C.S.C.).

[40] Paragon Capital Corp. v. Merchants & Traders Assurance Co. (2002), 46 C.B.R. (4th) 95 (Alta. Q.B.).

[41] Royal Bank of Canada v. White Cross Properties Ltd. (1984), 53 C.B.R. (N.S.) 96 (Sask. Q.B.); Macotta Co. of Canada v....