AuthorStephanie Ben-Ishai; Thomas G. W. Telfer
Secured creditors who have been granted an all-encompassing security interest in the debt-
or’s assets will usually also be given the power to appoint a receiver-manager in the event
of a default under the security agreement. If this power is exercised, the receiver-manager
will take possession and control of the business from the debtor. The receiver-manager will
operate the business in the hope of selling it to a buyer as a going concern.
The law relating to receiverships is complicated by the fact that there are two dierent
sources of receivership law. A receiver-manager may be appointed pursuant to the contrac-
tual power contained in the security agreement. Alternatively, a court exercising its equitable
jurisdiction may appoint a receiver-manager. The rules and principles governing these two
types of receiverships dier in many important respects, although these dierences have
been reduced somewhat by legislation. The law relating to receiverships is also complicated
by the fact that there are several dierent federal and provincial statutes that regulate receiv-
erships, and there is considerable overlap in their provisions.
For several centuries, equity has employed the remedial device of a court-appointed receiver
and manager to administer assets while a dispute is being resolved or to assist in the
enforcement of a judgment where the legal enforcement mechanisms were inadequate.
The privately appointed receivership has a much shorter history and traces its genesis to,
approximately, the middle of the nineteenth century. Historically, in the case of realty mort-
gages, mortgagees were reluctant to take possession of the land because the courts held the
mortgagees strictly to account for maladministration. Mortgagees were reluctant to apply
for court-appointed receivers because the device is expensive and can require many court
hearings. Ingenious counsel thereupon hit on the device of a contractual clause allowing the
secured creditor, on the debtor’s default, to appoint a private receiver-manager to take pos-
session of the collateral and manage the business until it was disposed of. To make sure that
the secured creditor could not be held responsible for the receiver’s actions, and that the
receiver would have plenary powers to manage the business, the clause also provided (and
continues to provide) that the receiver shall be deemed to be the debtor’s agent.
Strictly speaking, a distinction is drawn between a person who is appointed to collect
income and rent from a property and a person who also has the power to manage the busi-
ness of the debtor. The former is referred to as a receiver, while the latter is referred to as a
receiver and manager (or receiver-manager). The appointee is virtually always given a power
of management over the business, and it has therefore become usual to refer to the latter
simply as a receiver. This usage will be adopted here, but it should be kept in mind that the
receiver must be given a power of management either by the security agreement (in the
case of a privately appointed receiver) or by the court order (in the case of a court-appointed
The powers of a court-appointed receiver were derived from the order appointing the
receiver. The powers of a privately appointed receiver were derived from the terms of the
security agreement. A secured creditor who had the power to appoint a privately appointed
receiver pursuant to its security agreement was not compelled to do so and could instead
seek to have a receiver appointed by a court. A secured creditor could also seek to have a pri-
vately appointed receiver converted into a court-appointed receiver. The next case discusses
the dierence between these two kinds of receiverships.
Ostrander v Niagara Helicopters Ltd (1973), 1 OR (2d) 281 (Ont H Ct J)
In spite of the lengthy evidence that was taken in these proceedings continuing over many
days, I am satised that the real questions involved have become quite narrowed and con-
ned. This result was mainly achieved by the very careful and thorough arguments of all
counsel and by their careful review of the evidence. Summarily stated the facts are briey
these. The company known as Niagara Helicopters Limited (hereinafter referred to for con-
venience as “Niagara”), was founded by the plainti Paul S. Ostrander who was the owner
of % of the stock of the company. This company operated out of the City of Niagara Falls
providing charter commercial air services, a ight school, tourist operations and various
other services using helicopters. While Ostrander was an experienced helicopter pilot he
proved to be an inept nancial manager and when the company experienced serious nan-
cial diculties the defendant Roynat was approached for a substantial loan by way of bond
mortgage. A debenture dated October , , (ex.) was entered into between Niagara
Helicopters Limited and the Canada Trust Company as trustee, as a result of which Roynat
became the single debenture holder. An initial advance of , was made on Novem-
ber , . Two or three months later Niagara defaulted on the loan and the insurance on
its aircraft was cancelled. On January , , the defendant, C.R.Bawden, was appointed
as receiver-manager by virtue of the default provisions contained in the deed of trust. It was
admitted by counsel for the plainti and was placed on the record that all powers of the
trustee were properly delegated to Roynat pursuant to s.. of the debenture and, in eect,
Bawden was appointed receiver and manager as the agent of Roynat for the purpose of
protecting and enforcing its security. The defendant Bawden was considered by Roynat to
be an experienced receiver-manager, having acted in that capacity on many previous occa-
sions. Bawden took immediate steps to reinstate the insurance, came to the conclusion
that the company was a viable operation, although it lacked working capital, and a further
, was advanced under the debenture. Bawden’s duties as receiver-manager were
then terminated but Roynat insisted that the company retain a nancial adviser; and with
the consent of Ostrander, indeed it appears with the urging of Ostrander, Bawden acted
in this capacity. However, during this period the nancial position of Niagara deteriorated
mainly because of Ostrander’s inability to operate the company eciently and due also to
his frequent absences from the company for various reasons and Roynat became increas-
ingly concerned as to the safety of its security. Thus, ex. indicated that during the year
ending December , , a loss of , had been incurred as opposed to a net loss

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