E. Stay of Proceedings

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 482-484

Page 482

The appointment of a privately appointed receiver does not result in a stay of proceedings in respect of the actions or remedies of creditors who have claims against the debtor, or in respect of actions brought against the receiver. Despite the absence of a stay of proceedings, the unsecured creditors of the debtor are unlikely to pursue their remedies against the debtor or debtor’s assets. The secured creditor ranks in priority to the claims of the unsecured creditors. The unsecured creditors therefore have no incentive to expend further funds in futile litigation or collection efforts. A claimant who has priority over the secured creditor has a superior right of enforcement and may demand that the receiver give up possession of the asset.⁴⁴

A court order appointing a receiver usually contains a provision that stays any proceedings against the debtor or the property of the debtor.⁴⁵The drafting of the stay provisions in the template receiver-ship order was heavily influenced by the drafting of the stay provisions in the template CCAA initial orders.⁴⁶The template orders replace a cumbersome multi-page stay provision with an abbreviated five-para-graph provision. Alberta, British Columbia, and Saskatchewan have also produced similar template receivership orders.

The first component of the stay provisions is an order that prevents parties from bringing proceedings against the receiver without leave of

Page 483

the court. This is substantially similar in effect to the provision of the BIA that prevents parties from bringing actions against a trustee without leave of the court.⁴⁷The threshold for obtaining leave is not high, since the provision was designed to protect the trustee against frivolous or vexatious actions.⁴⁸However, if the receiver has received court approval of the activities or if the receiver has been discharged and considerable time has passed, the applicant must demonstrate a strong prima facie case.⁴⁹The court may grant leave nunc pro tunc in the event that the applicant failed to seek leave before commencing the action.⁵⁰

The second component prevents commencement or continuation of any proceedings against the debtor or the debtor’s property without the written consent of the receiver or the leave of the court. The third component provides that all rights and remedies against the debtor or the receiver or affecting the property are stayed except with the consent of the receiver or the leave of the court. The...