The Foundations of Receivership Law

AuthorRoderick J. Wood
Receivership law emerged from two different sources. One body of sub-
stantive principle governed court-appointed receivers, while a differ-
ent body of law governed privately appointed receivers. More recently,
federal and provincial government s have passed statutes that regul ate
receiverships. These statutes do not codify receivership law, and so it
remains necessary to delve into the two original bod ies of law. How-
ever, the statutes have signif‌icantly altered the legal landscape. They
set out a common set of rules that applies to both ty pes of receiver-
ships. Furthermore, the impact of these new statutory rules has been
one-sided. The rules governing privately appointed receivers have been
modif‌ied to a much greater degree th an the rules governing court-
appointed receivers. As a consequence, there is a now gre ater similar ity
in the legal rules and pr inciples that govern these t wo types of receiver-
There have been two recent fundamental sh ifts in the law and practice
relating to receiverships in Can ada. The f‌irst has been the dwindling u se
of the privately appointed receiver. The other has been the emergence of
the national receiver appointed under the BI A. When receiverships f‌irst
began to be widely used in C anada in the 1980s, the privately appoint-
ed receiver was very much the norm and the court appointed receiver
was exceptional.1 This no longer holds true. The 2009 BIA a mendments
permit the court appointment of a receiver who has t he authority to act
throughout Canada (a practice that had star ted through the appoint-
ment of interim receivers under the BIA), and it is now the case that
most receivers are appointed under this provision.
1) The Historical Bifurcation of Receivership Law
The courts of equity provided a remedy in the form of the appointment
of a receiver to protect the interests of a secured creditor. The court-
appointed receiver would take possession of the propert y, collect the
rents and prof‌its, and apply them against the sec ured obligation. The
courts of equity provided the remedy in ot her contexts as well, such as
disputes over partnership property or in cases where ordinary judg-
ment remedies were inadequate.2 Under this regime, the receiver is ap-
pointed by the court and is accountable to it. The receiver does not act
as agent for either the secured party or the debtor and does not obey
their directions.3
In order to produce a quicker and less expensive procedure, debt-
ors would appoint a receiver at the request of a secured creditor. Later,
it became common for the parties to stipulate that the secured credit-
or would appoint the receiver and that the receiver would act as the
debtor’s agent. The secured creditor was viewed as acting as agent for
the debtor in making the appointment of the receiver.4 This led to the
creation of the privately appointed receiver, also referred to as an in-
strument-appointed receiver, a document-appointed receiver, or an out-
of-court-appointed receiver. Whereas the substantive law governing
court-appointed receivers was largely derived from principles of equit y,
the substantive law governing privately appointed receivers was largely
derived from principles of agency and contract law.
As industria lization progressed, it became common for lenders to
take security on the entire undertaking of an operating business. In
these circumstances, it was not enough simply to appoint a receiver to
collect income and rents generated from land. Increasingly, commercial
1 P Farkas, “Why Ar e There So Many Court-Appointed Receiver ships?” (2003) 20
National Insolvenc y Review 37.
2 Since these do not i nvolve insolvency proceedings, not hing further wil l be said
about these other t ypes of court-appointed rece ivers.
3 Bacup Corporation v Smith (1890), 44 Ch D 395; Parsons v Sovereign Bank of
Canada, [1913] AC 130 (PC).
4 The historical de velopment of the privately appointed receive r is described in
Gaskell v Gosl ing, [1896] 1 QB 669 at 691–92, Rigby LJ.

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