The Status, Powers, Duties, and Liabilities of the Receiver

• Author: Roderick J. Wood
• Pages: 543-560

543

CHAPTER 19

THE STATUS, POWERS,

DUTIES, AND LIABILITIES

OF THE RECEIVER

A. THE STATUS OF THE RECEIVER

1) The Traditional View

Historically, there was a signif‌icant difference in the status of a court-

appointed receiver and the status of a privately appointed receiver. A

court appointed receiver has an independent status and does not act

as agent of either the secured creditor or the debtor.1 A privately ap-

pointed receiver acts as an agent of either the secured creditor or the

debtor depending on the function undertaken by the receiver.2 In man-

aging the business, the receiver acts as agent for the debtor; in realizing

the security, the receiver acts as agent of the secured creditor. This

difference was signif‌icant in its legal effect. A court appointed receiver

enters into new contracts with third parties as a principal. The court-

appointed receiver therefore becomes personally li able on the contracts3

but has a right of indemnity from the assets under receivership.4 A pri-

vately appointed receiver enters into new contracts as agent of the debt-

or and therefore does not become personally liable on them. As well, a

1 Parsons v Sovereign Bank of Cana da, [1913] AC 160 (PC).

2 Peat Marwick Ltd v Consum ers’ Gas Co (1980), 35 CBR (NS) 1 (Ont CA) [Peat

Marwick].

3 Re Ashk Developmen t Corp (1988), 70 CBR (NS) 72 (Alta QB).

4 Burt, Boulton & Hayward v Bull, [1895] 1 QB 276; Re Smith & Son (1929), 10 CBR

393 (Ont HCJ).

BANKRUPTCY AND INSOLVENCY L AW544

court-appointed receiver is an off‌icer of the court, whereas a privately

appointed receiver does not have this status.

This status of a privately appointed receiver has not been directly

changed by statute. However, it is possible that provincial personal

property security legislation has modif‌ied the powers and duties owed

by the privately appointed receiver to such an extent that it is better to

view the privately appointed receiver as having the same independent

status as a court-appointed receiver.

2) The Effect of the Personal Property Security Acts

Personal property security legislation has been adopted in every Can-

adian common law jurisdiction. These statutes contain provisions that

govern receiverships. The legislative provisions in most of these juris-

dictions regulate receiverships in the following manner.5 First, they

provide that the receiver may take possession and control of the assets

and may manage the business if appointed as a receiver and manager.

Second, they give a court the power to appoint, replace, and discharge

receivers and give directions to them. These powers are not restricted

to court-appointed receivers. It is thus possible for an interested party

to seek a court order replacing a privately appointed receiver, or for

a privately appointed receiver to apply to court for directions. Third,

they impose a number of accounting and reporting duties on receivers.

Fourth, provisions that relate to the enforcement remedies of secured

creditors are made applicable to receivers. A receiver who is realizing

the collateral is therefore required to f ulf‌il the same obligations that are

imposed on a secured creditor in the exercise of these remedies.6

The traditional view was that a privately appointed receiver acted

as agent of the debtor in managing the business but as an agent of the

secured creditor in enforcing the security interest.7 It is likely that per-

sonal property security legislation has altered this position. The legis-

lation directly imposes statutory obligations on a privately appointed

receiver, and this suggests that the receiver’s duties and liabilities are

no longer to be viewed as being derived from the receiver’s status as

agent of the secured creditor. Instead, the privately appointed receiver

5 The Ontario PPSA cont ains less extensive r eceivership provisions th an those

contained in t he PPSAs of other Canadia n jurisdictions.

6 See R Cuming, C Walsh, & R Wood, Personal Proper ty Security Law, 2d ed (To-

ronto: Irwin L aw, 2012) at 669–71.

7 Peat M arwick , above note 2.