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Joint Book of Authorities of Class A

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Joint Book of Authorities of Class A Court File No.: 31-2734090 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED AND IN THE MATTER OF THE NOTICES OF INTENTION TO MAKE A PROPOSAL OF YG LIMITED PARTNERSHIP AND YSL RESIDENCES INC. APPLICATION UNDER THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED Joint Book of Authorities of the “Class A LPs” (YongeSL Investment Limited Partnership, 2124093 Ontario Inc., SixOne Investment Ltd., E&B Investment Corporation, and TaiHe International Group Inc., 2504670 Canada Inc., 8451761 Canada Inc., and Chi Long Inc.) (Sanction Hearing: June 23, 2021) June 21, 2021 THORNTON GROUT FINNIGAN LLP 100 Wellington St. West, Suite 3200 TD West Tower, Toronto-Dominion Centre Toronto, ON M5K 1K7 D. J. Miller (LSO #34393P) Tel: (416) 304-0559 / Email: [email protected] Alexander Soutter (LSO #72403T) Tel: (416) 304-0595 / Email: [email protected] Lawyers for YongeSL Investment Limited Partnership, 2124093 Ontario Inc., SixOne Investment Ltd., E&B Investment Corporation, and TaiHe International Group Inc. LAX O’SULLIVAN LISUS GOTTLIEB LLP Suite 2750, 145 King Street West Toronto ON M5H 1J8 Shaun Laubman (LSO #51068B) Tel: (416) 360-8481 / Email: [email protected] Sapna Thakker (LSO #68601U) Tel: (416) 642-3132 / Email: [email protected] Lawyers for 2504670 Canada Inc., 8451761 Canada Inc., and Chi Long Inc. Court File No.: 31-2734090 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED AND IN THE MATTER OF THE NOTICES OF INTENTION TO MAKE A PROPOSAL OF YG LIMITED PARTNERSHIP AND YSL RESIDENCES INC. APPLICATION UNDER THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED INDEX Tab Case No. 1. Tudor Sales Ltd (Re), 2017 BCSC 119, per Saunders J 2. US Steel Canada Inc (Re), 2016 ONSC 569, per Wilton-Siegel J, aff’d 2016 ONCA 662 3. Sino-Forest Corporation (Re), 2012 ONCA 816 4. Alberta Energy Regulator v Lexin Resources Ltd, 2018 ABQB 590 5. Canada Deposit Insurance Corp v Canadian Commercial Bank, 1992 CanLII 49, [1992] 3 SCR 558 6. Kitchener Frame Ltd (Re), 2012 ONSC 234 (Commercial List) 7. Mayer, Re, 1994 CanLII 7461 (ON SC) 8. Lofchik, Re, 1998 CarswellOnt 194 (SC) 9. Re San Francisco Gifts Ltd (Companies’ Creditors Arrangement Act), 2005 ABQB 91 10. Re Canada North Group Inc, 2017 ABQB 508 11. Canadian Imperial Bank of Commerce v Cicoria, 2000 CanLII 16990 (ONCA) 12. Re Cobourg Felt Co, Ex Parte Weaver, 1925 CanLII 392 (ONSC) - 2 - Tab Case No. 13. Brigham v La Banque Jacques-Cartier, (1900) 30 SCR 436 14. Hochberger v. Rittenberg, 1916 CanLII 49 (SCC), 54 SCR 480 Secondary Sources 15. L.W. Houlden and Geoffrey B. Morawetz, Bankruptcy and Insolvency Law of Canada, 4th Edition, The Bankruptcy and Insolvency Act - Proposals (ss. 50-66), E§80 – Secret Agreements with Creditors TAB 1 IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Tudor Sales Ltd. (Re), 2017 BCSC 119 Date: 20170125 Docket: B131477 Registry: Vancouver Between: IN THE MATTER OF THE BANKRUPTCY OF TUDOR SALES LTD. 2017 BCSC 119 (CanLII) Before: The Honourable Mr. Justice A. Saunders Reasons for Judgment Counsel for the Trustee, Boale, Wood & S. H. Stephens Company Ltd: Counsel for the Applicant Cascade Steel W. B. Milman Rolling Mills Inc.: K. Macdonald Counsel for the Applicant Tavi Eggertson: D. K. Magnus Place and Date of Hearing: Vancouver, B.C. January 8, 2016 Further Written Submissions of Cascade April 19; June 2, 2016 Steel Rolling Mills Inc.: Further Written Submissions of Tavi May 19, 2016 Eggertson: Place and Date of Judgment: Vancouver, B.C. January 25, 2017 Tudor Sales Ltd. (Re) Page 2 Introduction [1] The applicant Cascade Steel Rolling Mills Inc. (“Cascade”), an acknowledged unsecured creditor of the bankrupt, Tudor Sales Ltd. (“Tudor”), seeks an order under s. 135(5) of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3 [BIA], that the proof of claim and proof of security of Tavi Eggertson (“Mr. Eggertson”) be expunged, reduced, or subordinated to the claims of other creditors. [2] The applicant Mr. Eggertson, who claims to be a secured creditor, seeks an order that all funds currently held in trust by the trustee, Boale, Wood & Company Ltd. (“Boale, Wood”), be released to him. 2017 BCSC 119 (CanLII) [3] The applications were argued on January 8, 2016. Cascade and Tudor were subsequently given leave to make further written submissions as to the import of the decision of the Ontario Superior Court of Justice in U.S. Steel Canada Inc. (Re), 2016 ONSC 569 [U.S. Steel]. Those submissions were received by June 2, 2016. A further written submission filed by counsel for Mr. Eggertson, purportedly as sur- reply, has been disregarded, as it was, in its entirety, not proper sur-reply but essentially repetition of arguments previously advanced. Background [4] Tudor made an assignment in bankruptcy on November 20, 2013. At that time, Tudor’s most recent (unaudited) financial statements were for the fiscal year ending October 31, 2012. Those financial statements recorded shareholder loans owed to Mr. Eggertson, who was a shareholder of Tudor, and its sole officer and director, in the amount of $1,361,359. This loan liability as recorded in the financial statements arose out of two purported loans made to Tudor by Mr. Eggertson in 2005 and 2006 (collectively, the “2005-06 Advances”). [5] Tudor’s Form 78 Statement of Affairs, sworn to by Mr. Eggertson on November 20, 2013, included Mr. Eggertson amongst the listed secured creditors. It asserted that Mr. Eggertson’s secured claim was in the amount of $1,770,656.70. How that claim amount was arrived at is not disclosed. Mr. Eggertson’s evidence Tudor Sales Ltd. (Re) Page 3 when examined on November 26, 2014 is that this amount was “a guess at best”. As will be seen, since then Mr. Eggertson has at least implicitly resiled from that claim amount. [6] Cascade, a trade creditor of Tudor, is the single largest unsecured creditor. Its claim of $1,367,746.25 represents approximately 28% of the bankrupt’s total unsecured debt. That claim amount is not in dispute. [7] Acting under a general security agreement dated March 1, 2006 and registered November 18, 2011 (the “GSA”), Mr. Eggertson sought the appointment 2017 BCSC 119 (CanLII) of Boale, Wood as receiver. After satisfying itself of the validity of Mr. Eggertson’s security, by way of obtaining an independent legal opinion, Boale, Wood accepted the appointment in November 2013. [8] Boale, Wood prepared and distributed a trustee’s preliminary report to creditors, in December 2013. That preliminary report stated that there would be a significant shortfall to the secured creditors, and there would be no funds available for distribution to the unsecured creditors, among which was Cascade. [9] After payment of other secured claims, Boale, Wood – presumably, acting on the belief that the indebtedness to Mr. Eggertson was secured by his GSA – paid out $500,000 to Mr. Eggertson, in March 2014. That left approximately $600,000 on hand for distribution. [10] Following the aforesaid $500,000 distribution to Mr. Eggertson, Cascade advised Boale, Wood that it was investigating the validity of, and/or the amount secured by, Mr. Eggertson’s GSA. Boale, Wood determined that no further distributions would be made until the issues related to Mr. Eggertson’s security were resolved. [11] In May 2014, Cascade requested that Boale, Wood undertake an examination of Mr. Eggertson; Boale, Wood declined to do so, citing a lack of funds. Tudor Sales Ltd. (Re) Page 4 [12] Cascade then applied for an order under s. 163(2) of the BIA that Mr. Eggertson undergo an examination under oath. That order was granted by Mr. Justice Leask, on August 21, 2014. [13] In response to that application, Mr. Eggertson filed an affidavit in which he asserted that his secured claims were comprised not only of the approximately $1.37 million in shareholder loans described in Tudor’s financial statements, but also a further $1.92 million in loans he had made to Tudor in 2011 and 2012 (the “2011-12 Advances”). He put his total claim, net of the $500,000 received in March 2014, at $2,781,359. He affirmed that claim in a formal Proof of Claim delivered on 2017 BCSC 119 (CanLII) October 31, 2014, in response to a Notice by Trustee Requiring Filing of Proof of Security. [14] Cascade examined Mr. Eggertson under oath on November 26, 2014. [15] In the course of Boale, Wood’s review of Mr. Eggertson’s claim, the trustee identified documentation – in evidence on these applications – that the 2011-12 Advances had been recorded in Tudor’s books as being due from “TE Steel”, a related company whose expenses Tudor had funded. Mr. Eggertson was advised of Boale, Wood’s position that those advances should not form part of his claim against Tudor, by way of an email from the trustee’s legal counsel dated December 9, 2014. The materials filed on these applications do not disclose any response to this position having been made by Mr. Eggertson. [16] On the basis of the transcript of the examination of Mr. Eggertson, Cascade sought a ruling from Boale, Wood in January 2015, asking that Mr. Eggertson’s proof of security be disallowed under s. 135 of the BIA, and that the trustee demand the return of the previously distributed funds. Boale, Wood declined to do so, again citing a lack of resources, leaving it to the creditors to bring the present applications.
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