Executive Summary: Key Legal and Evidentiary Issues

• Two competing insolvency applications were before the court: a receivership application by Cameron Stephens Mortgage Capital Ltd. and a CCAA application by Square Nine King George Development Ltd. and Square Nine Builders Inc.

• The court applied the “just and convenient” test for receivership, including the Maple Trade/Bennett factors, and considered whether a CCAA proceeding was a viable alternative to receivership.

• Allegations by the lender of non-disclosure of third-party loans and below-covenant “Condo Day” sales were raised, but the court found the evidence thin and insufficient to prevent Square Nine from seeking CCAA relief or to support stronger findings on lack of faith.

• Evidence of a softening real estate market, the nature of the Belvedere Project inventory, and REDMA disclosure requirements showed that receivership would likely delay marketing and sales and require a new disclosure statement, while a CCAA regime could allow continued sales with only an amended disclosure statement.

• The court weighed the lender’s contractual right to appoint a receiver and its objections to administration and DIP charges against the broader goal of maximizing recovery for all stakeholders through continued marketing and completion of the pending commercial unit sale.

• The court granted the CCAA relief sought by Square Nine King George Development Ltd. and adjourned Cameron Stephens Mortgage Capital Ltd.’s receivership application to the same come-back date.

Facts of the case

Square Nine King George Development Ltd. is part of what is described as the “Square Nine group of companies, a real estate development group focused on concrete high-rises, townhomes, and investment properties.” It developed a 275-unit residential condominium project known as the Belvedere Project in Surrey’s Whalley neighbourhood, which also includes commercial condominium units and underground parking stalls. Cameron Stephens Mortgage Capital Ltd. is the senior secured lender to Square Nine. It advanced a first mortgage bridge and inventory demand loan of $33.5 million to allow Square Nine to market and sell the Belvedere Project. The Loan is guaranteed by Square Nine Developments Inc. and Manish Sharma, who is the principal of Developments, and they are collectively referred to as the Guarantors. As at 18 August 2025, Square Nine owed Cameron Stephens over $18.6 million, with interest accruing at approximately $116,000 per month, and that amount remained unpaid despite a demand for payment. Square Nine and the Guarantors did not dispute that Square Nine was in default of its obligation to honour the demand. Square Nine admitted in its CCAA petition that it is insolvent and that it owes over $38.7 million to various stakeholders, including over $22 million globally to Cameron Stephens and other secured creditors (of which $18.6 million is owed to Cameron Stephens), $6 million to the Canada Revenue Agency, $6.3 million to trade creditors, and $4.4 million to various other creditors, excluding inter-company indebtedness and shareholder loans. Square Nine attributed its financial difficulties primarily to the softening of the residential condominium market in the Lower Mainland, the failure of 15 pre-sale purchases to close with an approximate value of $11 million, and difficulties in selling unsold units thereafter.

Competing insolvency applications

Cameron Stephens applied for the appointment of a receiver over Square Nine based on its specific rights under the Loan documents and under s. 39 of the Law and Equity Act and s. 243(1) of the Bankruptcy and Insolvency Act. It argued that it had lost confidence in Square Nine’s management. The lender alleged that Square Nine failed to disclose, as required by the Loan documents, the existence of third-party loans when Cameron Stephens advanced the Loan proceeds, and that Square Nine did not disclose a one-day “flash” sales event called “Condo Day” at which 26 units were sold below the permitted minimum purchase price prescribed in the Loan documents. Cameron Stephens also pointed to litigation commenced by six trade creditors against Square Nine with claims totalling approximately $2.6 million, and a $4 million judgment against Square Nine on account of a guarantee for another development project unrelated to the Belvedere Project. It relied on the Maple Trade/Bennett receivership factors and submitted that irreparable harm would occur if an order were not made, that the nature of the property was residential strata units in a declining market, that the balance of convenience favoured receivership, that it had a contractual right to appoint a receiver, that a court appointment was necessary to enable the receiver to act efficiently, that Square Nine’s misconduct justified a receivership, and that the proposed receiver’s expertise would maximize return. In response, Square Nine opposed receivership and brought its own application for relief under the CCAA for itself and Square Nine Builders Inc. It argued that a CCAA proceeding would give it time to obtain interim financing, continue marketing unsold residential units without interruption, and complete the sale of five commercial units scheduled to close in late January 2026. It submitted that proceeding under the CCAA would promote an orderly, efficient realization of maximum value for all stakeholders and avoid “almost certain” distressed sales in a receivership. Square Nine pointed to an appraisal dated 16 May 2025 valuing the remaining unsold residential units at $27.365 million and to the value of the commercial unit sale at just over $8 million, arguing that there was more than sufficient equity to satisfy the indebtedness to Cameron Stephens and other secured creditors.

Legal issues and analysis

Square Nine blamed its financial difficulties on market conditions and denied any misconduct. It asserted that it acted in good faith toward Cameron Stephens, having made payments of approximately $13.5 million in principal, interest, and fees to reduce the Loan amount, holding the Condo Day promotional event in a rapidly softening market to raise funds to pay down its indebtedness, and negotiating an agreement in principle with certain trade creditors to apply the amounts owing to them as deposits toward purchases of residential units, which it said would generate net sales proceeds of approximately $3 million to further reduce its debt to Cameron Stephens. According to Mr. Sharma, the third-party loans predated the Loan from Cameron Stephens, were necessary after the loss of several pre-sales to finalize construction, and remained subordinate to Cameron Stephens’ security. Square Nine also gave evidence that it was in negotiations with third-party lenders to refinance the Loan and that it continued to actively market the residential units. Square Nine submitted that, if a receivership were ordered, new rescission rights would arise and all marketing efforts and sales would be postponed, for up to six months, pending the filing of a new disclosure statement under the Real Estate Development Marketing Act. It contrasted this with a CCAA proceeding with debtor-in-possession financing, where only an amended disclosure statement would be required and marketing and sales could continue, and noted that home warranty insurance and contractual relationships with existing builders would not be disrupted. The court noted that the qualifications and expertise of the proposed receiver and proposed monitor were not in issue. It found that the evidence supporting Cameron Stephens’ lack-of-faith position was thin and consisted largely of an affidavit from an external financial consultant, containing argument and hearsay. The court inferred that Square Nine did not advise Cameron Stephens of the third-party loans when it applied for the Loan, but also found there was no prejudice to Cameron Stephens because its security was not affected. On the evidence adduced at this stage, the court concluded it lacked sufficient evidence to make further findings on the lender’s lack-of-faith allegations and that this evidence was insufficient to deny Square Nine’s efforts to invoke the CCAA. The court also found no evidence that Square Nine had not acted, or was not acting, in good faith in seeking to engage the CCAA, and no basis to find at this early stage that any plan that might be proposed was doomed to failure.

Receivership versus CCAA as the appropriate remedy

The court observed that a receivership order is extraordinary relief to be granted cautiously and sparingly and that, if a remedy short of receivership could be fashioned, that should be considered. It cited authorities emphasizing that the chambers judge must carefully balance the rights of both applicant and respondent and consider whether other remedies, short of a receivership, could protect the applicant’s interests. The determinative question was whether there was a viable alternative remedy to receivership. The court determined that, at least for the time being, proceeding under the CCAA with certain enhanced powers granted to the monitor and rights granted to Cameron Stephens to access information from Square Nine was a viable alternative. It found that proceeding under the CCAA would allow continued marketing and sales, including completion of the commercial unit sale, facilitate ongoing home warranty insurance, avoid the creation of new rescission rights, maintain Square Nine’s relationship with its builders to remedy deficiencies, avoid delays resulting from the need for a new REDMA disclosure statement in a receivership, and avoid the stigma of a receivership and the risk of lower realizations. The court agreed that the equity-in-the-assets valuation based on the May 2025 appraisal had to be viewed with caution given the continued softening market, but accepted Square Nine’s point that even discounting that valuation by 20 to 25%, there was sufficient equity to satisfy the amount owing to Cameron Stephens, including accrued interest, and to pay additional amounts to other creditors when the commercial unit sale closed. Cameron Stephens argued that it should not have to subordinate its security to an administration charge of $75,000 and DIP financing capped at $750,000 with additional fees, particularly given its contractual right to appoint a receiver, and contrasted this with its own proposed borrowings of $2 million at the greater of 7.95% and prime plus 2.25% in a receivership. The court held that the disadvantages arising from a receivership outweighed the benefits when compared to a closely supervised CCAA proceeding with controls on professional fees and DIP financing, enhanced powers for the monitor, and obligations on Square Nine to provide full access to financial and marketing information. It found that appointing a receiver at this time would not serve to maximize recovery to Cameron Stephens and other stakeholders and that a receivership order would cause immediate financial prejudice while marketing and sales were suspended due to REDMA requirements. At this juncture, the court concluded that proceeding under the CCAA with the proposed administration and DIP financing and associated fees was the more viable option to maximize recovery. Considering the Maple Trade factors and the principle that receivership should be granted cautiously and sparingly, the court determined it would not be just and convenient to appoint a receiver at this time.

Outcome and next steps

The court advised that it could not see granting a stay beyond the end of January 2026, when the commercial unit sale was scheduled to close. It stated that, should it become apparent that the purposes of the CCAA were no longer being met, either party could apply to terminate the proceeding, and that Cameron Stephens’ receivership application would be adjourned with liberty to bring it back if it determined that it was prejudiced by continuing within the CCAA to the point that the prejudice outweighed the benefits. The court indicated it would grant the relief sought by Square Nine, but only with a compressed return date for a come-back hearing so that the terms of an order granting specific powers to the monitor and granting Cameron Stephens access to information could be worked out or determined by the court, and that if these matters could not be resolved it would consider whether the CCAA proceeding should be terminated. After the ruling was given, counsel asked that the come-back hearing be scheduled for 20 November 2025. The court scheduled the come-back hearing to that date and adjourned the receivership proceeding to the same date. In its formal disposition, the court granted the relief sought by Square Nine in the CCAA proceeding (VA S258449) and adjourned the receivership proceeding (VA S257283) to 20 November 2025.