Executive Summary: Key Legal and Evidentiary Issues

• RBC sought court-supervised receivership over a trucking company owing approximately $11 million after over 11 months of uncured default.
• Debtors' last-minute adjournment request was denied, as no viable alternative restructuring path had been concretely advanced before the court.
• Privileged settlement communications were improperly disclosed by the debtors' counsel through a partner-sworn affidavit filed the night before the hearing — struck on both impropriety and irrelevance grounds.
• Filing a contentious affidavit from a lawyer in the same firm currently appearing in court was identified as procedurally improper conduct.
• Court confirmed that a stand-alone CCAA application, without the Bank's support, could not be weighed against an existing, fully ripe receivership application.
• Environmental exposure risks and complex intercreditor PPSA disputes were cited as sufficient justification for court-supervised rather than private receivership.

When the bank comes calling: Court grants receivership over Ontario trucking company amid procedural missteps and failed restructuring talks

Background and the parties

International Trucking Incorporated and its related numbered company, 1000563626 Ontario Inc. (collectively, the "Debtors"), operated a trucking and logistics business in Ontario. Over the course of their operations, the Royal Bank of Canada ("RBC" or the "Bank") extended a variety of credit facilities to the Debtors, secured by both general and specific security interests over substantially all of the Debtors' assets, property, and undertaking. The Bank's security package expressly included the contractual right to appoint a receiver upon default — a right that would eventually be enforced before the Ontario Superior Court of Justice.

Financial difficulties and events of default

The Debtors' financial troubles arose from a combination of internal mismanagement and broader industry headwinds. Internally, the Debtors failed to accurately record accounts receivable, specifically by not properly reflecting customer discounts, which resulted in an overstatement of the value of their receivables. They also failed to remit proper source deductions to the Canada Revenue Agency ("CRA"), leading to unexpected and onerous obligations including penalties and interest. Externally, the trucking industry itself was experiencing significant challenges, compounding the Debtors' already-fragile financial position.

By June 2025, the Debtors had fallen into default under their credit facilities. RBC responded by issuing a formal demand for payment and all requisite notices of intention to enforce security, as required under applicable law. Despite some minor partial payments made over the following eleven months, the defaults remained uncured. As of the hearing date, the Debtors owed RBC approximately $11 million across its various facilities.

Negotiations and the road to litigation

Following the events of default, the parties engaged in lengthy negotiations. The Debtors explored multiple avenues to resolve their situation without judicial intervention, including refinancing to pay out the Bank and pursuing a restructuring under the Companies' Creditors Arrangement Act ("CCAA") with the Bank's support. None of these avenues ultimately succeeded. The court noted that both sides negotiated diligently and pursued their respective interests appropriately, and that no allegation of impropriety was advanced by either party. The challenging economic climate, the state of the trucking industry, and the Debtors' internal accounting issues all played a role in the collapse of those discussions.

Having exhausted negotiations, RBC filed a Notice of Application for the appointment of a court-supervised receiver on March 11, 2026. The matter was initially returnable on April 1, 2026, at which point Justice Dunphy approved a consent schedule negotiated by the parties, setting the application down for a full hearing on the merits on May 21, 2026.

The adjournment request and evidentiary misconduct

At the opening of the May 21, 2026 hearing, the Debtors sought an adjournment — a request that was vigorously opposed by RBC. In support of the adjournment, the Debtors' counsel filed, the night before the hearing, an affidavit sworn by a partner of the same law firm representing the Debtors in court. The affidavit was commissioned by the very lawyer appearing before Justice Dunphy that morning, and it contained substantial details regarding the substance of settlement negotiations between the parties over the preceding seven weeks.

Justice Dunphy found this conduct to be improper on multiple levels. First, absent exceptional circumstances, a lawyer should not present a contentious affidavit sworn by another lawyer from the same firm. Second, and more significantly, the affidavit improperly disclosed privileged settlement communications into the public domain without first following proper process — namely, retaining the privileged portions under seal and confining the affidavit to the question of whether the privilege does not apply or whether exceptional circumstances justified its breach. The court emphasized that the substance of settlement negotiations is almost never relevant in court proceedings, and this case was no exception. The affidavit of Mr. Wray was accordingly struck from the record on both grounds of impropriety and irrelevance.

On the merits of the adjournment request itself, the court found no justification for granting it. The Debtors indicated they wished time to formulate a stand-alone CCAA application without the Bank's support — a path distinct from the Bank-supported CCAA restructuring they had previously pursued. Justice Dunphy found that while such a process could be hoped for, it could not be imposed. Crucially, no cross-application for CCAA protection had been filed before the court. The court held it could not weigh a speculative future application against the Bank's fully ripe, properly constituted receivership application. The adjournment was denied.

Justification for court-supervised receivership

Justice Dunphy found that a court-supervised receivership was justified on the facts. RBC had provided all required notices and had negotiated with the Debtors for nearly a year before seeking judicial relief. The Bank presented several reasons for pursuing court supervision rather than exercising its contractual right to appoint a private receiver. These included the risk of unknown environmental liability associated with real estate from which a trucking business had been operating, and the potential complexity of intercreditor disputes among multiple secured creditors holding PPSA registrations — some with possible purchase money security interests, others with subordinate security ranking behind the Bank — which might require judicial resolution.

The receivership order granted tracked the standard Commercial List Model Order without material substantive alterations, beyond minor grammatical corrections and filling in blanks regarding borrowing power and private sale thresholds. The Debtors raised no objections to the form of the order. The court directed that the draft order be amended to remove any reference to retroactive application and to add the judge's name before it was signed later that day.

Outcome and directions

The application of Royal Bank of Canada was granted in full. A receivership order was issued placing the Debtors' assets under court-supervised receivership, authorizing the receiver to take control of and manage or realize upon substantially all of the Debtors' assets toward satisfaction of the debt owed to RBC. As a final procedural matter, the court noted that the Debtors had secured a case conference appointment for the following day to discuss scheduling of a potential stand-alone CCAA application. Justice Dunphy directed counsel to advise the Commercial List office by 4:00 p.m. that day whether that appointment would proceed, failing which the office was instructed to vacate it.

RBC was the successful party. The court did not make a specific award of costs or damages in the endorsement. The principal debt established on the record and in respect of which the receivership order was granted stood at approximately $11 million, though the ultimate recovery to RBC will depend on the outcome of the receivership process and the realization of the Debtors' assets.