Executive Summary: Key Legal and Evidentiary Issues

• Petitioners sought to lift a receivership stay to sue Stratford Underwriting Agency Inc. for breach of trust, breach of fiduciary duty, breach of contract, and negligence.
   
• Colin Brown, a former director of Stratford, opposed the application, arguing it was really about whether he could be sued personally.
   
• Evidence from affidavits raised a fair issue to be tried on whether Stratford breached trust and fiduciary duties over customer premiums held in trust accounts.
   
• Bankruptcy and Insolvency Act summary claims procedures under section 95(2) were found too limited for the complexity of an unliquidated or contingent debt claim of this kind.
   
• Justice Doyle relied on established guidance from prior receivership and lifting-of-stay case law, including Romspen, Advocate Mines, Maple Homes, and Zheng.
   
• The receiver, Ernst & Young, took no position on the application.
   

Facts of the case

On February 20, 2025, the petitioners — Four Points Insurance Company Ltd., The Mutual Fire Insurance Company of British Columbia, and Everest Insurance Company of Canada — commenced this proceeding. Five days later, Mr. Justice Masuhara made an order appointing Ernst & Young as receiver over Stratford Underwriting Agency Inc. and imposing a stay of proceedings against Stratford under paragraph 10 of that order. Stratford was an insurance underwriting agency that offered optional automobile insurance products through insurance agencies, acting as a broker and administrator for policies underwritten by the petitioners. The petitioners allege that Stratford was required to hold premiums collected from customers in separate trust accounts in accordance with underlying broker agreements. As a result, the petitioners intend to sue Stratford for breach of trust, breach of fiduciary duty, breach of contract, and negligence, but the receivership stay prevented them from doing so without leave of the court. The petitioners also intend to sue one or more directors of Stratford, including Colin Brown, who was a director at least at certain times. Brown opposed the application, framing the real issue as whether he could be pursued personally, while the receiver took no position. The draft notice of civil claim named Stratford, Brown, and Jane and John Doe as defendants.

Policy terms or contractual clauses at issue

The central provision at issue was paragraph 10 of the receivership order, which stayed and suspended any proceeding against or in respect of Stratford or "the Property," subject to an exception preserving claims that might otherwise become time-barred. The court also considered section 95(2) of the Bankruptcy and Insolvency Act, which sets out a summary claims procedure; Justice Doyle found the petitioners' claim — an unliquidated or contingent debt — too complex for that summary process. Beyond the stay itself, the underlying broker agreements requiring Stratford to hold customer premiums in trust were referenced as the basis for the alleged breach of trust and fiduciary duty, and Stratford's obligation to carry errors and omissions insurance was identified as a further asset the petitioners could pursue once the stay was lifted.

Reasoning and analysis

Justice Doyle applied the guidance for lifting stays set out in Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, and the principles from Advocate Mines Ltd. (Re), [1984] O.J. No. 2330, as summarized in Re Maple Homes Canada Ltd., 2000 BCSC 1443. The court also drew on Zheng v. Anderson Square Holdings Ltd., 2023 BCSC 2215, where Justice Loo confirmed that a court need only be satisfied on one or more of the relevant grounds, not all of them, citing Save-A-Lot Holdings Corp. v. Christiansen, 2021 BCSC 2546. On the affidavit evidence from Mr. Williamson and Mr. Christopherson, Justice Doyle concluded there was sufficient evidence of a fair issue to be tried on breach of trust and fiduciary duty relating to the trust funds, such that discharge would not operate as a defence. He further found the claim too complex for the summary procedures under section 95(2) of the Bankruptcy and Insolvency Act, that Stratford was a necessary party to the intended action, and that lifting the stay would allow the petitioners to pursue Stratford's errors and omissions insurance. Regarding Colin Brown, the court noted the receivership order did not stay any claim against him, so the petitioners could already sue him independent of the outcome against Stratford; whether such a claim against Brown would ultimately succeed was not before the court and was not decided.

Ruling and overall outcome

Justice Doyle allowed the application in relation to Stratford, lifting the stay under paragraph 10 of the receivership order specifically as it applied to Stratford Underwriting Agency Inc. and granting leave for the petitioners to commence and continue an action against Stratford, with a duplicate order to be entered on meeting the Registrar's requirements. On costs, the court declined counsel for Brown's request for $500 in all-inclusive costs of the application, finding that request premature, and instead ordered that costs be in the cause of any future action brought against Brown, leaving open the possibility that Brown could seek costs of this application later if he succeeds in extricating himself from that anticipated action. No specific dollar amount was awarded or ordered in favour of either side; the monetary outcome of costs remains Not Specified, contingent on the results of the future litigation.