Executive Summary: Key Legal and Evidentiary Issues

• The Superior Court of Justice granted National Bank of Canada's motion to appoint an interim receiver over two related OCM auto-financing companies.
   
• Justice K. Perron found the Companies were in default of their financing agreements, including their failure to deliver a binding refinancing commitment and their admitted inability to pay a $906,557.46 invoice.
   
• Evidence showed the Companies transferred funds out of a trust-designated Blocked Account and delayed disclosing a fraudulent cheque and related account issues to the Bank.
   
• KPMG's willingness to act as receiver, together with its existing but limited review mandate, was found insufficient to protect the Bank's interests.
   
• Undisclosed transactions totaling approximately $420,000, including payments to shareholders, an investor, and a non-arm's-length party, contributed to the court's concern about possible preferential payments.
   
• Rather than granting the full powers the Bank sought, the court limited the interim receiver's role to preserving collections tied to the Bank's portfolio, excluding authority to manage the business, borrow funds, or implement a service-provider changeover.
   

Facts of the case

National Bank of Canada applied under section 47(1) of the Bankruptcy and Insolvency Act and section 101 of the Courts of Justice Act to appoint an interim receiver over OCM Auto Financing Group Ltd. and OCM Auto Financing Fund Ltd., companies that service auto loans. KPMG, represented by Pritesh Patel, consented to act as the proposed interim receiver. The Companies' business was originally financed through debentures held by private investors, but in 2023 they entered a lending arrangement with CWB Maxium Financial Inc., which at one point extended a loan commitment reaching $60 million. In October 2023, under a master purchase and servicing agreement, CWB advanced funds to OCM Group and purchased certain of its accounts receivable, with purchase funds deposited into a Reserve Account and collections remitted to a Blocked Account held at TD Bank in trust for CWB, with monthly payments due to CWB. The arrangement was secured by general security agreements dated February 6, 2023, one between CWB Maxium and OCM Group and one between CWB Maxium and OCM Fund, which gave CWB the right to appoint a receiver on default. On March 1, 2025, National Bank of Canada and Canadian Western Bank amalgamated, making the Bank the successor in interest to CWB Maxium, though the Bank had administered the agreements since Fall 2024. Disputes over compliance arose soon after, and by November 2025 the Bank indicated it wished to exit the relationship. On December 31, 2025, the parties signed an Amending Agreement under which the Bank purchased OCM Group's rights to payments from its auto financing contracts for approximately $18.2 million; at this point, the GSAs stood as the first registered security interests against the Companies' assets in the Alberta and Ontario personal property security registries, apart from a Computershare registration that had been contractually subordinated to the Bank. The Amending Agreement gave the Companies until May 29, 2026 to refinance and pay out the Bank, conditional on a binding third-party commitment by April 17, 2026. The Companies pursued a refinancing transaction with Encina Lender Finance between January and June 2026, receiving two extensions to produce a binding commitment letter, but the transaction collapsed for reasons not in evidence. On June 30, 2026, the Companies told the Bank they could not repay their indebtedness and asked for time to prepare a repayment plan through a newly engaged restructuring officer, Sinclair Range Inc. The Bank issued an invoice for $906,557.46 in collections on July 1, 2026, and delivered a termination notice on July 3, 2026 declaring an event of termination under the master agreement. Separately, on or about July 6, 2026, the Bank discovered irregular Blocked Account activity, including a negative balance of $11,217 inconsistent with prior deposit patterns. The Companies subsequently disclosed a fraudulent cheque and admitted transferring $63,000 out of the Blocked Account. The Bank later discovered approximately $420,000 in transactions between the Blocked and Operating Accounts occurring between June 22 and July 6, 2026, including payments to shareholders, an investor, and a non-arm's-length party.

Policy and legislative provisions at issue

The application turned on section 47(1) of the Bankruptcy and Insolvency Act, which permits the court to appoint an interim receiver once a notice of intention to enforce security (NITES) has been delivered, and section 47(3), which limits such an appointment to circumstances necessary for the protection of the debtor's estate or the interests of the creditor who sent the notice. Section 101 of the Courts of Justice Act was also engaged, allowing the court to appoint a receiver where it is just or convenient having regard to the nature of the property and the rights and interests of all parties. The master purchase and servicing agreement itself was central to the dispute: Article 3 granted the Bank a security interest in the Relevant Contracts, reserve account monies, records, collections, and payments, while section 2.6(c) permitted the Bank to debit the Reserve Account for overdue obligations without that debit constituting a waiver of default, and required the Companies to promptly repay any amount so debited. Section 7.1(a) of the agreement gave the Bank the right to designate a replacement service provider following termination. The Bank also relied on its notice of intention to enforce security under section 244 of the BIA, satisfaction of which was not in dispute.

Reasoning and analysis

Justice Perron noted that while the Bank argued a relaxed burden applies where a security instrument grants a right to appoint a receiver, the authorities it cited concerned full receiverships rather than interim receivers. The Companies, by contrast, relied on case law addressing interim receivers specifically, including the principle articulated in Highbreed Financial Corporation v. Canada Tax Reviews Inc. that such an appointment requires an immediate need to protect the debtor's estate from the grave danger that assets will disappear or the estate will otherwise be placed in jeopardy, along with the framework in Peel Condominium Corporation No. 49 v. Zaffino. Because the Companies' authorities were more directly on point, the court applied that framework, while also accepting, per Royal Bank of Canada v. Canadian Print Music Distributors Inc., that a moving party need not prove actual misfeasance or dissipation of assets to meet its onus. Even applying the more stringent test, the court found it necessary and just and convenient to appoint an interim receiver. The Companies were in default both for failing to deliver a binding commitment and for admittedly being unable to pay the July 1 invoice. They had not been forthcoming about material developments, including the Encina transaction's failure and the fraudulent cheque, and had transferred trust funds out of the Blocked Account without accounting for their location or quantum. The court was satisfied that KPMG's existing mandate and the Companies' proposed "monitorship" alternative were insufficient to protect the Bank, particularly given that potentially preferential payments continued even after KPMG's involvement began, undermining the Bank's confidence in the Companies. The court also found the evidence insufficient to conclude that the Reserve Account and other security already held by the Bank were adequate, making an interim receiver useful to establish the true quantum of the reserve floor and other disputed figures. The Companies' request to debit the Reserve Account to cure the July 1 default was rejected because the agreement would require immediate repayment they admitted they could not make. The court further found the Companies had not shown the appointment would impede their refinancing efforts or harm subordinate debenture holders; if anything, preservation of assets would benefit all stakeholders, drawing on Macquarie Equipment Finance Limited v. Validus Power Corp. Turning to scope, the court drew on Suitor v. Libro Credit Union Inc. for the principle that an interim receiver's powers should be limited to steps necessary in the interim period, and declined to authorize the receiver to manage or operate the business, to implement the Bank's proposed service-provider changeover, or to borrow funds to pay its own fees, since these were not shown to be necessary or beneficial to stakeholders at this stage.

Ruling and overall outcome

The motion was granted, with National Bank of Canada succeeding in obtaining the appointment of an interim receiver, but on narrower terms than initially sought. The interim receiver's role was limited to full oversight of the Companies' operations as they relate to the Bank's portfolio, sufficient to ensure collections are gathered and preserved, without authority to manage the broader business, borrow funds for its fees, or carry out the changeover to the Bank's designated replacement servicer. The appointment is to run until the earliest of August 12, 2026, or such other date the parties agree. The parties were directed to further discuss and settle the terms of a revised draft order, with the possibility of a short conference before Justice Perron if agreement could not be reached by July 27, 2026, and the matter was directed to return before her given her familiarity with the issues.