Court Confirms that Priority of Receivers’ Charges is Discretionary

by Blake, Cassels & Graydon LLP

Justice R. Graesser of the Court of Queen’s Bench of Alberta (Court) recently released his decision in Royal Bank of Canada v. Reid-Built Homes Ltd. (Decision), where he held that the Court has the discretion, but not the obligation, to grant a super priority for receivers’ fees and disbursements ahead of the claims of secured creditors. The Decision also held that court-order charges provided for the benefit of receivers may be subordinated to municipal tax claims against property of the debtor’s estate.


On November 2, 2017, the Reid-Built group of companies (Reid-Built Group) was placed into receivership pursuant to a consent receivership order (Receivership Order). The Receivership Order was based on the Alberta Template Receivership Order (Template Order), but provided that creditors and other affected parties could apply to vary its terms on November 29, 2017 (Comeback Hearing).

At the Comeback Hearing, two creditors applied (Creditor Applications) to vary the priority of the receiver’s (Receiver) fee, disbursement and borrowing charge (Receiver’s Charges). Both creditors argued that it was unfair that the Receiver’s Charges be granted super priority status over their secured claims against certain of the Reid-Built Group’s real property. ICI Capital Corporation (ICI), a first mortgagee on several properties, objected to the priority of the Receiver’s Charges and sought to have the stay of proceedings lifted so that it could institute its own proceedings under its mortgage. Standard General Inc. (Standard General) sought similar relief to ICI, but had filed builders’ liens under the Builders’ Lien Act (BLA) against certain lands worked on for the Reid-Built Group. The Receiver and its appointing creditor opposed the Creditor Applications.

Before Justice Graesser issued his decision on the Creditor Applications, the City of Edmonton (Edmonton) brought a separate application seeking for its property tax claims (PT Claims) to be placed in priority to the Receiver’s Charges. Edmonton argued that section 348 of the Municipal Government Act provides for a special lien on levied land for certain taxes that has priority over the claims of every person except the Crown. It alleged that it did not participate in the Comeback Hearing because its position was that the Receiver’s Charges did not take priority over its PT Claims. The Receiver and its appointing creditor also opposed Edmonton’s application.

Justice Graesser dismissed the Creditor Applications. He found that ICI did not meet its burden to lift the stay of proceedings or to be removed from the receivership. He also found that Standard General’s priority claims were stayed from enforcement by the doctrine of paramountcy. He confirmed that where there is a conflict between provincial legislation related to priorities and the provisions of the Bankruptcy and Insolvency Act (Canada) (BIA) (or the exercise of powers by the Court under the BIA) the provisions of the BIA prevail. Consequently, he concluded that the Receiver’s Charges had priority over the claims of ICI and Standard General.

Justice Graesser did, however, hold that the doctrine of paramountcy did not apply in respect of Edmonton’s PT Claims. While the Court confirmed it has the power to grant a super priority for the Receiver’s Charges ahead of the claims of secured creditors, such power must be exercised equitably, having regard to the purposes of the legislation and the receivership proceeding. In effect, the priority of court-ordered charges in insolvency proceedings is always in the discretion of the Court in each case.

Justice Graesser also confirmed that it is generally appropriate to have court-ordered charges rank ahead of claimants who benefit from the receivership. Nevertheless, as there was no anticipated benefit to Edmonton accruing out of this particular receivership, it was determined that this was not an appropriate case to provide the Receiver’s Charges with priority over the PT Claims. He therefore held that the appropriate priority for the PT Claims was ahead of the Receiver’s Charges.

The Decision highlights the discretionary nature of court-ordered charges in insolvency proceedings and the importance of drafting specific priority provisions in receivership orders that take into account the claims of unique creditors. While the use of the Template Order is highly desirable, they are not statutory or regulatory forms with the force of law. Ultimately, the priority of court-ordered charges in receivership proceedings remains at the discretion of the Court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP

Blake, Cassels & Graydon LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.