ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) B … · 2019-12-28 · doc#4244256v1 court...

Doc#4244256v1

Court File No. CV-15-11054-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

B E T W E E N:

THE TORONTO-DOMINION BANK

Applicant

- and -

B. GOTTARDO CONSTRUCTION LTD. AND

B. GOTTARDO SITE SERVICING LIMITED

Respondents

APPLICATION UNDER SUBSECTION 243(1) OF THE BANKRUPTCY AND

INSOLVENCY ACT, R.S.C 1985, c. B-3 AS AMENDED AND SECTION 101 OF THE

COURTS OF JUSTICE ACT, R.S.O 1990, c. C. 43, AS AMENDED

MOTION RECORD

(Distribution of the Harcap Settlement – Returnable August 22, 2018)

July 20, 2018 CHAITONS LLP

Barristers and Solicitors

5000 Yonge Street, 10th Floor

Toronto, ON M2N 7E9

Harvey Chaiton (LSUC # 21592F)

Tel: (416) 218-1129

Fax: (416) 218-1849

E-mail: [email protected]

Maya Poliak (LSUC # 54100A)

Tel: (416) 218-1161

Fax: (416) 218-1844


Lawyers for BDO Canada Limited,

Court-appointed Receiver

TO: THE SERVICE LIST

mailto:[email protected]


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SERVICE LIST

(as of May 29, 2017)

TO: AIRD & BERLIS

Brookfield Place

181 Bay Street, Suite 1800

Toronto, ON M5J 2T9

D. Robb English

Tel: (416) 865-4748

Fax: (416) 863-1515

Email: [email protected]

Sam Babe

Tel: (416) 865-7718

Fax: (416) 863-1515


Lawyers for The Toronto-Dominion Bank

TO: BDO CANADA LIMITED

20 Wellington Street East

Suite 500

Toronto, Ontario M5E 1C5

Josie Parisi

Tel: (416) 369-6031


Court-Appointed Receiver of B. Gottardo Construction Ltd. and B. Gottardo Site

Servicing Limited

TO: CHAITONS LLP


Toronto, ON M2N 7E9

Harvey Chaiton

Tel: (416)-218-1123

Fax: (416) 218-1849


Maya Poliak

LSUC No. 54100A

Tel: (416) 218-1161

Fax: (416) 218-1844


Lawyers for BDO Canada Limited






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TO: TIBOLLO & ASSOCIATES PROFESSIONAL CORPORATION

11 Direcgtor Court, Suite 201

Woodbridge, ON L4L 4S5

Michael Tibollo

Tel: (905) 850-4500


Bhupinder Nagra


Lawyers for B. Gottardo Construction Ltd. and B. Gottardo Site Servicing Limited

TO: WATSON JACOBS MCCREARY LLP

509-4711 Yonge Street

North York, ON M2N 6K8

Michael C.P. McCreary

Tel: (416) 226-0055

Fax: (416) 226-3602


Lawyers for Teamsters Local 231

TO: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF

ONTARIO AS REPRESENTED BY THE MINISTRY OF FINANCE

Legal Services Branch

777 Bay Street, 11th Floor

Toronto, ON M5G 2C8

Kevin O’Hara

Tel: (416) 327-8463

Fax: (416) 325-1460


TO: DEPARTMENT OF JUSTICE

The Exchange Tower

130 King St. West, Suite 3400

Toronto, ON M5X 1K6

Diane Winters

Tel: (416) 973-3172

Fax: (416) 973-0810







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TO: AZEVEDO & NELSON

892 College Street

Toronto, ON M6H 1A4

William Ribeiro

Tel: (416) 533-7133

Fax: (416) 533-3114


Lawyers for Triumph Aluminum and Sheet Metal Inc.

TO: SHIBLEY RIGHTON LLP

250 University Avenue, Suite 700

Toronto, ON M5H 3ES

Thomas McRae

Tel: (416) 214-5206

Fax: (416) 214-5400


Lawyers for Gilbert Steel Limited

TO: ENVISION LANDSCAPING INC.

A Division of JMJ Construction Inc.

42 Village Centre Place, Suite 200

Mississauga, Ontario L4Z 1V9

Jasmine M. Ghosn, Legal Counsel

Tel: 416-985-0362

Fax: 905-501-9529

[email protected]

Lawyers for Envision Landscaping Inc.

TO: BATTISTON & ASSOCIATES

1013 Wilson Avenue, Suite 202

Toronto, ON M3K 1G1

Eddy Battiston

Tel: (416) 630-7151

Fax: (416) 630-7472


Lawyers for Deep Foundations Contractors Inc.





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TO: TEPLITSKY, COLSON LLP

70 Bond Street, Suite 200

Toronto, ON M5B 1X3

James M. Wortzman

Tel: (416) 365-9320

Fax: (416) 365-0695


Karey Dhirani

Tel: (416) 865-5343

Fax: (416) 365-0695


Lawyers for Sundial Homes (Sharon) Limited

TO: SIMPSON WIGLE LLP

1 Hunter Street East, Suite 200

Hamilton, ON L8N 3R1

Derek A. Schmuck

Tel: (905) 528-8411 x 353

Fax: (905) 528-9008


Lawyers for Armtec Limited Partnership, by its general partner, Armtec Holdings

Ltd.

TO: NORTON ROSE FULBRIGHT

45 O’Connor Street, Suite 1500

Ottawa, ON K1P 1A4

Dan J. Leduc

Tel: (613) 780-1536

Fax: (613) 230-5459


Lawyers for Guild Electric Limited





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TO: BATTISTON AND ASSOCIATES

1013 Wilson Avenue, Suite 202

Toronto, ON M3K 1G1

Flavio Battiston

Tel: (416) 630-7151

Fax: (416) 630-7472

Email: [email protected] Harold Rosenberg

Tel: (416) 630-7151 Ext. 237

Fax: (416) 630-7472


Lawyers for Gage Aluminum & Glass Ltd.

TO: BORDEN LADNER GERVAIS LLP

Bay Adelaide Centre, East Tower

22 Adelaide St. West

Toronto, ON M5H 4E3

James MacLellan

Tel: (416) 367-6592

Fax: (416) 367-6749


Lawyers for Travelers Insurance Company of Canada and Intact Insurance

Company

TO: VOLPE, NORFI A.J.

901-3700 Steeles Avenue West

Woodbridge, ON L4L 8K8

Tel: (905) 850-2468 X 212

Fax: (905) 293-3503


Lawyers for Omico Mechanical Limited

TO: GOWLINGS

1 First Canadian Place

100 King St. West, Suite 1600

Toronto, ON M5X 1G5

Calvin Ho

Tel: (416) 862-5788

Fax: (416) 862-7661


Lawyers for VFS Canada Inc.






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TO: CASSELS BROCK & BLACKWELL

2100 Scotia Plaza

40 King St. West

Toronto, ON M5H 3C2

Todd Robinson

Tel: (416) 860-6506

Fax: (416) 642-7160


Matthew Alter

Tel: (416) 860-6764

Fax: (416) 640-3083


David Ward

Tel: (416) 869-5960

Fax: (416) 640-3154


Lawyers for the Corporation of the City of Mississauga

TO: LIPMAN, ZENER & WAXMAN LLP

1220 Eglinton Avenue West

Toronto, ON M6C 2E3

Anthony J. O’Brien


Jason D. Spetter


Tel: (416) 789-0652

Fax: (416) 789-9015

Lawyers for Business Development Bank of Canada

TO: BORDEN LADNER GERVAIS

Bay Adelaide Centre, East Tower

22 Adelaide St. West

Toronto, ON M5H 4E3

Roger Jaipargas

Tel: (416) 367-6266

Fax: (416) 367-6749


Denise Bambrough

Tel: (416) 367-6008







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Fax: (416) 367-6749


Lawyers for Aviva Insurance Company of Canada

TO: GOLDMAN, SLOAN, NASH LLP

480 University Avenue

Toronto, ON M5G 1V2

Stanley Naftolin

Tel: (416) 597-3388


Brendan Bissell

Tel: (416) 597-6489


Lawyers for Crowle Fittings & Supply Ltd.

TO: LANDY MARR KATS LLP

Suite 900

2 Sheppard Avenue East

Toronto, ON M2N 5Y7

David Fogel

Tel: (416) 221-9343 Ext 244

Fax: (416) 221-8928


Lawyers for ASN Inc.

TO: GLAHOLT LLP

141 Adelaide St. West, Suite 800

Toronto, ON M5H 3L5

John Margie

Tel: (416) 368-8280 Ext 211

Fax: (416) 368-3467


Lawyers for Lafarge Canada Inc.






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TO: PAGE, MARTIN LLP

150 York Street, Suite 800

Toronto, ON M5H 3S5

Kenneth H. Page

Tel: (416) 595-9935 x 340

Fax: (416) 595-1731


Lawyers for B & L Gottardo Brothers

TO: FRED TAYAR & ASSOCIATES

Professional Corporation

65 Queen St. West, Suite 1200

Toronto, ON M5H 2M5

Fred Tayar

Tel: (416) 363-1800 x200

Fax: (416) 363-3356


Lawyers for Bruno Gottardo, David Gottardo, Kleinridge Investments Inc.,

615146 Ontario Limited, 2191673 Ontario Limited,

Falconridge Corporation and 2303663 Ontario Ltd.

TO: DICENZO & ASSOCIATES

41-1070 Stone Church Rd. E.

Hamilton, Ontario L8W 3K8

Allan Buist

Tel: (416) 574-3300

Fax: (416) 574-1766


Lawyers for 1631057 Ontario Inc.

TO: SIMPSON WIGLE LLP

1 Hunter Street East, Suite 200

Hamilton, ON L8N 3R1

Derek A. Schmuck

Tel: (905) 528-8411 x 353

Fax: (905) 528-9008


Lawyers for Direct Equipment Ltd.





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TO: PALLETT VALO LLP

77 City Centre Drive, Suite 300

Mississauga, ON L5B 1M5

Maria Ruberto

Tel: (905) 273-3022 Ext. 206

Fax: (905) 273-6920


Paul Guaragna


Lawyers for Toromont Industries Ltd. carrying on business as Battlefield

Equipment Rentals

TO: NORTON ROSE FULBRIGHT

45 O’Connor Street, Suite 1500

Ottawa, ON K1P 1A4

Dan J. Leduc

Tel: (613) 780-1536

Fax: (613) 230-5459


Lawyers for C & R Air Systems Inc.

TO: McNEELY & KELLY

197 Bond Street East

Oshawa, ON L1G 1B4

William F. Kelly

Tel: (905) 579-1121 Ext. 28

Fax: (905) 579-0214


Lawyers for Furfari Paving

TO: WOLFGANG J. PAZULLA

202-16 Four Seasons Pl.

Etobicoke, ON M9B 6E5

Tel: (416) 622-6669

Fax: (416) 622-1440


Lawyers for Brascon Stainless Steel Fabricators Inc.






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TO: TEPLITSKY, COLSON LLP

70 Bond Street, Suite 200

Toronto, ON M5B 1X3

Jennifer Lake

Tel: (416) 865-5331

Fax: (416) 365-7702


Stephen Brunswick

Tel: (416) 865-5303

Fax: (416) 365-7702


Lawyers for Ringley Construction Ltd.

TO: MILLER THOMSON LLP

300-295 Hagey Blvd.

Waterloo, ON N2L 6R5

Timothy McGurrin

Tel: (519) 593-3221


Jack Masterman

Tel: (519) 593-2428


Lawyers for M-CON





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ONTARIO


(COMMERCIAL LIST)

B E T W E E N:


Applicant

- and -



Respondents




INDEX

TAB

Notice of Motion dated July 20, 2018 1

Tenth Report of the Receiver dated July 20, 2018 2

Appendices:

Appendix A Order of Justice Newbould, dated August 10, 2015 A

Appendix B Order and Endorsement of Justice Newbould

dated October 7, 2016 B

Appendix C Order of Justice Newbould, dated November 29, 2016 C

Appendix D Notice of Application, issued on January 31, 2017 D

Appendix E Affidavit of Josie Parisi, sworn January 20/17 (without exhibits) E

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Appendix F Order and Endorsement of Justice Conway

dated October 6, 2017 F

Appendix G Order of the Court of Appeal of Ontario, dated January 19, 2018 G

Appendix H Statement of Adjustments and Trust Account Analysis

re: 132 Ashbridge H

Appendix I Trust Account Analysis, dated February 13, 2018

re: 12 Ashbridge I

Appendix J Letter from Amy Lok to Harvey Chaiton, Fred Tayar and Fred A.

Platt, dated May 17, 2018, re: 770 Gana J

Appendix K Security Opinion K

Appendix L Order of Justice Penny, dated January 15, 2016 and Order of L

Justice Mesbur, dated December 6, 2016

Appendix M TD Bank Statement dated July 19, 2018 M

Appendix N Statement of Receipts and Disbursements for the period August N

10, 2015 to July 18, 2018

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ONTARIO


(COMMERCIAL LIST)

B E T W E E N:


Applicant

- and -



Respondents




NOTICE OF MOTION

(Distribution of the Harcap Settlement – Returnable August 22, 2018)

BDO CANADA LIMITED (“BDO”), in its capacity as Court-appointed receiver (the

“Receiver”) of the property, assets and undertakings of B. Gottardo Construction Ltd.

(“Construction”) and B. Gottardo Site Servicing Limited (“Servicing”, and together with

Construction, the “Debtors”) will make a motion to a Judge of the Commercial List on

Wednesday, August 22, 2018 at 10:00 a.m., or as soon after that time as the motion can be heard,

at 330 University Avenue, Toronto, Ontario.

PROPOSED METHOD OF HEARING: The motion is to be heard orally.

THE MOTION IS FOR:

(a) an order approving:

(i) the distribution of the Settlement Funds and Residual Proceeds (each as

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defined below) to The Toronto-Dominion Bank (“TD Bank”);

(ii) subsequent distributions of funds recovered by the Receiver in this

proceeding, after payment of the fees and disbursements of the receiver and

its legal counsel, without further order of the Court; and

(b) such further and other relief as counsel may request and this Honourable Court may

permit.

THE GROUNDS FOR THE MOTION ARE:

Background

1. On August 10, 2015, BDO was appointed as Receiver of the Debtors pursuant to the Order

of the Honourable Mr. Justice Newbould (the “Appointment Order”) on an application of TD

Bank. Prior to the Receiver’s appointment, on July 28, 2015, bankruptcy applications were filed

by TD Bank. On August 29, 2015, this Court issued bankruptcy orders in respect of each of the

Debtors. BDO was appointed as bankruptcy trustee.

2. The Debtors are privately owned, directly or indirectly, by members of the Gottardo family.

3. TD Bank is the Debtors’ first ranking general secured creditor. At the time that the

Receiver was appointed, the Debtors’ indebtedness to TD Bank was approximately $15 million.

Judgment against Kleinridge and 615

4. Pursuant to an order of Justice Newbould dated October 7, 2016, the Receiver, on behalf

of the Debtors obtained judgment (the “Judgment”) against Kleinridge Investments Inc.

(“Kleinridge”) and 615146 Ontario Limited (“615”), among others, in the following amounts:

a. Kleinridge in the amount of $2,884,584.74; and

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b. 615 in the amount of $108,612.65.

5. Kleinridge and 615 are also owned and controlled by members of the Gottardo family.

Kleinridge is the registered owner of the property municipally known as 12 Ashbridge Circle,

Vaughan, Ontario (“12 Ashbridge”) and 615 is the registered owner of the property municipally

known as 770 Gana Court, Mississauga, Ontario (“770 Gana”, and together with 12 Ashbridge,

the “Properties”).

6. At the time that the Judgment was obtained by the Receiver, Business Development Bank

of Canada (“BDC”) held the following mortgages against the Properties: (i) a collateral mortgage

in the principal amount of $4.8 million registered against title to each of the Properties, granted by

Kleinridge and 615 as security for the loan by BDC to Kleinridge and 615; and (ii) a collateral

mortgage in the principal amount of $2.7 million registered against title to each of the Properties

as security for the loan by BDC to 1043280 Ontario Limited (“104”), another company owned or

controlled by the Gottardo family, pursuant to the terms of unlimited guarantees provided by

Kleinridge and 615 to BDC in connection with this loan.

7. 104 is the registered owner of the property municipally known as 132 Ashbridge Circle,

Vaughan Ontario (“132 Ashbridge”), which is a neighbouring property to 12 Ashbridge.1

8. At the time that the Judgment was obtained by the Receiver, 770 Gana, 132 Ashbridge and

12 Ashbridge were also encumbered by a collateral mortgage in favour of 1968328 Ontario Inc.,

formerly 2283074 Ontario Inc. a.k.a. Harcap (“Harcap”) in the principal amount of $4 million

1 The Receiver did not seek to obtain judgment against 104. The parcel search in respect of 132 Ashbridge discloses

that on December 12, 2003, a transfer of charge in the principal amount of $575,000 was registered against title to

132 Ashbridge from Bank of Montreal to Construction (the “Construction Mortgage”). However, the Receiver

was not able to confirm that there were amounts owing to Construction under the Construction Mortgage. In

addition, Construction’s books and records disclose a further intercompany loan made by Construction to 104 in an

amount of $20,777.82.

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granted by Kleinridge, 615 and 104 to Harcap. These mortgages were registered pursuant to

unlimited guarantees provided by them to Harcap securing the obligations of another related

company, Falconridge Corporation, to Harcap. Harcap’s mortgages against the Properties are

subordinate to BDC’s mortgages.

9. Kleinridge, 615 and 104 defaulted on their obligations to BDC and Harcap under their

mortgages and BDC and Harcap each commenced power of sale proceedings.

The Application and Settlement

10. In January 2017, the Receiver commenced an application by issuing a notice of application

for, among other things, a declaration that Harcap’s collateral mortgages granted by Kleinridge,

615 and 104, were void as, inter alia, a fraudulent conveyance or preference (the “Application”).

Kleinridge, 615 and 104 were also named as respondents in the Application.

11. Harcap delivered responding materials. Kleinridge, 615 and 104 did not deliver any

responding materials.

12. Before the parties could proceed to conduct examinations, the Receiver and Harcap entered

into settlement negotiations of the Application which culminated in the execution of minutes of

settlement (the “Settlement”). Pursuant to the terms of the Settlement, the parties agreed, among

other things, that BDC would sell 770 Gana, 12 Ashbridge and 132 Ashbridge under power of

sale. The parties also agreed that the net proceeds will be distributed in accordance with the

following order of priorities:

(a) first to BDC up to the full amount owing to BDC under its mortgages inclusive of

principal, interest, fees and costs of enforcement and sale;

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(b) second to the Receiver to the maximum amount of $2,000,000 (the “Settlement

Funds”) from the net sale proceeds of 12 Ashbridge or 770 Gana, payable

immediately following the completion of the sale of 12 Ashbridge and/or 770 Gana

and after payment of BDC’s mortgages; and

(c) the balance to Harcap up to the full amount owing to Harcap under its mortgages.

13. The Receiver and Harcap agreed that the Receiver will not share in the proceeds from the

sale of 132 Ashbridge.

The Settlement Approval Motion

14. The Receiver brought a motion for approval of the Settlement, which was heard by Justice

Conway on October 6, 2017 (the “Settlement Approval Motion”).

15. At the return of the Settlement Approval Motion on October 6, 2017, counsel for David,

Bruno, Falconridge, Kleinridge, 615 and 104 (collectively, the “Respondents”) attended and

opposed the relief being sought, taking the position that the Settlement resulted in a reordering of

priorities that was prejudicial to the Respondents.

16. Justice Conway approved the Settlement and in her Endorsement, held that the approval of

the Settlement is without prejudice to the Respondents arguing their entitlement to any or all of

the $2 million to be paid to the Receiver under the Settlement. Her Honour also held that the

Settlement Funds were to be held by the Receiver in trust and not paid out unless and until Court

approval is obtained on a distribution motion on at least 30 days’ notice to the Respondents.

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Proposed Distributions to TD Bank

17. 132 Ashbridge and 12 Ashbridge were sold by BDC under power of sale. BDC’s mortgages

were paid out in full from the net sale proceeds of 132 and 12 Ashbridge. In addition, pursuant to

the terms of the Settlement, the Receiver received $2 million from the net sale proceeds of 12

Ashbridge.

18. 770 Gana was subsequently sold by Harcap. Harcap has advised that following satisfaction

of its mortgage and payment of certain holdbacks, approximately $217,000 would be available for

distribution to subsequent encumbrancers and, if applicable, 615. The Receiver is the only

subsequent encumbrancer as a judgment creditor with writs of execution in the total amount of

$131,033.92 plus interest (the “Residual Proceeds”).

19. The Debtors remain indebted to TD Bank in the amount of approximately $12.5 million.

TD Bank is expected to suffer a substantial short fall on its loans to the Debtors.

20. Counsel for the Receiver conducted a review of TD Bank’s security and advised the

Receiver that, subject to the usual qualifications and assumptions, it is of the opinion that the

security granted by the Debtors in favour of TD Bank creates a valid security interest in all personal

property of the Debtors located in the province of Ontario and proceeds thereof.

21. The Receiver seeks an order authorizing it to distribute $700,000 from the funds currently

held by the Receiver in its trust account (in addition to the Settlement Proceeds). The Receiver

also seeks an order authorizing it to distribute any future proceeds collected by the Receiver in this

proceeding, after payment of the Receiver’s fees and disbursements and the fees and disbursements

of the Receiver’s counsel, to TD Bank without further order of the Court.

22. Such other grounds as counsel may advise and this Honourable Court may permit.

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THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the

motion:

1. The Tenth Report and the Appendices annexed thereto; and

2. such further and other material as counsel may advise and this Honourable Court may

permit.

July 20, 2018 CHAITONS LLP



Toronto, ON M2N 7E9

Harvey Chaiton (LSUC # 21592F)

Tel: (416) 218-1129

Fax: (416) 218-1849



Tel: (416) 218-1161

Fax: (416) 218-1844




TO: THE SERVICE LIST

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THE TORONTO-DOMINION BANK - and - B. GOTTARDO CONSTRUCTION LTD. et al

Applicant Respondents

Court File No. CV15-11054-00CL

ONTARIO


(COMMERCIAL LIST)

Proceedings commenced at Toronto

NOTICE OF MOTION

(Returnable August 22, 2018)

CHAITONS LLP


Toronto, ON M2N 7E9

Harvey Chaiton (LSUC #21592F)

Tel: (416) 218-1129

Fax: (416) 218-1849



Tel: (416) 218-1161

Fax: (416) 218-1844




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ONTARIO


COMMERCIAL LIST

TENTH REPORT OF BDO CANADA LIMITED, IN ITS CAPACITY

AS COURT APPOINTED RECEIVER

July 20, 2018

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INDEX OF APPENDICES

Appendix A Order of Justice Newbould, dated August 10, 2015 Appendix B Order and Endorsement of Justice Newbould, dated October 7, 2016 Appendix C Order of Justice Newbould, dated November 29, 2016 Appendix D Notice of Application, issued on January 31, 2017 Appendix E Affidavit of Josie Parisi, sworn January 20, 2017 (without exhibits) Appendix F Order and Endorsement of Justice Conway, dated October 6, 2017 Appendix G Order of the Court of Appeal of Ontario, dated January 19, 2018 Appendix H Statement of Adjustments and Trust Account Analysis re: 132 Ashbridge Appendix I Trust Account Analysis, dated February 13, 2018 re: 12 Ashbridge Appendix J Letter from Amy Lok to Harvey Chaiton, Fred Tayar and Fred A. Platt, dated May 17, 2018, re: 770 Gana Appendix K Security Opinion Appendix L Order of Justice Penny, dated January 15, 2016 and Order of Justice Mesbur, dated December 6, 2016 Appendix M TD Bank Statement dated July 19, 2018 Appendix N Statement of Receipts and Disbursements for the period August 10, 2015 to July 18, 2018

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INTRODUCTION AND PURPOSE OF THIS REPORT

1. B. Gottardo Construction Ltd. (“Construction”) and B. Gottardo Site Servicing

Limited (“Site Servicing”, and collectively, the “Debtors”) are corporations incorporated

pursuant to the Business Corporations Act (Ontario). The Debtors are privately owned,

directly or indirectly, by members of the Gottardo family. Bruno Gottardo was the founder

and president of Construction and Servicing (“Bruno”). David Gottardo (“David”),

Bruno’s son, was the general manager of the Debtors.

2. The Debtors provided large scale construction services, frequently being

infrastructure projects for municipalities and other government entities as well as site

servicing for developers.

3. On application by The Toronto Dominion Bank (“TD Bank”), the Debtors’ senior

secured lender, BDO Canada Limited was appointed as the receiver (the “Receiver”)

without security, of the assets, undertakings and properties of the Debtors, pursuant to the

order of Justice Newbould dated August 10, 2015 (the “Receivership Order”). Attached

hereto as Appendix “A” is a copy of the Receivership Order.

4. At the time that the Receiver was appointed, the Debtors’ indebtedness to TD Bank

was approximately $15 million.

5. Prior to the Receiver’s appointment, on July 28, 2015, bankruptcy applications

were filed by TD Bank. On August 29, 2015, this Court issued bankruptcy orders in respect

of each of the Debtors. BDO was appointed as trustee.

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6. This Report is prepared in support of the Receiver’s motion for an order approving:

i) the distribution of the Settlement Funds and Residual Proceeds (each as defined

below) to TD Bank; and

ii) subsequent distributions of funds recovered by the Receiver in this proceeding,

after payment of the fees and disbursements of the Receiver and its legal counsel,

without further order of the Court.

JUDGMENT AGAINST RELATED PARTIES

7. The Receivership Order empowers the Receiver to, among other things, receive and

collect all monies and accounts owed to the Debtors, to exercise all remedies of the Debtors

in collecting such monies, and to initiate and prosecute any and all proceedings with respect

to the Debtors and their properties.

8. The Receiver brought a motion on behalf of the Debtors for the purpose of

collecting on a number of intercompany loans, including those made to Kleinridge

Investments Inc. (“Kleinridge”) and 615146 Ontario Limited (“615”). Kleinridge and 615

are companies owned or controlled by David and/or Bruno.

9. Pursuant to an order of Justice Newbould dated October 7, 2016, the Receiver, on

behalf of the Debtors obtained judgment (the “Judgment”) against Kleinridge and 615,

among others, in the following amounts:

a. Kleinridge in the amount of $2,884,584.74; and

b. 615 in the amount of $108,612.65.

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Copies of Justice Newbould’s order and endorsement are collectively attached as

Appendix “B”.

10. Pursuant to an order of Justice Newbould dated November 29, 2016, the Receiver,

on behalf of the Debtors, obtained a cost award against, among others, Kleinridge and 615,

payable on a joint and several basis, in the amount of $14,920.64. A copy of the cost order

is attached as Appendix “C”.

11. The Receiver also obtained a judgment against each of Bruno and David in the

amount of $110,242.52 and $362,191.47, respectively.

12. Kleinridge was the registered owner of the property municipally known as 12

Ashbridge Circle, Vaughan, Ontario (“12 Ashbridge”). 615 is the registered owner of the

property municipally known as 770 Gana Court, Mississauga, Ontario (“770 Gana”,

together with 12 Ashbridge, the “Properties”).

APPLICATION AGAINST HARCAP

13. At the time that the Judgment was obtained by the Receiver, Business Development

Bank of Canada (“BDC”) held the following mortgages against the Properties: (i) a

collateral mortgage in the principal amount of $4.8 million registered against title to each

of the Properties, granted by Kleinridge and 615 as security for the loan by BDC to

Kleinridge and 615; and (ii) a collateral mortgage in the principal amount of $2.7 million

registered against title to each of the Properties as security for the loan by BDC to 1043280

Ontario Limited (“104”), another company owned or controlled by David and/or Bruno.

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The Receiver is advised by counsel for BDC that Kleinridge and 615 provided unlimited

secured guarantees of 104’s obligations to BDC under this loan.

14. 104 is the registered owner of the property municipally known as 132 Ashbridge

Circle, Vaughan Ontario (“132 Ashbridge”), which is a neighbouring property to 12

Ashbridge.1

15. At the time that the Judgment was obtained by the Receiver, each of the Properties

was also encumbered by a collateral mortgage in favour of 1968328 Ontario Inc., formerly

2283074 Ontario Inc. a.k.a. Harcap (“Harcap”) in the principal amount of $4 million

granted by Kleinridge and 615 to Harcap pursuant to guarantees provided by them to

Harcap securing the obligations of Falconridge Corporation (“Falconridge”), another

Gottardo related company, to Harcap. Harcap’s mortgages against the Properties are

subordinate to BDC’s mortgages.

16. Kleinridge, 615 and 104 defaulted on their obligations to BDC under their

mortgages and BDC commenced power of sale proceedings.

17. Kleinridge, 615 and 104 also defaulted on their obligations to Harcap under their

mortgages and Harcap also commenced power of sale proceedings. Harcap also

1 The Receiver did not seek to obtain judgment against 104. The parcel search in respect of 132 Ashbridge

discloses that on December 12, 2003, a transfer of charge in the principal amount of $575,000 was

registered against title to 132 Ashbridge from Bank of Montreal to Construction (the “Construction

Mortgage”). However, the Receiver was not able to confirm that there were amounts owing to

Construction under the Construction Mortgage. In addition, Construction’s books and records disclose a

further intercompany loan made by Construction to 104 in an amount of $20,777.82.

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Doc#4187585v4

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commenced a separate proceeding against Kleinridge, 615 and 104 and obtained judgments

against each in the amount of $3 million, plus interest.

18. In or around January 2017, the Receiver commenced an application for, among

other things, a declaration that the collateral mortgages granted by Kleinridge, 615 and 104

in favour of Harcap are void as, inter alia, a fraudulent conveyance or preference (the

“Application”). A copy of the Receiver’s Notice of Application is attached hereto as

Appendix “D”.

19. In support of the Application, Josie Parisi, a Senior Vice President with BDO

Canada Limited, swore an Affidavit on January 20, 2017 (the “Parisi Affidavit”). A copy

of the Parisi Affidavit without exhibits is attached hereto as Appendix “E”.

20. Kleinridge, 615 and 104 are also named as respondents in the Notice of Application.

Kleinridge, 615 and 104 did not file any responding materials in connection with the

Application.

21. Harcap defended the Application and delivered responding affidavits.

22. The next step in the Application proceeding would have been for the Receiver to

conduct cross-examinations of Harcap’s representative on his affidavits and examine

Bruno and David in their capacities as directors and/or officers of Falconridge, Kleinridge,

615 and 104. Before the examinations were scheduled, the Receiver and Harcap entered

into settlement negotiations of the Application which culminated in Minutes of Settlement

between the parties (the “Minutes of Settlement”).

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THE MINUTES OF SETTLEMENT

23. A summary of the salient terms of the Minutes of Settlement is set out in this section

of the Report. Capitalized terms not otherwise defined in this Report, shall have the

meaning ascribed to such term in the Minutes of Settlement.

24. Pursuant to the Minutes of Settlement, the Receiver and Harcap agreed that BDC

would sell 770 Gana, 12 Ashbridge and 132 Ashbridge under power of sale. The parties

also agreed that the net sale proceeds will be distributed immediately following completion

of the sale of each of these properties in accordance with the following order of priorities:

i) first to BDC up to the full amount owing to BDC under its mortgages inclusive

of principal, interest, fees and costs of enforcement and sale;

ii) second to the Receiver to the maximum amount of $2,000,000 (the “Settlement

Funds”) payable immediately following the completion of the sale of 12

Ashbridge and/or 770 Gana and after payment of BDC’s mortgages; and

iii) the balance to Harcap up to the full amount owing to Harcap under its mortgages.

25. Pursuant to the Minutes of Settlement, Harcap agreed to postpone and subordinate

its mortgages registered against the Properties in favour of the Receiver to give effect to

the priorities described above. In addition, pursuant to the Minutes of Settlement, the

Receiver is entitled to the first $250,000 realized pursuant to the parties judgments and

executions against David and Bruno.

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26. The Receiver and Harcap also agreed that the Receiver will not share in the

proceeds from the sale of 132 Ashbridge.

THE SETTLEMENT APPROVAL MOTION

27. The Receiver brought a motion for approval of the Minutes of Settlement, which

was heard by Justice Conway on October 6, 2017 (the “Settlement Approval Motion”).

28. At the return of the Settlement Approval Motion on October 6, 2017, counsel for

David, Bruno, Falconridge, Kleinridge, 615 and 104 (collectively, the “Respondents”)

attended and opposed the relief being sought, taking the position that the Minutes of

Settlement resulted in a reordering of priorities that was prejudicial to the Respondents.

29. Justice Conway approved the Minutes of Settlement and in her Endorsement, held

that the approval of the Minutes of Settlement is without prejudice to the Respondents

arguing their entitlement to any or all of the $2 million to be paid to the Receiver under the

Minutes of Settlement. Her Honour also held that the Settlement Funds were to be held by

the Receiver in trust and not paid out unless and until Court approval is obtained on a

distribution motion on at least 30 days’ notice to the Respondents. Copies of the Order of

Justice Conway dated October 6, 2017 (the “Approval Order”) and her Endorsement are

attached hereto as Appendix “F”.

30. The Respondents appealed the decision in the Approval Order (the “Appeal”). In

the Appeal, the Receiver brought a motion for a declaration that the Respondents required

leave to appeal and Harcap brought a motion to quash the Appeal (the “Quash Motion”).

By Endorsement of the Court of Appeal dated January 19, 2018, a copy of which is attached

hereto as Appendix “G”, the Appeal was quashed.

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SALE OF THE PROPERTIES AND DISTRIBUTION OF NET SALE PROCEEDS

31. On August 3, 2017, 132 Ashbridge was sold by BDC under power of sale for a

purchase price of $3,400,000. From the net sale proceeds, BDC was paid the sum of

approximately $2.4 million to discharge its mortgage on 132 Ashbridge. The balance of

the sale price in the approximate amount of $868,000 was released to Harcap. Copies of

the statement of adjustments and trust ledger provided by counsel for BDC to the Receiver

are collectively attached as Appendix “H”.

32. On or around January 29, 2018, 12 Ashbridge was sold by BDC under power of

sale for a purchase price of $6,850,000. From the net sale proceeds, BDC was paid

approximately $3.8 million.

33. Also from the net sale proceeds from 12 Ashbridge, the Receiver was paid the

amount of $2 million in respect of the Settlement Funds, which funds are being held by the

Receiver in trust in accordance with the Approval Order. The Receiver understands that

the balance of the sale price, in the amount of approximately, $800,000 was distributed to

Harcap. Attached as Appendix “I”, is a Trust Account Analysis dated February 13, 2018

provided by counsel for BDC.

34. On or around May 8, 2018, Harcap sold 770 Gana under power of sale for a

purchase price of $3.5 million. From the net sale proceeds, approximately $3.1 million was

paid to Harcap to satisfy its mortgage in full. Attached as Appendix “J” is a copy of the

letter from counsel for Harcap to counsel for the Receiver and counsel for the Respondents

advising of the closing of the sale of 770 Gana and attaching a Statement of Adjustments.

19

Doc#4187585v4

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35. In its letter, counsel for Harcap advises, among other things that following

satisfaction of Harcap’s mortgage and payment of certain holdbacks, approximately

$217,000 would be available for distribution to subsequent encumbrancers and, if

applicable, to 615. The Receiver is the only subsequent encumbrancer as a judgment

creditor with writs of execution in the total amount of $131,033.292, plus interest (the

“Residual Proceeds”).

PROPOSED DISTRIBUTIONS TO TD BANK

36. TD Bank is the Debtors’ first ranking general secured creditor.

37. Pursuant to the terms of a letter agreement dated September 22, 2011 (the “Credit

Agreement”), TD Bank provided the Debtors with credit facilities in the approximate

amount of $18.5 million (exclusive of a Visa facility). Each of the Debtors is a signatory

to the Credit Agreement and each provided an unlimited guarantee of the other.

38. The Receiver requested Chaitons LLP to provide a legal opinion on the validity

and enforceability of the security held by TD Bank. Chaitons LLP has advised the Receiver

that subject to the usual qualifications and assumptions, it is of the opinion that the security

granted by the Debtors in favour of TD Bank creates a valid security interest in all personal

property of the Debtors located in the province of Ontario and proceeds thereof which was

duly perfected by registration under the Ontario Personal Property Security Act. A copy

of this opinion is attached as Appendix “K”.

2 This amount is comprised of the Judgment obtained against 615, the cost award dated November 29, 2017

against 615 and the cost award in favour of the Receiver awarded by the Court of Appeal at the Quash

Motion in the amount of $7,500.

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39. By orders dated January 15, 2016 and December 6, 2016, this Court has authorized

the Receiver to make interim distributions to TD Bank in the amount of approximately $3.9

million. Copies of the distribution orders are collectively attached as Appendix “L”.

40. The obligations of the Debtors to TD Bank, including interest charges to July 19,

2018 total approximately $12,429,420.14 and are reflected in a statement provided by TD

Bank to the Receiver attached as Appendix “M”.

41. As a result of the foregoing, the Receiver recommends that the Court approve the

distribution of the Settlement Funds and any Residual Proceeds to TD Bank. Pursuant to

the Endorsement of Justice Conway, the Receiver will provide 30 days’ notice to the

Respondents of this motion.

42. In addition to the proceeds from the sale of the Properties, the Receiver has

approximately $1.7 million in its trust account from realizations on the Debtors’ assets in

this proceeding (the “Additional Funds”). Attached as Appendix “N” hereto is a copy of

the Receiver’s statement of receipts and disbursements for the period of August 10, 2015

to July 18, 2018.

43. There will not be sufficient funds to repay the indebtedness owed by the Debtors to

TD Bank and TD Bank is expected to suffer a substantial shortfall on their loan to the

Debtors. Accordingly, the Receiver requests the permission of this Court to distribute a

further $700,000 from the Additional Funds and any future funds collected by the Receiver

in this proceeding, after payment of the Receiver’s fees and disbursements and the fees and

disbursements of the Receiver’s counsel, to TD Bank without further order of the Court.

21

All of which is respectfully submitted this 20th day of July, 2018.

BDO CANADA LIMITED Court Appointed Receiver of B. Gottardo Construction Ltd. and B. Gottardo Site Servicing Limited

Per: Name: Josie Parisi, CPA, CA, CBV, CIRP, LIT Title: Senior Vice President

22

Appendix “A”

23

Appendix “B”

41


ONTARIO SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

B E T W E E N:

BDO CANADA LIMITED, IN ITS CAPACITY AS COURT-APPOINTED RECEIVER OF B. GOTTARDO CONSTRUCTION LTD. and B. GOTTARDO SITE

SERVICING LIMITED

Applicant

- and -

BRUNO GOTTARDO, DAVID GOTTARDO, KLEINRIDGE INVESTMENTS INC., 615146 ONTARIO LIMITED, 2191673 ONTARIO LIMITED, FALCONRIDGE CORPORATION, 2303663 ONTARIO LTD. and 2346192 ONTARIO LIMITED

Respondents

UNOFFICIAL TRANSCRIBED REASONS OF JUSTICE NEWBOULD

October 7, 2016

The receiver of the two debtors, B. Gottardo Construction Ltd. (“Construction”) and B. Gottardo Site Servicing Ltd. (“Site Servicing”) moves for judgment against a number of entities and persons. The parties agreed to proceed by way of application. See endorsement of Conway J of March 22, 2016.

It is agreed that judgment should go in favour of Construction against (i) Falconridge for $398,000, (ii) 615146 Ontario Ltd. for $107,484.90, (iii) 2191673 Ontario Ltd. for $45,000 and (iv) 2303663 Ontario Ltd. for $434,805.

Claims against 2346193 Ontario Ltd.

(a) $608,393.65

234 acknowledges receiving this money. Lino Toncic, the sole officer, director and shareholder of 234 stated in his affidavit that prior to this proceeding he did not know that the bank transfers for this money came from Construction. He said until he became involved in the litigation he “believed that the money was loaned to 234 by 2303663 Ontario Ltd. (“230”). There is no evidence provided to support such a belief. Moreover, there is no evidence that the money was in fact advanced to 234 by 230.

66

The audited financial statements of Construction state that the money was advanced to 234. That amount, along with other amounts identified in the receiver’s 4th report, are shown in an invoice of $1,882,298.65 plus HST for a total of $2,126,997.47 from Construction to 234 described as Various Property Management Projects and in a second invoice of the same date from Construction to 234 of $1,882,298.65 with HST described as “To transfer billings” from sundry receivables for a total of $2,126,997.47.

These invoices were put to Mr. David Gottardo on an examination under s.163(i) of the BIA. He could not recall them. If HST was properly added to the amount owing on the invoice, the amount owing could not be for a loan.

In any event, 234 admits receiving this money. Mr. Toncic stated in his affidavit that the $608,000 was repaid to 230 during the first week of February, 2016. He said in his affidavit sworn April 20, 2016 that he was still trying to get some confirmation of the payment. He has not to date provided any cheque, bank transfer record or any other record of such payment. It is his company and he would have ready access to its banking records. I do not accept his bald assertion that the loan was repaid. I draw an inference from his lack of any record of 234 showing payment to 230 that in fact no payment was made to 230.

In a written interrogatory agreed to be held rather than a viva voce cross-examination of Mr. David Gottardo on his affidavit, Mr. Gottardo, an officer of 230, was asked if 230 received $608,000 from 234 in the first week of February, 2016 or at any time. The response from counsel for Mr. Gottardo was that Mr. Gottardo confirms that 230 received $608,000 from 234. A further question by counsel for the receiver was that Mr. Gottardo produce the cheque, wire transfer and/or bank statements evidencing receipt of the money. There has been no response.

I do not accept this statement provided by counsel to Mr. Gottardo that he confirms 230’s receipt of the money from 234. I draw an inference from the lack of any supporting documentation that 230 did not receive $608,000 from 234.

I find $608,393.65 is owed by 234 to Construction and a judgment for that amount plus pre-judgment and post-judgment interest is to go.

(b) $17,000

There is evidence of a wire transfer of $17,000 to a law firm that did work for 234 from Construction. It does not indicate that the funds were to be used by the law firm on behalf of 234. There is evidence that the law firm also did work for 230. Mr. Toncic in his affidavit said the person in the law firm who could tell him if the transfer was for some advance for which 234 is liable was away but he expected to get an answer before the matter went to court. Five months later the lawyer took the position that he was not at liberty to disclose information because he needed written instructions from all of his clients, not just 234. That is certainly a very questionable position to take.

However, on this record, I cannot find that $17,000 was advanced to the law firm for the benefit of 234. This claim is directed to be dealt with by way of a trial of the issue.

67

(c) $869,393

The audited financial statements of Construction in the year ended November 30, 2013 show $869,393.65 owing to Construction by 234. This amount is contained in the journal entry of the books of Construction. It was certified by David Gottardo to the auditor’s as being an outstanding loan receivable from 234. Bruno Gottardo, an officer and director of Construction signed the audited statements on behalf of Construction to confirm their validity.

Mr. Toncic stated in his affidavit that with respect to the $869,393.65 supposedly advanced to 234 he has no knowledge of how or why the sum came to be created, recorded or in any way referenced in the books and records of Construction. This is a curious statement. Mr. Toncic does not state that the money was not advanced to 234. Nor has he produced financial statements or bank records that would list or not list receipt of this money.

234 has an obligation to put its best evidence on an application. A vague reference by Mr. Toncic of having no knowledge of how amounts in the records of Gottardo is not sufficient evidence to require a trial of an issue. It is no statement that the money was not advanced to 234. Even if it could be said that the statement means he does not recall receiving the money, which it really does not, without more, such as the company’s records, it is of no cogent value. I draw an inference from the lack of any cogent evidence from 234 that it cannot deny the receipt of the money or an obligation to repay it. I accept the audited statement of Construction certified by both David and Bruno Gottardo that the money was and is a receivable payable by 234 to Construction.

Judgment is to go in the amount of $869,393 plus pre and post-judgment interest against 234 in favour of Construction.

(d) The balance of the invoices of $2,126,997

There is simply not enough evidence for the balance of the invoices after deducting the claims in (a), (b) and (c) to hold 234 liable. A trial of an issue is directed for this surplus amount.

Claims against Kleinridge Investments Inc.

It is not disputed that Kleinridge owes $2,756,346.60 to Construction and $128,238.14 to Site Servicing.

Kleinridge takes the position, however, that it is entitled to set off rents said to be owing by Construction to Kleinridge.

The allegation is raised in the affidavit of David Gottardo, also an officer of Kleinridge. He says a lease agreement of Construction for premises owned by 1043280 (“104”) Ontario Limited dated December 1, 2009 required payments for occupation rent to 104. However, he says that inasmuch as 104 gave a mortgage to Kleinridge, 104 directed Construction on December 1, 2009 to make the occupation rent payments to Kleinridge. He said no rent was paid by Construction from December 1, 2009 to July 31, 2015 for a total of $1,147,500 plus HST of $149,175.

68

He also said in his affidavit that prior to December 1, 2009, rent had not been paid by Construction for 13 years when the agreed rent was $11,250 per month plus HST, for a total of $1,755,000 plus HST of $228,150. Further, there is no suggestion that this rent was directed to be paid by 104 to Kleinridge, yet Kleinridge claims it should be entitled to set it off as well against Construction.

The direction of December 1, 2009 to Construction was signed by David Gottardo on behalf of 104. It was also signed by Construction to acknowledge its receipt. Mr. Gottardo in his affidavit did not state that the direction was given to Construction. His explanation that the direction was made because 104 gave a mortgage to Kleinridge is clearly not true. The parcel register for the 104 properties from the time 104 acquired the property on September 9, 1993 shows that there has never been a mortgage to Kleinridge.

The evidence is clear that Construction owes nothing. It is contained in the supplemental report of the receiver to the 4th report of the receiver. The audited statements of Construction for the year ended November 31, 2013 do not disclose any liabilities to 104 or to Kleinridge. David Gottardo confirmed in a representation letter to the auditors that all related transactions had been disclosed and accounted for in the audited statements. It is now not open for him to assert otherwise in his affidavit. Apart from the 2013 audited statements, the trial balance and unaudited financial statements of Construction included in the auditor’s working paper files for the November 30, 2014 year end do not show $3.2 million is owed to 104. They do show that Kleinridge was indebted to Construction.

If any money was owed for rent, it would be owed to 104 for all rent owed before the direction of December 31, 2009, and perhaps after as well if the direction was not binding on Construction, as appears to be the case. If the direction was binding, the failure to pay it would be breach of a rental agreement between Construction and 104. There is no evidence of an agreement by Construction to pay rent to Kleinridge.

In the circumstances, there would be no legal set-off. Kleinridge in its factum claims equitable set-off.

The test for equitable set-off is discussed fully in Telford v. Holt, [1987] 2 S.C.R. 193. In my view, whether the rent was owed to 104 or to Kleinridge, assuming it was owed, equitable set-off is not available to Kleinridge. The claim for rent did not arise out of the same transaction as the outstanding loans and it is not closely connected to it. It would not be manifestly unjust to enforce payment of the loans without taking into account the cross-claim for rent of the premises from 104. In the language of Brown J. (as he then was) in CIBC World Markets v. Burgess [2009] O.J. No. 1724, the claim for the loans was not brought about, or contributed to by, or otherwise closely bound up with the rights relied on for payment of occupation rent.

In the circumstances, there is no basis to set off any alleged rent owing by Construction to 104 or to Kleinridge.

There will be judgment of $2,756,346.80 against Kleinridge in favour of construction and $128,238.14 against Kleinridge in favour of Site Servicing, both with pre and post-judgment interest.

69

Claims against Bruno Gottardo and David Gottardo

Construction claims $110,242.52 against Bruno Gottardo. Site Servicing claims $212,400 against David Gottardo.

The Gottardos do not deny that money is owing. They say, however, that they were terminated by the receiver and that they can set-off claims for damages for wrongful dismissal equal to salary and benefits for one and a half years.

In his affidavit David Gottardo said that what he owes Site Servicing is not for loans but “a deferral of salary which were booked on the shareholder loan account because “I took out the money without booking it to wages”. He says his father told him the same thing about the money owed to Construction by him. This makes no sense. If they took the money out “as a deferral of salary”, i.e. they did not draw the salary they were entitled to, they would not owe money to the company.

In any event, it is conceded that David Gottardo signed a representation letter to the auditor and that Bruno Gottardo signed the audited statements that listed the account outstanding as loans. They cannot now try to change the character of the loans in order to try to shoe horn into an equitable set-off argument.

Any claim for damages for wrongful dismissal is not so clearly connected to the amounts payable by David and Bruno Gottardo to give rise to an equitable set-off. Moreover, because a claim for wrongful dismissal is a claim for unliquidated damages against the Receiver, it is not a debt permitting legal set-off and the Gottardos in their factum do not seek legal set-off.

There will therefore be judgment against David Gottardo in the amount of $212,400 plus pre and post-judgment interest in favour of Site Servicing and against Bruno Gottardo in the amount of $110,242.52 plus pre and post-judgment interest in favour of Construction.

A further claim is made by Construction against David Gottardo on a loan of $149,791.43. The same defence of set-off for their obligation is made by David as for the Site Servicing obligation of $212,400. For the same reasons, a judgment is to go in favour of Construction against David Gottardo in the amount of $149,791.43 plus pre and post-judgment interest.

The receiver is entitled to its costs against the defendants who are ordered to make payments under the judgments. If not agreed, a brief written argument may be made by the receiver within 10 days along with a costs outline and brief reply submissions may be made within a further 10 days.

Newbould J.

70

Appendix “C”

71

Appendix “D”

75

Appendix “E”

97

Appendix “F”

118

Doc#4243856v1


ONTARIO


(COMMERCIAL LIST)

B E T W E E N:


Applicant

- and -

B. GOTTARDO CONSTRUCTION LTD. and B. GOTTARDO SITE

SERVICING LIMITED

Respondents




UNOFFICIAL TRANSCRIPTION OF THE ENDORSEMENT OF JUSTICE

CONWAY

October 6, 2017

The Receiver (BDO) seeks approval of Minutes of Settlement with regards to its application to

set aside mortgages held by 2283074 Ontario Inc. The MOS will result in the Receiver receiving

up to $2 million from the sale of the properties being sold under Power of Sale by BDC, the 1st

mortgagee. 228 obviously consents to the Receiver’s motion.

Counsel for the Gottardos sought an adjournment to the approval motion. He argues that the

reordering of priorities under the MOS prejudices his client. He also argues that there is no

reason for the 770 Gana property to be sold.

The Receiver has argued that approval of the MOS will be without prejudice to the Gottardos,

arguing their entitlement to any or all of the $2 million. The money will be held by the Receiver

in its trust account and not paid out unless and until court approval is obtained on a distribution

motion.

The Receiver’s materials and submissions satisfy me that the MOS should be approved and meet

the Soundair principals. This course of action provides costs effective resolution to a costly and

complicated Application against 228. The recovery is 68 – 70% of the value of BDO’s

judgement against the companies in full.

124

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Doc#4243856v1

I am approving the MOS. However, this is without prejudice to the Gottardos’ right to make any

argument on a distribution motion (on not less than 30 days’ notice to them) with regard to their

entitlement to any or all of the $2 million held by the Receiver. Further, in approving the MOS

this court makes no pronouncement on whether the sale of 770 Gana by BDC is proper. The

court is only approving the resolution of the dispute as between 228 and the Receiver. Order to

go as signed by me.

Conway J.

125

Appendix “G”

126

COURT OF APPEAL FOR ONTARIO

THE HONOURABLE CHIEF JUSTICE OF ONTARIO )THE HONOURABLE JUSTICE HOURIGAN )THE HONOURABLE JUSTICE MILLER )

Court File No. C64459M48506M48562

^THFRIDAY, THE 191n DAY

OF JANUARY, 2018

TWEEN:

THE TORONTO DOMINION BANK

-and-

B. GOTTARDO CONSTRUCTION LTD. ANDB. GOTTARDO SITE SERVICING LIMITED

Applicant

Respondents

>PLICATION UNDER subsection 243(1) of the Bankruptcy and Insolvency Act., R.S.C.1985, c. B-3, as amended, and section 101 of the Courts of Justice Act, R.S.O. 1990, c. C. 43,asamended

ORDER

THESE MOTIONS, made by 1968328 Ontario Inc., formerly 2283074 Ontario Inc., for

an order quashing the appeal of Kleinridge Investments Inc., David Gottardo, Bruno Gottardo,

615146 Ontario Limited and 1043280 Ontario Limited (collectively, the "Appellants") from the

Order of Justice Conway dated October 6, 2017 and by BDO Canada Limited ("BDO") in Its

capacity as the Court-appointed receiver and trustee in bankruptcy of B. Gottardo Construction

Limited and B. Gottardo Site Servicing Limited, for an order declaring that the Appellants have

no automatic right of appeal from the said Order of Justice Conway, were both heard on this day

at Osgoode Hall, 130 Queen St. West, Toronto, Ontario.

127

ON READING the motion records, facta and authorities of the moving parties and the

motion record, facta and authorities of the Appellants on both motions, and on hearing from

counsel for each of the moving parties and for the Appellants,

1. THIS COURT ORDERS that the motions are granted and the appeal is hereby

quashed.

2. THIS COURT ORDERS that the costs of the moving parties, 1968328 Ontario Inc.

and BDO are fixed at $7,500 each, inclusive of taxes and disbursements payable by

the Appellants.

THIS ORDER BEARS INTEREST at the rate of 3.0% per year commencing on January 19,

2018.

.0.^ €^'^\J^JÛQ^Q

ENTERED W/INSORIPTATORONTO O^.^-f /i^S'ST'^ÔN/BOOKNO; _.___._ (:?'/^<Q)d£^ tr^ô^^trLE/'DANS LE REGISTRE NO.-.

MAY 17 Z018

PER/PAR: ^

128

THE TORONTO DOMINION BANKApplicant

-and- B. GOTTARDO CONSTRUCTION LTD. ET AL.Respondents

Court FUe No. C64459, M48506, M48562

COURT OF APPEAL FOR ONTARIO

(PROCEEDINGS COMMENCED ATTORONTO)

ORDER

RVBIN & CHRISTIE LLP219 Finch Avenue West, 2nd FloorToronto, Ontario M2R 1M2Douglas Christie (LSUC No. 226560)Tel: (416)361-0900Fax: (416)361-3459Email: [email protected] for 1968328 Ontario Inc., formerly 2283074 Ontario Inc.Court File No. M48606

CHAITONS LLP5000 Yonge Street, 10th FloorToronto, ON M2N 7E9Harvey Chaiton (LSUC No. 21952F)Tel: (416)218-1129Fax: (416)218-1849Email: [email protected] for BDO Canada Limited, in its capacity as the Court-appointed receiver and trustee in bankruptcy of B. GottardoConstruction Limited and B. Gottardo Site Semcing Limited,Court FUe No. M48562

129

Appendix “H”

130

Appendix “I”

134

U:\Cathy\Business Development Bank of Canada\Gottardo Connection\Trust Account Analysis.doc

IN ACCOUNT WITH

LIPMAN, ZENER & WAXMAN LLP


1220 Eglinton Avenue West

Toronto, Ontario M6C 2E3

Tel: (416) 789-0652 H.S.T. #R119437119

Our File No. 64855

February 13, 2018

Re: Business Development Bank of Canada and 1043280 Ontario Limited

Sale under Power of Sale – 12 Ashbridge Circle, Vaughan

Distribution of Sale Proceeds

TRUST ACCOUNT ANALYSIS:

RECEIVED from John LoFaso re: net closing proceeds

$6,591,247.67

PAID to Business Development Bank of Canada re: settlement $3,848,616.19

RECEIVED from Vanguard Realty re: refund of real estate

commission

$95,190.00

PAID to BDO Canada Limited, Receiver of B. Gottardo

Construction Ltd. and B. Gottardo Site Servicing Ltd. $2,000,000.00

PAID to Harris + Harris LLP in trust for 1968328 Ontario Inc. $667,821.48

HOLDBACK held in Lipman, Zener & Waxman LLP Trust

Account re: potential HST owing $100,000.00


Account re: post-closing fees and disbursements $20,000.00


Account re: post-closing adjustments $50,000.00

$6,686,437.67 $6,686,437.67

LIPMAN, ZENER, & WAXMAN LLP

“Jason D. Spetter”

Per: Jason D. Spetter

JDS/nm

E. & O.E.

135

Appendix “J”

136

HARRIS + HARRIS LIPBARRISTERS AND SOLICITORS

BY EMAIL

May 17, 2018

Harvey ChaitonChaitons LLPBanisters and Solicitors5000 Yonge Street, 10th FloorToronto, OntarioM2N 7E9

Fred TayarFred Tayar & Associates Professional CorporationBarristers and Solicitors65 Queen St. West, Suite 1200Toronto, OntarioM5H 2M5

Fred A. PlattBarrister & Solicitor65 Queen Street West, Suite 1200Toronto, OntarioM5H 2M5

Dear Sirs:

Re: 1968328 Ontario Inc. (formerly 2283074 Ontario Inc.) under Power of Sale Sale of770 Gana Court, Mississauga, OntarioOur File No.: 14498

We wish to confirm that the sale of 770 Gana Court, Mississauga, Ontario by 1968328Ontario Inc. ("196") has closed. Attached is a copy of the Statement of Adjustments in respect ofthe transaction.

From the proceeds of sale and the balance of the deposit (less commissions), the amountof $3,093,222.31 has been paid to 196 to satisfy its mortgage in full and our client is proposingthat the following holdbacks be maintained:

295 The West Mali, 6° Floor, Toronto, Ontario M9C 414 T. 416.798.2722 f. 416.798.2720

137

(a) $50,000.00 for any outstanding HST liabilities of 615146 Ontario Limited("615"); and

(b) $10,000.00 for post-closing legal fees and disbursements.

Taking into account the aforementioned holdbacks, the balance of $216,870.75 would beavailable for distribution to subsequent encumbrancers and, if applicable, the mortgagor. Theonly subsequent encumbrancer of 615 that was known to 196 on the closing date was BDOCanada Limited ("BDO"), as a judgment creditor with writs of execution in the amount of$108,612.65 and $14,920.64 plus interest respectively. As such, any residual proceeds aftersatisfaction of the debt owing to BDO would be payable to 615. At this time I would ask thatMr. Chaiton provide to the undersigned and the addressees of this letter a statement from BDOoutlining the full amount payable to it by 615 so that it can be reviewed by 615 and Mr.Tayar/Mr. Platt can authorize on 615's behalf the payment of the stated amount from the balancecurrently held in trust by our firm to BDO.

Upon receipt by the undersigned of written confirmation from Mr. Chaiton and Mr.Tayar/Mr. Platt, on behalf of their respective clients, as to their client's concurrence with theholdbacks and the release of the amount payable to BDO, the amount to BDO and the residualproceeds will be released to 615 respectively.

I would also ask that Mr. Tayar/Mr. Platt provide a current statement from CanadaRevenue Agency confirming that all harmonized sales tax ("HST") owing to date by 615 hasbeen paid in full so that the HST holdback can also be released.

Lastly, our client will require a release and indemnity to be signed by each of BDO and615 as it relates to the distribution of proceeds prior to the release of funds; a draft of same willsubsequently be provided for review and execution.

Yours very truly,

HARRIS + HARRIS LLP

AAL:Encls.

cc: Doug Christie, Rubin & Christie LLP, by email

GMVP5111-1 14001-15000\ 14498,,Correspondence \Letter to II. Chaiton, F. Tayar and F. Platt.May 17, 2018.doc

138

STATEMENT OF ADJUSTMENTS

Vendor: 1968328 Ontario Inc.

Purchaser: Americair Corporation

Property: 770 Gana Court, Mississauga, Ontario

Adjusted as of: May 8, 2018

SALE PRICE $3,500,000.00

DEPOSITS

First Deposit 100,000.00

Second Deposit 100,000.00

Credit Purchaser: $200,000.00

REALTY TAXES

2018 interim taxes: 22,945.00

Estimated Increase for 2018: 5.0%

Estimated 2018 taxes: 48,184.50

Vendor has paid: 22,945.00

Vendor's share for 127 days: 16,765.57

Credit Vendor: 6,179.43

TENANCY

Monthly rent: 9,165.29

HST calculated at 13.00%: 1,191.49

Purchaser to collect for rental period

commencing May 1, 2018

Vendor's share for 7 days: 2,338.63

Credit Vendor: 2,338.63

BALANCE DUE ON CLOSING

payable to

HARRIS + HARRIS LLP, in trust

or as further directed $3,308,518.06

$3,508,518.06 $3,508,518.06

E. & O. E.

139

Appendix “K”

140

Appendix “L”

159

Appendix “M”

166

Appendix “N”

168

RECEIPTS:Sale of machinery, equipment and vehicles 3,522,479.59$ Sale of Joint Venture 3,000,000.00 Collection of judgements against related parties 2,000,000.00 Collection of judgement against principal 400,000.00 HST Refunds 219,935.43 Advance from Secured Creditors 100,000.00 Accounts Receivable 483,027.07 Insurance Refund 8,183.68 Income Tax Refund 182,372.66 Interest 19,848.74 Miscellaneous Other Receipts 1,876.44 HST Collected 14,209.77 Advance from trustee 70.00 Cash 885.54 Other Assets 700.00

Total Receipts 9,953,588.92$

DISBURSEMENTS:Payments to Secured Creditors 3,900,000.00$ Professional Fees 1,476,055.38 HST Paid on Professional Fees 190,701.57 Deemed Trust Claim 219,204.60 Repayment of Advance from Secured Creditors 100,000.00 Consultants and Subcontractors 95,547.13 Insurance 59,663.83 Occupation Rent 36,401.41 Equipment Repairs and Haulage 31,900.00 Storage 31,511.19 HST Paid on Disbursements 21,251.19 Transportation Costs 17,776.50 GST/HST remitted 7,086.66 Utilities 13,297.29 Appraisal Fee 10,775.00 Repairs and Maintenance 5,616.37 Wages 5,460.00 Advertising 3,949.12 Interest on Advance from Secured Creditors 2,583.03 Change of Locks 1,125.00 Telephone 598.39 Other Misc Disbursements 498.32 Stock Taking and Possession 315.00 Search Fees 425.00 Bank Charges 224.46 Travel 137.23 Filing Fees 140.00

Total Disbursements 6,232,243.67$

NET RECEIPTS OVER DISBURSEMENTS 3,721,345.25$

B. GOTTARDO CONSTRUCTION LTD. & B. GOTTARDO SITE SERVICING LIMITEDRECEIVER'S STATEMENT OF RECEIPTS AND DISBURSEMENTS

for the period August 10, 2015 to July 18, 2018

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Doc#4244256v1

THE TORONTO-DOMINION BANK - and - B. GOTTARDO CONSTRUCTION LTD. et al

Applicant Respondents

Court File No. CV15-11054-00CL

ONTARIO


(COMMERCIAL LIST)

Proceedings commenced at Toronto

MOTION RECORD

(Distribution of the Harcap Settlement

returnable August 22, 2018)

CHAITONS LLP


Toronto, ON M2N 7E9

Harvey Chaiton (LSUC #21592F)

Tel: (416) 218-1129

Fax: (416) 218-1849



Tel: (416) 218-1161

Fax: (416) 218-1844






ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) B … · 2019-12-28 · doc#4244256v1 court...

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