12870428 Canada: Popeyes franchisees, $357,000 to RBC and the accountant's files

Four numbered companies held four Popeyes Louisiana Kitchen franchises: two in Whitby, on Dundas Street West and Dundas Street East, one at 22 Stevenson Road South in Oshawa, and 12870428 Canada Inc.'s at 75 Strathy Road in Cobourg. Before KPMG Inc. was appointed receiver in November 2025, the landlords of both Whitby stores had terminated the leases and the Cobourg company had shut down operations. At 965 Dundas West the receiver found a bailiff's notice dated September 13, 2025, citing arrears of rent and other breaches of the lease; 1525 Dundas East was closed, with a "For Lease" sign on the window and a lockbox on the door, per the First Report of the Receiver, Dec. 22, 2025, paras. 13–23. The Oshawa store still had about eight employees, the receiver understood. It closed the store shortly after its appointment, because "the lack of cooperation from the Debtors' management and the inability to obtain sufficient financial and operational information" left it without the details it needed to keep operating, per the First Report, paras. 30, 32.

On July 8, 2026, Justice F.L. Myers of the Ontario Superior Court of Justice (Commercial List) approved an interim distribution of $357,000 to Royal Bank of Canada, which the receiver estimated had been owed $1,579,376.13 at its appointment, and ordered KPMG discharged once the approved payments are made and it files its certificate, per the Approval, Distribution and Discharge Order, July 8, 2026, paras. 7–9 and the First Report, para. 34. Eight days earlier he had held back the discharge to learn more about the receiver's efforts to get information from the Cobourg company's former accountant.

A forbearance, and a payout sent back

RBC lent to the Whitby and Oshawa companies under credit agreements dated October 2023 and to 12870428 Canada Inc. under agreements from 2021, took general security agreements and chattel mortgages from each, and held guarantees of certain of the debts from two directors, Varun Kakkar and Anza Chaman. It was the only registered secured creditor, according to the affidavit of Ryan Wood, a senior manager in RBC's Special Loans and Advisory Services, per the Affidavit of Ryan Wood, Aug. 26, 2025, paras. 1, 4–8.

On October 25, 2024, RBC demanded about $1.3 million from the three Whitby and Oshawa companies. In a letter received November 4, 2024, their then-counsel said the franchisor had preapproved buyers for the locations and asked for 90 days, saying the sales "will result in enough money to payout RBC entirely," per the Wood Affidavit, paras. 10–12. A forbearance agreement of November 25, 2024 ran to February 10, 2025. In it the three companies consented to a receiver, and the two guarantors to judgment, if the bank was not repaid by then. The monthly written evidence it required that the companies' priority obligations to the Canada Revenue Agency were current never came, and the period expired with nothing repaid, per the Wood Affidavit, paras. 13–17.

The Cobourg company owed about $300,000 when RBC made demand on April 22, 2025. In May its then-counsel asked for a payout letter, which called for a statutory declaration that "no balance is owing by the Debtor to CRA as of the date hereof for employee source deductions or HST," with evidence from the CRA; counsel delivered the signed declaration and the funds without the CRA exhibit, per the Wood Affidavit, paras. 21–23. On May 9 he wrote that "There was some miscommunication between the partners concerning the HST owings" and "there are some owings to Canada Revenue Agency." The client would not release the funds held in escrow, and they were returned on May 12, 2025, per the Wood Affidavit, paras. 23–24.

"A desperation that positively requires the removal of management"

The application reached Justice Myers on November 4, 2025. Three companies had consented to a receiver; 12870428 Canada Inc. had not. His endorsement recounts the declaration: a director of 128 had sworn there were no priority payables outstanding to the CRA, counsel for 128 later said it was incorrect, and "To this day 128 has not told the bank the amount of its priority obligations to CRA," per the Endorsement of Justice Myers, Nov. 4, 2025, paras. 2–4.

That day the respondents, in the judge's words, "purported to deliver a Notice of Appearance and a supporting affidavit today," disclosing sales of locations by two of them under agreements signed September 15, 2025, to close December 15. Their counsel, Samir Chhina of Chhina Law, asked for a brief adjournment; the bank, the judge recorded, said "this is just another stalling tactic by the respondents," per the Nov. 4 Endorsement, paras. 7–8. Of 128 he wrote, "Its CRA machinations put all creditors at risk." Of the deals, none of them a sale by 128, he wrote, "The last second disclosure of the supposed deals bespeaks a desperation that positively requires the removal of management in favour of a court-appointed officer who will be responsible to all interested parties," per the Nov. 4 Endorsement, paras. 11–12. He signed the order appointing KPMG under s. 243(1) of the Bankruptcy and Insolvency Act, per the Nov. 4 Endorsement, para. 13 and the Appointment Order, Nov. 4, 2025, para. 2.

Two stores sold

The person the receiver understood had managed the business emailed it on November 13, 2025. The receiver sent an information request list and, "Despite multiple follow-ups," had received nothing from that person, the companies or their principals by December 22, per the First Report, paras. 10–11. Its creditor list estimated RBC's claim at $1,579,376.13 and unsecured claims at $420,584.03, among them the franchisor, Popeyes Louisiana Kitchen Inc., at $350,646.74; the receiver understood that most of the unsecured payables "relate to royalties and advertising fees owed to Popeyes," per the First Report, paras. 34, 44.

Oshawa went on an expedited process. "Popeyes, as franchisor, would need to approve the prospective purchaser as a franchisee for the location," the receiver wrote, so it focused primarily on existing Popeyes franchisees, and the franchisor had "expressed its strong desire to have this location restart operations as soon as possible." Of four parties approached, mostly existing Popeyes owners, one made a formal offer: 1001436654 Ontario Inc., on or about November 11, 2025, for substantially all of 705's assets, per the First Report, paras. 47–49. Justice J. Dietrich approved the sale of equipment and inventory on January 7, 2026. "I am satisfied that the Soundair principles have been met," she wrote, citing the single offer, the receiver's view that it exceeded liquidation value, and RBC's support, per the Endorsement of Justice Dietrich, Jan. 7, 2026, paras. 2, 12. The unredacted agreement was sealed until the transaction was completed or the court ordered otherwise, per the Ancillary and Sealing Order, Jan. 7, 2026, para. 3. The deal closed January 23, 2026, and the receiver's interim statement records $470,000 in sale proceeds for 705's property, per the Second Report of the Receiver, June 18, 2026, paras. 15–16.

In Cobourg the landlord, Calloway REIT (Cobourg) Inc., had been talking to an interested party about an assignment of the lease and a purchase of the assets. Through the broker, the receiver closed a bill of sale and a lease assignment and amending agreement on December 1, 2025, for net proceeds of $40,000, above the estimated liquidation value of the equipment and fixtures. It sought no court approval because, it said, the proceeds did not exceed the thresholds in para. 3(k) of the appointment order, which permits sales of up to $50,000 without it, per the First Report, paras. 23–27 and the Appointment Order, para. 3(k). The interim statement records no sale proceeds from the two Whitby companies.

The Cobourg tax account

A management company, 1000272540 Ontario Inc., told the receiver it had employed the Whitby and Oshawa staff and filed their payroll and GST/HST under its own number, and the receiver identified no GST/HST or source deduction obligations for those three, per the Second Report, paras. 36–37. 12870428 Canada Inc. had GST/HST returns outstanding from January 1, 2023 to the appointment, and its payroll account showed arrears of approximately $202,822.04 for 2022 through 2025, $191,961.16 of it assessed unremitted source deductions. The 2025 figures were the CRA's own estimates, because no T4 information return had been filed for that year, per the Second Report, paras. 29–33. The receiver said any CRA priority claims against 428 would be limited to its net recoveries after the fees and other costs of realization incurred in respect of 428. From the $40,000 it paid $12,591 attributed to 428 and set aside about $27,409 for the CRA, per the Second Report, paras. 34–35.

Of $414,289.11 available at June 12, 2026, counting $398,063.86 in cash, a reserve of $57,289.11, including the amount set aside for the CRA and $24,854.70 for fees to completion, left $357,000 for RBC. The cash "will not be sufficient to repay RBC's secured indebtedness in full," the receiver wrote. KPMG's fees and expenses to April 30, 2026 were $90,323.14, and Gowling WLG's, as its counsel, to May 12 were $18,301.38, both before HST, per the Second Report, paras. 20, 38–40, 47–48. The report added that Saturday Accounting Forum Inc., 428's authorized representative in the CRA's records, "has not responded to the Receiver's requests for information," per the Second Report, paras. 27–28.

"This is surprising"

On June 30, 2026, Justice Myers wrote: "This is surprising. Perhaps there is a communication problem I usually expect that professional accounting firms don't want to be seen to be ignoring a court order," per the June 30 Endorsement, paras. 1–2, Supplemental Report, July 7, 2026, App. A. He noted the receiver's report of reasonable efforts, but "I do not have any details of those reasonable efforts. So, I do not know if the Receiver's right to obtain the information it seeks was brought home to the accounting firm." He added: "I am not in a position therefore to draw any conclusions or make any finding of wrongdoing yet," per the June 30 Endorsement, paras. 5–7, Supplemental Report, App. A.

The records bore on the money: "Although gross realizations from 12870428 Canada Inc. are limited, there could be issues akin to the doctrine of marshalling as between the CRA and the Applicant bank if the CRA chooses to become engaged," he wrote. He was not yet in a position to grant the discharge, he had "no other concerns" with the relief sought, and he adjourned to July 8, directing Saturday Accounting "to send its lawyer to attend the hearing of this motion on July 8, 2026 if it does not provide the Receiver with everything it seeks by then," per the June 30 Endorsement, paras. 8–13, Supplemental Report, App. A.

A week of letters

The receiver's supplemental report of July 7 set out its efforts: calls on or around March 25 and March 31, 2026, and contacts on or around April 9 and on April 23, each answered with word that the person responsible for 428's tax filings would get in touch. A written request followed on July 2, due July 6, and on July 3 Gowling sent the endorsement and served it on the service list, including the CRA, per the Supplemental Report, paras. 18–22.

The firm replied on July 3. Its office had "a scheduled annual break after tax season from July 1 to July 31," it wrote, and "Prior to receiving your correspondence, we had not been advised by RBC, Gowling, or KPMG regarding this matter or the urgency of the requested information." It was treating the request with priority, and enclosed an invoice for compiling the records, per the Supplemental Report, App. E. The receiver declined to pay it: the appointment order required the records to be produced, and it had not retained the firm to perform professional services, per the Supplemental Report, para. 23.

The July 6 letter described a narrow engagement: "Our office's involvement was limited to the preparation and filing of the corporation's corporate income tax return for the fiscal year ended March 31, 2023, as well as the preparation and filing of T4 slips for the corporation's employees for the applicable period handled by our office," per the Saturday Accounting letter, July 6, 2026, Supplemental Report, App. F. The relationship had ended on March 31, 2023, the firm wrote, and "To the best of our knowledge, no GST/HST returns for 12870428 Canada Inc. were prepared by Saturday Accounting"; it enclosed the records it held, per the Supplemental Report, App. F.

The receiver identified nothing in the response that would enable it to prepare the outstanding GST/HST returns or identify any potential refunds, rebates or other recoveries, per the Supplemental Report, para. 28. On marshalling, it said 428's recoveries had gone into a separate trust account and were not commingled with any other company's, and that the consolidated statement in the second report "was intended solely to simplify reporting." It did not believe the doctrine akin to marshalling was engaged, or "that any rights of CRA, RBC or any other stakeholder have been altered or prejudiced," per the Supplemental Report, paras. 30–31. Pritesh Patel, a senior vice-president, and Manoj Oommen, a manager, signed for KPMG.

July 8

Rachel Moses of Gowling appeared for the receiver, and the court heard a representative of Saturday Accounting; no one else appeared, per the Discharge Order, July 8, 2026, recitals. Justice Myers found the fees reasonable and the rates "within market norms." The CRA, he noted, "has been served with this motion and does not appear to object," and the former accounting firm "has delivered belatedly information to the Receiver as sought," per the Endorsement of Justice Myers, July 8, 2026, paras. 2–3. Of the week's delay he wrote: "While I recognize that added costs are never desirable, the Receiver and the Court both have to be satisfied that the process is run fairly and transparently for the Applicant and other interested parties. With Ms. Moses' input, the delay was only a week and the steps required of the Receiver and its counsel were quite limited," per the July 8 Endorsement, para. 5.

The order approves the second report, the interim statement and the fees, and approves and authorizes payment of $357,000.00 to RBC, a reserve for fee accruals, the CRA's priority claims and variances, and a final distribution to RBC, if any, "provided the aggregate distributions to RBC do not exceed the indebtedness owed to RBC by the Debtors." KPMG is discharged once those amounts are paid and it certifies that the remaining matters are done, and on filing the certificate it is released, "save and except for any gross negligence or willful misconduct on the Receiver's part as determined by this Court," per the Discharge Order, paras. 3–9. Those remaining matters include filing outstanding returns under the Excise Tax Act, paying the Cobourg realizations to the CRA on account of the pre-filing source deductions, and a final report under s. 246(3) of the BIA, per the Second Report, para. 52.