CBJ Developments: a credit bid, then two lawsuits in the company's name

In 2021 three Ontario companies, CBJ Developments Inc., CBJ – Clearview Garden Estates Inc. and CBJ – Bridle Park II Inc., bought three large properties in Stayner, Ontario, "with the goal of developing the land for residential use and sale," as their own notice of application put it two years later. To help with the purchase, 1180554 Ontario Limited, which the record calls 118, lent $16,000,000 as representative of a syndicate of lenders to CBJ Developments and an Alberta numbered company, secured by, among other things, first mortgages of $5,000,000, $5,000,000 and $6,000,000 on the three parcels, per the Notice of Application, Nov. 15, 2023, para. 2(a), (d), (f). The loan carried interest at 13%, per the Endorsement of Justice Steele, Dec. 19, 2023, para. 4, and a participation agreement signed September 28, 2021 promised the lender $10,000 for every single detached, semi-detached or townhouse unit and $5,000 for every apartment, condo or other high-density unit, on receipt of a deposit for each unit's sale, per the Notice of Application, Nov. 15, 2023, para. 2(g)–(h).

Two of the parcels share an address, 7535 Highway 26 in Nottawasaga, and measure 97.28 and 78.6 acres; the third is at 6273 27/28 Sideroad, Stayner, per the First Report, May 22, 2024, para. 2. Justice Steele described all three as vacant land that had "not yet been zoned for residential development," per the Endorsement of Justice Steele, Dec. 19, 2023, paras. 6–7. Behind 118 sat second mortgages of $12,969,738, $9,999,762 and $13,001,142, granted in 2021 and later assigned to First Global Financial Corp., per the First Report, May 22, 2024, para. 26.

The borrowers missed the August 2023 interest payment. On September 7, 2023, 118 sent a notice of intention to enforce security under s. 244 of the Bankruptcy and Insolvency Act and, the same day, notices of sale under the Mortgages Act, demanding $27,981,804.70, of which $11,685,000 was the participation payment. In a separate application that November, the companies asked for a declaration that the s. 244 notice was void, and said the participation claim "has frustrated the efforts of the Applicants to sell or refinance the Stayner Properties," per the Notice of Application, Nov. 15, 2023, paras. 1(b), 2(i)–(k), 2(n).

Five weeks to find a buyer

On December 19, 2023, the companies asked Justice Steele for six months to finish a sale they had started that fall. The land had been listed with Royal LePage Signature Realty for more than two months and marketed to about 6,000 recipients. "A receiver is not needed to manage the Properties, deal with employees, or collect rents, etc. A receiver would only be selling the Properties," the endorsement says. The application was adjourned to January 26, 2024, when the companies were to report whether there was a buyer, per the Endorsement of Justice Steele, Dec. 19, 2023, paras. 2, 22–24, 26.

"Since December 19, 2023, there have been no letters of intent and no offers," Justice Penny wrote on the return date. The listing price had just been cut from $70 million to $60 million, below the debt now claimed by 118 and by the second and third mortgagees, whom the endorsement calls the Niagara lenders. Those lenders had served default notices demanding more than $55 million, and the defaults had raised their interest to 24% a year, compounded monthly. The companies and the Niagara lenders wanted more time. "In my view, this latest adjournment request is based on nothing more than a wing and a prayer and must be denied," Justice Penny wrote. RSM Canada Limited, whose name an order of March 1, 2024 replaced with TDB Restructuring Limited, was appointed receiver, per the Endorsement of Justice Penny, Jan. 26, 2024, paras. 3–5, 7, 10, under s. 243(1) of the BIA and s. 101 of the Courts of Justice Act, per the Appointment Order, Jan. 26, 2024, para. 2 and the First Report, May 22, 2024, para. 3.

A buyer that could not close

Under the receiver, Royal LePage sent brochures to 1,071 prospective purchasers on four occasions, and 51 parties signed confidentiality agreements; by the April 15, 2024 deadline there was one offer on the receiver's form and one letter of interest, per the First Report, May 22, 2024, paras. 11, 14–17. On May 29 Justice Kimmel approved the receiver's sale to Toronto Capital (Stayner) Corp. in Trust, finding that the process had "yielded the most advantageous (and only) offer for the Properties." Part of the price was to be a new vendor take-back mortgage from First Global; the agreement, which holds the price, was sealed, per the Endorsement of Justice Kimmel, May 29, 2024, paras. 1, 6–8, 13 and the Ancillary Order, May 29, 2024, para. 4.

The buyer could not close on June 10 and asked for time "in order to finalize its financing commitment." The receiver moved the date to June 28 for a further $250,000 deposit on top of the $750,000 it held. The buyer missed that date and a second extension, and on July 3, 2024 the receiver's real estate counsel, Dickinson Wright, confirmed the deal terminated and the deposits forfeited. The receiver paid $500,000 of the forfeited money to 118 and used the rest for the administration, per the Second Report, Sept. 20, 2024, paras. 13–17, 36.

The relaunch began July 11 with a new listing and brochures to 1,234 prospective purchasers. At the July 31 deadline the only offer was 118's: a credit bid that, the receiver said, "will not generate any proceeds for distribution to creditors," per the Second Report, Sept. 20, 2024, paras. 18–24, 35.

The credit bid

First Global's debt and security would be "extinguished by the requested order without any recovery," Justice Kimmel noted on October 7, 2024, in adjourning the approval motion for about two weeks at its request, over the objection of the receiver and 118. It came with a caution: "The second mortgagee should not treat this as an invitation to object just for the sake of objecting. The record discloses a very robust sales process that has not produced a single bid from any third party." The first failed transaction, the endorsement added, "involved the second mortgagee itself," per the Endorsement of Justice Kimmel, Oct. 7, 2024, paras. 3–4, 7–8.

By October 23 First Global had said it would take no position. A company whose counsel was still being retained asked for two more weeks to "either buy out 118's position or present a better offer." Justice W.D. Black refused, finding "simply no evidence to refute the Receiver's evidence – seemingly confirmed by the market – that there will be no economic interest for anyone following the 118 transaction," and approved the sale, per the Endorsement of Justice W.D. Black, Oct. 23, 2024, paras. 6–7, 9–11, 13–14. The Clearview parcel vested in 118 and the other two in 1000983019 Ontario Limited, per the Approval and Vesting Order (Clearview), Oct. 23, 2024, para. 2 and the Approval and Vesting Order (Bridle Park), Oct. 23, 2024, para. 2. The agreement was sealed until closing, per the Ancillary Relief Order, Oct. 23, 2024, para. 5.

The sale closed on November 7, 2024. The Third Report, filed afterwards, gives the number: 118 "acquired the Real Property in consideration for $18,300,000 of 118's secured debt against the Real Property," against indebtedness of $18,469,188 at September 30, 2024, which left $169,188 owing under the loan agreement, per the Third Report, Mar. 7, 2025, paras. 14, 17, 19. The $11,685,000 participation fee sat outside those figures; the receiver had limited 118's distributions to its undisputed debt, per the Second Report, Sept. 20, 2024, paras. 39–41.