Chesswood: the investor class action comes back for the bankruptcy stay

The statement of claim was issued on October 11, 2024, eighteen days before Chesswood Group Limited's lenders put it under the CCAA. It was brought by a shareholder, Shane McCormick, for two proposed classes of people who bought Chesswood's common shares, which traded on the Toronto Stock Exchange as CHW, and it named three defendants: the company; Ryan Marr, its president and chief executive officer; and Tobias Rajchel, its chief financial officer. The claim alleges that from May 2023 Chesswood told the market it was in compliance with the covenants on its syndicated revolving credit facility and that its financial statements could be relied on, and that three announcements in the summer of 2024 publicly corrected those statements. After the first, on June 14, 2024, when Chesswood said it was in breach of the facility's minimum borrowing-base covenant, the claim pleads that the share price fell from $7.49 to $3.75, per the Statement of Claim, Oct. 11, 2024 (Motion Record, Sept. 18, 2026, Tab 2, Ex. "A"), paras. 1, 6, 8, 18, 21–24.

None of the allegations has been tested, and the action is still at the pleadings stage. The plaintiff served a draft motion record for leave under s. 138.8 of the Ontario Securities Act and for certification under the Class Proceedings Act, 1992 on March 27, 2026, and says he cannot file it, per the Affidavit of Mark Sebastian, Sept. 18, 2026, paras. 12–14. Since the autumn of 2024 the action has been held by a CCAA stay, and since February 2026 by a bankruptcy stay as well. On July 16, 2026, Justice J. Dietrich lifted the first. On September 18, the plaintiff's counsel, Berger Montague (Canada) PC, filed a motion record in Chesswood's bankruptcy, court file BK-26-03332011-0031, asking Justice Black to lift the second, returnable October 1, 2026 at 11:00 a.m. by videoconference, per the Notice of Motion, Sept. 18, 2026, p. 14 and paras. 1, 12–13.

What the CCAA left behind

The CCAA proceeding, CV-24-00730212-00CL, was the lenders' application. Royal Bank of Canada, as administrative and collateral agent to a syndicate of six banks, put the amounts outstanding at US$66,254,723.30 and C$92,797,926.72 as at October 24, 2024, plus letters of credit of US$4,000,000 and C$6,600,000, per its Notice of Application, Oct. 29, 2024, para. 15. Justice Kimmel granted the initial order on October 29, 2024, per the Initial Order, Oct. 29, 2024, p. 1. It appointed FTI Consulting Canada Inc. as monitor with enhanced powers to manage the group and the sale of its assets, and the amended and restated initial order of November 7 extended the stay to any claim against Chesswood's former, current or future directors or officers, which is how the class action's two individual defendants came within it, per the Endorsement of Justice Cavanagh, Nov. 20, 2025, paras. 3–4.

The monitor then sold the business in pieces: certain of Rifco's assets to Vault Auto Finance Corporation; the shares of Pawnee Leasing and Tandem Finance, by reverse vesting order, to North Mill Equipment Finance, LLC; the shares of Waypoint Investment Partners; the Bishop equity interests and a related contract, also to North Mill; and the Easy Legal assets. By its Ninth Report of January 18, 2026, those five transactions had produced realizations "in excess of $130 million," the interim facility had been repaid in full from the Pawnee proceeds, and the CCAA parties had "no material assets or operating businesses remaining." The wind-down reserve stood at approximately US$1.57 million on January 2, 2026, any balance to go to the lenders, whose outstanding obligations still exceeded $83 million and who "will not be repaid in full," per the Ninth Report of the Monitor, Jan. 18, 2026, paras. 7–11, 33–34, 40, 46 and n. 2.

Justice Cavanagh's CCAA Termination Order of January 23, 2026 ends the proceeding, discharges FTI and terminates the court-ordered charges when the monitor serves a termination certificate on the service list. It also directs that any tax refunds received by a CCAA party, before or after a bankruptcy, stay out of the bankruptcy estate and go to the lenders' agent, per the CCAA Termination Order, Jan. 23, 2026, paras. 3–8. The plaintiff's affidavit says that as of September 18, 2026 the certificate had not been served and the CCAA proceeding had not terminated. Chesswood made its assignment in bankruptcy on February 11, 2026, under authority granted in October 2025, and FTI was appointed trustee, per the Affidavit of Mark Sebastian, Sept. 18, 2026, paras. 18, 21, 24–25.

The statement of affairs, sworn on February 10 by Jeffrey Rosenberg of FTI in its capacity as monitor, lists no asset of realizable value and liabilities of $84,222,005.13, all but $0.01 of it unsecured. RBC's claim is listed at $83,205,528.39. Line 16 is headed "Securities Class Action," at the Bay Street address of the plaintiff's counsel, in the amount of $0.00, per the Form 78 Statement of Affairs, Feb. 10, 2026, pp. 1–2, 4–5.

The lenders went first

The class action was not the first claim against Chesswood's former management to get past the stay. On November 20, 2025, Justice Cavanagh lifted it "solely for the purpose" of letting RBC, for the lenders, sue Chesswood and "certain former directors and officers or senior management figures," per the Lift Stay Order, Nov. 20, 2025, para. 2. The lenders were then owed approximately C$83.2 million as at October 24, 2025. RBC's stated reason for moving before the stay ran out was the court-approved records protocol, under which the monitor could destroy the books and records after December 31, 2025: an issued claim would give the defendants the chance to ask for particular records to be kept. One proposed defendant opposed, arguing the claim disclosed no tenable cause of action against him. Justice Cavanagh applied the three Timminco factors (relative prejudice, balance of convenience and, where relevant, the merits), found no prejudice to the individuals in facing the claim "approximately two months sooner," and granted the order because "the underlying purpose of the CCAA proceeding has been accomplished," per the Endorsement of Justice Cavanagh, Nov. 20, 2025, paras. 7–15.

RBC's claim, issued November 28, 2025 in court file CL-25-00753601-0000, names Chesswood, the two individual defendants in the class action, a former executive vice-president and a former director. It seeks at least C$83,000,000 from Chesswood for breach of the credit agreement, and the same from the four individuals for negligent supervision and oversight of the borrowing-base calculation and for negligent misrepresentation in the borrowing-base certificates, with a declaration of oppression under s. 248 of the Business Corporations Act, per the Statement of Claim, CL-25-00753601-0000 (Motion Record, July 7, 2026, Ex. "K"), paras. 1, 6–9. On April 27, 2026, Justice Myers struck the claim against one of the four individuals with leave to amend and dismissed the other three's motions to strike, per the Order of Justice Myers (Motion to Strike), Apr. 27, 2026 (Motion Record, July 7, 2026, Ex. "L"), paras. 1–2.