Clarington Esso: a sale approved, and soil contamination at Bethany

On April 30, 2024, Jason Gagnon, a senior manager in Royal Bank of Canada's Special Loans & Advisory Services group, went to look at two Esso stations belonging to borrowers whose accounts had been moved to his group in May 2023. At Bethany, on Highway 7A, the gas station business appeared to be running. At 6065 Highway 35/115 in Clarington, neither the gas station nor the restaurant in the same building appeared to be operating, he deposes, per the Affidavit of Jason Gagnon, Aug. 29, 2024, paras. 1, 63, 104 and the First Report of the Receiver, June 29, 2026, para. 6.

By July 2026, the receivership RBC obtained over both properties had reached a different point at each. The Clarington station, whose doors and windows the receiver boarded up and whose pumps it locked, drew a buyer who had last seen it before the receivership and, inspecting it before signing, reported it "in much worse condition than when they previously attended." At Bethany, soil tests found contamination, RBC has said it is not prepared to fund remediation, and the receiver, which has not taken possession of the property, asked to be discharged as receiver of the two companies that own and operate that station, per the First Report of the Receiver, June 29, 2026, paras. 4–5, 17(e), 20–22, 28, 42–43. On July 23, 2026, Justice Mew of the Ontario Superior Court of Justice approved the Clarington sale, sealed the material that holds its price, and adjourned the discharge, per the Endorsement of Justice Mew, July 23, 2026, pp. 1–2.

An order with a condition in its last paragraph

Mr. Gagnon's affidavit, sworn August 29, 2024, sets out the borrowers. 2414897 Ontario Inc. owned the Clarington property and ran the station on it. 2300089 Ontario Inc. owned the Bethany property, and 2324449 Ontario Inc. ran the Bethany station; the debts of those two to RBC were cross-collateralized. RBC held first mortgages on both properties. Behind it on the Clarington title in August 2024 were second and third charges held by Connor Brock Holdings Inc. and a fourth held by H.R.D.S. Ontario Inc.; on Bethany, a second mortgage held by 2520693 Ontario Inc., per the Affidavit of Jason Gagnon, Aug. 29, 2024, paras. 8–12, 22, 37, 59, 61. Kanesamoorthy Selliah, Yogeswary Selliah and Vigneswaran Kathiravelu are the principals of 241, and Mr. Kathiravelu is the principal of 230 and 232, per the First Report of the Receiver, June 29, 2026, para. 7.

The accounts went to special loans on or around May 26, 2023, the affidavit says, over concerns about the companies' financial performance and missed payments on term loans. Requests for financial information that summer did not produce a satisfactory response, a monthly payment on one of 230's term loans was missed on August 29, 2023, and on September 27, 2023 RBC's lawyers at the time issued demands and notices of intention to enforce security under s. 244 of the Bankruptcy and Insolvency Act, per the Affidavit of Jason Gagnon, Aug. 29, 2024, paras. 63–67.

What followed, in the affidavit's account, was a series of payout proposals. In September 2023 the companies' counsel told RBC's lawyers that 241 was arranging financing to pay the bank out in full but needed "an additional 60 days to payout"; in October, that his clients "will be in a position to repay all indebtedness within the next month"; at the end of November he sent two private mortgage commitments and asked for another 30 days. In July 2024 counsel wrote that the lender was "confident of funding on or before July 31", and the firm's managing lawyer wrote that the Bethany site "has been conditionally sold and the purchaser is performing their due diligence," per the Affidavit of Jason Gagnon, Aug. 29, 2024, paras. 68–71, 84, 86. RBC's notice of application was issued at Napanee on August 15, 2024. "To date, the indebtedness remains outstanding," it says, per the Notice of Application, Aug. 15, 2024, para. 10.

Justice Muszynski's order of October 4, 2024 appointed Grant Thornton Limited receiver and manager of the property of all three companies under s. 243(1) of the BIA and s. 101 of the Courts of Justice Act, with a condition in its last paragraph. The appointment "shall not take effect" until the companies failed to repay everything owed to RBC on or before October 31, 2024, bank fees, legal fees and accrued interest included, together with evidence satisfactory to the bank that there were no priority payables owing to the Canada Revenue Agency for source deductions, HST or other amounts, per the Order Appointing Receiver, Oct. 4, 2024, para. 33. The companies did not repay, and the receivership became effective on November 1, 2024, per the First Report of the Receiver, June 29, 2026, paras. 2–3.

Two stations, two sets of soil samples

Of the books and records the receiver asked the principals for, it received some records of the gas station operations, but most, including accounting records, payroll records and information on the status of the CRA filings, has not been provided, the First Report says. The receiver insured both properties, arranged inspections of each every 72 hours as the insurer required, changed the locks at Clarington, boarded up its doors and windows and locked its pumps, and assisted the CRA in conducting trust examinations, per the First Report of the Receiver, June 29, 2026, paras. 15–17.

It noted, at each station, "the potential for environmental contamination given the nature of gas station operations" and engaged Pinchin Ltd. for Phase 1 and Phase 2 environmental site assessments. The Clarington soil samples tested within applicable standards, and no further subsurface investigation was recommended. At Bethany, soil contamination had been discovered; Pinchin did further testing and estimated what it would cost to remediate, per the First Report of the Receiver, June 29, 2026, paras. 18–21, 29–31. The receiver's interim statement of receipts and disbursements to May 31, 2026 shows $93,600 paid for environmental consulting, per the Motion Record, June 30, 2026, p. 197 (Interim Statement of Receipts and Disbursements).

What the receiver asked to leave

The Bethany property holds the station, a convenience store and a residential unit that was leased to a tenant. "RBC has advised that it is not prepared to fund the Bethany Remediation Costs," the report says, and the receiver has not taken possession of the property. Cushman & Wakefield appraised Bethany on the assumption that there is no environmental contamination, and the realtors' listing proposals the receiver gathered rest on the same basis. The appraisal, the listing proposals and the remediation estimate are in Confidential Appendix 1, which compares the remediation costs with the property's appraised value once remediation is complete, per the First Report of the Receiver, June 29, 2026, paras. 4, 21–25.

The receivership order authorizes, but does not oblige, the receiver to take possession of the property and market it. "The Receiver does not have funding to take any further actions in respect of the Bethany Property," the report continues, and RBC "is not prepared to further fund the receivership of 230 and 232." The receiver told the second mortgagee through counsel on May 21, 2026 that it would seek its discharge in respect of Bethany, per the First Report of the Receiver, June 29, 2026, paras. 26–28. The draft discharge order in the motion record would discharge Grant Thornton as receiver of the property of 230 and 232 only, not of 241, and would release it from liability for its acts as their receiver, save for gross negligence or wilful misconduct, per the Motion Record, June 30, 2026, p. 46 (draft Discharge Order, paras. 1–2).