EBF Group: one trust clause, two answers

On August 7, 2026, the day MNP Ltd. filed its entitlement report as monitor of The EBF Group Ltd., the Monitor's counsel found a document it had missed. It sat in a package the company had handed over on July 21, titled as a guarantee from JNR Farms Transport Ltd., and it was a facility agreement between EBF and JNR Farms dated November 18, 2024 — apparently the one that a participation agreement dated three days later was to have attached as a schedule. No copy the Monitor held had the schedule, and counsel for the participant, Fred Hageman's Holdings Limited (FHHL), could not locate one, per the Third Report of the Monitor, Aug. 7, 2026, paras. 119–124.

The document mattered because of how EBF, a Burlington lender that made advances to factoring clients, funded part of its book. Under three agreements titled "Loan & Security Trust and Participation Agreement", FHHL advanced a "senior tranche" of a loan EBF made, and EBF agreed to hold the loan, its security and its collections in trust for FHHL and itself. On its counsel's advice, the Monitor understands that if those trusts were valid, the collections would belong beneficially to FHHL until it was repaid, ahead of the security of the three creditors who registered against EBF before FHHL did, per the Third Report, paras. 15, 69–70, 95, 127.

Once a supplement followed on August 13, the Monitor's answer had two halves: on the loan to Summit Earthworks Inc., it could identify no traceable funds; on the loan to JNR Farms, under an agreement it had described as containing substantively similar terms, the proceeds of enforcing EBF's security are likely FHHL's, per the Third Report, paras. 70, 152 and the Supplement, Aug. 13, 2026, para. 30. On September 4, the deadline, Brian Vyner and 1968328 Ontario Inc. (196 Ontario) delivered notices disputing the JNR conclusion. "The trust language in the two agreements is identical; what distinguishes them, on the Monitor's own reasoning, is the state of the Applicant's bank accounts in 2026," 196 Ontario says, per its Notice of Dispute, Sept. 4, 2026, para. 2. The timetable was reported here on July 24.

Who ranks where before any trust

The Monitor's counsel, Thornton Grout Finnigan LLP, is of the opinion that Vyner, 196 Ontario and FHHL each hold valid security over EBF's personal property, perfected to the extent Ontario law allows. The creditors' counsel reported the debts as of July 15, 2026: $6,555,448.11 to Vyner; $3,541,774.40 to 196 Ontario; and to FHHL, $2,702,323.54 on a revolving note, $5,146,344.56 on a note that funded EBF's loan to Rumble Industries Ltd., and $833,019.47 on a $750,000 note that funded EBF's purchase of Summit's receivables. The Monitor has not independently reviewed these amounts and does not accept them for distribution. A further FHHL note of May 20, 2025 is, on counsel's opinion, unsecured: the general security agreement it contemplated has not been produced, per the Third Report, paras. 32–68 and n. 1.

By PPSA registration the Paatz 2016 Family Trust comes first (November 5, 2019), then 196 Ontario (June 8, 2021), Vyner (September 13, 2021) and FHHL (November 30, 2023). Postponement agreements of September 15, 2021 rearrange the first three into Vyner, 196 Ontario and the trust, with the trust's postponement to 196 Ontario ending once Vyner is paid in full. FHHL took priority over all three in two pools: the Rumble assets, by subordinations of December 15, 2023, and the first $750,000 of the Summit receivables, by subordinations of December 6, 2024 that the Monitor reads as limited to $750,000, "with no additional interest." Across everything else the Monitor's order is Vyner, 196 Ontario, the trust, then FHHL, per the Third Report, paras. 95–116.

The trust that registered first

The trust's place at the head of the registry comes from a sale of the company. "In September 2019, I sold the [Company] to a third party, with a portion of the purchase price satisfied by way of a vendor take-back mortgage," Frederick J. Paatz, who has sworn EBF's affidavits in the proceeding, deposed; the purchaser defaulted, and "In May 2021, I re-acquired the [Company]." EBF guaranteed the purchasers' notes to the trust, whose trustees on the 2019 sale included Mr. Paatz, and gave it a general security agreement securing "all indebtedness, obligations and liabilities" owed to it, per the Third Report, paras. 11, 76–81.

What the trust now claims appears, to the Monitor, unrelated to that sale. On July 21, 2026, Mr. Paatz gave the Monitor's counsel a statement of account showing nil owing as of October 1, 2024, "investments" and "withdrawals", an interest rate rising from 12% to 14% on January 20, 2025, and a "Total investment including accrued interest as of June 30, 2026" of $429,758.97. EBF's books, the Monitor says, show the trust putting money in since April 26, 2023 and generally taking out the same amounts. Asked who EBF's shareholders are, the company's counsel passed the request to Mr. Paatz; the information had not been provided by the report's date, per the Third Report, paras. 83–87.

The Monitor's counsel is "unable to conclude whether a debt obligation is owing." Assuming for the report that the trust is a shareholder not at arm's length, it says the trust may hold an "equity claim" under the CCAA, citing the statement's labels, no evidence that interest was payable, and withdrawals that matched the investments "without any interest." Its opinion is that the trust's security is valid but "does not likely currently secure any debt obligations," per the Third Report, paras. 90–93. The draft Entitlement Order lists no claim for the trust, per the Supplement to the Third Report of the Monitor, Aug. 13, 2026, Sched. "A", paras. 2–3. 196 Ontario accepts the conclusions on the trust but "does not accept that any subordination to the Paatz 2016 Family Trust is presently engaged," per its Notice of Dispute, paras. 30, 69.

Summit, where the money could not be followed

Counsel's view is that the participation agreements likely show an intention to create trusts and name their beneficiary clearly; the difficulty is certainty of subject matter where trust funds are commingled, per the Third Report, paras. 131–135.

Under the Summit agreement of September 25, 2025, for a $1,500,000 "bulge facility", FHHL advanced $550,000 on September 26 and $950,000 on October 1. Between September 26 and October 17, EBF advanced $1,722,058 to Summit. Over the same period Summit's account debtors paid EBF $3,299,569, of which $2,012,395 was applied to capital recouped, and the money moved into the main operating account at Bank of Montreal, which also funded EBF's other advances and its operations. EBF did not track FHHL's advances separately in its Factorsoft system. "The Monitor therefore has no certainty regarding which funds were used to make the advances to Summit during this period as there is no direct dollar-for-dollar correlation," per the Third Report, paras. 69(c), 138, 141–147.

The Summit agreement therefore fails the test for a trust, the Monitor and its counsel concluded, because the facility agreement it was to append has not been provided and because "the funds are not directly traceable by any reasonable measure." FHHL may have claims against EBF for breach of that agreement, counsel advises; the report does not comment on them. FHHL's counsel reported $1,388,365.78 owing by Summit under the participation as of July 15, and $1,669,563.09 by JNR Farms under the JNR participation, per the Third Report, paras. 72–73, 137, 152–153.