Lion Force: the receivership stay catches the debtors' own NOIs

When The Fuller Landau Group Inc. was appointed receiver of Lion Force Transport Inc., 2696942 Ontario Inc. and 2854233 Ontario Inc. in May, the trucking group's equipment was located throughout Ontario, the United States and Mexico. The receiver had limited financial and accounting information, insurance coverage had lapsed, very few employees remained who could help collect the receivables, and there was, in the endorsement's words, "significant uncertainty regarding recovery and ownership of the Transportation Equipment." It concluded that it would be difficult and not cost effective to complete deliveries of customer loads, and focused on recovering the equipment. From the debtors' GPS tracking system and a physical inventory, the receiver understands that 121 tractors and 390 trailers are located across Canada, the United States and Mexico, with 31 of the tractors and 23 of the trailers at unknown locations. It has received "numerous requests from alleged financiers, lessors and owner/operators" for the release of equipment, and after reviewing those claims it has released 120 tractors and 280 trailers to third parties, per the Endorsement of Justice J. Dietrich, Sept. 29, 2026, paras. 7–8.

That is the receiver's account, from its First Report of September 22, 2026, as Justice J. Dietrich set it out on September 29. When this case was reported here on August 27, Justice F.L. Myers had dismissed the group's CCAA application and appointed Fuller Landau on Royal Bank of Canada's application on May 15, per the Endorsement of Justice F.L. Myers, May 15, 2026, para. 57, and on August 26 the U.S. Bankruptcy Court had granted a final recognition order, recognizing the receivership as a foreign main proceeding and giving the appointment order full force and effect in the United States, per the Endorsement, Sept. 29, 2026, para. 5. Of the two orders the receiver sought, no one opposed the first, and Dietrich J. granted it in every respect but one; the second, which would approve among other things an auction agreement, was adjourned, per the Endorsement, Sept. 29, 2026, paras. 1–4, 24.

The First Report is not in the record read for this piece; what is known of it here comes from the endorsement, which also records a disagreement. According to the First Report, as the endorsement summarizes it, the debtors' principal has not been cooperative and has taken steps to interfere with the receivership. He has advised the receiver that he disagrees with that characterization, per the Endorsement, Sept. 29, 2026, para. 7. The endorsement says nothing further on either side of it. Beyond the trucks and trailers, the debtors' assets include tools and mechanic shop equipment, inventory, parts, office equipment and outstanding receivables, per the Endorsement, Sept. 29, 2026, para. 9.

Three notices, three days before the receiver

On May 12, 2026, three days before the appointment order, each of the three debtors filed a notice of intention to make a proposal under s. 50.4(1) of the BIA, with TDB Restructuring as proposal trustee. The debtors have not filed a cash-flow forecast, per the Endorsement, Sept. 29, 2026, para. 20. (Myers J.'s endorsement had dated Lion Force's notice to May 13, per the Endorsement, May 15, 2026, para. 22.)

The receivership order's stay sits in two paragraphs. The first provides that no proceeding "against or in respect of the Debtors or the Property" may be commenced or continued without the receiver's written consent or the court's leave, and stays and suspends any under way; the second stays and suspends all rights and remedies against the debtors or the receiver, or affecting the property, except with the receiver's written consent or the court's leave, per the Receivership Order, May 15, 2026, paras. 10–11. On August 14 the Office of the Superintendent of Bankruptcy (OSB) advised the receiver that, in its view, the appointment order's stay provision stays and suspends the NOI proceedings, and that only an order of the court can authorize their continuation. The provision, Dietrich J. noted, is substantially identical to the stay in the model receivership order developed by the Commercial List Users Committee, per the Endorsement, Sept. 29, 2026, para. 21.

The receiver's motion asked for the stay to be lifted "if necessary" to let the NOI proceedings go forward, and for an order directing the OSB to administer them. Its view, as the endorsement states it, was that the appointment order's language does not stay an automatic bankruptcy following an unsuccessful NOI filing, and that more specific language is needed to do so. It relied on White Oak Commercial Finance, LLC v. Nygård Holdings (USA) Limited, 2020 MBQB 58, and Dondeb Inc. (Re), 2012 ONSC 6087, cases in which, the endorsement notes, specific language staying an NOI proceeding was granted. The receiver also acknowledged that "a technical reading of the language in the Appointment Order is sufficiently broad to include bankruptcy proceedings in respect of the Debtors," per the Endorsement, Sept. 29, 2026, paras. 2(g)–(h), 22.

Dietrich J. did not accept that more was needed. "I do not agree that further language is required to stay an NOI or a bankruptcy proceeding, including one resulting from unsuccessful NOI proceedings," she wrote. She agreed that the purpose of the stay is to permit the orderly and equitable realization and distribution of the debtor's assets, citing Alberta Energy Regulator v. Lexin Resources Ltd., 2019 ABQB 23, but held that this is best done by "ensuring that NOI and bankruptcy proceedings are captured by the stay, subject to the lifting of the stay by further Court order or, if appropriate in the circumstances, by the consent of the Receiver," so that measures delaying or coordinating the proceedings can be put in place if necessary. "From a policy perspective, the default should be that NOI and bankruptcy proceedings are stayed, just like all other proceedings, and the current wording of the Appointment Order (and the model order) supports this interpretation," per the Endorsement, Sept. 29, 2026, para. 23.

Why the receiver wanted the NOIs to run

Having held that the stay caught the NOIs, she lifted it. The OSB did not oppose an order lifting the stay so that "the NOI proceeding and the potential following bankruptcies can continue." The receiver asked for the lift "because it remains uncertain whether recoveries will exceed the value of priority and secured claims such that unsecured creditors may receive any distribution in the bankruptcies," and it considered that a bankruptcy would be helpful for "the statutory claims process that is triggered along with the various investigative tools that may be of assistance in the receivership proceedings," per the Endorsement, Sept. 29, 2026, para. 24.