Pitter Patter Daycare: the waterfall, and the final pay that bounced

The last payroll Pitter Patter Daycare Inc. ran for its childcare staff did not clear. In its Fourth Report, dated September 15, the proposal trustee, S.R. Stack & Company (2023) Ltd., told the Supreme Court of Newfoundland and Labrador that it was taking calls from employees whose cheques for their final pay period "are being returned due to insufficient funds," although the trustee had advanced money to the company against a disbursement request to pay them. It could not say why, "because PPDI is not responding to requests for information," per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, paras. 41–42. Records of employment and T4s were still outstanding; the trustee and the financial adviser Resolve Advisory Services Ltd. had arranged for the company's bookkeeper to complete them, but the bookkeeper's office was closed until September 21, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, para. 45.

The same report accounts for what the sale of the Conception Bay South daycare operator's business produced. When Justice Alexander MacDonald approved the sale of its Holyrood and Conception Bay South centres and the St. George's after-school program to BelleAn Properties Inc. on August 20 — an order reported here on August 21, together with the director release the CRA had said it would oppose — the price sat in a sealed supplement and closing was still ahead. By September 14 the trustee could tell the court that "the sale of PPDI has been completed" and the proceeds were in its hands, per the Interlocutory Application of the Proposal Trustee, Sept. 14, 2026, para. 9. Two days later the court approved how they would be paid out.

Four and a half million, four claimants

The trustee holds $4,518,896.43 in trust. Of that, $380,812.50 goes to the CRA for HST on the sale of the real property, leaving $4,138,083.93 for creditors, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, paras. 27–28. The waterfall the Fourth Report proposes spends every dollar of it, in four steps: $300,000 for professional fees under the administration charge, including a holdback for fees billed after the report; $502,181.06 to Libra Finance Company Inc. to retire the DIP facility if paid on September 18; $853,875.65 to the CRA for deemed trust amounts on unremitted payroll source deductions; and "the remaining $2,482,027" — $2,482,027.22 in the report's table — to RBC under its security, which the trustee's counsel had opined on in August. The table's last line, "Remaining funds," is a dash, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, paras. 29–30.

Libra's payout schedule shows how the DIP grew: $475,000 of principal drawn in four advances between April 2 and May 1, at the Bank of Canada rate plus 8.75%, shown as 13.20%, with interest accruing at about $181 a day by mid-September, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, App. A, pp. 11–12. RBC's statement as at September 8 puts the bank's claim at $2,548,093.95, across a credit line, two term loans, a Visa loan, an overdraft and $97,848.58 in professional fees. The trustee attached it and said any part of the administration-charge holdback not needed for reasonable closing costs "will be remitted to RBC," per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, para. 31, App. C.

What the CRA's letter separates

The CRA's share comes from a letter its complex case officer sent the trustee on September 4. It restates the July 8 proof of claim for source deductions of $1,298,565.86 — $622,748.31 in income tax, $337,470.83 in Canada Pension Plan contributions, $118,700.29 in Employment Insurance premiums and $219,646.43 in penalties and interest — and then sets apart the portion that, under the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act, is held in trust and "form[s] no part of the property, business or estate" of the company: federal income tax of $429,146.15, provincial income tax of $193,602.16, the employee share of CPP at $181,668.88 and the employee share of EI at $49,458.46, together $853,875.65, payable "in priority to all other creditors." The letter asks when that sum "and the remaining balance of $444,690.21" will be paid, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, App. B, pp. 14–15.

The trustee's waterfall pays the trust figure and nothing past it, and the report states the premise on which it is built: "This waterfall is applicable once PPDI is in bankruptcy where the CRA's penalties and interest do not have priority over other claims." The proposed distribution had gone out to stakeholders as the court directed, and none objected, per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, paras. 32–33. Elsewhere the report notes that the trustee's counsel holds a retainer, paid by the company, to protect the fees of the trustee and its counsel in "the forthcoming bankruptcy proceedings," per the Fourth Report of the Proposal Trustee, Sept. 15, 2026, para. 39.