Trade X: settling before defence costs exhaust a $4 million D&O policy

Trade X bought vehicles in one market and sold them in another, borrowing up to 90% of each car's value and pledging the car, and then its sale proceeds, back to the lender, according to the claim its receiver has brought against the company's founder. The lenders were two Post Road Group funds acting through MBL Administrative Agent II LLC, on two revolving facilities of US$30 million each, per the Fresh as Amended Statement of Claim (Trade X v. Davidson), Sched. "B" to Minutes of Settlement, Motion Record of the Receiver, Sept. 8, 2026, paras. 11, 27–29. When MBL applied for a receiver in December 2023, its affiant swore that the group owed it US$15,256,504.16 and had "improperly diverted over US$7 million in funds payable to MBL, and instead used those funds for their working capital needs," per the Affidavit of Westin Lovy, Dec. 4, 2023, Application Record, paras. 5, 7.

By April 30, 2026, FTI Consulting Canada Inc., the receiver, was holding $504,505 in cash, and its report of June 1 listed its remaining work as tax refunds, sundry assets, a share of a receivable claim being litigated in Quebec, and the litigation against the people who ran the company, per the Eleventh Report of the Receiver, June 1, 2026, paras. 29, 32. The amounts in the partial settlement of that litigation are redacted from the public record. What the record does disclose is the ceiling on the insurer's share: Trade X's directors' and officers' policy with AIG Insurance Company of Canada, which pays at most $4 million for defence costs and judgments combined. The receiver understands the defendants' defence costs already exceed $600,000, with both actions still at the pleading stage. "Absent a settlement, it is likely that the D&O Policy Limits would be exhausted by defence costs and the D&O Policy would not be available to pay any judgments obtained in the Actions," says the Twelfth Report of the Receiver, Sept. 8, 2026, para. 22(b).

On September 8 the receiver brought a motion, returnable by videoconference at 10:00 a.m. on September 17, for an order approving the settlement and sealing the unredacted minutes, and a second order approving its reports since October 2024 and two years of its own and its counsel's fees. The draft orders are prepared for Justice Cavanagh, per the Notice of Motion, Sept. 8, 2026, Motion Record of the Receiver, pp. 5–7, 16, 22. MBL, the senior secured creditor and the other plaintiff, negotiated the settlement, signed it and supports it, per the Twelfth Report of the Receiver, Sept. 8, 2026, para. 23.

Two actions, nine defendants out

The receiver issued the Trade X Action on April 7, 2025, claiming $20,000,000 from Ryan Davidson, Eric Gosselin, Eric Van Essen, Luciano Butera, Patrick Leung, Brent Sawadsky and The CFO Centre Limited. MBL sued on April 30, 2025 for US$17,000,000, naming those seven and six more: Wouter Van Essen, Philip Mittleman, Lakshmi Suresh and three numbered Ontario companies. The two actions are case-managed together on the Commercial List, per the Factum of the Receiver, Sept. 11, 2026, paras. 11–13. The pleadings attached to the receiver's June 2025 report give the individuals' roles: Mr. Davidson as founder and chief executive; Mr. Butera as chief operating officer, executive vice-president and president; Mr. Leung as chief financial officer; Mr. Gosselin, co-founder of the Wholesale Express auction business Trade X bought in December 2021, as chief executive from June 2023; Mr. Sawadsky as part-time interim CFO under a contract with The CFO Centre; Eric Van Essen as managing director of the exporter Techlantic; Lakshmi Suresh as director of finance; Mr. Mittleman as a board member; and Wouter Van Essen as a consultant to Techlantic, per the Ninth Report of the Receiver, June 10, 2025, App. "A", paras. 13–23; App. "B", para. 6.

On or about February 19, 2026, the plaintiffs reached a settlement in principle with every individual defendant except Mr. Davidson, and with The CFO Centre Limited, sued as vicariously liable for Mr. Sawadsky. The terms were disclosed to the other defendants under rule 49.14 on March 2, and three sets of minutes of settlement are dated August 26, per the Twelfth Report of the Receiver, Sept. 8, 2026, paras. 13(d), 16–18.

The main minutes, signed by the eight individuals and by AIG, provide for an "all-inclusive sum," blacked out in the public copy, to be paid by the insurer "pursuant to the terms, limits and conditions" of policy 06-162-22-36 "and not by the Settling Defendants personally." AIG pays into trust at Goodmans LLP, the receiver's counsel, within 45 business days of execution, and the money stays in escrow until the court approves, the actions are dismissed against the settling defendants and both claims are amended. The insurer signs only to be bound by those payment terms, per the Minutes of Settlement, Aug. 26, 2026, paras. 2, 4, 21, Motion Record of the Receiver, Tab 4D, pp. 50–51, 53. Mr. Gosselin pays a further sum himself within 10 business days, and the receiver and MBL will not execute the main agreement until his money is in trust. He also warrants that his sworn affidavit summarizing his October 9, 2024 testimony is "truthful and accurate in all material respects," per the Minutes of Settlement (Eric Gosselin), Aug. 26, 2026, paras. 2–4, 11, Motion Record of the Receiver, Tab 4E, pp. 164–165. The CFO Centre Limited pays within 15 business days, and its payment comes back to it if the dismissal orders are not delivered, per the Minutes of Settlement (The CFO Centre Limited), Aug. 26, 2026, paras. 2–3, Motion Record of the Receiver, Tab 4F, pp. 176–177.

The plaintiffs have agreed to divide the money equally between the two claims, yet it is credited in full against each action, "on the basis that both actions concern the same underlying conduct and losses and the Plaintiffs are not seeking double recovery," per the Minutes of Settlement, Aug. 26, 2026, para. 3, Motion Record of the Receiver, Tab 4D, pp. 50–51 and the Twelfth Report of the Receiver, Sept. 8, 2026, para. 21. The structure is a Pierringer agreement. The receiver will pursue Mr. Davidson, and MBL will pursue him and the three numbered companies, only for damages for which each "may be directly and only severally liable." The settling defendants give up any rights of contribution, indemnity or subrogation against them, the mutual release bars claims against anyone who could claim contribution back from a settling defendant, and the settlement is expressly no admission of liability, per the Minutes of Settlement, Aug. 26, 2026, paras. 7–8, 10, and Sched. "A" (Mutual Full and Final Release), Motion Record of the Receiver, Tab 4D, pp. 51–52, 69–70.

The receiver's case for it, and for the seal

Beyond the arithmetic of the policy, the Twelfth Report gives three reasons. MBL is owed "over $18 million in principal obligations and accrued and unpaid interest," and is unlikely to be repaid in full unless the plaintiffs are "entirely (or almost entirely) successful" and collect any judgment in full. With overlapping defendants and facts, and one policy covering both actions, "it is unlikely that one of the Actions can be settled unless the other Action is also settled." And the receiver considers the settlement reasonable "having regard to the roles that the Settling Defendants filled at Trade X," per the Twelfth Report of the Receiver, Sept. 8, 2026, paras. 22–24. The factum runs the Maple Bank and Soundair factors, reports that the receiver has received no objections, and states that "No other creditors will be affected by the Settlement," per the Factum of the Receiver, Sept. 11, 2026, paras. 27–28, 31(b)–(c).