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).

For the seal, the factum cites Sable Offshore for the proposition that a Pierringer agreement, including its negotiated amount, is protected by settlement privilege, and applies the Sherman Estate test. The minutes oblige the parties to keep the amounts confidential, and the receiver is advised they will be disclosed to the trial judge at the end of trial, per the Factum of the Receiver, Sept. 11, 2026, paras. 35–39. The receiver acknowledges that the seal may not keep the figures from the remaining defendants themselves. Certain of them "are related to certain Settling Defendants or are represented by the same counsel," and some or all of them may already know one or more of the amounts; the seal is still needed, it says, to keep the figures from the trial judge before disclosure is due, from any mediator, and from others in the litigation not yet entitled to them, per the Twelfth Report of the Receiver, Sept. 8, 2026, paras. 27–29. The draft approval order would also bind any future trustee in bankruptcy to the settlement and shield it from attack as a preference, a transfer at undervalue or any other reviewable transaction, per the draft Settlement Approval Order, paras. 5–6, Motion Record of the Receiver, Tab 2, p. 18.

What remains against Ryan Davidson

The amended claims the plaintiffs have agreed to file are attached to the minutes. The receiver's amended claim names Mr. Davidson alone, "solely for his several liability," for $20,000,000 in damages or disgorgement for breach of fiduciary duty and negligence, plus punitive damages. None of its allegations has been tested at trial. It begins with the company's pitch: that Mr. Davidson raised debt and equity of more than US$100 million on the story of a technology company building a platform for international vehicle trades, a story the pleading calls "in many critical respects, a work of fiction," per the Fresh as Amended Statement of Claim (Trade X v. Davidson), Sched. "B", paras. 1–4, Motion Record of the Receiver, pp. 87–88. It alleges that he withdrew about $4.4 million in April and May 2022 as repayment of a shareholder loan without disclosing it to the board, then returned about $5.6 million between late June and October that year; that he directed about $17.2 million into a platform that never generated revenue; and that between June and September 2023 Trade X diverted approximately US$7 million of sale proceeds meant to be held in trust for MBL, paying operating expenses such as payroll while sold vehicles were reported to the lender as unsold, per the Fresh as Amended Statement of Claim (Trade X v. Davidson), Sched. "B", paras. 84, 97–100, 116–122, Motion Record of the Receiver, pp. 109, 112–113, 117–118.

The same pleading describes undocumented vehicle financing from companies owned by the families of Mr. Butera and Eric Van Essen, which it says left cars pledged to two lenders at once: 1254382 Ontario Ltd., operating as Auto Credit Canada, and 1309767 Ontario Ltd. and 2601658 Ontario Ltd. MBL's amended claim keeps all three companies as defendants alongside Mr. Davidson, for knowing receipt of trust funds, inducing breach of contract and unlawful means conspiracy, among other causes, per the Fresh as Amended Statements of Claim, Scheds. "B", paras. 52–53, 62, and "C", para. 1, Motion Record of the Receiver, pp. 101–104, 130–132. Mr. Butera and both Van Essens have settled; the numbered companies have not. No defence by any remaining defendant is in the receivership record.

The estate so far, and its bills

Through May 31, 2024, the first five months of the receivership, the receiver took in $4,507,421, including $2,512,212 of cash in the debtors' bank accounts and $1,606,625 from inventory; newspaper notices for the business and its technology platform drew no viable offers, per the Fourth Report of the Receiver, June 18, 2024, paras. 9(i), 41, reproduced in Seventh Report of the Receiver, Oct. 22, 2024, App. "A". In August 2024 the Van Essen companies agreed to pay $1,650,000 to settle the receiver's claim to $1,723,495 of Techlantic sale proceeds they had received and set off against a debt they said Techlantic owed them, per the Fifth Report of the Receiver, Aug. 26, 2024, paras. 10–12, 24. That November the court authorized a $1,500,000 interim distribution to MBL, per the Interim Distribution Order, Nov. 1, 2024, para. 3, and extended examinations under oath to further former officers, directors and a customer, Justice Steele noting the receiver's account of books and records that were "complicated, difficult to interpret, unreliable and at times inconsistent and/or missing transactions or other relevant information," per the Endorsement of Justice Steele, Nov. 1, 2024, paras. 7–8.

A settlement approved on January 16, 2025 gives the estate 30% of any recovery, after funded litigation costs are repaid, on a receivable of approximately $7.9 million owed by Groupe Grégor Inc. to the former subsidiary Wholesale Express, per the Factum of the Receiver, Sept. 11, 2026, para. 51(g)(i). The receiver understands that Groupe Grégor has since failed to deliver its counter-expert report in the Quebec action, which has not been set down for trial, and by June 2026 the receiver had decided not to pursue any further potential claims, per the Eleventh Report of the Receiver, June 1, 2026, paras. 23, 25, 28.

The fee request covers September 1, 2024 to August 31, 2026. FTI billed $211,609.50 as receiver for 222.7 hours at an average of $950, plus $2,704 of forensic work; Goodmans billed $815,832.00 for 967.6 hours at an average of $843.15; and Woods LLP, Quebec counsel on the Wholesale Express and Groupe Grégor matters, billed $38,573.00 for work between September 9 and December 10, 2024. With disbursements and HST the three accounts total $248,939.06, $951,192.68 and $44,617.37, per the Affidavits of P. Bishop, Sept. 8, 2026, para. 4 and Exs. "B"–"C"; C. Descours, Sept. 2, 2026, paras. 4–5; L. Sévéno, Sept. 1, 2026, paras. 3–5, Motion Record of the Receiver, pp. 188, 245, 248, 261–262, 382–383 and the Twelfth Report of the Receiver, Sept. 8, 2026, paras. 34, 36. In the receivership's first eight months, to August 31, 2024, FTI had billed $789,286.50 for 930.7 hours as receiver and $654,355.00 for 922.4 hours of forensic work, and Goodmans $835,814.50 for 1,056.9 hours, per the Affidavits of P. Bishop and C. Descours, Motion Record of the Receiver (Fee Approval), Sept. 20, 2024, pp. 146–147, 222–223. Over a period nearly three times as long, the receiver has since recorded less than a quarter of its earlier hours, and its counsel about 90 fewer than before; the factum lists the later period's work as the additional examinations, the Trade X Action and the Groupe Grégor and D&O settlements, per the Factum of the Receiver, Sept. 11, 2026, para. 51(c).

The fee order would also approve the Seventh through Twelfth Reports and the receiver's conduct described in them, an approval only the receiver, in its personal capacity, may rely on, per the draft Fee Approval Order, para. 2, Motion Record of the Receiver, Tab 3, p. 23.