MOTION RECORD (BDO Canada Limited, in its capacity as Court-appointed Receiver) Returnable January 11, 2017

Transcription

1 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) Court File No.: CV CL B E T W E E N: EMMANUEL VILLAGE RESIDENCE INC. Applicant - and - ATTORNEY GENERAL OF ONTARIO Applicant - and WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent MOTION RECORD (BDO Canada Limited, in its capacity as Court-appointed Receiver) Returnable January 11, 2017 January 4, 2017 Thornton Grout Finnigan LLP Suite 3200, TD West Tower 100 Wellington Street West P.O. Box 329, Toronto-Dominion Centre Toronto, ON M5K 1K7 Tel: (416) Fax: (416) Leanne M. Williams (LSUC# 41877E) lwilliams@tgf.ca Asim A. Iqbal (LSUC# 61884B) aiqbal@tgf.ca Lawyers for BDO Canada Limited

2 TO: AND TO: THIS HONOURABLE COURT THE ATTACHED SERVICE LIST

3 SERVICE LIST (as at November 1, 2016) TO: THORNTON GROUT FINNIGAN LLP 100 Wellington Street West Suite 3200 P.O. Box 329, Toronto-Dominion Centre Toronto ON M5K 1K7 Fax: (416) Leanne M. Williams Tel: (416) Asim Iqbal Tel: (416) Lawyers for BDO Canada Limited AND TO: BDO CANADA LLP, BDO CANADA LTD 150 Caroline St. S., Suite 201 Waterloo, ON N2L 0A5 Fax: 1 (905) Michael Hanson Tel: 1 (519) mhanson@bdo.ca Brad Newton Tel: 1 (905) BNewton@bdo.ca The Court Appointed Receiver

4 - 2 - AND TO: BENNETT JONES LLP Suite 3400 One First Canadian Place P.O. Box 130 Toronto ON M5X 1A4 Fax: (416) Lincoln Caylor Tel: (416) caylorl@bennettjones.com Alan Gardner gardnera@bennettjones.com Jonathan Bell bellj@bennettjones.com Joseph N. Blinick blinickj@bennettjones.com Lawyers for the Plaintiffs in Court File No. CV CL AND TO: DLA PIPER (CANADA) LLP Barristers & Solicitors 1 First Canadian Place 100 King Street West, Suite 6000 P.O. Box 367 Toronto ON M5X IE2 Fax: (416) Bruce Darlington Tel: bruce.darlington@dlapiper.com Jennifer A. Whincup Tel: (416) jennifer.whincup@dlapiper.com Kim Hamill Tel: (416) kim.hamill@dlapiper.com Lawyers for the Applicant/Respondent

5 - 3 - AND TO: TORKIN MANES Barristers and Solicitors 151 Yonge Street Suite 1500 Toronto ON MSC 2W7 Fax: Jeffrey J. Simpson Tel: (416) jsimpson@torkinmanes.com Lawyers for HMT Holdings Inc. and Harbour Mortgage Corp. AND TO: MINISTRY OF FINANCE Legal Services Branch 33 King Street West 6th Floor Oshawa ON LIH 8H5 Fax: (905) Kevin O Hara Tel: (905) kevin.ohara@ontario.ca AND TO: MINISTRY OF NATIONAL REVENUE c/o Department of Justice Canada Ontario Regional Office The Exchange Tower 130 King Street West Suite 3400, Box 36 Toronto ON M5X IK6 Fax: (416) Diane Winters Tel: (416) diane.winters@justice.gc.ca Peter Zevenhuizen Tel: (416) peter.zevenhuizen@justice.gc.ca Lawyers for Canada Revenue Agency

6 - 4 - AND TO: RETIREMENT HOMES REGULATORY AUTHORITY Office of the Registrar 160 Eglinton Avenue East Fifth Floor Toronto ON M4P 3B5 Fax: (416) Heather Hogan Heather.Hogan@rhra.ca John Risk john.risk@rhra.ca Tel: (416) AND TO: RCAP LEASING INC North Service Road Suite 300 Burlington ON L7L 6Ml Fax: (905) Tel: Ext. 7 rcap.collections@rcapleasing.com Secured Party AND TO: KRONIS, ROTSZTAIN, MARGLES, CAPPEL LLP Sheppard Avenue West Toronto ON M2N 6S6 Fax: (416) Onofrio Ferlisi Tel: (416) Ext oferlisi@krmc.law.com Solomon Khan Tel: (416) Ext skhan@krmc-law.com Lawyers for The Bank of Nova Scotia

7 - 5 - AND TO: MADORIN, SNYDER LLP 55 King Street West, 6 th Floor P.O. Box 1234 Kitchener, ON N2G 4G9 Tim J. McGowan Tel: (519) tmcgowan@kw-law.com Dawn E. Phillips-Brown Tel: (519) dphillips-brown@kw-law.com AND TO: GOVERNMENT OF ONTARIO Legislative Bldg Queens Park Toronto, ON M7A 1A1 Lori Blaskavitch Tel: (416) Lori.Blaskavitch@ontario.ca

8 - 6 - AND TO: MINISTRY OF THE ATTORNEY GENERAL Civil Law Division Civil Remedies for Illicit Activities Office (CRIA) 720 Bay Street 8 th Floor Toronto ON M7A 2S9 Fax: (416) Gary Valiquette Tel: (416) gary.valiquette@ontario.ca Jennifer Malabar Tel: (416) jennifer.malabar@ontario.ca Ronald Carr Tel: (416) ronald.carr@ontario.ca Lawyers for the Attorney General of Ontario AND TO: OLDFIELD, GREAVES, D AGOSTINO P.O. Box King Street South Waterloo ON N2J 4X8 Fax: (519) Edward L. D Agostino Tel: (519) edagostino@watlaw.com Proposed Representative Counsel of EVH Residents AND TO: GOWLINGS WLG LLP 50 Queen Street North Suite 1020, P.O. Box 2248 Kitchener ON N2H 6P4 Fax: (519) Ross F. Earnshaw Tel: (519) ross.earnshaw@gowlingwlg.com

9 - 7 - AND TO: GOODMANS LLP Bay Adelaide Centre 333 Bay Street, Suite 3400 Toronto ON M5H 2S7 Fax: (416) Joe Latham Tel: (416) jlatham@goodmans.ca Jason Wadden Tel: (416) jwadden@goodmans.ca Lawyers for Revera Inc. AND TO: PROUSE, DASH & CROUCH LLP 50 Queen Street West Brampton ON L6X 4H3 Fax: (905) Dalkeith Palmer Tel: (905) dpalmer@pdclawyers.ca Lawyers for Simarjeet Singh AND TO: NAYMARK LAW 171 John Street, Suite 101 Toronto, Ontario M5T 1X3 Fax: Daniel Naymark Tel: (416) dnaymark@naymarklaw.com Ronak Shah rshah@naymarklaw.com Lawyers for Judith Hunking

10 - 8 - AND TO: CITY OF KITCHENER Revenue Division 200 King Street West Ground Floor Kitchener ON N2G 4G7 Tel: (519) AND TO: ONTARIO INC. Ajinderpal Bajaj 10 Professor s Lake Parkway Brampton ON L6S 4T5 AND TO: ONTARIO INC. Rajesh Chowdhry 26 Daleridge Crescent Brampton ON L6P 2X6 AND TO: ONTARIO INC. Inderpal S. Bajaj 97 Professor s Lake Parkway Brampton ON L6S 4P8 AND TO: Ajindrapal Singh 12 Celestial Court Brampton ON L7A 3R8 AND TO: Rajesh Chowdhry 26 Daleridge Crescent Brampton ON L6P 2X6 AND TO: Inderpal S. Bajaj 97 Professor s Lake Parkway Brampton ON L6S 4P8

11 Service List

12 INDEX

13 I N D E X TAB DOCUMENT 1. Notice of Motion dated January 4, Receiver s Sixth Report dated January 4, Draft Order

14 TAB 1

15 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) Court File No.: CV CL B E T W E E N EMMANUEL VILLAGE RESIDENCE INC. Applicant and ATTORNEY GENERAL OF ONTARIO Applicant and 1250 WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent NOTICE OF MOTION (Motion returnable on January 11, 2017) BDO Canada Limited, in its capacity as Court-appointed Receiver (the Receiver ) of the assets, undertakings and property of Emmanuel Village Residence Inc. ( EVR ), will make a motion before a Judge of the Ontario Superior Court of Justice (Commercial List) on Wednesday, January 11, 2017, at 10:00 o clock in the morning, or as soon after that time as the motion can be heard, at 330 University Avenue, in the City of Toronto. PROPOSED METHOD OF HEARING: The motion is to be heard orally.

16 - 2 - THE MOTION IS FOR: 1. An Order approving the Receiver s activities as set out in the Sixth Report of the Receiver dated January 4, 2017 (the Sixth Report ) and the fees and disbursements of the Receiver and its counsel, Thornton Grout Finnigan LLP ( TGF ), as further detailed below; 2. Advice and directions with respect to the payment of EVR s arms length creditors; and 3. Such further and other relief as counsel may request and this Honourable Court may deem just. THE GROUNDS FOR THE MOTION ARE: Background 4. Pursuant to the Order of Justice Penny dated June 24, 2016 (the Receivership Order ), the Receiver was appointed for the limited purpose of reviewing the appropriateness of the sales process carried out by EVR and its consultants resulting in the execution of an agreement of purchase and sale between EVR and Revera Inc. (the Purchaser ) for the sale of substantially all of EVR s assets (the Transaction ). 5. The Transaction was approved pursuant to the Approval and Vesting Order of this Court dated August 26, 2016 and closed on October 3, In accordance with the provisions of the Receivership Order and the Order dated July 14, 2016, the sale proceeds were paid to the Receiver pending further Order of the Court.

17 In accordance with the Distribution Order (as defined in the Sixth Report) and the Endorsement of the Court dated September 29, 2016, the Receiver distributed proceeds of the Transaction in an amount sufficient to repay the outstanding principal, interest and the majority of the costs owing to each of the secured creditors of EVR. The Receiver continues to hold approximately $3.47 million of the Transaction proceeds in accordance with the Appointment Order. Advice and Directions 7. The Receiver has not conducted a formal claims process, nor has the Receiver conducted an audit of the books and records of EVR. The Receiver, at the Court s direction, conducted an investigation to ascertain EVR s known creditors. Following the investigation, the Receiver estimates that EVR has third-party unsecured creditors, excluding income taxes, if any (collectively, the Unsecured Third Party Creditors ), with claims totaling approximately $1,285, The Unsecured Third Party Creditors include the plaintiffs in a civil action against several defendants, including EVR (the Investor Action ). The plaintiffs in the Investor Action (the Investor Plaintiffs ) obtained an Order providing for the payment of $1.2 million on the sale or refinancing of EVR (the Settlement Amount ). The Investor Plaintiffs have sought the payment of the Settlement Amount which is opposed by the Attorney General of Ontario. The Receiver supports this relief.

18 The Receiver seeks the advice and direction of this Court regarding the payment of the remaining Unsecured Third Party Creditors, the majority of which are unrelated third party trade payables. Receiver s Activities and the Receiver s and its Counsel s Fees and Disbursements 10. A summary of the activities of the Receiver and its counsel is outlined in the Sixth Report but includes: (a) attending on multiple court motions, chambers appointments and the judicial mediation; (b) assisting with closing the Transaction and completed the post-closing adjustments process; (c) (d) engaged with stakeholders to attempt to resolve outstanding issues; and at the Court s direction, conducted an investigation to ascertain EVR s known creditors. 11. In performing its duties pursuant to the Receivership Order and subsequent Orders of this Court, the Receiver and its counsel have incurred fees and disbursements as more particularly detailed in the Fee Affidavit of Michael Hanson sworn January 4, 2017 (the Hanson Fee Affidavit ), in support of the Receiver s fees and disbursements, and the Affidavit of Asim Iqbal sworn January 4, 2017 (the Iqbal Fee Affidavit ), in support of the Receiver s counsel s fees and disbursements. 12. The Receiver s fees for the Fee Period encompass 88.9 hours at an average hourly rate of $ and disbursements of $557.83, for a total of $40,187.43, prior to applicable

19 - 5 - taxes. The fees of TGF for the Fee Period encompass hours at an average hourly rate of $ and disbursements of $2, for a total of $91,910.20, plus $11, in HST. 13. The fees and disbursements of the Receiver and TGF are fair and reasonable in the circumstances. 14. The Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended. 15. Such further and other grounds as counsel may advise and this Court may permit. THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion: 1. the Sixth Report dated January 4, 2017; 2. the Hanson Fee Affidavit; 3. the Iqbal Fee Affidavit; and 4. such further and other material as counsel may advise and this Honourable Court may permit. January 4, 2017 Thornton Grout Finnigan LLP Suite 3200, TD West Tower 100 Wellington Street West P.O. Box 329, Toronto-Dominion Centre Toronto, ON M5K 1K7 Fax: (416) Leanne M. Williams (LSUC# 41877E) lwilliams@tgf.ca Tel: (416)

20 - 6 - Asim Iqbal (LSUC# 61884B) aiqbal@tgf.ca Tel: (416) Lawyers for BDO Canada Limited TO: AND TO: THIS HONOURABLE COURT THE ATTACHED SERVICE LIST

21 Court File No.: CV CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) Proceedings commenced at Toronto NOTICE OF MOTION (Motion returnable January 11, 2017) Thornton Grout Finnigan LLP Barristers and Solicitors Suite 3200, P.O. Box 329 Toronto-Dominion Centre Toronto, Ontario M5K 1K7 Leanne M. Williams (LSUC# 41877E) Tel: Lawyers for BDO Canada Limited EMMANUEL VILLAGE RESIDENCE INC. Applicant -and- ATTORNEY GENERAL OF ONTARIO Applicant -and WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent Asim Iqbal (LSUC# 61884B) Tel: Fax: _1.doc

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23 Court File No.: CV CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: EMMANUEL VILLAGE RESIDENCE INC. Applicant - and- ATTORNEY GENERAL OF ONTARIO Applicant - and WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) SIXTH REPORT TO THE COURT SUBMITTED BY BDO CANADA LIMITED, IN ITS CAP A CITY AS RECEIVER OF EMMANUEL VILLAGE RESIDENCE INC. Respondent January 04, 2017

24 Table of Contents 1.0 Background and Purpose Creditors Final Adjustment Amount Receiver's Statement of Receipts and Disbursements as at December 15, Receiver's and its Counsel's Activities and Accounts Recommendations... 16

25 Listing of Appendices Appendix "A" Appendix "B" Appendix "C" Appendix "D" Appendix "E" Appendix "F" Appendix "G" Appendix "H" Appendix "I" Appendix "J" Endorsement of Justice Newbould September 12, 2016 Endorsement of Justice Newbould November 21, 2016 Order of Justice Campbell May 17, 2013 Emmanuel Village Homes Noteholders Emmanuel Village Residence February 29, 2016 financial statements Summary of Emmanuel Village Residence unsecured debt November 25, 2016 Transaction Statement of Adjustments Statement of Receipts and Disbursements December 15, 2016 Fee Affidavit of Michael Hanson sworn January 4, 2017 Fee Affidavit of Asim Iqbal sworn January 4, 2017 Page 3

26 1.0 Background and Purpose 1.1 Background Mr. Bryan Hunking ("Mr. Hunking") and certain third party partners (the "Partners") acquired ownership of Emmanuel Village Homes (Kitchener) Inc. ("EVH") in October 2001, through the purchase of shares from its then owners. Emmanuel Village Residence Inc. ("EVR" or the "Company") was incorporated on October 25, 2001 to acquire lands from EVH on which a retirement residence apartment building (the "Residence") was being constructed. In December 2002, the portion of land on which the Residence was being built was severed and transferred to EVR. In March 2003, Mr. Hunking, through a numbered corporation, purchased the 75% interest of the Partners in EVR and became the sole shareholder (through a numbered corporation) and director of EVR. I. 1.2 Construction of the Residence began in the fall of 2001 and was completed in March, The Residence is located in Kitchener, Ontario, houses between 110 and 130 residents and has approximately 50 employees. The Residence has enjoyed an occupancy rate in excess of 90% since This rate is well above the average in the Waterloo Region and throughout Ontario. I. 1.3 Mr. Hunking was also involved with and is a director of other companies, including but not limited to, Netbusmodel Inc., Alcorp Financial Services Inc. ("Alcorp"), Help for Humanity Charity and Commonwealth Capital Corporation ("CCC"). Netbusmodel Inc. was incorporated in March 28, 2000 for the purpose of soliciting funds from third party investors. In 2004 and 2005, complaints were filed with the Waterloo Regional Police and the Peel Regional Police with respect to the investments in Netbusmodel Inc. I. 1.4 The Peel Regional Police retained Grant Thornton LLP ("GT LLP") to conduct a forensic audit of the accounts of Netbusmodel Inc. and Alcorp. GT LLP issued a report on January 25, 2010 (the "GT Report") which found that the money received from investors was moved between various corporate accounts and a portion of those funds were eventually funnelled into EVR and EVH, which was not the intention of the investors In 2005, a civil action was started against several defendants, including Mr. Hunking, the Partners, EVH and EVR (the "Investor Action"). The plaintiffs in the Investor Action (the "Investor Plaintiffs") alleged wrongdoing related to various financial transactions in Netbusmodel Inc. and CCC between 2000 and In 2010, criminal charges were laid against Mr. Hunking and the Partners. On or about the end of April, 2015, Mr. Hunking pied guilty to one count of fraud over $5,000. On June 10, 2016, Mr. Hunking was sentenced to five years imprisonment and is currently serving that sentence On November 30, 2012, a settlement was reached in the Investor Action between the Investor Plaintiffs and certain of the defendants (the "Settlement"), including Mr. Hunking and EVR (the "Hunking Defendants"). Under the terms of the Settlement, the Hunking Defendants agreed to pay the Investor Plaintiffs $1,300,000 immediately, with a further payment of $1,200,000 to be paid on the sale or refinancing of EVR (the "Second Payment"). The Settlement also provides for a further payment in the event that the sale price ofevr exceeds $21,000,000 after deduction of realtor and legal fees (the "Third Payment"). The Second Payment and the Third Payment, if any, have not been paid. Page4

27 1.1.8 We understand that historically, Mr. Hunking had significant day-to-day involvement in the operations of EVR and that Mr. Hunking's spouse ("Mrs. Hunking") has been employed by EVR since Further, we understand that Mr. Hunking ceased his management of EVR in and around March, 2014 due to health issues. At that time, Mrs. Hunking took over the management of the day-to-day operations of EVR. Mrs. Hunking informed the Receiver that Mr. Hunking was not directly involved with managing EVR immediately prior to the receivership, aside from maintaining his ownership of EVR and holding the position as an officer and director, but was consulted on a regular basis EVR is regulated under the Retirement Homes Act, 2010 (the "Act") and through the Retirement Homes Regulatory Authority (the "RHRA"). Businesses that meet the legal definition of a retirement home under the Act must apply to the RHRA for a licence. This licensing process began in August, l O On the basis of the charges laid against Mr. Hunking, Mr. Hunking' s guilty plea, and the agreed statement of facts in the criminal proceedings, the RHRA decided to revoke EVR's license to operate as a retirement home (the "License"). Accordingly, the RHRA sent a letter to EVR on March 1, 2016 enclosing an Order to Revoke a License (the "License Order"). The License Order set out, among other things, that EVR's License would be revoked, effective July 4, 2016, or a later date at the discretion of the RHRA As a result of the License Order, EVR executed an engagement letter dated March 3, 2016 (the "Sure Engagement") with Sure Mortgage, a division of Durham Capital Management Inc. ("Sure Mortgage"), to act as sole external advisor/broker to advise the Company on the potential sale, refinancing or recapitalization ofevr's business and assets. Sure Mortgage engaged the services of Raymond James Bank to assist with the marketing and sales efforts On March 30, 2016, EVR's primary mortgage lender, HMT Holdings Inc. ("HMT"), issued a demand for payment to EVR and a notice of intention to enforce its security pursuant to section 244(1) of the Bankroptcy and Insolvency Act. In HMT's letter to EVR, HMT cited the License Order issued by the RHRA as the default under the mortgage. HMT did not commence any enforcement proceedings and the Company has kept HMT abreast of its ongoing sales process and the results thereof J Based on management's discussions with the RHRA since the date of the License Order, on or about May 30, 2016, the RHRA extended the effective date of the License Order to September 2, 2016 to provide EVR sufficient time to complete a sale of the assets and business of EVR to a reputable service provider who had entered into a letter of intent with EVR On June 16, 2016, the Attorney General of Ontario (the "AGO") made a motion to the Ontario Superior Court of Justice in Kitchener, Ontario (the "Kitchener Court") for a 30-day Preservation Order pursuant to the Civil Remedies Act, 2001, on an ex parte basis (the "Preservation Order"), which was granted by Mr. Justice Sloan on June 16, Among other things, the Preservation Order enjoined any party from dealing with the Property, as defined in the Preservation Order, including, but not limited to, the sale or encumbrance of the Property, for a period of 30 days from the date of the Preservation Order. The Property encompasses the real property owned by both EVR and EVH. The Preservation Order required that the matter be returned to the Court on July 14, 2016 at which time a further motion to extend the Preservation Order would be heard. The Preservation Order has been registered on title to the Property. Page 5

28 1.2 Receivership Application and Sale of EVR l.2.1 On June 24, 2016, EVR's application to the Ontario Superior Court of Justice, Commercial List (the "Commercial List") for the appointment of BDO Canada Limited as receiver (the "Receiver") over EVR's assets, undertakings and properties pursuant to section 101 of the Courts of Justice Act, R.S.O. 1990, c. C43, as amended, was heard. The order was granted on June 24, 2016 (the "Receivership Order"). The Receiver's primary role pursuant to the Receivership Order was to review the sales process carried out by EVR and its consultants to determine if the process and its results were fair and reasonable in the circumstances. The Receivership Order specifically excluded any requirement for the Receiver to take possession of the assets and operations ofevr. EVR's management remained in control of the assets and operations ofevr. The Receivership Order also granted a priority charge over the assets of EVR in favour of the Receiver, its counsel and the counsels ofevr to a maximum of $350,000 (the "Administration Charge") for their collective outstanding fees and expenses incurred in respect of the receivership At the July 14, 2016 hearing before the Kitchener Court, it was agreed by all parties that the motion for the extension of the Preservation Order would be heard by the Commercial List on July 15, The Commercial List extended the Preservation Order on July 15, 2016 to August 8, With the consent of the parties, on July 22, 2016, the Commercial List issued an Order transferring the Kitchener action to the Commercial List and two consolidation orders enjoining the proceedings On July 27, 2016 the Commercial List issued a revised preservation order with the consent of all of the parties (the "Revised Preservation Order"). The Revised Preservation Order permits EVR's property to be sold with Court approval. It also requires that the proceeds of the sale be paid to the Receiver to be held pending further order of the Commercial List On August 12, 2016, EVR and Revera Inc. (the "Purchaser") entered into a purchase and sale agreement (the "APA") in respect of substantially all of the assets ofevr which was set to close on October 3, 2016 (the "Transaction"). On August 30, 2016, the RHRA issued a letter varying the License Order to provide for an extension of the effective revocation date of the License from September 2, 2016 to October 3, l.2.6 Pursuant to the Order of Mr. Justice Newbould dated August 19, 2016, representative counsel, Oldfield, Greaves D' Agostino LLP ("EVH Rep Counsel"), was appointed for the residents of EVH and their fees were added to the Administration Charge. The residents of EVH have certain rights to access programs and facilities at EVR and the APA required that their access be terminated after the closing of the Transaction. The APA also required that the EVH residents be represented in the sale approval motion as they would be affected by the Transaction On August 22, 2016 the Receiver issued its third report (the "Third Report") to the Court along with the supplement to the Third Report dealing principally with the Transaction and the marketing process conducted by EVR in respect of its business. EVR also requested an increase in the Administration Charge and the creation of a priority charge in favour of Sure Mortgage for the commissions to be earned upon the successful completion of the Transaction (the "Broker Charge") On August 26, 2016 the Court issued an approval and vesting order approving the Transaction and, upon delivery to the Purchaser of a Receiver's Certificate, vesting title to the purchased assets in the Purchaser free and clear of all encumbrances (the "Approval and Vesting Order"). The Approval and Vesting Order was subsequently amended by Order dated September 6, 2016 to Page6

29 replace Schedule D appended thereto which was inadvertently incorrect. The Court also issued an ancillary order on August 26, 2016 (the "Ancillary Order") approving, among other things, the Receiver's and its counsel's fees as set out in the Third Report. The requests for the increase in the Administration Charge and the creation of the Broker Charge were adjourned to September 6, Pursuant to the Order of Justice Newbould dated September 6, 2016, the Receiver was directed to pay the amount owing to Sure Mortgage in respect of the Sure Engagement (less $10,000) upon the successful closing of the Transaction Pursuant to the additional Order of Justice Newbould dated September 6, 2016 (the "Amending Order"), the Court, inter a/ia: varied the Receivership Order and the Revised Preservation Order to increase the Administration Charge to $700,000; and amended paragraph 26 of the Appointment Order to replace "the Receiver and its counsel" with the "Professional Group", which included DLA Piper (Canada) LLP ("DLA") and Madorin, Snyder LLP ("Madorin"), thus requiring DLA and Madorin to have their accounts passed by the Court I The reasons for the Amending Order are set out in the Endorsement of Justice Newbould released on September 12, 2016, a copy of which is attached as Appendix "A" Pursuant to the Order of Justice Newbould dated September 26, 2016 (the "Distribution Order"), the Court, inter a/ia: directed the Receiver to distribute funds from the proceeds of the Transaction to each of the secured creditors to repay the principal and interest of their loans to EVR; directed the Receiver to pay the fees and disbursements of the Professional Group and EVH Rep Counsel; and approved the fees and disbursements of the Receiver and its counsel On September 29, 2016, Justice Newbould issued an Endorsement: authorizing and directing the Receiver to pay: o o 11, to Sure Mortgage pursuant to its security; $104, to HMT in respect of its fees to August 30, 2016, with $34,000 to be held by the Receiver pending the consent of HMT and the AGO or further Order of the Court (the "HMT Disputed Amount"); granting a cost award to Sure Mortgage to be paid by the AGO directly in the amount of $8, in respect of its brokerage fees; authorizing the payment ofhmt's fees post-august 30, 2016, subject to the objection of the AGO, in which case, the Receiver shall seek further direction of the Court. It is the understanding of the Receiver that neither the payment of the HMT Disputed Amount nor the post-august 30, 2016 fees have been resolved as at the date of this Report On November 21, 2016, Justice Newbould issued an Endorsement, attached as Appendix "B", approving the fees ofevr's legal counsel DLA and Madorin in the amounts of $246, and Page 7

30 $102, plus HST, respectively, and authorizing their payment from the proceeds of the Transaction. 1.3 Amended Forfeiture Order Pursuant to an Order dated October 18, 2016, the Court extended the AGO's forfeiture application, previously only against the real property ofevr, to all of the assets ofevr, subject to the present and future Orders of the Court in respect of the distribution of the sale proceeds of the Transaction. Also on October 18, 2016, the Court issued an Order amending the Notice of Application for a Forfeiture Order under the Civil Remedies Act, Pursuant to the Order dated October 18, 2016, the Court preserved, pursuant to section 4(1) of the Civil Remedies Act, 2001, the payment to Mrs. Hunking in the amount of $150,000 under a noncompetition agreement to be signed by her in favour of the Purchaser (the "Non-Competition Payment") as part of the Transaction until November 25, The Order also directed Mrs. Hunking to pay the Non-Competition Payment to her counsel to be held in trust pending further Order of the Court Pursuant to the Order dated December 12, 2016, the Court directed that the Non-Competition Payment be forfeited as directed therein. 1.4 Investor Plaintiffs and Claims Process The Investor Plaintiffs also brought a motion originally returnable on September 6, 2016 (the "Investor Motion") seeking, among other things, a direction that, in accordance with the Order of Justice Campbell dated May 17, 2013 (the "Settlement Order"), the Receiver pay $1.2 million to the Investor Plaintiffs' counsel in trust for the Investor Plaintiffs immediately upon the closing of the Transaction. A copy of the Settlement Order is attached as Appendix "C". The Investor Motion was opposed by the AGO. Pursuant to the Endorsement of Mr. Justice Newbould, the Investor Motion was adjourned to September 26, 2016 upon the payment of$5,000 in costs by the AGO The Receiver brought a motion returnable on September 26, 2016 for, inter alia, advice and directions in respect to the formulation and implementation of a claims process. At the hearing of the September 26th motion, the Court verbally directed the AGO and the Receiver to attempt to arrive at a mutually agreed upon claims process. After meeting with the AGO, the Receiver determined that an agreement was not possible As a result of the inability to resolve an agreeable path forward, on October 18, 2016, the Court directed that counsel for Mr. and Mrs. Hunking, the AGO and its representative, with authority to deal with this matter, and the Receiver attend a mediation before Justice Newbould. The mediation took place on November 1, As a result of the mediation, the Court issued an Endorsement dated November 1, 2016 (the "November Endorsement") directing, inter a/ia, (a) the AGO to draw up documentation for execution by Mr. and Mrs. Hunking to give up their rights to the proceeds of sale, and (b) the Receiver to attempt through Mrs. Hunking and the Purchaser to get information on the creditors of EVR at the time of the sale On November 25, 2016, the parties attended a chambers appointment to, among other things, review the information obtained by the Receiver regarding the potential creditors of EVR at the Page 8

31 time of the Transaction and to seek further direction from the Court. Pursuant to the Court's Endorsement, the return of the Investor Motion was scheduled to be heard. 1.5 Purpose of the Receiver's Sixth Report The purpose of this sixth report to the Court (the "Sixth Report") is to: Provide the Court with the results of the Receiver's efforts to ascertain the quantum and identity of the unsecured creditors of EVR as at the date of the Transaction; To advise the Court of the results of the Final Adjustment Amount as defined in paragraph 3.l(c) of the APA; To obtain this Court's direction with respect to the payment of the arm's length creditors ofevr; To support the amended Investor Motion, as amended; and Obtain an Order approving the Receiver's activities as set out in the Sixth Report and the fees and disbursements of the Receiver and its counsel, Thornton Grout Finnigan LLP ("TGF"). Page9

32 2. 0 Creditors As more particularly described herein, the Receiver is currently holding approximately $3.47 million from the proceeds of the Transaction in accordance with the terms of the Receivership Order. With the exception of the amounts in dispute in respect of the fees of HMT, the secured creditors of EVR have been fully repaid As required pursuant to the November Endorsement, the Receiver obtained information from the following sources in determining the quantum and identity of the potential unsecured creditors of EVR: 1. the Purchaser; 11. legal counsel to EVR and Mrs. Hunking on behalf of EVR; m. the notes in respect of the liabilities in the February 29, 2016 Notice to Reader financial statements; and 1v. a former employee ofevr We note that the Purchaser provided copies of invoices to the Receiver in respect of certain of the outstanding accounts of EVR. The Receiver has not audited or otherwise verified the creditor information supplied and there has been no claims process to call for or validate claims. A summary of the information provided to the Receiver is as follows: 1. The Purchaser provided a workbook containing a spreadsheet detailing invoices for services provided to EVR prior to the closing date of the Transaction that remain outstanding. The spreadsheet provided a list of invoices totalling $14, Of those amounts, Kitchener Wilmot Hydro is the largest amount at $11, ii. iii. iv. Mrs. Hunking, via EVR's counsel, provided the following unsupported information: o a list of noteholders of EVH, attached as Appendix "D", totaling $714, who advanced funds to CCC; o o o the name of a creditor, "Lageer", who is owed $50,000 by EVR; the Ministry of Finance has not completed their Employer Health Tax audit but estimates that the liability could be in excess of $5,000; and Canada Revenue Agency has conducted an audit of source deductions and has found that $550 is outstanding. Mrs. Hunking advised that she believes that there were errors in the audit and that the amount outstanding is closer to $100. Counsel to EVR advised the Receiver that Canada Revenue Agency has completed its HST audit and that no money is owing in respect of HST. The Receiver understands that, on September 30, 2016, EVR paid a $20,000 retainer to its accountant, Tom Wilhelm Professional Corporation, to complete the 2017 fiscal year end and income tax returns that would include the taxes payable, if any, arising from the Transaction. The potential income tax liability is not yet known. v. On September 19, 2016, Mrs. Hunking advised the Receiver that the trade payables were $114, as at that date, but details were not provided. On November 7, 2016, Mrs. Hunking, through her counsel, provided copies of the September 30, 2016 and October 31, 2016 bank statements and cancelled cheques, which remain subject to an account reconciliation. It appears that the accounts payable that existed as at September 19, 2016 Page 10

33 may have been paid in full; however, an account reconciliation is required to determine the amount of outstanding cheques and to whom they may be payable, if any. The Receiver notes that the October 31, 2016 balance in the general and payroll accounts was $3,613 and $451, respectively. v1. A former employee of EVR notified the Receiver that she was terminated by EVR immediately prior to the Transaction. She claimed that she was owed severance and termination pay and that she notified the Ministry of Labour of her termination. She worked for EVR for approximately nine years and stated that she earned $33,000 per year. This information has not been independently verified by the Receiver. v11. Attached as Appendix "E" are EVR's financial statements dated February 29, The balance sheet lists $5,205,728 due to an unnamed related company. Note 6 to the financial statements indicates that no interest was paid on this amount during the year. Based on a comparison of EVR's financial statements to the financial statements of EVH, it appears that this amount is owing to EVH As noted above, the Settlement Order directs that EVR pay $1.2 million to the Investor Plaintiffs immediately upon the sale of EVR Based on the above and without the benefit of a claims bar process, EVR's unsecured debt before considering intercompany loans and income taxes, if any, is estimated to be $1,285,000. A summary of the potential unsecured creditors and related notes was previously provided to the Court on November 25, 2016 for the mediation hearing and is attached as Appendix "F" Based on the information obtained by the Receiver, which has not be independently verified, it appears that the Receiver is holding funds sufficient to pay the amounts owing pursuant to the Settlement Order and any outstanding unsecured arm's length creditors of EVR. The Receiver supports the relief sought by the Investor Plaintiffs and seeks advice and directions in respect of the payment of EVR's remaining arm's length creditors. Page 11

34 3.0 Final Adjustment Amount On closing the Transaction, counsel for the Purchaser and EVR agreed to the Statement of Adjustments attached as Appendix "G". As noted on the Statement of Adjustments, there were estimates provided for certain items which were adjustments to the purchase price on closing. The estimates were: Utilities Sysco Food Service Payroll Tenant extras Medical Pharmacies Termination Bookkeeping Total purchase price reduction of $51,400. $11,400 $25,000 $20,000 $(24,580) $19,000 $ Paragraph 3.l(c) of the APA requires the Receiver and the Purchaser to make a final one-time determination of the readjustment amount ("Final Adjustment Amount") on the date that is 60 days following the Closing Date The Purchaser has provided all of the information to reconcile the adjustments. The actual payments made or receipts received were: Utilities Sysco Food Service Payroll Tenant extras Medical Pharmacies Termination Bookkeeping (estimate) $11, $22, $18, $(20,508.48) $19, $ Actual purchase price reduction of $51, Therefore, the Final Adjustment Amount agreed to by the Receiver, counsel for EVR and the Purchaser is $ in favour of the Purchaser. The Receiver has refunded $ to the Purchaser thereby completing and closing the Transaction. Page 12

35 4.0 Receiver's Statement of Receipts and Disbursements as at December 15, Attached as Appendix "H" is the Receiver's statement of receipts and disbursements for the period from the Receivership Order to December 15, As of December 15, 2016, the Receiver had total receipts of $18,340,463 primarily from the closing of the Transaction. The Receiver has made the following disbursements: $458,750 in respect of commissions; $577,612 in respect of professional fees; $13,691,684 in respect of payments to secured creditors; and $134,642 in respect ofhst on goods and services. Accordingly, the net amount being held by the Receiver is $3,477,774. Page 13

36 5.0 Receiver's and its Counsel's Activities and Accounts 5.1 Pursuant to paragraph 26 of the Receivership Order, the Receiver and its counsel are required to pass their accounts before a judge of the Commercial List. The fees and disbursements of the Receiver and its counsel for the period from September 10, 2016 through to December 31, 2016 (the "Fee Period") are detailed in the attached affidavits of Michael Hanson and Asim Iqbal for the Receiver and its counsel, respectively. The affidavit of Michael Hanson is attached as Appendix "I" and the affidavit of Asim Iqbal is attached as Appendix "J". 5.2 In summary, during the Fee Period, the Receiver and its counsel: (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) prepared the Fifth and the Sixth Report; attended multiple court motions and chambers appointments; assisted with closing the Transaction; reviewed and opined on the validity of each secured creditor's security for distribution purposes; engaged with stakeholders to attempt to resolve issues surrounding the AGO's objections to the fees of certain secured creditors and EVR's counsel; distributed proceeds from the Transaction to the secured creditors' in accordance with the Distribution Order; completed a process with the Purchaser in respect of post-closing adjustments to the Purchase Price; worked with stakeholders, including the AGO, to achieve a resolution of certain issues surrounding EVH; attempted to negotiate a claims procedure that was mutually agreeable to the stakeholders and the AGO; attended a judicial mediation in respect of a claims process, which required two appearances before Justice Newbould; at the Court's direction, conducted an investigation to ascertain EVR's known creditors, as more particularly described in this Sixth Report; and corresponded with stakeholders in respect of these proceedings. 5.3 The Receiver's fees for the Fee Period encompass 88.9 hours at an average hourly rate of $ and disbursements of$557.83, for a total of$40,187.43, prior to applicable taxes. The Receiver is therefore requesting that this Court approve its total fees and disbursements inclusive of applicable taxes in the amount of $45, The fees of TGF for the Fee Period encompass hours at an average hourly rate of $ and disbursements of $2, for a total of $91,910.20, plus $11, in HST. The Receiver Page 14

37 is therefore requesting that this Honourable Court approve its counsel's total fees and disbursements inclusive of taxes in the amount of $103, The Receiver has reviewed the fees of TGF and is of the opinion that they are reasonable in the circumstances. Page 15

38 6.0 Recommendations 6.1 The Receiver respectfully recommends that the Court grant an Order: Directing the Receiver in respect of the payment of the arm's length creditors ofevr; Directing the Receiver to comply with the Settlement Order and making the payment required therein; and Approving the Receiver's activities as set out in the Sixth Report and the fees and disbursements of the Receiver and its counsel, TGF. All of which is respectfully submitted this 4th day of January, BDO CANADA LIMITED COURT-APPOINTED RECEIVER OF EMMANUEL VILLAGE RESIDENCE INC. Per: Page 16

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123 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST Court File No. CV CL THE HONOURABLE ) WEDNESDAY, THE 11 TH JUSTICE NEWBOULD ) DAY OF JANUARY, 2017 ) EMMANUEL VILLAGE RESIDENCE INC. and Applicant ATTORNEY GENERAL OF ONTARIO and Applicant 1250 WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent ORDER (Re: Approval of Sixth Report and Fees and Disbursements of Receiver and its Counsel) THIS MOTION made by BDO Canada Limited, in its capacity as Court-appointed receiver (the Receiver ) of the assets, undertakings and properties of Emmanuel Village Residence Inc. ( EVR ), was heard this day at 330 University Avenue, Toronto, Ontario. ON READING the Notice of Motion herein, the Sixth Report of the Receiver dated January 4, 2017 (the Sixth Report ), and on hearing the submissions of counsel for the Receiver, counsel for EVR, counsel for the Attorney General of Ontario and all other parties

124 - 2 - listed on the Counsel Slip, no one else appearing, although duly served as it appears from the Affidavit of Service of sworn on January, 2017, SERVICE 1. THIS COURT ORDERS that the time for service of this Motion Record is validated such that this motion is properly returnable today and hereby dispenses with further service thereof. APPROVAL OF FOURTH AND FIFTH REPORT 2. THIS COURT ORDERS that the Sixth Report and the conduct and activities of the Receiver described therein are approved. APPROVAL OF FEES AND DISBURSEMENTS 3. THIS COURT ORDERS that the fees and disbursements of the Receiver, being $40, in fees and disbursements plus HST of $5, totaling $45, as set out in the Affidavit of Michael Hanson sworn January 4, 2017, attached as Appendix I to the Sixth Report, are approved. 4. THIS COURT ORDERS that the fees and disbursements of the Receiver s counsel, Thornton Grout Finnigan LLP, being $91, in fees and disbursements plus HST of $11, totaling $103,826.35, as set out in the Affidavit of Asim Iqbal sworn January 4, 2017, attached as Appendix J to the Sixth Report, are approved.

125 Court File No.: CV CL ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST Proceedings commenced at Toronto ORDER Thornton Grout Finnigan LLP Barristers and Solicitors Suite 3200, P.O. Box 329 Toronto-Dominion Centre Toronto, Ontario M5K 1K7 Leanne M. Williams (LSUC# 41877E) Tel: Lawyers for BDO Canada Limited EMMANUEL VILLAGE RESIDENCE INC. Applicant -and- ATTORNEY GENERAL OF ONTARIO Applicant -and WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent Asim Iqbal (LSUC# 61884B) Tel: Fax:

126 Court File No.: CV CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) Proceedings commenced at Toronto MOTION RECORD (Motion returnable January 11, 2017) Thornton Grout Finnigan LLP Barristers and Solicitors Suite 3200, P.O. Box 329 Toronto-Dominion Centre Toronto, Ontario M5K 1K7 Leanne M. Williams (LSUC# 41877E) Tel: Lawyers for BDO Canada Limited EMMANUEL VILLAGE RESIDENCE INC. Applicant -and- ATTORNEY GENERAL OF ONTARIO Applicant -and WEBER STREET EAST, KITCHENER, ONTARIO OR THE PROCEEDS OF THE SALE THEREOF (IN REM) Respondent Asim Iqbal (LSUC# 61884B) Tel: Fax: _1.doc