In a dramatic ten-day turnaround, the Superior Court of Quebec (Commercial Division) first dismissed an ex parte application to appoint an interim receiver,¹ then ultimately granted a revised application after a full hearing.² The two judgments, issued by Justice Luc Morin on August 19 and 29, 2025, highlight the delicate balance between the urgency of insolvency proceedings and the principles of judicial fairness.

A “regrettable” decision to not notify the Debtors

In the initial hearing on August 19, 2025, a bank holding security on movables (the “Bank”) sought an immediate interim receivership order in respect of Canadoil Forge Ltd. (“Canadoil”) and its American affiliate CFC Canadoil Inc. (“CFC”), without prior notification to those two debtors (the “Debtors”). The Bank asserted a loss of confidence in the Debtors’ management due to alleged misrepresentations in borrowing calculations, failure to disclose a payment plan with the Canada Revenue Agency, and a questionable transaction with a director of the Debtors.

Despite serious allegations, Justice Morin dismissed the application, expressing discomfort with the Bank's decision to proceed without notifying the Debtors. He described the appointment of an interim receiver as an “extraordinary and intrusive remedy”, adding that

The Court should never be compelled to issue an order that could have far-reaching and significant consequences for numerous stakeholders without a complete understanding of the full context.  Judiciaries must exercise prudence, ensuring they are not cornered or coerced into decisions, especially given the high stakes involved.

Despite those comments, Justice Morin did not close the door to the possibility of an ex parte order being rendered in an appropriate case. He carefully examined the facts before him and determined that such an order was not appropriate, in that:

• the Debtors had been collaborating with the Bank;
• the Debtors had engaged financial advisors and were taking the Bank’s requests seriously;
• the Debtors’ latest draft financial statements showed a profit;
• the broad proposed interim receivership powers included the power to assume control of the Debtors’ business in Canada and the United States, suspend employment and operations, issue subpoenas and examine directors and officers;
• a stay of proceedings was requested;
• an administrative charge was requested, notwithstanding the Debtors’ liquidity crisis;
• the Bank had no clear plan for the next steps;
• no notice had been issued under s. 244 of the Bankruptcy and Insolvency Act; and
• the Debtors had retained insolvency counsel, who had not been notified of the application.

The Court was also not convinced that it could issue a stay of proceedings in an interim receivership context.

Although Justice Morin referred to the lack of notice as “regrettable”, he ordered that his judgment be served upon the Debtors as a warning that management’s conduct would be under heightened scrutiny and that a hearing would be required if there was insufficient collaboration with the Bank.

“Take 2”: A More Convincing Picture

Ten days later, on August 29, 2025, the Bank returned to court, this time joined by the creditor holding security on immovable property (collectively, the “Applicants”). Opening his judgment with “Take 2, camera rolling”, Justice Morin noted, “Whereas the first act was precipitated, this second act is far more convincing”.

This time, the Debtors had been notified of the previous judgment and were represented by experienced attorneys who had filed a sworn declaration in respect of the Applicant’s application. However, instead of offering a comforting structured explanation regarding the serious allegations made by the Applicants, the Debtors focused on making recriminations against the Applicants. The Court was also informed that all directors and officers of Canadoil had resigned, and that there was no opposition or consent to the interim receivership from former management.

On this occasion, Justice Morin found that the Applicants’ position as senior secured lenders was deteriorating and may continue to do so in the absence of the orders sought.

Given these developments, Justice Morin granted the application and appointed FTI Consulting Canada Inc. as the interim receiver in respect of Canadoil (the Applicants had excluded CFC for the time being). In doing so, he raised the following important considerations:

• The question of the 100 employees currently working “fell through the proverbial cracks”. Having been advised that they “seemingly had been informed à la dépêche that they would not need to come to work next week”, Justice Morin stated that “Respectfully, this is not the way to treat employees in an insolvency situation”.
• The Court expected to receive clear guidance at the next hearing as to the plan for the operations and any kind of sale, investment and solicitation process to be contemplated.
• Proportionality militated against the appointment of two interim receivers (one for each Applicant), which would be more costly than one and add an unnecessary layer of complexity.

The interim receivership order rendered included a stay of proceedings.

These judgments exemplify the need for careful consideration when an ex parte hearing is being contemplated, to ensure that exceptional circumstances can be demonstrated to justify the granting of an extraordinary remedy without notice. They also emphasize the importance of due process, proportionality and a proper balancing of the interests of the various stakeholders in insolvency proceedings.

¹ Séquestre de Royal Bank of Canada, 2025 QCCS 2906.

² Séquestre de Canadoil Forge Ltd., 2025 QCCS 3066.