B E T W E E N :

Court File No. CV-13-10370-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE - COMMERCIAL LIST
BETWEEN:
IN THE MATTER OF THE RECEIVERSHIP OF SHS SERVICES
MANAGEMENT INC./GESTION DES SERVICES SHS INC. AND SHS
SERVICES LIMITED PARTNERSHIP
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 243
OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-5, AS
AMENDED; AND SECTION 101 OF THE COURTS OF JUSTICE ACT,
R.S.0.1990, c. C.43, AS AMENDED.
FACTUM OF THE RECEIVER
PRICEWATERHOUSECOOPERS INC.
(returnable March 19,2015)
MCMILLAN LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, ON, M5J 2T3
Brett Harrison LSUC# 44336A
Tel: 416.865.7932
Email: [email protected]
Fax: (416) 865-7048
Stephen Brown-Okruhlik
Tel: 416.865.7043
Email: stephen.brownokruhlik^mcmillan. ca
LSUC# 66576P
Counsel for the Receiver
TO:
SERVICE LIST
TABLE OF CONTENTS
Page
PART I - INTRODUCTION
1
PART II - THE FACTS
2
A.
INTRODUCTION
2
B.
LIEN AND TRUST CLAIMS RESOLUTION PROCESS
3
C.
FEES AND DISBURSEMENTS OF RECEIVER AND ITS COUNSEL6
PART III - ISSUES AND THE LAW
A.
THE DISPUTED LIEN CLAIMS HAVE BEEN FINALLY
DETERMINED
B.
THE RECEIVER'S ACTIVITIES, FEES AND DISBURSEMENTS
SHOULD BE APPROVED
7
8
PART IV - ORDERS REQUESTED
16
7
PART I - INTRODUCTION
1.
On this motion the Receiver seeks an order:'
(a)
Approving the Eleventh Report to the Court of the Receiver
dated February 6, 2015 (the "Eleventh Report") and the actions and
activities of the Receiver described therein;
(b)
Approving the fees and disbursements of the Receiver for the
period of September 1, 2014 through January 31, 2015, as set out in the
affidavit of Cameron Wilson sworn February 6, 2015 (the "Wilson
Affidavit");
(c)
Approving the fees and disbursements of the Receiver's legal
counsel, McMillan LLP ("McMillan"), for the period September 1,
2014 through January 31, 2015, as set out in the affidavit of Wael
Rostom sworn February 6, 2015 (the "Rostom Affidavit"); and
(d)
Declaring that certain claims that have been appealed pursuant to
paragraph 13 of the Order of Justice Patillo dated October 13, 2014
("Lien Claims Resolution Order") be finally dismissed in accordance
with the terms of that Order.
1
Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Receiver's Eleventh
Report to the Court dated February 6, 2015 or the Lien Claims Resolution Order, as applicable.
-2PARTII - THE FACTS
A.
INTRODUCTION
2.
On December 13, 2013 (the "Date of Appointment"), PricewaterhouseCoopers
Inc. ("PwC") was appointed as interim receiver under section 47 of the Bankruptcy and
Insolvency Act (the "BIA") and receiver (in both capacities referred to as the "Interim
Receiver") under section 101 of the Courts of Justice Act (the "Appointment Order")
of all of the assets, undertakings and properties of SHS Services Management
Inc./Gestion des Services SHS Inc. ("SHS Inc.") and SHS Services Limited Partnership
("SHS LP", collectively "SHS").
3.
On January 9, 2014, by order of this Court, PwC was discharged as Interim
Receiver and appointed as receiver under section 243 of the BIA (the "Receiver"),
without security, of the Property (the "Receivership Order").
4.
On July 30, 2014, the Court granted a lift stay order against each of SHS Inc. and
SHS LP for the sole purpose of filing, serving and proceeding with an application for the
Bankruptcy Orders adjudging each of the SHS Inc. and SHS LP bankrupt and appointing
PwC as Trustee of each of SHS Inc. and SHS LP. The Bankruptcy Orders were made on
July 31, 2014.
5.
Alaris Income Growth Fund ("Alaris") and Sears Canada Inc. ("Sears") each
hold lien registrations against SHS in Ontario and other provinces. However, as a result
-3-
of the issues with Alaris' security raised in the Fifth Report to the Court,2 Sears is the
principal secured creditor of SHS.
B.
LIEN AND TRUST CLAIMS RESOLUTION PROCESS
6.
On March 11, 2014, this Court granted an order establishing a process for
claimants to submit lien and trust claims to the Receiver in regards to SHS (the "Claims
Identification Order").
7.
On October 3, 2014, this Court granted an order approving a process for the
resolution of Lien Claims and Trust Claims submitted under the Claims Identification
Order (the "Lien Claims Resolution Order").
Lien Claims Resolution Order of Justice Brown, dated October 3, 2014, Motion Record of the
Receiver, Tab IB.
8.
The Lien Claims Resolution Order deemed all Trust Claims to be disallowed and
fully adjudicated. It also ordered that "the Receiver will schedule a motion for a date to
be determined by the Receiver to resolve any Claims that are subject of a Notice of
Revision or Disallowance that has been appealed by the applicable Claimant...".
Lien Claims Resolution Order of Justice Brown, dated October 3, 2014, Motion Record of the
Receiver, Tab IB, at para. 14.
9.
Following the Lien Claims Resolution Order, the Receiver reviewed all Claims
made under the Claims Identification Order. The Receiver issued Notices of
2
See discussion beginning at para. 26 of the Fifth Report of the Receiver dated June 19, 2014.
Disallowance where appropriate. The Receiver also issued Requests for Supporting
Information to certain claimants, as contemplated in the Lien Claims Resolution Order.
Eleventh Report, para 22.
10.
Some, but not all, of the Claimants who were issued Requests for Supporting
Information provided further supporting information regarding their Claims. The
Receiver then conducted a review of the remaining Lien Claims to determine if they
were eligible under governing provincial Lien Legislation.
Eleventh Report, para 23.
11.
Where appropriate, the Receiver issued a Notice of Revision or Disallowance to
the Claimants who had asserted a Lien Claim pursuant to the Claims Identification Order
that were rejected in whole or in part by the Receiver, providing the reasons for the
revision or rejection of the Lien Claim to the Claimant.
Eleventh Report, para 24.
12.
Following the issuance of the Notices of Revision or Disallowance, a total of 23
Claimants filed Dispute Notices with the Receiver, totalling $227,836 (the "Disputed
Claims").
Eleventh Report, para. 25.
13.
As a result of efforts by the Receiver to explain the reasons for disallowances of
claims, eight Claimants with Disputed Claims totalling $109,419 withdrew their Dispute
Notices. Accordingly, there remain 15 Disputed Claims with a value of $118,417.
-5Eleventh Report at paras. 26-28.
14.
There remain 15 Disputed Lien Claims. The remaining Disputed Lien Claims
have been denied by the Receiver because they contain one of the following deficiencies
under the Lien Claims Resolution Order:
(a)
The Dispute Notice in regards to the Claim was received later
than 15 days after the Receiver had issued the Notice of Revision or
Disallowance to the Claimant;
(b)
The Claim did not provide adequate documentation to prove a
Lien Claim; or
(c)
The Lien Claim did not have a registered lien pursuant to
applicable Lien Legislation, or the Claimant did not properly preserve
their lien pursuant to applicable Lien Legislation.
Eleventh Report, para. 30
15.
The Receiver is in the process of completing payments of the Proven Lien
Claims in accordance with the Lien Claims Resolution Order.
Eleventh Report, para 35.
16.
The Receiver has now substantially completed the Lien Claims Resolution
Process.
Eleventh Report, para. 14
-6C.
FEES AND DISBURSEMENTS OF RECEIVER AND ITS COUNSEL
17.
Pursuant to paragraphs 23 to 25 of the Receivership Order, the fees and
disbursements of the Receiver and its legal counsel are authorized to be paid on a
periodic basis subject to any final approval as ordered by the Court.
18.
The Receiver is seeking the approval of the Court for the fees and disbursements
of the Receiver and its counsel, McMillan LLP ("McMillan"), for the period from
September 1, 2014 to January 31, 2015 (the "Receivership Fee Period").
Eleventh Report at para. 59.
19.
During the Receivership Fee Period, the Receiver incurred fees of $187,209.45
and disbursements of $121.42. McMillan incurred fees of $117,191.70 and
disbursements of $3,694.05.
Eleventh Report at para. 60.
20.
The fees charged were at or below the Receiver's and McMillan's respective
standard billing rates. The disbursements of the Receiver and McMillan were charged in
amounts that were less than or equal to their respective standard charges.
Affidavit of Cameron Wilson, sworn February 6, 2015, at para. 12, Motion Record of the
Receiver, Tab 2J, p. 85; Affidavit of Wael Rostom, sworn February 6, 2015, at para. 10, Motion
Record of the Receiver, Tab 2K, p. 144.
21.
The fees and disbursements of both the Receiver and McMillan during the
Receivership Fee Period are reasonable in the circumstances and have been validly
incurred in accordance with the provisions of the Appointment Order and the
Receivership Order.
Eleventh Report at para. 64.
PART III - ISSUES AND THE LAW
22.
The Receiver's requested Order raises the following issues:
(a)
Should this Court find that the Disputed Lien Claims have been finally
determined?
(b)
Should this Court approve the fees of the Receiver and its counsel?
A.
THE DISPUTED LIEN CLAIMS HAVE BEEN FINALLY DETERMINED
23.
The Receiver submits that all remaining Disputed Lien Claims were properly
denied by the Receiver and that they have been fully determined and adjudicated
pursuant to the Notices of Revision or Disallowance issued by the Receiver in
accordance with the Lien Claims Resolution Order.
24.
The Lien Claims Resolution Order provided for a comprehensive and fair process
for the final determination of the Lien Claims. The Receiver has determined the
eligibility of the Lien Claims, including the Disputed Lien Claims, in accordance with
the Lien Claims Resolution Order, as set out in detail at paragraphs 14 to 35 of the
Eleventh Report.
25.
Accordingly, the Receiver respectfully requests that this Honourable Court deem
the Remaining Disputed Claims fully determined and adjudicated pursuant to the
Notices of Revisions or Disallowance.
-8-
B.
THE RECEIVER'S
ACTIVITIES,
FEES
AND
DISBURSEMENTS
SHOULD BE APPROVED
26.
The primary purpose of this receivership has been to facilitate the orderly sale of
SHS' business and Property. The activities of the Receiver, as set out in detail in the
Eleventh Report, were all necessary and undertaken in good faith in furtherance of the
Receiver's duties and powers pursuant to the Receivership Order. The Receiver submits
that such activities should be approved by this Court.
27.
This has not been a simple process. As highlighted in the Eleventh Report,
among other things, the Receiver has been:
a) Administering the Lien and Trust Claims Resolution Process,
including mailing and publishing notices, maintaining a register of
all proofs of claim received, completing initial checklists of
missing or incomplete supporting documentation to be provided,
reviewing additional supporting documentation provided by
claimants, and quantifying the Proven Lien Claims and the
Disputed Lien Claims as outlined in the Lien Claims Resolution
Process;
b) Responding to a motion for leave to commence a class action
proceeding by the moving party, Barry Patrick Kenny, against
SHS, Sears and certain directors or former directors of such
entities, on behalf of former employees of SHS;
c) Identifying and addressing a broad range of creditor claims made
against the Company, including claims pursuant to sections 81
and 81.1 of the BIA and claims of former employees pursuant to
section 81.4 of the BIA;
d) Reviewing the status of the Company's orders that were
purchased by third parties to be completed, and receiving payment
for such completed orders;
e) Communicating with Canada Revenue Agency ("CRA") and the
various provincial tax offices regarding completion of SHS's HST
returns for the period of the Receivership Proceedings to date;
f) Communications with CRA regarding completing a payroll audit;
g) Terminating contracts for certain services that are no longer
required by SHS or the Receiver, including utilities for the
premises which have now been vacated, and correspondence with
the various utility companies regarding reconciling and finalizing
the accounts of SHS or the Receiver related to the Receivership
Proceedings;
h) Communicating with the Commission des normes du travail du
Quebec (the "CNTQ") and their legal counsel with respect to
-10amounts owed to SHS's former employees resident in Quebec and
the claim asserted by CNTQ against SHS's estate;
i) Evaluating CNTQ's proof of claim and issuing a notice of
disallowance to disallow, in part, CNTQ's proof of claim,
pursuant to the provisions of the BIA;
j) Continuing the review and assessment of multiple proofs of claim
filed by SHS's former employees with respect to their
entitlements pursuant to section 81.4 of the BIA and, where
appropriate, issuing notices of disallowance to those employees
who claimed in excess of the amounts owed to them according to
SHS's payroll records;
k) Communications with Service Canada regarding proof of claims
filed by SHS's former employees in connection with the Wage
Earner Protection Program Act ("WEPPA") and continuing to
record subrogation letters (the "Subrogation Letters") as they are
received from Service Canada with respect to payments made to
employees under the WEPPA program;
1) Finalizing the calculation of the amounts owed to SHS' former
employees pursuant to SHS's payroll records and provincial
legislation for compliance with WEPPA requirements, and
-11corresponding with former employees of SHS regarding WEPPA
compliance and assisting employees with application process;
m) Arranging payment of the amounts owed to SHS' former
employees pursuant to section 81.4 of the BIA, including paying
Service Canada directly with respect to the Subrogation Letters
filed with the Receiver;
n) Responding to phone and e-mail inquiries from customers, former
employees, installers, contractors, third party licensees and
various other interested parties;
o) Other administrative matters incidental to the administration of
the estate, managing the preservation of the Company's books and
records, ongoing banking and cash management;
p) Retaining, on behalf of the Company, certain staff on a term and
task contract basis;
q) Recovering proceeds from the sale of certain customer orders to
third parties which were payable as those orders were completed;
r) Safeguarding the Company's computer server and certain books
and records in a temporary rented office;
-12s) Maintaining a website (www.pwc.com/car-shs), maintaining the
Receiver's phone hotline (1-855-376-8474) and its email address
([email protected]) for creditors, former employees,
customers and other stakeholders to obtain further information on
the Company and the Receivership Proceedings. The Receiver
continues to return calls and emails and make regular updates to
the website;
t) Liaising with Sears to assist in managing information requests
from former SHS customers seeking service and warranty work,
which Sears was performing;
u) Communicating with Sears and Alaris and their counsel regarding
the status of the Receivership Proceedings, ongoing matters and
providing requested analyses;
v) Resolving claims of suppliers for the repossession of unpaid
inventory pursuant to section 81.1 of the BIA;
w) Communicating with Licensees regarding the termination of their
agreements with SHS, and recovering amounts owed to SHS, if
any;
-13x) Completing records of employment, T4s and (where relevant)
T2200 forms for former SHS employees and corresponding with
former SHS employees regarding same;
y) Completing the Receiver's second interim statutory report
pursuant to section 246 (2) of the BIA and filing same with the
Office of the Superintendent of Bankruptcy;
z) Arranging payment of the amount owed to Sun Life Financial to
settle their claim filed pursuant to section 81.6 of the BIA; and
aa) Completing statutory and operational requirements; such as
ongoing
banking,
cash
management,
and
managing
the
preservation of the Company's books and records.
Eleventh Report at paras. 11 to 13
28.
This Court should approve the fees and disbursements of the Receiver and
McMillan for the Receivership Fee Period. These fees and disbursements are fair and
reasonable in the circumstances, and reflect both the Receiver's and McMillan's
standard billing rates.
29.
The accounts of both the Receiver and McMillan meet the technical requirements
established by prior case law:
-14(a)
the accounts disclose in detail the name of each person who rendered
services, the date on which the services were rendered, the time expended each
day, the rate charged, and the total charges for each of the categories of services
rendered;
(b)
the accounts are in a form that can be easily understood by those affected
by the receivership or by the judicial officer required to assess the accounts; and,
(c)
both the Receiver's and McMillan's accounts are verified by an affidavit.
Confectionately Yours Inc., Re, 2002 CarswellOnt 3002 (C.A.) at paras. 37-38 {Confectionately
Yours].
30.
A Receiver is entitled to be paid its fees and disbursements, along with those of
its counsel, where the amount charged is fair and reasonable in the circumstances. Courts
will consider the following factors in making this determination:
(a)
the nature, extent and value of the assets handled;
(b)
the complications and difficulties encountered;
(c)
the degree of assistance provided by the company, its officers or its
employees and the time spent;
(d)
the Receiver's knowledge, expertise and skill;
(e)
the diligence and thoroughness displayed;
-15(f)
the responsibilities assumed;
(g)
the results of the receiver's efforts; and
(h)
the cost of comparable services when performed in a prudent and
economical manner.
Confectionately Yours at para. 42; Belyea v. Federal Business Development Bank, 1983
CarswellNB 27 (C.A.) at para. 9.
31.
Any assessment of whether the Receiver's account is fair and reasonable must
focus on the circumstances as they existed at the time the fees and disbursements were
incurred, and not with the benefit of hindsight.
BT-PR Realty Holdings Inc. v. Coopers & Lybrand, 1997 CarswellOnt 1246 (Sup. Ct.
(Commercial List)) at para. 22 [BT-PR Reality Holdings].
32.
The Receiver has acted in good faith and in the interest of the creditors. Over the
course of the Receivership Proceedings, the Receiver has exercised the reasonable care,
supervision and control that an ordinary person would have given to SHS if it were his
or her own company.
BT-PR Reality Holdings at para. 22.
33.
The fees and disbursements of both the Receiver and McMillan reflect the firms'
standard billing rates and were validly incurred in accordance with the provisions of the
Appointment Order and the Receivership Order. In light of the circumstances of the SHS
Receivership, as set out further in the Eleventh Report, this Court should approve the
payment of the fees and disbursements incurred by the Receiver and McMillan.
-16PART IV - ORDERS REQUESTED
34.
For the reasons set forth herein and in the Eleventh Report, the Receiver
respectfully requests the granting of orders substantially in the form contained in the
Receiver's Motion Record.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 12th day of March, 2015.
Stephen Brown-Okruhlik
McMillan LLP
Counsel for the Receiver
-17SCHEDULE"A"
LIST OF AUTHORITIES
1.
Confectionately Yours Inc., Re, 2002 CarswellOnt 3002 (C.A.)
2.
Federal Business Development Bank, 1983 CarswellNB 27 (C.A.)
3.
BT-PR Realty Holdings Inc. v. Coopers & lybrand, 1997 CarswellOnt 1246
(Sup. Ct. (Commercial List))
IN THE MATTER OF THE RECEIVERSHIP OF SHS SERVICES MANAGEMENT INC./GESTION DES SERVICES SHS INC.
AND SHS SERVICES LIMITED PARTNERSHIP
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 243 OF THE BANKRUPTCY AND INSOLVENCY ACT,
R.S.C. 1985, c. B-5, AS AMENDED; AND SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.0.1990, c. C.43, AS AMENDED
Court File No. CV-13-10370-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
FACTUM OF THE RECEIVER
PRICEWATERHOUSECOOPERS INC.
(returnable March 19, 2015)
MCMILLAN LLP
181 Bay Street, Suite 4400
Brookfield Place
Toronto, ON M5J 2T3
BRETT HARRISON
Tel: 416.865.7932
Email:
LSUC# 44336A
STEPHEN B R O W N - O K R U H L I K
Tel: 416.865.7043
Email: stephen.brown-okruhlik(q),mcmillan.ca
LSUC# 66576P
Counsel for the Receiver
LEGAL 23568147.2