superior court -and- ontario goudas food ... food products and investments limited respondent...
TRANSCRIPT
BETV/EEN:
Court File No. CV14-10680-00CL
ONTARIOSUPERIOR COURT OF' JUSTICE
(Commerciat List)
ROYAL BANK OF CANADA
-and-
GOUDAS FOOD PRODUCTS AND INVESTMENTS LIMITEDRespondent
Applicant
IN THE MATTER OF'AN APPLICATION PURSUANT TO SECTION 47OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-30 AS
AMENDED
MOTION RECORI)
September 15 ,2014 osLER, HOSKIN & HARCOURT LLPP.O Box 50, 1 First Canadian Place100 King Street V/estToronto, ON M5X 188
Shawn Irving (LSUC #50035U)Tel: 416.862.4733
Caitlin Fell (LSUC #60091H)Tel: 416.862.6434Fax: 416.862.6666
Lawyers for the Applicant,Royal Bank of Canada
INDEX
BETV/EEN:
TAB
Court File No. CV14-10680-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(Commercial List)
ROYAL BANK OF CANADA
-and-
GOUDAS FOOD PRODUCTS AND INVESTMENTS LIMITEDRespondent
Applicant
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IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS
AMENDED
TABLE OF CONTENTS
DOCUMENT
Notice of Motion, dated September 15 2014
Form of Order
Affidavit of Richard Hall, sworn September 15 2014
Exhibit "A" Initial Affidavit of Robert Kizell, sworn September I2014
Exhibit "B" Interim Receivership Order dated September 3 2014
Exhibit "C" Endorsement of Penny J. dated September 3 2014
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A
A
B
C
TAB 1
Court File No. CV-14-10680-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(Commercial List)
BETWEEN:
ROYAL BANK OF CANADA
Applicant
GOUDAS FOOD PRODUCTS AND INVESTMENTS LIMITED
Respondent
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47.I OFTHE BANKRUPTCY AND INSOLWNCY ACT, R.S.C. 1985, c. B-3, ASAMENDED
NOTICE OF MOTION(returnable Septemb er 16, 2014)
The Applicant, Royal Bank of Canada ("RBC"), will make a Motion to a Judge presiding
over the Commercial List on September 16,2014 at 10:00 a.m., or as soon after that time as the
Motion can be heard at the Court House, 330 University Avenue, Toronto Ontario.
PROPOSED METHOD OF HEARING: The Motion is to be heard orally.
THE MOTION IS F'OR:
1. An Order, substantially in the form attached hereto as Appendix "4". which
provides for, inter alia,the following relief:
and
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a
abridging the time for service of this Notice of Motion and Motion Record and
directing that any further service of the Notice of Motion and Motion Record be
dispensed with;
(b) declaring terminated the 30-day period in which Goudas Food Products and
Investments Limited ('oGoudas") has to f,rle a proposal, which 30-day period
commenced on August 29, 2014, pursuant to subsection 50.4(11) of the
Banlcruptcy and Insolvency Act, R.S.C. 1985 c. B-3, as amended ("BIA");
(c) in the altemative, an order declaring that the stay in the proposal proceedings of
Goudas no longer operates in respect of RBC pursuant to section 69.4 of the BIA;
and
(d) appointing Duff & Phelps Canada Restructuring Inc. (the "D&P") as receiver and
receiver and manager, without security, of all of the property, assets and
undertakings ("Property") of Goudas pursuant to subsection 243(l) of the BIA
and section 101 of the Courts of Justice Act (Ontario)("CJA"); and
such further and other relief as counsel may advise and to this Honourable Court
may seemlust.
THE GROUNDS FOR THE MOTION ARE:
1. Goudas' business involves the wholesale distribution of non-perishable canned,
bottled and packaged ethnic products to large grocery store chains and small neighbourhood
stores across Ontario and western Quebec;
(a)
)
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2. The principal assets of Goudas consist of inventory in the form of non-perishable
food product ("Inventory") as well as accounts receivables from the sale of Inventory;
3. Goudas has borrowed $12 million from RBC under an asset based loan (the
"Loan") pursuant to a Loan Agreement dated September 6, 2013 (as amended, the "Loan
Agreement");
4. As at September2,2014, approximately US$6,413,700 and CAD$3,982,850.15 in
principal plus interest and amounts on overdraft was outstanding under the Loan;
RBC holds various security in support of Goudas' obligations to RBC;
6. It recently came to the attention of RBC that Goudas has made material and
serious misrepresentations to RBC concerning the assets which comprise the borrowing base for
the Loan. Such misrepresentations enticed RBC to allow Goudas to make fuither draw downs
under the Loan;
7. Such misrepresentations, among other things, caused Goudas to be in default of
the Loan Agreement;
8. On August 29,2014, Goudas filed a Notice of Intention to make a Proposal under
subsection 50.4(1) of the BIA ("NOI");
9. On the same day, as a result of certain events of default under the Loan, including
the material misrepresentafions, RBC demaneleel immeelialo pa.-vment of all amounts outstanding
under the Loan and delivered a Notice of Intention to Enforce Security pursuant to section 244 of
the BIA;
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10. On September 3, 2014, upon application by RBC, this Honourable Court issued
an Order appointing D&P as the interim receiver (the "Interim Receiver") of the property of
Goudas under section 47.1 of the BIA;
11. The application to appoint the Interim Receiver was unopposed by Goudas;
12. Goudas' business has continued to deteriorate since the appointment of the
Interim Receiver;
13. On September 9, 2014, Goudas filed with the Official Receiver a cash flow
statement as part of its statutory requirements under the BIA. The cash flow statement reflects
an injection of fresh capital in the amount of $220,000 during the week of September 8,2014
and $520,000 between September 8 and 30, 2014. The source of such funding has not been
identified;
14. Neither RBC nor the Interim Receiver is aware of any injection of fresh capital in
Goudas during the week of September 8,2014;
15. The Interim Receiver was recently advised that funding will only be made
available to Goudas if RBC agrees not to seek the appointment of a receiver prior to September
30,2014;
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At no point has Goudas communicated to RBC the terms of any potential
Goudas has not acted and is not acting in good faith and with due diligence;
16.
proposal;
17.
18.
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RBC's has lost all confidence in Goudas and its management;
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19. RBC is the largest secured creditor of Goudas and holds a veto over any proposal
thatmay be filed by Goudas which includes RBC;
20. If included in a proposal filed by Goudas, RBC will not vote, under arry
circumstances, in favour of a proposal which that affects its rights as a creditor;
2t. RBC intends in all circumstances to enforce its security over Goudas;
22. Goudas has not provided evidence to the Interim Receiver or RBC that it has
suffrcient cash to operate in the normal course;
23. The continued operation of a stay of proceedings preventing RBC from enforcing
its security will be materially prejudicial to the rights of RBC;
24. The appointment of a receiver and receiver and manager is necessary in order to
allow RBC to rcalize on its security, preserve Goudas' assets and properly investigate the flow of
funds from Goudas to related parties and non-trade parties before any possibility of recovering
them is lost;
D&P is a licensed trustee under the BIA and has agreed to act as receiver, is so
appointed;
Sections 50.04(11),69.4 and243 of the BIA;
Sections 101 of the Courts of Justice Act;
The inherent jurisdiction of this Court;
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26.
27.
28.
29.
LEG¡^L l:32029542.1
Rules 1.04,2.01,3.02, and 37 of the Rules of Civil Procedure;
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30. The grounds as detailed in the First Report of the Interim Receiver; and
31 Such further and other grounds as counsel may advise and this Honourable Court
may permit.
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the
motion:
The Affidavit of Richard Hall sworn September 15,2014 (with exhibits);
First Report of the Interim Receiver dated September I5,20I4; and
Such materials as counsel may advise and this Honourable Court may permit.
September 15,2014 osLER, HOSKIN & HARCOURT LLPP.O. Box 50One First Canadian PlaceToronto, ON M5X lB8
Shawn T. Irving (LSUC# 50035U)Tel: 416-862-4733
Caitlin Fell (LSUC# 60091H)Tel: 416-862-6434Fax: 416-862-6666
Lawyers for Royal Bank of Canada
TO: GOUDAS F'OOD PRODUCTS AND INVESTMENTS LIMITED241 Snidercroft RoadConcord, ON L4K 2J8
Atiention: iohn SimmoncisEmail : j gs@acsimmondsandsons. com
AND TO: KYLE & van der STEEN LLP416 North Service Road East, Suite 300Oakville, ON L6H 5R2
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LEGAL 1132029542.1
AND TO:
AND TO:
AND TO:
AND TO:
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Attention: Robert W. V/ilsonTel: 905.842.2222Fax: 905.338.2301Email : rwilson@oakvillelawyers. ca
Lawyers for the Respondent, Goudas Food Productsand Investments Limited
DUFF'& PHELPS CANADA RESTRUCTURING INC.33 Bay Street, 14th FloorToronto, ON, M5H 2R2
Attention: Bobby KofmanTel: 416.932.6228Email : [email protected]
Interim Receiver
AIRD &BERLIS LLPBrookfield Place, 181 Bay StreetSuite 1800, Box 754Toronto, ON M5J 2T9
Attention: Steven Graffllan Aversa/Brett KenworthyTel: 4 1 6. 86 5.7 726 I 308213406Fax: 416.863.1515Emai I : s sr aff@,airdberli s. com
Lawyers for the Interim Receiver
MACPHERSON & ASSOCIATES INC.Trustee in Bankruptcy150 Ferrand Drive, Suite 900Toronto, ON, M3C 3E5
Attention: Jim MacphersonTel 647.497.9753Email: [email protected]
Proposal Trustee for Goudas and Breadko
FASKEN MARTINEAU LLP333 Bay Street, Suite 2400Bay Adelaide Centre, Box 20Toronto, ON M5H 2T6
LEGAL 1:32029542.1
Attention: Aubrey Kauffman
AND TO:
AND TO:
AND TO:
AND TO:
AND TO:
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Tel: 416.868.3538Fax: 416.364.7813Email : akauffman@fasken. com
Lawyers for 562444 Ontario Limited and 562445Ontario Limited
LOAD KING TRAILER RENTALS420 Rodinea RoadMaple, ON L6A 4P5
Attention: Brad McCaugheyEmail : bradmccau@bellnet. ca
WELLS F'ARGO CAPITAL FINANCE CORPORATION40 King Street West, s. 2500Toronto, ON, M5H 3Y2
CLE LEASING ENTERPRISES LIMITED3390 South Service Road,2nd levelBurlington, ON, L7N 3J5
BUSINESS DEVELOPMENT BANK OF CANADA305 Milner Avenue, Suite 112Toronto, ON, MIB 3V4
PETER GOUDAS & PATRICIA GOUDAS241 Snidercroft RoadConcord, ON, L4K 2J8
LEGAL 1:32029542.1
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TAB A
Court File No. CV-10680-00CL
ONTARIO
SUPERIOR COURT OF' JUSTICE
COMMERCIAL LIST
THE HONOURABLE ' ) TUESDAY, THE 13TH
JUSTICE O ) DAY OF SEPTEMBER, 20014
BETWEEN:
ROYAL BANK OF CANADA
Applicant
-and-
GOUDAS FOOD PRODUCTS AND INVESTMENTS LIMITED
Respondent
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47.1 OF THEBANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985' c. B-3, AS AMENDED
ORDER(Terminating Proposal and Appointing Receiver)
THIS MOTION made by the Applicant for an Order: (i) pursuant to subsection 50.4(11)
of the Banlcruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the "BIA") terminating
the thirty day period for the Respondent to file a proposal under the BIA and (ii) pursuant to
section 243(l) of the BIA and section 101 of the Courts of Justice lcl, R.S.O. 1990, c. C.43, as
)
LEGAL_I:3 1 8 14903.1
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amended (the "CJA") appointing Duff & Phelps Canada Restructuring Inc. ("D&P") as receiver
and receiver and manager (in such capacities, the "Receiver") without security, of all of the
assets, undertakings and properties of Goudas Food Products and Investments Limited (the
"Debtor") acquired for, or used in relation to a business carried on by the Debtor, was heard this
day at 330 University Avenue, Toronto, Ontario.
ON READING the affidavit of Robert Kizell sworn September 2,2014 and the Exhibits
thereto, the affidavit of Richard Hall sworn on September 15, 2014 and the Exhibits thereto and
the First Report of the Interim Receiver dated September 15, 2014 and hearing the submissions
of counsel for the Applicant, D&P in its capacity as interim receiver and proposed Receiver of
the Debtor, the Debtor and those other counsel listed on the Counsel Slip, no one appearing for
any other person on the service list, although duly served as appears from the affidavit of service
of INAME] sworn IDATE] and on reading the consent of D&P to act as the Receiver,
SERVICE
1. THIS COURT ORDERS that the time for service of the Notice of Motion and the
Motion Record is hereby abridged and validated so that this motion is properly returnable today
and hereby dispenses with fui'ther service thereof.
TERMINATION OF PROPOSAL PROCEEDINGS
2. THIS COURT ORDERS that the 30- day period in which the Debtor has to file a
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make an assignment in bankruptcy.
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APPOINTMENT
3. THIS COURT ORDERS that pursuant to subsection 243(1) of the BIA and
section 101 of the CJA, D&P is hereby appointed Receiver, without security, of all of the assets,
undertakings and properties of the Debtor acquired for, or used in relation to a business carried
on by the Debtor, including all proceeds thereof (the "Property").
RECEIVER'S PO\ilERS
4. THIS COURT ORDERS that the Receiver is hereby empowered and authorized,
but not obligated, to act at once in respect of the Property and, without in any way limiting the
generality of the foregoing, the Receiver is hereby expressly empowered and authorized to do
any of the following where the Receiver considers it necessary or desirable:
(a) to take possession of and exercise control over the Property and any and all
proceeds, receipts and disbursements arising out of or from the Property;
(b) to receive, preserve, and protect the Property, or any part or parts thereof,
including, but not limited to, the changing of locks and security codes, the
relocating of Property to safeguard it, the engaging of independent security
personnel, the taking of physical inventories and the placement of such insurance
coverage as may be necessary or desirable;
(c) to manage, operate, and carry on the business of the Debtor, including the powers
to enter into any agreements, incur any obligations in the ordinary course of
business, cease to carry on all or any part ofthe business, or cease to perform any
contracts of the Debtor;
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(d) to engage consultants, appraisers, agents, experts, auditors, accountants,
managers, counsel and such other persons from time to time and on whatever
basis, including on a temporary basis, to assist with the exercise of the Receiver's
powers and duties, including without limitation those confened by this Order;
(e) to purchase or lease such machinery, equipment, inventories, supplies, premises
or other assets to continue the business of the Debtor or any part or parts thereof;
(Ð to receive and collect all monies and accounts now owed or hereafter owing to the
Debtor and to exercise all remedies of the Debtor in collecting such monies,
including, without limitation, to enforce any security held by the Debtor;
(g) to settle, extend or compromise any indebtedness owing to the Debtor;
(h) to execute, assign, issue and endorse documents of whatever nature in respect of
any of the Property, whether in the Receiver's name or in the name and on behalf
of the Debtor, for any purpose pursuant to this Order
(Ð to initiate, prosecute and continue the prosecution of any and all proceedings and
to defend all proceedings now pending or hereafter instituted with respect to the
Debtor, the Property or the Receiver, and to settle or compromise any such
proceedings. The authority hereby conveyed shall extend to such appeals or
applications for judicial review in respect of any order or judgment pronounced in
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c) to market any or all of the Property, including advertising and soliciting offers in
respect of the Property or any part or parts thereof and negotiating such terms and
conditions of sale as the Receiver in its discretion may deem appropriate;
(k) to sell, convey, transfer, lease or assign the Property or any part or parts thereof
out ofthe ordinary course ofbusiness,
(i) without the approval of this Court in respect of any transaction not
exceeding $200,000, provided that the aggregate consideration for all such
transactions does not exceed 500,000; and
(iÐ with the approval of this Court in respect of any transaction in which the
purchase price or the aggregate purchase price exceeds the applicable
amount set out in the preceding clause;
and in each such case notice under subsection 63(a) of the Ontario Personal
Property Security Act, shall not be required, and in each case the Ontario Bulk
Sales Act shall not apply.
(l) to apply for any vesting order or other orders necessary to convey the Property or
any part or parts thereofto a purchaser or purchasers thereof, free and clear ofany
liens or encumbrances affecting such Property;
(m) to report to, meet with and discuss with such affected Persons (as defined below)
as the Receiver deems appropriate on all matters relating to the Property and the
receivership, and to share information, subject to such terms as to confidentiality
as the Receiver deems advisable'
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(n) to register a copy of this Order and any other Orders in respect of the Property
against title to any of the Property;
(o) to apply for any permits, licences, approvals or permissions as may be required by
any govemmental authority and any renewals thereof for and on behalf of and, if
thought desirable by the Receiver, in the name of the Debtor;
(p) to enter into agreements with any trustee in bankruptcy appointed in respect of the
Debtor, including, without limiting the generality of the foregoing, the ability to
enter into occupation agreements for any property owned or leased by the Debtor;
(q) to exercise any shareholder, partnership, joint venture or other rights which the
Debtor may have;
G) to exercise any and all rights and remedies that the Debtor may have against
Breadko National Baking Ltd. ("Breadko") in respect of any debt, security
interest, encumbrance or otherwise and in furtherance of such, to investigate the
business and affairs of Breadko;
(s) to take any steps reasonably incidental to the exercise of these powers or the
performance of any statutory obligations
and in each case where the Receiver takes any such actions or steps, it shall be
exclusively authorized and empowered to do so, to the exclusion of all other
Persons (as defined below), including the Debtor, and without interference from
any other Person.
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DUTY TO PROVIDE ACCESS AND CO.OPERATION TO THE RECEIVER
5. THIS COURT ORDERS that (i) the Debtor, (ii) all of its current and former
directors, officers, employees, agents, accountants, legal counsel and shareholders, and all other
persons acting on its instructions or behalf, and (iii) all other individuals, firms, corporations,
governmental bodies or agencies, or other entities having notice of this Order (all of the
foregoing, collectively, being "Persons" and each being a "Person") shall forthwith advise the
Receiver of the existence of any Property in such Person's possession or control, shall grant
immediate and continued access to the Property to the Receiver, and shall deliver all such
Property to the Receiver upon the Receiver's request.
6. THIS COURT ORDERS that all Persons shall forthwith advise the Receiver of
the existence of any books, documents, securities, contracts, orders, corporate and accounting
records, and any other papers, records and information of any kind related to the business or
affairs of the Debtor, and any computer programs, computer tapes, computer disks, or other data
storage media containing any such information (the foregoing, collectively, the "Records") in
that Person's possession or control, and shall provide to the Receiver or permit the Receiver to
make, retain and take away copies thereof and grant to the Receiver unfettered access to and use
of accounting, computer, software and physical facilities relating thereto, provided however that
nothing in this paragraph 6 or in paragraph 7 of this Order shall require the delivery of Records,
or the granting of access to Records, which may not be disclosed or provided to the Receiver due
to the privilege attaching to solicitor-client communication or due to statutory provisions
prohibiting such disclosure.
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7. THIS COURT ORDERS that if any Records are stored or otherwise contained on
a computer or other electronic system of information storage, whether by independent service
provider or otherwise, all Persons in possession or control of such Records shall forthwith give
unfettered access to the Receiver for the pu{pose of allowing the Receiver to recover and fully
copy all of the information contained therein whether by way of printing the information onto
paper or making copies of computer disks or such other manner of retrieving and copying the
information as the Receiver in its discretion deems expedient, and shall not alter, erase or destroy
any Records without the prior written consent of the Receiver. Further, for the purposes of this
paragraph, all Persons shall provide the Receiver with all such assistance in gaining immediate
access to the information in the Records as the Receiver may in its discretion require including
providing the Receiver with instructions on the use of any computer or other system and
providing the Receiver with any and all access codes, account names and account numbers that
may be required to gain access to the information.
8. THIS COURT ORDERS that the Receiver shall provide each of the relevant
landlords with.notice of the Receiver's intention to remove any fixtures from any leased
premises at least seven (7) days prior to the date of the intended removal. The relevant landlord
shall be entitled to have a representative present in the leased premises to observe such removal
and, if the landlord disputes the Receiver's entitlement to remove any such fixture under the
provisions of the lease, such fixture shall remain on the premises and shall be dealt with as
agreed between any applicable secured creditors, such landlord and the Receiver, or by further
Order of this Court upon application by the Receiver on at least two (2) days notice to such
landlord and any such secured creditors.
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9. THIS COURT ORDERS AND DIRECTS those entities listed in Schedule B
hereto to promptly provide the Receiver, upon request, with any information, documentation,
records or correspondence requested by the Receiver in order for the Receiver to obtain details
with respect to the nature of the transactions identified in the report of D&P dated September 2,
2014.
NO PROCEEDINGS AGAINST THE RECEIVER
10. THIS COURT ORDERS that no proceeding or enforcement process in any court
or tribunal (each, a "Proceeding"), shall be commenced or continued against the Receiver except
with the written consent of the Receiver or with leave of this Court.
NO PROCEEDINGS AGAINST THE DEBTOR OR THE PROPERTY
I l. THIS COURT ORDERS that no Proceeding against or in respect of the Debtor or
the Property shall be commenced or continued except with the written consent of the Receiver or
with leave of this Court and any and all Proceedings currently under way against or in respect of
the Debtor or the Property are hereby stayed and suspended pending further Order of this Court.
NO EXERCISE OF RIGHTS OR REMEDIES
12. THIS COURT ORDERS that all rights and remedies against the Debtor, the
Receiver, or affecting the Property, are hereby stayed and suspended except with the written
consent of the Receiver or leave of this Court, provided however that this stay and suspension
does not apply in respect of any "eligible financial contract" as defined in the BIA, and further
provided that nothing in this paragraph shall (i) empower the Receiver or the Debtor to carry on
any business which the Debtor is not lawfully entitled to carry on, (ii) exempt the Receiver or the
LEGAL l:31814903.1
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Debtor from compliance with statutory or regulatory provisions relating to health, safety or the
environment, (iii) prevent the filing of any registration to preserve or perfect a security interest,
or (iv) prevent the registration of a claim for lien.
13. THIS COURT ORDERS AND DIRECTS that Load King Trailer Rentals Ltd.
("Load King") shall promptly return to the Debtor's premises at the property municipally known
as 241 Snidercroft Rd., Toronto, Ontario, the three trailers that Load King leased to the Debtor
and which Load King removed from the Debtor's premises, provided that Load King is paid any
outstanding lease payments that have accrued from and after September 3,2014.
NO INTERFERENCE WITH THE RECEIVER
14. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter,
interfere with, repudiate, terminate or cease to perform any right, renewal right, contract,
agreement, licence or permit in favour of or held by the Debtor, without written consent of the
Receiver or leave of this Court.
CONTINUATION OF SERVICES
15. THIS COURT ORDERS that all Persons having oral or written agreements with
the Debtor or statutory or regulatory mandates for the supply of goods andlor services, including
without limitation, all computer software, communication and other data services, centralized
banking services, payroll services, insurance, transportation services, utility or other services to
+L^ Tl^L+^- ^-^ L^-^L-, -^^+-^:^^.J --.^+.1.1 f.--¿1^^-. ^--l^-. ^c +1^:^ r\^---] C,-^--^ l:-^^-^+:-^--:-^- ^1+^--2-^-Lrrç l-rnuLrrl anI' uçrçuy rçsll¡1llrçLl ullLll turulçr \_rluçr uI ttlls \-uult llulll LllsuulrurlulrlB,4rtçrruB,
interfering with or terminating the supply of such goods or services as may be required by the
Receiver, and that the Receiver shall be entitled to the continued use of the Debtor's current
telephone numbers, facsimile numbers, internet addresses and domain names, provided in each
LEGAL_I:3 1 8 14903.1
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case that the normal prices or charges for all such goods or services received after the date of this
Order are paid by the Receiver in accordance with normal payment practices of the Debtor or
such other practices as may be agreed upon by the supplier or service provider and the Receiver,
or as may be ordered by this Court.
RECEIVER TO HOLD FUNDS
16. THIS COURT ORDERS that all funds, monies, cheques, instruments, and other
forms of payments received or collected by the Receiver from and after the making of this Order
from any source whatsoever, including without limitation the sale of all or any of the Property
and the collection of any accounts receivable in whole or in part, whether in existence on the date
of this Order or hereafter coming into existence, shall be deposited into one or more new
accounts to be opened by the Receiver (the "Post Receivership Accounts") and the monies
standing to the credit of such Post Receivership Accounts from time to time, net of any
disbursements provided for herein, shall be held by the Receiver to be paid in accordance with
the terms of this Order or any further Order of this Court.
EMPLOYEES
17. THIS COURT ORDERS that all employees of the Debtor shall remain the
employees of the Debtor until such time as the Receiver, on the Debtor's behalf, may terminate
the employment of such employees. The Receiver shall not be liable for any employee-related
liabilities, including any successor employer liabilities as provided for in section 14.06(L2) of
the BIA, other than such amounts as the Receiver may specifically agree in writing to pay, or in
respect of its obligations under sections 81 .4(5) or 81 .6(3) of the BIA or under the I4røge Earner
Protection Program Act.
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PIPEDA
18. THIS COURT ORDERS that, pursuant to clause 7(3Xc) of the Canada Personal
Information Protection and Electronic Documents Act, the Receiver shall disclose personal
information of identifiable individuals to prospective purchasers or bidders for the Property and
to their advisors, but only to the extent desirable or required to negotiate and attempt to complete
one or more sales of the Property (each, a "Sale"). Each prospective purchaser or bidder to
whom such personal information is disclosed shall maintain and protect the privacy of such
information and limit the use of such information to its evaluation of the Sale, and if it does not
complete a Sale, shall retum all such information to the Receiver, or in the alternative destroy all
such information. The purchaser of any Property shall be entitled to continue to use the personal
information provided to it, and related to the Property purchased, in a manner which is in all
material respects identical to the prior use of such information by the Debtor, and shall return all
other personal information to the Receiver, or ensure that all other personal information is
destroyed.
LIMITATION ON ENVIRONMENTAL LIABILITIES
19. THIS COURT ORDERS that nothing herein contained shall require the Receiver
to occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
LEGAL l:31814903.1
-13-
Canadian Environmentøl Protection Act,the Ontario Environmentsl Protection Act,the Ontario
Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Receiver from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Receiver shall not, as a result of this Order or anything done in
pursuance of the Receiver's duties and powers under this Order, be deemed to be in Possession
of any of the Property within the meaning of any Environmental Legislation, unless it is actually
in possession.
LIMITATION ON THE RECEIVER'S LIABILITY
20. THIS COURT ORDERS that the Receiver shall incur no liability or obligation as
a result of its appointment or the carrying out the provisions of this Order, save and except for
any gross negligence or wilful misconduct on its part, or in respect of its obligations under
sections 81.4(5) or 81'.6(3) of the BIA or under the V/age Earner Protection Program Act.
Nothing in this Order shall derogate from the protections afforded the Receiver by section 14.06
of the BIA or by any other applicable legislation.
RECEIVER'S ACCOUNTS
21. THIS COURT ORDERS that the Receiver and counsel to the Receiver shall be
paid their reasonable fees and disbursements, in each case at their standard rates and charges
unless otherwise ordered by the Court on the passing of accounts, and that the Receiver and
counsel to the Receiver shall be entitled to and are hereby granted a charge (the "Receiver's
Charge") on the Property, as security for such fees and disbursements, both before and after the
making of this Order in respect of these proceedings, and that the Receiver's Charge shall form a
LEGAT I 31814903.1
-14-
first charge on the Property in priority to all security interests, trusts, liens, charges and
encumbrances, statutory or otherwise, in favour of any Person, but subject to sections 14.06(7),
81.4(4), and 81.6(2) of the BIA.
22. THIS COURT ORDERS that the Receiver and its legal counsel shall pass its
accounts from time to time, and for this purpose the accounts of the Receiver and its legal
counsel are hereby referred to a judge of the Commercial List of the Ontario Superior Court of
Justice.
23. THIS COURT ORDERS that prior to the passing of its accounts, the Receiver
shall be at liberty from time to time to apply reasonable amounts, out of the monies in its hands,
against its fees and disbursements, including legal fees and disbursements, incurred at the
standard rates and charges of the Receiver or its counsel, and such amounts shall constitute
advances against its remuneration and disbursements when and as approved by this Court.
FUNDING OF THE RECEIVERSHIP
24. THIS COURT ORDERS that the Receiver be at liberty and it is hereby
empowered to borrow by way of a revolving credit or otherwise, such monies from time to time
as it may consider necessary or desirable, provided that the outstanding principal amount does
not exceed $250,000 (or such greater amount as this Court may by further Order authorize) at
any time, at such rate or rates of interest as it deems advisable for such period or periods of time
as it may arrange, for the purpose of funding the exercise of the powers and duties conferred
upon the Receiver by this Order, including interim expenditures. The whole of the Property shall
be and is hereby charged by way of a f,rxed and specific charge (the "Receiver's Borrowings
Charge") as security for the payment of the monies borrowed, together with interest and charges
LEGAL_l:31814903.1
-15-
thereon, in priority to all security interests, trusts, liens, charges and encumbrances, statutory or
otherwise, in favour of any Person, but subordinate in priority to the Receiver's Charge and the
charges as set out in sections 14.06(7),81.4(4), and 81.6(2) of the BIA.
25. THIS COURT ORDERS that neither the Receiver's Bonowings Charge nor any
other security granted by the Receiver in connection with its borrowings under this Order shall
be enforced without leave of this Court.
26. THIS COURT ORDERS that the Receiver is at liberty and authorized to issue
certificates substantially in the form annexed as Schedule "4" hereto (the "Receiver's
Certificates") for any amount borrowed by it pursuant to this Order.
27. THIS COURT ORDERS that the monies from time to time borrowed by the
Receiver pursuant to this Order or any further order of this Court and any and all Receiver's
Certificates evidencing the same or any part thereof shall rank on a pøri passu basis, unless
otherwise agreed to by the holders of any prior issued Receiver's Certificates.
SERVICE AND NOTICE
28. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
"Protocol") is approved and adopted by reference herein and, in this proceeding, the service of
documents made in accordance with the Protocol (which can be found on the Commercial List
website at http://www.ontariocourts.calscj/practice/practice-directions/toronto/e-service-
protocoii) shaii be vaii<i anci effective service. Subject to Ruie i7.05 this Orcíer shaii constitute
an order for substituted service pursuant to Rule 16.04 of the Rules of Civil Procedure. Subject to
Rule 3.01(d) of the Rules of Civil Procedure and paragraph 2I of the Protocol, service of
LEGAI l:11814903.1
-t6-
documents in accordance with the Protocol will be effective on transmission. This Court further
orders that a Case Website shall be established in accordance with the Protocol.
29. THIS COURT ORDERS that if the service or distribution of documents in
accordance with the Protocol is not practicable, the Receiver is at liberty to serve or distribute
this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier, personal
delivery or facsimile transmission to the Debtor's creditors or other interested parties at their
respective addresses as last shown on the records of the Debtor and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
SEALING
30. THIS COURT ORDERS that Confidential Appendix o'1" to the First Report of
D&P, in its capacity as interim receiver of the Debtor, dated September 15, 2014, be and is
hereby sealed until further Order of the Court.
GENERAL
31. THIS COURT ORDERS that the Receiver may from time to time apply to this
Court for advice and directions in the discharge of its powers and duties hereunder.
32. THIS COURT ORDERS that nothing in this Order shall prevent the Receiver
from acting as a trustee in bankruptcy of the Debtor.
LEGAL 1:31814903.1
-t7 -
33. THIS COURT ORDERS that the title of proceedings in the within proceedings be
and is amended to read as follows:
BETWEEN
ROYAL BANK OF'CANADA
Applicant
-and-
GOUDAS F'OOD PRODUCTS AND INVESTMENTS LIMITED
Respondent
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47.1 OF THEBANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED
AND IN THE MATTER OF SECTION 243(l) OF THE BANKRUPTCY ANDINSOLVENCY ACT, R.S.C. 1985, c. B-30 AS AMENDED AND SECTION 101 OF THECOURTS OF JUSTICE ACT, R.S.O. 1990, c. C43, AS AMENDED
34. THIS COURT HEREBY REQUESTS the aid and recognition of any court,
tribunal, regulatory or administrative body having jurisdiction in Canada or in the United States
to give effect to this Order and to assist the Receiver and its agents in carrying out the terms of
this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully
requested to make such orders and to provide such assistance to the Receiver, as an officer of this
Court, as may be necessary or desirable to give effect to this Order or to assist the Receiver and
its agents in carrying out the terms of this Order.
LEGAL_I:3 1 8 14903.1
-18-
35. THIS COURT ORDERS that the Receiver be at liberty and is hereby authorized
and empowered to apply to any court, tribunal, regulatory or administrative body, wherever
located, for the recognition of this Order and for assistance in carrying out the terms of this
Order, and that the Receiver is authorized and empowered to act as a representative in respect of
the within proceedings for the purpose of having these proceedings recognized in a jurisdiction
outside Canada.
36. THIS COURT ORDERS that the Plaintiff shall have its costs of this motion, up to
and including entry and service of this Order, provided for by the terms of the Plaintiff s security
or, if not so provided by the Plaintiff s security, then on a substantial indemnity basis to be paid
by the Receiver from the Debtor's estate with such priority and at such time as this Court may
determine.
37. THIS COURT ORDERS that any interested party may apply to this Court to vary
or amend this Order on not less than seven (7) days' notice to the Receiver and to any other party
likely to be affected by the order sought or upon such other notice, if any, as this Court may
order.
LEGAL_I 31814903.1
SCHEDULE 66A''
RECEIVER CERTIFICATE
CERTIFICATE NO
AMOUNT $
1. THIS IS TO CERTIFY that IRECEIVER'S NAME], the receiver (the
"Receiver") of the assets, undertakings and properties IDEBTOR'S NAME] acquired for, or
used in relation to a business carried on by the Debtor, including all proceeds thereof
(collectively, the "Property") appointed by Order of the Ontario Superior Court of Justice
(Commercial List) (the "Court") dated the _ day of 20_ (the "Order") made in an
action having Court file number -CL-_, has received as such Receiver from the holder
of this certificate (the "Lender") the principal sum of $ being part of the total
principal sum of $ which the Receiver is authorized to borrow under and pursuant
to the Order
2. The principal sum evidenced by this certificate is payable on demand by the
Lender with interest thereon calculated and compounded [daily]fmonthly not in advance on the
day of each month] after the date hereof at a notional rate per annum equal to the rate of
per cent above the prime commercial lending rate of Bank of from time to
time.
3. Such principal sum with interest thereon is, by the terms of the Order, together
with the nrincioa-l su-ms and interest thereon of all other certifica,tes issr-led bv the R-coeiverr___--_r-'_ '------ -J
pursuant to the Order or to any further order of the Court, a charge upon the whole of the
Property, in priority to the security interests of any other person, but subject to the priority of the
LEGAI_l:3 1 8 14903.1
-2-
charges set out in the Order and in the Bankruptcy and Insolvency Act, and the right of the
Receiver to indemnify itself out of such Property in respect of its remuneration and expenses.
4. All sums payable in respect of principal and interest under this certificate are
payable at the main office of the Lender at Toronto, Ontario.
5. Until all liability in respect of this certificate has been terminated, no certificates
creating charges ranking or purporting to rank in priority to this certificate shall be issued by the
Receiver to any person other than the holder of this certificate without the prior written consent
of the holder of this certificate.
6. The charge securing this certificate shall operate so as to permit the Receiver to
deal with the Property as authorizedby the Order and as authorized by any further or other order
of the Court.
7. The Receiver does not undertake, and it is not under any personal liability, to pay
any sum in respect of which it may issue certificates under the terms of the Order.
DATED the day of 20
IRECEIVER'S NAME], solely in its capacityas Receiver of the Property, and not in itspersonal capacityBy:
NameTitle:
LEGAL 1:31814903.1
SCHEDULE 668''
Vertility Oil & Gas Inc
Vertility Group of Companies Corporation
Vertility Plas-Techs Inc.
Foodcrafters Group Inc.
Vertility V/aste Solutions and Equipment Inc
Breadko National Baking Ltd.
Mozaic Foods Inc.
A.C. Simmonds and Sons Inc.
Baywood Homes Partnership
Cornerworld Developments Inc.
AFI Limited
Sprague Foods Limited
Carino &,Lally Developments Inc.
Woodstock Biomed Inc.
2072906 Ontario Limited o/a Plasticap
2293900 Ontario Limited o/a Plasticap
Bio Sec Enviro Inc.
Direct Reefer Services Inc.
A&F Conveyors Limited
Triple Canon Corporation
The Links at New England Village
Marlwood Golf& Country Club
Rivers Edge Golf & Country Club
Wasaga Sands Golf & Country Club
LEGAI_I:3 l8 14903. I
a-L-
Tifco Foods Inc
Martinwood Resort & Golf Resort
Miller Mechanical Services Inc.
Kenaidan Contracting Ltd.
Rx100 Products
BLVD Holdings Inc.
LEGAL 1:31814903.1
a-J-
TAB 2
Court File No. CV-l4-10680-00CL
ONTARIOSUPERIOR COURT OF' JUSTICE
(COMMERCTAL LrST)
BETWEEN:
ROYAL BANK OF CANADA
Applicant
-and-
GOUDAS F.OOD PRODUCTS AND II\IVESTMENTS LIMITED
Respondents
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47 OT THEBANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985' c. B-3, AS AMENDED
AFF'IDAVIT OF RICHARD HALL(sworn September 15, 2014)
I, RICHARD HALL, of the Town of Oakville, in the Province of Ontario, MAKE OATH
AND SAY AS FOLLOWS:
l. I am a Director in the Group Risk Management Division of Royal Bank of
Canada("RBC"). RBC is the largest secured creditor of Goudas Food Products and Investments
Limited ("Goudas"). As such, I have knowledge of the matters to which I hereinafter depose.
rrn,-,- rt,- :,-f-,-,- - - Lt- ,- l-^ Ã- l- ^cf, l^--:L:^ L^^^) ---^- :-f^*^+:^- +L^+ T L^.'^ -^^^:,,^ÃwIlçIç ulç llllL'llllauult sgt uul lll ulls alltuilvlt ls uaùtru uPUu u[urrll4Lrvl rll(tL I ICvv rvvwrvwu
from others, I have stated the source of that information and believe it to be true.
2 I swear this affidavit in support of a motion by RBC for the following relief:
a
(a) an order terminating the 30-day period in which Goudas has to file a proposal,
which 30-day period commenced on August 29, 2014, pursuant to subsection
50.4(11) of the Banlvuptcy and Insolvency Act (the "BIA"); or
(b) in the alternative, an order declaring that the stay in the proposal proceedings of
Goudas no longer operates in respect of RBC pursuant to section 69.4 of the BIA;
and
(c) an order appointing Duff & Phelps Canada Restructuring Inc. (the "D&P") as
receiver and receiver and manager, without security, of all of the property, assets
and undertakings ("Property") of Goudas pursuant to subsection 243(l) of the
BIA and section 101 of the Courts of Justice Act (Ontario)("CJA").
3. This affrdavit should be relied on in conjunction with the affidavit of Robert
Kizell, a Managing Director in the Asset Based Lending division of RBC sworn September 2,
2014 (the "Initial Affidavit") in support of the application by RBC for the appointment of D&P
as interim receiver in respect of the Property of Goudas pursuant to section 47.I of the BIA and
section 101 of the CJA (D&P, in such capacity,the "Interim Receiver").
OVERvIE\il
4. Goudas is a wholesale distributor of non-perishable canned, bottled and packaged
ethnic products and intemational foods to large grocery store chains and small neighbourhood
stores across Ontario an<Í western Quebec.
5. RBC extended to Goudas a $12 million facility under an asset based loan (the
,,Loan") pursuant to a Loan Agreement dated September 6, 2013 (the oolnitial Loan
-J-
Agreement"), as thereafter amended by a First Amending Agreement dated June 25,2014 (the
"F'irst Amending Agreement", and together with the Initial Loan Agreement, the 'ol,oan
Agreement").
6. As at September2,2}l4,approximately US$6,413,700 and CAD$3,982,850.15 in
principal plus interest and amounts on overdraft was outstanding under the Loan.
7. On August 29,2014, RBC was advised by Goudas that it would be immediately
filing a Notice of Intention to make a Proposal under subsection 50.4(1) of the BIA ("NOI"). As
a result of the threat of the flrling of the NOI as well as several significant events of default
committed by Goudas under the Loan Agreement and other alarming conduct identif,red by
RBC's field examiner and financial advisor, on August 29, 2014, RBC demanded immediate
payment of all amounts outstanding under the Loan and delivered a Notice of Intention to
Enforce Security pursuant to section 244 of the BIA.
Late in the day on August 29,2014, and without further advising RBC, Goudas
flled the NoI.
g. On September 3,2014" upon application by RBC, an Order was granted by the
Honourable Justice Penny of this Court appointing D&P as Interim Receiver over all of the
Property of Goudas (the "Interim Receivership Order"). The Interim Receivership Order was
unopposed by Goudas. In his endorsement, Justice Penny found, among other things, that there
appeared to be an immediate risk to assets (or the possibility of their dissipation or loss).
10. The relief sought on this motion for the immediate termination of the 30-day
period afforded to Goudas in order to hle a proposal and, concurrently with such termination, the
8
-4-
appointment of a receiver and receiver and manager, is just and appropriate in these
circumstances as a result of, among other things, the following:
(a) Goudas has not acted and is not acting in good faith and with due diligence;
(b) RBC is the largest creditor of Goudas and holds a veto over any proposal frled by
Goudas which includes RBC;
(c) RBC's faith and confidence in Goudas and its management has been ineparably
damaged such that RBC is not prepared to vote in support of any proposal which
Goudas may make that includes RBC. Accordingly, Goudas will not be able to
make a viable proposal before the expiration of the 30-day period (or any
extension thereof) that will be accepted by creditors;
(d) In the event that RBC is not part of the proposal, it intends to enforce its security
through the appointment of a receiver over all of the Property;
(e) Goudas has not provided evidence that it has the funding or capital suffrcient to
continue the operation of the business despite reflecting the provision of fresh
capital in the cash flow statements filed by Goudas with the Offrcial Receiver
pursuant to the proposal requirements under the BIA;
(Ð Goudas' business has continued to deteriorate since the appointment of the
Interim Receiver;
(g) a debtor in possession proceeding is not appropriate to realize on the Debtors'
business and assets for the benefit of RBC and Goudas' other creditors, including
the collection of amounts owing from related entities and other entities with
-5-
which the principal of Goudas, Mr. John Simmonds, appears to have a
relationship with, but which do not appear to carry on business in the food
industry (the "Non-Trade Parties");
(h) the continued operation of a stay of proceedings preventing RBC from enforcing
its security will be materially prejudicial to the rights of RBC; and
the appointment of a receiver and receiver and manager is necessary in order to
allow RBC to rcalize on its security, preserve Goudas' assets and properly
investigate and trace the flow of funds from Goudas to related parties and Non-
Trade Parties before any possibility of recovering them is lost.
OVERVIEW OF' PRE.FILING EVENTS
11. The events and circumstances leading to the appointment of the Interim Receiver,
including the justification for such an appointment, is set out in the Initial Affidavit. A copy of
the Initial Affidavit (without exhibits) is attached hereto as Exhibit "A".
12. The application to appoint the Interim Receiver was unopposed by Goudas.
Goudas did not seek to cross-examine on the Initial Aff,rdavit or otherwise dispute any of the
facts as set out in the Initial Affidavit. In addition, I am advised by RBC's counsel, Ms Caitlin
Fell of Osler, Hoskin & Harcourt LLP, that no party applied to Court to vary or amend the
Interim Receivership Order pursuant to the comeback provision provided for therein.
13. For convenience, a summary of the salient facts set out in the Initial Affidavit are
set forth below inparagraphs 15- 29. All capitalized terms not defined herein are defined in the
Initial Afhdavit.
(Ð
-6-
Backgroand of the Debtor
14. The principal assets of Goudas consist of inventory in the form of primarily non-
perishable food products as well as accounts receivables generated from the sale of inventory.
Mr. John Simmonds is the sole director of Goudas.
15. At the time of the Interim Receivership Order, Goudas employed approximately
39 employees and 11 commissioned sales persons. It is my understanding based on discussions
with the Interim Receiver that Goudas has subsequently reduced its workforce.
16. Goudas currently operates out of a leased premise at 241 Snidercroft Road,
Concord, Ontario (the "Concord Premises").
17. Goudas is a wholly owned subsidiary of A.C. Simmonds. A.C. Simmonds
acquired Goudas on or about April 3, 2014. According to the Organization Chart, A.C.
Simmonds represents to wholly or indirectly own various entities including Mozaic Brands Corp.
("Mozaic"), Vertility Group of Companies Corporation, Vertility Plas-Techs Inc., Foodcrafters
Group Inc. ("X'oodcrafters"), Vertility Waste Solutions and Equipment Inc., Breadko National
Baking Ltd. ("Breadko"), Mozaic Foods Inc., 2072906 Ontario Limited o/a Plasticap, 2293900
Ontario Limited o/a Plasticap, Rx100, Marlwood Golf Course, Wasaga Sands Golf Course,
Rivers Edge, and Direct Reefer Services (collectively, the "Related Entities").
RBC's Loan and SecarÍly
18. Pursuant to the Loan Agreement, RBC extended to Goudas a credit facility by
way of a revolving loan in the maximum amount of C$12,000,000. Under the Loan Agreement,
-7 -
if any of the advances extended by RBC exceeded the Borrowing Base then Goudas was
required to immediately pay any excess in respect thereof.
19. Under the Loan Agreement, the Borrowing Base comprises amounts equal to the
sum of a percentage of Eligible Accounts and a percentage of Eligible Inventory. Eligible
Accounts under the Loan Agreement specifically excludes Accounts that arise from a sale to or
performance of services by Goudas to an affiliate, subsidiary or shareholder of Goudas or an
entity which has common officers or directors with Goudas. Eligible Inventory includes, inter
alia, alllnventory located on the premises owned or operated by Goudas or that which is located
on premises for which RBC has received a landlord or mortgagee letter acceptable to RBC.
20. Goudas is required to deliver weekly to RBC a Bonowing Base Certifrcate in
order for RBC to determine the Borrowing Base.
2I. Under the Loan Agreement, Goudas is required to comply with certain covenants.
This includes, among other things, a covenant that as of the date of each Borrowing Base
Certificate, each Account listed as an Eligible Account shall be an Eligible Account and all
Inventory listed as Eligible Inventory shall be Eligible Inventory.
22. As security for the Loan, Goudas granted to RBC a GSA charging all of Goudas'
current and after-acquired property.
23. RBC has registered its security interests in respect of all of Goudas' property
un<ier tne Personaí Properiy Securiiy Acl (Orrtario).
-8-
Events of Default and MÍsrepresentatÍons of Goudas
24. Goudas is in default under the Loan Agreement as a result of breaches of the
covenants contained therein. In addition, Goudas has made a number of misrepresentations to
RBC.
25. The material defaults and misrepresentations made by Goudas to RBC (identified
by both the RBC field examiner and the Interim Receiver) include, among others the following:
(a) the inclusion by Goudas of receivables owing to Goudas from Related Entities or
other Non-Trade Parties in the Borrowing Base Certificate. As of August 21,
2014, there were 13 Related Entities or Non-Trade Parties with receivables owing
to Goudas in the total approximate amount of $12.4 million, which represented
approximately 76% of the Goudas accounts receivables balance at that date,
including amounts owing from Breadko, Foodcrafters and Plasticap;
(b) payment by Goudas of Related Entity and Non-Trade Parties' expenses totalling
approximately $7 million;
(c) the overstatement of Goudas' accounts receivables caused RBC to advance at
least $10.6 million more to Goudas than it would have had these receivables not
been included in the Borrowing Base;
(d) failure of Goudas to notifu RBC of the ineligible Related Entity andlor Non-Trade
Party receivables on the Borrowing Base Certificate;
(e) the movement by Goudas of Inventory from the Concord Premises; and
-9-
(Ð failure to maintain adequate insurance coverage.
26. In reliance on certain assurances given by Mr. Simmonds that funding would be
made available to pay out RBC, RBC drafted a forbeatance agreement to be entered into by
Goudas and the Related Entities pursuant to which RBC would forbear from enforcing its rights
under the Loan Agreement. Mr. Simmonds refused to negotiate or enter into the Forbearance
Agreement and instead filed an NOI.
RBC's demand for Payment and 244 NotÍce
27. As stated, on August 29, 2014, RBC delivered by email and ovemight courier a
demand for the immediate payment of all of the Indebtedness and a Notice of Intention to
Enforce Security pursuant to section 244 of the BIA.
Notice of fnfuntion to Make a Proposal
Zg. On August 29,2014, Goudas filed the NOI. Goudas did not seek the consent of
RBC prior to filing the NOI nor did it give RBC further notice that it had filed the NOI.
29. pursuant to the Creditor List filed by Goudas with the Official Receiver, RBC is
overwhelmingly the largest secured creditor of Goudas. RBC holds approximately 83% of the
secured debt and accordingly, holds a majority in value of the secured debt. RBC holds
approximat e1y 59Yo of all of the debt of Goudas, including secured and unsecured debt. As a result,
RBC is in a veto position with respect to any proposal that may be made to both unsecured and
secured creditors of Goudas.
-10-
APPOINTMENT OF' THE INTERIM RECEIVER
30. On September 3, 2014,D&P was appointed as Interim Receiver over the Property
of Goudas. A copy of the Interim Receivership Order is attached as Exhibit "B".
31. Pursuant to the endorsement of the Honourable Justice Penny dated September 3,
2014, a copy of which is attached hereto as Exhibit "C", the books and records of all the
companies listed in Section 4 of the D&P's Report were required to be provided to the Interim
Receiver by no later than September 10, 2Ot4 in order to allow the lnterim Receiver to
investigate the transactions between Goudas and Related Entities and Non-Trade Parties.
32. I am advised by the Interim Receiver that a substantial portion of the books and
records were not delivered to the Interim Receiver by September 10, 2014 and that to the extent
that certain records have been provided, they relate primarily to Breadko, Foodcrafters and
Plasticap, but not the other Related Entity and/or Non-Trade Parties identified by the Interim
Receiver in section 4.0 of its report to RBC dated september 6,2014.
OperatÍons and FundÍng durÍng the InterÍm ReceÍver
i.3. I am advised by the Interim Receiver that since its appointment, Goudas' business
has continued to deteriorate. Sales have declined materially versus historic levels and Goudas has
not been replenishing its inventory as a result of insufficient cash to fund its operations. I am
advised by the Interim Receiver that vendor cheques are not clearing the Goudas bank account
and customers of Goudas are being unclerserviceii. To the extent possibie, Goucias is meetirrg
orders from existing inventory but there has been very little inventory purchased since the
conunencement of the interim receivership proceedings.
- 11-
34. I am advised by the Interim Receiver that on September 4,20t4, the Interim
Receiver was provided with a copy of an insurance certificate which identifies RBC as an
additional insured on Goudas' new insurance policy; however, the insurance certificate is only
with respect to the inventory of Goudas. This is unsatisfactory to RBC and contrary to the Loan
Agreement which provides that RBC must be an additional insured over all of the Goudas'
business and assets.
35. On September 9, 2014, Goudas filed with the Offrcial Receiver a cash flow
statement as part of its statutory requirements under the BIA. The cash flow statement reflects
an injection of fresh capital in the amount of $220,000 during the week of September 8,2014
and $520,000 between September 8 and 30,2014.
36. RBC is not aware of any capital injection in Goudas during the week of
September 8, 2014, other than a payment by Mozaic of past due wage amounts owed to
employees of Goudas in the approximate amount of $104,000 and other sundry amounts.
37 . I am advised by the Interim Receiver that the books and records of Goudas reflect
that it is owed approximately $1.5 million by Mozaic, suggestingthat to the extent monies have
been injected into Goudas by Mozaic in order to operate the business, such injection is
essentially a repayment of the amounts owing by Mozaic to Goudas and not fresh capital. This is
despite the fact that any repayment of amounts owing by Mozaic to Goudas are required to be
paid to RBC and instead are being used to fund the business through payment to employees.
38. I am also advised by the Interim Receiver that prior to September 10, 2014 a
majority of Goudas' employees had not been paid wages for approximately three weeks, which
-12-
caused drivers to threaten to refuse to deliver customer orders and employees threatening not to
come to work.
39. Prior to the frling of the NOI, Mr. Simmonds represented to RBC on numerous
occasions that funding of the business would be forthcoming in order to cure the overdrafts
under the Loan Agreement and to repay all of the Indebtedness. However, no such funding of
Goudas was ever made. Since the commencement of the proposal proceedings, neither Mr.
Simmonds nor the Proposal Trustee (as defined below) has contacted RBC to confirm and
evidence the source of funding provided for in the cash flow statements filed by Goudas or how
RBC's debt is to be paid down. Moreover, at no point has Goudas communicated to RBC the
terms of any potential proposal.
40. I am advised that the Interim Receiver has requested that Jim Macpherson of
Macpherson & Associates Inc., the proposal trustee of Goudas (the "Proposal Trustee"),
confirm the source and terms of the fresh capital reflected in the cash flow statement. The
Proposal Trustee has not identified the source of that funding, nor its terms.
41. I am advised by the Interim Receiver that Mr. Simmonds has advised the Interim
Receiver that funding - whatever its source - will be made available to Goudas only_if RBC
agrees not to seek the appointment of a receiver prior to September 30,2014. Effectively, unless
RBC agrees not to seek the appointment of a receiver, the funding required for the operation of
the business is and will be held hostage notwithstanding the steady deterioration of the Goudas
business.
-13-
Enforcement by other Credítors of Goudas
42. Goudas is a sub-tenant of Goudas Food Realty Inc. ("Goudas Realty") at the
Concord Premises. Goudas Realty is not, to my knowledge, subject to an insolvency proceeding.
43. On September 5, 2014, Mr. Aubrey Kauffman of Fasken Martineau DuMoulin
LLP, legal counsel to the landlord of the Concord Premises, sent a letter (a copy of which is
attached to the First Report of the Interim Receiver) to Goudas Realty setting out that Goudas is
in breach of the lease for non-payment of rent in the amount of $381,675, including rent for
September, and demanding that rent be paid immediately.
44. I am advised by the Interim Receiver that Mr. Kauffinan sent a further email
advising that Goudas had until end of day on September 10, 2014 to pay the September rent,
failing which the landlord would be seeking an order to terminate the head lease and to exercise
its rights against the Property of Goudas.
45. I am advised by the Interim Receiver that a copy of a certified cheque payable to
the landlord for September rent alone was provided to the Interim Receiver on September 11,
2014; however, this cheque had not been delivered to Mr. Kauffrnan as of the end of business on
September ll, 2014. I am advised by the Interim Receiver that the Proposal Trustee has
indicated that payment of rent is conditional on Goudas reaching a deal with RBC.
46. I am also advised by the Interim Receiver that one of Goudas' creditors, Load
King, a company thaí ieases iraiiers io Goudas, has taken possessiorr of at leasi orre of its trailers
as a result of non-payment of lease amounts. I am advised that Goudas requires the continued use
of the trailers for its operations in order to make shipments to customers.
-14-
Relíef Sought
47. As set out more fully in the Initial Affidavit, Goudas has repeatedly acted in bad
faith, including:
(Ð Goudas' misrepresentations to RBC regarding Related Entity and Non-
Trade accounts receivable which were included in the Borrowing Base and
which misrepresentations caused RBC to advance over $10 million more
to Goudas than it would have been entitled;
(iÐ the concealment of information by Goudas, including the identity of
Related parties andlor Non-Trade Parties;
(iiÐ the movement of inventory to other premises contrary to the Loan
Agreement and the instructions of RBC;
(iv) the failure to maintain adequate insurance coverage andlor to confirm that
RBC was a loss payee; and
(v) the failure of Goudas to engage with RBC in forbearance discussions.
48. Goudas has continued to act in bad faith following the appointment of the Interim
Receiver, by, among other things, failing to evidence that Goudas has secured the funding
identified in the cash flow statement, allowing the business to deteriorate by failing to pay
emnlnwees (enrl not cornmrrnicafino fn srrch emnlovees how nr when fhev woulrl he nairll anrl hv-^.^1.-'J.^.---..^Þ-..-Í.-J,^.-.-...-J--Í..--/..-----J
allowing customers to be underserviced due to the fact that new inventory is not being
purchased.
-15-
49. The pre and post filing bad faith conduct of Goudas has caused RBC to lose all
confidence in the Goudas business and its management. A continuation of the stay in the
proposal proceedings will only serve to delay and frustrate the right of RBC to enforce its rights.
The conduct of Goudas does not reflect an attempt by Goudas to make serious efforts to
restructure. No attempts have been made by Goudas to contact RBC since the Interirn Receiver
was appointed. In these circumstances, if included in a proposal filed by Goudas, RBC would
not vote, under any circumstances, in favour of a proposal which that affects its rights as a
creditor. RBC, as the most significant financial stakeholder in these proceedings, intends in all
circumstances to enforce its security over the Debtor.
50. I am advised by the Interim Receiver that Goudas has not provided evidence to it
that it has sufficient cash to operate in the normal course. Goudas is insolvent. Given that RBC is
not funding Goudas and capital has not been in injected into the company (and promises of
future funding have repeatedly proven to be illusory), it appears that Goudas will not be able to
continue to operate in the ordinary course.
51. As a result of the foregoing, RBC believes that the 30-day period afforded to a
debtor in a proposal proceeding should be terminated.
52. I verily believe that the immediate appointment of a receiver and receiver
manager by the court is just, equitable and in the interest of RBC and all of Goudas' legitimate
creditors.
SWORN BEFORE ME at the City of
Toronto, in the Province of Ontario on
September 15,2014.
Commissioner for Taking Afhdavits
TrerorJerenry Kirsh,a Cornnlssloner, eic., Prcvlnc€ ofOfiarío, wñile a Studentat.Law.FJçh.¡ Juty 10, 2017.
lfuRICHARD HALL
-4-
TABA
'. :-- -'
Court File No. CV-14-10680-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCTAL LrST)
BETV/EEN:
ROYAL BANK OF'CANADA
Applicant
-and-
GOUDAS F'OOD PRODUCTS AND INVESTMENTS LIMITED
Respondents
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 47 OF TTTE
BANKRUPTCY AND INSOLWNCY ACT, R.S.C. 1985, c. B-3, AS AMENDED
AF'FIDAVIT OF' ROBERT KIZELL
(sworn September 9, 201,4)
I, ROBERT KIZELL, of the City of Toronto, in the Province of Ontario, MAKE OATH
AND SAY AS FOLLOWS
1. I am a Managing Director in the Asset Based Lending Division of Royal Bank of
Canada("RBC"). RBC is a secured creditor of Goudas Food Products and Investments Limited
\
LEGN, 1131716871.4
("Goudas"). As such, I have knowledge of the matters to which I hereinafter depose. Where the
infonnation set out in this afftdavit is based upon information that I have received from others, I
have stated the source of that information and believe it to be true.
2. This affidavit is sworn in support of an application by RBC for the appointment of
Duff & Phelps CanadaRestructuring Inc. ("D&P") as interim receiver in respect of the property,
assets and undertakings of Goudas pursuant to section 47.1 of th'e Banlvuptcy and Insolvency Act
(the *BIA") and section 101 of the Courts of Justice Act (OnlaÅo) (D&P, in such capacity, the
"Interim Receiver")
i. As described in greater detail below, RBC extended to Goudas a $12 million
facility under an asset based loan (the "Loan") pursuant to a Loan Agreement dated September
6,2013 (the "Initial Loan Agreement"), as thereafter amended by a First Amending Agreement
dated June 25,2014 (the"First Amending Agreemen t", andtogether with the Initial Loan
Agreement, the "Loan Agreement"). A copy of the Initial Loan Agreement is attached hereto as
Exhibit "A". Approximately US$6,413,700 and CAD$ 3,982,850.15 in principal plus interest
and amounts on overdraft is currently outstanding under the Loan.
As a result of several significant events ofdefault under the Loan Agreement, on
August 2g,20l4,RBC demanded immediate payment of all amounts outstanding under the Loan
(the "Demand Letter") and delivered a Notice of Intention to Enforce Security pursuant to
section 244 of theBIA (the "244 Notice"). Copies of the Demand Letter and the 244 Notice are
attached together as Exhibit ¿rB" to this Affidavit.
4
2
5 The immediate appointment of an interim receiver is just and appropriate in these
circumstances as a result of among other things, the following:
(a) Goudas is in default of the Loan Agreement;
(b) Goudas has knowingly made material and serious misrepresentations to RBC
concerning the assets which comprise the borrowing base for the Loan. Such
misrepresentations enticed RBC to allow Goudas to make draw downs under the
Loan in excess of what they would have been had Goudas not misrepresented its
assets available for bonowing;
(c) Goudas has misrepresented its sales and accounts receivables to RBC by
recording sales and accounts receivables of related or non-trade parties on its own
financial statements'
(d) according to the books and records of Goudas, Goudas has, contrary to the terms
of the Loan Agreement, advanced funds in the approximate amount of $12.5
million to related and/or non-trade parties or to entities which are under common
control of Goudas, many of which do not carry on business in the food industry
and for business purposes which appear to have nothing to do with the normal
course operations of Goudas;
(e) the outstanding and unpaid amount of the Loan is now due and payable;
aJ
(Ð Goudas has moved inventory to other premises, contrary to the instructions of
RBC and the terms of the Loan Agreement and which results in inventory not
being classified as "Eligible lnventory" under the bonowing base;
(g) RBC has lost confidence in the management of Goudas; and
(h) the appointment of an interim receiver is necessary in order to preserve and
protect the property and assets of Goudas and to investigate and trace the flow of
funds from Goudas to recipient entities or persons in order to recover such funds
before any possibility of recovering them is lost.
BACKGROUND
Goudas' Corporate Structure and Business Operations
6. Goudas is a corporation incorporated and existing under the laws of the province
of Ontario and has its registered head office at 144 Kingston Road, Ajax, Ontario. Goudas was
founded in 1969. John Graham Simmonds is the sole director of Goudas. Attached hereto and
marked as Exhibit r6C" is a copy of the corporation profile report obtained from the Ontario
Ministry of Govemment Services in respect of Goudas. :
7. Goudas is a wholesale distributor of non-perishable canned, bottled and packaged
ethnic products and international foods, including packaged beans, rice, canned fruits, and other
food products, to large grocery store chains and small neighbourhood stores across Ontario and
westem Quebec. In order to supply such non-perishable ethnic products, Goudas maintains
relationships with a number of North American and overseas factory suppliers, including
4
suppliers in Thailand, Pakistan, India, Malaysia and China. Goudas currently employs
approximately 39 employees and 11 commissioned sales persons.
8. Goudas currently operates out of a leased premise at24l Snidercroft Road,
Concord, Ontario (the "Concord Premises"). The principal assets of Goudas consist of
inventory in the form of non-perishablé food products as well as accounts receivables from the
sale of inventory.
A.C. Simmonds
9. Goudas is a wholly owned subsidiary of A.C. Simmonds and Sons Inc., formerly
known as BLVD Holdings lnc. ("4.C. Simmonds"). A.C. Simmonds was incorporated in the
State of Nevada on June 1 l,20l2and its stock is traded under the ticker ACSX on the OTC
Bulletin Board. According to the Form 10-Q Quarterly report (the "10Q Form", attached hereto
as Exhibit "D") filed by A.C. Simmonds with the United States Securities and Exchange
Commission on August 19,2014, for the six month period ending June 30, 2014, A.C.
Simmonds has a principal executive office in King City, Ontario and is focused on acquiring
businesses for expansion and development. The Board of Directors of A.C. Simmonds as listed
in the 10Q Form comprises John Graham Simmonds, Canie J. Weiler, Ian Bradley, Ken
Adelberg, Chandra Panchal and Ted Daniel.
10. A.C. Simmonds acquired Goudas on or about April 3, 2014 pursuant to a Share
Purchase Agreement (the "Share Purchase Agreement") made between Peter Spyros Goudas,
Patricia Goudas (together, the "X'ormer Goudas Owners"), Goudas and A.C. Simmonds.
Pursuant to the Share Purchase Agreement, in consideration for the sale of 100% of the issued
5
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;
and outstanding shares of Goudas, A.C. Simmonds, inter alia,issuedto the Former Goudas
Owners 400,000 common shares and 167,200 convertible preferred shares of A.C. Simmonds.
11. According to an organizatioîchart (the "Organizational Chart") posted on the
website of A.C. Simmonds, and which is attached hereto as Exhibit 668,,, A.C. Simmonds
wholly or indirectly orwns various entities including Mozaíc Brands Cotp., Vertility Group of
Companies Corporation, Vertilþ Plas-Techs Inc., Foodcrafters Group Inc. ("Foodcrafters"),
Vertility Waste Solutions and Equipment Inc., Breadko National Baking Ltd. ("Breadko"),
Mozaic Foods Inc.,2072906 Ontario Limited o/a Plasticap,2293900 Ontario Limited o/a
Plasticap, Rx100, Marlwood Golf Course, Wasaga Sands Golf Cowse, Rivers Edge, and Direct
Reefer Services (collectively, the "Related Entities").
RBCOS LOANS AND SECURITY
Loan Agreement
t2 RBC is a lender to Goudas and holds security over all of its properfy as security
for those obligations.
13. Pursuant to the Loan Agreement, RBC extended to Goudas advances by way of a
revolving loan in the maximum amount of C$10,000,000 in order to pay out the indebtedness
owing by Goudas to Wells Fargo Capital Corporation and to finance various working capital
requirements. Under the Loan Agreement, if any of the advances extended by RBC exceeded the
Rorrowinø Rase las ¡lefined therein\ then Gorrrlas wâs reouired to immediatelv nav anv excess in-L'--- ' - '--''- - -J r --J '-- J
respect thereof.
6
L4. Under the Loan Agreement, the Borrowing Base comprises amounts equal to the
sum of a percentage of Eligible Accounts and a percentage of Eligible Inventory. Eligible
Accounts under the Loan Agreement specifically excludes Accounts (as defined therein) that
arise from a sale to or performance of services by Goudas to an affiliate, subsidiary or
shareholder of Goudas or an entity which has common officers or directors with Goudas.
Eligible Inventory includes, inter alia, all Inventory located on the premises owned or operated
by Goudas and referenced in the disclosure scheduled appended to the Loan Agreement or is
located on premises that RBC has received a landlord or mortgagee letter acceptable to RBC.
Goudas is required to deliver weekly to RBC, a Borrowing Base Certificate (as defined therein),l
in order for RBC to determine the Borrowing Base.
15. Under the Loan Agreement, Goudas is required to comply with certain affirmative
and negative financial and non-financial covenants. These include, among other things, a
covenant that as of the date of each Borrowing Base Certificate, each Accourrt listed as an
Eligible Account shall be an Eligible Account and all lnventory listed as Eligible Inventory shall
be Eligible Inventory. In addition, Goudas covenanted:
(a) to establish and maintain a blocked account (the "Blocked Account") at RBC and
an account at RBC to deposit proceeds from the Loan to pay disbursements (the
"Disbursement Account"), that all monies received by Goudas shafl be deposited
to the Blocked Account, and that no other accounts shall be opened or maintained
bv Goudas other than the Bloeked Account and the Disbursement Account;
(b) to not incur, assume or permit any indebtedness, other than the indebtedness
permitted under the Loan Agreement;7
t6
(c) not enter into any lending, borrowing or other commercial transaction with any of
its affrliates (including upstreaming and downstreaming of cash); and
(d) that Goudas shall not transfer or convey or otherwise dispose of its assets other
than in the ordinary course ofbusiness.
The Loan Agreement provides that an "Event of Default" has occurred when,
among other things:
(a) Goudas fails to make a payment in respect of any obligations under the Loan
Agreement when due and payable; or
(b) any default occurs in the observance or performance of the covenants or
agreements contained therein.
17. The Loan Agreement further provides that upon the occurrence of an Event of
Default, RBC, without notice, may declare all or any portion of the obligations thereunder to be
forthwith due and payable and to exercise any rights and remedies provided to RBC at law or
equity.
Security ;
18. As security for the Loan, Goudas granted to RBC a General SecuÍity Agreement
dated September 6,2013 (the "GSA", acopy of which is attached hereto as Exhibit o'F")
charging all of Goudas' current and after-acquired properry (the "Security").
8
19. RBC has registered its security interests in respect of all of Goudas' property
under the Personal Property Security Acl ("PPSA"). Attached hereto as Exhibit ,,G, are the
PPSA statements of Goudas as of Augustl9,20I4
CHANGE OF'CONTROL OF GOTIDAS
Change of Control of Goudas and Thereafter
20. On March 7,2014, at the request of Peter Goudas, Mr. Goudas met with RBC
representatives to inform RBC that he wished to sell his ownership interest in Goudas. Mr.
Goudas advised RBC that a purchaser, Mr Simmonds, had been identified and that the parties
had executed a purchase and sale agreement.
21. On March 17,2014, a Waiver of Loan Agreement was entered into between RBC
and Goudas pwsuant to which RBC agreed to waive an event of default under the Initial Loan
Agreement as a result of the occurrence of a Change of Control (as defined in the Loan
Agreement) arising from the sale by the Former Goudas Owners of all of the shares in Goudas to
A.C. Simmonds. A copy of the Waiver of Loan Agreement is attached hereto as Exhibit .úHr.
The Loan Increase Meeting ;
22. On or about June 20, 2014,Mr. Simmonds approached RBC to request that
funding under the Loan be increased from $10,000,000 to $12,000,000; and that various
affiliates of Goudas be brought under the Loan. RBC advised Mr. Simmonds that those affiliates
would only be brought into the Loan at such time as RBC had completed due diligence with
respect to those affrliated entities.
9
23. On June 25,2014, RBC and Goudas entered into a First Amending Agreement, a
copy of which is attached hereto as Exhibit "l",to increase the maximum amount of the Loan
from $10,000,000 to $12,000,000.
EVENTS OF DEFAULT OF GOUDAS
The Goudas Field Examination
24. Pursuant to the terms of the Loan Agreement, in July 2014, RBC commenced a
field examination (the "Field Examination") at Goudas' place of business in order to inspect,
review and verify the.inventory and accounts receivables. The results of the field examination
became available to RBC on or around the week of August 8,2014.
25. The Field Examination Report noted that A.C. Simmonds had acquired a number
of companies in the ethnic food industry, including Breadko and Foodcrafters, and that A.C.
Simmonds has been consolidating these companies along with Goudas under its business
division, Mozaic Brands Corp.
26. The Field Examination Report also uncovered certain conduct by Goudas that was
both alarming to RBC and contrary to the Loan Agreement. In particular, RBC discovered that
Goudas had been including receivables owing to Goudas from Related Entities or other non-
trade parties in the.Borrowing Base Certificate. As of July 2,20l4,there were 13 related entities
or non-trade companies with receivables owing to Goudas in the total approximate amount of $7
million which represented approximately 57.5'/o of the Goudas accounts receiva'oies baiance ai
that date.
10
27. The Field Examination Report further noted that Goudas was recording on its
books, sales equivalent to those generated by each of Breadko, Foodcrafters and Plasticap. For
example, when one of Breadko, Foodcrafters and Plasticap would record a sale and a receivable
from one of their respective customers, Goudas would record an equivalent sale to Breadko,
Foodcrafters and/or Plasticap (as the case may be) and a corresponding receivable from Breadko,
Foodcrafters and Plasticap (as th9 case may be). However, RBC was subsequently advised by
D&P (pursuant to its engagement by the Bank as described below) that when each of Breadko,
Foodcrafters and Plasticap collected receivables from their respective customers, they were not
remitting their collections to Goudas.
28. The false and misstated accounts receivable listing of Gouda as well as any
improper transfer of funds from Goudas to related parties (or elsewhere) was not apparent to
RBC until the Field Examination had taken place. This is because Goudas would deliver a
weekly accounts receivable ledger to RBC which, among other things, identified specific
customers of Goudas. However, under RBC's borrowing base system, each customer of a debtor
company is identified by a customer number provided by the debtor. To use an example, the
accounts receivable ledger of Goudas would identify an accounts receivable owing from a
customer - ABC Co to Goudas. This would appear on RBC's system to be a trade related
accounts receivable owing from ABC Co which would be properly captured as an Eligible
Account under the Borrowing Base. However, in reality, the customer number that Goudas
initiatly gave to RBC was not updated in the RBC system as Goudas had failed to notifi RBC
that the customer ID no longer reflected an arm's length customer but rather that it had been
11
changed to a related or non-trade entity, such as Breadko, A.C. Simmonds and Foodcrafters (or
any of a myriad of other related entities).
29. ln addition, when Goudas submiued the weekly Bonowing Base Certificate to
RBC, Goudas was required to have identified any ineligible related or non-trade company
receivables or non-trade receivables ori the Borrowing Base Certifrcate. Notwithstanding this
requirement, other than immaterial amounts owing from related parties entities, Goudas did not
identiff the extent of the related entity or non-trade receivable amounts to RBC on any weekly
submitted Borrowing Base Certificate.
The Overdraft
30. On August t,2014,I received a telephone call from Mr. Tyrone Ganpaul, the
Chief Financial OfÍicer of A.C. Simmonds, requesting that RBC permit an overdraft on Goudas'
account. Mr. Ganpaul advised me that Goudas had placed a deposit of $293,005.67 on new
leased premises for the company. The cheque would overdraw Goudas' account. Mr. Ganpaul
requested that RBC clear the cheque and permit the overdraft to occur and advised RBC that Mr.
Simmonds would deposit suffrcient funds to cover the overdraft on August 4,2014.I agreed to
authorize the temporary overdraft of Goudas' account onthis condition.
31 On August 4,2014, Goudas failed to deposit funds to repay the overdraft.
RBC's Heightened Concerns
32. As a result of the overdraft position of Goudas as well as the serious concerns
arising from the Field Examination, RBC requested a meeting with Mr. Simmonds and Mr.
12
T
nl
Ganpaul to afford Goudas an opportunity to explain the unusual book entries and other concerns
that had been identified. To that end, on August 12,20I4,a meeting was convened (the
"August 12th Meeting") with representatives of RBC together with myselt Mr. Ganpaul, and
Mr. Simmonds.
33. At the August 12th Meéting, among other things, RBC requested that Goudas pay
into its account suffrcient funds to cover the overdraft and that Goudas explain the affiliate
accounts receivables that were not reflected in the Borrowing Base Certificates delivered to RBC
and that were only uncovered through the Field Examination.
34. In response, Mr Simmonds alleged that he too had uncovered various
discrepancies in the accounts receivables, accounts payable and the inventory system of Goudas.
According to Mr. Simmonds, certain accounting issues had been identified and which were the
result of the activities of the former owner, Peter Goudas. The alleged discrepancies identified by
Mr. Simmonds are separate and distinct from those identified by RBC's field examiner and pre-
dated the acquisition of Goudas by A.C. Simmonds.
35. At this time Mr. Simmonds requested patience and cooperation from RBC until
August 31,2014.I requested atthattime that Goudas cure the overdrafts immediately. Mr.
Simmonds advised that he would inject equity into Goudas by Augustl8,20l4,to cure the
excess overdraft position. However, by end of day on August 18,2014,the overdraft position
was not cured.
36. On Monday, August 18,2014,I participated in a conference call with Mr.
Simmonds and Mr. Ganpaul. At this time, I reiterated my demand that Goudas cure the
13
overdrafts immediately. I was advised by Mr. Ganpaul on this conference call that indeed, the
accounts receivables represented in the Borrowing Base included non-trade transactions with
affiliates of Goudas.
37. Mr. Ganpaul also advised and confirmed to RBC that Goudas had been using the
same customer numbers in its accountihg software to refer to accounts receivables from affiliated
companies, and that Goudas had failed to provide RBC with an updated customer reference list.
As a result, RBC had been receiving inaccurate Borrowing Base Certificates from Goudas since
March 2014.
38. As of the close of business on August 19, 2014, RBC had not received any
amounts from Goudas or Mr. Simmonds (or any other entity) to cure the overdrafts in the
Goudas accounts despite the assurances given by Mr. Simmonds that a deposit would be made
on that date. Attached hereto as Exhibit r(J" is email correspondence of Mr. Simmonds to
39. On August 20,2014,I attended another meeting (the "August 20th Meeting")
with Mr. Simmonds, various representatives of A.C. Simmonds Inc. and our counsel. At the
August 20th Meeting, Mr. Simmonds indicated to RBC that, contrary to the Organizational Chart
and Goudas' representations to the field examiner that A.C. Simmonds had acquired Breadko
and Foodcrafters, A.C. Simmonds did not in fact own Foodcrafters or Breadko, but that A'C'
Simmonds was in the process of acquiring these entities. At the August 20th MeetinB, Mr'
Simmonds represented to RBC that Goudas was willing to address RBC's concerns.
myself.
t4
40. The disclosure by Mr. Simmonds that A.C. Simmonds did not in fact own some
of the Related Entities was very troubling to RBC in light of the fact that in excess of $12 million
dollars appears to be owing from related and/or non-trade entities to Goudas, including in excess
of $3 million from Breadko.
4t. At the August 20th MeeÍing, I requested that Mr. Sirlrmonds consent to RBC
engaging a financial advisor to attend the premises of Goudas to review Goudas' business and
affairs. Mr. Simmonds consented to this request. RBC subsequently engaged D&P to attend
Goudas' premises and conduct its review. It is my understanding that D&P commenced its
review on August 21,2014.
42. On August 21,20!4,I received a proposal from Mr. Simmonds pursuant to which
A.C. Simmonds would take an assignment of the debt in an unspecified amount owing by
Goudas to RBC, such assignment of the debt to close no later than September 30,2014.
Attached hereto as Exhibit "K" is a copy of the proposal.
43. Mr. Simmonds is a signatory on a number of cheques issued by Goudas to various
related or non-trade entities. On August 22,2014,I attended, along with Raymond Chang and
Richard Hall of RBC Special Loans Group, a meeting (the "Augu stL2ndMeeting") with Mr.
Simmonds. At the August 22"d Meeting, Mr. Simmonds was asked about his signature being on
cheques written to related and non-trade parties. Mr. Simmonds denied that he had any
knowledge of any cheques being written to any related or non-trade entities because he signs
hundreds of cheques a day. Mr. Simmonds is a signatory on a number of cheques issued by
Goudas to various related or non-trade entities.
15
II
44. At the August 22"d Meeting, RBC advised Mr. Simmonds that it would not
extend Goudas any additional credit, and that cheques written against Goudas' account would be
returned unless sufficient funds to cover those cheques rwere deposited on a daily basis. RBC
advised that it required a deposit of $20,000 into Goudas' operating account that day to cover
cheques that had already been presented. Additionally, as a demonstration of Goudas' good faith,
RBC sought a payment of $500,000 from Goudas before August 26,2014.In addition, RBC
advised Mr. Simmonds that all cheques issued by Goudas would have to be paid by Mr.
Simmonds or his related companies, as RBC would not be disbursing any additional frmds to
Goudas.
45. I understand that Breadko filed a Notice of Intention to make a Proposal on
September 27 , 2013,and a proposal was filed on October 28, 2013 .RBC was a secured creditor
of Breadko. On August22,20l4, Mr. Simmonds advised me that he had personally taken an
assignment of the RBC debt owing by Breadko to RBC and that he had paid for this debt with
his own capital. However, I am advised by D&P that on ApnI22,20l4, it was actually Goudas
that made apayment to RBC in the amount.of $375,000 on account of the debt owing by
Breadko to RBC. Accordingly, funds from Goudas - on which RBC is the senior secured creditor
(and on which it may incur a shortfatl) were used to pay out the debt owing to RBC by Breadko.i
46. On August 22,2014,Mr. Hall sent an email to Mr. Simmonds, copying me,
summarizing the items discussed on the conference call that morning and setting out the specific
milestones that Goudas would need to achieve in order for RBC to agree to continue working in
cooperation with the Goudas and to forbear from enforcing its rights (the "Augu st22
Correspondence", a copy of which is attached hereto as Exhibit "L").The milestones
t6
included: (i) a $20,000 deposit to RBC by the end of day on August 22,201'4 to cover cheques
that cleared; (ii) $500,000 to be deposited by way of a certified cheque to RBC by close of
business Tuesday, August 2l,topartially repay the bonowings in excess of the Bonowing
Availability; (iii) additional weekly repayments of the bonowings in excess of the Borrowing
Availability to be made on a regular basis until RBC's facilities are fully paid out; (iv) execution
of a forbearance agreement by Goudas pursuant to which, inter alía,RBC would agree to forbear
from enforcing its rights provided that the above payments were made to RBC and that security
would be granted by any affitiated companies who were listed as owing money to Goudas in
favour of RBC.
47. On the afternoon of August 22,2014, a cheque written by Mozaic Brands Corp. in
the amount of $20,000 was deposited into Goudas' operating account. On August 25,2014, a
further cheque written by Breadko in the amount of $39,000 was deposited into Goudas'
account.
4g. On August 27,2014,R8C's field examiner attended premises located at 10 Sun
pac Road, Brampton, Ontario, as the company had negotiated a new 350,000 square foot lease'
White RBC was aware that Goudas had entered into this lease, RBC had provided instructions to
Goudas that the inventory was not to leave the Concord Premises until such time as a landlord
waiver or mortgagee letter could be obtained pursuant to the terms of the Loan Agreement.
Notwithstanding these instructions, the RBC field examiner noted that there were 38 skids of
Goudas labelled inventory= I r:nelerstand from D&P that Goudas has not recorded this inventory
nor the corresponding payables on Goudas' financial statements.
17
49. I am advised by D&P that on August 28,2014, D&P requested a copy of Goudas'
insurance poticy but was told by Mr. Chan, the controller of Mozaic Brands Corp and/orMozaic
Foods Inc., that Goudas' insurance policy had been cancelled. I am also advised by D&P that it
has not been able to obtain a copy of the insurance policy from Goudas despite numerous
requests for same. The cancellation of.the insurance policy is an event of default under the Loan
Agreement.
50. On August 28,2014,Mr. Hall emailed Mr. Simmonds attaching a draft
forbearance agreement outlining the terms that RBC was willing to agree to in order for RBC tò
forbear from enforcing its rights as \Mas previously communicated to Mr. Simmonds on August
22,2014. Attached hereto as Exhibit 6(M", is a copy of the email from Richard Hall to Mr.
Simmonds and the attached forbearance agreement that RBC requested Goudas and certain of its
affiliates ex ecute (the "Fo rb ea rance Agreement").
51. On August Zg,Zfiq,Mr. Hall attempted to speak to Mr. Simmonds regarding the
Forbearance Agreement and when RBC could expect execution of the agteement. RBC did not
receive a response from Mr. Simmonds.
52. At the end of the day on Friday August 29:2014, Mr. Simmonds wrote to Richard
Halt (the'oAugust zgth Lettet'', a copy of which is attached hereto as Exhibit o'N") indicating
that Goudas was not agreeable to the terms of the Forbearance Agreement and that Goudas
would be taking immediate steps to file aNotice of Intention to make a Proposal under the BIA.
The August2gh Letter also advised that A.C. Simmonds has entered into a letter of intent with a
third party for the sale of A.C. Simmonds food division and that as a result of such transaction, it
18
was expected that RBC would be fully paid out. No other details were provided, including any
dates upon which RBC would purportedly be "paid out".
RBC'S DEMAND FOR PAYMENT AND 244 NOTICE
53. As a result of thq above, including: (i) the August 29th Lette4 (ii) the substantial
and unexplained prohibited related party and/or non-trade accounts receivables which were
included in the Borrowing Base under which RBC advanced funds; (iii) the inability or
unwillingness of Goudas to rectiff the situation and live up to its commitments under the Loan
Agreement; and (iv) the findings of D&P as outlined in its report, on August29,20l4, counsel to
RBC responded to Mr. Simmonds (the "August 29th RBC Response", attached hereto as
Exhibit "O") by way of letter advising Mr. Simmonds that RBC no longer had confrdence in
Goudas or its management's ability to continue to run and manage the business. The August 29th
RBC Response also indicated that RBC would be contesting the filing by Goudas of any Notice
of Intention to make a Proposal under the BIA and would seek the appointment of an interim
recelver.
54. Concurrent with the delivery of the August 29th RBÇ Response, RBC demanded
immediate payment of all of the Indebtedness and delivered a Notice of Intention to Enforce
Security pursuant to section 244 of the BIA. A copy of the demand letter and 244 notices are
attached hereto as Exhibit "B".
NOTICE OF'INTENTION TO MAKE A PROPOSAL
55. On Sunday, August 31.,20I4,R8C became aware that Goudas filed on late Friday
August 29,2014, a Notice of Intention to make a Proposal (:'NOI") under subsection 50.a (1) oft9
L
the BIA only after RBC's counsel reached out to the proposal trustee of Breadko. I am advised
by Caitlin Fell of Oster, Hoskin & Harcourt LLP, counsel to RBC, that the proposal trustee for
Breadko is also the proposal trustee of Goudas.
56. Goudas did not seek the consent of RBC prior to filing the NOI nor did it give
RBC notice that it filed the NOI. Attached hereto as Exhibit 6rP" is a copy of the NOI filed by
Goudas.
57. Attached hereto as Exhibit *q" is the creditor listing of Goudas filed with the
NOI (the "Creditor Listing"). Under the Creditor Listing, RBC is listed as the most significant
secured creditor of the company. I understand that Goudas has not yet filed a proposal.
CONCLUSIONS OF D&P
58. Pursuant to D&P's engagement with the Bank, D&P delivered its report on
September 2,2}ll,describing its findings concerning the financial affairs of Goudas based on its
preliminary review. Attached hereto as Exhibit "R" is the report of D&P which outlines the
following observations :
(a) RBC advanced monies to Goudas against related party and other accounts
receivables which Goudas included in its Borrowing Base and which do not
reflect bona fide transactions. After removing these receivables from the
Borrowing Base, Goudas is in an over-advance of approximately $7.6 million;
20
(b) the overstatement of the accourts receivable appears to have caused RBC to have
advanced at least $10.6 million more to Goudas than it would have had these
receivables not been included in the Borrowing Base;
(c) many of the receivables on Goudas' books and records are reflected as owing
from related companies and from companies which have no connection to the
food business;
(d) Goudas paid expenses and other items totalling approximately $7 million in
respect of related and non-trade entities, including Breadko, Foodcrafters and
Plasticap;
(e) it is unclear whether AC Simmonds has completed its acquisition of Breadko,
Foodcrafters and Plasticap. Nevertheless, AC Simmonds has issued a press
release announcing this transaction and references these entities as subsidiaries on
its website; and
(Ð Goudas does not have any liquidity to fund its business and cannot meet its
obligations as they come due.
NEED F'OR AN INTERIM RECEIVER
59. In light of D&P's observations and the events discussed above, RBC has lost all
confidence in Goudas and its management and in management's ability to manage the business.
Currently, there is approximately $12.5 rnillion of related party or non-trade accounts receivables
2t
which constitute "lneligible Accounts" under the Loan Agreement. This has resulted in Goudas
being over advanced in excess of $7.5 million under the Bonowing Availability.
60. Moreover, RBC does not have confidence in a debtor in possession insolvency
proceeding by way of a proposal under the BIA in order to ensure that RBC's collateral is not
further dissipated and that no additional untoward conduct is taken by Goudas. Given: (i)
Goudas' misrepresentations to RBC regarding accounts receivable; (ii) the concealment of
information by Goudas, including the identity of related parties or non-trade entities; (iii) the
misleading statements from principals of Goudas; (iv) the movement of Inventory to other
premises contrary to the Loan Agreement and the instructions of RBC; and (v) the fact that it
appears that the collateral may not be insured under any insurance policy, RBC is especially
concerned with respect to the preservation of its collateral and that Goudas will transfer money
to related or non-trade entities, and/or improperly divert funds away from the Blocked Account.
61. Further, I am advised by D&P that Goudas does not currently have sufficient cash
to operate and that cheques to Goudas' payroll provider were retumed. Given that RBC is not
firnding Goudas and capital has not been in injected into the company, it appears that Goudas'
will not be able to continue to operate in the ordinary course and assets may be further
dissipated.
62. As a result of the foregoing, RBC believes that it must act immediately in order to
protect and preserve RBC's collateral as well as prevent further erosion of RBC's position.
22
63. D&P has been attending at Goudas' Concord Premises since August2l,2014-It
is therefore my belief that D&P will har¡e considerable knowledge of the business and affairs of
Goudas. In these circumstances, I verily believe that the immediate appointment of an interim
receiver by the court is just, equitable and in the interest of RBC and all of Goudas' legitimate
creditors.
S\ryORN BEFORE ME at the CitY of
Toronto, in the Province of Ontario,
this 2nd of 14.ROBERT KIZ,ELL
))))))))A Commissioner fo Affidavitsr
!t1V AnOela Wes ley Fto,ea,a commissione[ g/tc., noyincp c*umarro,vhile a Studer¡t-gH-gw.rxp¡res Marcñ 2A,æ16.
23
TAB B
Court File No. CV14-10680-00CL
ONT,{RIO
SUPERIOR COURT OF IUSTICE
COMMERCIAL LIST
THE HONOURABLE f\8\&.. WEDNESDAY, THE 3RD
DAY OF SEPTEMBER,^OT4JUSTICE
BETWEEN:
ROYAL BANK OF CANADA
Applicant
-and-
GOUDAS FOOD PRODUCTS AND INVESTMENTS LIMITED
Respondents
ORDER(Appointment of Interim Receiver)
THIS APPTICATION made by the Applicant for an Order pursuant to
section 47.1ot the Bankruptcy and Insolaency Acf, R.S.C. L985, c. B-3, as amended (the
"BlA") and section 101 of the Courts of lustice Acf, R.S.O. 1990, c. C.43, as amended
(the "CJA") appointing Duff & Phelps Canada Restructuring Inc. ("D&P") as interim
receiver (in such capacity, the "Interim Receiver") without security, of all of the
assets, undertakings and properties of Goudas Food Products and Investments
Limiieci (ihe "Debior") acquired for, or used in reiation io a business carried on by
the Debtor, was heard this day at 330 University Avenue, Toronto, Ontario.
?eo*¡
LEGAI.._ I :-l I fì75529.2
-2-
ON READING the affidavit of Robert Kizell sworn September 9,2014, and
the exhibits thereto and the Pre-filing Report of D&P and on hearing the submissions
of counsel for the Applicant and the Respondents, no one else appearing although
duly served as appears from the affidavit of service of Caitlin Fell sworn September
3,2074,
SERVICE
1. THIS COURT ORDERS that the time for service of the Notice of Application
and the Application Record is hereby abridged and validated so that this application
is properly returnable today and hereby dispenses with further service thereof.
APPOINTMENT
2. THIS COURT ORDERS that pursuant to section 47.7 of the BIA and section
101 of the CJA, D&P is hereby appointed Interim Receiver, without security, of ail of
the assets, undertakings and properties of the Debtor acquired for, or used in relation
to a business carried on by the Debtor, including all proceeds thereof (the
"Property").
INTERIM RECEIVER'S POWNRS
3. THIS COURT ORDERS that the Interim Receiver is hereby expressly
empowered and authorized, but not obligated, to act at once in respect of the
Property and, without in any way limiting the generality of the foregoing, the
Interim Receiver is hereby expressly ernpowered and authorized to do any of the
following where the Interim Receiver considers it necessary or desirable:
(a) to take possession of and exercise control over the Property and any
and all proceeds, receipts and disbursements arising out of or from the
Property;
-3
(b) to receive, preserve, and protect the Property, or any part or parts
thereof, including, but not limited to, the changing of locks and security
codes, the relocating of Property to safeguard it, the engaging of
independent security personnel, the taking of physical inventories and
the placement of such insurance coverage as may be necessary or
desirabie;
(c) to engage consultants, appraisers, agents, experts, auditors,
accountants, managers, counsel and such other persons from time to
time and on whatever basis, including on a temporary basis, to assist
with the exercise of the Interim Receiver's powers and duties, including
without limitation those conferred by this Order;
(d) to receive and collect all monies and accounts now owed or hereafter
owing to the Debtor and to exercise all remedies of the Debtor in
collecting such monies, including, without limitation, to enforce any
security held by the Debtor;
(e) to report to, meet with and discuss with such affected Persons (as
defined below) as the Interim Receiver deems appropriate on all
matters relating to the Property and the interim receivership, and to
share information, subject to such terms as to confidentiality as the
Interim Receiver deems advisable;
(Ð to execute, assign, issue and endorse documents of whatever nature in
respect of any of the Property, whether in the úrterim Receiver's name
or in the name of and on behalf of the Debtor, for any purpose pursuant¡ ,1,:-
^ IIO rftts \jroer;
-4-
(g) to register a copy of this Order and any other Orders in respect of the
Property against title to any of the Property; and
(h) to take any steps reasonably incidental to the exercise of these powers
or the performance of any statutory obligations;
and in each case where the Interim Receiver takes any such actions or steps, it shall
be exclusively authorized and empowered to do so, to the exclusion of all other
Persons (as defined below), including the Debtor, and without interference from any
other Person.
DUTY TO PROVIDE ACCESS AND CO-OPERATION TO THE INTERIM
RECEIVER
4. THIS COURT ORDERS that (a) the Debtor, (b) all of its current and former
directors, officers, employees, agents, accountants, legal counsei and shareholders,
and all other persons acting on its instructions or behalf, and (c) all other individuals,
firms, corporations, governmental bodies or agencies, or other entities having notice
of this Order (all of the foregoing, collectively, being "Pefsons" and each being a
"Person") shall forthwith advise the Interim Receiver of the existence of any
Property in such Person's possession or control, shall grant immediate, unfettered
and continued access to the Property to the Interim Receiver, and shall deliver all
such Property to the Interim Receiver uPon the Interim Receiver's request.
5. THIS COURT ORDERS that all Persons shall forthwith advise the Interim
Receiver of the existence of any books, documents, securities, contracts, orders,
corporate and accounting records, and any other papers/ records and information of
any kind related to the business or affairs of the Debtor and any computer Programs/
computer tapes, computer disks, or other data storage media containing any such
information (the foregoing, collectively, the "Records") in that Person's possession or
control, and shall provide to the Interim Receiver or permit the Interim Receiver to
-5-
make, retain and take away copies thereof and grant to the Interim Receiver
unfettered access to and use of accounting, computer, software and physical facilities
relating thereto, provided however that nothing in this par4graph 5 or in paragraph
6 of this Order shall require the delivery of Records, or the granting of access to
Records, which may not be disclosed or provided to the Interim Receiver due to the
privilege attaching to solicitor-client communication or due to statutory provisions
prohibiting such disclosure. For greater clarity, nothing in this paragraph 5 shall
affect any privilege attaching to solicitor-client communications in the Interim
Receiver's possession as at the date of this Order.
6. THIS COURT ORDERS that if any Records are stored or otherwise contained
on a computer or other electronic system of information storage, whether by
independent service provider or otherwise, all Persons in possession or control of
such Records shall forthwith give unfettered access to the Interim Receiver for the
purpose of allowing the Interim Receiver to recover and fully copy all of the
information contained therein whether by way of printing the information onto
paper or making copies of computer disks or such other manner of retrieving and
copying the information as the Interim Receiver in its discretion deems expedient,
and shall not alter, erase or destroy any Records without the prior written consent of
the Interim Receiver. Further, for the purposes of this paragraph, all Persons shall
provide the Interim Receiver with all such assistance in gaining immediate access to
the information in the Records as the Interim Receiver may in its discretion require
including providing the Interim Receiver with instructions on the use of any
computer or other system and providing the Interim Receiver with any and all access
codes, account names and account numbers that may be required to gain access to
the information.
7. THIS COURT ORDERS that all Persons are hereby enjoined and restrained
from in any way altering, concealing, defacing, destroying, discarding, erasing or
-6
otherwise tampering or adversely dealing with any of the Property of the Debtor or
from removing any Property from the prernises of the Debtor without the prior
written consent of the hrterim Receiver.
8. THIS COURT ORDERS that any security personnel engaged by the Interim
Receiver pursuant to paragraph 3(b) herein shall be authorized and entitled, but not
required, to: (i) escort any Persons on the Property of the Debtor as the Interim
Receiver may in its sole discretion consider it necessary or desirable to escort; and (ii)
remove or exclude from the Property of the Debtor any Person who the Interim
Receiver believes has acted contrary to, or is likely to act contrary to, this Order.
NO PROCEEDINGS AGAINST THE INTERIM RECEIVER
9. THIS COURT ORDERS that no proceeding or enforcement process in any
court or tribunal (each, a "Proceeding"), shall be conunenced or continued against
the Interim Receiver except with the written consent of the Interim Receiver or with
leave of this Court.
NO PROCEEDINGS AGAINST THE DEBTOR OR THE PROPERTY
L0. THIS COURT ORDERS that no Proceeding against or in respect of the
Debtor or the Property shall be coÍunenced or continued except with the written
consent of the Interim Receiver or with leave of this Court and any and all
Proceedings currently under way against or in respect of the Debtor or the Property
are hereby stayed and suspended pending further Order of this Court'
NO EXERCISE OF RIGHTS OR REMEDIES
1L. THIS COURT ORDERS that all rights and remedies against the Debtor, the
Interim Receiver, or affecting the Property, are hereby stayed and suspended except
with the written consent of the Interim Receiver or leave of this Court, provided
7-
however that this stay and suspension does not apply in respect of any "eligible
financial contract" as defined in the BIA, and further provided that nothing in this
paragraph shall (a) empower the Interim Receiver or the Debtor to carry on any
business which the Debtor are not lawfully entitled to carry on, (b) exempt the
Interim Receiver or the Debtor from compliance with statutory or regulatory
provisions relating to health, safety or the environment, (c) prevent the filing of any
registration to preserve or perfect a security interest, or (d) prevent the registration of
a ciaim for lien.
NO INTERFERENCE WITH THE INTERIM RECEIVER
72. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter,
interfere with, repudiate, terminate or cease to perform any right, renewal right,
contract, agreement, Iicense or permit in favour of or held by the Debtor, without
written consent of the Interim Receiver or leave of this Court.
CONTINUATION OF SERVICES
13. THIS COURT ORDERS that all Persons having oral or written agreements
with the Debtor or statutory or regulatory mandates for the supply of goods and/ or
services, including without limitation, all computer software, communication and
other data services, centralized banking services, payroli services, insurance,
transportation services, utility or other services to the Debtor are hereby restrained
until further Order of this Court from discontinuing, altering, interfering with or
terminating the supply of such goods or services as may be required by the Interim
Receiver, and that the Interim Receiver shall be entitled to the continued use of the
Debtor' current telephone numbers, facsimile numbers, internet addresses andl^,-^-:,, - ,^-----:l-,I ! - 1 11--r rf- I !--- --- -I--,,- -- a- - ^11 -,--t-uurrlaur rrafrrer/ PruvrqeLr rrl eacrl case ulat LIte Itorlltar PrIUes ur ultar8es IUr art Ðuçrr
goods or services received after the date of this Order are paid by the Interim
Receiver in accordance with normal payment practices of the Debtor or such other
8-
practices as may be agreed upon by the supplier or service provider and the Interim
Receiver, or as may be ordered by this Court.
INTERIM RECEIVER TO HOLD FUNDS
14. THIS COURT ORDERS that all funds, monies, cheques, instruments, and
other forms of payments received or coliected by the Interim Receiver from and after
the making of this Order from any source whatsoever, including without limitation
the collection of any accounts receivable in whoie or in part, whether in existence on
the date of this Order or hereafter coming into efstence, shall be deposited into one
or more new accounts to be opened by the Interim Receiver (the "Post Receivership
Accounts") and the monies standing to the credit of such Post Receivership Accounts
from time to time, net of any disbursements provided for herein, shall be held by the
Interim Receiver to be paid in accordance with the terms of this Order or any further
Order of this Court.
15. THIS COURT ORDERS that the Interim Receiver is empowered and
authorized to pay to the Debtor such amounts out of the Post Receivership Accounts
as the Interim Receiver considers necessary or desirable to permit the Debtor to pay
for goods and/or services actually supplied to the Debtor, provided that any such
amounts advanced to the Debtor shall be paid forthwith by the Debtor to the
supplier of such goods and/ or services.
EMPLOYEES
1.6. THIS COURT ORDERS that all employees of the Debtor shall remain the
employees of the Debtor until such time as the Interim Receiver, on the Debtor'
behalf, may terminate the employment of such employees. The Interim Receiver shall
not be liable for any employee-related liabilities, including any successor employer
liabilities as provided for in section 1,4.06(1,.2) of the BIA, other than such amounts as
the Interim Receiver may specifically agree in writing to pay.
-9-
LIMITATION ON ENVIRONMENTAL TIABILITIES
17. THIS COURT ORDERS that nothing herein contained shall require the
Interim Receiver to occupy or to take control, care, charge, possession or
management (separately and/or coilectively, "Possession") of any of the Property
that might be environmentally contaminated, might be a poliutant or a contaminant,
or might cause or contribute to a spill, discharge, release or deposit of a substance or
cause an adverse effect contrary to any federal, provincial or other law respecting the
regulation, protection, conservation, enhancement, remediation or rehabilitation of
the environment or relating to the deposit, disposal of waste or other contamination
including, without limitation, tlne Fisheries Act (Canada), the Cønadian Enuironmental
Protection Act, the Ontario Enuironmental Protection Act, tlne Ontario Water Resources
Act, or the Ontørio Occupational Henlth nnd Safety Act and regulations thereunder (the
"Environmental Legislation"), provided however that nothing herein shall exempt
the Interim Receiver from any duty to report or make disclosure imposed by
applicable Environmental Legislation. The Interim Receiver shall not, as a result of
this Order or anything done in pursuance of the Interim Receiver's duties and
powers under this Order, be deemed to be in Possession of any of the Property
within the meaning of any Environmental Legislation, unless it is actually in
possession.
LIMITATION ON THE INTERIM RECEIVER'S TIABILITY
18. THIS COURT ORDERS that the Interim Receiver shall incur no liability or
obligation as a result of its appointment or the carrying out of the provisions of this
Order, save and except for any gross negligence or wilful misconduct on its part.
Nothing in this Order shall derogate from the protections afforded the Interim
Receiver by section t4.06 of the BIA or by any other applicable legislation.
- 10-
INTERIM RECEIVER'S ACCOUNTS
19. THIS COURT ORDERS that the Interim Receiver and counsel to the Interim
Receiver shall be paid their reasonable fees and disbursements, in each case at their
standard rates and charges unless otherwise ordered by the Court on the passing of
accounts, and that the Interim Receiver and counsel to the Interim Receiver shall be
entitled to and are hereby granted a charge (the "Interim Receiver's Charge") on the
Property, as security for such fees and disbursements, both before and after the
making of this Order in respect of these proceedings, and that the Interim Receiver's
Charge shall form a first charge on the Property in priority to all security interests,
trusts, liens, charges and encumbrances/ statutory or otherwise, in favour of any
Person, but subject to section 74.A6(7) of the BIA.
20. THIS COURT ORDERS that the Interim Receiver and its legai counsel shall
pass its accounts from time to time, and for this purpose the accounts of the Interim
Receiver and its legal counsel are hereby referred to a judge of the Commercial List
of the Ontario Superior Court of |ustice.
21,. THIS COURT ORDERS that prior to the passing of its accounts, the Interim
Receiver shall be at liberty from time to time to apply reasonable amounts, out of the
monies in its hands, including any monies that were in any of the Debtor' bank
accounts as of the date of this Order, against its fees and disbursements, including
legal fees and disbursements, incurred at the normal rates and charges of the Interim
Receiver or its counsel, and such amounts shall constitute advances against its
remuneration and disbursements when and as approved by this Court.
GENERAT
22. THIS COURT ORDERS that the Interim Receiver may from time to time
apply to this Court for advice and directions in the discharge of its powers and duties
hereunder.
- 1l -
23. THIS COURT ORDERS that nothing in this Order shall prevent the Lrterim
Receiver from acting as receiver pursuant to s. 243 of the BIA or a trustee in
bankruptcy of the Debtor.
24. THIS COURT HEREBY REQUESTS the aid and recognition of any court,
tribunal, regulatory or administrative body having jurisdiction in Canada or in the
United States to give effect to this Order and to assist the Interim Receiver and its
agents in carrying out the terms of this Order. All courts, tribunals, regulatory and
administrative bodies are hereby respectfully requested to make such orders and to
provide such assistance to the Interim Receiver, as an officer of this Court, as may be
necessary or desirable to give effect to this Order or to assist the Interim Receiver and
its agents in carrying out the terms of this Order.
25. THIS COURT ORDERS that the Interim Receiver be at liberty and is hereby
authorized and empowered to apply to any court, tribunal, regulatory or
administrative body, wherever located, for the recognition of this Order and for
assistance in carrying out the terms of this Order, and that the Interim Receiver is
authorized and empowered to act as a representative in respect of the within
proceedings for the purpose of having these proceedings recognized in a jurisdiction
outside Canada.
26. THIS COURT ORDERS that any interested pafty may apply to this Court to
vary or amend this Order on not less than seven (7) days' notice to the Interim
Receiver and to any other party likely to be affected by the order sought or upon
such other notice, if. any, as this Court may order.
SERVICE AND NOTICE
27. THIS COURT ORDERS that the E-Service Protocol of the Commercial List
(the "Protocol") is approved and adopted by reference herein and, in this proceeding,
the service of documents made in accordance with the Protocol (which can be found
-12-
on the Commercial List website at
htþ:/ /www.ontariocourts.ca/scj/practice/practice-directions/toronto/e-service-
protocol/) shall be valid and effective service. Subject to Rule 17.05 this Order shall
constitute an order for substituted service pursuant to Rule 1.6.04 of the Rules of Civil
Procedure. Subject to Rule 3.01(d) of the Rules of Civil Procedure and paragnph2l'
of the Protocol, service of documents in accordance with the Protocol will be effective
on transmission. This Court further orders that a Case Website shali be established
in accordance with the Protocol.
28. THIS COURT ORDERS that if the service or distribution of documents in
accordance with the Protocol is not practicable, the Interim Receiver is at liberty to
serve or distribute this Order, any other materiais and orders in these proceedings,
any notices or other correspondence, by forwarding true copies thereof by prepaid
ordinary mail, courier, personal delivery or facsimile transmission to the Debtor's
creditors or other interested parties at their respective addresses as last shown on the
records of the Debtor and that any such service or distribution by courier, personal
delivery or facsimile transmission shall be deemed to be received on the next
business day following the date of forwarding thereof, or if sent by ordinary mail, on
the third business day after mailing.
;r.,-;:: ..:- .:.: ,., .,^-:,,, . 'i.;jl:.;ì... irlr-ìÀ, , ;) "1 , i.: "ì.
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ffi$EP ü 3 2014
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ROYAL BANK OF CANADAApplicant
GOUDAS FOOD PRODUCTS ANDINVESTMENTS LIMITED
Respondent
Courr File No: Cu lq-þØ*rC{tCWand
ONTARIOSUPERIOR COT]RT OF JUSTICE
(Commercial List)Proceeding commenced at Toronto
INTERIM RECEIVERSHIP ORDER
OSLER, HOSKIN & HARCOURT LLPP.O Box 50, I First Canadian Place100 King Street WestToronto, ON M5X 188
Shawn Irving (LSUC #50035U)Tel: 416.862.4733
Caitlin Fell (LSUC #600911H)Tel: 416.862.6434Fax: 416.862.6666
Lawyers for the Applicant,Royal Bank of Canada
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ROYAL BANK OF CANADA
APPlicant
GOUDAS FOOD PRODUCTS AND
II'IVESTMENTS LMITED
ResPondent
Court File No. CV 14-10680-00CL
ONTARIOST}PERIOR COT]RT OF' JUSTICE
(Commercial List)
Proceeding commenced at Toronto
APPLICATION RECORD OF THE APPLICANT
OSLER, HOSKIN & HARCOURT LLP
È.O norsO, I First Canadian Place
100 King Sneet \Mest
Toronto, ON M5X 1BB
Sbawn Irving (LSUC #50035U)
Tel: 416.862.4733
Caitlin Fell (LSUC #60091H)
Tel: 416.862.6434
Fax: 416-862-6666
Lawyers for the APPlicant'
Royal Bank of Canada
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ROYAL BANK OF CANADA
Applicant
GOUDAS FOOD PRODUCTS ANDINVESTMENTS LIMITED
Respondent
Court File No. CV14-10680-00CLand
ON,-TARIOSUPERIOR COURT OF JUSTICE
(Comm,ercial List)
Proceeding comrnenced at Toronto
MOTION RECORD OF THE APPLICANT
osLER, HOSKIN & HARCOURT LLPP.O Box 50, 1 First Canadian Place100 King Street WestToronto, ON M5X 188
Shawn lrving (LSUC #50035U)Tel: 416.862.4733
Caitlin Fell (LSUC #60091H)Tel: 416.862.6434Fax: 416.862.6666
Lawyers for the Applicanti,Royal Bank of Canada