Part 2Part 2Security Interests in LandSecurity Interests in Land

Section IISection IIEnforcement & Enforcement &

Receiverships – Land and Receiverships – Land and Personal PropertyPersonal Property

Mortgagee’s RemediesMortgagee’s Remedies 1) Action on the Covenant1) Action on the Covenant 2) Possession2) Possession 3) Foreclosure3) Foreclosure

Similar to PPSA right to retain in Similar to PPSA right to retain in satisfactionsatisfaction

Not available in NB, NSNot available in NB, NS

Mortgagee’s RemediesMortgagee’s Remedies 4) Sale4) Sale

Judicial SaleJudicial Sale Not available in NBNot available in NB

Private/Contractual/Extrajudicial SalePrivate/Contractual/Extrajudicial Sale Not available in NSNot available in NS Usual action in N.B., Nfld & Lab, Usual action in N.B., Nfld & Lab,

PEI, OntPEI, Ont

Mortgagee’s RemediesMortgagee’s Remedies 5) Right to rents5) Right to rents

Similar to PPSA proceedsSimilar to PPSA proceeds 6) Distress6) Distress 7) Appointing a receiver7) Appointing a receiver

Also in respect of personal propertyAlso in respect of personal property

PossessionPossession M’ee has right to go into possessionM’ee has right to go into possession

By inherent right as owner once mortgage is in By inherent right as owner once mortgage is in defaultdefault

Because a mortgage is in form a conveyance of the Because a mortgage is in form a conveyance of the fee simple, the m’ee would have a right to possession fee simple, the m’ee would have a right to possession even before default, but for a standard clause giving even before default, but for a standard clause giving the debtor quiet possession until defaultthe debtor quiet possession until default

Similarly with equitable mortgage (e.g. conveyance Similarly with equitable mortgage (e.g. conveyance of right of redemption)of right of redemption)

Second m’ee has better right to possession after Second m’ee has better right to possession after default than does m’ordefault than does m’or

First m’ee has better right than 2First m’ee has better right than 2ndnd

PossessionPossession M’ee has right to go into possessionM’ee has right to go into possession

No notice requiredNo notice required Unless BIA appliesUnless BIA applies

Possession by any means without a Possession by any means without a breach of peacebreach of peace Often attornment of rents is sufficient to Often attornment of rents is sufficient to

induce commercial m’or to give up induce commercial m’or to give up possessionpossession

PossessionPossession M’ee in possession has duty to M’ee in possession has duty to

manage property prudently (e.g. manage property prudently (e.g. ensure that rental property is leased) ensure that rental property is leased) and is liable for failure to do soand is liable for failure to do so For this reason m’ee is very reluctant to For this reason m’ee is very reluctant to

go into possessiongo into possession It is said that the duty is is onerousIt is said that the duty is is onerous But as importantly, it is a fruitful field for But as importantly, it is a fruitful field for

litigationlitigation

Equity of Redemption & Equity of Redemption & ForeclosureForeclosure

In form a mortgage is a transfer of the In form a mortgage is a transfer of the fee simple with a covenant for fee simple with a covenant for reconveyance on condition (or defeasible reconveyance on condition (or defeasible on condition subsequent)on condition subsequent)

Originally given strict legal Originally given strict legal interpretationinterpretation Condition is not satisfied if a payment is Condition is not satisfied if a payment is

missedmissed Debt remains owing, with no obligation to Debt remains owing, with no obligation to

reconvey landreconvey land

Equity of RedemptionEquity of Redemption The Court of Equity intervened to allow the The Court of Equity intervened to allow the

mortgagor to redeem the property by paying the mortgagor to redeem the property by paying the debtdebt Thus “the equity of redemption”Thus “the equity of redemption”

Originally the right of redemption was recognized Originally the right of redemption was recognized only in limited circumstancesonly in limited circumstances Eg when the delay was short and the failure to redeem Eg when the delay was short and the failure to redeem

was the result of accident or fraudwas the result of accident or fraud Eventually, the mortgagor became Eventually, the mortgagor became entitledentitled to to

redeem within a reasonable timeredeem within a reasonable time This is recognition that the mortgage is merely security This is recognition that the mortgage is merely security

for a debt rather than a true transferfor a debt rather than a true transfer

Equity of RedemptionEquity of Redemption The right of redemption is the right to pay the The right of redemption is the right to pay the

debt and regain title to the land, even after debt and regain title to the land, even after defaultdefault

The right of redemption cannot be waived The right of redemption cannot be waived contractually – consumer protectioncontractually – consumer protection

Is the right of redemption necessary?Is the right of redemption necessary? Recall, when it was originally introduced, if Recall, when it was originally introduced, if

the debtor did not redeem she would lose the the debtor did not redeem she would lose the land and still be liable for the debtland and still be liable for the debt

Now the proceeds of disposition are applied Now the proceeds of disposition are applied to the debtto the debt

ForeclosureForeclosure Foreclosure is a correlative right in the Foreclosure is a correlative right in the

m’ee to extinguish the right of redemption, m’ee to extinguish the right of redemption, which might otherwise persist indefinitelywhich might otherwise persist indefinitely

It is a motion asking the court to terminate It is a motion asking the court to terminate or “foreclose” the debtor’s equity of or “foreclose” the debtor’s equity of redemptionredemption

In effect “either redeem now on the terms In effect “either redeem now on the terms on which you would be entitled if you filed on which you would be entitled if you filed a suit for redemption in equity, or forever a suit for redemption in equity, or forever hold your peace."hold your peace."

ForeclosureForeclosure Effect of a order of foreclosure Effect of a order of foreclosure

The property vests in the m’eeThe property vests in the m’ee The m’ee cannot sue the debtor for any The m’ee cannot sue the debtor for any

deficiency, deficiency, unlessunless the m’ee is in a position to the m’ee is in a position to reconvey the property (ie. has not sold to a reconvey the property (ie. has not sold to a third party)third party)

Deficiency action automatically re-opens the Deficiency action automatically re-opens the foreclosureforeclosure

Similar to PPSA retention in satisfactionSimilar to PPSA retention in satisfaction Except PPSA cuts off right to sue for deficiency Except PPSA cuts off right to sue for deficiency

completely – cannot be ‘reopened’completely – cannot be ‘reopened’

ForeclosureForeclosure DisadvantagesDisadvantages

Requires judicial actionRequires judicial action ExpensiveExpensive Slow – typically 6 monthsSlow – typically 6 months UncertainUncertain

The foreclosure can be reopened on a motion by The foreclosure can be reopened on a motion by the debtor, sometimes even after the property the debtor, sometimes even after the property has been transferred to a third partyhas been transferred to a third party

AdvantageAdvantage Judicially supervisedJudicially supervised

Power of SalePower of Sale The defects of the foreclosure remedy led parties The defects of the foreclosure remedy led parties

to insert a power of sale into the mortgage to insert a power of sale into the mortgage contractcontract Sale conducted by the m’eeSale conducted by the m’ee

This power was accepted by the courts and This power was accepted by the courts and recognized legislativelyrecognized legislatively Most jurisdictions statutorily imply a private power of Most jurisdictions statutorily imply a private power of

sale into any mortgage, e.g. NB Property Act s.44(1)sale into any mortgage, e.g. NB Property Act s.44(1) Some jurisdictions (e.g. N.S.) also allow judicial Some jurisdictions (e.g. N.S.) also allow judicial

sale.sale. Sale, not foreclosure, but conducted by the courtSale, not foreclosure, but conducted by the court

Power of SalePower of Sale Effect of the sale essentially the same as under Effect of the sale essentially the same as under

the PPSA right of disposalthe PPSA right of disposal Debtor has right of redemption up until the time of saleDebtor has right of redemption up until the time of sale M’ee has duty to take reasonable steps to secure fair M’ee has duty to take reasonable steps to secure fair

market pricemarket price Proceeds are applied to the debtProceeds are applied to the debt

M’ee can sue debtor for any deficiencyM’ee can sue debtor for any deficiency Debtor is entitled to any surplusDebtor is entitled to any surplus

Property is conveyed to third party clear of all Property is conveyed to third party clear of all subordinate interests, subject to all senior interestssubordinate interests, subject to all senior interests

Purchaser takes good title regardless of defects in salePurchaser takes good title regardless of defects in sale With damages remedy against m’ee for sale defectsWith damages remedy against m’ee for sale defects

Power of SalePower of Sale Notice prior to saleNotice prior to sale

Usually a statutory notice requirement:Usually a statutory notice requirement: 4 weeks in NB4 weeks in NB

Property Act s. 45(1)(b)Property Act s. 45(1)(b) 15 days after default before notice of sale; 15 days after default before notice of sale;

35 days after notice before sale in Ont35 days after notice before sale in Ont S. 33 Mortgages ActS. 33 Mortgages Act

Power of SalePower of Sale Property Act s.47(2)Property Act s.47(2)

S.47(2) Where a conveyance is made in S.47(2) Where a conveyance is made in professed exercise of the per of sale conferred professed exercise of the per of sale conferred by section 44, the title of the purchaser is not by section 44, the title of the purchaser is not impeachable on the ground that no case had impeachable on the ground that no case had arisen to authorize the sale, or that due notice arisen to authorize the sale, or that due notice was not given, or that the power was was not given, or that the power was otherwise improperly or irregularly exercised; otherwise improperly or irregularly exercised; but any person damnified by an unauthorized but any person damnified by an unauthorized or improper or irregular exercise of the power or improper or irregular exercise of the power shall have his remedy in damages against the shall have his remedy in damages against the person exercising the power. person exercising the power.

Power of SalePower of Sale Differences from PPSADifferences from PPSA

In most jurisdictions m’ee cannot buy in at In most jurisdictions m’ee cannot buy in at the salethe sale

But note that m’ee often can buy in at But note that m’ee often can buy in at judicial salejudicial sale

(In many U.S. jurisdictions can buy in at (In many U.S. jurisdictions can buy in at reasonable price)reasonable price)

Differences in details, e.g.Differences in details, e.g. Notice periodNotice period Statutory publicity requirements – advertise in Statutory publicity requirements – advertise in

newspapernewspaper

Power of SalePower of Sale N.B. law is extremely unusualN.B. law is extremely unusual

M’ee can buy in for their own benefit, at any M’ee can buy in for their own benefit, at any priceprice

Duty to take reasonable steps to secure fair Duty to take reasonable steps to secure fair market price does not always applymarket price does not always apply

Duty applies to banks, or secured party buying Duty applies to banks, or secured party buying in for their own benefit: in for their own benefit:

See Canada Trustco v 040381 NB IncSee Canada Trustco v 040381 NB Inc

Right of RedemptionRight of Redemption Right of redemption is triggered by Right of redemption is triggered by

sale or foreclosure proceedings, not sale or foreclosure proceedings, not by possessionby possession Why would m’ee want to go into Why would m’ee want to go into

possession on default without intending possession on default without intending to sell?to sell?

Right to Collect RentsRight to Collect Rents A m’ee in possession has the right to A m’ee in possession has the right to

collect rents as an incident of possessioncollect rents as an incident of possession M’ee will usually take an independent M’ee will usually take an independent

assignment of rents as additional assignment of rents as additional security, with the right to collect rents security, with the right to collect rents triggered on defaulttriggered on default This allows m’ee (if careful) to collect rents This allows m’ee (if careful) to collect rents

without going into possessionwithout going into possession Similar to PPSA right to collect accountsSimilar to PPSA right to collect accounts

Distribution of SurplusDistribution of Surplus Proceeds of sale applied to:Proceeds of sale applied to:

Costs of disposalCosts of disposal Debt owing to SPDebt owing to SP Subordinate interest holders in order of Subordinate interest holders in order of

their prioritytheir priority Same as under the PPSASame as under the PPSA

Action on the CovenantAction on the Covenant M’ee has right to sue debtor on debt M’ee has right to sue debtor on debt

without realizing on securitywithout realizing on security When would m’ee want to do this?When would m’ee want to do this?

Also a right to sue for deficiency Also a right to sue for deficiency after saleafter sale

ReceivershipsReceiverships

TerminologyTerminology A “receiver” is a person appointed to take A “receiver” is a person appointed to take

possession of and dispose of the property of a possession of and dispose of the property of a debtordebtor

A “manager” is a person appointed to operate the A “manager” is a person appointed to operate the business of a debtorbusiness of a debtor

A receiver does A receiver does notnot have the powers of a have the powers of a manager unless appointed as suchmanager unless appointed as such Very often a security agreement Very often a security agreement doesdoes provide for the provide for the

appointment of a receiver-managerappointment of a receiver-manager Accordingly, the term “receiver” is often used to refer Accordingly, the term “receiver” is often used to refer

to a person who, strictly, should be called a “receiver- to a person who, strictly, should be called a “receiver- manager”manager”

Types of ReceiverTypes of Receiver A receiver may be appointed (partial list):A receiver may be appointed (partial list):

By a secured party pursuant to a power granted By a secured party pursuant to a power granted by the security agreementby the security agreement

A “private receiver” or “privately appointed receiver”A “private receiver” or “privately appointed receiver” Private receivers are unknown in the U.S.Private receivers are unknown in the U.S.

By a court to preserve and protect the debtor’s By a court to preserve and protect the debtor’s property pending judgmentproperty pending judgment

A “court appointed receiver”A “court appointed receiver” By a court to aid an unsecured party to liquidate By a court to aid an unsecured party to liquidate

assets which could not be reached by execution assets which could not be reached by execution (judgment creditor’s normal remedy)(judgment creditor’s normal remedy)

““Receiver in aid of equitable execution”Receiver in aid of equitable execution”

Governing ActsGoverning Acts In addition to common law:In addition to common law: BIA part XIBIA part XI

Applies to all receivers (CAR or PAR) of substantially all the Applies to all receivers (CAR or PAR) of substantially all the property of an insolvent or bankrupt personproperty of an insolvent or bankrupt person

PPSAPPSA All receivers of personal property (incorporated or All receivers of personal property (incorporated or

unincorporated debtor, court or privately appointed unincorporated debtor, court or privately appointed receiver)receiver)

Business Corporations Acts (except Ont.)Business Corporations Acts (except Ont.) Receivers of corporations (real and personal property)Receivers of corporations (real and personal property) [PPSA and Bus. Corp. Acts are very similar][PPSA and Bus. Corp. Acts are very similar]

Rule 41 NB Rules of Court – CAR onlyRule 41 NB Rules of Court – CAR only

Governing ActsGoverning Acts BIA and PPSA are almost identical and BIA and PPSA are almost identical and

provide the most comprehensive regulationprovide the most comprehensive regulation Only receivers of real property of individual Only receivers of real property of individual

debtors (mostly residential mortgages) are not debtors (mostly residential mortgages) are not subject to either of these Actssubject to either of these Acts

Receivers are rarely appointed in such casesReceivers are rarely appointed in such cases In what follows, we will only consider the In what follows, we will only consider the

law as amended by statutelaw as amended by statute Note that only receivers of real property of Note that only receivers of real property of

solvent individual debtors are not subject to any solvent individual debtors are not subject to any statutory regulationstatutory regulation

Status of ReceiverStatus of Receiver A receiver is A receiver is notnot simply the agent of the simply the agent of the

SPSP Court appointedCourt appointed

Normally appointed on recommendation of SP, Normally appointed on recommendation of SP, but formallybut formally

Officer of the CourtOfficer of the Court Acts as principal, not as agentActs as principal, not as agent

Privately appointedPrivately appointed Typically agent of both SP and Debtor because Typically agent of both SP and Debtor because

of “deemed agency clause”of “deemed agency clause”

Deemed Agency ClauseDeemed Agency Clause The security agreement normally The security agreement normally

provides that the receiver is appointed provides that the receiver is appointed “as agent of the debtor”“as agent of the debtor”

If the agreement does not so provide, If the agreement does not so provide, then the PAR is simply an agent of the SPthen the PAR is simply an agent of the SP

Since the clause is almost universal, in Since the clause is almost universal, in what follows we will assume that the what follows we will assume that the security agreement does have such a security agreement does have such a clauseclause

Deemed Agency ClauseDeemed Agency Clause Two goalsTwo goals

Allow receiver to enforce contracts on behalf of Allow receiver to enforce contracts on behalf of debtor, enter into new contractsdebtor, enter into new contracts

Receiver is like new managementReceiver is like new management Insulate SP from liability for acts of receiver in Insulate SP from liability for acts of receiver in

dealing with propertydealing with property Only partially successfulOnly partially successful

Courts have held that notwithstanding the Courts have held that notwithstanding the deemed agency clause, the receiver is agent of deemed agency clause, the receiver is agent of the SP for purposes of dealing with the the SP for purposes of dealing with the collateralcollateral

Deemed Agency ClauseDeemed Agency Clause It seems to me that the receiver and manager in a It seems to me that the receiver and manager in a

situation, like the present, is wearing two hats. “When situation, like the present, is wearing two hats. “When wearing one hat, he is the agent of the debtor wearing one hat, he is the agent of the debtor company; when wearing the other, the agent of the company; when wearing the other, the agent of the debenture holder. In occupying the premises of the debenture holder. In occupying the premises of the debtor and in carrying on the business, the receiver debtor and in carrying on the business, the receiver and manager acts as the agent of the debtor and manager acts as the agent of the debtor company. In realizing the security of the debenture company. In realizing the security of the debenture holder, notwithstanding the language of the holder, notwithstanding the language of the debenture, he acts as the agent of the debenture debenture, he acts as the agent of the debenture holder, and thus is able to confer title on a purchaser holder, and thus is able to confer title on a purchaser free of encumbrance.”free of encumbrance.”

Peat Marwick Ltd. v. Consumers' Gas Co. (Ont C.A.)Peat Marwick Ltd. v. Consumers' Gas Co. (Ont C.A.)

PARM as Agent of SPPARM as Agent of SP Since PARM is agent of the SP for Since PARM is agent of the SP for

the purposes of realization, the purposes of realization, PARM can give clear title to purchasePARM can give clear title to purchase Presumably SP is liable for any breach Presumably SP is liable for any breach

of duty by PARM in realizationof duty by PARM in realization

Receiver’s DutyReceiver’s Duty Either type of receiver has strong Either type of receiver has strong

reputational incentive to look after reputational incentive to look after the interests of SP behind the interests of SP behind appointmentappointment

CAR owes fiduciary duty to all CAR owes fiduciary duty to all parties with an interest in the estate parties with an interest in the estate of the debtor, ie debtor and all of the debtor, ie debtor and all creditors, secured and unsecuredcreditors, secured and unsecured

Receiver’s DutyReceiver’s Duty PAR PAR

PPSA s.64(7) On application by an interested person, the PPSA s.64(7) On application by an interested person, the Court may. . . (e) notwithstanding anything contained in a Court may. . . (e) notwithstanding anything contained in a security agreement or other document providing for the security agreement or other document providing for the appointment of a receiver, make an order requiring a appointment of a receiver, make an order requiring a receiver or a person by or on behalf of whom the receiver is receiver or a person by or on behalf of whom the receiver is appointed to make good a default in connection with the appointed to make good a default in connection with the receiver's custody, management or disposition of the receiver's custody, management or disposition of the collateral of the debtor or to relieve the person from any collateral of the debtor or to relieve the person from any default on such terms as the Court thinks fit, ...default on such terms as the Court thinks fit, ...

See similarly BCA s.58(d)See similarly BCA s.58(d) Liability of Liability of bothboth SP and receiver for any default SP and receiver for any default Applies in principle to CARM but not in practice Applies in principle to CARM but not in practice

because of close court supervisionbecause of close court supervision

Managers & New Managers & New ContractsContracts

The receiver-manager may enter into new The receiver-manager may enter into new contractscontracts CARM as principal, PARM as agent of CARM as principal, PARM as agent of debtordebtor

RM may want to RM may want to Borrow money to finance receivershipBorrow money to finance receivership Enter into contracts for everyday operations of Enter into contracts for everyday operations of

the debtor company ie for the supply of gas and the debtor company ie for the supply of gas and electricityelectricity

Enter into contract for more ambitious operations Enter into contract for more ambitious operations of debtor, e.g. finance completion of existing of debtor, e.g. finance completion of existing contractscontracts

Managers & New Managers & New ContractsContracts

In either case (CARM or PARM), SP at In either case (CARM or PARM), SP at whose instance receiver was appointed whose instance receiver was appointed is is notnot liable on new contracts (unless liable on new contracts (unless that SP specifically agrees to be liable)that SP specifically agrees to be liable)

TerminologyTerminology For convenience, the party with whom the For convenience, the party with whom the

receiver contracts will be referred to as receiver contracts will be referred to as “the receiver’s creditor” even though, as we “the receiver’s creditor” even though, as we will see, the receiver is not necessarily will see, the receiver is not necessarily liable on the contractliable on the contract

CARM & New ContractsCARM & New Contracts CARM normally contracts as principalCARM normally contracts as principal However, CARM has control over the legal However, CARM has control over the legal

persona of the debtor company and may persona of the debtor company and may attempt to contract solely on behalf of the attempt to contract solely on behalf of the companycompany In which case CARM is not liable and CARM’s In which case CARM is not liable and CARM’s

creditor has only a claim against the debtor creditor has only a claim against the debtor company ie is unsecured creditor of insolvent company ie is unsecured creditor of insolvent companycompany

This result is unusual and would depend on the This result is unusual and would depend on the wording of the contractwording of the contract

CARM & New ContractsCARM & New Contracts When CARM contracts as principal, CARM has When CARM contracts as principal, CARM has

unlimited personal liability on the contract, unlimited personal liability on the contract, absent contractual wording the to contraryabsent contractual wording the to contrary But is entitled to indemnification as charge on the But is entitled to indemnification as charge on the

assets, in priority to the charge of the SP at whose assets, in priority to the charge of the SP at whose instance he was appointed and all subordinate instance he was appointed and all subordinate chargescharges

CARM’s creditor is entitled to be subrogated CARM’s creditor is entitled to be subrogated against the rights of the CARM and so has a senior against the rights of the CARM and so has a senior charge against the assets of the debtor if the charge against the assets of the debtor if the CARM were itself to become insolventCARM were itself to become insolvent

CARM & New ContractsCARM & New Contracts CARM often limits personal liability to the extent CARM often limits personal liability to the extent

of its charge against the assets of the debtorof its charge against the assets of the debtor What if CARM disclaims its personal liability What if CARM disclaims its personal liability

entirely?entirely? In principle, CARM’s creditor cannot have subrogated right In principle, CARM’s creditor cannot have subrogated right

against the debtor company if CARM is not liable at allagainst the debtor company if CARM is not liable at all Rule 41.06 of the NB Rules of Court may give direct rightRule 41.06 of the NB Rules of Court may give direct right

““Where the receiver exercises the powers granted under Where the receiver exercises the powers granted under this rule, the property which is subject to the receivership this rule, the property which is subject to the receivership is charged with the payment of obligations arising from is charged with the payment of obligations arising from the exercise of such powers.”the exercise of such powers.”

PARM & New ContractsPARM & New Contracts PARM is not personally liable on new contractsPARM is not personally liable on new contracts

PARM is agent, and the liability is that of his principalPARM is agent, and the liability is that of his principal Which is normally the debtor companyWhich is normally the debtor company

In which case the third party contracting with the receiver In which case the third party contracting with the receiver has a worthless claim against an insolvent companyhas a worthless claim against an insolvent company

PARM may accept (usually limited) personal liability PARM may accept (usually limited) personal liability on new contractson new contracts In which case, like CARM is entitled indemnification as In which case, like CARM is entitled indemnification as

charge on the assets, in priority to the charge of the SP at charge on the assets, in priority to the charge of the SP at whose instance he was appointed and all subordinate whose instance he was appointed and all subordinate chargescharges

PARM’s creditor is entitled to be subrogated to those PARM’s creditor is entitled to be subrogated to those rightsrights

Managers & New Managers & New ContractsContracts

CARM and PARM are both usually able CARM and PARM are both usually able to borrow money to finance the to borrow money to finance the receivership and to grant new charges receivership and to grant new charges against the assets of the debtor in against the assets of the debtor in priority to the charge of the SP at whose priority to the charge of the SP at whose instance he was appointed and all instance he was appointed and all subordinate chargessubordinate charges CARM has power by order of appointmentCARM has power by order of appointment PARM has power with permission of SP by PARM has power with permission of SP by

instrument under which it was appointed instrument under which it was appointed

Managers & New Managers & New ContractsContracts

Can subordinate interest holders object to the Can subordinate interest holders object to the creation of this senior charge?creation of this senior charge? Not against CARM since charge is created with the Not against CARM since charge is created with the

authorization of the courtauthorization of the court Not against PARM for routine charges, since these Not against PARM for routine charges, since these

are expenses of the receivership and can be added in are expenses of the receivership and can be added in priority: PPSA s.59(3)(a)priority: PPSA s.59(3)(a)

For unusual charges, at one time SP might seek to For unusual charges, at one time SP might seek to have CARM appointed to avoid challenges of this kindhave CARM appointed to avoid challenges of this kind

Now, PPSA s.64(7)(c), BCA s.58(f) allows PARM to Now, PPSA s.64(7)(c), BCA s.58(f) allows PARM to seek pre-approval of the court without need to seek pre-approval of the court without need to appoint CARMappoint CARM

Managers & New Managers & New ContractsContracts

In circumstances in which receiver is In circumstances in which receiver is personally liable on new contract and is personally liable on new contract and is entitled to be indemnified as a first charge entitled to be indemnified as a first charge on the assets of the debtor, parties who on the assets of the debtor, parties who contracted with the receiver are entitled to contracted with the receiver are entitled to be subrogated to the receivers rights be subrogated to the receivers rights against the assetsagainst the assets So, if receiver becomes insolvent, party who So, if receiver becomes insolvent, party who

contracted with receiver who was personally contracted with receiver who was personally liable is becomes entitled to a first charge on liable is becomes entitled to a first charge on the assets of the debtorthe assets of the debtor

Court Appointed Court Appointed ReceiverReceiver

Advantages Advantages Useful where privately appointed receiver is having Useful where privately appointed receiver is having

difficulty taking possession, ordifficulty taking possession, or Where there are many parties attempting to realize at Where there are many parties attempting to realize at

the same timethe same time Insulated from actions for improper disposition, since Insulated from actions for improper disposition, since

disposal is made pursuant to order of the courtdisposal is made pursuant to order of the court Insulated from frivolous actions – typically cannot be Insulated from frivolous actions – typically cannot be

sued without leave of the courtsued without leave of the court DisadvantagesDisadvantages

Slow – court motions requiredSlow – court motions required Expensive – court motions requiredExpensive – court motions required

Court Appointed Court Appointed ReceiverReceiver

Courts are reluctant to appoint a Courts are reluctant to appoint a receiver when a privately appointed receiver when a privately appointed receiver is adequatereceiver is adequate