Century Services Corp. v. LeRoy
Page 34
[67] It is true that private receivers will often be seen as wearing ‘two hats’, one as
agent for the debtor (as is often specified in loan agreements) and one as agent for
the security holder: see Bennett at 58; Peat Marwick Ltd. v. Consumers’ Gas Co.
(1981) 113 D.L.R. (3d) 754 (Ont. C.A.) at 762. (Indeed, in the case at bar, I note that
the mortgage granted by Ms. LeRoy specified that Century could appoint a receiver,
who would be the mortgagor’s agent.) Bennett cites the comments of Mr. Justice
Houlden on this point in Peat Marwick, supra:
This point arose in the recent case of Diegel & Feick Inc. et al. v. Donia
Consulting Corp., released March 27, 1980, and not yet reported
[summarized 2 A.C.W.S. (2d) 256]. It involved an application under the
Vendors and Purchasers Act, R.S.O. 1970, c. 478. A receiver and manager
was selling real property which was charged as security under a debenture.
The purchaser submitted certain requisitions on title. Eberle J., dealt with the
point that is relevant for this appeal in the following words:
It was also argued that a sale of the assets of the company is
subject to the claims of the debenture holders and execution
creditors I have referred to, because of a provision in para. 4.3
of the debenture as follows: "Any such receiver shall for all
purposes be deemed to be the agent of the Company and not
the agent of the holder of the Debenture." Based on that
sentence, it is submitted that in selling the assets, the receiver
is acting as agent of the Company, not as agent of the holder
of the debenture, and that a sale of the company's interest in
the assets is subject to all encumbrances against the
company's interest, including the debentures and executions I
have referred to. On the other hand, if it were a sale of the
interests and rights of the debenture holder, those subsequent
encumbrances would be cut out. I think this submission is
answered by the decision in Re B. Johnson & Co. (Builders)
Ltd., [1955] Ch. 634, where at p. 644, the Master of the Rolls,
Lord Evershed, refers to a debenture which appears to have
many terms similar to those in para. 4.3 of the debenture here,
.... At that page the Master of the Rolls says:
“The situation of someone appointed by a
mortgagee or a debenture holder to be a
receiver and manager--as it is said, out of court-
-is familiar. It has long been recognized and
established that receivers and managers so
appointed are, by the effect of the statute law,
or of the terms of the debenture, or both,
treated, while in possession of the company's
assets and exercising the various powers
conferred upon them, as agents of the
company, in order that they may be able to deal
effectively with third parties. But, in such a case