Executive Summary: Key Legal and Evidentiary Issues

• Scope of “Property” under the receivership order, specifically whether $143,000 in HST on a lease-termination settlement falls within the defined receivership estate.
• Characterization of the HST funds as personal property “acquired in connection with or arising from or out of” the debtor’s real property at 761 Queen Street West.
• Effect of the Canada Revenue Agency’s statutory deemed trust over HST on the debtor’s proprietary interest and on the Receiver’s right to possession.
• Timing issue as to whether the receivership order can capture funds received by the debtor before the order was granted, where the transaction was already concluded.
• Conduct of the debtor and its principal in failing to disclose the whereabouts of the $143,000 and complying with the duty to cooperate and deliver Property to the Receiver.
• Proper insolvency process for resolving competing priority claims (first mortgagee vs. CRA) through the Receiver, rather than self-help payments by the debtor or its director.

Background and facts of the case
Portage Capital Nominee Corp. commenced an application in the Ontario Superior Court of Justice and obtained a receivership order dated January 13, 2026, appointing KSV Restructuring Inc. as receiver and manager over the assets of R & B Properties (2011) Inc. (the debtor). The receivership related to real property known municipally as 761 Queen Street West, Toronto, Ontario. The order defined the “Property” to include: (i) the real property, (ii) all of the personal property of the debtor “located at or related to or used or acquired in connection with or arising from or out of” that real property, and (iii) the proceeds of (i) and (ii).
Before the receivership, the debtor had a commercial lease with a tenant, The Beer Store, for premises in the building. The lease was terminated through a settlement pursuant to which The Beer Store agreed to pay the debtor $1,000,000 plus HST of $143,000. The entire settlement amount was thus $1,143,000, with the $143,000 representing the HST payable on the lease-termination payment. The Beer Store paid these funds to the debtor, and at the time the receivership order was granted, the settlement proceeds, including the HST component, were in the possession or under the control of the debtor or its principal, Mr. Daniel Rumack.
Following the appointment of KSV as Receiver, the $1,000,000 (non-HST portion) of the settlement was turned over to the Receiver by the debtor and/or Mr. Rumack. However, the debtor and Mr. Rumack did not similarly remit the $143,000 HST amount. The Receiver then brought a motion seeking an order requiring the debtor and Mr. Rumack to pay the $143,000 to the Receiver on the basis that it was part of the Property captured by the receivership order.

Key provisions of the receivership order
The court focused on three main parts of the receivership order to resolve the dispute.
First, the preamble set out the definition of “Property,” expressly including “all of the personal property of [the debtor] which is located at or related to or used or acquired in connection with or arising from or out of the Real Property” along with the proceeds of such property. This was the central definitional clause, as the HST payment’s characterization turned on whether it fell within this broad concept of Property tied to the debtor’s building.
Second, paragraph 3 of the order granted the Receiver extensive powers over the Property. It authorized the Receiver 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,” and specified that where the Receiver took such steps it would be exclusively authorized and empowered to do so to the exclusion of all other persons, including the debtor. This confirmed that, once something was properly within the defined Property, the Receiver had primary control and others, including the debtor, had to step aside.
Third, paragraph 4 imposed a “duty to provide access and co-operation to the Receiver.” It required the debtor, its current and former directors and officers, and all other persons having notice of the order to “forthwith advise the Receiver of the existence of any Property in such Person’s possession or control” and to deliver all such Property to the Receiver upon request. This clause framed the debtor’s and Mr. Rumack’s obligation to disclose and turn over any qualifying Property, including funds already in their possession when the order took effect.

Arguments about the nature and timing of the HST funds
On the Receiver’s application, the core factual point was not disputed: the $143,000 was the HST portion of the $1,000,000 lease-termination settlement paid by The Beer Store to the debtor. The controversy instead centred on whether those funds were part of the receivership Property and, if so, whether the receivership order nonetheless failed to capture them because the payment preceded the order.
The Receiver’s position was that the HST component was plainly money “arising from or out of” the real property, because it was tax exigible on a lease-termination payment tied to the tenant’s obligations for a unit in the building. It therefore fell squarely within the preamble’s definition of Property. The Receiver maintained that since the funds were in the debtor’s possession when the order was granted, paragraph 4 compelled the debtor and Mr. Rumack to disclose and deliver them to the Receiver, just as they had done with the $1,000,000 principal amount.
The debtor, through counsel, advanced two connected arguments. First, it contended that the receivership order operated only prospectively and did not reach funds already paid to the debtor before the order was granted where the underlying transaction (the lease-termination settlement) had been fully concluded. On that reading, because the HST funds were received before the receivership began, they were outside the order’s scope.
Second, the debtor relied on the Canada Revenue Agency’s statutory deemed trust for HST, arguing that because CRA enjoys a deemed trust over collected HST, the debtor had no real interest in the funds, which were never truly its personal property. If the HST proceeds were held under a deemed trust for CRA, then, in the debtor’s submission, they would fall outside the receivership Property definition and should be paid directly to CRA, not to the Receiver.

Court’s analysis on the scope of the receivership Property
The court rejected both of the debtor’s arguments. On the timing issue, the judge held that even if the receivership order only “speaks” from the date it is granted, it still reaches all property in the possession of the debtor on that day. All of the debtor’s assets necessarily came into its hands under transactions concluded before the date of the order; that does not exclude them from the receivership. To accept the debtor’s approach would effectively strip the order of any practical effect, since virtually all debtor property arises from pre-receivership transactions.
The judge also emphasized that the debtor and Mr. Rumack had already paid the $1,000,000 non-HST settlement amount to the Receiver, and that money came from “the same transaction and presumably the same cheque” as the $143,000 HST component. It was all in their possession or control when the receivership order was granted. Given paragraph 4’s co-operation obligation, there was no principled basis for distinguishing between the principal settlement payment and the HST portion—both were Property in the debtor’s possession that should have been turned over.
On the characterization of the HST funds, the court found that the $143,000 was “plainly” funds arising from or out of the debtor’s building. The settlement amount, including HST, flowed directly from the tenant’s obligations in respect of premises in the building, so it fit within the express words “acquired in connection with or arising from or out of the Real Property.” The judge therefore concluded that the HST amount fell within the definition of Property in the preamble.

Treatment of the CRA deemed trust and proprietary interest
With respect to the CRA’s statutory deemed trust for HST, the court declined to accept that this mechanism meant the debtor had no interest in the funds. The debtor had been paid the HST, deposited it in its bank account, and retained it. Mr. Rumack’s affidavit did not candidly disclose where the money was being held at the time of the motion. The judge noted that if the debtor and its principal truly believed the funds belonged entirely to CRA, they had not acted on that belief by immediately remitting the HST.
The court pointed out that HST remittance obligations are complex, depending on reporting periods and the availability of input tax credits under the Excise Tax Act. Some or all of the $143,000 might or might not ultimately be payable to CRA, and that would be determined by the applicable tax regime in due course. In the meantime, the property was owned by the debtor “subject to the deemed trust” that would be enforceable if and when net payments became due. Even if one characterized the debtor’s interest as bare legal title as trustee, that legal title itself constitutes an interest in personal property arising from or out of the building, which the Receiver is entitled to seize as part of the Property.
The judge further noted that if the debtor were later assigned into bankruptcy, the statutory deemed trust would not bind the trustee in bankruptcy, and the first mortgagee’s claim (represented by Portage Capital) would likely have priority over CRA’s claim. This underscored that priority and entitlement to the HST were matters to be resolved under insolvency and tax statutes, not through unilateral decisions by the debtor or its director.

Court’s view on self-help and insolvency process
The court was critical of the approach taken by the debtor and Mr. Rumack, characterizing it as “self-help” inconsistent with the collective and neutral nature of insolvency proceedings. The receivership process exists to centralize control of the debtor’s assets in a court-appointed receiver, to ensure transparency and fair treatment of all stakeholders, including secured creditors like the first mortgagee and statutory creditors such as CRA.
By failing to disclose the current whereabouts of the $143,000 and resisting turnover of the money, the debtor and its principal were ignoring the court’s order requiring them to advise the Receiver of any Property in their possession and deliver it on request. The judge made clear that all interested parties, including CRA and Mr. Rumack (who faces potential director liability for unpaid HST), can raise their priority and entitlement claims within the receivership proceeding. Those issues will be addressed at an appropriate time on notice, when the receivership estate has been realized and the court can properly adjudicate priorities.
The court dismissed the suggestion that the debtor should first pay the funds to CRA, leaving any necessary adjustments to a later refund process. That sequence could result in CRA receiving money to which it was not entitled, thereby prejudicing secured creditors and the Receiver. It could also still leave Mr. Rumack exposed if CRA later faced a shortfall. The judge stressed that insolvency proceedings are not run to protect one individual creditor—or a director worried about personal exposure—at the expense of others or contrary to statutory schemes.

Outcome and orders, including the successful party and monetary amount
In the result, the court declared that the $143,000 paid by The Beer Store to the debtor as HST on the lease-termination settlement is “Property” within the meaning of the receivership order’s preamble. Because the order already obliges the debtor and its principal to turn over all Property to the Receiver, the judge did not issue a fresh mandatory order but emphasized that, following this declaration, the debtor and Mr. Rumack have no colour of right to retain the funds and that any delay in payment could be viewed as contumelious disregard of the receivership order.
The court also set a timetable for costs submissions, allowing the Receiver to deliver submissions by April 3, 2026, and the debtor and Mr. Rumack by April 10, 2026, with strict word and formatting limits. However, no specific amount of costs was fixed in this endorsement; the quantum of costs remains to be determined in subsequent written submissions.
Overall, the successful party on this motion is the Receiver, KSV Restructuring Inc., acting in the receivership obtained by Portage Capital Nominee Corp. The court confirmed that the $143,000 HST component of the Beer Store lease-termination settlement is part of the receivership estate and must be turned over to the Receiver, while the precise amount of any additional costs award has not yet been determined in this decision, meaning the only clear monetary amount ordered in favour of the successful party at this stage is the $143,000 to be paid into the receivership.