On December 22, 2023, the Ontario Superior Court of Justice (Commercial List) released the decision in Kingsett Mortgage Corp et al v. Stateview Homes et al, which dismissed a motion to declare that $77 million in deposits were subject to trust in priority to the registered mortgagees.
The Stateview entities owned and operated pre-construction residential development projects. Stateview was placed into receivership in May 2023, with KSV Restructuring appointed as Receiver over the assets. Approximately 765 purchasers had paid deposits to the Stateview entities in respect of new homes to be built – in total these deposits amounted to approximately $77 million and were unsecured. Tarion Warranty Corporation had a statutory right of subrogation and brought the motion on behalf of the purchasers. The Receiver made submissions opposing the relief sought by Tarion.
The Court found that unlike the applicable statute for condominiums, there is no statutory deemed trust for new homes. With the exception of one of the projects that had an early termination provision, the Court found that other purchasers were not entitled to an express trust. The Court also noted that granting a constructive trust would upset the priority scheme set out in the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) and could not be applied to the deposits.
Cassels represented KSV Restructuring.