The Plaintiff Receiver: Ontario Court Affirms Application of Single Proceeding Model to Connected Third-Party Claims

In a recent decision, the Ontario Superior Court of Justice (Commercial List) (the “Court”) reaffirmed the single proceeding model in insolvency matters, driven by a desire to avoid the inefficiency and fragmentation associated with multiple separate proceedings.

In Constantine Enterprises Inc. v. Mizrahi (128 Hazelton) Inc., 2026 ONSC 2781 (“Constantine”), the Court held that a court-appointed receiver may pursue claims against non‑debtor third parties within the receivership proceeding itself, rather than in a separate action, where those claims are sufficiently connected to the debtor and the underlying insolvency.

Court Reinforces Scope of Single Proceeding Model

In Constantine, after a Yorkville luxury condominium project failed and entered receivership, the receiver sought to bring contractual and related claims against the director who was the principal behind the Mizrahi entities (the “Principal”) and Mizrahi Inc. (“MI”). The Principal led Mizrahi Development Inc. (“MDI”), which held a 50% interest in the debtor, Mizrahi (129 Hazelton) Inc. and also controlled MI, the project’s general contractor and developer.^[1]

The receiver’s claims concerned alleged overbilling and repayment obligations arising from pre-insolvency agreements.^[2] As a preliminary issue, the Court considered whether these claims could properly be advanced by motion within the receivership proceeding, rather than through a separate action.^[3]

The Court ultimately permitted the receiver to seek judgment within the receivership proceeding against both MI and the Principal. Although the Court’s reasons were brief, the decision confirms that the single proceeding model is not confined to protecting a debtor from the numerous claims brought against it by creditors. It can also operate where the debtor is a plaintiff, allowing a debtor’s estate to pursue claims against third parties within the same proceeding, provided those claims are sufficiently connected to the insolvency.

In reaching this conclusion, the Court adheres with the principles previously set out by the Ontario Court of Appeal in Mundo Media Ltd. (Re), 2022 ONCA 607 (“Mundo Media”), which recognizes that the single proceeding model may extend to claims against third parties who are not “strangers” to the insolvency. The central inquiry is the degree of connection between the claim, the third party and the insolvency proceeding.^[4]

While the Court did not undertake a detailed analysis, its conclusion is consistent with a finding that MI and the Principal were sufficiently connected to the insolvency. The factual matrix demonstrated a high degree of economic and operational integration. The project was structured as a joint venture equally owned by Constantine Enterprises Inc. and MDI, an entity controlled by the Principal, who also served as both director and president of the project. In addition, MI, another entity under control of the Principal, acted as the project’s sole general contractor and developer.^[5] These overlapping roles supported treating the Principal as the controlling mind of both MI and MDI and tie the Principal and MI directly to the project’s financial performance and the obligations at issue.

Single Proceeding Model Objectives Support Adjudication Within a Receivership

This decision advances the core objectives of the single proceeding model articulated in Century Services Inc. v. Canada, 2010 SCC 60 (“Century Services”): efficiency, consistency and maximizing recovery for creditors.^[6] Allowing the receiver to pursue these claims within the receivership avoids the time, cost and duplication of separate proceedings and keeps related issues before a single court, promoting consistent outcomes.

Conclusion

Constantine reiterates the single proceeding model in Ontario insolvency practice. It also confirms that receivers can pursue claims against non-debtor third parties where those claims are closely tied to the debtor and the insolvency.

The Financial Services Group at Aird & Berlis LLP will continue to monitor developments in insolvency law and related court decisions. If you have questions regarding this decision or related matters, please contact the authors or a member of the group.

[1] Constantine, paras. 4-7.