What role does business common sense play in the interpretation of commercial contracts? This issue was recently addressed by the Supreme Court of the United Kingdom in Rainy Sky S.A. v. Kookmin Bank. The answer: “where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense”. Since there is currently some uncertainty in Canada on the point, Rainy Sky is an important case to consider.

Decision

Sunrise, sunset. Perhaps a matchmaker would have helped. The saga of the dispute between Ventas, Inc. and Health Care Property Investors, Inc. arose five years ago when Sunrise Senior Living Real Estate Investment Trust’s "board of trustees determined that a strategic sale process of its assets would be beneficial to its unitholders, thus effectively putting Sunrise ‘in play’ on the public markets" (per Blair J.A. for the Ontario Court of Appeal) in Ventas, Inc. v.

On August 18, 2011, Mr. Justice Morawetz, of the Ontario Superior Court of Justice, released an important decision in regard to preference actions in the matter of Tucker v. Aero Inventory (UK) Limited (together with Aero Inventory plc, Aero).

Background

A recent Alberta appellate decision establishes that a trustee in bankruptcy may sell a franchise agreement to a third party, in spite of objections by the franchisor, under the Bankruptcy and Insolvency Act (BIA). The Alberta Court of Appeal’s decision in Ford Motor Company of Canada Ltd v Welcome Ford Sales Ltd contains three important messages for franchisors:

The Supreme Court of Canada decision in Century Services Inc. v. Canada (Attorney General), which arose from the restructuring proceedings of Ted LeRoy Trucking Ltd. and was released on December 6, 2010, is a landmark decision in Canadian insolvency law.

In a client update released earlier this month, we discussed the recent decision of the Ontario Court of Appeal in the CCAA proceedings of Indalex Limited. In that case, the Court decided that Indalex’s pension plan wind-up deficiency claims had priority over Indalex’s CCAA secured lender in the context of that case. Of concern is the "chill" that decision may have on secured lending in Ontario to borrowers that sponsor defined benefit pension plans.

This week, the Ontario Court of Appeal surprised many by deciding that in the context of the CCAA proceedings of Indalex, pension plan deficiency claims can have priority over security held by secured DIP lenders. The Court granted priority for the entire wind-up deficiency of two pension plans over the DIP lender’s security. If not reversed on appeal, the ruling creates a potential worst case scenario for secured lenders in Ontario and could affect availability of credit for all employers who provide defined benefit pension plans for their employees.

Shareholder claims and corporate bankruptcies are on the rise.

In Ferme CGR Enr, senc (Syndic de) 2010 QCCA 719, the Québec Court of Appeal decided that it is not necessary to put the partners of a Québec general partnership into bankruptcy when the partnership itself is put into bankruptcy. In doing so, the court initially relied upon authorities interpreting the relevant provisions of the Bankruptcy and Insolvency Act. In addition, the court supported its decision with an analysis of the legal nature of Québec general partnerships and, as a result, modified the ownership structure of partnerships in Québec.

The restructuring proceedings of Canwest Publishing Inc and affiliated entities (“Canwest”) has recently provided secured lenders and particularly debtor-in-possession lenders with some food for thought.

In March of this year, four former non-unionized employees of Canwest brought a motion in the Ontario Superior Court of Justice (the “Court”) for the appointment of representative counsel to protect the interests of themselves and similarly situated former employees in the Canwest Companies’ Creditors Arrangement Act (“CCAA”) restructuring proceedings.