2011 ONCA 535 (Released July 28, 2007)

Landlord and tenant – Repudiation of Lease – Companies' Creditors Arrangement Act Proceedings

In June 2011, EDS Canada Corp. ("EDS") subleased premises to NexInnovations ("Nex"). On October 2, 2007, Nex obtained creditor protection under the CCAA (the "Initial Order"). The Initial Order gave Nex the right to "vacate, abandon or quit any leased premises and/or terminate or repudiate any lease…"

A Toronto-based clothing retailer that operates more than 100 locations in shopping malls across Canada has received court protection to support its restructuring and eventual sale.

Clothing for Modern Times Ltd. (“CMT”) designs and markets men's and women's clothing and accessories through its Urban Behaviour (“UB”), Costa Blanca (“CB”) and Costa Blanca X (“CBX”) branded stores.

Cellfor, a privately held company that bills itself as the world's first and largest commercial supplier of conifer varietal seedlings to the forest industry, has obtained a court order granting it protection under the Companies' Creditors Arrangement Act.

The initial order of Mr. Justice Harris of the Supreme Court of British Columbia grants a stay of proceedings against all actions and creditors until January 16, 2012, when a further hearing is scheduled to consider a possible extension of the stay period.

The Canadian Investor Protection Fund, the investment industry’s customer compensation agency, has obtained a bankruptcy order in the Ontario Superior Court against MF Global Canada, the Canadian subsidiary of MF Global Holdings which sought Chapter 11 protection in New York last week. KPMG Inc. has been appointed as trustee in bankruptcy for MF Global Canada.

The Investment Industry Regulatory Organization of Canada, whose dealer members support the CIPF, had previously obtained an order requiring MF Global Canada to cease dealings with the public.

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

The appeal by an insurer ("Sovereign") was dismissed. The Court found that the notice provided to Sovereign by a co-defendant of the bankrupt insured was sufficient notice in accordance with the policy conditions for liability coverage. In the alternative, that the plaintiffs were entitled to relief from forfeiture.

[2011] O.J. No. 4106

2011 ONCA 597

Ontario Court of Appeal

D.R. O'Connor A.C.J.O., J.I. Laskin and J.C. MacPherson JJ.A.

September 19, 2011

What happens when Canadian entities are part of a corporate group with international operations that seeks to restructure? A recent decision of the Ontario Superior Court of Justice in Re Massachusetts Elephant & Castle Group, Inc. provides guidance on how Canadian courts will consider recognition of foreign restructuring proceedings.

Norgate Metals, a Québec-based company specializing in the engineering, manufacturing and installation of steel-based metal products, has received court protection under the Companies’ Creditors Arrangement Act to continue operations and develop a restructuring plan.

Today, the Supreme Court of Canada agreed to hear an appeal of the unanimous decision rendered last April by the Ontario Court of Appeal (OCA) in Re Indalex Limited (Indalex). According to many commentators, the Indalex case turns accepted law on the priority of debtor in possession (DIP) and working capital security on its head and introduces new concerns for employers about how to properly discharge their sometimes conflicting duties under corporate law and under pension law.

UBS terminated its ISDA Master and FX transactions with Lehman Brothers Inc., was obligated to return about $23 million in collateral, wanted to set-off against that $23 million amounts owing by LBI to UBS affiliates as contemplated by the cross-affiliates set-off provision.