Court File No. CV-13-10181-00CL COMPANIES' CREDITORS

Court File No. CV-13-10181-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS
ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF 923451 ONTARIO INC.
(FORMERLY KNOWN AS COMSTOCK CANADA LTD.),
CCL REALTY INC., AND CCL EQUITIES INC.
FACTUM OF THE MONITOR
(Approval and Vesting Order and Sealing Order)
DAVIES WARD PHILLIPS & VINEBERG LLP
155 Wellington Street West
Toronto, ON M5V 3J7
Robin Schwill (LSUC #384521)
Dina Milivojevic (LSUC #64521U)
Tel:
Fax:
416.863.0900
416.863.0871
Lawyers for the Monitor
Court File No. CV-13-10181-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS
ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF 923451 ONTARIO INC.
(FORMERLY KNOWN AS COMSTOCK CANADA LTD.),
CCL REALTY INC., AND CCL EQUITIES INC.
FACTUM OF THE MONITOR
PART I ~ OVERVIEW
1.
PricewaterhouseCoopers Inc., in its capacity as the court-appointed monitor (the
"Monitor") of 923451 Ontario Limited (formerly known as Comstock Canada Ltd.)
("923"), CCL Realty Inc. ("CCL Realty") and CCL Equities Inc. ("CCL Equities" and
together with 923 and CCL Realty, the "Companies") brings this motion for approval of
an agreement (the "3475 APS") entered into as of February 24, 2014, as amended,
between CCL Realty, as seller, and 1906320 Ontario Inc., as buyer (the "Buyer"). The
3475 APS provides for the sale of real property municipally known as 3475 Landmark
Road, Burlington, Ontario ("3475 Landmark") that is beneficially owned by CCL Realty
and legally owned by 923 (the "3475 Transaction").
2.
On this motion, among other things, the Monitor seeks an Order approving the
execution of the 3475 APS and vesting 923 and CCL Realty's right, title and interest in
and to 3475 Landmark in the Buyer.
-2­
3.
The Monitor oversaw the sale and solicitation process leading up to the 3475
APS and recommends that this Court approve the 3475 Transaction.
Among other
reasons, the 3475 Transaction should be approved because:
4.
(a)
the sale and solicitation process leading up to the 3475 Transaction was
fair and transparent and the market for 3475 Landmark was thoroughly
canvassed;
(b)
the sale price for 3475 Landmark is fair and reasonable in the
circumstances;
(c)
the 3475 Transaction is supported by the Bank of Montreal ("BMO"), the
only party with an economic interest in the proceeds of sale of 3475
Landmark; and
(d)
no party opposes the approval of the execution of the 3475 APS and the
vesting of 923 and CCL Realty's right, title and interest in and to 3475
Landmark in the Buyer.
In addition, the Monitor is of the view that the Court should make an Order
sealing the List Price Summary, the 3475 Landmark Offer Summary (each as defined
below), an unredacted copy of the 3475 APS and an unredacted copy of the Amending
Agreement (as defined in the Tenth Report of the Monitor dated March 31, 2014 (the
"Tenth Report")) pending the closing of the 3475 Transaction.
5.
These documents contain confidential and commercially sensitive information
which, if made public, would materially prejudice the Companies and detrimentally affect
the price at which 3475 Landmark could subsequently be sold should the 3475
Transaction not close.
6.
The salutary effects of sealing such documents greatly outweigh the deleterious
effects of not doing so.
If granted, the Sealing Order will protect the commercial
interests of the Companies and other stakeholders.
-3PART II ~ FACTS
7.
The facts relevant to this motion are set out in the Tenth Report. The following is
a summary of some of the facts central to this motion.
The Companies and This Proceeding
8.
On July 9, 2013, the Ontario Superior Court of Justice (Commercial List) (the
"Court") issued an order (the "Initial Order") granting the Companies protection
pursuant
to
the
Companies'
Creditors
Arrangement
Act
("CCAA").
PricewaterhouseCoopers Inc. was appointed Monitor under the Initial Order.
The Sales Process
9.
On October 4, 2013, this Court granted an order (the "Enhanced Powers
Order") which, among other things, empowered the Monitor to act in respect of certain
residual assets of the Companies, including 3475 Landmark.
The Monitor conducted
the sale and solicitation process described below in accordance with the powers
granted to it pursuant to the Enhanced Powers Order.
10.
On or around December 11, 2013, the Monitor engaged CBRE Limited ("CBRE")
to assist with the marketing and solicitation of offers in respect of 3475 Landmark, as
well as another property municipally known as 3455 Landmark Road, Burlington,
Ontario ("3455 Landmark" and together with 3475 Landmark, the "Burlington Real
Property") that is beneficially owned by CCL Realty and legally owned by 923.
11.
Between December 2013 and February 2014, the Monitor undertook a sales and
solicitation process (the "Sales Process") in respect of the Burlington Property. Among
other things, the Sales Process included the following key elements:
-4-
12.
(a)
CBRE compiled a list of prospective purchasers to whom Sales Process
materials would be distributed;
(b)
CBRE listed the Burlington Real Property on the multiple listing service to
broadly expose the Burlington Real Property to the market;
(c)
CBRE placed advertisements in the national edition of The Globe & Mail in
early January 2014, advertising the Burlington Real Property for sale;
(d)
CBRE, in conjunction with the Monitor, scheduled and oversaw interested
parties' site visits to the Burlington Real Property;
(e)
CBRE sent teasers and/or flyers to over 6,000 brokers and local
businesses summarizing the opportunity to purchase the Burlington Real
Property; and
(f)
CBRE advertised the Sales Process in the national edition of The Globe &
Mail newspaper on January 21 and 26, 2014.
BMO, the first mortgagee in respect of the Burlington Real Property and the only
creditor with an economic interest in the proceeds of the sale of 3475 Landmark, was
consulted throughout the Sales Process.
The Offers
13.
In total, CBRE received three offers in respect of 3475 Landmark, including an
offer made by the Buyer.
14.
The first offer was made at a price substantially less than the listing price and
was allowed to expire by the Monitor.
15.
The second offer was made on terms that were virtually identical to the offer
made by the Buyer. However, this offeror failed to pay the required deposit when it was
due and the second offer was terminated.
-516.
The third offer was made by the Buyer.
On February 24, 2014, the Buyer
accepted the Monitor's counter-offer to its revised offer, which became the 3475 APS.
The 3475 APS
17.
The assets being purchased pursuant to the 3475 APS exclude chattels and
fixtures and include only 3475 Landmark.
18.
The key terms of the 3475 APS are set out at pages 13-14 of the Tenth Report.
PART III ~ ISSUES
19.
There are two issues before the Court on this motion:
(a)
Should the 3475 APS be approved and an Order be made vesting 923
and CCL Realty's right, title and interest in and to 3475 Landmark in the
Buyer?
(b)
Should the Court make an Order sealing the List Price Summary, the 3475
Landmark Offer Summary and the unredacted version of the 3475 APS
pending the closing of the 3475 Transaction?
PART IV ~ LAW & ARGUMENT
Issue 1:
Approval of the Sale Agreement
a.
The Test for Approval of an Asset Sale
20.
Section 36 of the CCAA expressly permits a debtor company to sell its assets
outside the ordinary course of business provided it is authorized to do so by the Court:
36.(1) A debtor company in respect of which an order has been
made under this Act may not sell or otherwise dispose of assets
outside the ordinary course of business unless authorized to do
so by a court.
Despite any requirement for shareholder
approval, including one under federal or provincial law, the court
may authorize the sale or disposition even if shareholder
approval was not obtained.
-6Companies' Creditors Arrangement Act, R.S.C. 1985, c. C36, s. 36(1) [CCAA]
21.
In Royal Bank o f Canada v. Soundair Corp., a 1991 decision of the Ontario Court
of Appeal, the Court summarized the factors to be considered by the Court in approving
an asset sale outside the ordinary course of business in an insolvency proceeding:
(a)
whether sufficient effort has been made to get the best price and the
applicant has not acted improvidently;
(b)
the interests of all parties;
•(c)
the efficacy and integrity of the process by which offers were obtained;
and
(d)
whether there has been unfairness in the process.
Royal Bank of Canada v. Soundair Corp. [1991] OJ. No.
1137 at para. 16 (C.A.), Book of s,
Authoritie Tab 1
22.
In 2009, almost two decades after the Ontario Court of Appeal's decision in
Soundair, the CCAA was amended to provide a non-exhaustive list of factors that the
Court should consider in determining whether to approve a sale of assets outside the
ordinary course of business under the CCAA. Section 36(3) of the CCAA now reads as
follows:
Factors to be considered
(3) In deciding whether to grant the authorization, the court is to
consider, among other things,
(a) whether the process leading to the proposed sale or
disposition was reasonable in the circumstances;
(b) whether the monitor approved the process leading to the
proposed sale or disposition;
(c) whether the monitor filed with the court a report stating that in
their opinion the sale or disposition would be more beneficial to
the creditors than a sale or disposition under a bankruptcy;
-7(d) the extent to which the creditors were consulted;
(e) the effects of the proposed sale or disposition on the
creditors and other interested parties; and
(f) whether the consideration to be received for the assets is
reasonable and fair, taking into account their market value.
CCAA, s. 36(3)
23.
The section 36(3) criteria are not cumulative and an applicant need not satisfy all
of the enumerated factors in order to obtain court approval of an asset sale outside the
ordinary course of business.
Re Canwest Publishing Inc., [2010] OJ. No. 2190 at para. 13
(S.C.J. [Commercial List]) [CanwesQ, Book of Authoritie
s,
Tab 2
24.
The section 36(3) factors largely overlap with the criteria established by the
Ontario Court of Appeal in Soundair.
Indeed, courts often consider a combination of
relevant factors from section 36(3) and Soundair in determining whether to approve a
particular sale transaction.
Canwest, supra at para. 13, Book of Authoritie
s,
Tab 2
Re Terrace Bay Pulp Inc., [2012] O.J. No. 3628 at para. 44
(S.C.J. [Commercial List]), Book of Authoritie
s,
Tab 3
Re Nortel Networks Corp., [2009] O.J. No. 3169 at para. 53
(S.C.J. [Commercial List]) [Nortel\, Book of Authoritie
s,
Tab
4
Re Grant Forest Products Inc., [2010] O.J. No. 1684 at para.
31 (S.C.J. [Commercial List]), Book of Authoritie
s,
Tab 5
25.
Absent a violation of the section 36(3) factors or the Soundair principles, the
Court should place particular weight on the Monitor's support for a proposed sale
transaction. Where the marketing and sale process was fair, reasonable, transparent
-8and efficient, it is not for the Court to second guess the commercial and business
judgment of the Monitor.
Re Eddie Bauer of Canada Inc., [2009] O.J. No. 3784 at para.
22 (S.C.J. [Commercial List]), Book of Authoritie
s,
Tab 6
Re AbitibiBowater Inc., [2010] QJ. No. 3855 at paras. 69-72
s,
Tab 7
(S.C.), Book of Authoritie
b.
The 3475 APS Should be Approved
26.
The Monitor submits that the 3475 APS should be approved. The 3475 APS is
the result of the Sales Process, which was conducted by the Monitor pursuant to its
powers under the Enhanced Powers Order. Through that process, efforts were made to
attract the best possible offer and sufficient time was given for interested parties to
participate.
The Monitor oversaw the process and has confirmed that there was
integrity and no unfairness in the process and all appropriate procedures were followed
and complied with.
27.
The Monitor has considered the section 36 criteria and has recommended that
the 3475 Transaction be approved for the following reasons, among others:
(a)
the Sales Process was fair and treasonable in the circumstances;
(b)
the market for 3475 Landmark was thoroughly canvassed;
(c)
the Monitor believes that all reasonable requests for information made by
prospective purchasers were satisfied;
(d)
the 3475 Transaction is supported by BMO, the only party with an
economic interest in the proceeds of sale of 3475 Landmark; and
(e)
the sale price for 3475 Landmark is within the range estimated values
provided by certain commercial realtors (as summarized in the List Price
Summary).
-9­
28.
The Sales Process and resulting 3475 Transaction have observed the letter and
spirit of the section 36(3) factors and the Soundair principles.
29.
For the foregoing reasons, the Monitor respectfully requests that the 3475 APS
be approved.
c.
3475 Landmark Should Vest in the Buyer
30.
Schedule A to the 3475 APS requires, as a condition of closing the 3475
Transaction, that a court order be obtained vesting right, title and interest in and to 3475
Landmark in the Buyer free and clear of any existing security charges or other
restrictions. Pursuant to section 36(6) of the CCAA, this Court has the authority to vest
3475 Landmark in the Buyer free and clear of any "security, charge or other restriction"
provided that the Court orders that the proceeds of the sale be subject to a security,
charge or other restriction in favour of any creditor whose security is otherwise affected
by the vesting order.
CCAA, s. 36(6)
31.
In this case, the Monitor has sought approval of the Court to distribute the
proceeds of sale of 3475 Landmark to BMO, the only party with an economic interest in
such proceeds, subject to the provision of a reserve sufficient to satisfy any costs
arising from the sale of 3475 Landmark.
32.
For the foregoing reasons, the Monitor respectfully requests that an order be
made vesting 923 and CCL Realty's right, title and interest in and to 3475 Landmark on
-10the terms and conditions set out in the draft order appended to the Monitor's Notice of
Motion.
Issue 2: The Court Should Make the Sealing Order
a.
The Test for a Sealing Order
33.
Sections 137(2) of the Courts o f Justice Act (Ontario) provides courts with the
discretion to order that any document filed in a civil proceeding be treated as
confidential, sealed, and not form part of the public record, notwithstanding the general
principle that court hearings should be open to the public:
137(2) A court may order that any document filed in a civil
proceeding before it be treated as confidential, sealed and not
form part of the public record.
Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 135(2) and
137(2)
34.
In Sierra Club of Canada v. Canada (Minister o f Finance), the Supreme Court of
Canada held that courts should exercise their discretion to grant sealing orders where:
(a)
the order is necessary to prevent a serious risk to an important interest,
including a commercial interest, because reasonable alternative measures
will not prevent the risk; and
(b)
the salutary effects of the order outweigh its deleterious effects, including
the effects on the right of free expression, which includes the public
interest in open and accessible court proceedings.
Sierra Club of Canada v. Canada (Minister of Finance),
[2002] S.C.J. No. 42 at para. 53 (S.C.C.) [Sierra Club], Book
of Authoritie
s,
Tab 8
-11 35.
In the insolvency context, courts have applied this test and authorized sealing
orders over confidential or commercially sensitive documents to protect the interests of
debtors and other stakeholders.
Re Stelco Inc., [2006] O.J. No. 275 at paras. 4-5 (S.C.J.
[Commercial List]), Book of Authoritie
s,
Tab 9
Nortel, supra at para. 57, Book of Authoritie
s,
Tab 4
Re Holllnger Inc., 2011 ONCA 579, [2011] O.J. No. 3977 at
para. 11, Book of Authoritie
s,
Tab 10
b.
Application of the Test for a Sealing Order
36.
In connection with this Motion, the Monitor has prepared a summary of estimates
provided by certain commercial realtors regarding the reasonable list prices that such
realtors recommended in their proposals to act as the Monitor's agent for the purpose of
selling 3475 Landmark (the "List Price Summary"). The Monitor has also prepared a
summary of the three offers received in respect of 3475 Landmark (the "3475
Landmark Offer Summary").
37.
In addition, the Monitor has provided the Court with an unsealed copy of the APS
(the "Unsealed 3475 APS") and an unsealed copy of the Amending Agreement (the
"Unsealed Amending Agreement") disclosing, among other information, the purchase
price for 3475 Landmark. The List Price Summary, the 3475 Landmark Offer Summary,
the Unsealed 3475 APS and the Unsealed Amending Agreement are referred to in the
Tenth Report as Confidential Appendices "A", "B", "C" and "D" respectively (the
"Confidential Appendices").
- 12­
38.
The Confidential Appendices contain confidential and commercially sensitive
information which, if made public prior to the closing of the 3475 Transaction, would
materially prejudice the Companies and detrimentally affect the price at which 3475
Landmark could subsequently be sold should the 3475 Transaction not close. Thus, if
the Confidential Appendices are made public prior to the closing of the 3475
Transaction, the commercial interests of the Companies and other stakeholders may be
irreparably harmed.
39.
If granted, the Sealing Order will protect the commercial interests of the
Companies and other stakeholders.
This salutary effect greatly outweighs the
deleterious effects of not sealing the Confidential Appendices, namely the lack of
immediate public access to all documents filed in this Motion.
40.
As a result, it is submitted that the test for a sealing order has been met and the
Court should make an order that the Confidential Appendices be treated as confidential,
sealed and not form part of the public record in the within proceedings pending closing
of the 3475 Transaction.
PART V ~ ORDER SOUGHT
41.
The Monitor respectfully requests that this Court grant the relief sought on this
Motion in the draft order appended to the Monitor's Notice of Motion.
ALL OF WHICH IS RESPECTFULLY SUBMITTED
April 9, 2014
Dina Milivojevic
Lawyers for the Monitor
SCHEDULE"A"
AUTHORITIES
1
Royal Bank of Canada v. Soundair Corp., [1991] O.J. No. 1137 (C.A.)
2
Re Canwest Publishing Inc., [2010] O.J. No. 2190 (S.C.J. [Commercial List])
3
Re Terrace Bay Pulp Inc., [2012] O.J. No. 3628 (S.C.J. [Commercial List])
4
Re Nortel Networks Corp., [2009] O.J. No. 3169 (S.C.J. [Commercial List])
5
Re Grant Forest Products Inc., [2010] O.J. No. 1684 (S.C.J. [Commercial List])
6
Re Eddie Bauer o f Canada Inc., [2009] O.J. No. 3784 (S.C.J. [Commercial List])
7
Re AbitibiBowater Inc., [2010] Q.J. No. 3855 (S.C.)
8
Sierra Club of Canada v. Canada (Minister of Finance), [2002] S.C.J. No. 42
(S.C.C.)
9
Re Stelco Inc., [2006] O.J. No. 275 (S.C.J. [Commercial List])
1
Re Hollinger Inc., [2011] O.J. No. 3977 (C.A.)
SCHEDULE"B"
RELEVANT STATUTES
Companies' Creditors Arrangement Act
R.S.C., 1985, c. C-36
Restriction on disposition of business assets
36. (1) A debtor company in respect of which an order has been made under this Act
may not sell or otherwise dispose of assets outside the ordinary course of business
unless authorized to do so by a court. Despite any requirement for shareholder
approval, including one under federal or provincial law, the court may authorize the sale
or disposition even if shareholder approval was not obtained.
Notice to creditors
(2) A company that applies to the court for an authorization is to give notice of the
application to the secured creditors who are likely to be affected by the proposed sale or
disposition.
Factors to be considered
(3) In deciding whether to grant the authorization, the court is to consider, among other
things,
(a) whether the process leading to the proposed sale or disposition was reasonable in
the circumstances;
(,b) whether the monitor approved the process leading to the proposed sale or
disposition;
(c) whether the monitor filed with the court a report stating that in their opinion the sale
or disposition would be more beneficial to the creditors than a sale or disposition under
a bankruptcy;
(d) the extent to which the creditors were consulted;
(e) the effects of the proposed sale or disposition on the creditors and other interested
parties; and
(/) whether the consideration to be received for the assets is reasonable and fair, taking
into account their market value.
Additional factors — related persons
-2(4) If the prdposed sale or disposition is to a person who is related to the company, the
court may, after considering the factors referred to in subsection (3), grant the
authorization only if it is satisfied that
(a) good faith efforts were made to sell or otherwise dispose of the assets to persons
who are not related to the company; and
(b) the consideration to be received is superior to the consideration that would be
received under any other offer made in accordance with the process leading to the
proposed sale or disposition.
Related persons
(5) For the purpose of subsection (4), a person who is related to the company includes
(a) a director or officer of the company;
(b) a person who has or has had, directly or indirectly, control in fact of the company;
and
(c) a person who is related to a person described in paragraph (a) or (b).
Assets may be disposed of free and clear
(6) The court may authorize a sale or disposition free and clear of any security, charge
or other restriction and, if it does, it shall also order that other assets of the company or
the proceeds of the sale or disposition be subject to a security, charge or other
restriction in favour of the creditor whose security, charge or other restriction is to be
affected by the order.
Restriction — employers
(7) The court may grant the authorization only if the court is satisfied that the company
can and will make the payments that would have been required under paragraphs
)(a)
6(4
and (5)(a) if the court had sanctioned the compromise or arrangement.
2005, c. 47, s. 131; 2007, c. 36, s. 78.
Courts of Justice Act
R.S.O. 1990, CHAPTER C.43
Sealing documents
137. (2) A court may order that any document filed in a civil proceeding before it be
treated as confidential, sealed and not form part of the public record.
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985,
c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF 923451
ONTARIO LIMITED (FORMERLY KNOWN AS COMSTOCK CANADA LTD.), CCL
EQUITIES INC., AND CCL REALTY INC.
Court e
F j|
o.
N
CV-13-10181-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(Commercial List)
Proceeding commenced at Toronto
FACTUM OF THE MONITOR
DAVIES WARD PHILLIPS & VINEBERG LLP
155 Wellington Street West
Toronto, ON M5V 3J7
Robin B. Schwill (LSUC #384521)
Dina Milivojevic (LSUC #64521U)
Tel:
Fax:
416.863.0900
416.863.0871
Lawyers for the Applicant
PricewaterhouseCoopers Inc.
in its capacity as court-appointed monitor of
923451 Ontario Limited, CCL Realty Inc. and
CCL Equities Inc.