Estate/Court File No. 32-1942339 Estate/Court File No. 32-1942340 Estate/Court File No. 32-1942341

Estate/Court File No. 32-1942339
Estate/Court File No. 32-1942340
Estate/Court File No. 32-1942341
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
(COMMERCIAL LIST)
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL OF KARRYS BROS., LIMITED, KARRYS SOFTWARE LTD.
AND KARBRO TRANSPORT INC., CORPORATIONS WITH A HEAD
OFFICE IN THE CITY OF MISSISSAUGA IN THE PROVINCE OF
ONTARIO
Applicants
FACTUM OF THE APPLICANTS
(Motion Returnable February 19, 2015)
Date: February 13, 2015
STIKEMAN ELLIOTT LLP
Barristers & Solicitors
5300 Commerce Court West
199 Bay Street
Toronto, Canada M5L 1B9
Elizabeth Pillon LSUC#: 35638M
Tel: (416) 869-5623
Email: [email protected]
Kathryn Esaw LSUC#: 58264F
Tel: (416) 869-6820
Email: [email protected]
Fax: (416) 947-0866
Lawyers for the Applicant
TO: SERVICE LIST
Estate/Court File No. 32-1942339
Estate/Court File No. 32-1942340
Estate/Court File No. 32-1942341
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
(COMMERCIAL LIST)
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL OF KARRYS BROS., LTD, KARRYS SOFTWARE LTD. AND
KARBRO TRANSPORT INC., CORPORATIONS WITH A HEAD OFFICE IN
THE CITY OF MISSISSAUGA IN THE PROVINCE OF ONTARIO
SERVICE LIST
GENERAL
Karrys Bros. Ltd.
180 Courtney Park Drive East
Mississauga, On L5T 2S5
Steven Karrys
Tel: (905) 565-4900
Fax: (905) 565-5584
Email: [email protected]
Applicant
Karrys Software Ltd.
180 Courtney Park Drive East
Mississauga, On L5T 2S5
Steven Karrys
Tel: (905) 565-4900
Fax: (905) 565-5584
Email: [email protected]
Applicant
Karrys Transport Inc.
180 Courtney Park Drive East
Mississauga, On L5T 2S5
Applicant
Steven Karrys
Tel: (905) 565-4900
Fax: (905) 565-5584
Email: [email protected]
2
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, ON M5L 1B9
Liz Pillon
Tel: (416) 869-5623
Fax: (416) 947-0866
Email: [email protected]
Lawyers for the Applicants
Kathryn Esaw
Tel: (416) 869-6820
Fax: (416) 947-0866
Email: [email protected]
Patrick Corney
Tel: (416) 869-5668
Fax: (416) 947-0866
Email: [email protected]
Core-Mark Inc.
3509 Hulen Street, #108
Fort Worth, Texas 76107
Scott McPherson
Senior Vice President, Corporate Development
Tel: (972) 713-2901
Email: [email protected]
Core-Mark International, Inc.
395 Oyster Point Blvd., Suite 415
So. San Francisco, CA 94080-1928
Greg Antholzner
Vice President, Finance & Treasurer
Tel: (650) 589-9445
Email: [email protected]
Goodmans
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto,ON
M5H 2S7
Stephen Bloom
Tel: (416) 597-4179
Fax: (416) 979-1234
Email: [email protected]
Lawyers for Core-Mark Inc.
Brendan O'Neill
Tel: (416) 849-6017
Fax: (416) 979-1234
Email: [email protected]
-3
PricewaterhouseCoopers Inc.
PwC Tower
18 York Street, Suite 2600
Toronto, ON M5J OB2
Michelle M. Pickett
Tel:(416) 815-5002
Fax: (416) 814-3210
Email: [email protected]
Proposal Trustee
Tracey Weaver
Tel:(416) 814-5735
Fax: (416) 814-8378
Email: [email protected]
Holly Thompson
Tel:(416) 941-8383 ext. 13185
Email: [email protected]
Blakes Cassels & Graydon LLP
Suite 4000, Commerce Court West
199 Bay Street
Toronto, ON M5L 1A9
Linc Rogers
Tel: (416) 863-4168
Fax: (416) 863-2653
Email: [email protected]
Lawyers for the Proposal Trustee
Jenna Willis
Tel: (416) 863-3348
Fax: (416) 863-2653
Email: [email protected]
Bank of Montreal
Special Accounts Management Unit
1ST Canadian Place, 7th Floor
SAMU
100 King Street West
Toronto, ON M5X 1A1
Greg Fedoryn
Tel: (416) 643-1623
Fax: (416) 643-1653
Email: [email protected]
Capitalink Advisors Inc.
Roderick McIsaac
Tel: 416-318-7533
Fax: 416-488-8328
Email: [email protected]
Karim Mashnuk
Tel: 647-993-3516
Fax: 416-488-8328
Email: [email protected]
4
Aird & Berlis
Brookfield Place
Suite 1800, Box 754
181 Bay Street
Toronto, Ontario M5J 2T9
Canada
Lawyers for Bank of Montreal
Steven Graff
Tel: 416.865.7726
Fax: (416) 863-1515
Email: [email protected]
Aaron Collins
Tel: (416) 865-3412
Fax: (416) 863-1515
Email: [email protected]
Karrys Holdco Inc.
180 Courtney Park Drive East
Mississauga, On L5T 2S5
Steven Karrys
Tel: (905) 565-4900
Fax: (905) 565-5584
Email: [email protected]
Peter Karrys
[email protected]
Joel Kissack
Barrister and Solicitor
405-277 Lakeshore Road East
Oakville, ON L6J 6J3
Joel Kissack
Tel: (905) 849-5635
Fax: (905) 849-5632
Email: [email protected]
Lawyer for Peter Karrys
Canada Revenue Agency
5800 Hurontario Street
Mississauga, Ontario
L5R 4B4
Independent Tobacco Wholesalers Limited
440 Railside Drive
Brampton, ON L7A 1L1
Cassels Brock & Blackwell LLP
Suite 2100, Scotia Plaza
40 King Street West
Toronto ON, M5H 3C2
Jane Dietrich
Tel: (416) 860-5223
Fax: (416) 640- 3144
Email: [email protected]
Lawyers for ITWAL
Rothmans, Benson & Hedges Inc.
1500 Don Mills Road
Toronto, ON M3B 3L1
Gwenno Lloyd
Tel: (416) 442-5532
Fax: (416) 449-9601
Email: [email protected]
-5
Davies Ward Phillips & Vineberg LLP
Robin Schwill
Tel: (416) 863-5502
Fax: (416) 863-0871
Email: [email protected]
155 Wellington Street West
Toronto, ON M5V 3J7
Lawyers for Rothmans, Benson & Hedges Inc.
[Personal Information Redacted]
[Personal Information Redacted]
[Personal Information Redacted]
[Personal Information Redacted]
PPSA REGISTRANTS
Colony Ford Lincoln Sales Inc.
300 Queen Street East
Brampton, ON L6V 1C2
De Lage Landen Financial Services Canada Inc.
3450 Superior Court, Unit 1
Oakville, ON L6L 0C4
G.N. Johnston Equipment Co. Ltd.
5990 Avebury Road
Mississauga, ON L5R 3R2
Mercedes-Benz Financial Services Canada
Corporation
2680 Matheson Blvd. East
Suite 500
Mississauga, ON
L4W 0A5
CIT Financial Ltd.
5035 S. Service Road
Burlington, ON L7L 6M9
Ryder Truck Rental Canada Ltd.
2233 Argentia Rd, Suite 300, Mississauga, ON
L5N2X7
David Kerr
Tel: (905) 595-3680
Email: [email protected]
Faseeh Ahmad
Tel: 1-855-732-2818
Fax: 1-866-318-3447
Email: [email protected]
Sean Duffy
Tel: (416) 300-5543
Email: [email protected]
Dan Purdy
Tel: (416) 662-9158
Email: [email protected]
Isobel Fraser
Tel: (905) 533-2097
Email: [email protected]
Lina Trennert
Email: [email protected]
Carlo Rodriguez
Email: Carlo [email protected]
-6
Trailcon Leasing Inc.
6950 Kenderry Gate
Mississauga, ON L5T 2S7
Alan Boughton
Tel: (905) 670-9061
Email: [email protected]
CONTRACT COUNTERPARTIES
Canadian Tire Corporation Limited
2180 Yonge St., PO Box 770, Stn. K
Toronto, ON, M4P 2V8
Caroline Khachehtoori
Tel: (416) 480-8157
Email: [email protected]
Roadnet Technologies Inc.
PO Box 123329, Dept #3329, Dallas, TX 75312-3329
Laura Hughes
Tel: (410) 847-1974
Email: [email protected]
LANDLORDS
Extender Products Limited
106 Princess Margaret Blvd
Etobicoke, ON M9B 2Z3
R. A. (Bob) Hill
Tel: (416) 231-0200
Fax: (416) 231-0290
Email: [email protected]
McLaughlin Bros.
500 Hwy #3, P.O. Box 428
Tillsonburg, ON N4G 4H8
Ewart McLaughlin
Tel: (519) 842-3363
Fax: (519) 842-6689
Email: [email protected]
8834181 Ontario Ltd.
RR6, Perth, ON K7G 3C8
Sean Carson
Tel: (613) 812-1199
Email: [email protected]
Crestpoint Real Estate Inc. / Director Industrial
Holdings Limited
3700 Steeles Avenue W, Suite 800
Vaughan, ON L4L 8M9
Edward Cattana
Tel: (905) 850-8508 ext 251
Fax: (905) 850-6166
Email: [email protected]
SUB-TENANTS
Westons Bakeries Limited
1425 The Queensway
Etobicoke, ON M8Z1T3
Heather O'Hagan
Tel: (416) 935-1623
Fax: (416) 503-7658
Email: [email protected]
Old Dutch Foods
1136 Russell St
Thunder Bay, ON P7B 5N2
Glen MacKinnon
Email: [email protected]
Paul Hutton
Email: [email protected]
-7
GOVERNMENT AGENCIES
Ministry of the Attorney-General (Ontario)
McMurtry-Scott Building
720 Bay Street, 11th Floor
Toronto, ON M7A 2S9
Ministry of Finance (Ontario)
33 King Street West
Oshawa, Ontario, Canada
L1H 8H5
-8
Estate/Court File No. 32-1942339
Estate/Court File No. 32-1942340
Estate/Court File No. 32-1942341
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
(COMMERCIAL LIST)
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL OF KARRYS BROS., LIMITED, KARRYS SOFTWARE LTD.
AND KARBRO TRANSPORT INC., CORPORATIONS WITH A HEAD
OFFICE IN THE CITY OF MISSISSAUGA IN THE PROVINCE OF
ONTARIO
Applicants
FACTUM OF THE APPLICANTS
(Motion Returnable February 19, 2015)
1.
Karrys Bros., Limited„ Karrys Software Ltd. and Karbro Transport Inc.
(together, "Karrys" or the "Companies") bring this motion for the Extension Order:'
(a)
extending the time for each of the Companies to file a proposal
under the BIA to April 9, 2015;
(b)
directing that the Purchaser shall be provided access to the
Courtneypark Facility for a period of approximately four months
following the closing of the Sale Transaction pursuant to the terms
of the Courtneypark Leases;
(c)
sealing the Confidential Exhibits to the Karrys Affidavit; and
I Capitalized terms used herein but not otherwise defined shall have the meaning attributed to them in the Affidavit
of Steven Karrys sworn February 12, 2015 (the "Karrys Affidavit").
9
(d)
approving the Second Report of the Proposal Trustee (the "Second
Report").
2.
Such further and other relief as the Companies may request and this Court
deems just and appropriate.
PART I THE FACTS
-
Background
3.
Established in 1913, Karrys' is a full-service wholesale distributor of tobacco,
confectionary, snacks, beverages, health and beauty products, grocery, automotive
supplies and other products to retail gas and convenience stores. As at December 12,
2014, Karrys served 8,566 customers across Canada from a system of four distribution
centres located throughout Ontario, and employed approximately 164 non-unionized
employees.
Karrys Affidavit, Motion Record Tab 2, at para. 3.
4.
In response to financial difficulties, Karrys undertook a broad and
comprehensive sales process with respect to its assets, ultimately entering into the APA
with the Purchaser for all or substantially all of Karrys' business.
Karrys Affidavit, Motion Record Tab 2, at para. 4-6.
5.
Ultimately, the purchase price offered by the Purchaser was insufficient to allow
Karrys to complete the sale absent formal insolvency proceedings; therefore, each of
the Karrys entities filed a Notice of Intention to File a Proposal under the BIA on
December 12, 2014.
-
10
-
Karrys Affidavit, Motion Record Tab 2, at para. 4, 6, 7.
6.
On December 23, 2014, the Court granted an order, among other things,
approving the APA and the associated Sale Transaction.
Karrys Affidavit, Motion Record Tab 2, at para. 9-10.
7.
On December 23, 2014, the Court also granted an order, among other things,
extending the Proposal Period to February 23, 2015.
Karrys Affidavit, Motion Record Tab 2, at para. 9-10.
Activities During the Proposal Proceedings
8.
Since the commencement of the Proposal Proceedings, Karrys and its financial
and legal advisors have been working diligently towards closing the Sale Transaction.
The Sale Transaction is expected to close on or about February 23, 2015.
Karrys Affidavit, Motion Record Tab 2, at para. 11.
9.
Material conditions to the APA have been met to date including: court approval
of the Approval and Vesting Order; Competition Act approval; 75% of Karrys First
Nations customers have consented to appoint the Purchaser as the supplier of their
annual allocation of unmarked cigarettes and assignment of contracts to the Purchaser.
Karrys Affidavit, Motion Record Tab 2, at para. 17.
10.
Karrys anticipates that all of the Closing Conditions associated with the APA
will have been met or waived by February 23, 2015.
Karrys Affidavit, Motion Record Tab 2, at para. 18.
11.
Karrys has also addressed other matters arising during these proceedings
including:
(a)
Negotiating the Transition Services Agreement to facilitate the
transition of Karrys' assets to the Purchaser;
(b)
Establishing occupation and termination agreements with Karrys'
landlords regarding the Purchaser's interest in maintaining short
term occupation agreements in respect of those properties to
facilitate transition;
(c)
Assisting the Purchaser with the identification of and offers of
employment to the Offerees and providing notice of termination to
the Terminated Employees;
(d)
Advising the Transitional Employees of the opportunity to remain
employed by Karrys to April 17, 2015 in order to facilitate the
transition of the Karrys business to the Purchaser and assist Karrys
and the Proposal Trustee with the proposal process;
(a)
Responding to requests by the Ministry of Finance (Ontario) to
conduct an audit on Karrys of Karrys Bros' Tabacco Tax returns in
the period prior to the filing of the NOIs; and
-12(b)
Assessing whether the Karrys tax losses could be the subject of a
possible sale for the benefit of the estate.
Karrys Affidavit, Motion Record Tab 2, at para. 9-10.
12.
To the extent that further facts pertaining to Karrys' businesses and the proposal
proceedings are relevant to the determination of this motion, they are set out below.
PART II ISSUES
-
13.
The issues on this motion are whether the Court should:
(a)
extend the time for each of the Companies to file a proposal
pursuant to s. 50.4(9) of the Bankruptcy and Insolvency Act, RSC
1983 c B-3 to April 9, 2015;
(b)
direct that the Purchaser shall be provided access to the
Courtneypark Facility the Occupancy Period following the Sale
Transaction pursuant to the terms of the Courtneypark Leases;
(c)
seal the Confidential Exhibits to the Karrys Affidavit; and
(d)
approve the Second Report of the Proposal Trustee.
- 13
-
PART III - LAW AND ARGUMENT
A. THE EXTENSION OF THE PROPOSAL PERIOD SHOULD BE GRANTED
14.
The Sale Transaction is near completion and is expected to close on or about
February 23, 2015, the current day on which the Proposal Period is set to expire.
15.
While the closing of the Sale Transaction is not expected to be delayed past
February 23, 2015, in the event that the transaction does not close on time and the
Proposal Period has not been extended, Karrys will be automatically assigned into
bankruptcy and will be unable to close the transaction, which would have a significant
deleterious effect on Karrys' stakeholders.
Karrys Affidavit, Motion Record Tab 2, at para. 6, 9.
16.
Karrys will require additional time to facilitate the transition of the business to
the Purchaser and assist the Purchaser with post-closing transition issues as
contemplated in the Transition Services Agreement.
Karrys Affidavit, Motion Record Tab 2, at para. 47-53.
17.
Karrys is also in the process of determining what would be the terms of a viable
proposal and considering alternative means to efficiently call for claims and make a
distribution to Karrys' stakeholders.
Karrys Affidavit, Motion Record Tab 2, at para. 48.
18.
In respect of Karrys Software, given the limited assets and no known creditors at
this entity, it is anticipated the most efficient means of winding up this entity post-
- 14 closing would be a bankruptcy. Karrys is also considering the most administratively
efficient means of winding up the Karbro entity post-closing.
Karrys Affidavit, Motion Record Tab 2, at para. 48.
19.
Accordingly, Karrys is requesting an extension of the Proposal Period to April 9,
2015, in order to (i) allow Karrys and the Purchaser to close the Sale Transaction, (ii)
facilitate an orderly transition of Karrys' business to the Purchaser, and (iii) prepare a
proposal to be submitted to Karrys' creditors.
Karrys Affidavit, Motion Record Tab 2, at para. 49.
BIA, ss. 50.4(8), (9), 69.1.
20.
This Court has authority to grant the requested extension under section 50.4(9)
of the BIA, which states that such an extension may be granted where the Court is
satisfied that:
(a)
the insolvent person has acted, and is acting, in good faith and
with due diligence;
(b)
the insolvent person would likely be able to make a viable
proposal if the extension being applied for were granted; and
(c)
no creditor would be materially prejudiced if the extension being
applied for were granted.
BIA, s. 50.4(9).
21.
In this instance, each of these factors has been met:
-15-
(a)
Karrys has acted, and is continuing to act, in good faith and with
due diligence in pursuing the Sale Transaction. Courts have found
that the pursuit of a sale of assets in an attempt to maximize value
for stakeholders is an indicator of good faith and due diligence.
(b)
Karrys has acted, and is continuing to act, in good faith and with
due diligence in managing other aspects of the Proposal
Proceedings as described above, including in managing its
customers, suppliers, employees and other stakeholders.
(c)
Following completion of the Sale Transaction, Karrys will finalize
its review of the most efficient manner in which to call for claims
and distribute remaining proceeds to its stakeholders. The form of
a proposal or proposals are currently being considered.
(d)
Karrys' creditors will not be prejudiced by the requested
extension. The cash flow statement prepared by the Proposal
Trustee indicates that Karrys has sufficient cash flow to fund
operations through to April 9, 2015.
(e)
The extension of the Proposal Period will allow Karrys to complete
the closure of the Sale Transaction and deal with any transition
issues which will assist not only the Purchaser but also Karrys'
-16suppliers, customers and employees, all important stakeholders in
this proceeding.
Re Colossus Minerals, 2014 ONSC 514, Applicant's Book of
Authorities, Tab 1, at para 37-43.
Karrys Affidavit, Motion Record Tab 2, at para. 49-55.
22.
In addition to the above factors, the Proposal Trustee supports the relief
requested.
Second Report.
B. OCCUPANCY OF THE COURTNEYPARK FACILITY BY THE PURCHASER
SHOULD BE GRANTED
23.
Karrys' head office is located at the Courtneypark Facility at 180 Courtneypark
Drive East, Mississauga, Ontario which is leased pursuant to the Courtneypark Leases.
24.
A condition of the APA requires that the Purchaser obtain access to the
Courtneypark Facility for a period of approximately four months after the closing of
the Sale Transaction. Permitting the Purchaser access to the Courtneypark Facility not
only complies with the APA but will also facilitate a smooth transition of Karrys'
business to the Purchaser, for the benefit of Karrys' stakeholders.
25.
To achieve these goals, Karrys initially attempted to sublease its interest in the
Courtneypark Facility to the Purchaser. Discussions are ongoing between Karrys, the
Purchaser and the Courtneypark Landlord and the parties continue to discuss a means
by which a four month access period can be achieved consensually.
Karrys Affidavit, Motion Record Tab 2, at para. 35, 36, 38.
-1726.
In the event a consensual resolution cannot be achieved, Karrys is seeking an
order directing that the Purchaser be provided access to the Courtneypark Facility for
the Occupancy Period following the closing of the Sale Transaction pursuant to the
terms of the Courtneypark Leases. This could be achieved through an occupancy
agreement between Karrys (or its Bankruptcy Trustee) and the Purchaser.
27.
To date, Karrys has not disclaimed the Courtneypark Facility and continues to
be entitled to access the premises.
28.
The Landlord will suffer no prejudice if this Court directs that the Purchaser
shall be provided access to the Courtneypark Facility for the Occupancy Period:
a. all rent obligations will be paid directly by the Purchaser during the term
of the agreement such that the Courtneypark Landlord will have received
four months' rent it would not otherwise have received if the
Courtneypark Leases were disclaimed;
b. the Courtneypark Facility will ultimately be returned to the
Courtneypark Landlord in broom swept condition such that the facility
will be left in the same condition as if the lease had been disclaimed upon
Closing by Karrys; and,
c. In the interim the draft occupancy agreements anticipate the Landlord
will have the opportunity to commence marketing and releasing efforts
for the Courtneypark Facilities.
-1829.
Post-closing access to premises within insolvency proceedings has historically
been recognized and achieved through occupancy agreements between Debtors,
Receivers or Bankruptcy Trustees and the Purchaser.
In the Matter of Protana Inc. and In the Matter of an Application under
Section 47.1(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B.3,
as Amended and Section 101 Of The Courts of Justice Act, R.S.O 1990, c.
C-43, As Amended Applicant, Applicant's Book of Authorities, Tab 2.
See also: examples of occupancy agreements entered into during the
course of insolvency proceedings, Applicant's Book of Authorities,
Tab 3.
30.
The relief sought by Karrys in this instance is analogous to the relief available in
a bankruptcy scenario, where a trustee would have a three month period to occupy
leased real property before determining whether it is disclaiming the lease. Karrys is
seeking one additional month than is permitted under bankruptcy proceedings, with
no prejudice to the Courtneypark Landlord for providing such access.
Re Limestone Electrical & Supply Co., [1955] O.R. 291 (Ont. C.A.),
Applicant's Book of Authorities, Tab 4, at para. 17.
BIA, ss. 136(1)(f); 146.
Commercial Tenancies Act, R.S.O. 1990, c. L. 7 ["CTA"], ss. 38, 39.
The Relief Sought Also Meets the Test for the Assignment of Agreements under the BIA
31.
It is respectfully submitted that the Court can look to the factors considered in
determining whether it is appropriate to assign a lease, inside and outside of
bankruptcy, as guidance for determining whether the interim access to the facilities
should be granted.
32.
Outside of an insolvency proceeding, a landlord could not unreasonably
withhold its consent to an assignment of their rights under a lease to the Purchaser.
-19CTA, s. 23.
33.
Inside an insolvency proceeding, a debtor seeking to assign a contract would
seek to do so under the assignment provisions of the BIA.
34.
This situation is also analogous to Karrys seeking the assignment of the
Courtneypark Leases under the assignment provisions of the BIA.
BIA. ss. 66(1.1); 84.1(4).
35.
Section 84.1(4) (as modified by s. 66(1.1)) provides the following factors for the
court to consider in determining whether an agreement should be assigned in a
proposal proceeding:
(a)
whether the person to whom the rights and obligations are to be
assigned is able to perform the obligations;
(b)
whether it is appropriate to assign the rights and obligations to
that person; and
(c)
whether the proposal trustee has approved the assignment.
BIA, ss. 84.1(4), 66 (1.1).
36.
In this instance, each of these factors has been met.
(a)
In insolvency proceedings, courts have ordered the assignment of
agreements where such assignment was "important to the reorganization
process" and which furthered the purpose and spirit of the insolvency
proceedings. The Purchaser having access to the Courtneypark Facility is
such an instance. The Purchaser's access to the Courtneypark Facility is a
fundamental term of the APA and will allow the Purchaser to more easily
- 20 step into the shoes of Karrys, ensuring a smooth transition for the benefit
of counterparties, employees and other stakeholders.
(b)
The Proposal Trustee approves of the relief sought by the
Applicant.
Re Nexient Learning Inc., 2009 CarswellOnt 8071, Applicant's Book of Authorities,
Tab 5, at para. 53-54, 56, 59.
Second Report.
37.
Granting the Purchaser occupancy of the Courtneypark Facility for the
Occupancy Period will fulfill the conditions of the APA. Such occupancy does not
prejudice the Courtneypark Landlord and is in the best interests of Karrys, the
Purchaser and Karrys' stakeholders and as such, should be granted. If this condition is
not met, the Sale Transaction is at risk of not closing with adverse inferences to all of
Karrys' stakeholders.
C. THE CONFIDENTIAL EXHIBITS SHOULD BE SEALED
38.
Karrys requests that the Court seal the Confidential Exhibits to the Karrys
Affidavit, which contains copies of the Courtneypark Leases and Lease Assignment
Agreement, and the form of Sublease.
39.
Pursuant to the Ontario Courts of Justice Act, this Court has 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.
Courts of Justice Act, R.S.O. 1990, Chapter C. 43, s. 137(2).
- 21 40.
In Sierra Club of Canada v. Canada (Minister of Finance) lacobucci J. adopted the
following test to determine when a sealing order should be made:
A confidentiality order under Rule 151 should only be granted when:
(a) such an order is necessary in order to prevent serious risk to
an important interest, including a commercial interest, in the
context of litigation because reasonable alternative measures will
not prevent the risk; and
(b) the salutary effects of the confidentiality order, including the
effects on the right of civil litigants to a fair trial, outweigh the
deleterious effects, including the effects on the right to free
expression, which in this context includes the public interest in
open and accessible court proceedings.
Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R.
522, Applicant's Book of Authorities Tab 6, at para. 53.
41.
This Court has applied the Sierra Club test in considering whether to approve a
sealing order in respect of documents containing (i) the value of payment obligations
and (ii) pricing information. In Re Nortel Networks Corp., Morawetz J. found that a
Settlement and Release Agreement contained sensitive commercial information which,
if released, would disadvantage the applicants as the disclosure of certain details of the
settlement would impair the ability of the applicants to successfully manage their
relationship with other suppliers and creditors.
Re Nortel Networks Corp, 2009 CarswellOnt 8166, Applicant's Book of
Authorities, Tab 7, at para. 18-20.
42.
In this case, the Confidential Exhibits contain commercially sensitive
information related to the pricing of real property leases. The disclosure of this
information will impair the ability of the Purchaser and the Courtneypark Landlord to
- 22 manage their relationships with each other and third parties. Protecting the disclosure
of sensitive commercial information of this nature is an important commercial interest
that should be protected.
43.
The salutary effects of sealing the Confidential Exhibits, namely the protection
of commercially sensitive information that could negatively affect the Purchaser and
the Courtney Park Landlord, if disclosed, outweigh any deleterious effect of restricting
the accessibility of court proceedings.
44.
The Proposal Trustee supports the sealing of the Confidential Exhibits for
substantially the reasons discussed above.
Second Report.
PART IV - ORDER REQUESTED
45.
Karrys requests the Extension Order be granted in order to permit, among other
things, the Sale Transaction to close, the management of post-closing transitional issues
and Karrys to prepare and make a proposal to its creditors.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 13th day of February, 2015.
Stikeman Elliott LLP
Lawyers for the Applicants
SCHEDULE "A"
LIST OF AUTHORITIES
DOCUMENT (in order of
appearance)
TAB
1
Re Colossus Minerals, 2014 ONSC 514
2
In the Matter of Protana Inc. and In the Matter of an Application under Section 47.1(1) of the
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B.3, as Amended and Section 101 Of The Courts
3
Example occupancy agreements
4
Re Limestone Electrical & Supply Co., [1955] O.R. 291 (Ont. C.A.)
5
Re Nexient Learning Inc., 2009 CarswellOnt 8071
6
Re Limestone Electrical & Supply Co.,
[1955] O.R. 291 (Ont. C.A.), Applicant's Book of
Authorities
7
Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522
8
Re Nortel Networks Corp, 2009 CarswellOnt 8166
SCHEDULE "B"
RELEVANT STATUTES
Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3
50.4
(8) Where an insolvent person fails to comply with subsection (2), or where the trustee
fails to file a proposal with the official receiver under subsection 62(1) within a period
of thirty days after the day the notice of intention was filed under subsection (1), or
within any extension of that period granted under subsection (9),
(a) the insolvent person is, on the expiration of that period or that extension, as
the case may be, deemed to have thereupon made an assignment;
(b) the trustee shall, without delay, file with the official receiver, in the
prescribed form, a report of the deemed assignment;
(b.1) the official receiver shall issue a certificate of assignment, in the prescribed
form, which has the same effect for the purposes of this Act as an assignment
filed under section 49; and
(c) the trustee shall, within five days after the day the certificate mentioned in
paragraph (b) is issued, send notice of the meeting of creditors under section
102, at which meeting the creditors may by ordinary resolution,
notwithstanding section 14, affirm the appointment of the trustee or appoint
another licensed trustee in lieu of that trustee.
Extension of time for filing proposal
(9) The insolvent person may, before the expiry of the 30-day period referred to in
subsection (8) or of any extension granted under this subsection, apply to the court for
an extension, or further extension, as the case may be, of that period, and the court, on
notice to any interested persons that the court may direct, may grant the extensions, not
exceeding 45 days for any individual extension and not exceeding in the aggregate five
months after the expiry of the 30-day period referred to in subsection (8), if satisfied on
each application that
(a) the insolvent person has acted, and is acting, in good faith and with due
diligence;
(b) the insolvent person would likely be able to make a viable proposal if the
extension being applied for were granted; and
(c) no creditor would be materially prejudiced if the extension being applied for
were granted.
-2
Act to apply
66.
(1) All the provisions of this Act, except Division II of this Part, in so far as they are
applicable, apply, with such modifications as the circumstances require, to proposals
made under this Division.
Assignments
(1.1) For the purposes of subsection (1), in deciding whether to make an order under
subsection 84.1(1), the court is to consider, in addition to the factors referred to in
subsection 84.1(3), whether the trustee approved the proposed assignment.
69.1
(1) Subject to subsections (2) to (6) and sections 69.4, 69.5 and 69.6, on the filing of a
proposal under subsection 62(1) in respect of an insolvent person,
(a) no creditor has any remedy against the insolvent person or the insolvent
person's property, or shall commence or continue any action, execution or other
proceedings, for the recovery of a claim provable in bankruptcy, until the trustee
has been discharged or the insolvent person becomes bankrupt;
(..•)
Limitation
(2) The stays provided by subsection (1) do not apply
(...)
(c) to prevent a secured creditor who gave notice of intention under
subsection244(1) to enforce that creditor's security from enforcing the security if
the insolvent person has, under subsection 244(2), consented to the enforcement
action;
(-. -)
Sealing documents
(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.
Assignment of agreements
84.1
(1) On application by a trustee and on notice to every party to an agreement, a court
may make an order assigning the rights and obligations of a bankrupt under the
agreement to any person who is specified by the court and agrees to the assignment.
(...)
-3
Factors to be considered
(4) In deciding whether to make the order, the court is to consider, among other things,
(a) whether the person to whom the rights and obligations are to be assigned is
able to perform the obligations; and
(b) whether it is appropriate to assign the rights and obligations to that person.
Restriction
(5) The court may not make the order unless it is satisfied that all monetary defaults in
relation to the agreement — other than those arising by reason only of the person's
bankruptcy, insolvency or failure to perform a non-monetary obligation — will be
remedied on or before the day fixed by the court.
136.
Priority of Claims
(1) Subject to the rights of secured creditors, the proceeds realized from the property of
a bankrupt shall be applied in priority of payment as follows:
(- -)
(f) the lessor for arrears of rent for a period of three months immediately
preceding the bankruptcy and accelerated rent for a period not exceeding three
months following the bankruptcy if entitled to accelerated rent under the lease,
but the total amount so payable shall not exceed the realization from the
property on the premises under lease, and any payment made on account of
accelerated rent shall be credited against the amount payable by the trustee for
occupation rent.
146.
Application of provincial law to lessors' rights
Subject to priority of ranking as provided by section 136 and subject to subsection 73(4)
and section 84.1, the rights of lessors are to be determined according to the law of the
province in which the leased premises are situated.
Courts of Justice Act, R.R.O. 1990, Reg.194, Ontario Rules of Civil Procedure
1.04(1)
These rules shall be liberally construed to secure the just, most expeditious and least
expensive determination of every civil proceeding on its merits.
-4
137. (1)
On payment of the prescribed fee, a person is entitled to see any document filed in a
civil proceeding in a court, unless an Act or an order of the court provides otherwise.
Commercial Tenancies Act, R.S.O. 1990, c. L. 7
23.
Licence to assign not to be unreasonably withheld
(1) In every lease made after the 1st day of September, 1911, containing a covenant,
condition or agreement against assigning, underletting, or parting with the possession,
or disposing of the land or property leased without licence or consent, such covenant,
condition or agreement shall, unless the lease contains an express provision to the
contrary, be deemed to be subject to a proviso to the effect that such licence or consent
is not to be unreasonably withheld.
38.
Lien of landlord in bankruptcy, etc.
(1) In case of an assignment for the general benefit of creditors, or an order being made
for the winding up of an incorporated company, or where a receiving order in
bankruptcy or authorized assignment has been made by or against a tenant, the
preferential lien of the landlord for rent is restricted to the arrears of rent due during
the period of three months next preceding, and for three months following the
execution of the assignment, and from thence so long as the assignee retains possession
of the premises, but any payment to be made to the landlord in respect of accelerated
rent shall be credited against the amount payable by the person who is assignee,
liquidator or trustee for the period of the person's occupation.
Rights of assignee
(2) Despite any provision, stipulation or agreement in any lease or agreement or the
legal effect thereof, in case of an assignment for the general benefit of creditors, or an
order being made for the winding up of an incorporated company, or where a receiving
order in bankruptcy or authorized assignment has been made by or against a tenant,
the person who is assignee, liquidator or trustee may at any time within three months
thereafter for the purposes of the trust estate and before the person has given notice of
intention to surrender possession or disclaim, by notice in writing elect to retain the
leased premises for the whole or any portion of the unexpired term and any renewal
thereof, upon the terms of the lease and subject to the payment of the rent as provided
by the lease or agreement, and the person may, upon payment to the landlord of all
arrears of rent, assign the lease with rights of renewal, if any, to any person who will
covenant to observe and perform its terms and agree to conduct upon the demised
premises a trade or business which is not reasonably of a more objectionable or
hazardous nature than that which was thereon conducted by the debtor, and who on
application of the assignee, liquidator or trustee, is approved by a judge of the Superior
5
Court of Justice as a person fit and proper to be put in possession of the leased
premises.
39.
Election to surrender
(1) The person who is assignee, liquidator or trustee has the further right, at any time
before so electing, by notice in writing to the landlord, to surrender possession or
disclaim any such lease, and the person's entry into possession of the leased premises
and their occupation by the person, while required for the purposes of the trust estate,
shall not be deemed to be evidence of an intention on the person's part to elect to retain
possession under section 38
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL OF
KARRYS BROS., LIMITED, KARBRO TRANSPORT INC., AND KARRYS
SOFTWARE LTD, CORPORATIONS WITH A HEAD OFFICE IN THE CITY OF
MISSISSAUGA IN THE PROVINCE OF ONTARIO
Estate/Court File No. 32-1942339
Estate/Court File No. 32-1942340
Estate/Court File No. 32-1942341
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
(COMMERCIAL LIST)
Proceeding commenced at Toronto
FACTUM OF THE APPLICANTS (MOTION
RETURNABLE FEBRUARY 19, 2015)
STIKEMAN ELLIOTT LLP
Barristers & Solicitors
5300 Commerce Court West
199 Bay Street
Toronto, Canada M5L 1B9
Elizabeth Pillon LSUC#: 35638M
Tel: (416) 869-5623
Email: [email protected]
Kathryn Esaw LSUC#: 58264F
Tel: (416) 869-6820
Email: [email protected]
Fax: (416) 947-0866
Lawyers for the Applicant