Jennifer Linde

In CCAA proceedings arising from a major construction project, the monitor sought an order authorizing release of a contractor-specific holdback notwithstanding the continued construction of the project and the resulting technical inability to satisfy the timing requirements of the construction lien regime.

The court held that s. 11 of the CCAA gave it jurisdiction to deem compliance with statutory preconditions where doing so usefully furthered the remedial objectives of the restructuring, caused no demonstrated prejudice, and preserved the substantive rights of affected stakeholders.

The court also held that it could protect the monitor and CRO from potential personal liability under specified tax statutes for implementing the court-authorized payment, but revised the proposed wording to grant a narrower and more direct liability shield.

The holdback release order was approved with modifications, including removal of an unnecessary overlapping protection.

The court-appointed Monitor in CCAA proceedings brought a motion to approve a CSA Plan disclaiming 314 of 329 existing condominium sale agreements for an 85-storey tower at 1 Bloor Street West, Toronto, to approve a Deposit Return Protocol for refunding approximately $105 million in insured deposits, and to approve a reconfiguration reducing total residential units to 411.

The Monitor demonstrated that disclaimers would generate incremental proceeds exceeding $200 million by enabling resale at higher market prices under a luxury hotel brand.

The court applied the established three-part test for disclaiming pre-construction sale agreements under s. 32 of the CCAA, finding that the senior secured lenders held first-ranking priority, that failure to disclaim would amount to a preference for purchasers, and that the equities did not support maintaining the existing agreements.

The motion was granted, the Deposit Return Protocol and Monitor's reports were approved, and a sealing order was granted over confidential market analysis appendices.

The Receiver sought and obtained two orders: a Construction Continuance Order to approve the engagement of a new construction manager (SKYGRiD) and extend a stay of proceedings, and a Lien Regularization Order to establish a court-supervised process for construction lien claims.

The court found jurisdiction under the Bankruptcy and Insolvency Act and the Courts of Justice Act, concluding that the orders were necessary and appropriate to ensure the ongoing construction of "The One" project and to manage lien claims efficiently without prejudicing claimants' substantive rights.

Objections from the former developer (Mizrahi Parties) regarding their own pending motion for fees were acknowledged but did not prevent the approval of the Receiver's requested orders.

The applicants, senior secured lenders, sought the appointment of a receiver over the assets of "The One" mixed-use construction project due to financial and covenant defaults by the borrower.

The project, significantly delayed and over budget, had outstanding debt of approximately $1.235 billion.

The appointment of Alvarez & Marsal Canada Inc. as receiver was unopposed by any key stakeholder.

The court granted the application, appointed the receiver, approved a super-priority receivership funding credit agreement of up to $315 million, and issued a stay of proceedings, finding it just and convenient to stabilize the situation and maximize recovery for all stakeholders.