DATE: 20051026
Docket: C43383
COURT OF APPEAL FOR ONTARIO
CRONK, GILLESE and ARMSTRONG JJ.A.
B E T W E E N :
2022177 ONTARIO INC.
Applicant (Respondent)
- and -
TORONTO HANNA PROPERTIES LIMITED
Respondent (Appellant)
Counsel: Allan Sternberg and Robert A. Watson, for the appellant John J. Chapman and Adam Stephens, for the respondent
Heard: May 20, 2005
On appeal from the judgment of Justice John D. Ground of the Superior Court of Justice dated April 11, 2005, reported at [2005] O.J. No. 1458.
CRONK J.A.:
I. OVERVIEW
[1] The appellant, Toronto Hanna Properties Limited (“Toronto Hanna”), is a former owner of a Toronto property known municipally as 9 Hanna Avenue (the “Toronto Property”). In 2000, Toronto Hanna sold the Toronto Property to WFI Metrobuild Ltd., later known as Carrier Centers (Canada) Ltd. (“Carrier”).[^1] As part of that sale, Toronto Hanna and Carrier entered into an agreement that provided for a continuing interest by Toronto Hanna in the surplus density associated with the Toronto Property (the “Density Agreement”).
[2] Notice of Toronto Hanna’s interest under the Density Agreement in the surplus density was registered on title to the Toronto Property.
[3] Carrier is a member of the 360 Networks Inc. group of companies (the “360 Group”). In June 2001, the 360 Group sought creditor protection in British Columbia under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”). As part of the restructuring of the 360 Group and in recognition of certain settlement agreements entered into between the 360 Group and various claimants in the CCAA proceedings, the British Columbia Supreme Court approved the sale of specific assets of the 360 Group, including the Toronto Property (the “Settlement Order”). As a result, the Toronto Property was sold by the 360 Group to LIL Limited (“Ledcor”), who thereafter assigned its interest in the Toronto Property to the respondent, 2022177 Ontario Inc. (“202 Inc.”), a subsidiary of Ledcor.
[4] This appeal concerns the nature of Toronto Hanna’s interest under the Density Agreement in the surplus density on the Toronto Property and the effect, if any, of the court orders in the CCAA proceedings, especially the Settlement Order, on that interest.
[5] After it acquired the Toronto Property, 202 Inc. applied to the Superior Court of Justice in Ontario for a declaration that, as a result of the Settlement Order, the Density Agreement did not constitute a lien, interest, encumbrance or claim on title to the Toronto Property or, in the alternative, that the Density Agreement constituted a positive covenant that, as a matter of law, did not run with the land. 202 Inc. also sought orders discharging and expunging the Density Agreement from title to the Toronto Property.
[6] The application judge held that the Density Agreement included negative covenants that ran with the land. However, he also granted a declaration that the court orders in the CCAA proceedings, including the Settlement Order, provided for the conveyance of the Toronto Property free and clear of any claims by Toronto Hanna under the Density Agreement. He ordered that the Density Agreement be discharged and expunged from title to the Toronto Property.
[7] Toronto Hanna appeals this judgment. It argues that the application judge erred in his interpretation of the Settlement Order by holding that the CCAA orders authorized the conveyance of the Toronto Property by the 360 Group free and clear of any claim by Toronto Hanna under the Density Agreement. For the reasons that follow, I conclude that the Settlement Order did not eliminate or displace Toronto Hanna’s surplus density interest under the Density Agreement. Accordingly, I would allow the appeal.
II. BACKGROUND
(i) Toronto Hanna’s Sale of the Toronto Property
[8] As I have already mentioned, Toronto Hanna is a former owner of the Toronto Property. It also owns lands located to the east, west and north of the Toronto Property.
[9] By an agreement of purchase and sale dated April 25, 2000 (the “Hanna Sale Agreement”), Toronto Hanna sold the Toronto Property to Carrier, a member of the 360 Group and an affiliated company of Ledcor. The Hanna Sale Agreement provided, in part:
- Vendor and Purchaser Covenants: The Vendor and Purchaser covenant and agree with each other as follows:
(c) To cooperate with each other and work together in good faith with respect to the allocation of any surplus density on the [Toronto] Property which allocation may be dealt with as part of the Severance Conditions (but the satisfaction or completion of which shall not constitute a condition precedent of this agreement) it being understood that such surplus density refers to permitted density under the current existing zoning by-laws beyond the final area of the Building as determined under paragraph 12. Any such surplus density if such allocation is permitted by the City, shall only be allocated to the Easterly Land. In the event such agreement with the City is not reached prior to the Closing Date, the Purchaser and Vendor agree that this agreement shall continue to survive after the Closing Date for a period of seven (7) years provided that all costs and expenses in connection therewith shall be the responsibility of the Vendor and the Vendor shall be entitled to register notice of such agreement on title to the [Toronto] Property.
[10] When the Hanna Sale Agreement was executed, one building was located on the Toronto Property. The building’s gross floor area was substantially less than the maximum size then permitted under the applicable municipal zoning by-laws. The agreed purchase price for Carrier’s acquisition of the Toronto Property was calculated according to a formula based on the existing, rather than the potential, take-up of the density. Thus, the full density potential of the site had not been utilized, giving rise to ‘surplus’ density under the relevant zoning by-laws.
[11] The Hanna Sale Agreement also provided for an option to purchase in favour of Carrier concerning certain of Toronto Hanna’s land situated to the west of the Toronto Property. If this option was not exercised by Carrier, Toronto Hanna was obliged under the Hanna Sale Agreement to convey to Carrier a “rear strip” of land, namely, Toronto Hanna’s lands adjacent to the northerly face of the building on the Toronto Property, for a purchase price of $1.00.
[12] In mid-October 2000, Toronto Hanna and Carrier entered into the Density Agreement, whereby they confirmed their bargain, as originally set out in the Hanna Sale Agreement, to work together to allocate any surplus density on the Toronto Property to Toronto Hanna’s land to the east of the Toronto Property, subject to municipal approval. The applicable language in the Density Agreement is virtually identical to the language employed in s. 10(c) of the Hanna Sale Agreement, as described above.
[13] There is no dispute that by virtue of the Hanna Sale and the Density Agreements, Toronto Hanna retained an interest in and Carrier did not purchase the surplus density on the Toronto Property. However, the proper legal characterization of Toronto Hanna’s interest under the Density Agreement is a matter of contention.
[14] Notice of the Density Agreement was registered on title to the Toronto Property on October 26, 2000.
(ii) Settlement Order
[15] The CCAA proceedings were commenced by the 360 Group, including Carrier, in June 2001. Toronto Hanna was not a party to the CCAA proceedings, nor was it included on the formal service list in that litigation. However, the principal of Toronto Hanna, through his solicitors, was on the service list. In contrast, of course, Carrier and Ledcor were involved in the CCAA proceedings as direct participants. Importantly, Toronto Hanna neither sought nor was requested to file a claim in the CCAA proceedings.
[16] The Settlement Order was granted on August 26, 2002. By its provisions, the British Columbia Supreme Court approved the sale of various assets by the 360 Group to Ledcor, its nominee, or a group of companies called the “Call-Net Group”, on certain terms as detailed in settlements reached in the CCAA proceedings among the 360 Group and Ledcor (the “Ledcor Settlement”), on the one hand, and the 360 Group and the Call-Net Group, on the other hand. The transactions contemplated under the Ledcor Settlement included the sale of the Toronto Property by Carrier to Ledcor.
[17] The Settlement Order also contained a vesting order. Paragraph 2 of the Settlement Order provided, in part:
- All estate, right, title and interest of the [360 Group] in, to or against the…real property…and all other assets…that either Ledcor or the Call-Net Group, as the case may be, are to receive from the [360 Group] under the terms of the Settlement Agreements (collectively, the “Transferred Assets”) be and the same shall be indefeasibly vested in either Ledcor (or its nominee) or the Call-Net Group, as the case may be…free and clear of any and all liens, interests, encumbrances or conflicting claims against the Transferred Assets of any kind whatsoever (whether contractual, statutory or otherwise)…(collectively referred to as “Claims”)…and that all of the Claims in any way affecting the Transferred Assets be and the same are hereby expunged and discharged with respect to the Transferred Assets.
[18] On September 4, 2002, a final amended plan of arrangement for the 360 Group was approved by the British Columbia Supreme Court (the “Final CCAA Order”). It stipulated, among other matters, that registrations be deleted against title to the property and assets of the 360 Group, except for specific “permitted” liens or “permitted” encumbrances. The Density Agreement was not included in the Final CCAA Order as a “permitted” lien or a “permitted” encumbrance.
[19] The Final CCAA Order also expressly discharged and extinguished the “Claims” of lien creditors against the 360 Group. The term “Claim” enjoyed a broad definition under the Final CCAA Order. Paragraph one of the Final CCAA Order provided that terms not otherwise defined therein had the same meanings as attributed to them in the final amended plan of arrangement for the 360 Group. Under that plan, the word “Claim” was defined, in part, to mean “any right or claim…against any one or more of the [360 Group] whatsoever, whether or not asserted, in connection with any indebtedness, liability or obligation of any kind of the [360 Group]…in existence at the [date of filing in the CCAA proceedings]…together with any other claims that would have been claims provable in bankruptcy had the [360 Group] become bankrupt”.
[20] The 360 Group emerged from CCAA protection on November 12, 2002. Under s. 16 of the CCAA, the Final CCAA Order has full force and effect across Canada. It is unchallenged on this appeal.
[21] Also in November 2002, Carrier entered into an agreement of purchase and sale with Ledcor (the “Carrier Sale Agreement”), whereby it agreed to sell the Toronto Property to Ledcor as contemplated under the Ledcor Settlement. Upon the closing of this transaction in June 2003, title to the Toronto Property was transferred to 202 Inc.
[22] None of the Ledcor Settlement, the Settlement Order, the Final CCAA Order or the Carrier Sale Agreement referenced the density on the Toronto Property or the Density Agreement.
[23] However, the Carrier Sale Agreement contained the following provisions:
4.2 Acknowledgement. The Purchaser acknowledges and agrees with the Vendor that:
(c) Except as expressly provided for in this Agreement, the Property is being purchased and assumed by the Purchaser as at the date of this Agreement on an “as is, where is” basis, without any express or implied agreement, representation or warranty of any kind whatsoever as to the title, condition, suitability for development, physical characteristics, profitability or use for zoning thereof;
5.1 Covenants of the Vendor. The Vendor covenants with the Purchaser as follows and acknowledges that such covenants are being relied upon by the Purchaser:
(e) the Vendor shall use commercially reasonable efforts to cause [Toronto Hanna] to convey to the Purchaser, at the Purchaser’s cost, the Rear Strip (as defined in the agreement of purchase and sale between Toronto Hanna and [Carrier] dated April 25, 2000) prior to Closing and, if requested, to authorize the Purchaser as attorney of the Vendor to pursue the Vendor’s rights under section 7(p) of such agreement.
[24] In March 2004, at 202 Inc.’s request and as contemplated under paragraph 5.1(e) of the Carrier Sale Agreement, Toronto Hanna conveyed to 202 Inc. the “rear strip” of land identified in the Hanna Sale Agreement.
(iii) Application Judge’s Decision
[25] Following its acquisition of the Toronto Property, 202 Inc. applied to the Superior Court of Justice in Ontario for one of two declarations: first, that the Density Agreement did not constitute a lien, interest, encumbrance or claim on title to the Toronto Property as a result of the terms of the orders made by the British Columbia Supreme Court in the CCAA proceedings, in particular, the Settlement Order; and second, in the alternative, a declaration that the Density Agreement constituted a positive covenant that did not run with the land. It also sought orders discharging and expunging the Density Agreement from title to the Toronto Property.
[26] By judgment dated April 11, 2005, Ground J. of the Superior Court of Justice (Commercial List) granted the first declaration sought by 202 Inc. and ordered the Land Registrar for the Toronto Registry Office to discharge the Density Agreement from title to the Toronto Property.
(iv) Toronto Hanna’s Appeal
[27] Toronto Hanna appealed this judgment and applied to stay the judgment pending the determination of its appeal. This stay was granted by order of this court dated April 27, 2005.
[28] Toronto Hanna’s main argument in support of its appeal is that the application judge erred in law by misinterpreting the Settlement Order. Toronto Hanna submits that the Settlement Order did not deal with assets owned by persons who were not parties to the CCAA proceedings, that it did not terminate Toronto Hanna’s interest in the surplus density on the Toronto Property and that it did not operate to discharge the Density Agreement from title to the Toronto Property.
[29] For the reasons that follow, I conclude that neither the Settlement Order nor the Final CCAA Order eliminated or displaced Toronto Hanna’s interest under the Density Agreement in the surplus density on the Toronto Property and that the application judge erred by ordering the discharge of the Density Agreement from title to the Toronto Property. Accordingly, I would allow the appeal.
III. ISSUES
[30] There is no challenge on this appeal to the application judge’s finding that there is a negative component to the Density Agreement that runs with the land. Instead, the parties’ submissions concerned the interpretation and effect of the CCAA court orders, particularly the Settlement Order, on the interest in surplus density asserted by Toronto Hanna pursuant to the Density Agreement. The fact of the surplus density on the Toronto Property is not contested. However, the parties dispute the legal effect of the Settlement Order, if any, on Toronto Hanna’s claimed interest in the surplus density.
[31] In these circumstances, I would frame the issues on appeal as follows:
(1) What is the nature of Toronto Hanna’s interest under the Density Agreement? and
(2) Did the Settlement Order provide for the conveyance of the Toronto Property free and clear of any claim by Toronto Hanna under the Density Agreement?
IV. ANALYSIS
(i) Toronto Hanna’s Interest Under the Density Agreement
[32] Toronto Hanna contends that, by virtue of the Density Agreement, it ‘owns’ the surplus density on the Toronto Property. In my opinion, this is an inaccurate legal characterization of the nature of Toronto Hanna’s surplus density interest under the Density Agreement.
[33] ‘Density’ in respect of a parcel of land is created as a result of the regulation of the permitted uses of the land by municipal authorities through official plans, zoning by-laws and related regulatory measures and processes. In Ontario, the power to regulate the use of land is conferred upon municipalities by the Planning Act, R.S.O. 1990, c. P.13.
[34] Under Ontario’s land use planning regime, the transfer of building densities from one parcel of land to another may be permitted under municipal zoning by-laws, subject to prescribed conditions and municipal approvals, or excluded altogether. The transfer of density rights between landowners, where permitted, involves the surrender by one landowner of a ‘higher’ zoning or density on one parcel of land in favour of another (usually adjacent) landowner who enjoys a ‘lower’ zoning or density on another parcel of land, subject to municipal approval. In practical terms, the transfer of density rights reflects the ‘downzoning’ of one property and the ‘upzoning’ of another property. For discussion of these principles in the taxation context, see Sun Life Assurance Co. of Canada v. Canada, [1997] 3 C.T.C. 2593 (T.C.C.).
[35] Thus, density rights are concerned with the regulated uses to which land may be put by its owner. Although they are associated with the attributes of land ownership, they are not themselves property interests in land that are ‘owned’ by a landowner. Zoning by-laws do not create interests or rights in land per se. As observed by Bowman T.C.J. in Cadillac Fairview Corp. Ltd. v. R., [1996] 2 C.T.C. 2197 (T.C.C.) at 2212-13, aff’d, 1999 7417 (FCA), [1999] 3 C.T.C. 353 (F.C.A.):
[Z]oning does not constitute a conferral of a right but rather a restriction of the otherwise unlimited right of a landowner to do what it wishes with its land. It is less accurate to describe a change in zoning to allow a further use of land as the conferral of a right than to describe it as a lifting or relaxation of a restriction on the otherwise unrestricted use of the property. It follows that the right to use property, whether restricted by zoning by-laws or not, is a right that inheres in the ownership of the property. It is part of the bundle of rights that a landowner has by reason of ownership of property... Density rights have to do with what the owner can do with the land.
[36] In Sun Life Assurance Co. of Canada, supra, Bowman T.C.J. further elaborated at para. 18:
[S]ince zoning determines what a landowner can do with land it is an attribute of the land…Density rights have to do with what an owner can do with land. They are, therefore, an integral component in the value of land. They exist independently of their exercise and independently of any present or future building [on the land].
[37] However, the fact that Toronto Hanna’s surplus density interest did not constitute a property interest in land owned by it prior to the CCAA proceedings does not end the matter. Density rights are intimately connected with the value of the land to which they attach. Surplus density rights can have a real, and sometimes significant, commercial value.
[38] In this case, Toronto Hanna sold specific land and a building to Carrier for a purchase price calculated solely with reference to the existing density then utilized on the Toronto Property. In so doing, Toronto Hanna expressly reserved to itself the potential future benefit of an allocation of the excess density on the Toronto Property to its land to the east of the Toronto Property, subject to municipal approval of this allocation by the City of Toronto. Under the Density Agreement, Toronto Hanna’s interest in the surplus density on the Toronto Property was for a fixed term of seven years.
[39] Toronto Hanna contends that the Density Agreement thus created a property interest in the surplus density on the Toronto Property analogous to an easement. I would characterize Toronto Hanna’s interest under the Density Agreement as an independent contractual right in the nature of a restriction on the permitted future use of designated lands. In this sense, I agree with Toronto Hanna that the terms of the Density Agreement benefited the ownership of Toronto Hanna’s land located to the east of the Toronto Property, to which the surplus density would be allocated if municipal approval was forthcoming.
[40] Carrier accepted this reservation of interest by Toronto Hanna and neither paid for nor acquired the surplus density on the Toronto Property. Instead, Carrier effectively agreed to a restriction on its future use of the Toronto Property, i.e. to refrain from attempting to utilize or seek an allocation of the surplus density on the Toronto Property for its own benefit. This is the negative component of the parties’ bargain as documented in the Density Agreement. I agree with the application judge’s reasoning that:
[T]he Density Agreement would have to be interpreted as an agreement on the part of [Carrier] not to apply to have any of the surplus density allocated to its property and that any step taken by [Carrier] to obtain such an allocation would be a breach of the Density Agreement and actionable by Toronto Hanna. The Density Agreement does, therefore,…include, by necessary implication, negative covenants on the part of [Carrier] and therefore must be viewed as running with the land.
As I have indicated, this finding by the application judge is not challenged on this appeal.
[41] Notice to third parties of Toronto Hanna’s interest in the surplus density on the Toronto Property was provided by the registration of notice of the Density Agreement on title to the Toronto Property. This ensured that prospective successors in title to Carrier in relation to the Toronto Property had notice both of the contractual restriction that applied to the permitted uses of the Toronto Property by its owner and of Toronto Hanna’s interest in the surplus density on the Toronto Property.
(ii) Effect of the Settlement Order
[42] In these circumstances, what effect, if any, did the Settlement Order have on Toronto Hanna’s interest under the Density Agreement?
[43] 202 Inc. argues that the broad language of paragraph two of the Settlement Order had the effect of vesting in it, as Ledcor’s nominee, the assets sold to it pursuant to the Ledcor Settlement and the Settlement Order, free and clear of all claims by third parties, including Toronto Hanna. It relies, in particular, on the following passages in paragraph two of the Settlement Order:
All estate, right, title and interest of the Petitioners in, to or against…real property…and all other assets…that either Ledcor or the Call-Net Group, as the case may be, are to receive from the Petitioners under the terms of the Settlement Agreements (collectively, the “Transferred Assets”) be and the same shall be indefeasibly vested in either Ledcor (or its nominee) or the Call-Net Group…as of and from the closing of the respective Settlement Agreements free and clear of any and all liens, interests, encumbrances or conflicting claims against the Transferred Assets of any kind whatsoever (whether contractual, statutory or otherwise)…(collectively referred to as “Claims”)…and that all of the Claims in any way affecting the Transferred Assets be and the same are hereby expunged and discharged with respect to the Transferred Assets [emphasis added].
[44] 202 Inc. submits that, to the extent that Toronto Hanna has an interest in the surplus density on the Toronto Property pursuant to the Density Agreement, this interest falls squarely within the language of paragraph two of the Settlement Order, with the result that 202 Inc. purchased the Toronto Property “free and clear” of the Density Agreement.
[45] The application judge accepted 202 Inc.’s argument. He grounded his decision on the definition of “Claim” in the CCAA proceedings, stating:
[T]he definition of “Claim” in the CCAA proceeding is, in my view, clearly broad enough to include any claims, contingent or otherwise, which Toronto Hanna might have against [Carrier] pursuant to the Density Agreement. The CCAA Orders do, by their terms, provide for the conveyance of the Toronto property free and clear of all Claims as defined which would include any claims of Toronto Hanna under the Density Agreement.
[46] With respect, I disagree for several reasons.
[47] First, although it is true that the definition of “Claim” under the Settlement Order is expansive, it nevertheless applies only to “liens, interests, encumbrances or conflicting claims…of any kind whatsoever (whether contractual, statutory or other-wise)” against the “Transferred Assets”. As relevant to the matters at issue on this appeal, the term “Transferred Assets” is defined in paragraph two of the Settlement Order as meaning “all estate, right, title and interest of the [360 Group] in, to or against…real property…and all other assets” that Ledcor was to receive “from the [360 Group]” under the terms of the Ledcor Settlement.
[48] However, the effect of the Density Agreement was to reserve to Toronto Hanna an interest in the surplus density on the Toronto Property for a maximum period of seven years. 202 Inc.’s predecessor in title, Carrier, did not pay for or acquire the surplus density when it purchased the Toronto Property. To the contrary, through the Density Agreement, Toronto Hanna essentially exempted the potential future benefit of the surplus density on the Toronto Property from the sale to Carrier. Simply put, the surplus density on the Toronto Property formed no part of the property sold by Toronto Hanna to Carrier. Moreover, there is no suggestion that Carrier paid any consideration therefor. Thus, the surplus density on the Toronto Property was not part of the “Transferred Assets” under the Settlement Order. Only the “Transferred Assets” emerged under the Settlement Order “free and clear” of claims.
[49] Although Carrier was a “Petitioner” in the CCAA proceedings and could dispose of its “estate, right, title and interest” in the Toronto Property to Ledcor, it could dispose of no more than it held. Nor could a vesting order in the CCAA proceedings purport to vest in Ledcor assets in which the 360 Group had no interest and which it was in no legal position to convey. Consequently, Carrier could not agree with Ledcor under the Ledcor Settlement to sell Ledcor any asset or interest associated with land to which it had no colour of right nor a controlling claim.
[50] Thus, the “Claims” mentioned in paragraph two of the Settlement Order as relied upon by the application judge in his reasons were confined to potential or existing claims against or in respect of those assets capable of transfer to Ledcor. As a result of the Density Agreement, this did not include any rights concerning the surplus density on the Toronto Property. It is noteworthy, in this regard, that Carrier made no representations to Ledcor in the Carrier Sale Agreement concerning the zoning on the Toronto Property or its development potential. Instead, as I have already described, the Carrier Sale Agreement provided for Ledcor’s acquisition of the Toronto Property on an “as is, where is” basis.
[51] Nor do I read the Final CCAA Order as effecting a different result. Although it is true that the “Claims” released or discharged thereunder were defined in widely cast language, the released or discharged “Claims” concerned claims by construction and building lien creditors. This did not apply to Toronto Hanna. Nor did the Final CCAA Order mention the surplus density on the Toronto Property, Toronto Hanna’s interest under the Density Agreement, or otherwise provide for the discharge of notice of the Density Agreement from title to the Toronto Property.
[52] Second, I would reject 202 Inc.’s assertion that Toronto Hanna’s required recourse in the circumstances was to make a claim for compensation in the CCAA proceedings consequent upon the compromise of its rights. Toronto Hanna was not a creditor of Carrier or other members of the 360 Group. It did not have a “claim” against the land and building comprising the Toronto Property, which was the asset capable of being transferred to Ledcor pursuant to the Ledcor Settlement and the Settlement Order. Toronto Hanna’s interest related solely to the surplus density on the Toronto Property. It had no actionable claim, provable in bankruptcy, in the CCAA proceedings, or otherwise, unless and until the owner of the Toronto Property attempted to utilize the surplus density on the Toronto Property in a manner that contravened the terms of the Density Agreement. This did not occur.
[53] Third, and more generally, in the circumstances of this case, I do not accept that the Settlement Order or the Final CCAA Order had the effect of eliminating the substantive rights of persons who did not have notice that their interests stood to be potentially affected by the CCAA proceedings.
[54] I appreciate, as argued by 202 Inc., that court-approved plans of arrangement involve the compromise of rights in the interests of maximizing the value available to a financially troubled company to satisfy its obligations. Nor do I question that bankruptcy and CCAA proceedings involve corporate disasters, with much attendant adverse fallout for all stakeholders. For this reason, as observed by this court in Canadian Union of Public Employees v. Royal Crest Lifecare Group Inc. (2004), 46 C.BR. (4th) 126 at 133, leave to appeal to S.C.C. dismissed, [2004] S.C.C.A. No. 104, appellate courts accord considerable deference to judges’ decisions in such proceedings. See also Algoma Steel Inc. v. Union Gas Ltd. (2003), 63 O.R. (3d) 78 (C.A.).
[55] The application judge emphasized these realities when he commented in his reasons:
The court cannot and does not in the course of a complex CCAA proceeding deal with every individual creditor’s claim and every interest of every party having a contractual relationship with the Applicants…it is somewhat rough justice and is an unavoidable result of the emphasis of the court being toward the restructuring of the Applicants and the survival of the businesses in one form or another.
[56] But this does not mean, as asserted by 202 Inc., that Toronto Hanna is merely “a casualty of war” in respect of its interest under the Density Agreement. CCAA proceedings do not licence the permanent abrogation of substantive contractual rights or property interests of strangers to the proceedings without notice or compensation. The frequent imperative of speedy decisions in such proceedings, in the interests of the financially jeopardized company and affected stakeholders, does not extend this far.
[57] In this case, it is not seriously challenged that until the commencement of this litigation in March 2005, Toronto Hanna had no notice that any of Carrier, Ledcor or 202 Inc., as Ledcor’s nominee, contended that Toronto Hanna’s interest under the Density Agreement was or could be affected by the CCAA orders. By then, the opportunity to oppose or influence such orders or to participate in the proceedings in which they were made had long passed.
[58] Moreover, it is telling that none of the Ledcor Settlement, the Carrier Sale Agreement, the Settlement Order or the Final CCAA Order mentioned the Density Agreement or the zoning on the Toronto Property. In my view, the fact that these documents were silent on these issues strengthens Toronto Hanna’s assertion that there was no intention to deal with the surplus density on the Toronto Property in the CCAA proceedings.
[59] For these reasons, I conclude that the application judge misinterpreted the effect of the Settlement Order. Properly read, the Settlement Order dealt only with assets that belonged to the 360 Group or in respect of which the 360 Group had a controlling or disposable interest. Accordingly, neither the Settlement Order nor the Final CCAA Order operated to eliminate or displace Toronto Hanna’s interest under the Density Agreement in the surplus density on the Toronto Property.
[60] I offer this additional observation. In my view, 202 Inc.’s conduct after the CCAA proceedings undermines its assertion that Toronto Hanna’s interest in the surplus density on the Toronto Property was extinguished by the Settlement Order. Approximately 20 months after the date of the Settlement Order and about 17 months after the 360 Group emerged from the CCAA proceedings, 202 Inc. compelled the conveyance to it by Toronto Hanna of the “rear strip” of land identified in the Hanna Sale Agreement. That agreement also contained the original bargain between Toronto Hanna and Carrier’s predecessor in title regarding the future allocation of surplus density on the Toronto Property. Carrier thus enforced and derived benefit from the terms of the Hanna Sale Agreement yet it now seeks to deny the same right to Toronto Hanna. To permit this would be to sanction fundamental unfairness between the parties.
V. DISPOSITION
[61] For the reasons given, I would allow the appeal. The appellant is entitled to its costs of this appeal, its earlier application for a stay of the judgment of the application judge pending appeal, and the proceedings before the application judge. I would fix these costs, as agreed by the parties, in the total amount of $20,000, inclusive of disbursements and Goods and Services Tax.
RELEASED:
“OCT 26 2005” “E.A. Cronk J.A.”
“EAC” “I agree E.E. Gillese J.A.”
“I agree Robert P. Armstrong J.A.”
[^1]: I refer throughout these reasons to WFI Metrobuild Ltd. as Carrier.