COURT FILE NO.: CV-21-00672654-00CL
DATE: 2021-12- 06
SUPERIOR COURT OF JUSTICE – ONTARIO (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 A PLAN OF COMPROMISE OR ARRANGEMENT OF BOREAL CAPITAL PARTNERS LTD., JRB-331 SHEDDON HOLDINGS LTD., 2123068 ONTARIO LIMITED, JRB-109 REYNOLDS HOLDINGS
BEFORE: Penny J.
COUNSEL: Rebecca L. Kennedy, Rachel Nicholson and Puya Fesharaki for the Applicants
Peter J. Osborne and Sarah Bittman for the Monitor, Ernst & Young Inc.
Daniel Shapira and Jessica Sorbara for the DIP Lender, Halmont Properties Corporation
Bevan Brooksbank for Trisura Guarantee Insurance Company
John Adair for JRB Capital Group Ltd. and Mr. Bowman
HEARD (by videoconference in Toronto): December 3, 2021
ENDORSEMENT
Background
[1] This is the “come-back” hearing from an initial order granted on November 25, 2021. The specific relief sought was contemplated and explained at the original hearing but was deferred to the comeback date to allow for notice to all affected parties. The relief sought is supported by the Monitor and the secured creditors.
[2] Mr. Adair appeared for JRB Capital and Mr. Bowman. He sought an adjournment with respect to two issues deal with in the proposed order. This was the only form of opposition to any of the relief sought. At the conclusion of submissions on these points, I indicated I was not granting an adjournment and that the amended and restated initial order, as submitted, would issue with reasons to follow. These are the reasons.
[3] The relief sought includes the conferral of investigative powers on the Monitor. Mr. Adair acts for the identified “investigatees” in relation to these powers, JRB Capital and Mr. Bowman. The requested adjournment concerned two discrete issues:
(1) the Court’s “ratification” of the appointment of Kesmark as the general partner of each of the partnerships in para 17 of the proposed order; and
(2) the grant of the investigative powers in paras 28 to 31 of the proposed order.
[4] Mr. Adair sought an adjournment of these two issues to allow Mr. Bowman to file evidence and make further submissions.
[5] As to the first issue, Mr. Adair submits that Mr. Bowman may well, in future litigation with Mr. Price, challenge the corporate meetings and procedures which removed his company as general partner of the Boreal entities and replaced it with Kesmark. He does not want Mr. Bowman’s future position (for example, in possible litigation with Mr. Price) to be prejudiced by the Court’s “ratification” of Kesmark’s original appointment.
[6] As to the second point, Mr. Adair says he was just retained. The investigative powers are very broad and directed specifically at his client. He says such broad powers ought not to be granted without giving Mr. Bowman a full opportunity to be heard.
Analysis
[7] It is extremely important that there be no question about Kesmark’s ability to make reliable commitments as general partner of the Boreal entities in the course of the restructuring, both pre-filing and post-filing. The ratification of Kesmark’s status as general partner of the Boreal entities is for the purpose of its both its pre-filing and post-filing activities and actions for the purposes of the restructuring. Mr. Adair’s concern seems to me to be more about JRB Capital’s removal that Kesmark’s appointment. In any event, I do not see the Court’s ratification of Kesmark’s status as general partner of the Boreal entities for the purpose of its role in the restructuring as necessarily dispositive of any potential future dispute, as between Mr. Bowman and Mr. Price, about the conduct of the affairs of Boreal Capital or the legality of removing JRB Capital from that role prior to Kesmark’s appointment.
[8] As to the investigative powers, there are several reasons why I do not believe an adjournment is appropriate or necessary. First, The DIP lender, whose participation is absolutely critical to the restructuring, will not advance further funds unless the investigative powers are conferred and acted upon. Thus, without the investigative powers, there will be no restructuring, and there will follow a bankruptcy or some other form of liquidation. This will have an extremely negative impact on many stakeholders, beyond the applicants and the secured creditors, including service providers to the building projects and purchasers of housing units.
[9] Second, this situation (that is, a CCAA proceeding with a Court appointed monitor and CRO) is not like a private shareholder dispute such as an oppression application. Here, we are dealing with Court appointed supervising officers who have advised the Court that there are prima facie indications of questionable transactions which, in their professional opinion, ought to be investigated. Again, there is more at stake than the interests of Mr. Price and Mr. Bowman. There are dozens of people and entities who have in good faith advanced money and services to the applicants; their interests must be taken into account as well.
[10] Third, Mr. Bowman will have all the protections afforded by the law, and recourse to the Court, during the course of any investigation. Authorizing an investigation is not making any rulings or findings, reaching any conclusions, or otherwise materially affecting Mr. Bowman’s interests. And when the time comes for drawing conclusions from and making decisions based on the investigation, Mr. Bowman will have every opportunity to be heard.
[11] Fourth, while I appreciate the initial order was only made last week, there is no motion or affidavit before the Court from Mr. Bowman. Mr. Adair says he was only retained on Wednesday in this matter, but he has been acting for Mr. Bowman in connection with Boreal Capital matters and disagreements with Mr. Price since September 2020. Mr. Adair is concerned about prejudice to Mr. Bowman in potential litigation with Mr. Price, but there is no such litigation at the moment and under the stay, proceedings against directors of the Boreal entities is prohibited without leave of the Court.
[12] Finally, para 51 of the proposed order stipulates that any interested party may apply to the Court to vary or amend the order on not less than seven days notice. This of course applies to Mr. Bowman and JRB Capital.
Conclusion
[13] In conclusion, I am satisfied that the relief sought is warranted.
[14] The stay is extended to February 18, 2022.
[15] The amount the applicants can borrow is increased to $10 million, secured by the DIP charge. This amount is consistent with the anticipated total funding requirements to February 2022 to finance working capital requirements, capital expenditures and the like.
[16] The administrative charge is increased to $300,000. Now that the stay has been extended, the increased charge is reasonable in the circumstances.
[17] The Monitor is authorized to conduct investigations into potentially improper, undervalue, fraudulent or reviewable transactions as recommended by the Monitor and the CRO.
Penny J.
Released: December 6, 2021