Court File and Parties
Court File No.: CV-16-11541-00CL Date: 2023-10-03 Superior Court of Justice - Ontario
Re: 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 URBANCORP TORONTO MANAGEMENT INC., URBANCORP (ST. CLAIR VILLAGE) INC., URBANCORP (PATRICIA) INC., URBANCORP (MALLOW) INC., URBANCORP (LAWRENCE) INC., URBANCORP DOWNSVIEW PARK DEVELOPMENT INC., URBANCORP (952 QUEEN WEST) INC., KING RESIDENTIAL INC., URBANCORP 60 ST. CLAIR INC., HIGH RES. INC., BRIDGE ON KING INC. (Collectively the “Applicants”) AND THE AFFILIATED ENTITIES LISTED IN SCHEDULE “A” HERETO
Before: Chief Justice Geoffrey B. Morawetz
Counsel: Danny Nunes, for the Applicants Robin Schwill, for KSV Restructuring Inc., as Monitor Niklas Holmberg, for Mattamy (Downsview) Limited Kenneth Kraft, for Adv. Guy Gissin as Court-appointed Israeli Functionary of Urbancorp
Heard and Determined: September 29, 2023 Reasons: October 3, 2023
Endorsement
Overview
1At the conclusion of the hearing, the motion was granted with brief reasons to follow. These are the reasons.
2KSV Kofman Inc., now KSV Restructuring Inc. (“KSV”), in its capacity as court-appointed monitor (the “Monitor”) of the Applicants and the affiliated entities listed on Schedule “A” (collectively, the “CCAA Entities”, and each individually a “CCAA Entity”), brings this motion for an order:
(a) Approving the Minutes of Settlement (the “Settlement”) between the Monitor on behalf of Urbancorp Downsview Park Development Inc. and Urbancorp Toronto Management Inc., Adv. Guy Gissin, in his capacity as the (court-appointed Israeli Functionary of Urbancorp Inc. (the “Foreign Representative”), and Mattamy (Downsview) Limited (“Mattamy”); and
(b) Amending the amount of $1 million in paragraph 29(m) of the Initial Order dated May 18, 2016 (the “Initial Order”) by replacing it with the amount of $4.7 million.
3Counsel to the Monitor advised that the Settlement is conditional upon the Foreign Representative obtaining the approval of the Israeli Court to the Settlement (“Israeli Court Approval”) which itself is conditional upon the amendment to the Initial Order to ensure that the Settlement amount can be used to repay the actual amount of inter-company advances on a priority basis and ultimately be paid to Urbancorp.
4The Report contains a summary of the material terms of the Settlement and the Settlement is attached as an appendix to the Report.
Background
5Urbancorp Downsview Park Development Inc. (“Downsview”) and Mattamy are parties to an Amended and Restated Co-Ownership Agreement, made as of July 30, 2013 (the “Agreement”). A dispute arose under the Agreement as to Downsview’s entitlement to the Urbancorp Consulting Fee in the amount of $5.9 million. The Urbancorp Consulting Fee is payable to UTMI.
6The Monitor engaged in negotiations with Mattamy and the Foreign Representative in reaching the Settlement.
7The Monitor is of the view that the Settlement falls within the range of what is fair and reasonable under the circumstances.
8The Monitor also advises that Initial Order authorized the Monitor to cause any CCAA Entity with available cash to loan some or all of that cash to another CCAA Entity on an interest free intercompany basis up to an aggregate of $1 million.
9During the course of these proceedings, the intercompany advances to UTMI have amounted to approximate $4.7 million.
10The Monitor advises that the Settlement will now provide UTMI with $2.9 million in assets.
11The Settlement is conditional upon the Foreign Representative obtaining Israeli court approval.
12The Foreign Representative has informed the Monitor that obtaining Israeli court approval will be conditional upon the amendment of the $1 million limit to reflect the actual amount advanced to UTMI in order that the Settlement amount of $2.9 million can be used to repay the actual amount of intercompany advances on a priority basis which ultimately means it will be paid to UCI.
Analysis and Approval
13In assessing the settlement within the CCAA context, the court looks of the following factors:
(a) whether the settlement is fair and reasonable;
(b) whether it provides substantial benefits to other stakeholders; and
(c) whether it is consistent with the purpose and spirit of the CCAA.
14The Monitor submits that in this case the dispute giving rise to the Settlement involves interpretation of a complex commercial agreement that contains numerous inconsistencies and possible gaps in its drafting.
15The Monitor also Reports that the Settlement is the result of extensive negotiations between the Monitor, the Foreign Representative and Mattamy and the Monitor recommends that the Settlement be approved.
16The Monitor submits that the Settlement is fair and reasonable under the circumstances as it maximizes the realizable value of certain receivables owing to UTMI in an efficient, commercially pragmatic manner and permits the Monitor to move forward to ultimately completing all the outstanding matters left to administer in these proceedings.
17The Monitor also submits that the only party that would be adversely affected by not granting the order sought would be UCI and the Foreign Representative supports the granting of the order.
18The Monitor also submits that given that UTMI will have funds to distribute exclusively, UCI would actually be prejudiced (and the creditors of UTMI at the time of the Initial Order would obtain a windfall) by not amending the Initial Order to reflect the actual amount of inter-company advances made to UTMI.
19I accept the submissions of the Monitor. I am satisfied that the Settlement is fair and reasonable in the circumstances and it is approved.
20I am also satisfied that the request to amend the Initial Order is reasonable in the circumstances and it is approved.
Involvement of the Israeli Court
21However, as I indicated to counsel during argument, I am also of the view that it is necessary to address the involvement of the Israeli Court.
22As noted above, the Settlement is conditional on receiving Israeli court approval. Further, Israeli court approval is conditional upon the amendment of the $1 million limit to reflect the actual amount advanced to UTMI in order that the Settlement amount of $2.9 million can be used to repay the actual amount of intercompany advances on a priority basis and ultimately be paid to Urbancorp Inc.
23The Settlement arrived at by the parties relates to litigation that was commenced in the Ontario Superior Court of Justice. In my view, a court approved settlement of proceedings commenced in this court should not be conditional upon an order being granted in a foreign proceeding. Rather, it seems to me that it is more appropriate to first obtain the necessary approval from the Israeli Court prior to applying for court approval in this controlling jurisdiction. However, it is also important for this court to take a pragmatic approach to this issue.
24Accordingly, the Settlement is approved as is the Amendment to the Initial Order to ensure that the Settlement amount can be used to repay the actual amount of intercompany advances on a priority basis and ultimately be paid to Urbancorp Inc. However, the foregoing approvals are not effective until such time as the Israeli Court has considered the matter before it and has granted its approval to both the Settlement and the amendment to the Initial Order and a Certificate to that effect has been filed with the Court.
Chief Justice Geoffrey B. Morawetz
Date: October 3, 2023