Donnelly Holdings Ltd. (Re), 2024 BCSC 275

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Donnelly Holdings Ltd. (Re), 2024 BCSC 275 Date: 20240216 Docket: S233788 Registry: Vancouver Between: In the Matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 - and - In the Matter of the Business Corporations Act, S.B.C. 2002, c. 57 - and - In the Matter of Donnelly Holdings Ltd. and Others Petitioners Before: The Honourable Justice Fitzpatrick Reasons for Judgment Counsel for the Petitioners: T. Jeffries Counsel for the City of Vancouver: J. Fiddick R. Fischer Counsel for Bank of Montreal: N.

Mann Counsel for Ernest & Young Inc., Monitor: G. Nesbitt Place and Date of Hearing: Vancouver, B.C. February 9, 2024 Place and Date of Judgment: Vancouver, B.C. February 16, 2024 Introduction [ 1 ] These are proceedings commenced under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 [ CCAA ]. [ 2 ] The matter before the Court is the petitioners’ application for an approval and vesting order of the business assets of one of them, Cinema Public House Ltd. (“Cinema”), including approval of the assignment of the lease held for the premises (the “Lease Assignment”).

The sticking point is that the landlord of Cinema’s premises, the City of Vancouver (the “City”), opposes the approval of the Lease Assignment. Background Facts [ 3 ] The petitioners are known as “The Donnelly Group”. Jeff Donnelly is the sole shareholder of the main petitioner, Donnelly Holdings Ltd. (“DHL”). [ 4 ] DHL is the parent company which indirectly owns and controls other petitioners who operate in the hospitality industry— running restaurants, bars and nightclubs—in Greater Vancouver and Toronto.

The hospitality side of The Donnelly Group employed about 750 employees at the time of filing. [ 5 ] The Donnelly Group also includes barbershops that operate in Vancouver and Toronto and a brewery in Vancouver. [ 6 ] One of the petitioners in the hospitality side of The Donnelly Group is Cinema.

Cinema owns and operates a restaurant and bar at 901 Granville Street, in the heart of what is known locally as Vancouver’s “Granville Entertainment District”. [ 7 ] At the time of filing, The Donnelly Group owed approximately $13.6 million to their major secured creditor, Bank of Montreal (“BMO”), in relation to the hospitality entities. [ 8 ] At the date of filing, Reid Ogdon, the Chief Operating Officer of The Donnelly Group, described that the tangible assets of the

hospitality entities included modest cash balances, inventories, and fixtures and furnishing. The assets also included goodwill. However, the liquidation value of the assets of the hospitality entities was only about $1.15 million. [ 9 ] On May 23, 2023, Justice Milman granted the initial order. On June 2, 2023, he granted an amended and restated initial order (the “ARIO”).

In addition, on June 2, 2023, Milman J. granted a claims process order and meeting order in respect of the plan of arrangement and compromise presented to the Court for consideration (the “Plan”). [ 10 ] In July 2023, the creditors voted to approve the Plan is accordance with the CCAA . On July 26, 2023, I granted a sanction order approving the Plan (the “Sanction Order”) and I also approved a restructuring support agreement between the petitioners and BMO. [ 11 ] In broad terms, the Plan provides that a “Plan Contribution Amount” of $500,000 will be funded to pay unsecured creditors.

The Plan also provides that The Donnelly Group is to obtain exit financing. The Donnelly Group and BMO have negotiated a sum that must be paid to BMO in reduction of its secured debt, although the actual amount agreed upon has not been made public. [ 12 ] The Plan, as amended on January 31, 2024, provides that all conditions precedent to the exit financing necessary to raise funds to repay BMO have to be met no later than April 30, 2024.

In addition, the “Plan Contribution Amount” must be paid to the Monitor no later than 280 days after the Sanction Order, which is about the same date. [ 13 ] In the Monitor’s Second Report dated July 24, 2023, the Monitor states the Plan provides a better option for recovery for the creditors than in a bankruptcy or liquidation scenario. [ 14 ] In typical fashion, para. 15(

a) of the ARIO provides that the petitioners are able to dispose of “redundant or non-material assets” without seeking specific court approval, provided those sale proceeds come within the thresholds of $200,000 in any one transaction and $500,000 in the aggregate. [ 15 ] Since July 2023, The Donnelly Group’s efforts to advance its restructuring have included seeking purchasers for some of its “redundant” operations.

I assume that these sale efforts were toward raising funds for either payment to BMO or to secure the “Plan Contribution Amount”, as contemplated by s. 2.2 of the Plan. [ 16 ] In addition, the Monitor reports that the conditions precedent to the potential exit financing that has been arranged include confirmation of sale or satisfactory plans for the closure of the redundant locations. [ 17 ] Since August 2023, four locations have been listed on MLS. Mr. Donnelly describes that these efforts were toward monetizing these locations and assets for the benefit of BMO and other creditors.

Three of these businesses are in the hospitality industry and, like all of the hospitality businesses, are located on leased premises. They include Cinema. [ 18 ] No other offers have emerged in respect of these businesses, save for Cinema. The Donnelly Group received offers for the other two bars or restaurants, but issues arose with respect to the landlords and the limited time left on the leases. [ 19 ] The Donnelly Group has continued to face financial difficulties, even while operating within this proceeding.

At the time of filing, The Donnelly Group’s debt to unsecured creditors included tax arrears owing to both Canada Revenue Agency and BC Ministry of Finance, totalling about $3.3 million.

In the Monitor’s Third Report dated February 7, 2024, the Monitor reported that, beginning in August 2023, the petitioners had accrued and owe $613,749 for post-filing PST and GST arising from “liquidity constraints”. [ 20 ] The Monitor does not state how, or even if, The Donnelly Group can satisfy this post-filing debt and whether this further debt will have any effect on their ability to implement the Plan, other than confirming that this problem does not affect Cinema.

Cinema’s Business and Lease [ 21 ] As stated above, Cinema operates on premises leased from the City. [ 22 ] In July 2017, the City entered into the original five-year lease with Cinema. In July 2019, the lease was assigned from Cinema to Donnelly Public Houses Inc. (“DPH”), a subsidiary of DHL. [ 23 ] Beginning in April 2020, the City entered into rent deferral agreements with DPH. By June 2021, the rental arrears were $214,396.12.

DPH agreed to repay this amount by increasing the monthly rent by $5,359.90, which would have left $133,997.58 due at the end of the term on March 31, 2023, subject to a renewal of the lease with continued monthly payments. [ 24 ] On March 29, 2023, about seven weeks prior to the CCAA filing, the City and DPH entered into a new lease (the “Lease”). The term of the Lease is ten years, ending March 31, 2033.

It is common ground that the substantial time remaining under the Lease—about nine years—is a benefit, in contrast to the leases at other locations that The Donnelly Group is trying to sell. [ 25 ] The monthly rent under the Lease to 2025 is $25,237.33 and the rent deferral amount is also to be paid by further monthly payments of $3,621.55 for 37 months commencing April 1, 2023. [ 26 ]

Section 1.6 of the Lease provides that Cinema may only use the premises to operate a restaurant and pub under a certain liquor license. The maximum capacity is 92 people inside and 14 people on a small patio. [ 27 ] As particularly relevant here, s. 7.1 of the Lease provides that DPH, as tenant, may only assign the Lease with the written consent of the City, which consent is not to be unreasonably withheld. [ 28 ] At present, DPH still owes approximately $94,000 to the City for the deferred rental amounts owing under the Lease.

Marketing of Cinema and the Offer [ 29 ] As stated above, the marketing of Cinema began in August 2023. The petitioners retained a realtor who has specific experience in the restaurant and hospitality industry, who advertised on various social media platforms and industry sites and sent thousands of “email blasts”. [ 30 ] The MLS listing was viewed 212 times. Nineteen parties executed non-disclosure agreements.

Two offers were received for Cinema, although one party declined to proceed, which was the inferior bid in any event. [ 31 ] On November 1, 2023, the petitioners received an offer for Cinema’s assets and the Lease from 1442029 B.C. Ltd. (“144”) (the “Offer”). [ 32 ] The key terms of 144’s Offer include:

a) The purchase price is $575,000 (this includes the deposit under the Lease held by the City of $26,499.20);

b) A deposit of $30,000 has been paid;

c) The assets include Cinema’s business and substantially all of Cinema’s assets;

d) Although DPH is not a party to the contract of purchase and sale, the Offer provides that it is a “fundamental term … that the [City’s] consent be obtained to transfer or assign the lease”;

e) Cinema’s representations included providing 144 its financial statements for the fiscal years 2018–2023 as being accurate. I will discuss these financial statements later in these reasons;

f) The allocation of the purchase price is $400,000 for leasehold improvements and $180,000 for assets and equipment (presumable to be adjusted for the slight reduction in the purchase price from $580,000);

g) Cinema agrees to provide six weeks of training to 144, for a total of 220 hours. This training is to be provided both before and after sale completion by Freehouse Management Ltd. (“Freehouse”), another company owned by Mr. Donnelly which provides management services to the petitioners. The Monitor describes this training as “minimally defined” in the Offer.

This Offer provides that $75,000 will be paid to Freehouse for this training from the sale proceeds; and h) 144 may assign its right under the Offer to any person without the consent of Cinema. [ 33 ] The intended completion date of the Offer is February 21, 2024. Efforts to Obtain City Approval to the Lease Assignment [ 34 ] On November 9, 2023, the broker retained by The Donnelly Group approached the City seeking the City’s approval of the Lease Assignment. [ 35 ] The broker enclosed various information about 144 and its principals. 144 is a shelf company very recently incorporated in September 2023.

The directors of 144 are Amrinderveer Chahal and Apurv Yogeshkumar Modi, who are spouses. They both work as credit analysts for TD Canada Trust. 144’s registered and records office is at the couple’s residence in Maple Ridge, BC, which is a strata property is encumbered by a mortgage in favour of BMO. [ 36 ] In addition, the broker advised that Cinema’s business was not going to change at all, in that 144 was keeping the bar and restaurant open and that it was keeping the staff. The broker also advised that Mr. Modi and Ms. Chahal were “keeping their days jobs as well”. [ 37 ] Mr. Modi’s and Ms.

Chahal’s respective resumes indicate that, for about three-and-a-half years (2019–2022), they were the owner and supervisor respectively of a small unlicensed restaurant in suburban Edmonton called “Bombay Street Tadka”. The resumes indicate that they oversaw the day-to-day operations of the restaurant and handled administrative matters. Both resumes also indicate that, during this same period of time, Mr. Modi and Ms. Chahal were employed by Easy Financial as a financial sales or service representatives respectively. [ 38 ] Mr.

Modi’s other work experience includes working as an assistant store manager at Best Buy and a supervisor and manager at Freedom Mobile. Ms. Chahal’s other work experience includes working as a senior sales representative at Best Buy and a food counter attendant at Subway. [ 39 ] On November 23, 2023, the City advised The Donnelly Group that it was unable to provide its consent to the Lease Assignment to 144. [ 40 ] Further exchanges between the City and counsel for The Donnelly Group and 144 continued into November and December 2023.

Specifically, on December 8, 2023, counsel for the petitioners advised that the sale would result in payment of all outstanding rent. [ 41 ] On December 8, 2023, Mr. Ogdon provided the City with Cinema’s financial statements that were prepared in late November 2023, presumably to satisfy the condition in the Offer, as above. That document showed that Cinema was operating at a loss for the last two fiscal years ending July 2022 and July 2023, with yearly losses of about $130,000-140,000.

This was the first time that the City learned of these ongoing losses, even with the rent deferral that had been granted by the City to Cinema over those years.

[42] The petitioners do not suggest that Cinema’s operations have returned to profitability. In fact, Mr. Ogdon’s December 8, 2023email to the City states that “this current year is worse”. [43] On December 12, 2023, communications between the parties ended with the City remaining firm in its refusal to approve theLease Assignment. No further information regarding 144’s ability to complete the sale and operate Cinema’s business at a profit hasbeen provided to the City since then. Statutory Framework [44] There are two aspects to this application to be addressed.

The Sale Process [45] Although the City expressed some concerns regarding the marketing and sales process that led to the Offer, those were notpressed by the City’s counsel on the application. [46] In the circumstances, including after a consideration of the factors set out in s. 36(3) of the CCAA, I am satisfied that sufficientefforts have been made toward obtaining offers for Cinema’s assets and that the process has been fair and reasonable: Royal Bank ofCanada v.

Soundair Corp., 83 DLR (4th) 76, (O.N.C.A.); Veris Gold Corp. (Re), 2015 BCSC 1204 [Veris Gold] atparas. 22–25; and, North American Tungsten Corporation Ltd. (Re), 2016 BCSC 12 at paras. 28–30. [47] BMO, as the party secured against these assets who will financially benefit from any sale, supports the Offer, which is asignificant proxy that a fair process has occurred: CCAA, s. 36(3)(e). [48] In its Third Report, the Monitor also supports the Offer, stating that Cinema’s assets were adequately exposed to the market:CCAA, s. 36(3)(b).

Further, the Monitor states that it is of the view that the Offer represents a fair and reasonable value for the assets,while also noting that Cinema is unprofitable and operates with negative EBITDA. [49] I am satisfied that a fair and reasonable sale process for Cinema’s assets and DPH’s interests in the Lease has occurred. The Lease Assignment [50] Turning to the Lease Assignment, the statutory basis to consider that relief is found in s. 11.3 of the CCAA. The relevant portionsof that

section are:

(1) On application by a debtor company and on notice to every party to an agreement and the monitor, the court may make an orderassigning the rights and obligations of the company under the agreement to any person who is specified by the court and agrees to theassignment. ...

(3) In deciding whether to make the order, the court is to consider, among other things, (

a) whether the monitor approved the proposed assignment; (

b) whether the person to whom the rights and obligations are to be assigned would be able to perform the obligations; and (

c) whether it would be appropriate to assign the rights and obligations to that person.

(4) The court may not make the order unless it is satisfied that all monetary defaults in relation to the agreement—other than thosearising by reason only of the company's insolvency, the commencement of proceedings under this Act or the company's failure toperform a non-monetary obligation—will be remedied on or before the day fixed by the court. [51] The “reasonableness” requirement on the part of the City found in the Lease is, of course, inherent in the factors set out inss. 11.3(3)(

b) and (

c) of the CCAA. [52] The fact that the request for the approval is taking place within these CCAA restructuring proceedings brings other considerationsinto play. As the Court discussed in Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the policy objectives of theCCAA may be considered in terms of whether any relief might be “appropriate”: [70] The general language of the CCAA should not be read as being restricted by the availability of more specific orders.

However,the requirements of appropriateness, good faith, and due diligence are baseline considerations that a court should always bear in mindwhen exercising CCAA authority. Appropriateness under the CCAA is assessed by inquiring whether the order sought advances thepolicy objectives underlying the CCAA. The question is whether the order will usefully further efforts to achieve the remedial purpose ofthe CCAA — avoiding the social and economic losses resulting from liquidation of an insolvent company. I would add thatappropriateness extends not only to the purpose of the order, but also to the means it employs.

Courts should be mindful that chances forsuccessful reorganizations are enhanced where participants achieve common ground and all stakeholders are treated as advantageouslyand fairly as the circumstances permit. [Emphasis added.]

[ 53 ] As set out above, any relief under the CCAA should result in “fair” treatment of all stakeholders commensurate with the circumstances. These stakeholders would include a counterparty to a contract that a debtor seeks to monetize within the proceedings. As I stated in Veris Gold at para. 58 : … the previous approach of the courts in considering whether to approve an assignment based on the twin goals of assisting the reorganization process (i.e., the sale in this case) while also treating a counterparty fairly and equitably.

These considerations can be discerned in particular from the factors set out in s. 11.3(3) set out above. [ 54 ] The parties have referred to two other decisions on the issue. [ 55 ] In Dundee Oil and Gas Limited (Re) , 2018 ONSC 3678 [ Dundee ], Justice Dunphy was addressing an application under s. 11.3 to approve an assignment.

At para. 27, the court described s. 11.3 of the CCAA as an extraordinary power, a comment with which I agree. [ 56 ] In addition, consistent with my comment in Veris Gold , the court in Dundee emphasized that an application under s. 11.3 requires a balancing of the competing interests at play: [29] Bankruptcy and insolvency always involves a balancing of a number of such competing interests. Creditors, contract counterparties - all of these have rights arising under agreements with the debtor that are either actually compromised or at risk of being compromised by insolvency.

The CCAA and BIA regimes are predicated on facilitating a pragmatic approach to minimize the damage arising from insolvency more than they are concerned to advance the interests of one stakeholder over another. [ 57 ] Counsel for the City emphasized my discussion in para. 54 of Veris Gold in relation to earlier decisions where the courts had referred to the degree of importance of the assignment to the reorganization process and noted that counterparties should only be affected if it is “absolutely required” to assist in that regard. [ 58 ] In my view, the Court’s discretion under s. 11.3 must be exercised after a consideration of all the circumstances.

It is not necessary for the debtor to establish that the assignment is “absolutely required” to the reorganization, although the degree of importance will no doubt be a factor in the balancing exercise. [ 59 ] This is illustrated by the second case authority referred to, being Justice Sharma’s decision in UrtheCast Corp. , 2021 BCSC 1819 . As did Dunphy J. in Dundee , at para. 88 , she referred to the extraordinary nature of the power of the Court under s. 11.3 .

At paras. 26, 66 and 80, Sharma J. approved an assignment over the objections of the counterparty, after describing that the preservation of the agreements was “critical” and “vital” to the restructuring. [ 60 ] The burden is on the petitioners to satisfy the Court that the approval of the assignment is appropriate: Hayes Forest Services Ltd. (Re) , 2009 BCSC 1169 at para. 33 . Discussion and Analysis [ 61 ] The City advances a number of reasons why the Lease Assignment is unacceptable to it: a) 144, Mr. Modi and Ms.

Chahal do not have any history of operating this type of business—namely, a licensed restaurant and pub—that is required to be operated in the premises under the Lease in a unique environment such as the Granville Entertainment District;

b) The City has concerns about whether Freehouse will be able to provide the support to 144 that is required under the Offer and even if so, who will receive such support and when;

c) The remaining term of the Lease is lengthy—namely, over nine years; and

d) There is significant risk that 144 will default on its obligations under the Lease. The City points to the fact that DPH is a long- standing, experienced and knowledgeable operator of these types of business and even DPH was not able to operate the business profitably. Does the Monitor Approve the Lease Assignment? [ 62 ] It is undisputed that the Monitor has indicated its approval of the Lease Assignment, but its statements and conclusion are questioned by the City. The Monitor has set out its reasoning in relation to the other two factors set out in s. 11.3(3) and I will discuss that below.

Does 144 have the Ability to Perform the Lease? [ 63 ] The petitioners baldly state in their application materials that 144 can perform the obligations under the Lease. [ 64 ] Further, the Monitor states: The Monitor understands that each of the Purchaser’s principals have recent experience in the hospitality industry, and will receive transitional training and support from Freehouse under the Cinema Agreement. Further, the Purchaser has acted in good faith throughout the negotiation of the Cinema Agreement, including by agreeing to further extensions to allow for court-approval.

Additionally, the Purchaser has committed to paying the Cure Costs, which, based on the Petitioners’ books and records, the Monitor understands are substantial. All of the foregoing satisfy the Monitor that the Purchaser will be able to perform the obligations under the Cinema Lease.

[ 65 ] I agree with the City that the lack of evidence from 144 through either Mr. Modi and/or or Ms. Chahal gives rise to significant concerns. The very limited evidence found in the original package sent to the City in late 2023 is just that—limited.

For reasons that are not clear to me, the petitioners have either decided not to seek further support for the Offer from 144 or have been unable to discern any further support for the Offer, as may have advanced to the City and this Court. [ 66 ] I accept Dunphy J.’s comment in Dundee at para. 30 that the evidence does not need to reach the level of guaranteeing the success of a purchaser; rather, there must be an evidentiary foundation to support that the purchaser will be able to perform the obligations, as required under the CCAA , s. 11.3(3) (b).

See also UrtheCast at para. 44 which describes that the issue is to be assessed on a “reasonableness standard”. [ 67 ] In Dundee , the court initially rejected an application to approve the assignment of certain executory contracts, but later did approve the transaction when further evidence was provided to the court. In particular, similar to the City’s concerns, one specific concern initially raised in Dundee at para. 8 (

b) was: The affidavit material at the motion provided no solid evidence of the expected financial stability or durability of the purchaser post- closing, a rather critical factor to assess in considering the suitability of a proposed assignee. [ 68 ] Firstly, again, 144 is a shelf company. I can only assume that it has no assets or debt at this time. There is no information as to how 144 will finance the purchase price: see similar concerns in Dundee at paras. 25–26 and 31 .

In UrtheCast at para. 54, Sharma J. considered that the new venture would be viable due to significant capital. [ 69 ] Secondly, the petitioners and the Monitor emphasize that Mr. Modi and Ms. Chahal have experience in the hospitality industry. Yet, the details of that “experience” are not before me. What kind of operation was at the Bombay Street Tadka as may be relevant to running a bar and restaurant on Granville Street? What happened to that restaurant?

I agree that, on the face of the limited information before the Court, these seem to be two very different types of business. [ 70 ] Thirdly, the assertion that Mr. Modi and Ms. Chahal are “experienced” is then supplemented with the contrasting proposition that Freehouse will provide training, a fact also emphasized by the petitioners and the Monitor. I agree that, generally speaking, training is a positive support and it can be beneficial. However, if these people are so experienced, why do they need training? One can only assume that the staff at Cinema, who 144 says it will maintain, have already been trained.

In addition, there is no evidence as to if and how Mr. Modi and Ms. Chahal will manage the business, when they appear to have full time day jobs at TD Canada Trust. [ 71 ] Fourthly, as the City emphasizes, and as has been confirmed by the financial statements, Cinema has been suffering substantial operating losses over the last few years. This was not the situation in Dundee (see para. 33 ). The Monitor states that Mr. Modi and Ms. Chahal have the financial statements and “know what they are getting into”. That may be true, but all we know is that 144 plans to continue with the same operations as before.

No other business plan has been put forward by 144 that would suggest that 144 has other plans that can reasonably lead to operations that are profitable. Again, this is in contrast to what was before the court in Dundee at paras. 34–35 to alleviate the court’s initial concerns. [ 72 ] As does the City, I would emphasize that The Donnelly Group, who is an experienced operator in terms of running bars and restaurants in Vancouver, and particularly the Granville Entertainment District, was not able to make a go of it.

There is simply nothing to suggest that 144, who does not have that same level of experience, will be more successful. [ 73 ] Finally, there is the matter of the payment of the rental arrears—also known as “cure costs”—which the Court is required to address under s. 11.3(4) of the CCAA . [ 74 ] The petitioners’ draft order provides that all monetary defaults will be remedied, although it also provides that this payment will be no later than 30 days after the closing of the transaction. Indeed, the only evidence that 144 will pay the rental arrears is found in Mr.

Donnelly’s affidavit, where he states that 144 will repay the lease arrears “on or soon after closing”. [ 75 ] There is absolutely no evidence from 144 as to whether it has the financial ability to pay the cure costs and, if so, that it is prepared to do so and when.

I question the Monitor’s statement that 144 is “committed” to paying this amount, when there is nothing before the Court to support that statement. [ 76 ] The City opposes the Lease Assignment, whether or not 144 will pay the cure costs. [ 77 ] The petitioners’ counsel’s “fix” to that issue in the course of this hearing was to suggest that the Court could make it a condition of any sale that the amount be paid on closing. That is true, however, it does not address the fundamental questions about 144’s ability and/or willingness to pay these amounts.

There is simply no explanation why evidence to address this important issue is not before the Court. [ 78 ] In all of the circumstances, I am unable to conclude that the petitioners have satisfied their onus in establishing that 144 will be able to perform the obligations under the Lease. Is the Lease Assignment Appropriate? [ 79 ] On this issue, the Monitor also weighs in: The Cinema Lease Assignment is a condition precedent to the Cinema Agreement, which will contribute to the Petitioners’ overall restructuring, which, in turn and if implemented, will maximize stakeholder benefit at an enterprise level.

At a business level, the Monitor is advised by the Petitioners that the Purchasers intend to retain Cinema’s approximately 10 full and part-time employees pending the completion of the Cinema Agreement. Alternatively, in Donnelly #1, Mr. Donnelly deposes that the Petitioners expect to have to terminate Cinema’s employees and disclaim the Cinema Lease in the event that the Cinema Agreement does not complete

[ 80 ] The petitioners have also addressed the importance of this sale in the context of the overall restructuring. Akin to the Monitor’s statement that this sale will “contribute” toward that end, the petitioners’ counsel states that every sale will advance their overall objectives in this proceeding. Any sale that cannot be completed poses a risk to the ability of the petitioners to secure the exit financing. [ 81 ] Mr. Donnelly states that, if 144’s Offer is not approved, the petitioners will disclaim the Lease and wind up operations.

I acknowledge that may result in a loss of the ten jobs for Cinema’s current staff. [ 82 ] It appears to be the case that non-approval of the Lease Assignment cannot be described as “critical” or “vital” to the petitioners’ restructuring. I am somewhat in the dark at to what effect that might have and whether there will be any material impact. In that event, given the lack of evidence, I am not in a position to weigh that factor in the balancing exercise, as Sharma J. did in UrtheCast . [ 83 ] The City also emphasizes that it is a unique commercial landlord.

The City manages and leases real property in accordance with its statutory mandate under the Vancouver Charter, S.B.C. 1953, c. 55 , and its actions are informed by public policy goals. Part of those public policy goals include efforts to revitalize and refresh the Granville Entertainment Districts toward creating a vibrant area with viable businesses for day and nighttime. [ 84 ] The petitioners also emphasize that the City will have the remedies under the Lease if 144 should fail to perform.

That is so, but in my view, that is not a complete answer to the issue and in part disregards the need for the petitioners and/or 144 to provide cogent evidence in respect of the s. 11.3(3) factors, including that it will be able to perform under the Lease: Hayes Forest Services at para. 33(4). [ 85 ] I acknowledge the petitioners’ counsel’s submission that the evidence required on this type of an application will vary from case to case, depending on the specific facts. What bears emphasizing, however, is that there has to be some evidence to satisfy the Court in that regard.

Bald and unsupported statements—or indeed, a complete lack of evidence in relation to critical concerns—will hardly be persuasive at the end of the day. [ 86 ] As all parties emphasize, the remaining term of the Lease is long, over nine years. In fulfilling it public mandate in terms of properly managing public lands, the City will be required to manage the credit risk of 144 over that significant time frame: Dundee at para. 27 . [ 87 ] I am not satisfied that the Lease Assignment is appropriate in the circumstances.

The sale and Lease Assignment would appear to generate a positive result for BMO, and the petitioners more generally. However, in my view, that benefit is not fair and reasonable when balanced against the interests of the City, in terms of imposing a new counterparty on the City in this long contractual relationship where there are significant credit risks. Conclusion and Orders [ 88 ] At the conclusion of the hearing, I granted the amendment to the ARIO that was not contested.

Accordingly, the limits in the ARIO concerning the disposition of redundant or non-material assets was increased to $750,000 for one transaction and $3 million in the aggregate, subject to the approval of BMO and the Monitor.

In addition, that amendment provided that any other approvals required— such as by landlords under any lease—would still be required to be obtained consensually or by court order. [ 89 ] With respect to the remaining matter—the approval of the Offer and the Lease Assignment—I decline to exercise my discretion under s. 11.3 of the CCAA to grant such relief, for the reasons set out above. [ 90 ] However, as Dunphy J. did in Dundee , the petitioners have leave to renew any such application if further information is available to address the concerns noted in these reasons.

I will remain seized of any potential further application to address Cinema’s business or the Lease, subject to any limitations on my availability. In that event, the matter can be heard by Milman J. or another presider as is appropriate. “Fitzpatrick J.”