



COURT OF APPEAL FOR ONTARIO

CITATION:
Urbancorp Toronto Management Inc. (Re), 2021 ONCA 613

DATE: 20210909

DOCKET: M52721

(M52689)

Miller
    J.A. (Motions Judge)

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

Kenneth Kraft, Neil Rabinovitch and
    Michael Beeforth, for the moving party, Guy Gissin, in his capacity as the Foreign
    Representative of Urbancorp Inc.

Robin Schwill, Matthew Milne-Smith and
    Robert Nicholls, for the responding party, KSV Restructuring Inc., in its
    capacity as Monitor

Matthew Gottlieb, James Renihan and
    Jane Dietrich, for the responding party, Mattamy Homes Limited

Heard: August 26, 2021 by video conference

ENDORSEMENT

[1]

This motion arises out of long-running CCAA
    proceedings involving a group of companies ultimately owned by Urbancorp Inc.
    (UCI). The moving party, the Foreign Representative of UCI, seeks a stay pending
    its motion for leave to appeal an order of the supervising judge. That order authorized
    a process for the sale of a 51% interest in a real estate development project
    called Downsview Homes Inc. (DHI), owned by Urbancorp Downsview Park
    Development Inc. (Downsview), a subsidiary of UCI. The responding party,
    Mattamy Homes Limited (Mattamy), owns the other 49% of DHI.

[2]

Mattamy is the lender to Downsview under a
    debtor-in-possession facility (the DHI Facility), which matured eight months
    ago, on February 3, 2021. Downsview owes Mattamy over $9 million pursuant to
    the terms of the DHI Facility and the order approving the DHI Facility (the
    DIP Order). Downsview cannot repay the debt, and Mattamy will not extend the
    deadline for payment any further unless a sales process is conducted for
    Downsviews interest in DHI.

[3]

There is also a dispute as to whether Mattamy is
    entitled to a substantial payment from Downsview under the co-ownership
    agreement they entered into with respect to DHI. The supervising judge ordered arbitration
    of that payment dispute. The outcome of the arbitration will have a material
    impact on the value of Downsviews interest in the project. If Mattamy is
    entitled to the payment, Downsviews interest in the project will be essentially
    worthless. If Mattamy is not entitled, then Downsviews interest will be worth
    millions of dollars, even after the repayment of the DHI Facility.

[4]

Downsview argued before the supervising judge that
    the sale process for Downsviews interest proposed by the Monitor be postponed until
    the question of the disputed payment could be arbitrated. Downsview was (and
    remains) concerned that the uncertainty about the value of its interest in DHI
    will have a chilling effect on the sale process. It is conceivable, Downsview
    says, that no bidder will step forward because of the difficulty they would
    encounter conducting due diligence and ascertaining the probable value of DHI in
    light of the disputed payment. If the sale process fails and no bidder is
    found, Mattamy could, under the proposed terms of the sale process, seize
    Downsviews interest. This would result in a windfall to Mattamy  even if the
    arbitration of the disputed payment were to be resolved in Downsviews favour
    later.

[5]

The supervising judge was persuaded by the
    arguments of the Monitor and decided that the sale process should not be
    postponed until after the arbitration. He highlighted three of the Monitors
    arguments. First, that Mattamy, as the debtor-in-possession lender, was
    entitled to assert its rights over Downsviews interest in DHI in the event
    Downsview did not repay the DHI Facility. Second, that Downsviews obligations
    under the DHI Facility continued to accrue. Third, that the proposed sale
    process could be conducted without knowing the outcome of the arbitration,
    because the process contemplated the bidders submitting two offers  one on the
    basis that Mattamy was entitled to the additional payment and one on the basis
    that it was not.

[6]

The Monitor had considered and rejected
    Downsviews concerns that the proposed sale process would create a chilling
    effect on potential bidders. The Monitor concluded that potential bidders would
    be sophisticated enough to conduct due diligence and assess both possible
    outcomes of the disputed payment issue, and would not be dissuaded or confused
    by being asked to submit separate bids for both possible outcomes. It argued
    that Downsview was merely speculating that potential bidders would be dissuaded
    from bidding.

[7]

The supervising judge agreed with the Monitor that
    Downsviews concerns were speculative and ought to have been given no weight.

[8]

Downsview is seeking leave to appeal to this
    court. It will argue that the supervising judge erred in concluding that its
    concerns were speculative, and erred in not ordering the sale process to be
    delayed until after the conclusion of the arbitration.

[9]

Downsview argues for a stay of the sale process
    until the leave application can be decided. If leave to appeal is denied, then
    that will be the end of things and the sale process can unfold. However, if
    leave is granted, Downsview will seek a motion for a further stay of the order
     and the sale process  pending the disposition of the appeal.

ANALYSIS

[10]

The test for staying an order pending appeal is analogous
    to the test set out in
RJR-MacDonald Inc. v. Canada (Attorney General)
,

[1994] 1 S.C.R. 311, at
    p. 334
for granting an interlocutory injunction: (i) is
    there a serious issue to be determined on appeal; (ii) will the moving party
    suffer irreparable harm if the stay is not granted; and (iii) does the balance
    of convenience favour the granting of the stay:
Belton v. Spencer
, 2020
    ONCA 623, paras. 20-21.

A.

A serious question to be determined on appeal

[11]

The moving party set out four issues that it
    characterized as important, both to the parties and to the CCAA process as a
    whole: (i) the level of deference owed by the court to a Super Monitor; (ii)
    the extent to which a Super Monitor needs to obtain independent evidence to
    support the fairness and viability of a proposed sale process; (iii) whether
    the evidentiary onus regarding fairness and viability of the sale process
    remains with the Super Monitor or shifts to the party objecting to the sale
    process; and (iv) the extent to which a court can rely on a decision that is
    released after the parties hearing.

[12]

Although it may seem unlikely the moving party
    will succeed on a motion for leave to appeal, the first two issues are at least
    arguable, if weak. The latter two issues would be highly unlikely to attract leave.
    First, although there seems to be little reason why a Super Monitor should be
    given less than the substantial deference that a supervising judge gives to the
    decisions and recommendations of a receiver, there is no authority from this
    court settling the issue. Second, the idea that a Monitor must obtain independent
    evidence as to the fairness and viability of the sale process seems premised on
    the idea that an independent party would have greater expertise than the
    Monitor. Were the moving party correct, it would seem to undermine the speed at
    which the process is meant to operate. Third, the question of whether there was
    a shift in evidentiary onus is not a genuine issue  the supervising judge
    found that the Monitor had satisfied the evidentiary burden necessary to
    establish that the sale process was fair and reasonable. Fourth, the question
    of whether the supervising judge ought not to have cited a decision
    subsequently released by this court is of no importance. The decision in
    question did not change the law, and the ground is further weakened by the moving
    partys failure to outline the submissions on the decision that it would have
    made before the supervising judge if it had the opportunity.

[13]

Above all, the moving party faces the high
    hurdle of the standard of review applicable to a decision of the supervising
    judge in a CCAA proceeding. The supervising judge had to determine whether the
    Sale Process ought to commence immediately or wait until the arbitration was
    concluded. The supervising judge applied the appropriate criteria set out in
(Re)
    Brainhunter
(2009)
,
62 C.B.R. (5th) 41 (Ont. Sup. Ct.), at para.
    13,

in deciding whether to order a particular sale process, all of
    which are factual in nature. The findings of the supervising judge will be entitled
    to deference on appeal, should leave be granted. The decision to order the sale
    process was itself made on the recommendations of the Monitor within the
    context of a long-running CCAA proceeding, compounding the nature of the
    deference owed by this court:
Marchant Realty Partners Inc. v. 2407553
    Ontario Inc.
, 2021 ONCA 375, 90 C.B.R. (6th) 39, at para 19.

[14]

Given the weakness of the grounds for appeal
    that have been articulated, as well as the unlikelihood that the moving party will
    satisfy the other grounds of the test for leave to appeal, the moving party is
    unlikely to obtain leave to appeal. This factor weighs in favour of dismissal.

B.

Irreparable Harm

[15]

As the moving party argued, the criterion of
    irreparable harm refers to the nature of the harm rather than its magnitude:
RJR-MacDonald
,
    at p. 341. The question is whether refusal to grant relief would so adversely
    affect the moving partys interests that the harm could not be remedied were
    the moving party to lose the motion but succeed on the appeal:
RJR-MacDonald
,
    at p. 341.

[16]

The moving party argues that if the sale process
    is not deferred until after the arbitration is completed, and Downsviews
    interest in DHI is sold, it will be impossible to know whether a higher
    purchase price could have been obtained had the sale process been deferred. Additionally,
    if the stay motion is not granted and a sale is concluded prior to the appeal
    being heard, the moving partys appeal will have been rendered moot.

[17]

Mattamy argues in reply that the supervising
    judge already adjudicated the issue of whether the sale process constitutes
    irreparable harm to the moving party. The supervising judge dismissed as
    speculative the argument that the sale process would generate a chill that
    would result in a lower sale price. Mattamy argues that if I were to find the
    prospect of irreparable harm, I would be finding that the prospect of a chill
    is more than speculative, and effectively would be reversing a factual finding
    of the supervising judge, contrary to the role of this court on a stay motion:
Hodgson
    v. Johnston
, 2015 ONCA 731, at para. 9.

[18]

In addition, if the sale process is frustrated, Mattamy
    would be entitled, as a result of the moving partys default under the terms of
    the DHI Facility, to simply enforce its security and run another sale process,
    involving additional time and expense.

[19]

I agree with the submissions of Mattamy. There
    is no basis on which I can substitute my evaluation of the efficacy of the sale
    process over that of the supervising judge and find that not granting the stay could
    result in irreparable harm to the moving party.

C.

The balance of convenience

[20]

Determining the balance of convenience requires
    an inquiry into which of the two parties will suffer the greater harm from
    granting or refusing the stay:
RJR-MacDonald
, at p. 342.

[21]

The moving party argues that it will suffer the
    greater harm if a stay is refused, because it owns the 51% interest in DHI at
    issue, and therefore bears the risk of the interest being sold for a lower
    price than what otherwise could have been obtained. It also bears the risk of the
    sale process failing to attract any bids, which could result in Mattamy
    foreclosing on its interest. It argues that Mattamy faces no conceivable harm
    in delaying the sale process until such time as this court decides whether to
    grant leave to appeal.

[22]

Mattamy and the Monitor argue to the contrary that
    Mattamy will suffer irreparable harm if there is further delay, and that the
    balance of convenience favours Mattamy. Mattamy has presented evidence on this
    motion that it has approached eight potential bidders since the sale process
    order was issued, and is concerned that those potential bidders will lose
    interest and faith in the sale process if it continues to be bogged down in
    litigation. Mattamy attests that the current market is favourable for
    investments of this nature because of favourable interest rates. These market
    conditions can change at any time, and prospective bidders can lose faith in
    the process because of procedural delay and decline to participate.

[23]

Comparing the potential commercial prejudice to
    Mattamy from delaying the sale process against what the supervising judge
    concluded to be an absence of genuine prejudice to the moving party in proceeding
    with the sale process prior to the conclusion of the arbitration, I find that
    the balance of convenience favours Mattamy. I would dismiss the motion.

D.

Sealing order

[24]

All parties request a sealing order on the same
    basis and on analogous terms as the sealing order granted by the supervising
    judge, in order to preserve the integrity of the sale process and the pending
    arbitration. I am prepared to grant that order.

E.

Disposition

[25]

The motion to stay is dismissed. The request for
    a sealing order is granted. If parties are unable to agree on an order for costs
    for this motion, I will receive submissions from each party not exceeding three
    pages within 10 days of these reasons.

B.W.
    Miller J.A.




SCHEDULE A

LIST OF AFFILIATED ENTITIES

Urbancorp Power
    Holdings Inc.

Vestaco Homes
    Inc.

Vestaco
    Investments Inc.

228 Queens
    Quay West Limited

Urbancorp
    Cumberland 1 LP

Urbancorp
    Cumberland 1 GP Inc.

Urbancorp
    Partner (King South) Inc.

Urbancorp
    (North Side) Inc.

Urbancorp
    Residential Inc.

Urbancorp
    Realtyco Inc.


