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Insolvency (BIA) - 'Liquidation Process Order'. 2668602 Ontario Inc. v. GWL Realty Advisors Inc.
In 2668602 Ontario Inc. v. GWL Realty Advisors Inc. (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here involving "the interpretation and application of a Liquidation Process Order that governed the sale of assets in proceedings under the Bankruptcy and Insolvency Act".
Here the court considers 'liquidation process orders', which apply when a business 'asset sale' occurs with a BIA insolvency context (as in commercial tenancy insolvencies):[63] In Koroluk v. KPMG Inc., 2022 SKCA 57, [2022] 11 W.W.R. 423, the Saskatchewan Court of Appeal addressed a liquidation plan that was approved by court order. At para. 43, Leurer J.A. stated:However, the interpretation of a court order, or for that matter a document approved by a court order or which a court order directs be implemented, involves more than simply reading its words in isolation. Like other law-making instruments, court orders are to be interpreted wholistically and purposively. The interpretation of specific provisions must take into account other parts of the order. A court interpreting an order should consider the authority to render it, since it should be assumed that a court would not grant an order it had no power to make. Finally, consideration must also be given to the broader context in which the order was made, including the pleadings and litigation events leading to the order.
This formulation was adopted by this court in Aizic, at para. 26. See also Kuang, at para. 8; Warde v Slatter Holdings Ltd., 2016 BCCA 63, 83 B.C.L.R. (5th) 229; Onion Lake Cree Nation v. Stick, 2020 SKCA 101, [2021] 2 W.W.R. 614; Yu v. Jordan, 2012 BCCA 367, 36 B.C.L.R. (5th). ....
[73] In his book, Canadian Bankruptcy and Insolvency Law for Commercial Tenancies, at pp. 293-304, David Bish describes the provenance of liquidation sale orders. He noted that there are “continuous squabbles” among debtors, liquidators, and landlords concerning the appropriate procedure for liquidation sales in insolvency proceedings. In the 2007 insolvency proceedings concerning The Bombay Furniture Company of Canada Inc., Morawetz J. (as he then was), proposed model or standard form provisions for the conduct of liquidations in leased retail premises that “provided certainty, transparency and fairness with respect to the taking of steps that affect landlords (such as repudiation of a lease, the removal of fixtures, etc.)”: at pp. 293-94. Mr. Bish described the import of this decision, at p. 294:The significance of this case cannot be understated, as it was instrumental in putting to rest many (but not all) of the ongoing acrimony and disputes that plagued commercial tenancies insolvency cases prior to that time. Among other things, this case led to the amendment of the Model Form of Initial CCAA Order in Ontario (and other provinces) so as to resolve a number of these issues and was followed in a host of ensuing cases through to the present day… [74] He explained that since then, standard sale guidelines incorporated as part of liquidation orders typically include provisions requiring that leased premises be left in a “‘broom swept’ condition and good state of repair”: at p. 303. He went on to explain that nonetheless, it is common for landlords to recover their premises after a lease has been disclaimed to find property left behind. This could cause serious issues for a landlord who (absent the sale guidelines) could face liability for disposing of this property. He stated, at p. 303-4:To alleviate this problem, sale guidelines customarily contain express authority for the landlord to treat as abandoned any fixtures or personal property left behind at the conclusion of the liquidation sale, with the right to dispose of the same as the landlord wishes and without liability. [75] In her interpretation, the trial judge properly placed weight on the bankruptcy and insolvency context and purpose of the Liquidation Process Order. A contrary interpretation would detract from the purpose of liquidation orders and sale guidelines involving landlords and insolvent tenants. Such orders reflect a compromise. A landlord refrains from exercising its rights under a lease to allow for a sale of the contents. Once the lease is disclaimed, a landlord may not charge the bankrupt rent but may repossess the premises and re-lease them to a third party. An interpretation that allows for no end date for removal, which is implicit in the appellant’s position, would be commercially unreasonable. The deemed abandonment provision must be read in that context. The authority to make the order, including the bankruptcy statutory context, also supports the trial judge’s interpretation.
[76] In conclusion, the Liquidation Process Order was correctly interpreted as applying to the Racking in the distribution centre/warehouse that was sold to 266 and as including the deemed abandonment provision.
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