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In Re: Canopy Rivers Inc., 2021 ONSC 355

What information does a court require on an interim hearing for a CBCA arrangement?

The applicant asked the court to waive ordinary rules of service and ordinary litigation timetables and the court took the opportunity to give directions to the bar about the information helpful to a court on an ex parte initial application relating to a plan of arrangement. In most cases, the time between delivery of the information circular and the meeting to approve the plan is in the range of 21 to 30 days. The final hearing follows within days of that.

While abbreviated timetables make sense when dealing with most plans of arrangement, the court should have some basic information to allow it to determine what the terms of service and the terms of the meeting will be. On an interim hearing, parties should provide details of the transaction, the amount of time people may need to respond to it and the conditions under which they should be given that time. The most direct way to give the court this information is to explain why the transaction is fair from the point of view of the applicant. Details about fairness should be in the factum, not buried in a motion record.

Three core forms of information are helpful. First, the nature of the security holders. Are there significant institutional security holders or widely dispersed retail security holders? Second, what is the genesis of the transaction. Why is the applicant proposing the plan of arrangement at all? What issues is it designed to address and what ends is it designed to achieve? Why are those issues or ends being pursued at this time? Third, why does the applicant believe the proposed plan is fair? The court requires more than bald assertions that the plan is fair or simple assertions that fairness opinions say the plan is fair.

Simply referring to the presence of a fairness opinion is of little help. Fairness opinions vary widely in quality. Some take the form of a reasoned opinion and contain a detailed description of what the author(s) did, what competing considerations they took into account, and why they balanced those considerations as they did to arrive at their opinion. Others are merely assertions that the authors(s) took certain steps, followed by a bald conclusion that the plan is fair. Others still merely perform a numerical calculation based on numbers provided by management without independent assessment. The first type is useful. The latter two do not allow a judge to form any view of fairness.

What is helpful is some sort of qualitative and/or quantitative explanation of fairness. For example, if the transaction involves a share exchange or share cancellation, comparing the transaction pricing to the weighted average trading prices in the period leading up to the plan of arrangement is helpful to include in the factum even on the interim application. In other cases, quantitative fairness may not jump off the page. In those situations, an explanation of why the transaction is nevertheless fair will help in giving a judge comfort that the terms of service and on which the meeting is held are appropriate. 

The judge on an interim hearing is not assessing fairness of the plan but fairness of the terms of service or the meeting. The nature of the proposed plan does, however, have an effect on the terms sought on the interim hearing. In a plan where the share price offered is at a significant premium to the weighted average trading price, 21 days may be ample time. In a complex share exchange transaction where valuation is highly disputed, 21 days may be inadequate. Similarly, in a corporation dominated by institutional security holders, 21 days may be adequate because such investors have easy access to financial and legal advice. Where security holders are widely held retail investors with small holdings, the analysis might differ. The takeaway is to always give the court the information it needs to decide whether the terms the applicant seeks are appropriate.

Counsel: Derek RicciAaron Atkinson and Rui Gao of Davies Ward Phillips & Vineberg for the Applicant, Canopy Rivers Inc., and John Picone of Cassels Brock & Blackwell for Canopy Growth

Judge: Koehnen J.

 

Fullcase: https://canlii.ca/t/jct0v