Extraordinary court-ordered auction upheld

Cameron Stephens Mortgage Capital Ltd. v. Conacher Kingston Holdings Inc., 2025 ONCA 732
When will a court-ordered auction be reopened to allow for a late bid?

Summary: The Ontario Court of Appeal has upheld a motion judge’s decision to reopen a court-ordered auction after a late bid emerged that was 37% higher than the accepted offer. Although the initial sale process was fair and the receiver’s conduct faultless, the motion judge found that the substantial increase in price risked rendering the original transaction improvident and ordered a new bidding round open to all prior participants. The appellant argued that the judge had misapplied the Soundair principles, but the Court of Appeal confirmed that those principles are flexible and fact-specific, requiring no rigid two-step test. Emphasizing the deference owed to commercial court judges and receivers acting reasonably and fairly, the Court concluded that reopening the auction struck an appropriate balance between finality and maximizing value for creditors.

On October 7, 2024, the appellant, Arjun Anand, entered into an Agreement of Purchase and Sale with the court-appointed Receiver to purchase the debtor’s real property. The real property was previously marketed pursuant to a sales process that spanned eight months. The appellant completed his due diligence and waived all conditions. Court approval was the only remaining contingency. Consequently, the Receiver brought a motion before the Superior Court of Justice seeking an approval and vesting order.

A day prior to the scheduled hearing of the motion, a third party, 1001079582 Ontario Inc. (“100 Inc.”), a wholly owned subsidiary of the debtor, made two offers for the property, which were 6.7% and 14.2% higher than the price of the Subject Transaction with the appellant. The motion judge adjourned the matter by a week, because of the “flurry of activity” leading up to the hearing. He acknowledged the two late-breaking offers from 100 Inc. and sought to give all parties more time to respond. Two days later, 100 Inc. submitted a third offer, which was 37% higher than the appellant’s offer.

At the return of the motion, the Receiver continued to seek approval of the Subject Transaction but recognized that given the magnitude of the third offer, the court could order a further auction process whereby the bidders are asked to submit their best offers by a specified date. The motion judge declined to approve the sale, finding that the preferable approach was to re-open the auction process. The motion judge recognized that there were no flaws in the sales process, and that the Receiver’s conduct throughout the process was unassailable.

However, the motion judge held that the magnitude of the third offer qualified as “substantially higher”, such that the price of the Subject Transaction risked improvidence. Further, he found that it would not be in the interests of the stakeholders to forego the value differential between the two offers. The motion judge’s order provided that all bidders who previously submitted an offer, including the appellant and 100 Inc., would be able to re-bid on the property.

On appeal, the appellant submitted that the motion judge misapplied the principles articulated in Soundair in deciding to re-open and extend the bidding process. The appellant asked the Court of Appeal to set aside the motion judge’s order and direct the Receiver to proceed with the sale of the property to him.

Appellate courts give substantial deference to the discretion of commercial court judges supervising insolvency and restructuring proceedings. Accordingly, the motion judge’s decision to re-open the auction process was entitled to substantial deference. Commercial court judges also give substantial deference to the recommendations of a court-appointed receiver, so long as: (1) the receiver’s recommendations are within the broad bounds of reasonableness; and (2) the receiver proceeded fairly.

The Court noted that the Soundair principles are flexible and case specific and no one factor is determinative. The Court found that the motion judge considered whether the Receiver made sufficient efforts to get the best price, and whether the Receiver acted improvidently. The Court rejected the appellant’s submission that Soundair imposes a mandatory two-step test before re-opening the bidding, requiring the motion judge to find both: (1) a significantly higher price; and (2) that the integrity of the process was compromised. The motion judge’s approach and his assessment that a late-breaking offer should be considered in this case was entirely consistent with the court’s guidance in Soundair.

The motion judge’s reasons reflected a thoughtful and practical balancing of competing interests. The motion judge appropriately considered and grappled with the Receiver’s alternate recommendation that the process be re-opened. The motion judge acknowledged that re-opening the auction process was contrary to the appellant’s interests. However, the motion judge also recognized the interests of the creditors in securing the best possible price. In this case, the Receiver sought to balance between competing concerns and stakeholders in offering the court more than one option in how best to proceed. The motion judge owed deference to the Receiver’s business judgment. It was not an error for the motion judge to proceed with the alternate recommendation.

The appellant’s submissions were an invitation to engage in a minute parsing of specific phrases used by the motion judge, in search of error. However, the motion judge’s decision balanced the interests of all parties and favoured the Receiver’s judgment in recommending that the auction process be re-opened. There was no basis to disturb the motion judge’s considered decision.

Judges: Miller, Paciocco and Coroza JJ.A.

Professionals involved:

• Jeffrey Larry and Ryan Shah of Paliare Roland for the receiver TDB Restructuring

• Wendy Greenspoon-Soer of Garfinkle Biderman for the respondent Cameron Stephens Mortgage Capital Ltd.

• Raffaele Sparano of Himelfarb Proszanski for the respondents Yury Boltyansky and 2462686 Ontario Inc.

• Dale Denis and Paul Rooney for the respondents AJGL Group Inc. and 1001079582 Ontario Inc.

• Michael Byers and Katarina Wasielewski of Crawley MacKewn Brush for the respondents Issam Saad and 2858087 Ontario Inc.

• Jordan Wajs of Stikeman Elliott for the interested party Ron Barbaro

• Jonathan Kulathungam of Teplitsky for the appellant Arjun Anand, in Trust for a Company to Be Incorporated