Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether the receiver could sell the debtor’s inventory through a landlord-led RFP process over the debtor’s objections.

• Peace Bridge Duty Free Inc. objected, arguing the sale was premature and that it should be allowed to repay debts or pursue its own buyers.

• The receiver lacked the authority to transfer or monetize the debtor’s lease and duty-free license, both of which required third-party consents.

• The inventory sale through the landlord’s process was the only viable method to realize value and avoid liquidation below cost.

• The court assessed the fairness and commercial efficacy of the proposed marketing process under Soundair principles.

• The receiver’s conduct and reports were approved, and no costs were awarded against the debtor despite unsuccessful opposition.

Facts and outcome

Royal Bank of Canada, the senior secured creditor, brought a receivership application against Peace Bridge Duty Free Inc., which operated a duty-free store on the Peace Bridge through a lease with the Buffalo & Fort Erie Public Bridge Authority. The debtor was heavily indebted to both the Bank and the landlord, with minimum arrears of $8 million to the landlord and $1.9 million to the Bank. A court-appointed receiver, Spergel Inc., was tasked with managing and eventually realizing on the debtor’s assets.

The receiver brought a motion seeking approval of its conduct and its proposed plan to sell the debtor’s inventory—primarily alcohol and tobacco—through a request for proposals (RFP) to be launched by the landlord to identify a new tenant for the retail premises. This was necessary because the debtor’s business could not function without the lease and a duty-free license, both of which were non-transferable and required third-party approvals. The license, governed by the Customs Act and CBSA regulations, required an existing lease to apply.

Peace Bridge Duty Free objected to the motion, arguing that the sale was premature and that it could repay RBC if granted more time. It also argued that the receiver should run a broader sale process for the whole business rather than participate in the landlord’s RFP. The debtor raised concerns about the landlord’s control over the process and its exclusion from participating due to ongoing litigation and arrears. It proposed using more novel insolvency tools like a reverse vesting order (RVO), despite having no funding or guarantee of success.

The court rejected the debtor’s objections. Justice Kimmel found that the only asset the receiver had authority to realize on was the inventory, as the lease and license could not be marketed without third-party cooperation. The receiver’s plan to sell the inventory through the landlord’s RFP guaranteed a sale at cost, which was the most the inventory was worth, and avoided the risk of discounted liquidation. The court held that the debtor’s suggested alternatives were speculative and that the RFP process was fair and commercially reasonable.

The court approved the receiver’s conduct and reports, applying the Soundair principles for assessing court-supervised sales. It also granted a temporary sealing order over the landlord’s RFP documents to protect commercial sensitivity until the process went public. While the debtor had contributed to added delay and expense, no costs were ordered against it due to the unusual circumstances and the need for the receiver to justify its actions transparently to all stakeholders. However, the court explicitly barred the debtor from using company funds to pay for its own legal fees in opposing the motion.

The outcome was a clear endorsement of the receiver’s plan, deferring to its business judgment and the support of the secured creditors, with the expectation that any final transaction arising from the RFP would be brought back for court approval.