Executive Summary: Key Legal and Evidentiary Issues

• Allocation of risk under an “as is where is” Agreement of Purchase and Sale, including whether statutory designations like the Metrolinx transit corridor notice are Permitted Encumbrances.
• Evidentiary use of counsel and law clerk affidavits and cross-examinations to prove that the wrong version of Schedule C was attached to the Approval and Vesting Order through inadvertence.
• Characterization of the Metrolinx Registration as a statutory notice “arising by operation of law” rather than an expropriation, and its impact on marketable title.
• Application of modern contract interpretation principles (Sattva, Salah, SS&C, Weyerhaeuser) to determine the parties’ bargain about encumbrances and closing conditions.
• Scope of the court’s corrective jurisdiction under s. 187(5) of the Bankruptcy and Insolvency Act and Rule 59.06(1) to vary an Approval and Vesting Order to reflect its true intention.
• Effect of contractual termination rights and closing timelines where the Approval and Vesting Order did not initially conform to the Agreement of Purchase and Sale, and whether the purchaser could validly terminate.

Background and parties

This case arises from a receivership proceeding brought by secured creditor Home Trust Company against 58 King Street East Hamilton Ltd. and 2238394 Ontario Ltd. The Ontario Superior Court of Justice appointed msi Spergel Inc. as receiver of the respondents’ assets, including certain real property. As part of the receivership administration, the Receiver entered into an Agreement of Purchase and Sale (APS) dated September 29, 2025 (signed October 30, 2025) to sell the lands to Spuric Canadian Ventures Inc. (the Purchaser), with court approval of the transaction to be obtained by way of an Approval and Vesting Order (AVO).

The agreement of purchase and sale and the “as is where is” structure

The APS provided that the lands were sold on an “as is where is” basis, with the Receiver making no representations or warranties and not guaranteeing title. The Purchaser expressly agreed in section 5 that it was relying entirely on its own investigations and inspections, that it had satisfied itself with respect to the condition of and title to the lands, that the Receiver made no representations or warranties “with respect to or in any way related to the lands,” that the Receiver did not guarantee title, and that the Purchaser would accept title subject to specified permitted encumbrances. Schedule B to the APS defined “Permitted Encumbrances” in broad terms, including: reservations or unregistered restrictions, rights of way, easements or covenants that run with the land; registered or unregistered agreements or easements with municipalities or utility suppliers; all applicable laws, by-laws, regulations, work orders and notices affecting the land; minor utility easements; survey and encroachment issues; Land Titles Act exceptions and qualifications; Crown reservations; land registrar’s orders; and, if applicable, reference plans and condominium instruments. In substance, the APS allocated to the Purchaser the risk of ordinary title burdens and public-law constraints captured by the definition of Permitted Encumbrances, while promising a vesting order that would convey the debtor’s right, title and interest free and clear of all other claims and encumbrances.

Conditions to closing and the role of the approval and vesting order

Section 6 of the APS set the closing date as ten business days after the Receiver obtained the AVO. Section 13 made the Purchaser’s obligations conditional on the Receiver obtaining an AVO in full force and effect, and provided that if the Receiver failed to fulfill its conditions by closing, the Purchaser could, in its “absolute and unfettered discretion,” terminate the APS by written notice and obtain a return of its deposit. Section 14 further stipulated that on the closing date the Receiver must deliver an AVO authorizing and approving the APS and vesting in the Purchaser all right, title and interest of 2238394 Ontario Ltd. in the lands free and clear of all claims “save and except for the Permitted Encumbrances.” Thus, the AVO was the procedural vehicle by which the court would implement the parties’ commercial bargain as recorded in the APS, including the agreed allocation of which encumbrances would stay on title.

The approval and vesting order and the Schedule C error

On December 2, 2025, the court approved the sale and granted the AVO. In preparation for closing, the Receiver’s commercial counsel, Ms. Gokcin Nalsok, reviewed the AVO and on December 8, 2025 discovered that three instruments had been included in Schedule C as encumbrances to be deleted from title upon closing. These three items were two City of Hamilton encroachment registrations (WE1447724 and WE1660191) and a Metrolinx Notice of Transit Corridor designation registered as instrument WE1739020 (the Metrolinx Registration). The Receiver’s position was that these instruments were never intended to be expunged because they were meant to remain as Permitted Encumbrances under the APS. Evidence from the Receiver’s law clerk, Ms. Tanisha Lashley, explained that the Schedule C attached to the AVO was an original draft she had prepared listing instruments she thought would be deleted, which was supposed to be vetted and amended by counsel. She testified that she was later told that the original Schedule C had been amended by handwritten changes, but she never received those changes, and the unvetted original was mistakenly attached to the draft order brought for court approval. The court ultimately accepted that the inclusion of the three instruments in Schedule C resulted from counsel’s inadvertence in attaching the wrong version of the schedule and that this was an “accidental slip or omission” in the AVO.

The City of Hamilton encroachment registrations and their effect

The City of Hamilton Registrations (WE1447724 and WE1660191) allowed encroachment onto City property to operate an outdoor patio and therefore conferred a benefit associated with the use of the property. Their nature fit comfortably within the APS language covering rights of way, easements, and municipal agreements and did not raise a substantive dispute between the parties. The Purchaser did not object to treating these two registrations as Permitted Encumbrances and to their being deleted from Schedule C so they would remain on title.

The Metrolinx transit corridor registration and the parties’ disagreement

The central dispute concerned the Metrolinx Registration. This notice had been registered on title following an Order in Council made under the Building Transit Faster Act, 2020, designating the lands as “transit corridor land.” Under the statute, such designation requires notice to be given, including registration under the Land Titles Act or Registry Act or by prescribed public notice. The statutory regime empowers the Lieutenant Governor in Council to designate land needed or potentially needed for a provincial transit project and contemplates that designations can later be revoked, with the Minister then registering the necessary documents to remove the notice. The court characterized the Metrolinx Registration as a statutory notice arising by operation of law, reflecting statutory restrictions on land use and having the force of law, but not itself effecting an expropriation or initiating a taking of land. The timing was significant: the Metrolinx notice was registered in February 2024, well before the APS in September 2025, and therefore formed part of the public record that any prudent purchaser would uncover in a title search—something the APS explicitly required the Purchaser to conduct and rely upon as part of its own due diligence. The Receiver argued that, given the broad wording of the Permitted Encumbrances, including “any laws, by-laws and regulations…affecting the land,” the parties had agreed that the Metrolinx Registration would remain on title as a statutory, law-driven constraint. By contrast, the Purchaser contended that because the Metrolinx Registration was not expressly listed in Schedule B, it fell outside the category of Permitted Encumbrances and that the APS implicitly allocated the risk of this registration to the Receiver, such that it had bargained for its deletion through Schedule C of the AVO.

Contract interpretation and application of commercial reasonableness

In resolving the dispute about the Metrolinx Registration, the court applied modern contract interpretation principles as articulated in leading cases such as Sattva Capital Corp. v. Creston Moly Corp., Salah v. Timothy’s Coffees of the World Inc., SS&C Technologies Canada Corp. v. Bank of New York Mellon, and Weyerhaeuser. The court read the APS as a whole, giving the words their ordinary and grammatical meaning, in light of the surrounding circumstances known to both parties at the time of contracting, while excluding subjective intentions. It emphasized that contracts should be interpreted in a manner consistent with sound commercial principles and good business sense to avoid absurd results. The court accepted the Receiver’s position that the Metrolinx Registration fell within the broad language of Permitted Encumbrances. The APS expressly required the Purchaser to accept title subject to any laws and regulatory constraints affecting the lands and to conduct its own title investigations. Because the transit corridor designation was a known statutory regime reflected on title before the APS was signed, and because the APS was structured as an “as is where is” sale without title guarantees, commercial reasonableness dictated that the purchaser bore the risk of that designation. The court rejected the Purchaser’s argument that treating the Metrolinx Registration as a Permitted Encumbrance would deprive it of marketable title by initiating an expropriation. It found the registration to be a notice of statutory designation—not a taking of land—and noted that the Act expressly allows for revocation of a designation. The court further held that the Purchaser could not, through litigation, ask the court to rewrite the APS to avoid the consequences of a risk it had already contractually assumed.

Jurisdiction to amend the approval and vesting order

Having found that the inclusion of the three instruments in Schedule C was an accidental slip and that the true parties’ agreement, as reflected in the APS, contemplated that these instruments would remain on title as Permitted Encumbrances, the court turned to whether it had jurisdiction to amend the AVO. The Receiver relied on section 187(5) of the Bankruptcy and Insolvency Act (BIA), which allows a court to review, rescind or vary its orders in bankruptcy matters, and Rule 59.06(1) of the Rules of Civil Procedure, which permits the court to amend an order containing an error arising from an accidental slip or omission or an aspect on which the court did not adjudicate. The Purchaser argued that section 187(5) must be sparingly exercised and cannot be used to recall a judgment to address collateral matters not actually adjudicated, and that Rule 59.06(1) could not be invoked to fix counsel’s oversight in drafting. The court accepted that section 187(5) is to be used cautiously but emphasized that its core purpose, as recognized in HOJ National Leasing Corp. (Re), is to allow the court to rectify an order that fails to correctly state what the court actually decided or intended. Here, the court intended to approve the sale transaction as set out in the APS but, because of a drafting error in Schedule C, the AVO did not accurately implement that intention. Drawing on the analysis in Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., the court concluded that Rule 59.06(1) applies to clerical or drafting slips, misadventures, and oversights, and empowers the court to amend an order where it obviously does not reflect the court’s manifest intention. It held that the Receiver’s request fell squarely within this corrective jurisdiction because it sought only to correct the expression of the prior order, not to change the underlying bargain or revisit an adjudicated substantive issue.

The purchaser’s attempted termination and the timing of closing

The Purchaser attempted to terminate the APS by letter dated January 12, 2026, invoking its contractual right to do so if the Receiver failed to complete the transaction within ten business days of obtaining the AVO and asserting that the Receiver could not convey the lands in accordance with the APS and Schedule B. It sought a return of its deposit, relying on sections 6 and 13 of the APS and the “absolute and unfettered” discretion language. The court rejected this position as overly narrow and inconsistent with the contract read as a whole. It held that the parties must have intended closing to occur within ten business days after the Receiver obtained an AVO that properly implemented their APS, not merely any AVO. Section 14 of the APS specifically required delivery of an AVO that authorized and approved the APS and vested title free and clear of all claims except the Permitted Encumbrances as defined in the agreement. Because the original AVO attached the wrong version of Schedule C and thus did not meet this contractual definition, the Receiver was not in a position to deliver the AVO contemplated by the APS until the court corrected the order via this endorsement. On that analysis, the Purchaser could not rely on the ten-day closing and termination provisions to escape a deal whose risk allocation it had previously accepted.

Final order, successful party, and monetary outcome

In the result, the court granted the Receiver’s motion. It ordered that Schedule C to the AVO be amended to delete any reference to the three instruments: the two City of Hamilton encroachment registrations (WE1447724 and WE1660191) and the Metrolinx Notice (WE1739020). This correction ensured that these instruments would remain on title as Permitted Encumbrances, consistent with the APS and the court’s original approval of the transaction. The successful party on the motion was the court-appointed Receiver, msi Spergel Inc., acting within the Home Trust Company receivership proceeding. Pursuant to the parties’ agreement on costs, the court ordered the Purchaser to pay the Receiver its costs of the motion in the all-inclusive amount of $10,000, and no other separate monetary damages or awards were made beyond this agreed costs figure.