Sharab Developments Ltd. v. Zellers Inc.

Sharab Developments Ltd. v. Zellers Inc.

Majority held that article 11.10 and the final CCAA order required delivery of an unequivocal written Executory Contract Termination Notice by the debtor to convert a counterparty into a claimant under the plan; in the absence of such written notice the final order declared the executory contracts to remain in force and the Fair Group's loss of profits claim for the unexpired term was not swallowed by the CCAA arrangement and therefore payable in full, but the $600,000 award for loss of opportunity to renew was set aside because there was no realistic prospect of profitable renewal with Zellers on the balance of probabilities.

Citation
1999 BCCA 39
Parties
Plaintiff (respondent): Sharab Developments Ltd.; Defendant (appellant): Zellers Inc.
Court
British Columbia Court of Appeal
Jurisdiction
Canada
Judgment Date
26 January 1999
Procedural Posture
Civil Appeal — Breach of Contract and CCAA Issues / Court of Appeal Judgment
Outcome
Appeal allowed in part: award for loss of opportunity overturned; award for loss of profits affirmed.
Legal Topics
Executory Contracts, Notice Requirements, Repudiation, Loss of Profits, Loss of Opportunity, Plan of Arrangement
Source Language
English
Contract Law Insolvency (ccaa) Remedies and Damages Executory Contracts Notice Requirements Repudiation Loss of Profits Loss of Opportunity +1 more

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Parties

Sharab Developments Ltd.

Plaintiff (respondent)

Zellers Inc.

Defendant (appellant)

Procedural Posture

Civil Appeal — Breach of Contract and CCAA Issues / Court of Appeal Judgment

Legal Issues

  1. 1 Whether claims for damages arising from termination or repudiation of executory contracts fall within and must be asserted in a CCAA plan of arrangement absent formal written termination notice by the debtor
  2. 2 Whether actual or constructive knowledge of the reorganization suffices where the plan requires notice to convert counterparties into creditors
  3. 3 Whether damages for loss of opportunity to renew were proven on a balance of probabilities

Ratio Decidendi

Majority held that article 11.10 and the final CCAA order required delivery of an unequivocal written Executory Contract Termination Notice by the debtor to convert a counterparty into a claimant under the plan; in the absence of such written notice the final order declared the executory contracts to remain in force and the Fair Group's loss of profits claim for the unexpired term was not swallowed by the CCAA arrangement and therefore payable in full, but the $600,000 award for loss of opportunity to renew was set aside because there was no realistic prospect of profitable renewal with Zellers on the balance of probabilities.

Court Disposition

Appeal allowed in part: award for loss of opportunity overturned; award for loss of profits affirmed.

Orders

  • Allow appeal in respect of loss of opportunity and set aside $600,000 award
  • Dismiss appeal in respect of loss of profits and affirm $1,729,800 damages awarded to respondent