Summary

37219

Ocean Choice International LP, by its General Partner 55104 Newfoundland and Labrador Inc. v. Landvis Canada Inc., et al.

(Newfoundland & Labrador) (Civil) (By Leave)

Keywords

None.

Summary

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Commercial law – Contracts – Privity of contract – Third parties – Applicant seeking to compel third party to subordinate its debt pursuant to contractual arrangements – Whether the applications judge and Newfoundland and Labrador Supreme Court, Court of Appeal erred in law, or alternatively misapprehended the evidence and made a reviewable error of mixed fact and law, in finding that Landvis ehf was not bound by the Unanimous Unitholders Agreement because of an absence of privity of contract – Whether in so finding, the Supreme Court of Newfoundland and Labrador, Court of Appeal applied the doctrine of privity of contract rigidly, and in a manner inconsistent with the Ontario Court of Appeal treatment of the doctrine in analogous circumstances – Whether, considering the conflict in the law and the injustice caused by the rigid application of the doctrine, this case presents an ideal factual matrix for this Honourable Court to re-address the doctrine of privity of contract in a modern commercial context and raises an issue of national importance.

The applicant, Ocean Choice International LP, was created to acquire certain assets in the seafood industry. It financed the acquisition through senior debt held by a secured lender and subordinated debt held by Landvis ehf and another lender. Landvis ehf is the parent company of Landvis Canada, one of Ocean Choice’s limited partners. The relationship between the partners is governed by, among others, a Unanimous Unitholders Agreement (“UUA”). While Landvis Canada is a party to the UUA, Landvis ehf is not.

Ocean Choice sought to refinance its senior debt and secured financing with a consortium of Desjardins lenders. As a condition precedent to closing this financing, Ocean Choice had to satisfy Desjardins that all loans advanced and outstanding to it by any of the limited partners, or any affiliates or nominees of the limited partners, were subordinated to the new debt to be provided by Desjardins. Landvis ehf took the position that the terms of the Desjardins subordination agreement were commercially unreasonable and would not allow Ocean Choice to respect the obligations under its loan agreement with Landvis ehf. Ocean Choice applied for an order to compel Landvis ehf to sign the agreement subordinating its debt in favour of Desjardins.

Lower Court Rulings

April 29, 2016
Supreme Court of Newfoundland & Labrador, Trial Division

201601G1650, 2016 NLTD(G) 72
Application for order compelling subordinated lender to subordinate its debt to that of senior lender dismissed
July 15, 2016
Supreme Court of Newfoundland and Labrador - Court of Appeal

201601H0049, 2016 NLCA 36
Appeal dismissed
 

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