Court of Appeal Rules in Favour of BF Realty and Brookfield

The Court of Appeal for Ontario upheld, on May 29, 2002, the judgment of Justice Cumming of the Commercial Court in favour of BF Realty (formerly BCED) and Brookfield Development Corporation, Carena Developments Limited, a number of directors of those companies, and BCE, in the trial involving BCED debentureholders.

Debentureholders of the former BCED, holding or representing some $75 million of debentures, had commenced two class actions in connection with the restructuring and refinancing of BCED and Brookfield (including BCE Place). The issue ordered tried was whether or not the following aspects of the restructuring amounted to a breach of the provisions in the trust indenture, restricting the ability of BCED to enter into any transaction whereby all or substantially all of the assets of BCED became the property of any other person: (i) the transfer of most of the company’s properties in Canada and the U.S. to and among subsidiaries; and/or (ii) the refinancing of the company by Carena and BCE, secured by charges on the assets of BCED, including shares in its subsidiary companies, followed ultimately by a realization of that security .

In a decision written by Justice Cronk, released in May 2002, the Court of Appeal upheld the decision that neither aspect of the restructuring and refinancing of BCED breached the trust indenture.

Ed Babin and Andrew Bernstein of Torys LLP represented BF Realty and Brookfield. David Byers and Elizabeth Pillon of Stikeman Elliott acted for a number of directors, Carena and Partnerco Equities Ltd. Mark Gelowitz of Osler, Hoskin & Harcourt LLP acted for the independent directors. Alan Lenczner and Anne Posno of Lenczner Slaght Royce Smith Griffin acted for BCE and some of its directors.