COVID-19 & Risk: Court orders performance of major M&A deal

Major acquisition affected by COVID-19 results in landmark case with multiple Canadian legal firsts

Stikeman Elliott acted for the sellers of Fairstone Financial in the first Canadian case to consider the impact of COVID-19 on an acquisition – litigation that led a Canadian court to order specific performance of a major M&A deal for the first time.

The COVID-19 pandemic has led to a notable increase in actual and contemplated M&A litigation, as buyers under acquisition agreements signed before the pandemic consider their obligations to close and sellers seek to compel performance. At issue in these cases are two key contractual risk allocation mechanisms widely used in acquisition agreements: material adverse effect (“MAE”) clauses and interim covenants requiring the target business to operate in the “ordinary course”.

On December 2, 2020, Justice Markus Koehnen of the Ontario Superior Court of Justice – Commercial List ordered specific performance of the acquisition of Fairstone Financial Holdings Inc. (“Fairstone”) by Duo Bank of Canada (“Duo Bank”). Following this decision, the transaction closed on January 4, 2021.

The Fairstone decision represents multiple notable firsts in Canadian M&A litigation. It is the first decision by a Canadian court: ordering specific performance of a major M&A transaction; interpreting a complex MAE clause including carve-outs for risks assumed by the buyer; interpreting an ordinary course covenant in an acquisition context; and considering whether a buyer was entitled to refuse to close an acquisition due to the impact of COVID-19 on the target business.

Click on the link to read the full article on COVID affecting acquisitions.

Eliot Kolers is a partner at Stikeman Elliott. He is the Head of the Litigation & Dispute Resolution Group and a member of the Management Committee and Diversity Committee in the Toronto office. His practice concentrates on corporate commercial litigation, competition litigation, and securities litigation. He has represented clients in a wide range of complex cases, including many expedited litigation matters in relation to contested corporate transactions.

Eliot has defended class actions involving competition law, securities and privacy issues, and has represented clients in a broad range of commercial cases involving oppression remedies, proxy contests, takeover bids, shareholder disputes, plans of arrangement and corporate governance matters. He regularly appears before the Commercial List of the Ontario Superior Court of Justice.


Danielle Royal is a partner in the Litigation & Dispute Resolution Group at Stikeman Elliott. Her practice focuses on class actions, complex commercial litigation and competition litigation. Danielle has appeared before all levels of Court in Ontario, the Federal Court of Appeal and the Supreme Court of Canada. She has represented clients on several cross-border class actions involving claims of price-fixing and conspiracy, other commercial disputes, as well as a range of product liability claims. Danielle has significant experience advising and assisting companies regarding internal investigations and responding to regulatory, criminal or quasi-criminal investigations and the class action litigation that often accompanies allegations of serious misconduct.


Sinziana Hennig is an associate in the Litigation & Dispute Resolution Group at Stikeman Elliott. She has a broad commercial litigation practice, including class action defence, securities litigation, complex contract disputes, shareholder disputes, and insurance matters. Sinziana has significant experience defending multi-jurisdictional and cross-border class actions, including cases involving competition, securities, franchise, and consumer protection law.

She has appeared before the Supreme Court of Canada, the courts of appeal in Ontario and Saskatchewan, superior courts in four provinces, and the Ontario Securities Commission.


Zev Smith is an associate in the Litigation & Dispute Resolution Group at Stikeman Elliott. He has a broad commercial litigation practice that includes complex contract disputes, contested corporate transactions, securities, class action defence, product liability and competition litigation. He also has experience in matters involving allegations of corporate misconduct including internal and regulatory investigations. Zev has appeared before all levels of court in Ontario, the Federal Court, the Ontario Securities Commission, and has represented clients in mediations and arbitrations.