Précis: Failure to make charter payments was an event of default for which, in the circumstances, there was no right to reinstatement or relief from forfeiture.
Facts:In October 2013 NTCL and ITB entered into an agreement (the “Purchase Agreement”) pursuant to which NTCL was to purchase from ITB 19 vessels and related assets for $12.9 million. The agreement provided for a closing date of 31 May 2018. Contemporaneously, the parties entered into a Charter Party and Equipment Lease Agreement (the “Lease Agreement”) pursuant to which ITB chartered/leased the vessels to NTCL pending the closing of the Purchase Agreement. The Lease Agreement provided for monthly charter/lease payments to be made by NTCL which were eventually to be applied towards the purchase price under the Purchase Agreement. NTCL failed to make the lease payments due in February and March 2016. On 8 April 2016 ITB gave notice that it considered the failure to make the payments an event of default, the effect of which was to make the purchase subject to an earlier closing date. NTCL responded by attempting to make the delayed payments but ITB refused to accept them. Pursuant to the provisions of the two agreements, the parties then entered into a 30-day dispute resolution period. Before that period concluded, NTCL applied for protection under the Companies’ Creditors Arrangement Act . NTCL then made this application in the CCAA proceedings for orders, inter alia, that it was not in default of the Lease Agreement or, alternatively, that the Lease Agreement be reinstated or, in the further alternative, for relief from forfeiture.
Decision:Application dismissed.
Held:The Lease Agreement defined an event of default as including failure to make punctual monthly payments. It further provided that NTCL would have 10 days to rectify such failure if the failure was “due to oversight, negligence, errors or omissions”. NTCL argues that this 10-day grace period applied and that it made the payments within the 10 day period. However, the non-payment of the two lease payments was intentional and does not come within “oversight, negligence, errors or omissions”. NTCL alternatively argues that the Alberta Personal Property Security Act permits a debtor to reinstate a lease by making up the overdue payments. This is the effect of the Alberta Act but the Lease Agreement provides that it is governed by British Columbia law and the British Columbia Personal Property Security Act provides no such remedy for a corporate debtor. Finally, NTCL requests relief from forfeiture but there is no forfeiture in this case. ITB has not elected to repossess the vessels but has instead elected for an early closing date. As there is no forfeiture, the court cannot grant relief against it.