Broken Break Fee: Investor's Claim For A Break Fee Denied In CCAA Proceeding

A recent decision of the British Columbia Supreme Court serves as a reminder to take special care when structuring commercial transactions where the counterparty is in financial distress.  In League Assets Corp. Re.,¹ an investment firm claimed a break fee on a deal that failed to close when the seller filed for protection under the Companies’ Creditors Arrangement Act.²  The court dismissed the claim on the basis that the conditions to trigger the break fee were not met, notwithstanding that as a practical matter, the CCAA proceeding appears to have been an impediment to the conditions being fulfilled.

Background

In May of 2013, ANB Canada Inc. and IGW Industrial Limited Partnership entered into an agreement of purchase and sale for a commercial property IGW owned.  IGW’s obligation to carry out the transaction was conditional upon ANB obtaining certain regulatory approvals and having the transaction close before the end of the year, among others conditions