Corporate Assets Inc. et al. v. 9214-6463, L.P. et al.

Québec industrial auctioneer receives $17 million from consortium of competitors for usurpation of asset rights

After eight years of litigation, plaintiff Corporate Assets Inc. (CAI) was awarded close to $17 million in capital and interest from a group of corporate defendants formed by 9214 6463 L.P., 9214-6463 Québec Inc., Counsel RB Capital LLC, CIA CPCC, S.E.N.C., CIA CPCC Inc., Maynards Industries Ltd., Hilco Industrial LLC, Hilco Assets Sales Canada, and Tim Martinez.

All parties in the case carried on activities in the field of industrial auctions and all participated in the same auction process for the bulk sale of the assets of the Aleris aluminum smelting plant in Québec, from which arose this litigation.

After securing the going concern offer of Koenig and Vits, a company represented at the time by defendant Tim Martinez, the trustee conducting the bid process wanted to secure, as a “plan B,” a contingent offer by a liquidator to provide for the sale of the assets if that of Koenig and Vits was to fail.

The trustee chose CAI, a specialist in industrial plant auctions, appraisals and asset management programs, as contingent offeror over the corporate defendants, which nonetheless submitted further offers after the bid deadline and tried to have the trustee restart the bidding process.

The hearing before Justice Martin Castonguay shed light on the corporate defendants’ knowledge of CAI’s pre-contract with the trustee and its scope. In disregard of that binding pre-contract, the corporate defendants had devised a scheme involving multiple undisclosed agreements in order to use the first offeror, Koenig and Vits, as a prête-nom or undisclosed agent to submit — on behalf of the corporate defendants whose previous offers had been rejected by the trustee — a revised offer providing for the purchase and liquidation of the assets, thereby usurping CAI’s rights over such assets.

The Court concluded that the defendants’ unrelenting attempt to win the bid, while knowing about the pre-contract, led the trustee to breach its pre-contract with CAI. The defendants were held jointly and severally liable towards CAI for its loss of profits in connection with the sale of the assets.

This case distinguishes itself as marking the first time in Québec that the Superior Court rendered a comprehensive judgment lifting the litigation privilege on the basis of a prima facie showing of actionable misconduct on the part of the defendants.

CAI, Galaxie Corporation and National Machinery Exchange Inc. were represented by Marc-André Coulombe, Frédéric Paré, Jean Fontaine and Marie-Laurence Migneault of Stikeman Elliott LLP.

9214 6463 L.P., 9214-6463 Québec Inc., Counsel RB Capital LLC, CIA CPCC, S.E.N.C., CIA CPCC Inc., Maynards Industries Ltd, Hilco Industrial LLC and Hilco Assets Sales Canada Corp. were represented by Marc Duchesne, Patrick Plante and Anaïs Bussières-McNicoll of Borden Ladner Gervais LLP.

Tim Martinez was represented by Emmanuelle Demers of BCF LLP.

 

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