Fact that company had greater liabilities than assets did not render company insolvent

Default based on insolvency. Tenant was medical imaging clinic that consented to creditor selling its assets to satisfy consent judgment. Sales officer entered into conditional asset purchase agreement with purchaser and had some dealings with landlord but did not advise landlord about pending motion for court approval. Landlord served tenant with notice seeking to terminate lease for default and subsequently refused to provide consent to assignment of lease. Landlord brought motion essentially for declaration that it was entitled to terminate tenant’s lease. Tenant brought cross-motion essentially for declaration allowing it to assign lease to purchaser. Motion dismissed; cross-motion granted. Tenant had not become insolvent nor subject of steps taken to liquidate to its assets, so tenant was not in default within meaning of lease. There was no judicial order declaring tenant to be insolvent, and tenant remained current with its financial obligations. Simple fact that company had greater liabilities than assets did not, by definition, render company insolvent. Sales officer was not receiver, and sale of business as going concern did not amount to liquidation of assets, dissolution, winding-up, or termination of tenant’s existence. Creditor’s debt would be fully satisfied if sale was approved, and landlord had only raised issue of default when it became unhappy with way it was being treated.

Royal Bank of Canada v. Oxford Medical Imaging Inc. (2019), 2019 CarswellOnt 3589, 2019 ONSC 1020, McEwen J. (Ont. S.C.J.).

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