Transaction
InterRent Successfully Defeats Court and Regulatory Attacks on $14,000,000 Private Placement
By Robert B. Cohen, Ted Frankel, Lorne Silver
In the summer of 2009, the Board of Trustees of InterRent Real Estate Investment Trust, whose units trade publicly on the Toronto Stock Exchange (TSX), entered into a subscription agreement to issue $14,000,000 of units to various subscribers at $1.50 per unit, which transaction included the execution of a management agreement with CLV Group Inc. While the TSX gave conditional approval of the subscription over the objection of InterRent's largest unitholder, NorthWest Value Partners Inc. (who alleged that CLV and the subscribers were acting in concert), NorthWest commenced an appeal of the TSX decision to the Ontario Securities Commission (OSC), brought an injunction to the Ontario Superior Court of Justice to try and enjoin the closing of the private placement (on the allegation that Board had breached its fiduciary duties in diluting the InterRent units and had acted in its own self-interest) and then brought a separate application to the Ontario Superior Court of Justice to seek a declaration that the Trustees of InterRent had been validly removed from the Board before the closing of the private placement by the delivery of consents to their removal pursuant to the governing Declaration of Trust, which was orchestrated by NorthWest.
Ultimately, NorthWest's appeal to the Ontario Securities Commission was unsuccessful as the OSC found that the TSX's decision granting conditional listing of the units was supportable by detailed and considered reasons warranting deference to the expertise of the TSX (reflecting a severe shift of the OSC's overruling of the TSX's conditional approval of another share offering in the case of HudBay rendered earlier that year). Additionally, NorthWest was unsuccessful in its attempt to enjoin the closing of the private placement as NorthWest could not demonstrate irreparable harm. Furthermore, NorthWest's additional court application to try and remove the trustees of InterRent before the private placement closed was unsuccessful on the basis that the consents did not prohibit the Board from completing a deal that had been struck before the consents had been delivered. InterRent was represented in the litigation by Lorne S. Silver, Robert B. Cohen and Ted Frankel of Cassels Brock & Blackwell LLP.