Skyepharma plc v. Hyal Pharmaceutical Corporation
[Indexed as: Skyepharma plc v. Hyal Pharmaceutical Corp.]
47 O.R. (3d) 234
 O.J. No. 467
Docket Nos. M24061 and C33086
Court of Appeal for Ontario
Carthy, Goudge and O’Connor JJ.A.
February 18, 2000
Bankruptcy — Receivers — Sale of assets — Receiver obtaining several offers to purchase assets — Receiver seeking court approval for sale of assets to one of competing offerors
— Potential purchaser not having legal or proprietary interest affected by order approving sale — Potential purchaser not having standing on motion for court approval.
Debtor and creditor — Sale of assets — Receiver obtaining several offers to purchase assets — Receiver seeking court approval for sale of assets to one of competing offerors — Potential purchaser not having legal or proprietary interest affected by order approving sale — Potential purchaser not having standing on motion for court approval.
In August 1999, PC Inc. was appointed the receiver and manager of the assets of HP Corp. Subsequently, S plc, C Corp. and BP plc, who were all creditors of HP Corp., submitted offers to purchase the assets of HP Corp. On September 28, 1999, the receiver was given approval to enter into exclusive negotiations with S plc and C Corp. with respect to their
offers, and the court order directed that no party was entitled to withdraw any outstanding offer until October 29, 1999.
In October 1999, the receiver reported to the court and also
brought a motion for approval of an agreement to sell the assets to S plc. On the return of the motion, S plc, C Corp. and BP plc were permitted to make submissions in their capacity as creditors of HP Corp. C Corp. and BP plc opposed approval of the sale; however, the sale was approved and BP plc then appealed to the Court of Appeal.
The receiver moved to have the appeal quashed on the ground that the court did not have jurisdiction. The receiver submitted that a potential purchaser does not have any legal or proprietary right that is affected by the court’s approval of a sale and accordingly the potential purchaser does not have standing to challenge the order approving the sale.
Held, the appeal should be quashed.
Under s. 6(1) of the Courts of Justice Act, there is an appeal from a final order of a judge of the Superior Court of Justice. A final order is one that finally disposes of the rights of the parties. Thus, the question raised by the receiver’s motion to quash was whether BP plc had a right that was finally disposed of by the sale approval order. The answer to that question was negative for two reasons. First, a prospective purchaser has no legal or proprietary right in the property being sold. There is no right in a party who submits an offer to have the offer, even if the highest, accepted by either the receiver or the court.
Second, the fundamental purpose of the sale approval motion is to consider the best interests of the parties with a direct interest in the proceeds of the sale, primarily the creditors, and an unsuccessful purchaser has no interest in that issue. The involvement of unsuccessful prospective purchasers could seriously distract from the fundamental purpose of the approval motion. That BP plc had an offer to purchase did not give it a right or interest that was affected by the sale approval order. In its capacity as a potential purchaser, it was not entitled to standing on the motion nor was it entitled to appeal the approval order.
Cases referred to
British Columbia Development Corp. v. Spun Cast Industries Ltd. (1977), 5 B.C.L.R. 94, 26 C.B.R. (N.S.) 28 (S.C.); Cameron
v. Bank of Nova Scotia (1981), 45 N.S.R. (2d) 303, 86 A.P.R. 303, 38 C.B.R. (N.S.) 1 (C.A.); Crown Trust Co. v. Rosenberg (1986), 60 O.R. (2d) 87, 39 D.L.R. (4th) 526, 67 C.B.R. (N.S.) 320, 22 C.P.C. (2d) 131 (H.C.J.); Halbert v.
Netherlands Investment Co.,  S.C.R. 329,  2 D.L.R. 418; Royal Bank of Canada v. Soundair Corp. (1991), 4 O.R. (3d) 1, 46 O.A.C. 321, 83 D.L.R. (4th) 76, 7 C.B.R. (3d) 1 (C.A.)
Statutes referred to
Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(1)(b) Rules and regulations referred to
Rules of Civil Procedure, O. Reg. 560/84, rule 13.01 — now
R.R.O. 1990, Reg. 194
MOTION to quash an appeal to the Court of Appeal for Ontario.
James W.E. Doris, for appellant, Skypharm plc. Alan H. Mark, for appellant, Bioglan Pharma plc.
Joseph M. Steiner and Steven G. Golick, for respondent, Pricewaterhouse Coopers Inc., court-appointed receiver of Hyal Pharmaceutical Corporation.
The judgment of the court was delivered by
 O’CONNOR J.A.: — This is a motion to quash an appeal from the order of Farley J. made on October 24, 1999. By his order, Farley J. approved the sale of the assets of Hyal Pharmaceutical Corporation by the court-appointed receiver of Hyal to Skyepharma plc. Bioglan Pharma plc, a disappointed would-be purchaser of those assets has appealed, asking this court to set aside the sale approval order and to direct that there be a new sale process.
 The receiver moves to quash the appeal on the ground that Bioglan, as a potential purchaser, did not have any rights that were finally determined by the sale approval order. Accordingly, the receiver contends, this court does not have jurisdiction to hear the appeal.
 Skyepharma, the largest creditor of Hyal, moved for the appointment of Pricewaterhouse Coopers Inc. as the receiver and manager of all of the assets of Hyal. On August 16, 1999, Molloy J. granted the order which included provisions authorizing the receiver to take the necessary steps to liquidate and realize upon the assets, to sell the assets (with court approval for transactions exceeding $100,000) and to hold the proceeds of any sales pending further order of the court.
 On August 26, 1999, Cameron J. made an order approving the process proposed by the receiver for soliciting, receiving and considering expressions of interest and offers to purchase the assets of Hyal.
 The receiver reported to the court on September 27, 1999 and set out the results of the sale process. The receiver sought the court’s approval to enter into exclusive negotiations with two parties which had made offers, Skyepharma and Cangene Corporation. The receiver indicated that it had also received an offer from Bioglan and explained why, in its view, the best realization was likely to result from negotiations with Skyepharma and Cangene.
 In its report, the receiver pointed out the importance of attempting to finalize the sale of the assets at an early date. The interest and damages on the secured and unsecured debt of Hyal were increasing in the amount of approximately $70,000 a week. Professional fees and operational costs were also adding to the aggregate debt of the company.
 On September 28, 1999 Farley J. ordered that the receiver negotiate exclusively with Skyepharma and Cangene until October 6, in an attempt to conclude a transaction that was acceptable to the receiver and that realized the superior value inherent in the offers made by Skyepharma and Cangene. [See Note 1 at end of document] The court also directed that no party would be entitled to retract, withdraw, vary or counteract any outstanding offer prior to October 29, 1999 and that, if the receiver was unable to reach agreement with Skyepharma or Cangene, then it would have the discretion to negotiate with other parties.
 On October 13, the receiver reported to the court on the results of the negotiations with Skyepharma and Cangene. The parties had been unable to structure the transaction to take advantage of Hyal’s tax loss positions. Nevertheless, the receiver recommended approval for an agreement to sell the assets of Hyal to Skyepharma. In its report, the receiver pointed out that the agreement it was recommending did not necessarily maximize the realization for the assets but that it did minimize the risk of not closing and also the risk of liabilities increasing in the interim period up to closing, which risks arose from the provisions and time-frames contained in other offers. The receiver said that these risks were not immaterial.
 At the same time that the receiver filed its report it brought a motion for approval of the agreement with Skyepharma. The motion was heard by Farley J. on October 20, 1999. Counsel for Skyepharma, Cangene and Bioglan appeared and were permitted to make submissions. Skyepharma, which was both a creditor of Hyal and the purchaser under the agreement for which approval was being sought, supported the motion. Cangene and Bioglan, which in addition to being unsuccessful prospective purchasers, were also creditors of the company, opposed the motion.
 It is apparent that the motions judge heard the submissions of Cangene and Bioglan in their capacities as creditors of Hyal and not in their role as unsuccessful bidders for the assets being sold. In his endorsement made on October
24 he said:
Unsuccessful bidders have no standing to challenge a receiver’s motion to approve the sale to another candidate.
They have no legal or proprietary right as technically they are not affected by the order. They have no interest in the fundamental question of whether the court’s approval is in the best interests of the parties directly involved.
The motions judge continued by saying that he would “take into account the objections of Bioglan and Cangene as they have shoehorned into the approval motion”. This latter comment, as it applied to Bioglan, appears to refer to the fact that Bioglan only became a creditor after the receiver was appointed and then only by acquiring a small debt of Hyal in the amount of $40,000.
 The motions judge approved the agreement for the sale of the assets to Skyepharma. In his endorsement, he noted that the assets involved were “unusual” and that the process to sell these assets was complex. He attached significant weight to the recommendation of the receiver who, he pointed out, had the expertise to deal with matters of this nature. The motions judge noted that the receiver’s primary concern was to protect the interests of the creditors of Hyal. He recognized the advantages of avoiding risks that may result from the delay or uncertainty inherent in offers containing conditional provisions. The certainty and timeliness of the Skyepharma agreement were important factors in both the recommendation of the receiver and in the reasons of the court for approving the sale.
 The motions judge said that “at first blush”, it appeared that the receiver had conducted itself appropriately throughout the sale process. He reviewed the specific complaints of Cangene and Bioglan and concluded that, although
the process was not perfect (my words), there was no impediment to approving the sale to Skyepharma.
 This court was advised by counsel that the transaction closed immediately after the order approving the sale was made.
 Bioglan has filed a notice of appeal seeking to set
aside the approval order and asking that this court direct that the assets of Hyal be sold pursuant to a court-supervised
judicial sale or, alternatively, that the receiver be required to re-open the bidding relating to the sale. The notice of appeal does not set out any specific grounds of appeal. It states only that the motions judge erred in approving the sale agreement.
 In argument, counsel for Bioglan said that there are two grounds of appeal. First, the receiver misinterpreted the order of September 28, 1999 and should have negotiated further with the non-exclusive bidders, including Bioglan, once it determined that a transaction based on the tax benefits of Hyal’s tax loss position could not be structured. Second, the motions judge erred in holding that Bioglan had a full opportunity to participate in the process and was the author of its own misfortune by using a “low balling strategy”.
 The receiver moves to quash the appeal on the ground that this court does not have jurisdiction.
 Section 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides for a right of appeal to this court from a final order of a judge of the Superior Court of Justice. A final order is one that finally disposes of the rights of the parties: Halbert v. Netherlands Investment Co.,  S.C.R. 329,  2 D.L.R. 418.
 The issue raised by the motion is whether Bioglan had a right that was finally disposed of by the sale approval order. Bioglan submits that there are four separate ways by which it acquired the necessary right. The first is one of general application that would apply to all unsuccessful prospective purchasers in court supervised sales. The other three arise from the specific circumstances of this case.
 First, Bioglan submits that because it made an offer to buy the assets of Hyal, it acquired a right that entitled it to participate in the sale approval motion and to oppose the order sought by the receiver. This right, Bioglan maintains, was finally disposed of by the order approving the sale to
 A similar issue was considered by Anderson J. in Crown Trust Co. v. Rosenberg (1986), 60 O.R. (2d) 87, 39 D.L.R. (4th)
526 (H.C.J.). In that case, a receiver brought a motion to approve the sale of certain properties. On the return of the motion, Larco Enterprises, a prospective purchaser whose offer was not being recommended for approval by the receiver, moved to intervene as an added party under rule 13.01 of the Rules of Civil Procedure, O. Reg. 560/84. The relevant portion of that rule, at the time, read as follows:
13.01(1) Where a person who is not a party to a proceeding claims,
(a) an interest in the subject matter of the proceeding;
(b) that he or she may be adversely affected by a judgment in the proceeding;
. . . . .
the person may move for leave to intervene as an added party. [See Note 2 at end of document]
 Anderson J. concluded that “the proceeding” referred to in rule 13.01 only included an action or an application. The motion for approval of the sale by the receiver was neither. He therefore dismissed Larco’s motion. He continued, however, and held that even if the proceeding was one to which the rule applied, Larco did not satisfy the criteria in it because it did not have an interest in the subject-matter of the sale approval motion nor did it have any legal or proprietary right that would be adversely affected by the court’s order approving the sale.
 I adopt both his reasoning and his conclusion. At p. 118, he said:
The motion brought by Clarkson to approve the sales is one
upon which the fundamental question for consideration is whether that approval is in the best interests of the parties to the action as being the approval of sales which will be most beneficial to them. In that fundamental question Larco has no interest at all. Its only interest is in seeking to have its offer accepted with whatever advantages will accrue to it as a result. That interest is purely incidental and collateral to the central issue in the substantive motion and, in my view, would not justify an exercise of the discretion given by the rule.
Nor, in my view, can Larco resort successfully to cl. (b) of rule 13.01(1) which raises the question whether it may be adversely affected by a judgment in the proceeding. For these purposes I leave aside the technical difficulties with respect to the word “judgment”. In my view, Larco will not be adversely affected in respect of any legal or proprietary right. It has no such right to be adversely affected. The most it will lose as a result of an order approving the sales as recommended, thereby excluding it, is a potential economic advantage only.
 The British Columbia Supreme Court reached a similar conclusion in British Columbia Development Corp. v. Spun Cast Industries Ltd. (1977), 26 C.B.R. (N.S.) 28, 5 B.C.L.R. 94 (S.C.). In that case the receiver in a debenture holder’s action for foreclosure moved for an order to approve the sale of assets. A group of companies, the Shaw group, had made an offer and sought to be added as a party under a rule which authorized the court to add as a party any person “whose participation in the proceeding is necessary to ensure that all matters in the proceeding may be effectively adjudicated upon
. . .”. Berger J. dismissed this motion. At p. 30, he said:
The Shaw group of companies has no legal interest in the litigation at bar. It has a commercial interest, but that is not, in my view, sufficient to bring it within the rule.
Simply because it has made an offer to purchase the assets of the company does not entitle it to be joined as a party.
Nothing in Gurtner v. Circuit [cite omitted] goes so far. No order made in this action will result in any legal liability
being imposed on the Shaw group, and no claim can be made against it on the strength of any such order.
 Although the issues considered in these cases are not identical to the case at bar, the reasoning applies to the issue raised on this appeal. If an unsuccessful prospective purchaser does not acquire an interest sufficient to warrant being added as a party to a motion to approve a sale, it follows that it does not have a right that is finally disposed of by an order made on that motion.
 There are two main reasons why an unsuccessful prospective purchaser does not have a right or interest that is affected by a sale approval order. First, a prospective purchaser has no legal or proprietary right in the property being sold. Offers are submitted in a process in which there is no requirement that a particular offer be accepted. Orders appointing receivers commonly give the receiver a discretion as to which offers to accept and to recommend to the court for approval. The duties of the receiver and the court are to ensure that the sales are in the best interests of those with an interest in the proceeds of the sale. There is no right in a party who submits an offer to have the offer, even if the highest, accepted by either the receiver or the court: Crown Trust v. Rosenberg, supra.
 Moreover, the fundamental purpose of the sale approval motion is to consider the best interests of the parties with a direct interest in the proceeds of the sale, primarily the creditors. The unsuccessful would be purchaser has no interest in this issue. Indeed, the involvement of unsuccessful prospective purchasers could seriously distract from this fundamental purpose by including in the motion other issues with the potential for delay and additional expense.
 In making these comments, I recognize that a court conducting a sale approval motion is required to consider the integrity of the process by which the offers have been obtained and to consider whether there has been unfairness in the working out of that process: Crown Trust v. Rosenberg, supra; Royal Bank of Canada v. Soundair Corp. (1991), 4 O.R. (3d) 1, 83 D.L.R. (4th) 76 (C.A.). The examination of the sale process will in normal circumstances be focused on the integrity of that process from the perspective of those for whose benefit it has been conducted. The inquiry into the integrity of the process may incidentally address the fairness of the process to prospective purchasers, but that in itself does not create a right or interest in a prospective purchaser that is affected by a sale approval order.
 In Soundair, the unsuccessful would be purchaser was a party to the proceedings and the court considered the fairness of the sale process from its standpoint. However, I do not think that the decision in Soundair conflicts with the position I have set out above for two reasons. First, the issue of whether the prospective purchaser had a legal right or interest was not specifically addressed by the court. Indeed, in describing the general principles that govern a sale approval motion, Galligan J.A., for the majority, adopted the approach in Crown Trust v. Rosenberg. Under the heading “Consideration of the interests of all the parties”, he referred to the interests of the creditors, the debtor and a purchaser who has negotiated an agreement with the receiver. He did not mention the interests of unsuccessful would be purchasers. Second, the facts in Soundair were unusual. The unsuccessful offeror was a company in which Air Canada had a substantial interest. The orde r appointing the receiver specifically directed the receiver “to do all things necessary or desirable to complete a sale to Air Canada” and if a sale to Air Canada could not be completed to sell to another party. Arguably, this provision in the order of the court created an interest in Air Canada which could be affected by the sale approval order and which entitled it to standing in the sale approval proceedings.
 In limited circumstances, a prospective purchaser may become entitled to participate in a sale approval motion. For that to happen, it must be shown that the prospective purchaser acquired a legal right or interest from the circumstances of a particular sale process and that the nature of the right or interest is such that it could be adversely affected by the approval order. A commercial interest is not sufficient.
 There is a sound policy reason for restricting, to the extent possible, the involvement of prospective purchasers in sale approval motions. There is often a measure of urgency to complete court approved sales. This case is a good example. When unsuccessful purchasers become involved, there is a potential for greater delay and additional uncertainty. This potential may, in some situations, create commercial leverage in the hands a disappointed would be purchaser which could be counterproductive to the best interests of those for whose benefit the sale is intended.
 In arguing that simply being a prospective purchaser accords a broader right or interest than I have set out above, Bioglan relies on the decision of the Nova Scotia Court of Appeal in Cameron v. Bank of Nova Scotia (1981), 38 C.B.R. (N.S.) 1, 45 N.S.R. (2d) 303 (C.A.). In that case, the receiver invited tenders to purchase lands of the debtor and received three offers. The receiver accepted Cameron’s offer and inserted a clause in the sale agreement calling for court approval. On the application to approve the sale, Treby, an
unsuccessful bidder, was joined as an intervenor. Treby opposed approval, arguing that he had been misled into believing that he would have another opportunity to bid on the property. The court directed that all three bidders be given a further opportunity to bid by way of sealed tender. Cameron appealed the order. The tender process proceeded. Treby and the third bidder submitted bids; Cameron did not. The receiver accepted Treby’s offer and the court approved the sale to Treby.
Cameron also appealed this order and Cameron’s two appeals were heard together. Hart J.A. held that both Cameron and Treby had a right to appear at the original hearing because both were parties directly affected by the decision of the court. He concluded that the first decision re-opening the bidding process and the order approving the sale to Treby were both final in their nature in that they amounted to a final determination of the rights of Cameron and Treby. He did not set out specifically what “rights” he was referring to. Having regard to the facts in the case, it is not clear to me that Cameron stands for the proposition asserted by Bioglan, that an unsuccessful would be purchaser, without more, has a right that is finally determined by an order approving a sale. If it does,
I would, with respect, disagree.
 In the result, I conclude that the fact that Bioglan
made an offer to purchase Hyal’s assets did not give it a right or interest that was affected by the sale approval order. It was not entitled to standing on the motion on that basis nor is it now entitled to bring this appeal on that basis.
 As an alternative, Bioglan relies upon three circumstances in this case, each of which it says, in somewhat different ways, results in it having the right to appeal the sale approval order to this court. First, Bioglan submits that it acquired this necessary right under the provision in the order of September 28 which directed that “no party shall be entitled to retract, withdraw, vary or countermand any offer submitted to the receiver prior to October 29 1999”.
 Bioglan’s offer was, by its terms, to expire on October
4. Bioglan argues that the order of September 28 imposed an obligation on it to keep that offer open until October 29. That being the case, Bioglan maintains that it acquired a right to appear and oppose the motion to approve the sale.
 I do not accept this argument. The ordinary meaning of the language in the order did not require Bioglan to extend its outstanding offer. The order did nothing more than preclude parties from taking steps to either amend or withdraw their offers before October 29. By its terms, Bioglan’s offer was to expire on October 4. The order of September 28 did not affect the expiry date of the offer.
 Even if the language of the September 28 order is interpreted to preclude an existing offer from expiring in accordance with its terms, the result would be the same. Bioglan made its offer to the receiver under terms and conditions of sale approved by the court on August 26. The terms and conditions of the sale were deemed to be part of each offer made to the receiver. Clause 14 of the terms and conditions provided:
No party shall be entitled to retract, withdraw, vary or
countermand its offer prior to acceptance or rejection thereof by the vendor (receiver).
 The order of September 28 tracks the emphasized language. If the language in the order is interpreted to preclude an existing offer from expiring according to its terms, then when Bioglan submitted its offer it agreed, by virtue of cl. 14 in the terms and conditions of sale, that its offer would remain open until it was either accepted or rejected by the receiver. Assuming this interpretation, the order of September 28 added nothing to the obligation that Bioglan had assumed when it made its offer.
 Accordingly I would not give effect to this argument.
 Next, Bioglan submits that the order of September 28 created a duty on the receiver to negotiate further with the non-exclusive bidders once it determined that a transaction based on the tax benefits of Hyal’s tax loss position could not be structured. This duty, it is argued, created a corresponding legal right in Bioglan to participate further in the process. This right, Bioglan maintains, was violated by the receiver when it recommended the Skyepharma agreement.
 I do not read the order of September 28 as imposing this duty on the receiver. The order provided the receiver with a discretion as to whether to negotiate further with the non- exclusive bidders. It did not require the receiver to do so. Moreover, the order of September 28 did not limit the receiver to entering into an agreement with the exclusive bidders only if an agreement could be structured to take advantage of the tax losses. The order of September 28 did not create either the duty or the right asserted by Bioglan.
 Finally, Bioglan submits that it acquired the necessary right to bring this appeal because the motions judge permitted it to make submissions on the sale approval motion. Again, I see no merit in this argument. As I have set out above, it seems apparent that the motions judge heard Bioglan’s argument
solely because it was a creditor of Hyal and not because it was an unsuccessful prospective purchaser. Bioglan does not seek to bring this appeal in its role as a creditor, nor does it complain that the sale approval order is unfair to the creditors of Hyal.
 The motions judge approved the sale based on the recommendation of the receiver that it was in the best interests of the creditors. The fact that Bioglan was given an opportunity to be heard in these circumstances did not create a right which would provide standing to bring this appeal. The order sought to be appealed does not finally dispose of any right of Bioglan as creditor.
 In the result, I would allow the motion and quash the appeal with costs to the moving party.
Note 1: These offers were superior in that they were the only two that attempted to provide value for the tax loss positions of Hyal.
Note 2: The rule as presently worded is not.