High Park Farms: a creditor takes up the claim against Cannfections

High Park Farms Ltd. grew cannabis in a leased greenhouse in Petrolia, Ontario, until the facility was shut down in the fall of 2021, per the Trustee's Preliminary Report, Apr. 25, 2024, p. 1. In September 2019 the company, a wholly owned subsidiary of Tilray Brands Inc., entered a joint venture with Douglas Liberman and paid $5,000,000 for a 50% preferred-share equity interest in Cannfections Group Inc., of which Mr. Liberman was a director and the chief executive (Affidavit of Carl Merton, June 30, 2026, para. 7; Statement of Claim, Mar. 13, 2024, Ex. "A", para. 7). The Douglas Liberman Family Trust kept the other half through common shares, and Mr. Liberman kept day-to-day operational control, according to the affidavit of Carl Merton, chief financial officer and treasurer of High Park Holdings Ltd. and, until the bankruptcy, of High Park Farms (Affidavit of Carl Merton, June 30, 2026, paras. 2, 7). Under a supply and development agreement signed that month, Cannfections would contribute its recipes and confectionery know-how; High Park Farms would supply the cannabis and a licensed facility, and brand and sell the edibles, per the Affidavit of Carl Merton, June 30, 2026, para. 8.

On May 13, 2021, Tilray announced that, as part of its plan to combine operations with Aphria, it would close the Petrolia facility, expecting to complete the closure by September 2021; approximately 200 employees worked there, per the Form 8-K exhibited to the affidavit (Motion Record, July 13, 2026, Ex. "B", p. 40). High Park Farms gave Cannfections written notice on September 8, 2022 that it would not renew the supply agreement, effective December 18, 2022. Cannfections pursued a damages claim in arbitration for alleged breaches of the agreement's requirements to order minimum quantities, and by a final award (except as to costs) dated March 5, 2024, the arbitrator ordered High Park Farms to pay Cannfections $19,951,490.80. The same award declared that High Park Holdings, also a party to the arbitration, was not a proper party, and dismissed the claims against it, per the Affidavit of Carl Merton, June 30, 2026, paras. 12, 18.

Eight days after the award, High Park Farms issued a statement of claim in the Ontario Superior Court of Justice against Cannfections, 13062775 Canada Inc. and Mr. Liberman (Statement of Claim, Mar. 13, 2024, Ex. "A", para. 1). On April 5, 2024, it filed an assignment in bankruptcy, and the official receiver appointed B. Riley Farber Inc., now GlassRatner Restructuring Inc., as trustee, per the Certificate of Appointment, Apr. 5, 2024. The trustee, as the order recites, refused under the direction of the inspectors to take the claims up for lack of funds, and on July 22, 2026, Justice F.L. Myers authorized a creditor, High Park Holdings, to prosecute them in its own name and at its own expense and risk under s. 38 of the Bankruptcy and Insolvency Act, per the Order (Section 38), July 22, 2026, recitals, para. 1.

An estate of two dollars

Mr. Merton swore the statement of affairs on April 4, 2024. It lists no inventory, cash, equipment or real property. The two assets are the 50% equity interest in Cannfections, at an original cost of $5,692,804.00, and a $70,000.00 prepaid utility deposit with Union Gas, each estimated to produce $1.00, for total assets of $2.00 and a deficiency of $27,926,013.00, per the Statement of Affairs, Apr. 4, 2024, Creditors Package, pp. 2, 10. The liabilities, $27,926,015.00, are all unsecured and owed to four creditors: Cannfections, at $19,964,767.00; High Park Holdings, at $7,692,804.00; DLA Piper, at $250,000.00; and the Canada Revenue Agency, at $18,444.00, per List "A", Statement of Affairs, Apr. 4, 2024, Creditors Package, p. 3.

The trustee's preliminary report of April 25, 2024 records management's account of the collapse: "an overinvestment in the cannabis market, which market failed to materialize to the anticipated level." According to the books, the company never earned a profit and had accumulated negative retained earnings in excess of $70 million. Under the same Cause of Insolvency heading, the report records the March 5 award of $19.95 million "in respect of its failure to honour the minimum order guarantees under their Supply Agreement," per the Trustee's Preliminary Report, Apr. 25, 2024, p. 2. Cannfections had not answered the trustee's request for its most recent financial statements, and the trustee could not determine the value of the shares or "how much, if any, funds will be available for distribution." Claims filed by then totalled $8,173,673.53. Tilray Brands, Inc. had provided a $50,000.00 third-party deposit toward the trustee's compensation, per the Trustee's Preliminary Report, Apr. 25, 2024, pp. 2–4.

High Park Holdings' proof of claim, which Mr. Merton signed on April 22, 2024 as its chief financial officer and treasurer, states that the creditor is related to the debtor within the meaning of s. 4 of the BIA. Its $7,692,804 is three intercompany balances: $692,804 to fund High Park Farms' operations, $5,000,000 to fund its initial investment in Cannfections, and $2,000,000 to fund a December 2023 settlement with Enniskillen Pepper Co., per the Motion Record, July 13, 2026, Ex. "D", pp. 48, 51. The arbitrator's costs decision of December 3, 2024 increased both creditors' claims. It was a "Sanderson order," which, Mr. Merton says, transferred the costs Cannfections owed High Park Holdings to High Park Farms and cancelled most of the costs High Park Farms would otherwise have owed Cannfections; High Park Farms now owes High Park Holdings a further $869,622.13 and Cannfections a further $48,399.35, per the Affidavit of Carl Merton, June 30, 2026, para. 22.

A dividend, a loan and a request for an inspector

The statement of claim seeks damages "for Liberman and Cannfections' oppression, Liberman's breach of fiduciary duties and Liberman and 130 Canada's wrongful misappropriation of corporate funds of Cannfections, conversion and, in the alternative, unjust enrichment." It also asks for disgorgement and for the appointment of an inspector to investigate related-party transactions, the compensation of Mr. Liberman and other executives, and any transfer of assets from Cannfections to another corporation, per the Statement of Claim, Mar. 13, 2024, Ex. "A", para. 1.

Its central allegation concerns October 2021. The claim alleges that in or about that month Mr. Liberman caused Cannfections to issue a dividend to himself of $1,500,000 net of taxes without the approval of its two-member board, on which High Park Farms had a representative, and later had the payment reclassified as an interest-free loan to 13062775 Canada Inc., a company the claim understands he wholly owns and controls. The payment, the claim pleads, was contrary to the articles, which it says require any dividend to be paid first, or at the same time, to the preferred shareholders in an amount equal to the common shareholders' dividend, and to the shareholders agreement, which requires board approval of dividends and of loans, per the Statement of Claim, Mar. 13, 2024, Ex. "A", paras. 5, 7, 13, 16, 18–19.

For the inspector, the claim points to a quarter, which Mr. Merton's affidavit identifies as the one ended November 30, 2023, in which Cannfections had less than $28,000 in sales, more than $315,000 in direct labour costs and almost $250,000 in bonuses shown as payable (Statement of Claim, Mar. 13, 2024, Ex. "A", paras. 20–21; Affidavit of Carl Merton, June 30, 2026, para. 16).