Kelsey's and Montana's: the 2025 buyer, at the 2025 price

In 2025, the principal of the companies that run the Kelsey's and the Montana's on Gardiners Road in Kingston decided to sell the two restaurants and retire. He found a buyer, the franchisor approved it, and the deal was set to close on or around May 4, 2026. In the weeks before that date, by his account, the Canada Revenue Agency asserted that the companies were in default and threatened to garnish or freeze their bank accounts in the first week of May, per the Affidavit of Timothy Lloyd sworn July 3, 2026, paras. 17–18. The companies' principal says a freeze would have stopped payroll, rent and franchisor payments and made any going-concern sale impossible, so the two operating companies filed notices of intention on May 1 instead, per the same affidavit, paras. 19–21. The default CRA asserted was on account of HST remittances, per his Affidavit of Timothy Lloyd sworn Sept. 2, 2026, para. 5.

In May the file held two positive cash-flow forecasts, a PPSA registration by the franchisor, Recipe Unlimited Corporation, against each company, and a CRA claim the trustee was still confirming. Four months later the 2025 deal has come back through a court-supervised sale process as the only bid standing. On September 9, Regional Senior Justice C. MacLeod approved it and vested the assets in 7055579 Canada Inc. free and clear, per the Approval and Vesting Order, Sept. 9, 2026, paras. 1–2.

The creditor that set the timetable

By early July the companies' only known creditor claims were CRA's: a proof of claim for $1,137,404.24 against 1382769 Ontario Limited, the Kelsey's company, of which $25.61 was claimed by reference to s. 60(1.1) of the BIA, the Crown claims a proposal must provide to pay within six months of approval; and one for $2,488,684.96 against 1622356 Ontario Limited, the Montana's company, being an unsecured claim of $2,272,177.33 and a further $216,507.63 claimed by reference to s. 60(1.1), per the Affidavit of Timothy Lloyd sworn July 3, 2026, paras. 13, 15(a) and Ex. "G". The same affidavit says CRA's Kelsey's claim records a $7,288.47 garnishment and $13,161.12 in collected arrears within the three months before the filings, and that the companies and the trustee were evaluating whether those amounts were preferential payments, per the July 3 affidavit, para. 15(b). Otherwise the companies say they are current with everyone, including the franchisor, their only registered secured creditor, per the July 3 affidavit, para. 11.

By September the trustee's Fourth Report says a component of CRA's claims is for amounts withheld from employee remuneration and not remitted, which are subject to a deemed trust in favour of the Crown, per the Fourth Report, Sept. 4, 2026, para. 5. The debtors' factum picks this up in a footnote: while CRA filed unsecured proofs of claim, "a portion of CRA's claims may be secured," per the Factum of the Debtors, Sept. 6, 2026, para. 28, n. 37. As of September 2 the trustee had not begun a formal review of the claims; that will come with the distribution, per the Affidavit of Timothy Lloyd sworn Sept. 2, 2026, para. 8.

Converting a private deal into a stalking horse

The companies' plan, formed with the trustee, their counsel, the franchisor and the buyer, was to run the pre-filing deal through a court-approved SISP as its stalking horse bid. The asset purchase agreement carries a cash price of $2,300,000 plus taxes and a $115,000 deposit, which the purchaser paid to the trustee, per the Affidavit of Timothy Lloyd sworn July 8, 2026, paras. 5, 9(b)–(c). The bid protections were a $46,000 break fee and an expense reimbursement of up to $12,000, together about 2.5% of the price, payable only if a superior bid closed and only out of its proceeds, per the Second Report, July 8, 2026, paras. 19–20. A qualified bid had to offer at least $2,358,000 in cash, per the Second Report, para. 26(iv).

Justice K. Perron approved the SISP, the stalking horse and a $200,000 administration charge on July 13, unopposed. The companies' restructuring efforts before signing the stalking horse agreement were "less robust than the debtor's restructuring efforts in Danier Leather," she wrote, but the case was distinguishable: the owner had already set out to sell, and "The proposed purchaser did not reduce the quantum of its offer following the filing of the NOIs." No valuation was put in to support the price; she accepted that the court could take comfort in it because the franchisor, "an interested third party, has provided its consent to the proposed transaction," and because the SISP would test it, per the Endorsement of Perron J., July 13, 2026, paras. 12–14. CRA was consulted before the hearing and did not oppose; the trustee reports that CRA considered the SISP and the stalking horse agreement more beneficial to it than a liquidation, per the Fourth Report, Sept. 4, 2026, para. 29(ii).

Seventeen parties and a deadline nobody met

The trustee put out a Canada Newswire release, advertised in the Insolvency Insider newsletter and on BusinessesForSale.com, and built a list of known interested parties that included existing and prospective Recipe franchisees, restaurant operators and financial buyers. It approached 17 of them. Four signed non-disclosure agreements and went into the data room, with a form of purchase agreement stripped of the stalking horse terms, per the Fourth Report, Sept. 4, 2026, paras. 18–19.

The bid deadline passed at 5:00 p.m. Ottawa time on August 20 with no bids of any kind, and the trustee did not extend it. The stalking horse agreement became the successful bid by operation of the SISP, no auction was held, and the bid protections cost the estates nothing, per the Fourth Report, paras. 21–24. The debtors' factum adds that no party indicated it would bid if the deadline were extended, per the Factum of the Debtors, Sept. 6, 2026, para. 11. The trustee's conclusion: "the absence of any competing bid, notwithstanding the marketing efforts described above, is itself an indication that the consideration payable under the Stalking Horse APA reflects the market value of the Purchased Assets," per the Fourth Report, para. 25.

The sale motion identified the buyer. The principal's September affidavit describes 7055579 Canada Inc. as "one of the Franchisor's largest franchisees, owning and operating multiple locations under several banners franchised from the Franchisor," per the Affidavit of Timothy Lloyd sworn Sept. 2, 2026, para. 4. The debtors describe it throughout as an arm's-length party, per the Factum of the Debtors, Sept. 6, 2026, para. 1(a)(i), and Justice Perron's endorsement calls it one, per the Endorsement of Perron J., July 13, 2026, para. 6.