Olive Branch: a factum on Monday, an unopposed sale on Tuesday

At 9:27 p.m. on Friday, October 2, Christopher Besant of Gardiner Roberts LLP, counsel for Henry Kauftheil, the personal guarantor of the store's loan, wrote to the lawyers for the interim receiver of Olive Branch and for its lender, per the Factum of the Responding Parties, Oct. 5, 2026, para. 1(c) and the Affidavit of Shawn Kirkman, Oct. 5, 2026, para. 7, Ex. "F", p. 26; Ex. "G", p. 33. "Our client opposes the sale approval and the distribution sought in your motion," the email began. It proposed adjourning the Tuesday hearing for a week "to allow for materials to be filed and to allow for discussions," and observed that the sale's outside closing date was October 30, "so a short adjournment does not put that at risk," per the Kirkman Affidavit, Ex. "F", p. 26. Joshua Foster of Bennett Jones LLP answered for the interim receiver the next afternoon. The interim receiver would not consent and would oppose any adjournment request at the hearing, the email said, and "[h]aving regard to the history of these proceedings, Mr. Kauftheil's belated request for an adjournment appears consistent with a pattern of seeking delay," per the Kirkman Affidavit, para. 8, Ex. "G", p. 30.

The written opposition came on Monday, in a factum for Kauftheil, the debtors and the buyer approved in June, and was withdrawn at the hearing on Tuesday. "At the hearing of the matter, however, I was advised that the Kauftheil Parties have withdrawn their opposition and request for an adjournment based on discussions that have taken place between Mr. Besant and Mr. Chaiton," Justice J. Dietrich wrote. "Accordingly, the matter proceeded on an unopposed basis before me." Harvey Chaiton appeared for 770 Corp., the lender; the endorsement says nothing more about the discussions, per the Endorsement of Justice J. Dietrich, Oct. 6, 2026, p. 1 and para. 4. Justice Dietrich approved the sale of the business to Kosher Grocers Inc., which the endorsement describes as "a party related to 770 Corp.," and, subject to a holdback for the interim receiver's charge and remaining work, authorized and directed distributions to 770 Corp. from the cash on hand, "including, without limitation, the Forfeit Deposit, up to the full amount of the Debtors' indebtedness to 770 Corp.," per the Endorsement, para. 6, the Approval and Vesting Order, Oct. 6, 2026, para. 4 and the Distribution Order, Oct. 6, 2026, para. 4.

Olive Branch is a high-end kosher grocery supermarket in the Promenade Shopping Centre in Thornhill, Ontario, operated by PerfectKo Limited Partnership, whose general partner is PerfectKo GP Inc. 770 Corp. is the debtors' sole secured creditor, owed approximately $14.2 million with interest and costs still accruing, per the Factum of the Interim Receiver, Sept. 22, 2026, paras. 7, 9, 37(b). How the sale approved in June failed to close, and how the interim receiver came to sign with Kosher Grocers for $4,850,000 on September 11, was reported here on September 19. The interim receiver terminated the June agreement on August 6, per the Endorsement, para. 5 and the Fourth Report of the Interim Receiver, Sept. 18, 2026, s. 5.0, paras. 2, 3(c).

Four parties and a right to credit bid

The factum of October 5 was filed for PerfectKo Limited Partnership, PerfectKo GP Inc., 4798670 Nova Scotia Limited and Kauftheil, whom the endorsement calls the "Kauftheil Parties." The factum lists Kauftheil's roles: president and secretary of the general partner, an investor in the partnership, personal guarantor of 770 Corp.'s loan, and principal of 4798670 Nova Scotia Limited, the "Approved Buyer" under the agreement the court approved on June 17, per the Responding Factum, para. 1(c).

The proposed sale, it said, "would be to an affiliate of the lender and is in substance a credit bid for far less than the amount of the loan … and over $7 million less than the Approved Buyer has agreed to pay." No appraisal or valuation had been done, the factum said, and there was no evidence of any marketing since the termination. The only evidence of value was what it called "a low ball offer" in the sale process, the only other bid, and that offer "is not evidence of value because of the market chill due to the Senior Lender's right of first refusal built into the original SISP," per the Responding Factum, paras. 2, 3(b)–(c), 14.

The right it meant is in s. 14 of the sale process approved in March. If no qualified bid would pay 770 Corp.'s indebtedness in full in cash, and the interim receiver obtained its counsel's opinion that the security was valid and enforceable, 770 Corp. had "the right, but not the obligation, to credit bid the Indebtedness in an amount that exceeds the highest bid," per the SISP Approval Order, Mar. 9, 2026, Sch. "A", s. 14. The factum read "highest bid" as the June buyer's. Accepting Kosher Grocers' offer, it argued, "violates the SISP, which requires the Senior Lender to beat the highest offer made during the SISP, not the lowest offer." In its account the process "worked as a process to pressure Mr. Kauftheil to redeem the loan by buying back his business at full price," not one to discover market value, per the Responding Factum, paras. 3(d), 16.

For the chill, it cited Quest University Canada (Re), 2020 BCSC 1883, Xebec Adsorption (2023 QCCS 466) and Groupe Sélection (2023 QCCS 923), in which courts vested out or stayed rights of first refusal, while noting that those cases concerned private rights "rather than as here SISP with a built in ROFR being relied on as evidence of value for an offer made after the SISP was conducted," per the Responding Factum, paras. 34–36, 38.

The forfeit deposit

The second fight was over money already paid. The Fourth Report defines the $3.5 million deposit and the $250,000 final deposit, together, as the "Forfeit Deposit," and says the interim receiver has retained it under the original agreement and its amendments, per the Fourth Report, s. 4.0, paras. 11(b), 16.

The dispute dates from the day of termination. On August 6 Besant wrote that the client "does not agree that there is an entitlement to terminate at this point" and "remains ready willing and able to close." "The delay in the wire is a force majeure event beyond our client's control," the email said, and "[t]he deposit far exceeds any possible damages (if any)." It reserved the right to seek relief from forfeiture, "to exercise rights in the nature of the equitable right of redemption," and to seek specific performance, per the affidavit of a Gardiner Roberts legal assistant, Oct. 5, 2026, para. 1, Ex. "A". Sean Zweig of Bennett Jones replied the next day: "The Interim Receiver had a crystal clear right to terminate, which was recently confirmed by your client in the latest Acknowledgement and Waiver." The reply went on, "And I will not even engage on your suggestion that there has been a force majeure, which we all know is not the case," per the Kirkman Affidavit, para. 3, Ex. "B", p. 8.

By the factum's account none of it had been decided: whether an extension should have been granted, whether the termination was permissible, whether the deposit could be forfeited, or "the status and repayment of the interim operating advances" the buyer had made. It raised "a course of dealing involving serial extensions which may rebut the usual deal principle that time is of the essence," and said the termination rested on "a misconception that the Lender only needed to overbid the lowest bid not the highest bid." The Kauftheil Parties asked that the sale approval be dismissed or adjourned to let the interim receiver "develop and tender additional evidence of value," that a procedure be set to decide the disputes over termination and the deposit, and that the deposit not be distributed until its forfeiture was determined, per the Responding Factum, paras. 12, 27, 45, 47.