A recent case out of the Ontario Supreme Court, Re Aeropostale Canada Corp. (Notice of Intention) 2018 ONSC 1468, examined the question of whether a court ordered assignment of a commercial lease pursuant to s. 84.1 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (the “BIA”) would include all terms of the lease, including those limited to the original lessee under the lease who was now bankrupt.
In this case, the bankrupt, Aeropostale Canada Inc., had negotiated and obtained a right to reduce its rate of rent if an anchor tenant’s premises became vacant. This provision provided that this right was only available to Aeropostale. An anchor tenant’s premises was vacant but for reasons unknown Aeropostale had never exercised its right to a reduced rent. The trustee sought assignment of the lease, the landlord did not object and it was accordingly assigned to a new tenant. Approximately one year later the assignee of the lease noticed the provision and sought to enforce it. The landlord denied that it could be enforced on the basis that it was personal to Aeropostale and therefore not assignable.
The court held that the purpose of s. 84.1 is to place an assignee of a lease in the exact same position as the bankrupt. If the landlord had had an objection to the assignment or the applicability of the provisions of the lease that were intended to benefit only Aeropostale, it should have taken that position at the hearing to approve the assignment of the lease. The court held that a provision or agreement is said to be personal when it cannot be usefully performed for or by another person. Such was not the case in these circumstances and accordingly the court ordered that the whole of the lease, including the provisions that applied only to Aeropostale, had been assigned.