THIRD EYE CAPITAL to extinguish a third party’s interest in land using a vesting order under s. 100 of the Courts of Justice Act (CJA)2 and s. 243 of the Bankruptcy and Insolvency Act (BIA)3 ? This decision has important implications on the Canadian restructuring regime and represents an opportunity for the Ontario Court of Appeal to establish a principled approach to determining the jurisdiction of a motions judge to vest out certain rights and proprietary interests. This would assist parties in insolvency proceedings to understand the limits and boundaries of the court’s jurisdiction and their respective rights and entitlements relative to other stakeholders and purchasers of assets in insolvency proceedings. The majority of the case law on the issue has held that the inherent jurisdiction of a motion court does not confer on it the power to take real property from third parties simply because the court considers it equitable to other stakeholders. Rather, the position of the courts has been that the enabling statutes only grant the courts authority to effect a transfer of title to a party who is otherwise or independently entitled to it. 1. FACTS At issue in Third Eye Capital were certain Ontario mining claims held by Dianor Resources Inc. (Dianor), which were subject to Gross Overriding Royalties (GORs) in favour of the appellant, 2350614 Ontario Inc. (235 Co.). Notices of the agreement granting these GORs were registered on title to the relevant surface rights and mining rights of Dianor. As a result of the financial insolvency of Dianor, Third Eye Capital Corporation sought and obtained the appointment of a receiver under s. 243 of the BIA and s. 101 of the CJA over Dianor’s assets, property and undertakings. The receiver ran a sale process for Dianor’s assets and received two bids for the mining claims, both of which included a condition that the GORs be terminated or significantly reduced. Third Eye Capital Corporation, as the secured lender, submitted a bid and was chosen as the successful bidder. In approving the sale of the assets to Third Eye Capital Corporation, the motion judge granted a vesting order which extinguished 235 Co.’s gross royalties. 235 Co., although not opposing the transfer, asked that the mining claims be transferred subject to the royalties. The motion judge rejected 235 Co.’s argument that the royalties constituted an interest in land and held that the court had jurisdiction under the CJA to transfer the mining claims to Third Eye Corporation free and clear of the royalties. On appeal, 235 Co. sought to set aside the order of the motion judge and obtain an order stating that its royalties by way of the GORs constituted an interest in land. The Court of Appeal agreed with 235 Co. that its GORs constitute an interest in land; however, it requested additional submissions on whether a motion judge had jurisdiction to vest out 235 Co.’s GORs in the sale of Dianor’s mining rights to Third Eye Capital Corporation. In its initial reasons, the Ontario Court of Appeal acknowledged several situations under which courts have vested out third party proprietary interests. First, the court considered the “narrow circumstances” exception in common law, according to which third party proprietary interests are allowed to be vested where doing so would provide added certainty and where there is no evidence of competing proprietary interests. Second, the Court stated that related case law has considered the “equities” in establishing priorities among interests. Finally, the Court questioned whether the Superior Court, by virtue of “equitable considerations” and s. 100 of the CJA, has the power to vest out virtually any interest in any asset. 2.  THE NATURE OF VESTING ORDERS GENERALLY Historically, the court’s power to grant vesting orders derived from the law of equity. The Court of Chancery used to grant in personam orders that directed parties to deal with property in accordance with the court’s judgment, which were then enforced in proceedings for contempt, followed by imprisonment or sequestration. Subsequently, the courts were granted statutory power to grant vesting orders and supplemented the contempt power by allowing the Court to effect the change of title directly. 2  RSO 1990, c. C.43, as amended. 3  RSC 1985, c. B-3, as amended. The only team ranked by Chambers Global as the #1 restructuring practice in Canada for the seventeenth year in a row. We are the right team to have on your side to consider and explore all strategic alternatives. For 17 years, Canada’s #1 ranked restructuring practice. Volume 19 Issue 1 Rebuilding Success 27