The Supreme Court of British Columbia refused to approve a reverse vesting transaction that would have eliminated TimberWest’s and Domtar’s long-standing fibre-supply rights. The Court found that the agreements created proprietary interests in a forestry tenure and that the proposed purchaser had not shown why those rights should be extinguished. The transaction was later approved after the purchaser agreed to retain the agreements.
For businesses affected by insolvency sales, the distinction between a commercial obligation and an interest in property can determine whether an agreement survives a restructuring.
Why the Purchaser Wanted the Agreements Removed
In Teal-Jones Group (Re), 2026 BCSC 1771, Teal-Jones was restructuring under the Companies’ Creditors Arrangement Act. Gillfor Manufacturing Inc. proposed to acquire the company operating the Surrey mill and holding Tree Farm Licence 46 on Vancouver Island.
Under a reverse vesting structure, Gillfor would acquire the operating company’s shares while specified liabilities and unwanted contracts moved into another company. Among the proposed exclusions were timber and fibre-supply agreements established when Teal-Jones acquired the forestry licence from TimberWest in 2004. The arrangements secured continuing supplies of logs, chips and other fibre, including supply important to Domtar’s pulp operations.
TimberWest and Domtar opposed losing those rights.
The Rights Were More Than Ordinary Supply Contracts
The Court found that the agreements created profits à prendre: proprietary interests associated with taking natural resources from land. Their history and wording showed that the supply rights were intended to remain connected to the forestry licence despite changes in ownership.
That legal character mattered. Although a court may approve reverse vesting orders in insolvency proceedings, a purchaser cannot assume that another party’s proprietary interests can be eliminated without consent or sufficient justification. Neither TimberWest nor Domtar had agreed to the proposed removal.
Gillfor argued that retaining the arrangements would make its acquisition uneconomic. The Court found the evidence inadequate. Transactions under the agreements were priced at fair market value, and there was no persuasive evidence that the obligations would cause financial hardship or unreasonably constrain mill operations.
The possible harm to the rights holders was more concrete. Domtar’s evidence indicated that losing the supply agreements could prevent the reopening of its Howe Sound mill and threaten the continued operation of its Port Alberni mill. The Court was not persuaded that the purchaser’s possible economic advantage outweighed that prejudice.
The Court therefore declined to approve the proposed reverse vesting order while the disputed supply agreements remained excluded. Following negotiations, Gillfor agreed to retain the contracts. The revised transaction received court approval on September 18, 2026. The September 18 order also provided that it would not affect Aboriginal or treaty rights, or any applicable duties to consult or accommodate First Nations.
What Businesses Should Take From the Decision
Long-term resource agreements may provide more than a right to receive goods. Businesses acquiring resource tenures should investigate whether connected contracts create proprietary interests that may remain enforceable following a change in ownership or restructuring.
Purchasers seeking to remove burdensome obligations must support their position with evidence of actual commercial consequences, not simply an assertion that the contracts reduce value. Courts also consider the harm to suppliers, customers and other stakeholders.
For parties holding supply rights, clear documentation of their connection to land or a resource tenure may materially affect protection in insolvency proceedings. Here, the Court approved the revised acquisition after the purchaser agreed to retain the disputed agreements.
