Hudson’s Bay Company’s landlords have won a rare CA$2.4 million costs award in Ontario court, as reported by Retail Insider, capping a multi year fight over an ambitious, but ultimately rejected, lease transfer plan to B.C. billionaire Ruby Liu. Landlords had collectively pushed back against a proposal they viewed as too uncertain, and the ruling now stands as an unprecedented warning on litigation strategy in complex retail restructurings.
How Hudson’s Bay Got Here
The dispute traces back to Hudson’s Bay Company’s insolvency and the closure of all remaining stores, which left a portfolio of prime but vacant department store boxes across Canada. To raise funds for creditors, the company pursued a deal to transfer 25 leases for former Hudson’s Bay and Saks OFF 5TH locations to investor Ruby Liu for CA$69.1 million.
Liu’s vision was to convert these shells into a new department store concept that blended retail with entertainment and dining, betting that multi use experiences could revive big box footprints. She had already secured leases for two additional former Hudson’s Bay and OFF 5TH sites in malls she owns, aiming to create a small network of reimagined destinations rather than isolated one off experiments.
However, after months of scrutiny, the court concluded that Liu’s business plan did not offer enough certainty around the long term viability of the properties and blocked the lease transfer. That decision left the leases in limbo, the creditor pool still competing over limited value, and landlords frustrated by the time and cost required to fight a deal they argued should never have advanced.
Landlords’ Pushback and the Missed Settlement Window
A coalition of major Canadian landlords, including Cadillac Fairview, Oxford Properties, Ivanhoé Cambridge, Primaris Management, QuadReal Property Group, Morguard Investments, and KingSett Capital, mounted a coordinated challenge to the Liu transaction. They devoted months to preparing extensive court materials, engaging experts, and participating in multiple hearings to demonstrate why the proposal posed unacceptable risks to their centres and co tenancy ecosystems.
Crucially, the landlords say they tried to resolve the situation earlier. They offered a settlement under which they would take back control of the leases as early as September, absorbing responsibility for removing fixtures, furniture, and signage, and effectively resetting the spaces themselves. Hudson’s Bay Company declined, reportedly countering with a request for CA$29 million, which landlords saw as a non starter and a key reason the dispute escalated instead of closing.
Those failed settlement efforts loomed large in the landlords’ later request for cost recovery. They argued that a consensual solution had been on the table and that the retailer’s decision to press ahead with a legally and commercially fragile deal forced them into expensive, drawn out litigation just to protect their assets.
The Court’s Ruling
In her March 10 decision, Justice Jessica Kimmel awarded landlords CA$2.4 million in legal costs, an outcome that is highly unusual in creditor protection and restructuring proceedings, where parties often bear their own fees. She stressed that the ruling was not meant to punish Hudson’s Bay Company or its lenders, but to indemnify landlords for extraordinary costs triggered by the retailer’s chosen strategy.
“Awarding costs encourages parties in future cases to be thoughtful about litigation strategies, to embrace and fully explore alternatives to litigation, and to make concerted efforts to resolve disputes consensually via settlement,” Kimmel wrote in her March 10 decision. She called the circumstances unprecedented and concluded that an equally unprecedented costs order was justified.
At the same time, the decision stops short of guaranteeing landlords will ever see the money. The court has paused distribution of funds, and Justice Kimmel made clear that questions of payment priority, how this CA$2.4 million ranks alongside other creditor claims, will be an issue for another day. With lenders also fighting for access to remaining assets, landlords’ wins on paper may not translate into full cash recovery.
Hudson’s Bay’s Position
Hudson’s Bay Company opposed the cost award, warning that high costs against an insolvent retailer could deter others from testing innovative restructuring paths that might preserve value and jobs. The company argued that if any costs were granted, they should be nominal, in order not to chill future use of court supervised processes.
The retailer also pointed out that landlords had continued to receive almost CA$15 million in rent during the period when Hudson’s Bay was pursuing court approval for the Liu deal, despite the properties being otherwise vacant. In their view, this ongoing income should have weighed against a substantial costs award.
Justice Kimmel ultimately sided with landlords, concluding that the scale and nature of the case justified significant cost recovery even within the constraints of insolvency law. But by deferring any decision on priority and payment mechanics, the court also acknowledged the practical tension between fairness to landlords and the limited pool available to satisfy all creditor claims.
Lessons for Landlords, Retailers, and Lenders
This case offers several clear lessons for stakeholders navigating distressed retail situations in Canada:
- Early settlement is critical: The court’s emphasis on landlords’ earlier settlement attempts, and Hudson’s Bay’s rejection, shows judges are watching not just outcomes, but conduct over the full timeline. Parties who ignore viable compromise risk cost consequences later.
- Restructuring creativity has limits: Ambitious concepts, like Liu’s entertainment and retail department store model, must still satisfy courts that they provide sufficient certainty and protect counterparties, especially when long term leases and major landlords are involved.
- Cost risk is now real in insolvency fights: A CA$2.4 million award of this type is a notable precedent. Landlords may be more willing to resist controversial deals knowing that, in exceptional cases, courts can compensate extraordinary legal efforts.
- Winning a judgment ≠ getting paid: Even with a landmark order, landlords remain just one group in a crowded creditor queue. The decision underlines that in large retail insolvencies, recovery is as much about capital structure and priority as it is about courtroom victories.
For future restructurings, the Hudson’s Bay and Liu saga will likely be cited as a case study in how deal structure, negotiation behavior, and litigation choices can influence not just outcomes, but who ends up footing the legal bill.
