Lessor Repossession During a Stay: Walgre Transport Inc. (Re)

Overview 

On December 22, 2025, the Ontario Superior Court of Justice (Commercial List) released its reasons Walgre Transport Inc (Re), 2025 ONSC 7143 at paras 1–2 [Walgre] regarding TD Equipment Finance Canada’s (“TDEF”) ability to complete enforcement on certain equipment leased by Walgre Transport Inc. (“Walgre”) (the “Leased Equipment”). At the time, Walgre had been afforded a stay of proceedings (the “Stay”). (Ibid at para 3(g); The NOI proceedings and corresponding stay of proceedings under the Bankruptcy and Insolvency Act were continued, without prejudice to TDEF’s position, under the Companies’ Creditors Arrangement Act, RSC, 1985, c C–36 (the “CCAA”) on October 8, 2025 (Ibid at paras 3(k), 3(i)) 

In this decision, the Court permitted TDEF to complete enforcement by taking possession of the Leased Equipment. (Ibid at para 2.) This was decided on the basis that, among other things, TDEF had completed all steps for enforcement prior to the Stay being granted, save for being granted physical possession of the Leased Equipment. (Ibid at para 19.) The Court held that Walgre’s failure to deliver physical possession at the time of, and subsequent to, the Stay being granted did not preclude TDEF from being given possession of the Leased Equipment. (Ibid.) 

Background 

Walgre operated a trucking business. (Ibid at para 3(a)) In early 2025, Walgre began experiencing financial difficulties, and by May 12, 2025, it was in default under each of the leasing agreements concerning the Leased Equipment (Ibid at paras 3(d), 6(a)). With respect to ownership, Walgre did not have an interest in the Leased Equipment—its rights of use and an eventual buyout were derived from the governing lease agreements. (Ibid at para 36.) 

On June 4, 2025, TDEF delivered to Walgre: 

• a notice of intention to enforce security under s. 244 of the Bankruptcy and Insolvency Act (Bankruptcy and Insolvency Act, RSC, 1985, c B3 [BIA].) (the “BIA”) (“BIA NITES”); 

• a demand and termination letter (the “Letter”) declaring the lease agreements terminated, all amounts owing under those agreements immediately due and payable, and demanding the return of the Leased Equipment within ten days; and 

• a notice under s. 63(4) of the Personal Property Security Act (Personal Property Security Act, RSO 1990, c P10 [PPSA]) advising Walgre of TDEF’s intention to dispose of the Leased Equipment unless Walgre redeemed it (the “PPSA Notice”) (together, the “Enforcement Documents”). (Ibid at paras 3(e)–(g), 11.) 

By the expiry of the notice periods contained in the Enforcement Documents, Walgre did not exercise its redemption right or indicate a desire to do so, and it did not return the equipment to TDEF. (Ibid at paras 3(f), 6(e), 6(h)). On June 25, 2025, TDEF wrote to Walgre and reiterated that it required the delivery of the Leased Equipment. (Ibid at paras 6(i)) Two days later, on June 27, 2025, Walgre obtained creditor protection pursuant to the BIA, including the Stay, by filing a notice of intention to make a proposal (“NOI”). (Ibid at paras 3(g), 9.) 

Following the NOI filing and the accompanying Stay, TDEF maintained the position that the Stay did not apply to the Leased Equipment, and Walgre disagreed. (Ibid at para 9.) 

The Stay Was Not a Bar to TDEF’s Possession Motion 

TDEF brought a motion to address repossession of the Leased Equipment, which was heard on October 17, 2025, with reasons delivered on December 22, 2025. Justice Kimmel agreed with TDEF and ordered that the Leased Equipment be returned. (Ibid at para 43.) While granting TDEF possession of the Leased Equipment, Justice Kimmel noted that further remedies for TDEF, such as damages, may have been subject to the Stay. (Ibid at para 26.) However, TDEF’s rights as owner to use and possess the Leased Equipment predated the Stay. (Ibid.) 

Justice Kimmel explained that a stay operates to preserve the debtor’s status quo as of the date it takes effect. (Ibid at para 16.) As of June 27, 2025, Walgre’s status quo did not include any right to possess or use the Leased Equipment because the lease agreements had already been terminated. (Ibid; Justice Kimmel also held that Walgre’s subsequent designation of certain equipment as “essential” to restructuring could not revive rights under the terminated lease agreements, Ibid at para 17.) Justice Kimmel made two observations in holding that the lease agreements were terminated prior to the NOI proceeding. (Ibid at paras 11–12.) First, the lease agreements did not contemplate any contractual notice period as a precondition to an effective termination. (Ibid.) Second, irrespective of their applicability, any relevant statutory notice periods had expired without redemption rights being exercised before June 27, 2025—the BIA NITES expired on June 14, 2025, and the PPSA Notice expired on June 20, 2025. (Ibid at para 11.) As such, when TDEF reiterated its demand for the return of the Leased Equipment on June 25, 2025, it had completed its final remedial step for obtaining possession. TDEF was not in possession solely because Walgre refused to disclose the precise location of the Leased Equipment or otherwise return it to TDEF. (Ibid at para 19.) 

Walgre advanced various procedural and policy-based arguments in support of its position, but Justice Kimmel rejected these as incorrect characterizations and “speculative,” respectively. (Ibid at paras 31, 40.) The Court observed that Walgre’s arguments required an improper characterization of TDEF’s efforts as owner to secure possession of the Leased Equipment as a continuing exercise of secured creditor remedies. (Ibid at paras 31–32.) Justice Kimmel further reasoned that even where a creditor has a contractual right of termination, which is not always the case, it would be “speculative” to assume that termination would necessarily be the preferred course at the first sign of financial trouble in a debtor. (Ibid at paras 40–41.) 

Takeaways 

This case is instructive in determining when a lessor’s termination and enforcement efforts have been fully completed. It stands for the proposition that if a lessor has completed all steps of termination and enforcement prior to an insolvency proceeding, and the debtor simply refuses to surrender physical possession of an asset, that asset will not be subject to a stay of proceedings. It also serves as a cautionary tale for debtors in that deadlines in demands issued under s. 244 of the BIA and s. 63 of the PPSA are critical, and failure to address them before expiry may foreclose a debtor’s ability to prevent a creditor’s repossession efforts. 

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