Securities Law & Instruments

Headnote

Request for partial revocation of cease trade orders to permit transfer of units pursuant to a settlement agreement. Cease trade orders issued for failure to file financial statements. Relief granted subject to conditions. Applicants have provided an undertaking to the Commission to file an application to have the cease trade orders revoked and to take all other necessary steps to have the cease trade orders revoked by September 15, 2004.

Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127 and 144.

Ontario Policies

OSC Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements.

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, C. S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF

SOVEREIGN LIMITED PARTNERSHIP

AND KNIGHTSBRIDGE LONDON LIMITED PARTNERSHIP 1993

 

ORDER

(Section 144)

WHEREAS the securities of Sovereign Limited Partnership ("Sovereign") and Knightsbridge London Limited Partnership 1993 ("Knightsbridge 1993") (collectively, "Sovereign and Knightsbridge 1993, the "Applicants") are subject to a cease trade order dated August 12, 1998 with respect to Sovereign and a cease trade order dated September 19, 2003 with respect to Knightsbridge 1993 (collectively, the "CTOs") issued by the Ontario Securities Commission (the "Commission");

AND WHEREAS the Applicants have applied to the Commission for a partial revocation of the CTOs pursuant to section 144 of the Act solely to permit the trade of limited partnership units issued by Sovereign (the "Sovereign Units") and Knightsbridge 1993 (the "Knightsbridge 1993 Units") (collectively, the Sovereign Units and the Knightsbridge Units, the "Units") to 1450473 Ontario Inc. (the "Purchaser");

AND UPON the Applicants having represented to the Commission that:

    (a) Sovereign is a limited partnership under the laws of Ontario. Sovereign General Partner Limited is the general partner of Sovereign.

    (b) Sovereign is a reporting issuer in Ontario, having become such on or about December 31, 1992 upon obtaining a receipt for a prospectus with respect to the distribution of Sovereign Units in Ontario, and is not a reporting issuer in any other jurisdiction.

    (c) Fourteen Sovereign Units held by 10 unitholders are outstanding. Mandeville Financial Services Limited ("Mandeville"), an affiliate of the Purchaser, owns 4 units. Sovereign has no other securities, including debt securities, outstanding.

    (d) The CTO regarding Sovereign was issued by reason of the failure of Sovereign to file with the Commission audited annual statements for the year ended December 31, 1997.

    (e) Sovereign and Sovereign General Partner Limited have provided an undertaking to the Commission to file an application to have the CTO revoked and to take all other necessary steps to have the CTO revoked by September 15, 2004.

    (f) Sovereign and Sovereign General Partner Limited have apprised themselves of their obligations under Ontario securities legislation to ensure future compliance with Ontario securities legislation.

    (g) Knightsbridge 1993 is a limited partnership under the laws of Ontario. Knightsbridge Baseline Limited is the general partner of Knightsbridge 1993.

    (h) Knightsbridge 1993 is a reporting issuer in Ontario, having become such on or about May 31, 1993 upon obtaining a receipt for a prospectus with respect to the distribution of Knightsbridge 1993 Units in Ontario, and is not a reporting issuer in any other jurisdiction.

    (i) Twenty-one Knightsbridge 1993 Units held by 18 unitholders are outstanding. Knightsbridge 1993 has no other securities, including debt securities, outstanding.

    (j) The CTO regarding Knightsbridge 1993 was issued by reason of the failure of Knightsbridge 1993 to file with the Commission interim statements for the six-month period ended June 30, 2003.

    (k) Knightsbridge 1993 and Knightsbridge Baseline Limited have provided an undertaking to the Commission to file an application to have the CTO revoked and to take all other necessary steps to have the CTO revoked by September 15, 2004.

    (l) Knightsbridge 1993 and Knightsbridge Baseline Limited have apprised themselves of their obligations under Ontario securities legislation to ensure future compliance with Ontario securities legislation.

    (m) Sovereign, Sovereign General Partner Limited, or a "related party" (as the term is defined under Commission Rule 61-501 Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions ("Related Party")) of Sovereign or Sovereign General Partner Limited is not a Related Party of Knightsbridge 1993, Knightsbridge Baseline Limited or a Related Party of Knightsbridge 1993 or Knightsbridge Baseline Limited.

    (n) None of the Plaintiffs are a Related Party of any of the Purchaser, Sovereign, Sovereign General Partner Limited, Knightsbridge 1993 or Knightsbridge Baseline Limited.

    (o) In 1997, two unitholders of Sovereign and four unitholders of Knightsbridge 1993 (the "Plaintiffs") and others, including the holders of units of other limited partnerships, commenced an action (the "Litigation") against Sovereign, Knightsbridge 1993 and other entities, including other limited partnerships, appraisers and investment advisors (the "Defendants"). There are approximately 68 parties to the Litigation.

    (p) As part of the resolution of the Litigation, Sovereign, Knightsbridge 1993 and other parties to the Litigation agreed to a settlement set out in the minutes of settlement dated January 7, 2004, which followed a memorandum of understanding dated October 3, 2003, which requires, among other things, that a "defence entity" purchase all the Units currently held by the Plaintiffs (the "Proposed Transaction"). Affiliates of Sovereign General Partner Limited and Knightsbridge Baseline Limited subsequently determined that the "defence entity" would be the Purchaser, an affiliate of Sovereign General Partner Limited. There has been no admission of liability of the allegations in the Litigation by any party.

    (q) The Purchaser is an accredited investor within the meaning of Commission Rule 45-501 Exempt Distributions.

    (r) The value of each of Sovereign and Knightsbridge 1993 will not be impaired in any way as a result of the Proposed Transaction.

    (s) Sovereign Units and four Knightsbridge 1993 Units or 19.05% of the Knightsbridge 1993 Units will be transferred to the Purchaser. Following the Proposed Transaction, 42.86% of the Sovereign Units and 19.05% of the Knightsbridge 1993 Units will be held by the Purchaser or affiliates of the Purchaser.

    (t) The Plaintiffs and the Applicants had independent legal representation prior to approving the Minutes of Settlement.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 144 of the Act, that the CTOs be partially revoked solely to permit the trades of the Units to the Purchaser pursuant to the Proposed Transaction.

July 29, 2004.

"Erez Blumberger"