Law360 Canada (December 2, 2020, 6:04 AM EST) -- Appeal by the landlord from a decision of a motions judge limiting the landlord’s entitlement to draw on a letter of credit posted as security by the commercial tenant after the disclaimer of the lease by the tenant’s trustee in bankruptcy. The landlord made draws on the letter of credit after the tenant’s bankruptcy, both before and after the trustee’s disclaimer of the lease, for the full amount of the credit of $2.5 million. On a motion brought by the Trustee, the motion judge determined that the landlord was only entitled to draw on the letter of credit to recover the amount of its preferred claim for three months’ accelerated rent under s. 136(1)(f) of the Bankruptcy and Insolvency Act. In the alternative, the motion judge concluded that, in accordance with the terms of the lease, the letter of credit should have been reduced to $1.35 million in May 2017, just under a year prior to the date of bankruptcy, based on his interpretation of the letter of credit reduction provisions in the lease, with the landlord’s draws limited to the reduced amount. The lease provided the letter of credit could be reduced in the 37th month if the tenant had always promptly paid all rent through the Term. The tenant failed to pay rent twice on the due date prior to May 2017. The motion judge interpreted prompt to mean within a reasonable time....