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Insolvency - CCAA - Appeals. Urbancorp Inc. v. 994697 Ontario Inc.
In Urbancorp Inc. v. 994697 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered the CCAA s.13 leave to appeal test:[12] As a preliminary point, Downing Street submits that because Edge was assigned into bankruptcy by the Monitor, the appeal provisions of the BIA apply rather than s. 13 of the CCAA. In our view, the commencement of and assignment of the claims in this case were authorized by a CCAA judge and that order was “made under” the CCAA such that leave to appeal is required under the CCAA. The decision of this court in Urbancorp Inc. v. 994697 Ontario Inc., 2023 ONCA 126, involved identical parties and action and analyzed when an order is “made under” the CCAA. The issue in that case was whether the CCAA leave test applied to an appeal of a motion judge’s pleadings order. This court concluded that the CCAA applied. Although the specific fact of Edge’s subsequent assignment into bankruptcy did not play a part in that judgment, the analysis in that case applies equally to the present case.
[13] Accordingly, the usual test for granting leave under the CCAA applies. In determining whether leave should be granted, this court considers whether:a. the proposed appeal is prima facie meritorious or frivolous;
b. the points on the proposed appeal are of significance to the practice;
c. the points on the proposed appeal are of significance to the action; and
d. the proposed appeal will unduly hinder the progress of the action. Stelco Inc. (Re) (2005), 2005 CanLII 8671 (ON CA), 75 O.R. (3d) 5 (C.A.), at para. 24; Timminco Limited (Re), 2012 ONCA 552, 2 C.B.R. (6th) 332, at para. 2; and Nortel Networks Corporation (Re), 2016 ONCA 332, 130 O.R. (3d) 481, at para. 34 (“Nortel Networks 2016”), application for leave to appeal discontinued, [2016] S.C.C.A. No. 301.
[14] While the jurisprudence does not clearly indicate whether the four factors from the test are conjunctive, this court has treated the failure to demonstrate that the proposed appeal is prima facie meritorious as fatal: Timminco Limited (Re), at para. 3 and Nortel Networks Corporation (Re), 2013 ONCA 427, at para. 4.
[15] Leave to appeal is also granted sparingly and only where there are “serious and arguable grounds that are of real and significant interest to the parties”: Stelco, at para. 24; Timminco Limited (Re), at para. 2; and Nortel Networks 2016, at para. 34.
[16] We conclude that leave is not warranted. We are not satisfied that the proposed appeal is prima facie meritorious, nor that it raises issues of significance to the insolvency practice. While the appeal may be of significance to this action, standing alone, this factor is insufficient to warrant granting leave to appeal in this case: Nortel Networks 2016, at para. 95; and Urbancorp Toronto Management (Re), 2022 ONCA 181, 96 C.B.R. (6th) 165, at para. 48. . U.S. Steel Canada Inc. (Re)
In U.S. Steel Canada Inc. (Re) (Ont CA, 2023) the Court of Appeal set out the CCAA test for leave to appeal:[22] In our view, it is not arguable that the motion judge erred in concluding that the CCAA applied. Accordingly, the usual test for granting leave under the CCAA applies.
[23] Under this test, the court will consider whether:. the proposed appeal is prima facie meritorious or frivolous;
. the points on the proposed appeal are of significance to the practice;
. the points on the proposed appeal are of significance to the action; and
.whether the proposed appeal will unduly hinder the progress of the action. See Nortel Networks Corporation (Re), 2016 ONCA 332, 130 O.R. (3d) 481, at para. 34; Urbancorp Toronto Management Inc. (Re), 2022 ONCA 181, at para. 3. . Urbancorp Inc. v. 994697 Ontario Inc.
In Urbancorp Inc. v. 994697 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered the criteria for granting leave to appeal under s.13 of CCAA:(2) Should leave to appeal be granted?
[25] We start with the well-established principle that leave to appeal under s. 13 of the CCAA is granted sparingly and only where there are “serious and arguable grounds that are of real and significant interest to the parties”: Nortel Networks Corporation (Re), 2016 ONCA 332, 130 O.R. (3d) 481, at para. 34.
[26] In Urbancorp Toronto Management Inc. (Re), 2022 ONCA 181, at para. 3, this court recently reiterated the following factors for consideration in determining whether leave should be granted:a. the proposed appeal is prima facie meritorious or frivolous;
b. the points on the proposed appeal are of significance to the practice;
c. the points on the proposed appeal are of significance to the action; and
d. the proposed appeal will unduly hinder the progress of the action. [Citations omitted.] [27] The appellants meet none of the criteria for leave. We see no error in the motion judge’s analysis or conclusions in striking as irrelevant the paragraphs from the amended statement of claim; no grounds of the appeal are of significance beyond the parties to this litigation; the amended statement of defence does not depend on the struck paragraphs with the result that the outcome of the proposed appeal will have little real effect on the action other than create unnecessary delay; and the proposed appeal will unduly hinder the progress of the action which is arrested at the pleadings stage. We also note that the proposed appeal equally hinders the progress of the CCAA proceedings and the distribution of assets to creditors. . Urbancorp Inc. v. 994697 Ontario Inc.
In Urbancorp Inc. v. 994697 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered a novel appeal situation where active litigation, arguing OBCA oppression breaches (and more), had been assigned by a CCAA 'monitor' (akin to a receiver) to creditors. When an interlocutory appeal arose that required a decision of which appeal jurisdiction should govern [ie. the CJA s.19(1)(b), OBCA s.255 or the CCAA s.13] (the immediate concern was whether leave to appeal was required) the court has to address it:[9] The correct analytical framework to be followed in determining whether an order requires leave to appeal under s. 13 of the CCAA was set out by Brown J.A., sitting as a single motions judge, in Essar Steel Algoma (Re), 2016 ONCA 138, 33 C.B.R. (6th) 172. He advanced a purpose-focused inquiry that was informed by the legislative purpose underlying the s. 13 leave requirement and reflected in his survey of Canadian cases.
[10] As Brown J.A. concluded, the leave requirement in s. 13 reinforces the CCAA goal of enabling a company to deal with creditors while carrying on business by resolving matters and obtaining finality without undue delay: Essar, at para. 20. As a result, the words, “made under this Act” in s. 13 must be given a broad interpretation to achieve the Act’s legislative purpose: Essar, at para. 22.
[11] Brown J.A. very helpfully set out a summary of relevant indicia for an appellate court to consider when determining whether an order requires leave to appeal under s. 13 of the CCAA, at para. 34:To aid that purpose-focused inquiry, the case law has identified some indicia about when an order is “made under” the CCAA. In [Redfern Resources Ltd. (Re), 2011 BCCA 333, 94 C.B.R. (5th) 53], Tysoe J.A. stated a court should ask whether the order was “necessarily incidental to the proceedings under the CCAA” or “incidental to any order made under the CCAA”: at paras. 9 and 10. In [Monarch Land Limited v. CIBC Mortgages Inc., 2014 ABCA 143, 575 A.R. 46], O'Brien J.A. looked at whether the order required the interpretation of a previous order made in the CCAA proceeding or involved an issue that impacted on the restructuring organization of the insolvent companies: at paras. 8 and 15. As mentioned, in [Sandhu v. MEG Place LP Investment Corporation, 2012 ABCA 91], Paperny J.A. stated that s. 13 of the CCAA would apply if “CCAA considerations informed the decision of and the exercise of discretion by the chambers judge” or “if a claim is being prosecuted by virtue of or as a result of the CCAA”: at paras. 16 and 17. [Emphasis added.] See also: Hemosol Corp. Re, 2007 ONCA 124, 31 CBR (5th) 83.
[12] This framework is also consistent with and similar to the approach followed by this court and the Supreme Court of Canada in determining whether leave to appeal should be granted under other statutes with similar language and similar legislative purpose: see, for example, 1) with respect to leave to appeal provisions under the BIA: Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13; Dal Bianco v. Deem Management Services Ltd., 2020 ONCA 585, 82 C.B.R. (6th) 161; Ting (Re), 2021 ONCA 425, 90 C.B.R. (6th) 32, leave to appeal refused, [2021] S.C.C.A. No. 307; Rusinek & Associates Inc. v. Arachchilage, 2021 ONCA 112, 87 C.B.R. (6th) 1; and 2) with respect to the leave provisions under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (“CBCA”) and the OBCA: Kelvin Energy Ltd. v. Lee, 1992 CanLII 38 (SCC), [1992] 3 S.C.R. 235 (CBCA); Ontario Securities Commission v. McLaughlin, 2009 ONCA 280, 75 C.P.C. (6th) 26; and 1186708 Ontario Inc. v. Gerstein, 2016 ONCA 905 (OBCA).
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[20] Where the jurisdiction of a court emanates from both the CCAA and another statute, it is unhelpful to deconstruct the proceedings to determine which elements of the case fall under the CCAA and therefore require leave. Rather, as Paperny J.A. noted in Sandhu, at para. 17, “if a claim is being prosecuted by virtue of or as a result of the CCAA, section 13 applies.”
[21] In McLaughlin, this court followed the same broad approach in determining whether an order dismissing a motion to amend a statement of defence was made under the OBCA such that s. 255 required the appeal to proceed before the Divisional Court. O’Connor A.C.J.O. rejected the appellant’s argument that the order dismissing his motion was made under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and not the OBCA, so s. 255 of the OBCA did not apply, and as an appeal of a final order, the appeal would properly lie to the Court of Appeal under the Courts of Justice Act, s. 6(1)(b): at para. 12. In dismissing this argument, O’Connor A.C.J.O reasoned that the power exercised by the motion judge was “sufficiently ‘close’” to a legislative source under the OBCA, “namely, the power to adjudicate on oppression claims under s. 248” and that, “[i]mplicit in that power is the authority to allow or deny certain claims and defences”: at para. 16. He also relied on the same policy grounds that are applicable to CCAA proceedings, concluding that his interpretation was consistent with the legislative purpose of providing “a fast and effective remedy”: at para. 18.
[22] The appellants rely on McLaughlin and argue that the case at hand is distinguishable because it dealt only with an appeal of an order made under the OBCA, whereas this appeal involves claims based on both the CCAA and the OBCA, and the order to strike pleadings was made based on the court’s inherent jurisdiction to control its own process, as codified in the Courts of Justice Act. While the court held that the legislative power exercised by the motion judge in McLaughlin was “sufficiently close” to the OBCA, the appellants argue that because the order on appeal in this case involves the adjudication of claims under two statutes and a final order made under a common law power, it does not meet the “sufficiently close” test set out in McLaughlin. Specifically, the appellants contend that since the dismissal of the oppression remedy addresses a defence under the OBCA alongside the underlying CCAA proceedings, the appeal does not arise from the exercise of a legislative power that is “sufficiently close” to either the CCAA or the OBCA to constitute an appeal of a decision made under either Act. Accordingly, the appellants argue that their appeal lies properly to this court under the Courts of Justice Act.
[23] We disagree. The struck pleadings are connected to the knowledge of the Foreign Representative to whom the claim was assigned. They are aimed specifically at the transfers at undervalue, which is directly connected with the Urbancorp Companies’ insolvency and the creditors’ claims under the CCAA. Moreover, the order striking the paragraphs potentially impacts the restructuring under the CCAA as it defines the scope of available defences in relation to the s. 96 BIA claims. Circumscribing the breadth of the defence may impact the potential success of the insolvency-related causes of action and the resulting recovery on the part of the creditors. The tangential impacts on the oppression remedy defence referenced by the appellants do not affect our conclusion that the appeal is of a decision made under the CCAA.
[24] We therefore conclude that the appeal fits within the scope of the CCAA, and as such, the appellants require leave to appeal under s. 13 of the CCAA. . DEL Equipment Inc. (Re)
In DEL Equipment Inc. (Re) (Ont CA, 2020) the Court of Appeal set out the test for leave the appeal to the Court of Appeal under ss.13-14 of the CCAA:[12] This court will only sparingly grant leave to appeal in the context of a CCAA proceeding. Leave will be granted only where there are “serious and arguable grounds that are of real and significant interest to the parties”, determined by considering whether: (i) the proposed appeal is prima facie meritorious or frivolous; (ii) the issue on the proposed appeal is of significance to the practice; (iii) the issue on the proposed appeal is of significance to the proceeding; and (iv) the proposed appeal will unduly hinder the progress of the proceeding: Stelco Inc., (Re) (2005), 2005 CanLII 8671 (ON CA), 75 O.R. (3d) 5 (C.A.), at para. 24. . Just Energy Group Inc. (Re)
In Just Energy Group Inc. (Re) (Ont CA, 2022) the Court of Appeal set out the leave to appeal test for a CCAA insolvency matter:[10] It is well-established that leave to appeal is granted sparingly in CCAA proceedings and only where there are serious and arguable grounds that are of real and significant interest to the parties. In addressing whether leave should be granted, the court will consider:1) whether the proposed appeal is prima facie meritorious or frivolous;
2) whether the points on the proposed appeal are of significance to the practice;
3) whether the points on the proposed appeal are of significance to the action; and
4) whether the proposed appeal will unduly hinder the progress of the action: see, for e.g., Stelco Inc. (Re) (2005), 2005 CanLII 8671 (ON CA), 75 O.R. (3d) 5 (C.A.), at para. 24; Timminco Ltd. (Re), 2012 ONCA 552, 2 C.B.R. (6th) 332, at para. 2; Nortel Networks Corp. (Re), 2016 ONCA 332, 36 C.B.R. (6th) 1, at para. 34.
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