Friday 7 June 2013

Leave to Appeal Denied in CCAA Case

    The Court of Appeal of Alberta, June 6, 2013

Creditors who are unhappy about a decision under the Companies' Creditors Arrangement Act must obtain leave to appeal to the Court of Appeal. A recent decision of the Court on a leave application confirms that the standard for granting leave is high.

The applicant has to demonstrate that:

(a) the point on appeal is significant to CCAA practice;

(b) the point is important to the action;

(c) the appeal is meritorious; and

(d) the appeal won't unduly delay the CCAA proceeding.

On factual issues, the decision of the judge below will receive considerable deference. The applicant must show that the judge committed legal error.

In Romspen Investment Corporation v. Arsenault, the leave application involved a dispute as to which of two sets of secured creditors had priority over the proceeds from the sale of the Sorrento Inn. The Inn belonged to a company in the Shire International group of companies, which had been granted creditor protection under the CCAA in 2009.

The applicant, Romspen Investment, challenged the priority of the respondents' mortgage on the grounds that certain terms of the deed of trust and mortgage had not been satisfied. In particular, Romspen objected that the mortgage units had not been certified by the mortgage trustee, the units were not signed by an officer of the debtor company, and the respondents were not listed in the register as holders of mortgage units.

The Court of Queen's Bench judge characterized these matters as "irregularities" that did not invalidate the respondents' security.

In dismissing the leave application, Mr. Justice O'Brien stated that the standard of review "militates strongly against a successfull appeal". The decision of the Queen's Bench judge was consistent with precedent, and there was evidence to support her factual findings. Although the issue was important to the parties, it was not of general significance in Mr. Justice O'Brien's view.

The decision is consistent with a practical approach to CCAA matters, in which substance prevails over technical issues.

Romspen Investment Corporation v. Arsenault,

Contact Richard Hayles at Billington Barristers:
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Any legal information provided is general in nature and may not apply to particular situations. It does not constitute legal opinion or advice. Please consult your lawyer regarding your specific legal issue.

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