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DGDP-BC Holdings v Third Eye Capital Corp, PricewaterhouseCoopers, 2021 ABCA 33

When will a court grant leave to appeal under section 193 of the BIA?

DGDP-BC Holdings Ltd. (“DGDP”), an interim lender in the CCAA proceedings of Accel Canada Holdings Limited (“Accel”) before those proceedings were converted into a receivership, sought leave under s. 193(e) of the Bankruptcy and Insolvency Act to appeal paragraph 4 of a sale approval and vesting order that extinguished its security interest in the assets, property and undertakings of Accel. The test for leave involves four discrete questions:

  1. Is the question that DGDP seeks permission to appeal significant to those who practice at the insolvency bar?
  2. Is the question that DGDP seeks permission to appeal significant to the parties?
  3. Does the proposed appeal have merit?
  4. Will the proposed appeal unduly hinder the insolvency proceedings?

The question on appeal would be whether an interim lender, with a standard, Court-ordered, super-priority Interim Lenders’ Charge and Court-ordered status as an unaffected creditor in any CCAA plan of arrangement or compromise can have those protections and “certainties” stripped from it when the CCAA proceeding is converted into a receivership proceeding. This question is significant to the parties and the insolvency bar at large. Interim lenders who advance funds rely on the protection prescribed by the super-priority interim lenders’ charge. They need to know if their reliance is misplaced.

DGDP argued that “[n]o lender would risk participating in such a loan if the Court-ordered priority was subject to variation later in the process”. The Court agreed. The form of security a lender has is a vital consideration when assessing the merits of a loan. DGDP also argued that its position would be significantly prejudiced if the only collateral for its outstanding loan was the assets of Accel. Notwithstanding that other parties had advanced the argument that DGDP would be paid in full, the Court agreed that paragraph 4 of the contested order could adversely affect the interests of DGDP. As such, the question on appeal was of significance to DGDP.

The Court went on to consider whether the proposed appeal passed the merit-based component of the test for leave. The merit-based component requires the applicant to satisfy the adjudicator-gatekeeper that its appeal is not frivolous. A “position is frivolous if … the likelihood it will succeed is extremely low. It makes no sense to ask an appeal court to hear appeals that are frivolous”. Here, the Court was satisfied that DGDP’s prospects of succeeding on appeal met this low merit-based standard.

Next, the Court considered whether granting leave to appeal would unduly hinder the progress of the insolvency proceedings. It held that it would not. The applicant did not ask the Court-appointed receiver and manager of Accel to refrain from closing the transaction involving the sale of substantially all the assets of Accel. The receiver advised that it would close the sale transaction if the Court granted DGDB’s application for leave to appeal. Therefore, the argument that an appeal would distract the receiver and impair its abilities to perform its duties was of minimal force. The proposed appeal would not, in fact, unduly hinder the insolvency proceedings.

The Court granted leave to appeal.

Counsel: Terry Czechowskyj, Q.C. of Miles Davison LLP and Ian Aversa and Sam Babe of Aird & Berlis LLP for the Applicant, DGDP-BC Holdings Ltd.; Chris Simard of Bennett Jones LLP for the Respondent, Third Eye Capital Corporation; Jessica Cameron of Borden Ladner Gervais LLP for the Respondent, PricewaterhouseCoopers Inc.

Judge: Thomas W. Wakeling J.


Fullcase: https://canlii.ca/t/jcvxt