Can equity investors bring CCAA proceedings?

Angus A2A GP Inc v Alvarez & Marsal Canada Inc, 2025 ABCA 147
Can equity investors commence CCAA proceedings to prevent property from being sold?

Summary: In this case, the Alberta Court of Appeal granted leave to appeal to a group of real estate holding companies that had been placed under CCAA protection on application by a group of investors who sought to restrain the sale of a property without their consent. The Court stated that this case represents “a unique, if not singular use of the CCAA by equity investors in these circumstances”. The Court was satisfied that this issue met the threshold for leave to appeal, and granted permission for the appeal of the following question to a panel of the Court: Did the supervising justice err in concluding that the Canadian investors came within the scope of the CCAA and that use of the CCAA in these circumstances was proper?

A representative group of Canadian investors invested funds either directly or indirectly in several entities which managed three real estate development projects in Ontario (the Angus Manor Project) and Texas, USA. The Canadian investors did not participate directly in the management, control or sale of the properties. They had rights to financial information, meetings, and opportunities to participate in the direction of the partnerships or trusts that held other interests, including a direct interest in the land through Undivided Fractional Interests (UFIs). These investments were marketed to accredited investors in Canada without a prospectus and facilitated through corporate entities registered in Alberta, Ontario, and Canada. Offshore investors purchased UFIs in the development lands directly and had the right to vote on the sale of those lands.

Canadian investors discovered from a Facebook post that the Angus Manor Group was proceeding with a sale of the Angus Manor Project. They were neither informed of the sale nor contacted by the general partners to approve the sale. They brought a section 11.02 CCAA application seeking an initial stay order (the Initial Order) to temporarily prohibit the sale of the Angus Manor Project alleging insolvency. They sought a stay against the Angus Manor Group as well as the entities running the Texas investments (being the Windridge and Fossil Creek Groups), alleging that they were debtor companies or that they were integrally related to the debtor companies as affiliated entities.

At the hearing, the supervising justice granted the Initial Order, which prevented the sale of any of the properties for a ten-day period and appointed a Monitor with enhanced powers to oversee and exercise control over the Groups. He found that the Groups collectively had more than $5 million in debt and the stay was necessary as the Angus Manor Project would otherwise be sold. On December 20, 2024, the US Bankruptcy Court for the Northern District of Texas granted an order enforcing the Initial Order within the US.

The Groups sought to set aside or stay the Initial Order on the basis that: (1) service had not been properly effected at the Initial Order hearing; (2) the applicants were not insolvent and could not be subject to the CCAA proceedings; (3) the Angus Manor sale represented a fair market arm’s-length transaction that should proceed; (4) the Canadian investors lacked standing to commence the proceedings; and (5) the outstanding stay was prejudicing a much larger group of investors. In the alternative, they sought an adjournment of the hearing. The supervising justice acknowledged the CCAA proceeding was unusual, since the stay was not sought for the purpose of protecting a debtor company from creditors, nor was the proceeding commenced by creditors, but rather by investors who complained the applicants “have completely failed to communicate with them, and that their governance appears to be highly deficient”. Nevertheless, he found that the applicant investors had standing to make the initial order application, and the lack of service was excused by the urgency of the situation and effective notice had been provided for the purpose of the ARIO hearing.

The Groups subsequently sought leave to appeal several orders granted under the CCAA proceedings pursuant to section 13 of the CCAA and rule 14.5(1)(f) of the Alberta Rules of Court. They argued, among other things, that the investors were utilizing the CCAA process for an improper purpose inconsistent with the CCAA. The investors asserted that the lower court made no error in providing the several interim orders it made under the CCAA process. They pointed out that supervising justices under the CCAA have broad discretion under the Act, especially pursuant to section 11, and their decisions are entitled to deference.

All the parties to these applications and the supervising justice noted that this case represents a unique if not singular use of the CCAA by equity investors in these circumstances. The Court was satisfied that this issue met the threshold for leave to appeal, and granted permission for the appeal of the following question to a panel of the Court: Did the supervising justice err in concluding that the Canadian investors came within the scope of the Companies’ Creditors Arrangement Act, and that use of the Act in these circumstances was proper?

Judge: The Honourable Justice Joshua B. Hawkes

Professionals involved:

• Daniel Jukes of Miles Davison for Angus A2A GP Inc. et al.

• Kelsey Meyer, Luc Rollingson and Chyna Brown (student-at-law) of Bennett Jones for Fossil Creek A2A Developments, LLC et al.

• Robyn Gurofsky and Kaitlyn Wong of Fasken for the Canadian Investors

• Howard Gorman, KC and Daniel Stethem of Norton Rose Fulbright for the Offshore Investors

• Kyle Kashuba of Torys for Pillar Capital Corp., the Interim Lender

• Jeffrey Oliver, Danielle Marechal, Danica Jorgenson and Natalie Thompson for Alvarez & Marsal as Monitor