Extending time to appeal where meaning of underlying decision disputed?

IE CA 3 Holdings Ltd. v. NYDIG ABL LLC, 2024 BCCA 38
Is a dispute over the interpretation of a decision a sufficient basis to grant an extension of time to file a notice of cross-appeal?

Overview: In this case, the Court considered a request for an extension of time to file a cross-appeal in circumstances where a dispute had arisen as to the interpretation of the decision under appeal. The Court granted the extension on terms, emphasizing that a late-filed cross-appeal does not disturb the finality of litigation in the same way that a late-filed appeal does.

The Debtors owed NYDIG more than US $100 million. They used the borrowed funds to purchase approximately 37,800 pieces of specialized computer equipment (the “Equipment”) that generates “hashpower” that is used to mine for Bitcoin, a type of cryptocurrency. A receiver was appointed over the Debtors, and is in the process of, among other things, realizing on the Equipment, which was pledged to NYDIG as collateral under the financing agreement.

NYDIG brought an application seeking a declaration to the effect that the financing agreements granted NYDIG a security interest in all Bitcoin mined using the Equipment and the proceeds derived from the sale of it, or alternatively, among other things, a declaration that the transactions carried out by the Debtors pursuant to the Hashpower Agreements were, as against NYDIG, void as fraudulent conveyances, and should be reversed.

The chambers judge dismissed the primary application concerning NYDIG’s claim for a security interest in the Bitcoin but granted the declaration that the transactions carried out by the Debtors were, as against NYDIG, fraudulent transactions. The Debtors filed their notice of appeal on August 21, 2023 and the parties subsequently exchanged all remaining appeal materials, such that the appeal is ready for hearing and has been scheduled to be heard for one day on March 12, 2024.

While the appeal factums were being exchanged, draft orders were exchanged between the parties in connection with the chamber judge’s reasons. A disagreement arose as to the terms of the order. In NYDIG’s interpretation of the reasons, the chambers judge had declined to dismiss or refuse its requests for a declaration that it is entitled to a remedy under s. 227 of the Business Corporations Act (the “Oppression Remedy”) and for a declaration that the Debtors’ parent company and its subsidiaries be treated as a single debtor entity, pursuant to the doctrine of substantive consolidation (the “Substantive Consolidation Remedy”). In the appellant Debtors’ interpretation, the chambers judge had refused NYDIG’s request for the Oppression Remedy and the Substantive Consolidation Remedy.

In a memorandum issued to the parties on December 13, 2023, the chambers judge advised the parties that he had refused NYDIG’s application for the Oppression Remedy and the Substantive Consolidation Remedy. The formal order, entered on January 17, 2024, reflected that determination. On December 19, 2023, NYDIG advised that it intended to bring the present application for an extension of time to file a notice of cross-appeal regarding the Oppression Remedy and Substantive Consolidation Remedy. On January 16, 2024, NYDIG filed its application for an extension of time to file a notice of cross-appeal and cross-appeal factum.

The criteria applicable to whether to grant an extension of time can be summarized as follows:

1. Was there a bona fide intention to appeal?

2. When were the respondents informed of the intention?

3. Would the respondents be unduly prejudiced by an extension of time?

4. Is there merit in the appeal?

5. Is it in the interests of justice that an extension be granted?

While these considerations also apply to an extension of time to bring a cross-appeal, the weighting of the criteria may be adjusted to account for the reality that a late-filed cross-appeal does not disturb the finality of litigation in the same way that a late-filed appeal does. The most significant factors in assessing an application to extend the time to file a cross-appeal are whether the appellant would be unduly prejudiced by permitting the cross-appeal to be filed and whether, having regard to the nature of the appeal, the issues to be canvassed in the appeal, and the time available for the appellant to respond to the issues raised in the cross-appeal, it is in the interests of justice that all matters in dispute arising from the trial judgment be resolved in one hearing. If the proposed cross-appeal has no merit, the application to extend the time to file should be dismissed. However, unless the lack of merit is obvious, the merits question should be left to the division hearing the appeal.

The Court noted that the parties were diligent in filing their factums and appeal materials so that the appeal could be heard on a timely basis. The reason for the need for an extension of time was the dispute concerning the interpretation of the decision of the chambers judge. The dispute was not resolved until December 13, 2023 when the judge issued his memorandum clarifying that he had refused both alternative declarations sought. NYDIG proceeded promptly to bring this application forward. The question was whether it was in the interests of justice to permit the cross-appeal to be filed, given the impending appeal date. The Debtors argued that while it should have been apparent that the alternative relief had been refused, if there was any real doubt, NYDIG ought to have filed a protective cross-appeal until the matter could be clarified, thereby avoiding the risk of being unable to challenge the judge’s conclusion if their interpretation was rejected.

The Court agreed that it would have been prudent for NYDIG to either file a protective cross-appeal or at a minimum, advise the Debtors of its intention to do so if necessary. However, once the appellants filed their notice of appeal, it was obvious to all that the dispute had not ended and was heading for a different forum. Finality no longer plays a role in assessing the appropriateness of permitting a cross-appeal to proceed. It is difficult to see what difference it would have made to the Debtors to know that NYDIG wished to preserve its rights to assert the declaratory relief it did not obtain at trial. The prejudice to the Debtors from the delay was not so great that the application should be refused.

Accordingly, the Court granted the extension on terms.

Judge: The Honourable Mr. Justice Hunter (In Chambers)

Counsel: Chris Burr and Claire Hildebrand of Blakes for NYDIG; Kieran Siddall and Candace Formosa of Norton Rose Fulbright for the Debtors