Limiting the monitor's enhanced powers?

AlixPartners Restructuring Inc. v Li, 2026 ABCA 269
Should the court limit the monitor's enhanced powers?

Summary: The Alberta Court of Appeal has granted a former director leave to appeal orders giving the CCAA monitor broad investigative powers after allegations emerged that approximately $9 million had been wrongfully withdrawn from the company and concealed from the monitor. The former director argued that powers compelling him to produce documents and submit to questioning could infringe his Charter rights, particularly because the Calgary Police Service was actively investigating and the monitor had said it intended to cooperate with police. The Court of Appeal found a non-frivolous and practice-significant issue as to whether the chambers justice should have imposed safeguards or narrowed the orders to ensure the monitor's court-authorized powers were not used beyond its CCAA mandate in a manner that risked breaching the applicant's constitutional rights. It granted leave on that issue and stayed the relevant provisions pending appeal, while noting the appeal would not prevent the monitor from investigating other persons or sources or otherwise administering the restructuring.

On March 28, 2024, Alphabow Energy Ltd filed a Notice of Intention to Make a Proposal pursuant to the Bankruptcy and Insolvency Act. Those proceedings were subsequently continued under the Companies’ Creditors Arrangement Act. The applicant acted as a director of Alphabow during part of the CCAA proceedings until his resignation effective June 15, 2026.

The Monitor's legal counsel was contacted by counsel for a third party interested in the CCAA proceedings, who advised the Monitor of allegations that the applicant may have personally, or through an entity he controlled, withdrawn funds from Alphabow's bank account and that the Calgary Police Service had been contacted. The Monitor concluded on a preliminary basis that approximately $9 million had been wrongfully withdrawn from the company's bank account, and the withdrawals were deliberately concealed from the Monitor throughout the CCAA proceedings.

The Monitor applied for enhanced powers. The applicant’s counsel objected to the inclusion of provisions enabling the Monitor to compel the applicant to produce documents and submit to questioning on the basis that they would permit a violation of his ss 7 and 8 Charter rights. The Court ultimately granted wide investigative powers to the Monitor, finding that the nature of the investigation did not have a predominant purpose of determining penal or criminal liability. The Court concluded that the Monitor’s statement that it planned to cooperate with the police regarding any criminal investigation did not change the Monitor’s predominant purpose to pursue its mandate under the CCAA.

The applicant applied for permission to appeal the two Orders for Enhancement of Monitor's Powers and Stay Extension, as well as a stay of enforcement of certain paragraphs. Among other things, the applicant argued that the Court erred in finding the investigation did not have a predominant purpose of determining penal or criminal liability, and in granting the Monitor enhanced investigative powers without sufficient protections of the applicant's constitutional rights.

The test for leave to appeal under s 13 of the CCAA is based on four criteria, to be assessed collectively: 1) whether the appeal is prima facie meritorious (i.e. not frivolous); 2) whether the appeal will unduly hinder the progress of the action; 3) whether the point raised is of significance to the action itself; and 4) whether the point on appeal is significant to the practice. Leave to appeal under s 13 of the CCAA is discretionary and must be exercised sparingly. Intervention is justified only where the judge erred in principle or exercised discretion unreasonably.

Unlike other types of third parties, the Monitor was an officer of the Court carrying out statutory duties under s 23 of the CCAA. In these particular circumstances, the Court was asked to authorize the Monitor to exercise broad investigative powers in circumstances where there was an active police investigation, the police had requested evidence of the Monitor to determine whether a criminal offence had occurred, and the Monitor had expressed an intention to fully cooperate with the police investigation. The Court of Appeal noted that a non-frivolous issue arose in these circumstances, being whether the chambers justice erred in failing to include provisions, or limit the scope of the Orders, so as to ensure the powers granted were not used in a manner that exceeded the Monitor’s CCAA mandate and risked breaching the applicant’s relevant Charter rights. This issue was of significance to the action and to the practice.

The applicant also argued that the Orders were overbroad and exceeded the reasonable exercise of the Court's jurisdiction. The scope of the powers granted, and the balancing of stakeholder interests, are discretionary CCAA determinations reviewable for palpable and overriding error or error in principle. The chambers justice’s decision regarding the scope of the powers was tied to her analysis of the implications of the communications between the police and the Monitor. Given that the applicant framed his concerns relating to the powers granted only insofar as they affected him, the scope of powers issue was not of significance to the practice except as it might be affected by the first issue identified above.

It was clear the appeal would have some effect on the CCAA proceedings, but it would not interfere with the Monitor's ability to investigate or obtain records and information from other persons and sources, nor would it impact the Monitor's ability to deal with the property of Alphabow or to close any transactions on behalf of Alphabow.

Accordingly, the factors weighed in favour of granting the application with respect to the following general issue: Did the chambers justice err in failing to include provisions, or limit the scope of the Orders, so as to ensure the investigative powers granted to the Monitor by the Court were not used in a manner that exceeded the Monitor’s CCAA mandate and risked breaching the applicant’s relevant Charter rights?

The Court granted the applicant permission to appeal and a stay pending appeal.

Judge: The Honourable Justice Jane Fagnan

Professionals involved:

• Ian McKay, KC and Heather Ferg of McKay Ferg, and Paul Chiswell and Joanne Luu of Burnet, Duckworth & Palmer for the applicant, Ben Li

• Jeffrey Oliver, Melissa Burkett and Danica Jorgenson of Cassels for the respondent, AlixPartners as monitor