Order made in a CCAA proceeding not made under the CCAA

GEC (Richmond) GP Inc. v. Romspen Investment Corporation, 2024 BCCA 343
How do you determine whether an order is made under the CCAA for leave purposes?

Summary: In this case, the Court considered whether leave was required to appeal an order made in litigation that was being dealt with in the context of a CCAA proceeding. The Court found that the fact that an order was made in a CCAA proceeding did not necessarily make it an order made under the CCAA for leave purposes. In this case, the order at issue did not invoke or exercise any statutory provision or authority under the CCAA. The civil actions that were the subject of the order were grounded in pleadings that originated independent of the CCAA proceedings and did not require an interpretation of substantive orders made under the CCAA. Accordingly, the order was not made under the CCAA and leave was not required.

GEC and Alderbridge brought respective applications for leave to appeal an August 7, 2024 order issued by Justice Majawa in the Supreme Court, which arose out of interrelated and overlapping civil actions (the “Related Actions”) that are being tried together and involve disputes between lenders, real estate developers, and a third party in relation to a large commercial and residential development project in Richmond, BC. The respondent in both applications, Romspen, stopped financing the project on March 31, 2020, while construction was at its early stages but after a significant amount of money had been advanced and used by the developers in the project. The developers were unable to secure other financing to proceed with the project and, ultimately, faced insolvency and entered into proceedings under the Companies' Creditors Arrangement Act.

The CCAA proceedings are being supervised by Justice Fitzpatrick. In October 2023, Justice Fitzpatrick ordered that the Related Actions be tried together within the context of the CCAA proceedings in order to facilitate a timely resolution of the Related Actions.

Romspen then applied for an order bifurcating the trial in the Related Actions, with liability to be determined first. GEC and Alderbridge had opposed the applications, wanting the actions to be resolved in the fullness of time and in the usual civil trial process outside of the CCAA proceedings without the CCAA court imposing any case management deadlines at any time. Justice Fitzpatrick granted the bifurcation order, finding that it allowed for the usual civil litigation process and fully preserved the rights asserted by GEC and Alderbridge.

The first part of the trial in the Related Actions was heard by Justice Majawa in April and May 2024, and focused on liability. Justice Majawa decided the liability issues in favour of Romspen. Among other things, he found that Romspen was entitled to suspend further advances to the development project when it did, and it did not breach any duties of good faith or honest performance. On the other hand, the developers were found to have breached the relevant loan agreement by failing to repay the amounts advanced to them, interest, and other fees.

On appeal from the order of Justice Majawa, GEC and Alderbridge took the position that they had appeals as of right, and filed notices of appeal. However, because the Related Actions were tried “within the context” of the CCAA proceedings, and because they expected Romspen to object to the notion of an appeal as of right and bring a challenge to that effect, GEC and Alderbridge also filed separate applications for leave to appeal. In responding to the applications for leave, Romspen argued that Justice Fitzpatrick ordered that the Related Actions be adjudicated and determined within the context of the CCAA proceedings.

The Court disagreed with Romspen’s interpretation that Justice Fitzpatrick’s October 2023 order substantially narrowed the appeal rights that would otherwise be available to the parties in the Related Actions by rendering them subject to a leave requirement. It did not follow from the fact that an order was made in a CCAA proceeding that it was necessarily an order made under the CCAA. There was no question that the first part of the trial in the Related Actions was adjudicated within the context of the CCAA proceedings. However, in making his liability findings and issuing the order that he did, Justice Majawa did not invoke or exercise any statutory provision or authority under the CCAA. The civil actions before Justice Majawa were grounded in pleadings that originated independent of the CCAA proceedings, did not require an interpretation of substantive orders made under the CCAA, and his liability findings were not informed by CCAA considerations. Instead, he adjudicated common law actions and applied common law liability principles.

Second, Justice Fitzpatrick brought the Related Actions under the umbrella of the CCAA proceedings so that they could be trial managed in a way that facilitated a timely resolution, thereby preventing undue delay in the civil litigation process from impeding the ability to do what is required under the CCAA. That was the predominant objective of the Fitzpatrick order, not to substantively alter the parties’ otherwise-existing procedural rights.

Third, and most significantly, Justice Fitzpatrick was explicit in her reasons about her intention to preserve the procedural rights that GEC and Alderbridge—as parties to the Related Actions—would “otherwise have” in the civil litigation process. Had Justice Fitzpatrick intended to limit GEC and Alderbridge’s entitlement to appeal any final order emerging from the Related Actions through the imposition of a stringent leave requirement, that would have been made clear. Instead, she emphasized that GEC and Alderbridge would not be prejudiced by the Fitzpatrick order.

Accordingly, the Court did not consider it a requirement for GEC and Alderbridge to apply for leave to appeal Justice Majawa’s order, because the order was not made under the CCAA.

Judge: The Honourable Madam Justice DeWitt-Van Oosten

Counsel: John Sullivan and Salman Bhura of Harper Grey for the Appellants GEC (Richmond) GP Inc. and Global Education City (Richmond) Limited Partnership

Shane Coblin and Milaad Hashmi of Kornfeld for the Appellants 0989705 B.C. Ltd., Alderbridge Way GP Ltd., Alderbridge Way Limited Partnership et al.

Peter Bychawski and Joshua Hutchinson of Blakes for the Respondent Romspen Investment Corporation