Procedural entitlements in a receivership claims process

Overview: In this case, the Court considered an appeal of two procedural decisions made by the claims officer in the Bridging receivership. The claims officer had denied disclosure requests made by a group of claimants who had brought a pre-receivership $51 million claim against Bridging and others. The Court rejected the appeal, finding that a court-ordered claims process is "quite unlike normal civil litigation" and “is intended to establish an expeditious, efficient and summary procedure” for the resolution of claims. The receiver’s desire for expediency was a relevant consideration that the claims officer was entitled to take into account, particularly given that this receivership involves tens of thousands of stakeholders, billions of dollars in claims across numerous jurisdictions, hundreds of millions of dollars in assets, many derivative insolvency and litigation proceedings, and one of the largest distressed loan portfolios in Canada.

The Thomas Canning Claimants ("Canning") asserted a claim against Bridging Finance Inc. ("Bridging") arising from a pre-receivership $51 million fraud action they commenced against Bridging and others (the "Action"). Canning also submitted a proof of claim ("Canning Claim") which mirrored the allegations in the Action. At its core, the Canning Claim was about an alleged fraud and conspiracy committed by Bridging and others in the context of the court-supervised process for the refinancing, investment and/or sale of assets in a previous receivership proceeding dating back to 2017. The allegations involved dealings between Canning and Bridging between 2015 to 2017.

The Canning Claim was disallowed by PwC as the Bridging Receiver. The dispute of the disallowance came before the court-appointed Claims Officer. The Claims Officer Appointment Order required that the claims to be adjudicated by the Claims Officer in this receivership be determined as soon as practicable, and specifically stated that the Claims Officer was empowered to determine any and all procedural matters which may arise.

After the Claims Officer was appointed, in the lead up to the Canning Claim Adjudication, Canning asked the Receiver for extensive documentary discovery and to compel and produce information and documents from certain third-party witnesses. The parties made submissions about the relevance and scope of the requested disclosure and timing implications, among other matters. The Claims Officer has made two procedural decisions denying certain disclosure requests made by Canning (the "Decisions").

Canning appealed these two Decisions and requested that the Receiver be required to comply with the documentary requests of Canning, that certain third-party witnesses be presented for discovery or for cross-examination prior to the hearing of the Claim Adjudication, and that a further case conference be held to determine the process of the Claim Adjudication once the above steps were completed. Canning argued that the Decisions were manifestly and disproportionately unfair because they prioritized the timing of the Canning Claim Adjudication over Canning's desire for pre-hearing disclosure of additional Bridging records and information and documents to be obtained from third parties. Canning contended that, since this was simply the winding down of a business where all parties would like to be paid and not an insolvency or restructuring proceeding, there was no real urgency other than the Receiver's desire to make a distribution before the end of this year. All parties acknowledged that a distribution could not happen until after the Canning Claim Adjudication. The Receiver argued that the Canning Claim Adjudication should proceed as scheduled.

In the context of civil litigation, decisions about production and documentary and oral discovery are generally viewed to be discretionary decisions that are subject to deference on appeal. The Claims Officer Appointment Order empowered the Claims Officer to determine any and all procedural matters which may arise, including, without limitation, the timetable for adjudication, the production of documents and such discovery processes as may be appropriate in the circumstances, and the manner in which any evidence may be adduced. The Court found that that was what the Claims Officer did in the Decisions.

Having found the Decisions to be procedural, discretionary, and interim orders of the Claims Officer with the authority to make them under the Claims Officer Appointment Order—akin to case management decisions that are deserving of deference on appeal—the Court noted that Canning must demonstrate that a palpable and overriding error exists to merit court intervention. Canning alleged that the Decisions were animated by an overriding desire to make a distribution before the end of this year, and made a palpable and overriding error not to order the requested disclosure (of documents and witnesses), leading to a failure of natural justice.

The Court held that the Decisions were not so procedurally unfair as to amount to a failure of natural justice. As the Claims Officer quite properly noted, a court-ordered claims process is "quite unlike normal civil litigation" and “is intended to establish an expeditious, efficient and summary procedure for the Receiver's resolution of claims...[t]he Claimants’ suggestion that the resolution provisions in the Claims Procedure Order require extensive discovery and the formal trial of an issue undermines the integrity and summary nature of the court-approved claims process.” The Court was not persuaded that the Claims Officer gave improper weight to the Receiver’s desire for expediency. It was a relevant consideration that the Receiver was entitled to take into account. Canning’s position that the urgency and desire for expediency were not important in a winding-up (as opposed to insolvency) failed to appreciate that this is a complex receivership involving tens of thousands of stakeholders, billions of dollars in claims across numerous jurisdictions, hundreds of millions of dollars in assets, many derivative insolvency and litigation proceedings, and one of the largest distressed loan portfolios in Canada.

Accordingly, claims need to be ordered and streamlined. It was not manifestly unreasonable for the Receiver to attempt to complete the Canning Claim Adjudication within a year of the Claims Officer Appointment Order to enable some distributions to stakeholders. That is what the Receiver asked the Claims Officer to take into account, among other relevant factors, when making interim procedural orders that have timing implications; and that is what the Claims Officer did. Taking into consideration the full history and context of the requests by Canning for the Receiver to produce documents and witnesses that the Decisions did not order, the Claims Officer’s approach did not overwhelm Canning's procedural rights resulting in a failure of natural justice.

The appeal was dismissed.

Judge: Justice Kimmel

Counsel: Grant Moffat of TGF and Erin Pleet of Ross Nasseri for PricewaterhouseCoopers Inc., the Receiver of Bridging Finance Inc.

David Ullmann and Alexandra Teodorescu for the Thomas Canning Claimants

Thomas Gray of Bennett Jones as Representative Counsel for the Bridging Unitholders