Court says CCAA not a forum for third-party disputes

National Bank of Canada v Sunterra Food Corporation, 2025 ABKB 599
Can the CCAA be used to determine inter-creditor disputes?

Summary: The Ontario Court has dismissed National Bank of Canada’s application for an order compelling Compeer Financial PCA, a U.S. lender, to disclose whether it planned to pursue claims against the bank for dishonoured cheques issued by Sunterra’s Canadian affiliates. NBC argued the information was necessary to advance its contribution and indemnity claims in Sunterra’s Companies’ Creditors Arrangement Act (CCAA) proceedings, invoking s. 11 of the Act. The Court held, however, that disputes between non-debtor parties are generally outside the CCAA’s purview unless “inextricably connected” to the restructuring process, and NBC’s request did not meet that threshold. It found that NBC could still determine and value its contingent claim through the statutory proof-of-claim process without Compeer’s disclosure, and that any additional information from Compeer would provide little practical benefit. Accordingly, the Court found no jurisdictional or substantive basis to grant the order.

National Bank of Canada (“NBC”), the primary lender to various Canadian Sunterra companies, sought an order in Sunterra’s Companies’ Creditors Arrangement Act proceedings obliging Compeer Financial PCA (“Compeer”), a U.S. lender, to advise whether it intended to pursue recovery from NBC for losses caused by NBC’s dishonouring of certain cheques payable by some of the Canadian companies to certain Sunterra U.S. entities or Compeer itself; and, if so, the basis of Compeer’s anticipated claims against NBC and the range (in dollars) of those anticipated claims. NBC’s proposed order provided that, if Compeer did not perform this step by the requisite deadline, Compeer’s claim(s) against NBC in respect of the dishonoured cheques would be barred.

The basis for the relief sought by NBC was that it needed the requested details to prove, in the CCAA proceedings, a contribution-and-indemnity claim against the Canadian entities related to the dishonoured cheques (i.e. tagging them with some or all of whatever liability Compeer succeeded in attaching to NBC). NBC argued that s. 11 of the CCAA provided jurisdiction to make the requested order.

Compeer argued that NBC had sufficient information to identify its legal exposure to Compeer on the dishonoured cheques by definition, since it was NBC’s own decision to dishonour them, in circumstances known to NBC, that determined its potential liabilities to Compeer. Alternatively, Compeer argued that it did not have all the information it needed to decide what claim(s) it had or may have against NBC in respect of the dishonoured cheques.

The Court noted that it is not a proper use of a CCAA proceeding to determine disputes between parties other than the debtor company. An exception is where the resolution of such disputes is “inextricably connected to the restructuring process”. Assisting in proving and valuing claims in CCAA proceedings is not a purpose that is “inextricably connected to the restructuring process” or that is “likely to further the remedial purposes of the CCAA”.

The CCAA provides a mechanism for proving and, if proved, valuing claims in ss. 19 and 20. That mechanism is adequate for proving and valuing claims even where the claims are for contribution and indemnity, and even where those claims are contingent.

NBC acknowledged that it was possible to determine and value its claim in the absence of details sought from Compeer, notwithstanding that the process would be significantly more efficient and efficacious with those details. In these circumstances, the “inextricable connection” to the CCAA proceedings was found to be lacking.

In the alternative, if potential assistance in the CCAA proof-and-valuation-of-claims process reflected an inextricable connection or would likely further the CCAA’s remedial purposes, the Court found there was no assistance to be had in this case. Compeer had already advised NBC that it may pursue it for losses caused by the dishonoured cheques. NBC’s draft order, if granted, would require Compeer to answer the underlying question with a “yes” or a “no”. If faced with a “yes” or “no” election, Compeer would invariably answer “yes” to preserve potential recourse against NBC on the cheques. A “yes” election would not appear to lock Compeer into pursuing NBC regardless of any re-evaluation of present circumstances or a downstream change of circumstances. Accordingly, NBC’s understanding of Compeer’s present position would not increase appreciably via the election itself.

On the “bases” aspect, the Court held that NBC would presumably be familiar with the recourse(s) of collecting banks where cheques are dishonoured and those of drawees or holders of dishonoured cheques. In advance of Compeer starting an action against NBC—even without a catalogue of potential liability from Compeer as contemplated by the proposed order—NBC was presumably already aware of the liabilities it had or may have incurred to Compeer on the dishonoured cheques. The Court did not foresee that NBC would receive any materially and incrementally helpful information from Compeer via the proposed order. Accordingly, the Court dismissed NBC’s application.

Judge: The Honourable Justice Michael Lema

Professionals involved:

• Keely Cameron of Bennett Jones for Compeer Financial, PCA

• Scott Chimuk of Blue Rock Law for the Canadian Sunterra entities

• Gunnar Benediktsson of Norton Rose Fulbright for FTI as monitor

• Sean Collins, KC of McCarthy Tetrault for National Bank of Canada