Supervising judges’ decisions to be respected provided they balance the goals of Companies’ Creditors Insolvency Act.

This appeal concerns Québec Inc., (Appellant) a technology company specialized in Casino gaming business. When the company was in financial trouble it started Companies’ Creditors Insolvency Act (CCAA) process. Callidus Capital Corporation (Defendant) was a secured creditor of the appellant amongst many unsecured creditors. After selling all its assets to defendant, appellant was only left with one asset- Right to sue defendants because appellant claimed that it was defendant’s actions that have bought liquidity problems to them. Thereafter, defendant proposed a ‘plan of arrangement’ for distribution of payment amongst insolvent appellant’s creditors however, this proposal did not gain majority votes and was rejected.

Then appellant submitted a plan to stay the CCAA proceedings and raise money through suing defendant. While appellant sought the supervising judge to approve their ‘Litigation Financing arrangement’ with a third party for raising interim finance, defendant brought its own plan of arrangement and asked to be allowed to vote on the same claiming that otherwise their security has decayed to worthless. The Judge, seeing the case applied his discretion and rejected defendant’s proposal and accepted the appellant’s arrangement of Litigation Financing.

Present defendant then appealed against verdict of supervising judge to Court of appeals which reversed his judgement and subsequently the appeal has been filed by the appellant in front of Supreme Court of Canada. The Supreme Court did not give any independent judgement and restored the judgment of Trial court, finding that the Judge was within its jurisdiction to grant the orders and there seemed no ground to interfere with the Judge exercising discretion.

Court observed that CCAA applies to corporations carrying on business in Canada (except banks, railway or telegraph companies, insurance companies, and companies to which the federal Trust and Loan Act applies) and facilitate agreements between debtor company and its creditors. The court then went on to discuss on significance of the judge supervising these proceedings under CCAA. These judges supervise the case from the beginning and know specific situation at best and hence are best equipped to balance varied goals of the statute, the Court noted. The bench ruled that in the case at hand, in the light of legislation’s aim to help the business to stay and creditors to get their back money, supervising judge’s decision of stopping defendant from voting as it was acting in improper purpose and allowing interim financing agreement of the appellant to claim its only asset of right to sue defendant was appropriate.