Court proceedings under the Companies Creditors’ Arrangement Act (CCAA)¹ have often been referred to as “the hothouse of real-time litigation”.² Given the practical realities of CCAA proceedings and the interplay of those realities with the legal test for a Court of Appeal to hear an appeal under the CCAA, appellate courts only rarely find themselves in the hothouse while it is still hot.

Starting in late May 2020, Port Capital Development (EV) Inc. and Evergreen House Development Limited Partnership, the developers of a 19-storey high-rise luxury residential and commercial strata development located in Vancouver, British Columbia, known as Terrace House, commenced CCAA proceedings. Terrace House is a unique project,³ “touted for its Coal Harbour location, prize-winning architecture, and aspirations to be the world’s tallest hybrid timber structure.”⁴

After a year in CCAA proceedings, which included a dual track sales and investment solicitation plan that “charted a very long and crooked path”, the supervising CCAA judge was presented with numerous competing options to progress or bring an end to the CCAA proceedings.⁵ There were a number of offers to purchase Terrace House from two separate third-party purchasers and a proposal to refinance the project by the developers’ principle through a number company, 1296371 B.C. Ltd. (“129”).

The supervising CCAA judge concluded that the refinancing proposal was not appropriate and determined the highest third-party offer to purchase Terrace House represented the best outcome for stakeholders.⁶ 129 appealed the decision.

On August 20, 2021, the Court of Appeal granted leave to appeal. In addition, the Court of Appeal determined that a five-justice division was appropriate because it was important that the division hearing the appeal have the power to reconsider a previous decision of the Court of Appeal in Cliffs Over Maple Bay.⁷ Given the urgency attached to the proceedings, namely that the sale transaction approved by the supervising CCAA judge was set to close on September 30, 2021, the appeal hearing was set for September 21, 2021 and the Court of Appeal made orders to facilitate this expedited appeal.⁸

The Court of Appeal allowed the appeal the day after it was heard, and delivered reasons for judgment shortly thereafter. This was done because of the “fast‑moving nature of the circumstances and a looming deadline in the proposal”.⁹

Procedurally, in light of the “dynamic” nature of CCAA proceedings, the Court of Appeal admitted new evidence on the appeal and granted an order approving 129’s refinancing proposal. With respect to granting the order, the Court of Appeal determined it was impractical to remit the matter back to the supervising CCAA judge despite the complex and innovative nature of the relief sought by 129 in conjunction with the refinancing.¹⁰ Neither of these procedural steps are common for an appellate court, but both were warranted in the circumstances.

Substantively, the Court of Appeal determined the supervising CCAA judge erred in principle in her exercise of discretion in determining appropriateness under section 11 of the CCAA. The Court of Appeal concluded that the supervising CCAA judge’s focus on plans of arrangement and compromise, to the exclusion of other statutorily and judicial endorsed strategies under the CCAA, ran contrary “to the evolution of the complex and innovative ‘solutions’ that now characterize CCAA applications.”¹¹

The Court of Appeal concluded that 129’s refinancing strategy was an appropriate and sufficient plan under the CCAA, even though it was not a formal “plan of arrangement or compromise”. 129’s refinancing presented the best solution as compared to the third-party purchase offers, including the offer approved by the supervising CCAA judge.¹²

On the eve of closing the 129 refinancing transaction, the parties had a third, and final, Court of Appeal hearing on October 22, 2021. At this time, the purchaser under the offer approved by the supervising CCAA judge sought a stay of proceedings, which would have prevented closing the refinancing, in order to advance an application for leave to appeal to the Supreme Court of Canada. The Court of Appeal, on the same day as the hearing, refused the application for a stay of proceedings because the potential prejudice to the secured creditors and 129 outweighed that of the purchaser under the offer approved by the supervising CCAA judge.

Key takeaways

These three decisions from the Court of Appeal have important practical and legal implications. While the test for appellate review of decisions from a supervising CCAA judge remains high (as articulated by the Supreme Court of Canada in Callidus¹³), the Court of Appeal has shown it will, in appropriate circumstances, take a practical approach to timelines, admitting new evidence, and available relief, where necessary to facilitate the “real-time” nature of appeals in CCAA proceedings. Furthermore, while the Court of Appeal did not ultimately overturn its earlier decision in Cliffs Over Maple Bay¹⁴, it endorsed the broader interpretation of “appropriateness” under the CCAA set out in Century Services and Callidus, which confirms the court’s broad jurisdiction to craft relief that avoids “the social and economic losses resulting from liquidation of an insolvent company”.¹⁵

Dentons’ restructuring, insolvency and bankruptcy lawyers Jordan Schultz and Eamonn Watson were counsel to 129 with respect to its refinancing proposal in both British Columbia’s Supreme Court and Court of Appeal. For questions on how we can assist in your restructuring efforts, please contact a member of our team.

¹ Companies’ Creditors Arrangement Act, RSC 1985, c C-36.
² Century Services Inc v Canada (Attorney General), 2010 SCC 60 at para 58, citing Richard B Jones “The Evolution of Canadian Restructuring: Challenges for the Rule of Law” (2005) Annual Review of Insolvency Law 481 at 484 (online: Thomson Carswell, Westlaw Canada, 2005 ANNREVINSOLV 18).
³ Port Capital Development (EV) Inc (Re), 2021 BCSC 1272 at paras 5, 6, 10.
⁴ Joanne Lee-Young, “Appeal court reverses ruling on which developer will finish stalled Coal Harbour luxury condos”, Vancouver Sun (21 October 2021) https://vancouversun.com/business/real-estate/court-of-appeal-reverses-supreme-court-ruling-on-future-of-stalled-terrace-house-downtown-luxury-condo-project.
⁵ Port Capital Development (EV) Inc (Re), 2021 BCSC 1272 at paras 3, 12, 110.
⁶ Port Capital Development (EV) Inc (Re), 2021 BCSC 1272 at paras 4, 92, 111.
⁷ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 319 at para 56; Cliffs Over Maple Bay Investments Ltd v Fisgard Capital Corp, 2008 BCCA 327.
⁸ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 319 at paras 3, 61.
⁹ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at para 1.
¹⁰ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at paras 42–48, 74, 77, 88.
¹¹ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at para 77.
¹² Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at paras 68–71, 86.
¹³ 9354-9186 Québec inc v Callidus Capital Corp, 2020 SCC 10 at paras 53-54. See Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at paras 39, 77.
¹⁴ Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at paras 69, 76, 78.
¹⁵ 9354-9186 Québec inc v Callidus Capital Corp, 2020 SCC 10 at para 41; Century Services Inc v Canada (Attorney General), 2010 SCC 60 at para 70. See Port Capital Development (EV) Inc v 1296371 BC Ltd, 2021 BCCA 382 at paras 66, 74, 77–78.