CanaSea PetroGas Group Holdings Limited (Re)

CanaSea PetroGas Group Holdings Limited (Re) Collection Decisions of the Court of Appeal Date 2014-11-20 Neutral citation 2014 ONCA 824 Docket numbers M44375 Judges Sharpe, Robert J. Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: CanaSea PetroGas Group Holdings Limited (Re), 2014 ONCA 824 DATE: 20141120 DOCKET: M44375 Sharpe J.A. (In Chambers) In the Matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended And In the Matter of a Plan of Compromise or Arrangement of CanaSea PetroGas Group Holdings Limited, CanaSea Oil and Gas Group Pte. Ltd., CanaSea International Pte. Ltd., CanaSea PetroGas Investment Inc. and CanaSea Oil and Gas Ltd. Rebecca Huang, Brent McPherson and Martine S.W. Garland for the moving parties, CanaSea PetroGas Group Holdings Limited Shawn T. Irving and Andrea Lockhart for the respondent Equity Ventures International Holdings Limited Pamela L.J. Huff and Matthew Kanter for the respondent Blue Energy Holdings Limited Heard: October 31, 2014 ENDORSEMENT [1] The moving parties seek leave to appeal from a judgment setting aside a Companies’ Creditors Arrangement Act (“CCAA”) Initial Order. [2] The moving parties are five affiliated companies, the “CanaSea Group”. The corporate structure was described by the application judge, at para. 6, as follows: The applicant CanaSea PetroGas Holdings Limited (CPGH) is a holding company incorporated under the Canada Business Corporations Act with its head office in Toronto. The other applicants are all subsidiaries of CPGH. CPGH owns 100% of the shares of CanaSea Oil and Gas Group Pte. Ltd. (COGG), a Singapore company. COGG owns 100% of the shares of CanaSea Investment Inc. (CPII), a CBCA company. CPII owns 100% of the shares of CanaSea Oil and Gas Limited (COGL), the Saskatchewan operating company. CanaSea International Pte. Inc. (CPIL), another Singapore company, is also wholly owned by CPGH. [3] The moving parties applied for and obtained the Initial Order ex parte. I pause here to observe that in oral argument on this motion, counsel for the moving parties was unable to offer an acceptable explanation for having moved ex parte. [4] The respondents on this motion, Equity Ventures International Holdings Limited (“Equity Ventures”) and Blue Energy Holdings Limited (“Blue Energy”) are creditors of the Singapore company, COGG. They are owed $13 million, approximately 90% of the debt obligations of COGG and 49% of the total debt obligations of the CanaSea Group as a whole. They oppose any restructuring of COGG and intend to enforce their loans in Singapore where they have initiated proceedings against COGG in accordance with the loan documents which provide for Singapore jurisdiction. [5] Equity Ventures and Blue Energy moved to set aside the Initial Order on the ground that the CCAA court lacks statutory jurisdiction over COGG as well as jurisdiction simpliciter. [6] The application judge agreed and set aside his Initial Order. [7] The moving parties argue that they were denied procedural fairness before the application judge. They characterize the basis of the application judge’s reasons for setting aside the Initial Order as being their failure to make full and frank disclosure on the ex parte application. They argue that had they been put on notice that this was the issue, they could have satisfied the application judge that the disclosure was adequate. Preliminary Issue: Jurisdiction of a single judge [8] The respondents submit that as a single judge, I should decline to hear this motion for leave to appeal and defer the matter to be dealt with in writing by a panel of the court. [9] The CCAA, s. 13, provides: Except in Yukon, any person dissatisfied with an order or a decision made under this Act may appeal from the order or decision on obtaining leave of the judge appealed from or of the court or a judge of the court to which the appeal lies and on such terms as to security and in other respects as the judge or court directs. [10] It is clear from the wording of s. 13 that a motion for leave to appeal in a CCAA proceeding may be heard either by a judge of the court or by the court: see Re 1078385 Ontario Ltd. (2004), 16 C.B.R. (5th) 152; 206 O.A.C. 17, at para. 2: “Section 13 of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, provides the moving party with the procedural option of bringing a leave motion to a single judge”; Re Country Style Food Services Inc. [2002] O.J. No. 1377, 158 O.A.C. 30 (Ont. C.A.). While the usual practice is to bring CCAA leave motions before a panel in writing (see Re Air Canada (2003), 173 O.A.C. 154) and while there are no doubt advantages to proceeding before a full panel in writing, both to the party seeking leave and to the court, I am not persuaded that there is any proper basis shown upon which I should decline to hear this motion. Should leave to appeal be granted? [11] In my view, the moving parties fail to make out a case for granting leave to appeal. [12] I do not agree with their characterization of the application judge’s reasons. While the application judge was plainly troubled by what he regarded as the misleading picture the moving parties had painted on the ex parte application, I cannot agree that he set aside the Initial Order on purely procedural grounds not signaled by the respondents’ Notice of Motion. I agree with the respondents that the real basis for setting Initial Order is found at paras. 24 to 26 of his reasons where he finds that the evidence filed by the moving parties contains “no evidence of COGL’s solvency, independent of COGG” and that “CIPL and COGG, the real debtors in this proceeding, are Singapore companies and have very little connection to Canada.” [13] The application judge observes that he granted the ex parte order on the basis that: (1) each applicant had liabilities in excess of $5 million and was clearly insolvent; (2) each applicant was unable to meet its obligations as they came due; and (3) each applicant’s finances were inextricably intertwined through intercompany debt obligations. [14] Upon closer examination of the record and with the benefit of opposing argument, he found, at para. 26, that in fact, the situation was entirely different: The evidence now produced as a result of the Convertible Noteholders’ motion simply does not support those conclusions. These conclusions were, in fact, wrong on the basis of the evidence now available. The evidence only supports the conclusion that CPGH, CIPL and COGG have obligations in excess of $5 million and are insolvent. CPGH, although a Canadian company, essentially carries on no business – it is a holding company. [15] The claim that the finances of all the applicants “were inextricably intertwined through intercompany debt obligations” could not withstand scrutiny in the face of the admission given by the moving parties’ principal on cross-examination that there were no documented inter-company loans. [16] The application judge concluded, at para. 36: The evidence does not support the conclusion that CPII or COGL qualify as applicants under the CCAA. On the evidence, the only entities which meet the insolvency and $5 million thresholds are at the COGG level or above. COGG is a Singapore company with a tenuous connection to Canada, whose loan agreements provide for the resolution of disputes in Singapore under Singapore law. [17] That finding and conclusion, fatal to the request for CCAA protection, corresponds precisely with the grounds set out in the Notice of Motion to set aside the initial order and I do not accept that the moving parties were taken by surprise. [18] It is firmly established that the test for leave to appeal in insolvency proceedings is stringent where it involves the exercise of discretion as to the assessment of competing interests and the availability of the special protection afforded by the CCAA: see Re Country Style Food Services Inc., at para. 16; Regal Constellation Hotel Ltd., (2004) 71 O.R. (3d) 355; 242 D.L.R. (4th) 689; [2004] O.J. No. 2744 at para. 22. [19] In my view, this case falls squarely within the category in which deference is owed to the CCAA judge and where leave to appeal will be refused. It was for the CCAA judge to assess the evidence as to the nature of the debts from which the moving parties seek relief, the nature of the financial relationship between the various components of the CanaSea Group and the degree of connection between the alleged insolvency and Canada. There was ample evidence in the record to support the findings he made and I am far from persuaded that he made any error in principle or that he misapprehended the evidence. [20] I see no merit to the contention that simply because the debtor Singapore companies are part of a larger group under the umbrella of a Canadian holding company (CPGH), they can somehow claim the benefit of the CCAA in relation to debt they incurred in Singapore that is subject to Singapore law. The moving parties were unable to provide any authority to support their claim that there exists a common law doctrine of “common enterprise insolvency” that goes to such a length. Disposition [21] Accordingly, I refuse leave to appeal. The respondents are entitled to their costs of this motion fixed at $20,000 for Equity Ventures and $16,000 for Blue Energy, both amounts inclusive of disbursements and taxes. “Robert Sharpe J.A.”