Summary

38594

9354-9186 Québec inc., et al. v. Callidus Capital Corporation, et al.

(Quebec) (Civil) (By Leave)

Keywords

Commercial law - Commercial law — Insolvency — Plan of arrangement — Can a creditor vote on the Companies Creditors’ Arrangement Act (“CCAA”) plan it sponsors? — Can a creditor who sponsors a CCAA plan vote in the same class as the other creditors? — Does a CCAA court have jurisdiction to prevent a creditor from voting on a plan, and if so in what circumstances? — Does a CCAA court have jurisdiction to authorize litigation funding without a vote of the creditors? — Whether the Court of Appeal erred in holding that the litigation funding agreement and proposed litigation constitute a plan of arrangement under the CCAA — Whether the Court of Appeal erred in holding that a creditor could value its security at nil, and vote as an unsecured creditor in favour of its plan of arrangement —Whether the Court of Appeal erred in characterizing the litigation funding agreement as an equity investment in the insolvent corporation — Companies Creditors’ Arrangement Act, R.S.C., 1985, c. C 36.

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Summary

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The applicants 9354 9186 Québec Inc. et al. are in the business of developing and selling casino games and gaming machines since 1994. In 2012, they signed a loan agreement with the respondent Callidus Capital Corporation that lent them approximately 86 million dollars through credit facilities between 2012 and 2015. In 2015, the applicants filed a petition for the issuance of an initial order under the CCAA, which was granted by the Superior Court. Later, they were authorized to divest all their assets, which were eventually bought by Callidus. The purchase extinguished Callidus’ secured claim against the applicants; however, potential claims for damages owned by the applicants themselves against Callidus were not extinguished. In 2017, the applicants sought to obtain the necessary orders to finance their litigation against Callidus, which responded by filing a motion to obtain the necessary orders to hold a creditors’ meeting to propose a plan of arrangement. As a result, the applicants filed their own plan of arrangement. Both parties were ordered to present their plans for a vote at a creditors’ meeting on the condition of providing a deposit in order to share the costs incurred by the monitor to organise the meeting. Only Callidus’ plan was submitted to a vote but it was rejected because the threshold of two thirds in value of the claims fixed by the CCAA was not reached. In 2018, the aforementioned applicants sought the authorization for a litigation funding agreement with the applicants IMF Bentham Limited et al. Callidus responded by filing a motion to convene a creditors’ meeting to hold a vote on its new plan of arrangement. Meanwhile, a group of creditors, the respondents International Game Technology, Deloitte S.E.N.C.R.L., Luc Carignan, François Vigneault, Philippe Millette, Francis Proulx and François Pelletier, requested that Callidus be entitled to exercise its voting rights at the meeting for the unsecured portion of its claim. The Superior Court authorized both the funding and the litigation financing charge, and dismissed the motion for an order for the convening, holding and conduct of a creditors’ meeting. The Court of Appeal allowed the appeal. Both sets of applicants, namely 9354 9186 Québec Inc. et al. and IMF Bentham Limited et al. filed two separate applications for leave to appeal before the Supreme Court.