9354-9186 Québec inc., et al. v. Callidus Capital Corporation, et al.
(Quebec) (Civil) (By Leave)
Bankruptcy and insolvency - Commercial law - Commercial law ? Insolvency ? Plan of arrangement ? Litigation Agreement ? Can Callidus vote on the plan of arrangement it sponsors? If so, can Callidus, as sponsor of the plan, vote with the other creditors? In any event, does the court have jurisdiction to prevent a creditor from presenting and voting on a plan, and if so, in what circumstances? Did the Supervising Judge have the authority to approve the litigation funding agreement, and to declare a security or charge in respect of the litigation funding agreement pursuant to s. 11.2 of the Companies Creditors’ Arrangement Act? Was the Supervising Judge compelled, as a matter of fact or law, to find that the litigation funding agreement constitutes a “compromise or an arrangement … proposed between a debtor company and its unsecured creditors” pursuant to s. 4 of the Companies Creditors’ Arrangement Act? Can Callidus value the Retained Claims at zero in order to vote as an unsecured creditor, despite the fact that the Callidus Plan is an attempt by Callidus to settle those claims for almost $3 million? Does litigation funding make the funder an equity investor in the insolvent plaintiff, such that the litigation funder’s rights should be subordinate to those of the other creditors as suggested by the Quebec Court of Appeal? Companies Creditors’ Arrangement Act, R.S.C., 1985, c. C-36.
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The appellants 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 appellants filed a petition for the issuance of an initial order under the Companies Creditors’ Arrangement Act, R.S.C., 1985, c. C-36 (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 appellants; however, potential claims for damages owned by the appellants themselves against Callidus were not extinguished. In 2017, the appellants 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 appellants 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 appellants sought the authorization for a litigation funding agreement with the appellants 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.
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