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Supervising judge may bar improper-purpose creditor voting and approve litigation funding as interim financing.
In the context of ongoing CCAA proceedings where substantially all assets of the debtor companies had been liquidated, the supervising judge barred the sole secured creditor from voting on a proposed plan of arrangement on the basis that it was acting for an improper purpose, and authorized the debtor companies to enter into a third party litigation funding agreement as interim financing.
The Quebec Court of Appeal set aside those orders.
The Supreme Court of Canada restored the supervising judge's orders, holding that: (1) a supervising judge has discretion under s. 11 of the CCAA to bar a creditor from voting on a plan of arrangement where the creditor is acting for an improper purpose; and (2) a supervising judge may approve third party litigation funding as interim financing pursuant to s. 11.2 of the CCAA, provided the funding agreement does not constitute a plan of arrangement.
The Court affirmed the high degree of deference owed to discretionary decisions of a supervising judge and found the Court of Appeal had failed to treat those decisions with the appropriate degree of deference.
