DATE: 20030604
DOCKET: (M29922)M29923
COURT OF APPEAL FOR ONTARIO
LASKIN 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 SECTION 191 OF THE CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c. C-44, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF AIR CANADA AND THOSE SUBSIDIARIES LISTED ON SCHEDULE “A”
APPLICATION UNDER THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985 c. C-36, AS AMENDED
Frank J. C. Newbould, Michael J. MacNaughton and Tanya Kozak for the moving parties Global Payments Direct Inc. and Global Payments Canada Inc.
Peter Howard for the responding party Air Canada
Peter Osborne for the responding party Ernest and Young (Monitor)
Jeremy Dacks for the responding party GE Capital
Heard: June 3, 2003
On appeal from the order of Justice James Farley of the Superior Court of Justice, dated May 7, 2003.
A. INTRODUCTION
[1] The moving parties, Global Payments Direct Inc. and Global Payments Canada Inc. (“Global”) seek to expedite and consolidate the hearing of their motion for leave to appeal and appeal (if leave is granted) from the order of Farley J. dated May 7, 2003 in the Companies’ Creditors Arrangement Act (“CCAA”) proceedings for Air Canada.
[2] Global acts as an intermediary. For a fee, it pays Air Canada for future flights purchased by customers on Visa and MasterCard. At the beginning of April 2003, based on its admitted insolvency, Air Canada obtained relief from the Superior Court by an initial order under the CCAA. Paragraph 11 of the initial order required Global to continue to make payments to Air Canada as it had in the past.
[3] Global moved for an order under s. 11.3 of the CCAA, which, if granted, would have given it security for continuing to provide services to Air Canada. Farley J. dismissed the motion.[^1]
[4] Under s. 13 of the CCAA, Global can appeal a dismissal to this court, but only with leave. Our rules require leave motions to be in writing. If leave is granted, the appeal is then heard orally. Global, however, asks that the leave motion and the appeal be heard orally and as a single proceeding before the same panel and that the hearing be expedited.
[5] Air Canada agrees that the leave motion be expedited but says that it should be dealt with separately from the appeal in accordance with this court’s usual practice. The Monitor also urges the court to expedite Global’s review of Farley J.’s order but takes no position on whether the leave motion and the appeal should be dealt with separately or at the same time. For the brief reasons that follow, I propose to expedite both the leave motion and, if leave is granted, the appeal. But the two proceedings shall be heard separately.
B. BACKGROUND FACTS
[6] Global’s risk of loss comes from exposure to what are called “chargebacks”. Its arrangements with Visa, MasterCard and Air Canada work as follows: once a customer of Air Canada buys a ticket for future flight using a Visa or MasterCard, the customer’s bank (or card issuer) debits the customer’s account for the amount of the ticket. The bank then forwards the payment to Global and, in turn, Global forwards the payment (less agreed charges, including a fee) to Air Canada.
[7] If Air Canada does not provide the purchased flight, the customer may request a refund or credit from its credit card issuer. If, as is likely, the credit card issuer agrees to the customer’s request, it is entitled to chargeback the amount to Global. The amount of the chargeback is automatically debited to Global’s account. Global is then entitled to recover that amount from Air Canada, which is obligated to pay it. If Air Canada were to fail, Global runs the risk of not recovering these chargebacks. In his affidavit sworn April 21, 2003, Mr. Kelly, the Chief Financial Officer of Global, estimated that the exposure for chargebacks was about $432,000,000. Global was an unsecured creditor for that amount at the date of the initial CCAA order.
[8] Because of its continuing exposure to chargebacks, Global brought a motion before Farley J. seeking an order under s. 11.3 of the CCAA:
11.3 Effect of order — No order made under section 11 shall have the effect of
(a) prohibiting a person from requiring immediate payment for goods, services, use of leased or licensed property or other valuable consideration provided after the order is made; or
(b) requiring the further advance of money or credit.
[9] It is not, of course, in Global’s interest for Air Canada to stop flying. What Global wants is to continue to provide payment services to Air Canada but to do so with security for its chargeback exposures. That is evident from its alternative request for relief in its motion before Farley J.:
(c) in the alternative to (b), an order directing Air Canada to provide reasonable protection to Global in respect of its post‑filing financial exposure on terms to be agreed between Air Canada and Global, or failing such agreement, on terms established by the Court; and
An order under s. 11.3 would have given it that security. On its motion for leave to appeal, Global contends that in dismissing its motion Farley J. erred in his interpretation of s. 11.3. For the purpose of the motion before me I need not and do not express an opinion on the merits of Global’s position.
C. DISCUSSION
[10] Two issues arise on this motion. First, do I have jurisdiction to make the order sought by Global; and if so, second, should I make it?
(a) Jurisdiction
[11] This court’s practice in civil and criminal appeals differs. Where leave is a requirement in criminal appeals – for example sentence and summary conviction appeals ‑ the request for leave is heard together with the appeal itself as a single oral hearing. In civil appeals, however, the historical practice of this court, except in rare cases, has separated the leave motion from the appeal itself. Under the court’s current civil rules the leave motion “shall” be in writing (Rule 61.03.1(1)) and, will be heard by a panel 36 days after the motion is perfected (Rule 61.03.1(2)). The panel either decides the motion or orders an oral hearing (Rule 61.03.1(14)). In practice, virtually every leave motion is dealt with in writing.
[12] These rules for leave motions were designed primarily for appeals from the Divisional Court. However, they also apply to appeals to this court from orders of the Superior Court where leave is required. Thus, they apply to appeals from orders made under the CCAA. That this is so is made clear by s. 14 of the CCAA, which states “All appeals under section 13 shall be regulated as far as possible according to the practice in other cases of the court appealed to...”.
[13] What Global seeks is an exception not just to our usual practice in civil cases but to the requirements of the rules. Indeed the mandatory language of rule 61.03.1(1) might suggest that I have no jurisdiction to make the order Global seeks. I am satisfied, however, that I do have this jurisdiction. At a minimum I think that it can be found in rule 2.03 which states that “[t]he court may, only where and as necessary in the interests of justice, dispense with compliance with any rule at any time”.
(b) Should the order be made?
[14] I begin here by saying that I think it appropriate to abridge the 36 day period for hearing the leave motion and to order that the hearing be expedited. I also think it appropriate to expedite the hearing of the appeal, if leave is granted. Apart from Global’s concerns, I agree with the Monitor that certainty and stability in the CCAA proceedings warrant having both the leave motion and, if leave is granted, the appeal itself heard promptly.
[15] Thus, the only contentious issue is whether I should go further and order that the leave motion and the appeal itself be heard orally as a single proceeding before the same panel. An order of this kind – not given to other litigants – would be exceptional and should rarely be made. I think it would be in the interests of justice to make it only if Global can demonstrate that it will be substantially prejudiced if the order is not made and that Air Canada would not be unfairly prejudiced if it is made. See, for example, Dragon v. Canada (Minister of Citizenship and Immigration), [2003] F.C.A. 139 per Rothstein J.A.
[16] In my view the expediting orders I propose to make, which are not challenged by Air Canada, sufficiently protect Global’s interests. For at least the following three reasons I am not satisfied that Global will be prejudiced if I do not consolidate the leave motion and the appeal itself:
(1) As a result of the labour negotiations this past weekend, Air Canada has reached agreement with the Unions for all of its employees. Although the agreement with the pilots’ union has not been ratified by its members, the fact that it has been reached materially diminishes the risk of Air Canada failing, certainly in the short term. Labour peace will reduce Air Canada’s current $5,000,000 daily loss. The Monitor’s 6th report recognized the importance of labour peace to a successful restructuring of Air Canada. Paragraph 44 of the report states, “Labour cost reductions are critical to reducing the overall cost structure and to stabilize the situation and allow the Company to pursue the balance of its restructuring”;
(2) Every time Air Canada flies a plane Global’s chargeback exposure for tickets purchased for that flight on Visa or MasterCard is eliminated. Therefore, because of the decreased volume of Air Canada’s business, Global’s exposure to chargebacks is decreasing, not increasing;
(3) Global itself has not said that Farley J.’s order has materially increased its risk. Global is a public company trading on the New York Stock Exchange. It has an obligation to make timely disclosure of material changes. It has made no disclosure. Since the order of Farley J., it has not changed its reserves, issued a press release, or announced any material change to its risk of continuing to service Air Canada.
[17] I therefore intend to follow the court’s usual practice of keeping separate the leave motion and the appeal, and of having the leave motion heard in writing. The expediting orders I propose to make are all that are needed.
D. DISPOSITION
[18] I make the following orders:
Global’s motion for leave to appeal shall be expedited and heard in writing by a panel of this court, unless the panel orders otherwise. Counsel may speak to me this afternoon to fix a date for the hearing of the motion and for the filing of material;
If leave is granted, the hearing of the appeal shall be expedited. If a panel is available, the appeal shall be heard before the end of June;
I will case manage the proceedings and arrange for the necessary hearing dates; and
As agreed by counsel, whichever party is successful on the appeal shall be entitled to the costs of this motion. Neither the Monitor nor GE Capital are asking for costs.
[19] I am grateful to counsel for their assistance on this motion.
RELEASED: June 4, 2003 “JL”
“John I. Laskin J.A.”
[^1]: Except that he ordered Air Canada to provide reasonable protection to Global for certain fees and discounts payable.