CITATION: Hemosol Corp. (Re), 2007 ONCA 124
DATE: 20070226
DOCKET: (C46598) M34712/M34754
COURT OF APPEAL FOR ONTARIO
LABROSSE, SHARPE and BLAIR JJ.A.
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 HEMOSOL CORP. and HEMOSOL LP
Paul J. Pape and John N. Birch
for 2092248 Ontario Inc.
Robert S. Harrison and R. Graham Phoenix
for MDS Inc.
David C. Moore
for Catalyst Capital Group Inc. and Catalyst Fund Limited Partnership II, on behalf of its General Partner, Catalyst Fund General Partner II Inc.
Justin Forgarty and Gavin Finlayson
for ProMetic Biosciences Inc.
Julia Falevich and Alan Mersky
for the Interim Receiver and Monitor of Hemosol Corp. and Hemosol LP
Heard: February 22, 2007
On appeal from the order of Justice Colin L. Campbell of the Superior Court of Justice, dated January 22, 2007.
BY THE COURT:
[1] The order at issue was made in the context of a proposed plan of arrangement of Hemosol Corp. and Hemosol L.P. (Hemosol) under the Companies Creditors’ Arrangement Act, R.S.C. 1985, c. C-36 (CCAA). The appellant, 2092248 (209), sought to enforce a Memorandum of Agreement (MOA) against MDS Inc. and its assignee Catalyst Capital Group Inc. MDS was the parent corporation and the first-ranking secured creditor of Hemosol. The MOA relates to a conditional offer by 209 to purchase the assets of Hemosol and provides that 209 is to fund Hemosol during the CCAA process, this funding being subordinate to MDS’s security. MDS later sold its debt position to Catalyst and Catalyst assumed all obligations of MDS under the MOA.
Motion to Quash
[2] The respondents move to quash the appeal on the ground that the order was made under the CCAA and that leave to appeal is required by CCAA, s. 13.
[3] In our view, the proceeding before the motion judge and the decision under appeal were conducted and rendered under the CCAA within the meaning of s. 13 and therefore leave to appeal is required. The notice of motion and the reasons of the motion judge explicitly state that the matter is a CCAA proceeding. Directions were sought, amongst other things, to determine rights and requirements of voting in relation to the proposed plan of arrangement. There was no independent originating process to justify any other conclusion. The order determined rights arising under an agreement that arose out of and that was related entirely to the CCAA proceeding. We agree that the order finally determines the rights of the parties, but we do not accept the submission that this characterization removes it from the ambit of the CCAA, s. 13 and the requirement for leave to appeal. Accordingly, there is no appeal as of right and, unless leave to appeal is granted, the appeal must be quashed.
Motion for leave to appeal
[4] In the event we decide leave to appeal is required, 209 brought a cross-motion for leave to appeal.
[5] It is common ground that the test for leave to appeal is:
(a) whether the point on appeal is of significance to the practice;
(b) whether the point is of significance to the action;
(c) whether the appeal is prima facie meritorious or frivolous;
(d) whether the appeal will unduly hinder the progress of the action.
(see Re Country Style Food Services Inc. 2002 CanLII 41751 (ON CA), [2002] O.J. No. 1377 (C.A.) at para. 15; Re Stelco 2005 CanLII 42247 (ON CA), [2005] O.J. No. 4883 (C.A.) at para. 15-16.
[6] 209’s agreement to purchase the assets of Hemosol was conditional upon 209 reaching a satisfactory agreement with ProMetic Biosciences Inc. (ProMetic) as to Hemosol’s licence to use certain intellectual property. MDA agreed to extend the deadline in the MOA to September 18, 2006, but 209 failed to reach agreement with ProMedic by that date. On September 21, 209 waived the ProMetic condition and asserted its right to conclude the MOA and purchase the assets of Hemosol.
[7] Central to the motion judge’s decision rejecting 209’s claim that it was entitled to complete the MOA is a finding that 209 made a deliberate decision not to contact MDS to request an extension of the MOA beyond the September 18 termination date and that 209 knew that MDS had not agreed to an extension. The motion judge found that 209’s failure to seek an extension was fatal and that the MOA was no longer in effect after the last deadline agreed to by MDS ended on September 18. The motions judge considered and rejected 209’s claim that MDS had waived the September 18 deadline or was estopped from relying on it. He did not, however, explicitly deal with the principal submission advanced before us, namely that MDS’s silence in the face of 209’s continued payment under the MOA implies that MDS elected to waive 209’s breech.
[8] We see no basis upon which to interfere with the motion judge’s findings that by failing to obtain an extension from MDS prior to the termination date, 209’s right to under the MOA to purchase the assets of Hemosol expired. Nor do we see any basis to interfere with his findings as to estoppel. While the motions judge did not deal explicitly with the implied election point, in our view, that argument would be difficult to maintain in the face if his explicit finding that 209 was made aware that MDS was insisting upon the September 21deadline and had not agreed to any extension. These are sophisticated commercial parties acting to maximize their commercial interests and the question of the deadline and the implications of MDS not agreeing to extend the deadline on 209’s rights were very much on the on the table. In these circumstances, a court would be reluctant to imply that one party waived any of its legal rights.
[9] However, even assuming that 209 does raise an arguable ground of appeal on the election point, we are not persuaded that 209 can meet the test for leave to appeal. 209’s argument rests on well accepted legal principles. The only issue is whether 209 can bring the facts of this case within those legal principles. In our view, there is no point that transcends the interests of these parties and the point on appeal has insufficient significance to the practice to warrant granting leave to appeal.
Conclusion
[10] Accordingly, the motion for leave to appeal is dismissed and the appeal is quashed with costs to Catalyst and MDS fixed in the agreed amount of $2,500 each, all inclusive.
“J-M. Labrosse J.A.”
“Robert J. Sharpe J.A.”
“R.A. Blair J.A.”