Court of Appeal for Ontario
Date: 2017-06-29 Docket: M47761
Judges: Sharpe, Lauwers and Miller JJ.A.
In the Matter of the Companies' Creditors Arrangement Act
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
- New Solutions Financial Corporation
- New Solutions Financial (II) Corporation
- New Solutions
- New Solutions (III) Corporation
- New Solutions (IV) Corporation
- 2055596 Ontario Limited
Applicants (Respondents in Appeal)
Counsel
Catherine Francis, for the appellants, Feldstein & Associates LLP and Warren Feldstein
Neil S. Rabinovitch, for the respondents
Heard: In writing
Reasons for Decision
[1] The responding parties sought and obtained protection under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA). Their assets have been monetized and there is no intention to proceed with a restructuring plan. The main remaining asset is a claim for professional negligence against Feldstein & Associates LLP, and Warren Feldstein ("Feldstein"), the principal applicant's former auditor.
[2] Feldstein seeks leave to appeal the order of the CCAA judge: (1) extending the stay period from March 30, 2017 to June 30, 2017; (2) approving the Monitor's 23rd report; (3) declaring the litigation trustee, appointed by the court to pursue the litigation against the moving parties, is not in a conflict of interest; and (4) staying the litigation against Feldstein until June 30, 2017.
[3] Feldstein raises a number of proposed grounds of appeal:
that the pursuit of a lawsuit by an insolvent company on behalf of its secured creditors does not fall within the purpose and scheme of the CCAA;
that the CCAA judge ignored evidence of bad faith by the responding parties and others involved in the proceeding;
that it was inappropriate to make a declaratory order with respect to the role of the litigation trustee.
[4] It is well-established that leave is granted sparingly in CCAA proceedings. The considerations on a leave application are whether:
the proposed appeal is prima facie meritorious or frivolous;
the points on the proposed appeal are of significance to the practice;
the points on the proposed appeal are of significance to the action; and
the proposed appeal will unduly hinder the progress of the action.
[5] In our view, the proposed appeal fails to meet the test for leave to appeal and leave to appeal must be denied.
[6] The CCAA judge carefully considered all of the submissions made by Feldstein and provided cogent reasons for the order he made.
[7] There is authority for the proposition that a CCAA stay may be extended for purposes other than effecting a restructuring and, in our view, the CCAA judge did not err in granting a three-month extension of the stay in the circumstances of this case. In any event, the stay expires on June 30, 2017 and so by the time an appeal could be heard on this issue it would be moot.
[8] Feldstein raised objections to the conduct of the litigation trustee in response to the request for an extension of the stay and cannot complain that the CCAA judge ruled on that point.
[9] The findings of the CCAA judge, including that the responding parties have acted in good faith and with due diligence and that the litigation trustee is acting in an appropriate manner, are essentially factual in nature and attract deference on appeal. Moreover, those findings do not have sufficient significance to the practice to warrant granting leave.
[10] Leave to appeal dismissed with costs to the responding parties fixed at $2,500 inclusive of disbursements and applicable taxes.
Robert J. Sharpe J.A.
P. Lauwers J.A.
B.W. Miller J.A.