COURT OF APPEAL FOR ONTARIO

CITATION: Carillion Canada Holdings Inc. (Re), 2021 ONCA 468

DATE: 2021-06-28

DOCKET: M52316

Gillese, Tulloch and Roberts 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 Carillion Canada Holdings Inc., Carillion Canada Inc., Carillion Canada Finance Corp., Carillion Construction Inc., Carillion Pacific Construction Inc., Carillion Services Inc., Carillion Services (FSCC) Inc., Bearhills Fire Inc., Outland Camps Inc., Outsand Resources Inc., Rokstad Power GP Inc., 0891115 B.C. Ltd., Golden Ears Painting & Sandblasting Ltd., Plowe Power Systems Ltd. and Carillion General Partner (B.C.) Limited

Applicants

And In the Matter of Section 101 of the Courts Of Justice Act and the Receivership of 491313 B.C. Ltd., Carillion Investments (Canada) Inc., 2447586 Ontario Inc., Twd Roads Management Inc., Vanbots Capital Corporation and Carillion Canada (WOHC) Inc.

Debtors

Paul H. Le Vay and Carlo Di Carlo, for the moving party the Monitor

John Salmas and Dennis Wiebe, for the responding party HSBC Bank plc

Heard: in writing

Motion for leave to appeal from the order of Justice Glenn A. Hainey of the Superior Court of Justice, dated March 2, 2021.

REASONS FOR DECISION

OVERVIEW

[1] This leave motion arises in the context of a CCAA proceeding. The Applicants in the proceeding include Carillion Construction Inc. (“Carillion Construction”) and Carillion Canada Inc. They are part of a global construction conglomerate (“Carillion Group”). HSBC Bank plc (“HSBC UK”), the responding party on this motion, provided banking services to the Carillion Group.

[2] Shortly before the start of these insolvency proceedings, Carillion Construction, a general contractor for a number of major construction projects, received $28,844,390.53 from the owners of four different Ontario-based construction projects. The payments were on account of improvements to those projects. There were unpaid suppliers and subcontractors at each project. Pursuant to the cash sweep and pooling arrangements that the Carillion Group had with HSBC UK, these funds were swept from Carillion Construction’s Canadian bank account and ended up in an account at HSBC UK in England.

[3] Ernst & Young Inc., the court-appointed monitor of the Applicants (the “Monitor”) brought a motion for a declaration that, pursuant to s. 8 of the Construction Lien Act, R.S.O. 1990, c. C.30, $21,699,020.71 in the HSBC UK account was subject to a statutory trust.

[4] By order dated March 2, 2021 (the “Order”), the CCAA judge dismissed the motion. He found that the Monitor had failed to establish the certainty of subject-matter requirement for a trust, saying: “[T]he payments that are said to be the subject of the [Construction Lien Act] trust are not identifiable because they have been irreconcilably commingled and converted by seven different companies in two countries. … Tracing in equity cannot be used to enforce a [Construction Lien Act] trust in an insolvency proceeding where identification of specific trust property is impossible.” He further explained that tracing the trust funds in common law did not apply because the payments were deposited into and transferred among mixed accounts, and put to various uses.

[5] The Monitor moves for leave to appeal the Order. It submits that, among other things, the CCAA judge erred in: conflating ascertainability of subject matter of a trust with the ability to trace; holding that equitable tracing is not available in the insolvency context; and, holding that common law tracing is not permitted into mixed accounts. The Monitor also seeks leave to adduce fresh evidence of the Monitor’s 33rd Report, including a letter appended to the Report from the Surety Association of Canada (the “Letter”).

[6] For the reasons that follow, we would not admit the fresh evidence and we would refuse leave.

THE FRESH EVIDENCE IS NOT ADMITTED

[7] The responding party asks this court to dismiss the Monitor’s request to adduce fresh evidence. It submits that the only substantive component of the proposed fresh evidence is the Letter, which is the author’s subjective opinion of the impact of the motion judge’s decision on the construction and surety industries; it is devoid of factual information, statistics, or data to support the author’s views. Moreover, the Letter is not appended to an affidavit sworn by its author and so is inadmissible hearsay.

[8] We accept the responding party’s submission and, accordingly, do not admit the fresh evidence.

THE TEST FOR LEAVE IS NOT MET

[9] Leave to appeal is granted sparingly in CCAA proceedings, and only where there are serious and arguable grounds that are of real and significant interest to the parties. In deciding whether to grant leave, the court will consider whether: (1) the proposed appeal is prima facie meritorious or frivolous; (2) the point on the proposed appeal is of significance to the practice; (3) the point on the proposed appeal is of significance to the action; and, (4) the proposed appeal will unduly hinder the progress of the action: see, for e.g., Crystallex International Corporation (Re), 2021 ONCA 87, at para. 10.

[10] In our view, this is not one of those rare cases in which leave to appeal should be granted. We are not satisfied that the proposed appeal is prima facie meritorious or that the case is of significance to the practice.

[11] The CCAA judge is the supervising judge in this proceeding. He is deeply familiar with the Applicants’ varied, multi-industry corporate and banking structures, construction projects, and the general body of unsecured creditors. His findings of fact are entitled to considerable deference.

[12] The CCAA judge found that the money claimed to be the subject matter of the Construction Lien Act trust is not identifiable because it had been “irreconcilably commingled and converted by seven different companies in two countries”. Tracing at common law and in equity fails where identification of trust property is not possible: B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15, [2009] 1 S.C.R. 504, at para. 85; Citadel General Assurance Co. v. Lloyds Bank Canada, 1997 CanLII 334 (SCC), [1997] 3 S.C.R. 805 at paras. 57-8. Further, the CCAA judge did not hold that, as a general rule, equitable tracing is not available in the insolvency context, as the Monitor urges. He held that tracing in equity cannot be used to enforce a Construction Lien Act trust in an insolvency proceeding “where identification of specific trust property is impossible”. As the CCAA judge found, that is the situation in this case.

[13] Nor did the CCAA judge confuse the ascertainability of the subject matter of a trust with the ability to trace. His finding that the trust property was not identifiable due to commingling and conversion disposed of the tracing argument.

[14] We do not view the CCAA judge’s decision as of significance to the practice for two reasons. First, the decision is fact specific: the nature and operation of the Carillion Group’s unique banking structure were critical factors. Second, the decision does not create uncertainty because it is consistent with established jurisprudence.

[15] As neither of the first two considerations of the leave test are satisfied, we refuse leave.

DISPOSITION

[16] The motion for leave to appeal is dismissed, with costs to the responding party fixed at $15,000, all inclusive.

“E.E. Gillese J.A.”

“M. Tulloch J.A.”

“L.B. Roberts J.A.”