



COURT OF APPEAL FOR
BRITISH COLUMBIA




Citation:



Edgewater Casino Inc.
  (Re),









2009 BCCA 40




Date: 20090206

Docket: CA035922; CA035924

In the Matter of the
Companies
Creditors Arrangement Act
,
R.S.C. 1985, c. C-36, as amended

In the Matter of the
Business Corporations
Act
,
S.B.C. 2002, c 57, as amended

In the Matter of Edgewater Casino Inc. and
Edgewater Management Inc.

Between:

Canadian Metropolitan
Properties Corp.

Appellant

(
Applicant
)

And

Libin Holdings Ltd.,
Gary Jackson Holdings Ltd.
and Phoebe Holdings Ltd.

Respondents

(
Respondents
)




Before:



The Honourable Madam
  Justice Levine





The Honourable Mr. Justice
  Tysoe





The Honourable Madam
  Justice D. Smith









J.J.L. Hunter, Q.C. and
  J.A. Henshall



Counsel for the Appellant





J.R. Sandrelli and A.
  Folino



Counsel for the Respondents





Place and Date of Hearing:



Vancouver
, British Columbia





January 7, 2009





Place and Date of Judgment:



Vancouver
, British Columbia





February 6, 2009









Written Reasons by
:





The Honourable Mr. Justice
  Tysoe





Concurred in by:





The Honourable Madam
  Justice Levine

The Honourable Madam
  Justice D. Smith




Reasons for Judgment
of the Honourable Mr. Justice Tysoe:

Introduction


[1]

This application raises the
question of the nature and application of the test to be utilized when leave is
sought to appeal from an order made in proceedings under the
Companies
Creditors Arrangement Act
, R.S.C. 1985, c. C-36 (the 
CCAA
).

[2]

On August 29, 2008, the chambers
judge refused Canadian Metropolitan Properties Corp. (the Landlord) leave to
appeal from two orders pronounced on March 5, 2008 and December 18, 2008, by
the judge supervising the
CCAA
proceedings (the 
CCAA
judge)
concerning Edgewater Casino Inc. and Edgewater Management Inc. (Edgewater). 
The Landlord applies under section 9(6) of the
Court of Appeal Act
,
R.S.B.C. 1996, c. 77, to vary or discharge the order of the chambers judge so
that it is given leave to appeal from the two orders.  The respondents, being
the original shareholders of Edgewater, oppose the application.

Background

[3]

The Landlord and Edgewater entered
into a lease agreement dated for reference November 8, 2004 (the Lease) under
which the Landlord leased part of the Plaza of Nations site in downtown Vancouver for the operation of a casino by Edgewater.  Edgewater took possession of the
leased property on May 4, 2004 and, prior to commencing operation of the casino
on February 5, 2005, spent approximately $15 million renovating the main
building covered by the Lease.  These renovations indirectly led to two
disputes between the parties.  The first dispute related to the extent, if any,
to which Edgewater was responsible to reimburse the Landlord for increases in
property taxes attributable to improvements made by Edgewater.  A related issue
was whether Edgewater was responsible to pay a portion of the consulting fees
incurred by the Landlord in appealing property tax assessments. The second
dispute related to Edgewaters responsibility to pay for the cost of utilities
supplied to the leased property prior to the commencement of the operation of
the casino while Edgewater was in possession and renovating the building.

[4]

Edgewater commenced the
CCAA
proceedings
on May 2, 2006, and the
CCAA
judge supervised the proceedings. 
Edgewater proposed a plan of arrangement by which sufficient funds would be
paid into a law firms trust account in an amount to fully pay all claims of
creditors accepted by Edgewater and the asserted amounts of creditor claims
disputed by Edgewater.  I gather that the plan of arrangement was predicated on
a sale of the shares in Edgewater by the respondents to a new owner and that it
was agreed that the respondents would be the benefactors of any monies
recovered from the Landlord and any monies left in trust following the
resolution of the property tax and utilities disputes.

[5]

On August 11, 2006, the
CCAA
judge
pronounced a Claims Processing Order establishing a process for claims to be
made by Edgewaters creditors and to be either accepted by Edgewater or
adjudicated upon in a summary manner in the
CCAA
proceedings.  On August
29, 2006, the
CCAA
judge  pronounced a Closing Order pursuant to which
the plan of arrangement was implemented and sufficient funds were paid into
trust to satisfy the accepted and disputed claims of Edgewaters creditors.

[6]

The Landlord filed a proof of
claim asserting that Edgewater was indebted to it in the amount by which the
property taxes for the leased property had increased since 2004.  Edgewater
disallowed the proof of claim.  Edgewater subsequently claimed a right of
setoff against the Landlord in respect of the utilities that it alleged had
been improperly charged by the Landlord and had been paid by mistake.

[7]

By a case management order dated
March 29, 2007, the
CCAA
judge directed that, among other things, the
property tax and utilities disputes were to be determined summarily, with the
parties exchanging pleadings and having representatives cross-examined on
affidavits or examined for discovery.  Hearings took place before the
CCAA
judge in August and September, 2007.

[8]

In his reasons for judgment
dealing with the property tax dispute, indexed as 2008 BCSC 280, the
CCAA
judge held that: (i) clause 3.05 of the Lease, which dealt with Edgewaters
responsibility for increases in the property taxes, was sufficiently clear to
be enforceable; (ii) the Landlord had not made negligent misrepresentations to
Edgewater on matters relevant to the property tax increase; (iii) Edgewater was
only responsible for increases in the assessment of the Lands (defined as the
lands and improvement thereon) solely attributable to the improvements made by
it, with the result that Edgewater was only obliged to pay the Landlord the
increased taxes based on the increase in the assessed value of the buildings;
and (iv) Edgewater was not liable, either in contract,
quantum meruit
or unjust enrichment, to reimburse the Landlord for any consulting fees
incurred by it in appealing the property tax assessments in question.

[9]

In his reasons for judgment
dealing with the utilities dispute, indexed as 2007 BCSC 1829, the
CCAA
judge
held that: (i) clause 4.01 of the Lease, which was clear on its face,
restricted the amount of rent and additional rent during the period preceding
the commencement of operation of the casino to the sum specified in the clause,
and Edgewater was not responsible to pay for any additional sum in respect of
utilities; (ii) the Landlord did not meet the test in order to have the Lease
rectified in respect of the payment for utilities during the period of
possession preceding the commencement of operation of the casino; and (iii)
Edgewater was entitled to the return of the payments for utilities during the
period of possession preceding the commencement of the casino made by it as a
result of a mistake.

Decision
of the Chambers Judge

[10]

In dismissing the applications for
leave to appeal the two orders, the chambers judge commented that the
CCAA
judge had held the language of clauses 3.05 and 4.01 of the Lease to be clear
and unambiguous.  Relying on
Re Pacific National Lease Holding Corp.
(1992), 72 B.C.L.R. (2d) 368, 15 C.B.R. (3d) 265 (C.A. Chambers), and
Re Pine
Valley Mining Corporation
, 2008 BCCA 263, 43 C.B.R. (5th) 203 (Chambers), the
chambers judge stated that leave to appeal in proceedings under the
CCAA
is granted sparingly.  He commented that there were none of the time pressures
that often attend
CCAA
proceedings.

[11]

The chambers judge noted that the
CCAA
judge had applied settled principles of contractual interpretation and
expressed the view that there were very limited prospects of success on appeal. 
He observed that the issues had been decided in the context of summary
proceedings under the
CCAA
and stated that the decision of the chambers
judge was entitled to substantial deference.

Discussion

[12]

The parties are agreed that the
test to be applied by a reviewing court on an application to review an order of
a chambers judge is to determine whether the judge was wrong in law or
principle or misconceived the facts: see
Haldorson v. Coquitlam (City)
,
2000 BCCA 672, 3 C.P.C. (5th) 225.

[13]

The parties made their submissions
on the basis that there is a special test or standard for the granting of leave
to appeal from an order made in
CCAA
proceedings.  The genesis of this
perception is the following passage from the decision of Mr. Justice Macfarlane
in
Pacific National Lease
:

[30] 
Despite what I have said, there may be an arguable case for the petitioners to
present to a panel of this court on discreet questions of law.  But I am of the
view that this court should exercise its powers sparingly when it is asked to
intervene with respect to questions which arise under the C.C.A.A.  The process
of management which the Act has assigned to the trial court is an ongoing one.  In
this case a number of orders have been made.  Some, including the one under
appeal, have not been settled or entered.  Other applications are pending.  The
process contemplated by the Act is continuing.

[31] 
A colleague has suggested that a judge exercising a supervisory function under
the C.C.A.A. is more like a judge hearing a trial, who makes orders in the
course of that trial, than a chambers judge who makes interlocutory orders in
proceedings for which he has no further responsibility.

[32] 
Also, we know that in a case where a judgment has not been entered, it may be
open to a judge to reconsider his or her judgment, and alter its terms. In
supervising a proceeding under the C.C.A.A. orders are made, and orders are
varied as changing circumstances require.  Orders depend upon a careful and
delicate balancing of a variety of interests and of problems.  In that context
appellate proceedings may well upset the balance, and delay or frustrate the
process under the C.C.A.A.  I do not say that leave will never be granted in a
C.C.A.A. proceeding.  But the effect upon all parties concerned will be an
important consideration in deciding whether leave ought to be granted.

Numerous
subsequent decisions have referred to these comments.  These decisions include
Re
Westar Mining Ltd.
(1993), 75 B.C.L.R. (2d) 16, 17 C.B.R. (3d) 202 (C.A.) at para. 57;
Re Woodwards Ltd.
(1993), 105 D.L.R. (4th) 517, 22 C.B.R. (3d)
25 (B.C.C.A. Chambers) at para. 34;
Re Repap British Columbia Inc.
(1998), 9 C.B.R. (4th) 82 (B.C.C.A. Chambers) at para. 8;
Luscar Ltd.
v. Smoky River Coal Ltd.,
1999 ABCA 179, 175 D.L.R. (4th) 703 at para. 62;
Re
Blue Range Resource Corp.
, 1999 ABCA 255, 12 C.B.R. (4th) 186 (Chambers) at
para. 3;
Re Canadian Airlines Corp.
, 2000 ABCA 149, 19 C.B.R. (4th) 33
(Chambers) at para. 42;
Re Skeena Cellulose Inc.
, 2003 BCCA 344, 13
B.C.L.R. (4th) 236 at para. 52;
Re Fantom Technologies Inc.
(2003),
41 C.B.R. (4th) 55 (Ont. C.A. Chambers) at para. 17; and
Re New Skeena
Forest Products Inc.
, 2005 BCCA 192, [2005] 8 W.W.R. 224 at para. 20.

[14]

The Landlord accepts the general
proposition that leave to appeal from
CCAA
orders should be granted
sparingly, but says that there should be an exception where, as here, the time
constraints present in typical
CCAA
situations do not exist.  In this
regard, the Landlord relies on the views expressed by Chief Justice McEachern
in
Westar Mining
.  After quoting the above passage from
Pacific
National Lease
, McEachern C.J.B.C. said the following:

[58]  I respectfully agree with what Macfarlane J.A. has said, but in
this case the situation of the Company has stabilized as its principal assets
have been sold.  The battle for the survival of the Company is over, at least
for the time being.  What remains is merely to determine priorities, and the
proper distribution of the trust fund which was established with the approval
of the Court primarily for the protection of the Directors.

Although
McEachern C.J.B.C. was speaking in dissent when making these comments, an
appeal to the Supreme Court of Canada was allowed, [1993] 2 S.C.R. 448, and the
Court agreed generally with his dissenting reasons.

[15]

The respondents submit that there
should be the same test for leave to appeal from all orders made in
CCAA
proceedings. 
The respondents maintain that the test has been consistently applied throughout
  Canada and that a different test in some circumstances would lead to the
result that there would be many more leave applications to appeal orders made
in
CCAA
proceedings and appellate courts would be required to analyze
the underlying
CCAA
proceeding in every leave application.

[16]

The requirement for leave to
appeal from an order made in
CCAA
proceedings is found in the
CCAA
itself (section 13), as opposed to the provincial or territorial statutes
governing the appellate courts in Canada.  This suggests that Parliament
recognized that appeals as of right from orders made in
CCAA
proceedings
could have an adverse effect on the efforts of debtor companies to reorganize
their financial affairs pursuant to the Act and that appeals in
CCAA
proceedings should be limited: see
Re Algoma Steel Inc.
(2001), 147
O.A.C. 291, 25 C.B.R. (4th) 194 at para. 8.

[17]

However, it does not follow from
the fact that the statute itself is the source of the requirement for leave
that the test or standard applicable to applications for leave to appeal orders
made in
CCAA
proceedings is different from the test or standard for
other leave applications.  It is my view that the same test applicable to all
other leave applications should be utilized when considering an application for
leave to appeal from a
CCAA
order.  In British Columbia, the test
involves a consideration of the following factors:

(a)        whether the point on appeal
is of significance to the practice;

(b)        whether the point raised is
of significance to the action itself;

(c)        whether the appeal is
prima
facie
meritorious or, on the other hand, whether it is frivolous; and

(d)        whether the appeal will unduly hinder the
progress of the action.

The authority most frequently cited in British
Columbia in this regard is
Power Consolidated (China) Pulp Inc. v. British
Columbia Resources Investment Corp.
(1988), 19 C.P.C. (3d) 396 (B.C.C.A.
Chambers).

[18]

This is not to suggest that I
disagree with the above comments of Macfarlane J.A. in
Pacific National
Lease
.  To the contrary, I agree with his comments, but I do not believe
that he established a special test for
CCAA
orders.  Rather, his
comments are a product of the application of the usual standard used on leave
applications to orders that are typically made in
CCAA
proceedings and a
recognition of the special position of the supervising judge in
CCAA
proceedings. 
In particular, a consideration of the third and fourth of the above factors
will result in leave to appeal from typical
CCAA
orders being given
sparingly.

[19]

The third of the above factors
involves a consideration of the merits of the appeal.  In non-
CCAA
proceedings, a justice will be reluctant to grant leave where the order
constitutes an exercise of discretion by the judge because the grounds for
interfering with an exercise of discretion are limited: see
Silver Standard
Resources Inc. v. Joint Stock Co. Geolog
, [1998] B.C.J. No. 2298 (C.A.
Chambers).  Most orders made in
CCAA
proceedings are discretionary in
nature, and the normal reluctance to grant leave to appeal is heightened for
two reasons alluded to in the comments of Macfarlane J.A.

[20]

First, one of the principal
functions of the judge supervising the
CCAA
proceeding is to attempt to
balance the interests of the various stakeholders during the reorganization
process, and it will often be inappropriate to consider an exercise of
discretion by the supervising judge in isolation of other exercises of
discretion by the judge in endeavouring to balance the various interests. 
Secondly,
CCAA
proceedings are dynamic in nature and the supervising
judge has intimate knowledge of the reorganization process.  The nature of the
proceedings often requires the supervising judge to make quick decisions in
complicated circumstances.  These considerations are reflected in the comment
made by Madam Justice Newbury in
New Skeena Forest Products
that
[a]ppellate courts also accord a high degree of deference to decisions made by
Chambers judges in CCAA matters and will not exercise their own discretion in
place of that already exercised by the court below (para. 20).

[21]

The fourth of the above factors
relates to the detrimental effect of an appeal on the underlying action.  In
most non-
CCAA
cases, the events giving rise to the underlying action
have already occurred, and a consideration of this factor involves the
prejudice to one of the parties if the trial is adjourned or if the action
cannot otherwise move forward pending the determination of the appeal.
CCAA
proceedings are entirely different because events are unfolding as the
proceeding moves forward and the situation is constantly changing  some refer
to
CCAA
proceedings as real-time litigation.

[22]

The fundamental purpose of
CCAA
proceedings is to enable a qualifying company in financial difficulty to
attempt to reorganize its affairs by proposing a plan of arrangement to its
creditors. The delay caused by an appeal may jeopardize these efforts.  The
delay may also have the effect of upsetting the balance between competing
stakeholders that the supervisory judge has endeavoured to achieve.

[23]

Similar views were expressed by
Mr. Justice OBrien in
Re Calpine Canada Energy Ltd.
, 2007 ABCA 266, 35
C.B.R. (5th) 27 (Chambers):

[13]  This Court has repeatedly stated, for example in
Liberty Oil
& Gas Ltd., Re
, 2003 ABCA 158, 44 C.B.R. (4th) 96 (Alta. C.A.), at
paras. 15-16, that the test for leave under the CCAA involves a single
criterion that there must be serious and arguable grounds that are of real and
significant interest to the parties. The four factors used to assess whether
this criterion is present are:

(1)        Whether the point on appeal is of significance to the
practice;

(2)        Whether the point raised is of significance to the action
itself;

(3)        Whether the appeal is
prima facie
meritorious or, on
the other hand, whether it is frivolous; and

(4)        Whether the appeal will unduly hinder the progress of the
action.

[14]  In assessing these factors, consideration should also be given to
the applicable standard of review:
Canadian Airlines Corp
.
, Re
,
2000 ABCA 149, 261 A.R. 120 (Alta. C.A. [In Chambers]).  Having regard to the
commercial nature of the proceedings which often require quick decisions, and
to the intimate knowledge acquired by a supervising judge in overseeing a CCAA
proceedings, appellate courts have expressed a reluctance to interfere, except
in clear cases:
Smoky River Coal Ltd., Re
, 1999 ABCA 179, 237 A.R. 326
(Alta. C.A.) at para. 61.

Other decisions on leave applications where the usual
factors were expressly considered include
Re Blue Range Resource Corp
.,
Re
Canadian Airlines Corporation
and
Re Fantom Technologies Inc
., each
of which quoted the above comments of Macfarlane J.A. in
Pacific National
Lease
.

[24]

As a result of these
considerations, the application of the normal standard for granting leave will
almost always lead to a denial of leave to appeal from a discretionary order
made in an ongoing
CCAA
proceeding.  However, not all of the above
considerations will be applicable to some orders made in
CCAA
proceedings.  Thus, in
Westar Mining
, McEachern C.J.B.C., while
generally agreeing with the comments made in
Pacific National Lease
, believed
that the considerations mentioned by Macfarlane J.A. were not applicable in
that case because the
CCAA
proceeding had effectively come to an end
with the sale of the principal assets of the debtor company.  Madam Justice
Newbury made a similar point in
New Skeena Forest Products
at para. 25 (which
was a hearing of an appeal, not a leave application), although she found it
unnecessary to decide the appeal on the point.

[25]

The chambers judge did give
consideration to the usual factors in the present case, but none of the
considerations I have mentioned were applicable to the two orders.  The
CCAA
judge was deciding questions of law in each case and was not exercising his
discretion.  The knowledge gained by the
CCAA
judge during the
reorganization process was not relevant to his decisions, which involved events
that occurred prior to the commencement of the
CCAA
proceeding.  The
plan of arrangement made by Edgewater has been implemented, and appeals from
the two orders will not delay or otherwise jeopardize the reorganization
process.  There is no prospect that the outcome of the appeals will affect the
continuing viability of Edgewater; indeed, although the disputes involve
Edgewater in name, the parties with a monetary interest in the disputes are the
Landlord and the respondents, who are the former shareholders of Edgewater.  In
the circumstances, there was no reason to give substantial deference to the
CCAA
judge.

[26]

I am not saying that the
considerations I have mentioned will never apply to a determination of claims
pursuant to a claims process in a
CCAA
proceeding.  For example, a plan
of arrangement may only be successful if the total amount of claims against the
debtor company is less than a specified sum.  An appeal from an order
quantifying a claim of a creditor would delay the
CCAA
proceeding and
could jeopardize the companys reorganization.

[27]

I have no doubt that there will be
other circumstances in which the claims process will have an impact on the
reorganization process.  Even if the claims process will not jeopardize the
reorganization process, some of the other considerations I have mentioned may
apply to the determination of the claims.  For example, the outcome of an
appeal may affect the amounts received by other creditors and may delay the full
implementation of the plan of arrangement.  The fact that section 12 of the
CCAA
mandates the determination of claims to be by way of a summary application to
the court illustrates that Parliament recognized that the claims process will
often be sensitive to time constraints.

[28]

There is one other point about the
order relating to the utilities dispute that differentiates it from the typical
CCAA
order.  The dispute did not involve a claim against Edgewater but,
rather, it was a claim by Edgewater to have the Landlord refund utilities
payments made by it.  Such a claim would normally be pursued in a normal
lawsuit and, if it was determined on a summary application (i.e., a Rule 18A
application), there would have be an appeal as of right, and leave would not have
been required.  It was only because the claim was raised as a setoff to the
Landlords property tax claim that it came to be determined in the
CCAA
proceeding.

[29]

I now turn to a consideration of
the usual factors in relation to the order dealing with the property tax
dispute:

1.         As stated by the chambers
judge, the point in issue is of no significance to the practice.

2.         As conceded by the
respondents on the application before the chambers judge, the point in issue is
of significance to the action itself (in the sense that it finally determines
the Landlords claim).

3.         The order did not involve an
exercise of discretion by the
CCAA
judge.  The chambers judge was
mistaken in his belief that the
CCAA
judge held that clause 3.05 was
clear and unambiguous; the first issue considered by the
CCAA
judge was
whether the clause was sufficiently clear as to make it enforceable.  In my
opinion, the appeal is not frivolous.

4.         The appeal will not unduly hinder the
progress of the action because Edgewaters plan of arrangement has been
implemented and the
CCAA
proceeding has come to a conclusion.

On
a consideration of all of the factors, it is my view that leave to appeal the
order dealing with the property tax dispute should be given.

[30]

A consideration of the usual factors
in relation to the order dealing with the utilities dispute leads to the same
observations with one exception.  As conceded by the Landlord on this
application, the prospects of success of an appeal do not appear to be as high
as the prospects in an appeal from the other order.  However, I am not
persuaded that the appeal has so little merit that it amounts to a frivolous
appeal.  If the dispute had not become intertwined with the property tax
dispute as a result of Edgewaters claim of a right of setoff, the dispute
would not have been determined in the
CCAA
proceeding, and the Landlord
would have had an appeal as of right.  In all the circumstances, it is my view
that leave to appeal from the order dealing with the utilities dispute should
also be given.

Conclusion

[31]

I would discharge the order made
by the chambers judge dismissing the leave application, and I would grant the
Landlord leave to appeal from both of the orders.

The Honourable Mr. Justice Tysoe

I
agree:

The
Honourable Madam Justice Levine

I
agree:

The
Honourable Madam Justice D. Smith


