



COURT OF APPEAL FOR ONTARIO

CITATION: CanaSea PetroGas Group Holdings Limited (Re), 2014
    ONCA 824

DATE: 20141120

DOCKET: M44375

Sharpe 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 a Plan of
    Compromise or Arrangement of CanaSea PetroGas Group Holdings Limited, CanaSea
    Oil and Gas Group Pte. Ltd., CanaSea International Pte. Ltd., CanaSea PetroGas
    Investment Inc. and CanaSea Oil and Gas Ltd.

Rebecca Huang, Brent McPherson and Martine S.W. Garland
    for the moving parties, CanaSea PetroGas Group Holdings Limited

Shawn T. Irving and Andrea Lockhart for the respondent Equity
    Ventures International Holdings Limited

Pamela L.J. Huff and Matthew Kanter for the respondent Blue
    Energy Holdings Limited

Heard: October 31, 2014

ENDORSEMENT

[1]

The moving parties seek leave to appeal from a judgment setting aside a
Companies
    Creditors Arrangement Act

(CCAA) Initial Order.

[2]

The moving parties are five affiliated companies, the CanaSea Group.
    The corporate structure was described by the application judge, at para. 6, as
    follows:

The applicant CanaSea PetroGas Holdings Limited (CPGH) is a
    holding company incorporated under the
Canada Business Corporations Act

with its head office in Toronto.  The other applicants are all
    subsidiaries of CPGH.  CPGH owns 100% of the shares of CanaSea Oil and Gas
    Group Pte. Ltd. (COGG), a Singapore company.

COGG owns 100% of the shares of CanaSea

Investment

Inc.

(CPII),

a

CBCA company.  CPII
    owns 100% of the shares of CanaSea Oil and Gas Limited (COGL), the Saskatchewan
    operating company.  CanaSea International Pte. Inc. (CPIL), another
    Singapore company, is also wholly owned by CPGH.

[3]

The moving parties applied for and obtained the Initial Order
ex
    parte
. I pause here to observe that in oral argument on this motion,
    counsel for the moving parties was unable to offer an acceptable explanation
    for having moved
ex parte
.

[4]

The respondents on this motion, Equity Ventures International Holdings
    Limited (Equity Ventures) and Blue Energy Holdings Limited (Blue Energy)
    are creditors of the Singapore company, COGG. They are owed $13 million,
    approximately 90% of the debt obligations of COGG and 49% of the total debt
    obligations of the CanaSea Group as a whole. They oppose any restructuring of
    COGG and intend to enforce their loans in Singapore where they have initiated
    proceedings against COGG in accordance with the loan documents which provide
    for Singapore jurisdiction.

[5]

Equity Ventures and Blue Energy moved to set aside the Initial Order on
    the ground that the CCAA court lacks statutory jurisdiction over COGG as well
    as jurisdiction
simpliciter
.

[6]

The application judge agreed and set aside his Initial Order.

[7]

The moving parties argue that they were denied procedural fairness
    before the application judge. They characterize the basis of the application
    judges reasons for setting aside the Initial Order as being their failure to
    make full and frank disclosure on the
ex parte

application. They
    argue that had they been put on notice that this was the issue, they could have
    satisfied the application judge that the disclosure was adequate.

Preliminary Issue: Jurisdiction of a single judge

[8]

The respondents submit that as a single judge, I should decline to hear
    this motion for leave to appeal and defer the matter to be dealt with in
    writing by a panel of the court.

[9]

The CCAA, s. 13, provides:

Except in Yukon, any person dissatisfied with an order or a
    decision made under this Act may appeal from the order or decision on obtaining
    leave of the judge appealed from or of the court or a judge of the court to
    which the appeal lies and on such terms as to security and in other respects as
    the judge or court directs.

[10]

It
    is clear from the wording of s. 13 that a motion for leave to appeal in a CCAA
    proceeding may be heard either by a judge of the court or by the court: see
Re 1078385 Ontario
Ltd.

(2004),
16 C.B.R. (5th) 152;

206 O.A.C. 17
,

at
    para. 2: 
Section 13 of the
Companies Creditors
    Arrangement Act
, R.S.C. 1985, c. C-36, provides the moving party with the
    procedural option of bringing a leave motion to a single judge
;
Re
    Country Style Food Services Inc.

[2002] O.J. No. 1377,

158 O.A.C. 30
(Ont. C.A.).
While the usual
    practice is to bring CCAA leave motions before a panel in writing (see
Re
    Air Canada

(2003), 173 O.A.C. 154) and while there are no doubt
    advantages to proceeding before a full panel in writing, both to the party
    seeking leave and to the court, I am not persuaded that there is any proper
    basis shown upon which I should decline to hear this motion.

Should leave to appeal be granted?

[11]

In
    my view, the moving parties fail to make out a case for granting leave to
    appeal.

[12]

I
    do not agree with their characterization of the application judges reasons.
    While the application judge was plainly troubled by what he regarded as the
    misleading picture the moving parties had painted on the
ex parte

application,
    I cannot agree that he set aside the Initial Order on purely procedural grounds
    not signaled by the respondents Notice of Motion.  I agree with the
    respondents that the real basis for setting Initial Order is found at paras. 24
    to 26 of his reasons where he finds that the evidence filed by the moving
    parties contains no evidence of COGLs solvency, independent of COGG and that
    CIPL and COGG, the real debtors in this proceeding, are Singapore companies
    and have very little connection to Canada.


[13]

The
    application judge observes that he granted the
ex parte
order on the
    basis that:

(1)

each applicant had
    liabilities in excess of $5 million and was clearly insolvent;

(2)

each applicant was
    unable to meet its obligations as they came due; and

(3)

each applicants
    finances were inextricably intertwined through intercompany debt obligations.

[14]

Upon
    closer examination of the record and with the benefit of opposing argument, he
    found, at para. 26, that in fact, the situation was entirely different:


The evidence now produced
    as a result of the Convertible Noteholders motion simply does not support those
    conclusions.  These conclusions were, in fact, wrong on the basis of the
    evidence now available.  The evidence only supports the conclusion that
    CPGH, CIPL and COGG have obligations in excess of $5 million and are
    insolvent.  CPGH, although a Canadian company, essentially carries on no
    business  it is a holding company.

[15]

The
    claim that the finances of all the applicants were inextricably intertwined
    through intercompany debt obligations could not withstand scrutiny in the face
    of the admission given by the moving parties principal on cross-examination
    that there were no documented inter-company loans.

[16]

The
    application judge concluded, at para. 36:

The evidence does not support the conclusion that CPII or COGL
    qualify as applicants under the CCAA.  On the evidence, the only entities
    which meet the insolvency and $5 million thresholds are at the COGG level or
    above.  COGG is a Singapore company with a tenuous connection to Canada,
    whose loan agreements provide for the resolution of disputes in Singapore under
    Singapore law.

[17]

That
    finding and conclusion, fatal to the request for CCAA protection, corresponds
    precisely with the grounds set out in the Notice of Motion to set aside the
    initial order and I do not accept that the moving parties were taken by
    surprise.

[18]

It is firmly established that the test for leave to appeal in
    insolvency proceedings is stringent where it involves the exercise of
    discretion as to the assessment of competing interests and the availability of
    the special protection afforded by the CCAA: see
Re Country Style Food
    Services Inc.
, at para. 16;
Regal Constellation Hotel Ltd.
,

(2004)
71 O.R. (3d) 355;

242 D.L.R. (4th)
    689;

[2004] O.J. No. 2744 at para. 22.

[19]

In
    my view, this case falls squarely within the category in which deference is
    owed to the CCAA judge and where leave to appeal will be refused. It was for
    the CCAA judge to assess the evidence as to the nature of the debts from which
    the moving parties seek relief, the nature of the financial relationship
    between the various components of the CanaSea Group and the degree of
    connection between the alleged insolvency and Canada. There was ample evidence in
    the record to support the findings he made and I am far from persuaded that he
    made any error in principle or that he misapprehended the evidence.

[20]

I
    see no merit to the contention that simply because the debtor Singapore
    companies are part of a larger group under the umbrella of a Canadian holding
    company (CPGH), they can somehow claim the benefit of the CCAA in relation to
    debt they incurred in Singapore that is subject to Singapore law. The moving
    parties were unable to provide any authority to support their claim that there
    exists a common law doctrine of common enterprise insolvency that goes to such
    a length.

Disposition

[21]

Accordingly,
    I refuse leave to appeal. The respondents are entitled to their costs of this
    motion fixed at $20,000 for Equity Ventures and $16,000 for Blue Energy, both
    amounts inclusive of disbursements and taxes.

Robert Sharpe J.A.


