



COURT OF APPEAL FOR ONTARIO

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

DATE: 20210628

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
    Constructions 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 Monitors 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 Monitors request to adduce fresh evidence. It submits that the only substantive
    component of the proposed fresh evidence is the Letter, which is the authors
    subjective opinion of the impact of the motion judges decision on the
    construction and surety industries; it is devoid of factual information,
    statistics, or data to support the authors views. Moreover, the Letter is not
    appended to an affidavit sworn by its author and so is inadmissible hearsay.

[8]

We accept the responding partys 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] 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 judges decision as of significance to the
    practice for two reasons. First, the decision is fact specific: the nature and
    operation of the Carillion Groups 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.


