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PROCEEDINGS - Appeals and judicial review - Leave to appeal

Wednesday, February 17, 2021 @ 6:16 AM  


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Application by Southern Star for leave to appeal an order approving a transaction in Companies' Creditors Arrangement Act (CCAA) proceedings. The respondent Quest, a not‑for‑profit university, obtained creditor protection under the CCAA to enable it to restructure its debts. The supervisory judge for the CCAA proceedings approved a transaction with Primacorp as a restructuring solution. The Primacorp proposal required Quest to disclaim certain subleases it executed in favour of Southern Star, as they were not economical for Quest. The subleases concerned campus residence buildings located on four lots of land that were sitting largely vacant because of the COVID‑19 pandemic. Quest and Southern Star executed an unregistered lease of a fifth lot. Southern Star objected to the judge vesting off any interest it had in the unregistered LotE Ground Lease, but the judge concluded that no valid and enforceable lease yet existed between the parties in respect of this lot such that it could be vested off to Primacorp. The judge granted a reverse vesting order approving the sale to Primacorp. She found that the transaction with Primacorp was the only viable option to avoid the devastating social and economic consequences to Quest’s stakeholders if a liquidation resulted. She also found the Primacorp transaction to be the best option available to maximize recovery for Quest’s creditors and preserve Quest’s university operations. Southern Star, one of Quest’s stakeholders, objected to the transaction. The transaction between Quest and Primacorp had to close by December 2020 or Primacorp had the right to walk away and Quest lost its funding. Conditions precedent of the transaction were the Disclaimer of the Subleases with Southern Star and the reverse vesting order.

HELD: Application dismissed. The appeal had no merit. The prospects that the court would interfere with the judge’s exercise of discretion was remote, especially so considering the judge’s assessment, grounded in months of experience of managing the proceedings, that the consequences of not approving the transaction would be catastrophic. The orders she made were well within her broad discretion and considerable expertise as a supervisory judge, who was alive to the intricacies of the commercial realities confronting the parties. The judge’s order reflected precisely the type of intricate, fact‑specific, real‑time decision making that inhered in judges supervising CCAA proceedings, and which formed the basis for the considerable deference their decisions were afforded on review. It would defeat the interests of justice and frustrate the purposes of the CCAA to grant leave. Granting leave would most probably have equally disastrous consequences for the myriad stakeholders affected by Quest’s financial circumstances.

Quest University Canada (Re), [2020] B.C.J. No. 2091, British Columbia Court of Appeal, D.C. Harris J.A., December 17, 2020. Digest No. TLD-February152021003