accounting firm, audit firm in toronto, hamilton …...cumberland 2 l.p., bosvest inc., edge on...

Court File No.: CV-16-11541-00CL

ONTARIO SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

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 URBANCORP CUMBERLAND 2 GP INC., URBANCORP

CUMBERLAND 2 L.P., BOSVEST INC., EDGE ON TRIANGLE PARK INC., AND EDGE RESIDENTIAL INC.

BOOK OF AUTHORITIES OF THE APPLICANTS (Returnable October 6, 2016)

October 4, 2016 BENNETT JONES LLP 3400 One First Canadian Place Toronto, ON M5X 1A4 Fax: 416.863.1716 S. Richard Orzy (LSUC#: 23181I) Tel: 416.777.5737 Raj Sahni (LSUC#: 42942U) Tel: 416.777.4804 Lawyers for the Cumberland Group

-2-

SERVICE LIST

WEIRFOULDS LLP Barristers & Solicitors The TD Bank Tower, Suite 4100 66 Wellington Street West, Toronto, ON M5K 1B7

Edmond E.B. Lamek Tel: 416-947-5042 Email: [email protected]

Danny M. Nunes Tel: 416-6196293 Email: [email protected]

Lawyers for the Urbancorp CCAA Entities

THE FULLER LANDAU GROUP INC. 151 Bloor Street West, 12th Floor Toronto, ON M5S 1 S4

Gary Abrahamson Tel: 416-645-6524 Fax: 416-645-6501 Email [email protected]

Adam Erlich Tel: 416-645-6560 Fax: 416-645-6501 Email: [email protected]

The Proposal Trustee and proposed Monitor

DENTONS CANADA LLP 77 King Street West #400, Toronto, ON M5K OAl

Neil S. Rabinovitch Tel: 416-863-4656 Email: [email protected]

Lawyers for Reznik, Paz, Neva Trustees Ltd., in its capacity as the Trustee for the Debenture Holders (Series A) and Adv. Guy Gissin, in his capacity as the Israeli Functionary of Urbancorp. Inc.

GOLDMAN SLOAN NASH & HABER (GSNH)LLP 480 University A venue, Suite 1600 Toronto, ON MSG 1 V2

Mario Forte Tel: 416-597-6477 Fax: 416-597-3370 Email: [email protected]

Robert J. Drake Tel: 416-597-5014 Fax: 416-597-3370 Email: [email protected]

Lawyers for the Proposal Trustee and proposed Monitor

- 3 -

BENNETT JONES LLP CHAITONS LLP 3400 One First Canadian Place 5000 Yonge Street, 1 oth Floor P.O. Box 130 Toronto, ON M2N 7E9 Toronto, ON M5X 1A4

Harvey Chaiton S. Richard Orzy Tel: 416-218-1129 Tel: 416-777-5737 Email: [email protected] Email: [email protected]

Lawyers for BMO Raj Sahni Tel: 416-863-1200 Email: [email protected]

Jonathan G. Bell Tel :416-777-6511 Email : [email protected]

Lawyers for the Cumberland Group and Alan Sas kin

TORYSLLP ROBINS APPLEBY LLP 79 Wellington Street West, 301h Floor 120 Adelaide Street West, Suite 2600 Box 270, TD South Tower Toronto, ON M5H 1 Tl Toronto, ON M5K 1N2

Leor Margulies Scott A. Bomhof Tel: 416-360-3372 Tel: 416-865-7370 Email: [email protected] Email: [email protected]

Dominique Michaud Lawyers for First Capital Realty Tel: 416-360-3795

Email: [email protected]

Lawyers for Terra Firma Capital Corporation

BANK OF MONTREAL First Canadian Place 1 gth

100 King Street West Toronto ON M5X lAl

Greg Fedoryn Tel: 416-643-1623 Email: [email protected]

Eden Orbach Email: [email protected]

DEPARTMENT OF JUSTICE Ontario Regional Office The Exchange Tower, Box 36 130 King Street West Toronto, ON M5X 1K6

Fozia Chaudary Tel: 416-952-7722 Email: [email protected]

Lawyers for the Department of Justice

TORYSLLP 79 Wellington Street West, 30th Floor Box 270, TD South Tower Toronto, ON M5K 1N2

Adam M. Slavens Tel: 416-865-7333 Email: [email protected]

- 4 -

GOWLING WLG (CANADA) LLP 1 First Canadian Place, 100 King Street West

Floor, Suite 1600 Toronto, Ontario M5X 1G5

Clifton Prophet Tel: 416-862-4340 Email: [email protected]

Lilly Wong Tel: 416-369-4630 Email: [email protected]

Lawyers for CIBC and CIBC Mortgage Inc.

MINISTRY OF FINANCE 777 Bay Street, 11th Floor Toronto, ON MSG 2C8

Kevin O'Hara Tel: 416-327-8463 Email: [email protected]

Lawyers for the Ministry of Finance

HARRIS SHEAFFER LLP Yonge Corporate Centre 4100 Yonge Street, Suite 610 Toronto, ON M2P 2B5

Barry Rotenberg Tel: 416-250-3699 Email: [email protected]

Lawyers for Tarion Warranty Corporation

ROSENSTEIN LAW P.C. 5255 Yonge Street, Suite 1300 Toronto, ON M2N 6P4

Jonathan Rosenstein Tel: 416-639-2123 Email: [email protected]

- 5 -

MILLER WASTE SOLUTIONS GROUP INC. 73 Brydon Drive Toronto, ON M9W 4N3

Jason Tower Email: [email protected]

Lawyers for Aviva Insurance Company of Rob Spinopoli Canada Email: [email protected]

FIRM CAPITAL MORTGAGE FUND INC. 163 Cartwright Ave. Toronto, ON M6A 1V5 Fax: 416-635-1713

MVL FINANCIAL SERVICES LIMITED 1064 South Service Rd. E. Oakville, ON L6J 2X7 Fax: 905-901-3825


MVL LEASING LIMITED 1064 South Service Rd. E. Oakville, ON L6J 2X7 Fax: 905-901-3825


CANADIAN MORTGAGE SERVICING CORPORATION 20 Adelaide Street E., Suite 900 Toronto, ON MSC 2T6 Fax: 416-867-1303

CANADIAN IMPERIAL BANK OF TEPLITSKY, COLSON LLP COMMERCE 595 Bay Street, 5th Floor Toronto, ON MSG 2C2

Barristers 70 Bond Street, Suite 200

James M. Wortzman Catherine Allen Tel: 416-365-9320 Email: [email protected] Email: [email protected]

Lawyers for Atrium Mortgage Investment Corporation

LAURENTIAN BANK OF CANADA 1981, av. McGill College, bur. 1675 Montreal (Quebec) H3A 3K3

Alexandre LeBlanc Tel: 514-284-4500 x 2145 Email: [email protected]

BANK OF MONTREAL, ADMINISTRATIVE AGENT First Canadian Place, 11th Floor Toronto, ON MSX lAl

LOOPSTRA NIXON LLP 135 Queens Plate Drive, Suite 600 Toronto, ON M9W 6V7

Michael Mc Williams Tel: 416-748-4766 Email: [email protected]

- 6 -

HENDRICK AND DEVELOPMENTS INC. 85 Hanna Ave., Suite 400 Toronto, ON M6K 3S3 Tel: 416-504-4114 Fax: 416-941-1655

MAIN

AS FIRST CAPITAL 1071 CORPORATION 85 Hannah Ave., Suite 400 Toronto, ON M6K 3S3 Tel: 416-504-4114 Fax: 416-941-1655

TORKIN MANES LLP 151 Yonge Street, Suite 1500 Toronto, ON MSC 2W7

Kayla Kwinter Tel: 416-777-5420 Email: [email protected]

Lawyers for 207875 Ontario Limited carrying Lawyers for MDF Mechanical Limited on business as Canadian Rental Centres

DICKINSON WRIGHT LLP 199 Bay St., Suite 2200 Toronto, ON MSL 1 G4

David P. Preger Tel: 416-646-4606 Email: [email protected]

Lawyers for Downing Street Financial Inc.

CITY OF TORONTO Legal Services 55 John Street, 26th Floor Toronto, ON MSV 3C6

Christopher P. Henderson Email: [email protected]

FINE&DEO 3100 Steeles Ave. W, Suite 300 Vaughan, ON L4K 3Rl

Tel: 90S-760-1800 Fax:90S-760-00SO

- 7 -

Lawyers for Toronto Standard Condominium Corporation No. 2448.

LEVINE SHERKIN BOUSSIDAN 23 Lesmill Road, #300 Toronto, ON M3B 3P6

Kevin Sherkin Tel: 416-224-2400 Email: [email protected]

Lawyers for Dolvin Mechanical Contractors Ltd.

TERRA FIRMA CORPORATION

CAPITAL FIRST CAPITAL REALTY INC. 8S Hannah Ave., Suite 400

22 St. Clair A venue East, Toronto, ON M4T 2SS

Suite 200 Toronto, ON M6K 3S3

Glenn Watchorn President Email: [email protected]

FIRST CAPITAL (S.C.) CORPORATION 8S Hannah Ave., Suite 400 Toronto, ON M6K 3S3 Tel: 416-S04-4114 Fax: 416-941-16SS

Tel: 416-S04-4114 Fax: 416-941-16SS

TERRA FIRMA CORPORATION SOOO Yonge Street, Toronto, ON M2N 7E9


TERRA FIRMA CAPITAL TERRA FIRMA CORPORATION 1 Toronto Street, Toronto, ON MSC 2V6


CORPORATION Suite 700 1 Toronto Street,

Toronto, ON MSC 2V6


CAPITAL

Suite 1S02

REALTY

Suite 700

- 8 -

GOODMANS LLP MILLER THOMSON Bay Adelaide Centre 600-60 Columbia Way 333 Bay Street, Suite 3400 Markham, ON L3R OC9 Toronto, ON M5H 2S7

Cara Shamess Mark Dunn Tel: 905-415-6464 Tel: 416-849-6895 Email: [email protected] Email: [email protected]

Lawyers for Mid-Northern Lawyers for Toronto Media Arts Cluster

McMILLAN LLP OFFICE OF THE SUPERINTENDENT Brookfield Place, Suite 4400 OF BANKRUPTCY 181 Bay Street 25 St. Clair A venue E, 6th Floor Toronto, ON M5J 2T3 Toronto, ON M4T 1M2

Paul Avis Julie Fay Tel: 416-865-7006 Senior Bankruptcy Analyst Email: [email protected] Tel: 416-973-6442

Fax: 416-973-7440 Lawyers for RBC and BNS E-mail: [email protected]

BLAKE, CASSELS & GRAYDON LLP DRUD I ALEXIOU KUCHAR LLP 199 Bay Street, Suite 4000 7050 Weston Rd. Commerce Court West Suite 610 Toronto ON M5L 1A9 Vaughan, ON L4L 8G7

Steven J. Weisz Marco Drudi Tel: 416-863-2616 Tel: 905-850-6116 Email: [email protected] Email: [email protected]

Lawyers for Laurentian Bank of Canada Lawyers for Paramount Structures Ltd.

TORYSLLP 79 Wellington Street W. Suite 3000 Toronto, ON M5K 1N2

Scott Bomhof Tel: 416-865-7370 Email: [email protected]

Crawford Smith Tel: 416-865-8209 Email: [email protected]

- 9 -

ALVAREZ & MARSAL CANADA INC. 200 Bay Street, Suite 2900 Toronto, ON M5J 211

Tony Zaspalis Tel: 416-847-5171 Email: [email protected]

Amanda Favot Tel: 416-847-5163 Email: [email protected]

Ryan Gruneir Lawyers for First Captial (King Liberty - Tel: 416-847-5151 Retail) Corporation, King Liberty North Email: [email protected] Corporation, and First Capital (S. C.) Corporation Construction Receiver over Urbancorp

(Leslieville) Developments Inc., Urbancorp (I'he Beach) Developments Inc., and Urbancorp (Riverdale) Developments Inc.

A. FARBER & PARTNERS INC. 150 York Street, Suite 1600, Toronto, ON, M5H 3S5

Hylton Levy, CPA, CA, CIRP, LIT Tel: 416-496-3070 Email: [email protected]

DELZOTTO ZORZI LLP 4810 Dufferin Street, Suite D Toronto, ON M3H 5S8

Robert W. Calderwood Tel.: 416-665-5555 E-mail: [email protected]

Financial Advisor for Adv. Guy Gissin, in his Sabrina Adamski capacity as the Israeli Functionary of Tel.: 416-665-5555 Urbancorp. Inc. E-mail: [email protected]

Lawyers for Furkin Construction Inc. and GMF Consulting Inc.

- 10 -

CASSELS BROCK & BLACKWELL LLP DAVAD INVESTMENTS INC. 40 King St. West, Suite 2100 113 lA Leslie Street, Suite 500, Toronto, ON M5H 3C2 Toronto, Ontario, M3C 3L8 Attention: Mark St. Cyr

David Walerstein Mark St. Cry Email: [email protected]:gerties.ca Tel: 416-869-5462 Email: [email protected] DIP Lender

Lawyers for Case Realty

FASKEN MARTINEAU DUMOULIN LLP 333 Bay Street, Suite 2400 Toronto, ON M5H 2T6

Nora Kharouba Tel: 416-865-5163 Email: [email protected]

Lawyers for HomeLife Landmark Realty Inc.

Court File No.: CV-16-11541-00CL

ONTARIO SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

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 URBANCORP CUMBERLAND 2 GP INC., URBANCORP

CUMBERLAND 2 L.P., BOSVEST INC., EDGE ON TRIANGLE PARK INC., AND EDGE RESIDENTIAL INC.

Tab 1.

2.

3.

4.

5.

6.

BOOK OF AUTHORITIES OF THE APPLICANTS (Returnable October 6, 2016)

INDEX

Document Re Clothing for Modern Times Ltd. (2011), 88 C.B.R. (5th) 329 (Ont. [Commercial List])

Re Ted Leroy Trucking [Century Services] Ltd., 2010 SCC 60

Urbancorp Toronto Management Inc., re: 2016 ONSC 3288 (Ont. [Commercial List])

Priszm Income Fund, Re (2011), 75 C.B.R. (5th) 213 (Ont. S.C.J.)

Canwest Publishing Inc., 2010 ONSC 222 (Ont. S.C.J. [Commercial List])

S.C.J.

S.C.J.

Canwest Global Communications Corp., Re (2009), 59 C.B.R. (5th) 72 (Ont. S.C.J. [Commercial List])

Clothing for Modern Times Ltd., Re, 2011ONSC7522, 2011CarswellOnt14402 ~-~----~-~'-'"" ,,, __ ,, __ m,,,,_,, , ---~,,-------

2011 ONSC 7522, 2011 CarswellOnt 14402, 210 A.C.W.S. (3d) 575, 88 C.B.R. (5th) 329

2011 ONSC 7522 Ontario Superior Court of Justice [Commercial List]

Clothing for Modern Times Ltd., Re

2011 CarswellOnt 14402, 2011 ONSC 7522, 210 A.C.W.S. (3d) 57s, 88 C.B.R. (5th) 329

In the Matter of the Notice of Intention to make a Proposal of Clothing for Modern Times Ltd.

Q~mnsel: M. Poliak, H. Chaiton for Applicant

D.M. Brown J.

Heard: December 16, 2011 Judgment: December 16, 2011

Docket: 31-1513595

M. Forte for A. Farber & Partners Inc., the Proposal Trustee and Proposed Monitor LA versa for Roynat Asset Finance D. Bish for Cadillac Fairview L. Galessiere for Ivanhoe Cambridge Inc., Oxford Properties Group Inc., Primaris Retail Estate Investment Trust, Morguard Investment Limited, 20 VIC Management Inc. M. Weinczuk for 7951388 Canada Inc.

Subject: Insolvency

Related Abridgment Classifications For all relevant Canadian Abridgment Classifications refer to highest level of case via History.

Bankruptcy and insolvency

XIX Companies' Creditors Arrangement Act XIX.5 Miscellaneous

Headnote

:B'ahkruptcy and insolvency --- Companies' Creditors Arrangement Act- Miscellaneous

Cbntinuation of Bankruptcy and Insolvency Act (BIA) proposal proceedings under Companies' Creditors Arrangement Act (CCAA) - Debtor company filed notice of intention to make proposal pursuant to s. 50.4 of BIA - Time to file proposal was running out and no further extensions of time to file proposal were available to debtor under BIA - Debtor brought mqtion to continue BIA proposal proceedings under CCAA - Motion granted - Debtor had not filed proposal -C~mtinuation to enable going-concern sale of part of debtor's business would be consistent with purposes of CCAA -Debtor filed cash flow statements which showed net positive cash flow for period and that debtor had sufficient resources to coptinue operating in CCAA proceeding, as well as to conduct sale process without need for additional financing - Proposal Trustee regarded cash flow statements as reasonable - Previous extension orders made under s. 50.4(9) of BIA indicated that debtor established it had been acting in good faith and with due diligence.

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Clothing for Modern Times Ltd., Re, 2011 ONSC 7522, 2011 CarswellOnt 14402 -"'""---·---~-,,,,_,,,_,, ___ ,m _____ _.__,, __ ,, ____________ ,,, ____ ·~--··-m-mhH ___ ,,,_,,,,,,,,,,_,,,,,_, ___ _ 2011 ONSC 7522, 2011 CarswellOnt 14402, 210 A.C.W.S. (3d) 575, 88 C.B.R. (5th) 329

Table of Authorities

q1ses considered by D.M. Brown J.:

Brainhunter Inc., Re (2009), 62 C.B.R. (5th) 41, 2009 CarswellOnt 8207 (Ont. S.C.J. [Commercial List])-referred to

Consumers Packaging Inc., Re (2001), 150 O.A.C. 384, 27 C.B.R. (4th) 197, 2001 CarswellOnt 3482, 12 C.P.C. (5th) 208 (Ont. C.A.)- considered

Nortel Networks Corp., Re (2009), 2009 CarswellOnt 4467, 55 C.B.R. (5th) 229 (Ont. S.C.J. [Commercial List]) -followed

Sierra Club of Canada v. Canada (Minister of Finance) (2002), 287 N.R. 203, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 18 C.P.R. (4th) 1, 44 C.E.L.R. (N.S.) 161, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 211 D.L.R. (4th) 193, 223 F.T.R. 137 (note), 20 C.P.C. (5th) I, 40 Admin. L.R. (3d) 1, 2002 SCC 41, 2002 CarswellNat 822, 2002 CarswellNat 823, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 93 C.R.R. (2d) 219, [2002] 2 S.C.R. 522 (S.C.C.)- followed

.. Ste/co Inc., Re (2004), 2004 CarswellOnt 4084, 6 C.B.R. (5th) 316 (Ont. S.C.J. [Commercial List]) - considered

Ted Leroy Trucking Ltd., Re (2010), (sub nom. Century Services Inc. v. Canada (A.G.)) [2010] 3 S.C.R. 379, [2010] G.S.T.C. 186, 12 B.C.L.R. (5th) 1, (sub nom. Century Services Inc. v. A.G. of Canada) 2011 G.T.C. 2006 (Eng.), (sub nom. Century Services Inc. v. A.G. of Canada) 2011 D.T.C. 5006 (Eng.), (sub nom. Leroy (Ted) Trucking Ltd., Re) 503 W.A.C. l, (sub nom. Leroy (Ted) Trucking Ltd., Re) 296 B.C.A.C. 1, 2010 SCC 60, 2010 CarswellBC 3419, 2010 CarswellBC 3420, 409 N.R. 201, (sub nom. Ted LeRoy Trucking Ltd., Re) 326 D.L.R. (4th) 577, 72 C.B.R. (5th) 170, [2011] 2 W.W.R. 383 (S.C.C.)- followed

Statutes considered:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Generally - referred to

Pt. III - referred to

s. 50.4 [en. 1992, c. 27, s. 19] - pursuant to

s. 50.4(9) [en. 1992, c. 27, s. 19] - considered

Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 .. Generally - referred to

s. I 0(2) - considered

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Clothing for Modem Times Ltd., Re, 2011ONSC7522, 2011CarswellOnt14402 _,,_,,__,,____ --~--------,,_ ___________ ,,,_,,. ____ ,, _____ ~-2011 ONSC 7522, 2011 CarswellOnt 14402, 210 A.C.W.S. (3d) 575, 88 C.B.R. (5th} 329

s. 11.52 [en. 2005, c. 47, s. 128] - referred to

s. 11.6 [en. 1997, c. 12, s. 124] - considered

s. ll.6(a)[en.1997,c.12,s.124]-pursuantto

MOTION by debtor company to continue Bankruptcy and Insolvency Act proposal proceedings under Companies' Creditors Arrangement Act.

D.M. Brown J.:

I. Motion to continue BIA Part III proposal proceedings under the CCAA

Clothing for Modern Times Ltd. ("CMT"), a retailer of fashion apparel, filed a Notice of Intention to Make a Proposal pursuant to section 50.4 of the Bankruptcy and Insolve.11cy Act, R.S.C. 1985, c. B-3, on June 27, 2011. A. Farber & Partners Inc. was appointed CMT's proposal trustee. At the time of the filing of the NOi CMT operated 116 retail stores from leased locations across Canada. CMT sold fashion apparel under the trade names Urban Behavior, Costa Blanca and Costa Blanca x'.'

2 CMT has obtained from this Court several extensions of time to file a proposal. That time will expire on December 22, 2011. Under section 50.4(9) of the BIA, no further extensions are possible.

3 Accordingly, CMT moves under section l 1.6(a) of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 for an order, effective December 22, 2011, continuing CMT's restructuring proceeding under the CCAA and granting an Initial Order, as well as approving a sale process as a going concern for part ofCMT's business.

II; Key background events

4 Following the filing of the NOi, pursuant to orders of this Court, CMT conducted a self-liquidation ofunderperforming stores across Canada and, as well, a going-concern sale of its Urban Behavior business. The latter transaction is scheduled to close on January 16, 2012.

5 At the time of the filing of the NOi there were three major secured creditors of CMT: Roynat Asset Finance, CIC Asset Management Inc., and CMT Sourcing. The company's indebtedness to those creditors totaled approximately $28.3 million. CMT anticipates that the proceeds from the Urban Behavior transaction and the liquidation of under-performing stores will prove sufficient to repay its loan obligations to Roynat in full before the expiration of a forbearance period on January 16, 2012.

i"

6: When CMT was last in court on November 7, 2011 it stated it intended to make a proposal to its unsecured creditors, an intention supported by the two remaining secured creditors, CIC and CMT Sourcing. Subsequently CMT met with representatives of certain landlords and commenced discussions about its proposed restructuring plan. As a result of those discussions CMT lacks the confidence that its proposal would be approved by the requisite majority of its unsecured creditors, and it does not believe that it can make a viable proposal to its creditors. Instead, CMT thinks that a going-concern sale of its Costa Blanca business would be in the best interests of stakeholders and would preserve employment for about 500 remaining employees, both full-time and hourly retail staff.

7 · In its Sixth Report dated December 14, 2011 Farber agrees that a going concern sale of the Costa Blanca business would be in the best interests of CMT's stakeholders, maximize recoveries to the two secured creditors, CIC and CMT Sourcing, and preserve employment for CMT's remaining employees. Farber supports CMT's request to continue its restructuring

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Clothing for Modern Times Ltd., Re, 2011ONSC7522, 2011CarswellOnt14402

2,011 ONSC 7522, 2011 CarswellOnt 14402, 210 A.C.W.S. (3d) 575, 88 C.B.R. (5th) 329

; . . under the CCAA. Farber consents to act as the Monitor under CCAA proceedings and to administer the proposed sale process.

Iii. Continuation under the CCAA

A.·Principles governing motions to continue BIA Part III proposal proceedings under the CCAA

8 _. Continuations of BIA Part III proposal proceedings under the CCAA are governed by section l 1.6(a) of that Act which pwvides:

11.6 Notwithstanding the Bankruptcy and Insolvency Act,.

(a) proceedings commenced under Pait III of the Bankruptcy and Insolvency Act may be taken up and continued under this Act only ifa proposal within the meaning of the Bankruptcy and Insolvency Act has not been filed under that Part.

9 It strikes me that on a motion to continue under the CCAA an applicant company should place before the court evidence dealing with three issues:

\ !

(i) The company has satisfied the sole statutory condition set out in section l l.6(a) of the CCAA that it has not filed a proposal under the BIA;

(ii) The proposed continuation would be consistent with the purposes of the CCAA; and,

(iii) Evidence which serves as a reasonable surrogate for the information which section 10(2) of the CCAA requires accompany any initial application under the Act.

Let me deal with each in tum

B. The applicant has not flied a proposal under the BIA

I 0 The evidence shows that CMT has satisfied this statutory condition.

C. The continuation would be consistent with tlte purposes of the CCAA

11 In Ted Leroy Trucking Ltd., Re, 1 the Supreme Court of Canada articulated the purpose of the CCAA in several ways:

(i) To permit the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating its assets;2

(ii) To provide a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of ongoing business operations can be avoided while a court-supervised attempt to reorganize the financial affairs of the debtor company is mad.e;3

(iii) To avoid the social and economic losses resulting from liquidation of an insolvent company;4

(iv) To create conditions for preserving the status quo while attempts are made to find common ground amongst stakeholders for a reorganization that is fair to all.5

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Clothing for Modern Times Ltd., Re, 2011ONSC7522, 2011CarswellOnt14402 2o1TC5Nsc 7s22,"201~ont144o2~ A.c:W.sl3d).575·, 88 c.s.R~5tl1·-)-32_9 ____ _

As the Supreme Court noted in Century Services, proposals to creditors under the BIA serve the same remedial purpose, though this is achieved "through a rules-based mechanism that offers less flexibility."6 In the present case CMT bumped up against one of those less flexible rules - the inability of a court to extend the time to file a proposal beyond six months after tqe filing of the NOi.

11 The jurisprudence under the CCAA accepts that in appropriate circumstances the purposes of the CCAA will be met even though the re-organization involves the sale of the company as a going concern, with the consequence that the debtor no longer would continue to carry on the business, as is contemplated in the present case. In Ste/co Inc., Re Farley J. observed .that if a restructuring of a company is not feasible, "then there is the exploration of the feasibility of the sale of the operations/enterprise as a going concern (with continued employment) in whole or in part".7 It also is well-established in the jurisprudence that a court may approve a sale of assets in the course of a CCAA proceeding before a plan of arrangement has been approved by creditors.8 In Nortel Networks Corp., Re Morawetz J. set out the rationale for this judicial approach:

The value of equity in an insolvent debtor is dubious, at best, and, in my view, it follows that the determining factor should not be whether the business continues under the debtor's stewardship or under a structure that recognizes a new equity structure. An equally important factor to consider is whether the case can be made to continue the business as a going concern.9

13 The evidence filed by CMT and Farber supports a finding that a continuation under the CCAA to enable a goingconcern sale of the Costa Blanca business and assets would be consistent with the purposes of the CCAA. Such a sale likely would maximize the recovery for the two remaining secured creditors, CIC and CMT Sourcing, preserve employment for mciny of the 500 remaining employees, and provide a tenant to the landlords of the 35 remaining Costa Blanca stores. Avoidance of the social and economic losses which would result from a liquidation and the maximization of value would best be achieved outside ofa bankruptcy.

))~Evidence which serves as a reasonable surrogate for CCAA s. 10(2) information

r·

14, As the Supreme Court of Canada observed in Century Services, "the requirements of appropriateness, good faith, and due diligence are baseline considerations that a court should always bear in mind when exercising CCAA authority." 10 On an initial application under the CCAA a court will have before it the information specified in section 10(2) which assists it in c~hsidering the appropriateness, good faith and due diligence of the application. Section 10(2) of the CCAA provides:

10. (2) An initial application must be accompanied by

(a) a statement indicating, on a weekly basis, the projected cash flow of the debtor company;

(b) a report containing the prescribed representations of the debtor company regarding the preparation of the cashflow statement; and

( c) copies of all financial statements, audited or unaudited, prepared during the year before the application or, if no such statements were prepared in that year, a copy of the most recent such statement.

15. Section 11.6 of the CCAA does not stipulate the information which must be filed in support of a continuation motion, but a court should have before it sufficient financial and operating information to assess the viability of a continuation under the CCAA. In the present case CMT has filed, on a confidential basis, ll cash flows for the period ending January 31, 2012, which show a net positive cash flow for the period and that CMT has sufficient resources to continue operating in the CCAA proceeding, as well as to conduct a sale process without the need for additional financing.

i~. In addition, the Proposal Trustee filed on this motion its Sixth Report in which it reported on its review of the cash fl~w statements. Although its opinion was expressed in the language of a double negative, I take from its report that it regards the' cash flow statements as reasonable.

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Clothing for Modern Times Ltd., Re, 2011 ONSC 752:!, 2011 CarswellOnt 14402


17 Finally, the previous extension orders made by this Court under section 50.4(9) of the BIA indicate that CMT satisfied the Court that it has been acting in good faith and with due diligence.

E; Conclusion

18 No interested person opposes CMT's motion to continue under the CCAA. Its two remaining secured creditors, CIC an,p CMT Sourcing, support the motion. From the evidence filed I am satisfied that CMT has satisfied the statutory condition 9Q.ntained in section 16(a) of the CCAA and that a continuation of its re-structuring under the CCAA would be consistent with tqe purposes of that Act.

·,

IV. Sale Process

.19· In Nortel Networks Corp., Re Morawetz J. identified the factors which a court should consider when reviewing a proposed sale process under the CCAA in the absence of a plan:

(a) is a sale transaction warranted at this time?

'i (b) will the sale benefit the whole "economic community"?

(c) do any of the debtors' creditors have a bona fide reason to object to a sale of the business?

(d) is there a better viable alternative? 12

20 No objection has been taken to CMT's proposed sale of its Costa Blanca business or the proposed sale process under the direction of Farber as Monitor. Chris Johnson, CMT's CFO, deposed that CMT is not in a position to make a viable proposal to its creditors and has concluded that a going-concern sale of the Costa Blanca business would be the most appropriate course of action. The Proposal Trustee concurs with that assessment. In light of those opinions, an immediate sale of,.the Costa Blanca business would be warranted in order to attract the best bids for that business on a going-concern basis. sij~h a sale, according to the evidence, stands the best chance of maximizing recovery by the remaining secured creditors and p~~serving the employment of a large number of people. No better viable alternative has been put forward.

2~ Accordingly, I approve the proposed sale process as described in paragraph 37 of the affidavit of Chris Johnson.

V. Administration Charges

22 CMT seeks approval under section 11.52 of the CCAA of an Administration Charge over the assets of CMT to secure the professional fees and disbursements of Farber as Monitor and its counsel, as well as the fees of Ernst & Young Grenda Corporate Finance Inc. ("E&Y"), who has been acting as CMT's financial advisor, together with its counsel. The order sought reflects, in large part, the priorities of various charges approved during the BIA Part III proposal process. CMT proposes that the Professionals Charge approved under ·;he BIA orders and the CCAA Administration Charge rank pari passu, and that whereas the BIA orders treated as ranking fourth "the balance of any indebtedness under the Professionals Charge", the CCAA order would place a cap of$250,000 on such portions of the Professionals and CCAA Administration Charges.

23 No interested person opposes the charges sought.

24 I am satisfied that the charge requested is appropriate given the importance of the professional advice to the completion of the Urban Behavior transaction and the sale process for the Costa Blanca business.

v·I. Order granted

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Clothing for Modern Times Ltd., Re, 2011 ONSC 7522, 2011 CarswellOnt 14402


25 I have reviewed the draft Initial Order submitted by CMT and am satisfied that an order should issue in that form.

26 CMT also seeks a variation of paragraph 3 of the Approval and Vesting Order ofMorawetz J. made November 7, 2011 in respect of the Urban Behavior transaction to include, in the released claims, the Professionals Charge and the CCAA Administration Charge. None of the secured creditors objects to the variation sought and it is consistent with the intent of the existing language of that order. I therefore grant the variation sought and I have signed the order.

Motion granted.

Footnotes

4

6.:

9

10

11

12 ..

2010 sec 60 cs.c.c.).

Century Services, para. 15.

Ibid., para. 59.

Ibid., para. 70.

Ibid., para. 77.

Ibid., para. 15.

(2004), 6 C.B.R. (5th) 316 (Ont. S.C.J. [Commercial List]), para. 1. In Consumers Packaging Inc., Re, 2001 CarswellOnt 3482 (Ont. C.A.) the Court of Appeal held that a sale of a business as a going concern during a CCAA proceeding is consistent with the purposes of that Act.

See the cases collected by Morawetz J. in Nortel Networks Corp., Re (2009), 55 C.B.R. (5th) 229 (Ont. S.C.J. [Commercial List]), paras. 35 to 39. See also section 36 of the CCAA.

Ibid., para. 40.

Century Services, para. 70.

CMT has filed evidence explaining that disclosure of the cash flows prior to the closing of the Urban Behavior transaction would make public the proceeds expected from that transaction. I agree that such information should not be made public until the deal has closed. CMT has satisfied the principles set out in Sierra Club of Canada v. Canada .(Minister of Finance), [2002) 2 S.C.R. 522 (S.C.C.) and a sealing order should issue.

Nortel Networks, supra., para. 49. See also Brainhunter Inc., Re (2009), 62 C.B.R. (5th) 41 (Ont. S.C.J. [Commercial List]), para. 13.

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Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419

2010 SCC 60, 2010 CarswellBC 3419, 2010 CarswellBC 3420, [2010] 3 S.C.R. 379 ...

Most Negative Treatment: Distinguished Most Recent Distinguished: Vesnaver, Re I 2015 QCCS 3357, 2015 CarswellQue 11729, 2015 CarswellQue 6930, J.E. 2015-1261, EYB 2015-254595, 258 A.C.W.S. (3d) 666 I (C.S. Que., Jul 16, 2015)

2010 SCC6o Supreme Court of Canada

Ted Leroy Trucking [Century Services] Ltd., Re

2010 CarswellBC 3419, 2010 CarswellBC 3420, 2010 SCC 60, [2010] 3 S.C.R. 379, [2010] G.S.T.C. 186, [2011] 2 W.W.R. 383, [2011] B.C.W.L.D. 533, [2011] B.C.W.L.D. 534, 12 B.C.L.R. (5th) 1, 196 A.C.W.S. (3d) 27, 2011 D.T.C. 5006 (Eng.), 2011 G.T.C. 2006 (Eng.), 296 B.C.A.C. 1, 326 D.L.R. (4th) 577, 409 N.R. 201, 503 W.A.C. 1, 72 C.B.R.

(5th) 170, J.E. 2011-5

Century Services Inc. (Appellant) and Attorney General of Canada on behalf of Her Majesty The Queen in Right of Canada (Respondent)

Deschamps J., McLachlin C.J.C., Binnie, LeBel, Fish, Abella, Charron, Rothstein, Cromwell JJ.

Heard: May 11, 2010 Judgment: December 16, 2010

Docket: 33239

Proceedings: reversing Ted Leroy Trucking Ltd., Re (2009), 2009 CarswellBC 1195, 2009 G.T.C. 2020 (Eng.), 2009 BCCA 205, 270 B.C.A.C. 167, 454 W.A.C. 167, [2009] 12 W.W.R. 684, 98 B.C.L.R. (4th) 242, [2009] G.S.T.C. 79 (B.C. C.A.); reversing Ted Leroy Trucking Ltd., Re (2008), 2008 CarswellBC 2895, 2008 BCSC 1805, [2008] G.S.T.C. 221, 2009 G.T.C. 2011 (Eng.) (B.C. S.C. [In Chambers])

Counsel: Mary I.A. Buttery, Owen J. James, Matthew J.G. Curtis for Appellant Gordon Bourgard, David Jacyk, Michael J. Lema for Respondent

Subject: Estates and Trusts; Goods and Services Tax (GST); Tax - Miscellaneous; Insolvency

R~·lated Abridgment Classifications For all relevant Canadian Abridgment Classifications refer to highest level of case via History.

Tax

l General principles l.5 Priority of tax claims in bankruptcy proceedings

Tax

III Goods and Services Tax lll.14 Collection and remittance

lll.14.b GST held in trust

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Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419 " '" ,,,,,,,,,,,.,.,.,,,,,,_ __ ._,,,,,_,, __ ,,..,,, ---~,_,,,, ___ ,, __ ~--~ 2010 SCC 60, 2010 CarswellBC 3419, 2010 CarswellBC 3420, [2010] 3 S.C.R. 379 ...

Headnote

Tax --- Goods and Services Tax - Collection and remittance - GST held in trust

Debtor owed Crown under Excise Tax Act (ETA) for unremitted GST- Debtor sought relief under Companies' Creditors Arrangement Act (CCAA) - Under order of BC Supreme Court, amount of GST debt was placed in trust account and remaining proceeds of sale of assets paid to major S(lcured creditor - Debtor's application for partial lifting of stay of proceedings to assign itself into bankruptcy was granted, while Crown's application for payment of tax debt was dismissed - Crown's appeal to BC Court of Appeal was allowed - Creditor appealed to Supreme Court of Canada - Appeal allowed - Analysis of ET A and CCAA yielded conclusion that CCAA provides that statutory deemed trusts do not apply, and that Parliament did not intend to restore Crown's deemed trust priority in GST claims under CCAA when it amended ETA in 2000 - Parliament had moved away from asserting priority for Crown claims under both CCAA and Bankruptcy and Insolvency Act (BIA), and neither statute provided for preferred treatment of GST claims - Giving Crown priority over GST claims during CCAA proceedings but not in bankruptcy would reduce use of more flexible and responsive CCAA regime - Parliament likely inadvertently succumbed to drafting anomaly - Section 222(3) of ET A could not be seen as having impliedly repealed s. 18.3 of CCAA by its subsequent passage, given recent amendments to CCAA - Court had discretion under CCAA to construct bridge to liquidation under BIA, and partially lift stay of proceedings to allow entry into liquidation - No "gap" should exist when moving from CCAA to BIA - Court order segregating funds did not have certainty that Crown rather than creditor would be beneficiary sufficient to support express trust - Amount held in respect of OST debt was not subject to deemed trust, priority or express trust in favour of Crown - Excise Tax Act, R.S.C. 1985, c. E-15, SS. 222(1), (1.1).

Tax --- General principles - Priority of tax claims in bankruptcy proceedings

Debtor owed Crown under Excise Tax Act (ETA) for unremitted OST- Debtor sought relief under Companies' Creditors Arrangement Act (CCAA) - Under order of BC Supreme Court, amount of GST debt was placed in trust account and remaining proceeds of sale of assets paid to major secured creditor - Debtor's application for partial lifting of stay of proceedings to assign itself into bankruptcy was granted, while Crown's application for payment of tax debt was dismissed - Crown's appeal to BC Court of Appeal was allowed - Creditor appealed to Supreme Court of Canada - Appeal allowed - Analysis of ETA and CCAA yielded conclusion th~.t CCAA provides that statutory deemed trusts do not apply, and that Parliament did not intend to restore Crown's deemed trust priority in GST claims under CCAA when it amended ETA in 2000 - Parliament had moved away from asserting priority for Crown claims under both CCAA and Bankruptcy and Insolvency Act (BIA), and neither statute provided for preferred treatment of OST claims ~ Giving Crown priority over OST claims during CCAA proceedings but not in bankruptcy would reduce use of more flexible and responsive CCAA regime - Parliament likely inadvertently succumbed to drafting anomaly - Section 222(3) of ETA could not be seen as having impliedly repealed s. 18.3 of CCAA by its subsequent passage, given recent amendments to CCAA - Court had discretion under CCAA to construct bridge to liquidation under BIA, and partially lift stay of proceedings to allow entry into liquidation - No "gap" should exist when moving from CCAA to BIA - Court order segregating funds did not have certainty that Crown rather than creditor would be beneficiary sufficient to support express trust - Amount held in respect of OST debt was not subject to deemed trust, priority or express trust in favour of Crown.

Taxation --- Taxe sur les produits et services - Perception et versement - Montant de TPS detenu en fiducie

Debitrice devait a la Couronne des montants de TPS qu'elle n'avait pas remis, en vertu de la Loi sur la taxe d'accise (LTA) - Debitrice a entame des procedures judiciaires en vertu de la Loi sur les arrangements avec les creanciers des compagnies (LACC) - En vertu d'une ordonnance du tribunal, le montant de la creance fiscale a ete depose dans un compte en fiducie et la'balance du produit de la vente des actifs a servi a payer le creancier garanti principal - Demande de la debitrice visant a objenir Ia levee partielle de la suspension de procedures afin qu'elle puisse faire cession de ses biens a ete accordee, alors que Ia demande de la Couronne visant a obtenir le paiement des montants de TPS non remis a ete rejetee - Appel interjete par la Cquronne a ete accueilli - Creancier a forme un pourvoi - Pourvoi accueilli - Analyse de la LT A et de Ia LACC co11duisait a la conclusion que le legislateur ne saurait avoir eu !'intention de redonner la priorite, dans le cadre de la LACC, a la fiducie reputee de la Couronne a l'egard de ses creances relatives a la TPS quand il a modifie la LTA, en 2000 -Legislateur avait mis un terme a la priorite accordee aux creances de la Couronne sous les regimes de Ia LACC et de Ia Loi s4r, la faillite et l'insolvabilite (LFI), et ni l'une ni l'autre de ces Iois ne prevoyaient que les creances relatives a la TPS becyeficiaient d 'un traitement preferentiel - Fait de faire primer Ia priorite de la Couronne sur les creances decoulant de la

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Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419 _,,.,,,,NM«<W>,,, , ,,.,,,,,,,,,,,,,,,,,,,_,,,, __________ ,~-


TPS dans le cadre de procedures fondees sur la LACC mais pas en cas de faillite aurait pour effet de restreindre le recours a la possibilite de se restructurer sous le regime plus souple et mieux adapte de la LACC - II semblait probable que le legislateur avait par inadvertance commis une anomalie redactionnelle - On ne pourrait pas considerer !'art. 222(3) de la LTA comme ayant implicitement abroge l'art. 18.3 de la LACC, compte tenu des modifications recemment apportees a la LACC - Sous le regime de la LACC, le tribunal avait discretion pour etablir une passerelle vers une liquidation operee sous le .regime de la LFI et de lever la suspension partielle des procedures afin de permettre a la debitrice de proceder a la transition au regime de liquidation - II n'y avait aucune certitude, en vertu de l'ordonnance du tribunal, que la Couronne etait le beneficiaire veritable de la fiducie ni de fondement pour donner naissance a une fiducie expresse - Montant pen;u au tiii,-e de la TPS ne faisait l'objet d'aucune fiducie presumee, priorite ou fiducie expresse en faveur de la Couronne.

Taxation --- Principes generaux - Priorite des creances fiscales dans le cadre de procedures en faillite

D,~bitrice devait a la Couronne des montants de TPS qu'elle n'avait pas remis, en vertu de la Loi sur la taxe d'accise (LTA) - Debitrice a entame des procedures judiciaires en vertu de la Loi sur les arrangements avec Jes creanciers des compagnies _(LACC)- En vertu d'une ordonnance du tribunal, le montant de la creance fiscale a ete depose dans un compte en fiducie et la balance du produit de la vente des actifs a servi a payer le creancier garanti principal - Demande de la debitrice visant a obtenir la levee partielle de la suspension de procedures afin qu'elle puisse faire cession de ses biens a ete accordee, alors que la demande de la Couronne visant a obtenir le paiement des montants de TPS non remis a ete rejetee - Appel interjete par la Couronne a ete accueilli - Creancier a forme un pourvoi - Pourvoi accueilli - Analyse de la LT A et de la LACC conduisait a la conclusion que le legislateur ne saurait avoir eu !'intention de redonner la priorite, dans le cadre de la LACC, a la fiducie reputee de la Couronne a l'egard de ses creances relatives a la TPS quand ii a modifie la LTA, en 2000 -Legislateur avait mis un terme a la priorite accordee aux creances de la Couronne sous Jes regimes de la LACC et de la Loi sur la faillite et l'insolvabilite (LFI), et ni l'une ni l'autre de ces lois ne prevoyaient que Jes creances relatives a la TPS beneficiaient d'un traitement preferentiel - Fait de faire primer la priorite de la Couronne sur Jes creances decoulant de la TPS dans le cadre de procedures fondees sur la LACC mais pas en cas de faillite aurait pour effet de restreindre le recours a la. possibilite de se restructurer sous le regime plus soup le et mieux adapte de la LACC - II semblait probable que le legislateur avait par inadvertance commis une anomalie redactionnelle - On ne pourrait pas considerer l'art. 222(3) de la LTA comme ayant implicitement abroge l'art. 18.3 de la LACC, compte tenu des modifications recemment apportees a la LACC - Sous le regime de la LACC, le tribunal avait discretion pour etablir une passerelle vers une liquidation operee sous le.,regime de la LFI et de lever la suspension partielle des procedures afin de permettre a la debitrice de proceder a la tn1nsition au regime de liquidation - II n'y avait aucune certitude, en vertu de l'ordonnance du tribunal, que la Couronne etait le beneficiaire veritable de la fiducie ni de fondement pour donner naissance a une fiducie expresse - Montant per9u au titre de la TPS ne faisait l'objet d'aucune fiducie presumee, priorite ou fiducie expresse en faveur de la Couronne.

The debtor company owed the Crown under the Excise Tax Act (ET A) for OST that was not remitted. The debtor commenced proceedings under the Companies' Creditors Arrangement Act (CCAA). Under an order by the B.C. Supreme CO,urt, the amount of the tax debt was placed in a trur.t account, and the remaining proceeds from the sale of the debtor's assets were paid to the major secured creditor. The debtor's application for a partial lifting of the stay of proceedings in order to assign itself into bankruptcy was granted, while the Crown's application for the immediate payment of the unremitted OST was dismissed.

The Crown's appeal to the B.C. Court of Appeal was allowed. The Comt of Appeal found that the lower court was bound by the ET A to give the Crown priority once bankruptcy was inevitable. The Court of Appeal ruled that there was a deemed trust under s. 222 of the ETA or that an express trust was created in the Crown's favour by the court order segregating the OST funds in the trust account.

The creditor appealed to the Supreme Court of Canada.

He.1d: The appeal was allowed.

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Ted Leroy Trucking [Century Services) Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419 2010 sec 60, 2010 carswe~8c3419,201ocarswe11sc 3420,[2o10f3"·s.c.R·. 379~~,, __ ,,,_,,_,_, ___ ,, _____ ,,,,,.,,,.--·-------

Per Deschamps J. (McLachlin C.J.C., Binnie, LeBel, Charron, Rothstein, Cromwell JJ. concurring): A purposive and contextual analysis of the ET A and CCAA yielded the conclusion that Parliament could not have intended to restore the Crown's deemed trust priority in GST claims under the CCAA when it amended the ETA in 2000. Parliament had moved away from asserting priority for Crown claims in insolvency law under both the CCAA and Bankruptcy and Insolvency Act (BIA). Unlike for source deductions, there was no express statutory basis in the CCAA or BIA for concluding that GST claims enjoyed any preferential treatment. The internal logic of the CCAA also militated against upholding a deemed trust for GST claims.

Giving the Crown priority over GST claims during CCAA proceedings but not in bankruptcy would, in practice, deprive companies of the option to restructure under the more flexible and responsive CCAA regime. It seemed likely that Parliament had inadvertently succumbed to a drafting anomaly, which could be resolved by giving precedence to s. 18.3 of the CCAA. Section 222(3) of the ET A could no longer be seen as having impliedly repealed s. 18.3 of the CCAA by being passed subsequently to the CCAA, given the recent amendments to the CCAA. The legislative context supported the conclusion that s. 222(3) of the ETA was not intended to narrow the scope of s. 18.3 of the CCAA.

The breadth of the court's discretion under the CCAA was sufficient to construct a bridge to liquidation under the BIA, so there was authority under the CCAA to partially lift the stay of proceedings to allow the debtor's entry into liquidation. There should be no gap between the CCAA and BIA proceedings that would invite a race to the courthouse to assert priorities.

The court order did not have the certainty that the Crown would actually be the beneficiary of the funds sufficient to support an express trust, as the funds were segregated until the dispute between the creditor and the Crown could be resolved. The amount collected in respect of GST but not yet remitted to the Receiver General of Canada was not subject to a deemed trust, priority or express trust in favour of the Crown.

!·:

Per Fish J. (concurring): Parliament had declined to amend the provisions at issue after detailed consideration of the insolvency regime, so the apparent conflict between s. 18.3 of the CCAA and s. 222 of the ETA should not be treated as a drafting anomaly. In the insolvency context, a deemed trust would exist only when two complementary elements co-existed: first, a statutory provision creating the trust; and second, a CCAA or BIA provision confirming its effective operation. Parliament had created the Crown's deemed trust in the Income Tax Act, Canada Pension Plan and Employment Insurance Aet and then confirmed in clear and unmistakable terms its continued operation under both the CCAA and the BIA regimes. In contrast, the ET A created a deemed trust in favour of the Crown, purportedly notwithstanding any contrary legislation, but Parliament did not expressly provide for its continued operation in either the BIA or the CCAA. The absence of this confirmation reflected Parliament's intention to allow the deemed trust to lapse with the commencement of insolvency proceedings. Parliament's evident intent was to render GST deemed trusts inoperative upon the institution of insolvency proceedings, and so s. 222 of the ET A mentioned the BIA so as to exclude it from its ambit, rather than include it as the other statutes did. As none of these statutes mentioned the CCAA expressly, the specific reference to the BIA had no bearing on the interaction with the CCAA. It was the confirmatory provisions in the insolvency statutes that would determine whether a given deemed trust would subsist during insolvency proceedings.

Per Abella J. (dissenting): The appellate comt properly found that s. 222(3) of the ETA gave priority during CCAA proceedings to the Crown's deemed trust in unremitted GST. The failure to exempt the CCAA from the operation of this provision was a reflection of clear legislative intent. Despite the requests of various constituencies and case law confirming that the ET A took precedence over the CCAA, there was no responsive legislative revision and the BIA remained the only exempted statute. There was no policy justification for interfering, through interpretation, with this clarity of legislative intention and, in any event, the application of other pl'inciples of interpretation reinforced this conclusion. Contrary to the majority's view, the "later in time" principle did not favour the precedence of the CCAA, as the CCAA was merely reenacted without significant substantive changes. According to the Interpretation Act, in such circumstances, s. 222(3) of the ET A remained the later provision. The chambers judge was required to respect the priority regime set out in s. 222(3) of the

!?_!A and so di~,,,E:.~!,,,,E,,~~,, the aut~:!!L!? deny ~~e C~?,,~~:,,~!-~S~est ,,,,~~.Pa).'..~ent ,,?f th~ GST ~1,1d~~:1E~~~_!.~.~-.~~AA WesttnwNoxL,CANAW\ Copyright© Thomson Heuters Canada Limited or its licensors (excluding individual court documents). All rights reserved. 4

Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419


proceedings.

La compagnie. debitrice devait a la Couronne des montants de TPS qu'elle n'avait pas remis, en vertu de la Loi sur la taxe d'accise (LTA). La debitrice a entame des procedures judiciaires en vertu de la Loi sur les arrangements avec les creanciers des compagnies (LACC). En vertu d'une ordonnance du tribunal, le montant de la creance fiscale a ete depose dans un cqmpte en fiducie et la balance du produit de la vente des actifs de la debitrice a servi a payer le creancier garanti principal. La demande de la debitrice visant a obtenir la levee partielle de la suspension de procedures afin qu'elle puisse faire cession de ses biens a ete accordee, alors que la demande de la Couronne visant a obtenir le paiement immediat des montants de TPS non remis a ete rejetee .

. , L'appel interjete par la Couronne a ete accueilli. La Cour d'appel a conclu que le tribunal se devait, en vertu de la LTA, de dc)nner priorite a la Couronne une fois la faillite inevitable. La Cour d'appel a estime que l'art. 222 de la LTA etablissait une .fi.cfocie presumee ou bien que l'ordonnance du tribunal a l'effet que les montants de TPS soient detenus dans un compte en fiducie creait une fiducie expresse en faveur de la Courcmne.

Le creancier a forme un pourvoi.

Arret: Le pourvoi a ete accueilli.

Deschamps, J. (McLachlin, J.C.C., Binnie, LeBel, Charron, Rothstein, Cromwell, JJ., souscrivant a son opinion) : Une analyse teleologique et contextuelle de la LT A et de la LACC conduisait a la conclusion que le legislateur ne saurait avoir eu l'jntention de redonner la priorite, dans le cadre de la LACC, a la fiducie reputee de la Couronne a l'egard de ses creances relatives a la TPS quand ii a modifie la LT A, en 2000. Le legislateur avait mis un terme a la priorite accordee aux creances de la<couronne dans le cadre du droit de l'insolvabilite, sous le regime de la LACC et celui de la Loi sur la faillite et l'ihsolvabilite (LFI). Contrairement aux retenues a la source, aucune disposition legislative expresse ne permettait de cohclure que Jes creances relatives a la TPS beneficiaient d'un traitement preferentiel sous le regime de la LACC OU celui de la LFI. La logique interne de la LACC allait egalement a l'encontre du maintien de la fiducie reputee a l'egard des creances Mcoulant de la TPS.

Le:fait de faire primer la priorite de la Couronne sur les creances decoulant de la TPS dans le cadre de procedures fondees sur la ,LACC mais pas en cas de faillite aurait pour effet, dans les faits, de priver les compagnies de la possibilite de se restructuver sous le regime plus souple et mieux adapte de la LACC. 11 semblait probable que le legislateur avait par inadvertance commis une anomalie redactionnelle, lac;uelle pouvait etre corrigee en donnant preseance a !'art. 18.3 de la LACC. On ne pouvait plus considerer l'art. 222(3) de la LTA comme ayant implicitement abroge l'art. 18.3 de la LACC parce qu'il avait ete adopte apres la LACC, compte tenu des modifications recemment apportees a la LACC. Le contexte legislatif etayait la conclusion suivant laquelle l'art. 222(3) de la LTA n'avait pas pour but de restreindre la portee de !'art. 18.3 de la LACC.

L'ampleur du pouvoir discretionnaire confere au tribunal par la LACC etait suffisant pour etablir une passerelle vers une liquidation operee sous le regime de la LFI, de sorte qu'il avait, en vertu de la LACC, le pouvoir de lever la suspension partielle des procedures afin de permettre a la debitrice de proceder a la transition au regime de liquidation. 11 n'y avait aucune certitude, en vertu de l'ordonnance du tribunal, que la Couronne etait le beneficiaire veritable de la fiducie ni de fondement pour donner naissance a une fiducie expresse, puisque les fonds etaient detenus a partjusqu'a ce que le litige entre le creancier et la Couronne soit resolu. Le montant per9u au titre de la TPS mais non encore verse au receveur general du Canada ne faisait l'objet d'aucune fiducie presumee, priorite ou fiducie expresse en faveur de la Couronne.

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Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419 -~~--~,,,,,,,,,,,,,,,,,,,,,,,,....,,,,,.,,..,,_,,,,,,,,,,,,,,,, _____ ~·-· 2010 SCC 60, 2010 CarswellBC 3419, 2010 CarswellBC 3420, [2010] 3 S.C.R. 379 ...

Fish, J. (souscrivant aux motifs des juges majoritaires) : Le legislateur a refuse de modifier Jes dispositions en question suivant un examen approfondi du regime d'insolvabilite, de sorte qu'on ne devrait pas qualifier l'apparente contradiction en.tre l'art. 18.3 de la LACC et !'art. 222 de la LTA d'anomalie redactionnelle. Dans un contexte d'insolvabilite, on ne pdurrait conclure a !'existence d'une fiducie presumee que lorsque deux elements complementaires etaient reunis : en premier lieu, une disposition legislative qui cree la fiducie et, en second lieu, une disposition de la LACC ou de la LFI qui confirme !'existence de la fiducie. Le legislateur a etubli une fiducie presumee en faveur de la Couronne dans la Loi de l'imp6t sur le revenu, le Regime de pensions du Canada et la Loi sur l'assurance-emploi puis, ii a confirme en termes clairs et explicites sa volonte de voir cette fiducie presumee produire ses effets sous le regime de la LACC et de la LFI. Dans le cas de la LTA, il a etabli une fiducie presumee en faveur de la Couronne, sciemment et sans egard pour toute legislation a l'effet contraire, mais n'a pas expressement prevu le maintien en vigueur de celle-ci sous le regime de la LFI ou celui de la LACC. L'absence d'une telle confirmation temoignait de !'intention du legislateur de laisser la fiducie presumee devenir caduque au moment de !'introduction de la procedure d'insolvabilite. L'intention du legislateur etait manifestement de rendre inoperantes Jes fiducies presumees visant la TPS des !'introduction d'une procedure d'insolvabilite et, par consequent, !'art. 222 de la LTA mentionnait la LFI de maniere a l'exclure de son champ d'application, et non de l'y inclure, comme le faisaient les autres lois. Puisqu'aucune de ces lois ne mentionnait specifiquement la LACC, la mention explicite de la LFI n'avait aucune incidence sur !'interaction avec la LACC. C'etait Jes dispositions confirmatoires que !'on trouvait dans Jes lois sur l'insolvabilite qui determinaient si une fiducie presumee continuerait d'exister durant une procedure d'insolvabilite.

Abella, J. (dissidente) : La Cour d'appel a conclu a bon droit que !'art. 222(3) de la LTA donnait preseance a la fiducie pfesumee qui est etablie en faveur de la Couronne a l'egard de la TPS non versee. Le fait que la LACC n'ait pas ete soustraite a i'application de cette disposition temoignait d'une intention claire du legislateur. Malgre Jes demandes repetees de divers groupes et la jurisprudence ayant confirme que la LTA l'emportait sur la LACC, le legislateur n'est pas intervenu et la LFI est demeuree la seule Joi soustraite a !'application de cette disposition. II n'y avait pas de consideration de politique generale qµi justifierait d'aller a l'encontre, par voie d'interpretation legislative, de !'intention aussi clairement exprimee par le legislateur et, de toutes manieres, cette conclusion etait renforcee par !'application d'autres principes d'interpretation. Contrairement a I' opinion des juges majoritaires, le principe de la preseance de la « Joi posterieure » ne militait pas en faveur deJa presance de la LACC, celle-ci ayant ete simplement adoptee a nouveau sans que !'on ne Jui ait apporte de modifications importantes. En vertu de la Loi d'interpretation, dans ces circonstances, !'art. 222(3) de la LTA demeurait la disposition posterieure. Le juge siegeant en son cabinet etait tenu de respecter le regime de priorites etabli a !'art. 222(3) de la LTA, et ii ne pouvait pas refuser la demande presentee par la Couronne en vue de se faire payer la TPS dans le cadre de la procedure introduite en vertu de la LACC.

Table of Authorities

Cases considered by Deschamps J.:

Air Canada, Re (2003), 42 C.B.R. (4th) 173, 2003 Carswell Ont 2464 (Ont. S.C.J. [Commercial List])-referred to

Air Canada, Re (2003), 2003 CarswellOnt 4967 (Ont. S.C.J. [Commercial List]) - referred to

. . Alternative granite & marbre inc., Re (2009), (sub 110111. Dep. Min. Rev. Quebec v. Caisse populaire De.1jardins de Montmagny) 2009 G.T.C. 2036 (Eng.), (sub nom. Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny) [2009] 3 S.C.R. 286, 312 D.L.R. (4th) 577, [2009] G.S.T.C. 154, (sub nom. 9083-4185 Quebec Inc. (Bankrupt), Re) 394 N.R. 368, 60 C.B.R. (5th) 1, 2009 SCC 49, 2009 CarswellQue 10706, 2009 CarswellQue 10707 (S.C.C.)-referred to

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Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60, 2010 CarswellBC 3419 @ ,,_,_ , ""~ ,,,, __ ,, ___ ,,.~~--·


ATB Financial v. Metcalfe & Mansfield Alternative Investments II Corp. (2008), 2008 ONCA 587, 2008 CarswellOnt 4811, (sub 11om. Metcalfe & Mansfield Alternative Investments II Corp., Re) 240 O.A.C. 245, (sub 11om. Metcalfe & Mansfield Alternative Investments ll Cmp., Re) 296 D.L.R. (4th) 135, (sub nom. Metcalfe & Mansfield Alternative Investments ll Corp., Re) 92 O.R. (3d) 513, 45 C.B.R. (5th) 163, 47 B.L.R. (4th) 123 (Ont. C.A.)- considered

Canadian Airlines Corp., Re (2000), [2000] 10 W.W.R. 269, 20 C.B.R. (4th) l, 84 Alta. L.R. (3d) 9, 9 B.L.R. (3d) 41, 2000 Carswell Alta 662, 2000 ABQB 442, 265 A.R. 20 l (Alta. Q.B.) - referred to

Canadian Red Cross Society I Societe Canadienne de la Croix Rouge, Re (2000), 2000 CarswellOnt 3269, 19 C.B.R. (4th) 158 (Ont. S.C.J.)-referred to

Dore c. Verdun (Municipalite) (1997), (sub 110111. Dore v. Verdun (City)) [1997] 2 S.C.R. 862, (sub 11om. Dore v. Verdun (Ville)) 215 N.R. 81, (sub nom. Dore v. Verdun (Cif)~) 150 D.L.R. (4th) 385, 1997 CarswellQue 159, 1997 CarswellQue 850 (S.C.C.) - distinguished

Dylex Ltd., Re (1995), 31 C.B.R. (3d) 106, 1995 Carswell011t 54 (Ont. Gen. Div. [Commercial List])- considered

First Vancouver Finance v. Minister of National Revenue (2002), [2002] 3 C.T.C. 285, (sub nom. Minister a/National Revenue v. First Vancouver Finance) 2002 D.T.C. 6998 (Eng.), (sub nom. Minister of National Revenue v. First Vancouver Finance) 2002 D.T.C. 7007 (Fr.), 288 N.R. 347, 212 D.L.R. (4th) 615, [2002] G.S.T.C. 23, [2003] 1 W.W.R. 1, 45 C.B.R. (4th) 213, 2002 SCC 49, 2002 CarswellSask 317, 2002 Carswel\Sask 318, [2002] 2 S.C.R. 720 (S.C.C.) -considered

Gauntlet Energy Corp., Re (2003), 30 Alta. L.R. (4th) 192, 2003 ABQB 894, 2003 CarswellAlta 1735, [2003] G.S.T.C. 193, 49 C.B.R. (4th) 213, [2004] 10 W.W.R. 180, 352 A.R. 28 (Alta. Q.B.)-referred to

Hongkong Bank of Canada v. Chef Ready Foods Ltd. (1990), 51 B.C.L.R. (2d) 84, 1990 CarswellBC 394, 4 C.B.R. (3d) 311, (sub nom. Chef Ready Foods Ltd. v. Hongkong Bank of Canada) [1991] 2 W.W.R. 136 (B.C. C.A.)-referred to

lvaco Inc., Re (2006), 2006 C.E.B. & P.G.R. 8218, 25 C.B.R. (5th) 176, 83 O.R. (3d) 108, 275 D.L.R. (4th) 132, 2006 CarswellOnt 6292, 56 C.C.P.B. 1, 26 B.L.R. (4th) 43 (Ont. C.A.)-referred to

Komunik Corp., Re (2010), 2010 CarswellQue 686, 2010 QCCA 183 (C.A. Que.)- referred to

Komunik Corp., Re (2009), 2009 QCCS 6332, 2009 Carswel!Que 13962 (C.S. Que.)- referred to

Nova Metal Products Inc. v. Comiskey (Trustee of) (1990), 1990 Carswell011t 139, 1 C.B.R. (3d) lO I, (sub 11om. Etan Corp. v. Comiskey) 1 O.R. (3d) 289, (sub nom. Etan Cmp. v. Comiskey) 41 O.A.C. 282 (Ont. C.A.)- considered

Ottawa Senators Hockey Club Corp., Re (2005), 2005 G.T.C. 1327 (Eng.), 6 C.B.R. (5th) 293, 2005 D.T.C. 5233

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