Claims in a CCAA Proceeding
| Author | Stephanie Ben-Ishai; Thomas G. W. Telfer |
| Pages | 606-649 |
CHAPTER 14
Claims in a CCAA Proceeding
I. INTRODUC TION
A creditor must prove it has a valid claim in order to be part of a restructuring. Section ()
of the Companies’ Creditors Arrangement Act, RSC , c C- (CCAA) denes a “claim” as
any indebtedness, liability, or obligation that would be a debt provable in a bankruptcy under
the Bankruptcy and Insolvency Act, RSC , c B- (BIA). Section () of the CCAA provides
that the only claims that may be dealt with by a compromise or arrangement are ()claims
that relate to debts or liabilities, present or future, to which the company is subject on the
day that restructuring proceedings are commenced; and ()claims that relate to debts or
liabilities, present or future, to which the company may become subject before the com-
promise or arrangement is sanctioned by reason of any obligation incurred by the company
before restructuring proceedings are commenced. This language conrms that liabilities
arising from the disclaimer of executory contracts that had been entered into before the
commencement of restructuring proceedings are properly dealt with in a plan of comprom-
ise or arrangement. The relevant date for determining the existence of a claim is the date of
the initial CCAA application; if the proceeding was initiated under the BIA but later switched
to the CCAA, the relevant date is the date of the initial bankruptcy event.
Section () of the CCAA thus dierentiates between pre-ling obligations and post-ling
obligations. Pre-ling obligations (those that relate to debts or liabilities that were incurred
before the commencement of the insolvency proceedings or that arise out of the disclaimer of
contracts that had been entered into before the commencement of restructuring proceedings)
may be compromised or otherwise aected by a plan of compromise or arrangement. Creditors
that hold pre-ling claims can vote for or against the plan. Claims that arise after this date are
not aected by the plan. This does not mean that post-ling creditors are free of risk of loss; if
the restructuring fails and the debtor goes into bankruptcy, post-ling creditors will be adversely
aected. For this reason, a company that is in restructuring proceedings often must take steps
to ensure that the post-ling creditors either are paid in cash or that a post-ling trade creditors’
charge is created in order to induce them to extend credit to a nancially distressed rm.
Unlike the BIA, the CCAA does not provide a statutory procedure for the proof and valu-
ation of claims held by creditors. Instead, the claims process is established by a claims pro-
cedure order from the court. The claims procedure order sets out how creditors are notied
of the process and establishes the procedure that the creditors must employ to prove their
claims. In some CCAA proceedings, a reverse claims procedure is used. The notice discloses
the amounts owing to the various creditors based on the debtor’s records, and the creditors
are required to act only if they disagree with the amount disclosed in the notice.
The claims procedure order may provide that the monitor will determine the validity and
amount of the claims. Alternatively, the order may provide for the appointment of a claims
Chapt er : Claims in a CCA A Proceeding
ocer who is responsible for the validation and assessment of claims. The claims procedure
order will also provide a claims bar date. Section of the CCAA provides that the court may
x deadlines for the purposes of voting and for the purposes of distributions under a plan.
Proofs of claims must be led before the expiration of the claims bar date. It has been held
that “a claims bar order and its schedule should not purport to ‘forever bar’ a claim without
a saving provision” and a saving provision could make it clear that a claimant may bring a
claim after the claims bar date with leave of the court.
The failure to notify a known creditor of the CCAA proceedings as required by the claims
procedure order will generally mean that the creditor is not bound by the plan of arrange-
ment (see Ivorylane Corp v Country Style Realty Ltd, CarswellOnt (Sup Ct J), a ’d
(), CBR (th) (CA)). Even if a creditor has not been properly notied, the creditor
may nevertheless be bound if the creditor knows of the CCAA proceedings but chooses not
to participate in the hopes of obtaining the full value of its claim following the restructuring
(see Lindsay v Transtec Canada Ltd (), CBR (d) (BCSC)).
II. DISPUTED AND LATE CLAIMS
The claims procedure order establishes how disputed claims will be resolved. These orders
can deal with disputed claims in many ways. The order can specify that the monitor will
resolve the dispute and if the parties disagree with the monitor’s assessment, they can have
the matter heard by a claims ocer or a court. If the monitor’s decision is referred to the
court, it will be determined by a trial de novo. If the claims ocer’s decision is referred to the
court, the standard of review is the same as in any appellate proceedings, thereby aording
considerable deference to the claims ocer.
Pacer Construction Holdings Corporation v Pacer Promec Energy Corporation, 2018 ABCA 113, 67
Alta LR (6th) 281
The Court:
[] The appellant FTI Consulting Canada Inc (hereafter “the Receiver”) is the court-ap-
pointed receiver of both Pacer Promec Energy Corporation and Pacer Promec Energy
Construction Corporation.
[] FDS Prime Energy Services Ltd (hereafter “Prime”) subcontracted with Pacer
Promec Energy Construction Corporation for work to be completed on the site of Can-
adian Natural Resources Limited’s (hereafter “CNRL”) Alberta Horizon plant. Prime
eventually led liens on property owned by Pacer Promec Energy Corporation.
[] Since the Receiver of Pacer Promec Energy Corporation and Pacer Promec Energy
Construction Corporation is the same, and there are no substantive distinctions between
the two for the purposes of this appeal, as did the chambers judge below we will continue
to refer to the corporations in receivership as “PPEC”.
[] Prime submitted to the Receiver a secured pro of of claim in the amount of
,, (“Lien ”) relating to work that Prime claimed to have done pursuant to four
contracts and three purchase orders.
Re Blue Range Resource Corp, ABCA at para .
BANKRUPTCY AND INSOLVENCY LAW IN CANADA: CASES, MATERIALS, AND PROBLEMS
[] The Receiver disallowed Lien , and the disputed claim was then dealt with pur-
suant to the Claims Procedure Order granted in the PPEC receiverships, a procedure
presided over by an appointed Claims Ocer.
[] Lengthy adavits and extensive written submissions were tendered before the
Claims Ocer, and the primary deponents representing Prime and the Receiver were both
cross-examined. In addition, the Claims Ocer requested and received adavits from
former employees of PPEC, who also underwent cross-examination. An oral hearing
took place before the Claims Ocer, following which supplemental written submis-
sions were sought and received.
[] T he Claims Ocer partially allowed Prime’s Lien claim, but only to the extent of
,.. The chambers judge upheld the Claims Ocer’s determination that monies
claimed under various contracts and purchase orders for work done more than days
before the registration of Lien , were not secured by Lien . No appeal has been taken
in respect of these contracts and purchase orders.
[] The primary point of disagreement between Prime and the Receiver in respect
of the balance of Lien was whether subcontract N was terminated or abandoned.
The Receiver took the position that subcontract N was terminated or abandoned
in December of , after which time Prime merely rented scaolding to the Receiver
pursuant to a new contract. Prime took the contrary position, asserting that subcontract
N subsisted, there was never a new contract, and that the underlying claim was led
within time.
[] The Claims Ocer agreed with the Receiver.
[] Prime took the matter to the Court of Queen’s Bench. In reviewing the Claims
Ocer’s determinations in respect of Lien , the chambers judge decided that subcon-
tract N was not terminated in November or December of , but instead con-
tinued until at least May , . Since the Receiver took no steps to terminate Prime’s
subcontract prior to May , , Lien led on July , was valid: Pacer Construction
Holdings Corp v Pacer Promec Energy Corp, ABQB (“Decision”).
[] The chambers judge made no comment about the value of Lien .
[] Subsequent to registering Lien , Prime registered a second lien for ,,.
(“Lien ”).
[] The Receiver applied before the chambers judge to have Lien discharged and
the related claim dismissed because Prime had not submitted a Proof of Claim notwith-
standing the Claims Procedure Order, and despite being reminded to do so on May ,
and June , by the Receiver’s legal counsel.
[] The chambers judge declined to dismiss the claim or order discharge of Lien ,
nding that there was “nothing improper in Prime not making a claim under the Claims
Procedure Order by June , [the stipulated deadline to make claims]”: Decision at
para . Further, he was of the view that if a led claim was required under the Claims
Procedure Order, then this would be the appropriate case to extend the time within
which Prime could make such a claim until “after CNRL has provided the information
it is gathering on the subject”. The chambers judge declined to make a determination as
to whether the claim was actually caught by the Claims Procedure Order.
[] On appeal, the Receiver contends that the chambers judge’s decisions in respect
of both Lien and Lien warrant intervention. Specically, the Receiver asks this Court
to restore the decision of the Claims Ocer dismissing Lien (with the exception of the
secured amount of ,. admitted by the Receiver to be owing), and dismiss Lien ,
direct the underlying lien be discharged, and award the Receiver its costs.
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