D. Jurisdiction of the Court to Make Orders

Author:Roderick J. Wood
Profession:Faculty of Law. University of Alberta

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1) Development of the Judicial Powers

Prior to 2005/2007, although courts routinely exercised wide powers in making a variety of different types of orders in connection with restructuring proceedings, there was considerable controversy concerning the source of and limits on these powers. The powers that were exercised by the courts in restructuring matters under the CCAA greatly exceeded the powers expressly conferred on the courts by the statute.

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On several matters, the CCCA and the BIA expressly confer power upon the courts to make certain kinds of orders. For example, both the CCAA and the commercial proposal provisions of the BIA give a court the power to approve the plan or proposal. The CCAA also gives a court the power to stay proceedings. This power is not needed under the commercial proposal provisions, since a statutory stay of proceedings arises automatically upon the initiation of the restructuring proceedings.35There are many other matters in respect of which courts have found that they had jurisdiction to make orders under the CCAA despite the absence of express power-conferring provisions. These include the following types of orders:

· orders that authorize the debtor to obtain interim financing and that give the interim financer superpriority over existing secured creditors;36· orders that create charges that secure the extension of credit by post-filing creditors and that give the post-filing creditors superpriority over existing secured creditors;37· orders that create a charge for administrative expenses such as the monitor’s fees and disbursements and that give the charge superpriority over existing secured creditors;38· orders that permit the debtor to terminate contractual obligations owed to a third party;39· orders that authorize the assignment of a contract notwithstanding that it contains an anti-assignment clause and the other contracting party does not consent to the assignment;40· orders that authorize the debtor to pay arrears in payment to a supplier in order to ensure that the supplier will continue to supply the critical goods or services that cannot be obtained from another supplier;41· orders that prevent a person from exercising a remedy or taking proceedings against a third party (as opposed to the debtor) where the exercise of the remedy would detrimentally affect the success of the restructuring proceedings;42

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· orders that authorize a sale of substantially all the business assets before a plan has been put before the creditors for approval;43and

· orders that authorize the use of a claims bar procedure that will bar a claimant from making a claim unless the claim is filed within a particular date after the claimants are notified.44

Courts long struggled to explain the jurisdictional basis for such orders. In many of the cases, the courts stated that the orders were made pursuant to their "inherent jurisdiction." More recently, some appellate courts have distanced themselves from this view. The British Columbia Court of Appeal in Re Skeena Cellulose Inc.45and the Ontario Court of Appeal in Re Stelco Inc.46have adopted the position that the court’s inherent powers relate to the power of the court to control its own processes and does not provide the jurisdictional basis for most of the powers exercised by a court in restructuring proceedings. The Ontario Court of Appeal has taken the view that, in most instances, the statute itself confers these powers. This is based on the proposition that the CCAA was a skeletal statute and that courts are permitted to fill any gaps in it in order to make it work. The British Columbia Court of Appeal suggested that the powers might instead be derived from the court’s equitable jurisdiction. For example, the superpriority that is given to the interim financer has been explained as an exercise of the court’s equitable jurisdiction akin to the orders made by courts in relation to court-appointed receivers.47The ability to make these types of orders under the CCAA is one of the reasons why the CCAA emerged as the dominant restructuring regime for larger corporations. It was far less clear whether courts had the same latitude to make similar orders in the context of commercial proposals under the BIA. If the ability to make such orders were derived from the court’s inherent jurisdiction, there would be no reason in principle why similar orders could not be made in respect of BIA restructurings.48But, if this is no longer a tenable position, some other jurisdictional basis needs to be found for such orders under the BIA. If the jurisdiction is derived from the court’s implied statutory powers, then it was far less likely that such orders were possible under the BIA. The greater detail and framework of rules provided by the commercial

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proposal provisions might be argued to be evidence that Parliament exhaustively dealt with the matters and that supplementation of these rules by the courts was not intended. If, however, the power is derived from the equitable jurisdiction of the court, these powers may also be available under the BIA.


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