Test
Back to all publications
Jan 31, 2020

SCC Reinstates Quebec Superior Court Judgment in 9354-9186 Québec inc. v. Callidus Capital Corp.

By Sam Babe

On January 23, 2020, the Supreme Court of Canada (the “SCC”) delivered its unanimous decision in 9354-9186 Québec inc. v. Callidus Capital Corp., with reasons to follow, to allow the appeal of the decision of the Quebec Court of Appeal (the “QCCA”) and reinstate the decision of the Quebec Superior Court (the “QCSC”).1

The QCSC had dismissed an application by a creditor group to permit Callidus Capital Corp. (“Callidus”) to vote on its own plan in the Companies’ Creditors Arrangement Act (the “CCAA”) proceedings (the “CCAA Proceedings”) of its debtor, 9354-9186 Québec inc., formerly Bluberi Gaming Technologies inc. (“Bluberi”). The plan had been brought by Callidus to compromise litigation claims threatened against it by Bluberi. Callidus had previously been the winning bidder, through a credit bid, of all Bluberi’s assets other than the claims against Callidus. Callidus had excluded $3 million of its secured debt from its credit bid, so as to remain the ranking secured creditor in the CCAA Proceedings. Callidus’ vote in favour of the plan was required in order to cross the two thirds in value of claims voting threshold required under section 6(1) of the CCAA. Justice Michaud of the QCSC had held that allowing Callidus to vote on the plan would serve an improper purpose and give rise to a substantial injustice. He also approved, without any creditor vote, a litigation financing agreement (the “LFA”) to allow Bluberi to pursue its claims against Callidus.

Justice Shrager for a unanimous QCCA found that seeking a settlement of litigation for valuable consideration could not be considered an improper purpose, especially when it would result in employees and smaller creditors receiving full payment on their claims and other creditors receiving between 33% and 39%. Justice Shrager found that Justice Michaud’s reliance on improper purpose was not based in any statutory discretion and resembled an application of the doctrine of equitable subordination, despite the fact that equity should not be used to exclude CCAA voting rights. Justice Shrager also held that the LFA ought to be put to a vote of creditors, so that they could properly weigh their options as against the Callidus plan.

We await the reasons of the SCC and will report on them when they are released.

The Financial Services Group at Aird & Berlis regularly advises a broad range of stakeholders on proceedings initiated pursuant to the Companies’ Creditors Arrangement Act, including plans of arrangement. Details are available at our Financial Services webpage.

Areas of Expertise

Related Publications

Publications Article
Bar Exam Breach: Law Society of Ontario Moves Ahead With Claim While Affected Candidates Are Left on Outside Looking In By Hannah Downard and Josh Suttner Jun 17, 2022 On May 25, 2022, following months of investigation, the Law Society of Ontario announced that it ... On May 25, 2022, following months of investigation, the Law Society of Ontario announced that it had commenced an action against Aamer Chaudhry and NCA Exam Guru for their alleged role in the breach and distribution of confidential exam m...
Publications Article
Historic NFT Insider Trading Charges in U.S. of Relevance to Canadian Operators By Russell J. Sanders, Sean Green and Ali Kwinter Jun 16, 2022 On June 1, 2022, the United States Department of Justice laid the first-ever insider trading char... On June 1, 2022, the United States Department of Justice laid the first-ever insider trading charges in relation to digital assets. The accused, Nathaniel Chastain, was arrested in Manhattan, New York, in connection with a scheme to commit insider trading of non-fungible tokens.
Publications Article
Enhanced French Language Requirements Under Bill 96: An Update for Employers with Quebec-based Employees and Operations By Daria (Dasha) Peregoudova, Michelle Lacroix and Madeline Grubert Jun 13, 2022 On May 24, 2022, the National Assembly of Québec adopted Bill 96, An Act respecting French, the o... On May 24, 2022, the National Assembly of Québec adopted Bill 96, An Act respecting French, the official and common language of Québec, amending language laws in the province previously set out in the Charter of the French Language.