Group of debtor companies was involved in property development. Some debtors made payments-in-kind to creditors of other debtors, receiving inter-company credits in return. Over one year later, debtors sought Companies’ Creditors Arrangement Act (CCAA) protection. Monitor alleged that replacing hard assets with impaired loans prejudiced creditors’ recovery in CCAA proceedings and was oppressive under Ontario Business Corporations Act (OBCA). Monitor brought motion for advice and directions, seeking to be recognized as OBCA complainant on behalf of certain creditors. Motion dismissed. Monitor purportedly sought advice and directions, but really sought judgment holding creditor liable. Monitor had not been empowered to bring proceedings on behalf of CCAA debtors. Utility of empowering Monitor to drop its cloak of neutrality to bring inter-creditor proceedings was not established. There was no evidence to assess whether discretion should be exercised to allow Monitor to sue or qualify as OBCA complainant. Absent evidence that could lead to inference of existence of reasonable expectations, reliance, and oppression, Monitor was unsuited to act for creditors in present case. Monitor is more constrained than creditors in its activities and ought to consider seeking court approval before undertaking litigation on behalf of particular interests.
Urbancorp Cumberland 2 GP Inc., (Re) (2017), 2017 CarswellOnt 20265, 2017 ONSC 7649, F.L. Myers J. (Ont. S.C.J.).