ANGUS A2A GP INC v ALVAREZ & MARSAL CANADA INC

The Appellants appealed several Orders continuing and confirming proceedings under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 (“CCAA”) arising from two real estate development projects in Texas. Equity investors had commenced the proceedings by Originating Application and obtained an Initial Order under the CCAA.

The Initial Order was made on short notice and was subject to a “comeback hearing” at which the Applicants were required to justify the continuation of the proceedings on notice to affected parties. One group of Appellants, consisting of two Texas corporations (the “Texas LLCs”), which owned and developed the project lands, argued that the Alberta Court lacked jurisdiction over them because they had been served outside Canada without first obtaining an Order permitting service ex juris under Rule 11.25(2). They also contended that the Initial Order had been obtained on less than two days’ notice of the Application, contrary to the 10-day notice required under Rule 3.9, rendering the proceedings procedurally unfair.

On the issue of service, the Court accepted that the Applicants had not complied with Rule 11.25(2) because they had served the Texas LLCs without first obtaining an Order permitting service ex juris. However, the Court observed that the service Rules served two purposes: the purpose of providing notice to the responding party and to establish an arguable basis for the Alberta Court to exercise jurisdiction. The Court found that the Texas LLCs had received actual notice of both the initial CCAA Application and the subsequent comeback hearing, and that the Chambers Judge had determined there was a sufficient connection to Alberta to support the Court’s jurisdiction. The Texas LLCs did not challenge the jurisdiction finding on Appeal. In those circumstances, the procedural defect in service did not justify setting aside the proceedings.

The Court also considered the Applicants’ failure to comply with Rule 3.9. It accepted that the Initial Order had effectively been obtained on an ex parte basis and that the two-day notice was procedurally unfair when viewed in isolation. However, the Court found that any prejudice arising from the inadequate notice was alleviated by the comeback hearing, which operated as a de novo hearing, on full notice to the affected parties. At the hearing, the Applicants continued to bear the burden of establishing that the Initial Order and continuation of the CCAA proceedings were warranted. Although there was no urgency justifying the Applicant’s departure from the notice requirements, the Court held that it would have been a disproportionate response to terminate otherwise meritorious CCAA proceedings solely based on the notice deficiency.

The Court also addressed other issues, including whether equity investors could commence CCAA proceedings, whether the Texas LLCs could be included within the Initial Order despite not qualifying as debtor companies, and whether the challenged Orders furthered the purposes of the CCAA. The Court concluded that the equity investors qualified as “persons interested” for the purposes of Section 11 of the CCAA, upheld the inclusion of the Texas LLCs under the Court’s broad authority under that provision, and found that the challenged Orders were supported by the evidence and consistent with the objectives of the CCAA. Accordingly, the Appeal was dismissed.