Application To Replace A CCAA Monitor Denied For Lack Of Standing

On October 10, 2019, the Supreme Court of British Columbia (the “BCSC” or the “Court”) released its decision in 8640025 Canada Inc. (Re)1 (“8640025 Canada”), denying an application to replace the monitor (the “Monitor”) in a Companies' Creditors Arrangement Act2 (the "CCAA") proceeding because the applicant was not a creditor and therefore had no standing to bring such an application.

8640025 Canada appears to be the first reported decision to address the application of 11.7(3) of the CCAA, which came into force with the 2009 amendments and reads:

On application by a creditor of the company, the court may, if it considers it appropriate in the circumstances, replace the monitor by appointing another trustee, within the meaning of subsection 2(1) of the Bankruptcy and Insolvency Act, to monitor the business and financial affairs of the company.3

In November 2016, 8640025 Canada Inc. (“864”), among other petitioning entities, obtained an initial order under the CCAA. In a Court-approved claims process run by the Monitor, 864's former parent, Teliphone Corp. (“Teliphone”), had failed to submit its proof of claim until over three months after the claims bar date (the “Claims Bar Date”).4 The Monitor did not accept that out-of-time proof of claim. Teliphone subsequently brought an application for replacement of the Monitor, paired with an application for a declaration that it was a secured creditor. The BCSC adjourned the latter application until such date as Teliphone might bring an application for an extension of the Claims Bar Date.5

Since Teliphone's proof of claim was barred for being out of time, and since Teliphone had not (yet) applied for an extension of the Claims Bar Date, the BCSC held that, for the purposes of deciding on the application for replacement of the Monitor, Teliphone was not a creditor and therefore did not have standing to bring such an application under subsection 11.7(3) of the CCAA. Accordingly, the BCSC dismissed Teliphone's application to replace the monitor.6

In obiter dicta, the BCSC listed four reasons why it would not be appropriate to substitute the Monitor so late in the CCAA proceedings, even if Teliphone had, or was deemed to have, successfully brought an application for an extension of the Claims Bar Date and was declared a secured creditor with standing.7 The first reason was that the Monitor had not conducted itself in an inappropriately adversarial manner or otherwise engaged in any impropriety.8...