9354-9186 Québec Inc. (Bluberi Gaming Technologies) v. Callidus Capital Corp.
Bluberi had been under Companies’ Creditors Arrangement Act (“CCAA”) protection since 2015. As part of its restructuring efforts, it intended to assert a claim against its former lender, alleging that it caused Bluberi’s demise (paras. 60-62). Bluberi lacked the funds to advance that claim and sought funding. Bluberi and Bentham, along with Bluberi’s counsel, entered into a litigation funding agreement (LFA) in January 2018 whereby Bentham agreed, subject to CCAA Court approval, to pay Bluberi’s legal fees and disbursements, in exchange for a portion of any proceeds of the litigation. If the litigation is unsuccessful, Bentham loses its investment and pays any costs orders.
The court-appointed monitor supported the funding arrangement (paras. 63-65), and Bluberi moved for the CCAA Court’s approval of the LFA. The lender brought a cross-motion for permission to call a creditors’ meeting to approve its own plan of arrangement, through which the lender would be released from any liability to Bluberi.
In his decision, Justice Michaud first dismissed the lender’s cross-motion, finding that it constituted an attempt to use the CCAA proceedings for an "improper purpose" and that it would result in a "substantial injustice" to Bluberi (paras. 38-40, 56). He then granted Bluberi’s motion for approval of the LFA. In addition to holding that Bluberi did not need creditor approval to bring its lawsuit and that Bluberi’s CCAA stay of proceedings should be extended (paras. 66-72, 87-91), Justice Michaud held that (paras. 73-86):
- The LFA provides funding that is necessary to allow Bluberi to gain access to justice, as its lawsuit represents the "only avenue that can potentially allow for any meaningful recovery for the creditors" (para. 69);
- The LFA does not diminish Bluberi’s ability to control its litigation and instruct its counsel;
- The LFA does not compromise or impair Bluberi’s lawyer-client relationship or its lawyers’ duties of loyalty and confidentiality;
- The LFA provides Bentham, whom the court-appointed monitor calls "a reputable lender with a proven track-record" (para. 64), with compensation that is fair and reasonable;
- The LFA protects confidential information;
- The LFA provides Bentham with reasonable contractual termination rights; and
- The LFA is protected from disclosure to the defendant, who is not entitled to know "how much money Bentham is investing, what its percentage of return is, or how any recovery would be apportioned" (para. 85).