9354-9186 Québec Inc. (Bluberi Gaming Technologies) v. Callidus Capital Corp.

In January 2020, the Supreme Court of Canada unanimously overturned the Quebec Court of Appeal’s decision in this matter, thus reinstating the March 2018 decision of the CCAA Court [see summary below]. Judgment was rendered immediately following the conclusion of oral arguments at the hearing.

The Supreme Court provided its written reasons for judgment in May 2020. Writing on behalf of the Court, Chief Justice Wagner and Justice Moldaver held that the CCAA Court properly exercised its discretion to approve Omni Bridgeway’s LFA after finding it “fair and reasonable”. The LFA was not a plan of arrangement, and did not need to be presented to Bluberi’s creditors for a vote.

The reasons made specific reference to the findings of the judge at first instance, and led the Court to the following conclusions (at paras. 106-107, citations omitted):

• “that approval of the LFA would assist [Bluberi] in finalizing a plan ‘with a view towards achieving maximum realization’ of its assets; …
• “that the creditors would not be materially prejudiced by the Litigation Financing Charge … [and] ‘given the particular circumstances of this matter, the only potential recovery lies with the lawsuit that the Debtors will launch’; and
• “that the [court-appointed] Monitor supported approving the LFA as interim financing.

“In our view, it is apparent that the supervising judge was focussed on the fairness at stake to all parties, the specific objectives of the CCAA [Canada’s insolvency legislation], and the particular circumstances of this case when he approved the LFA as interim financing. We cannot say that he erred in the exercise of his discretion.”

This decision represents a milestone for commercial litigation funding in Canada, particularly in insolvencies and restructurings where lawsuits can be an asset class from which to maximize recovery for creditors. As the Supreme Court acknowledges, litigation can be akin to a “pot of gold” (at para. 111):

“When the ‘pot of gold’ is secure — that is, in the event of any litigation or settlement — the net funds will be distributed to the creditors. Here, if the [claims] generate funds in excess of Bluberi’s total liabilities, the creditors will be paid in full; if there is a shortfall, a plan of arrangement or compromise will determine how the funds are distributed.