What Bluberi means for litigation funding and creditor recoveries in Canada
Associate Investment Managers and Legal Counsel Nickolas Tzoulas and Annie Lespérance hosted a webinar discussion on the background and importance of the Supreme Court of Canada’s unanimous decision in 9354-9186 Québec Inc. (Bluberi Gaming Technologies) v. Callidus Capital Corp., 2020 SCC 10 (the “Bluberi” case), which represented 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.
Omni Bridgeway was the litigation funder that agreed to provide financial support in the form of interim financing to Bluberi so that Bluberi could bring litigation, its only remaining asset, against its former lender and secured creditor, Callidus, who Bluberi alleged caused its demise.
Also joining the webinar discussion were two partners from Davies Ward Phillips & Vineberg in Montreal, Christian Lachance and Jean-Philippe Groleau, both of whom acted as counsel to the appellants Bluberi before the Supreme Court of Canada.
The panel addressed the impact of this important decision for insolvency professionals and litigation funding not only in the insolvency context but also for commercial claims more generally.
Click below to hear directly from those involved in the case about how it can help you or your clients use funding to realize value from litigation assets, and facilitate creditor recoveries.
Click below to jump to sections addressing key topics:
- Background: a brief history of the Bluberi litigation
- Arguments before the Supreme Court of Canada
- Decision of the Court, in brief
- Key findings of the Court and their likely impact on future insolvency proceedings
- Open questions: what the Court did not address
- Impact on litigation funding for insolvency matters and beyond
- Impact on insolvency matters outside of Canada
- What’s next for Bluberi
Other counsel who appeared before the Supreme Court were Woods, who represented the appellant Omni Bridgeway, Gowling WLG, who represented the respondent Callidus, McCarthy Tétrault, who represented certain respondent unsecured creditors, Stikeman Elliott, who represented the intervenor court-appointed monitor Ernst & Young Inc., and Norton Rose Fulbright, who represented the intervenors the Insolvency Institute of Canada and the Canadian Association of Insolvency and Restructuring Professionals.
The Supreme Court of Canada decision reinstated a March 2018 decision of the insolvency [“CCAA”] Court at first instance. Judgment was rendered immediately following the conclusion of oral arguments at the Supreme Court hearing in January 2020.
The Supreme Court provided its written reasons for judgment in May 2020. Writing on behalf of the unanimous Court, Chief Justice Wagner and Justice Moldaver held that the CCAA Court properly exercised its discretion to approve Omni Bridgeway’s litigation funding agreement (“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 of Wagner C.J. and Moldaver J. 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’;
- “that the [court-appointed] Monitor supported approving the LFA as interim financing; [and]
- “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, 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.”
As the Supreme Court acknowledged, 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.”