2021 QCCA 1925, 2021 QCCA 1925

Agence du revenu du Québec c. FTI Consulting Canada inc. 2021 QCCA 1925 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-029797-214 ( 500-11-048114-157 ) MINUTES OF HEARING DATE: December 17, 2021 THE HONOURABLE PETER KALICHMAN, J.A.

APPLICANTS COUNSEL agence du revenu du québec agence du revenu du canada Mtre JEAN-CLAUDE GAUDETTE Mtre DANIEL CANTIN ( Larivière Meunier (Revenu Québec) ) By videoconference RESPONDENT COUNSEL fti consulting canada inc Mtre SYLVAIN RIGAUD Mtre JOSHUA BOUZAGLOU ( Woods ) By videoconference IMPLEADED PARTIES COUNSEL quebec north shore & labrador railway company iron ore corporation Mtre GERRY APOSTOLATOS ( Langlois avocats ) By videoconference

employés salariés non syndiqués Mtre NICOLAS BROCHU ( Fishman Flanz Meland Paquin ) Par visioconférence bloom lake general partner limited quinto mining corporation 8568391 canada limited cqim québec iron mining ulc wabush iron co. limited wabush resources inc.

Mtre BERNARD BOUCHER Mtre YOUSSEF KABBAJ ( Blake, Cassels & Graydon ) Par visioconférence the bloom lake iron ore mine limited partnership bloom lake railway company limited wabush mines arnaud railway company wabush lake railway company limited ABSENT AND UNREPRESENTED DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of the proceeding on November 8, 2021 by the Honourable Michel A. Pinsonneault of the Superior Court , District of Montreal (Art. 13 et 14 Companies' Creditors Arrangement Act et art. 357 C.C.P.. ) .

Clerk at the hearing : Mélanie Camiré Courtroom: RC-18 HEARING 9:48 Commencement of the hearing. Identification of counsel. Preliminary remarks. 9:51 Question by the judge and Me Cantin answers. 9:56 Case management. Exchanges on both sides. 10:02 Recess of the hearing. 14:11 Resumption of the hearing. BY THE JUDGE: Judgment – see page 4. 14:12 Conclusion of the hearing. Mélanie Camiré, Clerk at the hearing

JUDGMENT [ 1 ] On January 27, 2015, Bloom Lake General Partner Limited, Quinto Mining Corporation, Cliffs Québec Iron Mining ULC, Wabush Iron Co. Limited and Wabush Resources Inc. (the Petitioners ) filed for protection from their creditors under the Companies’ Creditors Arrangements Act (the CCAA ) and an initial order was rendered.

The Respondent, FTI Consulting Canada inc. was appointed as monitor (the Monitor ) for the Petitioners as well as for The Bloom Lake Iron Ore Mine Limited Partnership, Bloom Lake Railway Company Limited, Wabush Mines, Arnaud Railway Company and Wabush Lake Railway Company Limited (together with the Petitioners, the CCAA Parties ). [ 2 ] The Agence du revenu du Québec (the ARQ ), on its own behalf as well as on behalf of the Agence du revenu du Canada, seeks leave to appeal from a judgment rendered on November 8, 2021 by the Superior Court, district of Montreal (the Honorable Michel Pinsonnault), granting in part a Motion for directions.

The conclusion which the ARQ seeks to overturn relates to the Judge’s refusal to allow it to set off a claim against the claim made against it by the Monitor. [ 3 ] Although the Motion for leave to appeal is not opposed, the ARQ must still demonstrate that the criteria for granting leave are met. * * * [ 4 ] In June, 2018, an order was rendered sanctioning a plan of arrangement submitted by the CCAA Parties. [ 5 ] In August, 2018, the Monitor made interim distributions to unsecured creditors, including creditors of Cliffs Québec Iron Mining ULC ( CQIM ). [ 6 ] CQIM then brought a claim against the ARQ to recover the roughly $7.5M in net taxes it was deemed to have paid as part of the interim distribution to its creditors (the CQIM Claim ). [ 7 ] The ARQ took the position that it was entitled to set the CQIM Claim off against its own claim of $ 13M, which existed prior to the date of the CCAA filing in 2015 (the ARQ Claim ). [ 8 ] In light of this disagreement, the Monitor brought a Motion for directions seeking to confirm that the ARQ Claim was a pre- filing claim, that the CQIM Claim was a post-filing claim and that, as a result, the ARQ should be required to pay the CQIM Claim to the Monitor without offset. [ 9 ] The Judge granted the conclusions sought by the Monitor in regards to the right of offset.

He concluded that the CQIM Claim, which he determined to be a post-filing claim, arose from a different tax obligation than the ARQ Claim and that there was no justification to allow set-off or compensation. He thus ordered the ARQ to pay the CQIM Claim to the Monitor without offset. * * * [ 10 ] The Application for Leave to Appeal is governed by sections 13 and 14 of the CCAA. For leave to be granted, the following four criteria must be satisfied:

a) The issue proposed to be raised is significant to the practice of restructuring;

b) The issue must be of significance to the CCAA proceeding at issue;

c) The appeal appears prima facie meritorious; and

d) The appeal will not unduly hinder the progress of the CCAA proceeding. [1] [ 11 ] The ARQ raises a number of grounds of appeal. For the purposes of the present application, I will summarize the principal focus of the proposed appeal. [ 12 ] The ARQ submits that the Judge erred in law in concluding that it was only at the time payments were made to CQIM’s creditors in 2018 that there was a deemed consideration for taxable purposes.

In fact, the ARQ maintains, while CQIM’s right to make the CQIM Claim was only triggered in 2018 after its creditors were paid, the tax credits which form the basis of that claim were intimately related to the claims of the creditors themselves, each of which existed prior to the CCAA filing. Accordingly, the ARQ maintains that the CQIM Claim must also be considered to be a pre-filing claim. [ 13 ] The ARQ contends that the Judge reached his conclusion through an erroneous

interpretation of the applicable tax legislation which, it argues, he should have read in harmony with the objectives and purposes of the CCAA and the Bankruptcy and Insolvency Act . [ 14 ] The questions at issue are not entirely new but I am satisfied that they have not been dealt with in this particular context. [2] Furthermore, as the ARQ argues, there may be merit in having the Court clarify the question of whether compensation between pre- filing and post-filing claims is possible. The issues raised in the appeal thus appear to be significant not only to this proceeding, but to

the practice in general. [ 15 ] Furthermore, I am satisfied that the grounds of appeal appear to be serious. [ 16 ] Lastly, while the appeal will no doubt cause delays in the progress of the proceeding, they cannot be considered undue.

FOR THESE REASONS, THE UNDERSIGNED : [ 17 ] GRANTS the application for leave to appeal; [ 18 ] GRANTS leave to appeal the decision rendered on November 8, 2021 by the Honourable Michel Pinsonnault, J.S.C.; [ 19 ] ORDERS the Appellants, after having notified a copy to the other parties, to file in the Office of the Court, no later than February 18, 2022, five copies of a single written argument not exceeding 30 pages.

All documents necessary for the adjudication of the appeal (judgment under appeal, pleadings, excerpts from depositions, etc.) shall be attached; [ 20 ] ORDERS both the Respondent and the Mises-en-Cause CCAA Parties, after having notified a copy to the other parties, to file in the Office of the Court, no later than April 1, 2022, five copies of their respective written arguments, neither of which is to exceed 30 pages, along with any supplementary documents; [ 21 ] ALLOWS the Mises-en-Cause Quebec North Shore & Labrador Railway Company and Iron Company of Canada, after having notified a copy to the other parties, to file in the Office of the Court, no later than April 1, 2022, five copies of a single written argument not exceeding 10 pages along with any supplementary documents; [ 22 ] ALLOWS the Mise-en-Cause Employés Salariés Non Syndiqués, after having notified a copy to the other parties, to file in the Office of the Court, no later than April 1, 2022, five copies of a written argument not exceeding 5 pages along with any supplementary documents; [ 23 ] DIRECTS the parties’ attention to

article 376 C.C.P. and

section 55 of the Civil Practice Regulation, which read as follows: 376. The appeal lapses if the appellant does not file a brief or a memorandum within the time limit for filing. The appellate clerk issues a certificate of lapse of appeal, unless an appellate judge is seized of an application for an extension. A respondent or any other party that does not make a timely filing of its brief or memorandum is precluded from filing and cannot be heard at the hearing unless so authorized by the Court of Appeal. 55. Format. The memorandum shall include a title page, a table of contents and be paginated consecutively.

The provisions relating to briefs (including the final requirements) apply to memoranda with the necessary adaptations. [ 24 ] REMINDS the parties about Practice Direction G-3 (latest revision: April 20, 2021) which strongly encourages them to attach a technological version of their brief or memorandum and their book of authorities to each hard copy of those documents.

The technological version must be saved on a USB key and must be in PDF format that allows keyword searches and includes hyperlinks from the table of contents to the brief, memorandum or book of authorities and, where applicable, from the argument to the schedules. If the Word version of their argument is available, parties are also invited to put that version on the USB key. [ 25 ] DEFERS the matter to the Clerk of the Court of Appeal to fix a date for hearing once the appeal is ready to be heard; [ 26 ] THE WHOLE , legal costs to follow. PETER KALICHMAN, J.A.