Alderbridge Way GP Ltd.

Alderbridge Way GP Ltd. (Re), 2022 BCSC 1694

)

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IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Alderbridge Way GP Ltd. (Re),

2

022 BCSC 1694

Date: 20220928

Docket: S222758

Registry: Vancouver

In the Matter of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36,

as amended

-

and -

In the Matter of a Plan of Compromise and Arrangement of 0989705 B.C. Ltd.,

Alderbridge Way GP Ltd. and Alderbridge Way Limited Partnership

Before: The Honourable Justice Fitzpatrick

Reasons for Judgment

In Chambers

Counsel for the Petitioners 0989704 B.C. Ltd., Alderbridge Way GP

Ltd., and Alderbridge Way Limited Partnership:

J.R. Sandrelli

V.L. Cross

P.L. Rubin

M. Gill

Counsel for Romspen Investment Corp.:

Counsel for Bowra Group Inc.:

Counsel for CIBT Education Group Inc., GEC Education City

S.Y. Bhura

(

Richmond), GEC (Richmond) GP Inc.:

Counsel for JV Driver Investments Inc.:

Place and Date of Hearing:

A. Williams

Vancouver, B.C.

August 11 and 19,

2

022

Place and Date of Judgment:

Vancouver, B.C.

September 28,

2

022

INTRODUCTION

[

1]

The petitioners (collectively, “Alderbridge”) apply for an order increasing the

Administration Charge from $300,000 to $655,000, which is focussed on securing payment

of Alderbridge’s outstanding counsel’s fees. In addition, Alderbridge applies for an order

allocating the Administration Charge, as increased, as between Alderbridge’s counsel

(

$455,000) and the Monitor and its counsel ($100,000 each).

[

2] The application is opposed by two major secured creditors, Romspen Investment

Corporation (“Romspen”) and CIBT Education Group Inc. and its related entities (collectively,

CIBT”). Romspen is Alderbridge’s first and largest secured creditor. CIBT is in third position,

“

however, it raises certain potential priority issues that may increase its ranking. Romspen and

CIBT essentially advance the same arguments on this application. I will therefore refer only to

the arguments as being those of Romspen.

BACKGROUND FACTS

[

3]

The underlying facts that inform this application are complex.

Historical Facts re Alderbridge

[

4]

Alderbridge’s main asset is a very large stalled development project in Richmond, BC.

[

5]

In 2018, construction of the development began. In November 2019, Romspen was

granted a first ranking charge, ranking ahead of the second-tier lenders and CIBT’s third

ranking security. Further financing to support the Romspen loan was contemplated but never

materialized.

[

6]

After March 2020, Romspen did not make any further advances to Alderbridge. From

that time forward, Alderbridge made significant efforts to secure new construction financing

and later, conduct a sales process, all from its own resources. In September 2020,

construction halted. By January 2022, efforts to refinance or sell the development assets had

failed.

[

7]

Since mid-2020, throughout the course of Alderbridge’s restructuring efforts, it has

been assisted by its legal counsel, Dentons Canada LLP (“Dentons”).

The Initial Hearing

[

9]

On April 1, 2022, I granted an initial order in favour of Alderbridge pursuant to the

CCAA (the “Initial Order”). My reasons for doing so are indexed at Alderbridge Way GP Ltd.

(

Re), 2022 BCSC 1436 [Initial Reasons].

[

10] At the hearing on April 1, 2022, this Court addressed the usual matters, including

appointing the Monitor, as proposed by Alderbridge.

[

11] The Initial Order provided that the Administration Charge was set at $300,000. The

form of the order in relation to the Charge and the payment of professional fees followed the

usual wording found in this Court’s CCAA Initial Model Order, as follows:

3

1.

The Monitor, counsel to the Monitor, if any, and counsel to the Petitioners shall be paid

their reasonable fees and disbursements, in each case at their standard rates and charges, by

the Petitioners as part of the cost of these proceedings. The Petitioners are hereby authorized

and directed to pay the accounts of the Monitor, counsel to the Monitor and counsel to the

Petitioners on a periodic basis and, in addition, the Petitioners are hereby authorized to pay to

the Monitor, counsel to the Monitor, and counsel to the Petitioners, retainers in the amounts

of $50,000 respectively to be held by them as security for payment of their respective fees and

disbursements outstanding from time to time.

…

3

3. The Monitor, counsel to the Monitor, if any, and counsel to the Petitioners shall be

entitled to the benefit of and are hereby granted a charge (the "Administration Charge") on the

Property, which charge shall not exceed an aggregate amount of $300,000 as security for their

respective fees and disbursements incurred at the standard rates and charges of the Monitor

and such counsel, both before and after the making of this Order which are related to the

Petitioners' restructuring. The Administration Charge shall have the priority set out in

paragraphs 40, 42, and 43 of this Order.

[

Emphasis added.]

12] I accepted that the amount of the Administration Charge was reasonable (Initial

Reasons at para. 9), noting that no stakeholder, including Romspen, objected to that amount.

In addition, the Proposed Monitor stated in its Report dated March 31, 2022 at para. 12.3 that

this amount was appropriate and reasonable given:

…

the scale and complexity of Alderbridge and the CCAA proceedings, the services to be

provided by the beneficiaries of the Administration Charge and the size of the charges

approved in similar CCAA proceedings.

[

Emphasis added.]

13] In the usual fashion, the Initial Order (para. 8(a)) contained a general prohibition that

Alderbridge was not entitled to pay any pre-filing debts, save as authorized by the Court.

However, also consistent with the Model Order, the Initial Order provided that Alderbridge

could pay Dentons’ fees, whether pre- or post-filing, as were “related to the … restructuring”:

5

.

The Petitioners shall be entitled, but not required, to pay the following expenses which

may have been incurred prior to the Order Date:

(

a)

the fees and disbursements of any Assistants [defined in para. 4 to include counsel]

retained by the Petitioners which are related to the Petitioners' restructuring, at their standard

rates and charges, including payment of the fees and disbursements of legal counsel retained

by the Petitioners, whenever and wherever incurred, in respect of:

(

i) these proceedings or any other similar proceedings in other jurisdictions in which the

Petitioners or any subsidiaries or affiliated companies of the Petitioners are domiciled; …

[

Emphasis added.]

14] At the initial hearing, Alderbridge had exhausted its cash resources and Romspen was

not prepared to advance any funds. Accordingly, I approved interim financing and a related

charge of $850,000 (initially estimated at $1 million) in favour of certain corporate entitles

related to Alderbridge (collectively, “Gatland”) (Initial Reasons at para. 10). The Gatland

financing was intended to allow Alderbridge to continue until the comeback hearing in late

April 2022. The Gatland financing and charge was ranked behind the Administration Charge,

the Directors Charge and Romspen’s security, but ahead of the second-tier lender and CIBT.

[

15] The First Report of the Proposed Monitor’s cash flow forecast for the period ending

April 29, 2022 was based on $1 million of financing from Gatland, not $850,000. Note 8 to

the Monitor’s cash flow forecast to late April 2022 projected payment of $555,000 to Dentons,

the Monitor and its counsel based on:

…

projected costs of professional services firms relating to the CCAA Proceedings and include

[

Alderbridge’s] counsel as well as the Monitor and its legal counsel. Payments forecast in

Week 2 and Week 4 of the Cash Flow Forecast represents the payment for retainers and the

payment of professional fees for services rendered during the lead up to the CCAA

Proceedings.

[

Emphasis added.]

[

(

16] At the initial hearing, the general contractor, Metro-Can Construction (AT) Ltd.

“Metro-Can”) specifically raised objections with respect to the large receivable owing to

Dentons and the Monitor’s cash flow: Initial Reasons at para. 20.

[

17] Dentons acknowledged at the hearing that a projected payment of $555,000 would be

used to pay the three $50,000 retainers (that were paid and are still held) and to pay the

Monitor for its costs in advance of the hearing. Counsel advised that the remainder to be

advanced would be to get Dentons “caught up”, although counsel acknowledged that it would

not quite “catch them up”. Counsel acknowledged that Alderbridge would have to find further

financing to advance the CCAA proceedings beyond the comeback hearing.

[

18] In the Initial Reasons, I addressed these issues and agreed that Alderbridge would be

given the authority to pay both the post-filing and pre-filing amounts owing and to be owed to

Dentons. I found that the amounts outstanding to Dentons represented a reasonable amount

expended by Alderbridge toward seeking a solution to their restructuring difficulties, as

follows:

[

12] The significant portion of the interim financing ($555,000) is budgeted in the cash

flow (to April 29, 2022) for payment of professional fees. As noted in para. 9.4(b) of the

Proposed Monitor’s report dated March 31, 2022, that amount is intended to include:

…

professional fees payable to … counsel to [Alderbridge] … Dentons ... and A&M,

representing payments for outstanding invoices for the period leading up to the CCAA filing

and payments for retainers to Dentons, A&M and counsel to the Monitor ….

…

[

20] Metro-Can’s counsel also addresses the amount to be spent through the proposed

interim financing, in particular the large amount to be paid to Dentons. I agree that it is a

large amount. Mr. Sandrelli has advised that the amount relates to the substantial work that

Dentons has done for Alderbridge, not just in the immediate lead-up to the CCAA filing, but

with respect to the undoubted substantial efforts that have been made over at least the last

two years. I have already outlined what those efforts have been. They include the extensive

and complex discussions between Alderbridge and other stakeholders and undertaking the

SISP. They also include all of the myriad of issues that would have arisen in respect of keeping

Alderbridge afloat, while they kept the CCAA option alive, but also explored other options,

including leading to the development agreement that came to pass through the SISP, but

eventually did not complete.

[

(

21] As Mr. Sandrelli notes, it is anticipated in the Court’s model CCAA initial order

Practice Direction-47) that reasonable amounts relating to the period before the filing may be

appropriately paid after the CCAA filing. I am satisfied that that is the situation here with

respect to the amount to be paid to Dentons.

[

Emphasis added.]

19] Romspen supported the CCAA filing and the specific relief granted in the Initial Order.

However, there are nuances to the circumstances that existed at the initial hearing,

particularly from Romspen’s point of view, that bear upon the current issues.

[

20] On April 1, 2022, Romspen’s counsel advised the Court that the CCAA filing, as

supported by Romspen, was the result of a material compromise with Alderbridge that

resulted from difficult negotiations between the parties and a careful balancing of Romspen’s

rights as the first ranking secured creditor. The negotiated aspects of the CCAA filing included

the Monitor having enhanced power to run the sales process (the “SISP”) in order to advance

the proceedings, all of which were reflected in the Initial Order.

[

21] Importantly, part of the negotiated agreement was that the Administration Charge

would be $300,000 and that the financing for the professional costs to be paid after the filing

would come from Gatland’s interim financing, which was to rank behind Romspen’s security.

Dentons expressly acknowledged this point in meeting Metro-Can’s objection to these future

payments to Dentons, when Dentons stated that Romspen would not be prejudiced by any

such payment since it was being financed under the Gatland charge.

The ARIO

[

22] On April 25, 2022, the comeback hearing took place, resulting in the granting of an

amended and restated initial order (the “ARIO”). The ARIO included: an extension of the stay

of proceedings to August 3, 2022; approval of the SISP; replacement of the Monitor who

continued to have the enhanced powers to run the SISP; and, confirmation of the

Administration Charge at $300,000 (essentially the provisions from the Initial Order, as

above).

[

23] Unfortunately, Alderbridge had not been successful in obtaining any further interim

financing, from Gatland or otherwise. Accordingly, Romspen agreed to advance $1.65 million

under a further interim financing charge, which was to rank pari passu with the Gatland

interim financing after Romspen’s main security. As with the Initial Order in relation to the

Gatland interim financing, the ARIO specifically provided that the Romspen interim financing

was to “finance the continuation of the Business and preservation of the Property”.

[

24] At the time of the comeback hearing, professional fees of $402,000 had been paid

against the forecast of $555,000, although the earlier forecast was based on the Gatland

interim loan being $1 million, not $850,000.

[

25] In its Second Report dated April 23, 2022, the Monitor revised the earlier cash flow

forecast. Then, the Monitor projected, to August 2022, payment of professional fees of

955,000. As with the earlier cash flow forecast, Note 8 addressed what payments were

$

intended to be made from that amount:

Restructuring professional fees have been forecast based on projected costs of professional

services firms relating to the CCAA Proceedings and include [Alderbridge’s] legal counsel as

well as the Monitor and its legal counsel, including professional fees for services rendered

during the lead up to the CCAA Proceedings.

[

Emphasis added.]

26] Over the ensuing three months, the parties and the Monitor made substantial efforts to

advance the SISP, including extending the applicable deadlines numerous times. Nevertheless,

by early August 2022, no compliant bid was received.

The SARIO

[

27] The next hearing took place on August 11, 2022 and represented a “sea change” of sorts

in respect of how this CCAA proceeding would continue.

[

28] On that date, Romspen applied for various relief, resulting in the granting of a second

amended and restated initial order (the “SARIO”) on an uncontested basis. The SARIO

included: an extension of the stay to October 2022; a further expansion of the Monitor’s

powers to assume control of the development in place of Alderbridge and continue the SISP;

and, approval of a second interim financing by Romspen of $2.5 million, to rank behind the

Administration Charge and the Directors Charge and ahead of Romspen’s main security.

[

29] In the SARIO, the Administration Charge was again confirmed at $300,000 under the

original provisions in the Initial Order, but with the added proviso that Alderbridge’s counsel

would only have the benefit of the Administration Charge for its reasonable fees and

disbursements incurred prior to August 11, 2022, the date that the SARIO was made.

[

30] In advance of the hearing to consider the SARIO, Alderbridge filed this application.

31] In the Monitor’s Fourth Report dated August 9, 2022, the Monitor reported that to the

end of July 2022, forecasted professional fees of $1.17 million were actually paid in the

amount of $1 million, leaving a shortfall of $171,000. By this time, Romspen had not advanced

all of the amounts initially projected under its first interim financing ($1.65 million) in that

$

1.377 million had been advanced.

[

32] The Monitor’s Fourth Report also reported that, of the $562,000 that had been

forecasted for Dentons from April–July 2022, $427,621 had been paid (including the $50,000

retainer), leaving a shortfall of $134,379.

Current Status of Dentons Accounts

[

33] The relevant figures with respect to Dentons’ accounts, both pre- and post-filing, are as

follows:

a)

b)

$621,906 for pre-filing fees (August 2021-March 2022); and

$227,228 for post-filing fees (April 2022-July 2022).

[

34] Alderbridge and Romspen analyze the amounts outstanding to Dentons in different

and opposite ways, arising from the manner in which Dentons has allocated the amount paid

during the CCAA proceedings ($427,621):

a)

position that its post-filing accounts (less the retainer) remain unpaid in the amount of

454,348 (hence the amount of the requested increase in the Administration Charge); and

Dentons applied all post-filing payments to its earliest accounts, and now takes the

$

b)

Romspen states that Dentons has been paid all of its post-filing accounts ($227,228)

and approximately $200,000 toward its pre-filing fees.

CCAA AND RELATED JURISPRUDENCE

[

35] The parties agree that the Court has jurisdiction to grant the relief sought.

[

36] The Court will typically exercise its general discretion under s. 11 of the CCAA in

respect of the conduct of the affairs of the debtor, including authorization to make payments

to certain persons. As is well-known, the broad discretion afforded to the Court is such that

pre-filing amount may be authorized, as are considered appropriate in the circumstances.

[

37] Section 11.7(1) of the CCAA mandates that a monitor be appointed to provide oversight

throughout the proceedings. Therefore, there is considerable focus at the initial hearing on

who the monitor will be and how it and its counsel will be paid in respect of the cost of their

services. In addition, the debtor will invariably have and need counsel in the course of the

proceedings and questions may arise, as they did here, as to how that professional firm will be

paid. The uncertainty that is inherent in CCAA proceedings will raise issues as to how to

protect these professionals from any untoward exposure of non-payment.

[

38] CCAA courts have been attuned to these issues and addressed them on a regular basis

even before the authority to do so was enshrined in the CCAA.

[

39] As of 2009, the CCAA provides express authority and discretion to grant a charge in

favour of professionals to secure their legal fees and disbursements, as is appropriate:

1

1.52(1) On notice to the secured creditors who are likely to be affected by the security or

charge, the court may make an order declaring that all or part of the property of a debtor

company is subject to a security or charge — in an amount that the court considers

appropriate — in respect of the fees and expenses of

(

a) the monitor, including the fees and expenses of any … legal or other experts engaged by

the monitor in the performance of its duties;

(

b)

any … legal … experts engaged by the company for the purpose of proceedings under

this Act; and

…

(

2) The court may order that the security or charge rank in priority over the claim of any

secured creditor of the company.

[

40] Alderbridge refers to the policy considerations underlying the protections that are

usually afforded to the professionals in CCAA proceedings, including the granting of a charge.

[

41] In Timminco Limited (Re), 2012 ONSC 506, Justice Morawetz, as he then was, stated:

66] In my view, in the absence of the court granting the requested super priority and

protection, the objectives of the CCAA would be frustrated. It is not reasonable to expect that

professionals will take the risk of not being paid for their services, and that directors and

officers will remain if placed in a compromised position should the Timminco Entities

continue CCAA without the requested protection. The outcome of the failure to provide these

respective groups with the requested protection would, in my view, result in the overwhelming

likelihood that the CCAA proceedings would come to an abrupt halt, followed, in all likelihood,

by bankruptcy proceedings.

[

3

42] Timminco was referred to recently in Canada v. Canada North Group Inc., 2021 SCC

0 [Canada North Group], where Justice Côtė endorsed the protections that are granted to

professionals in CCAA proceedings:

[

30] Super-priority charges in favour of the monitor, financiers and other professionals are

required to derive the most value for the stakeholders. They are beneficial to all creditors …

The fact that they require super priority is just a part of “[t]he harsh reality . . . that lending is

governed by the commercial imperatives of the lenders” (Indalex, at para. 59). It does not

make commercial sense to act when there is a high level of risk involved. For a monitor and

financiers to put themselves at risk to restructure and develop assets, only to later discover

that a deemed trust supersedes all claims, smacks of unfairness. …

[

31] It is therefore clear that, in general, courts supervising a CCAA reorganization have the

authority to order super-priority charges to facilitate the restructuring process. …

[

43] At any initial hearing, the court has a suite of options available to it to ensure payment

to the professionals for costs in the proceeding, as may be appropriate. The court can order

that retainers be paid; that ongoing payments be made as invoiced; and/or that a charge be

granted. All of those protections were employed here, as evidenced by the Initial Order

(

quoted above) and later, the ARIO and SARIO.

[

44] A consideration of these protections at the time of the initial hearing is typically

forward-focussed, as the court must gauge the costs that might be expected in the course of

the proceedings. Hence, para. 31 of the Initial Order refers to the “cost of these proceedings”

and para. 33 refers to a charge for costs (both pre and post filing) that are “related to the …

restructuring”. This latter phrase is intended to allow some flexibility in respect of the

payment of costs that will invariably arise prior to the filing date but are reasonably connected

to the restructuring proceedings.

[

45] The non-exhaustive factors that courts may consider in approving or increasing an

administrative charge and setting the amount were set out in Canwest Publishing Inc. (Re),

010 ONSC 222 [Canwest Publishing] at para. 54, as adopted by this Court in Walter Energy

2

Canada Holdings Inc. (Re), 2016 BCSC 107 at para. 42, and Mountain Equipment Co-

Operative (Re), 2020 BCSC 2037 at para. 58:

(

[

a)

b)

c)

d)

e)

f)

the size and complexity of the businesses being restructured;

the proposed role of the beneficiaries of the charge;

whether there is an unwarranted duplication of roles;

whether the quantum of the proposed charge appears to be fair and reasonable;

the position of the secured creditors likely to be affected by the charge; and

the position of the Monitor.

46] Many of the Canwest Publishing factors are, inherently, forward-looking. These refer

to the proposed role of the beneficiaries; the role to be undertaken by the professionals; and,

how secured creditors will likely be affected. As such, these factors are typically considered in

the early days of the proceedings, when the amount of the Administration Charge is set, either

at the initial hearing or the comeback hearing. Case authorities cited by Alderbridge are

representative of this scenario: Canwest Publishing at paras. 52–55; Pacific Shores Resort &

Spa Ltd. (Re), 2011 BCSC 1775 at paras. 2 and 59; Laurentian University of Sudbury (Re),

2

021 ONSC 659 at paras. 48-53 (and the later ARIO that was granted in that proceeding at

Laurentian University of Sudbury, 2021 ONSC 3545 at para. 8).

[

47] Stakeholders, but particularly secured creditors, who will normally rank behind the

Administration Charge, will often consider the amount of the Administration Charge and

some may, as Romspen did here, specifically negotiate the amount.

[

48] It is important to note, however, that the Administration Charge is intended, for the

most part, to simply secure the professional fees, rather than being the primary source for

payment (as is any retainer). Just as the Orders granted in this proceeding provide,

professional fees are generally intended to be paid on an ongoing basis and in the ordinary

course, usually from the cash on hand and any approved interim funding.

[

49] In addition, the amount of the Administration Charge is an estimate only. CCAA

proceedings are inherently unpredictable and intentions/forecasts to pay professionals may

not always be realized. The professional firms that work in the insolvency arena are highly

sophisticated. It is incumbent upon them to ensure that they are being paid as intended. The

Monitor will typically report on the status of the payment, or non-payment, of professional

fees in advance of any later hearings. That said, if the risk to the professionals who are

intended to be paid is increasing, particularly to the point where it may exceed the settled

Administration Charge, it is incumbent on those professionals to address the matter within a

reasonable period of time to avoid any difficulties. By addressing the matter, I would include

alerting other stakeholders who may be affected and possibly applying to increase the charge,

although I appreciate that cost considerations may come into play in respect of any court

application to do so and its timing.

[

(

50] Unfortunately, in the past, there have been instances where the professional fees

including as incurred by the monitor) were not paid and the claimed fees exceeded the

charge. This puts the stakeholders and the Court in a difficult situation, where prior

expectations (whether reasonable or not) can be challenged in light of what may be changed

circumstances for the stakeholders. It can also be the case that any dispute concerning a

professional’s claim to further fees and/or a charge puts the feasibility of the entire proceeding

at risk, as was discussed in Timminco.

[

51] All of these factors point to the fact that the professionals in CCAA proceedings must be

proactive in their approach to how and when they are to be paid. Such professionals must also

be proactive in addressing the ongoing viability of the protections that were put in place for

their benefit at the outset.

[

52] I accept of course that administration charges can and sometimes are increased in the

midst of CCAA proceedings, as may be appropriate. In that event, the Canwest Publishing

factors are a helpful guide as to whether an increase is warranted. As stated, the assessment

requires an estimate of what amount is appropriate to secure the anticipated fees. Each case

will depend on the specific facts and circumstances, both historically and what might be

expected into the future.

[

53] The only case cited on this application concerning an increase of an administration

charge which was refused is Boutique Euphoria inc. (Arrangement relatif à), 2007 QCCS 7127

BE Admin Charge]. The judgment is brief and must be read together with the concurrent

[

decision of Justice Gascon, as he then was, in Boutique Euphoria inc., 2007 QCCS 7129 [BE

Stalking Horse].

[

54] In BE Stalking Horse, Gascon J. refused to approve the stalking horse bid. There, the

court described that the CCAA proceedings were only in its early days. The initial order had

been granted only about 30 days earlier when the outcome of the proceeding was uncertain

and was possibly not just a liquidation. However, when this decision was rendered, the likely

outcome of the proceeding had definitely turned for the worse. Justice Gascon described that

the likely outcome was “not very positive” and that a liquidation was all but assured. It

appeared that the likely recovery from the assets was substantially less than even what the

secured creditors were owed (paras. 8–16 and 38).

[

55] In BE Admin Charge at para. 3, Gascon J. renewed the initial order for a short time to

allow the stakeholders to reassess the situation after his decision in BE Stalking Horse. The

court also addressed and refused a request to increase the administration charge by $100,000:

[

5]

The following reasons lead the Court to so conclude:

a)

In the Initial Order, the Court precisely reduced the Administration Charge from

$

300,000 to $200,000. There is no reason to review that decision thirty days later;

b)

c)

The total recovery will likely not exceed 1.2 to 1.5 million dollars, at best;

Because of that, any increase in the Administration Charge directly affects some

secured creditors;

d)

At this moment, it remains to be seen whether there indeed still exists a reasonable

prospect of a successful restructuring under the CCAA.

[

6]

In such a context, the Court considers that it is not justified to make use of the

extraordinary measure of the priority charge to increase the extent of the Administration

Charge.

[

56] I consider BE Admin Charge as an example where changed circumstances in a CCAA

proceeding may be relevant as to whether the court considers an increase in the

administration charge to be appropriate, particularly where different elements of prejudice to

the secured creditors may have arisen or become more apparent by that time.

[

57] With these general comments in mind, I now turn to a consideration of the specific and

unique circumstances which inform the issue before me.

DISCUSSION

[

58] Alderbridge’s sought-after increase in the Administration Charge of $455,000 is linked

to unpaid amounts owing to Dentons of $454,348, identified above.

[

59] Romspen takes the position that it would be inappropriate to elevate Dentons’

outstanding and unsecured pre-filing fees over the claims of the other stakeholders, and as

such, no additional fees should be paid to Dentons by securing them under the Administration

Charge.

[

60] The Monitor, in its Fourth Report, takes no position on this application. However, the

Monitor states that, if the Administration Charge is to be increased as proposed, $200,000

should be allocated to it and its counsel jointly. The Monitor confirms the payments to

Dentons in respect of Romspen’s calculations that Dentons has been paid the amount of its

post-filing accounts, as well as approximately $200,000, or what the Monitor considered were

the reasonable pre-filing fees. This is demonstrated in the reports of the Proposed Monitor

and the Monitor, including the cash flow forecasts and the Notes to those forecasts. In March

2

022, Dentons and the first Monitor were paid for pre-filing work, approximately $185,000

and $60,000, respectively.

[

61] It is helpful to frame the discussion and Alderbridge and Romspen’s respective

arguments around the relevant Canwest Publishing factors.

Size and Complexity of Alderbridge

[

62] At the initial hearing, I accepted that this restructuring was a complex one: Initial

Reasons at paras. 18–19.

[

63] Development projects that are not yet complete invariably involve some complexity

and this one is no different. The scope of the nascent project is very large, proposing seven

towers spanning a city block; at present, secured obligations stand at approximately

$

346 million, with Romspen owed $185 million of that amount; leaving aside the substantial

creditors, many other stakeholders are involved, including the City of Richmond and pre-sale

purchasers; and finally, the financing necessary to move the project forward will necessarily be

large and complex.

[

64] There is no doubt that Alderbridge has made significant efforts to advance a

restructuring, with the assistance of Dentons, in these complex circumstances. This factor

weighed in favour of my conclusion at the initial hearing that Dentons should continue to be

paid even after the filing with respect to its pre-filing fees, where the pre-filing fees are related

to the restructuring.

[

65] However, I agree with Romspen that the size and complexity of the matter has not

changed in respect of the anticipated involvement of the CCAA professionals in this

proceeding going forward. That is, the assistance required of Dentons in advancing the

restructuring, and the protections that are therefore appropriate in that respect, remain the

same. If anything, the assistance required of Dentons has been lessened since the SARIO now

provides that Dentons no longer has a claim to the Administration Charge in respect of its fees

incurred after August 11, 2022.

[

66] In my view, this factor is neutral in terms of whether the Administration Charge

should be increased.

Proposed Role of Dentons / Duplication of Roles

[

67] As I expressed in the Initial Reasons, I accept that Dentons’ services throughout its

retainer have been toward assisting Alderbridge to advance its restructuring efforts.

Alderbridge’s efforts were well documented in the evidence filed in support of the initial

hearing. The evidence of Dentons’ specific involvement in those efforts has been recently

supplemented for this application beyond counsel’s earlier submissions.

[

68] Alderbridge and Dentons’ assertion respecting their efforts and services is undisputed

on this application, including by Romspen. I also agree that Dentons’ efforts have been toward

benefitting all stakeholders, including Romspen. That those efforts were not successful prior

to the CCAA filing and were not successful to August 2022 is not relevant to this issue. The

prior involvement and efforts of Dentons informed my conclusion at the initial hearing that

Alderbridge should be allowed to pay Dentons in the course of this CCAA proceeding,

including with respect to its reasonable pre-filing fees.

[

69] There is also no dispute concerning Dentons’ involvement in the CCAA proceeding in

terms of their role and the benefits derived from their services. Following the CCAA filing,

Dentons has received payments equal to the value of its post-filing services, together with

$

200,000 toward its pre-filing amount. Dentons has performed its role in these proceedings,

just as was predicted at that time. Nothing has changed in that respect. As such, no issues

arise with respect to advancing the policy objectives, discussed in Timminco and Canada

North Group, in terms of protecting Dentons’ as a professional while it was engaged in the

course of this CCAA proceeding.

[

70] However, all of these circumstances (both in the past and as projected) informed the

Court’s decision to set the Administration Charge at $300,000 at the time of the initial

hearing.

[

71] Again, I would emphasize that the proposed role of Dentons is a forward-looking

factor that will typically inform the Court’s decision on the amount of the Administration

Charge. What Alderbridge and Dentons really seek to do is to retroactively increase the

Administration Charge effective to the time of the initial hearing to secure all of Dentons’

pre-filing fees, after now realizing that the course of the restructuring will not result in those

fees being paid. I will address that matter below.

[

72] In conclusion, this factor does not support an increase in the Administration Charge.

Dentons has no further involvement in that Charge for its post-August 11, 2022 fees and

therefore, there is no duplication of roles that might be considered in terms of increasing the

amount of the Administration Charge.

Quantum of the Proposed Charge

[

73] Again, no question arises with respect to the quantum of fees that Dentons has

presented, including with respect to the pre-filing amounts.

[

74] Alderbridge asserts that the proposed increase in the Administration Charge will not

have a material effect on Romspen or the other secured creditors. It says that CIBT is unlikely

to recover any amount.

[

“

75] With respect to Romspen, Alderbridge says that the $355,000 increase will be

immaterial” to Romspen, as representing less than 0.25% of the amount owed under its

security. It further argues that, assuming that the Monitor and its counsel are paid in the

ordinary course, and Dentons has full access to the increase in the Administration Charge, the

practical effect is an erosion of Romspen’s security by $200,000, or 0.10% of Romspen’s

loans.

[

76] I have difficulty accepting that Alderbridge and Dentons are in a position to assert the

materiality of the proposed increase on the part of Romspen.

[

77] Looked at in isolation, the $355,000 increase is a significant sum. It may seem less

significant in relation to Romspen’s overall indebtedness, but I am not convinced that is the

appropriate approach.

[

78] Clearly, Romspen considers the amount significant. It would not have mounted

opposition to this application with the attendant costs without having come to that conclusion.

Indeed, in light of the course of this CCAA proceeding, particularly the disappointing results of

the SISP, the fortunes of Romspen have considerably dimmed. It is apparent from the

financial information before the Court that there is even some question now as to whether

Romspen will be paid all of its debt, let alone any payment to the other secured creditors.

[

79] In BE Admin Charge at para. 5, the court explained that the downgrading of the

creditor’s fortunes factored into their decision to refuse an increase to the administration

charge. This is analogous to the case at bar. Just as here, that reversal of fortunes did not arise

from any actions or decisions of the debtor, and I agree that the failure of the SISP cannot be

laid at the feet of Alderbridge or Dentons. Nevertheless, it remains a reality of this

restructuring that the risk of non-payment to the secured creditors, including Romspen, has

materially increased.

[

80] This factor does not support an increase in the Administration Charge.

Position of Romspen

[

81] Alderbridge submits that it is appropriate to “revisit” the quantum of the

Administration Charge.

[

82] Alderbridge places great emphasis on its and Dentons’ “understanding” and intentions

at the time of the initial hearing that Dentons’ outstanding pre-filing accounts would be paid.

They assert that Dentons has not been paid “as anticipated, despite an order of this Court

requiring such payment”, said to be supported by my comments in the Initial Reasons. They

refer to their “reasonable expectations” that Dentons would be paid, based on the cashflow,

the terms of the Initial Order and the statements by the Court in the Initial Reasons.

[

83] With respect, Alderbridge has read more into the Initial Order and the Initial Reasons

than are warranted. The Initial Order did anticipate that Dentons would be paid after the

filing but it did not require that any payments be made. Paragraph 5 provides that Alderbridge

was “entitled, but not required” to pay these amounts. Paragraph 31 similarly authorizes

payment of Dentons’ fees only “as part of the costs of these proceedings”. Similarly, although

the Initial Reasons are not the controlling provisions (the Initial Order is). At para. 21 of the

Initial Reasons, I accepted that Alderbridge should be authorized to make these payments

after the filing when I stated:

…

reasonable amounts relating to the period before the filing may be appropriately paid after

the CCAA filing.

[

Emphasis added.]

84] The Initial Order did not elevate or secure the payment of Dentons’ pre-filing amounts

in any fashion. The authorized payments to Dentons after the filing were in no different

position than any other post-filing payments that might have become owing, or such pre-filing

payments as were authorized by the Court to be paid, but not secured.

[

85] A review of the April 1, 2022 transcript and the exchanges between Alderbridge’s

counsel and the Court at the time of the initial hearing supports what was eventually granted

in the Initial Order. At that time, counsel advised that payment for professional fees to the

comeback hearing was to come from the Gatland interim financing (then estimated at

$

1 million) to both pay ongoing amounts and to get Dentons “caught up”. Dentons also

confirmed what the math revealed—that the estimated payment to professionals under the

cash flow ($555,000), after payment of the retainers ($150,000), would not be sufficient to

pay Dentons, the Monitor and its counsel for their costs to the comeback hearing (including

the “lead-up costs”) and also, pay Dentons’s outstanding accounts. Significantly, Alderbridge

agreed that the funds for these costs were to come from the creditors ranking behind

Romspen.

[

86] At bottom, the Court allowed Alderbridge to pay Dentons’ pre-filing amount, but did

not require such payment, let alone payment of the full amount of Dentons’ accounts. These

payments were allowed, as requested by Alderbridge, and not contested by Romspen, in the

expectation that a successful restructuring would materialize. However, just as with other

post-filing obligations, no security was granted in the Initial Order (or the later ARIO and

SARIO) with respect to the pre-filing legal fees.

[

87] Alderbridge and Dentons also refer to the cash flow forecasts, discussed above. In its

Fourth Report, the Monitor reports that Dentons has received $134,379 less than forecast, but

Alderbridge asserts that the shortfall is actually around $300,000 since the Monitor revised

the initial forecast in its Third Report dated July 20, 2022 to reduce the amount of

professional fees to be paid.

[

88] Alderbridge refers to their “reasonable expectations” that the pre-filing amounts would

be paid. It alleges that Romspen advanced $223,000 less than forecast under its initial interim

financing. Alderbridge says that it appears that Romspen:

…

intentionally took steps to cause [Alderbridge] to short payment to Dentons despite the

reasonable expectations of the parties on April 1, 2022 and April 25, 2022.

[

89] Alderbridge also states that it “understood” that the Monitor was unable or unwilling

to facilitate payments of the pre-filing amounts to Dentons given Romspen’s position and/or

Romspen not providing the required forecasted advances under the Romspen interim

financing.

[

90] I cannot discern any basis upon which Alderbridge can rely on the various cash flow

forecasts as somehow guaranteeing payment of the pre-filing fees. Cash flow forecasts are just

that—forecasts. They are not scripts written in stone as to future disbursements that the

debtor must pay.

[

91] Cash flow forecasts are prepared based on expectations as to what will occur in the

future, depending on the course of the restructuring. In fact, here the Monitor’s various

reports specifically noted in the cash flow forecasts, at Note 8, that the amounts were based on

what was estimated as the professional costs “relating” to the CCAA proceedings and what was

termed the “lead up” costs. This is akin to how both Romspen and the Monitor view the

amounts paid to Dentons after the filing—namely, that this was equal to the amount of

Dentons’ post-filing fees and what was considered a reasonable amount for the preparation of

the CCAA filing just before April 2022 (about $200,000).

[

92] In addition, there is no evidence that Romspen undertook a specific campaign to

withhold advances under its first interim financing facility in order to shortchange payments

to Dentons. Advances under such facilities are made as circumstances require, given the

obvious need to reduce financing costs if the cash is not needed. Even if those amounts had

been advanced, there is nothing to indicate that they were guaranteed to land in the pockets of

Dentons.

[

93] In fact, under the ARIO, Alderbridge was still fully in control of its finances, subject to

the Monitor’s oversight. At no point did Alderbridge make any requests for advances from

Romspen, which Romspen refused, as this would presumably constitute a breach of the

funding agreement. Similarly, the Monitor does not report that this occurred. When the ARIO

was granted, no one, let alone Alderbridge, sought to increase the Administration Charge,

particularly when the Monitor reported that payment of professional fees was $153,000 less

than forecasted only weeks earlier. Alderbridge did not raise the matter of non-payment of its

pre-filing fees (or the forecasted fees) at that time.

[

94] In that event, I cannot see any basis for Alderbridge to assert that the Initial Order

and/or the cash flow forecasts provided any reasonable basis for it assuming that these pre-

filing amounts would be paid.

[

95] I also do not consider the fact of non-payment to Dentons after the filing as

representing a change in the factual matrix that would support an increase in the

Administration Charge. I agree the factual matrix has changed in respect of the overall

prospects for a restructuring; however, with respect to the possibility that Dentons’ fees will be

paid arising from this CCAA restructuring, nothing has changed. It always was uncertain

whether Dentons would be “caught up” for its pre-filing fees.

[

96] At the initial hearing, Alderbridge specifically sought and obtained the Administration

Charge in the amount of $300,000. At that time, Dentons’ was owed approximately $575,000.

If Dentons had sought to secure payment of this amount through the Administration Charge,

then I no have no doubt that the initial hearing would have been quite different. I also strongly

suspect that Romspen would have strongly opposed that relief and threatened a receivership,

based on Alderbridge’s consent to a receivership.

[

97] My views are consonant with Romspen’s position on this application. As Romspen’s

counsel submits, the terms of the CCAA filing were the result of a careful negotiation and

compromise between Alderbridge and Romspen. The $300,000 limit of the Administration

Charge was carefully negotiated in the context of allowing Alderbridge some further time to

sort out a restructuring within this CCAA proceeding, which would hopefully fully repay

Romspen. Failing agreement, a receivership would inevitably have resulted, in which case

there is no doubt that Dentons would not have been paid from the assets for its pre-filing fees.

Further, as agreed, the financing of the professional fees to the comeback hearing were on the

account of Gatland, not Romspen. The later Romspen interim financing was only put in place

because Alderbridge could not secure the next tranche that was needed to continue the

proceedings.

[

98] Alderbridge does not dispute that this was the backdrop to the granting of the Initial

Order.

[

99] I agree with Romspen that it reasonably expected that its exposure under the

Administration Charge would be only $300,000, unless it otherwise agreed.

[

100] In this context, I consider Alderbridge’s attempt to “revisit” the amount of the

Administration Charge to secure Dentons’ pre-filing fees to be unfair to Romspen and

unreasonable in the circumstances. At bottom, Alderbridge seeks to retroactively change key

aspects of the earlier agreement of the parties in terms of the amount of the Administration

Charge, which would unjustly prejudice Romspen.

[

101] I agree with Romspen that this case presents a unique set of circumstances in which to

consider an increase to the Administration Charge in that, viewed from a certain angle, that

increase is sought to secure pre-filing amounts still owing to Dentons. I acknowledge that

Dentons was entitled to apply the post-filing payments to its earlier invoices. However, I agree

with Romspen’s analysis as to how the amount paid to Dentons during the CCAA proceedings

(

$427,621) should be considered. That is, Dentons has been paid all of its post-filing accounts,

and approximately $200,000 of its pre-filing fees. Dentons’ allocation of amounts paid does

not change my view of the matter, particularly in terms of assessing Dentons’ involvement in

this proceeding, the post-filing payments it has received in this proceeding, and in light of the

CCAA policy objectives that I referred to above.

[

102] Dentons was and is entitled to the protections that were put in place under the Orders

granted in this proceeding. However, in essence, Alderbridge now seeks a retroactive

guarantee of the payment of the pre-filing fees at the expense of Romspen, which is neither

fair nor reasonable.

CONCLUSION

[

103] I conclude that it is inappropriate to increase the Administration Charge, as requested.

[

104] In the alternative, Alderbridge seeks an order that the entire Administration Charge be

allocated to Dentons. I also decline to grant that relief. There is no basis upon which to

suppose that Romspen will purposefully withhold ongoing payments to the Monitor and its

counsel so as to soak up the entire Administration Charge amount (assuming, for the sake of

argument, that the Monitor would claim priority to the entire Administration Charge). I

expect that the Monitor will report from time to time on the status of it and its counsel’s fees

and Alderbridge will be provided copies of those reports. Any concerns that arise may be

brought to the attention of the Court.

[

105] I appreciate that Alderbridge and Dentons will be disappointed by this result. However,

Dentons is a sophisticated law firm who is well able to assess whether to continue with a

client’s retainer without current payments or without adequate protections for payment. The

fact that payment for Dentons did not materialize through what was hoped to be a successful

CCAA restructuring is but one part of the story.

[

106] The application is dismissed.

Fitzpatrick J.”

“