Henenghaixin Corp v Long Run Exploration Ltd
Henenghaixin Corp.
Law Firm / Organization
Field LLP
Long Run Exploration Ltd.
Law Firm / Organization
Dentons Canada LLP
Calgary Sinoenergy Investment Corp.
Law Firm / Organization
Dentons Canada LLP
FTI Consulting Canada
Law Firm / Organization
Torys LLP
China Construction Bank Toronto Branch
Law Firm / Organization
Blake, Cassels & Graydon LLP
Lawyer(s)

Kelly J. Bourassa

Overview

Henenghaixin Corp (HCorp) sought leave to appeal a decision under the Companies’ Creditors Arrangement Act (CCAA) that approved a stalking horse bid and a Reverse Vesting Order (RVO) for Long Run Exploration Ltd. The transaction allowed Long Run to continue operating under new ownership, transferring certain liabilities to a creditor trust that was unlikely to provide recovery.

HCorp claimed a proprietary constructive trust over Long Run’s assets, alleging fraudulent misappropriation of $44 million. It sought to have its claim designated as a retained liability, preserving adjudication rights. The CCAA justice rejected this request and approved the RVO.

CCAA Justice’s Decision

The court applied Century Services Inc v Canada and Harte Gold Corp (Re), emphasizing:

  • The necessity of the RVO due to regulatory constraints.
  • The greater benefit of the RVO over bankruptcy for stakeholders.
  • The zero recovery for some creditors resulted from insolvency, not the RVO.
  • The stalking horse bid was the only viable option to maintain Long Run as a going concern.

HCorp was required to prove its claim on a balance of probabilities. The court found the evidence insufficient and ruled that HCorp’s claim did not warrant constructive trust.

Denial of Leave to Appeal

The Court of Appeal held:

  • The CCAA justice correctly applied the law and assessed the evidence properly.
  • No error in principle or legal significance justified an appeal.
  • Delay could jeopardize the transaction and impact stakeholders.

Conclusion

The application for leave to appeal was dismissed. The court did not grant any monetary award, damages, or costs

Court of Appeal of Alberta
2401-0341AC
Corporate & commercial law
Respondent