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