In a proceeding under the Companies’ Creditors Arrangement Act (“CCAA”), a judge has discretionary powers to, among other things, order debtor companies into bankruptcy and thereby resolve priority disputes. What should be the standard of review of such discretionary decisions? Historically, the standard has been high.
In its August 7, 2015 decision in Grant Forest Products Inc. v. The Toronto-Dominion Bank, the Ontario Court of Appeal held that “appellate intervention is justified only if the CCAA judge erred in principle or exercised his or her discretion unreasonably”. In doing so, the Court distinguished and questioned the correctness of what the Superintendent of Financial Services (the “Superintendent”) submitted was conflicting precedent from the Alberta Court of Appeal.
The Background Facts
This CCAA proceeding began when a related group of companies applied for relief from their creditors. The first lien lenders recovered all of the debts owed to them due to the companies selling all of their assets. However, there were not sufficient remaining assets to pay out the second lien lenders in full, while also meeting obligations owed to pension claimants.
After all the assets were sold, the CCAA judge ordered the remaining debtor companies into bankruptcy and, in so doing, resolved the priority dispute between the pension claimants and the second lien holder in favour of the second lien holder. The Superintendent appealed that order.
The Standard of Review
Justice Gillese, on behalf of a unanimous Court, addressed the standard of review issue as follows:
 The Superintendent submits that the standard of review of a decision made under the CCAA is correctness with respect to errors of law, and palpable and overriding error with respect to the exercise of discretion or findings of fact. As authority for this submission, the Superintendent relies on Resurgence Asset Management LLC v. Canadian Airlines Corporation, 2000 ABCA 149, 261 A.R. 120, at para. 29.
 I would not accept this submission for two reasons.
 First, in articulating this standard of review, Resurgence purported to follow UTI Energy Corp. v. Fracmaster Ltd., 1999 ABCA 178, 244 A.R. 93. However, UTI does not set out the standard of review in the terms expressed by Resurgence. At para. 3 of UTI, the Alberta Court of Appeal states that discretionary decisions made under the CCAA “are owed considerable deference” and appellate courts should intervene only if the CCAA judge “acted unreasonably, erred in principle, or made a manifest error”.
 Second, the applicable standard of review has been established by two decisions of this court: Re Air Canada (2003), 66 O.R. (3d) 257 and Re Ivaco Inc. (2006), 83 O.R. (3d) 108. In Air Canada, at para. 25, this court states that deference is owed to discretionary decisions of the CCAA judge. In Ivaco, at para. 71, this court reiterated that point and added that appellate intervention is justified only if the CCAA judge erred in principle or exercised his or her discretion unreasonably.
 The decision to lift the stay and order the Remaining Applicants into bankruptcy was a discretionary decision: Ivaco, at para. 70. Therefore, the question becomes, did the CCAA judge err in principle or exercise his discretion unreasonably in so doing?
The Court went on to dismiss the Superintendent’s appeal.