Executive Summary: Key Legal and Evidentiary Issues

• Whether a CCAA stay order precludes quasi-criminal proceedings brought by a regulatory body against an individual based on their role as an operating mind of affected companies.

• Application of section 11.1 of the CCAA, which exempts regulatory bodies' investigations and proceedings from being affected by CCAA orders except for payment enforcement.

• Whether the reach of section 11.03 director protections extends to individuals characterized as the operating mind rather than formal directors of companies subject to the stay.

• Temporal application of an expired stay order and whether its expiration before trial commencement affected the validity of subsequently commenced quasi-criminal proceedings.

• Distinction between the companies directly subject to CCAA proceedings and affiliated but separate entities for purposes of stay order applicability.

• Discretionary grounds for granting leave to appeal based on merits, significance to practice and action, and potential hindrance to ongoing proceedings.

The background and corporate proceedings

Benoit Laliberté was the operating mind of several companies comprising the TNW group, which conducted telephone and telecommunications services throughout Canada. Between November 25, 2016 and February 1, 2021, four companies within the TNW group were subject to proceedings under the Companies' Creditors Arrangement Act (CCAA). During this period, the British Columbia Supreme Court issued orders that stayed all actions against those four companies and prohibited the commencement of new actions against them. The stay provisions extended protection to directors and officers of the affected companies by preventing proceedings from being commenced or continued against them with respect to claims relating to obligations of the companies where directors or officers were alleged to be liable in their capacity as such for payment or performance of those obligations.

The tax proceedings and conviction

On May 8, 2018, while the CCAA proceedings were ongoing, the Agence du revenu du Québec (Quebec Revenue Agency) commenced quasi-criminal proceedings against Mr. Laliberté under the Tax Administration Act in respect of his activities with four companies affiliated with the TNW group. The proceedings were protracted, with delays attributable to the COVID-19 pandemic, and the trial did not commence until 2024. On December 3, 2024, the Cour du Québec found Mr. Laliberté guilty on all eight counts against him. During those Quebec proceedings, Mr. Laliberté advanced an argument that the quasi-criminal proceedings against him were improperly commenced because they violated the terms of the British Columbia Supreme Court order in the CCAA proceedings. The Cour du Québec dismissed this argument in comprehensive reasons, holding that the CCAA order did not apply to quasi-criminal proceedings.

The collateral British Columbia proceedings

Mr. Laliberté subsequently sought to collaterally attack the Quebec proceedings by filing an application in the British Columbia Supreme Court seeking a number of declarations that would rule that the quasi-criminal proceedings had proceeded in contravention of the CCAA order. Justice Coval, hearing this application, agreed with the Cour du Québec's conclusion that the CCAA order did not apply to penal proceedings and therefore could never have precluded the bringing of quasi-criminal charges against Mr. Laliberté. Justice Coval additionally provided two other reasons for rejecting Mr. Laliberté's application: first, the stay order had long expired before the commencement of Mr. Laliberté's trial, and second, the stay never applied to Mr. Laliberté in respect of his actions as a guiding mind of the four companies named in the penal proceedings, which were not companies affected by the CCAA stay order. The CCAA proceedings had drawn a clear line between the parties to that petition and the other members of the TNW group.

The leave to appeal application and variation application

Mr. Laliberté applied for leave to appeal Justice Coval's decision to the British Columbia Court of Appeal. A chambers judge, Justice Dickson, denied this application for leave. The chambers judge applied the established four-factor test from Goldman, Sachs & Co. v. Sessions, which considers whether the point on appeal is of significance to practice, whether it is of significance to the action itself, whether the appeal is prima facie meritorious or frivolous, and whether the appeal will unduly hinder progress of the action. The judge found that the proposed appeal lacked prima facie merit and based her decision primarily on that factor. She also found that the facts were unique and unlikely to have broad public importance or precedential value to CCAA practice, and noted that the CCAA proceedings had long since concluded, meaning the issues on appeal could have no importance to the underlying proceedings.

The statutory framework and legal analysis

The critical statutory provision in this matter is section 11.1 of the CCAA. This section defines a regulatory body as a person or body with powers, duties or functions relating to the enforcement or administration of an Act of Parliament or of a provincial legislature. Importantly, section 11.1(2) provides that no order made under section 11.02 (which authorizes stay orders) affects a regulatory body's investigation in respect of the debtor company or an action, suit or proceeding taken in respect of the company by or before the regulatory body, other than the enforcement of a payment ordered by the regulatory body or the court. The Québec Revenue Agency clearly qualifies as a regulatory body under this definition. The quasi-criminal proceeding against Mr. Laliberté was a proceeding taken in respect of a company by the regulatory body and thus fell outside the scope of the CCAA stay order except insofar as enforcement of payment was concerned. Since the stay had long expired before any issue of payment enforcement could arise, it simply could not affect the proceedings in Quebec. Furthermore, the CCAA stay order was issued under section 11.02 of the Act, and section 11.03 allowed the court to prohibit the commencement or continuation of actions against a director of a company that relates to the obligations of the company. Mr. Laliberté argued that although he was not formally pursued as a director, he was characterized as the operating mind of the companies and could therefore take advantage of the section 11.03 restriction. However, the Québec Revenue Agency was not prosecuting him as a director of any of the companies subject to the CCAA stay, and the companies involved in the penal proceedings were not the same companies subject to the CCAA order.

The Court of Appeal's decision

The British Columbia Court of Appeal, on Mr. Laliberté's application to vary the denial of leave to appeal, dismissed the application and confirmed the denial of leave. The Court agreed with all three lower authorities—the Cour du Québec, the British Columbia Supreme Court, and the chambers judge—that the CCAA stay order could not have precluded the bringing of quasi-criminal charges against Mr. Laliberté. The Court found no merit whatsoever in his argument that the CCAA order precluded the laying of quasi-criminal charges under the Tax Administration Act, stating that the case was devoid of merit. The Court also found no basis for interfering with Justice Dickson's exercise of discretion in denying leave, noting that the case was of very limited importance, particularly as the CCAA proceedings had terminated long ago. The successful party in this matter was the Québec Revenue Agency, which prevailed on every level of review. No costs or damages were awarded in the Court of Appeal decision, as this was a procedural application concerning leave to appeal rather than a matter addressing compensation or remedies.