On a motion by a major contingent creditor to set aside an Initial Order under the CCAA, the court held that the applicant corporation, whose only asset was its partnership interest in an insolvent accounting partnership facing massive legacy negligence claims, was insolvent when contingent liabilities and defence costs were properly considered.
The court declined to deny CCAA relief based on allegations about historical litigation misconduct, holding that the relevant good faith inquiry concerns conduct within the CCAA proceeding itself.
The stay was properly extended to the partnership and its insurers because their affairs were inextricably intertwined with the debtor and a global resolution of the Castor litigation would be significantly impaired without that protection.
The court also upheld the creditors’ committee and CLCA’s ability to fund its reasonable legal fees as part of the negotiated restructuring framework.
