Clifton P. Prophet

This decision concerns three motions to approve class counsel fees in the context of insolvency proceedings under the Companies' Creditors Arrangement Act involving three major tobacco companies.

The court approved the Quebec Class Action Plaintiffs' counsel fee request of approximately $901 million (representing 22% of the $4.119 billion allocated to the Quebec class members), the Knight Class Counsel fee request of $5 million plus disbursements, and the Tobacco Producers' counsel fee request of $3.75 million.

The court found that the fees were fair and reasonable given the exceptional risks assumed, the unprecedented outcome achieved, and the unique circumstances of the case.

A $50 million reserve was established from the Quebec counsel fees to protect against any pro-rata reduction in class member compensation due to actual take-up rates or other factors.

The decision addresses motions regarding the appointment of representative counsel for current and former employees and retirees of Hudson’s Bay Company ULC and related entities in ongoing Companies’ Creditors Arrangement Act (CCAA) proceedings.

The Court declined to appoint any of the nominated law firms as representative counsel at this stage, instead appointing the Honourable Herman Wilton-Siegel as an independent third party to evaluate proposals and make a recommendation.

The Court also approved amendments to the Sale and Investment Solicitation Process (SISP) to remove the company’s art and artifact collection from the SISP and to appoint Heffel Gallery Limited to conduct a separate auction for the collection, subject to further court approval of procedures.

The reasons review the legal framework for appointing representative counsel and the importance of balancing stakeholder interests in complex insolvency proceedings.

This decision sanctions the CCAA Plans of Imperial Tobacco Canada Limited, Imperial Tobacco Company Limited, JTI-Macdonald Corp., and Rothmans, Benson & Hedges Inc., effecting a global settlement of all tobacco-related claims in Canada.

The court reviews the structure, allocation, and fairness of the plans, including the creation of a $1 billion Cy-près Foundation, and addresses objections from social stakeholders.

The court finds the plans fair, reasonable, and in the public interest, and grants the requested relief, including third-party releases and the appointment of plan administrators.

This decision approves a class action settlement and distribution protocol regarding predatory and unconscionable equipment lease agreements, including the registration of Notices of Security Interests (NOSIs) on consumers’ homes.

The court finds the settlement fair, reasonable, and in the best interests of the class, considering the risks of continued litigation, the insolvency of several defendants, and the benefits achieved, including monetary compensation, lease cancellations, and legislative reform.

The court also approves class counsel fees, disbursements, a Class Proceedings Fund levy, and an honorarium for the lead plaintiff.

This decision concerns a certified class proceeding that is progressing towards a settlement approval hearing.

The plaintiffs brought an unopposed motion to appoint Verita Global as the administrator for the implementation of the proposed settlement.

Class counsel, after a request for proposals process, recommended Verita Global based on its extensive experience, capacity to serve vulnerable individuals, communication abilities, reporting, budget, and cybersecurity certification.

The court found class counsel's choice appropriate and approved the appointment of Verita Global as the settlement administrator.

The court addressed two related putative class proceedings concerning predatory equipment lease agreements.

The plaintiffs sought to amend pleadings, add parties, consolidate the actions, certify the consolidated proceeding for settlement, and approve the notice plan.

The court granted all motions, finding that the criteria for class certification under the Class Proceedings Act, 1992, were met in the context of a proposed settlement, and that a class proceeding was the preferable procedure, especially given ongoing CCAA proceedings.

The notice plan for the settlement approval hearing was also approved.

The Canadian Imperial Bank of Commerce (CIBC) initiated receivership proceedings against 1340182 Ontario Limited and Kazembe & Associates Professional Corporation.

The court-appointed Receiver, MNP Ltd., sought approval of its second report, fees, and authorization to assign 1340182 Ontario Limited into bankruptcy, and to distribute proceeds from the sale of a property.

A key dispute arose regarding the priority of mortgages on the property, specifically between Arthur Bryan, 923944 Ontario Ltd., and CIBC.

Bryan claimed his earlier mortgage was fraudulently discharged and sought declaratory relief to restore its first-ranking priority.

The court dismissed Bryan's cross-motion, finding that even if the discharge was fraudulent, the subsequent mortgages of 923944 Ontario Ltd. and CIBC were valid and enforceable under the Land Titles Act, as they were not fraudulent instruments and the mortgagees had no actual or imputed knowledge of fraud.

The court approved the Receiver's report and authorized distribution according to the registered priorities (923944 Ontario Ltd. first, CIBC second).

This motion addressed a receiver's application for an approval and vesting order (AVO) for the sale of properties, which was opposed by the debtors asserting their equitable right of redemption.

The debtors sought to delay the sale to secure financing, but their efforts were deemed highly conditional and uncertain.

The court applied the Soundair test, finding that the receiver conducted a robust and fair marketing process that yielded the best price.

The court emphasized that the debtors' inability to present a complete and unconditional financing package at the time of the motion was fatal to their request, distinguishing this case from precedents where redemption was allowed due to the debtor's immediate ability to pay.

The receiver's motion for the AVO was granted, and the debtors' cross-motion was dismissed.

This endorsement concerns the Companies' Creditors Arrangement Act (CCAA) proceedings for JTI-MacDonald Corp., Imperial Tobacco Canada Limited, Imperial Tobacco Company Limited, and Rothmans, Benson & Hedges Inc. The court granted an unopposed motion to extend the stay period until March 29, 2024.

Recognizing the complexity and the four-and-a-half-year duration of negotiations, the court directed the three court-appointed Monitors, in conjunction with the court-appointed Mediator, to collaborate and develop comprehensive Plans of Compromise or Arrangement.

The objective is to finalize plans that are fair and reasonable to all applicants and creditors, moving from observable activity to meaningful action.

The Applicants in a CCAA proceeding sought approval of an amended Share Purchase Agreement (SPA) and a reverse vesting order (RVO) to facilitate the sale of their business as a going concern.

The transaction aimed to preserve cannabis licenses, maintain business operations, and retain approximately 95% of employees.

The motion was unopposed, receiving strong support from the two senior secured creditors (2125028 Ontario Inc. and Marzilli) and the Monitor.

The court found the RVO appropriate, satisfying the factors under CCAA section 36, the Soundair Principles, and the Harte Gold framework.

Ancillary relief, including third-party releases for parties crucial to the restructuring, such as the stalking horse bidder (Cardinal) who provided interim financing and waived fees, was also granted.

The stay period was extended to allow for post-closing matters.

Following a successful response to a jurisdiction motion brought by the Proposal Trustee, the party seeking costs sought partial indemnity costs of $40,470.16.

The Proposal Trustee argued the amount was disproportionate and suggested $15,000.

The court found the time spent and hourly rates reasonable, and fixed costs payable by the Proposal Trustee at $40,470.16.

Following a successful motion to approve a proposal to creditors under the Bankruptcy and Insolvency Act, the Proposal Trustee and the debtor sought costs against the sole opposing creditor.

The opposing creditor argued that costs should not be awarded against creditors in insolvency proceedings on policy grounds.

The court rejected this argument, finding that the creditor was not relieved from paying costs after unsuccessfully opposing the motion.

The court awarded partial indemnity costs of $20,000 to the Proposal Trustee and $20,226.44 to the debtor.

The moving party, having successfully obtained an order declaring that no secured indebtedness was owing by the debtor to a related company, sought costs of the motion.

The moving party sought costs on a substantial indemnity scale, arguing it undertook actions that benefited all creditors.

The court declined to award substantial indemnity costs, finding no reprehensible conduct.

The court fixed costs on a partial indemnity scale at $89,339.63, payable jointly and severally by the debtor and the related company, as both had actively opposed the motion.

The Proposal Trustee brought a motion for court approval of the debtor company's amended proposal to creditors under s. 58 of the Bankruptcy and Insolvency Act.

An opposing creditor argued the proposal should be rejected under s. 59(3) because the debtor failed to perform its statutory duties by initially omitting the creditor's claim and a related party's secured debt from its statement of affairs.

The court found the debtor had failed in its duties but exercised its discretion to approve the proposal, noting the debtor provided reasonable security for the payments, the proposal offered a better return than bankruptcy, and it was supported by the vast majority of creditors.

Conforti Holdings Limited (CHL) and its Proposal Trustee sought leave to appeal a lower court's dismissal of their motion.

The motion requested an order advising the Proposal Trustee not to adjudicate Moroccanoil Inc.'s proof of claim and CHL's cross-claim, and to lift a stay to allow litigation to continue in New Jersey.

The motion judge denied the request, holding that s. 135(1.1) of the Bankruptcy and Insolvency Act (BIA) required the trustee to determine the claim and that there was no jurisdiction to exempt this function.

Even if there were jurisdiction, the judge found it inappropriate as continuing New Jersey proceedings would not be materially more efficient.

The Court of Appeal dismissed the motion for leave to appeal, finding no prima facie merit, as the motion judge's discretionary decision was unassailable and entitled to deference.

The Proposal Trustee brought a motion for advice and directions, seeking an order to not undertake the adjudication of a proof of claim filed by Moroccanoil and a cross-motion by the insolvent Company, and instead lift the stay of proceedings to allow the claims to be determined in ongoing U.S. litigation.

The Court dismissed the motion, finding that section 135(1.1) of the Bankruptcy and Insolvency Act unambiguously requires the Proposal Trustee to determine and value the claim, and the Court's inherent jurisdiction does not extend to displacing this mandatory statutory process.

In a bankruptcy proposal proceeding, a creditor (Moroccanoil) moved for an order declaring that no secured indebtedness was owing by the debtor (CHL) to a related company (BEI) and prohibiting a credit bid based on that debt.

The court found that the alleged debt, which consisted of management fees agreed to in 2019 for services rendered in previous years, was based entirely on past consideration.

Applying the rule that past consideration is not good consideration, the court held the agreement unenforceable and granted the order prohibiting the credit bid.

In the context of ongoing CCAA proceedings where substantially all assets of the debtor companies had been liquidated, the supervising judge barred the sole secured creditor from voting on a proposed plan of arrangement on the basis that it was acting for an improper purpose, and authorized the debtor companies to enter into a third party litigation funding agreement as interim financing.

The Quebec Court of Appeal set aside those orders.

The Supreme Court of Canada restored the supervising judge's orders, holding that: (1) a supervising judge has discretion under s. 11 of the CCAA to bar a creditor from voting on a plan of arrangement where the creditor is acting for an improper purpose; and (2) a supervising judge may approve third party litigation funding as interim financing pursuant to s. 11.2 of the CCAA, provided the funding agreement does not constitute a plan of arrangement.

The Court affirmed the high degree of deference owed to discretionary decisions of a supervising judge and found the Court of Appeal had failed to treat those decisions with the appropriate degree of deference.

Her Majesty the Queen in right of Ontario sought to lift a stay on its $330 billion health care cost recovery action against three tobacco companies (JTI-Macdonald Corp., Imperial Tobacco, Rothmans, Benson & Hedges Inc.) and eleven co-defendants, which was imposed under CCAA proceedings.

Ontario proposed to temporarily stay the effects of any judgment.

The court dismissed the motion, emphasizing the need to preserve the status quo in CCAA proceedings to facilitate a global resolution of significant claims.

Allowing Ontario's action to proceed would alter the level playing field, distract from restructuring efforts, and impose significant costs, prejudicing other stakeholders.

This decision addresses the costs of a dismissed interlocutory injunction motion brought by Phoenix Holdings Limited against Healthcare Holdings Inc. and KMH Cardiology Centres Incorporated.

The court found the injunction motion lacked merit and was brought with unacceptable late service of materials, causing the applicants unnecessary costs.

The court ordered Phoenix Holdings Limited to pay the applicants' costs on a partial indemnity basis, fixed at $20,000, inclusive of disbursements and HST.