Geoffrey B. Morawetz

The Canadian Debtors brought a motion for approval of an Allocation Protocol to determine the allocation of approximately $9 billion in sale proceeds among the global Nortel entities.

The EMEA Debtors opposed the motion and brought a cross-motion to compel arbitration, arguing the parties had agreed to arbitrate under the Interim Funding and Settlement Agreement.

The court dismissed the cross-motion, finding the agreement was merely an unenforceable agreement to agree.

The court granted the Canadian Debtors' motion, holding it had discretionary authority under the CCAA to approve the Allocation Protocol and that the parties had irrevocably submitted to the jurisdiction of the Canadian and U.S. courts.

A secured creditor applied for judgment against individual guarantors following the borrower corporation’s receivership.

The respondents had executed personal guarantees securing corporate indebtedness totaling $140,000.

Each guarantor attempted to shift responsibility to the other and argued the creditor should first exhaust recovery against the corporation.

The court held the guarantees expressly permitted the creditor to proceed directly against the guarantors without exhausting recourse against the principal debtor.

Finding no tenable defence, the court granted judgment against both guarantors for the guaranteed amounts plus interest and costs.

Recognition proceedings were brought under the cross‑border insolvency provisions of the Bankruptcy and Insolvency Act concerning a foreign main liquidation proceeding in the Commonwealth of the Bahamas.

Multiple parties asserted competing claims to approximately $4 million in assets held by a Canadian financial institution.

Motions were pending regarding whether a stay of proceedings should be lifted or modified to permit bankruptcy proceedings in Canada or enforcement of claimed interests.

The court held there was insufficient time to fully argue the issues and maintained the existing interim stay and related orders to preserve the status quo pending a full hearing.

The endorsement emphasized that the interim directions were not intended to interfere with the foreign main proceeding.

The Ontario Plaintiffs brought a motion for approval of a $117 million settlement and release of claims against Ernst & Young LLP within the CCAA restructuring of Sino-Forest Corporation.

Several institutional investors objected, arguing that the settlement improperly extinguished their opt-out rights under the Class Proceedings Act and that the third-party release was not justified under the CCAA.

The court approved the settlement and release, finding them fair, reasonable, and rationally related to the restructuring plan.

The court held that claims compromised within a CCAA proceeding do not afford opt-out rights, and the settlement provided a substantial benefit to stakeholders.

A debtor company sought an initial order under the Companies’ Creditors Arrangement Act to implement a consensual recapitalization transaction supported by major secured creditors.

The motion requested a stay of proceedings, approval of debtor‑in‑possession financing and related charges, authorization for certain pre‑filing payments, and the appointment of a monitor and foreign representative.

The court was satisfied that the company qualified as a debtor company and that the restructuring proposal had substantial creditor support.

The court granted the requested relief, including a sealing order for confidential financial materials and approval of claims procedure and creditors’ meetings orders to facilitate the restructuring plan.

In Companies’ Creditors Arrangement Act proceedings involving the Nortel corporate group, the Canadian debtor entities moved for approval of an Allocation Protocol governing the distribution of sale proceeds among various affiliated estates and stakeholders.

The court approved the protocol substantially in the form originally proposed, subject to modifications requiring reliance on the June 7, 2011 protocol version and expansion of the list of “core parties” to include additional indenture trustees.

The court directed the Monitor to prepare a revised list of core parties and coordinate a litigation schedule for resolving allocation disputes.

A cross-motion by the Joint Administrators of a UK affiliate seeking to compel arbitration of allocation disputes under the Interim Funding and Settlement Agreement was dismissed.

The appeal period was deferred until the release of full reasons coordinated with reasons of the United States Bankruptcy Court for the District of Delaware.

Secured creditors sought the appointment of a receiver over a debtor company pursuant to s. 243 of the Bankruptcy and Insolvency Act and s. 101 of the Courts of Justice Act following repeated loan defaults and concerns that assets might be removed from the premises.

Evidence indicated ongoing payment defaults and recent activity suggesting potential removal of items from the business location.

The respondent acknowledged default but requested a short period to obtain refinancing sufficient to satisfy secured creditors.

The court concluded that supervision was necessary to protect the debtor’s assets and the secured creditors’ interests.

An interim receiver with limited monitoring powers was appointed pending a further hearing on whether a full receivership should be ordered.

In ongoing proceedings under the Companies’ Creditors Arrangement Act, the applicants sought approval of an Employee Hardship Application Process and an extension of the stay of proceedings.

The requested hardship process was unopposed and approved.

Certain noteholders sought conditions requiring enhanced reporting and procedural safeguards in relation to the claims process and employee claims.

The court held that the statutory test under s. 11(6) of the CCAA was satisfied because the circumstances warranted the extension and the applicants had acted in good faith and with due diligence.

The stay extension was granted, while proposed procedural changes to the claims process were found more appropriately addressed through a motion to vary existing orders.

Co-owners of a Toronto property brought an application under the Partition Act seeking an order for sale and directions regarding the method of sale.

While all parties agreed the property should be sold, they disagreed on whether the sale should proceed by public auction or by sealed bid.

The court discounted partisan affidavit evidence from the parties and professional firms with financial interests in the process.

Emphasizing the need to safeguard the integrity of the sales process and maximize value, the court concluded that a sealed-bid process was preferable in circumstances where some co-owners intended to bid on the property.

The court ordered the sale to proceed by sealed bid under the supervision of an independent sales officer, with final process terms subject to court approval.

In CCAA proceedings involving shipping companies, the court addressed issues arising from a Claims Process Order and a referee’s report adjudicating maritime claims.

The court held that the referee was best positioned to determine entitlement to costs arising from the claims adjudication and directed that the referee address costs in accordance with the draft order.

The court declined to restrict cost submissions to certain claimants, holding that all claimants should be on equal footing.

A request to reconsider the referee’s decision or to receive further evidence was premature because no formal motion had been served.

The referee’s report was confirmed, the monitor’s eighth report was approved, and the monitor was discharged subject to conditions.

The plaintiffs brought a motion for summary judgment against the defendants for fraud, breach of trust, breach of fiduciary duty, unjust enrichment, and breach of contract arising from a fraudulent investment scheme.

The court found the defendants liable on a joint and several basis, as the uncontested evidence established that the defendants accepted funds for investment but did not invest them as promised, instead providing forged financial statements.

The court awarded damages based on the net principal invested plus compound interest, general damages for investigation costs, and punitive damages.

In litigation concerning environmental liabilities associated with the purchase of a paper mill asset from a receivership, the defendant purchaser sought leave under s. 215 of the Bankruptcy and Insolvency Act to pursue a third party claim against the court-appointed receiver for alleged wilful negligence and intentional misrepresentation.

The receiver moved to dismiss or permanently stay the third party claim on the basis that leave had not been obtained and that the claim was frivolous.

Applying the low threshold for granting leave established in the case law, the court held that the pleadings and contractual documents disclosed a sufficient factual basis for the proposed claim.

The court granted leave nunc pro tunc to proceed against the receiver (rather than the receiver’s firm), dismissed the receiver’s motion to stay, and awarded costs to the purchaser.

In the context of CCAA proceedings for Priszm, the landlord (Scott's REIT) brought a motion claiming entitlement to the proceeds from the sale and assignment of various restaurant leases to third-party purchasers.

Scott's argued it had a proprietary interest in the lease consideration and that the secured creditor (Prudential) had subordinated its security interest to Scott's claim.

The court dismissed the motion, finding that the lease provisions created only an unsecured contractual obligation, not a proprietary interest.

Furthermore, the court held that the leasehold charge consents did not contain clear and unequivocal language demonstrating an intention by Prudential to subordinate its first-priority security interest to Scott's unsecured claim.

The applicant, Sino-Forest Corporation, sought an order sanctioning a plan of compromise and reorganization under the CCAA.

The plan was supported by the vast majority of creditors, including noteholders, auditors, and underwriters, but opposed by certain funds.

The court found that the statutory requirements were met, the creditors were properly classified, and the plan, including its third-party releases, was fair and reasonable.

The motion was granted and the plan was sanctioned.

Institutional investors sought an adjournment of a motion to sanction a restructuring plan under the Companies’ Creditors Arrangement Act, arguing that provisions in the proposed plan concerning settlements and releases for third party defendants could improperly affect their ability to pursue claims in related securities class actions.

The court reviewed the plan and concluded that approval of any specific settlement, including a proposed auditor settlement, was not before the court on the sanction motion and would require further court orders and satisfaction of multiple conditions precedent.

The court held that any potential impact on investors’ claims could be addressed in future proceedings where the specific settlements and releases would be considered.

As the objections were premature and the debtor faced time and funding constraints, the request for an adjournment was denied.

In ongoing Companies’ Creditors Arrangement Act proceedings, the applicants sought advice and directions regarding the application of a directors’ and officers’ liability insurance policy issued by the insurer.

The dispute concerned whether a US$10 million retention applied to defence costs incurred by executives facing claims arising from alleged pre‑filing misconduct.

The applicants argued that the CCAA stay prevented the company from indemnifying the executives, thereby triggering the policy’s non‑indemnifiable loss provisions and eliminating the retention requirement.

The court held that the indemnity obligation was a pre‑filing obligation and that the stay prevented payment, rendering the loss non‑indemnifiable within the meaning of the policy.

As a result, the insurer was required to respond to the executives’ losses without reference to the retention.

During CCAA proceedings involving an aerospace manufacturer, former directors and officers sought an interlocutory injunction restraining the provincial environmental regulator from issuing a Director’s Order under the Environmental Protection Act pending determination of a related motion concerning adjudicative procedures for claims in the CCAA process.

The moving party argued that a “status quo” exception permitted injunctive relief against the Crown to preserve the court’s process.

The court held that the Proceedings Against the Crown Act generally bars injunctions against the Crown and that the asserted status quo exception did not apply because there was no government wrongdoing and the Environmental Protection Act provides a complete statutory scheme for issuing and appealing environmental orders.

The court further held that the moving party failed to meet the RJR‑Macdonald test, including establishing a serious issue to be tried or irreparable harm.

The motion was dismissed.

In CCAA restructuring proceedings, shareholder class action plaintiffs sought to limit the scope of a stay of proceedings so that certification, leave, and amendment motions in related Ontario and Quebec securities class actions could proceed against auditors, underwriters, and former directors.

The court applied the established test for lifting a CCAA stay, considering relative prejudice, balance of convenience, and the merits.

Given the pending appeal concerning whether shareholder claims constituted “equity claims” under the Companies’ Creditors Arrangement Act and the imminent creditor meeting regarding a proposed plan of arrangement, the court found that maintaining the stay temporarily would avoid prejudice and promote orderly proceedings.

The court held that the balance of convenience favoured maintaining the stay so that the auditors and underwriters could focus on the appeal and restructuring process.

The motion to limit the stay was dismissed without prejudice to renewal after the creditor meeting.

The employer sought judicial interpretation of an indemnity clause in an employment contract providing for two years’ salary, bonuses, and benefits if the company decided to terminate the employee within four years of signing.

The court held that the indemnity obligation was triggered when the decision to terminate was made, not when the termination was communicated.

Because the employer decided to terminate within the four‑year period but delayed communicating the decision until after the period expired, the contractual indemnity applied.

Relying on appellate authority, the court further held that where a termination clause stipulates compensation and is silent on mitigation, the employee has no duty to mitigate.

The employee was therefore entitled to the contractual lump sum, subject only to credit for salary continuation payments already made.

The defendants brought a motion seeking additional production of documents and an order that this action be tried together with or consecutively to a related proceeding.

The plaintiff brought a motion for leave to file a Fresh as Amended Statement of Claim and sought orders compelling further documentary disclosure and updated information from the defendants.

The court held that, following amendment of the pleading, document production should be assessed in relation to the amended claim and limited to documents relevant to common customers and vendors.

The court ordered ongoing disclosure obligations on the defendants regarding common customers and vendors but declined to order the actions tried together.

An interim award of $35,000 was granted to the defendants as costs thrown away arising from the amendment.