Geoffrey B. Morawetz

Former directors sought declarations that claims advanced in a Quebec class action concerning pension losses were barred by releases granted during Companies’ Creditors Arrangement Act proceedings.

The court held that it had jurisdiction to determine the motion because the dispute concerned the effect of orders and releases issued within the CCAA restructuring.

The contractual releases executed by the union on behalf of beneficiaries were broadly worded and applied to all claims relating to facts existing at the time of the release, whether known or unknown.

The court found that the claims process and releases extinguished any potential claims against the directors relating to the pension deficit.

Accordingly, the Quebec class action claims against the directors were fully and irrevocably released.

In proceedings under the Companies’ Creditors Arrangement Act, the court considered relief relating to the filing of a proposed plan of compromise or arrangement and the issuance of a meeting order for creditor voting.

The parties agreed that the relief sought should be limited to matters concerning plan filing and the convening of a creditors’ meeting.

The court emphasized that the meeting order did not determine the applicable test for plan approval, the court’s jurisdiction to approve the plan in its present form, compliance with the CCAA, the fairness or reasonableness of the plan, the validity or quantum of claims, or creditor classification for voting.

The endorsement further clarified that no party’s right to oppose a future sanction motion would be restricted.

In a receivership over a commercial condominium development, the receiver sought approval of a marketing and sale process allowing the property to be sold free and clear of unregistered unit purchase agreements and leases.

A group of purchasers argued their agreements should be honoured and that the project should proceed to condominium registration so their units could close.

The court held that the first mortgagee’s registered security had legal priority over the purchasers’ and tenants’ interests, which were unregistered and expressly subordinated by contract.

The receiver was not required to borrow funds or complete construction to facilitate specific performance of the agreements.

Finding that the equities did not favour the purchasers, the court approved the marketing process and authorized termination and vesting out of the agreements and leases if required for a sale.

In a CCAA proceeding, a former CEO moved for an order compelling the debtor company to continue paying his monthly consulting fees under a 1996 agreement.

The debtor company brought a cross-motion declaring the obligations were pre-filing obligations stayed by the Initial Order, or alternatively, seeking to disclaim the agreement under s. 32 of the CCAA.

The court held that the consulting fees were in substance termination or retirement benefits, constituting unsecured pre-filing obligations that were stayed.

Alternatively, the court found that disclaiming the agreement was advantageous to the restructuring and would not cause significant financial hardship to the former CEO.

The plaintiff brought a motion to approve a settlement of a representative action under Rule 10.01(3) of the Rules of Civil Procedure concerning governance and alleged improprieties in transactions involving the outsourcing and reassumption of real estate asset management by a pension plan.

After extensive litigation, mediation, documentary disclosure, and a neutral fact‑finding process, a report concluded that the transactions were commercially reasonable and that no wrongdoing occurred, although transparency concerns had arisen.

The settlement recognized governance reforms implemented during the litigation and provided for dismissal of the action with reimbursement of the representative plaintiff’s legal costs.

Applying principles analogous to settlement approval under the Class Proceedings Act, the court found the settlement fair, reasonable, and in the best interests of the represented persons.

The settlement was approved and the action dismissed.

In CCAA restructuring proceedings, the applicants sought approval of an asset sale transaction and related vesting order.

The provincial environmental regulator opposed the transaction and argued that a pre‑filing environmental remediation order was regulatory in nature and not subject to the CCAA stay.

The court held that where an insolvent debtor with no ongoing operations would necessarily incur financial obligations to comply with the environmental order, the order effectively enforced a payment obligation and was therefore stayed.

The court further held that the regulator could file a claim for remediation costs but could not use regulatory orders to create a super‑priority inconsistent with the CCAA priority scheme.

The proposed asset sale was approved as the result of a comprehensive marketing process and in the best interests of stakeholders.

In CCAA proceedings, the applicant sought an order declaring that shareholder class action claims alleging losses from the purchase or sale of its securities constituted “equity claims” under s. 2 of the Companies’ Creditors Arrangement Act.

The applicant also sought a determination that indemnity and contribution claims advanced by auditors and underwriters in relation to those shareholder actions were likewise equity claims.

The court held that shareholder claims alleging losses from trading in the company’s securities fall squarely within the statutory definition of equity claims and are subordinated to creditor claims.

Indemnification and contribution claims arising from those shareholder actions were also characterized as equity claims because their nature derives from the underlying shareholder claims.

However, the court left open the possibility that claims for defence costs might not necessarily be equity claims depending on the outcome of the underlying litigation.

In CCAA proceedings, the applicant sought approval of a sale transaction involving substantially all of its pulp mill assets pursuant to s. 36 of the Companies’ Creditors Arrangement Act.

Certain creditors opposed the transaction and urged the court to consider a late competing offer that proposed a higher purchase price.

The court held that the sales process had been extensively marketed internationally, complied with the court‑approved process, and was conducted with the oversight of the monitor and consultation with key stakeholders including the Province.

Applying the Soundair principles and s. 36(3) of the CCAA, the court found that the monitor had acted prudently, the process maintained integrity and fairness, and the later competing offer did not demonstrate that the accepted transaction was improvident.

The court approved the transaction and granted the requested vesting order.

A receiver was appointed over a fraudulent investment scheme where the deposits of 24 investors were commingled.

The receiver sought directions on how to distribute the remaining funds, which had a significant shortfall.

One group of investors argued for a pro rata distribution based on original contributions, while another argued for the Lowest Intermediate Balance Rule (LIBR).

The court held that LIBR is the general rule for resolving competing claims to commingled funds unless it is unworkable.

Finding that the receiver could practically calculate the LIBR distributions, the court ordered the funds to be distributed according to LIBR.

The applicants, facing severe liquidity issues and unable to meet financial covenants, sought protection under the Companies' Creditors Arrangement Act (CCAA).

The court found the applicants met the statutory definitions of 'company' and 'debtor company' and that a stay of proceedings was necessary to allow them to maintain operations and complete a sales process.

The court granted the Initial Order, which included the appointment of a Chief Restructuring Officer, approval of a DIP facility, various priority charges (Administration, Critical Supplier, Directors', and DIP Lenders'), and a Cross-Border Protocol to coordinate with parallel Chapter 11 proceedings in the United States.

On a cross-border insolvency recognition motion under ss. 44-49 of the Companies’ Creditors Arrangement Act, the moving party sought recognition of U.S. Chapter 11 proceedings as foreign main proceedings and requested ancillary relief, including enforcement of first-day orders, appointment of an information officer, and an administration charge.

The court held that Chapter 11 proceedings qualified as foreign proceedings and accepted that the moving party was a foreign representative, subject to possible further U.S. court developments.

Applying a centre of main interests analysis that can rebut the registered-office presumption, the court found the Canadian debtors’ centre of main interests was in the United States.

Mandatory and discretionary relief under Part IV of the statute was granted, including the requested supplemental orders and a capped administration charge.

In a proceeding under the Companies’ Creditors Arrangement Act, the applicants sought several restructuring-related orders, including increased priority for certain court-ordered charges, suspension of special pension payment obligations under an individual pension plan, and approval of an engagement letter for a financial advisor.

The court held that it had jurisdiction under ss. 11.2, 11.4, 11.51 and 11.52 of the CCAA to grant super‑priority charges and accepted the applicants’ submissions regarding critical suppliers, DIP lenders, and a directors’ charge.

The court also approved the suspension of special pension payments and the engagement of the proposed financial advisor on specified terms.

Certain issues relating to a key employee incentive plan were deferred for later determination.

An order was issued granting the requested relief.

The applicants, comprising the Cinram Group, sought an Initial Order under the CCAA.

The court found that the applicants were debtor companies and insolvent, facing a looming liquidity crisis.

The court granted the Initial Order, which included a stay of proceedings extended to non-applicant subsidiaries, authorization to pay critical pre-filing obligations, and approval of various charges including a $15 million DIP financing charge, a $3.5 million administration charge, a $13 million directors' and officers' charge, and a $3 million KERP charge.

The court also authorized the foreign representative to seek recognition under Chapter 15 of the US Bankruptcy Code.

The bankrupt appealed a registrar’s order lifting the automatic stay under s. 69 of the Bankruptcy and Insolvency Act to permit a creditor’s civil action to proceed.

The creditor alleged that the debt arose from misappropriation of funds received in a fiduciary capacity, potentially falling within s. 178(1)(d) of the Act such that the debt could survive bankruptcy discharge.

The court held that the registrar properly applied the governing legal principles and correctly concluded that the pleadings disclosed a sufficient basis to lift the stay.

The bankruptcy court’s role was not to determine the merits of the underlying claim but only whether sound reasons existed to allow the action to continue.

The appeal was dismissed with costs.

This endorsement determined costs arising from a security-for-costs motion and a related motion concerning transfer of an interest and continuation of the proceeding.

The court found the defendants had considerable but not complete success on the security-for-costs issue, and reduced the amount sought to account for partial success and duplication in senior-lawyer time.

For the continuation issue, the court ordered each side to bear its own costs.

Overall, the court fixed a single fair and reasonable costs award payable by the plaintiff to the defendants.

In CCAA restructuring proceedings, the plaintiff in a securities class action sought to lift the stay of proceedings to continue the class action against the debtor company and related defendants.

The moving party argued the action should proceed in order to access insurance proceeds that would not be available to other creditors.

The court considered the purposes of the CCAA stay, including preserving the status quo and facilitating a restructuring or sales process for the benefit of stakeholders.

Balancing prejudice, convenience, and the interests of the restructuring process, the court held that permitting the litigation to proceed would divert management resources from the ongoing court‑supervised sales process.

The stay was maintained except to permit the plaintiff to pursue a leave application to the Supreme Court of Canada on a limitation period issue.

The applicant landlord sought a declaration that a commercial tenant was required to pay its proportionate share of the cost of rehabilitating a shopping centre parking lot as additional rent under a lease provision requiring tenants to pay common area maintenance costs for repairs and maintenance.

The dispute turned on whether the parking lot rehabilitation constituted a repair or a capital expenditure under “accepted accounting practice.” After considering expert engineering and accounting evidence and principles drawn from GAAP and relevant case law, the court concluded that the work significantly extended the life of the parking lot and reduced operating costs, thereby enhancing its service potential.

The court held that the rehabilitation constituted a capital expenditure rather than a repair within the meaning of the lease.

Accordingly, the tenant was not responsible for the cost and was entitled to set-off amounts already paid.

Creditors brought a motion under s. 69.4 of the Bankruptcy and Insolvency Act seeking a declaration that the statutory stay of proceedings arising from a proposal no longer applied to their civil action against the debtor.

The underlying action alleged fraud, conspiracy, deceit, and conversion involving the misappropriation of significant funds.

The court held that the creditors would likely be materially prejudiced by continuation of the stay and that equitable grounds justified lifting it, particularly where the alleged debt would likely survive a bankruptcy discharge and the debtor appeared to be delaying the proceedings.

The court also confirmed a previously granted Mareva injunction on a nunc pro tunc basis to preserve assets.

Costs were awarded to the moving parties on a partial‑indemnity basis.

Two affiliated technology companies applied for initial protection under the Companies’ Creditors Arrangement Act after exhausting start-up capital and becoming unable to meet payroll and other obligations.

The applicants sought a stay of proceedings, approval of debtor-in-possession financing, and priority charges for administration expenses and directors’ and officers’ liabilities.

The court held that the companies qualified as debtor companies under the CCAA and that they were appropriately treated as affiliated entities for the purpose of the proceedings.

The court approved the requested stay, DIP facility and related charges, finding them reasonable and necessary to allow time for restructuring or a going-concern sale for the benefit of stakeholders.

The applicant corporation sought relief under the Companies’ Creditors Arrangement Act including an initial order, a stay of proceedings, approval of a sale process, and authorization of administration and directors’ charges.

The court considered whether the corporation qualified as a debtor company and whether the requested restructuring steps were appropriate in the circumstances of significant financial distress and ongoing investigations.

The court accepted that the corporation was insolvent and that a restructuring under the CCAA was necessary to preserve enterprise value and explore a potential sale of business operations.

The court approved the requested charges, authorized the sale process, and granted ancillary relief including recognition proceedings in foreign jurisdictions.