John Langen Finnigan

In the context of CCAA proceedings, the Monitor sought directions on the interpretation of a litigation funding agreement and the approved Plan of Arrangement regarding the distribution of funds released from security for costs.

The successful defendants in related litigation argued the funds should be paid to them to satisfy outstanding costs awards.

The court rejected this interpretation, finding the plain wording of the agreements required the funds to be treated as Subsequent Cash on Hand for the benefit of Secured Noteholders.

The court also declined to approve the Monitor's historical activities, noting the expiry of limitation periods rendered such approval unnecessary, but granted the Monitor's discharge.

In a professional discipline proceeding arising from four annual audits of a large construction group, the Panel found extensive failures to comply with auditing standards in client acceptance, audit planning, fraud risk assessment, professional skepticism, materiality, related-party procedures, internal controls, contract testing, marketable securities testing, covenant analysis, and reporting.

One respondent was also found to have failed to exercise due care when accepting the engagement despite serious warnings from the predecessor auditor concerning suspected fraud and scope limitations.

Applying the balance of probabilities standard, the Panel held that the evidence of the applicant’s expert established professional misconduct under Rules 202.1 and 206.1, except for one narrowly worded allegation concerning signatures on a management representation letter.

The Panel then applied the Anthony-Cook public interest test and, although expressing significant reservations, accepted joint submissions imposing fines, publication, compliance consequences, and substantial costs.

The Cash Store Financial Services Inc. operated a payday loan business from 2002 until it sought CCAA protection in April 2014.

The company's estate sued its auditor KPMG LLP and counsel Cassels Brock & Blackwell LLP, alleging negligence and breach of fiduciary duty.

The plaintiff claimed that the defendants knew or ought to have known that Cash Store was misrepresenting its business as a broker when it was actually a direct lender bearing credit risk, and that this misrepresentation caused a deepening of insolvency from late 2011 until the CCAA filing in 2014.

The plaintiff sought damages ranging from $119 million to $177 million, plus disgorgement of legal fees.

The court dismissed all claims against both defendants, finding that Cash Store was properly characterized as a broker during the relevant period, that the defendants met applicable professional standards, and that the plaintiff failed to prove causation and damages.

The court also found the claims were statute-barred.

The Monitor of the Applicants in a Companies’ Creditors Arrangement Act (CCAA) proceeding brought a motion to extend the Stay Period to allow Remaining Estate Actions to proceed and to continue administering the Plan.

The court reviewed the Monitor's Thirty-Fourth Report and submissions, finding that the Applicants continued to operate in good faith and with due diligence.

The motion was granted, extending the Stay Period until September 29, 2025, to allow for the determination of the Remaining Estate Actions.

The Trustee of the Alexander Morris Sharpe Trust sought the court's advice and directions on whether legal fees for David and Natasha Sharpe could be paid from the trust, which was established for the "sole and exclusive" benefit of their minor son, Alexander Morris Sharpe.

The Office of the Children's Lawyer opposed, arguing the trust language was clear and restrictive.

The court ruled that the trust funds could not be used to pay the legal fees, as such payments would not be for the "sole and exclusive" benefit of the minor beneficiary, even if there was a collateral benefit.

The Monitor of The Cash Store Financial Services Inc. and related entities brought a motion seeking an extension of a stay of proceedings to October 25, 2024, under the Companies’ Creditors Arrangement Act.

The Monitor's Thirty-Third Report detailed the status of remaining estate actions and confirmed sufficient liquidity to fund activities.

The motion was unopposed and granted, with the court satisfied that the parties were acting in good faith and with due diligence.

The Receiver brought an unopposed motion for an order approving a Claims Adjudication Process, appointing a Claims Officer, and approving its Twentieth Report.

The court granted the motion but modified the proposed order to remove limitations on appeal rights and standard of review, noting that such issues remain to be determined by the court hearing any appeal, not by the Claims Officer.

The Court of Appeal considered appeals regarding the priority of claims in the receivership of Bridging Finance Inc. and its investment funds.

The motion judge had previously granted priority to Statutory Rescission Claims but denied it to Redemption Claims.

The Court of Appeal dismissed the appeal by Redemption Claimants, affirming that their claims had not crystallized and were subject to Bridging's discretion, thus lacking priority.

It allowed the appeal by General Unitholders, reversing the priority granted to Statutory Rescission Claims.

The court held that neither the language of the Ontario Securities Act (s. 130.1) nor the inherent nature of the rescission remedy provided a basis for statutory or de facto priority.

Consequently, the court ordered that all Unitholders, including Redemption Claimants, Statutory Rescission Claimants, and General Unitholders, shall rank pari passu with respect to the distribution of proceeds from the Bridging Funds.

The Ontario Securities Commission (OSC) brought a motion seeking an order for the issuance of Letters of Request in Commissions under section 152 of the Securities Act.

The OSC required evidence from two individuals, one residing in British Columbia and one in Massachusetts, USA, for a proceeding before the Capital Markets Tribunal concerning Bridging Finance Inc. and its respondents.

The respondents did not oppose the motion.

The court granted the order, finding that the proposed witnesses had relevant evidence and that the Letters of Request and Commissions accorded with Rule 34.07(2) of the Rules of Civil Procedure.

The SMA 2 Unitholders sought a declaration that substantive consolidation does not apply to Bridging SMA 2 LP and approval for a second interim distribution.

The Receiver and Unitholder Representative Counsel opposed, arguing the motion was premature as various distribution issues, including the full economic impact of consolidation, remained unresolved.

The court dismissed the motion, deferring to the Receiver's position that a determination on substantive consolidation and further distributions was premature given the incomplete factual record and outstanding distribution issues.

In the receivership of the Bridging Funds, the Receiver brought a motion to determine whether unitholders with Potential Statutory Rescission Claims (based on misrepresentations in offering memoranda) or Potential Redemption Claims (based on unfulfilled redemption requests) were entitled to priority over General Unitholder Claims.

The court held that Potential Redemption Claims were not entitled to priority because the redemption requests had not been completed prior to the receivership.

However, the court held that Potential Statutory Rescission Claims were entitled to priority, finding that the statutory right of rescission under s. 130.1(1) of the Securities Act creates a de facto priority and justifies the imposition of a constructive trust over the invested funds.

The Receiver brought an unopposed motion for a Claims and Unitholdings Identification Order and for approval of its activities as described in its 12th Report.

The court found the proposed order practical and reasonable to assist the Receiver with the distribution process.

The motion was granted and the Receiver's activities were approved.

The Receiver brought a motion for an order approving an interim cash distribution of $78 million to the two institutional unitholders in Bridging SMA 2 LP.

The court found it appropriate to make an interim distribution but reduced the amount to $46 million to account for the potential impact of substantively consolidating the various Bridging Funds, an issue that had yet to be determined.

The Receiver brought a motion for court approval of multiple settlement agreements resolving litigation arising from the receivership of Distinct Infrastructure Group Inc., and for a sealing order over the confidential settlement terms.

The court approved the settlements, finding them to be a fair and reasonable commercial resolution.

The court also granted the sealing order, applying the Sherman Estate test and finding that the public interest in promoting settlements and preserving commercially sensitive information outweighed the negative effects on the open court principle.

The applicant sought to revoke a section 11 investigation order after the Ontario Securities Commission publicly disclosed his compelled testimony in a receivership application without first obtaining a section 17 disclosure order.

The Tribunal held that the Commission is bound by the confidentiality provisions of section 16 and cannot publicly disclose compelled evidence without a section 17 order.

However, the Tribunal concluded that revoking the section 11 investigation order was not an appropriate remedy for the improper disclosure, as the disclosure occurred after the order was issued and revocation would be purely punitive.

The Receiver of Bridging Finance Inc. sought court approval to terminate a sale and investment solicitation process (SISP) and proceed with an orderly liquidation ("Status Quo Option"), and to seal confidential appendices.

An unnamed unitholder opposed, requesting further consultation, a unitholder vote, and a new solicitation process for liquidation management.

The court denied the unitholder's adjournment request, finding no evidence to support it.

The court granted the Receiver's requests, deferring to the Receiver's business judgment, which was supported by Representative Counsel and a substantial majority of unitholders.

The Plaintiffs (Bondfield Construction Company Limited and Zurich Insurance Company Ltd.) brought a motion to stay summary judgment motions initiated by PricewaterhouseCoopers LLP (PwC) in complex professional negligence actions against auditors, which also involved significant fraud allegations and discoverability issues.

The court, acting as case management judge, granted the stay, determining that full documentary and oral discoveries were essential to ensure a fair and efficient process.

The decision highlighted the complexity of the case, the substantial damages sought, the allegations of long-standing fraudulent activities, and the potential for inconsistent findings if the summary judgment motions proceeded on a limited record.

The court emphasized the flexibility of judges in case-managed matters and the necessity of a comprehensive record for a just adjudication of limitation period issues.

The Receiver brought a motion to extend the appointment of limited partner advisory committees, approve its activities, and approve a process for appointing Representative Counsel for the Unitholders.

The Ad Hoc Committee of Retail Investors raised concerns about the independence of the proposed appointment process.

The court approved the Receiver's activities and the extension of the committees, but modified the Representative Counsel appointment process to include an independent third party to evaluate proposals and make a recommendation to the court.

The Receiver brought a motion for an order approving a proposed sale and investment solicitation process (SISP) and authorizing the disclosure of Borrower Information to Qualified Bidders.

The court found that the proposed SISP satisfied the test for approval, as it was fair, transparent, and optimized the chances of securing the best price.

The court also authorized the disclosure of Borrower Information, finding that the best interests of investors could be jeopardized without such disclosure, and noting that all borrower concerns had been resolved and confidentiality obligations would apply to bidders.

The motion was granted.

Commercial landlord appealed an order limiting its entitlement to draw on a $2.5 million standby letter of credit posted by a bankrupt tenant as security for a lease.

The motion judge held that, following the trustee’s disclaimer of the lease, the landlord could draw only the statutory preferred claim for three months’ accelerated rent under the Bankruptcy and Insolvency Act.

The Court of Appeal held that the autonomy principle governing letters of credit meant the issuing bank’s obligation to honour complying presentations was independent of the underlying lease and not limited by insolvency law absent fraud.

The court also found the motion judge erred in interpreting the lease to require a reduction in the letter of credit because the tenant had not “promptly” paid rent at all times as required.

The landlord was therefore entitled to draw the full amount of the letter of credit.