Kenneth Theodore Rosenberg

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.

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 plaintiffs, franchisees of Shoppers Drug Mart, brought a proposed class action alleging breach of contract, breach of the duty of good faith, unjust enrichment, and breach of fiduciary duty regarding the franchisor's retention of rebates and professional allowances, and its practices regarding cost recovery fees, budgeting, and inventory.

The defendants brought a Rule 21 motion to strike the claims for disclosing no reasonable cause of action.

The court struck the claims for rebates, breach of fiduciary duty, interference with association, and duty of disclosure, finding them untenable based on the clear language of the franchise agreements.

However, the court allowed the claims regarding professional allowances, cost recovery fees, budgeting practices, and inventory practices to proceed, finding it was not plain and obvious they would fail.

Following certification of a class proceeding concerning foreign exchange transactions in registered accounts, the plaintiffs sought substantial indemnity costs based on an unaccepted offer to settle made prior to the certification motion.

The defendants argued the outcome of the certification motion was less favourable than the offer and disputed the amount of fees and disbursements claimed.

The court held that the result of the certification motion was as favourable as the plaintiffs’ offer within the meaning of Rule 49.10 and that the defendants’ objections were overly technical.

Certain fees and disbursements were reduced, but the court concluded the remaining amounts were fair and reasonable in light of the work required for the certification motion.

Substantial indemnity costs were awarded from the date of the offer to settle.

The plaintiffs brought a motion for certification of a proposed class action against the defendants regarding foreign currency conversions in registered accounts.

The plaintiffs alleged that the defendants charged undisclosed, unnecessary, and unauthorized foreign exchange fees when converting foreign currency to Canadian dollars in RRSPs and other registered accounts.

The court found that the plaintiffs met all five criteria for certification under section 5 of the Class Proceedings Act, 1992, including disclosing causes of action for breach of contract, breach of fiduciary duty, and unjust enrichment.

The action was certified as a class proceeding.

The appellants, holders of Asset Backed Commercial Paper (ABCP) notes, appealed a decision sanctioning a restructuring plan under the Companies' Creditors Arrangement Act (CCAA).

The plan included comprehensive releases of third-party financial institutions from liability, including certain claims relating to fraud.

The appellants argued the CCAA does not permit third-party releases and that the releases were unconstitutional.

The Court of Appeal dismissed the appeal, holding that the CCAA permits third-party releases that are reasonably connected to the proposed restructuring.

The Court found the application judge did not err in concluding the plan was fair and reasonable, as the releases were necessary for the restructuring to succeed and benefited the creditors as a whole.

The appellants appealed an order confirming a Master's report that awarded compound interest on the respondent's lost profits from misappropriated trust property.

The Court of Appeal dismissed the appeal, finding no error in principle in the Master's discretionary decision to award compound interest.

The Court noted that in cases of wrongfully misappropriated trust property, it is open to the court to presume the injured party is entitled to compound interest, and the appellants failed to adduce evidence to rebut this presumption.

Following the dismissal of the defendants' application for leave to appeal, the court determined the quantum of costs.

The plaintiffs sought $13,257.73, while the defendants argued for $2,500.00.

The court found the plaintiffs' claimed costs excessive, noting that the participation of two counsel was unnecessary.

Costs were fixed at $5,000 on a partial indemnity basis.

The Court of Appeal issued an addendum to correct an error in paragraph 11 of its reasons for judgment released on November 17, 2005.

The court amended the reasons to replace the reference to 'Subordinated Debenture Holders' with 'Senior Debt Holders' in the first two sentences of the paragraph.

The Gold defendants sought leave to appeal a case management judge's order that refused to permit them to file a factum, make arguments in support of their co-defendants' motion for summary judgment, or bring their own summary judgment motion.

The case management judge had found that the Gold defendants deliberately breached a timetable they had devised, engaging in delaying tactics.

The Divisional Court dismissed the motion for leave to appeal, finding no conflicting decisions and no reason to doubt the correctness of the case management judge's exercise of discretion under the Rules of Civil Procedure to protect the integrity of the case management process.

In a CCAA restructuring of Stelco Inc., the appellants, representing subordinated debenture holders, sought to be classified as a separate class of creditors for voting purposes on the proposed plan.

They argued their interests conflicted with senior debt holders due to a turnover payment provision requiring them to remit distributions to senior debt holders until the senior debt was paid in full.

The supervising judge dismissed the motion, finding no material distinction in their legal rights vis-à-vis the debtor company.

The Court of Appeal granted leave but dismissed the appeal, affirming that creditor classification under the CCAA is determined by the creditors' legal rights in relation to the debtor company, not their rights as creditors in relation to each other.

In a CCAA proceeding regarding Stelco Inc., the Informal Independent Converts' Committee appealed an order denying them a separate class of creditors.

The Court of Appeal granted leave but dismissed the appeal, finding no legal error or error in principle in the motion judge's conclusion that the appellants lacked a different legal or practical interest from other unsecured creditors vis-à-vis the debtor.

The appellant, an informal committee of senior debenture holders, sought leave to appeal orders made by the supervising judge in a CCAA restructuring.

The orders authorized the debtor company to enter into agreements with stakeholders and a finance provider to facilitate a proposed plan of arrangement.

The appellant argued the judge lacked jurisdiction to make orders that entrenched elements of a plan before creditor approval and that the plan was doomed to fail.

The Court of Appeal dismissed the appeal, holding that the supervising judge had broad jurisdiction under s. 11 of the CCAA to move the restructuring process forward, provided the creditors retained their final right to vote on the plan under s. 6.

During a CCAA restructuring of Stelco Inc., the board of directors appointed two new directors who were associated with major shareholders.

Employee stakeholders, fearing the new directors would favour shareholder interests over employee interests in the restructuring, successfully applied to the supervising judge to have the directors removed based on a reasonable apprehension of bias.

The Court of Appeal granted leave to appeal and allowed the appeal, holding that the supervising judge lacked inherent jurisdiction or statutory authority under section 11 of the CCAA to remove duly appointed directors.

The Court further held that the administrative law concept of reasonable apprehension of bias does not apply to corporate directors, whose conduct is governed by fiduciary duties and the business judgment rule.

The moving parties, two directors who were removed from the board of a company undergoing restructuring under the Companies' Creditors Arrangement Act, sought an order expediting the hearing of their motion for leave to appeal the removal order.

The court granted the motion to expedite, finding that the fast-moving and unpredictable nature of CCAA proceedings required a generous view of urgency to provide the board with certainty regarding its composition during a critical phase of restructuring.

Enbridge Gas Distribution Inc. appealed a decision of the Ontario Energy Board that disallowed the recovery of $11 million in costs related to new pipeline routes.

The Board had found that Enbridge did not act prudently in incurring the costs, but Enbridge argued the Board erred by using hindsight in its prudence analysis.

The Divisional Court allowed the appeal, finding that while hindsight can be used to rebut the presumption of prudence, the Board committed an error of law by considering hindsight factors in the actual prudence analysis.

The decision was quashed and remitted to a differently constituted tribunal.

The appellants, two major gas distributors in Ontario, appealed a decision of the Divisional Court upholding the Gas Distribution Access Rule (GDAR) issued by the Ontario Energy Board.

The GDAR permitted gas vendors to determine how customers are billed for gas commodity sales and distribution services.

The appellants argued the Board lacked jurisdiction under the Ontario Energy Board Act to make such billing rules and failed to follow the required rule-making process.

The Court of Appeal held that the standard of review for subordinate legislation is correctness.

Applying this standard, the Court found that the Board had ample jurisdiction to make the billing provisions, as they regulated an important part of the gas distribution business.

The Court also found the Board complied with the statutory notice and comment process.

The appeal was dismissed.

The appellants appealed a judgment restraining use of storm-damaged lakefront property for cottage purposes after rezoning to hazard lands.

The central issue was whether a legal non-conforming use survived where the prior owners ceased occupancy after severe storm damage and decided not to rebuild.

The court held that continuation under s. 34(9) of the Planning Act requires both intention to continue the use and continuation of actual use so far as possible in the circumstances.

The prior owners had abandoned the cottage use, breaking the chain of continuity.

The appeal was dismissed, with only a formal amendment removing the word 'interlocutory' from the injunction.