DATE: 20061101 DOCKET: M34242-C46020

COURT OF APPEAL FOR ONTARIO

RE:

IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. c-36, AS AMENDED AND IN THE MATTER OF MUSCLETECH RESEARCH AND DEVELOPMENT INC. AND THOSE ENTITIES LISTED ON SCHEDULE “A” TO THE NOTICE OF APPEAL

BEFORE:

DOHERTY, GOUDGE and SHARPE JJ.A.

COUNSEL:

Kevin McElcheran for the applicants/appellants

Fred Myers and David Bish for the respondent Muscletech

Alan Mark for the respondent Iovate Companies

Sean Campbell for the respondent Richter (Monitor)

HEARD & RELEASED ORALLY:

October 24, 2006

ENDORSEMENT

[1] This is an application for leave to appeal and if leave is granted, an appeal from an order made by the motion judge in ongoing proceedings under the Companies’ Creditors Arrangement Act (“CCAA”). The motion for leave and the appeal itself were ordered heard together by Borins J.A.

[2] It is well established that leave to appeal from orders made in ongoing CCAA proceedings will be granted “sparingly”. This is particularly true where the order under attack is a discretionary order: see Re Stelco Inc. (2005), 253 D.L.R. (4th) 109 (Ont. C.A.).

[3] Counsel for the applicants/appellants accepts, correctly in our view, that the order under appeal was made in the exercise of the motion judge’s discretion under the CCAA. Counsel argues that the motion judge erred in the exercise of her discretion by taking into account two irrelevant considerations and by giving undue weight to a relevant consideration.

[4] The respondents concede that the relief sought by the applicants/appellants before the motion judge was available under the CCAA and that in an appropriate case, the order sought could have been made. They argue that the motion judge found that this was not an appropriate case for the order sought and that there is no reason to doubt the exercise of that discretion.

[5] The arguments advanced by counsel demonstrate the very fact-specific nature of the motion judge’s exercise of her discretion. Her order is very much a product of her assessment of the fact situation before her. It does not purport to determine any legal issues of significance outside of the factual corners of this proceeding.

[6] The applicants/appellants argue that the motion judge should not have taken into consideration the fact that any motion to certify the proposed class action proceedings would have to take place in the United States and not in Canada. Counsel submits that the location of the proceeding is irrelevant. In our view, the forum in which any future class certification proceedings might occur was relevant as one factor in the broader assessment of the nature and extent to which the ongoing CCAA proceedings could be delayed or lengthened were the applicants/appellants allowed leave to file a representative claim on behalf of the as yet uncertified classes. The impact of the requested order on the CCAA proceedings is clearly a relevant consideration.

[7] The applicants/appellants next submit that the motion judge was wrong to take into consideration the absence of any individual claims in the CCAA proceedings by those individuals who are part of the groups on whose behalf the applicants/appellants seek to advance a representative claim. Given the nature of the individual claims underlying the proposed class action, we think that it was open to the motion judge to view the absence of any individual claims as suggesting that these claims were neither strong nor financially significant. The nature of the proposed claims is clearly a relevant consideration in the exercise of the motion judge’s discretion.

[8] Finally, the applicants/appellants submit that the motion judge gave undue weight to the applicant/appellant’s failure to apply for the order before the claims bar date set out in the earlier order of Farley J. The essence of the motion judge’s reasoning is found at paras. 42-44 of her reasons:

[H]ere, a structure was established by court order, on notice to the very parties who now wish to alter the process fundamentally, after all stakeholders have relied on the structure that was established.

[43] Changing and increasing the landscape of claimants after the settlement of 30 of the ephedra claims after the claims bar date could cause prejudice to the eventual success of the CCAA process. Simply put, all the arguments made by the Representative Plaintiffs and California Consumers should have been made before Farley J. when the Call for Claims order was made, or earlier motions should have been made to deal with these issues before the Call for Claims order was even made.

[44] The process gave adequate opportunity for anyone with a claim to file a proof of claim. The forms were accessible, in plain English. The products liability claimants all managed to make individual claims, even though they might have been involved in class actions. No other prohormone claimants have filed a proof of claim. To allow representative or class claims at this date would be prejudicial to the entire claims process, and would impair the integrity of the CCAA process here. I decline to exercise my discretion in these circumstances.

[9] These factors were, in our view, properly considered by the motion judge in the exercise of her discretion. The weight to be assigned to these various factors was a matter for the motion judge.

[10] Ultimately, we see no realistic possibility of success were we to grant leave to appeal. These proposed representative claims appear individually very modest. They are at a very early stage whereas the claims in the CCAA proceeding appear to be nearing final resolution. These factors all tell strongly in favour of the disposition made by the motion judge.

[11] Leave to appeal is refused.

[12] We think this is an appropriate case for costs. Costs to Mr. Myers’ clients in the amount of $10,000. Costs to Mr. Mark’s clients in the amount of $5,000. Costs are inclusive of GST and disbursements.

“Doherty J.A.”

“S.T. Goudge J.A.”

“Robert J. Sharpe J.A.”