Court File and Parties
COURT FILE NO.: CV-11-9532-00CL DATE: 20200608 SUPERIOR COURT OF JUSTICE – ONTARIO – COMMERCIAL LIST
RE: IN THE MATTER OF the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended AND IN THE MATTER OF a Plan of Compromise or Arrangement of Crystallex International Corporation
BEFORE: Hainey J.
COUNSEL: Robin B. Schwill and Natalie Renner, for the Applicant, Crystallex International Corporation David Byers and Maria Konyukhova for the Monitor Alan Mark, Peter Ruby and Chris Armstrong for Computershare Trust Company of Canada Shayne Kukulowicz, Ryan C. Jacobs and Timothy Pinos for Tenor Special Situation I Rahim Moloo and Jason Myatt US Lawyers for Crystallex International Corporation
HEARD: May 7, 2020
Endorsement
Background
1This motion was heard by videoconference (ZOOM) in accordance with the changes to the operation of the Commercial List in light of the COVID-19 crisis and the Chief Justice’s Notices to the Profession.
2On May 4, 2020, I granted Crystallex International Corporation’s (“Crystallex”) motion for an order, inter alia, extending the stay of proceedings in these CCAA proceedings to November 6, 2020 and sealing certain material in the Monitor’s 33rd Report which Crystallex relied upon in support of its motion.
3At para. 13 of my order I indicated that a further hearing would be held on May 7, 2020 to determine whether the material in the Monitor’s report should remain subject to a sealing order.
4At the hearing on May 7, 2020 I reserved my decision with respect to the request for a sealing order. I indicated that I would provide my decision in due course. This is my decision.
The Sealing Request
5Crystallex requests a sealing order with respect to the following three areas of the Monitor’s 33rd Report filed in support of the motion:
a) Crystallex’s current cash balance and projected litigation and enforcement expenses;
b) Information pertaining to the impact of sanctions on Crystallex’s asset recovery initiatives and related sanctions and strategic litigation initiatives; and
c) Detailed descriptions of disputes and arguments between Crystallex and the Ad Hoc Committee of holders of senior notes of Crystallex (“Ad Hoc Committee”) which are the subject of an ongoing confidential mediation.
6The Ad Hoc Committee and the Trustee for the holders of the senior notes (“Trustee”) oppose the sealing order sought by Crystallex as it relates to the sealing of Crystallex’s (i) cash balance; (ii) cash-flow statement; and (iii) cash-flow forecast.
7According to the Ad Hoc Committee and the Trustee, their opposition to the sealing of this information is based upon the importance of the disclosure of this type of information in CCAA proceedings to allow creditors and other stakeholders to assess decisions being made by the debtor during the stay extension period in order to protect those stakeholders’ own rights and interests.
8The Ad Hoc Committee and the Trustee make the following submissions at para. 3 of their factum:
- Crystallex’s request to redact and seal the portions of the Monitor’s Thirty-Third Report dealing with Crystallex’s financial position is unfounded for three reasons:
a) One of the burdens of a company being granted the benefit of a stay of creditor claims under the CCAA is the sharing of information with stakeholders. At the very least, creditors must be kept informed of the CCAA debtor’s financial circumstances.
b) Precluding creditors and the public from having access to information based on which Crystallex, the Monitor and the Court make decisions is a serious matter. Crystallex must meet the sealing order test established by the courts, and this CCAA Court should strictly apply that test – not treat sealing as a routine matter.
c) The evidence in support of sealing must be compelling. The evidence adduced by Crystallex on this motion is not. It consists of bald statements, which do not come even close to meeting the applicable test for a sealing order.
Analysis
9Crystallex’s CCAA proceedings have been ongoing for more than eight and a half years. Throughout this entire period, Crystallex’s sole business activity has been pursuing, and now enforcing, its claim against Venezuela for having unilaterally rescinded its gold mining operation contract. Crystallex’s arbitration award and related judgement enforcing the arbitration award are now final.
10It is significant to me that the Monitor does not fully support Crystallex’s request for a sealing order.
11The Monitor submits that the Sierra Club test and s. 10(3) of the CCAA governs the issue of whether there should be a sealing order. Under the Sierra Club test I must be satisfied of the following in order to grant a sealing order:
a) That the sealing order is necessary to prevent a real and substantial serious risk to an important commercial interest. The risk must be well-grounded in the evidence and pose a serious threat to the commercial interest in question;
b) There must be no other reasonable alternative to the sealing order and the order, if granted, must be restricted as much as reasonably possible; and
c) The salutary effects of the sealing order must outweigh its deleterious effects including its effect on the open-court principle.
12The onus is on Crystallex to satisfy me that it has met the requirements of the Sierra Club test. The only evidence before me with respect to the Sierra Club requirements is para. 65 of Robert Fung’s affidavit sworn April 26, 2020 which states as follows:
- The Report discloses certain key information regarding the Company’s enforcement and monetization strategy and financial position. It is critical that information be kept confidential to retain Crystallex’s competitive advantage. Crystallex continues to remain concerned that if Venezuela or such other third parties have access to the confidential information contained in the Report, they might use it for strategic purposes to the detriment of Crystallex and its stakeholders.
13I accept Mr. Byers’ submission, on behalf of the Monitor, that Mr. Fung’s evidence at para. 65 of his affidavit does not provide detailed or compelling reasons about how this information, if disclosed, could be used to the detriment of Crystallex or any details whatsoever as to the feared consequences of its disclosure to the public.
14I have concluded that under the Sierra Club test the level of risk from disclosure must be higher to justify a sealing order than what Mr. Fung has described at para. 65 of his affidavit. Mr. Fung’s evidence is highly speculative and does not specify any incremental risk that Crystallex may suffer from the disclosure of this information over and above the risk it is already exposed to.
15I am unable to conclude on the strength of Mr. Fung’s evidence that the public disclosure of this information would create a real and substantial risk to Crystallex’s commercial interests or that there is a serious risk grounded in evidence that would justify the sealing order requested by Crystallex.
Disposition
16Crystallex’s Motion for a sealing order is therefore dismissed for these reasons.
Proposed Redactions
17Following the hearing, the Monitor identified certain redactions that should be made to its report if I decide not to grant the full sealing order requested by Crystallex. These redactions are set out in the attached email from Maria Konyukhova dated May 12, 2020 attached as Appendix A. As Ms. Konyukhova points out in her email, these redactions “represent only the Monitor’s proposal and views”, and other parties may wish to make further submissions on the Monitor’s proposed redactions.
18The Monitor’s proposed redactions make sense to me, however, if any party wishes to make further submissions only with respect to the Monitor’s proposed redactions, they may file written submissions of no more than three pages within five days of the date of this endorsement. After reviewing any submissions, I will decide if a further hearing by video conference on this issue is necessary.
19I thank counsel for their helpful submissions.
Hainey J.
Released: June 8, 2020