Richard B. Swan

The Nortel group of companies filed for insolvency protection across multiple jurisdictions.

Following the sale of Nortel's assets, approximately $7.3 billion was placed in escrow.

The trial judge ordered that these lockbox funds be allocated on a pro rata basis among the various debtor estates, finding that Nortel operated as a highly integrated multinational enterprise and that the master research and development agreement did not govern allocation upon insolvency.

Several parties sought leave to appeal under the Companies' Creditors Arrangement Act.

The Court of Appeal denied leave, finding that the proposed appeals were not prima facie meritorious, did not raise issues of significance to the practice, and would unduly hinder the progress of the proceedings.

In CCAA proceedings involving the liquidation of a national retail chain, the court considered a motion by the court-appointed monitor seeking approval of its reports and activities.

Certain landlord creditors opposed the request, arguing that broad approval could prejudice creditor rights and improperly create issue estoppel or res judicata effects in future disputes.

The court held that while approval of monitor activities serves useful procedural and policy purposes in CCAA proceedings, caution is required where approval is sought in a general sense without full fact-finding.

The court approved the monitor’s reports but limited the effect of the approval so that only the monitor, in its personal capacity and regarding its own potential liability, could rely on the approval.

This approach balanced protection for the monitor with preservation of creditor rights.

The appellants, holding unsecured crossover bonds, appealed a CCAA judge's decision that the common law 'interest stops' rule applies in CCAA proceedings, preventing them from claiming post-filing interest above their principal debt and pre-petition interest.

The Court of Appeal dismissed the appeal, confirming that the 'interest stops' rule is a fundamental tenet of insolvency law that applies to CCAA proceedings to ensure fair treatment of creditors and orderly administration.

The Court clarified that while creditors cannot legally claim post-filing interest, the rule does not preclude a negotiated CCAA plan from providing for such payments.

In a long-running judgment enforcement proceeding arising from a family business dispute, the judgment creditors sought answers to refusals and undertakings from the debtor's examination in aid and sought third-party examinations of the debtor's wife and son under Rule 60.18(6).

The court held that there was clear difficulty enforcing the judgment, given years of non-payment and evidence of asset transfers, opaque dealings involving coins, racehorses, a luxury vehicle, and a Florida condominium.

The court found the wife may have knowledge of the debtor's assets and that it was just to examine her, and also found grounds to order the son's examination, to proceed after additional production from Heritage Auctions and horse records.

The motion was granted and costs were awarded to the plaintiffs.

The plaintiff sought an interlocutory injunction arising from an alleged scheme by a former consultant and others to appropriate the goodwill, opportunities, confidential information, sponsors, and venue associated with the plaintiff's established industry conference.

The court found a strong prima facie case in breach of contract, unlawful interference with economic interests, passing off, and civil conspiracy, with at least serious issues to be tried on fiduciary duty.

Applying the RJR-MacDonald and American Cyanamid injunction frameworks, the court held that damages would be inadequate given the intangible and difficult-to-quantify loss of goodwill, market position, and reputation, and the defendants' inability to satisfy a damages award.

The balance of convenience favoured preserving the plaintiff's position and preventing the defendants from using the fruits of the alleged misconduct.

Interlocutory injunctive relief was granted pending trial or other final disposition.

In CCAA proceedings arising from the liquidation of a multinational telecommunications company, bondholders claimed entitlement to post‑filing interest exceeding US$1.6 billion in addition to principal and pre‑filing interest of approximately US$4.092 billion.

The court considered whether the common law "interest stops rule" applies in CCAA proceedings, particularly in a liquidating CCAA context.

Applying insolvency principles of pari passu distribution and relying on Supreme Court guidance emphasizing the integrated nature of the CCAA and BIA regimes, the court held that post‑filing interest does not accrue against the insolvent estate.

The court rejected arguments that contractual entitlement to interest survives the filing or that distributions require a negotiated plan recognizing such interest.

Accordingly, crossover bondholders were limited to principal and pre‑petition interest claims.

In long‑running insolvency proceedings under the Companies' Creditors Arrangement Act, the court was asked to determine whether unsecured bondholders were entitled to claim post‑filing interest on crossover bonds after the debtor companies entered CCAA protection.

The court considered the common law “interest stops” rule, the pari passu principle governing distribution to unsecured creditors, and the relationship between the CCAA and the Bankruptcy and Insolvency Act.

The court held that the interest stops rule applies in CCAA proceedings and prevents unsecured creditors from claiming post‑filing interest absent a negotiated plan providing for such payments.

Allowing interest to accrue for some creditors during the stay period would undermine the status quo and distort equality among creditors.

The court further held it had jurisdiction to determine the issue even without a proposed plan of arrangement.

In proceedings under the Companies’ Creditors Arrangement Act, the court addressed scheduling issues for a complex multi‑party trial involving the allocation of assets among creditor groups.

The parties proposed deferring the trial from April 1, 2014 to April 28, 2014, but disagreement remained regarding whether the later date would be feasible.

The court concluded that maintaining the earlier date risked a chaotic trial and that a rolling start date would create further uncertainty.

To ensure certainty and orderly preparation, the court rescheduled the trial to begin May 12, 2014 for 20 days and set case management and trial management conferences.

The court also required all parties to provide comprehensive fee and disbursement summaries to monitor escalating litigation costs.

The applicants sought leave to appeal an order that continued existing banking and management arrangements for joint venture properties, rather than ordering a court-appointed sales officer to distribute sales proceeds directly to the ultimate owners.

The Divisional Court dismissed the motion for leave to appeal, finding no reason to doubt the correctness of the motion judge's highly discretionary decision and concluding the proposed appeal did not involve a matter of general importance.

Following a successful motion by the moving party in a proceeding under the Business Corporations Act (Ontario), the court addressed the appropriate quantum and scale of costs.

The successful party sought substantial indemnity costs.

The court held that substantial indemnity costs are exceptional and reserved for rare cases involving outrageous litigation conduct, which was not established.

Applying Rule 57 of the Rules of Civil Procedure and the fairness principles articulated by the Court of Appeal, the court reduced the requested amount due to duplication of effort and counsel learning time following a change of lawyers.

In a liquidating CCAA proceeding, the court considered whether a deemed trust under the Pension Benefits Act arose in respect of pension plan wind-up deficiencies, giving priority over secured creditors.

Applying the Supreme Court's decision in Indalex, the court held that no deemed trust arose because the pension plans were not wound up prior to the CCAA Initial Order.

The court granted the second lien lenders' motion to lift the stay of proceedings to allow a bankruptcy petition to proceed, concluding that imposing a provincial deemed trust priority in the middle of an insolvency proceeding would undermine the predictability and flexibility of the CCAA regime.

The court addressed three motions in a proceeding involving the sale of multi-unit residential buildings by a court-appointed Sales Officer.

The court approved the Sales Officer's activities, receipts, and post-appointment fees, but directed that pre-appointment fees be allocated between the Sales Officer mandate and the applicants who initially sought a broader receivership.

The applicants' motions for production of accounting records and for independent oversight of the interim distribution were largely deferred to a case conference, though the court ordered a $7,500,000 holdback from the distribution to ensure liquidity for future adjustments.

A respondent brought a motion to stay or consolidate an application seeking enforcement of a “clawback” provision in a unanimous shareholders’ agreement pending determination of several related proceedings, including a wrongful dismissal action and oppression claims.

The court considered the principles under the Courts of Justice Act and Rule 6.01 of the Rules of Civil Procedure governing consolidation and avoidance of multiplicity of proceedings.

The court found that the issues raised in the clawback application were inextricably intertwined with the issues in the related proceedings, including allegations of oppression, breach of the shareholders’ agreement, and the consequences of changes in employment status.

Separate adjudication would risk duplication of evidence, inconsistent findings, and inefficient use of judicial resources.

The motion was granted and the application was ordered to be heard together with the related proceedings.

The EMEA Debtors sought leave to appeal an order approving an Allocation Protocol that provided for a joint trial by the Ontario Superior Court of Justice and the US Bankruptcy Court for the District of Delaware to allocate over US$7 billion in proceeds from the sale of Nortel assets.

The moving parties argued the joint trial violated the Ontario court's independence and that the parties had previously agreed to binding arbitration.

The Court of Appeal dismissed the motion for leave to appeal, finding the proposed appeal lacked prima facie merit as the joint trial did not infringe judicial independence and the relevant agreement did not mandate arbitration.

In a costs endorsement following an appeal and cross-appeal regarding an estate dispute, the respondents sought substantial indemnity costs of $85,000 for the main appeal.

The Court of Appeal declined to award substantial indemnity costs, finding the appellant's conduct was not reprehensible and her appeal raised reasonable questions of law.

The respondents were awarded partial indemnity costs of $30,000 for the main appeal.

The appellant, having been successful on the cross-appeal, was awarded $5,000 in costs.

The appellant challenged the validity of her mother's two wills and a codicil, alleging lack of testamentary capacity, lack of knowledge and approval, and undue influence.

The motion judge granted summary judgment dismissing the challenge and upholding the testamentary documents.

On appeal, the appellant argued that the motion judge erred by granting summary judgment instead of ordering a trial, and by excluding certain expert and lay evidence.

The Court of Appeal dismissed the appeal, finding that the motion judge had a full appreciation of the evidence and issues, properly excluded unreliable expert voicemail messages and uncorroborated evidence under the Evidence Act, and correctly found that the propounders met their burden of proving knowledge and approval despite suspicious circumstances.

The respondents' cross-appeal on costs was also dismissed.

In ongoing proceedings under the Companies’ Creditors Arrangement Act, the applicants sought approval of an Employee Hardship Application Process and an extension of the stay of proceedings.

The requested hardship process was unopposed and approved.

Certain noteholders sought conditions requiring enhanced reporting and procedural safeguards in relation to the claims process and employee claims.

The court held that the statutory test under s. 11(6) of the CCAA was satisfied because the circumstances warranted the extension and the applicants had acted in good faith and with due diligence.

The stay extension was granted, while proposed procedural changes to the claims process were found more appropriately addressed through a motion to vary existing orders.

The Court of Appeal issued a costs endorsement following an appeal in CCAA proceedings.

The appellant, Computershare Trust Company of Canada, was ordered to pay costs of the appeal to the respondent Crystallex International Corporation in the amount of $110,688.00, and to the respondent Tenor Capital Management Company, L.P. and Affiliates in the amount of $80,000.

Both amounts are inclusive of disbursements and HST.

The appellant Noteholders appealed orders approving a bridge loan, a $36 million DIP financing facility, and a Management Incentive Plan (MIP) for the respondent debtor under the CCAA.

The debtor's principal asset was a $3.4 billion arbitration claim against Venezuela.

The Noteholders argued the DIP financing, which could outlast the CCAA protection period and granted the lender a 35% interest in the arbitration proceeds, was effectively an arrangement requiring creditor approval.

The Court of Appeal dismissed the appeal, finding that the supervising judge reasonably exercised his broad discretion under s. 11.2 of the CCAA to approve the financing necessary to pursue the arbitration, and that the financing did not constitute a plan of arrangement.

In Companies’ Creditors Arrangement Act proceedings, the debtor sought approval of a debtor-in-possession financing facility, an extension of the stay of proceedings, approval of a management incentive plan, and approval of the monitor’s actions.

Certain noteholders opposed the proposed financing and incentive plan and proposed an alternative short-term DIP facility intended to maintain the status quo pending negotiation of a restructuring plan.

The court held that the debtor’s board had exercised reasonable business judgment after a competitive process and that the proposed financing satisfied the statutory considerations under s. 11.2 of the CCAA.

The court rejected the argument that the DIP facility constituted a de facto plan of arrangement requiring creditor approval and found the alternative financing proposal tactical and inconsistent with market conditions.

The management incentive plan was also approved as reasonable and necessary to retain key personnel responsible for pursuing a significant international arbitration claim forming the debtor’s primary asset.