ONTARIO
SUPERIOR COURT OF JUSTICE ( Commercial List)
2012 ONSC 1868
COURT FILE No.: CV-10-8671-00CL
Date: 20120321
B E T W E E N:
BTR GLOBAL OPPORTUNITY TRADING LIMITED, BTR GLOBAL GROWTH TRADING LIMITED, BTR GLOBAL ARBITRAGE TRADING LIMITED, BTR GLOBAL PROSPECTOR TRADING LIMITED and BTR GLOBAL PROSPECTOR II TRADING LIMITED, (Plaintiffs)
Jeffrey Leon, Derek J. Bell for the Plaintiffs
- and -
RBC DEXIA INVESTOR SERVICES TRUST and LEHMAN BROTHERS INTERNATIONAL (EUROPE) (Defendants)
Larry Lowenstein, Jean-Marc Leclerc for RBC Dexia
Douglas O. Smith, Heather K. Pessione for Lehman Bros. International (Europe)
HEARD: February 6, 2012
REASONS FOR DECISION
[ 1 ] This Court was asked to approve a settlement from what was to say the least contentious litigation.
[ 2 ] The Plaintiffs ("BTR") and the Defendants, Lehman Brothers International (Europe) (LBIE) and RBC Dexia were engaged in litigation and associated bankruptcy proceedings related to the ownership of the assets of the BTR Funds held by LBIE. at the time of the collapse of Lehman Brothers.
[ 3 ] LBIE acted as the prime broker for securities trading undertaken by the BTR Funds beginning in 2002. Dexia acted as LBIE’s Canadian sub-custodian.
[ 4 ] For purposes of fully and finally resolving both the outstanding litigation and the claims within the various bankruptcy related proceedings, the BTR Funds and LBIE have entered into a Settlement Agreement as of February 2, 2012 consisting of a public claims determinations and a confidential settlement agreement.
[ 5 ] The BTR Funds seek an Order approving the Settlement Agreement and a Vesting Order in relation to certain assets conveyed in the confidential settlement agreement, which relief is unopposed by the LBIE, and BTR Funds are unaware of any other party having an interest in the motion.
[ 6 ] The BTR Funds are privately held investment funds that invest in a variety of publicly listed and privately traded securities, and between 2002 and 2008 settlements were undertaken by LBIE pursuant to customer account prime brokerage agreements and subsequently new brokerage agreements with Lehman Brothers Inc.
[ 7 ] On September 15, 2008, LBIE went into administration proceedings in the United Kingdom: LBIE was subsequently placed into trusteeship and subject to the jurisdiction of the United States bankruptcy court.
[ 8 ] The relief sought by BTR Funds in an application in this Court resulted in orders the effect of which are set out in the decisions of this Court and of the Court of Appeal. (See 2008 ONSC 32 and 2009 ONCA 84 ), which provide the factual background.
[ 9 ] The BTR Funds subsequently commenced the within action in relation to certain of the investments that were public or listed securities not subject to re hypothecation by LBIE. Additionally, the BTR Funds commenced an action in New York in relation to certain investments that were United States private or unlisted securities.
[ 10 ] The BTR Funds have submitted claims within the LBIE administration and trustee proceedings, which proceedings remain ongoing in their respective jurisdictions.
[ 11 ] LBIE and LBI have denied the various claims advanced by BTR.
[ 12 ] BTR Funds recovered some of the securities which are subject to the counterclaim of LBIE in New York. Others were re-hypothecated by LBIE and held either in Canada or the United States and subject to claim by BTR Funds, which also has an unsecured claim against the estate of LBIE.
[ 13 ] The parties agree that there is risk to each side in the litigation and if continued would take some years to final resolution. Enforcement of any judgment in this court in favor of BTR Funds might also be problematic in the short run as LBIE sought leave to appeal to the Supreme Court of Canada on the issue of jurisdiction and that leave was only withdrawn by virtue of this settlement.
[ 14 ] I am satisfied that the specific terms of the settlement remain confidential. LBIE is engaged in several thousand claims by other investors and has insisted as a term of settlement that the specifics of these claims remain confidential.
[ 15 ] While each of the investors in each of the funds will be treated equally according to their shareholdings, each fund may appear to be different depending on the amount of securities as opposed to cash that will be returned to investor accounts.
[ 16 ] I am satisfied based on the material filed and the submissions of counsel that the return to the BTR Funds and their investors is fair and reasonable as between funds and between investors in each of the funds.
[ 17 ] The parties have been guided by reference to Part XII of the Bankruptcy and Insolvency Act and in particular ss. 261 and 262 with respect to the claims on behalf of public individual investors. The unsecured claims of the BTR Funds will be made in the U.S. proceedings and will not be subject to a claim for confidentiality. While Part XII is not directly applicable, it does provide guidance for the basis on which to conclude the settlement is fair and reasonable.
[ 18 ] I am satisfied that while Court approval of the settlement and the granting of a Vesting Order are not required, it is appropriate that the Court approve the settlement to provide transparency to the Fund investors as well as recognize the fairness of the compromise by the parties in the circumstances.
[ 19 ] Section 97 of the Courts of Justice Act permits the Court to make binding declarations of right which include entitlements under contract and declarations of interests. The contract of settlement is one between the BTR Funds and the administration and trustee on behalf of LBIE. I agree that it is appropriate that the investors in the BTR Funds receive the Court's view on the fairness of the settlement to them as investors.
[ 20 ] The Court has jurisdiction to declare settlement transactions within the context of litigation fair and reasonable, taking into consideration the surrounding circumstances, as well as the fairness and consistency of the settlement with any relevant contractual relationship and any competing interests. (See Hollinger International Inc. v. American Home Assurance Co. 2006 814 (ON SC) , [2006] O.J. No. 140 (S.C.J.) at paragraphs. 28 and 61 . The alternative to settlement would otherwise be great uncertainty for considerable time and at great cost.
[ 21 ] The Vesting Orders will therefore issue in the forms signed.
C. CAMPBELL J.
RELEASED:
2012 ONSC 1868
COURT FILE No.: CV-10-8671-00CL
Date: 20120321
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: BTR GLOBAL OPPORTUNITY TRADING LIMITED, BTR GLOBAL GROWTH TRADING LIMITED, BTR GLOBAL ARBITRAGE TRADING LIMITED, BTR GLOBAL PROSPECTOR TRADING LIMITED and BTR GLOBAL PROSPECTOR II TRADING LIMITED, (Plaintiffs) - and - RBC DEXIA INVESTOR SERVICES TRUST and LEHMAN BROTHERS INTERNATIONAL (EUROPE) (Defendants) REASONS FOR DECISION C. CAMPBELL J.
Released: March 21, 2012