SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: In the Matter of the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36
AND:
In the Matter of a Plan of Compromise or Arrangement of the Canadian Red Cross Society/La Société Canadienne de la Croix-Rouge; The Canadian Red Cross Society/La Société Canadienne de la Croix-Rouge, Applicant
RE: Michael McCarthy, Christine McCarthy, Derek Marchand, Plaintiffs
AND:
The Canadian Red Cross Society, The Attorney General of Canada, Defendants
BEFORE: D. M. Brown J.
COUNSEL: A. Parley, for the Trustee
A. Carr, for the HCV Class
L. Redden, for the Accountant of the Superior Court of Justice
HEARD: December 7, 2012
REASONS FOR DECISION
I. Trustee’s motion for directions regarding funds for Missing Claimants
1On September 14, 2000 this Court approved and sanctioned a plan of arrangement and compromise for the Canadian Red Cross Society. The history of that Plan of Arrangement has been described elsewhere. [1] The Plan Implementation Date was set at October 5, 2001. Section 5.05 of the Plan directed the Trustee to establish five trusts, one of which was the HCV Fund created under section 5.05(e) of the Plan to fund the settlement of the Pre-86/Post-90 HCV Class Actions. By Judgment dated June 21, 2001 Winkler J., as he then was, approved a settlement of the Ontario Pre-86/Post-90 HCV Class Action – McCarthy v. Canadian Red Cross Society , 98-CV-143334 – and, in so doing, he approved a Distribution Protocol for the HCV Fund. [2]
2By Reasons released July 6, 2011 [3] I extended the time for the completion of the administration of the Other Transfusion Claims Trust by one year to October 5, 2012. That extension of time affected the operation of the HCV Fund. As a result, by Reasons released August 9, 2011, [4] I extended the Final Distribution date in the HCV Fund Distribution Protocol by one year to October 5, 2012. By Reasons released September 7, 2011 I granted the Trustee’s request to fix a claims bar date for claimants against the HCV Fund. [5]
3The Trustee now moves for directions regarding certain funds held by the Claims Administrator of the HCV Fund from cheques issued to, but not cashed by, claimants to whom the funds were sent.
II. The problem
4Mr. Gilles Campeau, who works for the Claims Administrator, KPMG Inc., recalled, in his affidavit, the history of the HCV Fund. Back in 2001 the Trustee placed $68 million in the Fund. Administration of the Fund began on September 30, 2001. Distributions were made to Accepted Claimants in May, 2002. A further distribution was made to Accepted Claimants and Accepted Late Claimants in December, 2004. Thereafter, claims were paid on acceptance. By January, 2006, distributions had exhausted the available funds. After that date further claims were accepted, but no compensation was paid out until 2011 when further funds became available to the HCV Fund for distribution. In December, 2011 a partial distribution was made to Accepted and Unpaid Claimants. Additional funds now have come into the HCV Fund from other funds, and the Trustee is ready to make a final distribution.
5A question has arisen: how much money is available for distribution? The question arises because as of November 23, 2012 some 187 cheques, totaling $500,430.00, previously issued to claimants have not been cashed. The cheques sent range from $100 to $10,450, with the majority for amounts between $2,000 and $4,000. The cheques were issued between November 26, 2004 and November 20, 2012.
6Of these cheques, 23 amounting to $16,446.67 were issued this past October and November. The remaining 167 cheques total $483,983.33 (the “Unclaimed Funds” of the “Missing Claimants”). In addition to that amount, approximately $700,000 in the Fund stands ready for distribution.
7The Missing Claimants’ cheques all were sent to the claimant’s last address on file. Mr. Campeau deposed that throughout the administration process the Claims Administrator had informed claimants that they bore a responsibility to update their current address information.
8Of the 164 outstanding cheques, 89 were returned to the Claims Administrator as “undeliverable”, while the other 75 cheques have not been cashed.
9Mr. Campeau described the efforts the Claims Administrator has undertaken over the years to locate and contact the Missing Claimants. I am satisfied that those efforts were appropriate and reasonable in the circumstances.
10So, how should the Trustee and the Claims Administrator deal with the $483,983.33 of Unclaimed Funds for the Missing Claimants?
III. The options
11In his affidavit Mr. Campeau outlined two options.
A. Option A: Distribute the Unclaimed Funds to Known Partially Paid Claimants
12Option A would see the funds distributed amongst other known claimants - the Accepted and Unpaid Claimants who received a distribution in December, 2011. Mr. Campeau described them as the Partially Paid Claimants. These are claimants whose applications were approved between January, 2006 and October, 2011, the claims bar date. There are 645 such claimants.
13Under Option A an additional $750 would be paid to each Partially Paid Claimant. As Mr. Campeau deposed:
One benefit of this option is that it does not necessitate any further administrative efforts or costs on the part of the Claims Administrator. This option will ensure that approximately 100% of the funds are paid to eligible claimants and that they are paid out as part of the Final Distribution in the next few weeks.
14On the down side, if the Trustee were to proceed with Option A, some risk exists that at some point in the future a Missing Claimant might contact the Claims Administrator and ask about the distribution of further funds, only to be told the Fund had been depleted by the Final Distribution. Of course, since a Missing Claimant is one for whom the Claims Administrator lacks current contact information, no way exists to give the Missing Claimants notice of this motion.
B. Option B: Transfer the Unclaimed Funds to other organizations which will make efforts to track down the Missing Claimants
15Option B is much more complex. It would see the Trustee transfer the Unclaimed Funds to a number of organizations which are prepared to hold these funds on behalf of the Missing Claimants and make efforts to locate the Missing Claimants.
16According to their last known addresses, the Missing Claimants reside in Ontario (65), Quebec (24), British Columbia (20), Alberta (13), the rest of Canada (20 - New Brunswick, Manitoba, Nova Scotia, Saskatchewan and the Yukon), Texas (1), Oregon (1), Florida (1) and Virginia (1).
17Under Option B, the Unclaimed Funds would be transferred to: (i) the Accountant of the Superior Court of Ontario who would endeavour to obtain information about last known addresses from the Ontario Health Insurance Plan; (ii) the Ministre du Revenu du Quebec (“MRQ”) which would use tax filing information to locate Missing Claimants; (iii) the Office of the British Columbia Unclaimed Properties Society (the “Society”) which has access to the Insurance Corporation of British Columbia and Health Care databases; (iv) the Office of the Alberta Treasury Board and Finance, Tax and Revenue Administration – Unclaimed Property which would simply post the names of local Missing Claimants on its website; (v) the Texas Comptroller of Public Accounts which, too, posts names on its website; (vi) the Florida Department of Financial Services – Bureau of Unclaimed Properties which uses databases to search for the beneficiaries of unclaimed properties; (vii) the Department of State Lands of Oregon, which uses similar techniques; and, (viii) the Office of the Treasury of Virginia which annually publishes the names of newly reported unclaimed property beneficiaries in major state newspapers.
18If the funds are transferred to these organizations, what chance of success will they have of finding the Missing Claimants? Mr. Campeau gave the following estimates:
Ontario – 100%;
Quebec – 100% for those residing in Quebec, although the MRQ would charge a 10% administration fee. However, the Trustee proposes transferring to the MRQ Unclaimed Funds for Missing Claimants last known to live in Manitoba, New Brunswick, Nova Scotia, Saskatchewan and the Yukon (since those jurisdictions lack a beneficiary-finding organization) and the odds of the MRQ finding any of those Missing Claimants is very low since the MRQ does not possess any data for them;
British Columbia – 95%;
Alberta and Texas – 10%;
Florida, Oregon and Virginia – 50%
And if those organizations cannot locate a Missing Claimant, what will happen to that portion of the Unclaimed Funds held by that organization? Mr. Campeau deposed that: (i) Ontario and Quebec would hold the funds indefinitely for Missing Claimants; (ii) in Alberta, funds not claimed within 10 years would escheat to the Crown; and, (iii) in other jurisdictions unclaimed funds would eventually escheat to the government in that jurisdiction. However, the Trustee proposed that if after three years those organizations still held Unclaimed Funds, the balance should be paid to a charity selected by the Trustee.
19The Trustee proposed and sought an order based on Option B.
C. Option C: a hybrid approach
20During the course of my questioning at the motion hearing an Option C emerged under which the Trustee would transfer some of the Unclaimed Funds to the Ontario, Quebec and British Columbia organizations based on the Missing Claimants last known to reside in those three provinces, while the balance of the Unclaimed Funds would be distributed amongst the known Partially Paid Claimants.
D. The final, unclaimed funds
21Option A contains a low risk that some cheques delivered to Partially Paid Claimants might go uncashed. So, too, Under Option B, in the event the organizations to whom Unpaid Funds are transferred cannot locate all Missing Claimants, some unclaimed funds might remain. In those circumstances, the final, unclaimed funds would be paid to a charitable organization selected by the Trustee to benefit individuals like the claimants to the HCV Fund.
E. Positions of those attending on the motion
22Class Counsel supported the Trustee’s proposed Option B, but asked that the Trustee consult Class Counsel about the selection of the charity which would receive any final, unclaimed funds.
23Counsel for the Trustee advised that class counsel in British Columbia and Quebec, the Ontario Public Guardian and Trustee, and the Office of the Children’s Lawyer supported the Trustee’s proposal.
24Mr. Steven Adams, The Accountant of the Superior Court of Justice, filed a most helpful affidavit. I appreciate his office’s willingness to assist in locating Missing Claimants. Mr. Adams deposed that it might take his office up to three years to determine if a Missing Claimant could be found, its searches would be limited to living claimants and would not include estates of deceased claimants, and he would require some direction from the Court about how any funds remaining at the end of the search process should be distributed.
IV. Analysis
25The administration of the HCV Fund is now down to its final stages. Since the amount of the Unclaimed Funds is less than $500,000, the proportionality between the costs and benefits of any possible solution becomes a most important factor. Simply put, no perfect solution exists. Under Option A, Missing Claimants who later appear to claim their entitlements will find the pot empty. However, those claimants had an obligation to inform the Claims Administrator of their current contact information, and they did not do so. Under Option A there would be a high degree of certainty that most of the Unclaimed Funds would end up exactly where they should – in the pockets of the victims who are members of the class. Under Option B, some Missing Claimants likely will be found, but no doubt some will not. In addition, the beneficiary-search process will take time and will be placed in the hands of third parties who are not under court supervision, as are the Trustee and Claims Administrator. As I say, there is no perfect solution.
26I appreciate the information which the Trustee has placed before the Court. In my view the guiding principle should be to select the distribution mechanism which stands the greatest chance of placing as much as possible of the Unclaimed Funds in the pockets of class members. I conclude that Option A provides the greatest certainty of so doing. Although Option C is somewhat attractive in respect of Missing Claimants last known to reside in Ontario, Quebec and British Columbia, the passage of time since the claims process started inevitably means that some former residents of those provinces will have moved outside the province and, as well, some claimants will have died. Mr. Adams deposed that his office’s search would not include deceased beneficiaries.
27On balance, I conclude that Option A presents the best way to ensure that as much of the Unclaimed Funds will end up with class member claimants. I therefore approve the Trustee proceeding with Option A.
28As to the Trustee’s recommendation to disburse any final, unclaimed funds to a charity selected by him, I approve that course of action as long as the Trustee and Claims Administrator determine, in their sole discretion, that the cost of distributing any final, unclaimed funds to known claimants would exceed the amount of the distribution. If it would not, the final, unclaimed funds should be distributed equally to Partially Paid Claimants. I leave that decision in the hands of the Trustee in consultation with the Claims Administrator; there is no need to seek further directions from the Court on the issue. If the Trustee decides to pay the funds to a charitable organization, I would ask the Trustee to consult with Class Counsel about the charity. However, at the end of the day the selection decision rests in the sole discretion of the Trustee.
29The Trustee and Claims Administrator seek approval of their plan to dispose of claimant files. I grant such approval.
30Counsel for the Trustee should prepare an order reflecting the directions which I have given in these Reasons and attend at a 9:30 appointment before me over the next few days for my issuance of the order.
D. M. Brown J.
Date : December 13, 2012
1Re Canadian Red Cross Society , [2008] O.J. No. 4114 (S.C.J.) .
2Paragraph 19 to the order of Winkler J. made June 21, 2001 in Court File No. 98-CV-143334.
3Re Canadian Red Cross Society , 2011 ONSC 4222 .
4Re Canadian Red Cross Society , 2011 ONSC 4754 .
5Re Canadian Red Cross Society , 2011 ONSC 5255