In the Matter of a Plan of Compromise or Arrangement of Nortel Networks Corporation et al.

Ontario Reports
Ontario Superior Court of Justice,
Newbould J.
August 19, 2014

121 O.R. (3d) 228 | 2014 ONSC 4777

[Indexed as: Nortel Networks Corp. (Re)]

Case Summary

Bankruptcy and insolvency — Companies' Creditors Arrangement Act — Interest — "Interest stops" rule applying in Companies' Creditors Arrangement Act proceedings — Bondholders not entitled to post-filing interest — Court having jurisdiction to make declaration to that effect in absence of plan of arrangement — Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.

In proceedings under the Companies' Creditors Arrangement Act ("CCAA"), the court was asked to determine whether bondholders were entitled to post-filing interest.

Held, bondholders were not entitled to post-filing interest.

The "interest stops" rule applies in CCAA proceedings. To permit some creditors' claims to grow disproportionately to others during the stay period would not maintain the status quo and would encourage creditors whose interests are being disadvantaged to immediately initiate bankruptcy proceedings, threatening the objectives of the CCAA. While this was a liquidating CCAA proceeding, there is no need for there to be a liquidating CCAA proceeding in order for the interest stops rule to apply. The reasoning for the application of the common law insolvency rule -- that is, the desire to prevent a stay of proceedings from militating against one group of unsecured creditors over another in violation of the pari passu rule -- is equally applicable to a CCAA proceeding that is not a liquidating proceeding. The court had jurisdiction to declare that the bondholders were not entitled to post-filing interest even though a plan of arrangement or compromise had not been negotiated by the debtor and its creditors.

Century Services Inc. v. Canada (Attorney General), [2010] 3 S.C.R. 379, [2010] S.C.J. No. 60, 2010 SCC 60, 2011 D.T.C. 5006, 409 N.R. 201, 296 B.C.A.C. 1, 12 B.C.L.R. (5th) 1, 326 D.L.R. (4th) 577, EYB 2010-183759, 2011EXP-9, J.E. 2011-5, 2011 G.T.C. 2006, [2011] 2 W.W.R. 383, 72 C.B.R. (5th) 170, [2010] G.S.T.C. 186; Indalex Ltd. (Re), [2013] 1 S.C.R. 271, [2013] S.C.J. No. 6, 2013 SCC 6, 301 O.A.C. 1, 96 C.B.R. (5th) 171, 8 B.L.R. (5th) 1, 354 D.L.R. (4th) 581, 2013EXP-356, 2013EXPT-246, J.E. 2013-185, D.T.E. 2013T-97, EYB 2013-217414, 439 N.R. 235, 20 P.P.S.A.C. (3d) 1, 2 C.C.P.B. (2d) 1, 223 A.C.W.S. (3d) 1049, consd

Canada 3000 Inc. (Re); Inter-Canadian (1991) Inc. (Trustee of), [2006] 1 S.C.R. 865, [2006] S.C.J. No. 24, 2006 SCC 24, 269 D.L.R. (4th) 79, 349 N.R. 1, J.E. 2006-1215, 212 O.A.C. 338, 20 C.B.R. (5th) 1, 10 P.P.S.A.C. (3d) 66, 148 A.C.W.S. (3d) 182; Stelco Inc. (Re), [2007] O.J. No. 2533, 2007 ONCA 483, 226 O.A.C. 72, 32 B.L.R. (4th) 77, 35 C.B.R. (5th) 174, 158 A.C.W.S. (3d) 877, distd

Other cases referred to

Abacus Cities Ltd. (Trustee of) v. AMIC Mortgage Investment Corp., 1992 ABCA 57, [1992] A.J. No. 227, 89 D.L.R. (4th) 84, [1992] 4 W.W.R. 309, 1 Alta. L.R. (3d) 257, 125 A.R. 45, 11 C.B.R. (3d) 193, 14 W.A.C. 45, 32 A.C.W.S. (3d) 350 (C.A.); AbitibiBowater Inc. (Re), [2009] Q.J. No. 19125, 2009 QCCS 6461 (Sup. Ct.); Canada (Attorney General) v. Confederation Life Insurance Co., [2001] O.J. No. 2610, [2001] O.T.C. 486, 106 A.C.W.S. (3d) 245 (S.C.J.); [page229] In re Humber Ironworks and Shipbuilding Co. (1869), L.R. 4 Ch. App. 643 (C.A.); Indalex Ltd. (Re), [2009] O.J. No. 3165, 55 C.B.R. (5th) 64, 79 C.C.P.B. 104, 179 A.C.W.S. (3d) 267 (S.C.J.); Ivaco Inc. (Re) (2006), 2006 34551 (ON CA), 83 O.R. (3d) 108, [2006] O.J. No. 4152, 275 D.L.R. (4th) 132, 26 B.L.R. (4th) 43, 25 C.B.R. (5th) 176, 56 C.C.P.B. 1, 151 A.C.W.S. (3d) 1004 (C.A.); Lehndorff General Partner Ltd. (Re), [1993] O.J. No. 14, 9 B.L.R. (2d) 275, 17 C.B.R. (3d) 24, 37 A.C.W.S. (3d) 847 (Gen. Div.); Nortel Networks Corp. (Re), [2012] O.J. No. 1115, 2012 ONSC 1213, 88 C.B.R. (5th) 111, 66 C.E.L.R. (3d) 310, 213 A.C.W.S. (3d) 665 (S.C.J.); Savin (Re) (1872), L.R. 7 Ch. 760 (C.A.); Shoppers Trust Corp. (Liquidator of) v. Shoppers Trust Co. (2005), 2005 7878 (ON CA), 74 O.R. (3d) 652, [2005] O.J. No. 1081, 251 D.L.R. (4th) 315, 195 O.A.C. 331, 10 C.B.R. (5th) 93, 138 A.C.W.S. (3d) 225 (C.A.); Thibodeau v. Thibodeau (2011), 104 O.R. (3d) 161, [2011] O.J. No. 573, 2011 ONCA 110, 277 O.A.C. 359, 87 C.C.P.B. 1, 331 D.L.R. (4th) 606, 5 R.F.L. (7th) 16, 73 C.B.R. (5th) 173, 199 A.C.W.S. (3d) 1068; Timminco Ltd. (Re), [2014] O.J. No. 3270, 2014 ONSC 3393, 14 C.B.R. (6th) 113 (S.C.J.)

(Complete judgment text continues exactly as provided in the source.)