Re 4519922 Canada Inc., 2015 ONSC 6153

CITATION: Re 4519922 Canada Inc. 2015 ONSC 6153

COURT FILE NO.: CV-1410791-00CL

DATE: 20151005

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

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 4519922 CANADA INC.

BEFORE: Newbould J.

COUNSEL: Lou Brzezinski and Alexandra Teodorescu, for the Gambazzi Group

James Doris and Dina Milivojevic, for the Monitor

Mark E. Meland, for the Creditors’ Committee

John Porter and Lee Nicholson, for the Applicants

HEARD: October 1, 2015

ENDORSEMENT

[1] The Gambazzi Group moves for an order requiring the Monitor to disclose to them all information and documents considered by the Monitor with respect to its review of proofs of claim submitted by the German Bank Group pursuant to the claims procedure order in this matter. They wish the documents to use in the claims hearing to be conducted by the Honourable James Farley to determine the validity and quantum of the claims made by the Gambazzi Group that were not accepted by the applicant and CLCA.

[2] For the reasons that follow, the motion by the Gambazzi Group is dismissed.

Relevant history

[3] The applicant is a partner of Coopers & Lybrand Chartered Accountants (CLCA). It obtained an Initial Order on December 8, 2014 to stay the outstanding litigation in the Quebec Superior Court relating to Castor Holdings Limited (“Castor”), litigation that had gone on for 20 some years. The history of the matter is contained in endorsements dated January 12, 2015 and July 23, 2015 and need not be repeated here.

[4] The Gambazzi Group was among the plaintiffs who brought claims in the Castor litigation (other than International Finaco Establishment, which never filed a claim in the litigation). The other plaintiffs included certain Canadian financial institutions (the Canadian Bank Group), certain German financial institutions (the German Bank Group), Richter Group Conseil Inc. in its capacity as Castor's trustee in bankruptcy and FCA Canada Inc. and CIBC Melon Trust Company (Chrysler).

[5] Prior to the issuance of the Initial Order, the applicant and CLCA reached a settlement with all major creditors other than Chrysler and the Gambazzi Group which provided that the applicant and CLCA would accept the claims of such creditors as filed in the claims process. Eventually a settlement was also reached with Chrysler on the same essential terms.

[6] On March 10, 2015, a claims procedure order was made in this proceeding that established a process to determine the validity, quantum and priority of claims against the applicant and CLCA. Pursuant to the claims procedure order, the initial review of claims was to be completed by the applicant and CLCA, which had specialized knowledge of the claims, having litigated them for over 20 years. The claims procedure order required the Monitor to review the claims accepted by the applicant and CLCA to determine whether the decision to accept such claims was reasonable, and if so to provide its consent to the acceptance of such claims. In the event any claim was disputed, whether by the applicant and CLCA or the Monitor, the claims procedure order provided for an adjudication process.

[7] Pursuant to the claims procedure order, the Monitor had the right to request additional information from any claimant or any other person who possessed or had knowledge of information relevant to the Monitor's assessment of a claim. Such additional information was to be kept confidential by the Monitor pursuant to paragraph 14 of the claims procedure order.

[8] On April 10, 2015, each of the claimants comprising the Gambazzi Group filed a proof of claim with the Monitor pursuant to the claims procedure order. After reviewing such claims, the applicant and CLCA disallowed the Gambazzi Group's claims in whole on June 16, 2015. As provided for in the claims procedure order, because the applicant and CLCA disallowed the Gambazzi Group's claims, the Monitor did not review such claims. Such claims will be adjudicated by the Honourable James Farley at a claims hearing scheduled to occur in November 2015.

[9] The Canadian Bank Group, the German Bank Group, Richter and Chrysler also filed proofs of claim with the Monitor pursuant to the claims procedure order. After reviewing these claims the applicant and CLCA accepted them in whole. As provided for in the claims procedure order, the Monitor then reviewed these claims to determine whether the decision to accept such claims was reasonable. Following its review of these claims, the Monitor determined that, with certain relatively minor exceptions, the decision of the applicant and CLCA to accept these claims was reasonable.

[10] On August 18, 2015, counsel for the Gambazzi Group wrote to counsel for the Monitor and made wide-ranging inquiries with respect to the Monitor's process for reviewing the accepted claims, including questions about the information requests made by the Monitor on the various claims it reviewed, any interviews conducted by the Monitor, the documents reviewed by the Monitor and the evidence relied on by the Monitor in consenting to the accepted claims. Counsel for the Monitor advised that the requested information would not be provided to the Gambazzi Group. Later the request by the Gambazzi Group was limited to the claims filed by the German Bank Group. The motion brought by the Gambazzi Group is limited to information regarding the claims of the German Bank Group.

Analysis

[11] The essential argument of the Gambazzi Group is that the role of the Monitor under the claims procedure order and the role of the claims officer is the same and that the adjudication of the Gambazzi Group claims before the claims officer should be subject to the same criteria and considerations employed by the Monitor in its review of the accepted Castor claims to ensure that all claimants are held to the same standard of proof. What the Gambazzi Group hope to be able to say at the hearing before the claims officer is that if some lesser standard was applied by the Monitor in reviewing the claim of the German Bank Group, such lesser standard should be adopted by the claims officer in considering the claims of the Gambazzi Group. The Gambazzi Group does not know what the information it is seeking would disclose, and it is quite apparent that it is a fishing expedition in hopes of catching something it might consider useful.

[12] One major fallacy in this argument is that the role of the Monitor was not the same as the role to be played by the claims officer.

[13] Under the claims procedure order, the Monitor was required to review accepted claims and to decide if the acceptance of the claims was reasonable. Paragraph 26 provided in part:

THIS COURT ORDERS that the Monitor, subject to the terms of this Order, shall review all Proofs of Claim in respect of Claims or any part thereof accepted by the Applicant and CLCA (in whole or in part) for voting and/or distribution purposes, and at any time:

(b) may determine that the Applicant and CLCA's decision in respect of an Accepted Claim was reasonable, based upon the Monitor's review of the Proof of Claim and information provided pursuant to a Monitor request for Information, and subsequently may provide its consent to the acceptance (in whole or in part) by the Applicant and CLCA of a Claim; …

[14] This provision in the claims procedure order requiring the Monitor to review accepted claims was inserted because of the unique circumstances in this case in which the claims of all but Chrysler and the Gambazzi Group were pre-approved by the applicant and CLCA in the negotiations leading up to the term sheet and the initial application under the CCAA. There was built into the claims process a requirement that any claim approved by the applicant and CLCA had to be reviewed for reasonableness and consented to by the Monitor. The provision was intended to provide some comfort that the claims accepted by the applicant and CLCA were not accepted just to obtain the consent of the claimants without any regard to the validity of the claims.

[15] The role of the claims officer under the claims procedure order is to determine “the validity, quantum and priority” of all claims referred to the claims officer, not just to determine whether the applicant and CLCA acted reasonably in accepting a claim. That role is the same as the role that would be played by a judge in determining whether a person held a claim as defined in section 2 of the CCAA and section 2 of the BIA. The determination by the hearing officer is to be on a de novo basis.

[16] The attempt by the Gambazzi Group to require the claims officer to apply the standard used by the Monitor in considering whether an acceptance of a claim by the applicant and CLCA was “reasonable” is an impermissible collateral attack on the claims procedure order which sets out different functions for each. The Gambazzi Group did not oppose the claims procedure order and took no steps to vary or appeal it.

[17] Another problem with the position of the Gambazzi Group is that whether the claims of the German Bank Group were good or bad claims is not relevant to the issue of whether the claims of the Gambazzi Group are claims within the meaning of the CCAA. If the hearing involved a comparison of the claims of the Gambazzi Group to the claims of the German Bank Group, it would involve a trial within a trial of the German Bank Group claims. Nothing would be accomplished by that. The Gambazzi Group does not suggest that the information sought would help to prove their claims or disprove a defence to the claims. Moreover, there would be no reason to limit the comparison of the Gambazzi Group claims to just the German Bank Group claims. Why not compare all of the claims to see where the Gambazzi Group claims ranked in terms of strength or weakness?

[18] The information given by the German Bank Group included confidential information regarding their lending practices. This information was provided in confidence pursuant to paragraph 14 of the claims procedure order that required the Monitor to hold it in confidence, subject to further court order. The Gambazzi Group say they would be prepared to sign any confidentiality agreement in order to get the information. I would be extremely reluctant to permit the information to be released in this way. Confidential information regarding a bank’s lending practices, once out of the bottle, would not be able to be reinserted. Such knowledge could be used in the future in a way that could harm the bank, without in any way being known that it was being so used.

[19] In the circumstances, the motion of the Gambazzi Group is dismissed. The Monitor, the applicants and the Creditors’ Committee are entitled to their costs. If these cannot be agreed, brief written submissions along with a cost outline may be made within 10 days and brief reply submissions may be made within a further 10 days.

Newbould J.

Date: October 5, 2015