COURT FILE NO.: CV-09-0007950-00CL
DATE: 2022-11-28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 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 NORTEL NETWORKS CORPORATION, NORTEL NETWORKS LIMITED, NORTEL NETWORKS GLOBAL CORPORATION, NORTEL NETWORKS INTERNATIONAL CORPORATION, NORTEL NETWORKS TECHNOLOGY CORPORATION, NORTEL COMMUNICATIONS INC., ARCHITEL SYSTEMS CORPORATION AND NORTHERN TELECOM CANADA LIMITED
BEFORE: Chief Justice G.B. Morawetz
COUNSEL: Joseph Pasquariello and Christopher G. Armstrong, for the Monitor, Ernst & Young Inc.
HEARD: November 28, 2022
ENDORSEMENT
[1] Ernst and Young Inc., in its capacity as Monitor of the Canadian Debtors (the “Monitor”) brings this motion for approval of the fees and disbursements of the Monitor and its counsel incurred during the period of November 1, 2021, through to and including October 31, 2022 (the “Period”).
[2] Although these proceedings are in their wind-down phase, the Monitor, with the assistance of counsel, continues to undertake efforts to advance the administration of the Canadian Estate. During the Period, these efforts included completing the Fourth Distribution pursuant to the Plan of approximately $38 million, completing final distributions from the Health and Welfare Trust (“HWT”), and recovering a further $21 million for the benefit of the Canadian Estate’s creditors.
[3] The Monitor submits that the fees and disbursements for the Period are fair and reasonable in the circumstances of these proceedings.
[4] The motion was not opposed.
[5] In support of the motion, the Monitor delivered the One Hundred Sixty First Report dated November 17, 2022 (the “161^st^ Report”), which provides a detailed summary of the activities of the Monitor and its counsel throughout the Period together with a detailed breakdown of the Monitor’s and its counsel’s fees and disbursements. The 161^st^ Report supplements the other Reports that were filed during the Period that detailed the activities of the Monitor. In addition, affidavits from representatives of the Monitor and each of its counsel provide a listing of the accounts sought to be passed, including each account date and amount, along with summary tables identifying the individual professionals who have worked on the matter and each of their ranks, average hourly billing rates, total number of hours worked and total associated professional fees, among other information.
[6] The accounts of the Monitor and its counsel for the Period total approximately CA$3 million, inclusive of applicable taxes, the details of which are as follows:
[7] The Monitor and its counsel billed amounts at standard hourly rates consistent with the relevant market and that they, in their professional judgment, considered fair and reasonable in the circumstances of these proceedings.
[8] The efforts of the Monitor and (as applicable) its counsel during the Period have achieved significant results for the Canadian Estate and its creditors. These efforts included:
(a) completing the Fourth Distribution, which saw approximately $38 million distributed to more than 15,000 creditors, bringing cumulative distributions under the Plan to approximately $4.5 billion;
(b) continuing to administer the Initial, Second, Third and Fourth Distributions, which included following-up on uncashed cheques and the re-issuance of over 510 cheques totaling approximately $1 million;
(c) carrying out the steps contemplated by the Final HWT Distribution Order;
(d) continuing to progress the wind-up and repatriation of funds from NNI and the Canadian Debtors’ foreign controlled subsidiaries, recovering approximately $9.4 million during the Period;
(e) entering into an assignment agreement with NNI pursuant to which certain of NNI’s residual assets were assigned to NNL; and
(f) working with the Trustee of the Nortel D&O Trust regarding its wind-up and the return of trust funds to the Canadian Estate as residual beneficiary.
[9] The issue on this motion is whether the Court should approve the fees and disbursements of the Monitor and its counsel for the Period.
[10] The test on a motion to pass accounts is to consider the “overriding principle of reasonableness”, with the predominant consideration in such assessment being the overall value contributed by the Monitor and its counsel. As stated in Laurentian University of Sudbury, 2022 ONSC 2927 at para. 9 (“Laurentian”), the Court does not engage in a docket-by-docket or line-by-line assessment of the accounts as minute details of each element of a professional services may not be instructive when looked at in isolation. See also Bank of Nova Scotia v Diemer, 2014 ONCA 851at para 45.
[11] The following non-exhaustive factors assist courts in evaluating the fairness and reasonableness of a court-appointed officer’s fees:
(a) the nature, extent and value of the assets being handled;
(b) the complications and difficulties encountered;
(c) the degree of assistance provided by the company, its officers or its employees;
(d) the time spent;
(e) the Monitor’s knowledge, experience and skill;
(f) the diligence and thoroughness displayed;
(g) the responsibilities assumed;
(h) the results achieved; and
(i) the cost of comparable services when performed in a prudent and economical manner.
Laurentian, supra at para 10.
[12] Applying these factors to the present case, the Monitor submits that the accounts of the Monitor and its counsel during the Period are fair reasonable and should be approved, specifically noting that:
(a) the Monitor continues to oversee the administration of an estate of significant residual value and deliver results for creditors, with a further $38 million being distributed pursuant to the Plan and approximately $21 million in additional funds being recovered during the Period.
(b) the Monitor, with the assistance of its counsel, has undertaken a scope of work that is well beyond the typical role of a Monitor in a CCAA proceeding, overseeing the entire administration of the Canadian Estate for the benefit of creditors.
While the Monitor anticipates the ongoing administration of the Canadian Estate for a further period of time pending the wind-up of foreign affiliates and potential further distributions to creditors, the Monitor has worked to diligently “close out” matters during the Period where possible.
[13] The Monitor requests an order passing its accounts and those of its counsel and approving its fees and disbursements and those of its counsel incurred during the Period, being:
(a) for the Monitor, CA$2,691,582.77, inclusive of applicable taxes;
(b) for Goodmans, CA$259,043.52, inclusive of applicable taxes;
(c) for A&O, US$73,748.60, inclusive of applicable taxes; and
(d) for PSZJ, US$3,755.82, inclusive of applicable taxes.
[14] Having reviewed the 161^st^ Report and hearing submissions, I am satisfied that the accounts of the Monitor and its counsel should be passed and approved.
[15] The motion is granted and the Order has been signed in the form presented.
Geoffrey B. Morawetz
Date: November 28, 2022