The details have yet to emerge, but Canada has scored a significant deal in reaching an agreement on the Trans-Pacific Partnership, says an international trade lawyer.
|'We’ll still have supply management, but imports will play a bigger role,' says Milos Barutciski.|
He admits he had been a skeptic of the likelihood of a deal until recently due to the political challenges to the deal in the United States.
Today, Canada announced that members of the Trans-Pacific Partnership had concluded a free-trade agreement covering a $28.5-trillion market. Besides Canada, the 12 countries in the trading block are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.
The deal provides for lower tariffs and covers a range of areas. They include: textiles and apparel; financial services; telecommunications; government procurement; labour; and competition policy.
While the government has released a summary of the deal that, for example, refers to an investor-state dispute settlement mechanism and provides for protection from expropriation without adequate compensation, Barutciski says the fine details have yet to emerge.
“Trade agreements historically follow a boilerplate,” he says.
For Canada, of course, supply management in the dairy sector was a key sticking point in the negotiations, especially given the political sensitivities around agriculture. The federal government has maintained it has protected supply management, and Barutciski, who notes he’s not a fan of the system, says that likely means it will continue as is but with a higher quota for imports.
“We’ll still have supply management, but imports will play a bigger role,” he says, suggesting the change would largely benefit the United States, New Zealand, and Australia.
The government did, in fact, release some details on the plans for the agricultural sector today. Under the agreement, Canada will open up access to imports through quotas phased in over five years: 3.25 per cent of Canada’s milk production for 2016; 2.3 per cent for eggs; 2.1 per cent for chicken; two per cent for turkey; and 1.5 per cent for broiler hatching eggs.
In return, the government will provide the supply-managed sector with $4.3 billion in support, including an income guarantee program to “keep producers whole” with 100-per-cent income protection to producers for 10 years from the day the trade deal comes into force. The funding will continue on a “tapered basis” for a further five years, the government announced today.
Graham Lloyd, general counsel with the Dairy Farmers of Ontario, emphasizes his organization is pleased with the agreement "in the circumstances" given reports that those lobbying on the supply-management issue in the United States had been seeking access to 15 per cent of the market.
"You can't ever say when you're losing market share that you're happy," he says. "But in the circumstances of what was at risk, we are relieved that it wasn't as serious as it could have been."
Lloyd also notes the organization is happy with a plan to cancel a duty-deferral program that allowed imports to Canada for processing with a window of up to four years to re-export the product. "That program was not well audited," he says.
"We know that as much as one per cent of our market was being taken," he adds.
In addition, Lloyd gave kudos for new funding for development and innovation in the sector.
"We are in need of investment for new plants . . . and this will go a long way towards that," he says, noting he's not yet ready to pronounce on the government's broader compensation program for the sector given the need to assess the impact of the quota changes.
"I'll say at this point, it's difficult to assess," he says.
Trade deals are, of course, always controversial, and the Conservative government has faced some criticism for moving on the issue during an election campaign with the NDP in particular expressing cynicism about the deal.
Barutciski, however, says the negotiations couldn’t stop for a Canadian election, particularly given U.S. President Barack Obama’s drive to complete a deal as one of his last major achievements in office. And he suggests the deal will open up significant opportunities for Canadian companies to join “broader Pacific supply chains.”
But the biggest imperative for Canada, he says, was avoiding a repeat of the situation with South Korea where the United States got ahead of Canada when negotiations with this country stalled over the auto sector.
“We were pretty much wiped out when we stalled over the auto issue,” says Barutciski.
He notes Canada’s beef and pork industries suffered significantly despite reaching a subsequent free-trade deal with South Korea.
“American beef and pork suppliers basically took over our market,” he adds, suggesting Canada faced a similar loss of market access if it stayed out of the Trans-Pacific Partnership.
While politicians such as Harper are touting the economic benefits of the deal, Barutciski says the partnership was in many ways about the U.S. “geopolitical objective” of countering China’s growing influence in the region. The deal took years to conclude, something he attributes to the complications of bringing in additional countries such as Canada late in the game.
“That made the negotiations more complicated,” says Barutciski, who nevertheless suggests that having countries such as Canada, Japan, and Mexico involved “makes this a very serious trading bloc.”
Update 4:25 pm: Quotes added from Graham Lloyd.
A Toronto lawyer who lost his copyright claim against Wal-Mart Stores Inc. over his political memoir about the former prime minister of Kenya is taking his case to the Ontario Court of Appeal.
Miguna Miguna, a lawyer who spent four years as a key adviser to former prime minister Raila Odinga, before the pair fell out, took the retail giant to task after learning it was offering his book, Peeling Back the Mask: A Quest for Justice in Kenya, for sale on walmart.com. He also sued Consortium Book Sales and Distribution LLC, a company identified on walmart.com as the publisher of the book.
Miguna claimed he didn’t consent to any publication, production, or release of the book by the defendants, Ontario Superior Court Justice Graeme Mew noted in his decision this month granting summary judgment in the case.
Miguna alleged the proper publisher was Gilgamesh Africa Ltd., a company granted the right to publish the book through an agreement between Miguna and Gilgamesh Publishing Ltd. Consortium, however, said it was merely a distributor of the book and it had a distribution agreement with Gilgamesh Publishing Ltd. In fact, it said it never actually supplied a single copy of the book to anyone despite its appearance on walmart.com.
But as Mew noted, Miguna claimed his relationship with Gilgamesh Africa had fallen apart. He alleged it never delivered on its contractual obligations to him and never marketed, distributed, or sold the book. Alleging the publishing agreement “was a fraud from the beginning,” Miguna said he had terminated the contract in January 2013.
In considering the defendants’ motion for summary judgment this month, Mew found Miguna’s dispute with the Gilgamesh entities wasn’t the issue before him.
“There is no evidence in the record that the defendants dealt with any copy of the book that was not produced by Gilgamesh Africa or under its authority, or that does not bear the imprints ‘Gilgamesh Africa 2012’ (there is a reference in the record to the existence of pirated copies of the book in Kenya, but there is no suggestion that there is any link between that and the actions of the defendants in this case),” he wrote in Miguna v. Walmart Canada.
As a result, Mew found there were no genuine issues requiring a trial and there was no reasonable basis to believe further discovery would address the deficiencies in the case. He granted the defendants’ motion to dismiss the action and suggested Miguna should pay their costs on a partial indemnity scale.
Last week, however, Miguna filed a notice of appeal seeking to set aside Mew’s decision in its entirety. Among other things, he argues Mew committed several errors of law by failing to correctly apply the Copyright Act and case law as well as the appropriate test for summary judgment.
“He failed to take a hard look at the evidence and fully appreciate all the material evidence before him,” Miguna says in his notice of appeal.
“In the end, Justice Mew’s Reasons for Judgment is primarily a regurgitation of the respondents’ arguments; not a reasoned decision supported by material facts and relevant, credible and reliable evidence before the court.”
“The appellant had produced a true copy of the Assignment of Contract to Gilgamesh Africa Ltd. dated July 12, 2012. After the Contract Assignment, there was no residual rights that vested on Gilgamesh Publishing Ltd., hence the latter could not have assigned distribution rights to Consortium as alleged by the respondents in their pleadings and evidence. Moreover, on January 6, 2013, the appellant terminated the publishing contract with Gilgamesh Africa Ltd. This proves that as of March 2013 when Gilgamesh Publishing Ltd. and Consortium were purporting to enter into a distribution agreement, they could not have done so validly even if Gilgamesh Africa Ltd. had given them authorization (a claim that the respondents had not made and the appellant has not conceded in any event).”
Update 1:55 pm: Comments from Ilan Ishai removed due to lack of permission from client.
The Ontario Court of Appeal has upheld a decision to strike a defamation claim against a well-known personal injury lawyer in London, Ont., over statements about a case against a local obstetrician and gynecologist.
The case, Frank v. Legate, dealt with six statements posted on posted on the web site of lawyer Barbara Legate’s firm, Legate & Associates LLP, as well as a seventh statement on the CTV news web site, about civil and disciplinary action against Dr. Cathy Frank.
“If you think you or your baby may have a claim against Dr. Frank, please contact Legate & Associates,” reads one of the statements.
Another statement noted more than 100 former patients of Frank had contacted the firm and pointed out it had, at the time, issued 58 claims in Ontario Superior Court. Two of the statements made reference to “compromised babies” and the fact “children have been born with disabilities that they wouldn’t otherwise have had.”
Besides the defamation claim against Legate, her firm, and two other lawyers who represented the former patients, Frank also sued for malicious prosecution, champerty and maintenance, and intentional interference with economic relations and infliction of mental distress. She claimed $5 million in damages, including $500,000 as a punitive award.
Last August, Superior Court Justice Thomas Carey struck Frank’s claim, finding it didn’t disclose a reasonable cause of action. Frank appealed, arguing, among other things, that a court should only strike a defamation claim on a Rule 21 motion where the statements are clearly not capable of a defamatory meaning. The statements at issue, she argued, don’t fall within the clearest of cases.
But on Friday, the appeal court upheld Carey’s decision. Five of the statements, wrote Justice William Hourigan on behalf of a three-judge panel, “were purely informational and did not comment in any way on the merits of the ongoing litigation.”
The comments, he added, were “neutral in their description of the appellant. References to the numerous women who have come forward are supported by the appellant’s own pleading, which indicates that 58 actions have been commenced against her. No reasonable person, who is taken to understand the difference between allegations and proof of guilt, could interpret these statements in the manner suggested by the appellant (i.e. as suggestive of her being negligent and/or incompetent as a physician).”
In his findings, Hourigan also noted a bigger issue was at stake: “The appellant effectively seeks to prohibit law firms from describing allegations that form the basis of potential or ongoing claims. If this type of statement amounted to defamation, no law firm in the province could ever solicit clients because they could not provide the necessary information for people to determine if they should consult a lawyer about a potential claim. The class action process, for example, would be effectively eviscerated if lawyers were restricted in their communications in the manner urged upon us by the appellant.”
Paul Michell, the litigator at Lax O'Sullivan Scott Lisus LLP who acted for Legate and the other defendants, says he could find no other Canadian cases that involved similar circumstances and allegations.
"The Court of Appeal was concerned that, if accepted, it would severely restrict the ability of firms to communicate with potential clients," he says.
As a result, the appeal court dismissed Frank’s appeal and awarded the defendants $12,500 in costs.
Update 4:30 pm: Comments from Paul Michell added.
|A web site, youbethejudge.ca, questions NDP candidate Carol Baird Ellan’s rulings while on the bench.|
“This is one of the risks of people who have held judicial office becoming involved in partisan politics,” says Emmett Macfarlane, a professor at the University of Waterloo, of the Conservative attacks on B.C. NDP candidate Carol Baird Ellan.
The comments follow the launch of a Conservative web site, youbethejudge.ca, suggesting Baird Ellan was soft on crime while on the B.C. Provincial Court bench. “For five years she was a member of the B.C. provincial court, time and time again, when serious criminals — including sex offenders — appeared before her court, she exercised her discretion to give them a lenient sentence,” the web site states.
“Now, Ellan is helping the NDP bring their soft-on-crime approach to all of Canada.”
The web site highlights three of Baird Ellan’s rulings that it deems “unfair.” In one case, it says she gave a two-year sentence to a man who sexually abused his two granddaughters for six years. In another, she sent a man to jail for one day for exposing his genitals to minors, according to the web site. Two of the cases date back to the 1990s, while the other is about five years old.
Baird Ellan has been off the bench for some time, having retired from the court in 2012. After winning the NDP nomination for Burnaby North-Seymour earlier this year, she said she wanted to try to bring about change as an elected politician and highlighted issues, such as the environment, that she feels strongly about. Macfarlane, who has written a book looking at some of the issues surrounding the judiciary, Governing from the Bench: The Supreme Court of Canada and the Judicial Role, says the Conservatives have a right to question the rulings of judges who run for office. “It’s fair ball for the Conservatives to look at a candidate’s record,” he says, noting the situation raises questions about the line between politics and the judiciary. The perception matters, he adds, suggesting he has concerns as well about former cabinet ministers, such as Manitoba Court of Queen’s Bench Justice Vic Toews, who quickly joined the bench after leaving politics.
“I think there’s a real issue there that we have to do some hard thinking about,” says Macfarlane, adding there may be the need for rules such as a cooling-off period before those who leave the bench can enter politics.
“Perception is what kind of holds the thing together,” he says, noting that movement between the bench and politics can raise questions about a judge’s impartiality while on the court.
For her part, Baird Ellan says her party has lots to offer when it comes to dealing with crime and boosting public safety.
“The fact is the Conservatives are getting increasingly desperate with their misleading attacks," she says. "I was the first-ever female Provincial Court chief judge and when it comes to crime and policing, Canadians are looking for action but the Conservatives are just giving them a bunch of broken promises. Tom Mulcair has a plan to make streets safer by relaunching the police officer recruitment fund and put 2,500 new police officers on the streets. That’s the change Canadians want.”
With a big focus on the Ashley Madison hack, law firms are showing increased anxiety around external threats to their computer systems, a new report has found.
|Perceived greatest security threats (Source: Digital Defense)|
“I think they’re very applicable to the Canadian market as well,” says Meg Grant, a vice president of Digital Defense, of the study’s findings. Her company provides businesses with security software and consulting services.
According to the report, external threats such as hackers have replaced malware as the biggest perceived security threat. As for law firms’ top information security concerns, they range from employee negligence to phishing attacks and viruses.
Despite the concerns, the study found 65 per cent of the law firms that participated have no staff devoted to information security, with 31 per cent of them reporting budgets for the issue in the range of $10,000 to $50,000. The study covered a range of law firm sizes with 36 per cent of them employing less than 150 people.
In terms of law firms’ actions to deal with security threats, the study noted a couple of areas of concern. The biggest is around vendor management, in particular the lack of an evaluation process. According to the study, 63 per cent of respondents don’t use a vendor evaluation process.
|The most concerning threats including the top three: 1. employee negligence, 2. phishing/sishing, and 3. virus, worm, and malware threats. (Source: Digital Defense)|
“I would say that would be something that firms would really want to evaluate,” she adds, citing the need to ensure vendors meet criteria around issues such as access to law firms’ networks and information.
When it comes to firms’ responses to security threats, the most common one is information security training for employees followed by encryption and intrusion detection.
“That’s a positive trend because that’s a big target for hackers,” says Grant of the vulnerabilities around employees.
Firms commonly conduct such training once a year or when hiring new employees. A further 11 per cent of respondents have no training programs around information security.
While the Ashley Madison hack is the big issue of the day, of course, Canadian law firms have suffered significant breaches in the past. In April 2011, hackers attempting to access sensitive documents targeted four Canadian law firms by posing as partners who were working on an acquisition of a Chinese company.
Overall, Grant says she has seen some improvements in law firms’ responses to the issue but notes what’s key is dealing with the issue on a regular basis.
“You have to have a program in place,” she says.
The question of whether to accredit Trinity Western University’s planned law school is back on the agenda with the B.C. Supreme Court considering a judicial review application in the case this week.
|The language around conception in the covenant, says Kendra Milne, is a concern given the implications for reproductive rights and access to abortion care.|
Among the interveners is West Coast LEAF, which says it’s seeking to an advance a less talked-about issue in the case: women’s equality.
The university’s community covenant, says director of law reform Kendra Milne, creates “another access barrier” to women through language requiring students to “treat all persons with respect and dignity, and uphold their God-given worth from conception to death.” The language around conception, she says, is a concern given the implications for reproductive rights and access to abortion care.
The hearings in Vancouver will run for five days before Chief Justice Christopher Hinkson. In its submissions in the case, Trinity Western says “in the context of an evangelical Christian community,” its community covenant is “neither surprising nor offensive.”
“It is part of TWU’s Christian philosophy of education, which integrates academic learning, spiritual formation and moral character development in a manner consistent with TWU’s view of biblical faith.”
It also argues the law society’s decision to deny accreditation was contrary to the Legal Profession Act.
While 74 per cent of B.C. lawyers who participated in the October 2014 referendum voted against accreditation, Trinity Western argues it wasn’t in line with s. 13 of the act that deals with implementing resolutions of special meetings.
Among other things, it provides that a resolution of a special meeting of the LSBC isn’t binding on the benchers unless several conditions are present. One of them, according to the section, is a referendum in which one-third of all members in good standing vote and two-thirds of those participating voted in favour of the resolution. But the law society doesn’t have to conduct such a referendum unless it hasn’t implemented the resolution within 12 months of a general meeting on the issue and it receives a petition signed by at least five per cent of the members asking for a vote.
In this case, 12 months hadn’t passed from the June 2014 resolution directing the benchers to declare Trinity Western not an approved faculty of law, Trinity Western noted in its submissions.
Besides West Coast LEAF, other interveners in the B.C. case include the Canadian Council of Christian Charities; the Christian Legal Fellowship; the Justice Centre for Constitutional Freedoms; and OUTlaws.
In a news release ahead of the hearing, Trinity Western expressed confidence it would prevail in light of a recent Nova Scotia court decision in its favour.
“While the Nova Scotia decision is now under appeal, it has set an important precedent in protection of freedoms for all religious communities in Canada,” it said.
In Ontario, however, the court recently upheld the Law Society of Upper Canada’s decision to deny accreditation, and Milne expresses confidence the result will be similar in her province. There’s a “strong case,” she says, “to have that decision upheld.”
CALGARY — Mentoring is among the priorities as Ridout & Maybee LLP partner Janet Fuhrer takes over the presidency of the Canadian Bar Association.
|Janet Fuhrer took the chain of office yesterday from outgoing Canadian Bar Association president Michele Hollins. (Photo: Glenn Kauth)|
Besides emphasizing the CBA’s role in creating mentoring opportunities, Fuhrer also noted she’d be focusing on the advancement and retention of women in the legal profession and bolstering lawyers’ relationships with clients. Her priorities, she said, include practice fulfillment, competence, and livelihood as lawyers face what she called a “sea change” in the practice of law.
“Change can be very good but it can also be disruptive,” she said, suggesting she wants the CBA to play a key role in helping lawyers meet the challenges through the association’s Legal Futures, Equal Justice, and Rethink efforts.
Ottawa-based Fuhrer took over the presidency at the end of a CBA conference in Calgary that focused on innovation and how lawyers could meet the challenges putting pressure on existing business models.
Other leadership changes taking effect this week include the passing of the presidency of the Canadian Corporate Counsel Association to Frédéric Pérodeau of Montreal. Pérodeau, senior director of investigation at a Quebec financial markets regulator, the Autorité de marchés financiers, takes over the role from Heather Innes. His priorities include inclusivity and cohesion within the in-house counsel community.
At the Ontario Bar Association, the new president is Brampton, Ont., lawyer Edwin Upenieks. A certified specialist in civil litigation, he practises at Lawrence Lawrence Stevenson LLP, where his areas of practice include corporate and commercial litigation, real estate matters, expropriations, and partnership and shareholder disputes. He takes over the OBA role from Orlando Da Silva, a lawyer who made his mark over the last year with his focus on mental health in the legal profession.
CALGARY — As the Canadian Bar Association conference got underway this morning, Chief Justice Beverley McLachlin opened with a keynote speech emphasizing the need to balance the pressing need to change the delivery of legal services with lawyers’ professional obligations.
|‘If we are unable to revise ourselves, then we risk irrelevance,’ said incoming CBA president Janet Fuhrer.|
While McLachlin emphasized the need to protect core values, she made clear that resisting change isn’t an option.
“We’re part of it, and there’s no escape,” she said, referring to the technological changes making legal information available in other ways and players such as LegalZoom that are growing rapidly.
In her speech, McLachlin focused on the major challenges facing the legal profession while outlining what she sees as new opportunities that provide some optimism for different ways of doing business, particularly for “nimble, tech-savvy lawyers.”
“Legal systems everywhere are experience an access-to-justice crisis and are responding in different ways,” she said, suggesting Canada has done a good job of trying to address the issues by looking for ways to make legal services more accessible.
Efficiency and affordability, she added, will be key.
“The time-honoured legal phrase ‘with due deliberation’ has no place in the new world in which we live and practise,” she said.
She went on to suggest lawyers will also have to consider a loosening of their dominance over the delivery of legal services to make room for other, cheaper offerings.
“In the age of the Internet, people are questioning why they, the consumers of legal product, should be forced to go to expensive lawyers working in expensive office buildings located in expensive urban centres. Why, they ask, should a client retain lawyers, when integrated professional firms can deliver accounting, financial and legal advice?” she said.
“The old assumptions are being questioned,” she added, noting the question isn’t whether there will be liberalization but how it will happen.
“We must not close our mind to the changes that are being increasingly forced on us.”
McLachlin spoke in Calgary as the CBA conference got underway with a significant focus on how lawyers with a focus on innovation and “building a better lawyer.” Sessions at the conference will cover topics such as innovation and the future of law firms as well as the role of things like bitcoin, Google Glass, and three-dimensional printing in the practice of law.
In her speech this morning, outgoing CBA president Michele Hollins touted the CBA’s role in helping lawyers adapt to the changes.
“It’s a great time to be talking about innovation in the legal profession but it’s an even better time to be leading that conversation,” she said.
The comments come as the CBA itself faces significant change as it considers its Rethink process aimed at reinvigorating the organization to make it more relevant to lawyers. It was a theme incoming president Janet Fuhrer emphasized in her remarks to the CBA council yesterday.
“Every aspect of what we do is on the table and under the microscope,” said Fuhrer, who called on lawyers to embrace the CBA’s Legal Futures, Equal Justice, and Rethink efforts underway. “If we are unable to revise ourselves, then we risk irrelevance.”
Despite those challenges, Hollins noted the CBA has continued to play a significant role.
“We have tackled issues in every corner of the law,” she said, citing the association’s significant submissions on Bill C-51. And with a federal election underway, she said, it would be playing a role in trying to raise the access-to-justice issues it has been focusing on during the campaign.
To that end, she announced a new Twitter hashtag, #whataboutalex, aimed at discussing Canadians’ experiences in the justice system and the challenges they face.
CALGARY — Supreme Court Chief Justice Beverley McLachlin says she has no concerns about newly appointed Justice Russell Brown’s past political writings before his appointment to the bench.
|'I welcome a robust debate about the role of the court and how we do our job,' said Chief Justice Beverley McLachlin this morning at the CBA meeting. (Photo: Glenn Kauth)|
McLachlin pointed to Brown’s previous role as a legal academic and said it’s common for people to express their opinions before their appointment to the bench.
“He comes to the court with a rich background as a practitioner and law professor,” McLachlin said in her remarks to the CBA council as its annual conference gets underway.
At the press conference, McLachlin also addressed recent commentary that the top court often acts as a type of unofficial opposition to the federal Conservative government.
“I leave the labels to other people,” she said, suggesting the court’s role is to answer the questions put to it in accordance with the law.
“I welcome a robust debate about the role of the court and how we do our job,” she added.
But asked whether she accepts the label as an unofficial opposition, McLachlin was categorical.
“Of course not,” she said. “I’m a not a politician. I’m a judge.”
In her remarks to the council this morning, McLachlin said the top court had had a “productive year.” Citing its busy caseload, she noted some of the key cases it had dealt with, including the Carter v. Canada (Attorney General) matter that dealt with assisted suicide.
She also touted improvements at the Canadian Judicial Council, including providing more detailed information to complaints about the review of the matter; streamlining the conduct review process; and inviting laypeople to participate on review panels that decide whether to refer a complaint to an inquiry committee.
Besides McLachlin’s remarks, the CBA council began considerating a number of resolutions. Several of them dealt with aboriginal matters, including a call to boost the independence of the Specific Claims Tribunal following recent changes by the federal government.
Another key concern arose in a motion dealing with increased difficulty in access to counsel by inmates due to restricted visiting hours, limited phone time, and an inability by lawyers to see clients once they arrive at institutions.
“The conditions really are getting worse and worse,” said Michael Jerch, chairman of the CBA’s national aboriginal law section.
Another issue dealt with lawyers’ concerns about the overuse of and lack of law around solitary confinement in prisons.
“Generally speaking, it’s in a very vague type of realm,” said Bibhas Vaze, a Vancouver lawyer who moved a resolution calling for the CBA to urge governments to pass legislation and policies to restrict and regulate the use of solitary confinement.
The CBA council continues today with additional resolutions around matters such as doctor-assisted suicide and remarks from Janet Fuhrer, the association’s incoming president.
The Ontario Court of Appeal has rejected the superintendent of financial services’ bid to provide greater security for pension provisions during the restructuring proceedings of an Ontario wood manufacturing company.
The case once again raised questions about the deemed-trust provisions in Ontario’s Pension Benefits Act that the superintendent argued works in combination with the Personal Property Security Act to create a priority over the claims of secured creditors during Companies’ Creditors Arrangement Act proceedings.
“The Superintendent submits that the CCAA judge erred in concluding that no wind up deemed trusts arose during the CCAA Proceeding,” wrote Ontario Court of Appeal Justice Eileen Gillese in setting out one of the key issues in Grant Forest Products Inc. v. The Toronto-Dominion Bank on Friday.
“He contends that where a pension plan is wound up after an initial order is made under the CCAA, but before distribution is complete, unpaid contributions to the pension plan constitute a wind up deemed trust under the PBA.”
The case dealt with Grant Forest Products, a manufacturer with facilities in Ontario, Alberta, and the United States. It sought protection under the federal restructuring act after GE Canada Leasing Services Co. applied for a bankruptcy order against it in 2009.
During the ensuing years, the company sold off the bulk of its assets and was able to pay off its first lien lenders in full in January 2012. But there was little left for the second lien lenders and growing deficits in the pension plans for both salaried employees and executives.
In early 2012, the superintendent ordered the wind up of both plans with an effective date of June 10, 2010, for the executive plan and March 31, 2011, for the salaried plan. Later that year, Grant Forest Products and related companies brought a motion for a declaration that they no longer had to make contributions to the pension plans.
In the meantime, one of the creditors, West Face Capital Inc. sought to petition Grant Forest Products into bankruptcy. In 2013, former Ontario Superior Court justice Colin Campbell issued a transition order adjudging the companies to be bankrupt. The order stated that none of the companies’ funds were subject to a deemed trust under the Pension Benefits Act.
In deciding whether Campbell had erred, the appeal court returned to a familiar them: federal paramountcy under the Bankruptcy and Insolvency Act. “As I have explained, at the time that the Motions were heard, it was open to the CCAA judge to order the Remaining Applicants into bankruptcy,” wrote Gillese.
“Once the CCAA judge exercised his discretion and made that order, the priorities established by the BIA applied to the Remaining Funds and rendered the wind up deemed trust claims inoperative.
“Because wind up deemed trusts are created by provincial legislation, their payment could not be ordered when the Motions were heard because payment would have had the effect of frustrating the priorities established by the federal law of bankruptcy.”
As part of Friday’s ruling, Gillese included some comments about the merits of Companies’ Creditors Arrangement Act proceedings versus the bankruptcy process when it comes to pension funds. As she noted, all pension contributions continued to the plans during the bulk of the restructuring proceedings. Second, she pointed out that the company that bought some of the assets continued one of the pension plans. And third, she said the restructuring proceedings bought the company “breathing space” to ensure proper administration of the pension plans with orders authorizing the monitor to hold back some funds for pension claims.
“I hasten to add that these remarks are not intended to suggest a lack of sympathy for the position of pension plan beneficiaries in insolvency proceedings,” wrote Gillese.
“Rather, it is to recognize that while no panacea, at least there is some prospect of amelioration of that position in a CCAA proceeding.”
While the appeal court rejected the superintendent’s position, Andrew Hatnay, a partner at Koskie Minsky LLP who acted for an intervener in the case, says he was very happy with the decision.
While “it certainly disadvantages the Grant Forest pension plan members,” the decision was a narrow one that doesn’t create new law, says Hatnay, whose clients include non-union active employees and retirees of U.S. Steel Canada Inc. in its own restructuring proceedings.
The appeal court, he adds, dealt with the narrow issue of whether Campbell had erred in granting the bankruptcy application.
“Timing is always critical in CCAA proceedings,” he says.
“The courts have always made clear that creditors should make the rights on which they intend to rely known early in a CCAA proceeding.”
As for the court’s comment on the advantages of the restructuring legislation in general, Hatnay says he largely agrees. “Generally, we agree with the courts’ comments because the CCAA permits greater flexibility than a bankruptcy proceeding and encourages stakeholders to reach resolutions and settlements,” he says.
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