SCC’s Sino-Forest decision shows CCAA trumps all

Karin Sachar, Laura Fric

Mar 18, 2014

Jennifer Brown, Canadian Lawyer

(Extract)

The Supreme Court of Canada’s decision last week to deny a rogue group of investors leave to appeal in the Sino-Forest class action settlement provides a good example of the power of the Companies’ Creditors Arrangement Act when up against class proceedings legislation.

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The settlement is part of Sino-Forest’s plan of compromise and reorganization following a bankruptcy triggered by allegations of fraud. Plaintiffs had alleged the company misrepresented its finances.

In March of last year, Ontario Superior Court Justice Geoffrey Morawetz approved the EY settlement, which was supported by all parties to the CCCA proceedings including the monitor, Sino-Forest’s major creditor, and a group of plaintiffs looking to gain back lost investments in a proposed class action. Investors were prohibited from opting out of the settlement.

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In its analysis, Osler Hoskin and Harcourt LLP lawyers Laura Fric and Karin Sachar wrote that Morawetz “recognized that a class settlement must ordinarily include an opt out provision. However, he held that the CCAA allowed the court to impose a compromise of the class action claims on Invesco since the settlement:

  1. Was approved by the requisite majority of creditors;
  2. Was fair and reasonable.”

Critics say the request for leave to appeal needlessly delayed the payout of the settlement, while others representing the plaintiffs argue opt-out rights were not adequately protected.

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