Grant Forest Products Inc. et al. v. Toronto-Dominion Bank et al., (2015) 337 O.A.C. 237 (CA)

• Judge: Doherty, Gillese and Lauwers, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: August 07, 2015
• Jurisdiction: Ontario
• Citations: (2015), 337 O.A.C. 237 (CA);2015 ONCA 570

Grant Forest Products v. TD Bk. (2015), 337 O.A.C. 237 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. AU.006

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 Grant Forest Products Inc., Grant Alberta Inc., Grant Forest Products Sales Inc., and Grant U.S. Holdings G.P.

Grant Forest Products Inc., Grant Alberta Inc., Grant Forest Products Sales Inc., and Grant U.S. Holdings GP (applicants) v. The Toronto-Dominion Bank, in its capacity as agent for the secured lenders holding first lien security and the Bank of New York Mellon, in its capacity as agent for secured lenders holding second lien security (respondents)

(C58636; 2015 ONCA 570)

Indexed As: Grant Forest Products Inc. et al. v. Toronto-Dominion Bank et al.

Ontario Court of Appeal

Doherty, Gillese and Lauwers, JJ.A.

August 7, 2015.

Summary:

Debtor companies obtained protection under the Companies' Creditors Arrangement Act (CCAA) and entered a liquidation process. The sale of assets paid out first lien lenders in full, but there were insufficient funds to satisfy the claims of second lien lenders and claims asserted on behalf of two of the debtor companies' pension plans for post-CCAA proceedings unpaid contributions. The secured creditors and pension plans both claimed priority. The CCAA judge lifted the stay of proceedings and ordered the remaining debtor companies into bankruptcy, thereby giving the secured creditors priority. The Superintendent of Financial Services, who had wound up the two pension plans during the CCAA proceedings, argued on appeal that deemed trusts for all unpaid contributions arose when the pension plans were wound up, taking priority over the secured claims because the remaining funds were the proceeds of sale of the debtor companies' accounts and inventory. The Superintendent relied on ss. 57(3) and (4) of the Pension Benefits Act and s. 30(7) of the Personal Property Security Act.

The Ontario Court of Appeal dismissed the appeal. The CCAA judge neither erred in principle nor exercised his discretion unreasonably.

Bankruptcy - Topic 3642

Creditors - General - Priorities - Precedence of Bankruptcy and Insolvency Act over provincial legislation - Debtor companies obtained protection under the Companies' Creditors Arrangement Act (CCAA) and entered a liquidation process - The sale of assets paid out first lien lenders in full, but there were insufficient funds to satisfy the claims of second lien lenders and claims asserted on behalf of two of the debtor companies' pension plans for post-CCAA proceedings unpaid contributions - The secured creditors and pension plans both claimed priority - The CCAA judge lifted the stay of proceedings and ordered the remaining debtor companies into bankruptcy, thereby giving the secured creditors priority - The Superintendent of Financial Services, who had wound up the two pension plans during the CCAA proceedings, argued on appeal that deemed trusts for all unpaid contributions arose when the pension plans were wound up, taking priority over the secured claims because the remaining funds were the proceeds of sale of the debtor companies' accounts and inventory - The Superintendent relied on ss. 57(3) and (4) of the Pension Benefits Act and s. 30(7) of the Personal Property Security Act - The Ontario Court of Appeal dismissed the appeal - A CCAA judge's discretionary decision was subject to deference - There was no error in principle or unreasonable exercise of discretion in lifting the stay and ordering the remaining debtor companies into bankruptcy without first requiring that the wind up deemed trusts deficits be paid in priority to the second lien holders - Accordingly, once the priorities established by the Bankruptcy and Insolvency Act applied to the remaining funds, priority for the deemed trust claims under the provincial Pension Benefits Act could not be ordered to frustrate priorities under the federal Act (paramountcy) - See paragraphs 110 to 146.

Creditors and Debtors - Topic 8581.1

Debtors relief legislation - Companies' creditors arrangement legislation - Priorities - [See Bankruptcy - Topic 3642 ].

Creditors and Debtors - Topic 8599

Debtors' relief legislation - Companies' creditors arrangement legislation - Appeals - [See Bankruptcy - Topic 3642 ].

Master and Servant - Topic 1949.3

Remuneration - Pension or retirement benefits - Deemed trust on windup - [See Bankruptcy - Topic 3642 ].

Cases Noticed:

Indalex Ltd. et al., Re, [2013] 1 S.C.R. 271; 439 N.R. 235; 301 O.A.C. 1; 2013 SCC 6, dist. [para. 8].

Indalex Finance, LLC v. United Steelworkers - see Indalex Ltd. et al., Re.

Kaska Dena Council v. British Columbia (Attorney General) (2008), 262 B.C.A.C. 75; 441 W.A.C. 75; 85 B.C.L.R.(4th) 69; 2008 BCCA 455, refd to. [para. 92].

Grand River Enterprises, A Partnership et al. v. Burnham (2005), 197 O.A.C. 168 (C.A.), refd to. [para. 92].

Canadian Airlines Corp., Re (2000), 261 A.R. 120; 225 W.A.C. 120; 2000 ABCA 149, refd to. [para. 95].

UTI Energy Corp. v. Fracmaster Ltd. (1999), 244 A.R. 93; 209 W.A.C. 93; 1999 ABCA 178, refd to. [para. 97].

Air Canada, Re (2003), 174 O.A.C. 201; 66 O.R.(3d) 257 (C.A.), refd to. [para. 98].

Ivaco Inc. et al., Re, [2007] O.A.C. Uned. 414; 83 O.R.(3d) 108 (C.A.), refd to. [para. 98].

Century Services Inc. v. Canada (Attorney General) - see Leroy (Ted) Trucking Ltd. et al., Re.

Leroy (Ted) Trucking Ltd. et al., Re, [2010] 3 S.C.R. 379; 409 N.R. 201; 296 B.C.A.C. 1; 503 W.A.C. 1; 2010 SCC 60, refd to. [para. 103].

Federal Business Development Bank v. Commission de la santé et de la sécurité du travail et al., [1988] 1 S.C.R. 1061; 84 N.R. 308; 14 Q.A.C. 140, refd to. [para. 118].

Bank of Montreal v. Scott Road Enterprises Ltd. (1989), 57 D.L.R.(4th) 623 (B.C.C.A.), refd to. [para. 118].

Statutes Noticed:

Pension Benefits Act, R.S.O. 1990, c. P-8, sect. 57(3), sect. 57(4) [para. 6].

Personal Property Security Act, R.S.O. 1990, c. P-10, sect. 30(7) [para. 7].

Counsel:

Mark Bailey and Deborah McPhail, for the appellant, Superintendent of Financial Services;

Jane Dietrich, for the respondents, Grant Forest Products Inc., Grant Alberta Inc., Grant Forest Products Sales Inc., and Grant U.S. Holdings GP;

John Marshall and Roger Jaipargas, for the respondent, West Face Capital Inc.;

Alex Cobb, for the respondent, Mercer (Canada) Limited;

David Byers and Dan Murdoch, for the respondent, Ernst & Young Inc.;

Andrew J. Hatnay, James Harnum and Adrian Scotchmer, for the intervener, the court- appointed Representative Counsel to non-union active employees and retirees of U.S. Steel Canada Inc. in its CCAA proceedings.

This appeal was heard on February 3, 2015, before Doherty, Gillese and Lauwers, JJ.A., of the Ontario Court of Appeal.

On August 7, 2015, Gillese, J.A., released the following judgment for the Court of Appeal.