Sino-Forest Corp., Re, (2012) 299 O.A.C. 107 (CA)

• Jurisdiction: Ontario
• Judge: Goudge, Hoy and Pepall, JJ.A.
• Court: Court of Appeal (Ontario)
• Citation: (2012), 299 O.A.C. 107 (CA),2012 ONCA 816
• Date: 13 November 2012

Sino-Forest Corp., Re (2012), 299 O.A.C. 107 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. DE.014

In The Matter Of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended

In The Matter Of a Plan of Compromise or Arrangement of Sino-Forest Corporation

(C56115; C56118; C56125; 2012 ONCA 816)

Indexed As: Sino-Forest Corp., Re

Ontario Court of Appeal

Goudge, Hoy and Pepall, JJ.A.

November 23, 2012.

Summary:

Sino-Forest Corporation sought protection pursuant to the provisions of the Companies' Creditors Arrangement Act (CCAA). In 2009, the CCAA was amended to provide that general creditors were to be paid in full before an equity claim was paid. Sino-Forest applied for an order that claims by the appellant auditors and underwriters against Sino-Forest for contribution and indemnity fell within the definition of "equity claim" in s. 2(1) of the CCAA.

The Ontario Superior Court (the supervising judge), in a decision reported at [2012] O.T.C. Uned. 4377, concluded that the indemnity claims were equity claims. The appellant auditors and underwriters appealed. They argued that the supervising judge erred in concluding that the claims at issue were equity claims and in determining the issue before the claims procedure established in Sino-Forest's CCAA proceeding had been completed.

The Ontario Court of Appeal dismissed the appeal. The appellants' claims for contribution or indemnity were equity claims within s. 2(1)(e) of the CCAA. There was no basis to interfere with the supervising judge's decision to consider whether the appellants' claims were equity claims before the completion of the claims procedure.

Creditors and Debtors - Topic 8587.9

Debtors' relief legislation - Companies' creditors arrangement legislation - Equity claim - What constitutes - Sino-Forest Corporation sought protection pursuant to the provisions of the Companies' Creditors Arrangement Act (CCAA) - In 2009, the CCAA was amended to provide that general creditors were to be paid in full before an equity claim was paid - At issue was whether claims by the appellant auditors and underwriters against Sino-Forest for contribution and indemnity fell within the definition of "equity claim" in s. 2(1) of the CCAA - The claims arose out of proposed shareholder class actions for misrepresentation - The proposed representative plaintiffs in the class actions were shareholders of Sino-Forest - They alleged that: Sino-Forest repeatedly misrepresented its assets and financial situation and its compliance with Generally Accepted Accounting Principles in its public disclosure; the appellant auditors and underwriters failed to detect those misrepresentations; and the appellant auditors misrepresented that their audit reports were prepared in accordance with generally accepted auditing standards - The representative plaintiffs claimed that those misrepresentations artificially inflated the price of Sino-Forest's shares and that proposed class members suffered damages when the shares fell - The appellant auditors and underwriters filed proofs of claim against Sino-Forest seeking contribution and indemnity for any amounts that they were ordered to pay as damages to the plaintiffs in the class actions - The supervising judge concluded that both the shareholder claims and the related indemnity claims were equity claims - The Ontario Court of Appeal dismissed the appellants' appeal, holding that the appellants' claims for contribution or indemnity were equity claims within s. 2(1)(e) of the CCAA - There was also no basis to interfere with the supervising judge's decision to consider whether the appellants' claims were equity claims before the claims procedure established in Sino-Forest's CCAA proceeding had been completed.

Creditors and Debtors - Topic 8602

Debtors' relief legislation - Companies' creditors arrangement legislation - Practice - [See Creditors and Debtors - Topic 8587.9].

Cases Noticed:

Return on Innovation Capital Ltd. et al. v. Gandi Innovations Ltd. et al., [2011] O.T.C. Uned. 5018; 83 C.B.R.(5th) 123; 2011 ONSC 5018, leave to appeal denied [2012] O.A.C. Uned. 6; 90 C.B.R.(5th) 141; 2012 ONCA 10, refd to. [para. 24].

Blue Range Resource Corp., Re (2000), 259 A.R. 30; 2000 ABQB 4, refd to. [para. 30, footnote 4].

Stelco Inc., Re (2006), 17 C.B.R.(5th) 78 (Ont. Sup. Ct.), refd to. [para. 30, footnote 4].

Royal Bank of Canada et al. v. Central Capital Corp. (1996), 88 O.A.C. 161; 27 O.R.(3d) 494 (C.A.), refd to. [para. 30, footnote 4].

Central Capital Corp., Re - see Royal Bank of Canada et al. v. Central Capital Corp.

Nelson Financial Group Ltd., Re, [2010] O.T.C. Uned. 6229; 71 C.B.R.(5th) 153; 2010 ONSC 6229, refd to. [para. 30, footnote 4].

EarthFirst Canada Inc., Re, [2009] A.R. Uned. 164; 56 C.B.R.(5th) 102; 2009 ABQB 316, refd to. [para. 30, footnote 4].

Social Services Administration Board (Parry Sound District) v. Ontario Public Service Employees Union, Local 324 et al., [2003] 2 S.C.R. 157; 308 N.R. 271; 177 O.A.C. 235; 2003 SCC 42, refd to. [para. 34].

Goodyear Tire & Rubber Co. of Canada v. T. Eaton Co., [1956] S.C.R. 610, refd to. [para. 34].

National Bank of Canada et al. v. Merit Energy Ltd. et al. (2001), 294 A.R. 15; 2001 ABQB 583, affd. (2002), 299 A.R. 200; 266 W.A.C. 200; 2002 ABCA 299, refd to. [para. 34].

CanadianOxy Chemicals Ltd. et al. v. Canada (Attorney General) et al., [1999] 1 S.C.R. 743; 237 N.R. 373; 122 B.C.A.C. 1; 200 W.A.C. 1, refd to. [para. 41].

Nowegijick v. Minister of National Revenue et al., [1983] 1 S.C.R. 29; 46 N.R. 41, refd to. [para. 41].

Markevich v. Minister of National Revenue, [2003] 1 S.C.R. 94; 300 N.R. 321; 2003 SCC 9, refd to. [para. 41].

National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assurance Co. et autres, [1990] 2 S.C.R. 1029; 115 N.R. 42; 32 Q.A.C. 250, refd to. [para. 44].

National Bank of Greece (Canada) v. Katsikonouris - see National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assurance Co. et autres.

R. v. Proulx (J.K.D.), [2000] 1 S.C.R. 61; 249 N.R. 201; 142 Man.R.(2d) 161; 212 W.A.C. 161; 2000 SCC 5, refd to. [para. 49].

Mid-American Waste Systems Inc., Re (1999), 228 B.R. 816, refd to. [para. 54, footnote 7].

Statutes Noticed:

Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, sect. 2(1) [para. 28]; sect. 6(8) [para. 27].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (2nd Ed. 1983), p. 87 [para. 36].

Counsel:

Peter H. Griffin, Peter J. Osborne and Shara Roy, for the appellant, Ernst & Young LLP;

Sheila Block and David Bish, for the appellants, Credit Suisse Securities (Canada) Inc., TD Securities Inc., Dundee Securities Corporation (now known as DWM Securities Inc.), RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd. (now known as Canaccord Genuity Corp.), Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, successor by merger to Banc of America Securities LLC;

Kenneth Dekker, for the appellant, BDO Limited;

Robert W. Staley, Derek J. Bell and Jonathan Bell, for the respondent, Sino-Forest Corporation;

Benjamin Zarnett, Robert Chadwick and Julie Rosenthal, for the respondent, the Ad Hoc Committee of Noteholders;

Clifton Prophet, for the Monitor, FTI Consulting Canada Inc.;

Kirk M. Baert, A. Dimitri Lascaris and Massimo Starnino, for the respondent, the Ad Hoc Committee of Purchasers;

Emily Cole, for the respondent, Allen Chan;

Erin Pleet, for the respondent, David Horsley;

David Gadsden, for the respondent, Pöyry (Beijing);

Larry Lowenstein and Edward A. Sellers, for the respondent, the Board of Directors.

This appeal was heard on November 13, 2012, before Goudge, Hoy and Peppall, JJ.A., of the Ontario Court of Appeal. The following judgment was delivered by the Court of Appeal on November 23, 2012.