The back-story
From early 2019 until June 2023, it was Justice Thomas McEwen who was in charge of overseeing the
insolvency protection for Canada’s three large tobacco companies. The companies turned to the Ontario courts for protection after a multi-billion dollar award against them for injured Quebec smokers was upheld by the Quebec Court of Appeal in March 2019.
Rather than challenge the ruling to the Supreme Court or start sending cheques to these elderly and ill Quebecers, the companies were able to engage the federal Companies Creditors Arrangement Act to lump these court-ordered claims with untested claims by provincial governments and to force all parties to negotiate collectively. Doing so required the agreement of the provincial governments, for whom settlement discussions saved them the time and trouble of going to trial.
The new broom
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| Geoffrey B. Morawetz |
As it turns out, the Hon. Geoffrey B. Morawetz is no simple pinch-hitter or bench-warmer on this file. There is no judge at this court level with greater seniority (He has been Ontario’s Chief Justice of the Superior Court since mid 2019 – almost as long as this CCAA process has been underway). There are unlikely to be any with greater expertise in insolvency law in Canada: as they say, “he wrote the book”.
Tell me what you see ahead …
Facing a new judge, each of the parties which submitted paper work in advance of today’s hearing provided summaries of events over the past many months. (The paperwork is linked at the bottom of this post). They may have wanted to elaborate on these events or give more of the back-story, but from the beginning of this morning’s 90 minute hearing, Justice Morawetz made clear that he already knew what had happened, and shut down any such attempts.
“What I am focused on is receiving submissions as to where the parties are going … what I really want to hear from the parties is where they are today and where they think they will be within the next six months.”
This seemed to force the legal teams off their script, and prompted some scrambling. One after another – John MacDonald for Imperial Tobacco, Paul Steep for Rothmans, Benson and Hedges, Leanne Williams for JTI-Macdonald – the industry’s representatives pledged a continued commitment to negotiate diligently and in good faith. None of them could offer any specifics on the progress they foresaw – although some seemed to diminish expectations by referring to the “noted complexity of this restructuring, the vast number and size of claimants and the added complexity of 3 global industry groups.”
Leanne Williams’ comment illustrates the vagueness of the response “You asked for where we are and where we are going. JTI has actively participated and believes significant but there is much ground to cover before resolution is achieved. JTI is acting in good faith. JTI hopes that significant progress will continue in the next 6 months. I cannot confidently tell you where we will be, but we will maintain commitment to be fully and actively involved.”
Among the claimants, only three shared their views. These parties too were unable to project any expectations of the progress that a further extension would accomplish.
Speaking for the Quebec class action, Mark Meland said the delay was caused by “certain parties who seem to believe that a delay is an appropriate negotiating tactic.” This is the first hearing where complaints have been put on record about the behaviour of any party — and also the first when the Quebec team did not ask for adjustments to the proposed stay extension orders.
Instead, Mr. Meland appealed repeatedly to the judge make things go faster — to “turn up the heat”, set “a new paradigm”, to “light a fire” “to get this done.” “It is our firm expectation that if plans of arrangement are to be achieved they need to be in next six months.”
Only one participant in the hearing offered concrete advice on how to move things along quickly. On behalf of the Quebec government, Mr. Brett Harrison suggested that a case conference held before the end of the next extension might facilitate progress.
.. And then I will fill in the holes in your plan
Having pushed parties to articulate their (lack of) plans for the next six months, Justice Morawetz turned to his own vision of what should happen.
First, he assured them that the unopposed request for a six month extension would be granted in an order that would be released before Monday.
But then he (very) quickly read out the draft text of another part of his ruling. After mentioning the complexity of the issues and the “astronomical” dollar value of the claims, he announced that the monitors and mediator would be directed to develop plans of compromise or arrangement.
“Neutral parties will be charged with coming up with a plan. The three court appointed monitors are well positioned to come up with a plan or plans. The existing structure can be used to facilitate the development of a plan. The monitors and mediators are familiar and in view of their neutrality they are in the best positions to come up with a plan that will have the best opportunity to be fair and applicable.”
“It’s time to move from observable activity to meaningful action.”
Pausing for a moment for questions that did not come, he adjourned the hearing at 11:30.