Hello Everyone,

There were two substantive civil law decisions from the Court of Appeal this week.  One is but another chapter in the Nortel CCAA proceedings and whether certain bondholders are entitled to claim post-CCAA filing interest.  The other is about a construction company that sued the City of Ottawa for declaratory relief for alleged breaches of the Occupational Health and Safety Act when asbestos was found at a job site.

Enjoy your weekend and Go Jays Go!

John Polyzogopoulos

Blaney McMurtry LLP

JPolyzogopoulos@blaney.com

Tel: 416.593.2953

http://www.blaney.com/lawyers/john-polyzogopoulos

Table of Contents

Civil Cases

Nortel Networks Corporation (Re), 2015 ONCA 681 (click on the case name to read the summary)

Keywords: Bankruptcy and Insolvency, Companies’ Creditors Arrangement Act, Unsecured Claims, Bondholders, Post CCCA-filing interest, Interest Stops Rule, Canada 3000 (Re), Stelco (Re)

Curoc Construction Ltd. v. Ottawa (City), 2015 ONCA 693

Keywords: Statutory Cause of Action, Breach of a Statute, Occupational Health and Safety Act, s. 30(5), Declaratory Relief, Damages, Legal Costs, Administrative Costs, Summary Judgment, Genuine Issue Requiring a Trial,  Rules of Civil Procedure, Rule 20.04(2)(a)

For a list of Criminal Law decisions, click here

Civil Cases

Nortel Networks Corporation (Re), 2015 ONCA 681

[Simmons, Gillese and Rouleau JJ.A.]

Counsel:

R. B. Swan, S. R. Orzy and G. H. Finlayson, for the appellant Ad Hoc Group of Bondholders

A. Kent and B. Harrison, for the respondent The Bank of New York Mellon

E. Lamek, for the respondent Law Debenture Trust Company of New York

B. Zarnett and G. D. Smith, for the Monitor and the respondent Canadian Debtors

K. D. Kraft and J. J. Salmas, for the respondent Wilmington Trust, National Association

K. T. Rosenberg and A. N. Kaplan, for the respondent Canadian Creditors’ Committee

T. Wynne, for the Joint Administrators (EMEA)

S. A. Bomhof and A. M. Slavens, for Nortel Networks Inc./U.S. Debtors

Keywords:   Bankruptcy and Insolvency, Companies’ Creditors Arrangement Act, Unsecured Claims, Bondholders, Post CCCA-filing interest, Interest Stops Rule, Canada 3000 (Re), Stelco (Re)

Facts:

This appeal represents another chapter in the Nortel proceeding under the CCAA. A parallel proceeding under Chapter 11 of the United States Bankruptcy Code has also been on-going in Delaware. The Ad Hoc Group of Bondholders (the “appellant”) brings this appeal with leave. The group represents substantial holders of “crossover bonds”, which are unsecured bonds either issued or guaranteed by certain of the Canadian Nortel entities. The relevant indentures provide for the continuing accrual of interest until payment, at contractually specified interest rates, as well as other post-filing payment obligations, such a make-whole provisions and trustee fees. In contrast, the claims of other claimants, such as Nortel pensioners and former employees, do not have a provision for interest on amounts owing to them. Holders of the crossover bonds have filed claims for principal and pre-filing interest in the amount of US$4.092 billion against each of the Canadian and U.S. Nortel estates. They also claim they are entitled to post-filing interest and related claims under the terms of the crossover bonds.

At a joint allocation trial, the CCAA judge heard arguments on two issues:

  1. Whether the holders of the crossover bond claims are legally entitled … to claim or receive any amounts under the relevant indentures above and beyond the outstanding principal debt and pre-petition interest (namely, above and beyond US$4.092 billion); and
  2. If it is determined that the crossover bondholders are so entitled, what additional amounts are such holders entitled to so claim and receive.

The CCAA judge answered the first question in the negative, and so he did not need to answer the second question. In reaching that conclusion, he accepted that the common law “interest stops rule”, which has been held to be a fundamental tenet of insolvency law, applies in the CCAA context.

Issues:

  1. Did the CCAA judge err in concluding that an interest stops rule applies in CCAA proceedings?
  2. If the CCAA judge did not err in concluding that an interest stops rule applies in CCAA proceedings, did he err in holding that holders of crossover bonds claims are not legally entitled to claim or receive any amounts under the relevant indentures above and beyond the outstanding principal debt and pre-petition interest?

Holding: Appeal dismissed.

Reasoning:

  1. No. The same principles that underpin the conclusion that the interest stops rule is necessary in bankruptcy and winding-up proceedings – namely, the fair treatment of creditors and the orderly administration of an insolvent debtor’s estate – apply with equal force to CCAA proceedings for several reasons. First, the CCAA is part of an integrated insolvency regime which also includes the BIA. Since the common law interest stops rule applies upon bankruptcy under the BIA, it should follow that the common law rule also applies in a CCAA proceeding unless, of course, the rule is ousted by the CCAA. Second, if the interest stops rule were not to apply in CCAA proceedings, the creditors who do not have a contractual right to post-filing interest would have skewed incentives against reorganizing under the CCAA. Third, the CCAA creates conditions for preserving the status quo while attempts are made to find common ground amongst stakeholders for a reorganization that is fair to all. If post-filing interest is available to one set of creditors while the other creditors are prevented from asserting their rights to sue the debtor and obtain a judgment that bears interest, the status quo has not been preserved. Fourth, if the interest stops rule were not to apply in CCAA proceedings, the key objective of that statute – to facilitate the restructuring of corporations through flexibility and creativity – may be undermined as an asymmetrical entitlement to interest would be created.   Fifth, the principle of fairness supports the application of the interest stops rule. Finally, the Supreme Court’s decision in Canada 3000 (Re) and the Ontario Court of Appeal’s decision in Stelco (Re) are not precedents for whether the interest stops rule applies in CCAA proceedings.
  2. No. The appellant objects to the wording of the CCAA judge’s order, in particular the words “or receive”. The appellant submits that, to the extent this precludes the bondholders from receiving post-filing interest under a CCAA plan, the CCAA judge erred. The appellant notes that all the parties in this proceeding agree that a CCAA plan may provide for post-filing interest. The Court of Appeal held that the interest stops rule does not preclude the payment of post-filing interest under a plan of compromise or arrangement, and the CCAA judge did not decide otherwise. His decision confirms that the interest stops rule applies in CCAA proceedings. If a plan of compromise or arrangement is concluded, it should not, for example, be read as limiting any right to recover post-filing interest creditors may have as amongst themselves, as existed in Stelco, or from non-parties. Nor does it dictate what any creditor may seek in bargaining for a fair plan of compromise or arrangement.  In that regard, the Court of Appeal did not interpret the CCAA judge’s use of the words “or receive” as preventing the appellant from seeking and obtaining such a result in a negotiated plan.

Curoc Construction Ltd. v. Ottawa (City), 2015 ONCA 693

[Gillese, Epstein and Roberts JJ.A.]

Counsel:

N. McCready, for the appellant

J. Wright, for the respondent

Keywords:

Statutory Cause of Action, Breach of a Statute, Occupational Health and Safety Act, s. 30(5), Declaratory Relief, Damages, Legal Costs, Administrative Costs, Summary Judgment, Genuine Issue Requiring a Trial,  Rules of Civil Procedure, Rule 20.04(2)(a)

Facts:

The appellant, Curoc Construction Ltd. (“Curoc”), entered into a contract with the respondent, the City of Ottawa (the “City”) to remove, refinish and replace vinyl floor in the office areas of city-owned property. Curoc was informed after completing most of the work that there was asbestos in the flooring of the construction area. Curoc and the City agreed to stop the work and allow an asbestos contractor to coordinate the clean-up of the work site. The work stoppage lasted a week, at which time Curoc was able to complete the remainder of the work.

Curoc brought an action against the City for damages and declaratory relief for alleged breaches by the City of the Ontario Occupational Health and Safety Act (“OHSA”). Curoc claimed that the City knew asbestos was present at the work site and violated the OHSA by failing to disclose this information to Curoc. As a result, Curoc’s President and employees were unprotected and exposed to the asbestos.

The City moved for summary judgment on the basis that the action was premature, that Curoc had not actually sustained any damages, and that declaratory relief was inappropriate. Curoc brought a cross-motion for summary judgment on its claims.

The motion judge granted the City’s motion for summary judgment and dismissed Curoc’s cross-motion finding that Curoc failed to meet its evidentiary burden regarding damages. He refused to make the declaration sought by Curoc because of concerns that a declaration may have an impact on the rights of the employees of Curoc who were not a party to this action.

Issues:

  1. Did the motions judge err by:
  2. a) dealing with the exposure of the employees to asbestos in only a cursory way;
  3. b) failing to determine whether the City breached the OHSA and, if so, whether the City is liable pursuant to s. 30(5) of the OHSA; and
  4. c) failing to find that Curoc had suffered damages, despite evidence that Curoc’s president spent time on administrative tasks and Curoc had incurred legal costs.
  5. Did the motion judge err in finding that the test for declaratory relief had not been met?

Holding:

Appeal dismissed with costs to the respondent.

Reasoning:

(1) No. The nominate tort of breach of statute does not exist in Canada, however the City conceded that s. 30(5) of the OHSA creates a statutory cause of action which the court accepted for the purpose of this appeal. Liability under s. 30(5) requires that Curoc suffered “loss or damages” as the result of the subsequent discovery of asbestos.

Loss or damages is a required element of the statutory cause of action under s. 30(5). The motion judge found that Curoc failed to discharge its burden on the matter of loss or damages thus granting the City’s motion for summary judgment on the basis there is no genuine issue requiring a trial pursuant to Rule 20.04(2) of the Rules of Civil Procedure.

The motion judge correctly rejected Curoc’s claim for administrative costs. There was no evidence that Curoc actually paid these costs and the claim was in the nature of an estimate rather than damages suffered. The list of the hours spent on the asbestos issue provided by Curoc was vague and lacked particular details.

Curoc also claimed legal costs based on their retention of legal counsel in order to determine how to respond to the discovery of the asbestos. The motion judge was not satisfied that the sample legal bill pertained to the actions taken by counsel as a result of the asbestos issue. There was no evidence that the sample bill was ever paid or even given to Curoc and how much the sample relates to time spent on the present litigation.

The motion judge was entitled to assume the record before him contained all the evidence that Curoc would present if there was a trial. By finding that the Curoc had not met its burden with respect of loss and damages, the motion judge was not required to provide more detailed reasons about the employees’ exposure to asbestos or whether the City had breached the OHSA.

(2) No. Curoc sought a number of declarations. The Court did not accept the appellant’s submission that the motion judge erred when he refused to exercise his discretion to grant the declarations. The Supreme Court in Solosky v The Queen noted two factors that influence this exercise of discretion: (1) the utility of the declaration, if granted, and (2) whether the declaration will settle the questions at issue between the parties.

Curoc argued that the first factor is satisfied because a declaration would determine the issue of liability between it and the City constituting a determination of a present right. The Court rejected this argument on the basis that it is not known at this time whether employees of Curoc will ever become ill as a result of the exposure and if they do, if they will commence legal proceedings.

The Court concluded that the motion judge did not err in taking into consideration that the proposed declaration could affect the rights of the third parties, namely the employees of Curoc. A declaration might have an impact on their rights and it was not mere speculation on the part of the motion judge to take this into consideration.

Criminal Decisions

Nelson v Livermore, 2015 ONCA 688

[Gillese, Epstein and Roberts JJ.A]

Counsel:

S. E. Fraser, for the appellant

J. Blackburn, for the respondent Dr. Craig Livermore

Y. Ranganathan and H. Pitcher, for the respondent Attorney General for Ontario

Keywords: Criminal Law, Sexual Offender,  Mental Health, Mental Health Act, Sexual Assault Causing Bodily Harm, Consent and Capacity Board, Involuntary Admission, Mental Health Act, s. 20(5), P.S. v Ontario, 2014 ONCA 90, Canadian Charter of Rights and Freedoms, ss. 7, 9, 11(h), 12, Habeas Corpus

R v Khan, 2015 ONCA 689 (endorsement)

[Hoy A.C.J.O, Weiler and Pardu JJ.A.]

Counsel:

M. Halyfard, for the appellant

K. Zanutto, for the respondent

Keywords: Criminal Law, Leave to Appeal, Summary Convictions Appeal Court, Criminal Code,  s. 253(1)(b), Breath Samples, Impaired Driving, Canadian Charter of Rights and Freedoms, Cross-Examination, Test for Leave to Appeal, R v RR, 2008 ONCA 497

R v Ramono, 2015 ONCA 685 (endorsement)

[Hoy A.C.J.O., Weiler and Pardu JJ.A]

Counsel:

W. G. Orr, QC, for the appellant

J. McInnes, for the respondent

Keywords: Criminal Law, Certiorari, Evidence, Criminal Negligence Causing Death, Unlawfully Making False Document, Causation, Jury Instructions, Judicial Error, Weighing of Evidence, R v Acuri, 2001 SCC 54

R v ADH (Publication Ban), 2015 ONCA 690

[Hoy A.C.J.O., Weiler and Pardu JJ.A]

Counsel:

A. Whitzman, for the appellant

D. Arron, for the respondent

Keywords: Criminal Law, Sexual Assault, Defences, Consent, Honest but Mistaken Belief, Air of Reality Test, , Criminal Code, s. 839, R v RR, 2008 ONCA 497, R v Flaviano, 2014 SCC 14

R v Marshall, 2015 ONCA 692

[Cronk, Epstein and Brown JJ.A.]

Counsel:

J. Shanmuganathan, for the appellant

A. Rose, for the respondent

Keywords: Criminal Law, Drug Trafficking, Possession of a Prohibited Weapon, Firearm Possession, Evidence, Credibility, Standard of Scrutiny, Fitness of Sentence, Deterrence and Denunciation, Vetrovec v The Queen, [1982] 1 SCR 811, R v Howe (2005) 192 CCC (3d) 480 (Ont CA), R v Aird, 2013 ONCA 447, R v Nur, 2015 SCC 15, Criminal Code, s. 95, R v Borde (2003) 63 OR (3d) 417 (CA)

R v Sharif, 2015 ONCA 694

[Sharpe, Hourigan, Benotto JJ.A.]

Counsel:

J. Sharif, in person

J. Presser, duty counsel

M. Bernstein, for the respondent

Keywords: Criminal Law, Firearm Possession, Ineffective Counsel, Unreasonable Verdict, Pre-trial Custody, Young Offender, First Offender, Rehabilitation, R v Summers, 2014 SCC 26, R v Priest (1996), 30 OR (3d) 538 (CA)

R v Sinobert, 2015 ONCA 691

[Cronk, Gillese and Huscroft JJ.A.]

Counsel:

F. Addario and A. Furgiuele, for the appellant

M. Bernstein, for the respondent

Keywords: Criminal Law, Second Degree Murder, Mens Rea, Actus Reus, Possession of a Weapon Dangerous to the Public Peace, Evidence, Testimony, Intoxication, Jury Charge, R v JS, 2012 ONCA 684, Criminal Code s. 229(a), R v Huard, 2013 ONCA 650, R v Biniaris, 2000 SCC 15