Hello everyone,

There were only two judgments released by the Court of Appeal this week. One was a family law case concerning the obligation of the primary custodial parent to secure the compliance of a child to an access order in favour of the other parent. The other is an insolvency law decision relating to circumstances in which a CCAA judge can terminate a CCAA liquidation proceeding and assign the insolvent companies into bankruptcy, thereby impacting the priority contest between secured creditors and a pension plan.

A note about one of the features of this blog and the weekly email in particular, that may have caused our blog followers some frustration in the last few weeks.  Some of you will have noticed that the feature of clicking on the case name in the table of contents below to take you down to the summary of that decision only works by clicking on the link in the email on your desktop or laptop.  This feature does not work when pressing the link in the email from a smartphone.  To use this feature from a smartphone, you can click on the link to the weekly post on our website, and then press the name of the case in the table of contents when reading from the blog site rather than from the email.  We are trying to find a way to correct this  technical glitch, but in the meantime, we wanted our followers to be aware of it.

We hope you continue to find this blog useful and are sharing it with colleagues who may be interested.  As always, we welcome your comments and feedback.

John Polyzogopoulos

Blaney McMurtry LLP

JPolyzogopoulos@blaney.com

Tel: 416.593.2953

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

Table of Contents

Civil Cases 

Godard v Godard, 2015 ONCA 568 (click on the case name to read the summary)

Keywords:  Family Law, Access Orders, Parental Obligation to Secure Compliance from Child, Contempt, Findings of Fact, The Rule in Browne v. Dunn

Grant Forest Products Inc v The Toronto-Dominion Bank, 2015 ONCA 570 (click on the case name to read the summary)

Keywords:  Bankruptcy & Insolvency, Pensions, Companies’ Creditors Arrangement Act, Pension Benefits Act, ss 57(3) and (4), Personal Property Security Act,  s. 30(7), Deemed Trust, Wind-Up of Pension, Sun Indalex Finance LLC v United Steelworkers, Century Services v Canada, Doctrine of Paramountcy, Standard of Review, Reasonableness

Godard v. Godard, 2015 ONCA 568

http://www.ontariocourts.ca/decisions/2015/2015ONCA0568.pdf

[Hoy A.C.J.O, Epstein and Huscroft JJ.A.]

Counsel:

G.A. Wainwright, for the appellant.

P. Mongenais, for the respondent.

Keywords: Family Law, Access Orders, Parental Obligation to Secure Compliance from Child, Contempt, Findings of Fact, The Rule in Browne v. Dunn

Facts:

The appellant wife and respondent husband are separated. They have two children, I. and S.  A number of temporary custody and access orders have been made since the separation.

The respondent brought a contempt motion on June 18, 2014, alleging that he had been deprived of weekend access since January 2014. Justice Cornell dismissed the contempt motion but made an order for summer access on the basis of agreed dates.  The respondent did not have access to S. as the order required.  The appellant attempted to justify this situation by citing S.’s refusal to attend for access with the respondent.

On October 14, 2014, the respondent brought a motion for an order for specified access and an updated exchange protocol.  On November 3, 2014, MacDonald J. made an order that the respondent shall have access to S. every other weekend.  The appellant did not bring S. to the respondent as required by the order.  The respondent brought a second motion to find the appellant in contempt.

The motion judge employed the three-part test for contempt as outlined by this court in G. (N.) c. Services aux enfants & adultes de Prescott-Russell (2006), 82 O.R. (3d) 669 (C.A.).  The motion judge found that the order of Cornell J. dated July 18, 2014, did not state clearly and unequivocally what the appellant was required to do.  However, the motion judge found the order of MacDonald J. to be clear and unequivocal in setting out the requirement to drop off S.  Therefore, the motion judge found the appellant mother in contempt of the order of MacDonald J. granting the respondent father access to his daughter, S.  The appellant mother appealed.

Issues:

  • Did the motion judge err by failing to consider alternative remedies to contempt?
  • Did the motion judge err by rejecting the appellant’s un-contradicted evidence?
  • Did the motion judge err by finding that the appellant had deliberately and willfully breached the access order?

Held:

The appeal is dismissed. The appellant shall pay the respondent $8,293.79, inclusive of taxes and disbursements, for the costs of the appeal. Costs of the motion will be determined by the motion judge when he addresses the sanction for contempt.

Reasoning:

  • No, the motion judge did not err by failing to consider alternative remedies to contempt. Though Hefkey v. Hefkey, 2013 ONCA 44, 30 R.F.L. (7th) 65, stands for the proposition that contempt findings should only be made sparingly and as a last resort, the history of this case belies the adequacy of alternative approaches. The respondent has brought numerous motions asserting his access rights in the face of the appellant’s persistent non-compliance with access orders.
  • No, the motion judge did not err by rejecting the appellant’s un-contradicted evidence in the absence of cross-examination on her affidavit, thereby violating the rule in Browne v. Dunn (1893), 6 R. 67 (U.K. H.L.). The motion judge’s key findings of fact were, in fact, consistent with the appellant’s affidavit evidence.  There was, in other words, no conflict in the affidavit evidence relevant to the disposition of the motion.  The motion judge found that the appellant’s affidavit supported the conclusions that she has “left up to the child the decision as to whether or not she will attend for access with her father”, and that she has “effectively abdicated her parental authority on the issue of access”.  These findings form the basis for the finding of contempt and were open to the judge on the affidavit evidence, as discussed below.
  • No, the motion judge did not err by finding that the appellant had deliberately and willfully breached the access order. Although a child’s wishes, particularly the wishes of a child of S.’s age, should certainly be considered by a court prior to making an access order, once the court has determined that access is in the child’s best interests a parent cannot leave the decision to comply with the access order up to the child.  As stated by the motion judge, Ontario courts have consistently held that a parent “has some positive obligation to ensure a child who allegedly resists contact with the access parent complies with the access order”: Quaresma v. Bathurst, (2008), O.J. NO. 4734 (Ont. S.C.J.).  Parents are expected to do all that they reasonably can to get a child to comply with an access order.  The appellant has been put on notice in prior proceedings that more than mere encouragement was required.  In this case, the motion judge inferred deliberate and willful disobedience of the order from the appellant’s failure to do all that she reasonably could: she failed to “take concrete measures to apply normal parental authority to have the child comply with the access order”.  The motion judge properly concluded that deliberate and willful disobedience was established beyond a reasonable doubt.

Tags: Family Law, Access Orders, Parental Obligation to Secure Compliance from Child, Contempt, Findings of Fact, The Rule in Browne v. Dunn

Grant Forest Products Inc v The Toronto-Dominion Bank, 2015 ONCA 570

http://www.ontariocourts.ca/decisions/2015/2015ONCA0570.pdf

[Doherty, Gillese and Lauwers JJ.A.]

Counsel:

  1. Bailey and D. McPhail, for the appellant Superintendent of Financial Services
  2. Dietrich, for the respondents Grant Forest Products Inc., Grant Alberta Inc., Grant Forest Product Sales Inc., and Grant U.S. Holdings GP
  3. Marshall and R. Jaipargas, for the respondent West Face Capital Inc.
  4. Cobb, for the respondent Mercer (Canada) Limited
  5. Byers and D. Murdoch, for the respondent Ernst & Young Inc.
  6. J. Hatnay, J. Harnum and A. 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

Keywords: Bankruptcy & Insolvency, Pensions, Companies’ Creditors Arrangement Act, Pension Benefits Act, ss 57(3) and (4), Personal Property Security Act,  s. 30(7), Deemed Trust, Wind-Up of Pension, Sun Indalex Finance LLC v United Steelworkers, Century Services v Canada, Doctrine of Paramountcy, Standard of Review, Reasonableness

Facts:

The debtor companies in this case obtained protection under the Companies’ Creditors Arrangement Act, RSC 1985, c. C-36 (the “CCAA”) and entered into a liquidation process. After selling their assets and paying out the first lien lenders in full, there were insufficient funds to satisfy the claims of the second lien lenders and the claims asserted on behalf of two of the debtor companies’ pension plans. A contest ensued between one of the secured creditors and the pension claimants.

The CCAA judge ordered the remaining debtor companies into bankruptcy, thereby resolving the contest in favour of the secured creditor. Ontario’s Superintendent of Financial Services (the “Superintendent”) appeals.

During the CCAA proceeding, the Superintendent made wind-up orders in respect of the two pension plans. He contends that a deemed trust arose on wind-up of each plan. He says that those wind up deemed trusts encompassing all unpaid contributions took priority over the claims of the secured creditors because the remaining funds are the proceeds of sale of debtor companies’ accounts and inventory. The Superintendent contends that the decision below is inconsistent with the Supreme Court of Canada’s recent decision in Sun Indalex Finance, LLC v United Steelworkers, 2013 SCC 6, [2013] 1 SCR 271.

Issues:

  1. What standard of review applies to the CCAA judge’s decision to lift the CCAA stay of proceedings and order the remaining applicants into bankruptcy?
  2. Did the CCAA judge make a procedural error in his treatment of the pension motion at issue in the case? I.e. did he act improperly in adjourning the pension motion on his own motion so that additional notice could be given to second lien lenders?
  3. Did the CCAA judge err in principle, or act unreasonably, in lifting the stay and ordering the remaining applicants into bankruptcy?

Holding: Appeal dismissed.

Reasoning:

  1. The decision to lift the stay and order the remaining applicants into bankruptcy was a discretionary decision. The standard of review is therefore reasonableness.
  2. As discussed in Century Services Inc v Canada (Attorney General), 2010 SCC 60, the CCAA judge must be cognizant of the various interests at stake in the reorganization, which can extend beyond those of debtor and creditors. Thus, the judge had to be cognizant of the interests of the second lien lenders, as well as those of the moving parties and the pension claimants. The pension motion had the potential to adversely affect the interests of the second lien lenders. The funds that remained at the time that the pension motion was brought were insufficient to meet the claims of both the second lien lenders and the pension claimants. Had the CCAA judge refused to grant the pension motion and contributions continued to be made to the Plans, the second lien lenders would have been prejudiced because there would have been even fewer funds available to satisfy their claims. Given these circumstances, it was understandable that the CCAA judge had concerns about the adequacy of notice to the second lien lenders. Thus, the adjournments of the pension motion did not amount to procedural unfairness. Rather, they were consonant with the Supreme Court’s dictates in Century Services.
  3. There was no error in the CCAA judge’s exercise of discretion to lift the CCAA stay and order the remaining applicants into bankruptcy. At the time the motions were heard, GFPI had long since ceased operating, its assets had been sold, and the bulk of the sale proceeds had been distributed. It was a liquidating CCAA with nothing left to liquidate. Nor was there anything left to reorganize or restructure. All that was left was to distribute the remaining funds, and it was clear that those funds were insufficient to meet the claims of both the second lien lenders and the pension claimants. in those circumstances, the breadth of the CCAA judge’s discretion was sufficient to lift the stay and order the remaining applicants into bankruptcy. The judge’s discretion was not exercised unreasonably.

Tags: Bankruptcy & Insolvency, Pensions, Companies’ Creditors Arrangement Act, Pension Benefits Act, ss 57(3) and (4), Personal Property Security Act,  s. 30(7), Deemed Trust, Wind-Up of Pension, Sun Indalex Finance LLC v United Steelworkers, Century Services v Canada, Doctrine of Paramountcy, Standard of Review, Reasonableness