In 2005, Justice Blair, for the Ontario Court of Appeal,
cautioned courts acting pursuant to the Companies'
Creditors Arrangement Act ("CCAA") that their
jurisdiction, broad as it was, was not without limit. The setting
was the restructuring of Stelco, a complicated and hotly contested
affair, which by then had been ongoing for fourteen months or
Five years later, the extent to which the Court of Appeal's
caution on the limits of the court's jurisdiction is being
respected is open to question, as evidenced by a ruling made last
week by the Québec Superior Court in the restructuring
proceedings of AbitibiBowater Inc. ("Abitibi").
In a judgment dated June 11, 2010, Justice Gascon, sitting as a
CCAA Court judge, granted Abitibi's motion for an order
requiring certain union members to take a second vote on an
agreement entered into between it and the Communications, Energy
and Paperworkers Union regarding the amendment and renewal of
collective bargaining agreements in respect of four union locals.
In order to be accepted, a double-majority of union members from
the four locals in question had to vote in favour of the agreement.
A vote was held, and all but one of the four locals voted in favour
of the agreement, such that the requisite double-majority was not
achieved. Stressing the importance of the acceptance of the
agreement to its restructuring, Abitibi asked the court to order
the union members from the local that voted against the agreement
to submit to a second vote. Interestingly, the Union supported
Abitibi's position, although it admitted doing so because it
was facing an impasse.
Justice Gascon acknowledged that Abitibi's request was
unheard of, and that there was no precedent to support
Abitibi's motion. Nevertheless, having recognized that the
motion was unorthodox and that it was doubtful that Abitibi, as an
employer, could have brought such a motion before a court outside
of the CCAA context, Justice Gascon, relying on his broad statutory
discretion and inherent jurisdiction, went on to order the four
locals in question to submit to a second vote on the agreement.
In finding that the discretion contained in the CCAA and the
court's inherent jurisdiction afforded the court the necessary
jurisdiction to grant the relief sought, Justice Gascon started
from the proposition that the CCAA is a flexible tool and remedial
legislation, the purpose of which is to facilitate compromise and
the successful restructuring of companies in financial distress.
Justice Gascon stated that the court must, as much as it can,
facilitate the development of a plan of compromise and arrangement,
with the best costs and conditions possible. In light of the
urgency of the matter (agreement with various unions being a
pre-condition of the draft plan of compromise and arrangement
currently in existence), and the possibly dramatic consequences of
the rejection of the agreement in question to the restructuring,
Justice Gascon held that it was appropriate for the court to
exercise its jurisdiction in the manner requested.
In reaching this conclusion, the court noted that a negative
vote this late in the proceedings could be a threat to a successful
restructuring. Implicit in Justice Gascon's ruling was the
assumption that, if the union members were told once again how
crucial it was to vote in favour of the agreement, the result would
be different. While the decision could, on its face, be seen as an
implicit order to the union members to vote in favour of the
agreement (and, obliquely, support the draft plan of compromise and
arrangement), the court drew comfort from the fact that union
members would presumably still have the final word on the
The application of the CCAA creates, to an unusual degree, a
tension between ends and means. To achieve the goals of the CCAA,
courts can be strongly tempted to push the outer boundaries of
their statutory discretion and inherent jurisdiction to achieve a
satisfactory restructuring, sometimes in ways that courts would
not, in any other context, find acceptable, as Justice Gascon
explicitly acknowledged. Justice Gascon's decision raises, once
again, the difficult question of how far courts can and should go
to achieve the objectives of the CCAA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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