In the CCAA proceeding of Timminco Limited, on April 27, 2012, Justice Morawetz of the Ontario Superior Court of Justice denied, for the time being, a motion brought by the plaintiff in the securities class action Pennyfeather v. Timminco Limited to lift the stay of proceedings against Timminco and the other defendants to allow the class action to continue.
Timminco consented to a partial lifting of the stay to allow the plaintiff to apply to the Supreme Court of Canada for leave to appeal a recent decision of the Court of Appeal for Ontario relating to limitation period issues under Part XXIII.1 of the OntarioSecurities Act.
The plaintiff, however, sought a full lifting of the stay to allow him to proceed with further steps in the class action, including motions for certification and leave to bring the Part XXIII.1 action. The plaintiff contended that there would be no prejudice to lifting the stay because the plaintiff would limit his potential recovery to proceeds from D&O insurance (which would not have been available to other creditors in any event) or, if necessary, the directors and officers themselves.
Justice Morawetz agreed with Timminco that the sales process currently underway as part of the CCAA proceeding must take priority to the class action, and accepted Timminco's evidence that its small executive team should not be distracted from the sales process by the ongoing class action. Justice Morawetz ordered that the plaintiff could bring back the motion to lift the stay before the court no earlier than 75 days from the date of the decision, at which time the parties would have a better sense of when the sales process would be complete.
Of note, Justice Morawetz found that the stay of proceedings under the Initial Order in the CCAA proceeding not only applied to Timminco and its present and former directors and officers, but also to expert defendants (the Photon Defendants) who are third parties to Timminco. Justice Morawetz found it would be unfair to Timminco if issues in the class proceeding are determined without its involvement, and unfair to the Photon Defendants to have to proceed without access to the documents and information of Timminco.
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