Companies’ Creditors Arrangement Act

The CCAA, or Companies’ Creditors Arrangement Act, allows a company in serious financial difficulty to continue operating, giving it time to find a global solution to its indebtedness and avoid bankruptcy.

The Court then grants the company protection in the form of a stay of proceedings, so that it can negotiate with those to whom it owes or may owe money (its “creditors”) without fear of their demanding repayment of the sums owed to them. The company must then make a proposal to its current and potential creditors, also known as a “plan of arrangement”, detailing how and to what extent the company intends to pay the creditors.

The suspension can be extended for the time needed to negotiate and prepare the plan of arrangement, as long as the company is acting in good faith and has sufficient income to continue operations. Throughout the process, a court-appointed monitor oversees the company’s operations and reports periodically to the court on the progress and seriousness of the process.

A plan of arrangement must receive a favorable vote from at least half of the creditors holding 2/3 in value of the claims.

When the company is the subject of a class action, it is the person who has been granted the status of representative by the Court, and their lawyers, who look after the interests of the class members, take part in the discussions and vote.

If the creditors’ vote is favorable, the plan of arrangement is subsequently presented to the Court, which will hear before approving or rejecting it any person with an interest to assert, whether in favor of or against approval of the plan of arrangement.

If the Plan of Arrangement is approved by the Court, it is implemented under its supervision. If these requirements are met, the plan of arrangement will be imposed on all creditors, even those who have opposed it.

In the case of a class action covered by a plan of arrangement that has been approved by the Court, a claims process is then put in place to enable class members to claim compensation.

On March 1, 2019, the Quebec Court of Appeal rendered a historic judgment, confirming the no less historic judgment of the Quebec Superior Court, which ordered that the 100,000 Quebec victims covered by the CQTS-Blais class action who were diagnosed with lung cancer, throat cancer or emphysema (the “Class Members”) be compensated by the defendant tobacco companies (the “Tobacco Companies”). The value of the judgments is nearly $14 billion, including interest.

On March 8, 12 and 22, 2019, the Tobacco Companies sought, and were granted, the protection of the CCAA by the Ontario Superior Court of Justice (the “Ontario Court”), which ordered a stay of all proceedings against them. The three Tobacco Companies invoked the enormous $14-billion condemnation ordered by the Quebec Court of Appeal, as well as the lawsuits brought by the 10 Canadian provinces to recover health-care costs due to smoking, whose claims then exceeded $500 billion, in support of their request for court protection.

As a result of the CCAA Proceedings, the execution of the judgments obtained on behalf of Class Members who had won at the Quebec Court of Appeal were stayed by the Ontario Court.

The purpose of this stay of proceedings is to allow negotiations with all the Tobacco Companies’ creditors and to negotiate a global settlement of all tobacco-related claims against them.

The Ontario Court appointed a mediator to lead negotiations between the Tobacco Companies and all of their creditors with tobacco-related claims in the CCAA proceedings.

The Tobacco Companies’ creditors involved in the mediation include:

• the Class Members, who won their case in before the Quebec Court of Appeal, represented by Class counsel;
• tobacco victims across Canada, who do not have the benefit of a judgment, represented by The Law Practice of Wagner & Associates; and
• the 10 Canadian provinces seeking to recover the health care costs associated with tobacco-related illnesses.

These creditors must negotiate with the Tobacco Companies, as well as amongst themselves, in order to achieve a global settlement of all claims.

The intense mediation process has been underway since the Hon. Warren K. Winkler was appointed as mediator by the Ontario Court on April 5, 2019.

From the very beginning of the CCAA proceedings in March 2019, Class counsel, have been representing and defending the interests of the Class Members.