Arrangement relatif à Bloom Lake, 2018 QCCS 1657

Will the Court give a union a discretionary deemed proxy to vote the claims of employees and retirees?

The CCAA Parties sought and received court protection under the Companies’ Creditors Arrangement Act in 2015. While under court protection, the CCAA Parties liquidated all or virtually all of their assets with the result that the court-appointed Monitor holds substantial funds.

In March 2018, the Monitor negotiated a settlement of the potential preference claims of some of the CCAA Parties. The Monitor estimated that, as a result of the proposed settlement, there would be between $62 and $100 million available for distribution to the third party unsecured creditors of the CCAA Parties. The employees and retirees of the CCAA Parties comprise a significant portion of the creditors, with claims totalling approximately $200 million.

The CCAA Parties sought an Order authorizing the filing of the Joint Plan of Compromise and Arrangement (the “Plan”) and the voting procedure regarding the third party creditors. At issue in this motion were the voting rights of the 2,400 unionized and non-unionized employees and retirees of the CCAA Parties. The non-unionized employees and retirees were represented by several employees who were appointed as representatives (the “Representative Employees”). The unionized employees and retirees were represented by their Union.

The Representative Employees and the Union asked the Court to grant their counsel a deemed proxy to vote in counsel’s discretion, unless the employee or retire opted out by advising the Monitor that they would attend the meeting in person or appoint a different proxy. The CCAA Parties opposed the request for a discretionary deemed proxy.
The Court analyzed the appropriateness of a discretionary deemed proxy through a three-part analysis.

First, the Court considered whether a deemed proxy was appropriate. The Representative Employees and the Union argued that the deemed proxy was necessary to ensure that all of the employees and retirees could exercise their right to vote. They claimed that individual voting was inappropriate for a large, vulnerable creditor group who are not sophisticated commercial creditors. The CCAA Parties argued that a deemed proxy would give the proxy holder too much leverage.

The Court held that these concerns were overstated. For example, while some of the creditors may not have the capacity to make a decision, there is likely someone who can make a decision on their behalf or explain the proposed Plan in simpler terms. The decision that they have to make is a fairly simple “yes” or “no” vote, and the consequences of either vote can be explained. Nevertheless, the Court’s objective was to ensure that each employee and retiree is given the opportunity to vote, and the deemed proxy is a way to achieve that result. The Court rejected the CCAA Parties’ argument regarding excess leverage, adding that the deemed proxy simply ensures that the creditors exercise the leverage that they should have, given their numbers and the value of their claims.

Second, the Court pondered who should exercise the deemed proxy. It agreed with the Representative Employees and the Union that their counsel are the appropriate persons to hold the deemed proxies.
Finally, the Court considered whether the deemed proxy should be discretionary. The Representative Employees and the Union stated that they had not yet taken a position on whether they will vote for or against the Plan. They anticipate that there will be further discussions and negotiations right up until the vote. As such, they ask that the proxy holder be allowed to vote the claims in her or his discretion, and any employee or retiree who definitively wants to vote for or against the Plan can opt out of the deemed proxy.
The Court held that the discretionary deemed proxy is fundamentally undemocratic. The negotiations anticipated by the parties will have the effect of depriving the employees and retirees of any real participation in the process. If, as anticipated, the negotiations and discussions continue right up to the vote, the employees and retirees will have to decide whether to opt out on the basis of a Plan that may not be the final version and, if they do not opt out, they may not know the final position that the proxy holder will take on their behalf. There would be no time for the final version of the Plan to be explained to them.
Consequently, the Court did not authorize the discretionary deemed proxy. Its solution was to give the parties more time to take a final position on the Plan, and to ensure that the Plan is not amended further once that position has been determined. 

CounselBernard BoucherNatalie Bussière and Emily Hazlett of Blakesfor the Petitioners and the Mises-en-cause, Sylvain Rigaud and CrystalAshby of Norton Rose Fullbright for the Monitor, Andrew Hatnay of Koskie Minsky and Mark Meland of Fishman, Flanz, Meland Paquin for the objecting parties Michael Keeper, Terence Watt, Damien Lebel and Neil Johnson, Daniel Boudreault of Philion Leblanc Beaudry Avocats for the Objecting parties Syndicat des Métallos Section locale 6254, 6285 et 9996, Edward Bechard-Torres of IMK for the Superintendent of Pensions of Newfoundland, Gerry Apostolatos of Langlois Avocats for Quebec North Shore and Labrador Railway Company Inc., Gabriel Serena of Cain Lamarre for Ville de Fermont, Martin Roy of Stein Monast for Ville de Sept-Ïles and Ouassim Tadlaoui of BLG for Groupe UNNU-EBC S.E.N.C.

Full case: