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McEwan Enterprises Inc., 2021 ONSC 6453

Will the court allow modifications to prescribed creditor notifications in CCAA proceedings?

MEI was a multi-service food business, which operated six restaurants, two food-hall locations and one gourmet grocery location. It had been experiencing financial challenges for an extended period of time as a result of certain unprofitable locations, which were exacerbated by the COVID-19 pandemic. Consequently, MEI brought an application for an initial order under the Companies’ Creditors Arrangement Act.

As part of its restructuring efforts, MEI intended to seek to complete the sale and transfer of the business to the current owners of MEI, to ensure the continuation of the business with a reduced number of locations. MEI believed that the implementation of the transaction would result in a sustainable business going forward for the benefit of MEI’s many stakeholders, including its 268 employees whose jobs would be preserved, its secured creditors whose obligations would be unaffected and assumed by the Purchaser, and its many suppliers and service providers whose contracts and obligations would also all be assumed.

In respect of the Initial Order, MEI proposed that the Monitor not be required to comply with the notification requirements of s. 23(1)(a) of the CCAA to: (a) publish a newspaper notice in respect of the CCAA proceedings; (b) send a notice to known creditors; or (c) make publicly available a list showing the names, addresses and estimated claim amounts of those creditors. Under the CCAA, a court has the jurisdiction to grant an order not requiring compliance with the applicable notice provisions and/or varying those requirements. The question was whether it was appropriate to do so in this case.

MEI believed that the issuance of a newspaper notice, together with the public posting of a list of individual creditors and their claims, would not provide any material benefit to the relevant parties, as they would not be impacted by the CCAA proceedings. Under the proposed sale, the purchaser would assume the existing obligations owing to MEI’s employees, secured creditors and suppliers. Therefore, MEI submitted that adhering to these notice requirements would only add unnecessary costs.  It believed that a notice issued by MEI to its creditors would be a more efficient and less disruptive means of notifying such parties in the circumstances.

The Court was not persuaded that it was appropriate or necessary to deviate from the notice provisions prescribed by the CCAA. CAAA proceedings are public proceedings.  The Supreme Court confirmed that court proceedings are presumptively open to the public.  Absent extenuating circumstances, any attempt to limit the publication of CCAA proceedings by altering the prescribed notice provisions is not consistent with the open court presumption, which must be respected.

MEI sought court protection from its creditors and resorted to the CCAA to achieve its objectives. It was not up to MEI to alter the notice provisions to suit its purposes. The notice provisions prescribed in the CCAA were not onerous.  Further, the costs associated with a newspaper notice were inconsequential when considering the magnitude of assets and liabilities of MEI.

However, in an effort to eliminate any possible confusion surrounding the publication of individuals whose claims were expected to be unaffected in these proceedings, the Court authorized minor adjustments to the notice provisions, which were reflected in the signed order.

Counsel: Robert J. ChadwickCaroline Descours and Trish Barrett of Goodmans for MEI; Sean Zweig and Joshua Foster of Bennett Jones for A&M as Monitor; and Virginie Gauthier of Gowlings for The Cadillac Fairview Corporation Limited

Judge: Chief Justice G.B. Morawetz

Fullcase: https://canlii.ca/t/jjf4f