The Judges’ Perspective: Hot Topics & Practical Advice

The CBA Insolvency Law Conference, which was held on November 18, featured an impressive panel of insolvency judges who provided perspectives and practical advice on a range of issues, including how and when to use technology in insolvency proceedings, the use of Court-directed alternative dispute resolution (“ADR”) mechanisms in insolvency proceedings and the latest on forms of orders, including issues related to sealing orders and declaratory relief.

Participating in the panel were:

• The Honourable Geoffrey B. Morawetz, Chief Justice, Superior Court of Justice of Ontario

• The Honourable Madam Justice Chantal Corriveau, Superior Court of Québec

• The Honourable Mr. Justice David Kroft, Court of King’s Bench of Manitoba

• JJ Burnell, Partner, MLT Aikins LLP (moderator)

The Use of Technology

The judges began by discussing the use of technology in insolvency proceedings, and where things stand with the return to in-person hearings in their respective jurisdictions.

Madam Justice Corriveau noted that, in Québec, the courts have been adapting to the needs of the parties in conducting hearings in person or remotely. When witnesses are involved, the practice has generally been to conduct the hearing in person so that cross-examinations can be more efficient. However, the courts have used technology to their advantage where necessary, including in the ongoing CCAA proceedings of Groupe Sélection, which involves approximately 5,000 employees, 14,000 residents and dozens of lawyers. The case has been paperless and tried remotely. By contrast, in another case based in Gaspésie, a remote community, the court has been reluctant to hear the matter remotely, and lawyers have been required to attend hearings in person.

Chief Justice Morawetz shared that he hasn’t heard a matter in person since before the pandemic, although the issue is set to be reviewed in early 2023. Procedural matters will likely continue to be heard virtually going forward, while the expectation is that substantive matters will return to in person hearings. Chief Justice Morawetz noted that resolution rates are higher in person than online, which militates in favour of a return to court on substantive matters.

Mr. Justice Kroft explained that, in Manitoba, the bar wanted to return to normal as much as possible and courts have, for the most part, returned to in-person hearings. However, virtual hearings have not been tossed out entirely. Pre-trials are still conducted remotely, unless the judge thinks it’s necessary to have the parties attend in person. Similarly, where there are access to justice issues, cross-border issues or foreign experts, virtual hearings are available. Like Chief Justice Morawetz, Mr. Justice Kroft also noted that “business gets done in the hallways”.

ADR in Insolvency Proceedings

The judges then turned to the role of ADR in insolvency matters, with moderator JJ Burnell introducing the subject by referring to the CCAA proceedings of 1057863 B.C. Ltd., where mediation was imposed on the Province of Nova Scotia over its objections.

Chief Justice Morawetz noted that the late Justice Hainey incorporated ADR into insolvency proceedings. His Honour stated that, where parties are willing to negotiate, mediation can be a valuable tool, and cited the CCAA proceedings of Laurentian University as an example. His Honour also noted that, internationally, there is a movement towards ADR.

Mr. Justice Kroft agreed that ADR can be a valuable tool if it will assist the objectives of the proceedings, but also noted that it may be a waste of time and resources in certain circumstances.

Madam Justice Corriveau noted that, in Québec, the courts will not impose ADR on the parties, and that ADR will only be conducted if the parties consent.

Forms of Orders

Finally, the judges discussed model orders. All of the judges agreed that orders should be easy to understand, direct, written in plain language and restricted to the relief the parties actually need. People other than lawyers read the orders, and the orders should be easily understood by anyone reading them. Chief Justice Morawetz noted that Canadian forms of orders are very different from those of the US. Canadian orders should not include recitals with all of the factual findings, nor should sanction orders include declaratory relief. Every provision of the plan does not need to be tracked in a sanction order – the order simply needs to state that the plan is sanctioned and everything in the plan is binding. Justice Kroft added that orders should not include an appendix of defined terms that is 20 pages long.

With respect to sealing orders, all of the judges agreed that the Sherman Estate case has changed the courts’ approach, and that courts are not “handing out sealing orders like candy” anymore. Chief Justice Morawetz cited Madam Justice Kimmel’s recent caution in the Distinct Infrastructure case that sealing orders will not be granted simply because the parties have included a confidentiality clause in their agreement, and that all three prongs of the test in Sherman Estate must be met for a sealing order to be granted.

Madam Justice Corriveau cited the Raymond Chabot Grant Thornton c. Bourgeois case, where Justice Immer similarly cautioned that not all financial data or sensitive commercial information constitutes an important commercial interest, as required by Sherman Estate. It is not enough for the parties to have an important commercial interest in the information sought to be sealed – the sealing of the information must constitute an important commercial interest to society as a whole.

Justice Kroft added that sealing orders should be limited in time and scope and should contemplate when the sealing provision will come to an end. Rather than seeking to seal an entire document, the preferable approach is to file a redacted version in the public record and seal the unredacted version.

Finally, on the issue of declaratory relief, the judges focused their discussion on the appropriateness of interim orders approving a court officer’s activities. Chief Justice Morawetz noted that Justice Dunphy refused to approve a receiver’s actions in the Cosa Nova v. Midas case, ruling that interim approvals of a receiver’s actions are not necessary. Chief Justice Morawetz took a different approach in the CCAA proceedings of Target Canada, recognizing that there are good policy and practical reasons for the court to approve of Monitor’s activities, but that the benefit of the approval should be limited to the Monitor itself, and not the debtor and other parties.

Madam Justice Corriveau noted that catch-all approvals are problematic because the judge is not aware of all of the receiver’s actions, while Justice Kroft added that such approvals don’t offer any protection where something was misrepresented or not made known to the court.