Authors: Margo R. Siminovitch, Hugo Carrier-L’Italien and Justin Reiter
Publication ǀ August 2023
Class action litigation exposes companies to the risk of significant liability for alleged wrongdoing and may jeopardize their ability to continue as a going concern. In Canada, such risk may be the impetus for a company to seek protection under the Companies’ Creditors Arrangement Act (the “CCAA”). A facilitative federal statute, the CCAA provides breathing space for a financially distressed company to develop a plan of compromise or arrangement with its creditors with the objective of continuing the company’s viability going forward.
Constitutionally, laws governing class actions, including their settlement, are within the authority of the provincial legislature under ss. 92(13) and 92(14) of the British North America Act, 1867 (now the “Constitution Act, 1867”) over property, civil rights, and the administration of justice. Nonetheless, there is little doubt today that class actions can also be settled under the CCAA pursuant to the Parliament of Canada’s exclusive legislative authority over bankruptcy and insolvency. In this context, the rights of class members may be compromised as a result of a settlement approved by a superior court exercising its jurisdiction under a federal statute.
This article reviews the constitutional principles that justify a CCAA court resolving issues pertaining to class actions, including in a circumstance where the class action proceedings were not instituted in the same province as the CCAA proceedings. As well, the authors consider whether a CCAA court with the authority to make orders related to a class action should, in all circumstances, exercise its authority and discuss when during the course of proceedings, and on what basis, objections can be raised about a CCAA court’s jurisdiction.
The Constitution Act, 1867 provides for a division of powers between the federal and provincial legislatures, but does not provide for the resolution of conflicts between federal and provincial laws. However, this lacuna has been filled by the courts which established that the federal law is paramount and the provincial law inoperative to the extent of any conflict between the two.
The Supreme Court of Canada (the “Supreme Court”) recently confirmed in Murray-Hall that the doctrine of federal paramountcy applies when the inconsistency between the federal law and the provincial law results in operational conflict or frustrates the purpose of the federal law. By contrast, if a conflict does not exist in operation or purpose, the doctrine of paramountcy does not apply and both laws remain operative.
The decision in Multiple Access Ltd. v McCutcheon provides an example of such judicially confirmed coexistence. The provincial law duplicated federal law to protect companies against insider trading. Both laws were valid — under the Constitution Act, 1867 provinces can legislate on matters relating to property and civil rights and the Parliament of Canada can legislate on matters of trade and commerce. Because it was possible to follow both laws, the Supreme Court did not apply the doctrine of paramountcy but, rather, applied the double aspect doctrine.
The double aspect doctrine is employed by courts to justify measures dealing with subjects that could fall equally under two heads of power, one federal and the other provincial. Such overlaps in the exercise of provincial and federal authority are recognized as the indicia of cooperative federalism, an approach that reflects the evolution away from watertight compartments (i.e., the traditional divide set out in ss. 91 and 92 of the Constitution Act, 1867) to a more flexible approach in dealing with the division of powers. For overlaps to be permitted, each level of government must be properly pursuing objectives that fall within its legislative authority.
In Murray-Hall, however, Wagner C.J. cautioned that where the legislative subject matter has a double aspect, it is essential “to avoid eroding the importance attached to provincial autonomy.”
Legislative provisions concerning class actions are intra vires the provincial legislature as they relate to property, civil rights, and the administration of justice, while the Parliament of Canada retains exclusive jurisdiction in bankruptcy and insolvency matters. However, in contrast to the express provisions concerning the resolution of class actions found in most provinces’ legislation, the CCAA is silent with respect to the subject of class actions, including the resolution of such litigation as a component of an insolvent company’s plan of compromise and arrangement. Nevertheless, and as explained in Century Services, silence does not constitute a bar for a CCAA court to issue orders in appropriate circumstances:
The general language of the CCAA should not be read as being restricted by the availability of more specific orders. However, the requirements of appropriateness, good faith, and due diligence are baseline considerations that a court should always bear in mind when exercising CCAA authority. Appropriateness under the CCAA is assessed by inquiring whether the order sought advances the policy objectives underlying the CCAA. The question is whether the order will usefully further efforts to achieve the remedial purpose of the CCAA – avoiding the social and economic losses resulting from liquidation of an insolvent company. I would add that appropriateness extends not only to the purpose of the order, but also to the means it employs. Courts should be mindful that chances for successful reorganizations are enhanced where participants achieve common ground and all stakeholders are treated as advantageously and fairly as the circumstances permit.
The authority of a CCAA court to make orders regarding matters that are not explicitly addressed in the statute have been attributed to an exercise of inherent jurisdiction or to statutorily given discretion and, at times, CCAA courts appear to have conflated the two powers. Inherent jurisdiction is an extraordinary power that cannot be exercised in a manner that conflicts with a statute, whereas discretion under s. 11 of the CCAA is the engine that drives the statute’s broad and flexible approach to restructurings. Indeed, as restructurings become increasingly complex, “CCAA courts have been called upon to innovate accordingly to exercise their jurisdiction beyond merely staying proceedings (…). They have been asked to sanction measures for which there is no explicit authority in the CCAA.”
A fundamental purpose of the CCAA is to allow financially troubled companies the opportunity to restructure their affairs and to continue operations while providing some payment to creditors. A CCAA court’s subject-matter jurisdiction to make orders related to the settlement of a class action – inter-jurisdictional or not – is derived from the discretion granted to it under this broad statutory regime.
The scope of a CCAA court’s jurisdiction must be assessed in view of the Supreme Court’s guidance that a “single proceeding model” applies in insolvency proceedings – a model that favours all litigation involving an insolvent company being addressed within a single forum. The importance of the single proceeding model, as it relates to bankruptcy and insolvency proceedings, was confirmed by the Supreme Court in a number of decisions beginning in 2001 in Sam Lévy to, most recently, in Peace River in 2022. The model protects stakeholder rights and the public interest in the efficient and economical clean-up of the aftermath of financial collapse. The CCAA confers a broad scope of authority to deal with most disputes, as anything less would unnecessarily complicate and undermine the efficacy of winding up or reorganizing an insolvent entity’s affairs. As confirmed recently by the Supreme Court:
The central role of courts in ensuring the equitable and orderly resolution of insolvency disputes is reflected in the “single proceeding model.”
This model favours the enforcement of stakeholder rights through a centralized judicial process. The legislative policy in favour of “single control” is reflected in Canadian bankruptcy, insolvency, and winding-up legislation (Century Services, at paras. 22-23). The single proceeding model is intended to mitigate the inefficiency and chaos that would result if each stakeholder in an insolvency initiated a separate claim to enforce its rights (…).
This model is not without limits. A CCAA court may consider that the application of the single proceeding model would go too far in the particular circumstances and decide not to exercise its statutory given discretion, even in pursuit of CCAA objectives.
In 2013, in the context of a cross-border insolvency, the Superior Court of Québec was asked to lift a stay of proceedings to allow a motion for declaratory judgment to be filed in the U.S. The applicant admitted that the Québec court had jurisdiction but argued that the U.S. District Court of Maine was better placed to hear the motion. Dumas J. dismissed the applicant’s request and stated that there was no tangible benefit from departing from the single proceeding model as “the Bankruptcy Court is a court of equity and the notion of equity is interpreted as conferring on the Bankruptcy Court all powers to dispose of disputes or a difficulty even when the law contains no specific provision that is likely to apply.”
A few years later, in Bloom Lake 2017, debtors filed for CCAA protection in Québec and the Québec court was asked to decide a preliminary dispute as to whether it should request the aid of the Supreme Court of Newfoundland and Labrador with respect to the scope and priority of the deemed trust and other security created by Newfoundland and Labrador’s Pension Benefit Act. It was argued in support of the request that:
- there were complex and important issues of foreign provincial law;
- the Newfoundland and Labrador court possessed far greater expertise on said law;
- it was a question of purely local concern and could significantly impact a large number of residents in Newfoundland and Labrador; and
- if justice was to be done and be seen to be done, it was important that consequential decisions on provincial legislation be made by the courts of Newfoundland and Labrador.
Hamilton J. (as he then was) was not persuaded by these arguments and remained concerned by the delays that might result if the matter was referred to another court. He held that the general rule is that a CCAA court should rule on all issues that arise in the context of insolvency proceedings because “[t]here are clear efficiencies to having a single court deal with all of the issues in a single judgement.”
It is now well established that an objector to a CCAA court’s exercise of jurisdiction on the basis that a court in another jurisdiction is the more appropriate forum (e.g., on the basis of forum non conveniens) must show that the alternative forum is clearly more appropriate and that it would be fairer and more efficient to transfer the proceedings to another court. The objector, when it cannot claim to be a stranger to the CCAA proceedings, has the burden of demonstrating that the dispute relates to a matter that is outside even a generous view of the insolvency process.
Silence of the CCAA Versus Express Provisions of Provincial Law
As is evident from the decisions summarized below, most courts that have explicitly considered the interplay between the absence of provisions on a specific matter in the CCAA and the express provisions of provincial statutes relating to the same subject matter, did so in situations where the provincial law was found to be in conflict with the purpose of the federal law. At one time, in the absence of any inconsistency between the federal and provincial legislation on a particular matter, certain courts held that the discretionary power pursuant to s. 11 of the CCAA could not be used to override an express provision of provincial law; courts, however, no longer apply that reasoning.
Sulphur Corporation of Canada Ltd.
In Re Sulphur, the question before the Court of Queen’s Bench of Alberta was whether the CCAA court had the jurisdiction to grant a charge to secure debtor-in-possession (“DIP”) financing which ranked in priority to a statutory lien under s. 32 of the Builders Liens Act of British Columbia. At that time, there was no express authority for a CCAA court to grant priority security for DIP financing.
Sulphur Corporation of Canada Ltd. (“Sulphur”) was incorporated in Alberta and its only activity was a construction project in British Columbia. At the time Sulphur obtained CCAA protection, the project was incomplete and generated no cash flow. The CCAA court issued an order allowing Sulphur to borrow from its majority shareholder and this DIP financing was to rank in priority to all other creditors (except those claiming under the administrative charge). The loan was contingent on the lender being given priority ranking. About $9 million of builders’ liens, however, had been registered against Sulphur’s assets.
The builders’ lien claimants argued that an order made pursuant to the CCAA court’s inherent jurisdiction (an equitable power) could not override an express provincial statutory provision and fell outside the limited purview of the paramountcy doctrine. In response, it was argued that ss. 11(3) and 11(4) of the CCAA (as they read in 2002) provided the statutory basis for the CCAA order and, therefore, a conflict existed which justified the application of the paramountcy doctrine.
In 2002, ss. 11(3) and 11(4) of the CCAA read as follows:
11(3) A court may, on an initial application in respect of a company, make an order on such terms as it may impose, effective for such a period as the Court deems necessary not exceeding 30 days, (…) [staying proceedings, restraining proceedings and prohibiting proceedings against the debtor company].
11(4) A court may on application in respect of a company other than an initial application, make an order on such terms as it may impose, (…) [staying proceedings, restraining proceedings and prohibiting proceedings against the debtor company].
As there was no express power provided in the CCAA to grant priority security for DIP financing at that time, the Court considered whether the words “on such terms as it may impose” were sufficient to give inherent jurisdiction a statutory cloak.
In its analysis, the Court relied on the decision in Hunters Trailer & Marine Ltd. (Re), where Wachowich A.C.J. (as he then was) stated that the CCAA’s effectiveness in achieving its objectives was dependent on a broad and flexible exercise of jurisdiction to facilitate a restructuring and continue the debtor as a going concern. He concluded that a CCAA court had the inherent or equitable jurisdiction to grant a super-priority for DIP financing over the claims of all other creditors.
Lovecchio J. also noted that “numerous decisions in Canada have supported the proposition that s. 11 provides the courts with broad and liberal power to be used to help achieve the overall objective of the CCAA.” He distinguished the case before him from Baxter, relied on by the builders’ lien claimants to support the argument that inherent jurisdiction should not be used to override an express statutory provision, on the basis that the latter ruling was made in the context of competing provisions of two provinces’ legislation. In contrast, the situation in Re Sulphur concerned a conflict between a federal statute and a provincial statute.
Lovecchio J. also found support for his reasoning in a decision resolving a conflict between the CCAA and British Columbia’s Legal Professions Act. In that case, the Court of Appeal for British Columbia found that a CCAA court’s jurisdiction permits it to exercise broad power and flexibility and that the CCAA “will prevail should a conflict arise between this [the CCAA] and another federal or provincial statute.” Lovecchio J. agreed with that statement and applied it in Re Sulphur.
On this basis, the Court concluded that it could use its inherent jurisdiction under the CCAA to override an express provincial statutory provision. In Re Sulphur, such override was justified – the prejudice to the lien holders being outweighed by the potential benefit for the majority of stakeholders.
Richtree Inc. (Bankruptcy), Re
Richtree Inc. was a reporting issuer in a number of provinces and the Ontario Securities Commission (the “OSC”) had been appointed as the principal regulator. The corporation was under CCAA protection when it asked the CCAA court to exercise its inherent jurisdiction to grant an exemption from certain reporting obligations under provincial legislation to facilitate the restructuring.
Although the corporation conceded that the OSC had jurisdiction to grant the requested exemption, it argued that the CCAA court also had inherent jurisdiction to grant the relief sought consistent with its discretionary powers.
Lax J. correctly remarked that using the term “inherent jurisdiction” in this context was a misnomer. When making orders under the CCAA, the court exercises the discretion granted to it under the broad statutory regime of the CCAA, not the inherent jurisdiction that it possesses as a superior court. However, given the absence of a conflict with the federal law, Lax J. determined that such statutory discretion could not be exercised in the face of s. 80 of Ontario’s Securities Act, which provided the OSC with the authority to grant or refuse the exemptions sought. He explained his reasons as follows:
Here, as in the cases referred to, there is no inconsistency between federal and provincial law. The doctrine of paramountcy does not apply.
Further, where a provincial statute is given exclusive jurisdiction to determine a matter, the court’s discretionary power under the CCAA cannot be used to override it (…).
The purpose of s. 11 of the CCAA is to provide the Court with a discretionary power to restrain conduct against a debtor company so as to permit it to continue in business during the arrangement period (…) the power is discretionary and therefore is to be exercised judicially.
Companies under CCAA protection are not immunized from complying with regulatory regimes (…).
In subsequent decisions, Lax J.’s reasoning regarding the interplay between the silence of the CCAA and express provisions of provincial law has not been adopted. It is now well established that a CCAA court’s discretionary power can be used to override express provisions of provincial law. A CCAA court presented with the issue in Richtree today would most likely determine that it has jurisdiction to grant the requested exemption but decline to exercise its authority in the particular circumstances.
Collins & Aikman Automotive Canada Inc. (Re)
Collins & Aikman Automotive Canada Inc. filed for CCAA protection in 2007. It was clear that the CCAA was being used to maximize the potential recovery for the benefit of all creditors. The specific relief sought concerned the company’s pension plans registered in Ontario. The orders already made by the CCAA court had suspended the obligation to make certain payments and the application being made by pension regulators (among others) was seeking an order requiring the debtor company to comply with its statutory pension obligations under Ontario’s Pension Benefits Act, including special payments.
The Court concluded that it “has a jurisdiction under the CCAA which (…) ‘can be used to override an express provincial statutory provision where that would contribute to carrying out the protective function of the CCAA as reflected particularly in the provisions of s. 11 of the CCAA.”
It also considered the Stelco decision, where it was not apparent to the court how an order removing directors would relate to its role in making orders which align with the protective function of the CCAA.
The Court was now asked to make an order contrary to the reasonable expectations of the debtor company and the DIP lender as well as the CCAA orders already granted. In addition, it was clear that there were no funds to make any special payments, and, since filing, the company had been dependent on DIP financing to fund all disbursements. Importantly, the suspension of special payments was an integral part of the arrangement that enabled the company to continue operating. The Court found that the requested order “would be unfair and it would not contribute to the fair application of the CCAA.” In this case, the Court had exercised its discretion to suspend the application of a valid provincial provision with respect to the debtor. Such discretion was justified in the circumstances, and Spence J. dismissed the application to have the debtor company comply with said provincial law.
SR Telecom & Co. v Apex – Micro Manufacturing Corp.
SR Telecom & Co. (“SRT”) sought an order requiring the defendant (“Apex”) to return property that Apex held.
SRT had acquired the property through purchase and assignment agreements with another company (“SRX”). SRX had been for some time under CCAA protection. The purchase agreement was approved by the Superior Court of Québec and registered by the monitor in the CCAA proceedings in Québec.
SRT argued that the statutory discretion exercised by a CCAA court when granting vesting orders is paramount and therefore overrides conflicting rights of creditors secured pursuant to a provincial statute such as British Columbia’s Personal Property Security Act (the “PPSA”). For its part, Apex argued that the exercise of discretion granted to CCAA courts by s. 11 of the CCAA cannot defeat express rights under a provincial statute.
The Court found that a CCAA court may make an order contrary to the express terms of a provincial statute and that “the CCAA gives broad latitude to the courts to intrude on the affairs of companies under its protection, in priority over other legislation, operational and otherwise, including provincial legislation such as the PPSA.”
The Court ordered Apex to return the property to SRT with a requirement, however, that SRT make an undertaking for damages, to be posted as security.
Hy Bloom inc. v Banque Nationale du Canada
In Hy Bloom, a plan had been sanctioned by the CCAA court in Ontario and, as described by the Court: “[t]here is no question that this was the most elaborate restructuring ever carried out under the aegis of the CCAA. The Plan does not concern only a debtor and its creditors: it shapes and restructures an entire aspect of the country’s financial activity.”
The defendant filed a motion de bene esse to have the Québec court recognize the enforceable nature of the plan, which provided for third-party releases that were not at that time specifically authorized by a provision of the CCAA. The plaintiffs argued that the Court must refuse to apply the judgment since the plan, particularly with respect to the releases, did not comply with the civil law in Québec and was therefore unlawful, unenforceable, and unreasonable.
In 1993, the Québec Court of Appeal had ruled that the CCAA did not permit the application of a plan of arrangement or compromise to be extended to persons other than the debtor and its creditors because the legislation did not contain express provisions that allowed for third-party releases. The plaintiffs asserted that the Superior Court of Québec was required, under the rule of stare decisis, to follow the holding of the Court of Appeal. Therefore, it was argued that the plan, which provided for third-party releases, was ultra vires and contrary to the laws of Québec. In response, the defendant argued that: “[t]he economy of the legal system would be truncated if each province’s superior court were allowed to review an order issued by another province’s superior court under the CCAA on the grounds that it was not satisfactory according to the provisions of local private law.”
Circumscribing the debate, the Court considered the following questions:
- Was the plan, as sanctioned by the CCAA court in Ontario and upheld on appeal, legal, reasonable, and enforceable in Québec?
- What is the role of the Superior Court of Québec when called upon to ensure the application of a judgment sanctioning a plan pursuant to ss. 16 and 17 of the CCAA?
Wagner J. (as he then was) noted that the Ontario Court of Appeal promoted a generous and liberal interpretation of the CCAA. He concluded that the subject releases in favour of the third-party banks were justified because of their major contribution to the plan and the releases were important for the plan to succeed. He also distinguished the situation from that which existed in Michaud where there was no financial contribution made to the restructuring of the company. Wagner J. (as he then was) concluded that the third-party releases were valid, reasonable, and enforceable. Moreover, he rejected the plaintiffs’ argument that the Ontario Court of Appeal had misapplied the paramountcy doctrine on the basis that the federal statute (as it then was) did not specifically authorize the sanction of releases for solvent third parties and, as there was no contradictory legal provision, application of the paramountcy doctrine was wrong in law. Wagner J. (as he then was), relying on the decision in Re Sulphur, stated that the limited number of CCAA provisions was not an obstacle to the application of the paramountcy doctrine and that the CCAA “must therefore be interpreted liberally at the risk of overshadowing the civil law established by provincial legislation.”
Fraser Papers Inc. (Re)
On June 18, 2009, Fraser Papers Inc. (“Fraser Papers”) and certain of its affiliates filed for protection from their creditors under the CCAA in Ontario as well as pursuant to Chapter 15 of the U.S. Bankruptcy Code. Fraser Papers was the plan sponsor for four defined benefit pension plans – two were registered in Québec and two were registered in New Brunswick. A few months later, a motion brought by the Communications Energy and Paperworkers Union of Canada (the “CEP”) to represent both its current and former members was granted by the CCAA court. No party elected to opt out of the representation order.
A class action was filed in the Superior Court of Québec where the representative plaintiffs were current and former CEP members. The issue in the Québec class action with respect to the defendant directors was whether they – the persons directly responsible for the investment policy of the unionized workers’ pension plan – committed a fault making them liable for the loss of benefits and reductions in the rights of the participants and beneficiaries.
The former directors of Fraser Papers asked the CCAA court to declare that the Québec class action plaintiffs were subject to the jurisdiction of the Ontario CCAA court and that any claims that could have been asserted had been fully and irrevocably released. The motion raised the issue as to whether the CCAA court even had jurisdiction to address the matter.
The Québec class action plaintiffs argued that the fact that the CCAA plan was sanctioned by the CCAA court did not mean that exclusive jurisdiction was granted to issue orders relating to litigation commenced in another jurisdiction and asserted that the directors’ motion ought to have been brought before the Québec courts.
The CCAA plan stipulated that any issue relating to the effect of the plan was subject to the exclusive jurisdiction of the CCAA court. The Court concluded that the subject motion directly involved issues relating to the effect of the plan. Therefore, the representative plaintiffs were bound by the terms of the plan and their claims released. Moreover, ss. 11 and 17 of the CCAA provided the Court with the authority to grant the requested relief and to make any order that it considered appropriate in the circumstances. The CCAA provides for, and these orders requested, the aid and assistance of the courts of other jurisdictions in recognizing and enforcing the terms of such orders.
Labourers’ Pension Fund of Central and Eastern Canada v Sino-Forest Corporation
In Sino-Forest, the CCAA court approved the settlement of class actions that were instituted in several jurisdictions. Although the Court did not explicitly address the constitutional issues, it considered the argument that the settlement of a class action should be heard by the class action court where the proceedings were instituted.
Class actions alleging fraud and misrepresentation were instituted against the company (“SFC”) across Canada, including in Ontario, Québec, and Saskatchewan, as well as in New York. In late 2011, Perrell J. granted carriage to the Ontario plaintiffs and stayed the other class proceedings. A few months later, SFC obtained CCAA protection. Later that year, a settlement was reached with Ernst & Young, the company’s auditors. The proposed settlement agreement was part of a CCAA plan process that was subject to court approval in Ontario and recognition by the courts in Québec and the United States.
Morawetz J. (as he then was) confirmed that class actions can be settled in a CCAA proceeding. As to whether the CCAA court should exercise its discretion to approve the settlement, he considered the argument made by certain objectors who had taken the position that approval of this settlement by the CCAA court would render their opt-out right illusory and, therefore, the proposed settlement should be approved solely under Ontario’s Class Proceedings Act. As stated by the Court, however:
(…) the inherent flaw with this argument is that it is not possible to ignore the CCAA proceedings.
In this case, claims arising out of the class proceedings are claims in the CCAA process. CCAA claims can be, by definition, subject to compromise. The Claims Procedure Order establishes that claims as against Ernst & Young fall within the CCAA proceedings. Thus these claims can also be the subject of settlement and, if settled, the claims of all creditors in the class can also be settled.
In my view, these proceedings are the appropriate time and place to consider approval of the Ernst & Young Settlement. This court has the jurisdiction in respect of both the CCAA and the CPA.
I do not accept that the class action settlement should be approved solely under the CPA. The reality facing the parties is that SFC is insolvent; it is under CCAA protection, and stakeholder claims are to be considered in the context of the CCAA regime. The Objectors’ claim against Ernst & Young cannot be considered in isolation from the CCAA proceedings. The claims against Ernst & Young are interrelated with claims as against SFC, as is made clear in the Equity Claims Decision and Claims Procedure Order.
The applications for leave to appeal the sanction order and the settlement approval order were dismissed.
With regard to the treatment of the settlement approval order by the Québec courts, by judgment issued on October 29, 2013, Émond J. of the Superior Court of Québec declared that, as a consequence of the settlement order rendered by the Ontario court, the application filed by the representative plaintiff in Québec “shall be permanently and forever stayed, estopped and barred as against Ernst & Young LLP pursuant to the Plan of Compromise and Arrangement of Sino-Forest Corporation, and the Sanction Order, subject only to the right of the plaintiffs of the present class action to claim and receive the allocations to which they are entitled pursuant to the Claims and Distribution Protocol (as defined in the Sanction Order).”
In his reasons, Émond J. noted that Morawetz J. (as he then was) had been appointed to sit as both the CCAA and class proceedings judge, that the putative class members were claimants who could participate in the distribution of the settlement amount, and that the requirements under ss. 16 and 17 of the CCAA applied.
The Cash Store Financial Services Inc. (Re)
In 2013, class actions were commenced in Ontario, Alberta, and Québec, as well as in New York, against The Cash Store Financial Services, Inc. The following year, the company filed for CCAA protection. In his judgment approving the settlement of the class actions, Morawetz J. (as he then was) noted that the test for whether a class action settlement ought to be approved is similar to the test for approval of a settlement under the CCAA – i.e., whether in all of the circumstances, the settlement is fair, reasonable, and in the best interests of all of the affected persons. In considering the settlement agreement, Morawetz J. (as he then was) was satisfied that it was fair and reasonable under all of the circumstances and provided substantial benefit to the stakeholders.
When Should a CCAA Court Cede Jurisdiction?
In deciding whether to approve a class action settlement, both a CCAA court and a class action court will consider whether the settlement is fair and reasonable in the circumstances. In this respect, there is no conflict between provincial legislation and the CCAA. As a result of the judicial discretion provided to it by s. 11 of the CCAA, a CCAA court has the authority to approve the settlement of a class action by the application of the double aspect doctrine. However, in a situation where a conflict is found to exist between the federal and provincial legislation, then the CCAA would prevail to override the provincial legislation by application of the paramountcy doctrine. Therefore, with regard to the constitutional considerations, the result is the same in that the CCAA court has the authority to resolve the issues related to a class action as long as the orders sought serve the legislation’s purposes. The fact that the class action proceedings may not have been instituted in the same province as the CCAA proceedings would not change the CCAA court’s authority in this context.
Generally, pursuant to the single proceeding model, the CCAA court has the authority to rule on all issues that arise in the insolvency proceedings, including with respect to the settlement of class actions. However, a review of the case law reveals that the issues related to the resolution of class actions in the context of CCAA proceedings are not always determined by a CCAA court. For example, in Cash Store and MM&A, both the settlement agreements and class counsel fees were approved by the CCAA court. In contrast, the BDO settlement agreement in the Sino-Forest case was approved by the CCAA court, but class counsel fees were approved by the provincial class action court. In other cases, the settlement agreement and fees were approved in both the CCAA and class action proceedings. None of these decisions, however, expressly provide the constitutional basis for making these orders in the CCAA court as opposed to the provincial class action court – most especially given that there are express provisions of provincial law dealing with class actions, a subject matter that is not specifically included in the CCAA.
Objections to the CCAA court’s authority to resolve issues relating to a class action may be made at the settlement approval hearing. For example, in the Sino-Forest case, objectors argued that the settlement of the class action should be decided by the provincial class action court in order to protect the opt-out right of class members, a right provided for by the provincial legislation. In that case, none of the class actions were authorized at the time the CCAA court issued the initial order and, in the context of the class action proceedings, the possibility for class members to opt out of the settlement existed. In such a circumstance, the application of the CCAA resulted in a conflict triggering the application of the paramountcy doctrine – although this was not part of the Court’s reasoning. Rather, the objection did not succeed given the Court’s determination that the rights of class members can be compromised in the context of CCAA proceedings. Creditors, including putative class action members, cannot ignore or “opt out” of a CCAA restructuring. Once class action defendants are granted CCAA protection, the fundamental consideration transforms from what is in the best interests of the class to what is in the best interests of the debtor company and its stakeholders generally.
Outside of a CCAA context, the provincial class action courts hear requests to approve class counsel fees and assess their reasonableness in the interest of class members. However, in an insolvency context, CCAA courts are also empowered to assess the reasonableness of requests to approve class counsel fees and issue orders in this regard, including with respect to fees of international class counsel. The decisions in which a CCAA court made orders approving class counsel fees do not explicitly address the constitutional issue, although the CCAA court’s authority derives – once again – from the exercise of the broad discretion provided by s. 11 of the insolvency statute.
A CCAA court can also approve class counsel fees with respect to actions instituted in other provinces. As confirmed by the decision in Bloom Lake 2017, the particularities of another province’s law do not justify transferring a matter out of the CCAA court to another provincial court. The CCAA court has jurisdiction to deal with all the issues that arise in the context of CCAA proceedings. Well-established constitutional principles, as well as the single proceeding model favoured by the Supreme Court, lend support to a CCAA court’s refusal to transfer issues pertaining to the resolution of a class action to another court.
The Supreme Court in Asselin recently confirmed that the CCAA creates a nationwide system dealing with the insolvency and restructuring of companies. In this regard, sections 16 and 17 CCAA “provide that orders made under the CCAA are binding on the other courts that have jurisdiction under the CCAA and must be enforced by those courts in the same manner as if they had made the orders themselves.”
In other words, orders of a CCAA court in one province have legal force and effect in all other provinces by operation of law.
Consequently, after notices are communicated providing explanations about the settlement and related issues as well as the scheduled approval hearings, objections can be made and will be considered by a CCAA court prior to approving a class action settlement or matters related thereto. Thereafter, orders made by a CCAA court related to the resolution of a class action will only be subject to review pursuant to the ordinary rules for appeals under the CCAA.
The settlement of complex litigation involves many stakeholders and, for a CCAA plan to succeed, pending class actions against the debtor must be resolved with finality. Where the authority granted to a court under the CCAA is employed in a manner that conflicts with a provincial statute, the federal law is paramount. The view that, in the absence of such conflict, a CCAA court’s discretionary power could not be used to override the express provisions of provincial law has been rejected. Today, CCAA courts do not hesitate to exercise jurisdiction to settle class actions in CCAA proceedings despite the fact that the provinces have legislated on the same subject matter – a subject that falls within their constitutional authority. To serve its purpose to promote compromises between a company and its creditors, the CCAA has been interpreted liberally even “at the risk of overshadowing the civil law established by provincial legislation.”
With regard to the principles of constitutional law, a CCAA court has jurisdiction to make orders related to the resolution of a class action regardless of whether or not the federal law conflicts with express provisions of provincial law. The CCAA court may decide not to exercise its jurisdiction in a particular circumstance or as a result of a challenge that it deems to be well founded. In this respect, a CCAA court should refuse to exercise its discretion to make orders for matters that do not fall within its role of supervising the application of the CCAA.
Recognizing a CCAA court’s authority to compromise class action claims and rule on any related issues promotes the law’s objective of efficiently reorganizing an insolvent company’s affairs. Concluding otherwise could unnecessarily scatter disputes across multiple jurisdictions to be heard before multiple courts.
 RSC c C-36.
 Dr. Janis P. Sarra, the Honourable Chief Justice Geoffrey B. Morawetz & the Honourable L.W. Houlden, 2022-2023 Annotated Bankruptcy and Insolvency Act (Toronto: Thomson Reuters, 2022), Part III, Chapter 19 at ss 19:3.
 30 & 31 Vict, c 3.
 L’Oratoire Saint‑Joseph du Mont‑Royal v J.J., 2019 SCC 35 at para 6 (the Supreme Court articulates the objectives that underlie the provisions relating to class actions as facilitating access to justice, modifying harmful behaviour, and conserving judicial resources).
 Section 91(21) of the Constitution Act, 1867.
 Section 2 of the CCAA.
 See e.g., Peter W. Hogg, “Paramountcy and Tobacco” (2006) 34 Supreme Court Law Review 335.
 Murray-Hall v Québec (Attorney General), 2023 SCC 10 at para 84 [Murray-Hall].
  2 SCR 16.
 Rogers Communications Inc. v Châteauguay (City), 2016 SCC 23 at para 50.
 Jim Pattison Enterprises Ltd. v British Columbia (Workers’ Compensation Board), 2011 BCCA 35 at paras 1 and 86-87 [Jim Pattison].
 Alberta (Attorney General) v Moloney, 2015 SCC 51 at para 15.
 Murray-Hall, supra note 8 at para 85 (reproducing a concern expressed in References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 at para 128).
 See e.g., Sandoz Canada Inc. v British Columbia, 2023 BCCA 306, Poorkid Investments Inc. v Ontario (Solicitor General), 2023 ONCA 172 at para 21, and Janet Walker, “Are National Class Actions Constitutional?: A Reply to Hogg and McKee” (2010) 48:1 Osgoode Hall LJ 95 at 105.
 For example, Ontario’s Class Proceedings Act, 1992, SO 1992, c 6; British Columbia’s Class Proceedings Act, RSBC 1996, c 50; Alberta’s Class Proceedings Act, SA 2003, c C-16.5; Manitoba’s Class Proceedings Act, CCSM c C130; and Title III of Book VI of Québec’s Code of Civil Procedure, CQLR c C-25.01.
 Century Services Inc. v Canada (Attorney General), 2010 SCC 60 at para 70 [Century Services] [emphasis added].
 Dr. Janis P. Sarra, Rescue! The Companies' Creditors Arrangement Act, 2nd ed. (Toronto: Carswell, 2013) (citing the Ontario Court of Appeal in Stelco Inc. (Bankruptcy), Re, 2005 CanLII 8671 (ON CA) at paras 33 and 36 [Stelco]). The view that it is the discretion provided by s. 11 of the CCAA which is the basis for the court to make such orders, rather than inherent jurisdiction, was cited with approval by the Supreme Court in 9354-9186 Québec Inc. v Callidus Capital Corp., 2020 SCC 10 at para 68.
 Century Services, supra note 16 at paras 58 and 61 [emphasis added].
 Sam Lévy & Associés Inc. v Azco Mining Inc., 2001 SCC 92 [Sam Lévy].
 Peace River Hydro Partners v Petrowest Corp., 2022 SCC 41 [Peace River] (the principle was relied on in numerous decisions by Québec Courts including Arrangement relatif à Bloom Lake, 2021 QCCS 3402 at paras 52ff [Bloom Lake 2021] and Montréal, Maine & Atlantic Canada Co./Montréal, Maine & Atlantique Canada Cie (Arrangement relatif à), 2013 QCCS 5194 at para 25 [MM&A]).
 Peace River, supra note 20 at para 55.
 Ibid at paras 54-55.
 David Bish, “In Search of the Limits of Judicial Discretion in Insolvency Law” (2018) 7 J Insol Inst Can 181.
 MM&A, supra note 20.
 MM&A, supra note 20 at para 27.
 Arrangement relatif à Bloom Lake, 2017 QCCS 284 [Bloom Lake 2017].
 Ibid at paras 32-33.
 Bloom Lake 2021, supra note 20 at para 88 (citing the Supreme Court in Club Resorts Ltd. v Van Breda, 2012 SCC 17 at paras 105 and 108-110).
 Bloom Lake 2021, supra note 20 at paras 58ff.
 Richtree Inc. (Bankruptcy), Re, 2005 CanLII 55905 (ON SC) [Richtree].
 SR Telecom & Co. v Apex – Micro Manufacturing Corporation, 2008 BCSC 1768 [SR Telecom].
 2002 ABQB 682 [Re Sulphur].
 Today, s. 11 of the CCAA sets out the general power of the CCAA court “to make any order that it considers appropriate in the circumstances.” Subsections 11.02(1) and 11.02(2) particularize this broad discretionary power in the context of initial and subsequent applications, respectively. Finally, s. 11.2 expressly provides that the CCAA Court may order prior ranking DIP financing, see Conexus Credit Union v Voyager Retirement II Genpar Inc. et al., 2021 SKQB 273 at paras 48ff.
 2001 ABQB 546 [Re Hunter].
 Re Sulphur, supra note 32 at para 28.
 Baxter Student Housing Ltd. et al. v College Housing Co-operative Ltd. et al.,  2 SCR 475 [Baxter].
 See also Royal Oak Mines Inc., Re, 1999 CanLII 14843 (ON SC) at para 4 (in which Farley J. relied on Baxter, supra note 36, to conclude that inherent jurisdiction cannot be used to override a provincial statute).
 Pacific National Lease Holding Corp. v Sun Life Trust Co., 1995 CanLII 2575 (BC CA) (the law firm representing the petitioners in the CCAA proceeding was ordered by the CCAA court to tax its accounts incurred as restructuring costs pursuant to the stay order. Counsel did so and then asked the CCAA court to determine whether the costs incurred with respect to the taxation of its accounts should be considered restructuring costs. The CCAA court determined that such costs constituted restructuring costs. Sun Life asserted that the CCAA court did not have the jurisdiction to make this order on the basis that British Columbia’s Legal Professions Act was a “complete code” on solicitor/client accounts. The British Columbia Court of Appeal upheld the order stating that the CCAA court’s jurisdiction was found pursuant to the insolvency legislation).
 Ibid at para 26.
 Richtree, supra note 30.
 Richtree, supra note 30 at paras 9-10 and 17-18 [emphasis added].
 See for example SR Telecom, supra note 31 and Hy Bloom Inc. v Banque Nationale du Canada, 2010 QCCS 737 [Hy Bloom].
 Collins & Aikman Automotive Canada Inc. (Re), 2007 CanLII 45908 (ON SC) at para 42 [Collins & Aikman].
 Stelco, supra note 17.
 Collins & Aikman, supra note 43 at para 108.
 SR Telecom, supra note 31.
 SR Telecom, supra note 31 at para 43.
 Hy Bloom, supra note 42.
 Hy Bloom, supra note 42 at para 27 [unofficial translation].
 Michaud v Steinberg Inc., 1993 CanLII 3991 (QC CA) [Michaud].
 The legislature subsequently amended the CCAA to authorize the inclusion in plans of arrangement of releases in favour of the company’s directors and officers. See s. 5.1 of the CCAA.
 Hy Bloom, supra note 42 at para 54 [unofficial translation].
 Metcalfe & Mansfield Alternative Investments II Corp., (Re), 2008 ONCA 587 at para 104: “[t]he power to sanction a plan of compromise or arrangement that contains third-party releases of the type opposed by the appellants is embedded in the wording of the CCAA. The fact that this may interfere with a claimant's right to pursue a civil action -- normally a matter of provincial concern -- or trump Québec rules of public order is constitutionally immaterial. The CCAA is a valid exercise of federal power. Provided the matter in question falls within the legislation directly or as necessarily incidental to the exercise of that power, the CCAA governs. To the extent that its provisions are inconsistent with provincial legislation, the federal legislation is paramount.”
 Hy Bloom, supra note 42 at para 115 [unofficial translation].
 2012 ONSC 4882 [Fraser].
 2013 ONSC 1078 [Sino-Forest], Morawetz J. (as he then was); leave to appeal denied, 2013 ONCA 456; leave to appeal to the SCC denied, 2014 CanLII 11054 (SCC).
 See Sino-Forest Corporation (Re), 2012 ONSC 7050.
 Sino-Forest, supra note 57 at paras 40-42 and 72.
 A Plan of Compromise or Arrangement of Sino-Forest Corporation, 2013 ONCA 456.
 Ernst & Young, l.l.p. c Liu, 2013 QCCS 5351 at para 14.
 Section 16 of the CCAA: “[e]very order made by the court in any province in the exercise of jurisdiction conferred by this Act in respect of any compromise or arrangement shall have full force and effect in all the other provinces and shall be enforced in the court of each of the other provinces in the same manner in all respects as if the order had been made by the court enforcing it.”
Section 17 of the CCAA: “[a]ll courts that have jurisdiction under this Act and the officers of those courts shall act in aid of and be auxiliary to each other in all matters provided for in this Act, and an order of a court seeking aid with a request to another court shall be deemed sufficient to enable the latter court to exercise in regard to the matters directed by the order such jurisdiction as either the court that made the request or the court to which the request is made could exercise in regard to similar matters within their respective jurisdictions.”
 2015 ONSC 7538 [Cash Store].
 Ibid at paras 16-17.
 See the Sino-Forest – E&Y settlement and the September 25, 2018, order made regarding the approval of the global settlement In the Matter of Franz Auer and Mohamed Ramzy v Poseidon Concepts Corp. et al.
 Graham McLennan and Clarissa Dhillon, “Using the Companies Creditors Arrangement Act to Settle Class Actions: Lessons of Sino-Forest” (2015) McLennan Ross LLP.
 e.g., CannTrust (December 17, 2021), Ontario CV-20-00638930-00CL (Ont. SC); Labourers’ Pension Fund of Central and Eastern Canada v Sino-Forest Corporation, 2014 ONSC 62 (the decision was announced in late 2013 but the written reasons were issued in 2014); The Cash Store Financial Services Inc. (Re), 2015 ONSC 7535.
 Desjardins Financial Services Firm Inc. v Asselin, 2020 SCC 30 at para 275 [Asselin].
 Fraser, supra note 56 at para 27.
 Associated Freezers of Canada Inc. v U.S.W.A., 1996 CanLII 5624 (NS CA) at 3.
 Hy Bloom, supra note 42 at para 115 [unofficial translation].