September 03, 2008
National Post file
Purdy Crawford's committee has until
Friday to file a legal response
||The Supreme Court of
Canada needs to step in and overturn the $32-billion asset backed
commercial paper restructuring plan because it was premised on a
"bought vote" that is contrary to public policy, argue lawyers for
Ivan-hoe Mines Ltd. of Vancouver.
Ivanhoe, which holds $70-million of
the frozen ABCP, is one of more than a dozen companies yesterday
that want to appeal last month's Ontario Court of Appeal decision,
which found that the plan to restructure the third-party ABCP market
was "fair and reasonable," even though it was "distasteful."
The appeal court approved a lower-court ruling by Justice Colin
Campbell that sanctioned the plan on the fear that it would
otherwise lead to widespread investor losses.
The ABCP restructuring plan, negotiated
by the Pan-Canadian Investors Committee headed by lawyer Purdy Crawford,
would see current paper turned into long-term notes. In exchange, all
parties involved in the ABCP market, must agree to sign releases
preventing third-party lawsuits.
That would deny investors the right to sue the banks and brokers that
sold them the paper, even though those financial institutions are
solvent and are not part of the companies being restructured under the
Companies Creditors Arrangement Act, insolvency legislation that is used
If the plan goes through, then a side deal would see about 1,800 retail
investors holding ABCP paid out 100% of the funds they are owed. The
money would come from Cannacord and Credential Securities, the firms
that sold retail investors the paper.
Investors holding more than $1-million in paper, mostly corporate
investors, will be stuck stuck with any loses if they are forced to sell
them early in the open market.
Ivanhoe lawyer Howard Shapray, took issue with the restructuring plan,
saying it confiscated his clients right to property, in this case a
possible lawsuit against Bank of Montreal and HSBC Bank of Canada, which
sold Ivanhoe the paper.
The releases also impinge on his client's ability to arrive at a
commercially viable settlement because there's no incentive for them to
He said here is "no legal rule that authorizes a court to decide that
Party A cannot sue Party B for a meritorious claim because Party B and
or others would prefer that the court prevent Party A from doing so."
Calling such a legal principle "unthinkable," Mr. Shapray also attacked
the deal to buy the vote of retail investors, arguing that "the buying
of votes in an insolvency proceeding in which the minority's rights are
being confiscated is contrary to public policy."
Other lawyers have also weighed in on the appeal. James Woods, acting
for a group of companies holding more than $600-million of the paper,
says if the Ontario Court of Appeal ruling is allowed to stand it will
create a "dichotomy in bankruptcy and insolvency law...that could lead
to acute uncertainty on a national scale as to the security of
commercial transaction and relationships and open the door to abuse of
the CCAA mechanism designed solely for insolvent companies."
The Supreme Court must still decide if it will grant leave to hear
appeal, and the respondents, basically the firms that created the ABCP
market and Mr. Crawford's committee, have until Friday to file their
Mr. Crawford's committee maintains that the restructuring won't fly
without the legal releases and the opponents of the plan represent less
than 1% of the ABCP market.