In the middle of last week, two new motions were filed in the insolvency proceedings of Canada's three tobacco companies, one each by Imperial Tobacco Canada Ltd (subsidiary of British American Tobacco) and the other by Rothmans, Benson and Hedges (Philip Morris International).
The scheduling of a hearing to decide these issues less than a week later signalled that this would be another pro-forma moment in the prolonged shelter of Canadian tobacco manufacturers under the protection of the Companies' Creditors Arrangement Act.
Both motions sought the same decision from Justice McEwen of the Ontario Superior Court: an agreement to expand the number of people who can receive money from the 'insolvent' companies during the period that their other creditors can not.
In this case, the new recipient is the Canada Revenue Agency, which was recently assigned the task of collecting tax remittances from manufacturers of vaping products as part of the introduction of a federal excise tax on vaping liquids. Although the tax will not be imposed until October 1st (a day after the current litigation stay expires), the manufacturers are gearing up now to obtain licenses and tax stamps. Complying with this new excise regime could require them to post up to $5 million security with the federal government, and they wanted clear authority of the court to do so.
This morning's hearing started at 10:36 and ended 11 minutes later.
Justice McEwen said he "did not see any mischief" in allowing this "straightforward and narrow issue". Having confirmed that the auditing companies which are monitoring the insolvency proceedings were of the same view, and that there was no opposition to the motions from the lawyers representing the provinces and class actions whose claims against the companies are in abeyance, the judge said he would endorse their request and get the necessary paperwork to the companies by tomorrow.
Documents:
Imperial Tobacco Canada.
Rothmans, Benson and Hedges.
