Administrative powers extended and billings protected from public disclosure.

Late last week two short court orders were posted on the website of the monitors assigned to manage the CCAA proceedings for Imperial Tobacco, Rothmans, Benson and Hedges and JTI-Macdonald.

One of these extends the authority of the Hon. Warren Winkler, who has acted as mediator in this process for 6 years. His power in these proceedings is significant. In addition to those powers and services previously enumerated, this order directs him to "take all steps and actions, and to do all things, necessary or appropriate, in his sole discretion, with respect to the CCAA Plans (collectively, the "Ongoing Services") until further order of this court."

The confidentiality protocol, also extended by this order,  excludes disclosure of either the billings associated with these services or the administrative actions taken by this former chief justice in his role as mediator in these files. 

The second of these orders specifies that the fees paid to the monitors and their lawyers are subject to review by Mr. Winkler, and that these fees are also not to be made public.

August 29th is the target for settlement 'implementation date'

During a brief (15 minute!) hearing this morning before Chief Justice Geoffrey Morawetz, counsel for the Quebec tobacco class actions reported that August 29th was the target date to implement the settlement agreement that would end all pending litigation against Canada's tobacco companies. 

This may be the first public statement to this effect. The information was relayed during a discussion of administrative issues which need to be resolved before the companies begin to pay compensation. 

The purpose of today's hearing was to obtain court orders on the following pre-implementation issues:

• the transfer and use of the $1 billion security deposit imposed on two companies by the Quebec Court of Appeal in 2015. For the last 10 years this money has been held in trust by the Quebec government (without accruing any interest). It is expected that in July the Quebec Court of Appeal will be asked to order the transfer.
• a settlement that resolves all claims by a small number of pensioners of a former Imperial Tobacco subsidiary.
• settlements between Imperial Tobacco and four insurance companies with which the company had policies.
• agreements among Imperial Tobacco and the Canada Revenue Agency and Revenue Quebec to resolve tax disputes within the context of the CCAA proceedings. 

There were no objections to these requests and representatives of the parties involved were on hand to voice their support. The judge said these orders would be issued this morning with brief reasons (endorsements) to follow. When available, these will appear on the websites of the Monitors for the companies involved:

• FTI Consulting for Imperial Tobacco
• EY for Rothmans, Benson & Hedges

At the end of this session, Chief Justice Morawetz acknowledged that he had yet to rule on how much the lawyers representing Quebec smokers would be paid, but said his decision would be made public "long before the implementation date."

Steps towards implementing the settlement.

More than 3 months have elapsed since Chief Justice Morawetz approved the settlements brokered among Canadian provincial governments and the 3 large tobacco companies that have been the target of class action and cost-recovery suits for two decades. 

That approval was only an important finishing step in this saga, but came without an indication of when the agreement will be implemented and when the companies' victims will receive some compensation. Little information has been shared about that implementation date - although one mid-May news report suggested it would be in about "90 to 120 days" 

A joint motion filed this week by Rothmans, Benson & Hedges and Imperial Tobacco Canada and separate motions ITL hint at the activities that are taking place behind the scenes. These will be the subject of a hearing which starts at 9:30 a.m. on Wednesday June 18, which can be watched on YouTube at: https://youtube.com/live/VP2lCOG8zf8?feature=share

Gaining access to the security deposit

Chief Justice Morawetz is being asked to briefly suspend the stay of proceedings in order to allow the companies to approach Quebec courts. This is apparently required for the companies to access the almost $1 billion in security that the Quebec Court imposed on them 10 years ago and that will form part of their payments to injured smokers, the provinces and others. (JTI was not required to make a deposit).

He is also being asked to grant orders which approve three settlements entered into by Imperial Tobacco:

1. Resolving a dispute with Revenue Canada

In June 2019, shortly after the insolvency protection was in place, Revenue Canada disputed certain claims for tax deductions made by Imperial Tobacco for the 2011 and 2014 tax years, and made similar subsequent demands the following year for the 2015-2018 tax years. 

The affidavit  filed this week reports that the Canada Revenue Agency was seeking $42.3 million for 2011 (which would increase provincial tax by $6.5 million), with interests adjustments for delayed payment. The amount sought for 2014 was $64.3 million (plus $10.3 provincial). Additional tax demands totaled $7.5 million for 2015, $46.8 thousand for 2016, reduced overall tax for 2017 by $12.7 million, with a further reduction of $16.3 million for 2018. At the end of 2020 the assessment notice issued by Revenue Canada said the company owed $56,748,563.35 (shown below).

The details of the negotiations with CRA about the disputed amounts are not included in the material filed. It appears that the Agency was willing to resolve this large bill for considerably less than the amounts cited in the material filed: "an aggregate payment by ITCAN of $1.5 million and the exchange of full and final mutual releases." 

2. Finalizing obligations to 59 Genstar retirees.

Imperial Tobacco's legacy obligation to retirees of a real-estate company it sold many years ago was the subject of a non-controversial decision early in the CCAA process. It would appear there were lingering issues with 59 affected individuals which were resolved by the company at the beginning of 2025 in return for a payment of $850,000. The company wants these to be resolved through a special order of the court, and not through the "miscellaneous claims" process provided for in the settlement.

3. A contribution from insurance companies. 

Both ITL and RBH had at some point in previous years had liability-related policies with various insurance companies. In the material filed in advance of the June 18th hearing, ITL reports that it has reached a settlement with certain of its insurers for payments "totaling $2,750,000, to be held in trust by the Monitor" which will be transferred as part of payments made on the day the settlement takes effect.

A copy of the settlement, which includes some information on the policies held by the companies, was included in the material filed.