Monday 18 September 2023

Why is the CCAA process dragging on? Fingers are pointed at provincial governments

When the parties to the long-going insolvency proceedings for Canada's tobacco companies convene on September 27th , a new judge will be deciding whether to allow yet another 6-month time out on the lawsuits facing Canada's tobacco companies. Ontario's chief justice, the Hon. Geoffrey B. Morawetz  assumed responsibility for this file after Justice Thomas McEwen retired this summer.

Already some of the paperwork has been filed in advance of this hearing by the three tobacco companies and also by lawyers for Quebec smokers whose court award of $13+ billion has lain in limbo since these proceedings began in March 2019.

INDUSTRY POSITION: Impossible to commit to a deadline

In these motions, Imperial TobaccoRothmans, Benson & Hedges and JTI-Macdonald, each seek "an order extending the Stay Period (defined below) until and including March 27, 2024." 

Each request is elaborated with background on the case and on the perspectives of the companies. It would seem that these motions are being used as a primer for the new judge - framing events to date in a light to support each party's objectives. But the stories told by the companies' and by the injured smokers leave very different impressions.

According to the companies, the negotiation process is going as well as could be expected, the issues are too complex to be figured out in any less time than this process is taking, and it is not possible to predict when things will end.

These narratives go beyond offering assurance about the negotiation process. They remind the new judge that the companies deny they are guilty of the wrongdoing which underlies the claims against them.  (This, despite a unanimous decision of the Quebec Court of Appeal to the contrary which the Supreme Court has been unable to uphold or strike down because the companies have been granted a litigation stay for the past 54 months.)  

The motions filed in court last week show the companies will fight attempts to arrive at a separate settlement with those claimants who have achieved court-ordered compensation (the Quebec class action) and those who have not yet gone to trial and for whom compensation has not yet been set (everyone else). 

Illustrative extracts from RBH's motion:

" Progress has been made and the experienced Court Appointed Mediator continues to oversee and direct the process...

...While it is the best outcome for the parties, negotiating a global settlement is highly complex and time-consuming. 

... RBH believes that it is critical to continue to give the mediation process the time and attention required by the Court-Appointed Mediator to ensure the best chances of achieving a successful resolution. 

... there is no other practical and more expeditious alternative for creditors that does not involve a CCAA plan with the Tobacco Companies, and the mediation process offers the best opportunity to achieve a consensual CCAA plan.  

... It is difficult to provide a precise estimate of the time needed to complete the mediation and to develop and implement a CCAA plan.

... RBH vigorously disputes both liability and the calculation of alleged damages claimed in the HCCR  [government] Claims and there are numerous contested issues, including establishing a tobacco related wrong and issues relating to causation, damages and valuation."

QUEBEC CLASS ACTION POSITION:  Unreasonable delays attributable to some provinces

An opposite view is offered by the Quebec class action, which unsuccessfully requested that this hearing be held in person, instead of over a Zoom-link.

As summarized in their brief, they have made numerous requests for the stay extensions to be shortened as a way of cracking the whip on the process. This time, they do not repeat the request, but have added  more detail about reasons for the delay. For the first time, they point fingers at  "certain claimants" (presumably provincial governments), suggesting they are acting incompetently or in bad faith. Notably, they do not point fingers at the companies in this regard, but instead state clearly that they consider the companies are acting in good faith.

They also put more detail on the impact of the delay on the smokers whose injuries lay behind the $13+ billion award of the Quebec courts. Twenty-five years after the case was first filed, fewer and fewer of these whose emphysema and cancers were attributed to the wrongful behaviour of the companies are still alive. Approximately 700 class members are reported to have died during the CCAA process (about 3 per week). 

Another new element in their motion is a direct appeal to the Mediator (Hon. Warren Winker) and the Mediators to step up the pace, and to adjust their management of the file in order to reach the next stage in the CCAA process - a formal proposal from the companies on how to resolve the claims against them.

Illustrative extracts from the Quebec Class Action Motion 

"Based on developments over the past six months, I can affirm without any hesitation that a global settlement is currently not in sight.

... the Mediation process has been severely undermined by certain Claimants who have reneged on prior positions and failed to act in an acceptable or appropriate manner.

... we are well past the time that the Quebec Class Members, who have been waiting 25 years for justice to be served, should have received the court-ordered compensation to which they are rightfully entitled.

...  there will be few, if any, victims left alive to receive their rightful compensation from the tobacco companies.

...  approximately 700 Quebec Class Members have unfortunately succumbed to their tobacco-related illnesses and died and many more are becoming increasingly frail. Certain Quebec Class Members could wait no longer and have opted to end their lives by assisted suicide.

... The QCAPs have reluctantly decided not to oppose this six-month extension request to allow the Mediator and the Monitors an opportunity to seek and put in motion alternative solutions, leading to successful plans of arrangement during the next six months."


To this point, the provinces have submitted no paperwork for this week's hearing. Whether the allegations that some are bargaining in bad faith will prompt them to abandon the weeds in which they have stayed for so long remains to be seen.


The federal government finances roughly half the costs of Canada's health care system, has constitutional and statutory responsibilities for the health of Canadians, and is the author of the insolvency and bankruptcy process in Canada. Nonetheless, federal health officials appear unwilling to intervene, participate, form a position on or even review the discussions underway.