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Court rejects Thorneloe’s $9.8M claim against Laurentian

Judge says Thorneloe did not demonstrate a claims officer committed an error in arriving at his decision to deny compensation amount
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Thorneloe University. (File)

A judge has rejected an appeal of a decision to deny a $9.8 million claim by Thorneloe University against Laurentian University.

The appeal was heard by Chief Justice Geoffrey Morawetz in November, but he only issued his decision on January 19.

Thorneloe University is one of three educational institutions on Laurentian’s campus that were formerly federated with LU. 

However, the situation changed after Laurentian declared insolvency in early 2021, which was followed by LU legally severing ties with Thorneloe, as well as Huntington University and the University of Sudbury, in early May 2021.

This resulted in Laurentian removing all of Thorneloe’s courses from its curriculum. 

“Overnight, Thorneloe went from a teaching university with courses, faculty and students in its courses, to a university with no courses and soon to be terminated faculty and staff,” said a motion record submitted by Thorneloe in relation to the appeal.

Thorneloe’s November court appearance has a long and complicated history.

As part of Laurentian’s insolvency, the university launched a claims process for its creditors in the spring of 2021. Thorneloe submitted a claim with Ernst & Young, the court-appointed monitor of LU’s insolvency, with a total value of $14.87 million.

In May 2022, the monitor issued a “Notice of Revision or Disallowance” allowing some aspects of Thorneloe’s Claim, but disallowing the rest. 

In June of this year, counsel for Thorneloe delivered a dispute notice to the monitor. After failing to resolve the dispute consensually, the matter was referred to a claims officer. 

Thorneloe was asking for adjudication of its claim relating to the “loss of academic and commercial value” in the amount of $9.8 million, and professional fees in the amount of $1.85 million that Thorneloe had to incur to defend itself as a result of LU’s actions.

The claims officer released a decision in September, upholding the monitor’s disallowance of Thorneloe’s claims related to the loss of academic and commercial value and professional fees.

Thorneloe then brought its appeal to the courts in November. The appeal dealt only with the $9.8 million claim relating to what Thorneloe says is its loss of academic and commercial value.

That amount was arrived at after a report by Farber Corporate Finance Inc. that was commissioned by Thorneloe.

Thorneloe counsel Andrew Hatnay explained during the November court hearing that the $9.8 million number was arrived at as a valuation as if the institution were to put itself up for sale. 

Of that number, $3.1 million is a loss of future income, and $6.7 million is the cash that it had in the bank as of last year.

Hatnay said the Farber report came up with this number based on a type of evaluation called “loss of business value.” 

However, the claims officer disallowed Thorneloe’s claim based on a “loss of profits” approach, concluding that since Thorneloe was not profitable prior to the severing of ties with LU, it could not have a claim for loss of value. 

Hatnay argued that using this different method of evaluation was an error of law.

Maria Konyukhova, the counsel for the monitor, asked that Morawetz dismiss Thorneloe’s appeal and uphold the claims officer’s findings.

She said an error was not made by the claims officer, as it was “within his discretion” to use the different manner of evaluation.

In dismissing Thorneloe’s appeal and denying Thorneloe’s claim to loss of commercial value, Morawetz said “Thorneloe has not demonstrated that the Claims Officer committed an error in arriving at his decision.”

He said he is satisfied that the claims officer “carefully reviewed the evidence and based on factual findings in the circumstances of this case and concluded that the appropriate method to value damages is to focus on lost profits.”

Morawetz also said there is no Canadian law, which requires courts in these circumstances to assess damages on the basis of “loss of commercial value.”

“In arriving at his decision, the Claims Officer made a number of findings of fact,” Morawetz continued.

“The Claims Officer made a factual finding that the evidence demonstrated that Thorneloe was not profitable and was not likely to be profitable in the future if the Federation Agreement continued. On the evidence, it was open to the Claims Officer to make these findings.”

A table included in the decision that was provided by Ernst & Young, the court-appointed monitor of Laurentian’s insolvency proceedings, shows that Thorneloe was unprofitable between 2018 and 2021.

The Farber Report commissioned by Thorneloe “was based on assumptions that do not reflect Thorneloe’s financial reality or the damages they suffered as a result of the disclaimer,” said Morawetz.

“The Farber Report implies Thorneloe is a profitable entity and does not reflect reality … Because Thorneloe’s net cash flow is reasonably expected to continue to be negative, it is not entitled to claim the loss of academic and commercial value.”

Heidi Ulrichsen is Sudbury.com’s associate content editor. She also covers education and the arts scene.


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