A couple of decisions have been rendered by the courts over the past day related to Laurentian University’s ongoing insolvency restructuring.
Laurentian declared insolvency and filed for creditor protection and court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA) nearly one year ago, on Feb. 1, 2021.
Chief Justice Geoffrey Morawetz, the judge that has heard most matters related to LU’s insolvency over the past year, released his decision Jan. 26 regarding Laurentian’s request for a stay of a Speaker’s warrant issued by the Ontario legislature last month.
The Speaker’s warrant compels Laurentian to produce a long list of privileged documents by Feb. 1, or next Tuesday.
Morawetz denied Laurentian’s full request for the stay, but did grant a limited stay related to certain documents related to LU’s insolvency restructuring that are covered by court orders.
This limited stay “is in effect pending a determination of whether the issuance of the Speaker’s Warrants” as related to certain documents covered by court orders “falls within the scope and extent of the Legislative Assembly’s parliamentary privilege,” said Morawetz’s decision.
As well, on Jan. 27, Laurentian was back before the courts with a trio of requests:
- That the “stay of proceedings” protecting it from its creditors be extended to May 31 (the previous deadline was Jan. 31).
- That the current $35M debtor-in-possession (DIP) loan from a private lender be replaced by one from the province.
- And that it be allowed to hire a consultant for a new strategic plan.
During the court hearing, Morawetz endorsed Laurentian’s motion for these three requests.
Morawetz said in his Jan. 26 decision regarding the Speaker’s warrant he agreed with arguments by counsel for the Speaker of the Ontario legislature and the Minister of the Attorney General that parliamentary privilege allows the legislature to compel LU to disclose most of the requested documents.
However, as stated above, he’s granted a limited stay related to certain documents covered by court orders related to LU’s insolvency restructuring.
Those documents are ones covered by a court-ordered Sealing Order granted Feb. 1, 2021 (exhibits to LU’s supporting affidavit for its initial application under the CCAA), as well as documents related to a court-ordered Mediation Order granted Feb. 5, 2021 (involving the mediation process related to the CCAA with Justice Sean Dunphy).
“I have not been provided with any authority that stands for the proposition that a pre-existing court order which restricts the disclosure of specified information can be overridden by a legislative assembly’s demand for production,” Morawetz said.
He added that “the question as to whether the Legislative Assembly can compel the production of such information or whether this goes beyond the scope of parliamentary privilege is a serious issue that has not been addressed in any reported decision.
“It is a fundamental question that affects the relationship between the three independent branches of government – the executive, the legislative, and the judicial.”
Morawetz said he has “no hesitation in concluding that the disclosure of the information referenced in the Sealing Order and the Mediation Order is likely to result in irreparable harm to LU.
“The consequences of disclosing the information that is restricted by the Sealing Order and the Mediation Orders are significant. The CCAA proceedings have been ongoing for a year and LU is in the process of developing its restructuring plan. Disclosure of the positions of affected parties at this stage, including that of LU, would be problematic.”
Morawetz said that a hearing on the matter could be scheduled for February or March “and there will only be a relatively short delay in enforcement of the Speaker’s Warrant pending determination of the scope of the privilege. It is a serious issue which should be determined before it becomes a moot point.”
Creditor protection extended to May 31, and other LU requests
As mentioned above, during the Jan. 27 court hearing, Chief Justice Morawetz issued an endorsement of Laurentian’s three latest requests.
Laurentian had asked that the “stay of proceedings” protecting it from its creditors be extended to May 31, that the current $35M debtor-in-possession (DIP) loan from a private lender be replaced by one from the province, and that it be allowed to hire a consultant for a new strategic plan.
However, during the proceedings, Morawetz said he would like an idea of when Laurentian expects to be in a position to put a plan forward to its creditors for how they will be paid off (known as a plan of arrangement).
“The filing is almost a year old,” said Morawetz. “It’s time to get going and get towards a plan.”
Laurentian lawyer DJ Miller said Laurentian expects to come forward with a plan of arrangement within the current stay period (before May 31).
Laurentian said it was requesting the stay of proceedings protecting it from its creditors until May 31, as it still has a number of processes related to restructuring that are underway.
Those include upcoming reports by third-party consultants, including a real estate review, looking at property Laurentian can potentially sell, and an operational and governance review, looking at how the university will be run in the future.
“These are major undertakings and third-party reviews that were undertaken and have been going on for some time -- very, very detailed reviews,” said Miller at the Jan. 27 hearing.
“And so we are happy to say that we are finally at the end of the processes involved in those aspects, the operational and governance reviews have been completed, the real estate review is within a few days of being completed.”
With respect to the processing of the roughly 1,500 claims worth $360 million filed against Laurentian by its creditors, Miller said that process has “advanced significantly,” and it’s down to a handful of complex cases still being dealt with.
The university is also working on its audited financial statements alongside its external audit team from KPMG, with help from a team of accountants from Ernst & Young, the same company that’s acting as the court-appointed monitors of LU’s insolvency restructuring.
There has been a delay in completing the financial statements due to the strained resources of Laurentian’s financial team. Miller said Laurentian’s resources “continue to be extremely thin and stretched by all of the demands by various parties that are placed on it.”
The replacement of the current $35-million DIP loan with one from the provincial government is part of a provincial financial package provided to the ailing university announced last month.
The replacement DIP facility from the province will be used by Laurentian to repay the existing DIP lender, and refinance the existing DIP facility (which has an 8.5-per-cent interest rate -- the province’s loan has a much lower interest rate).
As one of the terms of the province, there have been changes to Laurentian’s board of governors, which has included the resignation of some members, including former chair Claude Lacroix, and the provincial appointments of some new members.
Miller said Laurentian was “obviously very pleased by that demonstration of support” related to the provincial financial support package.
“The financial components of the total package offered by the province of Ontario totals in the aggregate $63 million on a go-forward basis,” she said.
The province is also requiring that Laurentian develop a long-term strategic plan with the assistance of an external third party.
Laurentian sought approval from the courts for the monitor (Ernst & Young) and its chief redevelopment officer (or CRO, Lou Pagnutti) “to develop a process for the engagement with independent, prospective third parties who may be qualified and able to assist LU with the development of a strategic plan.”
Miller said Ernst & Young and Pagnutti have been tapped for this project so that time isn’t lost in going through a public procurement process for a consultant.
She said coming up with a strategic plan is a longer-term project that will not be completed during the current stay of proceedings (in place until May 31) within Laurentian’s insolvency restructuring.
Reporting of restructuring costs
During the Jan. 27 hearing, Danielle Stampley, counsel for the Laurentian University Staff Union (LUSU), brought up the union’s concern about the lack of detail related to millions in restructuring costs in reports by the monitor of LU’s insolvency restructuring.
She said people are left to add up all of these costs from report to report, rather than a running total being readily available in the reports. Morawetz encouraged Stampley to bring up these concerns with the monitor, Ernst & Young.
Information and Privacy Commissioner
Also during the Jan. 27 hearing, counsel for the Information and Privacy Commissioner (IPC) of Ontario took issue with the extension of Laurentian’s CCAA process as it relates to an order granted a year ago as part of LU’s insolvency restructuring.
That order grants Laurentian a stay from being required to respond to any freedom of information requests received by LU while still undergoing insolvency restructuring.
Linda Chen, counsel for the IPC, said there are only four outstanding freedom of information requests regarding Laurentian, two filed before LU’s insolvency was declared, and two since that time.
“There has been a significant passage of time, and that this particular state was never intended to be an indefinite one, given that it was unprecedented in nature, and given the quasi-constitutional rights that are inherent embedded in the public's right, and presumed right of access to information that's contained in public institutions,” Chen said.
Chief Justice Morawetz asked why Chen had not filed a written motion with the courts related to this matter. Chen said this was because of delays in receiving information from Laurentian on the number of outstanding freedom of information claims.
Morawetz asked that Chen file a motion with the courts if she wishes to proceed with the IPC’s objection.
Laurentian lawyer DJ Miller said the low number of freedom of information requests and the lack of any complaints about the issue means there’s no need for a “change to the status quo.”