An appeal of a decision to deny a $9.8 million claim by Thorneloe University against Laurentian University went before the courts Nov. 18.
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.
Andrew Hatnay, counsel for Thorneloe, said Nov. 18 that the educational institution is now in a “slow death” scenario.
Thorneloe’s appearance in court this week 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 of this year, the monitor issued a “Notice of Revision or Disallowance” allowing some aspects of Thorneloe’s Claim, but disallowing the rest.
It allowed certain portions of Thorneloe’s claim that the monitor said put the university out of pocket as a result of the dissolution of the federation agreement with LU.
That includes a severance payments claim in the amount of $1.48 million and a separation costs claim in the amount of $100,000.
The monitor also allowed part of Thorneloe’s claim to “pre- and post-filing receivables.” Thorneloe submitted a claim in the amount of $524,783, which the monitor allowed in the amount of almost $341,188.
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.
In October, counsel for Thorneloe issued a notice of motion to the courts, asking for mediation on the issue, or as an alternative, an appeal.
Chief Justice Geoffrey Morawetz, the judge who has heard most of the matters related to Laurentian’s insolvency, rejected the idea of mediation in a decision last month, so the matter went to an appeal instead this week.
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 Nov. 18 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 Chief Justice 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.
The monitor also takes issue with $6.7 million of Thorneloe’s claim. Konyukhova said this cash is “completely unimpacted” by LU’s actions, and it was “erroneous” for it to be included in the calculation.
Hatnay urged Chief Justice Morawetz to “allow this claim at least in the amount of $3 million.”
Laurentian counsel Andrew Hanrahan also made some brief submissions during the hearing, saying LU echoes the monitor’s sentiments on the matter.
Repeating earlier comments by Hatnay, Chief Justice Morawetz said Laurentian doesn’t really have any “skin in the game” in this matter.
That’s because a plan of arrangement has already been reached with its creditors, with Laurentian selling some of its real estate to the province for up to $53.5 million to pay them back.
Hatnay said any claim Thorneloe is able to reach with Laurentian in this matter is not expected to materially impact what creditors would receive.
At the conclusion of the hearing, Chief Justice Morawetz reserved his decision, saying he doesn’t see a “huge urgency on this matter,” and he’ll do his best to “get at it within the next few weeks.”
Heidi Ulrichsen is Sudbury.com’s associate content editor. She also covers education and the arts scene.
