Legal Technology

CASE LAW

Hollinger Inc. (Re), 2012 ONSC 5107

This motion decision was released in 2012 by Ontario Superior Court of Justice during a CCAA proceeding under which Hollinger Inc. was granted protection in 2007. Hollinger lodged five groups of claims against its (i) former counsel Torys LLP; (ii) former auditor KPMG LLP; (iii) six former outside directors; (iv) former inside directors and officers including Conrad Black, and related parties; (v) Members of former banking syndicate.

Conrad Black filed damages for breach for contract, asserting to be the largest creditor of Hollinger. But he took no further step to advance such claim since 2008. Hollinger reached settlement agreements with Torys, KPMG and former outside directors (Settling Defendants) pending on court approval. Non-Settling Defendants attacked the settlement on several grounds, which were all rejected by the court.

Black and his related defendants ("Black Defendants") first argued that the court had no jurisdiction because the proposed settlements failed to benefit all of Hollinger's creditors. The proceeds as claimed by the Black Defendants would be used to fund the litigation against Black Defendants instead of being distributed to its creditors. Campbell J. concluded that the court has jurisdiction consistent with the principles of the CCAA to maximize the assets available to creditors as long as the process is not being used to further a collateral objective that is not inconsistent with the ultimate goal of these CCAA proceedings.

The Non-Settling Defendants further argued that the third party release and Bar Orders as part of the settlements would deprive the remaining defendants of substantial rights for discovery. Alternatively, the Non-Settling Defendants requested, if the settlements are approved, an order that would provide the Non-Settling Defendants with the same opportunity for discovery and examination as if Torys and KPMG were to continue as defendants.

Hollinger argued that the third party release is a typical "Pierringer agreement" (name after Pierringer v. Hoger, 124 N.W. 2d 106) which permit some parties to withdraw from litigation, leaving the remaining defendants responsible only for the loss that they may be found to have actually caused, with no joint liability.

Campbell J. held that Pierringer agreements have been increasingly used in Canada in different litigation settings and in this case the terms did not prejudice the remaining defendants in respect...