2022 NLSC 81, 2022 NLSC 81

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION In Bankruptcy and Insolvency Citation : Roman Catholic Episcopal Corporation of St. John's (Re) , 2022 NLSC 81 Date : May 10, 2022 Docket : 20220124092 In The Matter of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 , as amended (the “ BIA ”); And In The Matter of the Notice of Intention to Make a Proposal of the Roman Catholic Episcopal Corporation of St. John’s Before: Justice Garrett A. Handrigan Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: April 29, 2022

Summary: On December 21, 2021, the Roman Catholic Episcopal Corporation of St. John’s gave Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act to Claimants for damages because of abuse they suffered while living at Mount Cashel Orphanage. On April 14, 2022, the Corporation filed an Interlocutory Application to convert the proceedings to the Companies’ Creditors Arrangement Act and to seek protection under that legislation while it evaluated and liquidated its assets, and the Claimants completed a claims process. The Corporation also asked for ancillary, but related, relief.

The Claimants opposed the Application arguing that it was premature and that it would increase costs, thereby diminishing the funds available to distribute to them. The Court allowed the Application in the main and granted the ancillary relief the Corporation sought. It also stated dates when the conversion from the BIA to the CCAA takes effect and to consider continuing the proceedings under the CCAA . Appearances:

Geoffrey L. Spencerand Meghan M. King Appearing on behalf of the Applicant, the RomanCatholic Episcopal Corporation of St. John’s (the“Corporation”) Clifton P. Prophet, Geoffrey E.Budden, Q.C., Thomas Gertner, PaulA. Kennedy Representative Counsel appearing on behalf ofclaimants, anonymous claimants / creditors of theCorporation (the “Claimants”) Maurice Chiasson, Q.C., Joseph J.Thorne Appearing on behalf of Ernst & Young Inc., Trusteeof the Corporation Authorities Cited: CASES CONSIDERED: John Doe (G.E.B. #25) v. The Roman Catholic Episcopal Corporation of St.

John’s, 2018 NLSC 60, rev’d2020 NLCA 27, leave to appeal refused [2020] S.C.C.A. No. 309, 2021 CarswellNfld 12; Clothing for Modern Times Ltd., Re, 2011ONSC 7522; Norcon Marine Services Ltd., (Re), 2019 NLSC 238; Stokes Building Supplies Ltd., Re (1992), (NL SC),100 Nfld. & P.E.I.R. 114, 318 A.P.R. 114 (Nfld. S.C.(T.D.)); Canwest Publishing Inc./Publications Canwest Inc., Re, 2010 ONSC 222;AbitibiBowater Inc., Re, 2012 SCC 67; Fisher Oil & Gas Corp. v.

Guaranty Bank & Trust Co. (1982), (ON CA), 40O.R. (2d) 548, 142 D.L.R. (3d) 43 (C.A.); Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60; Nova Metal Products Inc. v.Comiskey (Trustee of) (1990), 1 O.R. (3d) 289, 41 O.A.C. 282 STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Companies’ Creditors Arrangement Act, R.S.C.1985, c. C-36; Schools Act, 1997, S.N.L. 1997, c. S-12.2 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REASONS FOR JUDGMENT Handrigan J.: INTRODUCTION [1] The Roman Catholic Episcopal Corporation of St.

John’s (the “Corporation”) was incorporated on May 12, 1897, by a specialact of the legislature of the Province of Newfoundland. The Corporation is the legal owner of all the property, both real and personal, ofthe Archdiocese of St. John’s which administers thirty-four parishes on the Avalon and Burin Peninsulas, in eastern and southeasternNewfoundland. [2] Four Claimants sued the Corporation in December 1999 for damages because of the harm they suffered while living at MountCashel Orphanage in the 1940s and 1950s.

The Christian Brothers operated the Orphanage at the time and members of the Order abusedthe Claimants both physically and sexually. The Newfoundland and Labrador Court of Appeal found that the Corporation wasvicariously liable for the actions of the Christian Brothers, and the Supreme Court of Canada confirmed that the Corporation was liablein January 2021 by dismissing its application for leave to appeal (John Doe (G.E.B. #25) v. The Roman Catholic Episcopal Corporationof St. John’s, 2018 NLSC 60, rev’d 2020 NLCA 27, leave to appeal refused [2020] S.C.C.A.

No. 309, 2021 CarswellNfld 12). [3] This Court, from whose decision the Corporation appealed, assessed the damages of the four Claimants who sued theCorporation even though it dismissed their claims. It quantified their total at $2,611,113.96.

The Court of Appeal modified theClaimants’ damages slightly by adjusting the prejudgment interest the Claimants received, but otherwise confirmed this Court’s award.On April 15, 2021, the four Claimants filed a judgment at the Sheriff’s Office for $2,395,312.45. [4] Filing the judgment precipitated two other actions: Four other law firms notified the Corporation that they represent more thanone hundred other former residents of Mount Cashel Orphanage, and the Corporation anticipates that those claims, based on the damagesawarded to the first four Claimants, may exceed $50,000,000; and a class action proposed in the Supreme Court of British Columbia,against the Christian Brothers, named the Corporation as a co-defendant in that proceeding. [5] The Corporation, faced with overwhelming claims, filed a Notice of Intention to Make a Proposal under

section 50.4 (1) of theBankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) at the Office of the Superintendent of Bankruptcy on December 21,2021. This Court stayed proceedings against the Corporation under

section 50.4 (9) of the BIA on January 20, 2022, and has extendedthat stay three times since then so that it will expire on May 27, 2022, unless it is extended again. [6] However, the stay may not be extended beyond June 20, 2022, so that the Corporation will be deemed to have made anassignment in bankruptcy unless it makes a proposal to its creditors before then, as it declared it would do when it filed its Notice of

Intention on December 21, 2021. The Corporation says that it is unlikely to make a proposal before June 20, 2022, because of several compelling contingencies that I will discuss later in these reasons. [ 7 ] To that end, the Corporation filed an Interlocutory Application on April 14, 2022, asking generally for an Order converting the Notice of Intention proceedings it started under the BIA to proceedings under

section 11.6 of the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 (the “ CCAA ”). More particularly, the Corporation asks in its Interlocutory Application: (

a) to abridge time periods under

section 11 of the CCAA and the Rules of the Supreme Court, 1986 , S.N.L. 1986, c. 42, Sch. D (the “ Rules ”); (

b) to direct that it may serve its Application as it proposes in it; (

c) to declare that it is a “debtor company” to which the CCAA applies; (

d) to stay all proceedings against it under the CCAA for an initial ten days; (

e) to appoint Ernest & Young Inc. (“EY”) as its monitor in the CCAA proceedings; (

f) to grant an administration charge in an initial amount of $400,000 to secure payment of the professional fees and disbursements that EY, EY’s counsel, the Corporation’s counsel, and Deloitte Restructuring Inc. (the Financial Advisor to Representative Counsel) will incur in the CCAA proceedings (the “Administration Charge”); and finally (

g) to continue the role of Representative Counsel in the CCAA proceedings. [ 8 ] I set the Corporation’s Interlocutory Application for April 20, 2022, but adjourned it until April 29, 2022, because Representative Counsel, who opposed it, required time to file its objection and a Memorandum of Fact and Law in support. However, I proceeded with the Interlocutory Application as planned on April 29, 2022, and reserved my judgment until now. The Issues [ 9 ] The Corporation’s Interlocutory Application raises these issues: (

a) Does the Corporation meet the criteria for protection under the CCAA ? (

b) If it does, should I appoint EY as its monitor in the CCAA proceedings? (

c) Should I approve the Administration Charge that the Corporation requests? The Law Statute – Application to Convert [ 10 ] Section 3(1) of the CCAA provides: 3(1) This Act applies in respect of a debtor company or affiliated debtor companies if the total of claims against the debtor company or affiliated debtor companies, determined in accordance with

section 20, is more than $5,000,000 or any other amount that is prescribed. [ 11 ] Section 2(1) of the CCAA defines “company” as “… any company, corporation or legal person incorporated by or under

an Act of Parliament or of the legislature of a province, any incorporated company having assets or doing business in Canada, wherever incorporated…”; and it excludes other agencies, not applicable here. [ 12 ] Section 2(1) also says that “debtor company” means, as relevant here, any company that: (

a) is bankrupt or insolvent, (

b) has committed

an act of bankruptcy within the meaning of the [ BIA ] …, (

c) has made an authorized assignment or against which a bankruptcy order has been made under the [ BIA ] …. [ 13 ] While the CCAA does not define “insolvent”, courts generally defer to the definition of “insolvent person” that

section 2 of the BIA provides. It is, … [A] person who is not bankrupt and who resides, carries on business, or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and (

a) who is for any reason unable to meet his obligations as they generally become due, (

b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or (

c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under

legal process, would not be sufficient to enable payment of all his obligations, due and accruing due…. [ 14 ]

Section 11.6 of the CCAA allows a court to convert a

Part lll BIA proceeding into a CCAA proceeding. It provides: 11.6 Notwithstanding the Bankruptcy and Insolvency Act , (

a) proceedings commenced under

Part III of the [ BIA ] may be taken up and continued under this Act only if a proposal within the meaning of the [ BIA ] has not been filed under that Part; and (

b) an application under this Act by a bankrupt may only be made with the consent of inspectors referred to in

section 116 of the [ BIA ] but no application may be made under this Act by a bankrupt whose bankruptcy has resulted from (

i) the operation of subsection 50.4(8) of the [ BIA ], or (ii) the refusal or deemed refusal by the creditors or the court, or the annulment, of a proposal under the [ BIA ]. [ 15 ] Section 10(2) of the CCAA indicates what an applicant must file initially to convert a proceeding from the BIA to the CCAA : 10

(2) An initial application must be accompanied by (

a) a statement indicating, on a weekly basis, the projected cash flow of the debtor company; (

b) a report containing the prescribed representations of the debtor company regarding the preparation of the cash-flow statement; and (

c) copies of all financial statements, audited or unaudited, prepared during the year before the application or, if no such statements were prepared in that year, a copy of the most recent such statement. Case Law – Application to Convert [ 16 ] Brown J., then of the Ontario Superior Court, stated a “three-part test” in paragraph 9 of Clothing for Modern Times Ltd. , Re , 2011 ONSC 7522 , that a company seeking to convert from the BIA to the CCAA must meet: 9 It strikes me that on a motion to continue under the CCAA an applicant company should place before the court evidence dealing with three issues: (

i) The company has satisfied the sole statutory condition set out in

section 11.6(

a) of the CCAA that it has not filed a proposal under the BIA ; (ii) The proposed continuation would be consistent with the purposes of the CCAA ; and, (iii) Evidence which serves as a reasonable surrogate for the information which section 10(2) of the CCAA requires accompany any initial application under the Act. [ 17 ] Orsborn J., formerly of this Court, also discussed the onus on a company wishing to convert from the BIA to the CCAA in Norcon Marine Services Ltd., (Re) , 2019 NLSC 238 .

As counsel for the Corporation notes in the Memorandum of Fact and Law that he filed for the Corporation in this matter, “… [Orsborn J. considered that] the threshold to gain access to the CCAA is not high”: 14. … On an initial application,

section 11.02(3)(a) [of the CCAA ] requires an applicant to satisfy the court that “circumstances exist that make the order appropriate”. When a continuation is sought in circumstances where, as here, the BIA proposal process has already been engaged, case authorities suggest the

section 11.02(3)(

b) criteria of good faith and diligence also come into play…. [ 18 ] The learned justice cited, amongst other authorities, Brown J.’s decision in Clothing for Modern Times that I referred to above. [ 19 ] It is worth noting that, despite Orsborn J.’s view of how low the bar was for an applicant to convert proceedings from the BIA to the CCAA , the applicant in Norcon failed: 35 Assessing the matter as objectively as I can, the evidence does not disclose a germ of a reasonable possibility of reorganizing or

restructuring Norcon to a position from which it can either continue its operations or be sold as a going concern or otherwise. Theevidence discloses no potentially viable thread with which to begin the process of weaving a plan that will fulfill the objectives of theCCAA. The threshold of appropriate circumstances has not been crossed. [Emphasis Added] Statute – Appointing a Monitor [20]

Section 11.7 (1) of the CCAA provides for the appointment of a monitor. It reads: 11.7

(1) When an order is made on the initial application in respect of a debtor company, the court shall at the same time appoint aperson to monitor the business and financial affairs of the company. The person so appointed must be a trustee, within the meaningof subsection 2(1) of the [BIA]. [21] Section 2(1) of the BIA simply says that a “trustee” “… means a person who is licensed or appointed under this Act”.

Case Law – Appointing a Monitor [22] This Court discussed the qualifications of monitors and the Court’s expectations for them in Stokes Building Supplies Ltd., Re(1992), (NL SC), 100 Nfld. & P.E.I.R. 114, 318 A.P.R. 114 (Nfld. S.C.(T.D.)).

Of both, Halley J. stated: • The monitor must be able to discharge its duties, including and most importantly, it must have expertise in insolvency, forwhich trustees in bankruptcy are uniquely qualified; • The monitor must be able to negotiate and mediate with the parties to the insolvency, towards preparing a compromise orarrangement between the shareholders and creditors of the insolvent company; • The monitor must analyze the insolvent’s financial status during reorganization, project that data into the future and assistthe Court in assessing and weighing the proposed compromise or arrangement that is recommended; and • The monitor must be independent of all parties to the insolvency. (Generally, paragraphs 18-22 of Stokes, but with reference to other portions of Halley J.’s judgment and paragraph 16 in particular). [23] Halley J. inserted this strong caveat in paragraph 15 of his judgment: “It is essential for the court to ensure that neither theshareholders nor the creditors have any influence on the monitor.

As an agent of the court, the monitor must not be in a ‘conflict ofinterest’ situation. The monitor’s sole responsibility is to the court” [emphasis added]; and then he dismissed Stokes Building SuppliesLtd.’s request to appoint its auditor as monitor: 23 While the auditor of the applicant possesses the necessary qualifications, there is a lack of the necessary “independence”. Theapplication to appoint the company’s auditor as monitor is dismissed. Statute – Approving Administration Charge [24]

Section 11.52 (1) of the CCAA allows this Court to grant an administration charge. It provides: 11.52

(1) On notice to the secured creditors who are likely to be affected by the security or charge, the court may make an orderdeclaring that all or part of the property of a debtor company is subject to a security or charge – in an amount that the court considersappropriate – in respect of the fees and expenses of (

a) the monitor, including the fees and expenses of any financial, legal or other experts engaged by the monitor in theperformance of the monitor’s duties; (

b) any financial, legal, or other experts engaged by the company for the purpose of proceedings under this Act; and (

c) any financial, legal, or other experts engaged by any other interested person if the court is satisfied that the security orcharge is necessary for their effective participation in proceedings under this Act. Case Law – Approving Administration Charge [25] In Canwest Publishing Inc./Publications Canwest Inc., Re, 2010 ONSC 222, Pepall J. set out six factors a court may considerwhen it decides whether to grant an administration charge. She proposed the following (paragraph 54): (

a) the size and complexity of the businesses being restructured; (

b) the proposed role of the beneficiaries of the charge; (

c) whether there is an unwarranted duplication of roles; (

d) whether the quantum of the proposed charge appears to be fair and reasonable;

(

e) the position of the secured creditors likely to be affected by the charge; and (

f) the position of the Monitor. [ 26 ] Pepall J. noted that “[t]his is not an exhaustive list and no doubt other relevant factors will be developed in the jurisprudence” (paragraph 54). [ 27 ] This is the law I will apply to the issues I stated earlier in these reasons. I turn now to analyze those issues, starting with the background to them. Analysis Background [ 28 ] The Corporation applies to convert these proceedings from the BIA to the CCAA .

It filed its application on April 14, 2022, and asked for an “Initial Order” under the CCAA which will, amongst other things, stay “… all actions, suits or proceedings and remedies taken or that might be taken against … [it] …for an initial ten (10) days…”. If granted, the Corporation will ask at the end of those 10 days for an order under

section 11.02 (2) of the CCAA to extend that stay “… until otherwise ordered by the court, for any period that the court considers necessary”. [ 29 ] In effect, the Corporation anticipates that it will run out of time to make a proposal to its creditors (the Claimants ) and that it will be deemed to have made an assignment in bankruptcy under

section 50.4 (8) (

a) of the BIA for its failure to make a proposal. The Corporation notes that it cannot extend the time to make a proposal beyond June 20, 2021, six (6) months beyond the date it filed its Notice of Intention to make a proposal. [ 30 ] The Corporation says that there is much unfinished work that it and the Claimants must do before it can make a proposal and that too little time remains under the BIA to get that work done.

Matters remaining include: • Quantifying the damages that the Claimants seek to recover from the Corporation, including confirming the number of Claimants and the particulars of their individual claims; • Ascertaining in August 2022 whether a proposed class action in the Supreme Court of British Columbia, in which the Corporation has been named as a co-defendant, will be certified; • If the British Columbia class action is certified, quantifying the damages that may be payable in it; • Developing and executing plans to realize on the Corporation’s assets, including its real properties which are widely dispersed, some of which may be uniquely situated, as well as difficult to value and ultimately to market; • Ascertaining what, if anything, it will recover on an insurance policy with Guardian Insurance, which is set for trial in November 2022; and • Ascertaining what the Corporation will recover, if anything, from the Government of Newfoundland and Labrador for properties it owns that the Department of Education now occupies under the Schools Act, 1997 , S.N.L. 1997, c.

S-12.2 , with the Claimants ’ application to deal with this issue now set for hearing in November 2022. [ 31 ] In paragraph 38 of the Memorandum of Fact and Law the Corporation filed with its Interlocutory Application, it stated its dilemma this way: 38.

Without the requested protection under the CCAA , the Applicant [Corporation] will have to cease operations within the near future and will be unable to complete the Tender Process and further realizations on its assets for the benefit of its stakeholders and creditors. [ 32 ] These notes, together with my comments in the Introduction to these reasons, provide the background to the issues I stated above, to which I turn now for discussion. Discussion Protection under the CCAA [ 33 ] There are some aspects of the Interlocutory Application that are not controversial.

For example, there is no doubt that the Corporation is a “company” as defined in Section 2 (1) of the CCAA . As I noted earlier, the Roman Catholic Episcopal Corporation of St. John’s was incorporated on May 12, 1897, by a special act of the legislature of the Province of Newfoundland. It is the civil and working arm of the Archdiocese of St. John’s; and to paraphrase the definition of “company” in section 2 (1) of the CCAA , the Corporation was both incorporated by or under

an Act of the legislature of a province and it has assets and does business in Canada. [ 34 ] Additionally, the Corporation is a “debtor company” as that phrase appears in Section 2 (1) of the CCAA , in that it is an “insolvent person” as defined in

section 2 of the BIA . Again, to paraphrase the definition of “insolvent person”, the Corporation is not bankrupt, it carries on business in Canada, its liabilities exceed one thousand dollars, and it is either unable to meet those obligations or the aggregate of its property would not be sufficient for it to pay all its obligations, due and accruing due. [ 35 ] Section 3 (1) of the CCAA sets $5,000,000 as the entry-level indebtedness that a company must have before it is eligible for protection under the Act .

Presently, the only confirmed and quantified indebtedness that the Corporation has is the $2,395,312.45 judgment the four Claimants registered at the Sheriff’s Office on April 15, 2021. [ 36 ] When Representative Counsel filed its Memorandum of Fact and Law for the Claimants on this application, it noted that “… at

the April 20, [2022] hearing the RCECSJ and the Proposal Trustee [EY] took the position that there may not be proven claims against the RCECSJ in excess of the amounts owing to the Mount Cashel Plaintiffs” (paragraph 46). Representative Counsel condemned what it characterized as the Corporation’s disavowal of its liability to the Claimants and construed those comments as an effort “… to continue the abhorrent historic trend of the RCECSJ seeking to minimize the claims of abuse victims”.

Counsel for the Corporation claimed that Representative Counsel misconstrued his remarks about indebtedness when he responded to this comment during oral arguments on April 29, 2022. [ 37 ] While I acknowledge the fervour with which Representative Counsel condemned the suggestion that counsel for the Corporation claimed the only proven claims were those the four original claimants have brought, nothing particularly turns on that issue just now so I will leave it extant.

I do want to note, however, that Representative Counsel then seems itself to have adopted the suggestion, perhaps a tad facetiously and possibly only for the sake of argument, for it says thus at the end of paragraph 47 of its Memorandum: “The RCECSJ and the Proposal Trustee’s view (however misguided) appears to be that the RCECSJ may not have provable claims against it that exceed the threshold [of $5,000,000].

By the word of its own counsel and counsel to the Proposal Trustee, the RCECSJ is not eligible for protection under the CCAA ”. [ 38 ] Let me say definitively that the Corporation will not be precluded from protection under the CCAA because it does not meet the $5,000,000 threshold that section 3(1) of the Act prescribes. I acknowledge that this Court has certified only the damage claims of the four original claimants.

However, the number of Claimants has grown considerably in the year that has elapsed since those claimants filed their judgment in the Sheriff’s Office. [ 39 ] I have not been advised conclusively of the number of potential Claimants but estimates that have been provided indicate there may be as many as 150 or more and their claims may exceed $50,000,000. The ultimate number of Claimants and the global value of their claims awaits the claims process that Representative Counsel is developing.

Without liquidating all its assets, and even after it has done so, the Corporation may not be able to satisfy all those claims. [ 40 ] The Supreme Court of Canada made it clear in AbitibiBowater Inc., Re , 2012 SCC 67 , that “… provable claims in an insolvency … may be [monetary in nature], even if the amounts involved are not quantified at the outset of the proceeding” (paragraph 3).

I find the court’s reasoning in AbitibiBowater helpful and will examine the decision more closely, if only briefly. [ 41 ] In 2008, AbitibiBowater announced that it was closing its last paper mill in the Province of Newfoundland and Labrador. It filed for insolvency protection in the United States and petitioned for a stay of proceedings under the CCAA in the Superior Court of Quebec because its head office was in Montreal.

Meanwhile, within two weeks of the company’s announcement that the mill was closing, the Province of Newfoundland and Labrador passed legislation immediately transferring most of the property AbitibiBowater owned in this Province to itself. It also denied the company any legal remedy for the expropriation. [ 42 ] About six months after the Province expropriated the property, its Minister of Environment and Conservation issued environmental protection orders (“EPA orders”) directing the company to submit remediation plans to the Province for the five industrial sites from which it had operated.

Simultaneously, the Province brought a motion in the Superior Court of Quebec that a claims procedure order under the CCAA did not bar the Province from enforcing its EPA orders. [ 43 ] AbitibiBowater contested the motion and applied for orders staying the Province’s EPA orders and confirming they were subject to the claims’ procedure order under the CCAA . At issue was whether the EPA orders were “truly financial and monetary in nature”. The Superior Court of Quebec found that they were and confirmed they were subject to the CCAA process.

The Quebec Court of Appeal dismissed the Province’s appeal. [ 44 ] Deschamps J. of the Supreme Court of Canada, with six other judges concurring, also dismissed the Province’s appeal.

About the EPA orders she noted, “I agree with the Chief Justice [of Quebec] that, as a general proposition, an environmental order issued by a regulatory body can be treated as a contingent claim, and that such a claim can be included in the claims process if it is sufficiently certain that the regulatory body will make a monetary claim against the debtor” (paragraph 59). [ 45 ] Apropos of this matter, the as yet unascertained and unquantified claims of the other Claimants are “contingent claims” for which they are certain to make monetary claims against the Corporation.

I include those claims in the CCAA process against the Corporation so that its indebtedness clearly exceeds the $5,000,000 threshold. [ 46 ] More generally, the Claimants do not object so much to the substance of the Corporation’s application to convert the proceedings from the BIA to the CCAA , as they do the timing of its request. That said, they do suggest that other procedures may be more appropriate. In that behalf, they offer two possible alternatives, a holding proposal or a receivership, both under the BIA .

I will consider the other options subsequently, but first want to discuss the timing of the Corporation’s application to convert. [ 47 ] The Claimants say that the application to convert is premature for two reasons: When the Corporation filed the application on April 14, 2022, it still had more than 60 days available to it to make a proposal to its creditors through its Notice of Intention under the BIA ; otherwise, the Claimants say the Corporation is ignoring the significance of June 2, 2022, the date it set for the return of tenders for the 26 parcels of properties it is selling in the St. John’s region.

Let me deal with these objections in that order. [ 48 ] It is true that the Corporation still has some time available to it in the Notice of Intention process. It filed its Notice on December 21, 2022, and the six (6) months that the BIA allows for extensions of the stay of proceedings that this Court put in place then and has extended several times since, may be extended further but not beyond June 20, 2022. The Corporation feels that it is not acting fecklessly by applying now.

It believes that the BIA process does not offer a long-term solution, so it will gain nothing by simply deferring the inevitable. [ 49 ] I agree with the Corporation that the Notice of Intention process under the BIA will not allow it to liquidate its assets in the structured and orderly way that will likely maximize their returns from them. Earlier in these reasons, I enumerated matters outstanding for the Corporation that it must address before it may value, sell, and realize on its assets so it will be certain of what it will have available for the Claimants .

[50] Aside from the claims process, the creation and administration of which lies largely with the Claimants, there will be a furthertender process for properties that the Corporation owns elsewhere on the Avalon Peninsula than in the St. John’s region, as well as onthe Burin Peninsula. The Corporation also needed to know what impact, if any, the class action in British Columbia will have on itsliquidity, as well as what, if anything, it will recover by its claim against Guardian Insurance.

While it is too soon to realistically assesswhen these collateral matters will happen, there is no doubt they will take more time than is currently available under the BIA. [51] As to the importance of the June 2, 2022 closing date for the first tender package, the Claimants overstate its significance by agood measure. It is true that the returns from the tender process will indicate the market for and values of some of the propertiesavailable for sale. It may even show that the tender process is not especially effective for selling the properties, either at all or forobtaining their best values.

However, the efficacy of the tender process is only one part of the overall exercise on which the Corporationis engaged, and it applies to only a portion of the properties, albeit possibly the most valuable ones, that the Corporation will sell.Overall, June 2, 2022, is no more than an arbitrary date on which the Claimants are conferring too much importance. [52] As I noted above, the Claimants also suggest that continuing the BIA proceedings under the CCAA may not be the only or bestoption available to the Corporation to liquidate its assets.

They submit that a “holding proposal” is also available under the BIA. [53] They describe “holding proposal” in paragraph 33 of the Memorandum of Fact and Law they filed in this matter as: … a proposal submitted to a debtor’s creditors that provides that the Debtor will file a substantive proposal at a later date. A “holdingproposal” effectively tolls the time period available to make a proposal under the BIA.

It provides a debtor with sufficient time tocomplete its restructuring and/or liquidation, in the expectation that all stakeholders of the debtor, will derive a greater benefit from thetolling of the time period under the BIA than from any immediate bankruptcy. [54] The Claimants rely on a dated authority, Fisher Oil & Gas Corp. v. Guaranty Bank & Trust Co. (1982), (ON CA), 40 O.R. (2d) 548, 142 D.L.R. (3d) 43 (C.A.), to submit that a holding proposal under the BIA is available to the Corporation. [55] I disagree with the Claimants that the Corporation may resort to a holding proposal in this matter.

As described by theClaimants, a “holding proposal” is a promise by the Corporation to make a proposal. If the term has any relevance now, “holdingproposal” is actually the Notice of Intention process on which the Corporation is currently engaged. The Notice of Intention processsimply cannot be extrapolated further, for to do as the Claimants suggest would require the Corporation to make another promise tomake a proposal beyond what it did on December 21, 2021; and a fair reading of

section 50.4 (1) of the BIA does not support that kind ofduplicity. [56] The Claimants also submit in paragraph 42 of their Memorandum of Fact and Law that the results the tender process bears onJune 2, 2022 “… may require a re-evaluation of whether the RCECSJ remains the best steward of its property, assets, or undertakings, orwhether in the alternative the appointment of an independent receiver may be more appropriate”.

In effect, the Claimants are suggestingby this that it may be appropriate to consider switching the “debtor-driven” process that is now operating, to a “creditor-driven” processwhereby the Claimants would have more control over how the Corporation’s assets are called in, valued, and disposed of. They alsosuggest that a receivership would likely cost less. As to that, they note the reporting obligations that are built into the BIA-CCAAprocesses. [57] Let me address first the relevance of who “drives” the process.

I favour neither a creditor – nor a debtor – driven process, butwhatever works to the best interests of the Claimants, the ultimate beneficiaries of this undertaking. Thus far, I find that the initiative theCorporation has displayed, encouraging. It assiduously meets (and generally beats) its deadlines and it seems fully committed to derivingthe maximum value from its assets for the Claimants. [58] I offer this simple example: The parties have not yet sought my approval for the settlement they reached over the “Chase TheAce” funds from St. Kevin’s Parish, nor have they apprised me of its terms.

However, very early in the discussion of that issue theCorporation took, the perhaps uncomfortable stance, that the funds belonged to the Corporation and should be available for it todistribute amongst the Claimants. [59] I also find that the Corporation states and works methodically towards its goals and continually looks toward futureeventualities it will have to contend with. No doubt this anticipation lies behind the present application to convert from the BIA to theCCAA.

I believe that the efforts the Corporation have shown to date also garner support from the lay members of the 34 parishes underthe auspices of the Archdiocese of St. John’s.

Counsel for the Corporation reports that parishioners still give generously to the Church.We ought not to underestimate the importance of that support since those same parishioners will likely be involved in acquiring the assetsthe Corporation will sell by the tender process or howsoever the properties are sold. [60] As to how the costs of the CCAA proceedings compare to the costs of a receivership, the latter would also be court-orderedsince there is no private means for appointing a receiver here, so the reporting and accounting requirements (and the associated costs)would likely mirror each other. [61] Overall, I find that the Corporation is discharging the duties it has under the Notice of Intention proceedings that it instituted onDecember 21, 2021.

It has met its timelines; it shows a determined interest in maximizing the value of the assets it has available fordistribution; it is putting the interests of the Claimants first; and it is committed to liquidating its assets and meeting all othercontingencies that affect the recovery of funds to settle the claims outstanding against it. [62] Timelines under the BIA are too restrictive to allow the Corporation to complete the process on which it is engaged. However,the CCAA offers greater flexibility and is more conducive to the undertaking.

I note the comments of Deschamps J. of the Supreme Courtof Canada in Ted Leroy Trucking [Century Services] Ltd., Re, 2010 SCC 60. [63] The learned justice highlighted the “remedial nature” of the CCAA and expressed it with this quotation from paragraph 57 ofDoherty J.A.’s dissenting judgment in Nova Metal Products Inc. v. Comiskey (Trustee of) (1990), 1 O.R. (3d) 289, 41 O.A.C. 282:

The legislation is remedial in the purest sense in that it provides a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of ongoing business operations can be avoided while a court-supervised attempt to reorganize the financial affairs of the debtor company is made. ( Century Services at para. 59). [ 64 ] Elsewhere in Century Services , Deschamps J. compared and contrasted the restrictiveness of the BIA and the flexibility of the CCAA .

In paragraph 15, she noted: As I will discuss at greater length below, the purpose of the CCAA — Canada’s first reorganization statute — is to permit the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating its assets. Proposals to creditors under the BIA serve the same remedial purpose, though this is achieved through a rules-based mechanism that offers less flexibility .

Where reorganization is impossible , the BIA may be employed to provide an orderly mechanism for the distribution of a debtor’s assets to satisfy creditor claims according to predetermined priority rules. [Emphasis added.] [ 65 ] Otherwise, I note that the Corporation filed the documentation required under section 10 (2) of the CCAA , in that it submitted with its Interlocutory Application, a statement indicating its projected cash flow; its prescribed recommendations for preparing the cash- flow statement; and copies of appropriate financial statements. [ 66 ] Overall, I find the Corporation satisfies the three-part test that Brown J. set out in Clothing for Modern Times .

To summarize and paraphrase Brown J.’s test: • It has not filed a proposal under the BIA ; • It is maximizing its recovery from its assets for the benefit of the Claimants and enabling the Claimants to complete a claims process; and • It has filed all documentation that section 10(2) of the CCAA specifies. [ 67 ] In the result, I will allow its application to convert proceedings from the BIA to the CCAA and stay the Claimants ’ proceedings against it under the CCAA . Appointing EY as Monitor [ 68 ] The Corporation asks to appoint Ernst & Young Inc. to monitor its activities under the CCAA .

In paragraph 42 of the Memorandum of Fact and Law the Corporation filed to support its Interlocutory Application to convert, it states succinctly the reasons it believes EY is a suitable monitor: 42. EY is a trustee within the meaning of s. 2(1) of the BIA and is not subject to any of the restrictions as to who may be appointed as monitor under

section 11.7(2) of the CCAA . EY has a significant amount of experience acting as a court-appointed monitor in CCAA proceedings. EY also has been engaged by the Applicant to help with its restructuring since January, 2021. In addition, EY has acted as Proposal Trustee for the Application under the

Part III BIA proposal process and has therefore gained significant knowledge that would be of assistance during the CCAA proceedings. [ 69 ] The Corporation notes in paragraph 43 of its Memorandum that “EY has consented to acting as Monitor in these CCAA proceedings”; and I also note that the Claimants do not challenge EY’s appointment. [ 70 ] In the result, I order that EY will be Monitor of the Corporation in the CCAA proceedings. Administration Charge [ 71 ] The Corporation requests an Administration Charge of $400,000 under

section 11.52 of the CCAA . It relies on the criteria that Pepall J. identified in Canwest Publishing and offers three factors that justify granting the Administration Charge it asks for under the CCAA .

While the Claimants are clearly concerned that converting to CCAA proceedings will increase costs, thereby reducing the funds available for distribution, they do not oppose the Administration Charge per se ; nor do they specify how costs might increase. [ 72 ] As to the criteria Pepall J. stated in Canwest Publishing , I find that the CCAA proceedings are likely to be complex and involved, they may be of long duration and all parties to this process will surely benefit from the professional services the Administration Charge will be directed to.

In addition to the professional fees and disbursements that the Corporation will incur for its counsel, the Monitor and the Monitor’s counsel, the Charge covers the fees and disbursements of Deloitte Restructuring Inc., Financial Advisor to Representative Counsel. [ 73 ] In the result, I grant an Administration Charge against the property of the Corporation in an initial amount of $400,000 to secure the payment of the professional fees and disbursements already incurred and to be incurred in the CCAA proceedings by the Monitor, counsel to the Monitor, counsel to the Corporation, and Deloitte Restructuring Inc., and to rank as a super-priority charge on all assets of the Corporation.

Summary and Disposition [ 74 ] On December 21, 2021, the Roman Catholic Episcopal Corporation of St. John’s gave Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act to Claimants for damages because of abuse they suffered while living at Mount Cashel Orphanage. On April 14, 2022, the Corporation filed an Interlocutory Application to convert the proceedings to the Companies’ Creditors Arrangement Act and to seek protection under that legislation while it evaluated and liquidated its assets, and the Claimants

completed a claims process. The Corporation also asked for ancillary, but related, relief. The Claimants opposed the Application, arguing that it was premature and that it would increase costs, thereby diminishing the funds available to distribute to them. [ 75 ] The Court allowed the Application in the main and granted the ancillary relief the Corporation sought. It also stated dates when the conversion from the BIA to the CCAA takes effect and to consider continuing the proceedings under the CCAA . Order [ 76 ] In the result, I order that:

(1) The Corporation may convert its proceedings from the BIA to the CCAA and I stay the Claimants ’ proceedings against the Corporation under the CCAA ;

(2) Ernst & Young Inc. will be Monitor of the Corporation in the CCAA proceedings;

(3) I grant an Administration Charge against the property of the Corporation in an initial amount of $400,000 to secure the payment of the professional fees and disbursements already incurred and to be incurred in the CCAA proceedings by the Monitor, counsel to the Monitor, counsel to the Corporation, and Deloitte Restructuring, to rank as a super-priority charge on all assets of the Corporation;

(4) This order takes effect on May 17, 2022, and the Corporation may file its Amended and Restated Initial Order, in substantially the same form that it submitted with its Interlocutory Application, subject to any changes that may be warranted by this Judgment;

(5) The stay of proceedings ordered previously under the BIA remains in effect until May 17, 2022, when the stay of proceedings under the CCAA takes effect; and

(6) This matter returns to Court on Friday, May 27, 2022, to consider the continuation of the proceedings under the CCAA . _____________________________ Garrett A. Handrigan Justice