12 LEXPERT MAGAZINE
|
APRIL 2019
GENERAL MOTORS OF CANADA
COMPANY V. TRILLIUM MOTOR
WORLD LTD.
DECISION DATE: JANUARY 22, 2019
One of the few Ontario class actions to
proceed through trial to judgment and sub-
sequent appeals, the case of Trillium Motor
World Ltd. ("Trillium") v. General Motors
of Canada Company ("GM") and Cassels
Brock & Blackwell LLP ("CBB"), which
concerned the winddown of GM dealer-
ships during the 2009 financial crisis has
spanned nearly a decade. e final skirmish
in this case involved a priority dispute be-
tween class counsel and GM in which GM
sought to claim approximately $3 million
in costs awards that CBB had been ordered
to pay to Trillium at trial and on CBB's un-
successful appeal.
In this decision, the trial judge, Justice
omas McEwen, found that class coun-
sel's interest in the costs award had priority
over GM's interest as a secured creditor of
Trillium and directed that the costs award
be applied to class counsel's fees and dis-
bursements as per the court's prior approval
of class counsel's retainer agreement.
BACKGROUND
In a motion originally returnable in July
2018, class counsel sought court approval
of their retainer agreement and payment of
their fees and disbursements under section
32(2) of the Class Proceedings Act, 1992
("CPA"). e retainer agreement provided
for the assignment of the costs award from
Trillium to class counsel. Section 32(3) of
the CPA states that amounts owing under
a retainer agreement approved by the court
are a first charge on any settlement funds or
monetary award.
Prior to the return of class counsel's mo-
tion, GM brought an application for or-
ders: (i) adjudging Trillium bankrupt; (ii)
that the costs award be deemed the prop-
erty of Trillium; and (iii) declaring that
GM as secured creditor of Trillium had a
first-ranking security interest over the costs
award, and specifically ranked in priority
to class counsel.
Having succeeded in defending the case
at trial and on appeal, GM had received
substantial costs awards of its own and, as
such, was an unsecured creditor of Tril-
lium. GM was not, however, a secured
creditor of Trillium until it took steps to
acquire a $2.7-million secured debt that
the Business Development Bank of Can-
ada ("BDC") held with respect to Trillium.
Class counsel's retainer and fee approv-
al motion was ultimately heard together
with GM's application in September 2018.
GM's position was supported by submis-
sions from FTI Consulting Canada Inc.
("FTI"), who GM had proposed be ap-
pointed as Trillium's trustee in bankrupt-
cy. In an endorsement dated December 5,
2018 (2018 ONSC 6818), Justice McEwen
approved class counsel's retainer agreement
and the assignment of the costs award from
Trillium to class counsel, without prejudice
to GM's outstanding application that was
to be the subject of a subsequent decision.
THE DECISION
Aer (i) adjudging Trillium bankrupt;
(ii) declining to appoint FTI as Trillium's
trustee in bankruptcy given the "partiality
in favour of GM" that FTI had displayed
on the application; (iii) finding that there
was no constitutional paramountcy issue
between the CPA and the Bankruptcy and
Insolvency Act; and (iv) determining that
the costs award was the property of Tril-
lium and, therefore, formed part of its es-
tate in bankruptcy, Justice McEwen turned
to resolving the priority contest between
GM and class counsel. He framed the con-
test as one between the security granted
under the Personal Property Security Act
(Ontario) ("PPSA") and the security grant-
ed under the CPA, and noted the absence
of any cases directly on point.
Justice McEwen determined the priority
contest in class counsel's favour on the basis
that the PPSA has no application to a first
charge obtained under the CPA. He con-
cluded that the CPA first charge "should be
treated as effectively a solicitor's lien." e
effect of this finding was to bring the CPA
first charge within section 4(1)(a) of the
PPSA, "… a lien given by statute or rule of
law … ," to which the PPSA does not apply.
Consequently, the CPA first charge that
became operative on the court's approval of
the retainer agreement took priority over
the prior perfected security interest that
GM had acquired from BDC. e PPSA's
"first in time" rules had no application in
the circumstances.
e decision affirms the rationale under-
lying the CPA first charge is substantially
the same rationale that underlies solicitor's
liens at common law, i.e., that the work of
class counsel, and the property recovered
or preserved for the class's benefit through
that work, is to be protected in view of the
access to justice objectives and overarching
purposes of the CPA. Permitting a secured
creditor to scoop the proceeds arising from
class counsel's efforts would bear on coun-
sel's willingness to take on some cases.
Marie-Andrée Vermette and Michael
Statham of WeirFoulds LLP and David
Sterns, Allan Dick and Andy Seretis of
Sotos LLP represented Trillium Motor
World Ltd.
Sean Campbell, Natasha MacParland
and Natalie Renner of Davies Ward Phil-
lips & Vineberg LLP acted for General
Motors of Canada Company.
Robert ornton and Rachel Bengino
of ornton Grout Finnigan LLP repre-
sented FTI Consulting Canada Inc.
In two notable class proceedings, an Ontario judge finds that class counsel's interest in a costs award
had priority over General Motors of Canada's interest as a secured creditor; and the Court of Appeal
for Québec issues a judgment awarding over $13.5 billion against big tobacco companies in the largest
class proceeding in Canadian history
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