Law Times

Law Times • January 28, 2013 Page 5 NEWS CCAA case continues as mediation efforts fail Continued from page 1 She suffers from Crohn's disease, scleroderma, and debilitating allergies. Like others with disabilities who once worked for Nortel, she's part of an interim settlement agreement providing 35 per cent of what the company owes her. The settlement money Marin receives is about $400 a month, she says. "It's sickening. I'm here trying not to heat my house too much so I will not run out of money quickly, which I'm about to run out of anyway. When you don't sleep wondering where can I cut more than I already do, it's sickening to see that those lawyers were paid so much." Marin, who worked for Nortel as an engineering technologist, says she became aware of the 2010 settlement agreement when she heard about it in the news. There was little consultation, she adds. "You've got Ernst & Young having the keys of the business and doing whatever they want. Nobody is looking, nobody is asking questions," she says. Ernst & Young is the court monitor in the CCAA proceedings in Canada. On Jan. 22, Ontario Chief Justice Warren Winkler, who's leading the mediation in relation to Nortel, announced he was extending the talks as the parties hadn't reached an agreement. But on Thursday, he concluded "that further efforts at mediation are no longer worthwhile." The parties were considering a proposal Winkler had made to them, says Peter Rehak, media relations officer for the mediation. Citing confidentiality, Rehak declined to say what the proposal was. In the United States, about $386 million has gone to professionals compared to $126 million in Britain, according to Urquhart's calculations. Fees paid to professionals dealing with Nortel branches in other European, Middle Eastern, and African countries fall under the British amount. The calculations don't include a separate $82 million paid to Ernst & Young, the joint administrator of the proceedings in Britain. Urquhart compiled the British and Canadian amounts from Ernst & Young's court monitor administrator reports and gathered the U.S. figures from bankruptcy court records. At the time of the 2010 interim agreement with the 350 Canadian workers on long-term disability, Nortel's position was that there was no money to give out, says Urquhart. "Counsel for Ernst & Young and counsel for Nortel were basically saying, 'There's no money. . . . We can't do any better for this group because there is no money essentially.' So you can imagine how nauseated this group is now." In Canada, Norton Rose Canada LLP, Goodmans LLP, and Koskie Minsky LLP are among the primary law firms acting in the CCAA proceedings. Although the numbers are high, they may not tell the full story, says Richard Jones, who acts as special counsel in insolvency and restructuring cases and is an adjunct professor at Queen's University's Faculty of Law. "The difficulty with these cases is that the reaction is a quantitative reaction only," he says. "You must remember that Nortel itself was a large and complex organization. And some of these costs may in fact be the pay-to-stay bonuses, the payment over the last four years of a great number of Nortel executives. I don't know whether that has been finely separated from the professional fees as might be appropriate." (According to Urquhart, the fees indicated are above and beyond the amounts paid to Nortel executives.) But Jones admits the fees quoted are a "hell of a lot of money." He suspects the problem may lie in having too many parties involved. Many junior lawyers, associates, and subordinates look at the documents, he says, and all of them have their meters running. "The next thing you know, hundreds of hours of professional time have been applied and everybody thinks they're entitled to be paid a very high rate," he adds, noting it's rare that everyone involved in a file really needs to be working on it. While the employees aren't happy, the Office of the Superintendent for Bankruptcy, the federal agency that oversees bankruptcy cases, says it won't be auditing the fees paid to professionals in the Nortel matter. "The role of the Office of the Superintendent of Bankruptcy does not include investigating the conduct of executives employed by a company prior to a Companies' Creditors Arrangement Act (CCAA) filing," wrote spokeswoman Lauren Hébert in an e-mail to Law Times. The office only looks into complaints that directly involve the conduct of court monitors, she said. If the numbers provided by Urquhart are anything to go by, "I think there is something amiss," says Jones. "You cannot do these things without a prudent sense of economy, which is always necessary when you're dealing with insolvency." At some point in 2013, the workers on long-term disability will have run out of the settlement cash they've received, says Urquhart. "They're only getting . . . approximately $10,000 a year, so none of them could live on $10,000 a year in these three years. Their income is cut off, so they would have used up their settlement money." For her part, Marin says she's desperate to get better and go back to work but notes the stress of having to make do with so little money has been a setback. "Not working, for me, is worse than the illness and the prospect of dying," she says. The employees on disability have also launched a class action against Nortel that alleges wrongdoings with regards to money taken from their health and wellness trust. The case is ongoing. LT Judge denies being present on day of judgment Continued from page 1 agreement, D'Souza and D'Gama took Krystyna and Agnieszka Woldanska to court. The paralegal and real estate agent also sued the new owners of the property and the lawyers who facilitated the purchase. The judgment D'Gama and D'Souza say Penny signed declares all the defendants guilty as "evidenced by their conduct" and "badges of fraud." Marek Tufman, counsel for the Woldanskas, says he received a signed letter in July from the plaintiffs declaring victory and plans to pursue criminal proceedings against his clients. "It was clear to me that this could not have possibly been done without notice by a judge," he says. "It's outlandish, absolutely scandalous, and beyond belief." When Tufman told Penny he didn't know about the judgment, "He looked up at me and said, 'Well, neither do I, Mr. Tufman,'" the lawyer says. After setting aside the judgment in July, Penny went on to award more than $40,000 in costs to all of the defendants. "I find that the plaintiffs' conduct, in faking a judgment of this court, constitutes a scurrilous and fraudulent attack on the administration of justice," Penny wrote in his Jan. 7 ruling. "The plaintiffs' actions amount to a contemptuous and reckless disregard for the judicial process and were calculated to obstruct or interfere with the due course of justice in these proceedings." On the date he purportedly signed the would-be judgment, Penny said he was in family court. Even if he were working in civil court on July 19, "under no circumstances" would he have signed the order, he said. "It grants extraordinary relief, such as exemplary damages, which I do not grant on an ex parte basis," he added.  "It also grants highly unusual and prejudicial declaratory relief against other defendants in the action, besides those against whom the motion for default judgment was brought, without justification or explanation." The judgment came as a shock to Silver. "We were shocked," he says. "We were shocked to see an order of this measure being ordered by the court." The judgment seemed all the more bizarre since the defendants had already brought a summary judgment motion to throw out the case, Silver adds. "It's outrageous. There's no way a judge in the Superior Court is going to make this type of declaratory findings, fraud, and conspiracy without notice and particularly when there is a summary judgment motion to dismiss the action. We were skeptical that this order is authentic given the draconian relief that was contained in the order." D'Souza and D'Gama are seeking a leave to appeal Penny's decision. "It's not forged. Of course it's not forged," D'Souza says of the judgment. "It was a written motion. We believe it went before [Penny] but he doesn't have a recollection of it." Although the date on the judgment is June 19, Penny could have signed it on another date, D'Souza argues, noting that June 19 is the day the plaintiffs submitted the motion and that date could have simply been on the order when Penny signed it later on. On July 31, D'Souza and D'Gama consented to have the judgment set aside. But that wasn't a concession, according to D'Souza, who calls Penny's words "harsh." "It was a written motion and obviously Justice Penny was saying that he wasn't aware of this motion. So we thought, 'OK, nobody is aware of it so what we're going to do is bring this whole motion back again.' We felt that we could bring this whole motion back to Justice Penny with notice to all the parties . . . and argue the whole motion out." The argument that the plaintiffs brought a written motion the judge signed on a date other than the one indicated is a farce, says Evan Moore, counsel to the defendant lawyers. He points to the preamble on the judgment in question that notes the ex parte motion "was heard this 19th day of June www.lawtimesnews.com 2012 at 393 University Ave.," a fact Moore says is an indication the plaintiffs would have been present in court. In his Jan. 7 costs ruling, Penny said that prior to July 31, when he wrote an endorsement to set aside the judgment he says he never signed, D'Gama and D'Souza were complete strangers to him. "This matter was never before me, in person or in writing," wrote Penny. But in their notice of leave to appeal, D'Gama and D'Souza say there's no "hard, tangible or direct evidence that the plaintiffs actually provided a fake judgment." They continued: "That judgment does bear the signature of Justice Penny." Penny's ruling surprised them, they added, as they "did not understand, contemplate or expect in their wildest dreams" that the judge would make such findings against them. The court should give them a chance to thoroughly address these "harsh" findings, their notice says. The pair is also seeking to appeal the costs awarded to the defendants. LT

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