



COURT OF APPEAL FOR ONTARIO

CITATION: Labourers' Pension Fund of Central and Eastern
    Canada v. Sino-Forest Corporation, 2013 ONCA 456

DATE: 20130626

DOCKET: M42068 & M42399

MacFarland, Watt and Epstein JJ.A.

In the Matter of the
Companies Creditors Arrangement Act
,
    R.S.C. 1985, c. C-36, as amended, and in the Matter of a Plan of Compromise or
    Arrangement of Sino-Forest Corporation

BETWEEN

The Trustees of the Labourers Pension Fund of
    Central and Eastern Canada, the Trustees of the International Union of
    Operating Engineers Local 793 Pension Plan for Operating Engineers in Ontario,
    Sjunde Ap-Fonden, David Grant and Robert Wong

Plaintiffs

and

Sino-Forest Corporation, Ernst & Young LLP,
    BDO Limited (formerly known as BDO McCabe Lo Limited), Allen T.Y. Chan, W.
    Judson Martin, Kai Kit Poon, David J. Horsley, William E. Ardell, James P.
    Bowland, James M.E. Hyde, Edmund Mak, Simon Murray, Peter Wang, Garry J. West,
    Poyry (Beijing) Consulting Company Limited, Credit Suisse Securities (Canada),
    Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion
    Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch
    Canada Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit
    Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith
    Incorported (successor by merger to Banc of America Securities LLC)

Proceedings under the
Class Proceedings Act,
    1992

Defendants

James C. Orr, Won J. Kim, Megan B. McPhee and Michael C.
    Spencer, for the moving parties, Invesco Canada Ltd., Northwest & Ethical
    Investments L.P., and Comité Syndical National de Retraite Bâtirente Inc.

Ken Rosenberg, Massimo Starnino, Jonathan Ptak, Jonathan
    Bida, Charles M. Wright and A. Dimitri Lascaris, for the
Ad Hoc
Committee of Purchasers of the Applicants Securities, including the
    Representative Plaintiffs in the Ontario Class Action

Benjamin Zarnett, Robert Chadwick and Brendan ONeill,
    for the respondent
Ad

Hoc
Committee of Noteholders

Peter R. Greene, Kathryn L. Knight and Kenneth A.
    Dekker, for the responding party DBO Limited

Robert W. Staley, Kevin Zych, Derek J. Bell, Raj Sahni
    and Jonathan Bell, for Sino-Forest Corporation

David Bish, John Fabello and Adam M. Slavens, for the
    Underwriters

Derrick Tay, Clifton Prophet and Jennifer Stam, for FTI
    Consulting Canada Inc., in its capacity as Monitor

Peter H. Griffin, Peter J. Osborne and Shara N. Roy, for
    Ernst & Young LLP

Heard in writing

On appeal from the orders of Justice Geoffrey B. Morawetz
    of the Superior Court of Justice, dated December 10, 2012, with reasons
    reported at 2012 ONSC 7050, and March 20, 2013, with reasons reported at 2013
    ONSC 1078.

ENDORSEMENT

[1]

Leave to appeal is denied.

[2]

The test for granting leave to appeal in
CCAA
proceedings is
    well-settled. It is to be granted sparingly and only where there are serious
    and arguable grounds that are of real and significant interest to the parties.
    In determining whether leave ought to be granted, this court is required to
    consider the following four-part inquiry:

·

Whether the point on the proposed appeal is of significance to
    the practice;

·

Whether the point is of significance to the action;

·

Whether the proposed appeal is
prima facie
meritorious
    or frivolous; and

·

Whether the appeal will unduly hinder the progress of the action.

See
Re Country Style Food Services Inc
.
(2002), 158 O.A.C. 30 (C.A.).

[3]

In our view the proposed appeals fail to meet this stringent test.

[4]

These motions for leave to appeal relate to the supervising judges
    approval of a settlement releasing Ernst & Young LLP from any claims
    arising from its auditing of Sino-Forest Corporation.

[5]

The Ernst & Young settlement is part of Sino-Forests Plan of
    Compromise and Reorganization (the Plan) following a bankruptcy triggered by
    allegations of corporate fraud. The settlement has the support of all parties
    to the
CCAA
proceedings, including the Monitor, Sino-Forests
    creditors and a group of plaintiffs seeking to recover their investment losses
    in a contemplated, but not yet certified, class action (the Ontario
    Plaintiffs).

[6]

These motions for leave to appeal are brought by a single group of
    Sino-Forest investors, collectively known as Invesco, who together held
    approximately 1.6% of Sino-Forests outstanding shares at the time of its
    collapse. Invesco chose not to participate in any of the
CCAA
proceedings leading to the Ernst & Young settlement. It appeared for the
    first time at the hearing to sanction the Plan. Invesco objects to the Ernst
    & Young settlement because it wishes to preserve its right to opt out of any
    class proceedings and pursue an independent claim against Ernst & Young.

[7]

Invesco is represented by Kim Orr LLP, the firm that ranked last in a
    fight for carriage of the Ontario class action against Sino-Forest and its
    auditors and underwriters. In January 2012, Perell J. awarded carriage of that
    action to Koskie Minsky and Siskinds LLP, with the Ontario Plaintiffs as the
    proposed representative plaintiffs. No appeal was taken from the order of
    Perell J.

[8]

There are two motions for leave to appeal before the court.

·

M42068
 Invesco seeks leave to appeal the supervising judges order dated December
    10, 2012, sanctioning a Plan of Compromise and Reorganization for Sino-Forest
    (the Sanction Order)

·

M42399
 Invesco seeks leave to appeal the supervising judges orders dated March 20,
    2013, approving the Ernst & Young settlement and dismissing Invescos
    motion for an order to represent all prospective class members who oppose the
    settlement (the Settlement Order and the Representation Dismissal Order).

[9]

By order of Simmons J.A. dated May 1, 2013, the motion for leave to
    appeal the Sanction Order was ordered to be consolidated and heard together
    with the motion for leave to appeal the Settlement Order and the Representation
    Dismissal Order.

[10]

The
    motions for leave to appeal are opposed by Sino-Forest, the Monitor,
    Sino-Forests auditors and underwriters, the Ontario Plaintiffs, and a group
    representing Sino-Forests major creditors.

The Sanction Order

[11]

The
    supervising judge dismissed Invescos arguments opposing the Sanction Order on
    the ground that, since the settlement was not part of the Plan at that point,
    its objections were premature. It could raise those objections when the court
    considered whether or not to approve the settlement.

[12]

Invesco
    did not move to stay this order and the Plan has since been implemented. This
    proposed appeal is moot, and in any event, we see no basis to interfere with
    the supervising judges decision.

The Settlement Order and the Representation Dismissal Order

[13]

In
    approving the settlement, the supervising judge applied the test set out in
Robertson
    v. ProQuest Information and Learning Co
.
, 2011 ONSC 1647. And
    because the proposed settlement provided for a release to Ernst & Young, he
    went on to consider the test prescribed by this court in
ATB Financial v.
    Metcalfe and Mansfield Alternative Investments II Corp
., 2008 ONCA 587, 92
    O.R. (3d) 513, leave to appeal refused, [2008] S.C.C.A. No. 337 (

ATB
    Financial
). He found that the proposed settlement met those
    requirements. He concluded that the Ernst & Young settlement was fair and
    reasonable, provided substantial benefits to relevant stakeholders and was
    consistent with the purpose and spirit of the
CCAA
.

[14]

There
    is no basis on which to interfere with his decision. The issues raised on this
    proposed appeal are, at their core, the very issues settled by this court in
ATB
    Financial
.

[15]

Having
    dismissed their objection to the settlement order, it follows that Invescos
    motion for a representation order would also be dismissed.

[16]

The
    motions for leave to appeal are dismissed.

[17]

Costs
    are to the responding parties on the motions on a partial indemnity scale fixed
    in the sum of $1,500 per motion inclusive of disbursements and applicable
    taxes.

J. MacFarland J.A.

David Watt J.A.

Gloria Epstein J.A.


