Re: Sino-Forest Corporation – When is an Indemnity Claim Really Just an Equity Claim?

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When public companies are accused of accounting irregularities, class action shareholder litigation often follows. The case of Sino-Forest Corporation (“SFC”) is such an example. Weighed down by allegations of accounting irregularities and the class action lawsuits that followed, SFC sought and obtained court protection pursuant to the Companies’ Creditors Arrangement Act (“CCAA”) on March 30, 2012 (the “CCAA Filing”).

While the CCAA proceeding stayed the class proceedings as against SFC, there were still many other defendants that remained, including SFC’s auditors and underwriters. As the litigation against these other parties proceeded, the question was, who would bear the SFC liability in these class action claims? Would it be: the plaintiffs who would have one fewer defendant to which they could apportion liability; SFC’s co-defendants under the concept of joint and several liability; or a combination of both?

This was the question before the Ontario Court of Appeal in its first review of the 2009 amendments to the CCAA relating to “equity claims”.

Originally published in Ontario Bar Association - May 2013.

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