Sino-Forest Update: ONCA rules that institutional investors cannot appeal Ernst & Young settlement under the CPA

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In an earlier post, “Not Missing the Sino-Forest for the Trees: ONCA upholds auditor’s $117 million settlement despite objections from institutional investors over opt-out rights”, we reported that the Ontario Court of Appeal (“the Court”) dismissed a motion by a group of institutional investors seeking leave to appeal the approval of a settlement between Sino-Forest and its auditor, Ernst & Young, under the Companies’ Creditors Arrangements Act, 1985 (“CCAA”). These investors also sought to appeal the settlement directly to the Court under s. 30 of the Class Proceedings Act, 1992 (“CPA”). The class action plaintiffs brought a motion to quash, and the Court recently granted their request

Section 30(3) of the CPA provides that a party to a class proceeding can appeal as of right from a judgment on common issues or an aggregate award. Individual class members also have a right to appeal under s. 30(5), if they first obtain leave.

In granting the motion to quash, the Court held that the investors did not fall under either section; they were not parties to the class proceeding, and their appeal was not described under subsection (3). Significantly, the Court required the investors to pay a $7,500 cost penalty to the class action plaintiffs.

This is the first time the Ontario Court of Appeal has considered objector appeal rights and this decision will be of interest to institutional investors considering taking a more active role in class proceedings.