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The Ontario Superior Court will not take over the hearing of the appeal of the former Northstar directors against their personal cleanup order for TCE contamination in Cambridge Ontario.

The former directors applied to the Commercial List of the Superior Court of Justice to change the venue of the appeal from the Environmental Review Tribunal to the  Commercial Court, which handled the Northstar insolvency/bankruptcy. According to Justice Geoffrey Morawetz, his court might have jurisdiction to decide whether officers and directors of insolvent companies could face personal environmental cleanup costs, but only if the case came before him as part of an insolvency law  plan of compromise or arrangement. The Northstar insolvency was handled through a different process, a court approved sale, a process that is now complete:

[27] In the context of an entity that is undergoing a restructuring under the CCAA, the foregoing arguments put forward by the Former D&Os’ counsel may have merit. However, in  the circumstances of this case, it seems to me their arguments are flawed.

[28] In this case, there is no CCAA Plan of Compromise or Arrangement. There will be no  compromise of claims as against directors and officers. In my view, the factors that counsel put  forth as reasons why the claim should be adjudicated in the CCAA court are not persuasive for the following reasons:

(i) The nature of the issue to be determined is an MOE Claim against directors and  officers. There is no CCAA plan of arrangement and consequently claims against the Former D&Os will not be the subject of any type of compromise under the  CCAA.

(ii) With respect to the need to protect the integrity of the CCAA process, there is no ongoing CCAA process to protect.

(iii) With respect to the expertise of the CCAA court versus the ERT, although the CCAA court has had considerable experience with the Northstar insolvency proceedings and the relationship between Northstar and its Former D&Os, this does not alter the fact that, in these circumstances, the outstanding issue to be determined is the environmental liability claim against the Former D&Os. This is an area within the core competence of the EPA.

(iv) With respect to the interests of other stakeholders, in these circumstances, where the operating assets have been sold and the proceeds have been paid to the secured creditors and there are no further assets to distribute, the function of the CCAA court is very limited.

[29] It seems to me that, in these circumstances, there is no basis for the MOE Claim to be  adjudicated in the CCAA court and there is no basis to question or distinguish the Maybrun analysis. Further, there is no obvious area of conflict as between the CCAA and the EPA.”

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