1

Highland Capital Management LP et al. v. Uniforêt Inc. et al.

Uniforêt Inc. ("Uniforêt") is a publicly traded corporation, acting as a holding for its operating subsidiaries, Uniforêt Scierie-Pâte Inc and Foresterie Port-Cartier inc. These three corporations are debtors in possession (the "Debtors") under the Companies Creditors Arrangement Act ("CCAA"); they filed a petition for protection under the CCAA on April 17, 2001.

In 1996, Uniforêt issued US $ 125,000,000 worth of notes due and payable on October 15, 2006 and secured by a first ranking hypothec on specific tangible assets. In April 2000, Uniforêt defaulted on its interest payment and later on, as part of the financial reorganization, 51.6% of these notes were repurchased by Uniforêt, at discount, through a wholly owned subsidiary, and eventually transferred to Jolina Capital Inc. ("Jolina"). Jolina currently holds 40% of the shares of Uniforêt and 66.9% of its U.S. Notes.

In the days following the filing of the Debtors' initial plan, the Appellants, who operate institutional funds and whose aggregate share of the U.S. Notes is 26.8%, applied to the Superior Court to challenge the classification of creditors, namely the fact that Class 2, the holders of US notes, included Jolina and therefore was inappropriate. Their arguments ran as follows: Jolina was in conflict of interest (being also a major shareholder) and the vote of Class 2 on any plan would be oppressive to them.

The Superior Court rejected the Appellants' challenge and leave to appeal this judgment was denied.

On December 11, 2002, the Debtors filed a motion seeking judicial sanction of their plan of arrangement. The Appellants responded by a long Contestation. After a hearing of some twenty-two days, the trial judge dismissed the Appellants' arguments that the proposed arrangement was unfair and unreasonable to them and sanctioned the Plan, as recommended by the Court appointed Monitor and as approved by all the creditors but the Appellants.

The Appellants' grounds of appeal can be summarized as follows:

1. Oppression of the minority, manipulation of the voting process and impairment of the integrity of the Debtors' restructuring;

2. Favourable and preferable treatment of Jolina, a related party;

3. Alternatives to the Plan, including sale of the business as a going concern, ought to have been considered;

4. The Plan provides unfair treatment to arm's length Class 2 creditors and unduly preserves the interests of the existing shareholders; and

5. The judge disregarded the amount of the claim held by Appellants in the determination of the fairness of the Plan.

The Court is of the opinion that the first ground of appeal is related to the classification, an issue dealt with by the Superior Court and that the second ground is simply an attempt by the Appellants to retry an issue that was fully canvassed and decided in the fall of 2002. As for the third ground, it runs contrary to the evidence and it is therefore frivolous.

As for the remaining grounds, the Court considers that they are different ways to state that the Plan is unfair and unreasonable to the Appellants and that they were thoroughly argued before the Superior Court.

In a detailed judgment, the Superior Court stated that Jolina is the Debtors' White Knight which makes it possible to salvage the business of the Debtors and is therefore entitled to receive a benefit under the Plan and that the CCAA should not be used to permit a "cranky" minority creditor to frustrate a feasible and fair plan and that the amended conversion option provided in the Plan to the Appellants constitutes an offer of equity which, while not perhaps overly generous, is nevertheless adequate. The Superior Court concluded that the Plan, approved by all the creditors but the Appellants, was fair and reasonable in the circumstances.

The Court of Appeal indicates that the issue of the fairness and reasonableness of the Plan is a question of mixed fact and law. The conclusions of the trial judge should not be overturned absent palpable and overriding error. No such as error was shown prima facie.

The Court adds that the purpose of the CCAA is to balance a broad range of interests that includes creditors and shareholders and beyond the debtor, the employees and the public.

The motion for leave to appeal is dismissed with costs.

In the matter of the arrangement relating to the debtors herein: Highland Capital Management, L.P. and ML CBO IV (Cayman) Ltd. and Pamco Cayman, Ltd. and Highland Legacy, Ltd. and Pam Capital Funding, L.P. and Prospect Street High Income Portfolio Inc. petitioners/appellants v. Uniforêt Inc. and Uniforêt Scierie-Pâte Inc. and Foresterie Port-Cartier Inc. debtors/respondents and Richter & Associés Inc. monitor/respondent and Jolina Capital Inc. mise en cause/respondent, Court of appeal, 500-09-013469-036 (500-05-064436-015), July 24, 2003, Honourable Justice Dalphond.

2

Charron v. Résidence Les Deux Aires Inc. et al.

On November 2, 2001, Honourable Justice Sevigny issued a provisional order ordering Respondents to:

(translation) "transmit to Petitioner, within one (1) week, copy of the financial statements, statements of operating expenses and capital expenditures, monthly, since January 2001 until the date of the order; and further on"

Monthly but without any regularity, similar financial information were communicated to Petitioner for each month and at the end of the year. The delay for production was usually 60 days or more.

Petitioner believes that the provisional order orders a monthly communication of the financial information and request that the Court issues a condemnation for contempt under Article 53 C.P.C.

The Court indicates that contempt of court is strictissimi juris and requires scrupulous respect of the procedural rules. It must be proved beyond reasonable doubt, an exception to the rules of evidence in civil law. When the order is incomplete or ambiguous, the accused must benefit from the doubt resulting thereof. As a rule, contempt of court is not a means of execution of judgments. It must be used with care.

The Court is of the opinion that the use of the expression (translation) «further on» creates an obligation to remit financial statements after the period from January 2001 to November 2, 2001. However, it is definitely not clear that the word "monthly" defines the delay or the frequency of remittance. In fact, the Court considers that no delay has been stipulated in the order: under these circumstances, Respondents must act reasonably and in good faith by communicating the financial statements as soon as possible when they are ready.

The motion is dismissed.

Denis C. Charron v. Société en commandite Résidence Les Deux Aires, 9012-6707 Québec inc., Résidence Les Deux Aires inc. Claude L. Charron and Nicole M. Charron and Daniel Charron Lussier, Tull & Associés Assurance-vie Desjardins-Laurentienne inc. Piché Charron et Associés inc., Superior Court, 500-05-068258-019, 31 July 2003, Honourable Justice St-Pierre.

3

In the matter of the Bankruptcy of 9076-3335 Québec Inc.

The bankrupt debtor, 9076-3335 Québec Inc., was incorporated under the Companies Act and registered with the Inspector General of Financial Institution on April 19, 1999. It also does business under the name Gabeau Foresterie, as indicated on CIDREQ.

The Caisse populaire Desjardins de St-Augustin-de-Desmaures (the «Caisse»), is the principal financial institution of the company, the latter doing business under its corporate number as well as under its trade name Gabeau Foresterie.

On May 20, 1999, 9076-3335 Québec Inc. borrows $76,500 from the Caisse and grants a mortgage on some of its moveable assets. The mortgage is published on the Register of Personal and Movable Real Rights ("RPMRR"). As it appears from the loan and the mortgage agreements, 9076-3335 Québec Inc. was erroneously designated as 9076-3355 Québec Inc. It is not contested that it is a purely material error. 9076-3355 Québec Inc. does not exist.

Following the bankruptcy of 9076-3335 Québec Inc., the trustee in bankruptcy informs the Caisse of his refusal of the secured claim due to the error in the RPMRR.

The Caisse appeals the decision but the Superior Court denies the motion. The trial judge is of the opinion that the error in the name of the grantor is fatal. Articles 306 of the Civil Code of Quebec and section 62 of the Act regarding the Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons ("ARLP") govern situations that differ from registration of movable real rights; they cannot be use to bend the strict rules governing the publicity of rights, among which those provided for in the Regulation respecting the register of personal and movable real rights (the "Regulation"). The stability of suretyships requires that the governing rules be strictly complied with in order to avoid the need for elaborated research.

The appeal raises the following question: can a movable hypothec granted by a legal person and registered on the RPMRR both under the name (in this case a number) that was granted to the company upon its incorporation and under the other name it uses for carrying on business be opposed to third parties when an error was made in the legal name but not in the business name.

The Court of Appeal indicates that an error in the corporate number of a company cannot be compared to a spelling mistake in the name of a natural person. Any change in one of the figures necessarily creates a series of different figures, consequently a different name. Combinations are numerous. A spelling mistake is often apparent but an error in one of the 8 figures of a number is occult and cannot be easily detected. The analysis of the trial judge of the relevant legal provisions and his conclusion are without fault.

The Court of Appeal is of the opinion that when the grantor of a movable hypothec is a legal person whose name is a number, the inscription of such hypothec must correctly identify the legal person under its legal name, otherwise, the inscription is void.

The appeal is dismissed.

In the matter of the bankruptcy of: 9076-3335 Québec Inc. and Caisse Populaire Desjardins de St-Augustin-de-Desmaures v. Gérald Robitaille et Associés Inc., Court of appeal, 200-09-003837-017 (200-11-009098-016), 8 August 2003, Honourable Justices Chamberland, Pelletier, Rayle.

4

Caisse populaire St-Martin de Laval v. Guay et al.

On March 8, 1995, plaintiff, Caisse Populaire St-Martin de Laval (the «Caisse»), granted to Centre Médical Chomedey Inc. (the «Centre»), a $1,853,000 loan secured by hypothec. Defendants, Doctors Guay, Trudelle and Leduc and three other doctors guaranteed personally, jointly and severally the Centre’s obligations up to an amount of $75,000 each.

A first agreement of amendment was signed on July 5, 1995. A second agreement of amendment or renewal was concluded on August 22, 2000.

The Centre encounters financial difficulties. The director of the Caisse contacts Pierre Gosselin («Gosselin») a financial advisor of the Fédération des caisses populaires. On April 26, 2001, Gosselin meets with the 6 doctors directors of the Centre, who have all personally guaranteed the latter’s obligations.

After analysing the situation, Gosselin sends a letter to the Centre and calls a second meeting of the directors for June 14. Only 3 directors are present; defendants do not attend the meeting. Defendants then resign their office as directors and advise the Caisse in writing that they cease to guarantee the obligations of the Centre.

The Court held that defendants couldn’t plead that they were not advised of the terms of the agreement of amendment of July 27, 2001 since they did not attend the June 14 meeting, when Gosselin explained these terms. As shareholders of the Centre (and they still are shareholders at the date of the hearing), they had access to the records and documents of the company. Moreover, when they attended the April 26, 2001 meeting, they were aware of the difficult financial situation of the Centre and of the attempts to sell it. They also were aware of the due date of the loan, being June 30, 2001. Article 2354 C.C.Q. clearly states that a prorogation of the term does not discharge the surety.

The action is granted.

Caisse Populaire St-Martin de Laval, v. Raynald Guay, Louis Trudelle, Pierre Leduc,  Superior Court, 540-17-000761-014, 8 August 2003, Honourable Justice Courville.

5

National Public Storage Inc. v. True North Properties Ltd.

National Public Storage Inc. (« National ») is the corporate entity that resulted from the amalgamation of various corporations, among which 9001-6098 Québec Inc. (« 9001 »).

3087-7674 Québec Inc. (« 3087 ») is an owner or beneficial owner of shares of National and is part of a group of companies set up and controlled by Turan Kalfa.

National operates a self-storage facility in the basement of a building of True North Properties Limited (« True North »), as the operating entity for 3087.

National has filed proceedings in injunction and damages against True North, alleging breach of some provisions of real estate leases. It has filed a motion to amend in order to add 3087 as plaintiff. True North objects based on Article 199 of the Code of civil procedure and alleges that the right to amend does not extend to a change of plaintiff.

The Court reviews the case law and reminds that, under the new Code of civil procedure, the right to amend is the rule, not the exception. National occupies the premises but the leases were concluded with its shareholder 3087. The amendment aims to correct or complete the proceedings in order to ensure the presence of all parties involved. The motion is granted.

National Public Storage Inc. c. True North Properties Limited, Superior Court, 500-17-013925-030, 26 August 2003, Honourable Justice Silcoff.

6

Breton v. Betflex Inc. and al.

Dannys Breton v. Betflex Inc., Société Innovatech du Sud du Québec, and 9057-6141 Québec Inc., Superior Court, 450-17-000662-032, 22 August 2003, Honourable Justice Fréchette.

7

In the matter of bankruptcy of Oblin Homes Inc.

Oblin Homes Inc. ("Oblin"), a building contractor, designed and built a group of condominium residences in Westmount knows as "The Victoria Train Station Condominium Project".

Of the 16 units built, 13 were sold to individuals and 3 were transferred to Mr. Winikoff ("Winikoff"), Oblin’s president and sole shareholder, for a consideration of $1.00. The same day, Winikoff sold one unit to his wife, Belle Rzezak, one to his daughter, Anastasia Obolensky, and one to his daughter-in-law, Lorna Anne Dowson. Each sale was made for an amount of $66,666.66.

In October 2000, Oblin was declared bankrupt and Raymond Chabot Inc. ("RCI") was appointed trustee. RCI filed motions to void fraudulent real estate transactions.

RCI alleges that the transfer by Oblin to its president and sole shareholder and the subsequent transfer to members of his family were carried out for no consideration or for an amount well below the fair market value of the immovables, the whole in fraud with the rights of the creditors.

Winikoff and the other respondents contest the motions and allege that one or more subcontractors filed the motions as retaliation that the transfers were done at as fair market value at a time when Oblin was not insolvent.

After an extensive review of the evidence, the Court grants the motions and declares null and void for the trustee the deeds of transfer.

In the matter of bankruptcy of Oblin Homes Inc. and Raymond Chabot Inc. and Jérôme Winikoff and Bella Rzezak and Anastasia Obolensky and Lorna Anne Dowson, Superior Court, 500-11-013669-003, 22 August 2003, Honourable Justice Guibault.

8 

In the matter of proposition of Alain Brault

The Attorney General of Canada aims to recover from Alain Brault (« Brault »), now bankrupt, a debt of over $2,000,000 for unpaid income taxes. The Attorney General has thus filed a motion to be authorized to file proceedings under Article 1631 C.C.Q. to obtain a declaration that some transactions may not be set up against him and to file proceedings in simulation under Article 1451 C.C.Q.

The facts of the case are complicated and involve numerous assignments of rights between companies where Brault is, directly or indirectly, shareholder, officer and director.

In November 1999, judgment was rendered against Brault for an amount of over $6,000,000 for a corporate debt he had personally guaranteed. This debt was assigned to company indirectly controlled by Brault for a consideration of $174,500. The judgment created for Brault a tax loss, which was refused by Canada Customs and Revenue Agency ("CCRA") and by the Tax Court of Canada. The appeal division of the Federal Court confirms the judgment of the Tax Court of Canada.

Brault files a proposition under the Bankruptcy Act. The Attorney General objects and, during an examination, it is revealed that shares worth over $1,000,000 were sold to a trust for an amount of $2,000.

The Court first refuses to allow proceedings for declaration that transactions cannot be set up against the Attorney General on the grounds that it has been more than one year since the starting date of the action.

The Court grants the authorization to file proceedings in simulation on the grounds that the Attorney General has proved a serious right against Brault and his related companies.

In the matter of the proposition of Alain Brault and Le Groupe Boudreau Richard Inc. and Corporation Financière Chabra Inc. and Gestion Immobilière Chabra Inc. and Fiducie Fragimi and Gestion Fragimi Inc. and 9067-2098 Québec Inc. and Attorney General of Canada, Superior Court, 540-11-002177-014, 21 August 2003, Honourable Justice Laberge.

1

Decisions under the CIRA Domain Name Dispute Resolution Policy

In November 2001, the Canadian Internet Registration Authority (CIRA), which operates the Canadian « .ca » top-level domain, implemented the CIRA Domain Name Dispute Resolution Policy (CDRP)(1). This policy was implemented for the determination of cybersquatting claims pertaining to ".ca" domain names.

Panellists appointed under this new dispute resolution regime have rendered thirteen decisions so far. In the next two issues of the TeleMark, we will provide our readers with a summary of these decisions.

In order to succeed in having a domain name transferred, a complainant must prove 4 elements under the policy:

1. the complainant has a Canadian presence;

2. the complainant has rights in a trade mark;

3. the domain name is confusingly similar to the trade mark;

4. the domain name was registered in bad faith.

As we will see from the summary of the decisions, these elements have so far received a strict interpretation from the panellists.

00001

Panellist: J.E. Redmond Q.C.

7 October 2002

Domain name in dispute: www.redrobin.ca

The domain name is identical to the complainant’s registered trade-mark. The panel finds evidence of bad faith in correspondence between complainant and registrant where the latter indicates that he was offering to sell the domain name to the complainant and implies that he would sell it to someone else if the complainant did not buy it. The domain name was transferred to the complainant.

00002

Panellist: Denis M. Magnusson

22 October 2002

Domain name in dispute: www.browneco.ca

The complainant established that it has used the trade-mark and the trade name Browne & Co. since at least as early as 1991. Such use has created a reputation attached to the trade name and identifies the complainant’s business. The domain name greatly resembles the trade-mark and the trade name in appearance, in sound and in the ideas suggested and is thus confusingly similar to the mark and the trade name. The complainant has also proved that the registrant is a competitor who is using the domain name to direct Internet users to its own website, thus establishing bad faith. The domain name is transferred to the complainant.

00003

Panellist: Hon. Roger P. Kerans

29 November 2002

Domain name in dispute: www.biogen.ca

Complainant is the owner of the registered Canadian trade-mark for the name BIOGEN, a coined word, which was registered in 1984. It has used this trade-mark in Canada in connection with the sale of its products and services in the pharmaceutical industry. The domain name in dispute is confusingly similar to the trade-mark. The website under this domain name merely points to a website offering domain name registrations for sale. No record of an address or a telephone number in the name of respondent could be found and the latter has not filed any submissions. The domain name is transferred to complainant.

00004

Panellists: Bradley J. Freedman (chairman), David R. Haigh Q.C., Patrick Flaherty

6 February 2003

Domain name in dispute: www.cheaptickets.ca

Complainant is the registered owner of the Canadian trade-marks CHEAP TICKETS and CHEAP TICKETS AND TRAVEL & DESIGN. The complainant and its predecessors have been in the business of operating a travel agency and re-selling travel tickets and travel-related services since 1996. The registrant is in the business of collecting and using domain names to structure joint ventures with other persons, leasing the domain names to other persons or creating its own websites using the domain names for inclusion in a web portal called "Emall.ca". The registrant contends that the trade-mark CHEAP TICKETS is descriptive and should not have been registered. The panel dismisses the complaint on the grounds that the complainant has failed to prove, on a balance of probabilities, that the trade-mark CHEAP TICKETS constituted a "Mark" within the meaning of the Policy prior to the registration date of the domain name.

Elysium Wealth Management Inc. c. Brian Driscoll

00005

Panellist: David Allsebrook

28 February 2003

Domain name in dispute: www.ceofunds.ca

In this case, registrant agreed to cease using the domain name "ceofunds.ca" prior to the hearing.

Panellists: Denis N. Magnusson (chairman), Jean G. Bigras, Daria Strachan

23 April 2003

Domain name in dispute: www.airproducts.ca

The Panel finds that the domain name "airproducts.ca" is not confusingly similar to the complainant’s registered trade mark or to its trade name because, for the ordinary Internet user, the words "air products" are not adapted to and do not distinguish one business or product from other businesses or products but simply describe a type of business or a type of products. The complaint is dismissed.

__________

(1) A summary of this policy is published in the TeleMark, Volume 9, number 8d, 16 August 2002.