A monitor appointed under the Companies’ Creditors Arrangement Act (CCAA) may commence a claim against third parties in the name of the debtor. The purpose of such a claim is obviously to maximize the value of the debtor’s assets for the benefit of its creditors.
In the event the monitor settles a claim with some of the defendants, the latter will usually insist on obtaining a full and complete court-approved release. Courts will generally approve the release if it is fair and reasonable in the circumstances and if the rights (both procedural and substantive) of the non-settling defendants are protected.
In a recent decision, the bar for approving a third-party release was, however, significantly lowered. In the matter of Aquadis,* the court indeed approved a settlement agreement (i) granting release to defendants who did not contribute to the settlement, (ii) offering no procedural protection to the non-settling parties, and (iii) offering very limited protection to the substantive rights of the non-settling parties. Continue Reading