The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Steve Arnold published in the April 1, 2006 edition
By Steve Arnold
The Hamilton Spectator
(Apr 1, 2006)
Stelco's two-year struggle through bankruptcy protection has
forged new law, as well as a new future for the Hamilton landmark.
As the company enters its first days outside the shelter of
the Companies Creditors Arrangements Act, lawyers are still assessing the way
some controversial decisions in the case have helped to reshape Canada's
corporate insolvency rules.
Those decisions cover everything from the definition of
insolvency to the role of unions to who can be on the board of directors and
even how long a company can stay under protection.
"I think the Stelco case has really pushed out the
boundaries beyond what was expected in a number of areas," said lawyer and
Hamilton native Tony DeMarinis, head of the insolvency unit of Torys LLP.
"Even the fact it was allowed to go on for 26 months speaks to ... the
court's willingness to let every stone be turned over."
Stelco sought protection under the CCAA on Jan. 29, 2004,
claiming it was being crushed by a burden of debt and pension costs. That same
claim had been made by more than three dozen American companies, which used
court supervised restructuring to shed the cost of retirees and health
benefits, gaining a competitive advantage in price sensitive markets.
Within weeks of getting a protection order, however, soaring
steel prices left the company in the embarrassing position of being declared
legally insolvent while reporting record profits. Those profits, however,
"were just a blip on the radar screen and reality hit back in 2005,"
said Ottawa bankruptcy lawyer Stanley Kershman. The company reported losses of
$73 million.
Union leaders declared the entire process a
"fraud" designed to steal wages and pensions. They mounted a legal
fight to get the protection order revoked, but Superior Court Justice James
Farley ruled, "CCAA should not be the last gasp of a dying company, it
should be implemented ... at a stage prior to the death throe."
The Ontario Court of Appeal and Supreme Court of Canada
refused to hear challenges to that decision.
"Justice Farley had the dubious honour of having to
decide something for the first time in this case," said Bruce Leonard,
past chairman of the Insolvency Institute of Canada. "He said you don't
have to wait until a company has lost all of its money, but you do have to look
at the totality of the situation."
Beyond legal precedents, the Stelco case also showed a new
role for unions. It was the United Steelworkers which eventually brought Tricap
Management Limited to the table to finance Stelco's future.
"It's clear that Stelco's unions have played a central
role here," DeMarinis said.
"They've done an excellent job of protecting workers'
interests because it wasn't so long ago workers would have been shut out of
this entirely. They were clearly instrumental in shaping the final
outcome."
Even Local 1005, which refused to take part in restructuring
talks, contributed to changes in restructuring law through noisy demonstrations
which kept public attention focused on issues of pension and wage protection.
Ultimately, that aided in passing a package of bankruptcy law reforms. Bill
C-55, passed Nov. 25 but not yet proclaimed law, establishes a fund to protect
the wages of employees of bankrupt firms and bars courts from unilaterally
repudiating labour contracts.
"Labour issues were front and centre in the Stelco
case. They were put on the government's agenda because of this case,"
DeMarinis said. "The case really affected the agenda and the timing of
these reforms."
sarnold@thespec.com
905-526-3496