DISABLED NORTEL EMPLOYEES CHALLENGE DEAL.

Disabled employees cite Charter

The matter of fairness will be centre stage Tuesday when Jennifer Holley and Greg McAvoy, two long- term disabled ( LTD) former employees of Nortel Networks, appear before a CCAA hearing of the former technology giant.

The two, part of a group of 360 members, want to make their own case based on their interpretation of the Charter of Rights and Freedoms. In this way, the group, which signed an “interim settlement agreement” in March, 2010, want to opt out of representation they’ve been receiving from Koskie Minsky, the court-appointed law firm.

They are part of a group seeking an additional $ 44 million — or 0.80 per cent of the $5.7 billion Canadian estate. Last week, Koskie Minsky endorsed the plan. Oneway to view the $44 million: it’s 1.7 per cent of the $2.580 billion paid in professional fees to lawyers and accountants since Nortel entered CCAA in January, 2009.

In their submission, the two argue the Nortel Plan — a US$ 7.3- billion global settlement and support agreement agreed upon last October — is “unreasonable and unfairly disregards the interests of the LTD who are deprived of substantive equality in Canadian society and adequate disability income for basic housing, food, clothing and high medical and dental expenses,” they state in the submission. Payments to the affected parties are expected to start in April.

Diane Urquhart, a financial expert who helped with the research for the submission, added the CCAA court processes for the approval of the settlement “violated the Charter rights of mentally and physically disabled Canadians.” Urquhart, known for strong due diligence, added: “These disabled persons are deprived of enough income for housing, food, clothing and medical costs.”

Accordingly Urquhart disagrees with t he view the purpose of CCAA “is to ( obtain) equal treatment of unsecured creditors.” In her view, CCAA’s goal is ” to facilitate a restructuring or reorganization, to avoid a liquidation in order to save jobs, ensure the financial health of trade suppliers and to have business continue as a going concern in Canada.”

In their submission McAvoy and Holley advance the argument that the Constitution “is the supreme law of Canada and that any law that is inconsistent with its provisions, to the extent of the inconsistency, is of no force or effect.” As such, a judge who exercises “delegated powers pursuant to a law, does not have the power to make an order that would result in an infringement of the Charter.”

Lawyers for the monitor ( Ernst & Young) and for the Canadian debtors have filed a combined factum that essentially disagrees with the viewpoint advanced by McAvoy and Holley. In a report dated last Friday, the monitor — in its 153rd report — said the “request would appear to seek to treat the LTD Claimants as priority claimants pursuant to the Plan who will have their claims paid in full.”

And seemingly for the first time, the monitor noted US$ 530.3 million has been set aside for “prefiling unresolved claims,” the largest of which is US$ 90 million for former chief executive Frank Dunn and US$ 81.95 million for the Ontario government. That list raises the question of how final is final.

So what about the 2010 interim settlement agreement reached by the LTD? In light of arguments at the time and as a result of subsequent events ( notably the right given to U. S. bondholders in July, 2015, two months after the original allocation, to apply their full claim against the U. S. estate) McAvoy and Holley say the matter should be reconsidered. Bondholders are getting 100 cents on the dollar.

VIOLATED THE CHARTER RIGHTS OF ... DISABLED CANADIANS.