Steel Mills
Court Decision Will Favor US Steel Canada Pensioners
Written by Sandy Williams
August 11, 2015
US Steel Canada pensioners have won a court decision that will likely place them at the head of the queue of creditors for the CCAA protected entity.
Lawyers for retired Hamilton steelworkers intervened in a case of Grant Forest Products that entered CCAA protection to avoid bankruptcy. After its assets were sold and divided among creditors, another creditor brought forward a bankruptcy action against the company.
What the Hamilton attorneys were concerned with was a little known law called “deemed trust principle” that gives workers first claim on assets for their “deferred wages (pension) if a company goes bankrupt with an underfunded pension plan.
A Superior Court judge previously ruled that the deemed trust principle did not apply in the case of Grant Forest Products. Attorneys for Hamilton, as friends of the court, argued that the “result of the motion judge’s decision is to prefer recovery for secured lenders over pension creditors who have a statutory priority, and is driven by his concerns over lending and the obtaining of credit, which has no basis in law.”
An appeals judge upheld the decision due to the Grant Forest bankruptcy action but he also clarified that CCAA is preferable over bankruptcy for retirees whose pension funds are short funded because it allows for more compromise. That is what the Hamilton attorneys wanted to hear, since the USSC pension is underfunded by about $830 million.
Affirmation that the courts will recognize the deemed trust principle gives retirees the right to claim dibs on assets of USSC before other creditors, including parent company US Steel who claims it is owed $2.2 billion by US Steel Canada.
Sandy Williams
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