Ontario Court of Appeal Court Upholds Lower Court Decision in Sino-Forest Case

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Appeal court upholds Sino-Forest decision

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TORONTO - The Ontario Court of Appeal has upheld a lower court decision that ranked indemnity claims by the auditors and underwriters of Sino-Forest Corp. with other equity claims in the company's restructuring.

Several class-action lawsuits have been filed against the company, its auditors and its underwriters.

The company's auditors and underwriters made indemnity claims against Sino-Forest under its Companies Creditors Arrangement Act restructuring for any damages they may have to end up paying if the class-action lawsuits are successful.

The appeal court ruling Friday upholds a decision that puts the claims on a lower priority than other creditors' claims on the company's assets in the restructuring.

"We see no basis to interfere with the supervising judge's decision," the appeal court said in its decision.

The judge supervising Sino-Forest based the decision on changes to the CCAA that came into affect in 2009.

"We agree with the supervising judge that the definition of equity claim focuses on the nature of the claim, and not the identity of the claimant," the Appeal Court said.

"In our view, the appellants' claims for contribution and indemnity are clearly equity claims."

Generally, debt holders are first in line to make claims on a company's assets ahead of shareholders, who have an equity stake in the company. …