More judicial oversight needed to curb excess fees
Legislative change is not what’s needed to quell the expensive world of cross-border bankruptcy litigation, says Toronto lawyer Kevin Fisher.
“These issues arise in the management of these types of cases and has developed out of practise, procedure and precedent,” says Fisher. “There is a lot of repetition in the process that could be eliminated to make it more streamlined and less costly. In many of these steps, there are far too many professionals charging unnecessarily high fees for relatively routine matters.”
A recent Globe and Mail report examines the dispute over what remains of Nortel Networks Corp., with bondholders, pensioners and other creditors engaged in an expensive fight over the $9-billion left over from the piecemeal sale of the company. Read Globe and Mail
“There needs to be more scrutiny and oversight of how professional fees are accepted throughout the court process, including by court-appointed monitors and receivers,” says Fisher, litigation partner with Basman Smith LLP.
“Currently there is a culture in place that permits this type of thing to go on without being objected to by the professionals in charge because they are all interdependent upon one another and all work in the same field. The pendulum has swung too far and more attention needs to be paid as to how these fees are charged and the benefit to all of the stakeholders.”
So far, Nortel has been charged a total of $755-million worldwide in “professional fees,” $630-million of it in Canada and the U.S., since it went into insolvency proceedings in both countries in 2009, the Globe reports.
A recent attempt to broker a global settlement through mediation was unsuccessful, the report says, noting the company’s pensioners and disabled former employees have been left with slashed benefits, which has some calling for changes to Canada’s insolvency rules.
A more balanced structure would be beneficial to all involved, says Fisher.
“There should not be a bonanza to one group to the detriment of all others,” he says. “It will likely take judicial activism and case law allowing challenges by creditors and stakeholders to change the current accepted practices.”