Sunday, December 9, 2012

The Law versus Public Interest

We, "the great unwashed outside the law" continue to marvel at the "entanglements of the law".

The current case in point concerns a company that polluted the ground, and then vacated the site. A court said the the public must pay the estimated $50-100 million to repair the corporation's damage to the environment.

In its decision, seven of the nine Supreme Court of Canada Justices bowed to the legal mumbo-jumbo that lets corporations hide behind the law, regardless of public interest.

The Court majority ruled that the province of Newfoundland and Labrador must get in line with other creditors, and share in whatever may be left in the coffers of insolvent AbitibiBowater Inc. In other words, public interest -- the taxpayer -- has no more status than corporate debtors.

One of the Justices wrote, "[T]he province's position would result not only in a super-priority, but in the acceptance of a 'third party pay' principle".  Absolutely correct, and that would be a good thing.

The law must be reformed to establish a common sense hierarchy for the droppings of fugitive corporations. The first claim on the remaining assets belongs to workers, regardless, whether in the form of wages, pensions or other entitlements. Next in line is the tax-paying public as represented by the government. After that, the banks and other corporate lenders. At the end of the line are shareholders.

Note. "The great unwashed outside of the law" was how a law school dean once described to me his opinion of the  general public. "Entanglements of the law" was Winston Churchill's description of the law process.

Feb. 2, 2013.  In the unrelated case of Indalex Ltd., the Ontario Court of Appeal ruled that the pensions of the firm's retirees were entitled to a share of the the remaining assets.This, because the company had breached its duties to its retirees by failing to keep its pension plans fully funded, and failing to give proper notice that it was seeking bankruptcy protection.

The Supreme Court of Canada (SCC) did not like that decision, and reversed it on the grounds of hardship for the company to re-define itself. While some lawyers cheered this socially immoral decision, another described it as "leaving more room for potential abuse of the bankruptcy system."  A former Indalex executive, whose pension was cut in half by the SCC claimed, "To allow this pension plan to be underfunded  is an indictment of the whole system."

The same might be said of former employees of the late Nortel Networks Corp. who were left with little after the firm went bankrupt due to corporate malfeasance for which no one was punished except employees and shareholders.

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