Case information

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Bankruptcy and insolvency – Civil procedure – Class actions – Opting out – Settlement releasing Ernst & Young LLP from any claims arising from its auditing of Sino-Forest Corporation approved as part of Sino-Forest's plan of compromise and reorganization – Applicants objecting to settlement because they wish to preserve their right to opt out of any class proceedings – Whether in a class action it is permissible for a settling defendant and counsel for class plaintiffs to agree on an explicit no-opt-out provision as part of the proposed settlement, and for the court to approve such a provision – Whether absent class members lack standing under the Class Proceedings Act to appeal an order approving the settlement of a class proceeding that explicitly prohibits them from opting out – Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 – Class Proceedings Act, 1992, S.O. 1992, c. 6.

A settlement releasing Ernst & Young LLP from any claims arising from its auditing of Sino-Forest Corporation was part of Sino-Forest's plan of compromise and reorganization following a bankruptcy triggered by allegations of corporate fraud. The applicants object to the settlement because they wish to preserve their right to opt out of any class proceedings and pursue an independent claim against Ernst & Young.

The chambers judge granted the motion for an order sanctioning the plan of compromise and reorganization, and approved the Ernst & Young settlement. The Court of Appeal denied leave to appeal from those decisions. It subsequently quashed the applicants’ appeals under s. 30 of the Class Proceedings Act, 1992.