Celadon Group plans to obtain Canadian recognition of its U.S. Chapter 11 bankruptcy after an Ontario judge effectively forced the U.S. company’s hand over more than C$2 million in claims by former employees of its shuttered subsidiary, Hyndman Transport.
Edmond Lamek, a lawyer for Hyndman, told an Ontario Superior Court judge Monday that Celadon will seek to have its U.S. Chapter 11 bankruptcy recognized in Canada. That request could happen at a hearing on Thursday.
Justice Glenn Hainey also barred Celadon from transferring any funds from Hyndman accounts to fund creditor payments as part of its Chapter 11 proceedings in the United States without his court’s approval.
The move marks an apparent about-face by Celadon, which had been taking steps to liquidate Hyndman assets through its U.S. bankruptcy proceedings without consulting any Canadian court.
It also will also create a venue for more than 200 former employees who say they are owed more than C$2 million in compensation and allows them to apply for federal benefits. Under Canadian law, former employees are entitled to priority standing as creditors for portions of unpaid compensation.
Hainey likely will appoint a receiver on Thursday to oversee the liquidation of Hyndman’s assets. The receiver also will examine any transfers or asset sales that took place beforehand.
“This will bring important court supervision,” Andrew Hatnay, a Toronto labor lawyer representing the former employees, told FreightWaves.
Hatnay brought the employees’ claims to Hainey last week after Hyndman received U.S. court approval to sell its Hydnman headquarters in Ayr, Ontario.
The judge in effect left Celadon two options: Initiate proceedings for Hyndman or have them imposed.
Hyndman Transport shut down on Dec. 9 after Celadon filed for bankruptcy in the U.S. While Celadon included Hyndman in its U.S. proceedings, it curiously did not initiate proceedings in Canada.
While Celadon had no apparent legal requirement to begin proceedings in Canada, large corporations typically do so in the interest of streamlining the process of liquidating assets and paying creditors.
The Canadian proceedings will likely delay the sale and dispensing of funds generated by the sale of Hyndman assets — something that will undoubtedly irk U.S. creditors but potentially benefit those in Canada.
Lamek, the lawyer representing Hyndman Transport in Canada, declined to comment.
