Receivership of Hyndman Transport Limited
On December 9, 2019, Hyndman Transport Limited (“Hyndman Canada”) ceased all operations and terminated all of its employees without paying severance pay and other amounts owing to the employees. Hyndman Canada and its U.S. parent company, Celadon, immediately began liquidating all of its assets through the insolvency proceedings of Celadon in the United States.
Our firm, Koskie Minsky LLP was retained by a group of terminated employees. In January, 2020, we brought applications before the Ontario Superior Court of Justice objecting to the sale of Canadian assets through the United States proceedings without any court supervision in Canada. The Canadian judge issued directions restricting those sales without Canadian court approval.
In response to our court applications and the judge’s directions, on January 23, 2020, Celadon commenced proceedings in the Ontario Superior Court to Justice – Commercial List under the Bankruptcy and Insolvency Act, RSC 1985, c. B-3. On January 23, 2020, and after our involvement, the Court also appointed KSV Kofman Inc. as Receiver of Hyndman Canada. We also applied to the court to appoint our firm as Representative Counsel to all terminated employees of Hyndman. Celadon and other lenders opposed our motion. Despite the opposition, the judge appointed us as Representative Counsel.
The receiver has reported that there are insufficient assets in Hyndman Canada to pay all creditors and that there will not be any funds to pay the severance pay or termination pay owing to the employees.
Our mandate covers all current and former employees of Hyndman Canada, including those drivers referred to as “owners/operators” with respect to Claims (the “Represented Parties”). Under the Representation Order, Claims is defined as a claim that arises under a) law or equity and/or b) federal or provincial legislation, including vacation pay or unpaid bonuses, and which:
a) qualify for a payment under the Wage Earner Protection Program (“WEPP”); and/or
b) qualify as a secured claim; and/or
c) certain claims of owner/operators in respect of which the Receiver is holding the approximate total amount of $107,000 (these are amounts that were pre-paid to Hyndman by the owner/operators for fuel, maintenance etc.)
Jeff Sippel (the “Representative”) was also appointed as representative of the Represented Parties pursuant to Rules 10.01 and 12.07 of the Rules of Civil Procedure.
The court issued the Representation Order on March 16, 2020. Under paragraph 7 of that Order, any individual affected by this appointment who do not wish to be represented by the Representative and Representative Counsel must complete the Opt-Out Notice before April 16, 2020. A copy of the Representation Order can be accessed by clicking here and a copy of the Opt-Out Notice can be accessed by clicking here.
To streamline the employee claims process and ensure consistent claims, Representative Counsel negotiated an omnibus claim methodology with the Receiver to apply to all of the Employees’ claims, including whether to use common law damages for severance and termination pay, and if so, at a consistent rate. For most of the Employees, this increased the amount of WEPP paid to them, and in many cases, substantially increased their WEPP payment.
Representative Counsel also identified and negotiated that certain “anniversary bonuses” owing to some Employees as priority claims.
As part of the WEPP and claims process, there were additional issues that needed to be identified, researched and negotiated with the Receiver. These included negotiating whether certain dependent contractors were also entitled to WEPP, entitlement and/or increased claims for individuals who were on LTD, medical leave, lengthy bereavement leave, and dealing with length of service issues for individuals who originally worked at trucking companies that were bought by Hyndman Canada. In dozens of cases, Representative Counsel interviewed individual employees, gathered supporting documents (e.g., T4 slips, work stubs, medical records etc.), obtained and analyzed company records, set out the information for the Receiver and negotiated with the Receiver. Representative Counsel also retained an accountant with insolvency experience to assist with these calculations.
Following an investigation, Representative Counsel advanced trust claims for some amounts owing to the Owner/Operators. The Trust Claims totaled $109,347.80 for about 50 Owner/Operators. In advancing these Trust Claims, Representative Counsel researched the issue, analyzed company records and prepared a detailed affidavit by a former employee setting out the evidentiary basis for the claim. Representative Counsel also engaged in lengthy negotiations with the Receiver and the first priority secured creditor of Hyndman Canada identified by the Receiver, Luminus Energy Partners Master Fund, Ltd. (“Luminus”).
The quantum of the trust claims was not disputed, rather the issue was whether the claim qualified as a “Trust” claim. These were the amounts that certain Owner/Operators paid for the “Escrow Account (for which up to $1,500 was held back from each Owner/Operator’s pay in the event that the Owner/Operator quit while still owing reimbursement charges to Hyndman); and the “Maintenance Escrow Account” (whereby $0.05 per mile was held back from the Owner/Operator’s pay and used to cover truck repair and fuel costs).
The arguments advanced by Representative Counsel were challenged by Luminus and questioned by the Receiver and led to negotiations. Notably, Luminus raised several counter arguments, including that the holdbacks were not maintained in a sperate trust account, were comingled with other funds, and then used by Hyndman for other purposes (e.g. paying Hyndman’s expenses in the normal course). We raised counter arguments, including that these payments were improper, and in the circumstances, do not defeat the “Trust” claim.
Ultimately, we reached a settlement was reached whereby 50% of the Trust Claim will be paid out to the affected Owner/Operators (the “Settlement“).
On July 14, 2021, the Court approved payment for the Settlement of the Trust Claims. Subject to completing minor incidental matters, the Court also discharged the Receiver, Jeff Sippel as Employee Representative and Koskie Minsky as Representative Counsel. The Court noted that Jeff Sippel and Koskie Minsky “fulfilled their role” and “successfully facilitate[ed] WEPP payments to terminated employees in the receivership in which there were no funds to pay unsecured claims” and “successfully advanced trust claims of amounts owing to Owner/Operators”. Payments to the owner/operators should be made over the next 60 days. A copy of the Judge’s July 14, 2021 endorsement can be accessed by clicking here.
To view court documents, orders and other publicly available information with respect to the Receivership proceedings in Canada, please visit the website of the Receiver (KSV Kofman Inc.) by clicking here.
If you are a former employee of Hyndman Canada, with questions about the proceeding, please email us at email@example.com or call us at Toll Free is 1-833-630-1782.