Babcock & Wilcox Seek Insulation from Asbestos Claims

On February 25, 2000, Derrick Tay of Meighen Demers appeared before Mr. Justice James Farley on behalf of Babcock & Wilcox Canada Ltd. (B&W Canada) in an application for ancillary relief under the relatively new provisions of the Companies’ Creditors Arrangement Act (CCAA) dealing with international insolvencies. B&W Canada is the Canadian subsidiary of Babcock & Wilcox Company (B&W US), which recently filed in Louisiana under Chapter 11 of the US Bankruptcy code to finalise a series of asbestos related injury claims that have seen B&W US pay over US$1.6 billion over the last two decades in individual settlements. Under Chapter 11, there is a mechanism for having the court ultimately set up a trust fund which will then be the target of present and future asbestos related law suits, thereby freeing the B&W companies from the burden of the claims. B&W Canada, which had also been named as a party to some of these asbestos related suits, was ultimately seeking to ensure that, when a solution is worked out under Chapter 11, B&W Canada would have the benefit of that solution.

B&W Canada explained the nature of the US process to the Court and asked for a stay in Canada against any asbestos related suits being brought against B&W Canada while a global solution was being worked out under the Chapter 11 proceedings. Furthermore, B&W Canada requested that the Canadian Court supervise the process so as to ensure that the rights of any Canadian claimants will be appropriately treated in the Chapter 11 proceedings. B&W Canada argued that, unlike the Bankruptcy and Insolvency Act, the CCAA allows a solvent party to apply for relief even where the applicant itself is not a party to the foreign insolvency proceedings. Given the ground breaking nature of this case, Mr. Justice Farley produced a 12-page endorsement which, in addition to granting the relief sought, set out some of the principles which the Court would take heed of in dealing with foreign insolvency proceedings and in assisting the same.

Mr. Tay was assisted by a team of lawyers from Meighen Demers comprised of Ian Ness, Orestes Pasparakis, Alan Merskey and Shauna Flynn.

As part of the Chapter 11 proceedings the B&W companies also obtained a US$300 million DIP (debtor in possession) facility which was guaranteed by B&W Canada. Merie-Anne Beavis of Meighen Demers represented B&W Canada while Andrew Kent and Lisa Kerbel Caplan of McMillan Binch acted for the DIP lender.


Merie-Anne E. Beavis Alan B. Merskey Shauna E. Flynn Orestes Pasparakis Derrick C. Tay Ian A. Ness Andrew J.F. Kent