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MM&A granted creditor protection in wake of Lac-Mégantic disaster

The chairman of Montreal, Maine and Atlantic Railway Inc., Edward Burkhardt arrived in Lac-Mégantic, PQ and addressed questions from the media on July 10, 2013 before leaving with investigators. MM&A was granted bankruptcy protection on Thursday by a Quebec judge.

Peter Power/The Globe and Mail

The Canadian subsidiary of Montreal, Maine & Atlantic Railway, whose train ravaged Lac-Mégantic, got the creditor protection it was seeking, but the Quebec Superior Court judge who granted its request had some harsh words for the railway's directors.

Justice Martin Castonguay granted the stay of proceedings against the railway company on Thursday to "avoid judicial anarchy."

"It is in everybody's interest to maximize the value of the assets," he said in an oral decision.

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However, the judge initially excluded the directors of Montreal Maine & Atlantic Canada from the court's protection. To earn that privilege, the judge explained, directors must "act in good faith."

"The tribunal is not impressed at all by the way MM&A behaved," Justice Castonguay said.

"Since the beginning of the events, their conduct has been totally lamentable," he added.

But the judge later changed his mind when the lawyer representing MM&A's Canadian affiliate, Denis St-Onge, pointed out that allowing lawsuits to proceed against the railway's directors might deplete the company's $25-million insurance policy, leaving little money for other claimants such as the Quebec government, which is now footing the clean-up bill.

Justice Castonguay then ordered a stay of proceedings against the company's directors, but only in relation to claims pertaining to the train derailment and the ensuing explosions. This would still allow former employees to seek compensation for their unpaid vacation, a situation their union, the Syndicat des Métallos, denounced as a "theft" on Wednesday.

"I find it scandalous when a company doesn't pay its employees," Justice Castonguay commented.

The decision to allow some claims to proceed against the directors of MM&A's Canadian affiliate could however be revised, when Justice Castonguay passes the bankruptcy case to a judge based in the Eastern Townships.

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"For me it's totally obvious that this trial needs to be heard close to where the people in Lac-Mégantic live. They shouldn't have to drive for hours to find out what is happening."

Justice Castonguay offered his condolences to the Lac-Mégantic community on behalf of the judicial authorities, in a case he had earlier described as an "exceptional situation that requires exceptional remedies."

"There are secured and unsecured creditors, and then there are extraordinary creditors," he said. "It is not a legal term but it applies to the disaster victims."

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About the Author
Chief Quebec correspondent

Sophie Cousineau is The Globe and Mail’s chief Quebec correspondent. She has been working as a journalist for more than 20 years, and was La Presse’s business columnist prior to joining the Globe in 2012. Ms. Cousineau earned a master’s degree in journalism from the University of Illinois and a bachelor’s degree in economics and political science from McGill University. More

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