Finance Committee on Oct. 31st, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting 65 of the House of Commons Standing Committee on Finance.

Pursuant to the House order of reference adopted on Wednesday, June 22, 2022, and pursuant to the motion adopted by the committee on Wednesday, October 19, 2022, the committee is meeting to proceed with clause-by-clause consideration of Bill C-228, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

Today's meeting is taking place in a hybrid format pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

I would like to make a few comments for the benefit of witnesses and members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your microphone, and please mute your mike when you are not speaking.

There is interpretation. For those on Zoom, you have the choice at the bottom of your screen of floor, English or French. Those in the room can use the earpiece and select the desired channel.

I remind everyone that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as well as we can. We appreciate your patience and understanding in this regard.

I would now like to welcome our witnesses, who will help us with the clause-by-clause consideration of Bill C-228.

I wish to inform the committee that we have four witnesses with us. We did test them all. One is not able to participate since the testing could not go through. We do have one who has been tested and who is wearing a different headset, but I guess the audio does work and the interpreters are good with it. We will continue with that individual.

With us today, from the Department of Finance, we have Neil Mackinnon, who is the senior adviser, financial sector policy branch. From the Department of Industry, we have Martin Simard, who is the acting director general, marketplace framework policy branch; and Paul Morrison, manager of corporate, insolvency and competition directorate.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

Members, before we move to clause 2, following the advice of the legislative clerk, it would be better to go directly to the amendments that create new clause 4.1: NDP-1 first and then amendment G-3. The rationale for doing this is that G-1 refers to new paragraph 136(1)(d.001), created by amendment G-3, and amendment G-2 refers to new paragraph 60(1.5)(a.1), created by G-1.

We would need unanimous consent to do so. If members want further explanation on that, we do have the legislative clerk, Philippe Méla, with us today to explain.

Members, I'm just seeing if we have unanimous consent.

[Some hon. members]

Agreed.

[The Chair, Liberal, Peter Fonseca]

Members, we will now jump, on proposed new clause 4.1, to amendment NDP-1.

MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Chair, I'm moving this amendment with thanks to my former colleague Scott Duvall, who did a lot of work on this issue. Scott's background was with Stelco, so he was very familiar with the kinds of impacts that bankruptcies can have on workers. He worked hard to craft language that would also help to protect their termination and severance pay.

To honour that work, and after discussions with colleagues in the Conservative Party and the Bloc, I'm putting that proposal forward.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

My ruling is that Bill C-228 amends the Bankruptcy and Insolvency Act to provide for the solvency of pension funds in case of bankruptcy. The amendment seeks to create new categories of payments to specific former employees that would have to be paid by a bankrupt, which is not envisioned by the bill.

As House of Commons Procedure and Practice, third edition, states on page 770:

An amendment to a bill that was referred to committee after second reading is out of order if it is beyond the scope and principle of the bill.

In the opinion of the chair and for the above stated reason, the amendment brings a new concept that is beyond the scope of the bill, and therefore, I rule the amendment inadmissible.

This does now allow for debate.

MP Blaikie, go ahead for a short comment.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Chair, respectfully, I would like to challenge your ruling. I think that it's a very narrow interpretation of the scope of the bill. I think the fact that this amendment has the support of the proponent of the bill is an indication that it is a very narrow interpretation.

As I say, with respect, Mr. Chair, I challenge your ruling.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

The ruling has been challenged.

Shall the decision of the chair be sustained?

(Ruling of the chair overturned: nays 6, yeas 5)

[The Chair, Liberal, Peter Fonseca]

MP Chatel, is there any further debate on this?

[Sophie Chatel, Liberal, Pontiac, QC]

Chair, I agree it's extending the scope, but I'm also worried about.... We have been talking with witnesses. We have been talking about pensions and we have been talking about especially those defined benefit pensions. Severance payments are complex in their own right and we haven't had a chance to study them at all or to ask questions of witnesses on this.

I'm concerned about the impact on other creditors and other employees because, again, this has a limited scope to certain employees, mostly those who are unionized. It would not cover those who are not part of a union, if I understand correctly. I'm disappointed that we couldn't discuss this further and that we couldn't ask more questions about this.

All that being said, under the general principles of this legislation and helping pensioners, I totally agree with the principle and I hope that we can find a compromise with the proposed amendment.

Finally, I will just say that there is the wage earner protection program. I know there's a cap of a little over $8,000 to protect those severance payments in case of bankruptcy. I thought it would have been the right vehicle if we wanted to increase this.

For all those reasons, I would hope that we could debate this issue of severance payments at another time with the proper legislation.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel.

MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Chair, just for your information, the provision does not apply only to unionized workers. There's a reference so that termination and severance pay found in a collective agreement would also be protected, but the amendment clearly also refers to acts of Parliament or legislatures of a province under which entitlements to severance and termination sometimes accrue.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

(Amendment agreed to on division [See Minutes of Proceedings])

We are now moving to G-3.

PS Fillmore.

[Andy Fillmore, Liberal, Halifax, NS]

Chair, committee members will have the package of amendments in both official languages. I'll refer members to amendment G-3 at this point. We are looking to replace clause 3 with the new G-3.

The intent of that is to elevate the claim of unfunded pension liabilities and unpaid special payments from what it is today, before this bill would take effect, to just below preferred creditor. This is called a preferred claim. It's not a superpriority. It's amending the bill from superpriority to preferred claim for those unfunded pension liabilities and unpaid special payments.

[The Chair, Liberal, Peter Fonseca]

Thank you, PS Fillmore—

[Andy Fillmore, Liberal, Halifax, NS]

I'm sorry, Mr. Chair. I might add before I lose the floor that this is consistent with what the Steelworkers' testimony, for example, was in committee. The intention, of course, is that it provides more ability for the companies being restructured to do just that: to restructure. It allows them to continue with their creditworthiness, to have access to additional credit rather than having loans called and overall improves the ability for restructuring, for the pension liabilities to be met and for current employees to remain employed.

[The Chair, Liberal, Peter Fonseca]

Thank you, PS Fillmore.

We have MP Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Obviously, every member appreciates how significant the priority issue is. When my fellow member Marilène Gill introduced her bill, unionized workers asked for assurances that a company could obtain refinancing in order to avoid bankruptcy. That means that banks providing the mortgage on the plant, business or facility would have priority over pension funds.

All payments are, of course, important, but unionized workers told us how important it was to make sure that the company could be refinanced. Unless the Bankruptcy and Insolvency Act is completely over my head, this bill is in keeping with that spirit. As I understand the act, mortgage creditors take priority over pensioners.

If we do a comparison, Ms. Gill's bill put creditors above super creditors such as the government and the Canada Revenue Agency. Ms. Gladu's bill seeks more balance by not raising the payment priority level as high as what Ms. Gill proposed. Nevertheless, as the bill is currently worded, mortgage creditors take precedence over pensioners. That is my understanding, and that is why I don't think we need to adopt the amendment.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Shall G-3 carry?

We will proceed to a recorded vote on G-3.

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

(On clause 2)

[The Chair, Liberal, Peter Fonseca]

Members, we will now move to clause 2.

Is there any discussion on clause 2?

We have PS Fillmore.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you, Chair. We will try this one more time.

We heard from multiple witnesses during the course of the study. The same story that we heard and that the ISED departmental officials heard from industry stakeholders was that the risk of unintended outcomes with the superpriority is real and it's large. In fact, we heard from some people that it is basically a foregone conclusion that defined benefit pension plans will disappear in Canada if we don't indulge in a preferred payment rather than a superpriority for pension liabilities.

It's in the interest of all of us to look after Canadian workers and to honour the contributions they have made over the course of their lives. It's our collective responsibility also to protect the jobs of those still working and earning for their families in companies that are the subject of these proceedings.

By making a pension superpriority for unfunded liabilities above that of the secured creditors, we are putting these companies, these employers, at untenable risk for failure and, therefore, job loss and, therefore, a much lesser pension payout than may otherwise be possible in a preferred payment scenario.

I will plead one more time with my honourable colleagues in the opposition parties to heed the important advice that we have heard, to heed the hard math of the situation, which is sometimes at odds with the kind of philosophical position that we all hold, I think, of honouring workers' contributions. However, in the end, we must look after those workers and those retirees in the best way we can and that would be a preferred payment, not a superpriority.

[The Chair, Liberal, Peter Fonseca]

Thank you, PS Fillmore.

I have MP Ste-Marie and then MP Chambers.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

When the committee met with witnesses, we heard two diametrically opposed positions, just as the Standing Committee on Industry and Technology did when it studied a similar bill. On one hand, pension fund managers and employers expressed the view we just heard from the honourable parliamentary secretary; they were concerned about certain risks. On the other hand, seniors groups, unions and workers argued that those risks were completely unreasonable and cited examples to refute each one.

We heard two conflicting perspectives. My party is the one that stands up for seniors and unions. Do I think Bill C-228, as it's currently worded, poses serious risks to defined benefit pension plans or puts businesses in jeopardy? No, not at all. Workers and unionized employees care more about keeping their jobs than about being higher on the creditor payment list when a company is winding up. That is why, with all due respect, an amendment like this is unnecessary.

Witnesses representing seniors and unions assured the committee that that was the case. In my view, that's final.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste.‑Marie.

Now MP Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Mr. Chair, I have been on the record as being sympathetic to the concerns raised by members of the government on this point, but there are a couple of issues, or facts, that I think are important to consider.

This bill passed in the House in June and the government has had a considerable amount of time to consider amendments to change or continue to respect the spirit of the bill. I'm not sure that this proposed amendment does that. I do think there may be some unintended consequences or potential, but we asked very specifically about the size and scope of the problem with both government officials and industry.

The truth is defined benefit pension plans are already deteriorating or closing in this country at a substantial pace irrespective of this bill, so we asked how many more would be impacted. Is there potential? How many companies could negatively be affected? We didn't really get much information back on how many. We could maybe think about how to protect some of those companies—maybe there are 100, maybe there are 50—and we could think about how to carve some of them out of legislation, but we weren't really presented with an opportunity to do that.

I don't believe this amendment continues to respect the initial spirit of the bill.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We have PS Fillmore.