Judge puts brakes on Celadon’s Hyndman asset sales, swift exit from Canada

A Canadian judge had a simple message Wednesday for Celadon Group as it prepared to sell off the headquarters of its shuttered Ontario trucking company: not so fast.

Ontario Superior Court Justice Glenn Hainey, in a brief preliminary ruling, said Celadon cannot sell its Hyndman Transport assets without his approval and warned that he could place Hyndman into receivership if it does not petition to have its U.S. Chapter 11 bankruptcy proceedings recognized in Canada.

Hainey issued a decision in response to a request from a lawyer representing more than 200 former employees and contractors of Ayr, Ontario-based Hyndman, who are seeking more than C$2 million in unpaid compensation.

While the decision doesn’t address the merits of the former employees’ claims, it all but ensures their adjudication through a Canadian legal process that can afford them better standing as creditors. It also will give them access to federal benefits.

“It’s encouraging,” Andrew J. Hatnay, the labor lawyer representing the former Hyndman personnel, told FreightWaves.

It also will provide for a potentially more accessible venue for Celadon’s Canadian creditors who otherwise face the prospect of pursuing claims in the U.S. proceedings.

Edmond Lamek, an attorney representing Hyndman Transport in Canada, did not respond to FreightWaves’ request for comment. His firm, DLA Piper, is representing Celadon in the U.S. Chapter 11 case.

A setback for Celadon, U.S creditors

The decision is a setback for Celadon and its U.S. creditors, who face a lengthier process on less favorable terms for securing any proceeds from the Canadian assets, which include the Hyndman headquarters and two terminals.

Hatnay petitioned the court on Tuesday after Celadon’s plans to sell Hyndman’s headquarters emerged in U.S. court filings. Proceeds from the C$12 million sale were set to be disbursed under the terms of the U.S. court.

Hainey’s decision suggested he was unmoved by a U.S. federal bankruptcy judge’s decision to approve Celadon’s sale of Hyndman’s headquarters to an Ontario real estate investment firm.

He noted that his court, the Commercial List, which handles some of Canada’s largest and most complex corporate litigation, must approve the transaction “despite the sale proceedings underway in the U.S. proceedings of the U.S. debtors.”

Lawyer: ‘They’ve ignored Canada altogether”

If Celadon does petition for recognition of the U.S. proceedings, its lawyers will likely have to explain why it didn’t do so sooner. That delay also could make Hainey or a judge on a higher court hesitant to let a foreign proceeding set the terms for any Canadian interests, namely the former employees and other creditors.

Hatnay, who has represented former employees in other cross-border bankruptcies, said Celadon’s avoidance of the Canadian court system is unusual in the aftermath of Hyndman’s Dec. 9 shutdown.

“They’ve ignored Canada altogether. This is aggressive. It’s troubling from many perspectives,”  Hatnay said.