Executive Summary: Key Legal and Evidentiary Issues

• Status of William Armstrong as a “creditor” under the Bankruptcy and Insolvency Act (BIA) and the Metroland Proposal, despite his defamation claim having been dismissed before the filing date.
• Effect of a trustee’s disallowance of a contingent claim under s. 135 BIA on whether the claimant remains bound by a court-approved proposal.
• Scope of the Proposal’s broadly worded “Claim” and “Creditor” definitions, and whether they capture contingent or future claims tied to a dismissed defamation action and potential appeal rights.
• Interpretation of the Proposal’s third-party release, particularly whether a freelance columnist is a “contractor” and therefore a “Released Party” on the Effective Date.
• Use of contractual interpretation principles (factual matrix, ordinary meaning, commercial purpose) to limit the reach of very broad insolvency releases.
• Tension between insolvency goals of finality/fresh start for Metroland and the ability of Armstrong to continue appellate proceedings against Torstar and non-released individuals such as Amir Farahi.

Factual background

Metroland Media Group Inc. is an Ontario-incorporated publisher of newspapers and online news. It is a subsidiary of Torstar Corporation. William John Armstrong is a former municipal councillor in London, Ontario, and Amir Farahi is a freelance political columnist who contributed to “Our London,” a weekly Metroland publication. On February 2, 2017, Metroland published a column by Farahi that Armstrong alleges was defamatory. In April 2017, Armstrong commenced a defamation action against Metroland, Torstar, and Farahi. That defamation action was later dismissed on September 7, 2023, on an anti-SLAPP motion under s. 137.1 of the Courts of Justice Act, with no judgment or ongoing action against Metroland at the time of dismissal. Armstrong then served a notice of appeal in October 2023, but he chose to proceed with his appeal only against Torstar and Farahi, not Metroland.

Metroland’s insolvency proceedings and the Proposal

Shortly after the anti-SLAPP dismissal, Metroland commenced restructuring proceedings under the Bankruptcy and Insolvency Act (BIA), filing a Notice of Intention to Make a Proposal on September 15, 2023. As part of the statutory process, Metroland prepared a creditor list and included Armstrong as a creditor with a nominal $1 claim. Armstrong then filed a proof of claim around November 12, 2023, asserting an unsecured contingent claim for $250,000 based on the alleged defamation, and on the same date he submitted a voting letter in favour of Metroland’s first proposal. Metroland ultimately advanced a Third Amended Proposal. That Proposal was approved at the creditors’ meeting on December 11, 2023, and then approved by the Superior Court on January 24, 2024. Armstrong did not submit a voting letter on the Third Amended Proposal, but the Proposal—once court-approved—was expressed to bind creditors in accordance with s. 62 BIA.

The release provisions and their commercial purpose

The approved Proposal contained a broad release clause (s. 4.2) that released Metroland, its “Affiliates,” and their “employees, contractors, Directors, officers, heirs and assigns,” together with the proposal trustee and certain counsel, from essentially all claims that any creditor or other person “may be entitled to assert” against them, including liquidated, unliquidated, contingent, present and future claims, subject only to the continuing right to enforce Metroland’s obligations under the Proposal. The court that originally approved the Proposal (Kimmel J.) expressly noted that these third-party releases—covering directors, officers, employees and contractors—were “about as broad as they could be” and were justified under the Metcalfe criteria in light of the need to give Metroland a fresh start and to recognize the significant contributions those insiders and contractors made to the restructuring and ongoing operations. The commercial goal was to address creditor claims comprehensively and allow Metroland’s reorganized business to move forward without lingering litigation risks from pre-filing conduct.

Armstrong’s claim and the trustee’s disallowance

Despite Armstrong’s participation as a creditor in the process, the proposal trustee later disallowed his proof of claim. On April 4, 2024, the trustee valued Armstrong’s contingent claim at $0 and issued a Notice of Disallowance on the basis that the defamation action had been dismissed with no order or judgment against Metroland and that, as of the filing date, no action was ongoing against Metroland. The trustee expressly relied on s. 135(2) BIA, which empowers a trustee to disallow any claim and makes that decision final and conclusive if not appealed within the statutory deadline. Armstrong did not appeal the disallowance, and the trustee treated his position as a contingent claim reduced to nil for distribution purposes. Metroland then exited the BIA proceedings in March 2024 with the Proposal implemented.

The Court of Appeal’s direction and the Commercial List motion

As Armstrong’s appeal of the anti-SLAPP dismissal against Torstar and Farahi moved ahead, Torstar and Farahi brought a motion in the Court of Appeal to quash the appeal, arguing Armstrong was bound by the Proposal and its releases. The Court of Appeal declined to hear either the motion to quash or the appeal at that time. Instead, it directed that a Commercial List judge interpret the Proposal’s release provisions and answer two specific questions: whether Armstrong was a “creditor” bound by the Proposal, and whether Farahi was a “contractor” and therefore a “Released Party” under the Proposal. Metroland then brought the present motion before Justice Jana Steele on the Commercial List to obtain guidance on these issues, which would inform what claims, if any, Armstrong could continue to pursue in his appeal.

Whether Armstrong was a creditor bound by the Proposal

Justice Steele first had to determine whether Armstrong qualified as a “creditor” under the BIA and the Proposal despite the dismissal of his defamation action and the trustee’s later disallowance. Armstrong argued that because the defamation action had been dismissed before Metroland filed its NOI, and because his contingent claim had been disallowed and valued at $0 under s. 135 BIA, he no longer had a “claim provable” in bankruptcy and therefore was not a creditor bound by the Proposal. In his view, once the trustee decided his claim was not provable and he did not appeal that decision, he ceased to be a creditor for BIA purposes.

Justice Steele rejected this argument. She emphasized the breadth of the BIA definition of “creditor” (a person having a claim provable under the Act) and, crucially, the even broader contractual definitions in the Proposal. Under s. 1.1(k), a “Creditor” was any person having a “Claim,” and “Claim” was defined to include all unsecured and preferred claims and “any right” against Metroland or its affiliates “whether liquidated, unliquidated, fixed, contingent, matured, unmatured, present, future, known or unknown,” including any indebtedness or liability that, if unsecured, would be a debt provable in bankruptcy. On the date Metroland commenced BIA proceedings, Armstrong was still within the appeal period for the defamation judgment and therefore had, at minimum, a contingent or future claim. The trustee itself treated him as a contingent creditor and processed his proof of claim before disallowing it.

The judge also relied on core insolvency principles and Supreme Court of Canada authority emphasizing that proposals and reorganizations must capture a broad range of claims to ensure fairness between creditors and finality for the debtor, and to enable a meaningful “fresh start” after restructuring. Against that backdrop, it would be illogical if a person who was clearly entitled to participate as a creditor in the process could then argue they were not bound by the final approved proposal simply because their own claim had ultimately been disallowed or valued at zero for distribution purposes. Justice Steele concluded that Armstrong had a contingent claim against Metroland and Torstar, was treated as a creditor, filed a claim and voted on the first proposal, and is therefore a creditor under the Proposal and bound by its terms.

Whether Farahi was a contractor and a Released Party

The second issue concerned whether Farahi, as the author of the allegedly defamatory article, fell within the class of “contractors” of Metroland on the Effective Date of the Proposal and thus was a Released Party. Metroland argued that Farahi had been an independent contractor pursuant to written freelance agreements in 2015 and 2016, under which he contributed columns to Our London. Those freelance agreements expressly described him as an independent contractor and carved out that no employment relationship was created. Metroland also suggested that because the agreements did not specify a fixed term, they should be treated as having no expiry, allowing Farahi to remain a contractor indefinitely and thereby come within the Proposal’s release wording.

Justice Steele applied established contractual interpretation principles to the Proposal and the release language. She focused on the ordinary and grammatical meaning of “contractor,” the need to read the Proposal as a whole, and the surrounding commercial context in which the releases were sought and approved. The key factual point was that Metroland’s own accounting system records showed a contract start date of February 5, 2015, and a contract end date of December 31, 2016, for Farahi. Combined with the fact that the impugned article was published in early 2017 and that Metroland’s restructuring and Proposal process did not commence until 2023–2024, there was no evidence of any ongoing contractual relationship with Farahi on the Effective Date of the Proposal.

The judge also considered the evidence furnished to justify the breadth of the releases when they were approved. The then-CEO, Neil Oliver, provided affidavit evidence listing current directors and officers and describing the significant contributions of “employees, contractors, directors and officers” to Metroland’s restructuring efforts, negotiations, and operations. Farahi was not named anywhere in that evidence, and there was no indication he played any role in the Proposal, the restructuring, or Metroland’s ongoing business. In the judge’s view, the factual matrix and the Metcalfe criteria for third-party releases showed that the releases were designed to protect those who were integral to the restructuring and were contributing “in a tangible and realistic way” to the Proposal, not to immunize individuals whose connection to Metroland had ended years earlier and who wrote in their personal capacity.

On this basis, Justice Steele held that the most that could be said from the evidence was that Farahi had been a contractor between 2015 and the end of 2016, but he was not a contractor “On the Effective Date” of the Proposal. Accordingly, he did not come within the category of “contractors” who were Released Parties and he was not personally protected by the Proposal’s release clause.

Combined outcome and implications for the parties

In the result, Justice Steele determined that Armstrong is a creditor bound by the Proposal, reinforcing the broad and binding reach of BIA proposals over contingent and disputed claims and confirming that a trustee’s disallowance does not retrospectively remove a participant from the class of creditors for purposes of being bound by the restructuring outcome. At the same time, the court found that Farahi is not a contractor on the Effective Date and therefore is not a releasee under the Proposal, limiting the scope of the third-party release and preventing it from extending to a freelance writer whose contractual relationship had ended years before the insolvency process and who did not contribute to the restructuring.

This split outcome means that Metroland succeeds on its central insolvency point—that Armstrong is a creditor subject to the Proposal—while Armstrong and Farahi succeed on the question of whether the release insulates Farahi personally. The judge expressly noted that neither side was wholly successful. The parties had previously agreed that the successful party would receive a fixed amount for costs; however, because success was divided, the court declined to fix costs in this endorsement and instead encouraged the parties to agree on costs or, failing agreement, to file short written submissions on a specified timetable. As a result, there is no quantified monetary award for damages or costs stated in this decision, and the total amount granted or ordered in favour of any party cannot be determined from this judgment alone.