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Laurentian University update: Introduction
In February 2021, I wrote a blog about the Laurentian University cash crunch and that on February 1, 2021, it had filed for creditor protection. It stated that its application under the federal Companies’ Creditors Arrangement Act (CCAA) was intended to allow it to continue operating its day-to-day operations during restructuring. As events unfolded in the CCAA restructuring process, I wrote six more Laurentian University update blogs.
In this Brandon Blog, I provide a Laurentian University update regarding the difference of opinion it has with the Auditor General of Ontario concerning the information and documents the Auditor General is requesting access to.
Laurentian University update: The Laurentian insolvency reflects a structural crisis in Ontario’s university system
To the court, Laurentian described itself as a public institution, bilingual and tricultural, with around 8,200 undergraduate students and 1,098 graduate students. The Ontario Minister of Colleges and Universities appointed Alan Harrison of Queen’s University as a special advisor in January. He found Laurentian had been hiding deficits since 2014.
The Laurentian debacle is the result of a structural crisis rooted in Ontario’s neoliberal university system, namely increased tuition fees and corporate management. Back then, Laurentian did not address regional enrolment issues honestly in its presentation of its financial problems.
Historically, northern universities have faced low enrolment or excess capacity in some academic programs. But most students in northern Ontario come from away. University participation rates in northern Ontario are far below those in southern Ontario, which should be a top priority, but is not.
Furthermore, there are other factors affecting northern Ontario, including rising tuition fees and student debt, as well as deteriorating employment prospects.
Laurentian University update: Auditor General of Ontario investigating Laurentian’s finances
The Standing Committee on Public Accounts unanimously passed a motion on April 28, 2021, asking the Office of the Auditor General (OAG) to conduct an audit of Laurentian’s value for money for the period of 2010 to 2020. The Committee discussed the motion and said they want the audit to examine what led Laurentian to enter the CCAA process, to bring transparency to the situation, and to identify lessons learned.
Moreover, the Government Committee noted that it would like the audit to focus on the future and ensure something similar does not occur at another academic institution. Considering the historical scope of the request, as well as the desire to be forward-looking, the Committee granted discretion to the OAG on the scope of the audit.
The OAG began a value-for-money audit to examine Laurentian’s governance, operations, and past financial decisions.
OAG gives a Laurentian University update on the value-for-money audit
The OAG released an interim report last week on the Laurentian audit. In it, Laurentian is not painted in a good light. The OAG says Laurentian denied it unfettered access to information it deemed absolutely necessary for the audit. The OAG states that the university has refused to provide information that its internal and external legal counsel determined was subject to solicitor-client privilege.
According to the OAG, such a comprehensive restriction of audit work is unprecedented. In addition, it is claimed that Laurentian has implemented communication and documentation protocols that discourage university employees from interacting freely with the OAG or providing the OAG with unrestricted timely access to information without repercussions. In fact, the OAG says that Laurentian has created a culture of fear surrounding the OAG’s work and having conversations with people from the OAG. It says that Laurentian has instilled a fear of reprimand within its employees.
According to the OAG, Laurentian has a mandatory obligation to provide information and records to the OAG, which entitles the OAG to free access to Laurentian’s records and information, including privileged information.
It was noted by the OAG that Laurentian had refused to provide some non-privileged documents and information on the grounds that reviewing documents to determine if the information is privileged would take too much time. Therefore, on September 29, 2021, the Auditor General applied to the Ontario Superior Court of Justice for a declaration that section 10 of the Auditor General Act grants the Auditor General access to privileged information and documents.
Laurentian University is now being sued by Ontario’s Auditor General in an argument over how free and unfettered access to the university’s accounts should be defined. An Ontario court has never ruled on whether the OAG can compel audit subjects to disclose privileged information between lawyers and their clients.
Laurentian University update: Laurentian’s response to OAG accusations that it is withholding documents for financial audit
Laurentian for its part, responds in part by saying that it has received numerous requests for information from the OAG. Staff and directors of Laurentian have also met with the OAG delegation. In response to requests from government ministries, regulatory bodies, and governmental authorities, Laurentian has spent considerable time and effort.
In response to the OAG’s inquiries, the university says that:
- It has provided extensive information.
- The OAG has direct access to financial accounting and other systems at the university, therefore it is not a matter of access.
- As part of this process, external counsel has assisted Laurentian in reviewing privileged documents and making sure the disclosure of information does not violate any court orders.
- The university continues to supply all documents requested by the OAG, except for those subject to privilege or court-ordered confidentiality.
- It has taken time and effort to respond to the information requests due to the limited resources at their disposal.
- The university does not agree with the OAG’s belief that it is entitled to privileged documents, such as those that are protected by solicitor-client privilege, settlement privilege, and court-ordered confidentiality.
Laurentian University update: Auditor General seeks court hearing on access to information Laurentian deems “privileged”
As well as filing the court application last September, the OAG also informed the Standing Committee on Public Accounts of Laurentian’s restrictions on its work. The Committee then requested information from Laurentian University in connection with their motion. In the Public Accounts Committee’s opinion, the Legislative Assembly Act, Standing Orders, and Parliamentary Privilege give it the authority to command the production of documents or other items it deems necessary for its work.
Having sent three letters, Laurentian began sending the Committee documents in November 2021. Laurentian’s external legal counsel continues to tell the OAG and the Standing Committee on Public Accounts that Laurentian will not share privileged information, information subject to court-ordered confidentiality, or information implicating third parties and the CCAA process.
Thus, the hearing will proceed. The hearing is scheduled for today.
Rather than pending within the CCAA proceeding, the parties agreed that the issue of whether the Ontario Ministry of the Attorney General Act:
- requires an auditee to disclose privileged information to the OAG; or
- provides the OAG with access to an auditee’s privileged information should be heard under the Rules of Civil Procedure as a Commercial List matter instead.
Chief Justice Morawetz approved the following procedure following a case conference on September 27, 2021:
- An application may be made for an interpretation of section 10 of the Ontario Ministry of the Attorney General Act.
- It is only a question of interpreting section 10 of the Ontario Ministry of the Attorney General Act that will be raised in the application. The application will not raise CCAA issues. The OAG”s request for privileged documents or other aspects of the audit may be subject to the right of Laurentian to seek relief.
- The following timetable will be followed, subject to possible changes:
- OAG’s application record will be served by September 30, 2021;
- Laurentian’s response application record must be served by October 15, 2021;
- any cross-examinations must be completed by October 29, 2021;
- OAG factums must be served by November 12, 2021;
- the university’s factums must be served by November 26, 2021; and
- the hearing will take place on December 6, 2021.
It will no doubt be a fascinating hearing and His Honour’s ruling will be unique and will probably motivate me to report the results in another Laurentian University update. As stated earlier, no Ontario court has ever heard such a matter.
Laurentian University update: Summary
I hope you found this Laurentian University update Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?
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As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.
laurentian university update