Nova Scotia appeal court overturns Newline defence-cost order in Herald pension litigation

Nova Scotia’s Court of Appeal has overturned an order requiring Newline Canada Insurance Limited to advance defence costs in litigation over the Halifax Herald’s pension plan, holding that the particular insurance dispute fell outside the supervising insolvency judge’s authority under the Companies’ Creditors Arrangement Act.

The unanimous October 2 decision in Newline Canada Insurance Limited v. Fiera Private Debt Fund III LP, 2026 NSCA 71 leaves the policy’s coverage questions unresolved. It also leaves untouched separate findings against AIG Insurance Company of Canada, which did not appeal.

Justice David Farrar, writing for Chief Justice Michael Wood and Justice Cindy Bourgeois, ordered pension administrator Eckler Admin Corp. Ltd. to repay Newline $25,000 in costs from the proceeding below and pay another $10,000 in appeal costs, including disbursements.

A pension dispute inside an insolvency proceeding

The Herald sponsored and administered its retirement plan but failed to make required contributions in 2018 and 2019. It sought CCAA protection in March 2024, and Eckler was appointed interim plan administrator later that month.

Eckler subsequently sued the Herald and three directors and officers. Those actions alleged, among other things, that funds had been diverted toward the newspaper’s digital strategy instead of pension contributions, and that plan money had funded litigation over the unpaid contributions. They also alleged statutory and fiduciary breaches. The appeal did not determine the directors’ and officers’ liability for those allegations.

The insolvency orders complicated Eckler’s route forward. An August 2024 sale approval and vesting order released a broad range of claims but preserved an exception for insured claims. Eckler later obtained permission to commence its action against the directors and officers, with further steps requiring leave of the court.

Eckler therefore wanted to know whether insurance was available before committing more resources to the litigation. Its position was practical: if the claims fell outside insurance coverage, continuing to litigate could consume money without opening a route to recovery.

It sought declarations concerning both AIG’s fiduciary liability policy and Newline’s directors’ and officers’ policy. The supervising judge found a duty to defend under the AIG policy and a duty for Newline to advance defence costs. He declined to declare that either insurer had a duty to indemnify for the claimed losses.

Only Newline appealed. Eckler was the only respondent to participate in the appeal.

Broad insolvency powers still require an insolvency purpose

The statutory starting point was section 11 of the CCAA. It gives the court a broad power to make appropriate orders on an interested person’s application, subject to the Act’s restrictions.

The Court of Appeal held that this discretion nevertheless had to serve the legislation’s remedial objectives. It reviewed the scope of the CCAA court’s authority on a correctness standard, while acknowledging the deference ordinarily owed to a supervising judge’s discretionary decisions.

Here, the dispute over defence funding and coverage was between Newline and the insured directors and officers. Possible proceeds under that policy were not assets of the Herald or its parent, Brace Holdings Limited. Eckler itself had told the supervising court that the asset transaction was complete, there was no continuing business, and its proposed action would not affect restructuring.

Those circumstances defeated reliance on the CCAA’s single-proceeding model. That model brings actions against the debtor together. Eckler’s action at issue was against the directors and officers, not the Herald.

The appeal court also distinguished the Ontario Just Energy decision relied on below. In that case, the insurers had brought their own coverage motion, and the parties had implicitly agreed to have coverage decided. The authority to do so had not been contested. The court held that the decision did not support the disputed exercise of authority in Newline’s case.

The third-party recovery route mattered

The appeal court also rejected the suggestion that section 11 could fill a gap in section 28(1) of Nova Scotia’s Insurance Act.

As set out in the reasons, that provision permits a person awarded damages to pursue the defendant’s liability insurer where the judgment remains unsatisfied and execution has been returned unsatisfied, subject to the policy limit and the defences available to the insurer.

Farrar held that the provision already fills a gap: it creates a claim against an insurer for a third party who otherwise lacks a contractual relationship with it. Its permissive wording means a successful claimant may choose whether to pursue that remedy, not that its requirements can be bypassed.

Eckler had not obtained a determination that the directors and officers owed it damages. The court consequently regarded its attempt to resolve insurance coverage through the CCAA proceeding as premature, as well as disconnected from the statute’s remedial purpose.

What remains open

The court set aside the April 10, 2026 order only insofar as it concerned Newline’s directors’ and officers’ policy. It refused Newline’s invitation to go further and decide whether policy exclusions defeated coverage.

That refusal did not endorse the supervising judge’s coverage analysis. Farrar explained that, if Eckler continues its action and the directors and officers seek decisions on defence costs or coverage, those questions should come before a Supreme Court judge in that proceeding on a proper motion, with a proper record and submissions. The directors and officers had not participated in the appeal.

The distinction is important. The ruling rejects Eckler’s particular attempt to obtain advance insurance answers through these insolvency proceedings. It does not determine whether Newline must ultimately provide coverage, and it does not establish a blanket prohibition on resolving insurance issues in a CCAA case.

The AIG findings remain unaffected because AIG did not appeal. The costs result is separate: the $25,000 must be repaid, and the additional $10,000 is payable immediately regardless of the eventual outcome of the underlying litigation.