Synopsis

In the latest decision of the British Columbia Supreme Court (the “Court”) regarding the bankruptcy of Ted LeRoy Trucking Ltd. (“TLT”), the Court found that unpaid remittances owed by TLT to third party benefit providers constituted “wages” within the meaning of the Bankruptcy and Insolvency Act (“BIA). This entitled the benefit providers to super priority secured status in the bankruptcy of TLT.

The Facts

Prior to the 2009 amendments (the “Amendments”) to the Companies’ Creditors Arrangement Act (the “CCAA”),¹  courts exercising jurisdiction under that statute could, in the appropriate circumstances, approve “roll up” debtor in possession (“DIP”) financing arrangements.  While it can take different forms, in essence, a “roll up” DIP loan facility is an arrangement whereby an existing lender refinances or repays its pre-filing loan by way of borrowings under the new DIP loan facility.  The priority status of the charge granted by the court to secure the DIP

It is always an interesting question as to what rights a lender has with respect to a motor vehicle owned by a consumer who becomes insolvent, and whether a secured creditor is able to seize a motor vehicle in order to satisfy an obligation due under a loan. The answer may be surprising. The recent BC Court of Appeal case, Atwal (Re) (2011 BCSC 687), highlights the rights of a debtor vis-à-vis a trustee in bankruptcy with respect to the ownership of a motor vehicle.

Interim Financing Under the CCAA and “Roll-ups”

In a decision issued on April 20th, 2012, Justice Robert Mongeon of the Superior Court of Quebec gave a decisive answer to one of the most troubling questions facing debtors and DIP lenders in reorganizations under the Companies' Creditors Arrangement Act(CCAA).

The U.S. Court of Appeals for the 11th Circuit recently issued its opinion in one of the largest fraudulent transfer litigations against lenders.

In April 2011, the Ontario Court of Appeal rendered a unanimous judgment in Re Indalex Limited which ordered that the amount the debtor was required to contribute towards its pension plan wind up deficiency be paid in higher priority to repayments to its DIP lender. This judgment was a surprise to the legal community. Leave to appeal has since been granted by the Supreme Court of Canada. In November 2011, groups of White Birch employees and retirees (referred to below as employees) filed motions seeking the application of the legal findings of Indalex to White Birch.

On April 6, 2011, the Ontario Superior Court of Justice released its decision in the priority disputes between the lessors and aviation authorities resulting from the Skyservice receivership. The Court, in interpreting and applying the decisions in Canada 3000 and Zoom, raised the bar for lessors to defeat the seizure and detention rights of the aviation authorities in Canada.

The U.S. Supreme Court ruled on May 29, 2012, that secured lenders have the right to credit bid their debt instead of having to pay cash in an auction of their collateral as part of a Chapter 11 plan of reorganization.

A year after the uncertainty created in the Canadian corporate debt financing world by the Ontario Court of Appeal's pensions-friendly decision in the Indalex CCAA restructuring matter², the Quebec Superior Court, in April 2012, determined in a lengthy and well-reasoned decision that the key restructuring and pensions law principles underpinning Indalex do not apply in Quebec when considering the treatment of defined benefit amortization payment and deficit claims in a restructuring.