When a debtor files for bankruptcy, it’s axiomatic that all creditors, wherever located, must immediately cease their efforts to collect on debts owed to them by that debtor, right? Not necessarily so, says the United States Court of Appeals for the Seventh Circuit, insofar as those creditors and their collateral are located outside of the United States.

The Bankruptcy Protector

Envision a scenario in which you purchased a right of first refusal for a parcel of real estate. That right, as bargained for, would let you purchase the parcel if it was put up for sale by matching any competing bidder’s offer. As a diligent prospective purchaser, you would naturally record that right of first refusal in the appropriate land records. So far so good.

A person in possession of a debtor’s property upon a bankruptcy filing now has more guidance from the Supreme Court as to the effect of the automatic stay. In City of Chicago, Illinois v. Fulton, 141 S. Ct. 585 (2021), handed down on January 14 of 2021, the Court was faced with the issue of whether the City of Chicago (the “City”) was liable for violation of the automatic stay for refusing to return vehicles it impounded pre-petition. Issuing a narrow decision under Section 362(a)(3) of the Bankruptcy Code, the Court held that it was not.

On March 26, 2020, leave to appeal the decision of the Alberta Court of Appeal (the “Alberta CA”) in Canada v. Canada North Group Inc.¹ (“Canada North Group”) was granted by the Supreme Court of Canada (the “SCC”).² No reasons were given.

The Quebec Court of Appeal’s unanimous decision in Gestion Éric Savard¹ reaffirms the super-priority ranking of CCAA² DIP financing³ over regular unpaid post-filing obligations, absent steps being taken to reverse this usual order of priorities.

In Canada v. Canada North Group Inc., 2019 ABCA 314, the Court of Appeal of Alberta (the “ABCA”) upheld the decision of the Court of Queen’s Bench of Alberta (the “Lower Court”), which held that the Companies’ Creditors Arrangement Act (the “CCAA”) permits courts to subordinate statutory deemed trusts in favour of the Crown to court-ordered insolvency priming charges.

On November 1, 2019, a number of amendments to the Bankruptcy and Insolvency Act (the “BIA”) and the Companies’ Creditors Arrangement Act (the “CCAA”) will come into force pursuant to the Canadian federal government’s budget implementation legislation for 2018 and 2019.

Secured creditors should take note of Callidus,¹ wherein the Federal Court (the “Court”) held that the bankruptcy of a tax debtor rendered a statutory deemed trust under section 222 of the Excise Tax Act (the “ETA”) ineffective as against a secured creditor who, prior to the bankruptcy, received proceeds from the tax debtor’s assets.

Background

In Aventura², a recent decision of the Ontario Superior Court of Justice (Commercial List) (the “Court”), the Honourable Justice Penny confirmed that a bankruptcy trustee does not have the authority, pursuant to section 30(1)(k) of the Bankruptcy and Insolvency Act (the “BIA”), to disclaim a lease on behalf of a bankrupt landlord. Rather, a trustee’s authority to disclaim a lease is limited to situations where the bankrupt is the tenant.

On October 13, 2015, the Court of Appeal for Ontario (the “Court”) dismissed the so-called “interest stops rule” appeal in the Nortel matter,^[1] thereby confirming that the rule applies in proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”). The Court’s decision also appears to eliminate any suggestion that the rule only applies to so-called “liquidating” CCAA proceedings.