Many secured creditors see their position in absolute terms. They rely on their general security and aggressively assert their priority over unsecured creditors, such as trade creditors. However, a recent decision of the Ontario Court of Appeal(306440 Ontario Ltd. v. 782127 Ontario Ltd. (Alrange Container Services), 2014 ONCA 548) demonstrates that creative arguments by trade creditors may allow them to take priority over even secured creditors in certain circumstances, by using trust principles to remove assets from the estate.

The good news is that public works construction projects for municipalities are projected to remain a major sector of construction activity for the foreseeable future. The not-so-good news is that municipal bankruptcy filings are on the rise, and they are likely to increase. The issues facing parties under contract with a municipality when it files for bankruptcy protection are playing out nationally in places like Stockton, California, and Detroit, Michigan.