First published in The Lawyer on July 18, 2011

Western economies, many With recoveries stalling in investors and creditors are ­considering carefully which jurisdictions will govern their interests in the event of insolvency and what, if anything, can be done to influence the process.

Many investment funds and other vehicles, attracted by tax-neutrality and stability, are incorporated in jurisdictions such as the ­Cayman Islands and the British Virgin Islands, but with their managers, operations, assets and investors often dispersed globally.

Trial on preliminary issues

The Ontario Court of Appeal decision in Indalex Limited (Re) has created considerable uncertainty over the priority status afforded to pension plan wind-up deficits, particularly in insolvency proceedings involving the plan sponsor.

Certain provisions of Bill C-9, last year's Budget Bill, which amended the federal Pension Benefits Standards Act (PBSA), have been proclaimed in force.

On April 7, 2011, the Ontario Court of Appeal released its long-awaited decision in Re Indalex Limited 1. In a unanimous decision, the Court of Appeal overturned the decision of the Ontario Superior Court of Justice dated February 18, 2010, and allowed the appeals of the United Steelworkers and a certain group of retired executives. The Court of Appeal ordered FTI Consulting Canada ULC (the Monitor) to pay from the reserve fund (the Reserve Fund) held by the Monitor from the sale of Indalex Limited, Indalex Holdings (B.C.) Ltd., 6326765 Canada Inc. and Novar Inc.

On Friday 1 April, the Court of Appeal handed down its much awaited written judgment in Westford Special Situations Fund Limited v Barfield Nominees et al. The decision has far reaching consequences, not only for BVI funds, but also for all types of BVI corporate vehicles. The case directly and indirectly dealt with four major issues:-  

A recent decision of the Ontario Court of Appeal illustrates that secured creditors should address their priority position relative to all other creditors of their borrower in order to achieve a complete subordination of competing security. Failure to do so in this case resulted in circular priorities that the Court was left to resolve. In light of the Court of Appeal’s decision, secured creditors should ensure they are a party to all subordination agreements with the debtor in order to achieve their expected result.

The Facts and Agreements

In Yeung Kwok Mung v The Attorney General and the Financial Services Commission, BVIHCM 2011/0002 and Dedyson Enterprises Limited v Registrar of Corporate Affairs, BVIHCM 2011/0008, the BVI High Court Commercial Division addressed the principles applying to restoration applications under section 43 of the BVI Business Companies Act (the “BC Act”). The key principles emerge from the decisions:

The recent decision in Pacific China Holdings Limited v Grand Pacific Holdings Limited, BVIHCV 2009/389 sets out the view of the BVI Commercial Court as to who, if anyone, should be responsible for the remuneration of liquidators where a liquidation order is set aside on appeal.

• In Irving H. Picard v Bernard L. Madoff Investment Securities LLC, BVIHCV 0140/2010, the trustee appointed in the liquidation of the business of Bernard L. Madoff Investment Securities LLC (“Picard” and “BLMIS”) sought, amongst other things, (i) recognition in the BVI as a foreign representative; (ii) an entitlement to apply to the BVI Court for orders in aid of the foreign proceeding; and (iii) an entitlement to require any person to deliver up to him any property of BLMIS.
• Bannister J.