Significant insolvency law amendments were declared in force as of September 18, 2009 (the “Amendments”). The Amendments were contained in Bill C-55 which received Royal Assent on November 25, 2005 and in Bill C-12 which received Royal assent on December 14, 2007, but the Amendments were not proclaimed into force until September 18, 2009.

Making a will is regarded by most individuals as a necessary irritant ranking in popularity somewhere below a visit to the dentist or doctor. Following the unprecedented instability in the global financial markets since 2007, “systemic” risk (posed by the potential failure of large or complex cross-border financial institutions) was identified by regulators and legislators as one of the key areas requiring better supervision, in order to prevent a similar crisis in the future.

As we previously wrote about (Volume 1, Issue 3, December 2008), the Wage Earner Protection Program Act (“WEPPA”) came into force on July 7, 2008 as part of a comprehensive reform package to the Bankruptcy & Insolvency Act (“BIA”). WEPPA was designed to protect the wages of employees terminated as a result of a bankruptcy or receivership. Employees could now claim up to $3,000 worth of wages earned in the six months immediately preceding the bankruptcy or receivership, as well as a $2,000 super priority claim on all current assets of their employer.

After years of waiting, significant amendments to the Canadian regime of bankruptcy and insolvency law were declared in force as of September 18, 2009 (Amendments).

The Alberta Court of Appeal recently released its decision with respect to the appeal of Brookfield Bridge Lending Fund Inc. v. Vanquish Oil and Gas Corporation and has rekindled discussion as to the risks associated with an Operator’s right to commingle his own general funds with trust funds held for the benefit of Joint Operators.

Facts

A recent decision in the U.S. Bankruptcy Court for the Southern District of Florida, In re Tousa,[1] has received widespread attention for its near wholesale rejection of insolvency “savings clauses,” and the resulting order requiring lenders to disgorge hundreds of millions of dollars. The decision raises numerous practical problems for participants in the secondary loan and derivatives markets, and more generally for commercial lenders and borrowers.

Background

Brookfield Bridge Lending Fund Inc. v. Karl Oil and Gas Ltd., 2009 ABCA 99, 5 Alta. L.R. (5th) 1; on appeal from 2008 ABQB 444, 96 Alta. L.R. (4th) 329.

Vanquish Oil and Gas Corp. (“Vanquish”) operated certain oil wells. Under the 1990 Canadian Association of Petroleum Landman Operating Procedure under which Vanquish operated these wells, Vanquish was to receive well revenues in trust, it could commingle revenues with its other monies, and was to pay the revenues “only to their intended use”.

Insolvency law amendments were declared in force as of September 18, 2009 (the “Amendments”). The Amendments were contained in bills which received Royal assent on November 25, 2005 and on December 14, 2007, but the Amendments were not proclaimed into force until now.

Philip Gaidy and Judy-Kae McLeod v. Chrysler Financial Services Canada Inc. CV-09-095088-00 (S.C.J.) (Lauwers, J.)

Gaidy leased a 2007 Dodge truck from Chrysler Financial (“CF”) as lessor. McLeod entered into a conditional sales contract for a 2006 Hummer with CF as vendor.

Both were chronically late in payment and hid the vehicles. CF recovered the vehicles. Both applied to court to force CF to allow them to re-instate their agreements under s. 66(2) of the Personal Property Security Act (“PPSA”).

Caisse populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29 (Can LII) (S.C.C.); on appeal from 2006 FCA 366 (Can LII)

The Caisse granted Camvrac a line of credit of up to $297,000. Camvrac deposited $200,000 with the Caisse subject to a “Security Given Through Savings” agreement (the “Savings Agreement”) and agreed:

(i) to have the $200,000 on deposit as long as the line of credit was outstanding; and