Abitibi

The Supreme Court of Canada recently ruled in the Century Servicesi case that Goods and Services Tax (“GST”) deemed trusts under the federal Excise Tax Act (“ETA”) are ineffective in proceedings under the Companies’ Creditors Arrangement Act (“CCAA”).

One of the primary objectives of the Bankruptcy and Insolvency Act (“BIA”) is to provide the bankrupt with an opportunity to stay existing creditors and establish a financial “clean slate”. The stay imposed on existing creditors includes creditors with causes of action existing at the time the bankruptcy is initiated. As a result, bankrupts can cause a halt to any existing or potential litigation by assigning themselves into bankruptcy.

Case Comment - Re White Birch Paper Holding Co.

The purchase of an insolvent company’s assets by way of a credit bid has recently garnered attention, primarily because of the use of a credit bid in the Canwest Publishing Group restructuring. This past September the issue was again addressed under the Companies’ Creditors Arrangement Act (“CCAA”), this time by the Quebec Superior Court in the restructuring of White Birch Paper Holding Co. (“WBP”). The Court reaffirmed the acceptance of credit bids by Canadian courts.

With the future of the New York City Off Track Betting Corp. up in the air, the New York Senate returned to the Capitol Tuesday, Dec. 7, to find itself in the middle of a long-standing battle between tracks and OTB corporations in the state.

Officials at the NYCOTB, which is in Chapter 9 bankruptcy protection, vowed to shut down the stateowned betting giant at midnight Dec. 7 if the Senate does not pass a reorganization bill already approved last week by the Assembly.

Title II of the Act, designated "Orderly Liquidation Authority" – effective July 21, 2010 – establishes what is intended to be an orderly liquidation process for "financial companies" whose collapse or potential collapse are determined to constitute a risk to the financial system as a whole. Such systemically significant institutions would be liquidated under these new procedures, rather than being treated under existing bankruptcy laws. (The intent of Act is that most-failing financial companies will continue to be administered under existing bankruptcy laws.)

Typically under the Companies’ Creditors Arrangement Act (“CCAA”) when a debtor brings an application to extend the stay period, the court will grant the extension, so long as the applicant debtor is acting in good faith and with due diligence. In the vast majority of such extension applications the debtor has the support of the court appointed Monitor. The recent Ontario Superior Court of Justice case Re Dura Automotive Systems (Canada) Ltd.

Abitibi

In Capital One v. Solehdin,1 the Ontario Superior Court of Justice recognized judgments of a Louisiana bankruptcy court and held that they were enforceable in Ontario. The judgments were summary judgments against guarantors under their respective guarantees. The decision is significant – it is one of the first cases where guarantors challenged the recognition and enforcement of such judgments of a foreign bankruptcy court on the basis that the foreign bankruptcy court lacked the jurisdiction to grant the judgments.

With a growing number of projects facing financial difficulty, the importance of maintaining leverage for securing payment is greater than ever. The project itself remains a prime security target for any contractor, subcontractor or supplier for assuring appropriate attention is given to their claims and that payment will be forthcoming in a timely and unencumbered manner. Some very recent developments in the lien realm emphasize the ongoing attention that is being given to lien statutes and the opportunity they provide for maximizing those considerations of security and leverage.