The “Indoor Management Rule” is well established in Canadian law. This common law rule holds that parties dealing with a corporation, acting in good faith and without knowledge of any irregularity, are entitled to assume that a corporation’s internal policies and proceedings have been followed and complied with. Some elements of the rule are codified in the various provincial business corporations statutes.

Introduction

This paper aims to present a brief summary of significant legal decisions over the past year, as they relate to and impact Ontario consumer bankruptcy and insolvency practitioners. It is by no means necessarily comprehensive or exhaustive.

Effect of an Order of Discharge on driver’s licenses and outstanding penalties

Introduction

A bankruptcy discharge hearing is the forum for the Court’s determination of a bankrupt’s application for discharge which has been opposed by one or more of: a creditor, the Trustee, or the Superintendent of Bankruptcy. This paper will aim to provide practical advice on preparing for and arguing an opposed discharge, whether from the perspective of the bankrupt, an opposing creditor, or the Trustee.1

Discharge

The British Columbia Court of Appeal has overturned the B.C. Supreme Court decision inKBA Canada1, which was reviewed in the September 2012 issue of Fully Secured.

In a decision released on June 25, 2014, the US Court of Appeals for the Second Circuit held that ASARCO LLC could not maintain CERCLA cost recovery actions against the trustees of residuary trusts created by the will of John D. Rockefeller, Sr. ASARCO, as part of its emergence from Chapter 11 bankruptcy, paid the US, the State of Washington, and the Port of Everett, Washington $50.2 million to settle pending CERCLA claims at two Superfund sites in Washington State.

A unanimous Supreme Court, in Executive Benefits Ins. Agency, Inc. v. Arkinson (In re Bellingham Ins. Agency, Inc.), 573 U.S. ___ (2014), confirmed a bankruptcy court’s power to submit proposed findings of fact and conclusions of law for the district court’s de novo review, even though such court is constitutionally barred from entering a final judgment on a bankruptcy-related claim under Stern v. Marshall.

In the High Court decision of Jackson v Baker Tilly (unreported, 10 April 2014), the liquidators of an insolvent company successfully applied for the company's accountants to produce documents detailing their dealings with the company.

A recent decision by the U.S. District Court for the Western District of Washington found that certain distressed debt funds were not “financial institutions” under the definition of “Eligible Assignee” in the applicable loan agreement and thus were not entitled to vote on the debtor’s chapter 11 plan of reorganization. The District Court decision affirmed a bankruptcy court decision enjoining loan assignments to the funds and recently denied the funds’ motion to vacate the decision.”¹

In a novel decision, the United States Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are “generalized claims” which belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.

Background

What does the U.S. doctrine of equitable subordination have to do with Canada? Superficially, the answer may be: not much. But for many financing and insolvency professionals here in Canada, there remains a palpable sense that the U.S. doctrine will eventually, if not inevitably, find its way fully across the U.S. border into Canada. So, perhaps the more appropriate response really ought to be: not much, at least not yet! It is because of this anticipation that it is worthwhile, from time to time, to summarize the central aspects of the U.S.