On April 6, 2011, the Ontario Superior Court of Justice released its decision in the priority disputes between the lessors and aviation authorities resulting from the Skyservice receivership. The Court, in interpreting and applying the decisions in Canada 3000 and Zoom Airlines, may have raised the bar for lessors to defeat the seizure and detention rights of the aviation authorities in Canada.

On April 7, 2011, the Ontario Court of Appeal released its judgment in theRe Indalex Limited case (Indalex).1 The decision addresses the interplay between the deemed trust provision in the Ontario Pension and Benefits Act (PBA)2 and the federal Companies’ Creditors Arrangement Act (CCAA),3 as well as the fiduciary duties of pension plan administrators in CCAA proceedings. Indalex is important for pension plan sponsors and administrators for a number of reasons:

On April 7, 2011, in the context of a liquidating CCAA that achieved a going concern sale of the debtor’s business, the Ontario Court of Appeal held that:

Everyone loves a bargain – accordingly, there is a lot of interest when liquidators and other insolvency practitioners put a business up for sale. Purchasers jostle like shoppers in the Myer stocktake sale, trying to position themselves as the perfect purchaser. At the same time they try to convey their concern about the value of the business or assets – everyone expects a discount for a distressed business.

Recent regulations confirm that the GST/HST deemed trust has priority over all security interests and charges except for land or building charges. That exception has its own limitations. It is limited to the amount owing to the secured creditor at the time the tax debtor failed to remit the GST/HST. It also forces the secured creditor to look first to its other security; a kind of forced marshalling.

On December 16, 2010, the Supreme Court of Canada ( SCC) released its decision in Re Ted Leroy Trucking Ltd. In its decision, the SCC affirmed the importance of the Companies’ Creditors Arrangement Act (CCAA) as a flexible restructuring tool, and clarified the source and limits of the Court’s authority during CCAA proceedings. Furthermore, the Court overruled the judgment of the B.C.

On October 26, 2010, the British Columbia Court of Appeal (the Court) released its decision in Canadian Petcetera Limited Partnership v. 2876 R Holdings Ltd., 2010 BCCA 469 (Petcetera), an important case that addresses the rights of landlords when a tenant has filed a Notice of Intention to make a proposal (NOI) under the Bankruptcy and Insolvency Act (the BIA).

Introduction

On 24 November 2009, ASIC released Consultation Paper 124 which provides guidance for directors on their duty to prevent insolvent trading which is imposed by section 588G of the Corporations Act 2001.

The economic climate over the past two years has seen a growing number of corporate insolvencies. There is also evidence that directors, and particularly directors of small to medium size enterprises, do not fully understand their duty to prevent insolvent trading.

In the recent decision of Justice Cumming In the Matter of the Proposal of Hypnotic Clubs Inc. (“Hypnotic” or the “Debtor”) the court dismissed a motion by the Debtor for a sale of its assets pursuant to s.65.13 of the Bankruptcy and Insolvency Act (“BIA”).