Bankruptcy & restructuring
The economies of the United States (U.S.) and Canada are closely intertwined. As operations expand across the border, so too do the complexities associated with carrying on business - particularly the insolvency of a company spanning both jurisdictions. As such, understanding how to navigate the complexities of Canadian insolvency regimes is essential to successfully doing business in the country.
1. Legislation and court system
On 5 October 2022, the Supreme Court handed down its decision in the case of BTI 2014 LLC v Sequana SA and others. This is the first time that the Supreme Court has addressed the questions of whether there is a duty owed to creditor where a company may be at risk of insolvency, and the point at which that duty is triggered.
T W Timber Treatment Pty Ltd v Giddings [2022] VSCA 147
The Victorian Court of Appeal has re-affirmed that a director’s signature can indicate an intention to personally guarantee a company’s obligations, even where that signature is qualified and accompanied by contrary indications in the signed document.
The Court also confirmed that a creditor’s rights under a director’s guarantee, including a right to interest, are not affected by a Deed of Company Arrangement (DOCA).
Background
It is common for construction project owners to finance projects through multiple mortgages, especially in times of rising construction costs. However, when an insolvency situation arises, holdback priority claims from contractors and subcontractors are particularly complex when there are multiple building mortgages involved. The Ontario Superior Court (Commercial List) provided new clarity in this regard in its April 29, 2022 decision in BCIMC Construction Fund Corp. et al.
Understanding limitation periods are of crucial importance in the construction industry, particularly when a contractor is faced with unpaid invoices for services or materials rendered. The Ontario Court of Appeal stepped back into the spotlight in this regard with its decision in Thermal Exchange Service Inc. v Metropolitan Toronto Condominium Corporation No. 1289, 2022 ONCA 186, in holding that a defendant's assurances may prolong the "discoverability" of a claim for non-payment.
Background
Re Intellicomms Pty Ltd (in liq) [2022] VSC 228
The proceeding was brought by the liquidators of Intellicomms Pty Ltd (the Company) seeking relief in relation to a Sale Agreement dated 2021 between the Company and the defendant, Tecnologie Fluenti Pty Ltd (the Purchaser), involving the sale of certain business assets of the Company to the Purchaser.
Cathro (liquidator), in the matter of Petsamo No 14 Pty Ltd [2022] FCA 399
Bioaction Pty Ltd v Ogborne, in the matter of Bioaction Pty Ltd [2022] FCA 436
Aviation 3030 Pty Ltd (in liq) v Lao, in the matter of Aviation 3030 Pty Ltd (in liq) [2022] FCA 458
Can the remedies available for an unreasonable director-related transaction under section 588FDA of the Corporations Act 2001 (Cth) (Act) be awarded in the case of a solvent company? This was the key legal question in the recent case of Aviation 3030 Pty Ltd (in liq) v Lao, in the matter of Aviation 3030 Pty Ltd (in liq) [2022] FCA 458. Ultimately, Justice Anastassiou answered this question in the affirmative.
Morton as liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited [2021] FCAFC 228
The Full Court of the Federal Court confirms that a statutory set-off under s 553C(1) of the Corporations Act2001 (Cth) is not available against a liquidator’s claim for the recovery of an unfair preference under s 588FA of the Act.
Background