An “Administration Charge” under the CCAA
The Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (“CCAA”) permits a court having jurisdiction over proceedings for the restructuring of an insolvent company to make certain orders, to secure payment of the fees of certain officials involved in those proceedings, including the Monitor of the insolvent company appointed for the restructuring proceeding.
A surprising judgment re the “Administration Charge”
Punj Lloyd Ltd (PLL), the ultimate parent of Simon Carves Ltd (SCL), provided 'letters of support' (what would in North America be called 'comfort letters') indicating to the board of SCL that PLL would 'provide the necessary financial and business support to ensure that [SCL] continues as a going concern'. This is precisely what SCL did not do: it went into administration, leaving invoices unpaid and unsecured creditors largely out of luck.
It has long been standard practice for Court-appointed receivers, monitors and trustees in bankruptcy to include comprehensive disclaimer language in the reports they submit to Court in connection with insolvency proceedings. The reason is simple – these reports are relied on by the Court and other parties to the proceedings, and are often prepared using unaudited and unverified information obtained from management of the debtor company.
On April 2, 2013, Justice Mesbur of the Ontario Superior Court of Justice (Commercial List) granted an application brought by Business Development Bank of Canada (“BDC”) for the appointment of a receiver over the assets, undertakings and properties of Pine Tree Resort Inc. and 1212360 Ontario Limited, operating as the Delawana Inn in Honey Harbour, Ontario (together, “Delawana”).
On February 1, 2013, the Supreme Court of Canada (the “SCC”) released its long-awaited decision in Sun Indalex Finance, LLC v. United Steel Workers1 (“Indalex”). By a five to two majority, the SCC allowed the appeal from the 2011 decision of the Ontario Court of Appeal (the “OCA”) which had created so much uncertainty about the relative priorities of debtor-in-possession (“DIP”) lending charges and pension claims in Companies’ Creditors Arrangement Act (the “CCAA”) proceedings.
The Companies’ Creditors Arrangement Act1 (the “CCAA”) is by far the most flexible Canadian law under which a corporation can restructure its business. When compared against theBankruptcy and Insolvency Act2 (the “BIA”), the CCAA looks like a blank canvass and lends itself well to invention and mutual compromise.
Morris Kaiser’s trustee in bankruptcy, Soberman Inc., thought it smelled a rat: while claiming to be impecunious, Kaiser appeared to be living a life of ‘some means’, which included trips to casinos in the US. Kaiser claimed he was drawing advances on the credit card of a buddy, Cecil Bergman, but the trustee suspected the whole thing was a front to shield Kaiser’s assets from his creditors.
On February 1, the Supreme Court of Canada (the “SCC”) released its long-awaited decision in Sun Indalex Finance, LLC v. United Steel Workers. By a five to two majority, the SCC allowed the appeal from the 2011 decision of the Ontario Court of Appeal (the “OCA”) which had created so much uncertainty about the priority of pension claims in Companies’ Creditors Arrangement Act (the “CCAA”) proceedings.
In October 2012, The Futura Loyalty Group Inc. (“Futura”) commenced proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”). On November 13, 2012, Justice Brown of the Ontario Superior Court of Justice (Commercial List) (the “Court”) considered Futura’s request to permit pre-filing, prepayment obligations to its key customers.
The central question in Rubin v Eurofinance SA, [2012] UKSC 46, was whether the English courts ought to recognise the order or judgment of a foreign court to set aside transactions determined to be preferential or to have been at an undervalue, in circumstances where the defendant in the foreign proceedings was not present in the foreign jurisdiction or had not voluntarily submitted to its courts.