Orla McCoy explains the connections between retention of title clauses, insolvency, and the Personal Property Securities Act.
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On June 6, 2014, Justice Brown of the Ontario Superior Court of Justice (Commercial List) released additional reasons1 to his decision in Romspen Investment Corp. v. 6711162 Canada Inc., 2014 ONSC 2781, centred on the cost submissions made by counsel to Romspen Investment Corp. (“Romspen”). Despite a contractual provision in a mortgage agreement that gave the applicant, Romspen, a right to full indemnity costs from the respondents, Justice Brown found that the legal fees incurred by counsel to Romspen were unreasonable.
Key Points:
Principals or contractors dealing with insolvent downstream companies should ensure they can properly substantiate any counterclaims.
Usually a principal is not entitled to rely on a set-off or counterclaim to resist court proceedings to recover a debt under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act). However because of the operation of section 553C of the Corporations Act, the situation is different if the claimant is in liquidation.
Insolvent subcontractor’s claim
Factoring is a common way for businesses to monetize current assets. Typically, in a factoring transaction, an enterprise sells its accounts receivable to a third party (commonly a bank, but not always), which, in exchange for a discount on the value of the receivables, takes on the effort and time commitment related to collecting the accounts.
The recent decision by the Court of Appeal for Ontario (the “Court”) in 306440 Ontario Ltd. v. 782127 Ontario Ltd.1 serves as a cautionary reminder to secured creditors that their position may not always be at the top of the insolvency food chain, even when they have taken all the proper steps to perfect their security interests.
On December 1, 2014, the Court of Appeal for Ontario (the “Court of Appeal”) released its decision, written for the Court of Appeal by Madam Justice Pepall, in Bank of Nova Scotia v. Diemer, 2014 ONCA 851 (“Diemer”). The Court of Appeal dismissed the court-appointed receiver’s (the “Receiver”) appeal of the order of Justice Goodman, which, among other things, reduced the fees of counsel (“Counsel”) to the Receiver.
Key Points:
There are three things prudent insolvency practitioners can do when left with non-company assets.
A not too infrequent issue for insolvency practitioners: what can you do with unclaimed assets of third parties? Clayton Utz recently acted for the receivers and managers of Arcabi Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (known as “The Rare Coin Company”) and developed a strategy to deal with the issue.
Background
Key Points:
Courts will limit an administrator's liability where proposed funding is to be used directly to advance an agenda consistent with the objects of Part 5.3A of the Corporations Act.
A recent decision of the NSW Supreme Court highlights the flexibility of Part 5.3A of the Corporations Act and the ability of administrators to seek orders protecting their interests and facilitating restructures, and was the first stage of what promises to be a novel and challenging administration (In the matter of Nexus Energy Ltd [2014] NSWSC 1041).
Bankruptcy and insolvency professionals should take note of two recent Ontario Superior Court decisions that put professional fees in the spotlight. TNG Acquisition Inc. (Re), 2014 ONSC 2754 [Commercial List] (“TNG Acquisition”) and Bank of Nova Scotia v. Diemer, 2014 ONSC 365 (“Diemer”), saw Brown J. and Goodman J., respectively, reduce fees for court-appointed officers and their legal counsel on the basis that the amounts sought were unreasonable in consideration of the work performed.
Key Points:
This case presented a difficult and unique set of circumstances for the court to navigate while the scheme clock was ticking.
The recent approval of the David Jones scheme of arrangement demonstrates how, in the absence of shareholder opposition, the inexorability of a scheme timetable can cause problems for a court when there is a major development after the first court hearing.