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.

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.

A recent Victorian case has worrying implications for financiers and creditors.

A decision of the Victorian Court of Appeal in Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA 14 has the potential to significantly broaden the power of a liquidator to attack a company transaction under section 588FDA of the Corporations Act 2001 (Act) where there are ‘indirect benefits’ to a director or close associate of a director of the company.

Obtain advice before you lodge a proof of debt or vote in a liquidation

Secured creditors should remember that submitting a proof of debt and voting in a liquidation may result in the loss of their security if they get it wrong.

The Supreme Court of New South Wales has delivered a timely reminder to secured creditors of a company in liquidation, where the secured creditor lost its security because it submitted a proof of debt for the full amount of its debt and voted on a poll at a creditor’s meeting for its full debt.

Liquidators are commonly appointed to a company where, prior to liquidation the company was a trustee of a trust. Often when the liquidators are appointed, the company has ceased to be the trustee and a replacement trustee has not been appointed.

In these circumstances, the company in liquidation is a bare trustee in relation to the trust assets and the liquidator will assume this role until a replacement trustee is appointed. Often a replacement trustee is not appointed.

Does the liquidator as bare trustee have a power to sell trust assets?

In its June 11, 2014 decision in Iona Contractors Ltd. (Re), 2014 ABQB 347 (“Iona Contractors”), the Court of Queen’s Bench of Alberta (the “Alberta  QB”)  held that the trust created by section 22  of  the  Builders’ Lien Act (Alberta) is not effective in the bankruptcy of a would-be trustee debtor. This result  is  consistent with, but reached completely independently of, the recent Ontario  Superior Court  of Justice  (Commercial List) decision in Royal Bank of Canada v. Atlas Block Co.

Secured creditors should not allow a liquidator to sell a secured asset without first:

In his recent decision inRoyal Bank of Canada v.Atlas Block Co. Limited, 2014 ONSC 3062 (“Atlas Block”), Justice Penny of the Ontario Superior Court of Justice (Commercial List) held that trust claims pursuant to section 8 of the Construction Lien Act (Ontario) (the “CLA”) do not survive the bankruptcy of the would-be trustee debtor.

If your terms of trade documents don’t have the correct provisions, you can lose goods supplied to a customer that becomes insolvent, even though you may have title to the goods.

A recent Supreme Court decision highlights the need for retention of title suppliers to have adequate terms of trade documents and to register security interests on the Personal Property Securities Register (PPSR) to avoid losing assets if a customer becomes insolvent.

On December 19, 2013, the Ontario Court of Appeal held that the Registrar of Motor Vehicles (the “RMV”) cannot deny vehicle permits to individuals on account of pre- bankruptcy debts owing to the ETR Concession Company Limited (the  “ETR”). Based  on the  intent and  purpose of federal bankruptcy law to permit debtors to obtain a “fresh start,” it was concluded that the provincial act establishing the ETR conflicts with bankruptcy law and was, as a result, unconstitutional in part.

Background