Typically, courts will only rarely and sparingly interfere with contractual rights that parties freely negotiate and agree upon.

However, in Protiva Biotherapeutics Inc. v. Inex Pharma­ceuticals Corp., the British Columbia Court of Appeal recently determined that the courts can adjust contractual rights in order to achieve a workable plan of arrangement proposed by a company under the British Columbia Business Corporations Act (the "Act").

In order to get the information necessary to seize a debtor's assets or garnish his income, Rule 60.18 of the Rules of Court permit a creditor to require a debtor to attend an ex­amination under oath be­fore a court reporter and be questioned in relation to:

(a) the reason for non-payment or non-performance of the judgment;

(b) the debtor's income and property;

(c) the debts owed to and by the debtor;

(d) the disposal the debtor has made of any property either before or after the making of the order;

Courts will only rarely and sparingly interfere with contractual rights that parties freely negotiate and agree upon.

However, in Protiva Biotherapeutics Inc. v. Inex Pharmaceuticals Corp., the British Columbia Court of Appeal recently determined that it could adjust contractual rights in order to achieve a workable plan of arrangement proposed by a company under the British Columbia Business Corporations Act (“Act”).

Should Lenders be Concerned?

In the United States, claims for “deepening insolvency” have been advanced against lenders and investment bankers to insolvent companies as well as against the officers and directors of insolvent companies. Experience suggests that developments in U.S. commercial laws tend to be imported north of the border.1 Accordingly, lenders should be aware of the existence of the theory of deepening insolvency and the risk of creditors attempting to use it in Canada.

What is Deepening Insolvency?