Nortel Networks Corp. of Canada, one of the world’s leading suppliers of fixed line phone network equipment, filed for protection from creditors Wednesday under Chapter 11 of the U.S. Bankruptcy Code. A pioneer in the development of network switches, routers, and fiber-optic technologies used by many of the world’s top telecommunications carriers, Nortel ranked as Canada’s largest company by value at the height of the global telecom market boom of the late 1990s and early 2000s.

In the recent decision of Re WorkGroup Designs Inc.,1 the Ontario Court of Appeal considered the provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA") which relate to valuing and determining the claims of secured creditors in proposal proceedings under the BIA.

Background

In Re Norame Inc. (2008), 90 O.R. (3d) 303(Ont. C.A.), the Ontario Court of Appeal was again called upon to consider various issues of importance to insolvency practitioners. In a decision released on April 28, 2008, Mr. Justice LaForme delivered the judgment for the Court of Appeal and in so doing dismissed the appeal of Paddon + Yorke Inc., in its capacity as trustee in bankruptcy of Norame Inc. (the "Trustee").

On July 7th, the Wage Earner Protection Program (hereinafter the "WEPP") came into force, as instituted by the Wage Earner Protection Program Act[1].

The WEPP applies to workers whose employers have been declared bankrupt or were placed under receivership as of July 7, 2008.

In Ultra Information Systems Canada Inc. v. Pushor Mitchell LLP (2008 Carswell BC 1537 (B.C.S.C.)), one of the corporate Defendants had become bankrupt. There was an issue as to whether some of the bankrupt Defendant’s production documents were privileged. The Court considered whether the Trustee in Bankruptcy could waive the previously claimed solicitor and client privilege and therefore produce the documents.

Prudent lenders should monitor their corporate debtors’ pension plan liabilities and pension plan deficits because they may have a significant impact on the priority of the lender’s security and on the amount the lender will recover if the lender enforces its security.

Priority with respect to Lender’s Security

On July 23, 2008, the Canadian Government proclaimed into force amendments to the Bankruptcy and Insolvency Act (Canada) (the "BIA") that provide super-priority security to claims, subject to specified limits, for unpaid wages ("Unpaid Wage Claims") and unpaid pension plan contributions ("Unpaid Pension Contribution Claims") in a bankruptcy or receivership proceeding, effective as of July 7, 2008.

On July 7, 2008, the Wage Earner Protection Program Act (the "WEPPA") was proclaimed into force, along with complementary amendments to the Bankruptcy and Insolvency Act (the "BIA") and other related statutes. The new program protects a limited amount of the unpaid wages of employees when an employer becomes bankrupt or is placed into receivership, and the amendments to the BIA provide for the priority of some un-remitted pension contributions.

The Wage Earner Protection Program (the "WEPP")

Fourth-time personal bankruptcies come along so rarely that they deserve special recognition. The Supreme Court of British Columbia was recently presented with one such instance when Mr. Thomas Boivin ("Boivin") applied for a discharge from his fourth bankruptcy.

Over the course of about thirty years, Boivin's use of credit left creditors with total debts of approximately $834,000.

While rarely done, section 197(3) of the Bankruptcy and Insolvency Act ( “BIA”) authorizes a court to hold a bankruptcy trustee personally liable for the costs of its conduct. The principles underlying section 197(3) were recently reviewed and discussed by one of the leading authorities on Canadian bankruptcy law, Morawetz J., in the Ontario Superior Court of Justice case of Greenstreet Management where the Court used its statutory discretion to award costs personally against a trustee.