Reprinted with permission from the March 18, 2011 issue of The Legal Intelligencer © 2010 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
Over the last couple of years, the predominant goal in many business bankruptcy proceedings has been the sale of substantially all of the estate's assets. Such bankruptcy sales are often favored by buyers under Section 363(f), which enables a "free and clear" transfer of the assets.
Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.
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Knowing how much money you owe and are owed is critical when considering disputes with other parties. You need to consider whether a right of set-off exists between you and the other party.
Where the entirety of a debt is not included in an agreement to settle, a creditor can continue to prove in a bankruptcy for the balance.
36979 Darin Andrew Randle v. Her Majesty the Queen
(B.C.)
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Lenders should be aware that a broad definition of “wages” owing to employees of a borrower/customer in bankruptcy or receivership can take priority over what a lender might otherwise believe is its “first ranking charge” against the borrower.
Where a debtor's assets exceed his liabilities, the onus is on the debtor to prove he can not pay his debts if a creditor seeks to annul the bankruptcy order.
In Paulin v Paulin and another, the defendant petitioned for his own bankruptcy claiming he was unable to pay his debts. The claimant applied for the order to be annulled claiming the defendant could afford to pay his debts and was deliberately attempting to defeat her claims in the matrimonial proceedings.
In Paul L. Schnier v. Her Majesty the Queen,[1] the Tax Court of Canada (TCC) dismissed a motion to quash an appeal brought on the basis that the appellant did not, as an undischarged bankrupt, have the capacity, pursuant to Section 71 of the Bankruptcy and Insolvency Act, to deal with property, including the ability to bring an appeal. The Appellant believed he was required to file the appeal, but did not obtain the trustee in bankruptcy’s permission when he commenced the appeal.
A party cannot appeal a decision made in bankruptcy proceedings by reason only of a personal interest in the outcome. An economic interest is a pre-requisite.
This was confirmed by the court in Sands and another v Monem and another, in which the bankrupt had transferred the interest in his home to his wife before being made bankrupt. The transfer was made allegedly in order to settle a debt, although this was not reflected in the documentation. That transfer was successfully set aside as a preference by the bankrupt's trustee.