In Water Matrix Inc. v Carnevale, Justice Sanfilippo found that a consent judgment may survive bankruptcy if it arises from a claim that is based in fraud. This allowed a company that was defrauded by a former employee to continue to enforce the company’s judgment after bankruptcy.

Background

The Ontario Superior Court of Justice recently reviewed the indicia of a sham trust in McGoey (Re).

Gerald McGoey, an undischarged bankrupt, and his wife, Kathryn McGoey, claimed to be holding two properties in trust for their children. The Trustee in Bankruptcy brought a motion to have the properties declared assets of the Estate of Gerald McGoey, subject to realization for the benefit of his creditors.

There were six substantive civil decisions released by the Court of Appeal this week. There were many criminal decisions released.

In Wall v. Shaw, the Court determined that there is no limitation period to objecting to accounts in an application to pass accounts in an estates matter. A notice of objection is not a “proceeding” within the meaning of the Limitations Act, 2002.

On November 8, 2018, in a decision delivered unanimously from the bench, the Supreme Court of Canada confirmed that the Crown’s superpriority over unremitted Goods and Services Tax/Harmonized Sales Tax (GST/HST) is ineffective against a secured creditor who received, prior to a tax debtor’s bankruptcy, proceeds from that taxpayer’s assets.1

Where there is a bankruptcy, there is no personal liability of a secured creditor to the Crown for funds received prior to the bankruptcy from a realization of assets that were subject to the deemed trust under the Excise Tax Act (Canada) (“ETA”).

Factual Background

We previously wrote about the decision in The Queen v. Callidus Capital Corporation of the Federal Court of Appeal in our Restructuring and Tax Bulletin, here. The decision, released in July 2017, was overturned on November 8, 2018 by the Supreme Court of Canada, offering sought-after certainty for secured lenders. Access the ruling here.

In a unanimous decision issued November 8, 2018, the Supreme Court of Canada granted the appeal of the decision of the Federal Court of Appeal in Canada v Callidus Capital Corp, 2017 FCA 162.

Over the last year, several court decisions have touched on the legislative conflict between taxation authorities and secured creditors in insolvency situations.

In Esfahani v. Samimi, 2018 ONCA 516 the Ontario Court of Appeal confirmed that a plaintiff pursuing a fraudulent conveyance or preference must recognize that the legal landscapes changes with a bankruptcy and that the effects of a bankruptcy filing cannot be ignored.

We previously published Part 1 of our survey of interesting and important developments in Canadian insolvency and restructuring matters in 2017. This post is the second and final part – with an additional seven highlights and cases. You can also find a printable version containing the complete “Top Insolvency Cases and Highlights from 2017” bulletin on our website.