The Supreme Court of Canada, in a decision that has implications for borrowers and lenders alike, particularly where pension funds are involved, has raised some new hurdles for the country’s banks and their business customers and, at the same time, has bolstered protection for lenders of last resort who finance insolvent companies.
The court’s decision in Sun Indalex Finance, LLC v. United Steelworkers, issued earlier this year, addresses critical questions in insolvency law regarding pension funds and DIP financing.
It has long been standard practice for Court-appointed receivers, monitors and trustees in bankruptcy to include comprehensive disclaimer language in the reports they submit to Court in connection with insolvency proceedings. The reason is simple – these reports are relied on by the Court and other parties to the proceedings, and are often prepared using unaudited and unverified information obtained from management of the debtor company.
During the spring of 2012, the Canadian Appeals Monitor posted a five-part series on the Supreme Court’s judgments in Van Breda, Black, and
Morris Kaiser’s trustee in bankruptcy, Soberman Inc., thought it smelled a rat: while claiming to be impecunious, Kaiser appeared to be living a life of ‘some means’, which included trips to casinos in the US. Kaiser claimed he was drawing advances on the credit card of a buddy, Cecil Bergman, but the trustee suspected the whole thing was a front to shield Kaiser’s assets from his creditors.
In an earlier edition of Fully Secured (June 27, 2012 – Volume 3, Number 2), we reported on the Ontario Court of Justice decision in Snoek 7 where security granted by a borrower (“HSLP”) to a group of individual creditors (“B”) was held to constitute an improper preference and declared invalid following a challenge by the trustee in bankruptcy. B had been one victim of a Ponzi scheme involving numerous unsecured creditors of HSLP.
On February 1, 2013, the Supreme Court of Canada (SCC) released its much-awaited decision in theIndalex case.1 While the central issue in Indalex was the priority of wind-up deficiencies in defined benefit pension plans versus court-ordered debtor-in-possession (DIP) financing charges under the Companies’ Creditors Arrangement Act (Canada) (CCAA), the SCC also considered whether claims for wind-up deficiencies are covered by deemed trusts under the Ontario Pension Benefits Act (PBA).
In 2011-0427101C6 (released this week), the CRA was asked whether a creditor’s acquisition of an interest in a debtor-partnership could qualify as a “seizure” of the debtor-partnership’s property for purposes of s. 79.1. Section 79.1 contains rules (often favorable) for a creditor where the creditor has “seized” property of a debtor as a result of a foreclosure, conditional sale repossession, or similar transaction.
For some, environmental liability is akin to a game of hot potato. In other words, no one wants to be the one left holding the potato when the music stops playing - otherwise they could be facing significant obligations to remedy contaminated lands. As remediation costs can be significant, owners, purchasers and creditors must tread carefully when dealing with contaminated real estate.
On February 13, 2013, the Nova Scotia Department of Labour and Advanced Education announced temporary solvency relief for private sector defined benefit pension plans that can be viewedhere. The measures allow employers up to 15 years to fund solvency deficiencies reported between January 3, 2011 and January 2, 2014, rather than the usual five year period.