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").

The decision of the Ontario Court of Appeal earlier this year in Slater Steel* exposed 10 directors, officers and employees to possible personal liability of $20 million with no meaningful recourse against the insolvent Slater Steel or its assets. This is a reminder that failure to recognize and fulfill fiduciary obligations for a pension plan can expose you to substantial personal liability.

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.

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.

On June 5 2008 the Ontario Superior Court of Justice approved a plan concerning failed assetbacked commercial paper (ABCP). The restructuring called for in the plan can therefore proceed immediately, subject to any appeals from the court approval. This update is a brief survey of the key developments in the efforts to rescue the affected Canadian market for ABCP, which broke down in August 2007.

Breakdown of Market and the Montreal Accord

Although the global “credit crisis” phenomenon has been dominating the headlines for some time, the implications of it in Canada may just be beginning in the form of increased distressed M&A activity. The past decade of unprecedented growth and the abundance of liquidity has been replaced in the past few months by a more conservative lending environment. Around the country, bank loan officers are busy reviewing financial statements and covenant compliance certificates, and assessing loan renewals of corporate clientele.

Pursuant to an Order in Council dated July 4, 2008, July 7, 2008 was established as the date that certain of the provisions of S.C. 2005, c. 47 (the "Insolvency Reform Act 2005") and S.C. 2007, c. 36 (the "Insolvency Reform Act 2007") came into force. The Wage Earner Protection Program Act (the "WEPPA") as well as certain of the amendments to the Bankruptcy and Insolvency Act (the "BIA") made by the Insolvency Reform Act 2005 and the Insolvency Reform Act 2007 are, as a result, now in force.

For the first time ever in Canada, super-priority rights have been given to employees which will take priority over existing secured creditors.

The relationship between Canada and the United States is one of the closest and most extensive in the world. With the equivalent of $1.6 billion in bilateral trade every day3, it is no surprise that a large number of US companies have subsidiary operations and assets located in Canada. Despite numerous socio-economic similarities between both countries and legal regimes both anchored in the tradition of common law, there are a number of legal differences that have the potential to significantly impact US companies doing business in Canada.