Ontario Court Stays Retaliatory Action brought against Bank
Financial institutions seeking to enforce a debt or guarantee through bankruptcy or other court proceedings are sometimes faced with meritless retaliatory court actions brought by debtors attempting to frustrate or further delay payment. In general, Ontario courts will not compel parties to litigate the same dispute on multiple fronts. Instead, one proceeding will be temporarily stayed pending resolution of the other where the same core issues are raised in both.
InterTAN Canada Ltd (“InterTAN”) is a wholly owned subsidiary of US based Circuit City Store, Inc. (“Circuit City”), a consumer electronics retailer. In Canada, InterTAN operates retail stores under the trade name “The Source by Circuit City”. Prior to Circuit City's filing under Chapter 11 of the United States Bankruptcy Code, InterTAN was a borrower under a syndicated credit facility between Circuit City, certain U.S. affiliates, InterTAN, Bank of America NA, as agent, and certain other loan parties (the “Secured Credit Facility”).
One more province has joined the ranks of extending creditor protection to registered savings plans. Alberta’s Civil Enforcement Amendment Act came into force on October 1, 2009 (the “Act”). It applies to registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), deferred profit sharing plans (DPSPs) and registered disability savings plans (RDSPs).
Fair Treatment
The restructuring proceedings of Canwest Publishing Inc and affiliated entities (“Canwest”) has recently provided secured lenders and particularly debtor-in-possession lenders with some food for thought.
In March of this year, four former non-unionized employees of Canwest brought a motion in the Ontario Superior Court of Justice (the “Court”) for the appointment of representative counsel to protect the interests of themselves and similarly situated former employees in the Canwest Companies’ Creditors Arrangement Act (“CCAA”) restructuring proceedings.
The December issue of our e-communiqué considered Justice Pepall’s October 13, 2009 decision to grant CCAA protection to Canwest Global Communications Corporation and a number of related entities. As noted, the decision functions as an excellent guide to the recent legislative amendments affecting the grant of an initial order.
Extension of stay and Settlement Agreement
On September 18, 2009, after years of Parliamentary delay dating back to 2005, wide-ranging amendments to Canada’s Companies’ Creditors Arrangement Act (CCAA) and Bankruptcy and Insolvency Act (BIA) (the “Amendments”) came into force, providing, among other things, new protections for licensees of intellectual property.
It is important to note that the Amendments only apply in the CCAA restructuring and BIA proposal context, and not to conventional bankruptcies or receiverships.
In a recent decision of the Ontario Superior Court of Justice, Re Smurfit-Stone Container Canada Inc., Justice Pepall examined the conflicting interests that arise where companies within a group of restructuring companies have made intercompany loans to one another, and where the board of directors mirror each other in each subsidiary.
Recently, in Re AbitibiBowater Inc., the Province of Newfoundland sought a court order granting it access to the electronic data room of Abitibi created for the purpose of dissemination of certain non-public financial and operation information to its counsel, certain creditors, and the Monitor. The Court denied the Province’s application on the basis that it could not prove itself to be a legitimate stakeholder of Abitibi, and on several policy grounds.
On October 13, 2009, a U.S. Bankruptcy Court in Florida issued an opinion invalidating, under U.S. fraudulent conveyance law, guaranties and security interests given by certain subsidiaries to secure the $200 million first lien and $300 million second lien credit facilities made to the subsidiaries’ parent corporation, TOUSA, Inc. (In re TOUSA, Inc., 2009 WL 3519403, at *1 (Bankr. S.D. Fla. 2009).