As the Courts have often stated, in bankruptcy and insolvency law, time is of the essence. Bankruptcy and insolvency legislation allows the Court to craft orders with the specific aim of shielding a Receiver against frivolous actions, such that the Receiver may complete his task of managing property while enforcing the rights of a secured creditor in a timely fashion. The HRH Hotels Ltd. case is one such example where the Court ruled that a plaintiff's claim against the Receiver was frivolous and constituted a collateral attack on the Receivership process.
1117387 Ontario Inc., by court order in October 2003, was placed under receivership for defaulting on payment of a mortgage. In October 2008, the Court was asked to approve the receiver’s third report and the proposed sale of the mortgaged lands. A complicating factor was that the mortgaged lands were subject to environmental contamination as a result of a neighbouring oil and gas facility.
Under Czech law, insolvency petitions (regardless of whether they are filed by a creditor or debtor) and all other insolvency documents must be published in the Insolvency Register by the insolvency court within two hours of receipt. The register is publicly accessible online. Since the launch of the register in 2008, it has served as an effective, modern and transparent tool within the insolvency regulation framework. However, this transparency has also had negative side effects.
In SPV Optimal Osus Limited -v- HSBC Institutional Trust Services (Ireland) Limited & Ors the Court of Appeal rejected an appeal of a High Court decision dismissing proceedings as being frivolous and vexatious and bound to fail on the basis that the proceedings against the defendants were contrary to public policy, void and unenforceable as a matter of law since the assignment of the right to litigate third party claims amou
“Whoever is careless with the truth in small matters cannot be trusted with important matters.”
– Albert Einstein
IN RE: SOUTH BEACH SECURITIES (May 19, 2010)
BUSSON-SOKOLIK v. MILWAUKEE SCHOOL OF ENGINEERING (February 10, 2011)
The U.S. District Court for the Middle District of Florida recently denied a debt collector’s motion for sanctions based on the plaintiff’s filing of allegedly frivolous consumer protection claims, which the plaintiff consumer voluntarily dismissed with prejudice after demand from the debt collector’s counsel, where the debt collector failed to show the claims met the Eleventh Circuit’s two-prong test for frivolity.
We have written in the past about the risks to investors in troubled companies from trustees in bankruptcy seeking recoveries for the estate on theories such as insider trading, breaches of duty and conflicts of interest. While those risks remain real, a recent decision from the Seventh Circuit Court of Appeals should provide some restraint on bankruptcy trustees.