A Commentary on Recent Legal Developments by the Canadian Appeals Monitor
Since our last post, the Supreme Court has released a significant trilogy of judgments involving issues of federal paramountcy and the Bankruptcy and Insolvency Act (the “BIA”).
The Supreme Court has announced it will hear the appeal in the high profile Indalex Ltd., Re. The appeal is of great interest to the commercial litigation, insolvency and pension bar. Its outcome will be closely watched and may have dramatic impact on Canadian corporate reorganizations.
Background
On December 23, 2007, the Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper (ABCP) announced that an ‘agreement in principle’ had been reached for a restructuring of $33 billion of approximately $35 billion of Canadian ABCP. The repayment of this debt had been frozen pursuant to a standstill created by the ‘Montreal Accord’ as of August 16, 2007.
Prior to December 23, 2020, it had been unclear whether a court had the jurisdiction to grant an order assigning a contract without counterparty consent, on application by a court-appointed receiver (a “Receiver”).
Des modifications importantes à la Loi sur la faillite et l’insolvabilité ("LFI") et à la Loi sur les arrangements avec les créanciers des compagnies ("LACC") entreront en vigueur le 1er novembre 2019 avec l’adoption du projet de loi C-97. Elles auront une incidence importante sur certains aspects des procédures d’insolvabilité entreprises après cette date.
Over the last year, several court decisions have touched on the legislative conflict between taxation authorities and secured creditors in insolvency situations.
The restructuring of Sanjel Corporation and its affiliates (previously discussed here) continues to provide interesting developments on the application and interpretation of the Companies’ Creditors Arrangement Act.
In the spring of 2010, BioSyntech, a start-up biotechnology company, developing a cartilage-repair product, BST-Car Gel, filed a Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act. In the subsequent bankruptcy proceedings, the intellectual property relating to the BST-Car Gel was sold.
Today, the Supreme Court of Canada agreed to hear an appeal of the unanimous decision rendered last April by the Ontario Court of Appeal (OCA) in Re Indalex Limited (Indalex). According to many commentators, the Indalex case turns accepted law on the priority of debtor in possession (DIP) and working capital security on its head and introduces new concerns for employers about how to properly discharge their sometimes conflicting duties under corporate law and under pension law.
On December 14, 2007, Bill C-12 was given Royal Assent. The Bill involves a comprehensive reform of Canada’s insolvency system. A key component of these reforms was the creation of the Wage Earner Protection Program (WEPP). The WEPP provides statutory wage protection for workers when a) their employer becomes bankrupt or subject to a receivership, and b) their employment is terminated as a result.