In Capital One v. Solehdin,1 the Ontario Superior Court of Justice recognized judgments of a Louisiana bankruptcy court and held that they were enforceable in Ontario. The judgments were summary judgments against guarantors under their respective guarantees. The decision is significant – it is one of the first cases where guarantors challenged the recognition and enforcement of such judgments of a foreign bankruptcy court on the basis that the foreign bankruptcy court lacked the jurisdiction to grant the judgments.

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”).

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.

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.

Debtor-in-possession financing (“DIP financing”), which is new short-term financing obtained by an insolvent company after the commencement of an insolvency proceeding, is a recurring theme for two primary reasons. First, insolvent companies are generally desperate for an immediate infusion of cash to sustain operations. Second, creditors will usually provide such financing only on a super-priority basis, jumping ahead of existing secured creditors of the insolvent company.

In Royal Bank v. 2021847 Ontario Ltd. et al. (2007), Carswell Ont. 8283, the plaintiff Royal Bank sought summary judgment against the guarantors of a credit facility it granted to 2021847 Ontario Ltd. (“2021847”). The amount the plaintiff sought against the guarantors was the deficiency remaining after the plaintiff had appointed a receiver over the assets of the debtor company. The proceeds from the realization of the receivership were insufficient to payout 2021847’s credit facility.

The risks facing a lending bank if the borrower becomes insolvent are often twofold. Not only are outstanding repayments in jeopardy, but, in the case of debtor`s insolvency, there is also a risk of voidable preference (Insolvenzanfechtung), where the insolvency administrator may challenge repayments already received and loan collateral granted before the insolvency filing.

KWL Advertising Limited (in liquidation) ("KWL") -v- Kountouris & Kountouris, Guernsey UnreportedJudgment, 18 October 2006

Everyone is familiar with the story of the dashing Musketeers – Porthos, Athos, Aramis and d’Artagnan- and their inspirational motto. At the end of his adventures, one member of this famous band retired in order to marry the widow of a wealthy French lawyer, for whom the rallying cry might well have had a different significance.

The Personal Insolvency Act 2012 was signed into law on 26 December 2012.  As of 31 July 2013, all sections of the Act (save for Part 4 which relates to bankruptcy) had been commenced by ministerial order. 

In our Spring Insolvency Update, we provided an overview of the main provisions of the Personal Insolvency Act 2012.  Here we provide an update on some recent developments relating to the legislation.