Bankruptcy and Insolvency Law

The plaintiff bank sought leave under s. 215 of the Bankruptcy and Insolvency Act to continue an action against a trustee in bankruptcy for damages arising from an unpaid overdraft.

The bank alleged the trustee breached its duty of care by failing to provide notice of the debtor's proposal, sale of assets, and bankruptcy.

The court found that the bank's claim was not frivolous or vexatious and disclosed a factual foundation, particularly regarding the trustee's failure to notify the bank of the bankruptcy when the debtor's accounts held a positive balance.

Leave to continue the action was granted.

The applicant sought directions regarding a creditor claims and distribution process under the Bulk Sales Act for residual net sales proceeds of $5,458.91.

The motion was unopposed.

The court approved the order but expressed significant discomfort with the applicant's use of the Bulk Sales Act, noting that the statute is designed to protect creditors 'in full', whereas in this case, trade creditors would receive virtually nothing after professional fees and priority claims were paid.

The court suggested that the Bulk Sales Act should be limited to situations where creditors will be paid in full, with insolvency legislation used otherwise.

The appellant appealed a Registrar's order that suspended the bankrupt's discharge for one day without imposing any financial conditions, despite her significant income tax debt.

The Superior Court of Justice found that the Registrar erred in law by questioning the validity of the Crown's proven tax claim, which had not been disallowed by the Trustee.

The appeal was allowed, and the bankrupt was ordered to pay $8,000 as a condition of her discharge, balancing the policy objectives of the Bankruptcy and Insolvency Act with her current financial and family circumstances.

The applicant sought an order appointing Grant Thornton Limited as receiver of the respondents pursuant to section 243 of the Bankruptcy and Insolvency Act and section 101 of the Courts of Justice Act.

The respondents, operating a travel agency business, were insolvent and in default of their credit facilities.

The application was unopposed.

The court found it just and convenient to appoint the receiver to facilitate a going concern sale of the business, preserving consumer confidence and employee jobs.

The applicant, a secured creditor owed approximately $36 million, applied for the appointment of a receiver over the debtors' four retirement residences and for the approval of a pre-packaged credit bid sale.

After a prolonged but unsuccessful marketing process, the applicant proposed to acquire the assets for an amount equivalent to the indebtedness.

The court found the appointment of a receiver necessary to maintain the residences as going concerns and approved the sale, finding the credit bid reasonable based on independent appraisals.

The plaintiff, an involuntary creditor due to overdrawn accounts, sought the appointment of a receiver over the corporate debtors' receivables and the individual debtors' real property after the debtors defaulted on a demand loan.

The motion was opposed by the debtors and by prior mortgagees who argued the receiver's mandate should not extend to the real property.

The court found it just and convenient to appoint a receiver over both the receivables and the real property to ensure a fair, transparent, and efficient realization process for all creditors, while respecting the mortgagees' priorities.

The plaintiff sought to recover $25,000 from the defendant, representing a portion of over $153,000 he loaned her during their brief relationship.

The defendant had since made an assignment in bankruptcy and was discharged.

The plaintiff alleged the debt survived the bankruptcy discharge under s. 178(1)(e) of the Bankruptcy and Insolvency Act, claiming the defendant obtained the funds through fraud.

The Small Claims Court dismissed the claim, finding no evidence that the defendant made any fraudulent misrepresentations at the time the loans were advanced.

The defendants in a section 38 Bankruptcy and Insolvency Act fraudulent conveyance action brought a motion for leave to amend their Statement of Defence, issue a third party claim, and discharge certificates of pending litigation.

The court granted leave to amend the Statement of Defence in part, allowing unopposed amendments and certain 'state of mind' amendments subject to strict discovery conditions.

The court refused leave for amendments related to limitations and solicitor negligence, finding them irrelevant or already decided.

The motion to issue a third party claim was dismissed as the proposed claims lacked a factual nexus to the main action.

The request to discharge the certificates of pending litigation was also dismissed because the certificates were reinstated by a Court of Appeal order, which the Superior Court lacked jurisdiction to vary.

The Trustee in Bankruptcy sought an order under s. 164 of the Bankruptcy and Insolvency Act compelling the former Chief Restructuring Officer (CRO) and a secured creditor to produce documents.

The respondents claimed solicitor-client and litigation privilege over the documents.

The Trustee argued that the CRO could not assert privilege against the Trustee and that any common interest privilege was dissolved upon the CRO's appointment.

The court dismissed the motion, holding that the CRO could assert privilege regarding its specific duties and that the common interest privilege between the secured creditor and the CRO (acting as a consultant prior to appointment) was not dissolved.

The applicant, a creditor of the debtor company under CCAA protection, sought an order authorizing it to file a plan of compromise or arrangement and directing meetings of affected creditors to vote on the plan.

The proposed plan did not include a shareholder vote.

The debtor opposed the application, arguing the plan was not in the best interests of stakeholders and improperly excluded shareholders.

The court found that because the debtor's shares had potential equity value depending on the outcome of pending litigation, and the proposed plan would radically alter the economic prospects of the shares, a shareholder vote was required.

The application to order a meeting of creditors without a shareholder vote was denied.

The applicant, Sino-Forest Corporation, sought an order sanctioning a plan of compromise and reorganization under the CCAA.

The plan was supported by the vast majority of creditors, including noteholders, auditors, and underwriters, but opposed by certain funds.

The court found that the statutory requirements were met, the creditors were properly classified, and the plan, including its third-party releases, was fair and reasonable.

The motion was granted and the plan was sanctioned.

The court-appointed receiver of a non-profit housing co-operative moved for approval of an agreement of purchase and sale with a non-profit corporation.

The sale would preserve the property as affordable housing but required an increase in occupancy fees to fund necessary repairs.

A competing bidder submitted a revised offer after the bid deadline, matching the financial terms and offering a one-year freeze on occupancy fees, but without a long-term commitment to affordable housing.

Applying the Soundair test and considering the special factors for co-operative housing, the court found the receiver's process was fair and the recommended offer was not improvident.

The motion to approve the sale was granted.

In a CCAA proceeding, the Applicants (Hollinger Inc. et al.) sought approval of settlement agreements with their former auditors (KPMG) and lawyers (Torys).

The Non-Settling Defendants, including Conrad Black and David Radler, opposed the settlements, arguing the court lacked jurisdiction and that the included third-party releases and bar orders would deprive them of procedural rights to discovery.

The court held it had jurisdiction under the CCAA to manage litigation as a corporate asset.

The court approved the Pierringer-style settlements, finding that the procedural rights of the Non-Settling Defendants could be adequately protected through active case management and the application of the principle of proportionality in discovery.

A receiver was appointed over a fraudulent investment scheme where the deposits of 24 investors were commingled.

The receiver sought directions on how to distribute the remaining funds, which had a significant shortfall.

One group of investors argued for a pro rata distribution based on original contributions, while another argued for the Lowest Intermediate Balance Rule (LIBR).

The court held that LIBR is the general rule for resolving competing claims to commingled funds unless it is unworkable.

Finding that the receiver could practically calculate the LIBR distributions, the court ordered the funds to be distributed according to LIBR.

The applicants moved under the Companies' Creditors Arrangement Act for an extension of the stay of proceedings until June 6, 2012.

A successful bid had been selected following a sale and investor solicitation process, and the extension was required to finalize the purchase agreement and seek court approval.

The court found that the applicants had acted in good faith and with due diligence, and granted the extension as the applicants had sufficient interim financing to proceed.

The applicant bank brought an application under s. 243 of the Bankruptcy and Insolvency Act for the appointment of a receiver and manager over the respondents' assets.

The respondents opposed the application, arguing it was premature and that they should be given more time to address the outstanding demand for payment.

The court found that the respondents were in default, had failed to make agreed-upon payments from a prior adjournment, and that the applicant's security position was eroding.

Concluding that it was just and convenient to do so, the court granted the application and appointed a receiver.

The trustee in bankruptcy sought directions on whether $100,000 of a $275,000 motor vehicle accident settlement, allocated for 'loss of future competitive advantage', constituted property of the bankrupt under s. 67 of the Bankruptcy and Insolvency Act or income under s. 68.

The court applied a purposive approach, finding that the essential nature of the award was compensation for lost future income.

Consequently, the court held that the settlement funds were 'akin to income' and should be treated as income under s. 68 of the BIA, rather than property.

The applicants, Timminco Limited and Bécancour Silicon Inc., sought initial protection under the Companies' Creditors Arrangement Act (CCAA) due to severe liquidity issues and an inability to meet financial obligations.

The court found the applicants to be insolvent debtor companies and granted the initial CCAA order.

The court also extended the stay of proceedings to certain directors, officers, and specific partnership agreements, and approved an Administration Charge of $1 million and a Directors' and Officers' Charge of $400,000.

The appellant, who purchased a portion of the bankrupt company's business, appealed the Trustee's disallowance of various claims totaling over $3 million.

The claims sought reimbursement of expenses and damages allegedly resulting from misrepresentations in unaudited internal financial statements provided prior to the sale.

The court upheld the Trustee's disallowance, finding that the Asset Purchase Agreement contained 'as is, where is' and entire agreement clauses, and that the claims were barred by res judicata due to prior court orders approving the sale and discharging the Chief Restructuring Officer.

The appeal was dismissed.

Following a trial of issues under section 81 of the Bankruptcy and Insolvency Act regarding competing claims to property, the successful claimant sought costs against the unsuccessful claimant, and the unsuccessful claimant sought costs against the Trustee.

The court awarded partial indemnity costs to the successful claimant, finding no litigation conduct warranting elevated costs.

The unsuccessful claimant's request for costs against the Trustee was denied because its own contradictory and incomplete positions necessitated the Trustee seeking the court's directions.