Charles P. Russell

The Canadian Commercial Bank (CCB) faced a solvency crisis and received a $255 million advance from a support group consisting of governments and major banks.

When CCB was subsequently ordered to be wound up, the liquidator sought advice on whether the support group's claim for the advance should rank pari passu with other unsecured creditors or be postponed as a capital investment.

The Supreme Court of Canada held that the advance was in substance a loan, not a capital investment, despite having some equity features like warrants.

The Court also held that the loan did not fall within the postponement provision of the Partnerships Act because the lenders were not receiving a share of the profits, but rather repayment of a fixed debt out of profits.

Finally, the Court declined to apply the doctrine of equitable subordination, finding no inequitable conduct by the support group.

The liquidator of the Canadian Commercial Bank appealed a decision regarding whether interest received on loans after liquidation fell within the scope of security granted under certain agreements.

The Supreme Court of Canada dismissed the appeal, agreeing with the Alberta Court of Appeal that the interest on the loans in question came within the charging provisions of the security agreements.