Craig J. Hill

Companies applied for initial protection under the Companies’ Creditors Arrangement Act in respect of insolvency arising from liquidity issues and substantial unsecured investor debt.

Evidence showed significant unpaid promissory notes and bonds, loan losses, and transfers of company funds to a related management entity.

The court applied the insolvency tests drawn from the Bankruptcy and Insolvency Act and concluded the companies were debtor companies under the CCAA.

A stay of proceedings was granted to permit restructuring or realization of the lending portfolio.

The court also approved an administration charge and a directors’ and officers’ charge to support the restructuring process.

In a liquidating CCAA proceeding, the court considered whether a deemed trust under the Pension Benefits Act arose in respect of pension plan wind-up deficiencies, giving priority over secured creditors.

Applying the Supreme Court's decision in Indalex, the court held that no deemed trust arose because the pension plans were not wound up prior to the CCAA Initial Order.

The court granted the second lien lenders' motion to lift the stay of proceedings to allow a bankruptcy petition to proceed, concluding that imposing a provincial deemed trust priority in the middle of an insolvency proceeding would undermine the predictability and flexibility of the CCAA regime.

The trustee in bankruptcy of a securities firm sought directions on how to calculate a customer's “net equity” under s. 253 of the Bankruptcy and Insolvency Act in the context of the firm’s insolvency.

The dispute concerned whether post‑bankruptcy mark‑to‑market adjustments for commodity futures contracts should be included in the calculation of the customer’s claim.

The customer argued that daily settlement obligations inherent in futures contracts required inclusion of post‑bankruptcy adjustments.

The court held that net equity must be calculated based on the liquidation value of securities positions as of the date of bankruptcy, without adjustments for post‑bankruptcy mark‑to‑market fluctuations.

The trustee’s interpretation was preferred as consistent with the statutory language and the objectives of Part XII of the Bankruptcy and Insolvency Act.