Jane Dietrich

The Nortel group of companies filed for insolvency protection across multiple jurisdictions.

Following the sale of Nortel's assets, approximately $7.3 billion was placed in escrow.

The trial judge ordered that these lockbox funds be allocated on a pro rata basis among the various debtor estates, finding that Nortel operated as a highly integrated multinational enterprise and that the master research and development agreement did not govern allocation upon insolvency.

Several parties sought leave to appeal under the Companies' Creditors Arrangement Act.

The Court of Appeal denied leave, finding that the proposed appeals were not prima facie meritorious, did not raise issues of significance to the practice, and would unduly hinder the progress of the proceedings.

The applicant, Zochem Inc., applied under Part IV of the CCAA for recognition of First Day Orders made by the U.S. Bankruptcy Court in Chapter 11 proceedings.

The court found that the U.S. proceeding was a foreign main proceeding, as the debtors were managed as an integrated group from the United States, despite Zochem's operations being in Ontario.

The court also recognized the interim financing order and granted a super-priority charge for the DIP lender, noting that the interim advance was necessary to meet payroll and that the directors must act in the best interests of the Canadian corporation.

The appellant Superintendent of Financial Services appealed a CCAA judge's order lifting a stay of proceedings and ordering the debtor companies into bankruptcy.

The appellant argued that a deemed trust arose under the Pension Benefits Act upon the wind up of two pension plans during the CCAA proceedings, and that this trust should have priority over secured creditors.

The Court of Appeal dismissed the appeal, holding that the CCAA judge reasonably exercised his discretion to transition the proceedings to bankruptcy under the BIA, where provincial deemed trusts are rendered inoperative by the doctrine of federal paramountcy.

In a receivership arising from concurrent CCAA proceedings, the moving party sought to vary a prior receivership order to change the allocation of sale proceeds from certain properties.

The dispute concerned whether surplus proceeds should be applied first to a cross‑collateralized mortgage held by a secured lender or to higher‑interest receiver borrowings incurred for other properties.

The court held that the original order did not finally determine the allocation of proceeds and that new facts concerning the timing and financing of property sales had arisen.

Applying Rule 59.06 of the Rules of Civil Procedure and the commercial reasonableness requirement under the Bankruptcy and Insolvency Act, the court concluded that applying lower‑interest debt before higher‑interest borrowing costs was not commercially reasonable.

The receivership order was amended to prioritize repayment of the receiver’s other borrowings before the lender’s blanket mortgage.

In CCAA proceedings involving a debtor company whose assets had already been sold and where no plan of arrangement was contemplated, the representative plaintiff in a proposed securities class action moved to lift the stay of proceedings and to amend the claims procedure order after failing to file a proof of claim by the claims bar date.

The directors argued that the claims procedure barred the class action against them and extinguished related claims, including access to insurance proceeds.

The court held that both the stay and the claims bar order are discretionary tools intended to facilitate restructuring or liquidation objectives under the CCAA.

Because the restructuring process had effectively concluded and no plan was forthcoming, using the claims bar order to extinguish the class action would serve no functional purpose under the CCAA.

The court exercised its discretion to lift the stay and modify the claims procedure order to permit the plaintiff to proceed with the class action.

A hog supplier sought an order terminating the 30‑day period for an insolvent company to file a proposal under s. 50.4(11) of the Bankruptcy and Insolvency Act or, alternatively, the appointment of a receiver over the debtor’s inventory under s. 101 of the Courts of Justice Act.

The moving party argued the debtor acted in bad faith by accepting livestock deliveries shortly before filing a notice of intention to make a proposal and that creditors would be prejudiced because farmers would otherwise be unable to claim the statutory priority for agricultural suppliers under BIA s. 81.2.

The court held the evidence did not establish lack of good faith, inability to make a viable proposal, inability to obtain creditor approval, or material prejudice to creditors as a whole.

The court further held it would be inappropriate to appoint a receiver solely to trigger the statutory farmer priority scheme where Parliament had chosen not to extend that priority to NOI proceedings.

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.

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.

In CCAA proceedings involving a mining company, competing motions were brought concerning the restructuring process.

The debtor sought directions regarding the procedure for resolving noteholder claims and the alleged misuse of confidential information by certain creditors, while the noteholders sought an order convening a meeting of creditors to vote on their proposed plan of arrangement.

The court held that calling a creditors’ meeting was premature because the proposed plan conflicted with the debtor-in-possession financing facility, had been introduced without meaningful consultation, and unresolved claims and litigation issues could affect voting rights and recoveries.

The court dismissed the noteholders’ motion without prejudice and declined to order disclosure sought by the debtor.

The stay of proceedings was extended to facilitate continued negotiations and mediation.

The applicants, a group of companies owned by Dondeb Inc., sought an Initial Order under the Companies' Creditors Arrangement Act (CCAA) to enable an orderly liquidation of their assets.

The application was opposed by approximately 75% of the secured creditors, who argued for individual receiverships due to a lack of confidence in the applicants' principal and the burden of CCAA administrative costs.

The court dismissed the CCAA application, finding it unlikely that a successful plan could be developed and approved by the creditors.

Instead, the court issued a Global Receivership Order, which was supported by the opposing creditors, to achieve an orderly liquidation at a lower cost.

On a cross-border insolvency recognition motion under ss. 44-49 of the Companies’ Creditors Arrangement Act, the moving party sought recognition of U.S. Chapter 11 proceedings as foreign main proceedings and requested ancillary relief, including enforcement of first-day orders, appointment of an information officer, and an administration charge.

The court held that Chapter 11 proceedings qualified as foreign proceedings and accepted that the moving party was a foreign representative, subject to possible further U.S. court developments.

Applying a centre of main interests analysis that can rebut the registered-office presumption, the court found the Canadian debtors’ centre of main interests was in the United States.

Mandatory and discretionary relief under Part IV of the statute was granted, including the requested supplemental orders and a capped administration charge.

The applicant lender sought declaratory relief confirming the validity and priority of its security interests under a general security agreement granted by the respondent corporations, including over precious metals and a cause of action assigned to a third party.

The assignee opposed the declaration, arguing that a security agreement should not permit a creditor to control litigation brought by the debtor against the creditor itself.

The court accepted that causes of action may fall within the definition of collateral under a general security agreement but emphasized that control of the litigation would be exercised by the court‑appointed receiver rather than the secured creditor.

In those circumstances, the court found no unfairness or absurdity in including the assigned cause of action within the secured collateral.

Declaratory relief was granted confirming that the cause of action formed part of the collateral subject to the security.

The applicants, comprising the First Leaside group of companies, sought an Initial Order under the Companies' Creditors Arrangement Act (CCAA) to conduct an orderly wind-down of their operations.

The court found that the applicants, viewed as a group, were insolvent and that the CCAA could be appropriately used for a liquidating proceeding.

The court also granted super-priority Administration and D&O Charges, dismissing arguments from secured creditors that provincial paramountcy issues precluded such priorities without further notice.

The Chapter 11 Debtors brought a motion under section 49 of the CCAA for recognition and implementation of several orders made by the U.S. Bankruptcy Court, including a Final DIP Facility Order.

The Information Officer noted that the Final DIP Facility Order contained a partial 'roll up' provision that would not be permissible under section 11.2 of the CCAA in a domestic proceeding.

The court held that recognition of the foreign orders was necessary for the protection of the debtors' property and creditors' interests, and that the public policy exception under section 61(2) of the CCAA should be interpreted restrictively and did not apply to prevent recognition.

The appellants, representing unionized and non-unionized former employees of Nortel, appealed a decision dismissing their motions for directions to compel Nortel to pay severance, termination, and retirement benefits during its CCAA restructuring.

The appellants argued that the payments were protected under s. 11.3(a) of the CCAA as compensation for ongoing services, and that the CCAA stay could not override provincial Employment Standards Act obligations.

The Court of Appeal dismissed the appeals, holding that the payments were for past services and that the doctrine of federal paramountcy allowed the CCAA stay to suspend the immediate payment obligations under the provincial legislation to facilitate the restructuring.

The appellant challenged the legal effectiveness of a transfer of shares in a closely held corporation by a bankrupt shareholder's trustee in bankruptcy to another corporation.

The appellant argued the transfer did not comply with share transfer restrictions.

The Court of Appeal dismissed the appeal, finding that equitable title had passed for good consideration and that any defect in the original transfer was cured by a subsequent confirming transfer by the trustee.