John D. Marshall

In a joint cross-border insolvency trial concerning the allocation of approximately $7.3 billion in lockbox funds from the sale of global business lines and residual intellectual property, the court interpreted the Master R&D Agreement as an operating transfer-pricing document that granted limited licence rights but did not govern post-insolvency allocation.

The court rejected both the position that one Canadian debtor owned all sale proceeds by virtue of legal title and the position that the EMEA debtors jointly owned all intellectual property by operation of law.

Applying unjust enrichment principles and the broad remedial jurisdiction available in CCAA proceedings, the court held that a just result required a pro rata allocation among debtor estates based on allowed claims.

The court further directed that duplicate claims be counted only once for allocation purposes, that intercompany claims be included, and that interim distribution proposals be brought forward.

The moving parties, representing non-union active employees and retirees of a company in separate CCAA proceedings, sought leave to intervene in an appeal after oral arguments had concluded and judgment was reserved.

The appeal involved issues under the Pension Benefits Act and the Personal Property Security Act that could significantly impact the moving parties' interests.

The Court of Appeal granted the motion to intervene, finding the moving parties would provide a useful perspective.

To prevent injustice, the intervention was limited to existing issues and the record, and the moving parties were ordered to pay the responding party's reasonable costs for responding to their factum.

In CCAA proceedings arising from the liquidation of a multinational telecommunications company, bondholders claimed entitlement to post‑filing interest exceeding US$1.6 billion in addition to principal and pre‑filing interest of approximately US$4.092 billion.

The court considered whether the common law "interest stops rule" applies in CCAA proceedings, particularly in a liquidating CCAA context.

Applying insolvency principles of pari passu distribution and relying on Supreme Court guidance emphasizing the integrated nature of the CCAA and BIA regimes, the court held that post‑filing interest does not accrue against the insolvent estate.

The court rejected arguments that contractual entitlement to interest survives the filing or that distributions require a negotiated plan recognizing such interest.

Accordingly, crossover bondholders were limited to principal and pre‑petition interest claims.

In long‑running insolvency proceedings under the Companies' Creditors Arrangement Act, the court was asked to determine whether unsecured bondholders were entitled to claim post‑filing interest on crossover bonds after the debtor companies entered CCAA protection.

The court considered the common law “interest stops” rule, the pari passu principle governing distribution to unsecured creditors, and the relationship between the CCAA and the Bankruptcy and Insolvency Act.

The court held that the interest stops rule applies in CCAA proceedings and prevents unsecured creditors from claiming post‑filing interest absent a negotiated plan providing for such payments.

Allowing interest to accrue for some creditors during the stay period would undermine the status quo and distort equality among creditors.

The court further held it had jurisdiction to determine the issue even without a proposed plan of arrangement.

A court-appointed receiver sought approval of a sale transaction for a partially completed commercial condominium project owned by the debtor.

The property had been marketed through a court-approved process that produced four offers, all significantly below the amount owing on the first mortgage held by the secured creditor.

The secured creditor proposed a credit bid through a related nominee purchaser at the highest price obtained in the marketing process.

The court accepted the receiver’s evidence that the marketing process had been exhausted and that the proposed transaction represented the best available price in the circumstances.

The court also approved the distribution of purchaser trust deposits to identified unit purchasers, with disputed amounts paid into court pending further determination.

The U.K. Pensions Regulator and Pension Protection Fund Trustee appealed an order finding that their service of a Warning Notice breached the stay provisions in the Initial Order under the Companies' Creditors Arrangement Act.

The Court of Appeal dismissed the appeal, agreeing that the service of the Notice was a nullity.

The Court clarified that the order below does not preclude the appellants from seeking to assert a claim in the CCAA process for pension contribution shortfalls.

The appellant guarantor appealed a summary judgment enforcing a demand guarantee in favour of the respondent bank.

The appellant argued the claim was statute-barred under the Limitations Act, 2002, asserting the limitation period began either when the principal debtor defaulted or when the bank sent an initial courtesy letter.

The Court of Appeal dismissed the appeal, holding that a demand guarantee requires a clear and unequivocal demand before it is enforceable, and the limitation period does not commence until such demand is made.

The court found the bank's initial letter was not a demand, and the action was commenced within the two-year limitation period following the actual demand.

The Royal Bank of Canada (RBC) appealed a decision regarding a priority dispute over a $4.5 million tax refund to an insolvent company.

RBC had a perfected security interest when an interim receiver was appointed under s. 47 of the BIA.

However, RBC failed to file a financing change statement after the debtor's name changed, making its interest unperfected by the time the debtor was assigned into bankruptcy.

The Court of Appeal dismissed the appeal, holding that an interim receiver is not a 'person who represents the creditors of the debtor' under s. 20(1)(b) of the PPSA.

Therefore, the relevant date for determining priority was the date of bankruptcy, at which point RBC's unperfected security interest was ineffective against the trustee in bankruptcy.

The appellants, construction lien claimants, appealed a decision holding that the proceeds of a court-approved asset sale by a company under CCAA protection did not constitute trust funds under ss. 7 and 9 of the Construction Lien Act.

The Court of Appeal dismissed the appeals, finding that the statutory prerequisites for a trust were not met, as the sale proceeds were not 'received by' or 'in the hands of' the owner, but were instead paid to a court-appointed monitor and stood in substitution for the company's fully secured assets.

The appellants appealed a judgment regarding a mortgage dispute involving s. 22 and s. 36 of the Mortgages Act and a tax issue.

The Court of Appeal dismissed the appeal, finding that the trial judge's comprehensive reasons and findings of fact were open to him and there was no basis to interfere.

Costs were awarded to the respondents.

The appellants, various book publishers, appealed a decision determining that they did not have priority over the Bank of Nova Scotia regarding accounts receivable collected by the distributor, General Distribution Services Inc. (GDS).

The publishers argued that because they retained title to the books, they had priority.

The Court of Appeal dismissed the appeal, finding that the arrangement between the publishers and GDS did not require the segregation of funds, allowing GDS to mingle the proceeds with its own money.

Consequently, the relationship was one of debtor and creditor, not trustee and beneficiary, and the publishers did not hold a priority interest.

The appellant husband appealed the dismissal of his motion for judgment based on an alleged settlement between the parties.

The Court of Appeal found that the wife's Offer to Settle and the husband's acceptance did not constitute a binding contract, as the offer left open the future negotiation of a shareholders agreement and was conditional upon further documentation.

The appeal was dismissed with costs.

The appellant bank appealed an order striking portions of its defence in a cheque conversion action arising from employee fraud and forged endorsements.

The court held it lacked jurisdiction over the procedural complaint about allowing a late Rule 21 motion because that issue was interlocutory and required leave to the Divisional Court.

On the merits, the court held that the Supreme Court's strict liability conversion analysis in Boma bars a defence of contributory negligence, but does not eliminate the distinct statutory defence of preclusion under s. 48(1) of the Bills of Exchange Act.

Because the impugned paragraphs were unclear and could amount to contributory negligence, they were properly struck to that extent, but the appellant received leave to amend to plead any legally available defence clearly.

Costs were ordered in the cause.