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.

The Ministry of the Environment appealed a CCAA judge's decision that environmental remediation orders issued against an insolvent company were subject to a stay of proceedings.

The insolvent company had abandoned a contaminated site after selling its other assets.

Applying the Supreme Court's decision in AbitibiBowater, the Court of Appeal found it was sufficiently certain that the Ministry would perform the remediation work itself, making the regulatory orders in substance a provable monetary claim in the insolvency.

The appeal was dismissed.

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.

The appellant sold a waterjet machine to a debtor and perfected its purchase money security interest by registering under the PPSA.

Unbeknownst to the appellant, the debtor immediately transferred the machine to a related company.

The related company later obtained financing from the respondent, who registered a security interest against the related company's assets.

The Court of Appeal held that the appellant's security interest remained perfected and took priority under s. 48(2) of the PPSA, as the appellant registered a financing change statement within 30 days of learning of the unauthorized transfer.

The appellant's discharge of a separate, unrelated registration against the related company did not unperfect its original security interest.

The trustee in bankruptcy appealed an order setting aside its disallowance of a secured claim based on an alleged purchase money security interest.

The court held that the general curative provision in s. 9(2) of the Personal Property Security Act cannot override the specific attachment requirements in s. 11, including the requirement that the debtor sign the security agreement.

A complete absence of execution is not a defect or omission curable under s. 9(2).

The respondent's claimed security interest was therefore not effective against the trustee.