Madeline Klimek

The Court of Appeal for Ontario allowed the appeal of RPG Receivables Purchase Group Inc., finding that the bankruptcy judge erred in concluding that payments made by Specialty Chemical Industries Inc. to American Pacific Corporation were not void as preferences under section 95 of the Bankruptcy and Insolvency Act.

The Court held that an insolvent debtor’s intention to continue in business can only rebut the statutory presumption of intent to prefer if there is a reasonable basis to believe that the business continuation will benefit creditors generally.

Here, there was no such reasonable basis, and the payments must be repaid.

The court considered motions for security for costs and for summary judgment regarding a possessory lien under the Repair and Storage Lien Act (RSLA) in a dispute over helicopter repairs.

Mansfield Heliflight Inc. sought security for costs from USCAN Aviation Sales Ltd., while USCAN cross-moved for summary judgment to confirm its possessory lien and for an order requiring Mansfield to provide security.

The court dismissed the security for costs motion, finding USCAN had a good chance of partial success and that the defendant conceded some amount was owing.

The court granted a declaration that USCAN has a possessory lien over the helicopter, but declined to order Mansfield to pay security into court, maintaining the status quo until the amount of the lien is determined.