Bankruptcy and Insolvency Law - SCJ

The receiver, Ernst & Young Inc., moved for approval of its activities and its fees and disbursements in the receivership of Hanfeng Evergreen Inc. The former CEO and his spouse opposed the motion, seeking conditions to protect their position in separate litigation and demanding further document disclosure to assess the fees.

The court approved the receiver's activities, noting that such general approval does not constitute fact-finding that would bind the objectors in other litigation.

The court also approved the fees and disbursements, finding them fair and reasonable under the Belyea factors, and rejected the objectors' demands for further docket disclosure as disproportionate and misdirected.

The Monitor in a CCAA proceeding sought to declare void as an unjust preference $12 million in HST payments made by the insolvent debtor to the Canada Revenue Agency shortly before commencing a proposal proceeding.

The court dismissed the motion, finding that the payments were funded by an inter-company loan specifically earmarked for the tax liability, meaning the transaction was economically neutral to the debtor and did not prejudice the recovery of unsecured creditors.

The Receiver of a bankrupt masonry contractor sought directions to distribute remaining funds to a secured creditor.

A subcontractor opposed the distribution, arguing the funds were subject to a deemed trust under the Construction Lien Act and excluded from the bankruptcy estate.

The court found that the funds did not meet the certainty of subject matter required for a trust under general trust principles, as all funds were commingled in a single account.

The court ordered the funds distributed to the secured creditor.

In the context of Target Canada's CCAA proceedings, the Monitor sought advice and directions on whether to accept amended claims filed by Bell Canada and Bell Nexxia.

Bell sought to increase its original claims by approximately $4.1 million due to inadvertent calculation errors discovered after the claims bar date and after the original claims were admitted.

Target Corporation opposed the amendment.

Applying the Blue Range test, the court found that Bell acted in good faith, the errors were inadvertent, and admitting the amended claims would not cause relative prejudice to other creditors.

The court directed the Monitor to accept the amended claims for review, with Bell to bear the reasonable costs incurred by the Monitor and Target Canada due to the error.

The respondent brought a motion for summary judgment to dismiss the applicant's claims for retroactive child support, equalization of net family property, and a resulting trust over her pension.

The court dismissed the claim for retroactive child support because the adult child was no longer a student and therefore not a 'child of the marriage' when the application was commenced.

The equalization claim was dismissed because it was a claim provable in bankruptcy and was extinguished when the respondent was discharged from bankruptcy.

The resulting trust claim was dismissed for lack of factual foundation.

The applicant's claim for a divorce order was permitted to proceed.

In an insolvency proceeding involving syndicated mortgage investments, a claimant sought approximately $103,000 in fees for services allegedly provided to the Investors' Committee, along with a court-ordered priority charge against the respondents' assets.

The court dismissed the claim, finding that no binding contract was ever formed as the parties had not agreed on all material terms and the claimant had insisted on a signed agreement.

The court also rejected a claim in quantum meruit, concluding the claimant provided services gratuitously while negotiating a retainer.

Finally, the court held there was no basis in its inherent jurisdiction to grant a retroactive priority charge for the claimant's fees.

Following the dismissal of the bankrupt's appeal of his discharge conditions, the court determined the issue of costs.

The bankrupt requested that the trustee's costs be paid out of the $61,000 he was ordered to pay into the estate, while the trustee sought substantial indemnity costs of $6,915.31 due to allegations made against it.

The court rejected the bankrupt's request, finding it unfair to impose the costs on the creditors.

The court also declined to award substantial indemnity costs, noting the allegations were not severe enough.

The bankrupt was ordered to pay costs of $4,250 on a partial indemnity basis.

In the context of CCAA proceedings, the Board of Directors of Essar Steel Algoma Inc. brought a motion seeking to resume regular board meetings, receive confidential information, and be paid outstanding fees.

The Board had been previously disengaged due to an information sharing protocol and a prior court endorsement because the parent company was a bidder.

Although the parent company was no longer a bidder, the court dismissed the motion to reengage the Board, finding that the existing governance arrangements were functioning well and reengaging the Board could disrupt the restructuring.

However, the court granted the Board's request to have its independent counsel paid and included in discussions regarding the directors' potential liability.

The applicant, a major Canadian toy retailer, sought an initial order under the Companies' Creditors Arrangement Act (CCAA) due to a liquidity crisis triggered by the bankruptcy filing of its US parent company.

The court granted the initial order, including a stay of proceedings to stabilize operations ahead of the holiday season.

The court also approved a debtor-in-possession (DIP) lending facility to replace existing secured debt and fund ongoing operations, while limiting the DIP lenders' enforcement rights to require court approval.

Provisions allowing the Monitor to pay pre-filing claims of critical suppliers and establishing charges for administration and directors/officers were also approved.

The applicant sought a declaration that a bankrupt's notional gift of 50% equity in a matrimonial home to his spouse was a transfer at undervalue and void under s. 96(1)(b)(i) of the Bankruptcy and Insolvency Act.

The court found that even if the transfer was at undervalue, it would exercise its equitable discretion not to declare it void.

The court considered factors such as the spouses' good faith, the lack of intention to defeat creditors, the spouse's non-monetary contributions to the family, and her need for the funds to support herself and her children.

The Judgment Creditors brought a motion within a receivership proceeding seeking a declaration that they held valid, independent unsecured debt claims against two insolvent corporations, 230 and MM, arising from a consent order and minutes of settlement.

The Receiver and a preferred shareholder opposed, arguing the claims were equity claims.

The court applied the Van Laun principle to look behind the consent order and found that the obligations to purchase the shares and pay accrued dividends contravened the solvency and cross-holding provisions of the Business Corporations Act.

Consequently, the claims were unenforceable as debt, except for the costs component, which was remitted to the Receiver for a reasonableness review.

Following the dismissal of a motion to set aside assignments made by the bankruptcy trustee, the court determined costs.

The bankrupt's request for costs was dismissed as his participation was unnecessary.

The Trustee was awarded costs of $18,500 on a substantial indemnity basis because the moving parties lacked standing as 'aggrieved' persons under the BIA and had impugned the Trustee's integrity.

The bankrupt, a 72-year-old self-employed businessman with significant tax debts, applied for a discharge from bankruptcy.

The discharge was opposed by the Canada Revenue Agency and the Trustee in Bankruptcy.

The court found that the bankrupt had engaged in unjustifiable extravagance and had structured his affairs through a family trust to artificially lower his income.

The court granted a conditional discharge, requiring the bankrupt to pay $100,000 to the Trustee for the benefit of his creditors.

The bankrupt appealed a Registrar's order requiring him to pay $61,000 as a condition of his discharge from bankruptcy, and moved to admit fresh medical evidence regarding his mental health during the period he defaulted on his consumer proposal.

The court dismissed the motion to admit fresh evidence, finding the treating psychiatrist's letters were not sufficiently credible or probative to affect the outcome.

The court upheld the Registrar's decision, concluding there was no error in principle in finding the bankrupt dissipated funds and failed to perform his proposal despite having the means to do so.

The moving party, a creditor, brought a preliminary motion seeking production of a settlement agreement between the proposal debtor and another creditor.

The debtor opposed production, claiming the agreement was confidential and protected by settlement privilege.

The court ordered production of the settlement agreement, holding that settlement privilege does not apply to claims settlements in a BIA proposal process.

The court found that the public interest in maintaining the integrity and transparency of BIA proposal proceedings outweighs any need to encourage settlement by recognizing privilege.

The applicant, owner of a biomass electrical co-generation facility, sought an Initial Order under the Companies' Creditors Arrangement Act (CCAA).

Facing significant debt, construction liens, and operational difficulties, the applicant required a stay of proceedings to implement a sales and investment solicitation process.

The court granted the Initial Order, including a stay of proceedings, authorization to pay critical pre-filing supplier expenses, approval of a $5 million DIP financing facility with a priority charge, and a sealing order over sensitive commercial information.

The moving parties (defendants) sought a temporary stay of the Ontario action on the basis that another proceeding regarding the same subject matter was pending in Florida.

The Florida action had been dismissed on the basis of forum non conveniens, but an appeal was pending.

The court declined to grant the stay, finding that it would be unjust to the responding party (plaintiff) because it was unclear whether the moving parties intended to raise a statute of limitations defence for the period prior to May 5, 2015.

The court held that requiring the moving parties to deliver a statement of defence would clarify the limitations issue without imposing an onerous burden, and dismissed the motion without prejudice to bringing a further motion to stay after the statement of defence was delivered.

Following the dismissal of the plaintiffs' motions to lift bankruptcy stays and the granting of summary judgment dismissing the actions against the defendants, the court determined the appropriate costs award.

The defendants sought over $166,000 in costs.

The court awarded partial indemnity costs of $126,124.12, apportioning the liability among the three plaintiffs based on the proportionate size of their respective claims, finding that the summary judgment motions effectively disposed of the entire actions.

Following the consented annulment of the debtor's bankruptcy proposal, the moving party sought solicitor and client costs of over $62,000.

The court rejected the application of Rules 38.08(1) and 23.05(1), finding that section 197 of the Bankruptcy and Insolvency Act governed the costs motion.

Applying the factors in Rule 57.01(1), the court found the debtor's conduct in filing the proposal was ill-advised but not reprehensible enough to warrant solicitor and client costs.

Finding the claimed hours excessive and unreasonable, the court fixed costs at $8,000 inclusive of HST.

The Monitor in the CCAA proceedings of Nortel Networks Corporation brought a motion to pass its accounts and those of its legal counsel for the period from January 2009 to May 2016.

The fees sought totaled over $250 million CAD and USD combined.

The court applied the Belyea factors to assess the fairness and reasonableness of the fees.

Despite the unprecedented size of the fees, the court found them justified given the massive scale, complexity, and duration of the cross-border insolvency, the extraordinary powers granted to the Monitor, and the highly successful results achieved for the Canadian estate.

The accounts were approved in full.