Bankruptcy and Insolvency Law - SCJ

In a mini-trial of an agreed issue arising from judgment-enforcement litigation, the court held that after the debtor's bankruptcy and discharge, any claim under the Fraudulent Conveyances Act belonged to the bankruptcy estate and could only be pursued by the trustee or a creditor acting under s. 38 of the Bankruptcy and Insolvency Act.

The plaintiff's motion to continue personally against the bankrupt debtor on the theory that the claim survived discharge under s. 178(1)(d) was dismissed.

On the factual issue tried, the court found that a series of real estate transfers and mortgage transactions involving family members and related parties were undertaken with intent to defeat, hinder or delay the plaintiff's collection efforts.

The court made no liability ruling on remaining non-FCA causes of action and reserved costs.

In a receivership motion concerning accounts receivable insurance, the moving party sought a declaration that no outstanding disputes remained under the policy so as to trigger payment by the insurer.

The court held that the policy’s Dispute Clause was broadly worded and suspended payment where any legitimate dispute between the insured and the buyer called into question the amount owing, including set-off claims arising from unrelated shipments.

The court rejected the argument that the clause was shipment-specific and found that the policy contemplated an ongoing buyer relationship in which unresolved unrelated complaints could affect the calculation of loss.

The motion was dismissed and costs were fixed in favour of the responding party.

In a CCAA proceeding, a group of employees moved for appointment as court-appointed representatives for non-opt-out employees in the insolvency proceedings.

The Initial Order had already appointed representative counsel and required a process to identify up to seven employee nominees.

The court accepted that the proposed representatives reflected different employee roles and regions across Canada, noted the support of the applicants and monitor, and granted the motion.

In a Commercial List costs decision arising from competing receivership-related applications and motions, the applicant sought substantial indemnity costs based on contractual costs clauses in loan documentation.

The court held that, although contractual rights to solicitor-and-client-type costs are generally enforced, the unresolved allegation that the applicant breached a forbearance agreement constituted a special circumstance making an immediate substantial indemnity award inappropriate.

Applying the Rule 57.1 factors and rejecting reliance on outdated historical costs guidelines, the court fixed partial indemnity costs at $160,000 inclusive of fees and disbursement.

The request to require the respondent to pay the receiver's fees and disbursements was refused.

The mortgagees of one property subject to a court-appointed manager sought to vary a without-notice management order so that the manager’s charges would rank behind their mortgage and no fees would be allocated to that property.

The court held the motion was not brought forthwith as required by Rule 37.14(1), given the mortgagees had notice of the order for months before serving and scheduling their variation motion.

The court further held the mortgagees had acquiesced in the manager’s continued administration of the property while knowing the manager was incurring fees in reliance on court-ordered priority.

Applying the receiver-priority principles in Kowal, the court found the manager’s charges were properly granted and refused to disturb the priority scheme.

The applicant sought recognition in Ontario of U.S. Chapter 11 proceedings involving a large casino-entertainment corporate group, including an Ontario subsidiary managing the Windsor casino.

The court held the applicant was a proper foreign representative and that the U.S. proceeding qualified as a foreign main proceeding because the debtors’ centre of main interests was in the United States.

The court granted the initial recognition order and supplemental relief to preserve the status quo and protect Canadian assets while the U.S. venue dispute remained unresolved.

The supplemental order was modified to exclude a stay of actions against directors and officers.

The applicants sought a bankruptcy order against the respondent mining company under s. 43(1) of the Bankruptcy and Insolvency Act.

The court held the applicants had not established creditor status because their asserted claims were contingent and actively disputed in an existing action accompanied by a substantial counterclaim.

The court also found no act of bankruptcy within s. 42(1), rejecting reliance on an insolvency admission in pleadings because of absolute privilege and finding insufficient evidence that liabilities were generally unpaid.

In any event, the application was dismissed under s. 43(7) because it was brought for an improper purpose, namely to eliminate the respondent's counterclaim and gain control over its mining claims.

The defendants sought leave to appeal a motion decision permitting a fully subrogated insurer to continue an action in the names of insureds despite one insured being an undischarged bankrupt when the action was commenced.

The court held the proposed appeal raised important issues of insurance and insolvency law and that there was good reason to doubt the correctness of the motion judge's ruling.

Applying settled bankruptcy and subrogation principles, the court held that the bankrupt insured's cause of action vested in the trustee and that a subrogated insurer could assert only the rights available to the insured.

Because no assignment from the trustee was obtained before the limitation period expired, leave to appeal was granted.