November 04, 2015
A Lexpert article on the insolvency claim implications of the Ontario Court of Appeal’s (OCA) decision in Grant Forest Products v. Toronto-Dominion (Grant Forest) references Torys’ bulletin, “Court Sheds Light on Prioritizing Insolvency Claims.” The bulletin, authored by Scott A. Bomhof, Mitch Frazer, Tom Zverina and Lily Coodin, provides an analysis of the OCA decision and its impact on priority disputes between pension claims and secured creditors during insolvency proceedings. Below is an excerpt of the article that contrasts this decision with the Sun Indalex Finance, LLC v. United Steelworkers (Indalex) decision, considered a key precedent for this type of dispute until now.
The Court of Appeal did not explicitly uphold this ruling. It did, however, distinguish the facts in Grant Forest from Indalex, pointing out that the wind-up in Indalex had occurred before the CCAA [Companies’ Creditors Arrangement Act] proceedings started.
According to a recent Torys LLP bulletin, “Although the OCA did not expressly affirm Justice Campbell’s conclusion on this point (i.e. that the PBA [Pension Benefits Act] deemed trust priority only applied to plans that are wound up before the commencement of insolvency proceedings), they did not question his findings in any way.”
On this view, Grant Forest serves to contain the impact of Indalex on secured creditors by limiting the circumstances in which deemed trusts apply to alter priorities in CCAA proceedings. “This should give comfort to secured lenders, especially where secured credit facilities contain covenants restricting the commencement of such wind-up proceedings,” the Torys lawyers write.
To read the full article, click here.