Monthly Archives: June 2013

Can an Insolvency Court Revive A Contract under the CCAA?!?

 

The court has always had the power to enforce the terms of a contract – through the remedy of specific performance or through the much lesser known/used remedy of a positive injunction. But these are usually limited in scope, and not to a terminated contract.

The passing of the Companies’ Creditors Arrangement Act (CCAA), was done to give courts broad powers to facilitate the restructuring of a company – especially big money companies. In a recent judgement, the Superior Court of Quebec revived a distribution contract, to help bring about the sale of a retailer, in lieu of the fact that the agreement was already cancelled by the manufacturer.  The court overturned a notice of termination, temporarily.

The manufacturer appealed, and the court of appeal denied leave to appeal on the basis of expediency and from a procedural standpoint. It is an interesting issue, because it would seem that the court will have constitutional issues and procedural problems in allowing such an order. The temporary suspension is due to expire on June 28, 2013, so it will be interesting to see how the Quebec Superior court revisits the issue…

Bankruptcy Offences, what they are and what can happen!

Under the Bankruptcy and Insolvency Act (BIA) and the Canadian Criminal Code (Code), there are certain acts that a bankrupt has a duty not to commit, and will result in payment or imprisonment as a result.

The most common ones are when a bankrupt:

  • fraudulently disposes of property before (within a certain timeframe) or after a bankruptcy
  • lies to get credit
  • lies or refuses to answer truth fully to questions during an examination for a bankruptcy

RECENT CASE: R. v. Lee (2013) ONCJ 259:

Mrs Lee declared bankruptcy, and stated that she did not expect to receive anything other then her normal income over the next 12 month. She was discharged, and dissolved of close to $100,000.00 in debts.

It then came to light that $40,000 in cash of Mrs. Lee’s had been kept at her daughters house, and the police had seized it in a raid of her daughter’s ex-husband. She submitted an affidavit, stating that the money was hers, and it was ordered returned to her.

Mrs. Lee made no effort to inform the trustee. Instead, the trustee brought an action to get the money, and the order was set aside. Further, charges were brought against Mrs. Lee, on account of these actions.

She was charged with three crimes, and although she got off of two of them – the judge did not find her to be an economically sophisticated woman, and and thought there was an issue with what she knew – she was found guilty of failing to inform the trustee for over a year of the money.

The objective of the BIA is to allow for creditors to be able to obtain what they can, and be able to recover, what they extended to the bankrupt.

 

Property issues… How I can get the property that I am owed!

 

I wrote a blog posting a while back about ex-wives, and what happens to division of property.

There is a ‘family’ law case that came out last year on joint-tenancy, intention, and right of survivor – Hansen Estate v Hansen, 2012 ONCA 112

In that case, a man and his wife were getting divorced, and he had drawn up a new will, with all of his assets going to his kids from a previous marriage, but before he could sever the joint tenancy, he died! So the JT was still effective, therefore giving full title to his ex-wife (from separation). His kids claimed that the father intended to sever, and create a tenancy in common, and gave evidence to that effect. The Court of Appeal agreed.

This case is interesting from an insolvency and partition standpoint. If a person goes bankrupt, and they are a joint tenant, then there is a different process to when there is a tenancy in common, and it’s simply their portion of the house. Same thing if a lawsuit is against a person, and they lose, the writ would different – and the procedure.

Of course if you die, then the intention needs to be interpreted.

Very interesting…but this reminds you that if you are separating, divorced, worried that the person you co-own your property with is going to go bankrupt or file a proposal, or is involved in a lawsuit, sever the interest. 

Come talk to me if you want to discuss real estate issues!

So you think Bankruptcy is the answer…does it take care of my frauds?

Canada Mortgage and Housing Corp. v. Gray (2013), 2013 ONSC 1986, 2013 CarswellOnt 5150 (Ont. S.C.J.)

 

CMHC sought a declaration that the amount of debt owing to from Evan Gray would survive his discharge under Section 178, and for an order allowing them to pursue enforcement. This was a commercial list matter in front of Justice Wilton-Siegel. He used this case as an opportunity to review what would constitute fraudulent misrepresentation for the purpose of Section 178 of the Bankruptcy and Insolvency Act. He stated that false pretenses and fraudulent misrepresentations are not the same. And while the act allows for both to cited to stop a debtor from an absolute discharge, a pretence is simply an attempt to make something that is not the case appear to be true. While misrepresentations, especially fraudulent, requires a. the existence of a representation b. a false representation c. the bankruptcy must know that the representation was false and intended the creditor to act upon it so as to enable the bankrupt to obtain the credit sough and d. that the creditor did rely upon this false representation. Wilful blindness can amount to false representation for the purposes of 178(1)(e) which is also very important, because a bankrupts lack of action can be cause for alarm. Silence, on its own, without silence inferring a representation or constituting wilful blindness will not be a misrepresentation.

 

In this case, the judge said that Gray didn’t know about the fraudulent scheme and was not willfully blind.