BANKRUPTCY AND INSOLVENCY
CROSSBORDER
INSOLVENCY
DEVELOPMENTS
A BLOCKBUSTER CROSS-BORDER JOINT
TRIAL FOR THE NORTEL ASSETS AND A
SUPREME COURT OF CANADA DECISION
WERE MAJOR RECENT DEVELOPMENTS
IN CROSS-BORDER INSOLVENCIES
BY JULIUS MELNITZER
Early in 2013, the Supreme Court of Canada (SCC) released its decision in Sun Indalex Finance, LLC v. United Steelworkers. The upshot of the landmark ruling is that pension shortfalls under Ontario's Pension Benefits Act (PBA) may rank ahead of secured creditors' claims
in Companies' Creditors Arrangement Act (CCAA) proceedings. They cannot, however, supersede super-priority debtor-in-possession (DIP) loans.
"The key question was what happens when an employer is winding up a pension plan and
having trouble finding the money to do so?" says Ari Kaplan of Toronto's Koskie Minsky LLP,
whose partner Andrew Hatnay argued the case for the main group of creditor pensioners.
The court ruled that the PBA creates a statutory deemed trust that covers not only contributions paid and due to the date of the wind-up, but any deficiency in wind-up benefits.
"The deemed trust provision is a remedial one," the majority wrote. "Its purpose is to
protect the interests of plan members. This purpose militates against adopting the limited
scope proposed by Indalex [the debtor] and some of the interveners. In the case of competing
priorities between creditors, the remedial purpose favors an approach that includes all wind-up
payments in the value of the deemed trust in order to achieve a broad protection."
20 | LEXPERT • December 2013 | www.lexpert.ca
PHOTO: REUTERS
INDALEX: UNCERTAINTY REMAINS OVER PRIORITY
OF PENSION SHORTFALLS IN CCAA PROCEEDINGS
