Restructuring

NORTH OF THE BORDER UPDATE

This article has been contributed to the blog by Steven Golick and Patrick Riesterer. Steven Golick is a partner in the insolvency and restructuring group of Osler, Hoskin & Harcourt LLP, and Patrick Riesterer is an associate in the group.
On Tuesday, June 5, 2012 the Supreme Court of Canada heard an appeal of the Ontario Court of Appeal’s decision in Re Indalex Limited (“Indalex”). The Indalex decision concerned, among other things, the priority of a deemed trust for certain unpaid pension amounts over the super-priority charge granted in favour of a DIP Lender. The holding in Indalex represented a significant departure from previous practise relating to pension plan obligations in Companies’ Creditors Arrangement Act (“CCAA”) restructurings and presents a number of new challenges and issues for prospective CCAA debtors. We have described the decision in Indalex in a previous North of the Border Update.
Canadian courts have been grappling with the priority issue since the decision in Indalex. We have described subsequent decisions that have dealt with Indalex in our blog entries “Avoiding Indalex: Canadian Pension Law and Insolvency Law Collide Again” and “Québec Court: DIP Lender Has Priority over Pension Plan Deficit.”
As indicated in our previous blog entries, the law on this issue has been in flux since the Ontario Court of Appeal’s decision in Indalex and the law will remain in flux until the Supreme Court of Canada releases its decision on the case.
Due to the importance of the outcome of the appeal for the restructuring profession, lenders, unions, and pensioners, the Supreme Court of Canada heard from a number of interveners representing a variety of interests in addition to hearing from the parties. The following parties intervened:

• The Canadian Banker’s Association;
• The Insolvency Institute of Canada;
• The Canadian Association of Restructuring Professionals;
• The Superintendant of Financial Services;
• The Canadian Labour Congress; and
• The Canadian Federation of Pensioners.

The decision in Indalex has led to uncertainty in the law and has provoked extensive debate among insolvency, pension, financial services and labour professionals, the lending community and the labour movement. Each of these communities is waiting for the decision of the Supreme Court of Canada to provide clarity on the matter.  There is no current indication as to when the Supreme Court of Canada will release its decision.

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