Rebuilding Success Magazine Features - Fall/Winter 2025 > In Case you Missed it: Decisions on our Radar
In Case you Missed it: Decisions on our Radar
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By Natasha MacParland, Partner; Rui Gao, Partner; and Sean Monahan, Associate, Davies Ward Phillips & Vineberg LLP
The blue shading of cells denotes new cases we have been tracking since the last issue of Rebuilding Success; the blue font denotes updates to cases described in a previous issue.
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Case |
Issue |
Update |
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Autorité des marchés financiers v. Valeo Pharma inc. (Quebec) |
Does a CCAA Court have jurisdiction to exempt a reporting issuer from continuous disclosure obligations and other requirements under provincial securities law? |
Yes (subject to appeal). Valeo Pharma Inc. (“Valeo”) was a reporting issuer in Ontario, and filed for CCAA protection. In issuing the Initial Order and, subsequently, the Amended and Restated Initial Order, the Quebec Superior Court granted exemptions from continuous disclosure obligations and audit committee requirements to Valeo and its affiliates. The Autorité des marchés financiers (“AMF”), the Quebec securities regulator was granted leave to appeal to the Court of Appeal of Quebec. The AMF challenges the validity of the exemptions, arguing that they:
The AMF contends that the Superior Court erred in applying the doctrine of federal paramountcy to override provincial securities laws. The Ontario Securities Commission and Insolvency Institute of Canada were granted leave to intervene in the appeal, which is expected to be heard October 29, 2025. |
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Attorney General of Canada c. Valeo Pharma inc. (Quebec) |
Does transferring non-retained employees to a shell company for the purpose of terminating their employment and enabling them to claim WEPPA benefits constitute an abuse or circumvention of the WEPPA regime? |
No (subject to appeal). In a separate action regarding the Valeo restructuring, through a Court-supervised restructuring transaction, Valeo sought to retain 36 of its 60 employees, while the remaining 24 would have their salary and vacation benefits paid before being transferred to a shell company (“ResidualCo”), which would then terminate their employment. Applications would then be made for these terminated employees to receive benefits under the federal Wage Earner Protection Program Act (“WEPPA”), specifically severance pay. The Attorney General of Canada objected to this arrangement, arguing that the transfer to ResidualCo was a legal fiction to allow employees to claim WEPPA benefits in a manner inconsistent with the program’s intent. The Quebec Superior Court rejected these arguments and approved the transaction. The Attorney General then sought leave to appeal to the Quebec Court of Appeal, arguing that the lower court’s interpretation of WEPPA was contrary to the statute’s wording and objectives. Leave to appeal was granted, and the appeal is expected to be heard September 30, 2025. |
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Piekut v. Canada (National Revenue) (British Columbia) |
Does the seven-year period in section 178(1)(g)(ii) of the BIA (“within seven years after the date on which the bankrupt ceased to be a full- or part-time student”) run from the latest date that the bankrupt ceased to be a full- or part-time student, irrespective of whether the studies at that latest date were financed by one or more student loans secured through a government program? |
Yes. The Supreme Court of Canada ruled that, for bankruptcy purposes, there can only be a single-date when a person is no longer considered a student, specifically, the last date they were enrolled as a full- or part-time student. The Court reasoned that the “multiple-date” approach whereby there can be several dates that a bankrupt ceases to be a student depending on the end dates of the bankrupt’s various educational programs, could create absurd outcomes where a debtor could be discharged from student loans even if they had not had a real opportunity to repay them, simply because of a short break between study periods. This would be contrary to the aim of the BIA. This decision has since been referenced by the Supreme Court of Canada in Telus Communications Inc. v. Federation of Canadian Municipalities, 2025 SCC 15. |
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Peakhill Capital Inc. v. Southview Gardens Limited Partnership (British Columbia) |
Can the Court grant a reverse vesting order (“RVO”) in a receivership proceeding where the main benefit of the RVO structure is the avoidance of a tax liability? |
Yes, if the criteria for granting an RVO are met. The debtor company was in receivership and was pursuing an RVO. The purpose of the RVO structure, as opposed to a standard approval and vesting order, was to avoid a tax liability of $3.5 million. The Province of British Columbia opposed the structuring of the transaction as an RVO. The British Columbia Supreme Court relied on Payslate Inc. (Re), 2023 BCSC 608, in finding that an RVO is a tool available in insolvency contexts other than CCAA proceedings. Upon finding jurisdiction, the Court found that the factors from Harte Gold Corp. (Re), 2022 ONSC 653 were met and that the RVO structure was justified. The Court found that there was nothing unlawful about avoiding the tax liability through an RVO, given that the tax liability was one that could be readily avoided in a non-insolvency context. The Province appealed to the British Columbia Court of Appeal (“BCCA”), triggering an automatic stay of proceedings under s. 193 of the BIA. The purchaser applied for an order lifting the stay of proceedings to allow for the sale transaction to complete on time. The Court granted the order, lifting the stay with certain conditions to protect the Province in the event the appeal is successful. On July 2, 2024, the BCCA dismissed the Province’s appeal. The Province filed for leave to appeal to the Supreme Court of Canada on October 1, 2024, which was dismissed on May 1, 2025. |
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Invico Diversified Income Limited Partnership v. NewGrange Energy Inc. (Alberta) |
Are gross overriding royalties interests in land that cannot be “vested out”, i.e., removed from title to the assets being purchased in an RVO? |
In this case, no. Gross overriding royalties can constitute an interest in land, or can be contractual rights to receive royalty payments without constituting an interest in land. The Court of King’s Bench of Alberta (“ABKB”) found that the gross overriding royalties in this case were not interests in land, and therefore could be vested out in an RVO. The Court declined to consider whether, if the gross overriding royalties were interests in land, they could still be vested out in an RVO. In determining the royalty interests did not “run with the land”, the Court employed the test from Bank of Montreal v. Dynex Petroleum Ltd, 2002 SCC 7 to ascertain the intentions of the parties. Despite language in the royalty agreement purporting to create an interest in the land, the language in the royalty assignment clause and the surrounding factual circumstances indicated otherwise. NewGrange Energy Inc. (the holder of the gross overriding royalties) sought leave to appeal the decision of the ABKB. On July 5, 2024, the Court of Appeal of Alberta granted leave to appeal. The appeal is scheduled to be heard September 10, 2025. |
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Canadian Western Bank v. Canadian Motor Freight Ltd. (Ontario) |
Can debtors and non-parties be found in civil contempt of court for failing to comply with a receivership order and a related asset recovery order made under the BIA? |
Yes. The Ontario Court of Appeal upheld the findings of civil contempt made by the lower court against the debtor, the non-party, and each of their management. A receivership order required the debtor to turn over its assets – a fleet of trucks – to the receiver. Instead of complying, the debtor and its management moved the trucks to a yard owned by a non-party. The receiver, after unsuccessful attempts to recover the trucks, obtained a court order requiring the non-party to permit the receiver to take possession of the trucks. The non-party and its management failed to comply with this order and prevented the receiver from accessing the trucks, and were found to be in contempt of court. The debtor, the non-party and their respective management appealed to the Ontario Court of Appeal. The Court heard the appeal in the interest of expediting the receivership, even though the appellants did not seek leave to appeal under Section 193(e) of the BIA, which is required for the appeal of orders made under the BIA. In dismissing their appeal, the Court reiterated the importance of obeying court orders and warned of serious consequences for willful non-compliance. The contempt findings and sentences (including imprisonment and costs) were upheld. The time period for seeking leave to appeal to the Supreme Court of Canada has lapsed. Leave was not sought. |
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ATB Financial v. Mayfield Investments Ltd (Alberta) |
Can a forced share sale provision in a unanimous shareholders agreement be voided under the anti-deprivation rule? |
Yes. The Court of King’s Bench of Alberta found that a forced share sale provision in a unanimous shareholders agreement was void and unenforceable under the anti-deprivation rule as the provision allowed the other shareholders to purchase the shares of a shareholder who entered receivership at a 25% discount. The anti-deprivation rule invalidates contractual provisions that, upon insolvency, remove value from the insolvent person’s estate that would otherwise be available to creditors. The Court emphasized that the purpose of the forced sale provision or the parties’ intentions were irrelevant because the anti-deprivation rule is effects-based. The Court found that the provision met the test for the anti-deprivation rule articulated by the Supreme Court of Canada in Chandos Construction Ltd v. Deloitte Restructuring Inc, 2020 SCC 25, because:
As a result, the Court granted the receiver’s application for a declaration that the provision was void and unenforceable. It authorized the receiver to market and sell the shares as part of the SISP, and dismissed the shareholders’ application to compel the sale and lift the stay. As of August 1, 2025, this decision has not been appealed. |
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Angus A2A GP Inc v. Alvarez & Marsal Canada Inc (Alberta) |
Can equity investors initiate CCAA proceedings against a group of affiliated cross-border entities? |
Yes (subject to appeal). Canadian investors in real estate projects in Ontario and Texas discovered the Ontario project was being sold without their consent. They started CCAA proceedings in Alberta to stop the sale and have a Monitor appointed. The court granted a temporary order halting the sale and appointed a Monitor, with the order later recognized in the US. The project entities, including Texas LLCs, challenged the orders, arguing improper process and lack of jurisdiction. The Alberta Court of Appeal granted leave to appeal on the following two questions: 1. Was the CCAA was properly used by the investors? 2. Are the Texas-based entities subject to the CCAA? The appeal is scheduled to be heard September 8, 2025. |
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RPG Receivables Purchase Group Inc. v. American Pacific Corporation (Ontario) |
Were payments made by an insolvent company to its major supplier void as preferences when the debtor claims they were justified by the intention to stay in business? |
Yes. Specialty Chemical Industries Inc. (“Specialty”) paid USD $400,000 to one of its major suppliers, American Pacific Corporation (“AmPac”), one month before assigning itself into bankruptcy. Specialty’s trustee in bankruptcy was unsuccessful in its claim to recover the amounts from AmPac, and assigned its right of action to a creditor under Section 38 of the BIA. The lower court found that Specialty made the payments to keep its only customer and stay in business, which rebutted the presumption of a preference. The Ontario Court of Appeal disagreed, finding no objective evidence that the payments would actually save Specialty’s business. The Court noted the payments were much greater than any benefit Specialty might have received. It found the payments were preferences and must be repaid by AmPac. The time period for seeking leave to appeal to the Supreme Court of Canada has lapsed. Leave was not sought. |
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Spartan Delta Corp v. Alberta (Energy and Minerals) (Alberta) |
Does a court-approved CCAA Approval and Vesting Order prevent a creditor from claiming pre-filing royalty arrears from solvent co-lessor third-parties? |
Yes (subject to appeal). The chambers judge found that the creditor’s claims for pre-filing royalty arrears against the co-lessees were barred for three reasons:
The Court of Appeal of Alberta granted leave to appeal, recognizing that the issue is significant for both insolvency and energy law practice. As of August 1, 2025, the appeal has not yet been scheduled. |
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Easy Legal Finance Inc v. Law Society of Alberta (Alberta) |
Should the “interest stops rule” stop interest from accruing on a secured creditor’s claim during a receivership? |
No. The Court of Appeal of Alberta held that the rule should not be extended in this manner. The “interest stops rule” is a well-established principle in insolvency law that says that interest on debts stops accruing from the date of bankruptcy or insolvency proceedings. This rule is meant to ensure fairness among unsecured creditors, so that those with interest-bearing debts do not receive a greater portion of the estate than those with non-interest-bearing debts. In this case, the Law Society of Alberta and others wanted the interest stops rule to apply to a secured creditor, Easy Legal Finance Inc., who was owed over $1.4 million with interest at 18% per year. They argued that it was inequitable for the secured creditor to receive an ever-increasing portion of the estate. The Alberta Court of Appeal disagreed. It held that the interest stops rule has never applied to secured creditors in a receivership and there is no legal basis to expand it. The rule remains limited to unsecured creditors, and secured creditors can continue to accrue interest on their claims during a receivership. As of August 1, 2025, leave to appeal to the Supreme Court of Canada not been sought. |
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Senvion GHBH (Re) (Ontario) COA-24-OM-0166 (Motion for leave to appeal dismissed) |
Does the CCAA court have jurisdiction to determine if the stay of proceedings is violated by the drawdown on a letter of credit issued by a foreign debtor? |
Yes. The Ontario Superior Court of Justice held that it had jurisdiction to determine whether its own stay order, made in recognition of foreign insolvency proceedings, had been breached by a draw on a letter of credit. Senvion GMBH (“Senvion”), a Germany company, was subject to insolvency proceedings in Germany. The Ontario Superior Court of Justice recognized these proceedings and granted a stay of proceedings over Senvion. One of Senvion’s creditors drew on a letter of credit, and Senvion brought a motion before the CCAA Court arguing that the drawdown breached the stay and sought to have the funds returned. The creditor brought a jurisdiction motion seeking to stay or dismiss Senvion’s action. The creditor argued that, since the letter of credit is governed by Quebec law, a Quebec court has jurisdiction to hear matters related to it. The CCAA Court dismissed the creditor’s motion since it found it had jurisdiction to determine whether its own stay order had been breached. On September 13, 2024, the Court of Appeal for Ontario denied leave to appeal. On June 5, 2025 the Supreme Court of Canada dismissed with costs, the application for leave to appeal from the judgment of the Ontario Court of Appeal. |
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Milot Law v. Sittler (Alberta) |
Did the debtor’s former lawyer (and now creditor) breach solicitor-client privilege or confidentiality by disclosing to the bankruptcy trustee information and records obtained during pre-bankruptcy tax litigation? |
No (subject to appeal). The debtors hired Milot Law to represent them in a tax litigation matter. Later, the debtors assigned themselves into bankruptcy, and Milot Law became one of their creditors for unpaid legal fees. After reviewing the Statement of Affairs, and based on information obtained while representing the debtors, Milot Law became aware that the debtors had not disclosed all their assets to the trustee. After requesting that the debtors voluntarily disclose the missing information, and consulting with a practice advisor, Milot Law provided the trustee with the previously undisclosed records, in redacted form. The lower court found that Milot Law’s actions did not breach privilege. The debtors appealed the decision and sought a declaration that no party in the bankruptcy proceeding may rely on the information disclosed to the trustee by Milot Law. On February 28, 2025, the Court of Appeal of Alberta dismissed the debtors’ appeal. Relying on the Supreme Court’s holdings in British Columbia Securities Commission v. Branch, [1995] 2 SCR 3, the Court stated that the financial records and business documentation provided to Milot Law were not privileged since they were not created for the specific purpose of seeking legal advice. Therefore, Milot Law did not breach it duties of privilege and/or confidentiality. On April 28, 2025, the debtors filed an application for leave to appeal to the Supreme Court of Canada. As of August 2025, that application is still pending. |
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Ernst & Young Inc. v. Aquino (Ontario) |
Was the false invoicing scheme carried out by the company’s directing mind a “transfer[s] at undervalue […] intended to defraud, defeat or delay a creditor”? |
Yes. The lower courts held that the payments made in the fraudulent scheme were transfers at undervalue. In its analysis, the Ontario Court of Appeal also specifically imputed the fraudulent intentions of the company’s directing mind to that company, even though the directing mind was effectively defrauding the company as well. The lower courts’ conclusions were upheld by the Supreme Court of Canada, which held that the corporate attribution doctrine must be applied purposively, contextually, and pragmatically. Attributing fraudulent intent to the company was appropriate in this case as it aligned with the aims of section 96 of the BIA, by allowing creditors to recover assets fraudulently transferred and protecting the pool of assets available for their claims. This decision has been considered in several other decisions, including by the Ontario Court of Appeal in RPG Receivables Purchase Group Inc. v. American Pacific Corporation, 2025 ONCA 371, which is summarized above. |
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Golden Oaks Enterprises Inc. v. Scott (Ontario) |
In respect of a Ponzi scheme run by the principal of a company who subsequently files for bankruptcy, should the principal’s knowledge be imputed to the company in assessing when the trustee in bankruptcy’s claims to recover funds lost in the Ponzi scheme are discoverable for the purposes of limitation periods? |
No. The Supreme Court of Canada upheld the Ontario Court of Appeal’s decision, in which it declined to apply the principle of corporate attribution to impute Golden Oaks with the knowledge of fraud of its principal. The limitation period in respect of the unjust enrichment claim advanced by Golden Oaks’ trustee in bankruptcy began to run only when the trustee in bankruptcy was appointed. The Supreme Court held that attributing the principal’s knowledge to the company would offend public policy, as it would undermine the purpose of the Limitations Act and the BIA by facilitating the retention of illegal proceeds and reducing the value of the debtor’s assets available to creditors. This decision has been considered in subsequent decisions by the Ontario Superior Court and the Alberta Court of Justice, such as Olson v. Lubberts, 2025 ONSC 3235, and Singh v. Syndicate Transport Ltd, 2025 ABCJ 109, respectively. |
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Re Poonian (British Columbia) |
Does a “fresh start” granted in bankruptcy extinguish fraud related debts and liabilities? |
No. If there is a direct link between the fraudulent activity and the value of the debts or liabilities ordered, they will be exempt from discharge under section 178(1)(e) of the BIA. With respect to section 178(1)(e), the Supreme Court of Canada ruled that provision exempted the disgorgement order from discharge, but not the administrative penalties. This is because:
More generally, the Supreme Court of Canada clarified that for a debt or liability to survive bankruptcy under section 178(1)(e), three elements must be established:
This decision has been considered in several subsequent decisions, including by the Supreme Court of Canada in Piekut v. Canada (National Revenue), 2025 SCC 13, which is summarized above. |