Consumer and Mid-Market Technical Update

1. Consumer and Mid-Market Technical Update Carol Cash, Gehlen Dabbs and Tevia Jeffries, Dentons 10 May 2016

2. 1. Debts Surviving Bankruptcy • “Where pleadings allege a specific cause of action upon which a defendant consents to judgment, courts should be loath to characterize the judgment as based on allegations not made and facts not pleaded.” • H.Y. Louie C. Limited v Bowick, 2015 BCCA 256, para. 87 • A finding of joint liability can make an individual liable for the deceitful actions of his joint tortfeasors. That judgment can survive that individual’s discharge from bankruptcy. • Cruise Connections Canada v Szeto, 2015 BCCA 363 10 May 2016

3. 2. Sales Processes • Moving beyond White Birch… • 2016 was a big year for credit bidding in British Columbia, in particular credit bidding by reluctant purchasers • Territorial government credit bids on development property securing contingent reclamation obligations related to an operating mine • Re North American Tungsten Corp., 2016 BCSC 12 • Interim lender credit bids on mining property to recover interim loan • Re Veris Gold Corp., 2015 BCSC 1204 • Note on successor liability • Secured lenders credit bid on a strata hotel property in the face of alleged REDMA trust claims • Re Bison Properties Ltd., 2016 BCSC 793

4. 3. Miscellaneous • Donell v. GJB Enterprises Inc., 2012 BCCA 135, remains the law in BC – bankruptcy trustees can gain access to the accounting records of a bankrupt’s solicitors in the context of administering the bankrupt estate. • Wong v Luu, 2015 BCCA 159 • Damages in personal injury actions attributable to future care, house keeping, costs, disbursements and HST (GST) should not be included in a bankrupt’s income calculation because they constitute damages that are personal to the bankrupt and bear a close relationship to damages on account of pain and suffering. • The date for pro-rating damages for loss of future competitive advantage should be from the date of the settlement, not from the date of the bankrupt’s assignment into bankruptcy. • Re Conforti, 2015 ONCA 268 10 May 2016

5. Miscellaneous Cont. • The court may annul an assignment into bankruptcy where the assignment was made to frustrate a former spouse’s bona fide matrimonial and support claims. The assignment may be held to be an abuse of process motivated by malice. • Lazic v Lazic, 2015 ABQB 691 10 May 2016

6. 4. Claims • “Payment in full” can be accomplished with illiquid assets. • Re Bul River Mineral Corp., 2015 BCSC 113 • Set-off rights are stayed in CCAA. • North American Tungsten Corp. v. Global Tungsten and Powders Corp., 2015 BCCA 426 • Award of security for costs is not a claim provable in bankruptcy. • Doncaster v. Field, 2015 NSCA 83 10 May 2016

7. 5. Professional Fees • A judge has discretion under the CCAA to increase professional fees. • Montreal, Maine & Atlantic Canada Co. (Arrangement relatif à), 2015 QCCS 5896 • An interim receiver must seek court approval of its fees. • Doyle Salewski Inc. v BDO Dunwoody Ltd. (Trustee of), 2015 ONCA 393 • Realtors selling property in insolvency proceedings should ensure that their listing agreement is with the proper party and should seek court approval of a priority charge for their fees. • Avison Young Real Estate Alberta Inc. v Bosa Properties (Eau Claire) Inc., 2015 ABQB 208 10 May 2016

8. Professional Fees Cont. • A receiver has the onus to prove that its fees are fair and reasonable. A receiver’s fees may be reduced by the court where its fees are in excess of the original quote provided. • B. Love Holdings Inc. v Deloitte Restructuring Inc., 2015 ONSC 5272 • Even if given authorization by the court to pursue a claim, a trustee in bankruptcy should, on an upfront basis, seek direction from the court as to how its fees will be paid. • Re Khan, 2015 ONSC 4799 • A special committee of a company acting in insolvency proceedings should seek approval of its fees, under s. 11.52 of the CCAA, without delay or that approval may be denied. • Re Veris Gold Corp., 2015 BCSC 399 10 May 2016

9. 6. Professional Releases • What is the appropriate scope of releases? The discussion continues… • Re Bul River Mineral Corp., 2015 BCSC 113 • Re Redcorp Ventures Ltd., 2016 BCSC 188 • Where general approval of an insolvency professional’s actions is being sought but those actions have not yet been scrutinized or challenged in a formal sense, caution should be exercised so as to avoid causing the doctrine of res judicata, and related, to be prematurely applicable. • Re Target Canada Co., 2015 ONSC 7574 10 May 2016

10. Questions? Tevia Jeffries Associate InsolvencyD (604) 691- 6427E tevia.jeffries@dentons.comhttp://www.dentons.com/en/tevia-jeffries Carol CashAssociate InsolvencyD (604) 642- 0669E cc@gdlaw.cahttp://www.gdlaw.ca 10 May 2016