Bankruptcy/Insolvency Law

This commentary was first published in the Financial Post on November 4, 2008.

Last August, 4,500 Zoom Airlines passengers found themselves stranded across North America, the West Indies and various European countries when the airline ran out of money and grounded its planes. Passengers were left to pay for their return journey home and figure out how to recover the payments they had made to the airline. Their prospects were dim.

Since Zoom Airlines had declared bankruptcy, the best the passengers could expect was to be treated as unsecured creditors of the airline-- ranking at the bottom of the ladder in the distribution of Zoom's assets. Passengers must yield to the prior claims of Crown trust claims (for unremitted employment insurance premiums and tax deductions), secured creditors and preferential creditors. Typically, unsecured creditors recover no more than five cents on the dollar of their claims and often nothing at all.

This commentary was first published in the Financial Post on November 21, 2008.

One of the important roles of the Supreme Court of Canada is to resolve conflicts among lower courts on difficult issues of law and, in the commercial sphere and other areas of consensual law, to develop rules and doctrines that promote predictability of outcomes and enhance the free-flow of goods and services among contracting parties.

Judged by these standards, the Supreme Court's decision last month in Saulnier vs. Royal Bank of Canada will disappoint many, not because of what the court said but because of what it failed to say.

The immediate issues before the court were whether a bank can acquire a valid security interest in a commercial fishing license issued by the federal Department of Fisheries and Oceans and held by a Nova Scotia fisher, and whether a trustee in bankruptcy acquires the fisher's interest in the license if the fisher becomes bankrupt.

This commentary was first published in the Financial Post on March 10, 2009.

Every modern society needs a balanced, well-functioning insolvency law to take care of the inevitable casualties of a free-market economy. This is true even when the economy is buoyant. It becomes imperative when the economy is in recession with bankruptcies mounting.

Insolvency law has two major goals. The first is to provide an orderly procedure for the liquidation of insolvent estates and distribution of the proceeds among the debtor's creditors in a prescribed order. The second goal is to enable viable enterprises to restructure their affairs so as to save jobs and stay in business and, in the case of individuals, to enable them to compromise their debts and avoid the stigma of bankruptcy.