Restructuring and InsolvencyRestructuring and Insolvency Group e-COMMUNIQUÉ - September 2010Published: 08/30/2010 By Bruce Leonard, Alex Tarantino, David Ward In This Issue
The Model Law Revisited – A Look Back, New ResourcesBy David Ward The Model Law on Cross-Border Insolvency was produced under the auspices of the United Nations Commission on International Trade Law (UNCITRAL) which is the United Nations’ major commercial law organization headquartered in Vienna. UNCITRAL began work on the Model Law project in 1994 out of a recognition among insolvency practitioners that international insolvency systems and structures needed improvement. The UNCITRAL project focused on the twin concepts of access and recognition: access for foreign insolvency representatives in domestic insolvency proceedings and recognition of insolvency proceedings in other jurisdictions (subject to protections for domestic creditors). The insolvency profession was solidly behind the improvements and UNCITRAL’s work on the Model Law on Cross-Border Insolvency concluded in three years, with the Model Law being approved by the United Nations General Assembly in 1997. These days it is difficult to find a major case that does not have significant international issues and components. Frequently, the international issues are critical and determinative of the fate of the reorganizing business. As a consequence, Chapter 15 and its counterparts have become exceptionally important features of international trade and commerce and are having an effect that has substantially exceeded the expectations and intentions of the founders and drafters of the UNCITRAL Model Law on Cross-Border Insolvency. Chapter 15, which adopts the Model Law for purposes of the Bankruptcy Code, and its counterparts around the world represent a significant and unprecedented advance in international insolvency systems and procedures which has no equal in any other developments in the international insolvency field. The enactment of Chapter 15 and its counterparts in 19 different countries have brought about a profound change in the way that international insolvencies and restructurings are able to proceed. In recognition of the significance and emerging acceptance of the UNCITRAL Model Law and cross-border insolvency, Cassels Brock has assembled some important resources that will be of assistance to lawyers having an interest in the area. These resources include a listing of the cases in which Chapter 15 relief has been considered and, usually, granted. Although the listing is not exhaustive, it includes over 230 Chapter 15 cases from 36 bankruptcy courts including four decisions in four circuit courts. The listing is organized by the country of foreign proceeding. E-communique readers may also have an interest in two extensive bibliographies that have been prepared. The first is a bibliography of articles on Chapter 15 of the United States Bankruptcy Code, current to July 15, 2010. The list includes seventy published articles by legal commentators from around the world. Also available is an extensive bibliography of articles on the UNCITRAL Model Law. The list is also international and identifies upwards of eighty UNCITRAL Model Law articles current to July 15, 2010. Readers who have an interest in Chapter 15 and the Model Law who would like copies of these insolvency resources are invited to contact David Ward at dward@casselsbrock.com. Case Comment – Decker Estate (Trustee of) v. AlbertaIn this case, the Alberta Court of Appeal addressed the impact of the administrative gap created when a trustee is discharged but the bankrupt is not. In some cases, this administrative gap during the period prior to the appointment of a new trustee exceeds two years. Accordingly, the Court of Appeal had to determine whether or not the limitation period began running when the trustee was discharged, such that creditors with proven claims at the beginning of the bankruptcy lost their claim in the estate if they did not begin proceedings prior to the expiration of the limitation period. The Court of Appeal ultimately determined that, in this situation, the limitation period does not begin to run again. In essence, this case was an appeal of the 2008 Alberta Queen’s Bench case Re Dyrland which the trial judge followed in making his ruling. In Re Dyrland, the Court held that following the trustee's discharge, the provincial limitations period begins to run, such that a creditor with a proven claim can lose its right to a distribution made by a subsequently appointed trustee if that creditor has not commenced proceedings prior to the expiration of the limitations period. The Court of Appeal determined that the conclusion reached in Re Dyrland was incorrect. According to the Court of Appeal, under section 135(4) of the BIA, the original trustee’s determination of the claims were final and conclusive throughout the bankruptcy proceedings. Furthermore, the Court of Appeal concluded that section 121 of the BIA, which establishes the date for determining claims, should be interpreted such that the date of bankruptcy is the operative date regarding proof of debt or liability, and the discharge of the trustee does not impact or change this date. Accordingly, the claims proven in the bankruptcy remain within the bankruptcy regime because they have not been set aside either by the trustee under section 135(2) of the BIA or by court order under 135(5). The property realized by a new trustee remains subject to distribution, and is reserved for proven creditors under the BIA. As a result, the provincial limitation periods cannot deny creditors with previously proven claims to their entitlement of a distribution. The Court of Appeal determined that the decision in Re Dyrland had the effect of creating a new date for the determination of claims, namely the date of the new trustee’s appointment. The Court ruled that nothing in the BIA provides for a second validation process, and that to do so would be inconsistent with section 121 of the BIA. Furthermore, the Court of Appeal considered sections 67(1)(c) and 178(2) and decided that a creditor whose claim has been accepted by the trustee has an entitlement in the estate until the bankrupt is discharged. Accordingly, the discharge of a trustee in circumstances where the bankrupt is not discharged does not restart the provincial limitation period. This ruling by the Alberta Court of Appeal is noteworthy as it addresses the rare but potentially significant issue where an administrative gap is created when a trustee is discharged prior to the discharge of the bankrupt. The reasons in this case provide insight into the Court’s interpretation of the claims determination process under the BIA. In this case, the Court of Appeal favoured protecting the rights of creditors, over permitting the potentially unjust result of a creditor losing its proven claim due to the re-commencement of the limitation period as a result of an administrative gap. The CCAA Scene: Recent and Notable - September 2010AbitibiBowater
United Horsemen Professional Notes - September 2010Bruce Leonard has again been named to the International Who’s Who of Business Lawyers in the Insolvency and Restructuring category. The International Who’s Who is published by Law Business Research of London, England in association with the International Bar Association and the ABA Section of International Law. Bruce has been listed in the annual edition of the International Who’s Who publication since its inception several years ago. Bruce Leonard and David Ward will be participating in the First Annual American College of Bankruptcy/National Conference of Bankruptcy Judges International Insolvency Roundtable at the 84th Annual NCBJ Conference to be held on October 13-16, 2010 in New Orleans. Bruce and David jointly authored the Program Conference Materials which include a substantial compilation of resources related to the UNCITRAL Model Law on Cross Border Insolvency. The Roundtable, scheduled as an Opening Day Plenary Session, will be chaired by Bruce. |