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CREDITORS AND CLAIMS - Claims - Priorities

Wednesday, January 20, 2021 @ 6:21 AM  

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Application by DGDP–BC Holdings for leave to appeal a portion of the Receivership Order granted by the supervising judge that determined the ranking of charges, including subordinating the charges, that had previously been set forth in an earlier order granted in CCAA proceedings. In the CCAA proceedings, an interim financing loan was approved. An interim financing lender, 228, subsequently assigned its interest in the loan facility to the applicant. The applicant ultimately funded the entire amount required to be advanced by 228 throughout the CCAA proceedings. The approval order provided that the interim financing loans were ordered priority over the other debts. The Receivership order provided that the interim lenders ranked after the receiver and administrative charges. The applicant argued that the court could not grant an order in Receivership proceedings that would have the effect of changing the ranking of interim financing charges so that it would take priority over the original interim financing charge without the applicant’s consent as one of the original interim financers.

HELD: Application allowed. Whether an order made in proceedings under the Bankruptcy and Insolvency Act or pursuant to s. 13(2) of the Judicature Act, could legally override the validity and priority of the charges contained in an earlier order granted under the CCAA in the same insolvency proceedings, without the consent of the person in whose favour the provision relating to validity and priority was given was significant to the bankruptcy practice generally and to this action as well. There was also no authority on point.

DGDP-BC Holdings Ltd. v. Third Eye Capital Corp., [2020] A.J. No. 1341, J.D.B. McDonald J.A., December 4, 2020. Digest No. TLD-January182021005