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The Court of Appeal of Quebec confirms that a Court-ordered super-priority charge granted under the Bankruptcy and Insolvency Act can rank ahead of a statutory trust in favour of the Crown

The Court of Appeal of Quebec recently dismissed the appeal of the tax authorities in the case of Syndic de Chronométriq Inc., 2023 QCCA 1295. This decision confirms, among other things, that judges presiding over corporate restructuring and insolvency proceedings are given a wide range of powers, including the right to subordinate the Crown’s statutory trust for unremitted payroll deductions, regardless of the insolvency law governing the proceedings.

The Supreme Court of Canada already ruled in the case of Canada v. Canada North Group Inc., 2021 CSC 30 that a judge overseeing a restructuring under the Companies’ Creditors Arrangement Act (“CCAA”) can authorize a super-priority charge in favour of an interim lender that ranks ahead of the Crown’s statutory trust, given the judicial discretion provided under Section 11 of the CCAA. In the Chronometriq case, the Quebec Court of Appeal had to rule whether such a power also existed for restructurings governed by the Bankruptcy and Insolvency Act (“BIA”). Relying on the fact that the provisions regarding interim financing were identical under both the CCAA and the BIA, the Court of Appeal concluded that judges presiding over insolvency and restructuring matters have “all the powers ancillary and necessarily incidental” to the power granted to them by Section 50.6 of the BIA to grant super-priority charges. Furthermore, since there is no equivalent to Section 11 of the CCAA in the BIA regarding temporary financing, the Court of Appeal concluded that this constitutes a “gap to be filled” which can justify the use of a Superior Court’s inherent power.

Sylvain Rigaud and Joshua Bouzaglou, members of our insolvency team, supported the Canadian Imperial Bank of Commerce (CIBC) as temporary lender in this case. Click here for the Court of Appeal judgment and here for the summary.

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