Archive for July, 2013

Joyeux Fête Nationale

Sunday, July 14th, 2013

Je veux prendre une petite pause dans mon dimanche très dur (régarder le Tour de France sur la télé, buvant du pastis et mangeant des macarons, avant un après-midi rempli de beaucoup de bouteilles de Kronenbourg, des Kir-Royale et des chansons par Christophe Maé parmis d’autre chanteurs en lisant mes B.D. d’Asterix et Obelix les plus favorites) pour souhaîter un très joyeuse Fête Nationale à tout mes amis en France.  Je voudrais bien qu’il y aura des feux d’artifice ici à Toronto ce soir, mais il n’y en aura pas.  Tant pis!

CALC

 

It’s OK, I’ll Just Go Bankrupt or File a Proposal …

Tuesday, July 2nd, 2013

After being away, I’m a little behind in keeping up to date on recent cases.  An interesting decision was released before I went away and it is a good reminder for litigants who are less than fully committed to seeing the litigation to the end.

In the past, I have either heard from my clients before-hand or after the fact that their thinking was to deal with the litigation and then if things started to go badly to declare bankruptcy.  Now, I should state at the outset that while this is a possible option, it is one that you should discuss with your lawyer BEFORE the litigation starts since there are a series of issues that might make this a very bad option for you depending on your circumstances and it could be too late to avoid these problems if you do not discuss them with your lawyer, go ahead with the litigation, decide that you are not happy with the way things are going and then go see a trustee-in-bankruptcy and then tell your lawyer that you’ve gone bankrupt.  By that point it’s too late to avoid any problems which might arise.

The list of potential problems includes costs awarded after the filing of a bankruptcy or a proposal (or Notice of Intention) as seen in the Superior Court’s recent decision in Jema International.  The plaintiff started the lawsuit, there was a counterclaim by the defendant, the case went through several days of examinations for discovery, got ready for trial and at some point the plaintiff filed a Notice of Intention to file a proposal under the bankruptcy legislation.  Because this was a proposal, the counterclaim by the defendant was stayed but the plaintiff could proceed with its lawsuit – and it did continue with its lawsuit to the end of a three day trial (although it could have applied equally if this was a bankruptcy and the trustee-in-bankruptcy had elected to proceed with the lawsuit).  At the end, the plaintiff’s claim was dismissed and the defendant sought its costs of the lawsuit.  The plaintiff argued that any costs were covered by the stay of proceedings and thus the defendant’s costs (which were over $100,000) were something that the defendant would have to seek in the proposal (and for which it would likely get only pennies on the dollar).  The Court disagreed.

In the view of the Court, costs are discretionary items and do not come into existence until the Court awards costs.  That being the case, since the trial occurred AFTER the filing of the Notice of Intention, the stay only covered those liabilities that existed up to the date of the filing of the Notice – and therefore it did not cover the costs awarded after the trial.  The result is that the plaintiff now has to deal with a debt of over $100,000 and this debt is not covered by the proposal, nor will it be covered by any failure of the proposal (which would turn the proposal into a “full blown” bankruptcy) and if the intention of the plaintiff was to try and avoid having to pay costs if it failed in its lawsuit and to have the defendant added to the list of other creditors that went unpaid to some extent under the proposal or a bankruptcy, that plan backfired.

In the end, you should always consider the risks of litigation and you should consider the possibility that you may not win the lawsuit.  If that happens, what will you do?  If one of your options is to seek protection under the bankruptcy legislation, you should chat with your lawyer before-hand so that you can avoid, or at least minimize, any potential pitfalls that might leave you without the protection that you had hoped to have.

Something to think about.

CALC