Canadian Lawyer

44 J U N E 2 0 1 5 w w w . C A N A D I A N L a w y e r m a g . c o m business — the debtor's assets are being sold piecemeal and at the end of the process, the company will be gone and so will the business," says Duggan. However, in recent years commercial courts have been more willing to allow the CCAA to be used for liquidation and "in terms of protecting stakeholder interests, this type of proceed- ing may not be much different than a restructuring proceeding," says Duggan. The decision of Superior Court Justice Geoffrey Morawetz to approve the CCAA application was not unexpected, suggests Duggan. "The debtor [Target Canada] was clearly insolvent, because the parent com- pany had withdrawn its funding. There was no alternative mechanism available for ensuring an orderly wind-down of the debtor's business and the CCAA's language is open-textured enough to allow the statute to be used for this purpose," says Duggan. In his initial decision in January, Morawetz, also a co-author of a leading bankruptcy and insolvency text, referred to the "flexibility" of the CCAA and how it allows for more "innovation and creativity" than the "rules-based" approach of the Bankruptcy and Insolvency Act. "The sheer magnitude and complexity of the Target Canada entities business, including the number of stakeholders whose interests are affected, are, in my view, suit- ed to the flexible framework and scope for innovation offered by this 'skeletal' legislation," wrote Morawetz. While there were amend- ments to the CCAA in 2009 and Industry Canada is conducting a statutory review of the provi- sions, it is a framework where judicial discretion is still king. "The amendments added more, but they don't tell judges how to exercise their discretion," says Jassmine Girgis, a law profes- sor at the University of Calgary and a member of the board of the Canadian Insolvency Foundation. "It is a discretion that is appropriate," when it is a complicated liquidation "that is hap- pening relatively quickly," says Girgis. While the CCAA was not initially designed for situations such as the Target filing, "the law evolves," says David Jackson, a Winnipeg lawyer and co-chairman of the Canadian Bar Association's upcoming national insolvency and restructuring conference. He agrees that liquidation under CCAA is a "sensi- tive issue," but in the case of Target, it is probably an appropriate process, says Jackson, a partner at Taylor McCaffrey LLP in Winnipeg. "How else would you do it? There has to be a struc- tured wind-down." As well, in the case of a subsidiary, "stake- holders should do things to protect themselves," in advance, to protect against the possibility of a business failure, he says. Still, there is not a lot of appellate-level authority on the use of the CCAA in a liquidation proceeding. The Supreme Court of Canada, in the 2010 decision Century Services Inc. v. Canada (Attorney General), described the CCAA as being more responsive to a complex reorganization. "To permit the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating its assets," wrote then-justice Marie Deschamps. Even though Cen- tury Services was not a liquidation case, its broader principles have been adopted by many lower courts in proceedings that are. While the framework is praised for its "flexibility" the rights of employees are not always given the priority they deserve, sug- gests Darrell Brown, a partner at Sack Goldblatt Mitchell LLP in Toronto. "CCAA is effectively controlled by the company," says Brown, who acted for a union client in Indalex, another recent Supreme Court decision stemming from a CCAA proceeding. WHAT MAKES THE TARGET CANADA CASE DISTINCTIVE IS THAT THE APPLICANTS HAD NO INTENTION OF PRESERVING THE DEBTOR'S BUSINESS. . . . ANTHONY DUGGAN, University of Toronto L E G A L R E P O RT \ I N S O LV E N C Y The only thing harder than fi nding the right legal document is losing it and trying to quickly fi nd it again. With WestlawNext Canada, the information you fi nd remains found – and organized. Effortlessly drag and drop key cases and documents into folders. Easily highlight and annotate documents as you go. Discover more at westlawnextcanada.com 00227MO-A48602 HELPING YOU TO BE MORE EFFICIENT, EFFECTIVE AND CONFIDENT.

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