Background:

• Quality Sterling Group (QSG), a major Canadian flooring contractor, faced financial difficulties and sought protection under the Companies' Creditors Arrangement Act (CCAA) to restructure. The restructuring failed, and a receiver was appointed on the application of QSG’s senior lender, Waygar Capital Inc.
• Several suppliers (Suppliers) asserted trust claims against QSG's accounts receivable under Section 8 of the Ontario Construction Act, arguing for priority over other claims.

Key Issues:

1. Priority of Trust and Lien Claims:
   • Suppliers sought a "Lien and Trust Regularization Order" (LTRO) to grant their claims super-priority over other creditors. While the court initially granted this order, disputes arose about its priority over other court-ordered charges, such as the Debtor-In-Possession (DIP) Lender’s Charge.
2. Doctrine of Federal Paramountcy:
   • The court ruled that federal CCAA orders, including the DIP Lender’s Charge, take precedence over provincial trust claims under the doctrine of federal paramountcy, which gives priority to federal law in cases of operational conflict.

Court's Decision:

• The court granted the motion to give DIP financing super-priority over Suppliers' trust claims and dismissed the Suppliers' motion to prioritize their claims over other charges. It emphasized the necessity of DIP financing for maintaining QSG's operations and maximizing asset value for creditors, in line with CCAA objectives.

Successful Party:

• Waygar Capital Inc., and other parties supporting the super-priority charges (DIP Lender, Financial Advisor, and D&Os), were the successful parties.

Monetary Award/Costs/Damages:

• No specific monetary awards or damages were detailed; the decision focused on the prioritization of claims rather than quantifying costs or damages.