Main Issue: MNP sought to void the transfer of two legal claims from Eco-Industrial to Symmetry under section 96 of the Bankruptcy and Insolvency Act (BIA) and potentially under provincial legislation for fraudulent transfers.
Key Legal Claims Transferred:
- ADT Action: A $100 million lawsuit related to land sale disputes involving Alberta Diluent Terminal Ltd.
- Dentons Claim: A potential negligence claim against law firm Dentons Canada LLP.
Findings:
- Transfers at Undervalue: The court ruled both transfers were undervalued:
- The Dentons Claim was transferred without any consideration.
- The ADT Action was transferred for a liability assumption valued at $100,000—far below its fair market value (~$50 million).
- Insolvency: Eco-Industrial was insolvent at the time of the transfers, evidenced by unpaid debts exceeding US$87 million and property tax arrears of $383,387.
- Fraudulent Intent: Not addressed as insolvency alone sufficed for relief under section 96 of the BIA.
Court's Decision:
- Both transfers were voided, restoring the legal claims to the Trustee.
- MNP retained the right to request additional orders, such as transferring solicitor files related to the claims.
Key Legal Principles Applied:
- Section 96(1)(b) of the BIA allows voiding of transfers at undervalue made within five years of bankruptcy if the debtor was insolvent or intended to defraud creditors.
- The remedial purpose of the BIA emphasizes timely and efficient resolution of disputes without unnecessary trials.
Implications:
- This case reinforces trustees' ability to challenge transactions that undermine creditors' interests.
- The decision underlines the need for adequate evidence of fair consideration in inter-company transactions involving related parties.
- No specific monetary amount was granted.
