Literature is filled with instances when the characters are taken from one world in which they are comfortable and understand what to expect, and are then transported into a very different world where the "rules" are suddenly very different. A trade with rights under the Construction Lien Act (the "CLA") could be forgiven for feeling very much like they have been put in that situation if a proceeding under the Companies' Creditors Arrangement Act (the "CCAA") affects a project on which they are working. Hence the perhaps colourful literary reference.

The purpose of this paper is to briefly outline some of the salient ways in which a CCAA proceeding may impact the rights and obligations of a trade involved in a project, and to offer suggestions on options for how a trade might be able to better its position in such circumstances. Much of this is derived from the recent CCAA proceedings involving Comstock Canada Ltd. and its affiliated companies.

While brief mention may be made about construction lien rights in other insolvency situations (receiverships, proposals, or bankruptcies), those are not the focus of this paper. Those situations deserve consideration on their own, because they do not involve the same impact of the insolvency statute at issue as discussed in this paper under the CCAA (either at all, or to the same extent).

This paper is broken into four sections1, as follows:

  1. A CCAA changes the focus or paradigm for the Court, and how that impacts the trades.
  2. The changes in procedural rights of trades that can result from CCAA orders.
  3. The changes in substantive rights of trades that can result from CCAA orders.
  4. Ways that a trade can try to protect itself.

Chapter 1 - The paradigm shift under a CCAA ("waking up after the tornado")

Arguably, the most significant change that may occur for a trade when a CCAA occurs is in the approach taken by the Courts to the interests of the trades, or – more to the point – to the interests of the company, or debtor, under CCAA protection. This paradigm shift is important to understand, as it explains why the changes to substantive and procedural rights (to be discussed further below) may be ordered by the Court.

In the absence of a CCAA proceeding, it would be fair to say that a trade's interests receive a considerable amount of protection from the Courts, both through the enhanced remedies for trades under the CLA and also through common law principles.

When a CCAA proceeding takes place, on the other hand, it invokes a set of wider and different considerations for the Court. This is reflected in the considerable case law since CCAA applications started being used again in the 1980's2 about the purpose of that Act. One of the most recent articulations of this was in Indalex, where the Supreme Court of Canada put it this way last year:3

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Footnotes

1 They are called chapters, but only in deference to the literary references. If the sections were long enough to truly be called chapters then you would have given up and closed this paper by now.

2 The CCAA is a Depression era statute, which fell out of use until that time.

3 Sun Indalex Finance LLC v. United Steelworkers, 2013 SCC 7 at para. 205.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.