TRENDS IN BANKRUPTCY DISPUTES
CD: How would you describe the current bankruptcy dispute landscape? What trends and developments have you seen in recent months?
Massel: With a fall in the number of new bankruptcy filings, it appears that disputes in current matters are being focused on more closely. The number of business bankruptcy filings continued to fall in 2013 to their lowest level since 2006. Relatively low interest rates, pushed-out maturities and the high cost of filing for bankruptcy have contributed to the downward trend. These trends afford parties in interest more time and resources to review and prosecute their rights. As the number of new bankruptcy filings increase, the number of disputes in a particular case may decrease.
McElcheran: In formal insolvency proceedings, there are three main needs for dispute resolution: first, to resolve disputes that arise in the restructuring process itself, dealing with plan formation and priorities; second, to resolve disputes related to creditor claims and entitlement to participate in the restructuring process and in distributions; and third, to resolve preference and other disputes arising from the avoidance provisions of the local insolvency law. Traditionally, Canadian courts have adopted a streamlined approach to litigation of all of these disputes, particularly if they might impede plan formation. Such streamlined procedures curtail discovery and impose deadlines on litigating parties through close case management. Recently, even streamlining litigation procedures has been inadequate to meet the demands of participants seeking ‘real time’ solutions to save troubled businesses. Court mandated mediation is becoming the favoured approach to short circuit litigation and solve disputes that might otherwise frustrate a successful restructuring process.
Apr-Jun 2014 issue
Kevin P. McElcheran Professional Corporation
Simpson Thacher & Bartlett, LLP
Skadden, Arps, Slate, Meagher & Flom LLP