Follow-Up Commentary On Indalex

In a client update released earlier this month, we discussed the recent decision of the Ontario Court of Appeal in the CCAA proceedings of Indalex Limited. In that case, the Court decided that Indalex's pension plan wind-up deficiency claims had priority over Indalex's CCAA secured lender in the context of that case. Of concern is the "chill" that decision may have on secured lending in Ontario to borrowers that sponsor defined benefit pension plans.

From a secured lender's perspective, although there is much to dislike about the case, the situation may not be as dire as it may first appear.

As a starting point, the Ontario Court of Appeal only dealt with the priority of the statutory deemed trust for wind-up deficiency claims in relation to court-ordered CCAA security. The Court was not determining the priority of the statutory deemed trust relative to ordinary security granted to a secured lender in a regular financing context. The distinction is important.