Supreme Court Of Canada Indalex Decision: Implications For Lending

In a much awaited decision, on February 1, 2013, the Supreme Court of Canada ("SCC") set aside the Ontario Court of Appeal's ("ONCA") decision in Sun Indalex Finance, LLC v. United Steelworkers.¹ While the SCC was split, the majority agreed with the ONCA that a deemed trust arose from section 57(4) of the Pension Benefits Act (Ontario) ("PBA") for defined benefit pension plan wind-up deficiency payments. However, the SCC reversed the ONCA decision and held that the deemed trust did not have super-priority over lenders providing debtor-inpossession ("DIP") financing.²

Background

Indalex Limited ("Indalex") was the sponsor and administrator of two pension plans, one for salaried employees and one for executive employees. In 2009, Indalex became insolvent and sought creditor protection under the Companies' Creditors Arrangement Act ("CCAA"). Both plans had solvency deficiencies. The salaried employee plan was in the process of being wound-up. The executive employee