Indalex: Not Just a Pension Case

One of the issues that we did not have the space to deal with in our earlier Flash of April 11, 2011 on the Ontario Court of Appeal decision in Re Indalex Limited, 2011 ONCA 265, was the expansive impact that the decision may well have on corporate group insolvencies — and especially ones that are cross-border in nature.

As readers of this Flash may already know, the Court of Appeal held that where a debtor has breached its fiduciary duties ¹ to pension plan beneficiaries, the Court may find that a "constructive trust" applies to the debtor's property (such as the proceeds resulting from the sale of its business) and, therefore, such property (or sale proceeds) must be used to fund the full amount of any pension plan deficiencies first ahead of anyone else — whether or not a statutory deemed trust applies to such pension obligations. In this case, such a result arose in the context of Indalex's U.S. parent attempting to invoke the priority of a court ordered DIP