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ARTICLE · 25 AUGUST 2020

Set-off And Claims That May Not Be Compromised By A CCAA Plan Of Arrangement

McCarthy Tétrault
McCarthy Tétrault
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In the matter of the Companies' Creditors Arrangement Act ("CCAA") of the S.M. Group, the Québec Court of Appeal rendered a ruling on the effect of the law of set-off on debts...

CanadaInsolvency/Bankruptcy/Re-Structuring
Restructuring Roundup
Restructuring Roundup
Alain N. Tardif
Alain N. Tardif
Gabriel Faure
Gabriel Faure
Marc-Antoine Addoumi
Marc-Antoine Addoumi
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In the matter of the Companies' Creditors Arrangement Act ("CCAA") of the S.M. Group, the Québec Court of Appeal rendered a ruling on the effect of the law of set-off on debts arising out of alleged fraud and the application of the same Court's ruling in Kitco to this type of debts. The Court held that the rule prohibiting a creditor from setting-off a post-filing debt owed to the debtor against a pre-filing debt due by that debtor applies even if the latter debt cannot be compromised by a transaction or an arrangement.

Background: claims arising out of the debtors' fraudulent acts

The City of Montréal (the "City") claims to be owed two debts by the debtors, the S.M. Group and entities related to it (the "S.M. Group"), which are subject to an initial order issued under the CCAA on August 24, 2018.

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