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ARTICLE · 22 MARCH 2006

BC Court Expands Rights Of Unpaid Suppliers

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In an apparent departure from the interpretations previously given to section 81.1 of the Bankruptcy and Insolvency Act ("BIA"), the British Columbia Court of Appeal held that commingled fungible goods may be "identifiable" for the purposes of repossession by an unpaid supplier. The decision in Port Alice Specialty Cellulose Inc. Estate (Trustee of) v. ConocoPhillips Co. creates uncertainty for ABLs and other lenders that lend on the security of inventory and may trigger a re-examination of borr

CanadaLitigation, Mediation & Arbitration
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Article by Adam Maerov and Melissa McBean, Student-at-Law

Originally published in the Restructuring Bulletin February 2006

BC Court Expands Rights Of Unpaid Suppliers

In an apparent departure from the interpretations previously given to section 81.1 of the Bankruptcy and Insolvency Act ("BIA"), the British Columbia Court of Appeal held that commingled fungible goods may be "identifiable" for the purposes of repossession by an unpaid supplier. The decision in Port Alice Specialty Cellulose Inc. Estate (Trustee of) v. ConocoPhillips Co. creates uncertainty for ABLs and other lenders that lend on the security of inventory and may trigger a re-examination of borrowing base practices.

Conoco supplied four of five deliveries of fuel oil to a pulp mill operated by Port Alice. Following its bankruptcy, Conoco made a demand for repossession pursuant to section 81.1 of the BIA. That section allows a supplier to demand repossession of goods for which it has not been fully paid, within 30

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