An express trust exists where one party holds, in trust, money
or property for another party with the intention of creating a
trust relationship. If an unpaid supplier can demonstrate that it
and the bankrupt purchaser intended to create a trust, and the
funds and property remain specifically identifiable, it may be
entitled to recover the funds or property that is the subject of
An unpaid supplier may establish the intention of a valid trust
by ensuring that the "three certainties" of intention,
subject matter, and objects, are met.
In order to meet the certainty of intention, the trustee must
administratively hold property for the beneficiary. A trust exists
if the trustee is obligated to deal with the property on behalf of
the beneficiary. This obligation may be express or implied, but the
intention must be clear. Certainty of subject matter requires that
the property or funds held in trust be clearly identifiable, while
certainty of objects refers to having an identifiable
In addition to the certainty requirements, an unpaid supplier
with a valid trust claim must also demonstrate that the trust was
properly constituted. This occurs once the trustee has acquired
title to the trust property, such that any rights to the property
belong to the beneficiary.
Readers are reminded that bankruptcy courts are typically
solutions-oriented and that the application of the above-criteria
is dependent on the facts of each case. It is recommended
that readers consult an insolvency professional.
Given the substantial amount of capital invested in Canadian businesses by American investors a considerable number of trust indenture documents are governed by US law and are "qualified" under the Trust Indenture Act of 1939.
The Canadian government has recently changed how it defines
eligible financial contracts. For the derivatives industry, the
new definition appears to give deference to the
over-the-counter commodities market in determining what is an
eligible financial contract.
The Ontario Court of Appeal released its decision denying parties leave to appeal from Justice Newbould's decision which held that global proceeds of sale in the amount of US$7.3 billion should be distributed to the worldwide Nortel debtor estates on a pro rata basis.
When a lender makes an interest bearing loan to a borrower for a fixed term, the contract may provide that the borrower cannot repay the principal sum before maturity. This is often referred to as a "no call" provision.
Despite there being no distinction of a true or finance lease for purposes of the requirement of registration under the Ontario Personal Property Security Act (PPSA), there is an important difference in cases of insolvency or default.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).