The Alberta Court of Appeal has determined in Canada v. Canada North Group Inc. that the Court has authority to prime the Crown’s deemed trust claim when creating restructuring charges. The Court noted that to find otherwise would inject an unacceptable level of uncertainty into the insolvency process.

There have been conflicting decisions on this priority issue, with the Alberta Court of Appeal resolving the matter in favour of the Court having the jurisdiction to grant priority for restructuring charges. This means that the usual “super-priority” restructuring charges granted by the Court in a proceeding under the Companies Creditors Arrangement Act or the Bankruptcy and Insolvency Act can rank in priority ahead of the Crown’s deemed trust claim. Restructuring charges can include for example charges securing interim (DIP) financing and administrative charges for fees of restructuring professionals and their counsel.

It remains to be seen whether the Crown will seek leave to appeal this decision to the Supreme Court of Canada. A copy of the court decision is available by clicking this link.