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Cow Harbour True Lease Characterization Decision 'Released'
Whether a lease is a “true” or “finance” lease has been debated in Canadian courts for decades in many different contexts. The consequences of the categorization of a lease can have a material impact on the recovery that a lessor may have in an insolvency of its lessee. The Alberta Court of Queen's Bench recently released its decision in the matter of Royal Bank of Canada v. Cow Harbour Ltd. and 1134252 Alberta Ltd. on Jan. 23, 2012. This is one of the most important recent decisions in this debate and provides significant guidance as to how leases are to be classified in insolvency cases. We will review, at a high level, the tests that the court used in making its decision and offer an alternative analysis of what we believe should be the proper process.
Generally speaking, if a lease is determined to be a “true” lease, then the lessor is entitled to be paid rent during the restructuring period and may not be subject to certain costs associated with the restructuring. Accordingly, the economic impact of not being a “true” lease can be a very significant difference in the recovery obtained. Historically, the determination also impacted whether leases had to be registered under the Personal Property Security Act (“PPSA”), but recent changes to the PPSA have made this debate a non-issue. Unfortunately, the statutes governing Canadian insolvency legislation simply utilize the word “lease” but do not provide for any commentary or direction as to the meaning of the term. Reliance is placed on the common law and the common law, not surprisingly, is unclear. To complicate matters, tax and accounting have different tests for “true” and “finance” leases that are not common law driven but rules based.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
Risks of “Baseball Arbitration” in Resolving Real Estate Disputes
“Baseball arbitration” refers to the process used in Major League Baseball in which if an eligible player's representative and the club ownership cannot reach a compensation agreement through negotiation, each party enters a final submission and during a formal hearing each side — player and management — presents its case and then the designated panel of arbitrators chooses one of the salary bids with no other result being allowed. This method has become increasingly popular even beyond the sport of baseball.
Disconnect Between In-House and Outside Counsel
'Disconnect Between In-House and Outside Counsel is a continuation of the discussion of client expectations and the disconnect that often occurs. And although the outside attorneys should be pursuing how inside-counsel actually think, inside counsel should make an effort to impart this information without waiting to be asked.