2016 INSOLVENCY AND RESTRUCTURING FORUM VESTING ORDERS Robert G. MacKeigan, Q.C., Stewart McKelvey John D. Stringer, Q.C., McInnes Cooper

2 PART 1 – VESTING ORDERS IN INSOLVENCY PROCEEDINGS Vesting orders pass title “free and clear” of encumbrances without the need for a conveyance Not only used in insolvency proceedings – also estates and trusts, family law and other areas HISTORY Equitable in origin and discretionary Court of Chancery originally made in personam orders, enforceable by contempt orders

3 Power to issue vesting orders supplemented the contempt power by allowing the court to make the change of title directly Normally order is effective on the delivery of a certificate of the receiver, monitor or proposal trustee that the transaction is completed Notice to be given to all interested parties No need for a court ordered vesting when there is a bankruptcy as assets are vested in the trustee and trustee may sell without a court order, subject to the rights of secured creditors A vesting order has been stated to be: the cornerstone of the modern “restructuring” age of corporate asset sales and secured creditor realizations... the holy grail sought by every purchaser; the carrot dangled by debtors, court officers and secured creditors alike in pursuing and negotiating sale transactions. David Bish and Lee cassey,(2015) Nat Insov 41 at p. 42)

4 VESTING ORDERS IN RECEIVERSHIPS Vesting Orders have been used frequently in receiverships in all provinces Vests title in purchaser from Receiver “free and clear” of encumbrances Effective on delivery of the certificate of the receiver that the transaction is completed, Or on the delivery of a Receiver’s deed or both

5 Section of the BIA for proposals and section 36 for CCAA arrangements set out the circumstances in which a sale may be ordered On grounds of paramountcy, vesting orders in BIA proposals and CCAA proceedings have been held to be valid Prior to coming into force of these provisions in 2009, Ontario decisions in CCAA proceedings held the power to order sales and issue vesting orders are within the inherent powers of the Court to impose terms and conditions on the granting of a stay CCAA PROCEEDINGS AND BIA PROPOSALS

6 PART II - JURISDICTION TO ISSUE VESTING ORDER IN ATLANTIC CANADA- NOVA SCOTIA How Vesting Orders are used advantageously in recent insolvency proceedings Enterprise Cape Breton Corporation v. Crown Jewel Resort Ranch Inc. case How insolvency practitioners in Nova Scotia have responded to the Crown Jewel case Practice Memorandum No. 8 issued by the Supreme Court on June 25, 2015

7 NEW BRUNSWICK No explicit jurisdiction to grant Vesting Orders under the New Brunswick Judicature Act Assume Courts rely on inherent jurisdiction Used in various prominent cases without comment from the Court

8 PRINCE EDWARD ISLAND Explicit language set out in s.43 of the Judicature Act S.43 – The Courts may, by order, vest in any person an interest in real or personal property that the Courts have authority to order be disposed of, encumbered or conveyed No reported cases commenting on Vesting Orders

9 NEWFOUNDLAND AND LABRADOR No explicit jurisdiction under the Newfoundland and Labrador Judicature Act No reported decisions commenting on Court’s jurisdiction Vesting Orders granted pursuant to inherent jurisdiction

10 REQUEST TO NOVA SCOTIA ATTORNEY GENERAL AND MINISTER OF JUSTICE To amend Nova Scotia Judicature Act Give national mandate to receivers appointed pursuant to s.243 of the Bankruptcy and Insolvency Act Need consistency in all provinces Proposed Amendment to s.41: “The Court, in the exercise of the jurisdiction vested in it in every proceeding pending before it, may by order vest in any person an interest in real or personal property that the Court has authority to order be disposed of, encumbered or conveyed.” Submitted December 11, 2015

11 PART III – SALES OF NOVA SCOTIA ASSETS BY RECEIVERS BASED ON FORECLOSURE Except in Nova Scotia, the standard receivership order allows the receiver to apply for “any vesting order or other orders necessary to convey... [Emphasis added] Nova Scotia’s model receivership order allows an application to sell “all the right, title, interest, property and demand of the respondent in and to the property at the time the respondent granted a security interest or at any time since free of all claims...” Subsequent encumbrancers are bound if named respondents or parties joined as unnamed respondents or receive notice in accordance with the Civil Procedure Rules

12 In the approval order in Nova Scotia, since the Crown Jewel Case issued, we have omitted the word “vesting” in the receivership order and in the approval order. The approval order should contain words to the following effect: –All interest and equity of redemption of the Debtor, and of all persons claiming through the Debtor in the lands described in the mortgage dated * are forever barred and foreclosed. This follows the wording in the standard foreclosure order. Alternatively, the approval order could contain the words in the receivership order. Is there a difference in effect between vesting and foreclosure.

13 A provision in an order from another province directing the registration of the vesting order in the Land Registration Office has not to date been accepted by the Registrar General without a recognition order being obtained from the Supreme Court of Nova Scotia The Land Registration Act (Nova Scotia) defines “court” as the Supreme Court of Nova Scotia and only its orders may be registered under the Act In December, Justice John Murphy of the Supreme Court of Nova Scotia recognized a vesting order in New Brunswick CCAA proceedings but with qualifications PART IV – PROCEDURE FOR REGISTERING IN NOVA SCOTIA A VESTING ORDER FROM ANOTHER PROVINCE

14 The New Brunswick order as well as Justice Murphy’s order recognizing it contains provisions foreclosing the interest and equity of redemption of the landowner and of all persons claiming through the landowner Justice Murphy declined to recognize the provision of the New Brunswick order giving directions to the Registrar under the Nova Scotia Land Registration Act, presumably on the grounds that the New Brunswick court does not have jurisdiction to give directions to Nova Scotia Registrar The order approved by Justice Murphy also expressly states that the burdens and benefits shown on the parcel register are not affected