Commercial Law Symposium 2023
On Saturday, September 23rd, Queen’s University Faculty of Law hosted the 7th Annual Canadian Commercial Law Symposium in Kingston. Speakers presented works-in-progress on topics ranging from consumer protection and debt counseling, to the provincial power over municipal bankruptcy, the history of the Bank of Canada, reverse vesting orders under the CCAA, the interpretation of arbitration agreements and insurance contracts, and how the right to housing should influence foreclosure rules. For each paper, an invited discussant provided feedback and additional commentary on the topic, followed by open discussion among conference participants.
Following a thoughtful land acknowledgment by Queen’s Law Dean Colleen Flood, Professor Stephanie Ben-Ishai of Osgoode Hall presented her paper, “Avoiding Bankruptcy at a High Cost: the Dangers of the Canadian Debt Relief Industry.” With the proliferation of new buy now, pay later (BNPL) products, an expensive bankruptcy regime, voracious debt investors, and a lightly regulated debt relief industry, Ben-Ishai critically analyzed the power imbalance between those with unsustainable levels of debt and institutional creditors. Professor Gail Henderson, the discussant for this presentation, commented upon the dangers that a largely unregulated debt relief industry presents for the most vulnerable Canadians at a time of high interest and high inflation. Participants asked why Canada did not adopt the Australian model of “no asset, no income bankruptcy” and whether a public credit reporting agency could resolve some of the asymmetry inherent in consumer debtor-creditor relations. Ben-Ishai’s response was that, unfortunately, due to lack of political will and strong lobby groups, Canada is unlikely to adopt either approach anytime soon.
Joshua Karton, Associate Professor at Queen’s Law and a co-organizer of this year’s symposium, presented his paper, “Taking Arbitration-Agreements-as-Contracts Seriously.” In it, he asked some insightful questions concerning how arbitration agreements are treated in practice. If it is trite to say that arbitration agreements are contracts, why is contract law not applied more robustly in arbitration proceedings? For example, should courts reviewing arbitration agreements be concerned with vitiation of consent principles or public policy issues, such as competition law? When arbitration agreements are broken, why do courts rarely award breach-of-contract remedies, such as damages for consequential delays and full costs, or order specific performance? Though he does not purport to know the answers to all these questions, adopting a contractarian theory of arbitration agreements would help delineate the relationship between the courts and arbitration, point the way toward legislative reforms, and provide arbitral tribunals with more effective tools to restrain abusive tactics by aggressive parties. The discussant, Assistant Professor Angela Lee of Toronto Metropolitan University, suggested the author more explicitly spell out the differences between a contractarian versus contractual theory, as well as identify some of the differences inherent in domestic versus international arbitration.
Dan Rohde, an SJD candidate at Harvard Law School, is writing the first comprehensive history of central banking in Canada; he presented a part of this work in his paper, “The Founding of the Bank of Canada: A Legal History.” This is no small endeavor and is particularly timely given calls for central banks to take on a more expansive mandate in combating climate change or reducing economic inequality. Rohde, through his extensive archival research, found that in the years leading up to the Bank of Canada’s foundation, there were at least five competing visions for the Bank, and that it was not at all inevitable we would end up with the one the Conservatives under PM Bennet decided on (one focused solely on maintaining a stable foreign exchange rate) or the one we have now (one that sees price control as important as currency stability). This shows us that institutions evolve and adapt to changing social priorities. In her commentary on the paper, discussant Pascale Cornut St.-Pierre, an Assistant Professor in the University of Ottawa Civil Law Division, asked about the views of French Canadians. Rohde answered that the historical record focused on the views of the banks, headquartered in Montreal at the time, and on the politicians, but less so on the views of ordinary Quebecers.
Continuing in this historical vein, Professor Thomas Telfer presented “Justifying a Provincial Bankruptcy and Insolvency Power for Municipalities: An Analysis of Ladore v Bennett (1939) and its Divergence from Twentieth Century Federalism Jurisprudence in Canada,” co-authored with Virgina Torrie. What can we learn about Canadian federalism and insolvency law through a study of the amalgamation of four insolvent municipalities in the Great Depression? Telfer and Torrie argue that the Judicial Committee of the Privy Council (JCPC) decision in Ladore diverged from a long line of judicial reasoning that carved out a strong federal jurisdiction over bankruptcy and insolvency. This divergence continues to inform modern debates about public sector bankruptcies, as provincial governments must work with federal statutes, the Bankruptcy and Insolvency Act and CCAA, to regulate bankrupt and insolvent municipalities and other public sector institutions. Those institutions, however, have different purposes and their bankruptcy different consequences in the community than the corporations the federal statutes deal with. The ensuing discussion, led by Daniel Onyeje Ebegbodi, LLM candidate at the University of Calgary, not only touched on the intricacies of bankruptcy and insolvency law but also on some broader issues concerning Western alienation and federal-provincial relations. For example, it is arguable that federal insolvency proceedings interfere with the constitutional right of provinces to regulate municipalities.
What to make of the nascent reverse vesting order (RVO) in the Companies’ Creditors Arrangement Act (CCAA ) plans of arrangements? This is the broader question that Assistant Professor Alfonso Nocilla asks in his paper, “Crossing the Event Horizon: Reverse Vesting Orders Under the Companies’ Creditors Arrangement Act.” Unlike a traditional vesting order, an RVO transaction hives off the unwanted liabilities and assets of the debtor into a new corporation and the purchaser buys shares of the debtor, thereby acquiring the desirable assets without the liabilities. There are two major risks here: the purchaser may acquire, through an RVO, non-transferable assets (such as licenses to produce and sell cannabis) and some creditors’ interests may be overlooked as the RVO process obviates a vote by the creditors. Kevin McElcheran, a leading Canadian insolvency lawyer, as discussant for this presentation, focused his attention on the risk that RVOs present for creditors’ right to vote on insolvency plans, and the lack of remedies they may have as a result of these orders. Attuned to these issues, participants queried whether this innovation is driven by secured creditors who thereby gain disproportionate benefits, and whether this is an issue to be resolved by Parliament or the courts? Moreover, it was asked if the provincial administration of the CCAA and the different interpretations of RVO’s in their superior courts can lead to forum shopping? Nocilla answered that, although we may have crossed the “event-horizon” into a world where RVOs are commonplace, it is still too early to tell.
Who but Professor Erik Knutsen of Queen’s Law could make insurance law entertaining? In his presentation of “Real-World Insurance Policy Interpretation in Canada,” Knutsen pointed out some oddities in interpretation of insurance policies by Canadian courts. Examining the case law in Ontario and British Columbia between 2013-2023, Knutsen found that although the Supreme Court of Canada has laid out a purposive approach to insurance policy interpretation, trial courts consistently apply narrow textual interpretations, often never engaging in broader discussion of the reasonable expectations of the parties or the purpose of the policy in the marketplace. Unsurprisingly, a focus on the text of the policy seemed to overwhelmingly favour insurers. The discussant for this paper, Dean Barbara Billingsley of the University of Alberta, agreed with Knutsen that courts too-often stop at the textual analysis stage because the reasonable expectation test does not make sense. The ensuing discussion grappled with issues underlying this trend: how can we keep insurance costs low without prejudicing consumers, how can courts say a case is clear and unambiguous when text is often anything but that, and what accounts for the almost quadrupling of cases of insurers refusing to pay out?
The final speaker was University of Alberta Associate Professor Anna Lund, who presented her paper, “The Right to Housing in Mortgage Enforcement Proceedings Lessons for Canada from South Africa,” in which she considered responses to the Canadian housing crisis inspired by South African mortgage foreclosure law. While South Africa’s constitutional Bill of Rights is largely modeled on the Canadian charter, unlike Canada’s, South Africa’s constitution enshrines social rights, including an express right to housing. In Jaftha and Gundwana, the South African Constitutional Court found that a judge in a foreclosure proceeding must ensure that, in light of the debtor’s right to housing, the harm to the debtor must not be disproportionate to the benefit to the creditor if foreclosure is granted. Though the Canadian government has recognized a right to housing in its National Housing Strategy, courts do not need to look at the debtors’ particular circumstances and under Canadian law, and one cannot write down mortgage debt in bankruptcy proceedings. Leading the discussion, Queen’s Law Associate Professor Michael Pratt, provided insight into how redemption periods in a power of sale proceeding could, with some legislative change, help mortgagors keep their homes after a conditional closing. Some noteworthy questions under discussion included: how can Canadian law balance the interests of institutional lenders and the average Canadian mortgagor, particularly when it is a mortgagor’s personal residence, and to what extent can the courts apply a contextual approach as in South Africa, to prevent an involuntary loss of housing, in an era of rising homelessness?
It was an interesting and thought-provoking day, and a successful return to a primarily in-person event after two years on Zoom. The co-organizers would like to thank all the presenters, commentators, moderators and attendees, Dean Flood and Queen’s Law event coordinator Natalie Moniz-Henne. We look forward to seeing everyone again next year at the 8thannual CCLS.