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  • Hypothecary Claims, Factoring and Priorities

    In a recent decision, the Superior Court ruled in favour of GE, Commercial Distribution Finance Canada ('GE') in a dispute against the National Bank of Canada ('NBC'). Both institutions had a common client, New World Zanotti Transblock Inc. ('Zanotti'), which had granted to each of them a hypothec specifically charging its receivables. NBC had agreed to grant GE’s hypothec a prior rank to its own. In order to reduce Zanotti's indebtedness to it, NBC nevertheless collected the proceeds resulting from the sale of Zanotti’s receivables, which were themselves encumbered by GE's hypothec, and deposited those proceeds into Zanotti's operating bank account. The proceeds were paid by NatExport, a subsidiary of NBC, that had purchased the receivables pursuant to a factoring agreement entered into between it and Zanotti. GE claimed damages for an amount equal to the proceeds usurped by NBC on the grounds that NBC had contractually acknowledged GE's priority over those assets.

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  • The Court of Appeal clarifies the legal nature of a real guarantee

    Quebec law has for a long time distinguished the personal guarantor from the real guarantor: a personal guarantor is personally bound to repay a creditor should the principal debtor fail to perform its obligations; a real guarantor does no more than give some of its assets as collateral to a creditor, and unlike a personal guarantor, is not personally bound to repay the loan granted to the principal debtor.On July 16, 2012, the Court of Appeal of Québec upheld a judgment of the Superior Court to the effect that real guarantees are governed by the rules pertaining to hypothecs and not by those pertaining to guarantees, with the result that unlike personal guarantors, real guarantors are not entitled to the benefit of division or of discussion. That issue had not been addressed by Quebec courts since the coming into force of the Civil Code of Québec.

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  • The Superior Court applies restrictive interpretation to additional hypothecs

    The scope of additional hypothecs was examined by the Superior Court on September 6, 2011 in the case of Banque Nationale du Canada v. Larouche.At issue in this case was whether the additional hypothec provision contained in the deed of hypothec granted by Mr. Larouche in favour of the National Bank of Canada entitled the Bank to receive any proceeds from the sale by judicial authority of an immovable owned by Larouche, over and above what had been attributed pursuant to the principal hypothec also contained therein.

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  • What happens when a contract does not reflect what was agreed upon between the parties?

    On October 28, 2011, the Quebec Court of Appeal upheld a judgment of the Superior Court allowing for clauses of a loan agreement to be modified by the Court so as to reflect the common intention of the parties after it was proved that there was a discrepancy between the real intention of the parties, as stated in a letter of intent, and the wording of the document drawn up to implement the letter of intent, namely a loan agreement. The Court therefore refused to give effect to a clause in the loan agreement that contained a significant error that would have resulted in material financial consequences for the borrower.

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  • When it becomes necessary to revoke the appointment of an inspector to ensure the proper functioning of the proposal or bankruptcy process

    When a bankruptcy occurs, the creditors play a central role in the administrative control of the bankrupt’s estate. In this regard, the Bankruptcy and Insolvency Act provides that, at the first meeting of creditors, the creditors must, among other things, affirm the appointment of the trustee and give such directions to the trustee as they see fit with reference to the administration of the estate. The creditors will also appoint up to five inspectors to monitor the bankrupt’s estate or they can agree not to appoint any inspectors.

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  • Can a creditor who institutes a hypothecary recourse recover "Extra-judicial professional fees...for services"? A Quebec Court rules

    Since the amendments made to the Civil Code of Québec (“C.C.Q.”) in 2002, article 2762 provides that:2762. A creditor having given prior notice of the exercise of a hypothecary right is not entitled to demand any indemnity from the debtor except interest owing and costs.Notwithstanding any stipulation to the contrary, costs exclude extra-judicial professional fees payable by the creditor for services required by the creditor in order to recover the capital and interest secured by the hypothec or to conserve the charged property.

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  • Your Contracts: a Systematic and Disciplined Approach is Called for

    Every day, and several times a day, we enter into contracts without knowing it or without considering and controlling their effects. This bulletin provides a brief and non-exhaustive summary to help you better understand, prepare for and monitor your contractual environment.Do you know that a contract is a meeting of minds that may be expressed and entered into in different ways (written, verbal, e-mail, filling of orders, etc.). Do you know that a contract may be amended or rights abandoned by actions, words or subsequent writings, or by failing to take action in a timely manner.This bulletin provides practical advices before you drafting, negotiating, also advices regarding the performance and monitoring of contracts.In summary, clarity, transparency, a mutual understanding of the goals and expectations of each party, good faith and the use of a systematic and disciplined approach will smooth the way for your contracts. Have good contracts!

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