On March 16, 2018, a Quebec Court approved a litigation funding agreement for an insolvent company operating under court-protection in a Companies’ Creditors Arrangement Act (CCAA) proceeding. The insolvent company wanted to pursue a significant claim against its primary secured creditor and the litigation funding agreement stipulated that the third party litigation funder will pay all legal fees and disbursements in relation to the proposed claim in exchange for a portion of any proceeds of the litigation. 

Recent legislative amendments in Ontario are intended to protect construction subcontractors from the claims of other creditors in the event of insolvency. They impose a new requirement to maintain written records for trust funds that will be in effect as of July 1, 2018.

Section 8 of the Construction Lien Act, R.S.O. 1990, c. C.30 provides that amounts owing to, or received by, a contractor on account of a contract or subcontract constitute a trust fund for the benefit of the subcontractors.  These claims have often proved unrecoverable when a general contractor becomes bankrupt because trust claims created under provincial statutes like the Construction Lien Act do not survive bankruptcy unless the trust also meets the common law test for a trust.