C. The Sources of Insolvency Law

Author:Roderick J. Wood
Profession:Faculty of Law. University of Alberta

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The framework for Canadian insolvency law is found in several statutes enacted by the Parliament of Canada. However, these statutes are not the only sources of insolvency law, and for a full picture it is necessary to understand the interplay between the federal insolvency statutes and the other sources of insolvency law.

1) The Common Law

Although most of the insolvency regimes are overwhelmingly legislative in character, there is one that has its origins primarily in the common law. Receivership law began as a mixture of contract law and equitable principle. Although there has been a significant overlay of provincial and federal legislation, the common law core of receiver-ship law remains in place and defines many of the operative concepts

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and principles. It is impossible to understand the current state of the receivership law without having a detailed knowledge of these common law principles.

Even in insolvency regimes that are predominantly statutory in nature, such as the bankruptcy regime, there is a residue of common law principle that continues to operate. For example, a common law rule, referred to as the rule in Ex parte James; Re Condon,25 confers upon a bankruptcy court the power to prevent the trustee from acting in a high-handed or unreasonable manner. As well, courts have used their inherent jurisdiction in order to fill gaps in the statutory rules.26

2) Statute Law

The following federal insolvency statutes create or regulate the various insolvency regimes:

· Bankruptcy and Insolvency Act;

· Companies’ Creditors Arrangement Act

· Winding-up and Restructuring Act (WURA);

· Farm Debt Mediation Act (FDMA);

· Canada Business Corporations Act (Part IX, ss. 94?101); and

· Canada Transportation Act (sections 106?10);

By far, the largest and most encompassing of the federal insolvency statutes is the BIA. This statute governs the bankruptcy regime but also creates or governs several of the other non-bankruptcy insolvency regimes. The last three statutes in the list are more specialized. Part IX of the Canada Business Corporations Act contains provisions governing receiverships in relation to corporations that are incorporated under the federal Act. The FDMA applies only in respect of farmers. The provisions of the Canada Transportation Act apply only to insolvent railway companies.


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