In Montréal (City) v. Deloitte Restructuring Inc., 2021 SCC 53, the Supreme Court of Canada rendered on December 10, 2021 a 6-1 seminal decision establishing the burden that a creditor must meet in order to assert a claim arising from fraud in an insolvency context.
In this case, the City of Montreal was invoking a claim arising from a transaction concluded in the context of the Voluntary Reimbursement Program set up further to the findings of the Commission Charbonneau.
While the judge in first instance found that this claim indeed arose from fraud, the majority for the Supreme Court of Canada found otherwise and determined that the characterisation of this claim should be the subject of a trial to establish fraud.
In addition, the Supreme Court of Canada reversed the findings of the Quebec Court of Appeal decision in Kitco (2017) regarding the right to effect compensation/set-off in an insolvency context.
In essence, this decision sets out the path that must be followed in order to establish fraud in an insolvency context.
A team composed of Raphaël Lescop, Eleni Yiannakis, Mouna Aber and Johanna Mortreux of IMK represented the City of Montreal in this matter. Congratulations to our colleagues from Stikeman Elliott, Fasken and McCarthy Tétrault, and thank you to our colleagues from Borden Ladner Gervais and the City of Laval for their intervention in this case.
