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Corporate Attribution in Insolvency: Recent Developments in Aquino and Golden Oaks

November 20, 2023


The Supreme Court of Canada (SCC) has granted leave to appeal the decisions of Ernst & Young Inc. v. Aquino (Aquino) and Golden Oaks Enterprises Inc. v. Scott (Golden Oaks), which both address the corporate attribution doctrine in the insolvency context. Generally, the corporate attribution doctrine imputes the actions, intent and/or knowledge of a corporation’s “directing mind” to the respective corporation. Key differences between how Aquino and Golden Oaks apply the corporate attribution doctrine and preliminary intervenor arguments are discussed in our previous Blakes Bulletin: Corporate Attribution in Insolvency: Key Differences Between Aquino and Golden Oaks.

Since publishing our latest bulletin, the Insolvency Institute of Canada (IIC), a leading non-profit industry association promoting thought leadership in the commercial insolvency practice, and the Attorney General for Ontario (AGO) have filed facta containing their views to the SCC in respect of the corporate attribution doctrine. The IIC has additionally filed leave to intervene motion materials with respect to a discrete set-off issue in connection with section 97(3) of the Bankruptcy and Insolvency Act (BIA), with such leave recently granted by the SCC. This bulletin summarizes the IIC and AGO’s intervenor facta on the corporate attribution doctrine, as well as the IIC’s additional factum with respect to a set-off issue in connection with section 97(3) of the BIA.

IIC and AGO Factum Arguments

The IIC confirms in its factum that it intervenes in Aquino to (1) clarify that the corporate attribution test created in Canadian Dredge & Dock Co. v. The Queen (Dredge) was not meant to be all-encompassing, and (2) recommend that the SCC affirm the availability of exceptions to the “identification doctrine.”

The IIC submits that Dredge is the leading authority on the identification doctrine in Canadian common law. The corporate identification doctrine applies where the action taken by the directing mind of a corporation (i) was within the field of operation assigned to the relevant individual, (ii) was not totally in fraud of the corporation, and (iii) was by design or result for the benefit of the company. If the test is satisfied, the actions, intent and knowledge of the directing mind can be attributed to the corporation. The doctrine, however, recognizes policy-driven “defenses,” otherwise referred to as exceptions. In Deloitte & Touche v. Livent Inc. (Livent), the SCC built on the reasoning in Dredge regarding exceptions to the application of the doctrine, by refraining from applying the corporate attribution doctrine.

At issue in Livent, among other things, was whether the auditor was negligent in light of fraud committed by Livent Inc.’s principals. The auditor defended itself in the proceedings on the basis that, among other grounds, the fraud conducted by the principals should be attributed to Livent Inc. so as to prevent Livent Inc. from recovering damages against the auditor. The SCC refrained from applying the corporate attribution doctrine in this circumstance due to the context and purpose of the statutory audit at issue (essentially to detect wrongdoing) and determined that it was not in the public interest to apply the doctrine. Dredge and Livent together confirm that exceptions to the strict application of the identification doctrine exist based on the relevant context in which the corporate attribution doctrine arises and the purpose of applying such doctrine.

The IIC recommends in its factum that the context and purpose of a specific statutory provision at issue should guide the corporate attribution analysis. It submits that the parliamentary purpose for enacting a specific statutory provision should not be displaced to achieve broader policy objectives. An exception to the identification doctrine would only be warranted if the application of the corporate attribution doctrine would not lead to the core aim of the provision at issue, which in certain circumstances may be creditor recovery, but not in all circumstances. To further illustrate its point, the IIC distinguishes between the purposes of section 96 (creditor recovery) and sections 71 and 30(1)(d) of the BIA (together, to advance claims as a successor to the debtor) to show that the corporate attribution analysis is a case-specific approach. In sum, the purpose of a provision needs to inform any corporate attribution analysis, which should not simply result in the relevant court catering to broader public policy concerns and approving “whatever outcome most maximizes creditor recovery.”

The AGO factum provides similar guidance, albeit through a broader scope. The AGO views the appeals of Aquino and Golden Oaks as an opportunity for the SCC to clarify the application of the corporate attribution doctrine to novel statutory contexts more broadly instead of limiting its ruling to the insolvency context. In the event that the relevant legislation at issue does not contain provisions to allow for corporate attribution, the AGO advocates for a similar approach to the IIC in that the corporate attribution doctrine must be applied in a manner sensitive to and in furtherance of the “text, context, and purpose of the relevant statutory provision.” Both the AGO and IIC emphasize that their submissions to the SCC is consistent with the United Kingdom’s jurisprudence on corporate attribution.

IIC Set-Off Arguments

The IIC received leave to intervene in Golden Oaks on August 16, 2023 in respect of the Ontario Court of Appeal’s (ONCA) ruling that suggested permissible set-off pursuant to section 97(3) of the BIA should be “confined within narrow limits” to prevent a creditor from achieving a higher priority ranking to a general body of creditors (insofar as that creditor would receive full recovery for the set-off amount). The IIC’s factum on this matter posits that the ONCA’s ruling erroneously privileges one legitimate equitable consideration (avoiding one creditor being preferred vis-a-vis other creditors) over another (preventing a creditor with both a debt to and a claim against a bankrupt as of the date of the relevant bankruptcy from paying the debt while only recovering a small fraction of its claim against the bankrupt), and does not follow the explicit wording in section 97(3) that set-off applies “in the same manner and to the same extent as if” the set-off were occurring outside of the insolvency regime. The IIC accordingly advocates that the SCC should simply follow the legislative direction provided for in section 97(3) of the BIA and its own precedent decision, Husky Oil Operations Ltd. v. Minister of National Revenue, that “the party claiming set-off has Parliament’s blessing for the ‘reordering’ of his priority in bankruptcy by virtue of the operation of the law of set-off.”


The IIC and AGO facta shed further light on the arguments each intervenor will make before the SCC regarding corporate attribution and set-off, as applicable. The SCC’s decision on each issue will undoubtably provide for a significant impact on the insolvency regime once rendered.

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