At the court hearing to approve the sale, the United Steelworkers (representing the salaried employees) and a group representing the executives appeared to object to the planned distribution of sale proceeds, asking that a sufficient amount be retained to cover the pension plans' deficiencies, pursuant to the deemed trusts established under the Ontario Pension Benefits Act.

Indalex US remitted US$10.75 million to cover the shortfall owing to the DIP lenders, and the Monitor withheld an amount equal to the deficiencies of the plans.

In August 2009, motions were heard by the court from the USW and the executive group, arguing that the withheld amounts should be remitted to the pension plans, as the deemed trusts under the PBA had priority over the DIP lending.

I would add this additional consideration: it is inappropriate for a CCAA applicant with a fiduciary duty to pension plan beneficiaries to seek to avoid those obligations to the benefit of a related party by invoking bankruptcy proceedings when no other creditor seeks to do so.In September, the Ontario Court of Appeal issued a separate ruling with respect to the allocation of responsibility for the costs of the appeal.

[19] There was also discussion of the impact Indalex might have in the area of corporate governance, as it was seen to be extending on the principles expressed by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders.

[24][25][26] Many creditors sought to modify their lending agreements by incorporating provisions that are meant to circumvent the perceived uncertainty that may arise in similar CCAA proceedings.

There is no evidence to support the contention that Indalex's failure to meaningfully address conflicts of interest that arose during the CCAA proceedings resulted in any such asset.

Justice Deschamps held that the statutory deemed trust constituted under s. 57(4) of the PBA is remedial in nature, as it is intended to protect the interests of the plan members.

As this was a choice that had been made by the Ontario legislature, the court would not interfere with it, but the Superintendent under the Act had the option to order a wind-up and thus bring the provision into play.

[34] Justice Thomas Cromwell disagreed with the Court of Appeal's interpretation of subsection 57(4), based on the grammatical and ordinary sense of the words in the phrase "accrued to the date of the wind up" in that provision, together with the broader statutory context.

Finally, the legislative evolution and history of these provisions showed that the legislature never intended to include the wind-up deficiency in a statutory deemed trust.

[35] The appellants had argued that the SCC's own ruling in Century Services Inc. v. Canada (Attorney General) should be expanded to apply federal bankruptcy priorities to CCAA proceedings.

[36] The provincial deemed trust under the PBA continues to apply in CCAA proceedings, subject to the doctrine of federal paramountcy[37] The Court of Appeal therefore did not err in finding that at the end of a CCAA liquidation proceeding, priorities may be determined by the Personal Property Security Act's scheme rather than the federal scheme set out in the Bankruptcy and Insolvency Act.

This is done within the framework established by Canadian Western Bank v. Alberta, and the court has already ruled that a provincial legislature cannot, through measures such as a deemed trust, affect priorities granted under federal legislation.

[42] However, the appellants argued in favour of a "two hat" approach — i.e., the fiduciary duty only existed in the employer's role as plan administrator, but not when the directors were acting in the best interests of the corporation.

For the benefit of judges that will be involved in future CCAA proceedings, Justice Cromwell offered the following guidelines:[45] Justice Louis LeBel considered Indalex's conflict of interest to be more serious than conceded by the majority: Indalex was in a conflict of interest from the moment it started to contemplate putting itself under the protection of the CCAA and proposing an arrangement to its creditors.

[49] The failed attempt to assign Indalex into bankruptcy after the sale of the business was also noted, and one of the purposes of that action was essentially to harm the interests of the members of the plans.

[51] The governing principles arise in Soulos v. Korkontzilas,[52] where Justice Beverley McLachlin (as she then was) considered that they must be "generally present":[53] The second condition was not satisfied in this case, as the Court of Appeal found only a connection between the assets and the process by which Indalex breached its fiduciary duty.

[54] This high standard can be found in other Court jurisprudence, such as in Lac Minerals Ltd. v. International Corona Resources Ltd..[55] In addition, imposing a constructive trust was wholly disproportionate to Indalex's breach of fiduciary duty.

“The phones are burning up on Bay Street today.”Reaction was immediate and widespread, given that the range of interveners in Sun Indalex reflected the fact that the scope and importance of many of the issues raised in the case apply equally in non-insolvency circumstances.

[68] While some commentators described Sun Indalex as "clear and thoughtful",[69] concern was also expressed as to the fairness of the result, and questioning whether appropriate choices had been made in establishing the framework of federal bankruptcy and insolvency legislation.