In the recent case of Wolfe et al v Taylor et al, 2021 MBCA 83 the Manitoba Court of Appeal addressed an issue that arose in liquidation proceedings under The Corporations Act, CCSM c C225, related to the validity and amount of intercompany debt between two corporations.
Mr. Wolfe and Mr. Taylor ran a large farming operation through two jointly owned corporations (EPG and TBF) that conducted business together in an arrangement that is “typical of the manner by which many enterprises structure and conduct their affairs.”
Eventually the co-owners could no longer agree on how to run the operation and a liquidation process was initiated. In their assessment, the liquidation judge found there existed an intercompany debt owed by EPG to TBF, but Mr. Taylor appealed this decision by claiming that there also existed a debt, in the form of a land rental arrangement, owed by TBF to EPG that would offset that initial intercompany debt.
The court dismissed this appeal by finding there was substantial evidence supporting the intercompany debt, and virtually no hard evidence pointing to the existence of an offsetting debt. This serves as a valuable reminder of the importance of maintaining accurate and extensive records of financial agreements between jointly owned corporations.
By Ty Schmidt – Supervised by Professor Maharaj
The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.