We previously posted a blog regarding the BC Supreme Court’s finding in Peakhill Capital Inc. v Southview Gardens Limited Partnership, 2023 BCSC 1476 on October 27, 2023.
In British Columbia v Peakhill Capital Inc., 2024 BCCA 246, the BC Court of Appeal was asked to consider the BC Supreme Court chambers judge’s approval of a reverse vesting order whereby the shares of the debtor, a real estate holding company, were transferred to the purchaser. This transaction saved property transfer tax of approximately $3.5 million, thereby increasing the amount available for distribution to the creditors of the debtor. The Province of British Columbia appealed on a number of bases, including that the use of the reverse vesting order constituted unlawful tax avoidance. Like the court below, the Court of Appeal disagreed, holding that structuring transfers of property through a share sale to avoid the PTT is lawful and legitimate in a non-insolvency context such that there was no reason to view it differently in an insolvency context. The court had jurisdiction to authorize the reverse vesting order under s. 243 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, as it was incidental and ancillary to the receiver’s power to liquidate the assets by sale.
The Province is currently seeking leave to appeal to the Supreme Court of Canada, so there may be further guidance on this in the future.