Author Archives: Jassmine Girgis

About Jassmine Girgis

B.A. (Calgary); JD (With Distinction) (Western); LL.M. (Cambridge). Associate Professor. Member of the Alberta Bar. Please click here for more information.

Director Liability and the Workers’ Compensation Scheme: The Divergence Between Policy Goals and Outcomes

By: Jassmine Girgis

PDF Version: Director Liability and the Workers’ Compensation Scheme: The Divergence Between Policy Goals and Outcomes

Case Commented On: Hall v Stewart, 2019 ABCA 98

The workers’ compensation scheme and its effect on directors’ personal liability for corporate torts is an area of law that pursues the right policy goals but fails to achieve those goals in its implementation.

This post is about directors’ personal liability, the interplay between the Workers’ Compensation Act, RSA 2000, c W-15 (Act) and common law, and the policy issues that arise from this scheme. When the workers’ compensation scheme is superimposed on the common law system, it immunizes the corporation for corporate torts while leaving directors open to suit if they do not purchase special coverage. Their liability is then determined by common law principles.

In Hall v Stewart, the director, Stewart, did not purchase additional insurance, leading the Court of Appeal to conclude he could be held personally liable for the tort of the corporation under the two-step Anns/Kamloops test (from Kamloops (City of) v Nielsen, 1984 CanLII 21 (SCC), [1984] 2 SCR 2). This post will discuss two issues arising from this decision; first, the policy issue this scheme engenders, which should have been addressed under the second step of the Anns/Kamloops test, and second, the influence of Nielsen Estate v Epton, 2006 ABCA 382 (CanLII), affm’g 2006 ABQB 21 (CanLII), on this decision, which the Court of Appeal did not apply. Continue reading →

Lessons from Redwater: Discard the AbitibiBowater Test and Legislate Super Priority for the Regulator

By: Jassmine Girgis

PDF Version: Lessons from Redwater: Discard the AbitibiBowater Test and Legislate Super Priority for the Regulator

Case Commented On: Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (CanLII)

Environmental cleanup costs are a natural consequence of operating in the oil and gas industry. Provincial regulations ensure these costs are borne by the company responsible for them, and these regulations work if that company is solvent. An insolvent company, however, cannot bear the costs of outstanding environmental orders, which leaves those costs to the company’s creditors or to the public.

The goal should be, and fairness dictates, that the debtor always covers the cost, regardless of its solvency, but that requires amending the governing legislation, preferably to give the regulator (in this case, the Alberta Energy Regulator (Regulator), and the equivalent regulators in other provinces) a super priority. Knowing the Regulator has a super priority in a bankruptcy will compel the adjusting creditors to modify their agreements ex ante, ensuring, in turn, that companies comply with regulations and have enough capital to cover environmental costs as they arise. This solution is better than our current system, in which creditors must wait for a court to apply the three-part test from Newfoundland and Labrador v AbitibiBowater Inc, 2012 SCC 67 (CanLII) (AbitibiBowater test) to determine who has priority, potentially leaving them to deal with the consequences ex post.

On a matter this important and this costly, a matter that has notable public policy considerations and far-reaching implications for private parties, both sufficient environmental protection as well as certainty in adherence to the legislated priorities, must be the ultimate goals. The Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA”) does not currently provide enough environmental protection, which may compel courts to compensate through the AbitibiBowater test. It is hard to predict the outcome of the test and, depending on its application to a given set of facts, it undermines the BIA priority scheme. Throughout the proceedings of Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (CanLII) (commonly known as the Redwater case), in three levels of court, there were five judgments. Eleven judges applied the same test and six of them ruled in favour of the Regulator, while five ruled in favor of the secured creditor. This much disagreement over one set of facts should indicate that these issues should not be handled by the courts through the application of the AbitibiBowater test. The required certainty in this area must come from Parliament by way of legislative amendment to clarify a super priority charge in favour of the Regulator in the BIA.

Continue reading →

Preservation of Human Dignity as the Justification for Excluding Personal Rights of Action in Bankruptcy

By: Jassmine Girgis

PDF Version: Preservation of Human Dignity as the Justification for Excluding Personal Rights of Action in Bankruptcy

Case Commented On: Cooke (Re), 2018 ABQB 628

This case considers whether a contractual “critical illness” benefit forms part of the property of the bankrupt’s estate. Personal rights of action arising out of tort claims have traditionally not formed part of the bankrupt’s estate, meaning the bankrupt gets to keep the money from these claims. Prior to this case, however, courts do not appear to have addressed the bankrupt’s entitlement to personal rights arising from contract. In this case, the court drew an analogy between the two types of claims. It found that both compensate for the pain and suffering of the bankrupt and consequently concluded that a contractual critical illness claim should also be excluded from the distribution to creditors.

The bigger question raised by this case is why these types of claims are not included in the distribution to creditors. This is not a statutory exemption, but courts have been excluding personal rights of action in bankruptcy distributions for more than a century. This blog explores one possible reason for the exemption. Rather than seeing the debtor as a financial problem that must be solved without requiring state assistance, which has been the pattern of bankruptcy law, this may be the courts seeing and treating the debtor as a human being.

Continue reading →

BIA Preference Payments: Evidence Rebutting the Presumption must be Objectively Reasonable

By: Jassmine Girgis

PDF Version: BIA Preference Payments: Evidence Rebutting the Presumption must be Objectively Reasonable

Case Commented On: Gustafson (Re), 2018 ABQB 77 (CanLII)

Introduction

Legislation that governs fraudulent preferences applies if a debtor elects to pay only one or a few of his creditors and not the others, with the consequence of preferring certain creditors. These transfers are improper if they are made on the eve of the debtor’s bankruptcy. Preferences are governed provincially, by the Fraudulent Preferences Act, RSA 2000, c F-24, and federally, under the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA). This case deals with the preference provisions in the BIA. Continue reading →

Penalty Clauses: Inequitable, but Not Inherently Extravagant

By: Jassmine Girgis

PDF Version: Penalty Clauses: Inequitable, but Not Inherently Extravagant

Case Commented On: Super Save Disposal (Alberta) Ltd v Shenwei Enterprises Ltd, 2017 ABQB 805 (CanLII)

Overview

This is an appeal from a decision of the Provincial Court, which found that a purported liquidated damages clause was, in fact, a penalty clause. The court struck the clause down for being “extravagant and unconscionable”.

It was legitimate to find a clause comprised of gross profits to be “unfair and inequitable” in principle, but without knowing the value of the net profits and the difference between the two figures, it was problematic in this case to find its use to be “extravagant and unconscionable”, and “unreasonable and oppressive”. Continue reading →