Category Archives: Bankruptcy and Insolvency

Environmental Obligations Enforced Between Private Parties: The Extension of Redwater

By: Jassmine Girgis

Case commented on: Qualex-Landmark Towers Inc v 12-10 Capital Corp, 2023 ABKB 109 (CanLII)

PDF Version: Environmental Obligations Enforced Between Private Parties: The Extension of Redwater

The Qualex-Landmark Towers Inc v 12-10 Capital Corp, 2023 ABKB 109 (CanLII) (Qualex) decision extends the principles from the Supreme Court’s decision in Orphan Well Association, Alberta Energy Regulator v Grant Thornton Limited and ATB Financial, 2019 SCC 5 (CanLII) (Redwater) to a private dispute outside insolvency proceedings. Continue reading →

How does Bankruptcy Impact the Priority of a Writ of Enforcement’s ‘Binding Interest’?

By: Jassmine Girgis

Case Commented On: MNP Ltd v Canada Revenue Agency, 2022 ABQB 320 (CanLII)

PDF Version: How does Bankruptcy Impact the Priority of a Writ of Enforcement’s ‘Binding Interest’

This case is about the priority of a writ of enforcement’s “binding interest” upon bankruptcy. As the court found here, where a writ is not fully executed as of the date of bankruptcy, the writ’s binding interest ceases to have effect, rendering the writ holder an unsecured creditor and putting it last in priority, after secured and preferred creditors. Continue reading →

Exemptions to the BIA “Fresh Start” Policy

By: Jassmine Girgis

PDF Version: Exemptions to the BIA “Fresh Start” Policy

Case Commented On: Alberta Securities Commission v Hennig, 2021 ABCA 411 (CanLII)

In this decision, the Alberta Court of Appeal (CA) considered whether a debt fell within the exceptions contained in s 178(1) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA), and therefore survived the discharge of the bankrupt.

The CA allowed the appeal. The majority reasons were written by Justice Ritu Khullar and concurred in by Justice Jack Watson. Justice Dawn Pentelechuk wrote reasons concurring in the result. 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 →