Category Archives: Bankruptcy and Insolvency

Relevant Considerations in Approving Assignments Under the CCAA

By: Nigel Bankes

PDF Version: Relevant considerations in approving assignments under the CCAA

Case Commented On: Dundee Oil and Gas Limited (Re), 2018 ONSC 3678

As part of approving a plan of compromise or arrangement under the Companies’ Creditors Arrangement Act, RSC 1985, c. C-36, s.11.3 (CCAA), the Court on an “application by a debtor company and on notice to every party to an agreement and the monitor, … may make an order assigning the rights and obligations of the company under the agreement to any person who is specified by the court and agrees to the assignment.” Section 11.3(3) provides the following guidance to the Court in exercising this power:

(3) In deciding whether to make the order, the court is to consider, among other things,

(a) whether the monitor approved the proposed assignment;

(b) whether the person to whom the rights and obligations are to be assigned would be able to perform the obligations; and

(c) whether it would be appropriate to assign the rights and obligations to that person.

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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 →

The False Security of Commingled Trust Accounts

By: Nigel Bankes

PDF Version: The False Security of Commingled Trust Accounts

Case Commented On: Alberta Treasury Branches v Exall Energy Corporation, 2017 ABQB 602 (CanLII)

Working interest owners in the western sedimentary basin have long sought to have the best of both worlds: the convenience of allowing an operator to commingle joint account monies from multiple properties in a single general account, while offering (through the provisions of the Canadian Association of Petroleum Landmen (CAPL) operating procedures) the contractual assurance to non-operators that their funds were impressed with a trust while in that commingled account. The weakness of such an assurance is that its underlying premise is that the operator will always have a balance in that commingled general account equal to or greater than the amounts represented by the “monies of the joint operator”, whether those monies are monies contributed by a joint operator to fund joint operations or whether they represent monies received by the operator on account of the sale of a joint operator’s share of production. If that premise turns out not to be the case then a joint operator’s proprietary claim evaporates. The premise of course is most likely to be false when the operator is in financial difficulty – the precise point in time when a joint operator would like to have access to a proprietary remedy. Continue reading →

Orphan Well Association v Grant Thornton Limited: What’s at Stake in Redwater

By: Fenner L. Stewart

PDF Version: Orphan Well Association v Grant Thornton Limited: What’s at Stake in Redwater

Case Commented On: Orphan Well Association v Grant Thornton Limited, 2017 ABCA 124 (CanLII) (leave granted)

I. Introduction

This week, the Supreme Court of Canada (SCC) granted leave to the Alberta Energy Regulator (AER) to hear its appeal of Orphan Well Association v Grant Thornton Limited (Redwater) (for more on the Redwater decision, see Nigel Bankes’ post). The Court of Appeal’s decision in Redwater has punched a hole in the AER’s program for ensuring that licencees of oil and gas wells have the capital necessary to satisfy their reclamation and abandonment obligations. The ruling effectively allows trustees in bankruptcy to disclaim worthless assets (e.g., non-producing wells where the abandonment process is not yet complete), while selling valuable assets (e.g., producing wells). Redwater grants secured creditors the best chance possible to be compensated from the bankrupt’s assets, while guaranteeing that Alberta’s oil and gas industry (and potentially taxpayers) pay the cost for the bankrupt’s reclamation and abandonment obligations. As things stand today, if Redwater is not reversed, even more wells will be orphaned, adding to the already alarming number on the books of the Orphan Well Association (OWA). Continue reading →

Green Regs and Ham: Some Thoughts on Contaminated Sites, the Redwater Decision and the Principle of Intergenerational Equity

By: Nigel Bankes

PDF Version: Green Regs and Ham: Some Thoughts on Contaminated Sites, the Redwater Decision and the Principle of Intergenerational Equity

Note: This post is a revised version of remarks presented at the Fifth Green Regs and Ham Breakfast convened by the Environmental Law Centre, Edmonton on October 3, 2017. The session was entitled “Municipal Environmental Jurisdiction: Contaminated sites and hockey fights” but my remarks principally addressed liability for abandonment and reclamation of oil and gas wells and facilities.

Good morning. I acknowledge that we meet on the traditional territory of Treaty 7 First Nations, the Blackfoot, Tsuu T’ina, and Stoney First Nations. It is particularly important to acknowledge that connection given that we are talking today about our stewardship and custodial responsibilities for the land (and perhaps more specifically our failings).

There are three parts to the presentation: first, I will offer some remarks on the Court of Appeal’s decision in Redwater; second, some comments on a recent paper from the CD Howe Institute dealing with oil wells (see, Benjamin Dachis, Blake Shaffer and Vincent Thivierge, “All’s Well that Ends Well: Addressing End-of-Life Liabilities for Oil and Gas Wells”) and third, I will conclude with some more philosophical observations on the importance of the principle of intergenerational equity. Continue reading →