20
[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN CANADA]
Of particular in note, in Harte Gold Corp. Re , the Ontario Superior Court provided some important new guidance on what questions the court should investigate when asked to approve an RVO: (1) Why is the RVO necessary in this case? (2) Does the RVO structure produce an economic result at least as favourable as any other viable alternative? (3) Is any stakeholder worse off under the RVO structure than they would have been under any other viable alternative? (4) Does the consideration being paid for the debtor's business reflect the importance and value of the licenses and permits (or other intangible assets) being preserved under the RVO structure? While still relatively new, Canadian courts have begun to deal with RVOs more frequently. In Forage Subordinated Debt LP v. Enterra Feed Corporation , the Alberta Court of King's Bench granted an RVO in the context of a receivership. The Court reaffirmed the use of an RVO as an extraordinary remedy and clarified the Court's authority in granting RVOs for receiverships, which is derived from the interplay of several provincial statutes. The first denial of an RVO came from the Ontario Superior Court In the Matter of the Companies’ Creditors Arrangement Act. In denying the RVO, the Ontario Superior Court addressed the unfairness to one of the creditors with a security interest in the equipment. It would have been unfair to accept a bid where the equipment would have been transferred to the residual corporation, especially when there was a less prejudicial bid available. Following this, the British Columbia Superior Court refused to grant an RVO in PaySlate Inc. (Re). The court provided guidance on the procedural and substantive requirements for RVO applications. The refusal to grant the RVO was the result of inadequate notice to affected creditors and an insufficient evidentiary record.
Environmental Obligations and Priorities In 2019, the Supreme Court of Canada released its decision in the case of Orphan Well Association v Grant Thornton Ltd. , which held that certain environmental remediation obligations of an insolvent entity can and should be prioritized over and above the rights of secured creditors in the context of a closed oil and gas operation. More recently, the Alberta Court of Appeal released their decision in Qualex-Landmark Towers Inc. v. 12-10 Capital Corp . which saw them reverse the lower court decision that held that private citizens could claim a super-priority of environmental remediation obligations over and above other creditors. The Court of Appeal noted that the lower court judge had acted outside of his authority by using the common law to expand the availability of super-priority claims in a way that was incompatible with the legislation. Subsequently, the Alberta Court of King's Bench released their decision in Re Mantle Materials Group Ltd. The court held that restructuring charges, which would satisfy end-of-life environmental remediation obligations, have priority over security interests in equipment. While "unrelated assets" should not be used to satisfy end-of-life environmental obligations, equipment is not an unrelated asset. The Court in Orphan Well Association v. Trident Exploration Corp. clarified that all assets related to the business of the company in question are "related assets" and can therefore be used to satisfy these obligations. In Eye Hill (Rural Municipality) v. Saskatchewan (Energy and Resources) , the Saskatchewan Court of King's Bench confirmed the application of Orphan Well Association v. Grant Thorton Ltd. in Saskatchewan and addressed the priority of unpaid municipal taxes and environmental remediation obligations. Municipalities rank
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
Made with FlippingBook Online newsletter maker