Mind the gap…You CAN withdraw a Notice of Intention to Make a Proposal

The British Columbia Supreme Court (“Court”) was recently asked to address a gap in the Bankruptcy and Insolvency Act (“BIA”) as it relates to the withdrawal of a Notice of Intention to Make a Proposal made pursuant to section 50.4 of the BIA (“NOI”).

On March 1, 2024, the B.C. Supreme Court gave its reasons in Elk Gold Mining Corp. (Re), 2024 BCSC 371, a case involving the B.C. mining corporation, Elk Gold Mining Corp. (“Elk Gold”), that sought to withdraw the filing of its NOI, particularly given the unusual facts of the case.


On January 4, 2024, the secured lender of Elk Gold, Nhwelmen Construction Limited Partnership (the “Lender”), issued a demand letter and Notice of Intention to Enforce Security pursuant to s. 244 of the BIA (the “Demand”) to Elk Gold. Under the pressure of the Demand and facing uncertainty in being able to successfully negotiate with the Lender before the Lender would potentially enforce its security, Elk Gold engaged Ernst & Young Inc. (“Proposal Trustee”) to act as a proposal trustee with respect to the filing of an NOI.

Unusual circumstances

One of the unusual circumstances of this case relates to the filing of the NOI. On January 12, 2024, at the request of Elk Gold, the Proposal Trustee submitted the NOI for filing with the Office of Superintendent in Bankruptcy (“OSB”) on behalf of Elk Gold. Approximately one hour and 24 minutes after the NOI being submitted, the Proposal Trustee directed the OSB to withdraw the NOI (the “Withdrawal Request”). In the time between the NOI being submitted for filing and the Withdrawal Request, Elk Gold and the Lender had come to an agreement regarding the Demand and Elk Gold no longer wanted to proceed with the NOI proceeding.

On January 12, 2024, approximately 24 minutes after the Withdrawal Request, a member of the OSB informed the Proposal Trustee that they had checked the e-filing and no certificate had been issued at that time and directed another OSB staff member to “hold off” on filing the NOI. This communication from the OSB was interpreted by the Proposal Trustee, Elk Gold, and the Lender as a confirmation that the filing of the NOI had been halted.

Five days later, on January 17, 2024, the OSB contacted the Proposal Trustee and provided an estate number for Elk Gold and advising that the NOI filing had been accepted on January 12, 2024. The OSB informed the Proposal Trustee that if Elk Gold did not wish to proceed with the NOI, a court application could be brought to “annul” the NOI.

In searching for a mechanism to “annul” the NOI, given the unusual circumstances, it was determined that no mechanism exists in the BIA to permit Elk Gold to withdraw the NOI once the NOI had been filed. The Court was asked to address this functional gap in the BIA and permit the NOI to be withdrawn in the circumstances.

The decision of the Court

Justice Fitzpatrick began her analysis by examining analogous sections of the BIA where a person or insolvent person can withdraw certain initiating documents. The analogous and relevant provisions of the BIA include:

  • 43(14) which allows for the withdrawal of a bankruptcy application with leave of the Court;
  • 50(4) which states that “no proposal… may be withdrawn pending the decision of the creditors and the Court”; and
  • 183(1) which grants the Court with such jurisdiction at law and in equity as will enable it to exercise its original, auxiliary, and ancillary jurisdiction.

Justice Fitzpatrick then turned to the limited case law available involving a person seeking to withdraw its NOI to determine that the Court has jurisdiction to grant the relief sought. The available cases each applied s. 43(14) or s. 50(4) of the BIA in granting the applicant the relief to withdraw its NOI:

  • In Greey (Re) [1995] O.J. No 3206 (“Re Greey”), the Court (Justice Farley) applied s. 50(4) and concluded that Mr. Greey was permitted to withdraw his NOI as he had the consent of all his creditors and the Court.
  • In Poly Innovation Inc. (Re), 2013 ONSC 2782 (“Poly Innovation”), the company did not intend to file a proposal as it had sold all its assets and all creditors had been paid in full. The Court applied s. 43(14) and granted leave to the company to withdraw the NOI upon filing evidence that it had paid all creditors and was solvent following the sale of its assets.
  • In Junction Craft Brewing Inc. (Re), ON SCJ) (Endorsement), the Court deemed the NOI to be withdrawn, annulled, and/or cancelled for all purposes following the closing of a reverse vesting transaction as the outcome of the transaction had made the company solvent. The Court cited Poly Innovation in support of its decision.
  • In Regal Resources Inc. (Re), (21 March 2022), Vancouver B210471 (BCSC), the Court granted the withdrawal of the NOI to the company as it had raised enough funds to pay off or satisfy all of its creditors such that it was no longer insolvent. No reasons were provided but the Court cited Re Greey and Poly Innovation.

The above cases provide guidance but the factual circumstances of the case law does not contemplate the unique circumstances of Elk Gold. Elk Gold filed the NOI to avoid security enforcement by the Lender, which situation resolved almost immediately after the NOI was submitted for filing.

Justice Fitzpatrick determined that the Court has jurisdiction under s. 183(1) of the BIA to apply s. 43(14) by analogy to allow the withdrawal of an NOI where the circumstances are not found in typical NOI proceedings and the relief is justified in order to give effect to the purposes of the BIA. The purpose of BIA proposal proceedings is to allow a debtor to continue as a going concern.

Notwithstanding that Elk Gold had not satisfied the claims of all its creditors or was no longer insolvent, Elk Gold had come to an agreement with the secured creditor that had prompted the filing of the NOI in the first place. The Court found no reason to refuse the relief sought, particularly where the relief sought may lead to a resolution for the benefit of Elk Gold and its stakeholders. The Court further determined that it would be unfair to require Elk Gold to continue in formal insolvency proceedings with the additional statutory compliance burdens and costs.

Importance of decision

This decision by Justice Fitzpatrick for the B.C. Supreme Court is important as it provides more guidance to debtors in NOI proceedings where their circumstances are not contemplated by the BIA as a result of a functional gap.

Vancouver lawyers William E. J. Skelly and Jess R. Reid were pleased to act as counsel to Elk Gold Mining Corp. in this case. The MLT Aikins insolvency & restructuring group is comprised of 24 lawyers practicing in six offices across all four western Canadian provinces. Our insolvency and restructuring experience helps our clients preserve value, capture business opportunities and resolve disputes across various sectors of the western Canadian economy.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.