MLT Aikins lawyers Dana Nowak and Paul OIfert will be featured panellists at the Annual Review of Insolvency Law (ARIL) February 7 in Montreal.

Discussions will focus on two topics: environmental regulatory cleanup obligations when a company is insolvent, and what Canadian companies need to know about the limitations period in insolvency proceedings.

Panel: “Calming Troubled Waters” – Dana Nowak

Dana Nowak, a litigator and partner with MLT Aikins Calgary, will present a paper titled Calming Troubled Waters, co-authored by Carly Toronchuk, an associate from the Edmonton office.

“We’re exploring the change in regulatory engagement in formal insolvency proceedings following the Supreme Court of Canada’s decision in Redwater, including in respect of the Qualex case,” Dana comments.

Redwater case background

Redwater was a 2019 landmark decision in Canadian environmental law that significantly shaped how environmental regulatory obligations are treated in insolvency. It continues to influence cases involving secured lending, environmental liabilities and insolvency law.

Redwater was a financially distressed oil and gas company with both productive and inactive wells. Within its bankruptcy proceedings, Redwater’s trustee in bankruptcy sought to transfer its valuable oil and gas licences for value and to abandon its non-valuable leases, effectively shifting the cost to remediate Redwater’s non-valuable wells to the public under Alberta’s Orphan Well Association program.

The Alberta Energy Regulator (AER) opposed the trustee’s actions, arguing that the trustee was not authorized under statute to segregate and liquidate valuable leases while abandoning non-valuable leases.

The key issue in Redwater was whether the AER’s remediation claim was provable in Redwater’s bankruptcy proceedings. The Supreme Court or Canada determined that the AER’s claim against Redwater was not provable, effectively granting the AER a superpriority entitlement to recover its remediation costs and the ability to refuse a trustee’s transfer of valuable oil leases, which approval is required under provincial oil and gas  legislation.

Qualex case background

12-10 Capital Corp is the owner of a property in Calgary, Alberta which is allegedly contaminated with substances that have allegedly migrated onto a neighboring property owned by Qualex-Landmark Towers Inc.

12-10 received an offer to purchase its property, but the funds from the sale would have been in sufficient to pay out secured lenders and Qualex in respect of its claim against 12-10 regarding the alleged contamination.

Qualex sought judicial relief in the form of a prejudgment attachment order to ensure that the proceeds from the sale would prioritize environmental cleanup over the repayment of 12-10’s secured creditors (the mortgage holders).

However, the Alberta Court of Appeal ruled, among other things, that no statutory or common law authority grants Qualex the right to be compensated for damages arising from the alleged contamination in priority to 12-10 lenders.

Panel: “Statute Barred Claims: Implications and Consequences” – Paul Olfert

Saskatoon partner Paul Olfert will be featured in a panel discussion looking at the application of limitation periods in commercial and consumer insolvency proceedings.

“Recent changes to the Proof of Claim form highlight the need to consider applicable limitation periods when adjudicating claims” explains Paul.

Background

In 2021, the Ontario Superior Court of Justice in Re Eyton confirmed (after nine years of legal uncertainty in that province) that statute-barred claims are generally unrecoverable.

“The Eyton decision highlighted the fact that the Proof of Claim form needed to be amended in order to ensure that sufficient information was provided to identify statute-barred claims” explains Paul. “With that said, there is likely to be an adjustment period as creditors and trustees familiarize themselves with the new sections of the form and consider limitations issues in light of the additional information that will now be provided.”

MLT Aikins is a Groundbreaker level sponsor for ARIL

The 22nd Annual Review of Insolvency Law Conference takes place on Friday, February 7 in Montreal, Quebec. MLT Aikins is proud to be a Groundbreaker sponsor for the event.

Also attending from the MLT Aikins Insolvency & Restructuring group are: J.J. Burnell (Winnipeg), Catrina Webster (Calgary), James Rose (Vancouver) and Carly Toronchuk (Edmonton).

ARIL serves as a key forum for thought leadership with the Canadian insolvency community.

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