Jurisdiction And Broad Discretion Of Insolvency Court Upheld

• Published date: 25 June 2021
• Subject Matter: Finance and Banking, Energy and Natural Resources, Financial Services, Energy Law
• Law Firm: Borden Ladner Gervais LLP
• Author: Mr Josef Krüger, Jessica Cameron, Robyn Gurofsky and Jack Maslen

On June 17, 2021, the Alberta Court of Appeal (ABCA) dismissed two companion appeals in the receivership proceedings of Accel Canada Holdings Limited (Holdings) and Accel Energy Canada Limited (Energy and together with Holdings, Accel). In the unanimous decision DGDP-BC Holdings Ltd v Third Eye Capital Corporation, 2021 ABCA 226 (Accel Decision), the ABCA affirmed the jurisdiction of a supervising insolvency judge to order the relative priorities of various borrowings charges, and approve the sale and vesting of a debtor's assets free and clear of such charges, without repayment in full of the amounts secured by said charges and absent the consent of the party in whose favour the charges were made.

Background

While the background to the Accel receivership proceedings is complex, the relevant facts at issue on appeal were as follows. In October 2019, each of Holdings and Energy filed Notices of Intention to make a proposal under the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA). Shortly thereafter, in November 2019, the NOI proceedings were converted and continued as one under the Companies' Creditors Arrangement Act, RSC 1985, c C-36 (CCAA). Additionally, the Court approved an interim financing facility and granted an Interim Lenders Charge in the Amended and Restated Initial Order (ARIO). Pursuant to the terms of the interim financing term sheet, the facility was a 'super-priority (debtor-in-possession), interim, revolving credit facility'.

A syndicate of three lenders provided the interim facility: two affiliates of Third Eye Capital Corporation (TEC) as to 53.33%, and a numbered company 228139 Alberta Ltd. (222) as to 46.67%. Additionally, the interim lenders were also parties to an agency agreement whereby TEC as appointed as administrative agent on behalf of all interim lenders. The agency agreement authorized TEC to exercise all rights and remedies under the interim financing term sheet on behalf of the interim lenders, and all powers reasonably incidental thereto. Subsequently, on June 10, 2020, DGDP-BC Holdings Ltd. (DGDP) took an assignment of 222's interest in the interim facility and agency agreement.

Through the course of Accel's CCAA proceedings, approximately $38 million in borrowings were advanced and secured by way of the Interim Lenders' Charge. While under the terms of the interim financing term sheet, the obligations of the borrowers, being Holdings and Energy, were joint and several, the actual advancements were allocated to either Holdings or Energy, depending upon which company used the funding. The Interim Lenders' Charge was a single charge attaching to the assets of both...