Key Developments In Canadian Insolvency Case Law In 2022

• Published date: 17 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Arbitration & Dispute Resolution
• Law Firm: Blake, Cassels & Graydon LLP
• Author: Ms Pamela Huff, Kelly Bourassa, Linc Rogers, Aryo Shalviri, Caitlin McIntyre and Alexia Parente

In 2022, several significant judicial decisions were rendered across Canada that are particularly relevant to commercial lenders, businesses and restructuring professionals. This comprehensive report summarizes the key facts and core issues of importance in each case and provides status updates on the cases reported on in our May 2022 bulletin, Key Developments in Canadian Insolvency Case Law in 2021.

The following cases and topics are covered in this bulletin:

Case Name	Topic	Court
Carillion Canada Holdings Inc. et al. (Re), 2022ONSC 66	Tolling of limitation periods	Ontario Superior Court of Justice
Pandion Mine Finance Fund LP v. Otso Gold Corp., 2022 BCSC 136	Assigning a company into receivership without notice	Supreme Court of British Columbia
Ward Western Holdings Corp. v. Brosseuk, 2022 BCCA 32	Disputed events of default	Court of Appeal for British Columbia
Harte Gold Corp. (Re), 2022 ONSC 653	Reverse vesting orders	Ontario Superior Court of Justice
Urbancorp Toronto Management Inc. (Re), 2022 ONCA 181	Interpretation of the pari passu and anti-deprivation rules	Ontario Court of Appeal
Ernst & Young Inc. v. Aquino, 2022 ONCA 202	The corporate attribution doctrine	Ontario Court of Appeal
Golden Oaks Enterprises Inc. v. Scott, 2022 ONCA 509	The corporate attribution doctrine	Ontario Court of Appeal
White Oak Commercial Finance, LLC v. Nygard Holdings, 2022 MBQB 48	Substantive consolidation	The Court of King's Bench of Manitoba
Manitok Energy Inc. (Re), 2022 ABCA 117	Abandonment & reclamation obligations versus builders' liens	Court of Appeal of Alberta
Orphan Well Association v. Trident Exploration Corp., 2022 ABKB 839	Abandonment & reclamation obligations versus municipal tax claims	Court of King's Bench of Alberta
Ontario Securities Commission v. Bridging Finance Inc., 2022 ONSC 1857	Deference to the receiver in a sales process	Ontario Superior Court of Justice
Grant Thornton Limited et al. v. 1902408 Ontario Ltd., 2022 ONSC 2011	Vesting out municipal property taxes	Ontario Superior Court of Justice
1057863 B.C. Ltd. (Re), 2022 BCSC 759	Mediation within a CCAA proceeding	Supreme Court of British Columbia
Just Energy Group Inc. (Re), 2022 ONCA 498	Treatment of class action claims in CCAA	Ontario Court of Appeal
In the Matter of Voyager Digital Ltd., 2022 ONSC 4553	Centre of main interest	Ontario Superior Court of Justice
Mundo Media Ltd. (Re), 2022 ONCA 607	Arbitration clauses in insolvency proceedings	Ontario Court of Appeal
Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41	Arbitration clauses in insolvency proceedings	Supreme Court of Canada
Carillion Canada Inc., 2022 ONSC 4617	Pre versus post filing set-off	Ontario Superior Court of Justice
Arrangement relatif à Bloom Lake	Pre versus post filing set-off	Quebec Court of Appeal

Tolling of Limitation Periods

Carillion Canada Holdings Inc. et al. (Re), 2022 ONSC 66
Date of Decision: January 10, 2022

The Ontario Superior Court of Justice (ONSC) considered the impact of a tolling order granted in the context of a Companies' Creditors Arrangement Act (CCAA) proceeding on the claims of third parties against the debtor company.

Carillion Canada Inc. (Carillion) commenced proceedings under the CCAA in January 2018. At that time, the commencement of proceedings against Carillion without the consent of the monitor and Carillion or leave of the ONSC were stayed. On January 13, 2020, Carillion obtained a tolling order from the ONSC that extended certain limitation periods from the date of the tolling order to the expiry of the stay of proceedings. At the time this tolling order was granted, Carillion had already conducted a court-approved claims process and the claims bar date had long passed.

On May 29, 2020, prior to the limitation period's expiry in respect of its claim, Weinrich Holdings Inc. (Weinrich) issued a statement of claim against Carillion in respect of alleged damage to premises it leased to Carillion. Weinrich did not seek Carillion's or the court-appointed monitor's consent or leave of the court prior to issuing the statement of claim.

On October 27, 2020, after the expiry of the limitation period in respect of Weinrich's claim, Weinrich sought the monitor's consent to lift the stay. The monitor declined. Weinrich brought a motion within the CCAA proceeding seeking an order (i) declaring that any limitation period applicable to Weinrich's action against Carillion was tolled by the tolling order, and (ii) lifting the stay of proceedings to authorize Weinrich to bring its claim.

Weinrich relied on the provisions of the tolling order declaring that limitation periods were tolled in respect of claims relating to "current and future assets, undertakings and properties" and "the business" of Carillion. Weinrich took the position that the tolling order captured its claim against Carillion because its claim related to both Carillion's "assets, undertakings and properties" and its "business." Weinrich did not file a proof of claim in the claims process.

The ONSC held that the interpretation of a court order is much like the interpretation of a statute. Courts must consider the plain language of the tolling order as well as its context and purpose. The ONSC reviewed the tolling order, including its preamble. It determined that the context and purpose of the tolling order clearly related to Carillion's and the other CCAA applicants' claims against third parties, rather than claims against Carillion and the other CCAA applicants. If the provisions were intended to extend all limitations applicable to all possible claims against Carillion in general, the language used would have been explicit. Additionally, the tolling order was effective only with respect to a prescription, time or limitation period which "may hereafter expire during the pendency of these CCAA proceedings." Carillion's business was sold by July 2018. Thus, in January 2020 when the tolling order was issued, the Weinrich claim did not relate to any "current or future" property or to the then-existing "business" of Carillion.

Weinrich also failed to articulate any principled basis, context or purpose for why a general suspension of all limitation periods of all third-party claims against Carillion would have been in the interests of the CCAA applicants or other stakeholders in general. Given the claims process and claims bar dates, there was no discernible benefit to the applicants, the monitor, or the stakeholders of the applicants generally tolling claims of third parties against the applicants.

Status:
This decision was not appealed and is final.

Takeaway:
A tolling order (including scope thereof) will be interpreted in the same manner as a statute. Any language tolling a limitation period must be explicit and clear to be effective. Consent to commence a claim or toll a limitation period should be sought from a debtor company and/or court officer in advance of a limitation period's expiry. If consent is not obtained, leave should be sought from the court.

Seeking to Appoint a Receiver Without Statutory 10-Day Notice

Pandion Mine Finance Fund LP v. Otso Gold Corp., 2022 BCSC 136
Date of Decision: January 28, 2022

The Supreme Court of British Columbia (BCSC) heard an application for the appointment of a receiver under section 243 of the Bankruptcy and Insolvency Act (BIA) over a company that was subject to proceedings under the CCAA. The statutorily required 10-day notice of intention to enforce security under section 244 of the BIA had not been provided to the debtor company.

Otso Gold Corp. (Otso) is a Canadian company that owns a gold mine in Finland. The mine was Otso's only substantial asset. Otso produced gold at the mine between November 2018 and March 2019 and again briefly in November and December 2021. It ceased operations due to insufficient working capital.

Pandion Mine Finance Fund LP and certain other parties (collectively, the Petitioners) constituted Otso's only secured creditors. There was no dispute that Otso defaulted on the loan and was not able to pay the Petitioners.

In early December 2021, Otso sought and was granted relief under the CCAA. In January 2022, the Petitioners filed an application in the CCAA proceedings seeking to terminate the stay of proceedings against Otso and to appoint the court-appointed monitor as receiver of Otso.

In response, Otso took the position that recourse to section 243 was not available to the Petitioners because the Petitioners had not given notice to Otso in the manner contemplated by section 244 of the BIA.

The Petitioners submitted that appointment of a receiver was appropriate in this case and that courts are not bound by the 10-day notice period. Section 243(1.1)(b) of the BIA provides for the appointment of a receiver prior to the expiry of the notice period, where it is appropriate to do so.

The BCSC considered the purpose of the 10-day notice requirement under the BIA which is to provide a debtor company with the opportunity to negotiate and reorganize affairs before a receiver is appointed. Section 243(1.1)(b) provides for an abridgement of the 10-day notice requirement to acknowledge and provide for circumstances in which immediate relief from the court may be appropriate. The relevant considerations bearing on the exercise of discretion under Section 243(1.1)(b) are:

1. The extent to which the purpose of the 10-day notice requirement is engaged.
2. The possibility of prejudice to the Petitioners resulting from the requirement.
3. The possibility of prejudice to Otso if it is waived.

The BCSC concluded that Otso was not in a position to repay the Petitioners, and this would not change if Otso had been given 10-days notice before the application was heard. The statutory 10-day notice period would just be a formality. The BCSC did not find that Otso and its stakeholders would be...