Out Of Control: Yukon Court Lifts Stay In BC Proposal Proceedings Of Mining Company

In Yukon (Government of) v. Yukon Zinc Corporation, 2019 YKSC 39 ("Yukon Zinc"), the Yukon Supreme Court recently lifted a stay of proceedings imposed in proposal proceedings commenced in British Columbia by Yukon Zinc, a Vancouver-based mining company whose principal asset is the Wolverine Mine in Yukon. The lift stay was granted to allow the Government of Yukon to commence receivership proceedings in the Yukon Supreme Court in an attempt to recover its costs of remediating the closed mine.

This case is the latest, and most notable, example of what appears to be a growing penchant by courts to work around the "single control" model and grant relief with respect to bankruptcy proceedings commenced in other jurisdictions.

Most troublingly, whereas courts had previously crafted specific exceptions where the single control model could be avoided, Yukon Zinc may create a much broader exception based on a balancing of connecting factors. If other courts were to follow this lead, it could become easier for creditors to seek relief against an insolvent company in various provinces other than where the bankruptcy is proceeding, which may seriously undermine the efficiency that the single control model is designed to achieve.

The Single Control Model

The Bankruptcy and Insolvency Act ("BIA") contemplates that all proceedings related to a particular bankruptcy should proceed in a particular "command centre" located in the "locality of the debtor." This is referred to as the "single control" model and it is designed to ensure "the economy of winding up the bankrupt estate, even at the price of inflicting additional cost on its creditors and debtors." (Eagle River International Ltd., Re, 2001 SCC 92 ("Eagle River") at para. 77) The single control model also applies to proceedings under the Companies' Creditors Arrangement Act ("CCAA"). Generally, if a creditor wishes to seek some relief with respect to a bankrupt, they must do so in the bankruptcy court in the jurisdiction that the bankruptcy was commenced.

Recent Exceptions

In previous articles, we outlined the decisions in:

Arrangement relatif à Ferreira, 2018 QCCS 3891 (Ferreira), where the Quebec Superior Court annulled an assignment in bankruptcy that had been filed in Ontario in an attempt to subvert bankruptcy proceedings already underway in Quebec (see here); and JRB v. Jimenez, 2018 ABQB 847, where the Alberta Court of Queen's Bench lifted a stay of proceedings that had been imposed as a result of consumer proposal...