Warm Reception For Foreign Freezing Orders Under The BIA

• Published date: 24 November 2020
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
• Law Firm: McCarthy Tétrault LLP
• Author: Restructuring Roundup, Nicole Morin (Articling Student) and Gurvir Sangha

In Pelletier (Re), 2020 ABQB 540, the Court of Queen's Bench of Alberta provided guidance on the requirements that must be met for a Canadian court to recognize a freezing order from a foreign jurisdiction. In doing so, Justice Neufeld relied on landmark decisions by the Supreme Court of Canada to recognize a freezing order from the Cayman Islands.

Background

Richard Pelletier (the "Respondent", and together with Olga Pelletier, the "Respondents") was subject to a claim arising from the 2014 sale of his and his wholly-owned company's interests in a construction company, Pacer Construction Holdings Corporation ("Pacer"). In 2019, an arbitral panel awarded approximately $33 million in favour of Pacer, which was converted into a series of ABQB judgments later that year.

The Respondent had taken a series of steps prior to the arbitration panel's ruling that meant neither he nor his holding company had assets available in Canada for execution. Pacer subsequently petitioned the Grand Court of the Cayman Islands (the "Cayman Court") to find the Respondent bankrupt. Pacer brought a similar application against the Respondent's holding company in Alberta.

In November 2019, the Cayman Court granted an Interim Order adjudging the Respondent a bankrupt and ordering his affairs be wound up and his property administered. A Continuation Order was granted in Canada affirming the Interim Order. Also in November 2019, the Alberta Court of Queen's Bench granted Pacer's application to have the Respondent's wholly-owned company placed into bankruptcy. Further, a Supplemental Order was made recognizing two Ancillary Orders of the Cayman Court.

In January 2020, the Cayman Court granted a Freezing Order against the Respondents ("Cayman Freezing Order"). The Cayman Freezing Order prohibits the dissipation of assets in the Cayman Islands and elsewhere up to a value of $20 million (CDN). It further authorized the Trustees to seek similar orders in Singapore and Canada. In March 20, 2020, Justice Kawaley of the Cayman Court granted an Order Absolute ("Cayman Order Absolute"), affirming that the Cayman Islands was the Respondents Centre of Main Interest.

The Agents of the Trustee in Bankruptcy of Richard Paul Joseph Pelletier (the "Applicants") applied to the ABQB for the recognition of the Cayman Order Absolute. This Recognition Order was granted as the logical continuation of the previous recognition of the Cayman Proceeding. As part of the broader proceeding, the Applicants also...