[co-author: Marina Ferguson - Articling Student]

The Saskatchewan Court of Appeal has confirmed that the Supreme Court of Canada’s decision in Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5 [Redwater], applies in Saskatchewan. The Court of Appeal also affirmed that orders made in failed proceedings in Alberta under the Companies’ Creditors Arrangement Act (CCCA) did not have effect in subsequent receivership proceedings in Saskatchewan.

In Eye Hill (Rural Municipality) v. Saskatchewan (Energy and Resources), 2023 SKCA 120, the Court of Appeal considered a claim by several Saskatchewan municipalities (the Rural Municipalities) for proceeds in the receivership of Bow River Energy Ltd. (Bow River), an oil and gas company with holdings in both Alberta and Saskatchewan. The Rural Municipalities claimed that unpaid property taxes owed to them should take precedence over the Ministry of Energy and Resources’ claim for abandonment and reclamation obligations.

The Court of Appeal affirmed the Chambers Judge’s decision, which determined that the Ministry of Energy and Resources had priority over the receivership proceeds of Bow River by virtue of the Supreme Court’s test in Redwater. The Court noted that, while Redwater proceeded under the Alberta regulatory regime, the Chambers Judge correctly ruled that it also applies in Saskatchewan. The Court of Appeal highlighted that the regulatory regimes in Alberta and Saskatchewan are nearly identical. Applying Redwater, the Court ruled that the Ministry was not acting as a “creditor” within the meaning of the test set out in Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67 [Abitibi], as clarified in Redwater. The first part of the Abitibi test requires the existence of a debt or liability owed to creditor. The Court ruled that the Ministry’s claims were environmental obligations that cannot render the Ministry a creditor.

The Court also held that the CCAA proceedings did not impose payment obligations on Bow River outside of the statutory requirements already present. Additionally, the CCAA proceedings did not establish a trust that favored the Rural Municipalities.

What this means:

• Whether assets are located in Alberta or Saskatchewan, claims in insolvency related to abandonment and reclamation obligations will take precedence over most claims, including for unpaid municipal taxes; and
• Orders from failed CCAA proceedings are unlikely to have effect in subsequent receivership proceedings, particularly when those proceedings occur in a different jurisdiction.

Keely Cameron and Adam Williams represented the Receiver, BDO Canada Limited, in both the Saskatchewan Court of Queen’s Bench and Saskatchewan Court of Appeal.