Supreme Court

Bankruptcy and Insolvency

Priorities of claims

Unsecured claims

“Disclaimer” did not empower trustee to simply walk away from “disclaimed” assets

Provincial legislation imposed environmental obligations with respect to abandonment and remediation of “end of life” oil wells. Trustee-in-bankruptcy G Ltd. sought to disclaim R Corp.’s interest in wells where costs of remediation exceeded wells’ value (disclaimed wells), but sought to keep and sell valuable wells to maximize recovery of secured creditor. Orphan Wells Association (OWA) and Regulator applied for declaration that G Ltd.’s disclaimer of licensed wells was void and G Ltd. cross-applied for approval of sales process that excluded renounced wells. Chambers judge dismissed main application and granted cross application. Appeals by OWA and Regulator dismissed. Section 14.06 of Bankruptcy and Insolvency Act (BIA) did not exempt environmental claims from general bankruptcy regime, other than super priority in s. 14.06(7). Role of G Ltd. as a “licencee” under Oil and Gas Conservation Act and Pipeline Act was in operational conflict with provisions of BIA. OWA and Regulator appealed. Appeal allowed. There was no conflict between Alberta’s regulatory regime and BIA requiring portions of former to be rendered inoperative n context of bankruptcy. “Disclaimer” did not empower trustee to simply walk away from “disclaimed” assets when bankrupt estate had been ordered to remedy any environmental condition or damage. No operational conflict was caused by fact that G Ltd., as licensee, remained responsible for abandoning renounced assets. End-of-life obligations binding on G Ltd. were not claims provable in R Corp. bankruptcy, so they did not conflict with general priority scheme in BIA.

Orphan Well Association v. Grant Thornton Ltd. (2019), 2019 CarswellAlta 141, 2019 CarswellAlta 142, 2019 SCC 5, 2019 CSC 5, Wagner C.J.C., Abella J., Moldaver J., Karakatsanis J., Gascon J., Côté J., and Brown J. (S.C.C.); reversed (2017), 2017 CarswellAlta 695, 2017 ABCA 124, Frans Slatter J.A., Frederica Schutz J.A., and Sheilah Martin J.A. (Alta. C.A.).

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