CANADA Trends and Developments Contributed by: Laura Bevan, Craig Ferris KC, Anna Paczkowski and Catherine Whitehead, Lawson Lundell LLP
court, amongst other things, that there was a rea- sonable likelihood it would succeed in its claim, including for a declaration of priority. Qualex was an unsecured tort claimant, and there was no statutory basis for its purported entitlement to secure payment of its alleged claims in prior- ity to 12-10 Capital’s secured creditors. Rather, Qualex argued it met that test on the strength of the SCC’s decision in Orphan Well Association v Grant Thornton Ltd (the “Redwater case”). In the Redwater case, the SCC concluded the Alberta Energy Regulator’s use of its statutory powers to enforce a bankrupt’s compliance with end-of-life obligations before the distribution of the bankrupt’s estate to creditors did not conflict with the priorities established under the federal Bankruptcy and Insolvency Act, a decision that “had the practical effect of giving the Alberta Energy Regulator a ‘super priority’ over secured creditors in a formal bankruptcy proceeding”. Qualex argued that Redwater and subsequent decisions established that “environmental obligations have a unique place in the prior- ity scheme” and provided a basis for Qualex’s claim that “environmental remediation damages rank[…] in priority to registered mortgages and related security interests”. The chambers judge agreed and granted Qualex the attachment order amendments sought. The Alberta Court of Appeal overturned the deci- sion and set aside the attachment order, finding Qualex’s “super priority” claim was hopeless and there was no reasonable likelihood it would be established. The priority declaration sought by Qualex was unsupported by any statutory or existing court authority and would represent a change in the law underpinning millions of mort- gage loans in Canada which was beyond the power of the judiciary to make.
The Court said: “Nothing in the Civil Enforcement Act, Land Titles Act, Personal Property Securi- ties Act, EPEA – or in federal insolvency legisla- tion if it applied – gives a private litigant a right to a priority charge that ranks above any other claim, right or charge first registered against land merely because its claim can be characterised as involving environmental remediation obliga- tions”. According to the Alberta Court of Appeal, the Redwater case did not create a common law priority entitlement untethered from the legisla- tion at issue in that case and its objectives, nor did subsequent cases interpreting the Redwater case “establish common law rights or powers … wholly inconsistent with the applicable statutes”. The Court of Appeal’s refusal to recognise a “super priority” claim for future environmen- tal remediation costs outside of insolvency proceedings for private litigants represents an important limitation on the application of the Redwater case. The Court of Appeal took the view that going forward, if there is to be a change in priority entitlements due to environmental pol- icy objectives, that change must be made by the lawmakers themselves. Considerable Lender Fee Upheld Between Two Commercial Parties The Ontario Court of Appeal’s decision in the Sunningdale case is another ode to careful contractual drafting. The issue was whether a sophisticated commercial party should be excused from paying a hefty lender fee stipu- lated in a loan agreement for a loan it did not take because it was an unenforceable penalty, or alternatively because the law of relief against forfeiture applied.
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