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

Supreme court | Bankruptcy and Insolvency | Priorities of claims | Unsecured claims

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.).

Free newsletter

Our daily newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please complete the form below and click on subscribe for daily newsletters from Law Times.

Recent articles & video

Small claims court judges have little sway on anti-SLAPP cases

Davies' Kearney joins National Cannabis Working Group

Orlando Da Silva named chief administrator of ATSSC

Competition bureau to give lawyers more warning on deal reviews

Court fines concrete company $130,000 for worker’s death

OPSEU shows solidarity with injured workers’ groups over aid cuts

Most Read Articles

Court ruling could change law for spouses who co-own house

Audio tracks of lawyer-client chats accidentally exposed

Pressure mounts on MAG as more decry legal aid cuts

Province probing family law legislation