SCC Docket No. 33797, Leave granted 25 November 2010
Bankruptcy and Insolvency—Companies' Creditors
Arrangements Act—Provincial Obligations
On November 25, 2010, the Supreme Court of Canada granted leave
to appeal in Her Majesty the Queen in Right of the Province of
Newfoundland and Labrador v. Abitibibowater Inc., et al.
The central issue is whether a court overseeing proceedings
under the Companies' Creditors Arrangements Act
("CCAA") has the ability to effectively extinguish
regulatory obligations imposed on the restructuring company by
provincial law. In this case, the Province of Newfoundland and
Labrador ("the Province") issued orders under its
environmental protection legislation (the "EPA Orders")
several months after AbitibiBowater Inc. ("Abitibi")
commenced CCAA proceedings. The provincial legislation provided
that if Abitibi failed to comply with the EPA Orders, the Province
could undertake the remediation work itself and then recover the
associated costs from Abitibi.
Abitibi argued that these orders were monetary in nature, in
that it would have to spend money to comply, and because it could
not effectively comply with the orders, and therefore the Province
would have to do so and seek to recover the costs.
The Province brought a motion to decide the issue. The Quebec
Superior Court overseeing Abitibi's CCAA Proceedings (the
"CCAA Court") had previously issued a Claims Procedure
Order ("CPO") that defined "claims" as
encompassing any breach of a statutory duty. Thus, all
"claims" not filed before the deadline in the CPO are
stayed, while any "claim" filed before it is subject to
compromise along with all other such claims. Abitibi argued the EPA
Orders were caught by the definition of "claim" in the
CPO, and since they were not issued before the deadline, the
obligation to comply was stayed. The Province requested a
declaration that the orders were not barred or extinguished, and
that their enforceability was not affected by the CPO in this
The CCAA Court dismissed the Province's motion. The CCAA
Court held that the definition of "claim" in the CCAA was
broad enough to encompass statutory duties that are "financial
or monetary in nature", and held that the EPA Orders were
monetary in nature due to a combination of factors, such as Abitibi
being required to spend money for a purpose that did not result in
profit to the company, and the ability of the Province to undertake
the work itself and claim resulting costs from Abitibi. As the EPA
Orders were "claims" for the purpose of the CPO, and the
EPA Orders were made after the deadline for filing claims, the CCAA
Court held that Abitibi's obligations under the Province's
orders were extinguished.
The Province moved for leave to appeal to the Quebec Court of
Appeal. The Court of Appeal denied leave, holding that the CCAA
Court correctly interpreted the definition of "claim" in
the CCAA, and the CCAA Court's application of that definition
to the Province's orders was a factual finding that could not
be challenged on appeal.
The Supreme Court of Canada granted leave to appeal, though it
is unusual to do so from a denial of leave to appeal in the court
below. The specific issue before the Supreme Court will be whether
Abitibi's duty under the environmental laws of the Province to
comply with the EPA Orders can be extinguished under the CCAA like
any commercial debt, though the appeal will also deal with broader
issues that will have a significant impact on future insolvency
proceedings across the country.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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