Gray Aqua Group of Companies,
Re1is a case from New
Brunswick that dealt with the remedy of substantive consolidation
under the Bankruptcy and Insolvency Act (BIA).
Historically, courts have shown reluctance in granting
consolidation and it was seen as an extraordinary
The group of eight aquaculture companies (the
"Group") operated as an integrated
enterprise with centralized management, sales and accounting all
based in New Brunswick. The Group filed separate notices of
intention (NOIs) and Ernst & Young was appointed as the
Proposal Trustee. The Proposal Trustee sought an Order for a
Consolidated Proposal, pursuant to sections 34, 66, 183 and 192 of
While the BIA is silent as to when consolidation
of proceedings for corporate entities will be granted, limited case
law on the point relies on the equitable jurisdiction of the Court
under s. 183. Section 183(12) provides:
Where in the
opinion of the court the cost of preparing statements, lists of
creditors or other material required by this Act to be sent with
notices to creditors, or the cost of sending the material or
notices, is unjustified in the circumstances, the court may give
leave to omit the material or any part thereof or to send the
material or notices in such manner as the court may
Register Natalie H. LeBlanc held that the Group was a suitable
candidate for an Order for a Consolidated Proposal. There was
sufficient evidence to find that the Group was integrated from a
financial and practical perspective and that it functioned as a
centralized company. Evidence also indicated that neither the
shared nor individual creditors of the Group would be deprived of
any rights and would not suffer any measurable prejudice if the
Order was granted. Furthermore, accommodations were proposed under
the Consolidated Proposal for a group of unsecured creditors of one
member of the Group.
In granting the Order, Register LeBlanc noted:
The purpose of
the BIA is to facilitate financial rehabilitation in a fair and
structured atmosphere while protecting the integrity of the process
and all of its participants, including
Gray Aqua Group of Companies, Reis
valuable as it shows the expectations of the Court in granting an
Order for a Consolidated Proposal. The right balance of efficiency
and equity is essential, with evidence to show that a Consolidated
Proposal serves to streamline the proposal process, create savings
for all parties, and facilitate a faster restructuring on the whole
without unduly prejudicing the legal rights of stakeholders.
Interestingly, the Court did not consider whether the same effect
could have been achieved through procedural
1 2015 NBQB 107
2 Ibid at para 18.
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