Canada: Alberta Clarifies Status of Linear Property Tax Claims Under Bankruptcy and Insolvency Act

Last Updated: July 21 2017
Article by Kyle Kashuba and Gino Bruni

In an Application before the Alberta Court of Queen's Bench (the Court) on June 20, 2017, the Court provided clarity on the priority and status under the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA) of claims for taxes in respect of linear property (linear property taxes) from certain municipalities in Alberta, agreeing with the applicant that these claims are unsecured.1

What You Need To Know

  • The Court of Queen's Bench held that the Municipal Government Act, RSA 2000, c M-26 (MGA), which grants municipalities the power to levy linear property taxes in Alberta, may provide a special lien for tax arrears for taxes relating to a parcel of land. However, the MGA does not provide the same lien or any security for unpaid linear property taxes that would readily grant municipalities secured status under the BIA.
  • The Court declared that the claims did not form secured claims against the property of the debtors or property that the Receiver had sold to a purchaser under an E&P contract. The Court also declared that the municipalities had no further claims or remedies against the property sold to the purchaser, the purchaser itself, or the funds held by the Receiver from the sale of the debtor's property.
  • This has negative implications for municipalities and positive implications for future purchasers of oil and gas assets in Alberta.

Linear Property Taxes in Alberta

Linear property is defined under the MGA to include, among other things, electric power systems, street lighting systems, telecommunications systems and pipelines that do not include land or buildings. Linear property taxes are levied on a specific "assessed person" and are based on an "assessed value" of the property being taxed. However, since linear property often crosses municipal boundaries, the Province designates an assessor and sends out assessment notices to each assessed person, who is, as defined under the MGA, an operator of the linear property. The municipalities then levy linear property taxes as tax on "non-residential" property in its tax roll.

Recovery scheme under MGA

The MGA provides that a municipality may recover taxes not related to land through (i) the seizure process prescribed in sections 440 and 441 of the MGA, or (ii) a civil action against the debtor. The seizure process is limited to the seizure of "sufficient goods" of the operator and does not provide a recovery process where a notification can be registered against land, or where land can be seized and sold to collect the arrears - a process available to municipalities to recover taxes related to land.

The MGA provides a general provision in section 348(d)(i) relating to taxes due to a municipality that affords a special lien "on land and any improvements to the land, if the tax is a property tax, a community revitalization levy, a special tax, a local improvement tax or a community aggregate payment levy." Until now, the courts in Alberta have not addressed whether this section creates a special lien for linear property tax arrears.

The Application on June 20, 2017

The court-appointed Receiver and Manager (the Receiver, in this case, was Alvarez & Marsal Canada Inc.) of the assets, undertakings and property of two oil and gas companies in Alberta, Virginia Hills Oil Corp. and Dolomite Energy Inc. (the Debtors), brought an Application, heard by Justice Yamauchi, seeking clarity on the priority and status of claims made by certain Alberta municipalities for linear property tax arrears.

In the main, the Receiver argued that there is a clear delineation in the MGA between taxes related to land (e.g., property taxes) and those not related to land (e.g., linear property taxes) which informs the interpretation of section 348(d)(i) of the MGA. While this provision may provide a special lien for property tax arrears, the Receiver argued it does not provide the same lien or any security for unpaid linear property taxes when the MGA is considered as a whole.

If the Court had found that the MGA did provide a special lien against the linear property, the Receiver argued in the alternative that the municipalities were agents of the Crown by virtue of the municipalities performing mandatory duties for the Province under the MGA related to levying linear property taxes. This would then make the special lien under the MGA a "statutory Crown security" and be rendered invalid under section 87 of the BIA, unless this security was "registered under a prescribed system of registration before the date of the initial bankruptcy event." The municipalities owed linear property taxes from the Debtors provided no evidence that such registration had taken place.

The Receiver provided a further alternative argument in the event its first two arguments failed. It argued that any security provided under the MGA could not be enforced and was of no value. While the MGA provides that municipalities can seize and sell the property of the operator of the linear property pursuant to a distress warrant process, the Receiver argued that section 73(4) of the BIA prevented such a process once a debtor had been assigned into bankruptcy. Therefore, the municipalities would have been unable to enforce their special lien once bankruptcy had commenced and therefore would have no secured claims or security to value under the BIA.

Justice Yamauchi accepted the Receiver's arguments and granted the Receiver's proposed order declaring that the claims of the municipalities were unsecured under the BIA, that the claims did not form secured claims against the Debtors' property or property that the Receiver had sold to a purchaser. The Court also declared that the municipalities had no further claims or remedies against the property sold to the purchaser or the funds held by the Receiver from the sale of the Debtors' property.


Justice Yamauchi's order provides clarity that municipalities are unsecured creditors under bankruptcy proceedings when it comes to claims for linear property taxes. He also declared that the municipalities could not go after a purchaser of the Debtors' oil and gas assets, which provided a good precedent for potential purchasers of such assets in Alberta.

Given Justice Yamauchi's order, the municipalities' only recourse is to lobby for legislative amendments to the MGA and/or BIA to include a broader recovery process and/or provide a security that gives the municipalities secured status for these claims. In this regard, the Alberta Association of Municipal Districts and Counties (AAMDC) filed a resolution with the Government of Alberta in Spring of 2016 requesting the government to amend the MGA to broaden the tax recovery power of municipalities to collect linear property taxes.2 In the same resolution, the AAMDC also requested that the Government of Canada amend the federal BIA to recognize linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests.

In response to this resolution filed by the AAMDC, Alberta Municipal Affairs has convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education and the Alberta Energy Regulator. The working group is exploring how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to exempt municipalities from paying provincial education property tax requisitions that form part of the linear property tax levied. Currently, the resolution is assigned a status of "Accepted in Principle" and is to be revisited as the working group progresses.


1 A copy of the Order from the Court can be accessed online at:

2 A copy of the AAMDC resolution can be accessed online at:

To discuss these issues, please contact the author(s).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.