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November 30, 2017

Like Oil and Water: Courts Struggle to Mix Bankruptcy and Environmental Law – SCC to Hear Redwater Appeal

The Supreme Court of Canada (SCC) granted leave to hear the appeal of Orphan Well Association v Grant Thornton Limited.  The SCC will reconsider whether trustees and receivers in bankruptcy must remediate wells in priority to the claims of secured creditors.    

In April 2017, the Alberta Court of Appeal released its decision in Redwater.  The Court found that the Government of Alberta’s environmental orders for oil well remediation did not have priority over secured creditors in bankruptcy proceedings.

In upholding the lower court’s decision, set out in our previous update, the Court of Appeal added to the “untidy intersection” between bankruptcy proceedings and provincial environmental law.  Both Courts concluded that receivers and trustees were permitted to renounce an insolvent debtor’s interest in its licensed assets while selling valuable licensed assets to maximize recovery for secured creditors. 

The decision, as it stands, allows receivers and trustees in bankruptcy to disclaim unprofitable assets and not be required to fulfill certain environmental obligations associated with those disclaimed assets.

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