BACKGROUND

On August 30, 2017, the Alberta Court of Appeal denied an application for a stay of enforcement of its majority decision in Orphan Well Association v. Grant Thornton Limited 2017 ABCA 124 (a.k.a. the "Redwater decision") pending appeal to the Supreme Court of Canada. The Alberta Energy Regulator (the "AER") and the Orphan Well Association (the "OWA") applied to have the decision stayed, on the basis that the effect of this decision, and the trial decision of Wittmann CJ in Redwater Energy Corporation (Re), 2016 ABQB 278, permit receivers and trustees in bankruptcy to continue disclaiming uneconomic assets, and they also prohibit the AER from considering an insolvent debtor's licensee management rating ("LMR") in its determination of whether to allow license transfers of the debtor's AER licensed assets. The AER and the OWA argued that the decisions result in disclaimed assets becoming the problem of the AER and the OWA, and thus the Alberta taxpayer, which given themselves of insolvencies in the upstream oil and gas business, is a large issue for the AER and the OWA. The precedential value of the Redwater decision on the insolvency process is enormous, and the AER and OWA were seeking a stay of the Redwater precedent, not of the actual order in the Redwater case. The decision denying the stay was emphatic, with Wakeling JA stating that a contrary outcome would be "heretical in nature" to stare decisis, the legal requirement that courts must follow precedents.

BLG's full summary and analysis of the Court of Appeal decision can be read here. BLG's analysis of the trial decision of Wittmann CJ can be read here.

DECISION

At issue was whether the Court of Appeal could in fact grant the kind of stay sought by the AER and the OWA – Wakeling JA determined that he could not grant the stay because there was nothing to stay. He reasoned that neither the decision of Wittmann CJ at trial, nor the Court of Appeal's dismissal of the appeal, compelled or authorized a party to the proceedings or any third party to do anything, as both decisions were declaratory in nature. Therefore a stay was unnecessary.

The Court further held that there was no principled basis that justified the stay of anything occurring outside the Redwater litigation, and that the rights of other litigants having the same or similar facts would be subject to the same principles set out in the Redwater decisions, unless the Supreme Court of Canada granted leave to appeal and allowed the appeal. Wakeling JA was crystal clear that any other result would be contrary to the established judicial and legal principles of Canada – just because the decision has wide-ranging effects doesn't mean that its principles shouldn't be applied.

The Court did not rule out the possibility of the AER seeking a stay limited to the parties to this particular litigation; however, as the Receiver had already sold Redwater Energy's assets pursuant to the decision of the lower court, there was again nothing to stay.

IMPLICATIONS

In our view, a successful application by the AER and OWA was unlikely, irrespective of the implications for the insolvency and energy industries, in part because had they been successful, the implications would have been just as wide-ranging on how precedents are relied upon in Canadian law. The ability of trustees and receivers to disclaim assets, the inability of the AER to impose financial conditions on the transfer of a debtor's AER licensed property, be it through the posting of security or imposition of LMR requirements, and the priority of secured creditors over the AER's claims therefore remains. These do not appear to be changing until either the Supreme Court reaches a different result, or the federal government amends the Bankruptcy and Insolvency Act to address the matter. While the AER has filed for leave to appeal to the Supreme Court, leave has yet to be granted, and it is reasonable to expect that if leave to appeal is granted, a decision of the Supreme Court will not be rendered until well into 2019.