On November 16, 2011, the Supreme Court of Canada will hear a case challenging the constitutionality and applicability of several sections of the Companies’ Creditors Arrangement Act (CCAA) to provincial environmental statutes. The province of Newfoundland and Labrador (the “Province”) compels AbitibiBowater Inc. to clean up industrial sites that the company once owned and operated in the province.

Decision Below

Newfoundland and Labrador v. AbitibiBowater Inc., denied the Province leave to appeal of an earlier decision rendered by Gascon J. of the Superior Court on March 31, 2010, in AbitibiBowater Inc. (Arrangement relatif à), 2010 QCCS 1261.

The primary issue before the Superior Court was whether or not the Environmental Protection Act (EPA), orders compelling Abitibi to clean up the expropriated sites were “statutory non-monetary obligations” or “financial or monetary in nature.” All parties agreed that if the EPA orders were found to be financial or monetary in nature, then they would “fall within the meaning of claim under the CCAA…”

The Province also attempted a constitutionally-based argument to the effect that Quebec did not possess the constitutional competence to interfere with a statutory power of Newfoundland. This argument was dismissed by the Superior Court with a reference to the characterization of the orders as monetary in nature and within the claims process.

Gascon J. found, on the facts and in the context of this case, that the EPA orders were in substance financial or monetary in nature considering:

  1. the true nature and impact of the CCAA,
  2. the factual context of the issuance of the EPA orders, and their content,
  3. the Province’s behaviour prior and after the issuance of the EPA Orders,
  4. the EPA and the applicable case law, and
  5. the end result of the Province’s position.

In view of this conclusion, Gascon J. found it unnecessary to discuss the Province’s and the Intervening Parties’ other arguments on the lack of statutory jurisdiction or constitutional authority for the Court to include statutory non-monetary obligations in the definition of “Claim” found in the Claims Procedure Order.

Before the Court of Appeal, the Province’s position was: a) that it alone holds the right to modify the nature of its claim by converting the regulatory order into a monetary one, using the debt-creating provision of the EPA, and b) that it can, if it so chooses, postpone that conversion until after the restructuring is completed. As for the constitutional argument, Chamberland J.A. noted that these constitutional issues, albeit of undeniable intellectual interest, are of no genuine importance in the face of his conclusion regarding the true nature of the EPA orders.

Potential Significance

The Province wants to force Abitibi to clean up five sites it ran between 1905 and 2008. They include a defunct Grand Falls-Windsor paper mill in central Newfoundland that the government expropriated in December 2008.

Leave to appeal before the Supreme Court of Canada was granted on November 25, 2010. During the application for leave to appeal, the Province had said that the SCC needed to determine key issues of public importance related to the creditor protection process under which the initial ruling was made.

In particular it said that the court needs to decide if a debtor’s statutory duty to remove environmental contamination is “extinguished” under the CCAA, like a commercial debt.

The Attorney General of Canada, the Attorney General of Ontario, the Attorney General of British Columbia, the Attorney General of Alberta, Ernst & Young Inc. as Monitor, the Friends of the Earth Canada, and Her Majesty in right of British Columbia were all granted leave to intervene.

The constitutional questions are stated as follows:

  1. Is the definition of “claim” in s. 2(1) of the CCAA, ultra vires the Parliament of Canada or constitutionally inapplicable to the extent this definition includes statutory duties to which the debtor is subject pursuant to s. 99 of the EPA?
  2. Is s. 11 of the CCAA, ultra vires the Parliament of Canada or constitutionally inapplicable to the extent this section gives courts jurisdiction to bar or extinguish statutory duties to which the debtor is subject pursuant to s. 99 of the EPA?
  3. Is s. 11 of the CCAA, ultra vires the Parliament of Canada or constitutionally inapplicable to the extent this section gives courts jurisdiction to review the exercise of ministerial discretion under s. 99 of the EPA?  

Case Information

Newfoundland and Labrador v. Abitibibowater Inc.

SCC Docket Number: 33797

Hearing date: November 16, 2011