| Case-Name: | Newfoundland and Labrador v AbitibiBowater Inc |
| Full-Case-Name: | Her Majesty The Queen in Right of the Province of Newfoundland and Labrador v AbitibiBowater Incorporated, Abitibi‑Consolidated Incorporated, Bowater Canadian Holdings Incorporated, Ad Hoc Committee of Bondholders, Ad Hoc Committee of Senior Secured Noteholders and U.S. Bank National Association (Indenture Trustee for the Senior Secured Noteholders) |
| Heard-Date: | November 16, 2011 |
| Decided-Date: | December 7, 2012 |
| Citations: | 2012. scc. 67. |
| Docket: | 33797 |
| History: | APPEAL from a judgment of the Quebec Court of Appeal (Chamberland JA), 2010 QCCA 965, dismissing the appellant’s motion for leave to appeal a decision of Gascon JSC, 2010 QCCS 1261 |
| Ruling: | Appeal dismissed |
| Ratio: | A claim may be asserted in CCAA insolvency proceedings, even if it is contingent on an event that has not yet occurred |
| Puisne-Justices: | LeBel, Deschamps, Fish, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ. |
| Majority: | Deschamps J |
| Dissent: | McLachlin CJ |
| Dissent2: | LeBel J |
| Lawsapplied: | Companies' Creditors Arrangement Act |
Newfoundland and Labrador v AbitibiBowater Inc, 2012 SCC 67 is a ruling by the Supreme Court of Canada dealing with whether an obligation incurred under regulatory action constitutes a claim under the Companies' Creditors Arrangement Act, thus becoming subject to a stay of proceedings.
AbitibiBowater, a pulp and paper manufacturer, operated throughout the province of Newfoundland and Labrador for over a century. The company closed its paper mill in Stephenville, in 2005, and, in 2008, it announced its last operating mill, in Grand Falls-Windsor, would close in March 2009. This marked the end of the company’s active operations in the province. However, Abitibi still retained numerous property rights, assets and undertakings within Newfoundland amounting to well over $300 million. This included interests in hydroelectric facilities, surface rights and paper mills.
The company closed its paper mill in Stephenville in 2005 and announced in 2008 it would also close its plant in Grand Falls-Windsor. The Newfoundland and Labrador House of Assembly promptly passed legislation expropriating AbitibiBowater's assets in the province.[1] This included the cancellation of "water and hydroelectric contracts and agreements" between the province and Abitibi, the cancellation of ongoing legal proceedings Abitibi had against the province and the blocking of access to Newfoundland's courts by Abitibi.
The government later learned it had accidentally expropriated the former mill property in central Newfoundland and its environmental liabilities as well. The province issued remediation orders against Abitibi under the Environmental Protection Act,[2] compelling Abitibi to clean up various sites, many of them expropriated under the Abitibi Act. Abitibi had to submit a remediation plan by January 15, 2010, and the cleanup or "remediation actions" were to be completed by January 15, 2011.
Before the EPA orders were issued, Abitibi filed for protection from its creditors under the Companies' Creditors Arrangement Act (CCAA),[3] and an initial stay order and subsequent extension order were both granted by the court. The extension order included an amendment to the initial stay order stating that the stay order would not apply to government regulatory orders.
Newfoundland argued that the EPA orders were non-monetary, and thus were not within the scope of the creditor claims process under the CCAA. It also sought a declaration that a court did not have the constitutional competence under CCAA proceedings to fetter the discretion of a Minister of a provincial Crown under a law validly enacted by that province.
The application was dismissed by the Superior Court of Quebec. In his decision, Gascon JSC held that the EPA orders were in substance financial or monetary in nature, and were thus not exempted from the stay order previously issued.[4] As he noted:
The Province then appealed the decision to the Quebec Court of Appeal, stating that:
The Court of Appeal disagreed, and supported the trial judge's contention that:
Accordingly, there was no prima facie merit to the appeal envisaged by the Province, and leave to appeal was refused.[5]
The Province appealed to the Supreme Court of Canada, and the following constitutional questions were posed:[6]
The SCC ruled 7–2 that the appeal should be dismissed.
In her ruling, Deschamps J held that not all orders issued by regulatory bodies are monetary in nature and thus provable claims in an insolvency proceeding, but some may be, even if the amounts involved are not quantified at the outset of the proceedings. There are three requirements that must be met for orders to be considered claims:[7]
The first two were met in this case, but the dispute was with respect to the third, and the question was whether orders that are not expressed in monetary terms can be translated into such terms. A claim may be asserted in insolvency proceedings even if it is contingent on an event that has not yet occurred.[8] The criterion used by courts to determine whether a contingent claim will be included in the insolvency process is whether the event that has not yet occurred is too remote or speculative.[9] In that regard, certain indicators are available to a court to determine whether there is a provable claim in a CCAA proceeding:
In this case, it was sufficiently certain that the Province would perform remediation work and therefore fall within the definition of a creditor with a monetary claim. As Deschamps J observed:
Because the provisions on the assessment of claims in insolvency matters relate directly to Parliament’s jurisdiction, the ancillary powers doctrine is not relevant to this case. The interjurisdictional immunity doctrine is also inapplicable, because a finding that a claim of an environmental creditor is monetary in nature does not interfere in any way with the creditor’s activities; its claim is simply subject to the insolvency process.[11] As Deschamps J explained:
McLachlin CJ held that there was no “likelihood approaching certainty” that the Province would remediate the contamination itself, and therefore except with respect to one site the orders for remediation in this case are not claims that can be compromised.[12] Otherwise, she agreed with the majority decision with respect to the issues relating to the division of powers.
LeBel J disagreed with McLachlin CJ's use of the "likelihood approaching certainty" test, saying he preferred Deschamps J's "sufficient certainty" test instead, as it best reflects how both the common law and the civil law view and deal with contingent claims. Applying that test, the appeal should be allowed on the basis that there is no evidence that the Province intends to perform the remedial work itself.[13]
Newfoundland and Labrador v AbitibiBowater Inc, together with Sun Indalex Finance, LLC v United Steelworkers, were high-profile cases involving the application of the CCAA that the SCC was considering in its 20122013 term.[14]
The ruling acknowledged the polluter pays principle but said in this case it did not give the province any special status that would move it ahead of other creditors.[15] Friends of the Earth observed that the end result would be that taxpayers will bear much of the financial and environmental costs associated with cleaning up a polluter’s industrial sites, unless remediation orders are issued and acted upon before a company goes under.[16] Provincial Environment Minister Tom Hedderson said the province must still do assessments for any necessary cleanups.[17]
While the SCC did make it clear that as soon as a regulator initiates enforcement mechanisms it becomes a creditor for the purposes of an insolvency proceeding, it still left unresolved several difficult questions:[18]