SCC Refuses Leave to Appeal Receiver’s Priority Over Property Tax Claims

Supreme Court of Canada

On October 10, 2019, leave to appeal the decision of the Alberta Court of Appeal (the “Alberta CA”) in Edmonton (City) v. Alvarez & Marsal Canada Inc. (“Edmonton v. Alvarez”)1 was refused by the Supreme Court of Canada (the “SCC”).2 No reasons were given.

The City of Edmonton (the “City”) had sought leave to appeal the unanimous Alberta CA ruling that court-ordered charges for a receiver’s fees, disbursements and borrowings could rank ahead of unpaid municipal property tax claims. The Alberta CA had found that there was no evidence that the City would not benefit from the receiver selling the properties in question, or that the City’s secured position would be negatively impacted, and that the City itself would have to run sales if the receiver did not, likely at greater cost.3

In overturning the decision of the Alberta Court of Queen’s Bench, the Alberta CA had held that the Court ought to have exercised the discretion it had under subsection 243(6) of the Bankruptcy and Insolvency Act (“BIA”) to grant priority to the receiver’s charges.4 The Alberta CA’s confirmation of such statutory discretion stands in contrast to the view previously taken by an Ontario court, albeit prior to the enactment of BIA subsection 243(6), that a court had no discretion to grant a receiver priority for its fees and disbursements over a municipality’s claims for pre-receivership tax arrears.5

With the SCC’s refusal of leave to appeal Edmonton v. Alvarez and other recent decisions such as that of the Alberta CA in Canada v. Canada North Group Inc. allowing charges in a Companies’ Creditors Arrangement Act (“CCAA”) proceeding to prime federal statutory deemed trusts,6 there is a growing consensus that the super priority of court charges in insolvency and restructuring proceedings ought to be the rule and not the exception.7

The Financial Services Group at Aird & Berlis can advise on proceedings initiated pursuant to the BIA or CCAA. Details are available at our Financial Services webpage.

1 Edmonton (City) v. Alvarez & Marsal Canada Inc.2019 ABCA 109 (ABCA).

2 City of Edmonton v. Alvarez & Marsal Canada Inc., in its capacity as Court-appointed Receiver of the current and future assets, undertakings and properties of Reid-Built Homes Ltd., et al.2019 CanLII 94465 (SCC).

3 Edmonton v. Alvarez, supra note 1, at paragraph 25.

4 Ibid, at paragraph 26.

5 See Hamilton Wentworth Credit Union Ltd. (Liquidator of) v. Courtcliffe Parks Ltd.[1995] O.J. No. 1482 (OCJ (Gen Div, Commercial List)), at paragraph 41.

6 Canada v. Canada North Group Inc.2019 ABCA 314 (ABCA).

7 See also the unreported April 30, 2019 decision of Justice Hainey of the Ontario Superior Court of Justice, Commercial List in the matter of Royal Bank of Canada and D.M. Robichaud Associates Ltd. concerning the priority of receiver’s charges over construction trust claims, as discussed in Babe, Sam, “Priority of Receivership Charges over Construction Trusts,” National Insolvency Review, Volume 36, Number 5 (Toronto: LexisNexis Canada Inc., 2019).