Smoky River Coal Ltd. et al., Re, (1999) 237 A.R. 326 (CA)

• Judge: Picard, Hunt and McIntyre, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: April 13, 1999
• Citations: (1999), 237 A.R. 326 (CA);1999 ABCA 179;175 DLR (4th) 703;[1999] 11 WWR 734;237 AR 326;71 Alta LR (3d) 1;12 CBR (4th) 94;[1999] AJ No 676 (QL)

Smoky River Coal Ltd., Re (1999), 237 A.R. 326 (CA);

    197 W.A.C. 326

MLB headnote and full text

Temp. Cite: [1999] A.R. TBEd. JN.059

In The Matter Of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended;

And In The Matter Of Smoky River Coal Limited

Allstate Insurance Company, Allstate Life Insurance Company, Security Life of Denver Insurance Company, Indiana Insurance Company, Peerless Insurance Company, Pacific Life Insurance Company, Ah (Michigan) Life Insurance Company, Northern Life Insurance Company, Reliastar Life Insurance Company, Modern Woodmen of America, Phoenix Home Life Mutual Insurance Company, American International Life Assurance Company of New York and Phoenix American Life Insurance Company (petitioners/not parties to the appeal).

Luscar Ltd. and Consol of Canada Inc. (appellants) v. Smoky River Coal Limited (respondent/debtor) and Canadian National Railway Company (respondent/creditor)

(99-18164)

Indexed As: Smoky River Coal Ltd. et al., Re

Alberta Court of Appeal

Picard, Hunt and McIntyre, JJ.A.

June 9, 1999.

Summary:

Smoky River Coal Ltd., the appellants and others were shareholders of Neptune Bulk Terminals, which owned a port facility. The shareholders used the facility to import and export their goods. A shareholders' agree­ment restricted the manner in which a share­holder could dispose of rights arising under the agreement. Among the consequences of a breach was that shareholders were given a right of refusal to purchase, at book value, the Neptune shares belonging to an offend­ing shareholder. The Neptune shares were a substantial portion of Smoky's total assets. Further, the loss of the Neptune shares would result in the loss of the use of the port facilities. The agreement provided that any disputes were to be determined by arbitration in British Columbia. In April 1998, the appellants alleged that Smoky breached its obligations under the agreement. On July 30, 1998, Smoky's lenders had it placed under the protection of the Com­panies' Creditors Arrangement Act. They obtained an order staying all actions against Smoky and its assets. The appellants argued that the stay should not be extended to them and asserted that their dispute should be resolved by arbitration. The issue for deter­mination was whether the court, as part of its supervisory role of the reorganization of Smoky under the Act, could establish a procedure to resolve the dispute.

The Alberta Court of Queen's Bench, in a decision reported at [1999] A.R. Uned. 165, held that it had jurisdiction to hear and determine whether Smoky was in default under the agreement. The court ordered the parties to appear before it for directions concerning the trial of the issues arising under the agreement. The appellants appealed.

The Alberta Court of Appeal dismissed the appeal.

Creditors and Debtors - Topic 8586

Debtors' relief legislation - Companies' creditors arrangement legislation - Pro­ceeding against the debtor - What consti­tutes - Section 11(4) of the Companies' Creditors Arrangement Act permitted a court to, inter alia, stay proceedings - The Alberta Court of Appeal held that, in appropriate cases, arbitration was a "pro­ceeding" that could be stayed under s. 11(4) of the Act - See paragraphs 31 to 33.

Creditors and Debtors - Topic 8587.1

Debtors relief legislation - Companies' creditors arrangement legislation - Credi­tor defined - The appellant shareholders alleged that another shareholder (Smoky) breached its obligations under a share­holders' agreement - They proposed to have the dispute arbitrated in British Col­umbia under the agreement - Smoky's lenders had it placed under the protection of the Companies' Creditors Arrangement Act - They obtained an order staying all actions against Smoky and its assets - The Alberta Court of Appeal held that the appellants' claim against Smoky could be treated under the claims process of s. 12 of the Act and the appellants were creditors for the purpose of the Act - See para­graphs 34 to 46.

Creditors and Debtors - Topic 8588

Debtors' relief legislation - Companies' creditors arrangement legislation - Stay of proceedings against debtor - The appellant shareholders alleged that another share­holder (Smoky) breached its obligations under a shareholders' agreement - They proposed to have the dispute arbitrated in British Columbia as provided in the agree­ment - Smoky's lenders had it placed under the protection of the Companies' Creditors Arrangement Act - The trial judge stayed the arbitration and held that the dispute would be resolved by the court as part of its supervisory role of the reor­ganization of Smoky under the Act - The appellants appealed - The Alberta Court of Appeal affirmed that the trial judge had the discretion to stay the arbi­tration and establish a procedure for re­solving the dispute - Further, the court held that the trial judge had properly exercised his dis­cre­tion.

Words and Phrases

Proceeding - The Alberta Court of Appeal discussed the meaning of the word "pro­ceeding" in s. 11 of the Companies' Credi­tors Arrangement Act, R.S.C. 1985, c. C-36 - See paragraphs 31 to 33.

Cases Noticed:

Meridian Developments Inc. v. Toronto-Dominion Bank; Meridian Developments Inc. v. Nu-West Group Ltd., [1984] 5 W.W.R. 215; 53 A.R. 39; 32 Alta. L.R.(2d) 150; 11 D.L.R.(4th) 576; 52 C.B.R.(N.S.) 109 (Q.B.), refd to. [para. 31].

Quintette Coal Ltd. v. Nippon Steel Corp. (1990), 2 C.B.R.(3d) 303 (B.C.C.A.), refd to. [para. 31].

Norcen Energy Resources Ltd. v. Oak­wood Petroleums Ltd. (1988), 92 A.R. 81; 72 C.B.R.(N.S.) 1; 63 Alta. L.R.(2d) 361 (Q.B.), refd to. [para. 32].

Farm Credit Corp. v. Holowach (Bank­rupts), [1988] 5 W.W.R. 87; 86 A.R. 304; 51 D.L.R.(4th) 501 (C.A.), leave to appeal refused [1989] 4 W.W.R. lxx; 102 N.R. 236; 100 A.R. 395 (S.C.C.), refd to. [para. 37].

Royal Bank of Canada et al. v. Central Capital Corp. (1995), 22 B.L.R.(2d) 210 (Gen. Div.), affd. (1996), 88 O.A.C. 161; 27 O.R.(3d) 494 (C.A.), refd to. [para. 38].

Algoma Steel Corp. v. Royal Bank (1992), 11 C.B.R.(3d) 1 (Ont. Gen. Div.), refd to. [para. 39].

Quebec Steel Products (Industries) Ltd. v. James United Steel Ltd., [1969] 2 O.R. 349; 5 D.L.R.(3d) 374 (H.C.), refd to. [para. 39].

Cadillac Fairview Inc., Re (1995), 30 C.B.R.(3d) 17 (Ont. Gen. Div.), refd to. [para. 41].

Quintette Coal Ltd., Re (1991), 7 C.B.R.(3d) 165 (B.C.S.C.), refd to. [para. 41].

Campeau v. Olympia & York Develop­ments Ltd. (1992), 14 C.B.R.(3d) 303 (Ont. Gen. Div.), refd to. [para. 44].

Lehndorff General Partner Ltd., Re (1993), 17 C.B.R.(3d) 24 (Ont. Gen. Div.), refd to. [para. 51].

Hongkong Bank of Canada v. Chef Ready Foods Ltd. (1990), 4 C.B.R.(3d) 311 (B.C.C.A.), refd to. [para. 52].

Companies' Creditors Arrangement Act, Re; Canada (Attorney General) v. Que­bec (Attorney General), [1934] S.C.R. 659; 16 C.B.R. 1; [1934] 4 D.L.R. 75, refd to. [para. 57].

Eaton (T.) Co., Re (1997), 46 C.B.R.(3d) 293 (Ont. Gen. Div.), refd to. [para. 58].

Dylex Ltd., Re (1995), 31 C.B.R.(3d) 106 (Ont. Gen. Div.), refd to. [para. 59].

Pacific National Lease Holding Corp. et al., Re (1992), 19 B.C.A.C. 134; 34 W.A.C. 134; 15 C.B.R.(3d) 265 (C.A.), refd to. [para. 62].

Philip's Manufacturing Ltd., Re (1991), 9 C.B.R.(3d) 1 (B.C.S.C.), refd to. [para. 64].

Cadillac Fairview Inc., Re, [1995] O.J. No. 138 (Gen. Div.), refd to. [para. 65].

Landawn Shopping Centres Ltd. v. Harzena Holdings Ltd. et al. (1997), 44 O.T.C. 288 (Gen. Div.), refd to. [para. 66].

Kaverit Steel and Crane Ltd. et al. v. Kone Corp. et al. (1992), 120 A.R. 346; 8 W.A.C. 346; 87 D.L.R.(4th) 129 (C.A.), refd to. [para. 73].

Prince George (City) v. McElhanney En­gineering Services Ltd. - see Prince George (City) v. Sims (A.L.) & Sons Ltd. et al.

Prince George (City) v. Sims (A.L.) & Sons Ltd. et al., [1995] 9 W.W.R. 503; 61 B.C.A.C. 254; 100 W.A.C. 254 (C.A.), refd to. [para. 73].

Wynden Canada Inc. v. Gaz Métropolitain Inc. (1982), 44 C.B.R.(N.S.) 285 (Que. S.C.), refd to. [para. 75].

Pacific National Lease Holding Corp. v. Sun Life Trust Co. - see Pacific Nation­al Lease Holding Corp. et al., Re.

Pacific National Lease Holding Corp. et al., Re (1992), 62 B.C.A.C. 151; 103 W.A.C. 151; 34 C.B.R.(3d) 4 (C.A.), refd to. [para. 75].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 2(1), sect. 81(1), sect. 121(1), sect. 121(2), sect. 121(3) [para. 26].

Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, sect. 2 [para. 24]; sect. 11(4) [para. 22]; sect. 12(1), sect. 12(2)(a)(iii) [para. 25].

Commercial Arbitration Act, R.S.B.C. 1996, c. 55, sect. 15(2) [para. 27]; sect. 23 [para. 28].

Domestic Commercial Arbitration Rules of Procedure (B.C.), rule 33 [para. 30].

Counsel:

R.B. Davison, Q.C., and J.H. Hockin, for the appellants;

D.R. Haigh, Q.C., and B.T. Beck, for the respondent, Smoky River Coal;

W.E. Cascadden, for Neptune Bulk Ter­minals;

T.M. Warner, for the respondent, Canadian National Railway;

D.W. Mann, for the petitioners.

This appeal was heard on April 13, 1999, by Picard, Hunt, McIntyre, JJ.A., of the Alberta Court of Appeal. Hunt, J.A., delivered the following reasons on June 9, 1999.