On
The case provides further clarity to the judicial treatment of ARO following the
Operating Corp. constituted a transfer at undervalue pursuant to section 96 of the Bankruptcy and Insolvency Act (BIA). The assets transferred consisted of mature legacy assets, allegedly with more than
The Defendants brought an application for summary dismissal in 2018. That application was heard and granted in 2020, but much of it was overturned by the
The Court of Appeal held that the Chambers Justice erred by asking whether ARO are "obligations due, or accruing due" pursuant to section 96 of the BIA, rather than considering whether ARO could or should be incorporated elsewhere into the balance sheet solvency test in the definition of insolvent person in the BIA.
The Court held that ARO is an inherent part of asset value that may depress the value of the asset, even though it may not be easily quantified as fixed amounts currently owing to identified creditors. While recognizing the difficulty associated with valuing ARO, the Court found that was not a sufficient reason to not bring it to account. Companies routinely calculate ARO for their public disclosure. The attribution of a nil value to ARO by the Chambers Justice was accordingly an error, particularly where the evidence of the Trustee was the ARO impacted the assets in excess of negative
Finally, the Court held that the 2020 Application constituted an abuse of the Court's process by attempting to seek summary dismissal of the same claim a second time, in the absence of a material change. This was a situation where the argument could have been made in the first instance, but was not. Litigation by installment is an abuse of process.
Takeaway
Bennett Jones was counsel to the
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Mr
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