In a recent decision Industrial Alliance Insurance and Financial Services Inc. v Wedgemount Power Limited Partnership 2018 BCSC 970, the British Columbia Superior Court confirmed that:
- under Canada’s Bankruptcy and Insolvency Act, courts have broad powers and discretion to protect the interests of creditors and other affected parties including by staying the operation of an agreement to arbitrate if it is necessary to maximize recoveries in an insolvency proceeding.
In this dispute, a receiver had been appointed by the court over Wedgemount Power Limited Partnership, Wedgemount Power (GP) Inc. and Wedgemount Power Inc. (collectively, “Wedgemount”) on the application of the primary lender and secured creditor in 2017.
Bloom Lake General Partner Limited, Wabush Resources Inc. and related entities (Bloom Lake) received Court protection under the Companies’ Creditors Arrangement Act (CCAA) in 2015 and subsequently virtually all of its assets were liquidated. The remaining assets included preference claims valued at approximately $173 million. In 2018, there was a proposed settlement reached of the preference claims that would result in between $62 and $100 million available for distribution to the third party unsecured creditors. Based on this proposed settlement, Bloom Lake sought an order allowing a meeting of creditors to be called to vote on a proposed plan of compromise and arrangement (the “Plan”) that would distribute the proceeds to creditors. However, it was also anticipated that further negotiations on the form of the Plan would occur right up until the vote.