"Pacer Promec Energy Corporation and its affiliates (collectively, the "Debtors") were in the business of oilfield construction. In late 2014, the Debtors' business began to fail and they were placed into a receivership by order of the Court of Queen's Bench of Alberta. FTI Canada Consulting Inc. (the "Receiver") was appointed as Receiver.
Early in the receivership, the Receiver made the somewhat unusual decision to complete some of the very significant construction projects the Debtors were involved with. As a result, it was anticipated that the Receiver would potentially be subject to a large number of claims in addition to the usual prereceivership claims against the Debtors, all of which would need to be addressed in the receivership. As many of these claims would be pursuant to the Builders' Lien Act (Alberta) the Receiver would need to review both the validity and priority of the claims.
As a result, the Receiver applied to the court in May of 2015 for an Order which prescribed a process for reviewing and, if necessary, litigating the claims (the "Claims Procedure Order"). The Claims Procedure Order appointed a Claims Officer who was empowered to hear any disputed claims in the first instance. The Claims Procedure Order was inherently flexible in that it prescribed some of the litigation process, but also empowered the Claims Officer to control the process.
One of the claims that proceeded before the Claims Officer was the disputed builders' lien claim of FDS Prime Energy Services Ltd. ("FDS"). The Receiver was largely successful before the Claims Officer in that the builders' lien claim of FDS was allowed only in a relatively small amount which the Receiver had agreed to. FDS appealed this decision to the Court of Queen's Bench which reversed the decision of the Claims Officer and found that the entirety of the FDS claim was rightfully secured by its builders' lien. However, in reaching this conclusion, the Queen's Bench Justice made a number of troubling remarks about the role of Claims Officers in insolvency proceedings and the standard of review applicable when the Court of Queen's Bench reviewed the decision of a Claims Officer. As a result, the Receiver appealed to the Court of Appeal of Alberta.
The decision of the Court of Appeal is helpful to insolvency practitioners in that it clarifies that in determining the appropriate standard of review for the Court to employ, the Court should (i) review the Order appointing the Claims Officer, and (ii) carefully review the proceeding which took place before the Claims Officer.
It is also noteworthy that the Court of Appeal specifically recognized that insolvency processes often include a large number of claims, and that cost-effective and timely procedures are desirable and should be encouraged. Further, the Court of Appeal noted that given Alberta's current environment of limited judicial resources, the use of the Court of Queen's Bench and traditional litigation processes likely do not achieve these goals. The Court of Appeal has clearly encouraged the use of Claims Officers in insolvency proceedings where appropriate, and has mandated a deferential approach to the decisions of Claims Officers provided a thorough and fair process was implemented before the Claims Officer.
Our experience in the Debtors' receivership bears witness to the utility of Claims Officers. The numerous claims submitted against the Debtors and the Receiver were all subject to the Claims Procedure Order and the vast majority of them were resolved without the need to attend in Court. Indeed, FDS was the only creditor who appealed to the Court."
Originally published by OnPoint Law
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