What is the test for leave to intervene in an appeal?
The Receiver was appointed to manage the assets and properties of Manitok, a bankrupt oil and gas producer. The two Lien Claimants were contractors who performed work on certain Manitok oil and gas well sites. They registered builders’ liens against Manitok’s leasehold and working interests on those sites. The Receiver sold Manitok’s leasehold and working interests, which were subject to the lien claims. Portions of the net proceeds of sale were defined as holdbacks pending the resolution of disputed builders’ liens and municipal unpaid tax claims.
After the sale, the Alberta Energy Regulator (AER) designated certain Manitok assets as orphans and issued abandonment and reclamation orders. The assets that were subject to the lien claims were unrelated to the environmental liabilities represented by AER’s abandonment orders and were no longer owned by Manitok. However, the Receiver sought to exercise what it believed to be the priority over these holdback funds to fulfill a portion of Manitok’s remaining asset retirement obligations.
The chambers judge held that the builders’ lien holdbacks were held in trust for the Lien Claimants, the holdbacks were not the property of Manitok’s estate, and the funds could not be used to satisfy unrelated environmental liabilities. The chambers judge held that the Supreme Court’s decision in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (“Redwater”) did not change the priority of the Lien Claimants over these funds.
The Receiver obtained permission to appeal the entirety of the decision and argued that the chambers judge erred by deciding that the builders’ lien holdback funds were not available to the Receiver to satisfy the asset retirement obligations in priority to satisfying the lien claims. The Orphan Well Association (OWA) and two municipalities applied for permission to intervene in the appeal to provide submissions on priorities and the interpretation of Redwater more generally.
Granting intervenor status is discretionary and ought to be sparingly exercised. The test for intervention requires the court to first consider the subject matter of the proceedings and then determine the proposed intervenor’s interest in that subject matter. Intervenor status will be granted where the applicant: (1) is directly and significantly affected by the outcome of the appeal, and (2) will provide special expertise or a fresh perspective that will help resolve the appeal.
OWA had an interest in conducting abandonment and site reclamation work on orphaned oil and gas properties. Its mandate was to decrease the number and frequency of orphaned oil and gas assets, as well as the associated financial obligations. Manitok’s receivership proceedings contributed orphaned wells, facilities and pipelines to OWA’s inventory. If AER were determined to have priority over these funds, a portion of the funds would be distributed to OWA to address asset retirement obligations related to Manitok’s orphaned assets. However, if the Lien Claimants’ priority were upheld, OWA could be required to bear its own costs associated with the abandonment and site reclamation work.
OWA possessed industry-minded expertise on the end-of-life obligations of oil and gas properties. This perspective was important because there was no specific question upon which leave was granted. The Receiver argued that the chambers judge made numerous errors in deciding the priorities upon bankruptcy in the oil and gas context and in interpreting Redwater. In light of the Receiver’s wide-reaching argument, OWA was in a position to provide useful submissions about this area of law and provide relevant expertise that may help resolve this appeal. Submissions from OWA would not widen the dispute between the parties nor create prejudice because the scope of the Redwater decision was squarely before the panel on this appeal.
For their part, the Municipalities argued that they were directly and significantly affected by the outcome of this appeal because they were parties to a different insolvency proceeding that involved a priority dispute between asset retirement obligations and municipal taxes owed by Trident. Like this appeal, the Trident matter concerned the scope and interpretation of Redwater. While an interest that is purely jurisprudential does not constitute a direct and significant impact, a party’s involvement in parallel litigation may be sufficient to satisfy this criterion. This is particularly the case where the issue on appeal has not been considered by an appeal court.
The Court held that, without the Municipalities’ involvement, their interest would not be fully protected. An adverse result to the Municipalities in this appeal could be determinative of their litigation in the Trident matter. The Municipalities possessed a unique perspective, and their submissions could assist the Court in deciding an appeal with potentially significant consequences to insolvency practice and the regulatory process surrounding orphaned oil and gas facilities. With the appropriate conditions, the Municipalities’ participation would not cause prejudice to the parties or widen the dispute on appeal.
Accordingly, the Court concluded that both OWA and the Municipalities met the criteria for permission to intervene.
Judge: Veldhuis J.A.
Counsel: Howard A. Gorman, Q.C., Aaron Stephenson and Meghan Parker of Norton Rose for A&M as Receiver; Glynn L. Walters of Atlalaw for Prentice Creek Contracting Ltd.; Garrett Hamilton of Hamilton Baldwin Law for Riverside Fuels Ltd.; Gregory Plester of Brownlee for Stettler County and Woodlands County; Maria Lavelle for AER; and Robyn Gurofsky and Jessica Cameron of BLG for OWA