Business Development Bank of Canada v. Quattro Exploration & Production Ltd., 2021 ABQB 638

August 25, 2021

Does a stay of proceedings suspend the running of a limitation period?

The Applicants – freehold owners of mines and mineral rights on certain lands and the lessors of petroleum and natural gas leases that affect the lands – sought to lift the stays granted pursuant to the Receivership Orders. They also sought certain declaratory relief relating to whether the Applicants were under a disability for the purposes of the Alberta Limitations Act due to the stay of proceedings. The Applicants argued that the wording of the Receivership Orders prevented them from taking any enforcement steps with respect to interests they had in the subject property. The Receiver opposed this application, arguing that lifting the stay was not required because the Applicants were not prevented from seeking relief against parties other than the Debtor and the Receiver.

One of the issues in this application was whether the Court should grant a declaration that the limitation period had been suspended by the stays in the respective Receivership Orders and the proposals. The case law considering the impact of stays of proceedings on limitation periods in the bankruptcy context suggests that the analysis depends on the circumstances of each case, including the nature of the claim and the type of creditor. Generally, the courts have held that, in bankruptcy, the limitation period ceases to run against claims when a bankruptcy occurs.

A determining factor of whether the stay of proceedings suspends the limitation period is if the claim is in the bankruptcy or is independent of it. The creditor’s ability to take proceedings against the debtor is stayed by the Bankruptcy and Insolvency Act, and the stay of proceedings suspends the operation of the limitation period. The BIA takes away creditors’ civil remedies and requires them to submit their claims through the bankruptcy process. The bar on commencing or continuing proceedings serves this end and preserves the integrity of the bankruptcy process. In the rare case, where the bankrupt is not discharged or the claim survives bankruptcy, the suspension ends when the trustee is discharged and the limitation period may resume running.

It would be tremendously burdensome on litigants and the courts if every claim within the bankruptcy was subject to the continued running of the limitation period. It would force creditors to file claims with the court—in addition to filing their claim with the trustee in the bankruptcy—to preserve residual rights in the event the bankruptcy was not completed and the bankrupt not discharged. To address the running of the limitation period for those claims outside the bankruptcy process, the Receivership Orders in this case allow a party to commence an action to preserve a limitation period without seeking leave of the court to lift the stay. In many cases, this may be sufficient to ameliorate the potential prejudice in cases where the stay does not suspend the limitation period.

While the Receivership Orders contained provisions permitting persons to commence proceedings to preserve a limitation period without seeking leave of the court to lift the stay, this did not provide a full answer to the Applicants’ question of whether the limitation period had been suspended for all or part of the period of the stay. At this time, the nature of the Applicants’ claims was not entirely clear, including whether their claims constituted claims in the bankruptcy or whether the claims fell outside of it, or if there was another juristic reason to consider the limitation period suspended during any portion of the respective receiverships.

Once informed by a determination of whether the claim is inside or outside the bankruptcy, a further issue may be whether there are other acts that the Applicants were required to do prior to bringing a claim against the predecessors in interest to the Applicants and whether those steps were precluded due to the stays of proceedings. Regarding the permissive language of the Receivership Orders to commence actions, if the stay suspends the limitations period, one might ask whether the claim ought to have been brought earlier in light of the statutory regime and the objectives of the BIA.

The Court concluded that, since this analysis was a fact-based determination, until the specific claim was before the Court, it was not possible to declare that the limitation period was suspended by the stay of proceedings or the proposals.

Ronald J. Young of Ronald J. Young Professional Corporation for the Applicants; Kelsey Meyer of Bennett Jones for PwC as Receiver; Aaron Stephenson of Norton Rose Fulbright for Crescent Point Energy Corp.; Jessica Cameron of BLG for Hardie & Kelly Inc. and Orphan Well Association; Allison Sears of Fasken for Direct Energy Marketing Ltd.

Judge: Madam Justice C. Dario