CBA seeks to intervene in appeals considering super-priority status of private environmental obligations

Qualex-Landmark Towers Inc v 12-10 Capital Corp, 2023 ABCA 177
What is the test for leave to intervene in a priority dispute?

Overview: This case considers the test for leave to intervene in a priority dispute. The Court ultimately granted intervenor status to the CBA on the basis that its legal interests will be directly or specially affected by the appeal, and CBA can provide useful submissions that will bring a different perspective or expertise to the subject matter of the appeal.

The Canadian Bankers' Association (CBA) applied for leave to intervene in the fast-track appeals of Qualex-Landmark Towers Inc v 12-10 Capital Corp. The appeals involved a landowner (“Capital Corp”) and three mortgagees as appellants, and QLT as respondent. QLT alleged that its lands were contaminated due to leaching from Capital Corp lands. In chambers, QLT obtained permission to add the three mortgagees as defendants and obtained an attachment order pursuant to Part 3 of the Alberta Civil Enforcement Act in the amount of $2 million in respect of any sales proceeds generated from the sale of the Capital Corp lands. The chambers judge exercised his discretion to grant an attachment order to QLT charging the Capital Corp Lands in priority to the mortgages held by the three lenders.

The appeals will focus on whether a common law super-priority right can exist in favor of a private party in respect of environmental obligations, which right is capable of subordinating rights of pre-existing secured lenders. The parties are expected to address whether QLT should have been granted an attachment order in respect of its contingent tort claim against Capital Corp that resulted in QLT’s claim having priority over mortgages registered against Capital Corp’s land.

A single judge of the Court has jurisdiction under rules 14.37(2)(e) and 14.58 of Alberta Rules of Court to render a decision on an application to intervene. Granting intervenor status is discretionary and ought to be sparingly exercised. The applicable test for intervenor status is well established:

1. whether the legal interests of the intervenor will be directly or specially affected by the appeal; or

2. whether the intervenor can provide useful submissions that will bring a unique perspective or special expertise to the subject matter of the appeal that will assist the Court in its deliberations.

Contextual considerations include whether:

1. the presence of the intervenor is necessary for the Court to properly decide the matter;

2. the intervenor's interest in the proceedings might not be fully protected by the parties;

3. the intervention would unduly delay the proceedings;

4. there could be prejudice to the parties if the intervention is granted;

5. the intervention would widen the dispute between the parties; and

6. the intervention would transform the Court into a political arena.

The CBA argued that the chambers decision has created substantial uncertainty for secured lending, particularly lending to a borrower who may have liability in respect of environmental remediation obligations of any kind, no matter how remote. The CBA submitted that the appeal decision will have far-reaching implications for its membership and the secured lending regime in Canada as it could: (a) provide a super-priority security interest to a private party holding a contingent claim, in priority to registered mortgages; and (b) limit the ability of secured lenders or their borrowers to deal with mortgaged property outside of bankruptcy or insolvency proceedings. The CBA has special expertise and could provide the Court with the broader perspective of the secured lending industry, drawing on its experience and understanding of the impacts of environmental remediation obligations on secured lending.

QLT opposed the CBA’s application for leave to intervene, arguing that the CBA did not have a fresh perspective that was not already advanced in the appeal, as the CBA’s interest in defending the priority of secured lenders ahead of environmental remediation obligations was identical to the appellant mortgagees’ interest. Therefore, the CBA’s interests would be fully protected without intervening.

Intervenor status is discretionary and ought to be sparingly exercised. The decision in this case extends the principles in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (“Redwater”) to a private dispute outside insolvency proceedings. The CBA has an interest in that subject matter. Although the appeal relates to an interlocutory remedy, to the extent that the Court of Appeal may pronounce on the extension of the Redwater principles in such circumstances, the legal interests of the members of the CBA are potentially directly affected by the appeal.

When intervention is sought on a point of law, that point should be defined with particularity. The CBA proposed to address the broader implications on the secured lending regime of a common law super-priority right for private parties in respect of environmental obligations that can subordinate the rights of secured lenders, and more specifically, the law on the legal parameters around judicial expansion of the law in this area. This falls squarely within the CBA’s mandate to promote sound, coherent lending policy in Canada and is not addressed by the appellants in a fulsome manner.

Accordingly, the Court concluded that the legal interests of CBA will be directly or specially affected by the appeal, and CBA can provide useful submissions that will bring a different perspective or expertise to the subject matter of the appeal. The intervention would not unduly delay the proceedings and there will be minimal prejudice to the parties if the intervention is granted on appropriate conditions. CBA’s application for leave to intervene was granted on strict conditions.

Judge: Justice Fagnan

Counsel: Kelly Bourassa, Christopher Keliher and Jessica MacKinnon (no appearance) of Blakes for the CBA; Matti Lemmens and Taylor Kemp of BLG for Qualex-Landmark Towers Inc.; B.D. Comfort for 12-10 Capital Corp.; Dana Nowak and Carly Toronchuk (no appearance) of MLT Aikins for Trez Capital Limited Partnership & TCC Mortgage Holdings; Carly Mohr and Bren Cargill (no appearance) of Witten for Peoples Trust Company