Director faces indemnity claim despite CCAA release

Intact Insurance Company v. Edward Collins Contracting Limited, 2026 NLSC 49
Do CCAA releases extinguish a director's personal liability?

Summary: The Newfoundland and Labrador Supreme Court has refused to strike Intact Insurance’s personal indemnity claim against a director, holding that it was not “plain and obvious” that releases granted in Edward Collins Contracting’s CCAA sale process extinguished the director’s independent contractual liability under a surety indemnity. The Court found that the prior approval and vesting order did not adjudicate Intact’s claim, did not trigger res judicata or issue estoppel, and could not be read to override the protection for personal contractual claims preserved by section 5.1(2) of the CCAA.

Francis Collins (“Collins”) applied under Rule 14.24 of the Rules of the Supreme Court, 1986 to strike the Statement of Claim as against him on the basis that Intact’s claim for indemnification was barred by the doctrines of res judicata, issue estoppel, or otherwise constituted an abuse of process. Collins’s application was based on the order issued in the Companies’ Creditors Arrangement Act proceedings relating to Edward Collins Contracting Ltd. and related entities, including the Amended and Restated Initial Order (“ARIO”) dated October 17, 2022, and the Approval and Vesting Order (“AVO”) dated October 18, 2023. Specifically, Collins, a director of Edward Collins, relied on the release in paragraph 21 of the AVO to argue that his personal liability under the Indemnity Agreement with Intact was finally and unequivocally released.

On an application under Rule 14.24, the question is whether it is “plain and obvious” that the claim as pleaded discloses no reasonable cause of action. Rule 14.24 is concerned primarily with whether a notice of civil claim properly advances a cause of action. For a cause of action to be properly advanced, the elements of the cause of action must be set out, the material facts that ground those various elements of the cause of action must be concisely stated, and the relief that is sought must be available for the specific cause of action advanced. The test is a stringent one because it is based on the policy that, other things being equal, a case should be decided on its merits rather than be derailed on a technicality.

Intact’s claim against Collins was contractual, and was based on a personal indemnity agreement executed by him in favour of Intact in connection with the issuance of surety bonds. The Statement of Claim pleaded the existence of the Indemnity Agreement, the incurring of losses by Intact under the bonds, and Mr. Collins’s obligation to indemnify Intact for those losses. On its face, the statement of claim disclosed a reasonable cause of action. However, the main ground being advanced was the assertion that the claim had been extinguished by operation of the release in the AVO.

Paragraph 21 of the AVO released, among others, the debtor companies, certain third party sponsors, and directors and officers in their capacities as such, subject to an explicit savings clause. Paragraph 21 ended with the following statement: “nothing in this paragraph shall waive, discharge, release, cancel or bar any claim for fraud or wilful misconduct or any claim that is not permitted to be released pursuant to section 5.1(2) of the CCAA”. The releases covered any present and future claims against the released parties based on any fact, or matter, or occurrence in respect of the purchase transaction, but did not release any claim for fraud or willful misconduct nor any claim that could not be released pursuant to s. 5.1(2) of the CCAA.

Courts have consistently interpreted s. 5.1(2) of the CCAA as excluding from release personal guarantees and personal indemnities, which arise from independent contractual undertakings. Intact argued that an indemnity is a more direct contractual right than a guarantee, as an indemnitor has a primary obligation and a guarantor only a secondary obligation. As part of this primary obligation, Collins signed the Indemnity in both his personal capacity and on behalf of his company. The Indemnity Agreement specifically contemplated the release of one indemnitor without release of the others. Collins argued that under a CCAA proceeding the Court has the jurisdiction to grant releases in favour of third parties and paragraph 21 of the AVO did just that.

The Court concluded that it was not plain and obvious that paragraph 21 of the AVO discharged the liability of persons who have personally guaranteed the debts of the discharged vendor under a CCAA order. The reasons accompanying the AVO explicitly drew a distinction between liability arising in a representative capacity and liability arising from personal contracts with the latter not being addressed in the reasons advanced by the Court.

The focus of the AVO hearing was the approval of a sale transaction and the necessity of certain third party releases to facilitate that restructuring. The enforceability of Mr. Collins’ personal indemnity was neither litigated nor decided as a discrete issue. The CCAA Court did not purport to adjudicate, nor could it adjudicate, the merits of a creditor’s personal contractual claim that falls outside section 5.1(2). Accordingly, the essential elements of res judicata and issue estoppel were not met. The prior decision was not a final adjudication of the issue now before this Court.

The Court also found that Intact was pursuing a claim that the CCAA process expressly left untouched. To hold otherwise would impermissibly broaden the scope of the AVO and undermine the protections afforded to creditor contractual rights by Parliament in section 5.1(2) of the CCAA.

The Court concluded that the Statement of Claim disclosed a reasonable cause of action, and was not barred by res judicata, issue estoppel, or abuse of process. The Court dismissed Collins’s application to strike the Statement of Claim as against him.

Judge: Justice Peter N. Browne

Professionals involved:

• Sam Babe of BLG for Intact Insurance

• Adam Baker for Francis Collins et al.