West Face Capital Inc. v. Chieftain Metals Inc., 2020 ONSC 5161

The Ontario Superior Court of Justice recently issued a decision that highlights how the interests of First Nations as innocent third parties can be considered in bankruptcy proceedings.

In West Face Capital Inc. v. Chieftain Metals Inc., 2020 ONSC 5161, the court discharged the receiver of Chieftain Metals Inc. and Chieftain Metals Corp., the owners of the Tulsequah Mine Project located in Taku River Tlingit Territory in Northwest British Columbia. The Tulsequah Mine has been leaching acid mine drainage into the Tulsequah River since the Mine ceased operations in the 1950s. The Mine has changed hands multiple times with different owners trying to redevelop the site, without success.

Taku River Tlingit opposes the Mine. Taku River Tlingit views the Project as a threat to their lands and waters as well as to their way of life and has recently been working with the Province to remediate the Tulsequah Mine site and stop the acid mine drainage from discharging into the Tulsequah River.

In the court proceeding, Chieftain’s receiver, Grant Thornton, applied to be discharged and the creditor, West Face Inc., requested a “without prejudice” provision that would have given them unlimited time to appoint a new receiver should the Mine later become viable. Taku River Tlingit was permitted to participate in the application hearing and submitted that the Receiver should be discharged without the benefit of the proposed “without prejudice” provision. Taku River Tlingit took the position that the court should decline to exercise its discretion so as to give the secured creditor rights that it would not normally have under the Bankruptcy and Insolvency Act (“BIA”), particularly given that it would prejudice innocent third parties like the Taku River Tlingit. British Columbia argued that the period of time to reappoint a receiver should be limited to two years.

After considering Taku River Tlingit’s submissions and finding that the Province and Taku River Tlingit were entitled to certainty of outcome, the court has given the creditor two years only, until August 11, 2022, to seek the reappointment of a receiver in the proceedings. The court’s decision demonstrates that third party First Nations should be permitted to participate in bankruptcy proceedings where those proceedings will affect their rights and interests, and that courts should, in the exercise of their discretion under the BIA, consider those rights and interests where events in bankruptcy proceedings may work to prejudice third party First Nations.

Robert Janes, QC and Robin A. Dean of JFK Law Corporation represented Taku River Tlingit in the proceedings.