ATB Financial v Alberta Foothills Properties Ltd, 2021 ABQB 835

Court of Queen’s Bench of Alberta Citation: ATB Financial v Alberta Foothills Properties Ltd, 2021 ABQB 835 Date: 20211021 Docket: 2101 06388 Registry: Calgary Between: FTI Consulting Canada Inc, In Its Capacity as the Court-Appointed Receiver of Alberta Foothills Properties Ltd Applicant - and - Town of Okotoks Respondent - and - ATB Financial Third Party _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice C.M. Jones _______________________________________________________ I.

Introduction and Facts [ 1 ] The Applicant, FTI Consulting Canada Inc (the “Receiver”), in its capacity as Court-appointed receiver of Alberta Foothills Properties Ltd (“AFPL”) seeks the advice and direction of the Court.

The Receiver is authorized to apply for such advice and direction pursuant to paragraph 27 of the Consent Receivership Order of Madam Justice Eidsvik dated May 17, 2021 (the “Receivership Order”). [ 2 ] There is little dispute among the parties as to the relevant facts. [ 3 ] In 2009, AFPL acquired 145 acres of land (the “Property”) south of the Town of Okotoks (the “Town”) at a cost of $4.9 million.

AFPL’s intention was to pursue a seven-phase development called the Wind Walk Development (the “Development”). [ 4 ] On June 26, 2017, the Town approved an area structure plan (the “ASP”) required for purposes of the Development. In its brief, the Receiver describes the ASP as follows: The [ASP] is essentially the development road map for the Property. Under

section 633 of the Municipal Government Act (the “MGA”), an “area structure plan” must describe the sequence of development proposed for a certain area, the proposed land uses, the proposed population density, and the general location of major transportation routes and public utilities.

[ 5 ] On August 21, 2017, the Town re-designated part of the Property as residential and approved AFPL’s outline plan. On February 21, 2019, the Town approved AFPL’s subdivision plan for the first phase of the Development (the “Subdivision Plan”). The Subdivision Plan was valid for one year, though this subsequently was extended to September 30, 2020. [ 6 ] The Subdivision Plan included a number of conditions.

Despite its efforts, AFPL was unable to satisfy these conditions and on September 2, 2020, the Town advised that it would not extend the Subdivision Plan beyond September 30, 2020. [ 7 ] AFPL was unable to secure the necessary financing to proceed with the Development. It listed the Property for sale in August 2019, but no sale occurred. [ 8 ] Eventually, AFPL’s primary creditor, ATB Financial (“ATB”), applied to have it placed in receivership.

As noted above, the Receivership Order was granted by Justice Eidsvik on May 17, 2021. [ 9 ] On May 28, 2021, the Receiver advised the Town of its appointment and of its intention to list the Property for sale. [ 10 ] On June 14, 2021, the Town introduced Bylaw 20-21 (the “ASP Bylaw”) rescinding the ASP. On June 21, 2021, the Town’s legal counsel advised the Receiver of the Town’s intention to enact a bylaw governing land use in respect of the Property. On June 28, 2021, the Town introduced Bylaw 19-21 (the “Land Use Bylaw”) rezoning the Property from residential development to urban or agricultural holdings.

I will refer to the ASP Bylaw and the Land Use Bylaw collectively as the “Proposed Bylaws”. [ 11 ] On July 13, 2021, the Receiver advised the Town’s legal counsel of its opposition to the Proposed Bylaws. The Receiver and ATB made written submissions to the Town opposing the Proposed Bylaws and made oral submissions at a public hearing. [ 12 ] The Receiver has postponed its efforts to market the Property, taking the position that the Proposed Bylaws significantly impair its value. II. Issue [ 13 ] The Receivership Order contains the following provisions in clauses 9 and 11: 9.

All rights and remedies (including, without limitation, set-off rights) against or in respect of the Debtor, the Receiver, or affecting the Property, are hereby stayed and suspended except with the written consent of the Receiver or leave of this Court, provided however that this stay and suspension does not apply in respect of any “eligible financial contract” (as defined in the BIA), and further provided that nothing in this Order shall (

i) empower the Receiver or the Debtor to carry on any business which the Debtor is not lawfully entitled to carry on, (ii) exempt the Receiver or the Debtor from compliance with statutory or regulatory provisions relating to health, safety or the environment, (iii) prevent the filing of any registration to preserve or perfect a security interest, or (iv) prevent the registration of a claim for lien. 11.

No person shall accelerate, suspend, discontinue, fail to honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right, contract, agreement, licence or permit in favour of or held by the Debtor, except with the written consent of the Receiver or leave of this Court.

Nothing in this Order shall prohibit any party to an eligible financial contract (as such term is defined in the BIA) from closing out and terminating such contract in accordance with its terms. [ 14 ] The Receiver notes in its brief that the Receivership Order “prohibits third parties from interfering with the Receiver’s efforts to market the Property; prevents third parties from exercising all rights and remedies with respect to the Property; and prevents third parties from altering any right, licence or permit held by [AFPL].” It takes the position that “the Receivership Order appears to, on a plain reading, prevent the Town from affecting the Property by enacting the Proposed Bylaws.” [ 15 ] Both parties acknowledge that they have been unable to locate any direct authority on this issue.

III. Analysis [ 16 ] The Receiver makes three arguments in support of its position. A. Preservation of Status Quo [ 17 ] First, it asserts that “the purpose of the Receivership Order is to preserve the status quo and maximize the return to AFPL’s secured creditors through a sales process, both of which are disrupted by the Proposed Bylaws.” [ 18 ] The Receiver points out that paragraph 9 of the Receivership Order allows for only a limited exemption for “statutory or regulatory provisions relating to health, safety or the environment...”.

It asserts that the Proposed Bylaws are unrelated to any of those three matters. [ 19 ] The Receiver also notes that paragraph 11 of the Receivership Order prohibits any “Person” from interfering with AFPL’s rights and that “Person” is defined to include “governmental bodies or agencies, or other entities having notice of this Order”. [ 20 ] Finally, the Receiver notes that subparagraph 3(

k) of the Receivership Order authorizes it to market the Property as it deems appropriate “without interference from any other Person”. [ 21 ] The Receiver cites GE Canada Equipment Financing GP v Atikokan Forest Products Ltd , 2011 ONSC 2992 . In that case, a

receiver opposed cancellation of a debtor’s forestry licence on the grounds that it had value to the sales process. While cancellation of the licence was permitted, the Receiver argues this was because the debtor no longer had any interest in the wood supply, thus negating the value of the licence. [ 22 ] By contrast, development of the Property cannot proceed without an area structure plan. Therefore, the Receiver argues, the ASP functions like a licence permitting development that is consistent with the ASP.

Since the Proposed Bylaws would rescind the ASP, the Receiver argues this amounts to interfering with AFPL’s existing rights in contravention of the Receivership Order. [ 23 ] The Town argues that this is contrary to both the general nature of area structure plans and the express wording of the ASP. The Town’s position is that area structure plans do not grant rights, but are merely policy documents that establish a framework to guide future development decisions.

It points to s. 633(1) of the MGA: 633(1) For the purpose of providing a framework for subsequent subdivision and development of an area of land, a council may by bylaw adopt an area structure plan. [ 24 ] The Town argues that an area structure plan does not constitute development approval.

Section 637 of the MGA provides as follows in respect of a “statutory plan”, which includes an area structure plan: 637 The adoption by a council of a statutory plan does not require the municipality to undertake any of the projects referred to in it. [ 25 ] The Town cites Fredrick A.

Laux, QC and Gwendolyn Stewart-Palmer, Planning Law and Practice in Alberta , 4 th ed (Edmonton: Juriliber, 2019) at 5.6(3)(b): Consistent with this approach, the courts have said that statutory plans are policy documents that set out “proposals” for future development in a municipality and are not intended to regulate in any definitive way what can be done at the present time. They are subject to review and modification as circumstances change. This is to be contrasted with a land use bylaw, which sets forth the development rules and regulations that must be adhered to during the currency of the bylaw.

A land use bylaw serves to implement the proposals set out in the plan. It is based on fact, not hypothesis. There is no obligation on a municipal council to immediately input, through the land use bylaw or otherwise, everything that is proposed in its statutory plans nor, for practical reasons, can there be one. Thus, the plans and the bylaw occupy a separate place and function in the scheme of the Act.

It follows then, for purposes of assessing development rights, that the primary document to be scrutinized is the land use bylaw and not the statutory plan. [ 26 ] The Town also points to terms of the ASP indicating that development of the Property would require further approvals. [ 27 ] I agree with the Town that the Receiver’s analogy between the ASP and a licence is flawed. While the forestry licence at issue in Atikokan permitted timber removal, the ASP does not, in and of itself, permit development of the Property.

I am not satisfied that rescinding the ASP amounts to interference with an extant right of AFPL. I will discuss this point further in respect of the Receiver’s second argument. B. Prejudice [ 28 ] The Receiver argues that “the prejudice to AFPL’s creditors would greatly exceed any prejudice to the Town if the Town was not stayed from enacting the Proposed Bylaws.” The Receiver’s position is that the ASP is a “living document” that can be revisited and amended.

Therefore, it is not necessary for the ASP to be rescinded in its entirety. [ 29 ] In its brief, the Receiver outlines the prejudice it asserts will be suffered by AFPL’s creditors if the ASP is rescinded. First and foremost, the Property then will be bare agricultural land, rather than residential development land, significantly reducing its value. Second, AFPL expended time and resources developing the ASP. If the ASP is rescinded, a purchaser of the Property will be required to re-incur those costs to pursue development.

Third, the Proposed Bylaws will decrease potential purchasers’ certainty that the Property can be developed, again reducing its sale value. [ 30 ] The Receiver asserts that there is no corresponding prejudice to the Town if it is stayed from enacting the Proposed Bylaws. It argues that the timing of the Proposed Bylaws suggests that the Town is simply reacting to the Receivership Order, rather than advancing any pressing objective.

The Receiver’s position is that there will be no prejudice to the Town if the status quo is maintained until the Receiver completes its mandate and is discharged. [ 31 ] The Town takes issue with some the of the Receiver’s assertions. It points out, first, that most of the Property already is designated Agricultural and Land Holding District and that the Proposed Bylaws do not change this.

The Proposed Bylaws will change the designation of only 7.88 hectares (approximately 19.5 acres) of the Property. [ 32 ] During the hearing, counsel for the Town indicated that urban holding and agricultural are combined as one land use district. She stated that this designation does not preclude residential development.

Nevertheless, counsel for the Receiver indicated that rescinding the ASP leaves the landowner with no ability to apply for subdivision approval or a development permit. [ 33 ] More to the point, the Town notes that there are no current subdivision or development permit approvals in respect of the Property, the prior subdivision approval having expired in September 2020. Therefore, the Town argues that neither AFPL nor the Receiver in its place has any vested or “crystallized” right to develop the Property. Further, no such right existed as of the date of the Receivership Order.

The “status quo” at that time, in the Town’s view, was that AFPL had no right to pursue development of the Property. Further, the Receiver can have no greater right to develop the Property than AFPL had. [ 34 ] The Town disputes the Receiver’s contention that the value of the Property has been significantly impaired by the Proposed Bylaws. The Receiver provided the Court with four appraisals, dated October 18, 2018, September 12, 2020, April 21, 2021 and August 26, 2021. The last of these assumes that the Proposed Bylaws have been enacted and indicates a significantly lower value than the

previous three and the Receiver argues that the Proposed Bylaws resulted in this reduction. [ 35 ] The Town contends that this position ignores two things. First, the earlier appraisals did not value the Property in its actual state, namely unsubdivided, undeveloped bare land. Rather, they assumed a certain amount of development of the Property that in fact has never taken place. [ 36 ] Second, the Town argues that the earlier appraisals overvalue the Property.

It points out that the Property previously has been listed and has failed to sell, indicating that its market value is lower than reflected in the appraisals. [ 37 ] Finally, the Town argues that staying it from enacting the Proposed Bylaws actually creates further uncertainty. A prospective purchaser will have no idea if the current land use bylaw and ASP will remain in place or be changed by the Proposed Bylaws when the Receivership ends.

By contrast, if the Town is permitted to enact the Proposed Bylaws as it presently intends, potential purchasers will be clear on what they will need to do to pursue development. [ 38 ] I agree with the Town’s position on the issue of prejudice. The Receiver’s position is predicated upon the assumption that AFPL had some extant right to develop the Property. It is well-established that a receiver has no greater rights than the debtor whose estate it administers. I am satisfied that the ASP, on its own, afforded AFPL no rights in respect of the development of the Property.

Further approvals and/or permits would have been required and the ASP did not guarantee that such approvals and permits would have been granted. While AFPL had a previous subdivision approval, it was subject to conditions that were not satisfied prior to its expiry. While it may be that a landowner cannot apply for subdivision approval without an area structure plan in place, such approval is not guaranteed in any event.

Therefore, in the absence of an existing subdivision approval or even application, I find that there is no significant prejudice. [ 39 ] I also agree with the Town that certainty for prospective purchasers actually is enhanced by allowing the Town to proceed. C. Procedural Fairness [ 40 ] Finally, the Receiver asserts that it is unclear why the Town needs to proceed with the Proposed Bylaws at this time. It argues that procedural fairness requires that the Proposed Bylaws be held in abeyance until the Property is sold and the new owner can advocate for its own interest. [ 41 ] I do not accept this argument.

The Town’s uncontroverted evidence is that it gave the notice required for it to enact the Proposed Bylaws. I do not think procedural fairness necessitates permitting the Receiver to dictate timing more to its liking. [ 42 ] Moreover, as noted above, allowing the Town to enact the Proposed Bylaws at this point will create certainty for a purchaser, who will be able to advocate for its interest from a more secure footing. IV.

Conclusion [ 43 ] Taking all of the foregoing into account, I find that, without any extant right in AFPL to develop the Property, there is no basis upon which to stay the Town from enacting the Proposed Bylaws. [ 44 ] The Town devoted much of its brief to a discussion of the powers of municipalities.

In light of my conclusion that AFPL had no extant development right and that, therefore, a stay is not justified, I need not address these arguments further. [ 45 ] If the parties are unable to agree on costs, they may submit written arguments not to exceed five pages each within 30 days of the date of these Reasons. Heard on the 29 th day of September, 2021. Dated at the City of Calgary, Alberta this 21 st day of October, 2021. C.M. Jones J.C.Q.B.A. Appearances: Ryan Zahara/Kaitlin Ward

MLT Aikins LLP for the Applicant Dean Hutchison/Jennifer D. Sykes Caron & Partners LLP for the Respondent Travis P Lysak for the Third Party