2022 SKKB 203, 2022 SKKB 203

KING’S BENCH FOR SASKATCHEWAN IN BANKRUPTCY AND INSOLVENCY Citation: 2022 SKKB 203 Date: 2022 09 08 Docket: BKY-RG-00143-2022 Estate No: 23-2828728 Judicial Centre: Saskatoon APPLICANT TRON CONSTRUCTION & MINING LIMITED PARTNERSHIP & TRON CONSTRUCTION & MINING INC. IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL UNDER

SECTION 50.4 OF THE BANKRUPTCY AND INSOLVENCY ACT, RSC 1985, C B-3, AS AMENDED, OF TRON CONSTRUCTION & MINING LIMITED PARTNERSHIP Counsel: Clifton P. Prophet, Christopher M. Stanek for Bruce Power L.P. and M. Kim Anderson, Q.C. Trevor Batty for Tron Construction & Mining Inc. and Tron Construction & Mining Limited Partnership Chris D. Simard for Grant Thornton Limited, in its capacity as Proposal Trustee Ryan A. Pederson for First Nations Bank of Canada Derek C. Schmuck for Lancaster Group Inc. William F. Kelly for Connco Group Ltd. c.o.b. Northern Painters Ryan D. Moneo (observing) for SaskPower Jacey K.

Safnuk (observing) for Dynamo Electric Robert J. Drake (observing) for Vipond Inc. Paul E. Fedoroff (observing) for Robwel Constructors Inc. et. al. ___________________________________________________________________________ FIAT GERECKE J. September 8, 2022 ___________________________________________________________________________ A. INTRODUCTION [ 1 ] This application concerns the interaction between the Bankruptcy and Insolvency Act , RSC 1985, c B-3 [ BIA ],

regime for proposals to restructure debt, BIA stays of proceedings, and provincial builder’s lien legislation. [ 2 ] Tron Construction & Mining Inc. [Tron Inc.] and Tron Construction & Mining Limited Partnership [Tron LP] have filed notices of intention [NOIs] to make proposals under the BIA . I will refer to Tron Inc. and Tron LP collectively as [Tron]. [ 3 ] Tron is a general contractor that describes itself as specializing in multi-disciplined industrial construction.

At the time that it filed the NOIs, Tron was the general contractor for a number of projects in Saskatchewan and Ontario. [ 4 ] Bruce Power L.P. [Bruce Power] entered into two construction contracts [Contracts] with Tron to carry out work on projects [Projects] located on lands [Project Lands] leased by Bruce Power from Ontario Power Generation Inc. [OPG].

Under its lease with OPG, Bruce Power is obligated to keep the leased lands free and clear from all encumbrances including construction liens. [ 5 ] Bruce Power says that Tron breached its obligations under the construction contracts by failing to meet milestones and complete the required work. Multiple subcontractors have filed liens against the Projects pursuant to the Ontario Construction Act , RSO 1990, c C.30 .

There are six such lien claimants who have been identified for the Court. [ 6 ] After filing the NOIs, Tron disclaimed the Contracts. [ 7 ] Bruce Power maintained holdbacks under the Contracts in amounts totaling $1,669,951 [Holdback Funds] in respect of invoices totaling $16,699,520. Bruce Power paid Tron the amount of the invoices net of the Holdback Funds. [ 8 ] Bruce Power applies under the BIA within the context of Tron’s NOIs, asking this Court to order: a. That Tron may pay the Holdback Funds into this Court in full satisfaction of all its obligations under the Construction Act and the Contracts; b.

The discharge of all liens claimed and/or registered against the Project Lands; c. The dismissal or vacating of any actions commenced in respect of liens claimed under the Contracts as against OPG and its affiliates; and d. The creation of a claims procedure for proof of lien claims and determination of entitlement to the Holdback Funds. [ 9 ] Bruce Power’s application is supported by at least some lien claimants, to a point.

The lien claimants want certain additional protections beyond those set out in Bruce Power’s draft order [Proposed Order] that would be available under the Construction Act , such as payment by Bruce Power of security for costs. [ 10 ] The application is opposed forcefully by Tron for reasons I will discuss below. Tron’s position is supported by its main secured lender, First Nations Bank of Canada [FNBC]. [ 11 ] For the reasons that follow, I find, conditionally, that it is appropriate to grant an order to establish a claims process [Claims Process] for liens in respect of the Project Lands.

The terms of such an order remain to be settled. I also find that Bruce Power be partially responsible for the costs of administering the Claims Process, though I will offer Bruce Power the option to have its application dismissed if it is unwilling to take on such costs. B. JURISDICTION [ 12 ] Bruce Power argues that the Court has jurisdiction by virtue of s. 183(1) of the BIA , which states: Courts vested with jurisdiction 183

(1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers: … (

f) in the Provinces of Manitoba and Saskatchewan, the Court of Queen’s Bench; … [ 13 ] Bruce Power points to cases where such orders have been made under the BIA in the context of receiverships and bankruptcies, and under the Companies’ Creditors Arrangement Act , RSC 1985, c C-36 [ CCAA ]. I will discuss certain of those cases below. No party was able to identify an instance where such orders have been made in the context of a proposal to creditors under the BIA . [ 14 ] Tron acknowledges that the Court has jurisdiction in light of it having filed the NOIs.

No party argued that the Court does not have jurisdiction, though First Nations Bank of Canada, citing no authority, suggested that this application would take the Court to the “edge” of its jurisdiction. [ 15 ] It is tempting to refer to s. 183(1) as representing the backdrop to this matter, but in reality it represents the heart of this application.

Absent s. 183(1), it is doubtful that this Court would have jurisdiction. [ 16 ] In Sam Lévy & Associés Inc. v Azco Mining Inc. , 2001 SCC 92 , [2001] 3 SCR 978 [ Sam Lévy ] , Binnie J., writing for the Court, undertook an analysis of the history of bankruptcy jurisdiction and the reality that trustees often must deal with debtors and

creditors that are located in different parts of Canada. The same is true for monitors under the CCAA . The issue in Sam Lévy sprang from the question of what province’s court would have jurisdiction over the bankruptcy of a company that had an office in British Columbia. The petition had been filed with the Quebec Superior Court. At paras. 38-40, Binnie J. stated: 38 It seems to me that the decided cases recognize that the word “Bankruptcy” in s. 91(21) of the Constitution Act, 1867 must be given a broad scope if it is to accomplish its purpose.

Anything less would unnecessarily complicate and undermine the economical and expeditious winding up of the bankrupt’s affairs. Creation of a national jurisdiction in bankruptcy would be of little utility if its exercise were continually frustrated by a pinched and narrow construction of the constitutional head of power. The broad scope of authority conferred on Parliament has been passed along to the bankruptcy court in s. 183(1) of the Act, which confers a correspondingly broad jurisdiction. 39 There are limits, of course.

If the trustee’s claim is in relation to a stranger to the bankruptcy, i.e. “persons or matters outside of [the] Act” (Re Reynolds, supra, at p. 129) or lacks the “complexion of a matter in bankruptcy” (Re Morris Lofsky, supra, at p. 169) it should be brought in the ordinary civil courts and not the bankruptcy court. However, claims for specific property may clearly be advanced in the bankruptcy courts (Re Galaxy Interiors, supra, and Sigurdson, supra), as can claims for relief specifically granted by the Act (Re Ireland, supra, and Re Atlas Lumber, supra).

That said, it is sometimes difficult to discern the particular “golden thread” running through the cases. L. W. Houlden and G. B. Morawetz observe: There has been a great deal of litigation on this issue, and the cases are not always easy to reconcile.

The difficulty flows from the division of constitutional powers in Canada, bankruptcy and insolvency being a federal power, and property and civil rights and the administration of justice being provincial powers. (Bankruptcy and Insolvency Law of Canada (3rd ed. (looseleaf)), at I§4) 40 The short answer to the “property and civil rights” argument, however, is that the appellant poses the wrong question. The issue is whether the contractual dispute between it and the respondent trustee properly relates to the bankruptcy.

If so, the fact it also has a property and civil rights aspect does not in any way impair the bankruptcy court’s jurisdiction. [Emphasis added] [ 17 ] In the instant case, Bruce Power and the lien claimants all are creditors of Tron, though the claims may be contingent for some lien claimants depending on whether the Holdback Funds would be sufficient to pay them out.

None can be said to be strangers to the estate of Tron, nor to the BIA proposal proceedings it has commenced. [ 18 ] Accordingly, given the broad jurisdiction vested in this Court by s. 183(1), I find that the Court has jurisdiction to make the orders sought by Bruce Power. [ 19 ] That leads to the question of whether in these circumstances the Court should exercise its jurisdiction. C.

ANALYSIS [ 20 ] If the Court makes the orders sought by Bruce Power (whether exactly in the form of the draft order, or with modifications), that will have the effect of supplanting the normal process of dealing with liens under the Construction Act . Whether the Court should do that is not the subject of any consensus here. I begin by setting out the parties’ positions. 1. Positions of the parties (

a) Bruce Power’s position [ 21 ] Bruce Power’s principal arguments are as follows. [ 22 ] What it asks for has been done before in the contexts of CCAA restructurings, receiverships under the BIA , and in bankruptcies. The law requires that claims be administered in a single proceeding.

In support of the single proceeding model, Bruce Power relies on Century Services Inc. v Canada (Attorney General) , 2010 SCC 60 , [2010] 3 SCR 379 [ Century Services ] (a CCAA matter), where Deschamps J., writing for the majority, stated as follows: [22] While insolvency proceedings may be governed by different statutory schemes, they share some commonalities. The most prominent of these is the single proceeding model.

The nature and purpose of the single proceeding model are described by Professor Wood in Bankruptcy and Insolvency Law : They all provide a collective proceeding that supersedes the usual civil process available to creditors to enforce their claims. The creditors’ remedies are collectivized in order to prevent the free-for-all that would otherwise prevail if creditors were permitted to exercise their remedies.

In the absence of a collective process, each creditor is armed with the knowledge that if they do not strike hard and swift to seize the debtor’s assets, they will be beat out by other creditors. [pp. 2-3] The single proceeding model avoids the inefficiency and chaos that would attend insolvency if each creditor initiated proceedings to recover its debt.

Grouping all possible actions against the debtor into a single proceeding controlled in a single forum facilitates negotiation with creditors because it places them all on an equal footing, rather than exposing them to the risk that a more aggressive creditor will realize its claims against the debtor’s limited assets while the other creditors attempt a compromise. With a view to achieving that purpose, both the CCAA and the BIA allow a court to order all actions against a debtor to be stayed while a compromise is sought. [23] Another point of convergence of the CCAA and the BIA relates to priorities.

Because the CCAA is silent about what happens if reorganization fails, the BIA scheme of liquidation and distribution necessarily supplies the backdrop for what will happen if a CCAA

reorganization is ultimately unsuccessful. In addition, one of the important features of legislative reform of both statutes since theenactment of the BIA in 1992 has been a cutback in Crown priorities (S.C. 1992, c. 27, s. 39; S.C. 1997, c. 12, ss. 73 and 125; S.C. 2000,c. 30, s. 148; S.C. 2005, c. 47, ss. 69 and 131; S.C. 2009, c. 33, s. 25; see also Quebec (Revenue) v. Caisse populaire Desjardins deMontmagny, 2009 SCC 49, [2009] 3 S.C.R. 286; Deputy Minister of Revenue v.

Rainville, (SCC), [1980] 1 S.C.R. 35;Proposed Bankruptcy Act Amendments: Report of the Advisory Committee on Bankruptcy and Insolvency). [24] With parallel CCAA and BIA restructuring schemes now an accepted feature of the insolvency law landscape, the contemporarythrust of legislative reform has been towards harmonizing aspects of insolvency law common to the two statutory schemes to the extentpossible and encouraging reorganization over liquidation (see

An Act to establish the Wage Earner Protection Program Act, to amendthe Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and to make consequential amendments to otherActs, S.C. 2005, c. 47; Gauntlet Energy Corp., Re, 2003 ABQB 894, 30 Alta.

L.R. (4th) 192, at para. 19). [Emphasis added] In arguing for the single proceeding model, Bruce Power also relies on Re Nortel Networks Corporation, 2015 ONSC 1354, 23 CBR(6th) 264, another CCAA matter, and on the Lien Regularization Order [LR Order] granted by Morawetz J. on August 7, 2013, in respectof Comstock Canada Ltd. [Comstock] in CV-13-10181-00CL, a CCAA matter.

The LR Order was discussed to some extent in ReComstock Canada Ltd., 2013 ONSC 6043, 8 CBR (6th) 142, and in John Margie, Comstock Canada Ltd. (Re), A Model of Efficiency,2015 J Can C Construction Law 63 Journal of the Canadian College of Construction Lawyers 63. [23] It is appropriate to interpret and apply provisions in the BIA and CCAA in a consistent fashion, as contemplatedin Century Services as follows: [47] Moreover, a strange asymmetry would arise if the

interpretation giving the ETA [RSC 1985, c E-15] priority over the CCAA urgedby the Crown is adopted here: the Crown would retain priority over GST claims during CCAA proceedings but not in bankruptcy. Ascourts have reflected, this can only encourage statute shopping by secured creditors in cases such as this one where the debtor’s assetscannot satisfy both the secured creditors’ and the Crown’s claims (Gauntlet, at para. 21).

If creditors’ claims were better protected byliquidation under the BIA, creditors’ incentives would lie overwhelmingly with avoiding proceedings under the CCAA and not risking afailed reorganization.

Giving a key player in any insolvency such skewed incentives against reorganizing under the CCAA can onlyundermine that statute’s remedial objectives and risk inviting the very social ills that it was enacted to avert. … [78] Tysoe J.A. therefore erred in my view by treating the CCAA and the BIA as distinct regimes subject to a temporal gap between thetwo, rather than as forming part of an integrated body of insolvency law.

Parliament’s decision to maintain two statutory schemes forreorganization, the BIA and the CCAA, reflects the reality that reorganizations of differing complexity require different legalmechanisms. By contrast, only one statutory scheme has been found to be needed to liquidate a bankrupt debtor’s estate. The transitionfrom the CCAA to the BIA may require the partial lifting of a stay of proceedings under the CCAA to allow commencement of the BIAproceedings.

However, as Laskin J.A. for the Ontario Court of Appeal noted in a similar competition between secured creditors and theOntario Superintendent of Financial Services seeking to enforce a deemed trust, “[t]he two statutes are related” and no “gap” existsbetween the two statutes which would allow the enforcement of property interests at the conclusion of CCAA proceedings that would belost in bankruptcy (Ivaco Inc. (Re) (2006), (ON CA), 83 O.R. (3d) 108, at paras. 62-63). [Emphasis added] [24] Bruce Power says the Proposed Order is consistent with s. 135(1.1) of the BIA, which requires a proposal trusteeto determine whether any contingent or unliquidated claim is a provable claim, and then to value any provable claims.

In In the Matter ofthe Proposal to Creditors of Conforti Holdings Limited, 2022 ONSC 3264 [Conforti], the Court stated: [44] I read s. 135(1.1) of the BIA as unambiguously providing that the Proposal Trustee is required to determine whetherMoroccanoil’s claim is a provable claim and, if it is, that the Proposal Trustee value it. In Re Nortel Networks Corporation et al., 2015ONSC 1354, Justice Newbould, at para. 35, held, in the context of an insolvency under the CCAA, that a court should not lightly losecontrol of the process whereby claims against the debtor are to be determined.

The requirement for claims to be determined and valuedthrough a single claims process under the supervision of a single Bankruptcy Court is consistent with the scheme and objects of theinsolvency process under the BIA. [45] I conclude that the inherent jurisdiction of this Court under s. 183(1) of the BIA does not extend to displacing the claims processmandated by s. 135(1.1) of the BIA.

Bruce Power thus argues that s. 135(1.1) of the BIA mandates that the proposal trustee must value the lienholders’ claims under thesupervision of this Court. [25] Des Nedhe Management Inc. [DNMI] is the sole shareholder of Tron Inc. and the sole limited partner of TronLP. DNMI is wholly owned by English River First Nation.

Bruce Power argues that Tron and DNMI opted to invoke the proposalprovisions of the BIA and have to accept the whole of that regime and that the lien claims were inevitable from the start. [26] Similar to the argument made by Moroccanoil in Conforti, that it would be prejudiced by having to proceedthrough determination of its claim by a New Jersey court, Bruce Power says it would be prejudiced by having to follow the prescribedprocedure under the Construction Act (or by having the lien claims determined under the terms of the Contracts, as Bruce Power assertsthat the Construction Act may not apply to the Projects, though also asserting that this Court need not decide that question). [27] Bruce Power contends that the Claims Process is needed because subcontractors with lien claims will be thelargest body of Tron’s creditors.

Any proposal must be made to that group of creditors and it will be crucial to have had the lien claimsdetermined by that point.

(

b) Tron’s position [28] Tron makes several arguments in opposition to the relief sought by Bruce Power, as follows. [29] Tron argues that the Construction Act provides a comprehensive and effective scheme to determine the rightsand obligations of owners, contractors and subcontractors. It contemplates that all lien claims concerning a project can be consolidatedinto one action, and (though not expressly) provides for vacating lien registrations upon payment into court of a holdback, along withsuch other security that the Court deems reasonable.

That process allows lienholders to provide evidence and make submissions onwhether the holdback amount proposed by the creditor is an appropriate amount. [30] Tron argues that the Proposed Order is prejudicial to lien claimants, in that it would deprive them of the abilityto have the correct amount of holdback to be determined. What Bruce Power proposes to pay to the proposal trustee is 10% of theinvoices it paid to Tron, whereas the Construction Act provides in s. 22(1) that the holdback is to be 10% of the price of services ormaterials that are actually supplied. In C.A.P.

Concrete Forming Ltd. v Cochren Contractors, (Ont Sup Ct) at paras 8and 9, the Court found that the “actually supplied” formulation in s. 22(1) may be equated with “value”. [31] Tron argues that what Bruce Power seeks is prejudicial to lien claimants based in Ontario who did work onOntario lands; that it is unfair for them to be forced to come to another jurisdiction to have their rights under Ontario legislationdetermined. At least one of the lien claimants expressed the same concern.

Tron argued that “in any other circumstance” a Court woulddetermine that Ontario courts are the proper venue, and Tron having commenced restructuring proceedings in Saskatchewan has nobearing. [32] Tron argues that it does not have the means to fund the process under the Proposed Order. It is insolvent. It saysthat the process will be prohibitively expensive, that it will require Tron to pay the fees of an expert construction adjudicator to evaluateliens and report on those claims. The proposal trustee will also incur fees.

Tron argues that it has no financial ability to fund any of that,and that if I grant the Proposed Order, it will jeopardize Tron’s restructuring and could lead to its failure. Then there would be no fundsin the estate to fund the lien claims process, which would force Bruce Power and the lien claimants back into the process under theConstruction Act, having also bankrupted Tron. [33] Tron argues that the Proposed Order is a collateral attack on the stay of proceedings protecting Tron, in that thelien claim procedure would infringe on the breathing room that a stay of proceedings is supposed to provide.

As an alternative approach,Tron says that it could consent to a limited lifting of the stay in Ontario to allow the normal process under the Construction Act toproceed. [34] Finally, Tron argues that this circumstance is different from the CCAA proceedings of Comstock, which alsowas a general contractor.

Comstock’s continued operations spanned multiple provinces, each with its own builders’ lien legislation.Although a stay of proceedings was in place, Comstock’s subcontractors were filing liens against project lands, which inevitably wouldhave impacted on Comstock’s cash flows, thus forcing Comstock into bankruptcy. Thus, with Comstock’s support, the monitor sought alien regularization order to manage claims by subcontractors and allow funds to flow. Here, argues Tron, the Proposed Order is soughtby a single unsecured creditor over Tron’s objections.

It would not assist Tron with its cash flow requirements nor enhance the prospectsof a successful restructuring. The Comstock order covered only the projects that Comstock continued to work on, but Tron hasdisclaimed Bruce Power’s Projects. [35] Tron argues that Bruce Power’s application has no purpose other than to cause Tron hardship. No benefit to anyparty arises from having the Holdback Funds paid to the proposal trustee rather than paid into an Ontario court under the ConstructionAct. (

c) Proposal trustee’s position [36] The proposal trustee did not take a position for or against the Proposed Order. In terms of costs, the proposaltrustee views this as a standard proof of claim process, while acknowledging that liens can be more complex than other types of claims,raising questions such as whether the subcontractor did its work in compliance with its contract, or whether project lands are evenlienable. [37] When asked, the proposed trustee estimated that if the process ran smoothly, the cost could be as low as$35,000.

If it became more complex, the trustee said it could cost several hundred thousand dollars. The proposal trustee is alsoconcerned about how the process would be funded and confirmed, and whether there might be additional lien claimants of whom theproposal trustee is not yet aware, and about whether the Holdback Funds represent the correct amount. (

d) FNBC’s position [38] FNBC echoed the positions taken by Tron in opposing Bruce Power’s application. It described the ProposedOrder as being at “the edge” of the Court’s jurisdiction at best. It asks: is the Proposed Order required in the circumstances to protectTron’s estate, and says the answer is no. (

e) Lien claimants’ positions [39] The lien claimants who made arguments generally supported the concept of the Proposed Order, but with somesqueamishness about having to come before a Saskatchewan Court. They included Lancaster Group Inc. and Northern Paint, who askedfor certain protections to be included in any order. The principal protections pointed to were as follows: a. Section 44(1) of the Construction Act requires an applicant seeking the vacating of a lien to pay into court the full amount of thelien plus an additional 25% as security for costs. The lien claimants say that Bruce Power should be required to pay the additional 25% assecurity for costs.

b. The Court should order that the lien claims constitute a charge against the Holdback funds for the sole benefit of the lien claimants. c.

The Holdback Funds should be paid into court rather than to the proposal trustee, or at least the Holdback Funds should be held bythe proposal trustee in a separate account, impressed with a trust, so that other creditors cannot make a claim against those funds. [40] With such protections in place, the lien claimants would support the Proposed Order. [41] In response to certain of those arguments, Bruce Power says that Tron ceased work on May 9, 2022, and morethan 60 days have expired since then, so the list of potential lien claimants, currently at six or seven, should be complete.

Subcontractorsand other parties who have not already filed liens would be foreclosed by operation of s. 31 of the Construction Act. 2. Should the Court exercise its jurisdiction in this case? [42] Each of Bruce Power and Tron is concerned primarily with its own interests. [43] Bruce Power wants the liens vacated in a process that, for it, would be faster, more efficient and likely muchmore cost-effective than under the Construction Act.

It wants to save money and internal resources and avoid the Ontario courts underthe Construction Act, particularly where it does not acknowledge that the Construction Act even applies to the Projects (for reasonshaving to do with the Project Lands housing nuclear facilities). [44] Tron wants nothing to do with the liens concerning the Projects. It disclaimed the Contracts and wants them tobe fully in the rear-view mirror. It wants none of its resources to go towards sorting out the lien claims. Tron made it entirely clear duringargument that it is washing its hands of the Projects.

It has no intention of providing further information to aid Bruce Power andsubcontractors in sorting out what remains to be done for the Projects that remain incomplete, and who is owed what.

Presumably Tronwould obey a court order, but short of that Tron will not put any time or resources into assisting Bruce Power, lien claimants or any otherparties that might be involved in determining what the holdback amount should be or what is owed to a particular lien claimant. [45] It seems unlikely that Tron would escape involvement in evaluation of the liens, unless they are straightforward.Of course, if they are straightforward, then the process contemplated by the Proposed Order would be inexpensive in relative terms. [46] The lien claimants are caught in the middle.

They were pulled into a proceeding in this Court in Saskatchewan,when they have a process in Ontario under the Construction Act that they know and understand. Despite that discomfort, the notion of aspeedy process that gets the Holdback Funds paid out swiftly appeals to them. (

a) Single proceeding model / harmonization among insolvency regimes [47] Bruce Power relies heavily on the concept of the single proceeding model, which was discussed in CenturyServices. The concept predates Century Services by nearly 100 years: see Stewart v Lepage, (1916), (SCC), 53 SCR337 at 349 [Stewart], where Anglin J. wrote: No doubt some inconvenience will be involved in such exceptional cases as this where the winding-up of the company is conducted in aprovince of the Dominion far distant from that in which persons interested as creditors or claimants may reside.

But parliament probablythought it necessary in the interest of prudent and economical winding-up that the Court charged with that duty should have control notonly of the assets and property found in the hands or possession of the company in liquidation, but also of all litigation in which it mightbe involved. The great balance of convenience is probably in favour of such single control though it may work hardship in some fewcases. [48] In 2001, the single proceeding model was invoked by the Supreme Court of Canada in Sam Lévy.

Citing Stewartand s. 183(1) of the BIA, the Court in Sam Lévy described the BIA as “a federal statute that prima facie establishes one command centreor ‘single control’ … for all proceedings related to the bankruptcy”: Sam Lévy at para 76. [49] The single proceeding model was applied very recently in Mundo Media Ltd. (Re), 2022 ONCA 607 [Mundo],which offered the following

summary description of the model: [40] The single proceeding model is a judicial construct used to group all claims against a debtor. The objective of the singleproceeding model is to bring efficiency to the insolvency process and maximize returns for the benefit of all creditors: see CenturyServices Inc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379, at para. 22, citing Roderick J.

Wood, Bankruptcy andInsolvency Law (Toronto: Irwin Law, 2009), at pp. 2-3; Rompsen Investment Corporation [2017 ONCA 301], at para. 70. [50] In Mundo, the debtor had been ordered into receivership in Ontario under a court appointment. The issue beforethe Court was whether to support the receiver’s motion to require SPay Inc. to pay the debtor some $4 million in unpaid invoices. Theagreements between SPay Inc. and the debtor contained an international commercial arbitration clause requiring all disputes to beresolved by arbitration in New York pursuant to New York law.

The motions judge had determined that the arbitration provisions in theagreements were overridden by the single proceeding model, in part because SPay Inc. was not a stranger to the insolvency proceedingbecause it would assert a setoff against what it owed to the debtor. The Ontario Court of Appeal analysed the issue as follows: [48] It would seem therefore that the format of the proceeding is not determinative.

The fact that a claim is made by a third party byway of a set-off to recover monies from a debtor may be of great significance to all creditors in the single proceeding model; this isparticularly so where the debtor’s largest account receivable is at stake. To approach this matter differently would defeat the purpose ofthe “single proceeding model”, which is intended to “avoid the inefficiency and chaos” of a decentralized receivership process: CenturyServices, at para. 22. [49] In this case, SPay is a third party to the insolvency proceeding, but is also Mundo’s largest debtor.

The receiver claims that SPayowes Mundo US$4,124,000 as of the date of the appointment order. SPay’s proposed set-off may, if successful, eliminate all debt owing

by SPay to Mundo. [50] SPay is not a stranger to bankruptcy because the outcome of its proposed set-off will determine both the amount of Mundo’s single biggest account receivable and the size of the bankrupt’s estate, thereby affecting all other creditors.

As noted by the Supreme Court, the most significant debtor of a bankrupt estate is “[f]ar from being a ‘stranger’ to the bankruptcy”: Sam Lévy , at para. 49 . … [52] I appreciate that the single proceeding model is typically used as a ‘shield’ to protect debtors from having to defend claims in multiple proceedings or jurisdictions, rather than as a ‘sword’ to enable receivers to pursue claims against a third party. However, I see nothing in the jurisprudence precluding this result.

On the contrary, the motion judge identified two decisions – Essar Steel [2016 ONSC 595] and Montréal, Maine & Atlantic Canada Co. [2013 QCCS 5194] – which employed the single proceeding model in the very manner contested by the moving party.

The motion judge’s decision is also in keeping with the purpose of the single proceeding model as outlined by the Supreme Court in Century Services – to promote efficiency and maximize returns for creditors – and accords with the jurisprudence that parties should not be allowed to contract out of the single proceeding model where one party may make claims that will seriously adversely affect all creditors.

I see no principled reason for drawing the distinction urged by the moving party. [53] I note that the motion judge did not state that set-offs always, or even often, render a third party part of the single proceeding model . Rather, he held that “claims by a debtor against a third party may be required to be heard in the insolvency proceedings”, and that “[t]he determining factor is the degree of connection of the claim to the insolvency proceedings”.

The “dominating considerations” for the motion judge in this case were that “the Receiver is seeking to realize on a significant Mundo asset for the benefit of all creditors and that SPay intends to assert, in whatever forum is ordered, its own claim against Mundo by way of the defence of set-off .” … 76 In the present case, we are confronted with a federal statute that prima facie establishes one command centre or “single control” ( Stewart , supra , at p. 349) for all proceedings related to the bankruptcy ( s. 183(1) ).

Single control is not necessarily inconsistent with transferring particular disputes elsewhere, but a creditor (or debtor) who wishes to fragment the proceedings, and who cannot claim to be a “stranger to the bankruptcy”, has the burden of demonstrating “sufficient cause” to send the trustee scurrying to multiple jurisdictions. Parliament was of the view that a substantial connection sufficient to ground bankruptcy proceedings in a particular district or division is provided by proof of facts within the statutory definition of “locality of a debtor” in s. 2(1) .

The trustee in that locality is mandated to “recuperate” the assets, and related proceedings are to be controlled by the bankruptcy court of that jurisdiction. The Act is concerned with the economy of winding up the bankrupt estate, even at the price of inflicting additional cost on its creditors and debtors. [ 51 ] Thus, the single proceeding model, which has long been applied in bankruptcies, receiverships and CCAA restructurings, is extremely well-established. [ 52 ] Counsel advised that they were aware of no instance of something similar to the LR Order having been applied in a BIA proposal.

Nor was the Court able to locate any such precedent. However, a corollary to the single proceeding model is that courts should seek to minimize differences between different insolvency regimes even where the provisions are not identical, as is the case with the BIA and CCAA . At paras. 24-47 of Century Services , the Supreme Court noted both the legislative trend towards harmonizing features of insolvency and restructuring law in Canada (para. 24), and that public policy favours avoidance of asymmetry between insolvency regimes (para. 47).

At para. 77, Deschamps J. stated: [77] The CCAA creates conditions for preserving the status quo while attempts are made to find common ground amongst stakeholders for a reorganization that is fair to all. Because the alternative to reorganization is often bankruptcy, participants will measure the impact of a reorganization against the position they would enjoy in liquidation. In the case at bar, the order fostered a harmonious transition between reorganization and liquidation while meeting the objective of a single collective proceeding that is common to both statutes.

The single proceeding model and the concept of harmony and consistency (except where statutorily precluded of course) thus work together to enhance efficiency and predictability for creditors and debtors alike. [ 53 ] There will be exceptions. The “stranger to the bankruptcy” concept is one. Where a party is genuinely a stranger to the insolvency proceeding, there is room for that party to make a case that it should not be swept into the proceeding.

Similarly, an insolvent party could argue that there is no relationship between its insolvency proceeding and another party, such that any dispute concerning that party should be resolved outside of the insolvency proceeding. That is Tron’s position here concerning Bruce Power and the lien claimants. I will address it below. [ 54 ] The single proceeding model answers the concerns raised by Ontario lien claimants about having to participate in a court proceeding in Saskatchewan.

Such an occurrence is commonplace in Canadian insolvencies. [ 55 ] Tron was able to disclaim the Contracts because it invoked the BIA by filing the NOI. Having done so, Tron must accept the entirety of that regime. Given the statement in Century Services that the single proceeding model applies prima facie , in my view it rests on Tron to establish that the single proceeding model should not be utilized here. (

b) Are Bruce Power and the lien claimants strangers to Tron’s BIA proposal? [ 56 ] As argued by Bruce Power, it and the lien claimants are at least contingent creditors, and s. 135(1.1) of the BIA mandates that such claims be valued by the proposal trustee. To the extent that the Holdback Funds are paid to lien claimants, that will reduce their claims with respect to Tron’s proposal, similar to how SPay Inc.’s potential setoffs would reduce the debtor’s claims against it in Mundo . [ 57 ] It could be that Tron is never able to formulate a proposal. In that event, it would be deemed bankrupt pursuant

to BIA s. 50.4(8) . The Holdback Funds and the lien claimants would still need to be dealt with. [ 58 ] In my view, there is a manifest relationship between Bruce Power and the lien claimants, on the one hand, and this insolvency proceeding, on the other. It cannot be said that they are strangers to this insolvency proceeding notwithstanding disclaimer of the Contracts. (

c) Is this a collateral attack on the stay of proceedings? [ 59 ] Little time needs to be spent on this issue. The Court was advised that lien claimants have been filing liens against Ontario Project Lands despite the stay of proceedings. Tron’s counsel has had to write to those parties and advise them of the stay. Tron expressed a willingness to agree to a partial lifting of the stay to enable such claims to be evaluated under the Construction Act . [ 60 ] Instead, Bruce Power asks the Court to apply the single proceeding model that has existed for over a century in Canadian law.

Rather than what is described as the potential chaos of multiple proceedings under the Construction Act (or the arbitration provisions in the Contracts, if those are what would apply), Bruce Power proposes that the Court order a relatively standard claims process within Tron’s insolvency proceeding. [ 61 ] In my opinion, this application is not a collateral attack on the stay of proceedings under the BIA . It is entirely consistent with the BIA regime for Division I proposals. (

d) How would the process under the Proposed Order be funded? [ 62 ] This question is the driving force behind Tron’s opposition to the Proposed Order. Tron fears that the cash flow projections leave little or no room for it to pay the professional fees that would necessarily be incurred to administer the claims process under the Proposed Order.

Tron filed no evidence as to potential cost, simply describing it as “prohibitively expensive”. [ 63 ] The proposal trustee’s estimates (not in evidence but provided during oral argument of this application) were that the Claims Process could cost as little as $35,000, and as much as several hundred thousand dollars. [ 64 ] Section 31(2) of the Construction Act provides that the lien of a contractor will expire 60 days after the date on which the contract is completed, abandoned or terminated. On the evidence, the date on which Tron abandoned the Projects was May 9, 2022.

There are six lien claimants who filed their liens within 60 days of when Tron ceased work on the Projects. It might be possible that another subcontractor could establish a later date for abandonment of the Project, but it appears unlikely that many more, if any, subcontractors would emerge to make lien claims. For now, there are six known lien claimants and seven lien claims. [ 65 ] In a

summary claims process, even in a potentially complex construction context, it is difficult for the Court to envision the adjudication of seven lien claims costing Tron’s estate $100,000, let alone several hundred thousand dollars. If it appeared that it might occur, the proposal trustee would have the ability to seek directions from the Court to ensure the efficiency of the process. For perspective, in its first report dated June 3, 2022, the proposal trustee estimated that the proposal process would consume about $240,000 in professional fees from May to August 2022.

The cash flow forecast contemplated over $6.6 million in receipts during that period, with a closing cash balance of over $1.1 million at the end of August 2022. That closing cash balance was to be achieved in part by receipt of interim financing from DNMI of over $2.1 million. The proposal trustee’s second report contemplates a further $50,000 of professional fees to be incurred in September 2022, and closing cash at September 30, 2022 of about $1.47 million.

The projections were altered by Cameco Corporation establishing a holdback of about $150,000 that the proposal trustee and Tron did not anticipate, though. [ 66 ] If DNMI was not serious about completing a successful restructuring of Tron’s debt, the NOI would never have been filed, and DNMI would not have advanced over $2.1 million in interim financing.

The Court considers it unlikely that $35,000 or even $100,000 would make the difference between a failed proposal and a successful one. [ 67 ] Nonetheless, it should be noted here that Bruce Power brought this application mainly because it wishes to avoid being embroiled in at least seven separate lien claim actions in Ontario, having to apply to consolidate those, and having to contend with the potential for one or more trials involving several lien claimants under the Construction Act (or an alternative process if arbitration under the Contracts governs) as to whether the Holdback Amount is the right amount, and how it should be divided among the lien claimants. [ 68 ] The single proceeding model did not motivate Bruce Power’s application, nor did the notion that every insolvency proceeding involving a contractor should include a lien regularization order.

If those had been Bruce Power’s objectives, the Proposed Order would also cover Saskatchewan lien claimants and projects, in the fashion of the LR Order. Instead, Bruce Power designed the Proposed Order to cover only its own Projects, to replace the potential for trials with a

summary claims process administered by the proposal trustee. The result would undoubtedly be substantial savings for Bruce Power in both time and cost. Those savings could exceed the entire cost of the

summary claims process contemplated by the Proposed Order. [ 69 ] Here, the distinctions drawn by Tron between Bruce Power’s application and the circumstances surrounding the LR Order are apt. The Proposed Order would primarily benefit Bruce Power, though if framed appropriately, it can provide substantial benefits to the lien claimants. [ 70 ] It also may benefit Tron, as it appears unlikely that it would be able to simply ignore proceedings in Ontario to determine the proper amount of Bruce Power’s holdback and the amounts that the lien claimants are able to prove.

If I dismiss Bruce Power’s application, Tron might benefit from delaying its participation in those proceedings, but it seems inevitable that such participation will be required unless Tron has already become bankrupt. [ 71 ] Tron is concerned that the Proposed Order could jeopardize its ability to make a successful proposal and believes that it would hinder its restructuring. That stems largely or entirely from concerns about cost. Tron cites the following passage

from Lloyd W. Houlden, Geoffrey B. Morawetz & Janis P.

Sarra The 2022 Annotated Bankruptcy and Insolvency Act (Toronto:Thomson Reuters, 2022) at para I§2: … For carrying out the purposes of the BIA, there is deemed to be vested in the court sitting in bankruptcy the necessary power andjurisdiction to authorize and sanction acts required to be done by the trustee for the due administration and protection of the bankruptestate, even though there is no specific provision in the BIA expressly conferring such power and jurisdiction: … From that statement, which is sourced to numerous decisions and was approved in Dugas v PricewaterhouseCoopers Inc., 2004 NBCA15, 237 DLR (4th) 143, Tron emphasizes the words “and protection of the bankrupt estate”. [72] It is indeed true that a Court’s mandate includes protection of the estate of a bankrupt or an insolvent partyattempting to restructure under the BIA or CCAA.

But that is not the Court’s sole role. A balancing of interests is appropriate.

In Canada(Minister of National Revenue) v Engdahl (1994), (SK KB), 122 Sask R 247 (QB) at para 47 [Engdahl], Gunn J.stated: 47 The function of a court sitting in bankruptcy and insolvency matters is to take into account the interests of a debtor and his creditorsand balance their interests while maintaining the integrity and confidence of the public. [73] That principle from Engdahl has been cited with approval on multiple occasions, including in AutomotiveFinance Corporation v Davies, 2002 BCSC 509, 33 CBR (4th) 22, and Re Ter Mors (1998), (MB KB), 128 Man R(2d) 23 (QB).

In my view, it applies here. [74] None of Bruce Power or any of the lien claimants who made representations to me expressed that a procedureakin to that set out in the Proposed Order would be more cumbersome than the alternatives. On the contrary, there is agreement that itwould simplify things for them. [75] The Construction Act does not provide for a process for payment into court of only a holdback in order to vacateliens. In Royal Bank of Canada v M&L General Contracting Ltd. (Court File No.

CI 14-01-90850 – no reasons were provided), whichwas a court-appointed receivership, on March 17, 2015 the Manitoba Court of Queen’s Bench granted an order to the receiver creating aprocedure for adjudicating claims against trusts that arose under The Builders’ Liens Act, CCSM c B91, notwithstanding that that Actcontained no provisions that outlined such a procedure. [76] Forcing parties into an external process when a

summary claims process can be established within therestructuring proceeding is antithetical to the single proceeding model. The question is how to balance the interests of the debtor and itscreditors while maintaining the integrity of the process and confidence of the public. [77] In my view, the main answer is found in the anticipated cost of the proposed claims process. [78] In insolvency proceedings Courts have discretion concerning allocation of costs, though that is usually andpreferably done afterwards with the benefit of hindsight.

Here, Tron raises the spectre of the costs jeopardizing its restructuring, whichthe Court is loathe to do. [79] In oral argument I raised with Bruce Power’s counsel whether Bruce Power would be prepared to contribute tothe cost of administering the claims process, to reflect the considerable savings that Bruce Power would enjoy.

The answer to thatquestion was essentially “Yes, to a point”, without specifying what contribution Bruce Power would be prepared to make, though statingthat Bruce Power’s obligations would need to be fixed. [80] Again, cost allocations are generally done after the fact when costs and recoveries are known. However, tominimize the risk of Tron’s proposal being jeopardized, I find it appropriate to set the allocation (at least between Bruce Power andTron’s estate) in advance.

In ordering this allocation, I am mindful of the cost savings and simplification that Bruce Power wouldachieve by not having to work under the Construction Act (or arbitration pursuant to the Contracts). As noted, Bruce Power brings thisapplication to advance its own interests. The creditors at large do not benefit from it.

Nor does Tron. [81] In the circumstances, I find it appropriate to make an order along the lines of the Proposed Order, provided thatBruce Power contributes to the cost of administering the claims process, to reflect the savings and efficiencies Bruce Power will enjoyand to balance the interests of the debtor and the particular creditor seeking this relief. [82] I will not impose an order on Bruce Power without knowing what it will agree to, but rather will outline what Iam prepared to order, with the granting of such order being conditioned on Bruce Power’s agreement to be responsible for the share ofcosts that I will specify below, with an amount to be paid into court, or to the proposal trustee, to secure its share of the costs.

If BrucePower wants a Claims Process order, it will need to take on some risk of increased costs as opposed to having its contribution fixed. [83] Accordingly, Bruce Power shall be responsible for the first $35,000 of the cost of administering the ClaimsProcess, plus 50% of all additional cost of its administration as approved by the Court. I recognize that to be an arbitrary allocation, but itis designed to manage the cost that must be borne by Tron and provide incentive to Bruce Power to cooperate with the claims process soas to minimize its cost.

It also is fair because if the Claims Process becomes complex and expensive, a process run in Ontario would alsolikely encounter the same issues, with Bruce Power having to shoulder increased costs there. Under my approach, Bruce Power’sinvolvement and cost in Ontario is replaced by a share of the administration costs here. [84] Tron also is incentivized to provide cooperation to the proposal trustee in the claims process. Though itdisclaimed the Contracts, that would not relieve Tron of obligations to provide assistance (perhaps under subpoena or court order) underthe Construction Act.

Under the Claims Process Tron may have to provide assistance concurrently with working on the proposal, as

opposed to deferring it to later under Construction Act processes, but it is not unreasonable to expect Tron to contribute time to the process of determining entitlement to the Holdback Funds. There is undoubtedly some information that only Tron would possess. [ 85 ] It should not be difficult for the proposal trustee to track its costs separately to facilitate the allocation of costs to Bruce Power. Costs beyond what Bruce Power pays shall be the responsibility of Tron or its estate.

To secure its share of the costs of administering the Claims Process, Bruce Power would be required to pay into court or to the proposal trustee (as a separate trust) the sum of $60,000. Any unused amount would be returned to Bruce Power once the Claims Process is complete and its cost has been ascertained. As for the share to be borne by Tron’s estate, the Court may order allocation of it at the appropriate time. [ 86 ] That does not end the matter. Tron and the lien claimants raised concerns about the Proposed Order, and I have concerns as well. I will deal with those in the next section. (

e) Details of the Proposed Order / remaining issues [ 87 ] The potential cost is one aspect of concerns raised about the Proposed Order. Counsel for certain of the lien claimants raised other concerns. [ 88 ] As a starting point, Bruce Power argued that the lien claimants would be in no better or worse position under the Proposed Order than they would be under the Construction Act processes. The lien claimants want to ensure that they would not be in a worse position. [ 89 ] No materials were filed by any of the lien claimants who, in fairness, received short service of this application.

In my view, the lien claimants have yet to have a full opportunity to provide input as to the Proposed Order, nor has the Court yet received full argument with references to jurisprudence as to what the Construction Act requirements would be. I do not wish to turn this into an extended process of argument over the Construction Act requirements or even to have the Claims Process mirror them, but I also am left with some lack of clarity over what those requirements are. [ 90 ] The lien claimants argued that there should be a process for determining the proper amount of the Holdback.

There is uncontroverted evidence from Bruce Power that the Holdback Funds represent the correct amount, but service of this application on the lien claimants was abridged and they should be given a proper opportunity to respond. I consider it appropriate for that question to be determined by this Court as opposed to delegating it to the proposal trustee. On the next hearing date for this application, the Court will receive evidence and argument that the parties wish to make as to what the holdback amount should be.

Parties other than Bruce Power shall serve and file evidence 10 days in advance of such hearing date. Bruce Power shall have an opportunity to provide response affidavits by no later than 5 days before the hearing date. That is not language that would go into a Claims Process order but would determine the holdback to be paid by Bruce Power, and that amount would go into the order. [ 91 ] The lien claimants referred several times to the requirement to pay into court an additional 25% (to a maximum of $250,000 per lien), as security for costs, in order to vacate liens.

That requirement is found in s. 44(1) of the Construction Act , though that provision appears to contemplate payment into court of the full amount of the lien plus 25%. It does not appear to apply to payment in of a holdback amount, though perhaps that could fall under s. 44(2). [ 92 ] Section 23(2) limits an owner’s liability to a lien claimant to the holdback amount.

No specific provision exists that contemplates vacating of liens on payment into court of only the holdback, though s. 44(6) provides that on payment in of the full amount of the lien plus security for costs, the lien ceases to attach to both the premises and the holdback. [ 93 ]

Section 47 gives a Court the power to order vacating of a lien “on any proper ground”, along with other relief. In a case such as this, where the owner or contractor holding the holdback is prepared to pay it into court, and where the debtor who has failed to pay subcontractors has made an insolvency filing, it might be logical and appropriate to deal with the holdback and vacate the liens, but that process is not specifically outlined in the Construction Act . [ 94 ] Bruce Power and the lien claimants are in dispute over whether security for costs that is posted will be available to satisfy liens.

Bruce Power says posting security for costs does not make the posting party liable for costs, contending that only if costs are awarded against it specifically would it have such liability. The lien claimants say that s. 44(9) causes security to be available for distribution to lien claimants. [ 95 ] There was argument as to whether the holdback should include HST. The lien claimants say it should. Bruce Power says there is no ability to lien for HST, relying on s. 14(1) which refers to a lien being for the “price of those services or materials” that the lien claimant has supplied to the premises.

No jurisprudence was cited to the Court. [ 96 ] Either the lien claimants and Bruce Power need to reach agreement on the foregoing issues, or the Court needs to receive argument on them as to what language should be included in an order. [ 97 ] The Court should receive submissions as to whether the provisions in paras. 8 and 9 of the Proposed Order would be effective to vacate the liens from the relevant titles to the Project Lands. [ 98 ] There are certain matters raised by the lien claimants that appear not to be in dispute and should be reflected in an order if granted: a. that the holdback funds be paid into a separate account (or into court) to protect them from claims by other creditors; b. that on vacating of the liens, the lien claims become a charge against the holdback for the sole benefit of the lien claimants. [ 99 ] I have some comments on the Proposed Order as well:

a. I find the inclusion of many defined terms within the paragraphs of the order to be cumbersome and to detract from clarity. Where possible, defined terms are to be set out separately, in the manner of the LR Order. b. Para. 12 should be limited to matters arising before the filing of the NOI. c. The word “wave” in para. 14(

d) is to be corrected to “waive”. D. CONCLUSION [ 100 ] Bruce Power shall have 10 days from the date of this order to advise the Court and the parties who appeared before me as to whether it will agree to the cost allocation that I have stipulated. If it fails to do so, or does not accept the cost allocation, I will render a supplemental fiat dismissing its application. [ 101 ] If Bruce Power accepts the cost allocation, then the parties shall coordinate with the Local Registrar to set a date and time for the next hearing date. Ideally the parties will have reached agreement as to the matters discussed in the Details of the Proposed Order / remaining issues

section above, and the only business will be to settle the terms of the order. However, if matters remain in dispute, the Court will hear argument in order to resolve them. J. D.G. GERECKE