3.68: Court options to deal with significant deficiencies
7.3: Summary Judgment (Application and decision)

Case Summary

PricewaterhouseCoopers Inc. (“PWC”) was the Trustee in bankruptcy of the estate of Sequoia Resources Corp. PWC filed a Statement of Claim declaring an asset transaction to be void as against the Trustee, or in the alternative, seeking Judgment in excess of $217 million. The Defendants were Perpetual Energy Inc. and a number of its related entities, and one of Perpetual Energy Inc.’s directors. Sequoia Resources Corp. was formerly Perpetual Energy Operating Corp., a related entity of the Defendants.

The Statement of Claim raised four different claims: (i) a claim under the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (the “BIA”) for the undervalued asset transaction; (ii) an oppression claim; (iii) a public policy claim; and (iv) a claim against the director.

The Defendants filed an Application to have the claims struck or summarily dismissed under Rules 3.68(2)(b) and 7.3(1)(b).

Justice Nixon noted that in accordance with Rule 3.68(3), no evidence may be submitted when making an Application under Rule 3.68(2)(b). The Court must accept the allegations in the Statement of Claim as true for the purposes of the Application unless they are assumptions, speculation, patently ridiculous, or incapable of proof. Justice Nixon also noted that although no evidence may be submitted, a Court may consider the content of any document referred to in the Statement of Claim. A Court may also consider the circumstances and litigation history to determine whether the pleading discloses a reasonable claim.

In considering an Application pursuant to Rule 7.3(1)(b), Justice Nixon noted that the Defendants “need to establish there is no merit to the particular claim” and that Summary Judgment or Summary Dismissal is only appropriate when a Court can make necessary findings of facts and apply the law, and the process is a proportionate, expeditious, and less expensive means of achieving a just result.

In considering these Rules, Justice Nixon found that the oppression claim disclosed no reasonable claim and was struck pursuant to Rule 3.68. His Lordship came to this conclusion as PWC (as the Trustee) was not a proper “complainant” for the purposes of the BIA. Justice Nixon also struck the public policy claim under Rule 3.68 as His Lordship determined that it disclosed no cause of action. The claims brought against the director were barred by a release executed between the parties, and therefore Justice Nixon determined that the claims should be struck under Rule 3.68 for disclosing no reasonable claim, and summarily dismissed under Rule 7.3.

The claims under the BIA were allowed to stand and were not struck or dismissed pursuant to Rules 3.68 or 7.3, respectively.

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