One of the main benefits to a purchaser who buys oil and gas assets in a proceeding under the Companies' Creditors Arrangement Act or a receivership is the near-absolute quieting of title via a "vesting order." In
To appreciate the significance of vesting orders, it is useful to describe their effect. A vesting order "effects the transfer of purchased assets to a purchaser on a free and clear basis, while preserving the relative priority of competing claims against the debtor vendor with respect to the proceeds generated by the sale transaction"
...
[the vesting order] is the cornerstone of the modern "restructuring" age of corporate asset sales and secured creditor realizations ... The vesting order is the holy grail sought by every purchaser; it is the carrot dangled by debtors, court officers, and secured creditors alike in pursuing and negotiating sale transactions.
In Manitok, the Court considered whether the purchaser pursuant to a SAVO was entitled to receive the proceeds of the production of natural gas from the purchased assets, which had been produced and sold between the effective date and closing date.
Background
On
The SAVO provided that Manitok's right, title and interest to the assets described in the APA "shall vest absolutely" in the name of Yangarra. It also provided that all persons claiming by, through or under Manitok "shall stand absolutely barred and foreclosed from all estate, right, title, interest ... of the Purchased Assets." The SAVO provided that the proceeds of the sale were payable to
On
Yangarra sought to collect from the Receiver its proportionate share of the proceeds from the production of the gas wells for the period between
The chambers judge granted the Receiver's application to strike, concluding that Yangarra's claim to the Proceeds was an unsecured claim in Manitok's receivership and its status was not impacted by the SAVO. Yangarra appealed.
In addition to consideration of the substantive issue, the
The Court of Appeal stated that, while the language of section 193 appeared broad, it had been interpreted narrowly and purposively, to ensure that bankruptcy proceedings were administered efficiently and expeditiously by minimizing appeals. The Court of Appeal noted that previous decisions had found appeals related to SAVO's as procedural and did not provide an appeal as of right. The Court of Appeal, however, determined in this case that the appeal raised a substantive issue: it concerned the status of the Proceeds and whether Yangarra's claim to the Proceeds was covered by the APA and SAVO, or whether it was an unsecured claim in the receivership. Yangarra therefore had an appeal as of right pursuant to s 193(c) of the BIA.
The Court determined that the chambers judge erred in her interpretation of the SAVO. The chambers judge had concluded that Yangarra's claim to the Proceeds was an unsecured claim in the Manitok receivership, and that there was nothing in the SAVO that would change the status of that claim.
In overturning the chambers judge, the
The SAVO in question was reviewed in depth and the
In the result, the
This decision reaffirms the crucial role played by vesting orders but also potentially makes it easier for such orders to be appealed through the
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Ms
4500 Bankers
T2P 4K7
Tel: 4032983235
Fax: 4032657219
E-mail: azzuolol@bennettjones.com
URL: www.bennettjones.com
© Mondaq Ltd, 2022 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source