In the recent decision of British Columbia Attorney General v Quinsam Coal Corporation, 2020 BCSC 640 (Quinsam), the British Columbia Supreme Court (the Court) considered the priority between a debtor’s environmental liabilities and a secured creditor. In its analysis, the Court extensively discussed the Supreme Court of Canada’s decision in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (Redwater). In reference to Redwater, the Court posed the following question:

For debtors seeking to reorganize under Chapter 11 of the Bankruptcy Code, creditors with claims against reorganizing debtors, and purchasers of assets in bankruptcy court-administered sales, this alert flags seven things to keep in mind about the treatment of environmental liabilities in bankruptcy.

I. Bankruptcy Doesn’t Excuse Compliance with Environmental Rules

Two courts recently answered “yes,” finding that environmental claims brought against reorganized debtors by government entities were discharged under confirmed Chapter 11 plans of reorganization. In In re Exide Techs., 613 B.R. 79 (D. Del. 2020), the District of Delaware held that pre-petition, non-compensatory air quality penalties imposed on a Chapter 11 debtor by a state regulator were subject to discharge in bankruptcy. And in In re Peabody Energy Corp.

I.Exide Techs.: the Bankruptcy Code’s Exceptions to Dischargeability

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In this edition, now in its 7th year, we review the trends and developments in M&A across a wide range of countries and territories in the Asia Pacific region throughout 2019, and discuss our thoughts on the anticipated market trends for 2020 and beyond.

Asia Pacific M&A in 2019

Key themes across the 2019 Asia Pacific market include:

This is the twenty-ninth in our series of General Counsel Updates which aim to summarise major developments in key areas.

Liquidators have more certainty about their ability to disclaim the environmental liabilities and responsibilities of a company in liquidation.

The High Court has refused to grant the Queensland State Government (Qld Government) special leave to appeal the Queensland Court of Appeal’s March 2018 decision in favour of the liquidators of Linc Energy, concerning the liquidators’ obligations to cause Linc Energy to comply with an Environmental Protection Order (EPO).

What you need to know

The High Court has decided not to hear an appeal about the ability of the Linc Energy Limited (Linc Energy) liquidators to disclaim property of the company - this means the liquidators could disclaim that property, including any obligations under the specific environmental protection order (EPO) issued under Queensland's environmental legislation. The current position stands that the disclaimer notice had the effect of avoiding obligations of both the company and its liquidators under the EPO.

As we mentioned in a previous post, the COVID-19 pandemic has generated a wave of bankruptcies that we expect to continue into 2021. Companies entering 2020 in a strong financial position may now need to quickly shed distressed assets and generate cash. A Chapter 11 reorganization is likely to be too long and burdensome for companies in this position.