COURT FILE NO.: CV-16-11511-00CL

DATE: 2020-10-08

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: WEST FACE CAPITAL INC., AS AGENT

AND:

CHIEFTAIN METALS INC. AND CHIEFTAIN METALS CORP.

BEFORE: Chief Justice Geoffrey B. Morawetz

COUNSEL: Mark Laugesen and Danish Afroz, for the Receiver Grant Thornton Limited

Roger Jaipargas, for West Face Capital Inc., as Agent

Colby Linthwaite and Aaron Welch, for the Her Majesty the Queen in right of the Province of British Columbia

Robin Dean and Robert Janes, for Taku River Tlingit First Nation

Erin Gray, for Rivers Without Borders

HEARD by ZOOM CONFERENCE: August 11, 2020

ENDORSEMENT

[1] Grant Thornton Limited (“GTL”) as court-appointed receiver and manager (the “Receiver”), of the assets, undertakings and property (the “Property”) of Chieftain Metals Inc. (“CMI”) and Chieftain Metals Corp. (“CMC” and, together with CMI, the “Companies” or “Chieftain”) brings this motion for an order (the “Discharge Order”):

(a) approving the Third Report of the Receiver dated June 17, 2019 (the “Third Report”), including the actions and activities of the Receiver referred to therein;

(b) approving the Receiver’s final Statement of Receipts and Disbursements;

(c) approving the fees and disbursements of the Receiver and its legal counsel, Bennett Jones;

(d) approving the anticipated further fees and disbursements of the Receiver and Bennett Jones, estimated not to exceed $25,000 to complete the administration of the receivership (the “Receivership”) in the context of these proceedings (the “Receivership Proceedings”);

(e) approving the repayment to the ranking secured creditor West Face Capital Inc. as Agent (“West Face”) of any monies remaining in the hands of the Receiver after payment of the fees and disbursements;

(f) sealing Confidential Appendix 1 to the Third Report;

(g) subject to the possible revival of the Receivership and re-appointment of the Receiver in the Receivership Proceedings as set forth in (i) immediately below, terminating the Receivership and discharging GTL as Receiver;

(h) releasing GTL while acting in its capacity as Receiver, save and except for gross negligence or wilful misconduct;

(i) providing for the possible revival of the Receivership and the re-appointment of GTL as Receiver of the Companies in the Receivership Proceedings on the same terms as provided for in the Appointment Order, with any such revival and re-appointment to become effective on the date and time of the filing by GTL of a certificate with the Court (the “Re-appointment Certificate”), for the general purpose of implementing a transaction in connection with the Property; and

(j) providing that, if the Re-appointment Certificate is not filed with the Court within two years from the date of the Discharge Order, the Receivership Proceedings shall be terminated.

[2] Since the date of the Third Report there have been extensive discussions among the Receiver, West Face, and various departments of the Government of British Columbia, including the Ministry of Energy and Mines and Petroleum Services, the Ministry of the Environment, the Ministry of Forests, Land and Natural Resources, the Ministry of Indigenous Relations and Reconciliation and Ministry of the Attorney General (collectively, the “Province”).

[3] The Receiver subsequently filed a Supplement to the Third Report (the “Supplementary Report”) to support the Receiver’s request for a revised form of discharge order (the “Revised Discharge Order”, substantially in the form attached to the Supplementary Report.

[4] Subject to certain exceptions noted below, the relief sought in the Revised Discharge Order mirrors that in the Discharge Order.

[5] The requested Revised Discharge Order provides at paragraph 14:

[14] THIS COURT ORDERS that this Order, including the discharge of the Receiver as Receiver of the Property of Chieftain granted hereunder, shall be without prejudice to West Face’s right to bring a motion before this Honourable Court to seek the appointment of a receiver and/or manager of the Companies and the Property pursuant to section 243 (1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B – 3, as amended, and section 101 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, as amended, in the within receivership proceedings, bearing Court File Number CV–16–11511–00CL, and any such motion shall be served on Her Majesty the Queen in right of the Province of British Columbia.

[6] The Receiver reports that by late January 2020, there were no credible and interested parties willing to submit any bid or proposal on the Tulsequah Mine Project (the “Project”) on terms which would be acceptable to the Receiver and West Face.

[7] The Receiver also reported that a draft Closure and Reclamation Plan for the Project was finalized on April 24, 2020.

[8] During the first months of 2020, the Receiver determined that the most prudent course of action was to amend the relief sought in the Discharge Order in an effort to eliminate or reduce the issues of concern to the Province.

[9] In the Supplementary Report, the Receiver reports that, with one remaining exception, all issues in the proposed form of Revised Discharge Order have been settled among the Receiver, West Face and the Province.

[10] The unresolved issue concerns the proposed paragraph 14 of the Revised Discharge Order.

[11] Having reviewed the record and, in particular, the Third Report and the Supplementary Report, I am satisfied that with the exception of the sole issue in dispute, the relief requested by the Receiver is appropriate in the circumstances and is granted. In arriving at this conclusion, I have taken into account that no party is opposed to the requested relief. The requested fees and disbursements appear to be reasonable in the circumstances. In addition, I am satisfied that the requested sealing order provision is appropriate as the disclosure of the information in Confidential Appendix I to the Third Report could be harmful to stakeholders. The Sierra Club principles have been taken into account.

Issue for Determination

[12] The Receiver takes the position that it should be discharged at this time. The Receiver has concluded that incurring the cost necessary for the continuation of the receivership is no longer beneficial to the stakeholders of the Companies, including the secured creditor West Face. With no credible and interested parties willing to pursue a transaction to acquire the Project, the further costs of administering the Receivership cannot be justified at this time. West Face intends to continue in its efforts to find or develop a private-sector solution.

[13] West Face wants the Receiver to be discharged at this time and accepts the terms set forth at paragraph 14 of the Revised Discharge Order.

[14] The Province wants the language in paragraph 14 of the Revised Discharge Order augmented to provide that, “should West Face fail to bring the said motion to seek the appointment of a receiver and/or manager not later than two years from the date of this order, it may not do so thereafter without first obtaining the express written consent of Her Majesty the Queen in Right of the Province of British Columbia”.

[15] The Taku River Tlingit First Nation (“TRTFN”) does not oppose the discharge of the Receiver but submits that the Receiver should be discharged without the benefit of the proposed “without prejudice” provision and that the court should not exercise its discretion so as to give the secured creditor rights that it would not normally have under the BIA, particularly given the prejudiced innocent third parties like the TRTFN. Nor does the TRTFN agree with the additional wording proposed by the Province.

[16] The original version (paragraphs 12 – 14 of the Discharge Order) provided that the Receivership shall be revived and the Receiver re-appointed in the within Receivership Proceedings, in both cases effective on the filing of the Re-appointment Certificate. If the Re-appointment Certificate was not filed within two years, the Receivership Proceedings were to be terminated. No court order would be required to revive the Receivership Proceedings.

[17] The proposed Revised Discharge Order provides for a different path to revive the Receivership Proceedings. It requires West Face to bring a motion for the appointment of a receiver in the Receivership Proceedings on Notice to the Province. The two-year period within which to revive the Receivership Proceedings as set out in the Discharge Order is no longer referenced.

Analysis

[18] In its factum, counsel for West Face submits that the Province is requesting that the court take the extraordinary step of restricting the ability of West Face to move for the appointment of receiver over the Property to a two-year period and that it is the Province that is requesting that the court grant relief that is of an injunctive nature for which there is no authority to support such request.

[19] In my view, such a submission is misguided.

[20] In the vast majority of receivership proceedings, the discharge of the receiver is intended to bring finality to the receivership proceedings. There may be, in certain circumstances, ancillary work that remains to be completed and in such cases, the discharge may be granted subject to the finalization of the outstanding work to be confirmed through the filing of a certificate of completion by the receiver. That is not the situation in these Receivership Proceedings. This is not a case of ancillary work that remains to be completed. A court supervised sale transaction involving the Project is the fundamental purpose of the Receivership Proceedings.

[21] West Face is the party that initiated the Receivership Proceedings in 2016. The Receiver has been attempting to find a commercial resolution, satisfactory to West Face and other stakeholders since that time but has been unable to do so. It is understandable that West Face does not wish to continue to fund the Receivership Proceedings without any commercial resolution being implemented. West Face now proposes that its exposure in continuing to fund the Receiver should come at an end while the same time, it can continue to pursue, outside of the Receivership Proceedings, potential commercial transactions and, if a suitable transaction can be agreed upon, the Receivership Proceedings can be revived to provide a vehicle to complete the transaction.

[22] In seeking to preserve a route to revive the Receivership Proceedings, it is West Face and not the Province that is requesting extraordinary relief. In my view, the onus is on West Face to justify whether such relief is appropriate in the circumstances.

[23] West Face references that a re-appointment of a trustee in bankruptcy, is expressly contemplated in S. 41(11) of the BIA, which provides:

41(11) The court, on being satisfied that there are assets that have not been realized or distributed, may, on the application of any interested person, appointed a trustee to complete the administration of the estate of the bankrupt, and the trustee shall be governed by the provisions of this Act, in so far as they are applicable.

[24] Counsel to West Face submits that courts have interpreted this this provision to mean that the “door is not closed on the administration of an estate by the simple fact of a trustee’s discharge”, as the trustee may be reappointed to deal with assets which have not been realized or distributed. As such, courts have recognized that “it cannot be said that the trustee’s powers end permanently and unequivocally following discharge or that the bankrupt’s assets are unavailable.”

[25] In considering this submission, it is necessary to take into account two points. First, bankruptcy proceedings differ from receivership proceedings. In a bankruptcy scenario, the assets of the bankrupt vest in the trustee in bankruptcy (s. 71 of the BIA). This is to be contrasted with a receivership scenario where there is no statutory vesting of assets in the receiver. Second, the re-appointment of a trustee is specifically provided for in the BIA.

[26] Section 41(11) of the BIA should not be read in isolation. Section 40 and 41 address issues relating to the discharge of the trustee and the treatment of remaining assets. In particular, section 40 deals with disposal of property and s. 41(10) provides that notwithstanding the discharge, the trustee remains trustee of the estate for the performance of such duties as may be incidental to the full administration of the estate.

[27] There are no corresponding provisions to sections 40 and 41 in Part XI of the BIA which deals with secured creditors and receivers, other than perhaps, s. 247(b) which requires the receiver to deal with the property of the insolvent person or the bankrupt in a commercially reasonable manner.

[28] In my view, the authorities referenced by counsel to West Face which reference s. 41(11) of the BIA and the realization and distribution of assets are of limited assistance.

[29] However, I am satisfied that it is open to the court to consider provisions in a discharge order that would provide for the re-appointment of a receiver in certain circumstances. I arrive at this conclusion for two reasons. First, Re Grand River Railway Co. Limited [1933] O.J. 151, at para. 19 a decision of the Court of Appeal for Ontario, provided for the re-appointment of a receiver. Second, there is no express prohibition in the BIA that would prevent the court from re-appointing a receiver.

[30] In my view, the court does have the jurisdiction to reappoint a receiver in appropriate circumstances. The question is whether I should exercise my discretion to include a provision in the Revised Discharge Order that could result, at some future date, in a motion for the appointment or re-appointment of the receiver.

[31] The Province submits that if West Face is granted an unlimited time within which to move for the re-appointment of a receiver for the purpose of selling the Project, the Province will be required to run an unlimited risk that any costs it incurs and resources it expends with respect to the remediation of the Project will (i) be made redundant, or (ii) be for the benefit of West Face. The Province contends that West Face is content for the Province to solve the problem, while it retains its rights forever. In such circumstances, the re-appointment of a receiver, at some future time for the purpose of completing a sale of the Project would be convenient for West Face, but it would certainly not be just.

[32] Counsel to the Province references Bank of Nova Scotia v. Freure Village on Clair Creek, [1996] 40 C.B.R. [3rd] 274 [Ont. Commercial List] for the proposition that the “just or convenient” question becomes one of the Court determining, in the exercise of its discretion, whether it is more in the interests of all concerned to have the receiver appointed by the Court or not. This involved an examination of all the circumstances, including the potential costs, the relationship between the debtor and the creditors, the likelihood of maximizing the return on and preserving the subject property and the best way of facilitating the work and duties of the receiver-manager.

[33] The Province submits that in this case, the “potential cost” to the Province is the time, effort and money expended upon work towards the development and implementation of a final remediation and closure plan that is ultimately for the benefit of West Face and its buyer.

[34] The Province contends that there should be some time limit imposed on West Face’s ability to bring a motion to request the re-appointment of the Receiver and that the issue to be determined is what time limit should be imposed. The Province contends that it should be no longer than two years and that the consent of the Province should be a precondition to bring such a motion.

[35] Counsel to the TRTFN detailed that since the 1990s, the TFTFN has taken considerable steps to protect its lands and that the protection and stewardship of the TRTFN territory is fundamental to the TRTFN way of life. The TRTFN is opposed to the project as it views the Project as a threat to their lands and waters as well as to their way of life.

[36] With respect to the issue of the discharge of a Receiver, counsel to TRTFN submits that the BIA makes no provision for without prejudice discharge of a receiver and if there is any authority to make an order granting an unlimited period of time to move for the re-appointment of a receiver in this proceeding, it lies in the discretionary power of the court in managing insolvency proceedings. I agree.

[37] Accordingly, in the exercise of its discretion, counsel submits that the court should take into account all interests of innocent third party such as the TRTFN. The TRTFN submits that permitting West Face to move for the re-appointment of a receiver will have a chilling effect on the remediation plan and the Province will be reluctant to engage in an expensive environmental cleanup to benefit West Face and future purchasers.

[38] It is clear that West Face is not satisfied with the status quo. It does not wish to maintain the receivership and accept the costs and responsibilities associated with the Receivership Proceedings, including the ongoing supervision by the court. West Face desires an outcome which limits their ongoing financial exposure, but at the same time, preserves their ability to seek a satisfactory commercial resolution which may include the use of Receivership Proceedings to consummate a future transaction. West Face does not want a termination of the Receivership Proceedings. It is conceivable that there may be limitation period consequences to West Face if this course of action is implemented and West Face wanted to initiate a second receivership proceeding. While I acknowledge the practical concerns of West Face, the solution proposed by West Face results, in my view, in an unwarranted transference of risk and uncertainty to other parties.

[39] The Province raises legitimate concerns. In my view, the Province should not be faced with an unlimited period of time of uncertainty. There are environmental concerns with the Project which will have to be addressed. It has proposed a two-year period during which West Face can explore the possibilities of a commercial transaction. However, beyond that period, the Province quite properly put forward the position that it should have some certainty in the outcome.

[40] The TRTFN has also raised legitimate concerns and want these Receivership Proceedings to be dealt with in a definitive manner.

[41] In my view, the Province and the TRTFN are entitled to certainty of outcome. The only question to be addressed is whether West Face should have a defined period of time to bring a motion to revive the receivership proceedings, and if so, whether that time period shall be extended only with the consent of the Province.

Disposition

[42] In balancing the interests of the Receiver, the secured creditor West Face, the Province and TRTFN, I have concluded that the Receiver is to be discharged at this time, without prejudice to the right of West Face to bring a motion to seek the appointment of a receiver in these proceedings no later than August 11, 2022, this date being two years from the date of this hearing. This gives West Face adequate time to assess its options.

[43] I have also concluded that it is not appropriate, in the circumstances to include a provision that would potentially extend the timeline beyond August 11, 2022. To do so would just prolong a period of uncertainty that could be detrimental to the TRTFN and the Province. If circumstances are such that require this issue to be revisited on or before August 11, 2022, it is open to West Face to bring its motion in the Receivership Proceedings and, if reappointed, the Receiver can seek further direction from the court.

[44] An order shall issue to give effect to the foregoing.

Chief Justice Geoffrey B. Morawetz

Date: October 8, 2020