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PROCEEDINGS - Application to court for directions

Friday, June 14, 2019 @ 6:37 AM  

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Appeal by the Attorney General from a declaration stating that the Receiver’s disclaimer of the debtor’s interest in certain properties was without prejudice to a lawsuit in which the debtor claimed the Government of Canada had constructively expropriated those same properties. LGX owned several oil and gas leases in Alberta. LGX alleged that an emergency protection order to protect greater sage grouse amounted to a de facto expropriation of its properties and sought damages of $123 million. The lawsuit was LGX’s primary remaining asset. LGX entered receivership in 2016. In 2107, the Receiver determined that it would be best to disclaim the properties to avoid the expense of maintaining them. The Receiver then sought the declaration granted, relying on a provision in the Receivership Order which allowed the Receiver to seek advice and directions from the court.

HELD: Appeal allowed. The chambers judge erred in relying on the Receivership Order as authority to grant the declaration. An application for advice and directions was not an appropriate mechanism for the Receiver to seek legal advice from the court on the impact of the proposed disclaimer. The Receivership Order only authorized the Receiver to come to court for advice and direction. The Receiver acknowledged that what it sought was broader. The Receivership Order could thus not provide a legal basis to grant the impugned declaration. The Receiver also did not establish that the declaration sought was a remedy to which it was entitled, as the legal effect of the disclaimer on the litigation was a live issue.

Canada (Attorney General) v. LGX Oil + Gas Inc. (Receiver and Manager of), [2019] A.J. No. 617, Alberta Court of Appeal, P.W.L. Martin, D. Pentelechuk and J. Antonio JJ.A., May 14, 2019. Digest No. TLD-June102019011