When Receivership meets Planning

The Court of Queen’s Bench of the Province of Alberta has ruled in favour of the Town of Okotoks in an application for advice and direction brought forward by the Court-Appointed receiver of Alberta Foothills Properties Ltd., the proponent of the seven-phase Wind Walk Development Project planned for an area to the south of the Town. In his ruling, Justice Jones held that the Town of Okotoks was not stayed from adopting two proposed bylaws by the Consent Receivership Order granted in May of 2021.

The Facts

Alberta Foothills Properties Ltd. (“AFPL”) acquired land south of the Town of Okotoks with the intention of pursuing a seven—phase development called the Wind Walk Development. In June of 2017, the Town approved an area structure plan (the “ASP”) required for the purposes of the Development. In August of that year, the Town re-designated part of the property as residential and approved AFPL’s outline plan. In February of 2019, the Town approved AFPL’s subdivision plan for the development’s first phase subject to a number of conditions. AFPL attempted to sell the property in August of 2019, but failed to do so. The approval of the subdivision plan was valid for one year and was subsequently extended. Despite this extension, AFPL failed to satisfy the Town’s conditions and the subdivision plan was not extended beyond September of 2020.

In May of 2021, AFPL’s primary creditor applied to have it placed in receivership, which occurred pursuant to a Consent Receivership Order. The Receiver advised the Town of its intention to list the property for sale.

In June of 2021, the Town introduced Bylaw 20-21 (the “ASP Bylaw”) and Bylaw 19-21 (the “Land Use Bylaw”), which rescinded the ASP and rezoned the Property from residential to urban or agricultural holdings. The Receiver opposed these bylaws and applied for the advice and direction of the Court.

The Issue:

The Receiver contended that clauses 9 and 11 of the Receivership Order, which state that “All rights and remedies (including, without limitation, set-off rights) against or in respect of the Debtor, the Receiver, or affecting the Property, are hereby stayed and suspended except with the written consent of the Receiver or leave of this Court” and “No person shall accelerate, suspend, discontinue, fail to honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right, contract, agreement, licence or permit in favour of or held by the Debtor”, respectively, prohibited the town from enacting its Bylaws as they appeared to, on plain reading, “affect” the Property.

The Town of Okotoks contended that the proposed bylaws did not “affect the property” as the Receiver proposed and that, in the event that the Court found that the bylaws affected the property, the Receivership order did not have the effect of estopping the Town from employing the powers it holds pursuant to the Municipal Government Act.

The Ruling:

The Court held that the proposed bylaws did not defeat the Receiver’s attempts to maintain the status quo surrounding the property, nor did it prejudice AFPL’s creditors by affecting any rights held by the Receiver or the value of the property.

First, the Court found that an ASP does not, in and of itself, permit the development of the Property. Rather, the ASP is a policy document that sets out proposals for future development but does not create any right to the development for the project’s proponents. As a result, the Town’s recission of the ASP did not affect any right held by the Receiver.

Second, and furthering the Court’s analysis on the recission of the ASP, it held that the proposed bylaws did not Prejudice the Receiver. Specifically, it stated that:

·         It is well established that the receiver has no greater rights than the debtor whose estate it administers;

·         The ASP did not, on its own, grant AFPL any right to the development as further approvals and permits would have been needed;

·         AFLP had not satisfied the conditions imposed by the town on the approval of the ASP, and therefore the subdivision approval that had been granted had expired;

Analysis:

This matter provided a unique and interesting opportunity to explore the intersection between the municipal and insolvency areas of law. It provided important clarification around the rights of developers seeking a Statutory Plan and maintained the established principle that a Receiver stepping into the shoes of an insolvent debtor gains no greater or stronger right than those previously held by that debtor.

In the end, the Court did not address the Town’s submissions relating to the interaction between the Court’s receivership order and the employ of the Town’s powers under the Municipal Government Act. This could be a question before the courts again in the future as, given the number of corporations under receivership in a municipality at any given time, the intersection between the stay of proceedings in an insolvency context and a municipality’s ability to govern its affairs could prove to be a sticking point in future receiverships.