Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether Solvaqua’s insurance “claims” fall within a policy’s anti-assignment clause requiring EDC’s consent.

• EDC objected to the assignment of insurance claims in a receivership sale, citing lack of its prior written consent.

• The chambers judge determined insurance claims are not subject to the anti-assignment provision in the policy.

• Alternatively, the judge held that under s. 243 of the BIA, the court can override a contractual anti-assignment clause in a receivership.

• The Court of Appeal confirmed that s. 243 grants courts broad authority to facilitate asset realization, referencing Petrowest.

• Appeal dismissed as the assignment did not change EDC’s risk, and barring assignment would impede creditor recovery and judicial efficiency.

Background of the case

Solvaqua Inc. received financing from Arnaki Ltd. through three separate tranches. For each tranche, a general security agreement was executed, and Arnaki required Solvaqua to obtain insurance from Export Development Corporation (EDC) before advancing funds. Solvaqua complied and also issued EDC a direction to pay any insurance proceeds to Arnaki’s affiliate, Murchinson Ltd.

When Solvaqua defaulted on its debt, Arnaki enforced its security and had MNP Ltd. appointed as receiver under a court order dated August 19, 2022. Among Solvaqua’s primary remaining assets were insurance claims under the policies with EDC. One claim was accepted by EDC and proceeds were paid to Murchinson pursuant to the direction. Two other claims were denied by EDC.

Key legal dispute

MNP, as receiver, sought court approval on August 31, 2023, to sell Solvaqua’s assets, including the disputed insurance claims, to an Arnaki-affiliated entity. EDC objected to the inclusion of those claims, citing the policy’s clause:

"You [Solvaqua] cannot assign the Policy or any right, title or interest in it to anyone without our [the appellant’s] prior consent."

The chambers judge rejected EDC’s objection. She held that an insurance “claim” was not a “right, title or interest” in the policy and therefore not subject to the clause. Alternatively, she found authority under section 243 of the Bankruptcy and Insolvency Act (BIA) to approve an assignment despite EDC’s lack of consent. She reasoned that the direction to pay and the close connection between Arnaki, Murchinson, and Solvaqua justified the assignment. The judge approved the asset sale and issued a vesting order.

Appeal and judgment

EDC appealed, asserting the judge erred in interpreting the consent provision—an interpretation not argued by any party—and in concluding she had the legal authority to override it. The respondents conceded the interpretation issue but argued the court had jurisdiction under section 243 to permit the assignment.

The Alberta Court of Appeal found that while the judge’s interpretation of the consent clause was not argued by the parties, it was unnecessary to resolve that issue. Citing Peace River Hydro Partners v Petrowest Corp, 2022 SCC 41, the Court held that section 243 grants broad jurisdiction to override contractual terms where it is just or convenient to do so. Courts must balance freedom of contract with the practical need for asset realization in insolvency.

The appellate court found that the assignment of the claim did not increase EDC’s risk exposure but merely changed the identity of its litigation counterparty. Concerns about litigating with Arnaki were unsubstantiated and outweighed by the potential prejudice to the creditor and inefficiencies in court-supervised receivership proceedings.

Conclusion

The Alberta Court of Appeal upheld the chambers judge’s ruling. The appeal was dismissed on January 27, 2025, affirming that a court supervising a receivership may authorize the assignment of an insurance claim over the insurer’s objection, where such action promotes the fair and orderly distribution of the debtor’s assets.