Petrowest, Paramountcy, and the Single Proceeding Model

Abstract

The single proceeding model (“SPM”) in insolvency law seeks to make insolvency proceedings faster and more efficient by concentrating claims related to one insolvency into one single legal proceeding. The SPM is not explicitly included in Canada’s two federal insolvency statutes, the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act, but is instead a principle that courts have developed through case law and justified through provisions that give judges discretionary power in insolvency proceedings. However, the SPM occasionally conflicts with provincial legislation. This notably occurred in the Supreme Court of Canada case Peace River Hydro Partners v Petrowest Corp where British Columbia’s Arbitration Act collided with the single proceeding model. Instead of applying paramountcy to have the federal insolvency statute prevail over the Arbitration Act, the Supreme Court of Canada sidestepped the issue by interpreting the Arbitration Act in a manner that avoided any conflict between the Arbitration Act and the SPM, but also allowed them to follow the SPM. This is not an isolated incident as other courts have also avoided applying paramountcy when using the SPM as a justification for overriding provincial legislation. This paper argues that this approach is unsustainable in the long term and eventually the courts will have to rely on paramountcy to implement the SPM in a scenario where the SPM conflicts with provincial legislation. In the context of the Bankruptcy and Insolvency Act, the SPM would likely not prevail as the two provisions used to implement it, sections 183(1) and 243, have been interpreted in a manner that make their success in a paramountcy analysis questionable. The paper concludes by arguing that codification of the SPM would be desirable to ensure that the single proceeding model would prevail in a paramountcy analysis.