Arnaki Ltd. loaned money to Solvaqua Inc., requiring Solvaqua to secure insurance through Export Development Corporation (EDC).
Solvaqua directed EDC to pay insurance claim proceeds to Arnaki’s affiliate, Murchinson Ltd.
After Solvaqua defaulted, Arnaki obtained a receivership order, appointing MNP Ltd. as receiver.
MNP sought court approval to sell Solvaqua’s assets, including rejected insurance claims, to an Arnaki affiliate.
EDC objected, arguing that its consent was required for the assignment under the insurance policy.
Lower Court Decision:
The judge found that an insurance “claim” is not a “right, title, or interest” under the policy’s assignment clause.
Alternatively, the judge held that courts have authority under receivership law to override contractual consent provisions, citing Urbancorp Cumberland 1 GP Inc. (Re), 2020 ONSC 7920.
An approval and vesting order was granted.
Appeal Decision:
The Court of Appeal upheld the decision, relying on Peace River Hydro Partners v Petrowest Corp, 2022 SCC 41, which affirms broad judicial discretion under BIA s. 243.
The assignment did not alter EDC’s risk and facilitated equitable asset distribution.
The appeal was dismissed.
Key Legal Takeaways:
Courts may override contractual provisions in insolvency for fair asset distribution.
An insurance claim’s assignment may not require insurer consent in a receivership context.
Judicial discretion under BIA s. 243 is broad, balancing creditor rights and practicality.
The judgment did not specify a total monetary award, damages, or costs granted.
