In an article entitled “Last Man Standing” in the Insolvency Law Bulletin, I have addressed the question of regulators tending to impose liability or responsibility on an insolvency appointee for past or further responsibilities of the insolvent company. As a court said, this can be an issue because after a corporate collapse, the liquidator is the ‘last man standing’.

I have suggested that this on-going legal distraction, evident in Queensland’s 2016 chain of responsibility environmental protection laws, be the subject of legislative reform to clearly state the legal position of insolvency practitioners – that they can’t be held liable for things that happened when they weren’t there. 

Canadian law

Canada offers a useful provision, in the environmental law context, by clearly stating that an insolvency practitioner is not personally liable for any environmental harm that occurred before their appointment. The law goes on to set a standard of care for harm that is caused by the liquidator during any continuation of the business.   

Redwater Energy

Canadian law also addresses an issue behind the Queensland chain of responsibility laws, that a liquidator can disclaim a contaminated property.  In an important decision in Redwater Energy Corporation, in April 2016, a liquidator disclaimed 87 properties of an oil and gas producer that were contaminated – ‘orphan wells’ as they are called – and retained and sold the remaining 20 ‘clean’ properties. 

The regulator’s challenge to the disclaimer was refused.  The Alberta Chief Justice recognized that the case raised several issues of importance

“in terms of the potential environmental and financial repercussions when abandoned wells or a bankrupt energy company are renounced by a trustee or receiver in bankruptcy.”

However, the Chief Justice said that

“Parliament balanced a number of competing considerations in enacting [the disclaimer law] and that it would require a reassessment by Parliament to effect a different result”.

That decision is on further appeal, heard in October 2016, with a decision awaited, but whatever the outcome the insolvency law reform issue remains.  As to environmental law, the Canadian regulator has reminding business that it has ‘other ways’ of recovering clean up costs of companies that don’t attend to their environmental obligations, aimed at company directors and officers. In Queensland, those aimed at are now broader in scope – banks for one.

But let’s leave the liquidator out of the firing range.  

See (2017) 18(2) INSLB 38