Executive Summary: Key Legal and Evidentiary Issues

• Unclear whether Noventa Energy Partners Inc. (NEP), the holding company, itself committed an act of bankruptcy, as opposed to only its operating subsidiaries ceasing operations.
• Petitioning creditor’s debt appears interest-free and not yet due and payable, raising doubts about whether it qualifies as a provable, presently enforceable debt to support a bankruptcy application.
• Supporting affidavit is defective because it is based on information from unnamed sources for all material facts, undermining evidentiary reliability and jurisdictional sufficiency.
• The application fails to properly particularize the specific act(s) of bankruptcy of the named debtor, and does not adequately develop factual evidence of the subsidiaries’ alleged acts of bankruptcy.
• There are formal and jurisdictional deficiencies in the bankruptcy application, including insufficient detail on service of materials and why any abridgment or deemed service is appropriate.
• Corporate governance mechanisms under the CBCA (unanimous shareholder declarations and deemed directors under s. 109(4)) are central to identifying viable, legally effective routes to place NEP and its subsidiaries into bankruptcy and into the hands of a trustee.

Facts of the case
Noventa Energy Partners Inc. (NEP) is a Canadian holding company with a number of wholly-owned operating subsidiaries. These subsidiaries are single-purpose entities set up to manage green energy projects for various Ontario hospitals, and they are structured so that each operating subsidiary is the named power customer from Toronto Hydro’s perspective, meaning hospital power runs through those subsidiaries. The petitioning creditor, Bazalgette Power Limited, is a UK company and a shareholder of NEP, and it appears that other Bazalgette affiliates hold the remaining shares. NEP and its operating subsidiaries have effectively collapsed operationally and financially. The directors of both the holding company and each subsidiary have all resigned, leaving only one remaining employee who is providing hands-on assistance to keep operations going but has not been vested with any formal executive authority. The companies appear to be out of funds, and the projects that are critical to maintaining uninterrupted power to hospitals are at risk because the corporate structure that stands between Toronto Hydro and the hospitals is effectively non-functioning.

Procedural posture and the bankruptcy application
The matter comes before the Ontario Superior Court of Justice as an application by Bazalgette Power Limited for a bankruptcy order against NEP. The goal is to place NEP (and ultimately its subsidiaries) under the control of a trustee in bankruptcy who can administer the estate, stabilize the situation, and manage what might otherwise become a disorderly liquidation with serious consequences for hospital power supply. The judge acknowledges that there is a willing shareholder-creditor prepared to shoulder the costs of initiating the process and a licensed trustee ready to act, which is a practical advantage in circumstances of corporate collapse. However, the court identifies multiple technical and jurisdictional defects in the way the application has been brought, which prevent the court from comfortably granting a bankruptcy order on the record as filed.

Key deficiencies in the creditor’s application
The court notes that there are significant problems with the evidence and legal foundation underpinning the application. The debt allegedly owed by NEP to Bazalgette Power Limited appears to be interest-free and not yet due and payable, raising doubt as to whether the creditor’s claim is presently enforceable or provable for purposes of a bankruptcy application. While there is an indication that some operating subsidiaries may have committed acts of bankruptcy by ceasing operations and leaving creditors like Toronto Hydro unpaid, that evidence is not properly set out or developed in the application materials. Critically, it is “not at all clear” that NEP itself, the named debtor, has committed an act of bankruptcy. The supporting affidavit is also problematic: it is sworn on information from unnamed sources for all material facts, which fails to meet the evidentiary standard for a proper bankruptcy application. The court characterizes counsel as attempting to “pound this square peg into a round hole” and concludes there are too many formal jurisdictional issues to simply overlook.

Alternative routes using corporate law mechanisms
Rather than dismissing the matter outright, the judge identifies more straightforward paths to achieve essentially the same outcome—placing NEP and its subsidiaries into bankruptcy under a trustee’s control—without running afoul of the current technical defects. First, the court points out that NEP, as a private CBCA corporation, can act through a unanimous shareholder declaration, which can do anything a director’s resolution can do, and more. Through such a unanimous shareholder declaration, NEP’s shareholders could authorize and direct a named person (anyone they choose) to sign an assignment in bankruptcy on NEP’s behalf and to approve a draft statement of affairs. This approach can be structured to avoid personal liability for the individual signatory. The unanimous shareholder declaration could also extend to the wholly-owned subsidiaries: NEP’s shareholders could cause NEP, by the same declaration, to direct each relevant subsidiary to make an assignment in bankruptcy. Alternatively, once NEP itself is in bankruptcy, its trustee could, on day one, seek court authorization to file the subsidiaries into bankruptcy.

Deemed director route under CBCA section 109(4)
The court also highlights a second corporate law mechanism under section 109(4) of the CBCA. When all directors have resigned, a person who is in fact supervising the management of the business and affairs of the corporation can be deemed to be a director. In this situation, the remaining employee who is effectively keeping operations going and managing day-to-day affairs could potentially be deemed a director of NEP and/or the operating subsidiaries. If so, that person could validly sign an assignment in bankruptcy for the corporations whose affairs they are supervising. The endorsement is expressly intended to assist in processing an assignment using one of these routes, giving practical guidance to facilitate a lawful, efficient transition into bankruptcy administration.

Guidance for a revised bankruptcy application
If neither the unanimous shareholder declaration route nor the deemed director route proves workable, the judge outlines what would be required for a proper, revised bankruptcy application. Such an application would need to clearly identify: (i) the precise debt held by the creditor; (ii) the specific act of bankruptcy alleged against the named debtor (as opposed to its subsidiaries) and the supporting evidence; (iii) an affidavit based on personal knowledge or clearly attributed, identified sources; and (iv) a detailed explanation of what service has been made on the debtor and how, with justification for any request that service be deemed effective or time be shortened. The court signals willingness to hear such a corrected application on short notice, but emphasizes that the assignment route appears to be the simplest and most reliable path forward.

Concerns of Toronto Hydro and continuity of power
Toronto Hydro appears in the proceeding to raise its critical concern: it cannot contemplate cutting off power to its customer when that would place countless lives at risk in the hospitals whose power flows through NEP’s subsidiaries. The court acknowledges the urgency and necessity of maintaining uninterrupted power. To address this, the judge suggests that Toronto Hydro, with the cooperation of the trustee to be appointed, could put in place a straightforward assignment and assumption agreement so that Toronto Hydro could supply the hospitals directly, bypassing the failing corporate intermediaries. Such an agreement could be brought before the court on consent for rapid approval, and the judge explicitly indicates a willingness to sign such an order quickly if required.

Outcome, successful party, and monetary relief
In the result, the court does not grant the bankruptcy order sought by Bazalgette Power Limited on the basis of the application as filed. Instead, Justice Dunphy provides a roadmap of alternative mechanisms—principally, shareholder-driven assignments in bankruptcy and the deemed-director route, with a fallback of a properly framed revised application—to ensure a trustee can be appointed quickly and essential hospital power is protected. The endorsement is essentially procedural and advisory: it does not finally resolve the dispute between Bazalgette Power Limited and NEP in the sense of declaring a winner or loser, and it does not contain any award of damages, costs, or other monetary relief. As a result, there is no clearly identifiable successful party at this stage, and no total monetary award, costs, or damages ordered in favour of any party can be determined from this decision.