Executive Summary: Key Legal and Evidentiary Issues

• Francis Collins sought to strike Intact Insurance Company's claim under Rule 14.24(a) and (d), arguing the CCAA Approval and Vesting Order released him from personal liability

• Intact's claim is grounded in a personal indemnity agreement executed by Collins in connection with surety bonds, creating a primary and independent contractual obligation

• The AVO Release under paragraph 21 contained a savings clause preserving claims not permitted to be released pursuant to section 5.1(2) of the CCAA

• Justice MacDonald's oral reasons in the earlier CCAA proceeding explicitly noted that no one asked him to release the Collins family in their personal capacity beyond their roles as directors, officers, or employees of the Vendors

• Res judicata and issue estoppel were found inapplicable because Collins' personal indemnity obligation was never litigated or decided as a discrete issue in the CCAA proceedings

• Collins' application to strike was dismissed with costs in the cause on a Column III basis

The background and the parties involved

Intact Insurance Company brought a claim in the Supreme Court of Newfoundland and Labrador against several defendants, including Edward Collins Contracting Limited, Universal Environmental Services Inc., E & T Investments Limited, and Francis Collins (the Sixth Defendant). The action concerned monies owed under a personal indemnity agreement that Collins had signed in favour of Intact in connection with the issuance of surety bonds. Edward Collins and Theresa Collins, originally named as the Fourth and Fifth Defendants, had been discontinued from the proceedings prior to this application.

The CCAA proceedings and the Approval and Vesting Order

Edward Collins Contracting Ltd. and related entities had previously undergone insolvency proceedings under the Companies' Creditors Arrangement Act. An Amended and Restated Initial Order was issued on October 17, 2022, followed by an Approval and Vesting Order on October 18, 2023. The AVO approved the sale of substantially all of the assets of the debtor companies and granted releases to specified parties, including debtor companies, certain third-party sponsors, and directors and officers in their capacities as such. Paragraph 21 of the AVO Release, however, contained an explicit savings clause providing that nothing in the paragraph would waive, discharge, release, cancel, or bar any claim for fraud, wilful misconduct, or any claim not permitted to be released pursuant to section 5.1(2) of the CCAA. Justice MacDonald, who presided over the CCAA proceedings, stated in his oral reasons that no one had asked him to release UESI's directors or any of the Collins family in their personal capacity other than in their roles as directors, officers, or employees of the Vendors.

Collins' application to strike the claim

Francis Collins brought an application under Rule 14.24(a) and (d) of the Rules of the Supreme Court to strike Intact's Statement of Claim. He argued that the releases obtained under the AVO had released him from any personal liability to Intact. Collins relied specifically on paragraph 21 of the AVO Release, contending his personal liability under the Indemnity Agreement was finally and unequivocally released. He further argued that Intact's action was barred by the doctrines of res judicata and issue estoppel, and that continuing the claim constituted an abuse of process.

The nature of the indemnity agreement and the CCAA statutory framework

The Court examined the nature of Intact's claim, finding it to be contractual and based on a personal indemnity agreement that creates a primary obligation, independent of the debtor's liability, and is conceptually and legally distinct from liability arising solely by reason of one's status as a director or officer. Section 5.1(2)(a) of the CCAA expressly provides that a provision for the compromise of claims against directors may not include claims that relate to contractual rights of one or more creditors. Courts have consistently interpreted this provision as excluding from release personal guarantees and personal indemnities, which arise from independent contractual undertakings. Collins had signed the indemnity in both his personal capacity and on behalf of his company, and the Indemnity Agreement specifically contemplated the release of one indemnitor without release of the others.

The competing arguments on third-party releases

Collins' counsel cited JTI-MacDonald (Re), 2025 ONSC 1358 for the proposition that under a CCAA proceeding the Court has the jurisdiction to grant releases in favour of third parties. However, Justice Browne noted that JTI was a CCAA proceeding flowing out of a global settlement of the Tobacco Claims litigation in Canada, a much different circumstance than the current proceeding where Intact is pursuing payment of construction bonds that were underwritten by Collins' personal indemnity. Collins' own counsel conceded in oral argument that when read in its most favourable light, the JTI decision highlights some inconsistency in the jurisprudence surrounding whether section 5.1(2) permits the release of Collins in his personal capacity under the Indemnity Agreement.

The ruling and outcome

Justice Peter N. Browne dismissed Collins' application to strike in its entirety. The Court held that it was not plain and obvious that Intact did not have a reasonable cause of action, and that the wording of the Release, when read in conjunction with the AVO, the oral reasons of the Court, and the provisions of section 5.1(2) of the CCAA, was not intended to release Collins in any personal capacity. The essential elements of res judicata and issue estoppel were not met, as Collins' personal indemnity obligation was never litigated or finally decided as a discrete issue in the CCAA proceedings. The Court further found that Intact's claim did not constitute an abuse of process, as Intact is pursuing a claim that the CCAA process expressly left untouched. Intact Insurance Company was the successful party on this application, with costs awarded in the cause on a Column III basis. No exact monetary amount was determined at this stage, as the underlying claim for indemnification under the surety bonds remains to be adjudicated on its merits.