Constructive Trust Claim Dismissed As Court Backs Reverse Vesting Order

On February 20, 2025, the Alberta Court of Appeal released its decision in Henenghaixin Corp v. Long Run Exploration Ltd, dismissing an application for leave to appeal a decision rendered in the Companies' Creditors Arrangement Act (CCAA) proceedings of Long Run Exploration Ltd (Long Run), which approved a stalking horse bid to be implemented through a reverse vesting order (RVO). As RVOs gain in popularity, and are faced with new creative opposition, it is important to understand how, why, where and when courts will employ this powerful tool.

As is typical in RVO transactions, the RVO provided that prior to acquisition of Long Run's equity by the purchaser, all of Long Run's liabilities not explicitly retained would be 'left behind' by transferring them to a creditor trust. Henenghaixin Corp (HCorp) sought to have the transaction amended to have its claim designated as a retained liability to allow for its preservation and future adjudication.