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ARTICLE · 28 AUGUST 2025

Re Earth Boring: CCAA Order Restricts Calls On Performance Bonds – A Pragmatic Approach To Restructuring?

Singleton Urquhart Reynolds Vogel LLP
Singleton Urquhart Reynolds Vogel LLP
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Singleton Urquhart Reynolds Vogel LLP

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As general economic trends since COVID continue to cause turmoil in the construction industry, the value of surety bonds as a performance and financial backstop has become increasingly apparent.

CanadaReal Estate and Construction
Bruce Reynolds
Bruce Reynolds
Catherine Gleason-Mercier
Catherine Gleason-Mercier
Nicholas Reynolds
Nicholas Reynolds
Jeff Wong
Jeff Wong

As general economic trends since COVID continue to cause turmoil in the construction industry, the value of surety bonds as a performance and financial backstop has become increasingly apparent. While contractors may encounter difficult conditions in the course of their operations, sureties are not only well-capitalized and capable of weathering the storm but also, depending upon the relevant bond wording, are able to step in proactively when their principals experience financial troubles affecting the performance of the work and payment of the subcontractors.

However, a recent case has highlighted a nuance to this issue in circumstances where the principal has initiated formal insolvency proceedings. Specifically, in Re Earth Boring Co Ltd, 2025 ONSC 2422 ("Re Earth Boring"), the Court, in the context of insolvency proceedings under the Companies' Creditors Arrangement Act (the "CCAA"), ordered (at the request of the principal/insolvent) that calls on

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