Alberta court declines wage-benefit declarations for former Cleo Energy workers

An Alberta judge has declined to grant declarations aimed at protecting former Cleo Energy workers from a federal wage-benefit clawback, leaving the legality of that clawback undecided and pointing instead to the statutory appeal process.

In 2755857 Alberta Ltd. (Re), 2026 ABKB 742, issued October 23, 2026, Justice M.A. Marion of the Court of King’s Bench of Alberta held that the court had jurisdiction to consider the receiver’s request, but should not exercise it at this late stage of the receivership.

The decision does not establish that the workers were ineligible for benefits, approve the federal government’s interpretation of the law or order employees to repay anything. In a separate dispute, the court refused Canadian Natural Resources Ltd.’s late claim for $88,233.15 from the sale proceeds, while leaving its judgment against the purchaser intact.

Benefits paid before the company’s sale

The court granted a receivership order for Cleo on June 2, 2025. Its employees were terminated the next day. The receiver, Alvarez & Marsal Canada Inc., helped process their claims under the federal Wage Earner Protection Program, and the minister initially accepted their eligibility and paid benefits.

The subsequent sale used a reverse vesting order. Instead of simply transferring assets out of the operating company, this type of transaction allows the purchaser to acquire the company’s shares while specified unwanted obligations are moved to a residual company. Here, Cleo, now named Sumerian Oil & Gas Inc., left receivership after the transaction closed. The residual company, 2755857 Alberta Ltd., remained in the proceedings. The purchaser was a different entity, 2698902 Alberta Corp.

An initial proposed transaction was refused in October 2025 because the receiver had not supplied enough evidence to justify that structure. A revised transaction was approved on November 14 and closed on November 19.

The potential effect on employees’ benefits was already known. During the initial approval process, the federal government had warned that the transaction could disqualify the workers and lead to recovery of payments. The receiver sought protective declarations at that stage. The judge who refused the initial transaction criticized the prospect of a clawback, but those comments did not decide the benefits issue.

No protective declarations were sought when the revised transaction came before the court. After it closed, the minister reconsidered the workers’ eligibility and decided they were not entitled to the payments. All the former employees sought ministerial review, which confirmed that result. The receiver reported that repayment was being pursued or intended.

Why the judge left the benefits dispute to another process

The receiver asked Marion to declare that the revised transaction did not affect previously approved benefits and that eligibility was determined when employment ended, rather than by the later sale. The minister opposed the request, arguing that the wage-protection legislation and its review procedures governed the dispute.

Marion rejected the argument that the receivership court lacked jurisdiction. The benefit dispute was connected to the receivership, including the termination of employees and a payment the receiver had already made to the federal government. But having jurisdiction did not mean declaratory relief should be granted.

The timing mattered. Earlier cases relied on by the receiver involved requests made at the transaction-approval stage, before the minister had decided or reviewed the employees’ entitlement. They also arose in proceedings with express statutory authority to determine whether an entity qualified as a former employer under the wage-protection legislation.

Here, the transaction had closed and the minister had already made and reviewed the eligibility decisions. The requested declarations were not needed to approve the receiver’s final financial statement or proposed distribution. If the receiver wanted the issue resolved within the receivership, Marion said, the appropriate time to raise it was when the revised transaction was approved.

The Wage Earner Protection Program Act provides for ministerial decisions and reviews, followed by appeals to the Canada Industrial Relations Board on questions of law or jurisdiction. Marion concluded that the existing statutory appeal and related Federal Court processes were the better place to resolve the dispute at this stage.

Importantly, the judge expressly left open whether the minister had acted without jurisdiction or made a legal error. The former employees did not participate in the applications before him, and the record did not establish whether they had appealed to the board or intended to do so. On that record, the receiver had not demonstrated a practical purpose sufficient to justify the declarations.

One accounting issue also remained unresolved. The receiver had paid $15,333.41 to the federal government as a superpriority recovery connected to the benefits. That figure is not the total benefits paid to workers or an award to any individual. The judge said the receiver, government and former employees should try to resolve how that payment should be handled in light of any clawback, with further court directions available if needed.

CNRL missed the deadline while pursuing the purchaser

The separate creditor dispute concerned “cure costs”: amounts needed to address outstanding obligations under contracts retained in the sale. CNRL had negotiated an agreement requiring the purchaser to pay its cure costs within 30 days of closing. When payment did not follow, CNRL obtained a consent judgment against the purchaser in January 2026.

It then concentrated on enforcing that judgment and stopped actively monitoring the receivership to save costs. Its enforcement efforts had produced no recovery by the time of this decision.

Meanwhile, the receivership claims process required cure-cost claims to be filed by March 31, 2026. CNRL and its counsel were served with the application establishing that process, including the proposed order and claims package. CNRL did not file its $88,233.15 claim until September 11, after reviewing the receiver’s proposed final distribution.

In deciding whether to accept a late claim, the court considered the explanation for the delay, good faith, prejudice to others, whether that prejudice could be addressed and any other equitable considerations. Marion distinguished an inadvertent mistake from a deliberate decision to stop monitoring proceedings while pursuing a different recovery strategy.

CNRL knew it could seek payment from the transaction proceeds, the judge found. Its failure to follow the claims process was the foreseeable consequence of its economic choice, not an adequate explanation for missing the deadline.

The receiver should have separately sent CNRL a claims package and failed to do so. But Marion found that omission did not cause or contribute to the delay: CNRL had already been served with the relevant application materials, and neither it nor its counsel was monitoring the proceedings. A further package would likely also have gone unnoticed.

A negotiated settlement weighed against reopening claims

The Alberta Energy Regulator and five municipalities had settled a priority dispute on the basis of the claims filed by the deadline. Allowing CNRL’s claim would materially reduce the funds available under that settlement.

The concern was not simply that other creditors would receive less money. If the settlement remained in place, those parties would have lost the chance to negotiate knowing the smaller amount available. If it unravelled, further negotiations or litigation would create delay, expense and uncertainty in a receivership otherwise ready to be finalized. CNRL had not shown that conditions could cure that prejudice.

Marion did not rule that CNRL’s underlying claim was invalid or that its separate agreement had released its rights in the receivership. He proceeded on the basis that the claim was valid, but refused permission to file it late. CNRL retained its judgment against the purchaser.

The court also approved the receiver’s activities, fees, proposed distribution and conditional discharge relief, subject to the required changes and unresolved accounting for the federal superpriority payment. The ruling resolves these requests within the receivership; it does not settle whether a reverse vesting transaction can lawfully undo the former employees’ wage-benefit entitlement.