Gerry ’ s Well Services a Division of 312591 Alberta Ltd. Plaintiff - v. -, 2011 ABQB 380

Court of Queen ’ s Bench of Alberta Citation: Gerry ’ s Well Services v. Four Winds Energy Services Ltd., 2011 ABQB 380 Date: 20110617 Docket: 1004 00174 Registry: Grande Prairie Between: Gerry ’ s Well Services a Division of 312591 Alberta Ltd. Plaintiff - and - Four Winds Energy Services Ltd. Defendant _______________________________________________________ Memorandum of Decision of L. A. Smart, Master in Chambers _______________________________________________________ Background [ 1 ] This is an application for

Summary Judgment. The Plaintiff Gerry’s Well Service a division of 312591 Alberta Ltd. (“ Gerry’s”) completed construction of a project for the Defendant Four Winds Energy Services Ltd (“ Four Winds”). No written contract was entered into between the parties. [ 2 ] Construction commenced in December 2007 with substantial completion in June 2008. Mr. Roy the then President and individual in charge of day-to-day operations entered into the arrangement with Gerry’s. Four Winds now disputes Mr. Roy’s authority to enter into the arrangement and the amount due.

[ 3 ] Mr. Roy answered a list of interrogatories from Gerry’s and was thereafter examined on those answers and related matters pursuant to what was then Rule 266. It was acknowledged by Mr. Roy that: 1. The project was to be on an hourly basis and no set price quote was obtained; 2. Although he did not get Gerry’s rates at the time he was familiar with them from past dealings between Four Winds and Gerry’s, and had no difficulty with the rates; 3. He attended the construction site regularly and gave directions to Gerry’s foremen from time to time; 4.

He had discussed the project with the other directors and had their approval for the work done; 5. Following completion of the work when payment was delayed he agreed Four Winds would pay interest on past due accounts but he did not remember at what rate; 6. He reviewed many of the time sheets and invoices received and raised no objections to them with Gerry’s; and 7. He recalled generally agreeing to overtime but not specifically in relation to any particular work performed or invoices received in that regard. [ 4 ] Mr.

Tom Johnston, the witness for Four Winds, in his affidavit of July 21, 2010 raises the failure of Mr. Roy to obtain approval of the board of directors and therefore a lack of authorization to enter into the agreement with Gerry’s. He also states that he was advised by Mr. Roy of the following: 1. That Mr. Roy entered into verbal negotiations with Gerry’s in 2007 for purposes of obtaining a quote for the provision of products and services to be utilized in the new plant to be constructed. 2.

Ultimately he entered into a verbal agreement that the “Work” would be completed at a quoted cost of $150,000 with a maximum total cost of $200,000; 3. At no time was the verbal agreement reduced to writing; 4. For part of the construction project a pump skid had to be constructed. The pump skid was paid for through an equipment leasing company and was subsequently set up on-site by Gerry’s.

Further that under the terms of the verbal agreement the setup cost of the pump skid included approximately $40,000 worth of other products and services to be credited to Gerry’s for the Work as a method of “off the balance sheet financing”; 5. Gerry’s verbally agreed that the payment of invoices associated with the Work would be paid over an extended period of time and that there would be no interest charged on outstanding invoices;

6. Mr. Roy never agreed to interest being charged by Gerry’s on any outstanding invoices at the rate of 6% per annum; and 7. Under the verbal agreement there would be no overtime charged without priorauthorization from a representative with Four Winds. Discussion [ 5 ] Mr. Johnston was the secretary treasurer of Four Winds during the period of time that the construction took place. Mr. Roy was not re-elected as a director or the president on February 25 th , 2010 meeting of Four Winds and Mr. Johnston is now president. During the course of construction Mr.

Johnston traveled monthly to Grand Prairie and reviewed the invoices that had been received from Gerry’s. On questioning he acknowledged he was aware the purported $200,000 maximum was exceeded, that worked on the project was still needed and was continuing, and although he may have raised issues regarding the overall amount being charged with Mr. Roy, he never raised those issues with Gerry’s on any occasion. [ 6 ] There is now a dispute between Mr. Roy and Four Winds. Four Winds has third-partied Mr. Roy in these proceedings. As a result the Plaintiff used Rule 266 (now Rule 6.8) to examine Mr. Roy.

There was considerable argument before me as to the peculiar nature of this type of evidence particularly as it related to the “cross examination”of Mr. Roy by Four Winds’ counsel. The Rule states the transcript must be filed. After ruminating over this issue for a considerable time, I’ve concluded the simple answer is that it is all evidence for purposes of the

Summary Judgment application. It matters not whose evidence it is, if the transcripts establish a conflict in the evidence then the

Summary Judgment must be dismissed. [ 7 ] The difficulty for Four Winds in this case is that its dispute is with Mr. Roy and what he purportedly told them. Four Winds stood by and watched their obligation grow and have for a long period of time taken the benefit and used the improvements made by Gerry’s. Rather than stop Gerry’s from continuing to perform work they complain Mr. Roy the then President and man in the field misinformed them.

Conclusion [ 8 ] The doctrine of ultra vires, issues of capacity of directors, officers and employees to bind a corporation, the rule in Turquand’s case, “indoor management rules” and the like were put to rest by the enactment of the Business Corporations Act of Alberta, RSA 1981 c.B-15 (the “ Act ”). Quite apart from what is arguably actual authority of Mr. Roy and almost certainly ostensible authority, sections 17 through 19 of the Act provide a complete answer to that issue as raised by Four Winds.

I set out the relevant portions of those sections below: Restriction on Powers 17(1) It is not necessary for a bylaw to be passed in order to confer any particular power on the corporation or its directors.

(3) No act of a corporation, including any transfer of property to or by a corporation, is invalid by reason only that the act or transfer is contrary to its articles or this Act . Authority of directors, officers and agents 19 A corporation, a guarantor of an obligation of the corporation or a person claiming through the corporation may not assert against a person dealing with the corporation or dealing with any person who has acquired rights from the corporation (

a) that the articles, bylaws or any unanimous shareholder agreement have not been complied with, . . . .

(

e) that a person held out by the corporation as a director, an officer or an agent of the corporation (i) . . . . (ii) has not authority to exercise a power of perform a duty that the director, officer or agent might reasonably be expected to exercise or perform, [ 9 ] Mr. Roy agreed to the rate sheet and took no exception to the hours worked. It is appropriate in this case to grant

summary judgment for a portion of the claim. Therefore judgment is granted at the hourly rates provided for in the rate sheet for all of the hours worked although judgment shall only be at regular rates without adjustment for overtime rates. Amounts invoiced for any equipment and related charges set out in the rate sheet will also form part of the judgment. Where two foreman are charged for, one of the individual’s rates shall be reduced to the level appropriate for that person’s trade. [ 10 ] In addition there will be a declaration that there was an agreement to pay interest from May, 2009 until payment.

The rate of interest and any entitlement to prejudgment interest will be for a trial judge to decide as will issues with respect to when over time was payable and payment for items not expressly set out in the rate sheet. I will leave it to counsel to review the invoices and calculate the appropriate amount for the judgment. If they require assistance or for the direction in that regard they may contact me. [ 11 ] The Plaintiff will have its costs of the application. Heard on the 14 th day of October, 2010. Dated at the City of Edmonton, Alberta this 15 th day of June, 2011. L. A. Smart M.C.C.Q.B.A.

Appearances: Robert McVey, Q.C. Kay McVey Smith & Carlstrom LLP for the Plaintiff Shane King

McLeod & Company LLP for the Defendant