Fisher v. Coral Hill Energy Inc., 2013 ABQB 437

Court of Queen ’ s Bench of Alberta Citation: Fisher v. Coral Hill Energy Inc., 2013 ABQB 437 Date: 20130801 Docket: 1201 07389 Registry: Calgary Between: Edward Robert Fisher, as Representative Plaintiff Plaintiff/Respondent - and - Coral Hill Energy Inc., Kyle J. Kitagawa, Donald J. Rae, Hank B. Swartout, J. Graham Weir, Bryan D. Clake, Wave Energy Ltd. (now Crescent Point Energy Corp.) and Ward Hydrodynamics Ltd. Defendants/Applicants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ I. Introduction [ 1 ] This case involves a request for

summary judgment and has to do with the rightful ownership of, and the right to benefit from, a corporate opportunity. [ 2 ] The Plaintiff, Edward Robert Fisher (“Fisher”) commenced this action on behalf of a proposed class consisting of former shareholders of Wave Energy Ltd. (“Wave”). As proposed representative plaintiff, Fisher alleges that the Defendants colluded in a scheme to divert to themselves certain assets belonging to Wave, being petroleum and natural gas rights. The facts are complex and their sequence is important. [ 3 ] By way of overview, Ward Hydrodynamics Ltd. (“Ward Hydro”) had identified certain lands as good drilling prospects and

entered into a gentleman’s agreement with Wave to acquire certain of those lands in return for Ward Hydro receiving an overriding royalty. Later, when Wave was in the process of being pursued for purchase by Crescent Point Energy Corp. (“Crescent Point”), a director of Wave, Donald J. Rae (“Rae”), wanted to have the deal with Ward Hydro formalized in writing. When doing so, Rae suggested that Ward Hydro should have a change of control clause, similar to those sometimes found in seismic contracts, that would allow Ward Hydro to take back its prospects if Wave underwent a change of control.

At that point in time there were discussions about Crescent Point acquiring Wave, but no change of control had taken place. The written contract between Wave and Ward Hydro eventually contained the suggested change of control provision. Wave was then purchased by Crescent Point. Crescent Point conducted its own assessment of the prospects at issue, decided not to pursue them, and told Ward Hydro they were not interested in pursuing them. Next, Ward Hydro chose to exercise its option under the change of control clause to have the prospects returned to it.

Ward Hydro had further discussions with Rae, who was at that time involved with a company called Coral Hill. Crescent Point did not keep the directors of Wave and certain of the former Wave directors had, before Wave was acquired by Crescent Point, incorporated Coral Hill. Coral Hill acquired the same petroleum and natural gas rights brought by Ward Hydro to Wave. Some six months later Coral Hill and Crescent Point entered into joint venture on the very same rights Crescent Point said it was not interested in pursuing when it owned them as successor in title to Wave.

These rights have proven to have significant value. [ 4 ] Fisher was a shareholder of Wave and his perspective is that rights initially owned by Wave found their way into the hands of a separate corporation controlled by certain former Wave directors such that he obtained no benefit from what has turned out to be a promising and profitable play. Fisher alleges multiple breaches of duty, but in essence claims that the defendants have misappropriated rights that should have enured to the benefit of Wave and its shareholders.

Fisher claims that Rae, possibly in collusion with others and to the detriment of Wave and its shareholders, introduced and then used a change of control clause to divert rights that should have belonged to Wave to Coral Hill. [ 5 ] The Defendants have applied either to strike Fisher’s claim or for

summary dismissal thereof. At the commencement of the hearing, I was informed that the Plaintiff has discontinued against Ward Hydro. II. Facts [ 6 ] The Defendants set out the facts in their various briefs. Affidavits were filed by the Defendant Rae, by Grant Steven Ward (“Ward”) on behalf of Ward Hydro and by Gregory G. Turnbull, Q.C. (“Turnbull”) on behalf of Crescent Point. Rae, Ward and Turnbull were questioned on their affidavits by Fisher’s counsel.

Fisher filed no evidence. [ 7 ] The facts, then, as set out in the evidence put forward by the Defendants, are as follows. [ 8 ] Wave carried on the oil and gas business in Calgary, Alberta. The Defendants Rae, Kyle J. Kitagawa (“Kitagawa”), Hank B. Swartout (“Swartout”), J. Graham Weir (“Weir”) and Bryan D. Clake (“Clake”) were all directors of Wave, along with Jim Nieuwenburg (“Nieuwenburg”) and Robert Pletch, neither of whom is a defendant in this action.

At the relevant time, Wave had approximately 400 shareholders holding an aggregate of approximately 90,000,000 shares. [ 9 ] Ward Hydro is a private corporation of which Ward is the sole shareholder and director. According to Ward’s Affidavit sworn March 27, 2013 (the “Ward Affidavit”), in the late 1990s, Ward Hydro began selling “prospects” based on by-passed drill stem tests. Ward Hydro’s practice was to sell these prospects in exchange for a gross overriding royalty (“GORR”) rather than an upfront fee.

Under such an arrangement, Ward Hydro would receive remuneration only through the royalty if the prospect was drilled. According to the Ward Affidavit, Ward Hydro “always insisted on an option to get the prospects back if the buyer chose not to drill the prospects”. [ 10 ] In or around June 2009, Ward Hydro approached Rae with respect to some potential exploration prospects Ward had identified in the Swan Hills area of Alberta and in southeast Saskatchewan. Ward and Rae had known each other for some thirty years.

In Rae’s affidavit sworn March 12, 2013 (the “Rae Affidavit”), he swears that this was before the Crescent Point transaction arose. [ 11 ] The prospects Ward Hydro brought to Rae’s attention were certain petroleum and natural gas rights (the “P&NG Rights”). Rae swears in the Rae Affidavit that the P&NG Rights were in areas where Wave had no prior interests and that Wave played no role in identifying them. Further, Ward swears in the Ward Affidavit that the P&NG Rights were highly speculative and were based on publicly-available information.

[ 12 ] Wave acquired certain of the P&NG Rights in Alberta in August 2009 and entered into a royalty agreement with Ward Hydro dated August 25, 2009 with respect to those P&NG Rights. Wave also acquired certain of the P&NG Rights in southern Saskatchewan in October 2009 and entered into a royalty agreement with Ward Hydro dated October 8, 2009 with respect to those P&NG Rights. I will refer to these royalty agreements collectively as the “Royalty Agreements”.

Wave’s total cost to acquire the P&NG Rights was $632,330.60. [ 13 ] In accordance with Ward Hydro’s usual practice, the Royalty Agreements provided for no upfront payment to Ward Hydro. Rather, they provided for a GORR payable to Ward Hydro on Wave’s gross monthly production from the lands in question. The Royalty Agreements also provided that Ward Hydro had the right to repurchase the P&NG Rights if Wave had not engaged in any drilling activity on the lands within three years.

During his questioning on the Ward Affidavit, Ward indicated that this was a typical arrangement for him, saying that “...quite often there was a surrender clause, which meant if they were not going to do something, I would have the opportunity to – to do something on it.” [ 14 ] While Rae and Ward had had prior dealings, there had not been a previous agreement between them involving a GORR.

Nevertheless, Ward’s evidence was that the GORR was something he had insisted upon in prior dealings with others and that it was his normal way of doing business. [ 15 ] The Royalty Agreements also contained a change of control clause, which was the focus of much of Fisher’s argument. That clause provided that if Wave experienced a change of control within three years of the date of the Royalty Agreement, Ward Hydro would have the right to repurchase the P&NG Rights at the price Wave paid for them.

During his questioning on the Ward Affidavit, Ward acknowledged that this was out of the ordinary for him and that he had never previously had a royalty agreement with a change of control clause. He indicated during his questioning that it was Rae who had suggested that it might be in Ward Hydro’s best interests to have both an inactivity and a change of control clause. Ward indicated that he had no idea at that time that a sale of Wave might be imminent. [ 16 ] Rae was questioned extensively about the change of control clause during his questioning on the Rae Affidavit.

He indicated that he and Ward had a “gentlemen’s agreement basically on everything”. Often the gentleman’s agreement would not be reduced to writing until some later point, sometimes even only after drilling had occurred. In this instance, however, Rae knew that he might not be there in the future to honour their agreement and went on to say that “...when Crescent Point approached Wave, we [Wave and Ward Hydro] had nothing in writing, and he needed to get something in writing”. He stated that he had told Ward before the land sales that Wave might not be around long enough to drill Ward Hydro’s prospects.

Rae stated that he felt he was falling down on his gentlemen’s agreement with Ward and that he told Ward he had the option to talk to someone else about the P&NG Rights, but that, with only a week before the land sale, they both knew it would be very difficult to make another arrangement. Rae also stated that the “other side of the coin” was that if the Crescent Point deal fell through, Wave would want to pursue the P&NG Rights.

He did not know whether Crescent Point would or would not be interested in pursuing the P&NG Rights and, therefore, whether it would or would not want to spend the money on them. [ 17 ] Rae then described his thinking about the change of control clause as follows: So the change of control allowed Ward to get the prospects back and allowed Crescent Point to get their money back for something they might not be interested in. The change of control idea came from our discussion. I believe we started talking about seismic.

Like seismic – when seismic is at a company, many seismic firms have change of control clauses that say you give us our seismic back if somebody takes you out or you pay a premium for it or something like that. So that’s kind of where the change of control idea came up. It’s true Ward had the trigger, but that was the reason why I wanted Saxberg to know that, in my mind, he could take those prospects and negotiate with Ward. If Ward didn’t have the trigger, big companies just let the property sit and they have no compulsion to pursue the fellow’s plays.

So that was all of the logic that went into my side of the discussion with Ward.

[ 18 ] Finally, Rae said that the end result would be the same under the inactivity clause as under the change of control clause: You have to keep in mind there was another potential alternative here, too, that Ward – it goes to Crescent Point, but Ward doesn’t exercise his change of control right and doesn’t have somebody to take his place within the 30 days or whatever the time would be, it sits at Crescent Point. So there would be a three-year inactivity clause there.

So after three years, he could get his play back. [ 19 ] In the Rae Affidavit, Rae avers that he was contacted on August 4, 2009 by Scott Saxberg (“Saxberg”), the CEO of Crescent Point, about a possible acquisition of Wave.

Wave then took various steps that Rae described as being in accordance with typical industry practice: Wave’s board of directors sought advice from their outside legal counsel; a special committee consisting of Kitagawa, Weir and Nieuwenburg was appointed to consider the proposal; and a financial advisor was retained. [ 20 ] Crescent Point’s offer was that it would acquire Wave by assuming $57.9 million of Wave’s debt and paying $665 million to Wave’s shareholders by issuing them 0.21 Crescent Point shares for each Wave share. The acquisition was recommended by the special committee and the financial advisor.

On August 16, 2009, Wave’s board of directors voted unanimously to approve the acquisition and the parties executed a letter of intent that evening. [ 21 ] Rae swears in the Rae Affidavit that he informed Kitagawa of the purchase of the P&NG Rights and that the two of them disclosed that information to Saxberg prior to the Crescent Point acquisition. [ 22 ] In his affidavit sworn March 11, 2013 (the “Turnbull Affidavit”), Turnbull swears that a special committee was established by Crescent Point to review the Plaintiff’s claim.

Based on his review of that report, he confirms that Saxberg arranged for Dave Balutis (“Balutis”), Vice President Exploration of Crescent Point to review the P&NG Rights prior to the acquisition and that Balutis reported to Saxberg that he would not recommend pursuing them after the acquisition. The reasons for this were: (

i) the P&NG Rights were in different areas than the core area being pursued by Crescent Point at the time; (ii) Crescent Point had little information about the lands surrounding the P&NG Rights; (iii) the P&NG Rights were in areas that did not fit Crescent Point’s risk profile given their undeveloped nature; and (iv) the lands were very small relative to Crescent Point’s other areas of interest and its operating strategy.

Consequently, in valuing Wave for purposes of the acquisition, Crescent Point did not allocate any value to the P&NG Rights beyond their cost. [ 23 ] The circular sent to Wave shareholders describing the potential acquisition (the “Wave Circular”) did not make specific reference to the P&NG Rights. Rae swears in the Rae Affidavit that specific reference was not required because the P&NG Rights were immaterial, had no effect on the value of Wave’s shares and would not have been a factor in any shareholder’s decision as to whether to vote in favour of the Crescent Point transaction.

He states in the Rae Affidavit that the $632,330.60 fair market value of the P&NG Rights was immaterial in the context of the approximately $770 million Crescent Point paid for Wave. [ 24 ] Prior to the announcement of the Crescent Point acquisition, Wave shares were trading at approximately $4.00. By the time the transaction closed, the consideration for each Wave share amounted to approximately $8.08.

Rae states in the Rae Affidavit that every Wave shareholder realized a significant profit as a result of the acquisition of Wave by Crescent Point and that all of the feedback he received from shareholders was positive. [ 25 ] A meeting of the Wave shareholders was held on October 21, 2009 to vote on the acquisition. The vote was 100% in favour.

No Wave shareholder, including Fisher, dissented. [ 26 ] Also on October 21, 2009, a plan of arrangement comprising the Crescent Point acquisition was approved by this Court. [ 27 ] Prior to the closing of the Crescent Point acquisition, the Defendants Rae, Kitagawa, Clake, Swartout and Weir incorporated Coral Hill Energy Inc. (“Coral Hill”). Neither Nieuwenburg nor Pletch was associated with Coral Hill. [ 28 ] In the Rae Affidavit, Rae sets out the rationale behind the incorporation of Coral Hill and the timing thereof.

He states that it became clear early in the Crescent Point process that Crescent Point would not be retaining Wave’s personnel. Several of Wave’s directors and employees believed it would be worthwhile to start a new business because land prices at that time were depressed as a result of the Government of Alberta’s royalty regime. Rae states that Coral Hill was incorporated prior to the closing of the Crescent

Point transaction to allow Wave employees’ health benefits to be transferred without the need for those employees to undergo physicals. [ 29 ] Rae swears that, at the time of Coral Hill’s incorporation, he and Kitagawa were the only Wave directors who were aware of the P&NG Rights. However, he goes on to state that neither of them knew at that time that the P&NG Rights would revert to Ward. [ 30 ] After the Crescent Point acquisition of Wave had closed, Ward contacted Balutis to inquire about the P&NG Rights.

Ward indicated in his questioning on the Ward Affidavit that he was “shocked” to hear that Crescent Point had no interest in pursuing them: Well, first of all, I panicked drastically, because I was expecting Crescent Point to say, Well, yeah, we’ll – these – we may be interested in these. So I was shocked that they were not gonna be interested, Number 1. So, it was a panic situation for me. I was shocked. Even if he would have said, Well, we’re busy – what he told me was they were not at all interested.

That they had purchased Wave’s – the Wave for their Shaunavon play in southwestern Saskatchewan and that was going to be their next major endeavour. If he would have said, Well, we probably won’t get to ‘em for a couple of years, I’d have been fine with that. I would have been happy as heck ‘cause I had a surrender agreement.

So after three years, if Crescent Point hadn’t done anything, I’d have been fine, but he said they had no interest. [ 31 ] Ward also stated during his questioning that he would have been happy to have the P&NG Rights developed by Crescent Point: I was happy to hear that Crescent – they were going to Crescent Point. They are one of the largest active companies in western Canada.

They are who I would have preferred this had gone to. [ 32 ] In the Ward Affidavit, Ward swears that, after learning that Crescent Point was not interested in developing the P&NG Rights, he contacted Rae to see if he was interested in purchasing them. Ward and Rae are in agreement that Rae indicated at that time that Coral Hill would be interested. [ 33 ] There is some divergence in the evidence of Rae and Ward as to the payment to Crescent Point for the P&NG Rights. While both indicate that it was Coral Hill that provided the necessary funds, their evidence differs as to the reason for this.

In his questioning on the Rae Affidavit, Rae states that Ward told him he could not afford the repurchase: Yeah, Ward said he didn’t have the financial capability to pay. So I said “Okay, we could – we can pay you up front, but we need some paper before we forward you any money.” So that’s what we did. [ 34 ] However, in his questioning on the Ward Affidavit, Ward states that he had the ability to pay, but that there was a timing issue: Q. And you advised Mr. Rae that you didn’t have the $623,000 necessary to execute on the buyback; correct? A. That’s not correct. I could have executed that. Q. Okay. A.

I was – I was in Tucson, Arizona. I didn’t want to fly back to go to the Royal Bank of Canada where I deal because you can’t make these – these sort of transactions, so I would’ve had to fly back, so it was convenience for that to happen. Q. So, Mr. Rae – A. Not that I didn’t have the money. I could’ve done that. [ 35 ] By agreement on or about November 16, 2009, Ward Hydro exercised the change of control clause and purchased the P&NG Rights from Crescent Point. It then entered into a Letter of Intent regarding the P&NG Rights with Coral Hill on or about November 25, 2009.

Rae indicated in his questioning that the amount paid by Coral Hill for the P&NG Rights was exactly the same as what Wave had

paid for them at the land sales. [ 36 ] Fisher notes in his brief that, beginning within six months of Crescent Point’s acquisition of Wave, Crescent Point entered into a joint venture agreement with Coral Hill to develop the same P&NG Rights. This is explained as follows in the special committee report exhibited to the Turnbull Affidavit: Around April 2010, Rae came to see Crescent Point about Coral Hill’s Swan Hills play. He said that drilling had been expensive and that Coral Hill needed a partner. Saxberg understood that Rae was offering the opportunity to Crescent Point because of their past relationship.

Saxberg arranged for Balutis to review the Swan Hills play. By that time, there had been considerable successful drilling in the surrounding area by Arcan, and Coral Hill had spent approximately $50 million in assembling additional properties in the area. Balutis conducted a detailed review and Crescent Point decided to proceed with Coral Hill. On June 29, 2010, Crescent Point and Coral Hill entered into a joint venture. We have seen no evidence that the joint venture had any relation to, or flowed from the plan of arrangement transaction with Wave or Wave’s arrangements with Ward.

In April 2011, Crescent Point purchased 7.1 million common shares of Coral Hill for $42.0 million. III. Issues [ 37 ] As noted above, Fisher has commenced this action on behalf of a proposed class consisting of former Wave shareholders.

Paragraph 19 of Fisher’s Amended Statement of Claim reads as follows: In the circumstances as aforesaid, this is a claim for relief under the oppression remedy and for unjust enrichment, damages, restitution and disgorgement flowing from the Defendants’ breaches of their statutory and fiduciary duties and duties of care arising from their conduct in improperly causing or permitting the conversion or diversion of assets, proprietary confidential information and corporate opportunities to their own benefit and to the detriment of the Plaintiffs. [ 38 ] Thus, while Fisher advances various claims, the essence of his complaint is that some of the Defendants improperly “carved out” and diverted the P&NG Rights to Coral Hill, to the detriment of Wave’s shareholders. [ 39 ] Four separate, but substantially identical, applications were brought by various Defendants.

The application brought by Wave (the “Wave Application”) sets out the following: 1. The applicant, [Wave], the corporate predecessor of [Crescent Point], seeks Orders: 1.1 pursuant to s. 240 of the Alberta Business Corporations Act (ABCA), denying the plaintiff, [Fisher], leave to bring these derivative proceedings and dismissing the proceedings accordingly; 1.2 in the alternative, pursuant to Rule 7.3, dismissing these proceedings; 1.3 in the further alternative, pursuant to Rule 3.68, striking these proceedings; 1.4 granting such other relief that this Honourable Court determines to be just; and

1.5 directing Fisher to pay to Crescent Point the costs of this application and these proceedings, on such scale as this Honourable Court determines to be just. [ 40 ] Coral Hill and Ward Hydro brought applications seeking relief identical to that set out above. As noted above, the action has been discontinued as against Ward Hydro. In addition, Kitagawa, Rae, Swartout, Weir and Clake collectively brought an application seeking the above relief as well as “in the further alternative, an order directing that issues in this matter be tried or determined on a

summary basis.” IV. Analysis A. Leave to Bring Derivative Action [ 41 ] Interestingly, these applications raise the issue of the nature of Fisher’s claim. In all four applications, the Defendants seek an order of this Court denying Fisher leave pursuant to s. 240 of the Business Corporations Act , RSA 2000, c B-9 (the “ABCA”), which provides as follows: Commencing derivative action 240(1) Subject to subsection (2), a complainant may apply to the Court for leave to (

a) bring an action in the name and on behalf of a corporation or any of its subsidiaries, or (

b) intervene in an action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary.

(2) No leave may be granted under subsection (1) unless the Court is satisfied that (

a) the complainant has given reasonable notice to the directors of the corporation or its subsidiary of the complainant's intention to apply to the Court under subsection (1) if the directors of the corporation or its subsidiary do not bring, diligently prosecute, defend or discontinue the action, (

b) the complainant is acting in good faith, and (

c) it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued.

(3) Notwithstanding subsection (2), when all the directors of the corporation or its subsidiary have been named as defendants, notice to the directors under subsection (2)(

a) of the complainant's intention to apply to the Court is not required. [ 42 ] The Defendants allege that Fisher’s claim is derivative in nature and that, pursuant to the above provision, he cannot proceed with it without leave from this Court. In its brief, Coral Hill argues that “Fisher’s attempt to pursue this case as a class action on behalf of some shareholders, rather than seeking leave to commence a derivative action, is fundamentally flawed.” Crescent Point asserts that the basis of Fisher’s claim is that the Defendants misappropriated property belonging to Wave to the detriment of Wave.

It argues that, if any claim exists, it belongs to Crescent Point, as successor to Wave. [ 43 ] In addition, Crescent Point submits that the test for leave to pursue a derivative claim is primarily that pursuit of the claim be in the best interests of the corporation, which is a matter of business judgment. It points to the affidavit sworn by Turnbull (the “Turnbull Affidavit”) as evidence that pursuit of this claim is not in Crescent Point’s best interests.

In the Turnbull Affidavit, Turnbull swears that a special committee was established by the board of directors of Crescent Point to review and evaluate the claims set out in Fisher’s initial statement of claim. Turnbull reviews the actions taken by the special committee and swears that the special committee concluded that pursuit of Fisher’s claim was not in the best interests of Crescent Point. He swears further that, upon receipt of the Amended Statement of Claim, the special committee revisited the matter and again concluded that pursuit of the claim was not in Crescent Point’s best interests.

On the basis of this evidence, Crescent Point takes the position that Fisher would not satisfy the test for leave to pursue a derivative action and that his claim should be dismissed or struck on that basis.

[ 44 ] For his part, Fisher points out that he has not sought leave under s. 240 of the ABCA and argues that, therefore, there is no basis for the Defendants’ request that he be denied such leave. In addition, Fisher asserts that the Defendants are wrong in taking the position that the claims he advances belong exclusively to Wave. His position is that the Court may allow a derivative action as a remedy for oppression pursuant to s. 242 of the ABCA , which provides, in part: Relief by Court on the ground of oppression or unfairness 242(1) A complainant may apply to the Court for an order under this section.

(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates (

a) any act or omission of the corporation or any of its affiliates effects a result, (

b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (

c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the Court may make an order to rectify the matters complained of.

(3) In connection with an application under this section, the Court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing, any or all of the following: ... (

q) an order granting leave to the applicant to (

i) bring an action in the name and on behalf of the corporation or any of its subsidiaries ... [ 45 ] As Fisher’s claim is founded, in part, on oppression, he submits that his action is not derivative and that, therefore, the absence of leave under s. 240 of the ABCA is irrelevant. He asserts that derivative and oppression actions are not mutually exclusive. He does, however, indicate that he may seek leave to amend his claim to seek such leave at some point in the future “if necessary”. [ 46 ] Fisher cites various authorities in support of his position.

First, he refers to Morritt, DS et al., The Oppression Remedy (Toronto: Canada Law Book, 2012) looseleaf at 7-18 for this comment: ...the prevailing view appears to be that the oppression remedy is broad enough for complainants to pursue claims that are essentially derivative in nature, thereby obviating the requirement for the complainant to obtain leave of the court to commence the action. [ 47 ] The authors of that text give this example at 7-21: For example, if the board of directors diverts funds belonging to the corporation to a majority shareholder, such conduct could properly give rise to a derivative action in respect of the wrong done to the corporation (for waste of corporate assets) and an oppression remedy (for treating the majority shareholders more favourably than the minority shareholders).

Therefore, even if the injuries suffered by the minority shareholders are indirect (a loss in the value of the shares because of a decline in the assets of the corporation), the claim is nevertheless properly the subject of an oppression proceeding.

[ 48 ] In addition, Fisher cites several cases. In Sparling c Javelin International Ltd , [1986] QJ No. 2453 (SC) at para 331 , the Court held that, under the

Canada Business Corporations Act , a finding of oppression allows for a derivative action: The intent of Parliament in enacting

section 234 [the oppression section] was to include in its ambit all shareholders’ recourses, on the condition that a finding of oppression or unfairness first opens the door to the exercise of the Court’s jurisdiction. Nothing in the wording of

section 234 suggests that recourses foreseen in

section 232 [the derivative section] may not be included in a

section 234 application. [ 49 ] In Agbi v Durward , 1998 ABQB 751 , 231 AR 80, Mr. Justice McMahon found as follows at paras. 10 and 13: These 2 grounds can be dealt with together. Geosimm argues that if there is a cause of action disclosed against it, it is for wrongs done to it and accordingly for which only it has a cause of action. Geosimm’s counsel cites cases ... which hold that the law does not recognize a personal cause of action by shareholders for wrongs done to the company; the cause of action belongs to the company. ...

In any case, even if the Plaintiffs’ claims against Geosimm are wholly or partly derivative (which I need not decide) counsel has not provided any Alberta authority that prohibits commencement of an oppression action to obtain derivative relief (and thereby avoid the preconditions to the derivative action), as a matter of law or policy.

Indeed, the various authorities provided by the parties demonstrate that the matter is very much in debate (see for example, a text by Gordon Phillips entitled Personal Remedies For Corporate Injuries, (Scarborough: Thomson Canada Limited, 1992) at p. 510: The best that can be said at this moment is that in some provinces the oppression remedy provisions can easily be used to circumvent the derivative action provisions if the company was wronged by insiders, that in other provinces there is some judicial unease about this use of the oppression remedy provisions, and that if it is curtailed it will probably be by means of ad hoc decisions that will not easily be predictable in advance. [ 50 ] Finally, Fisher cites two Ontario cases in which the courts discussed the “overlap” between a derivative action and an oppression remedy.

In Malata Group (HK) Ltd v Jung , 2008 ONCA 111 , 89 OR (3d) 36, the Ontario Court of Appeal made these comments at paras. 26, 27 and 34: It appears from my reading of the case law that there is not a bright-line distinction between the claims that may be advanced under the derivative action

section of the Act and those that may be advanced under the oppression remedy provisions. Owing to this overlap between the oppression remedy and the derivative action, a court cannot determine which is the appropriate avenue for a claim to proceed through the simple application of a rule such as the rule in Foss v. Harbottle . Instead, a court must examine the relevant statutory text and the facts of the claim at issue. ... This analysis begs the question of whether there is any meaningful distinction between the oppression remedy under s. 248 of the Act and the derivative action under s. 246 of the Act.

In my view, allowing s. 248 oppression claims to proceed where there is harm to the corporation would not nullify s. 246, because the two sections involve different threshold tests.

Section 246 simply requires a violation of the corporation’s legal rights.

On the other hand, s. 248 requires, in the case of harm to the corporation, a violation of corporate legal rights that is oppressive or unfairly prejudicial, or that unfairly disregards the complainant’s interests. [ 51 ] The Defendants proffer several responses to Fisher’s position, focussing largely on the question of specific harm to Fisher himself, rather than to Wave. [ 52 ] Wave argues in its brief that “An oppression claim must be based on violation of the shareholder’s reasonable expectations, as opposed to a simple mirror image of duties owed to the corporation.” It asserts that Fisher has not plead any reasonable expectation beyond that Wave’s directors would fulfill their duties to Wave.

[ 53 ] Kitagawa, Rae, Swartout, Weir and Clake cite the decision of the British Columbia Court of Appeal in Pasnak v Chura , 2004 BCCA 221 , 27 BCLR (4 th ) 50, in which the Court held at para. 5: The authorities are clear that a shareholder must show direct and special harm in order to maintain a personal action for oppression, otherwise he must seek leave to bring a derivative action in the name of the company. [ 54 ] Similarly, Coral Hill cites Furry Creek Timber Corp v Laad Ventures Ltd (1992) 75 BCLR (2d) 246 at para 16 for the proposition that an oppression claim can be made only if “...the complaining shareholder has been affected by the breach in a manner different from or in addition to the indirect effect on the value of all shareholders’ shares generally.” [ 55 ] The Defendants first argue that

summary judgment should be granted because Fisher does not have the legal right to pursue his requested remedies. While these assertions engage important principles of corporate law, the law is not sufficiently clear to drive the Plaintiff from the judgment seat on the basis of the form of the proposed action alone.

The case law contains a divergence of opinion but at a minimum an overlap exists between derivative actions and claims in oppression. [ 56 ] As noted above, for a party to be granted leave to pursue a derivative action, the Court must be satisfied that it is in the best interests of the corporation that this be done. In this case, Crescent Point examined the matter twice, concluding first that it did not wish to pursue the P&NG Rights and second, that it was not in the corporation’s best interests to pursue Fisher’s claim.

That being the case, it may be that Fisher will have difficulty persuading the Court that pursuing his claim would in fact be in the best interests of Crescent Point. Nevertheless, it is not plain and obvious that he cannot succeed because a court may grant leave to pursue a derivative claim, especially if there have been questionable dealings. Further, it is not plain and obvious that Fisher cannot claim under the oppression provisions, which he is entitled to take as shareholder. Even if the opportunity belonged to Wave, a court may permit a derivative claim as a remedy for oppression.

It is thus not plain and obvious that a court would not allow a derivative action as a remedy for oppression in this case. [ 57 ] In my view, the Defendants have not established that they are entitled to

summary dismissal on the basis that Fisher lacks the legal right to proceed. The case law referred to me by all parties underscores the importance of a consideration of the factual context of the claims, and not merely their theoretical goal or role. It is therefore important to turn to the factual matrix of the claim. B. The Application for

Summary Dismissal [ 58 ] As noted above, all of the Defendants have applied for

summary dismissal of this action pursuant to Rule 7.3 of the Rules of Court. While a significant proportion of the Defendants’ arguments on this point relied upon the derivative/oppression action issue set out above, I believe it is necessary to canvas this matter more broadly in reaching a conclusion on this aspect of the application. [ 59 ] There is no serious dispute among the parties as to the test to be applied on a

summary dismissal application. The Defendants must show, on a balance of probabilities, that there is no genuine issue of material fact requiring trial. If the Defendants succeed in doing so, the burden then shifts to the Plaintiff to counter the Defendants’ evidence and demonstrate that there is a genuine issue for trial. [ 60 ] Interestingly, there is also little dispute among the parties as to the bare facts of this case.

It is common ground that, inter alia , Wave and Ward Hydro entered into the Royalty Agreements further to discussions between Rae and Ward, Wave acquired the P&NG Rights, Crescent Point acquired Wave, and Ward repurchased the P&NG Rights from Crescent Point and sold them to Coral Hill. What is in dispute are the explanations and motivations underlying these facts. [ 61 ] Whether seen as a derivative claim or one in oppression, the gravamen of the factual allegation is that the Defendants have acted improperly by having the rights at issue developed for the benefit of Coral Hill. 1.

Evidentiary Issues [ 62 ] The evidence before this Court consists of the Rae Affidavit and Rae’s questioning thereon, the Ward Affidavit and Ward’s questioning thereon and the Turnbull Affidavit and Turnbull’s questioning thereon. The Plaintiff takes issue with this evidence in several

respects. [ 63 ] First, the Plaintiff asserts that the Turnbull Affidavit is inadmissible as it consists entirely of hearsay. The Plaintiff suggests that evidence from numerous people at Crescent Point is required instead. [ 64 ] I do not accept this argument. I acknowledge that Turnbull was not involved in the events giving rise to this action and, as such, the Turnbull Affidavit is based on information Turnbull acquired after the fact.

However, as counsel for Rae, Kitagawa, Swartout, Weir and Clake pointed out during the hearing, Turnbull has been a director of Crescent Point since 2001, chaired the special committee that investigated Fisher’s claim and authored the report of that special committee. I am satisfied that, to the extent it was not within his personal knowledge, Turnbull’s evidence falls within the business records exception to the hearsay rule and is admissible. [ 65 ] The Plaintiff places great reliance on the absence of affidavits from Kitagawa, Swartout, Weir and Clake.

He submits that without any evidence of what these directors of Wave knew and when they knew it, this Court cannot have a “full appreciation” of the situation in question. [ 66 ] The response to this, in my view, is two-fold. First, there is some evidence before me of what these individuals knew, in the form of Rae’s assertion that he told Kitagawa about his dealings with Ward, but did not mention it to the others.

While this obviously is not direct evidence from those individuals, it is nevertheless some evidence before this Court of their state of knowledge and Rae was neither challenged nor shaken on this point during questioning. Second, and more importantly, the question of what these directors knew at any given point is not what is at the heart of this matter. While counsel for these directors candidly admitted that perhaps he had erred in not filing affidavits from each of them, it seems to me that filing such affidavits is not an end in itself.

The material question is whether such affidavits (and, presumably, questioning thereon) would advance the Plaintiff’s case. Even if we were to assume that each of these directors had the same level of knowledge of Rae’s interactions with Ward as Rae himself, the question is whether those interactions can be explained in a manner that is not iniquitous. Therefore, I do not consider the absence of such affidavits to be fatal to the Defendants’ application. [ 67 ] In addition, the Plaintiff points out in his brief that there are discrepancies between the Rae Affidavit and the Ward Affidavit.

For instance, there is the question of Ward’s ability to fund the repurchase of the P&NG Rights from Crescent Point, as set out above. The Plaintiff also says that there is inconsistency with respect to the information Ward provided to Rae about the P&NG Rights.

Most significantly, the Plaintiff argues that there are discrepancies in the evidence as to the specific terms of the change of control clause in the Royalty Agreements. [ 68 ] While I acknowledge that the evidence set forth in the Rae Affidavit, the Ward Affidavit and the questioning thereon are not entirely consistent as to certain details, I am satisfied that the discrepancies do not affect either the credibility of Rae and Ward or the overall picture of events.

With respect to the change of control clause specifically, it is clear from the evidence before me that the drafting of the change of control clause was an iterative process that evolved from the discussions between Ward and Percy Herring, who drafted the clause on behalf of Wave. This seems to me to be consistent with the testimony of Rae and Ward, both of whom indicated that such a clause had not previously been part of agreements with Ward. I find that it does not undermine the credibility of either witness. 2.

The Change of Control Clause [ 69 ] The primary basis for Fisher’s allegations is the change of control clause, the inclusion of which he refers to in his brief as the “seminal event”. Fisher summarizes his argument on this point as follows in his brief: The insertion of this clause at the suggestion of Wave’s President, [Rae], was not in the best interests of Wave or those shareholders who make up the Class (the “Excluded Shareholders”).

The Defendants were each involved in the events that began with the insertion of this change of control and ultimately resulted in Coral Hill reaping the benefit of the assets and corporate opportunities that, but for the change of control clause, would have accrued to the benefit of Wave and its shareholders. [ 70 ] Fisher asserts that there is conflicting evidence about the terms of the change of control clause and how it came to be included

in the Royalty Agreements. In my view, however, these conflicts are minor and are secondary to the real issue.

Fundamentally, it is the rationale behind the inclusion of that clause that is the bone of contention among the parties. [ 71 ] The thrust of the Plaintiff’s claim is that the change of control clause allowed the P&NG Rights to be “carved out” of Wave/Crescent Point and diverted to Coral Hill with the result that Rae, Kitagawa, Swartout, Weir and Clake realized a secret profit that was not shared by the other shareholders of Wave. [ 72 ] The Plaintiff argues that, in proposing the change of control clause, Rae breached his duty as a director of Wave to act in Wave’s best interests.

He points out that Rae acknowledged in his questioning on the Rae Affidavit that he suggested the change of control clause for the protection of Ward Hydro, not Wave.

The Plaintiff then goes further to suggest that Rae was acting outside the normal scope of a director’s duties such that a fiduciary duty to Wave’s shareholders arose, which duty he breached in proposing the change of control clause. [ 73 ] Further, the Plaintiff argues that there are material issues of fact in respect of how much Kitagawa, Swartout, Weir and Clake knew about the change of control clause and when they acquired that knowledge. [ 74 ] In my view, however, the Defendants have provided a satisfactory explanation for the inclusion of the change of control clause.

I accept Rae’s explanation that he felt the change of control clause was necessary to hold up his end of his “gentlemen’s agreement” with Ward. While it is true that Rae acknowledged that the clause was intended to protect Ward Hydro rather than Wave, I do not consider this inconsistent with Rae’s duties as a director of Wave. The evidence before me indicates that Rae had an ongoing business relationship with Ward and that Ward was a potential source of valuable information. It is reasonable that Rae would want to maintain good relations with Ward and that doing so would be in the best interests of Wave.

In addition, Rae pointed out that if the Crescent Point deal fell through, Wave would have wanted to pursue the P&NG Rights itself. The possibility that the Crescent Point acquisition would not proceed would also make it important to Rae, and to Wave, to maintain the relationship with Ward. [ 75 ] In this context, I find instructive these comments from the Supreme Court of Canada in BCE Inc v 1976 Debentureholders , 2008 SCC 69 , 3 SCR 560 at para 38 : The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short term profit or share value.

Where the corporation is an ongoing concern, it looks to the long term interest of the corporation. The content of this duty varies with the situation at hand. ... [ 76 ] Finally, it is significant in my view that Rae stated that the change of control clause was for the benefit of Ward Hydro; he did not say that the clause was inserted for the benefit of Coral Hill. Neither did counsel for the Plaintiff put that proposition to Rae during his questioning on the Rae Affidavit. To the contrary, while Rae admitted that he hoped to have the opportunity to develop the P&NG Rights, “hoped” is not the same as “arranged”.

Rae swears in the Rae Affidavit that “At the time Coral Hill was incorporated, only Mr. Kitagawa and I amongst the directors knew about the [P&NG Rights], but we did not know they would revert to Ward, or later be acquired by Coral Hill and there was no plan or intention in that respect.” Further, the following exchange occurred during Rae’s questioning on the Rae Affidavit: Q. In your discussions with Mr.

Kitagawa, did you indicate to him that if Crescent Point was not interested in picking up these lands that this is something that the new company that you were looking to start up might be interested in pursuing? A. Yeah, I said that to several people. It was Ward’s option, and he could talk to anybody, and “anybody” would include us as a start-up. But there was no commitment of any kind, but that was always a possibility. Q. And specifically that was a discussion that you had with Mr. Kitagawa and others, correct? A. I don’t know. I don’t know what I would have said to him.

I could have said, yeah, it could come to the new co. but – you know, I said that to several people, it could come to the new co. But there was no commitment from Ward or Saxberg of any of that. [ 77 ] Moreover, Ward’s testimony, both in the Ward Affidavit and in the questioning thereon, contradicts the assertion that there was any sort of prior arrangement between Rae and Ward to divert the P&NG Rights to Coral Hill. At para. 11 of the Ward Affidavit, Ward swears:

At no time up to October 22, 2009 did Rae discuss with me the fact that the change of control option in favour of Ward Hydrodynamics might be triggered, or that Ward Hydrodynamics and Rae might be working together in some future arrangement. [ 78 ] During questioning on the Ward Affidavit about the events following Crescent Point’s acquisition of Wave, Ward indicated that “I made a quick call thinking ‘Oh, I’m sure Crescent Point’s gonna be interested in this land.” This, too, is entirely inconsistent with any prior arrangement to divert the P&NG Rights to Coral Hill. [ 79 ] Once Ward discovered that Crescent Point had no interest in the P&NG Rights, it is not surprising that he would want to seek another party to develop them.

I also accept that he felt under pressure because he was going to leave Calgary for Arizona for an extended period. Neither do I find it surprising that Ward would approach Rae, with whom he had a prior business relationship and who had previously expressed interest in the P&NG Rights.

The evidence before me, however, indicates that Ward was under no obligation to bring the P&NG Rights to Rae and that his doing so was in no way orchestrated by Rae. [ 80 ] On the basis of the foregoing, I find that the Defendants have shown that there is no genuine issue of material fact in respect of the inclusion of the change of control clause in the Royalty Agreements. I reach the same conclusion whether the matter is analysed as a derivative action or claim in oppression.

The burden then shifts to Fisher to provide evidence that there is such an issue. [ 81 ] The Defendants assert that Fisher has put no evidence before this Court, only allegations. However, Fisher asserts, correctly in my view, that he has provided evidence in the form of the questioning on the Rae Affidavit, the Ward Affidavit and the Turnbull Affidavit. Whether that evidence is sufficient to meet the burden that now lies upon him is a separate question. [ 82 ] I find that the evidence raised by the questioning of Rae and Ward is not sufficient to meet the Plaintiff’s burden.

The Plaintiff’s allegation is that the change of control clause was effectively a mechanism to divert the P&NG Rights to Coral Hill, but both Rae and Ward indicate that there was no such arrangement. The Plaintiff also alleges that Saxberg was complicit in this arrangement, but Rae denies any commitment from Saxberg in respect of the P&NG Rights. Fisher puts forward no contrary evidence and none of the cross-examination yielded any different evidence. 3.

Lack of Disclosure [ 83 ] Next, the Plaintiff alleges that there was a lack of disclosure of the P&NG Rights and the Royalty Agreements, both to Crescent Point and to the shareholders of Wave. He submits that this lack of disclosure was detrimental to the Wave shareholders in two respects. First, failure to disclose a valuable asset to Crescent Point during the acquisition process gave rise to a failure to maximize the sale price of Wave.

Second, failure to disclose the P&NG Rights in the Management Information Circular provided to Wave shareholders prior to the vote on the proposed acquisition deprived those shareholders of the opportunity to make a properly informed decision on the vote. [ 84 ] The Defendants have provided evidence to refute the first of these two points. Turnbull refers in the Turnbull Affidavit to the report of the Crescent Point special committee, which states on p. 3 that Wave “...informed Crescent Point of its interest in acquiring the [P&NG Rights] and its arrangement with Ward.

There was no attempt to conceal relevant information.” In the Rae Affidavit, Rae swears that “I informed Mr. Kitagawa about [the acquisition of the P&NG Rights] and we then disclosed what we knew to Mr.

Saxberg, including informing him of both areas of possible interest...”. [ 85 ] The Plaintiff’s response in his brief is that “Rae mentioned the [P&NG Rights] once to Scott Saxberg at a busy meeting the day before the Arrangement Agreement was concluded; he did not highlight the potential that he saw or suggest that they were valuable...”. [ 86 ] I find that the Defendants have established that there is no genuine issue of material fact on this point. While Rae may not have emphasized the P&NG Rights in his discussions with Saxberg, neither did he conceal them.

Crescent Point was free to examine and evaluate the P&NG Rights along with all of Wave’s other assets. In fact, Turnbull’s evidence is that Saxberg instructed Balutis to do

precisely that and that, on the basis of Balutis’ review, Crescent Point concluded that it had no interest in the P&NG Rights. [87] The Defendants’ evidence is clear that Crescent Point attributed no value to the P&NG Rights beyond their face cost and thatthere was neither a concealment of those rights from Crescent Point nor a diminution of the value Crescent Point offered for Wave as aresult.

The Plaintiff’s evidence does nothing to refute this conclusion. [88] On the second point, the Plaintiff argues that the P&NG Rights should have been expressly disclosed in the ManagementInformation Circular provided to Wave shareholders before the vote on the proposed Crescent Point acquisition. [89] The Defendants argue that the P&NG Rights were not “material” in the sense attributed to that term under securitieslegislation and, therefore, were not required to be disclosed.

They point out that the $632,330.60 cost of the P&NG Rights wasinsignificant in the context of the $770 million value of the acquisition and that Crescent Point, as noted above, placed no value on theP&NG Rights above their cost. The Defendants’ position is that, given the insignificant value of the P&NG Rights, express disclosurethereof in the Circular would not have influenced how the Wave shareholders, including Fisher, voted.

They argue that Fisher hasprovided no evidence to the contrary, not even a sworn assertion that he himself would have voted differently. [90] Based on the evidence before me, I accept the Defendants’ argument on this point. It is well-established that only “material”facts must be disclosed in respect of securities transactions. Were it otherwise, such transactions would collapse under the weight ofdisclosure of all assets and liabilities, however insignificant.

While Rae may have hoped, based on his faith in Ward, that the P&NGRights would have value, the evidence is clear that, at the time of the Crescent Point acquisition, their value was highly speculative andCrescent Point itself did not attribute much to them. Given this and the fact that the cost of the P&NG Rights was less than 1/10 of 1% ofthe value of the acquisition, it is reasonable that they were not expressly mentioned in the Circular.

The Plaintiff has provided noevidence to show that there is an issue as to how the vote on the acquisition, even his own vote, might have been affected had there beenexpress disclosure of the P&NG Rights in the Circular. [91] The Defendants assert that Fisher’s argument on this point amounts to a collateral attack on the Order of Madam JusticeRomaine of this Court approving the acquisition. While there is scope to call matters into question without making a collateral attack, inmy view, the Plaintiffs have no reasonable prospect of success in demonstrating an actionable failure to disclose. 4.

Conspiracy [92] Though the Plaintiff does not devote a great deal of his argument to this allegation, he does assert that the facts known to datesupport an action in conspiracy. [93] The Wave directors, Rae, Kitagawa, Swartout, Weir and Clake resist this claim on a number of grounds. First, they contendthat, as indicated in Rae’s evidence, only Rae and Kitagawa were aware of Rae’s dealings with Ward. Swartout, Weir and Clake knew nomore about these dealings than Fisher did.

Counsel for these directors cited Murphy Oil Co v Predator Corp, 2006 ABCA 69, 384 AR251, in which the Court of Appeal stated at para. 42 that “...there was no evidence that Apache was even aware of Murphy’s variousactions. Consequently, the ‘conspiracy’ falls apart: Apache could not have conspired to do things of which it was unaware.” Counsel forthe directors argues that the same logic applies here.

Fisher, of course, responds by noting that this Court does not have direct evidenceof what Swartout, Weir and Clake knew or did not know. [94] However, even if we assume, contrary to Rae’s evidence, that these three individuals had the same knowledge as Rae andKitagawa, I find that the Defendants have established that there is not genuine issue for trial in respect of the alleged conspiracy. TheCourt of Appeal in Murphy noted the essential elements of the tort of civil conspiracy as follows at para. 36: With respect to the tort of civil conspiracy, the chambers judge relied on Canada Cement Lafarge Ltd. v.

British Columbia LightweightAggregate Ltd., (SCC), [1983] 1 S.C.R. 452 at 471 to ascertain the necessary parameters. A tort of conspiracy exists if: (1) whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants’ conduct is tocause injury to the plaintiff, or

(2) where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result. [ 95 ] The trial judge in Murphy at paras. 88 and 89 made these comments, which were accepted by the Court of Appeal: On an application for

summary judgment the plaintiff must show that it has a factual basis for its assertion that the conduct was in furtherance of a conspiracy. It is insufficient that the conduct could have been the result of the conspiracy where the conduct is easily explained by lawful motives ... The conduct the Respondents point to as evidencing a conspiracy and as described above is not unlawful in and of itself, and is innocently and easily explained by Murphy and Apache’s desire to further their own business concerns and protect their interests at Ladyfern. [ 96 ] The situation in this case is very similar.

Rae’s conduct in proposing the change of control clause to Ward was not unlawful and was not directed towards the Plaintiff, let alone did it have causing injury to the Plaintiff as its predominant purpose. Rae proposed the change of control clause to protect Ward and, by extension, his relationship with and “gentlemen’s agreement” with Ward. The lack of disclosure of the P&NG Rights in the Management Information Circular was not in itself unlawful as those rights were not sufficiently material to require disclosure.

Further, far from conspiring to conceal the P&NG Rights from Crescent Point, Rae and Kitagawa specifically disclosed them to Saxberg. [ 97 ] In their brief, the Defendants make this argument in respect of an alleged conspiracy: If the Wave directors held the motives attributed to them by Fisher, they would not have had Wave acquire the lands in the first place. One would think they would simply have acquired them through another entity.

Why would they go to the trouble and risk of acquiring them in Wave, disclose them to Crescent Point, engineer a change of control clause and then hope Crescent Point would neither object or negotiate with Ward to keep the lands? [ 98 ] I agree with the Defendants on this point. If the Defendants (or some of them) were conspiring to divert the P&NG Rights to themselves, this would have been a very risky way to go about it. The Defendants’ conduct is consistent with the lawful motives sworn to by Rae.

I am satisfied on this record that the fact that the P&NG Rights ended up with Coral Hill is simply the result of events as they naturally unfolded and is not, as discussed above, the product of an orchestrated scheme or other improper conduct. As such it is plain and obvious that the elements of a conspiracy claim are lacking. 5. Unjust Enrichment [ 99 ] Fisher also submits that the facts of this case support an action in unjust enrichment.

It is now trite law that unjust enrichment requires three elements: (1) an enrichment; (2) a corresponding deprivation; and (3) an absence of juristic reason for the enrichment. [ 100 ] Rae, Kitagawa, Swartout, Weir and Clake argue that Fisher has suffered no deprivation, as he received full and fair value for his Wave shares and was not personally deprived of any opportunity arising from the P&NG Rights.

During the hearing, counsel for these directors argued that Fisher was deprived of neither the opportunity to develop the P&NG Rights (since the rights belonged to Wave, not to Fisher as a Wave shareholder) nor a higher price for his Wave shares (since Crescent Point attributed no value to the P&NG Rights and would not have been willing to pay more for Wave as a result of them). [ 101 ] I find that the Defendants have shown that there has been no deprivation of Fisher and that Fisher has failed to raise a genuine issue for trial in that regard.

[ 102 ] Moreover, I find that there is no issue for trial in respect of any enrichment of Coral Hill or its principals. The evidence put forward by the Defendants establishes that Wave purchased the P&NG Rights from a third party unrelated to this action and paid $632,330.60 for them. When Ward Hydro exercised its right to repurchase the P&NG Rights, it paid that same amount for them, with the result that Crescent Point, as successor to Wave, got that amount back. Ward Hydro then sold the P&NG Rights to Coral Hill, again for the same amount.

Accordingly, Coral Hill obtained the P&NG Rights for the same amount as had been paid for them on the initial purchase from the third party. There was no enrichment of Coral Hill. Coral Hill realized a profit on the P&NG Rights only after expending significant time, energy and money on the development thereof. Therefore, there is no genuine issue of material fact in respect of this element of unjust enrichment. 6. Other Issues [ 103 ] The Plaintiff sets out in his brief a list of forty-four questions, each of which he submits raises a triable issue.

Many of these questions pertain to who had knowledge of what and when they had it. I agree with counsel for Rae, Kitagawa, Swartout, Weir and Clake that these are better characterized as questions for discovery rather than as separate triable issues. [ 104 ] In any event, what is important on this application is not the length of the list of questions. It is easy enough to compile a list of speculative inquiries. My task on this application is to assess whether, on the evidence before me, there is a genuine issue of material fact requiring trial.

Having reviewed the evidence, I have concluded that there is not. 7. Conclusion [ 105 ] While Fisher’s pleadings set out numerous causes of action, at its core, this is a fact-driven case. In my view, the Defendants have established three key facts. First, the acquisition of Wave by Crescent Point was fair. The Plan of Arrangement was approved by this Court on the strength of, inter alia , a unanimous shareholders’ vote and a positive fairness opinion and the Defendants have established to my satisfaction that the absence of specific disclosure of the P&NG Rights did not undermine the fairness of the transaction.

The Wave shareholders, including Fisher, received fair value for their shares. [ 106 ] Second, the Defendants have shown that when Crescent Point initially looked at the P&NG Rights, they concluded that they had no interest in them. Six months later, with the benefit of further information and after Coral Hill had acquired more property in the same area as the rights in dispute, Crescent Point undertook another evaluation and decided that there was something there worth pursuing. It appears Crescent Point simply changed its mind based on new information.

While Crescent Point could have also retained these rights, that was not the decision taken by the company and this was a decision that Crescent Point had a right to make. Crescent Point also examined Fisher’s claim and concluded that it was not in the corporation’s best interests to pursue it on two separate occasions. [ 107 ] Third, I am satisfied that the arrangement between Rae and Ward on this occasion was largely the same as their arrangements had been in the past. What they had is quite rightly described as a “gentlemen’s agreement”, the specific terms of which were worked out as needed.

The evidence of both was to the effect that they did not reduce their deals to paper until it was necessary to do so. As noted above, this was the first time their arrangement had included a GORR, though such an arrangement was usual for Ward. In addition, both readily admit that the change of control clause was unusual for them, but I find that it was agreed to at a critical time when Wave was in play and was added for reasons that had nothing to do with Rae seeking personal advantage. Further, he did not breach any obligations to Wave or its shareholders by negotiating a change of control clause.

It was a mutually agreed term that was grounded in and promoted long term financial relationships built on personal trust. [ 108 ] The Defendants have tendered evidence that provides a cogent, non-nefarious explanation of the events in question. That evidence satisfies me that there is in this case no genuine issue of material fact requiring trial. The burden therefore shifts to Fisher to provide this Court with evidence that there is a genuine issue for trial here.

That he has not done. [ 109 ] While Fisher questioned Rae, Ward and Turnbull on the Rae Affidavit, the Ward Affidavit and the Turnbull Affidavit, respectively, evidence sufficient to meet Fisher’s burden did not materialize from that questioning. [ 110 ] There is a surface attractiveness to Fisher’s allegations. The constellation of relationships and interactions in this case could, at first glance, be viewed as suspicious. However, I have thoroughly canvassed the law and the facts and the Defendants have provided

legitimate explanations sufficient to allay suspicion and to satisfy this Court that there is no genuine issue of material fact requiring trial in this case. The fact that the Defendants subsequently developed the P&NG Rights and realized a profit on that development does not undermine their explanations. It is merely the result of changed circumstances. Accordingly, the Defendants’ application for

summary dismissal is granted. C. The Application to Strike [ 111 ] All of the Defendants also apply to strike out Fisher’s claim pursuant to Rule 3.68. In light of my conclusion above in respect of Rule 7.3, I need not address this issue. D. The Application for

Summary Trial [ 112 ] Kitagawa, Rae, Swartout, Weir and Clake also applied for an order directing that the issues in this matter be tried on a

summary basis. Again, in light of my conclusion above in respect of Rule 7.3, I need not address this application. V. Costs [ 113 ] If the parties are unable to agree on costs, I may be spoken to. Heard on the 6 th day of May, 2013. Dated at the City of Calgary, Alberta this 31 st day of July, 2013. S.L. Martin J.C.Q.B.A. Appearances: Peter T. Linder, Q.C. Peacock Linder & Halt LLP for the Plaintiff/Respondent, Edward Robert Fisher John Blair, Q.C. and Randall W. Block, Q.C. Borden Ladner Gervais LLP for the Defendants/Applicants, Kyle J. Kitagawa, Donald J. Rae, Hank B. Swartout, J. Graham Weir and Bryan D. Clake

Daniel McDonald, Q.C. Burnet Duckworth & Palmer LLP for the Defendant/Applicant, Coral Hill Energy Ltd. Steven H. Leitl Norton Rose Canada LLP for the Defendant/Applicant, Wave Energy Ltd. (now Crescent Point Energy Corp.) Taryn C. Burnett Gowlings for the Defendant/Applicant, Ward Hydrodynamics Ltd.