Alignvest Private Debt Ltd. v Surefire Industries Ltd., 2013 ABQB 729

Court of Queen ’ s Bench of Alberta Citation: Alignvest Private Debt Ltd. v Surefire Industries Ltd., 2013 ABQB 729 Date: 20131209 Docket: 1301 11285 Registry: Calgary Between: Alignvest Private Debt Ltd. Applicant - and - Surefire Industries Ltd. Respondent _ ________________________________________ ______________ Reasons for Judgment of the Honourable Madam Justice C.A. Kent _________________________________________ ______________ [ 1 ] On August 30, 2013, Surefire Industries Ltd. (Surefire) was granted protection pursuant to the Companies’ Creditors Arrangement Act.

Those proceedings were terminated on September 25, 2013, and the Monitor under the CCAA proceedings was appointed Receiver and Manager of Surefire’s assets. Surefire’s principal secured debtor is Alignvest Private Debt Ltd. (Alignvest). Alignvest is owed approximately $13 million. [ 2 ] The business of Surefire was to manufacture large pieces of equipment to be used in the oil and gas industry. Most of the pieces of equipment were unique to the customers (the customers) that requested the manufacture of the piece.

At the time of Surefire’s insolvency, there were several pieces of equipment on Surefire’ premises in various states of completion. There is a dispute about the title to those pieces of equipment. That dispute will be decided by this court. In the meantime, the Receiver is in the process of liquidating other assets of Surefire. [ 3 ] The assets include 50% of the units in Surefire USA through Surefire Holdings Inc. Both Surefire USA and Surefire

Holdings Inc. are Texas companies and neither are subject to receivership proceedings. Surefire USA is a private company. Unitholders in the company are Surefire Holdings Inc., Stewart & Sons Holdings, Inc. and C. Jim Stewart IV. The rights of the unit holders are contained in a unitholders agreement. The company is managed by a Board of Directors which consists of two representatives of Surefire Holdings Inc., and a representative of each of Stewart & Sons Holdings and Mr. Stewart.

The unitholders’ agreement also sets out rights in respect to the transfer of shares, including a right of first refusal, and in respect of the admission of new members of Surefire USA. [ 4 ] On November 21, 2013, the Receiver brought an application to approve a Protocol Agreement which it had negotiated with Surefire USA, the purpose of which was to address the marketing of Surefire’s interests in Surefire USA. When the agreement was put before me on November 21, one of the provisions was that Mr. Sam Fleiser would be appointed to the Board of Surefire USA. Mr. Fleiser is an officer and director of Alignvest.

The agreement also provides for the Receiver to nominate one other person to the Board. The Receiver also provided to me on a confidential basis a list of proposed bidders for the Surefire units. That list was not provided to the customers. [ 5 ] On November 21, counsel for some of Surefire’s customers, notably Trican Well Service Ltd. and Precision Well Servicing, objected to the appointment of Mr. Fleiser. They had not seen the list of proposed bidders and were concerned that Alignvest may be on the list. If that was the case, they argued, Mr.

Fleiser would be in a conflict between his duties to Alignvest and his duties to Surefire USA. The objections of the customers appeared to have some merit. However, the application had been brought on short notice so that no one could provide me with sufficient authority to give me comfort either to approve the agreement in its entirety or reject it. I approved the agreement subject to a proviso that Mr. Fleiser was to maintain the confidentiality of any confidential information provided to him as a director of Surefire USA.

I invited counsel for the customers to provide me with a letter outlining their concerns about Mr. Fleiser’s nomination to the board. On November 29, counsel for Trican did provide such a letter. [ 6 ] Whether I would have approved the agreement without the proviso I originally put into place or at all is hypothetical. I can say that I continued to have some discomfort with the agreement. However, the landscape changed significantly. [ 7 ] The Receiver renewed its application to approve the agreement. There were two additional factors.

The first was an undertaking which Alignvest gave to the Receiver that it would not bid on the Surefire USA units without court order and only if the sales process did not yield a suitable offer or an accepted offer failed to close. The second was more information about the unitholders’ agreement, specifically the ROFR contained in that agreement. Those two factors give me the comfort that I need to approve the agreement. The customers continue to have reservations about Mr. Fleiser’s appointment.

I understand those concerns, but in my view, the fact that Alignvest will not be a bidder in the first instance and there is a ROFR that could be exercised by other unit holders balance off those concerns. This is coupled with the fact that any proposed sale will need to be approved by this court. Accordingly, the draft order is approved subject to paragraph 10 of that draft including a reference to Alignvest’s undertaking and subject to Alignvest providing that undertaking to the Court. [ 8 ] I wanted to provide these reasons in writing for several reasons. First, there is no question that Mr.

Fleiser is a qualified person to put on the board. It is the potential for conflict because of his two positions that raised concerns. Second, I wanted to ensure that everyone clearly understand that the customers’ initial objections were not without merit. Finally, from the commencement of the receivership in September, the customers have been suspicious about the neutrality of the Receiver. Some of them apprehend bias based upon a number of facts that I will not go into. If I had determined that the Receiver was not acting in the best interests of the estate, I would have dealt with that issue.

As the sales process unfolds, the customers have asked for more transparency. To the extent that the Receiver can provide information, I would like that to happen. Heard on the 4 th and 5 th day of December, 2013. Dated at the City of Calgary, Alberta this 9 th day of December, 2013. C.A. Kent J.C.Q.B.A. Appearances: Sean Collins, McCarthy Tetrault

for the Applicant Tom Cumming, Cliff Prophet Gowling Lafleur Henderson LLP for the Receiver Trevor Batty Burnet, Duckworth & Palmer LLP For Trican Well Servicing Ltd. Edward Halt, Q.C. Peacock Linder & Halt LLP For Precision Well Servicing Andrew Maciag, Locklynn Price Borden Ladner Gervais For Surefire Industries USA, LLC Aaron Stephenson Norton Rose Fulbright For OGES