Reiter v Quicksilver Resources Canada Inc, 2015 ABQB 776

Court of Queen ’ s Bench of Alberta Citation: Reiter v Quicksilver Resources Canada Inc, 2015 ABQB 776 Date: 20151207 Docket: 1501 05036 Registry: Calgary Between: Zane Reiter and Zelta Capital Partners Ltd. Plaintiffs - and - Quicksilver Resources Canada Inc. Defendant _______________________________________________________ Reasons for Judgment of J.T. Prowse, Master in Chambers _______________________________________________________ [ 1 ] The plaintiff Zane Reiter (“Reiter”) and his corporation, Zelta Capital Partners Ltd. (“Zelta”) bring this application for

summary judgment against Quicksilver Resources Canada Inc. (“Quicksilver”) for unpaid commission. [ 2 ] Under a written consultant agreement, dated January 13, 2012, and amended on October 1, 2012, Quicksilver promised to pay the plaintiffs: (

a) a monthly retainer of U.S. $15,000 per month, (

b) an incentive bonus of U.S. $1 million for successful completion of an international joint venture, and (

c) a success fee (incentive bonus) for any completed joint venture in relation to Quicksilver’s Canadian assets, based on a percentage of the transaction value.

[ 3 ] The plaintiffs say they are entitled to a success fee (incentive bonus) of $200,000 for negotiating the purchase by Quicksilver in 2013 of a prospective LNG site at Campbell River on Vancouver Island. [ 4 ] Quicksilver denies liability for the success fee (incentive bonus) on the basis that the purchase of the LNG site was simply a real estate deal and not a ‘Transaction’ as defined in the amended consultant agreement.

Quicksilver says that to qualify as a ‘Transaction’, a deal would need to result in an ongoing business relationship between Quicksilver and the vendor of the Campbell River assets, which never happened. [ 5 ] For the reasons detailed below I agree with the position taken by Quicksilver and I dismiss the

summary judgment application of the plaintiffs. Three contracts between the parties (

i) consultant agreement dated January 13, 2012 [ 6 ] The first contract is a consultant contract dated January 13, 2012. It contemplated Reiter working to locate a joint venture partner for Quicksilver’s Canadian shale gas operations. (ii) amended consultant agreement dated October 1, 2012 [ 7 ] The second contract is an amended consultant agreement dated October 1, 2012.

It added Reiter’s corporation Zelta as a party, extended the term of the retainer, and expanded the scope of the potential transactions which the plaintiffs would be attempting to arrange. [ 8 ] I will quote from the relevant provisions of this contract as it is the contract under which the plaintiffs’ claim stands or falls. [ 9 ] The plaintiffs emphasize different portions of the contract, but both need to be read together. [ 10 ] Here are the provisions emphasized by Reiter: B -

Part II – Joint Venture Partner or Investor for Company For the purposes of this

Part II, potential Transactions related to (

i) Company’s oil and/or gas interests in the Horn River Basin and Horseshoe Canyon area in Canada, the Niobara play of the Greater Green River Basin in northern Colorado, the Fort Worth Basin (Barnett Shale) in northern Texas, and the Delaware Basin of western Texas; (ii) downstream opportunities related to the foregoing ; and (iii) the financing of Company’s interest in connection with any of the forgoing Transactions. Incentive Bonus – For Transactions completed pursuant to

Part II of

section B above, an incentive bonus in an amount to be determined according to the following

Schedule shall be paid upon the successful completion of a Transaction that was originated by Consultant or in which Consultant participated as requested by Company ... (emphasis added) [ 11 ] Reiter notes that the purchase of the Campbell River site facilitates a downstream opportunity with respect to Quicksilver’s Horn River and Horshoe Canyon properties, but he avoids focussing on the defined term “Transaction”.

A Transaction must be completed for an incentive bonus to be paid and Transaction is defined as follows: For the purpose of this Agreement, “Transaction” shall be read and interpreted broadly to mean and include any transaction resulting in a business relationship between the Company (or one of them) and a third party, including a Prospect, in any form, including the formation of a corporation, partnership, joint venture, strategic alliance or other similar business relationship , for the purpose of providing Company with ... (

b) development opportunities for Company’s North American oil and gas assets. (emphasis added) [ 12 ] The purchase of the Campbell Site was simply a real estate purchase. It was not a Transaction as defined by the agreement.

It did not result in an ongoing business relationship between Quicksilver and a joint venture partner or investor. [ 13 ] What has happened is that Reiter has provided services, by means of negotiating a real estate purchase, which fall outside of the terms of the Amended Consultant Agreement. [ 14 ] This may result in Reiter having an argument that, by conduct, the parties acceded to a broadening of the terms of reference for Reiter’s services, or it may result in Reiter having a claim for quantum meruit , but that is not the claim for which Reiter has sought

summary judgment. (iii) letter agreement dated January 29, 2014 [ 15 ] The third contract is a letter agreement dated January 29, 2014 (the “2014 letter”). It arose in the context of a Quicksilver’s decision to exercise its contractual right to terminate the amended consultant agreement. Here is the relevant wording: The Company also desires to recognize your assistance with the purchase of the assets (the “Assets”) as set forth in that certain Asset Purchase Agreement dated ... [describes the Campbell River purchase] ... Therefore, in addition to the incentive bonus provided in subsection (

b) of Exhibit A to the Consultant Agreement, upon the final and completed consummation of a Transaction (as defined in the Consultant Agreement) with a Prospect which includes the Assets, the Company shall pay a bonus to you in the amount of $258,300 CSD (which reflects three percent of the Purchase Price (as defined in the Campbell River Agreement) (emphasis added) [ 16 ] The plaintiffs say the 2014 letter is an acknowledgement that a success fee is payable for the 2013 purchase of the Campbell

River site. They do not argue that the 2014 letter is an agreement to pay a success fee for the 2013 purchase of the Campbell River site. [ 17 ] The ‘in addition’ wording contained in the 2014 letter does not alter my conclusion that no incentive bonus was payable for the 2013 purchase of the Campbell River site. The wording of the amended consulting agreement is quite clear, and it does not provide for payment of a bonus as no “Transaction” occurred. [ 18 ] Nor do the surrounding circumstances support the plaintiffs’

interpretation of the amended consulting agreement. For example: • If an incentive bonus had been earned for the 2013 purchase, why had the plaintiffs not submitted an invoice for it or otherwise demanded payment of it prior to the 2014 letter, or even upon entering into the 2014 letter agreement?

Demand was not made for over another year following the 2014 letter. • If an incentive bonus had been earned for the 2013 purchase, but for some reason it was neither invoiced nor paid to that date, why would the 2014 letter not mention when it was to be paid? • Why would Quicksilver be facing the prospect of paying two bonuses – one for the 2013 purchase and another if there was a “Transaction” in the future as contingently contemplated by the 2014 letter?

Surely in the circumstances the reason for providing this contingent bonus in the 2014 letter was that no bonus had yet been earned despite the plaintiffs’ work to date. Limitations Argument [ 19 ] If I had found that an incentive bonus was owed pursuant to the amended consultant agreement, it would not have been barred by the Limitations Act . The claim for the incentive bonus is clearly a claim that is “related to the conduct, transaction or events described in the original pleading in the proceedings”, that is the claim made under the 2014 letter, and thus is saved under section 6(2) of the Limitations Act .

Conclusion [ 20 ] The plaintiffs’ application for

summary judgment is denied. If the parties cannot agree on costs they may approach me for a ruling in that regard. Heard on the 23 rd day of November, 2015. Dated at the City of Calgary, Alberta this 7 th day of December, 2015. M.C.C.Q.B.A. J.T. Prowse Appearances: Leslie R. Duncan, Q.C. for the Plaintiffs James A. D'Andrea, Q.C. Bennett Jones LLP for the Defendant