Wennekers v Gunn, 2016 ABQB 358

Court of Queen ’ s Bench of Alberta Citation: Wennekers v Gunn, 2016 ABQB 358 Date: 20160627 Docket: 1001 11120 Registry: Calgary Between: Henri Wennekers Plaintiff - and - Darryl Gunn and Jim Quillian Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice C.M. Jones _______________________________________________________ I. Introduction [ 1 ] This is a dispute arising from the collapse of a joint undertaking by three individuals: the Plaintiff Dr. Henri Wennekers, the Defendant Darryl Gunn and the Defendant Jim Quillian.

I employ the term “joint undertaking” to refer the parties’ mutual activity without, at this stage, attributing any legal characterization to it. [ 2 ] As revealed below, the parties did not take proper and timely steps to document their business arrangements. Thus, this Court must make a determination of the legal relationship among the parties, if any, and the consequences flowing from that legal relationship. [ 3 ] Wennekers, on the one hand, and Gunn and Quillian, on the other, present this Court with conflicting testimony regarding the understandings among them.

Accordingly, the outcome of this case will depend in large part upon the Court’s assessment of credibility. [ 4 ] In addition, the parties provided the Court with a voluminous written record consisting primarily of hundreds of (often ambiguous) emails. The Court’s challenge is to reconcile the conflicting testimony and the written record in an effort to determine the true nature of the joint undertaking. [ 5 ] In addition, regardless of the existence and nature of the legal relationship among the parties, the Court must consider if some form of equitable remedy is called for. II. Agreed Facts

[ 6 ] The parties submitted an Agreed Statement of Facts disclosing the following: (

a) Frac Energy Inc. (“Frac”) was incorporated on October 15, 2009; (

b) Wennekers, Gunn and Quillian were all appointed directors of Frac upon its incorporation; (

c) Gunn completed incorporation documents for Frac and submitted them to an Alberta Registry Office ; (

d) In or about December 2009, Frac entered into a joint venture agreement. It became the beneficial owner of a 40% interest in certain petroleum and natural gas rights. Those rights had been acquired by Frac’s joint venture partner at that partner’s sole cost; (

e) Early in 2011, Gunn and Quillian, on behalf of Frac, engaged Sayer Energy Advisors (“Sayer”) to market Frac’s assets or its shares; (

f) In April 2011, Gunn and Quillian entered into a share purchase agreement with Birch Lake Energy Inc. (“Birch Lake”) for the sale of all of the shares of Frac; (

g) Consideration for the sale to Birch Lake consisted of $2,000,000.00 in cash and five million shares of Birch Lake; and (

h) Wennekers consented to one-third of net cash sale proceeds and one-third of the five million shares of Birch Lake being held in trust pending the outcome of this action. [ 7 ] That Agreed Statement of Facts says little about the parties’ understandings and arrangements. Assessing those understandings and arrangements requires further examination of the background. III. Background [ 8 ] Prior to the events leading to this case, Wennekers had known and occasionally worked with Gunn for approximately seven years.

Gunn had known Quillian for many years and they had worked together at another company. [ 9 ] Wennekers is a highly experienced exploration geologist. Gunn is a petroleum engineer with particular expertise in completion and well “re-working”. Quillian is also a petroleum engineer with demonstrated success in raising capital for new ventures. [ 10 ] Wennekers acknowledges that Gunn had the idea to look for opportunities to drill horizontal wells and use stage fracking to extract hydrocarbons from the Cardium formation, a stratigraphic unit of Late Cretaceous age in the Western Canada Sedimentary Basin .

Gunn provided well logs to Wennekers, who agreed to review them and use them to prepare a map and cross-sections to illustrate the potential for development of the Cardium formation. [ 11 ] Gunn and Quillian claim that they had spent several months working up a Cardium “play” before it was ever brought to Wennekers. A play is a group of hydrocarbon prospects in the same region that are controlled by the same set of geological circumstances. [ 12 ] Wennekers sought to establish that he brought unique experience and knowledge to the joint undertaking, particularly as it relates to the Cardium formation.

Gunn and Quillian, though not denying Wennekers’ unquestioned expertise as an exploration geologist, sought to establish that his efforts on behalf of the joint undertaking were not a factor that contributed to the realization of value on the eventual sale of Frac shares. Gunn and Quillian argue that they, virtually alone, brought matters to the point where a sale was possible. [ 13 ] Wennekers asserts a claim to one-third of the consideration received for the sale of Frac shares. Gunn and Quillian contend that Wennekers never became entitled to any equity interest in Frac.

The record, they argue, supports the assertion that Wennekers never fulfilled the requirements for entitlement. To be clear, Gunn and Quillian do not deny the existence of a joint undertaking. They simply deny that it ever evolved to the point where it conferred any rights in law or in equity upon Wennekers. IV. Pleadings [ 14 ] Wennekers’ Amended Statement of Claims alleges, inter alia : (

a) Gunn and Quillian have refused to recognize Wennekers’ 1/3 interest in Frac, refused to issue Wennekers’ 1/3 interest in Frac or converted Wennekers’ 1/3 interest to themselves; (

b) Gunn and Quillian have, in breach of

section 242 of the Business Corporations Act , R.S.A. 2000, c. B-9 (“ ABCA ”), conducted the business or affairs of Frac and exercised powers in manner that is oppressive, unfairly prejudicial to and in disregard for Wennekers’ interests as a director and shareholder of Frac; (

c) Gunn and Quillian have been unjustly enriched as a result of Wennekers’ contributions to Frac; and (

d) Gunn and Quillian fraudulently conspired to convert Wennekers’ interest in Frac to themselves. [ 15 ] Wennekers originally sought the following relief: (

a) that Wennekers be issued shares of Frac to which he is entitled; (

b) that Gunn and Quillian be found to have engaged in oppressive conduct;

(

c) that all steps necessary to reflect Wennekers as the owner of 1/3 of the issued shares of Frac be taken and the corporate records of Frac be amended accordingly; (

d) an injunction preventing Gunn and Quillian from dealing with the shares or assets of Frac; (

e) that financial disclosure be provided to Wennekers; (

f) general, punitive and/or exemplary damages; and (

g) costs. [ 16 ] As noted above, the issued shares of Frac were sold. Wennekers concurred in the sale. By Order of this Court, 1/3 of net sale cash proceeds and 1/3 of the shares of Birch Lake received in exchange for shares of Frac are being held in trust by the Defendants’ counsel, pending the decision of this Court. [ 17 ] Gunn and Quillian’s Statement of Defence to Amended Statement of Claim alleges the following: (

a) Wennekers informed Gunn and Quillian that he had plays of his own; (

b) Gunn advised Wennekers that if Wennekers’ plays were suitable, the parties would incorporate Frac jointly, acquire an interest in the Lochend prospect and in Wennekers’ prospects and thereafter work to build Frac by acquiring and developing other opportunities; (

c) No agreement was reached among the parties at any time as to the issuance of Frac shares to Wennekers or as to the terms for him becoming a Frac employee. In early 2010, Gunn offered Wennekers the chance to leave his employment with Husky Oil Operations Limited (“Husky”) and join Frac on a full time basis in exchange for 1/3 of the Frac shares. A similar offer had been extended prior to Frac’s incorporation in October 2009 and repeated at various times after incorporation; (

d) Wennekers did not leave his employment with Husky and did not bring prospects to Frac; (

e) Wennekers had represented to Gunn and to Quillian that he would be able to work evenings and weekends prior to leaving Husky and could use a computer program called AccuMap at Husky to work on developing prospects; (

f) Wennekers had represented to Gunn and to Quillian that he could attend meetings during his normal work hours with Husky in order to promote Frac’s interests; (

g) Wennekers’ representations were in breach of the terms of his employment with Husky; (

h) Wennekers failed to leave his employment with Husky, resulting in the loss of a potential investor in Frac. He failed to attend meetings and failed to perform analysis of additional prospects. [ 18 ] Gunn and Quillian take the position that there was no agreement to issue Frac shares to Wennekers because he did not accept the offer of employment with Frac. In the alternative, if there was an agreement, its terms are too vague to enforce. In the further alternative, if there was an agreement, it required Wennekers to join Frac full time and bring his prospects; he did neither.

In the further alternative, any purported entitlement Wennekers might have properly belongs to Husky. [ 19 ] In addition, Gunn and Quillian take the position that Frac is not bound by any alleged agreement with Wennekers because the requirements of

section 15 of the ABCA regarding pre-incorporation contracts were not met. V. Evidence [ 20 ] As noted above, the evidence in this matter consists primarily of the parties’ testimony and the email correspondence among them. It will be most useful to set out this evidence in the form of a chronology. [ 21 ] As early as March 13, 2009 and on into early April 2009, Gunn engaged Wennekers in discussions about undertaking some joint activity.

These discussions do not appear to have related to a Cardium play in the Lochend area. [ 22 ] Gunn and Quillian were actively engaged in discussions as early as April 13, 2009 and on into May and June of 2009. They discussed horizontal drilling in the Cardium play for the first time on June 11, 2009. [ 23 ] It does not appear that Gunn and Wennekers were discussing horizontal drilling and fracking into the Cardium zone in the Lochend area until on or about June 25, 2009. On that date, Gunn sent an email to Wennekers, asking him to prepare a map of the potential pool in the Cardium from logs supplied by Gunn.

Gunn claimed that his idea was to drill horizontal wells in the Cardium zone in “Q-Country”. Q-Country encompasses the general area northwest of Calgary where Quillian’s residence is located.

Even though Quillian is not mentioned in the email, the reference to Q-Country corroborates Gunn and Quillian’s assertion that by then they were looking at drilling in the area they ultimately worked up. [ 24 ] On June 25, 2009, Quillian provided Gunn with a budget to develop the Q-Country Cardium play. [ 25 ] It is clear that, by June 27, 2009, Wennekers, Gunn and Quillian were all focused on developing a Cardium play in Q- Country.

On that day, Wennekers responded positively to Gunn’s email and provided three maps he had prepared. [ 26 ] By June 29, 2009, it appears the joint undertaking had come into existence. Gunn and Quillian exchanged emails discussing

Wennekers’ mapping efforts and Quillian asked Gunn if Wennekers would be comfortable using his maps for presentation to interested parties. [ 27 ] Further email discussions between Gunn and Wennekers took place on July 2, 2009. Gunn sent Wennekers a spreadsheet prepared by Quillian. There appears to be no direct email communication between Quillian and Wennekers until July 3, 2009.

After that point, all three parties appear to have communicated as a group with regard to the feasibility of this prospect. [ 28 ] On July 4, 2009, Wennekers provided Gunn and Quillian with work product (maps and montages) and invited further requests. [ 29 ] On July 5, 2009, Gunn emailed Wennekers and Quillian, commenting on Wennekers’ “great maps” and asking for more work product. He also noted that Quillian was to “handle the drilling costs”.

It is evident to me that the three of them were by that time working jointly towards the development of this play. [ 30 ] The combined efforts of the parties are depicted in an email exchange on July 8 and 9, 2009. Gunn provided insight into engineering and cost matters, presumably so that Quillian could refine his budget. Wennekers provided geological analysis. [ 31 ] In an email to Wennekers on July 10, 2009, Gunn and Quillian referred to the joint undertaking as “DJ Henri”. Gunn expressed the need to keep Quillian engaged with him and Wennekers because of Quillian’s other interests.

On July 11, 2009, Wennekers sent an email to Gunn concurring with that sentiment. [ 32 ] On July 11, 2009, Gunn and Wennekers engaged in technical discussions regarding a particular well. [ 33 ] On July 11 and 13, 2009, Quillian and Gunn exchanged emails and on July 13 and 14, 2009, Wennekers and Gunn exchanged emails. Wennekers was asked to do more work. [ 34 ] On July 11, 2009, Quillian responded to an email from Gunn that offered a draft letter of inquiry to be sent to prospective sellers of producing properties. That letter referred to a “a group” forming an oil and gas company.

Quillian approved that articulation by return email that day. That same day, Gunn requested more work product from Wennekers. [ 35 ] On July 15, 2009, Gunn emailed Wennekers, discussing how to move the joint undertaking forward and requesting that Wennekers prepare further maps. Wennekers responded by email that day and provided maps on July 16, 2009. [ 36 ] On July 20, 2009, Quillian emailed Gunn to request further work product from Wennekers. Wennekers agreed to this and provided work product on July 21, 2009. [ 37 ] Wennekers provided further work on July 22, 2009.

A request for modification of that work came by email from Quillian to Gunn on July 23, 2009 and was relayed by Gunn to Wennekers on July 24, 2009. [ 38 ] On July 27, 2009, Quillian emailed Wennekers requesting revisions to his work product. Wennekers complied and responded by email that day. [ 39 ] In late July 2009, Wennekers secured full-time employment with Husky. Gunn and Quillian assert that Wennekers effectively stopped contributing to Frac at this point.

In particular, they claim that Wennekers did no work on Frac matters between July 25, 2009 and September 17, 2009. [ 40 ] On August 14, 2009, Gunn emailed Wennekers to report on a meeting he and Quillian had with Spry Energy and to inform Wennekers that certain lands of interest were posted for sale. [ 41 ] On September 16, 2009, Gunn provided Wennekers with additional logs.

Wennekers responded the next day commenting on technical aspects of the logs and offering advice on how to move the joint undertaking forward. [ 42 ] On September 17, 2009, Gunn emailed Wennekers pointing out another promising Cardium prospect; Wennekers responded by email the next day. [ 43 ] On September 22, 2009, Gunn emailed Wennekers, discussing matters relating to this prospect. He noted that Quillian had suggested that the three of them develop this prospect through Arcadia, Wennekers’ and Gunn’s existing company, and that Quillian buy into it.

Gunn (somewhat indirectly) asked Wennekers to prepare additional maps. [ 44 ] Also on September 22, 2009, Gunn emailed Wennekers and Quillian, providing more data and requesting comments from Quillian. [ 45 ] Email exchanges among the parties continued on September 23, 2009. Gunn continued to seek work product from Wennekers. Despite being employed full time with Husky, Wennekers agreed to provide more work product. He emailed Gunn on September 23, 2009, providing analysis and undertaking to do further work. [ 46 ] On September 24 and 25, 2009, Gunn and Wennekers exchanged emails.

Gunn reported on progress in securing interest from potential participants/investors and Wennekers undertook to prepare additional maps. [ 47 ] On September 26, 2009, Gunn reported to Wennekers on discussions with Spry Energy and provided Wennekers with additional logs. Wennekers responded that day with technical comments. [ 48 ] On September 29, 2009, the three parties communicated regarding the urgency of securing financing and acquiring rights to land.

[ 49 ] On October 3, 2009, Quillian communicated with Wennekers, copy to Gunn, apparently requesting changes to cross-sections Wennekers had prepared in July. Wennekers responded on October 4, 2009 that he would prepare the requested revision. [ 50 ] On October 5, 2009, Wennekers advised Gunn that he had prepared two maps and would like to get them to Gunn. Email correspondence on October 5 and October 6 failed to produce a mutually acceptable meeting date. [ 51 ] On October 7, 2009, Gunn advised Wennekers that he had reviewed Wennekers’ maps and wanted to discuss them the following week.

He also advised Wennekers that Quillian thought the three of them should form a new company, as opposed to using Wennekers’ and Gunn’s existing corporation. Wennekers replied on October 8, 2009 indicating he agreed with the idea of forming a new company. [ 52 ] On October 9, 2009, Gunn advised Wennekers of an offer presented by a potential participant. He relayed discussions Quillian had held with another potential participant and asked if Wennekers could attend a meeting.

On October 12, 2009, Wennekers responded indicating that he would be able to attend. [ 53 ] On October 13, 2009, Quillian provided Gunn with his views regarding the outcome of two discussions with potential participants. That evening, Gunn relayed to Wennekers Quillian’s views with respect to various possible participation options. Wennekers indicated agreement the next day. [ 54 ] On October 13, 2009, Quillian alerted Gunn to prospective land acquisition opportunities.

Gunn and Wennekers each responded that day to Quillian’s email. [ 55 ] On October 15, 2009, Wennekers communicated with Quillian and Gunn, offering to prepare additional cross-sections. [ 56 ] On October 16, 2009, Gunn advised Quillian and Wennekers that Frac had been incorporated. [ 57 ] On October 19, 2009, Quillian emailed Gunn and Wennekers, reporting on possible land acquisitions and issues relating to drilling restrictions.

He requested additional cross-sections on certain lands and deferred to Wennekers to prepare these cross-sections, referring to Wennekers as the “expert”. [ 58 ] On October 23, 2009, Gunn directed Wennekers to prepare the cross-sections requested by Quillian. Wennekers sent the cross-sections to Quillian and Gunn. Quillian suggested the three of them meet to review their data in anticipation of making presentations.

On October 25, 2009, Gunn sought input from Wennekers and Quillian regarding a mutually convenient date for the three of them to meet. [ 59 ] On October 28, 2009, Wennekers sent a cautionary email to Quillian and Gunn, alerting them to presence of sulfur in a well they were very interested in recompleting. On October 29, 2009, Gunn responded, commenting on Wennekers’ caution and providing him with core data. On October 30, 2009, Quillian asked Wennekers to provide him with data to confirm concerns about sulfur. [ 60 ] Further email discussion on this issue ensued on October 30 and 31 and November 1, 2009.

Wennekers undertook to visit a core lab to further analyze the extent of this issue. On November 2, 2009, Wennekers reported to Gunn on his investigation of various cores and undertook to send new core cross sections. [ 61 ] On November 7, 2009, Gunn advised Wennekers that his cross-sections had been sent to Georox for consideration. He further advised that Quillian had lined up companies to look at the play and that interest in the play was developing.

Wennekers responded on November 8, 2009, offering advice and undertaking to prepare more work product. [ 62 ] That same day, Gunn advised Wennekers, inter alia , that Quillian might be getting impatient and seemed interested in getting “any deal done”, instead of moving forward as Gunn and Wennekers had agreed.

Wennekers responded, expressing a balanced view as to how matters should proceed, criticizing neither Quillian for having too narrow a focus nor Gunn for having unrealistic expectations. [ 63 ] It appears from these communications that the parties agreed they had a potentially attractive play to develop or market but might not be in agreement as to business strategy.

It is clear is that Wennekers was still being engaged to do work and to offer his views on how matters should proceed. [ 64 ] Wennekers acknowledged a meeting on November 11, 2009 at the offices of Pajak. [ 65 ] On November 14, 2009, Gunn reported to Wennekers on various developments involving potential participants. He also commented on a potential divergence of interests among the three parties. He suggested that he and Wennekers consider starting “Frac II”.

In a subsequent exchange, Gunn indicated he was glad Wennekers sided with him and suggested that he and Wennekers pursue another opportunity independent of Quillian. Wennekers inquired if Quillian was “continuing with us and Frac Energy” or had “lost faith”. [ 66 ] On November 15, 2009, Gunn offered an explanation for Quillian’s perspective. Wennekers responded that day, expressing some agreement with Quillian’s perspective.

He also offered geologic advice directed at delineating further opportunities. [ 67 ] By mid-November 2009, there were signs that the parties differed in their approach to further developing this play. It appears that Quillian was pursuing one vision for Frac and Gunn and Wennekers another. [ 68 ] On November 19, 2009, Wennekers enquired of Gunn regarding a presentation he thought Gunn and Quillian might have made.

Gunn responded that they had made a presentation to Peloton and noted “You were missed, the three of us give a better presentation than the two of us.” Gunn commented on meetings generally and expressed the view that potential investors might “leave them behind” and any deal t hey structured needed to prevent that.

[ 69 ] On November 20, 2009, Gunn provided Wennekers with additional logs and expressed concern about losing this opportunity, once others became aware of it. Wennekers responded to Gunn and Quillian, providing technical insight regarding the significance of the logs. [ 70 ] On November 22, 2009, Gunn provided Wennekers with additional logs, commenting on their significance. Gunn provided further information to Wennekers on November 23, 2009. [ 71 ] On November 23, 2009, Gunn reported to Quillian and Wennekers, discussing the position of two potential participants.

Gunn and Wennekers had further communication that day and the next. [ 72 ] Meanwhile, it appears that Quillian had communicated with Mike Ponto at Bernum on November 17, 2009, attaching a confidentiality agreement and describing the play. Ponto responded positively and Quillian indicated that he would be away but undertook to contact Ponto to set up a meeting. A meeting was set up for November 27, 2009, at which the president of Bernum, Marshall Abbott, would be present. Gunn and Wennekers were included in this email exchange. [ 73 ] It appears that Wennekers did not attend this meeting.

Gunn reported to him on November 28, 2009, advising that the meeting went well. He reported on other potential participants and asked Wennekers to do more work. [ 74 ] On December 1, 2009, Gunn communicated with Quillian and Wennekers, advocating a particular approach to dealing with Bernum and with Pelaton. He endorsed Wennekers’ “risk analysis approach” to deal formation in light of difficulties tying up rights to “section 33”, a desirable

section for the play. Gunn asked Wennekers to consider logs for additional areas in light of the possibility of an offer from Bernum taking Frac out of this play. They discussed possible offers. [ 75 ] On December 2, 2009, Wennekers produced a cross-section for Gunn’s review. [ 76 ] Also on December 2, 2009, Quillian communicated with CanEra Resources, attempting to stimulate interest in the play. Gunn, but not Wennekers, was copied on that email communication. [ 77 ] On December 2, 2009, Bernum communicated an offer to Quillian.

Gunn advised Wennekers that the offer was “very close to what you suggested they would prepare”. Wennekers was encouraging and agreed to prepare a revised cross-section. [ 78 ] On December 3, 2009, Quillian sent an email proposing the play to another potential participant and enclosing a draft confidentiality agreement. Gunn was copied on that communication but Wennekers was not. [ 79 ] On December 3, 2009, Gunn advised Wennekers that a tentative deal had been struck with Bernum and that Quillian had continued to vigorously pursue other potential participants.

Wennekers requested additional data so he could produce additional cross- sections. [ 80 ] On December 4, 2009, Gunn advised Wennekers that “we have a verbal deal with Bernum”. He provided additional data so Wennekers could continue his analysis. Wennekers responded that day and undertook to do additional work. [ 81 ] On December 5, 2009, Wennekers requested changes to maps so he could refine his analysis. [ 82 ] On December 7, 2009, Quillian responded to an email from Mike Ponto at Bernum. Gunn was copied on that email but Wennekers was not.

Quillian expressed general agreement with a draft joint venture agreement. [ 83 ] On December 7, 2009, Quillian set up a meeting with CanEra. Both Gunn and Wennekers were copied on his email and asked to confirm if they could attend. Wennekers responded indicating that he could. [ 84 ] On December 8, 2009, Gunn advised Wennekers that Gunn and Quillian had a productive meeting with Bernum.

Wennekers acknowledged Gunn’s report. [ 85 ] On December 12, 2009, Gunn provided Wennekers with an additional map to assist in his analysis. [ 86 ] On December 16, 2009, Wennekers advised Gunn of his travel to Europe in late December. Gunn advised that the agreement with Bernum had been signed and stated that, despite Wennekers’ absence, he reserved the right to contact him if needed. Gunn and Quillian claim Wennekers did no work between December 16 or 17, 2009 and January 1, 2010.

However, despite Wennekers’ absence, he and Gunn continued to discus Frac issues by email. [ 87 ] During Wennekers’ absence, Quillian continued efforts to generate interest in financing Frac’s 40% working interest in its joint venture with Bernum. [ 88 ] On December 23, 2009, Gunn reported to Wennekers on the outcome of four meetings he and Quillian had just completed with potential investors.

Gunn’s email does not display any resentment that Wennekers did not participate in those negotiations. [ 89 ] Responding to an email from Wennekers on December 31, 2009, Gunn reported on various meetings he and Quillian had had with potentially interested parties. [ 90 ] On January 4, 2010, Wennekers advised Gunn that he was returning to Canada and was experiencing respiratory challenges.

Gunn acknowledged that advice and alerted Wennekers to Quillian’s efforts to arrange additional meetings. [ 91 ] On January 5, 2010, Gunn advised Wennekers regarding the status of land acquisition efforts, meeting cancellations due to illness and Quillian’s back issues which caused him to be “laid up”. Wennekers responded with business related comments and an update on his own condition.

[ 92 ] On January 8, 2010, Gunn updated Quillian and Wennekers regarding a development relating to another company with a Cardium play. Gunn also provided additional logs so Wennekers could perform an analysis. [ 93 ] On January 8, 2010, Quillian advised a representative of JOG Capital that he was unavailable for meetings on two particular days. The representative expressed some consternation with Quillian’s unavailability. [ 94 ] On January 9, 2010, Wennekers provided Gunn with analysis of the logs Gunn had provided.

Gunn asked Wennekers his opinion on the viability of drilling certain wells and Wennekers responded the next day, providing his analysis. Gunn observed that Wennekers’ analysis may have answered a specific question and asked Wennekers if he had produced additional maps of the Crossfield area. [ 95 ] On January 11, 2010, Wennekers provided Gunn with additional technical explanations and suggested the addition of this play to Frac’s inventory.

Gunn expressed his appreciation to Wennekers for pointing out an oversight in Gunn’s analysis. [ 96 ] On January 12, 2010, Wennekers sought additional data so he could perform further analysis. He provided Gunn with more work product and Gunn responded that the work product “will do fine”. [ 97 ] On January 13, 2010, Gunn sent an email to Wennekers stating the following: Henri, For clarity after today’s meeting, your interest in Frac is 33%, the same as Jim & I. If we raise $12mm & get credit for $2mm land then each one of us would have 4.75% of the company.

If you chose to go to China then you would still have 4.75% (Assuming we do not raise any more money) We will attempt to negotiate a 15% bonus warrant, after the investors double their money. The warrant will be split among those who choose to participate in the management and operation of Frac. I think we have two good plays with great potential. Hopefully, the time of the financing and the prospect of working with us keeps you working in Frac.

As Jim said, it’s your choice See you tomorrow at JOG Capital. [ 98 ] That statement affirms that Wennekers was “working in Frac” and would continue to be engaged in some capacity if financing became available. It also shows that Wennekers’ participation in presentations was welcomed. [ 99 ] Later that day, Gunn commented to Wennekers and Quillian on the technical features of certain wells. Wennekers and Gunn exchanged further technical observations that day and again on January 14 and 15, 2010. [ 100 ] On January 15, 2010, Wennekers asked Gunn to select certain wells so he could make a cross section.

Gunn responded that Wennekers’ suggestion was a good one. Gunn reported on a meeting with JOG Capital and asked Wennekers to produce additional cross- sections. Wennekers responded that he would work on that request on Sunday. [ 101 ] On January 16, 2010, Wennekers provided Gunn and Quillian with a newspaper

article discussing the Cardium Pembina. Gunn provided Wennekers with additional Crossfield logs, presumably for Wennekers’ input. Gunn also provided Wennekers with additional reporting on Cardium opportunities. Quillian was copied on those emails. [ 102 ] On January 18, 2010, Gunn provided both Wennekers and Quillian with an update on drilling activity regarding the Cardium zone. [ 103 ] On January 18, 2010, Quillian advised Gunn and Wennekers that he had arranged a second meeting with Acumen Capital the next morning and inquired as to the status of maps and cross-sections Wennekers was preparing.

Gunn advised Quillian, inter alia , that Wennekers had been working on cross-sections but had been busy over the weekend. He asked if Quillian thought Wennekers should come to the meeting at Acumen Capital. Quillian replied that he would like Wennekers to attend if he could get the time off. [ 104 ] On January 19, 2010, Wennekers emailed cross-sections to Gunn and Quillian. Immediately after that email, Gunn replied that he had lost a map Wennekers had emailed to him, but then advised that he had the maps.

Wennekers replied that what Gunn had just sent him did not include the map he needed. [ 105 ] On January 21, 2010, Gunn and Wennekers exchanged emails on technical matters and Gunn updated Wennekers on Quillian’s discussions with Bernum regarding land acquisition. Gunn also reported on his discussions with Quillian regarding “strategies to get Frac moving”. Wennekers responded with questions to which Gunn replied on January 22, 2010.

Wennekers responded with a power point attachment and an assessment of Cardium opportunity in the Crossfield area. [ 106 ] On January 23, 2010, Gunn provided Wennekers and Quillian with insights regarding the continuity of pools in various areas. He provided Wennekers with additional logs to examine and undertook to provide further logs. [ 107 ] On January 24, 2010, Gunn sent additional logs to Wennekers for analysis.

He updated Wennekers and Quillian on discussions with Kevin Adair at Spry Energy and confirmed that Wennekers had been accurately describing all along how the Cardium zone was laid out. [ 108 ] On January 25, 2010, Gunn provided Wennekers with additional logs for analysis, with a request that he produce more cross- sections and a map.

[ 109 ] On January 26, 2010, Wennekers advised Gunn that he would not be sent to China by Husky. Gunn then provided additional maps and sought Wennekers’ advice regarding the Viking formation.

Wennekers requested a copy person to print a number of cross sections he appears to have prepared. [ 110 ] On February 2, 2010, Gunn commented on Wennekers’ review of certain logs, stating that he found the conclusions reasonable, based on Wennekers’ earlier observations. [ 111 ] On February 27, 2010, Gunn expressed to Quillian and Wennekers his concern that inability to raise money might mean that prospects were lost. [ 112 ] There was further communication between Gunn and Wennekers on February 28, 2010 relating to technical matters. [ 113 ] On March 1, 2010, Gunn advised Wennekers and Quillian that a meeting had been arranged with Spry Energy on March 3.

He raised the question of whether they had sufficient cross-sections for that meeting. [ 114 ] At 6:50 a.m. on March 2, 2010, Wennekers requested data from Gunn, indicating that he would try to construct a cross-section that evening. He advised Gunn that he would attempt to construct a porosity map in respect of Crossfield. At 12:29 p.m. that day, Gunn requested work product from Wennekers. At 3:55 p.m. that day, Wennekers requested data to allow him to prepare materials for the presentation at Spry Energy.

At 8:05 p.m. that evening, Wennekers provided Gunn with an update in respect of three Q-Country wells, indicating that he would add them to a cross-section but not until the weekend. At 8:31 p.m. that evening, Wennekers told Gunn he required a

schedule of what presentation materials were required of him and when those materials would be needed. He advised that he was under time constraints and could only work evenings and weekends. [ 115 ] On March 3, 2010, Gunn asked Wennekers to review certain Cardium logs. Gunn advised that they had needed Crossfield maps that day, presumably for the Spry meeting that had taken place that morning. Gunn also advised Wennekers of what was needed for a meeting with Charlton Capital and indicated that matters were a rush.

Wennekers responded at 4:31 p.m. that day, apologizing for not having materials ready for the meeting that day. He advised that matters were moving too fast for him at that moment, laid out a time table he could meet for completion of presentation materials and explained why he needed the time to work on these materials.

He also advised that there was only so much he could do on his own time. [ 116 ] On March 4, 2010, Wennekers provided Gunn with maps and cross-sections. [ 117 ] Gunn communicated further with Wennekers on March 4 and 5, 2010. [ 118 ] On March 6, 2010, Wennekers provided Gunn with cross-sections in respect of the Kakwa area and Gunn asked Wennekers to prepare a porosity map. Wennekers responded that he would require a base map with well locations. Later that afternoon, Gunn provided certain logs for inclusion in cross-sections Wennekers was working on.

At 8:56 that evening, Wennekers provided Gunn with “raw reservoir data” and advised that he was ready to make maps. [ 119 ] It appears that on March 11, 2010 Gunn advised Wennekers that Quillian had prepared cross-sections and maps for Kakwa and no that further work was needed in respect of Kakwa.

He did advise that Wennekers should prepare other cross-sections and that “Frac Energy needs to meet this week to discuss our go forward plans”. [ 120 ] On March 8, 2010, Gunn provided Wennekers with logs and told him that he hoped to meet with Chartlon Capital that week and that having Crossfield cross-sections would be helpful.

Wennekers responded later that morning saying “cross sections tonight”. [ 121 ] On what appears to be March 8, 2010, Gunn expressed newly acquired understanding of a technical point Wennekers had made earlier and Wennekers provided Gunn with additional work product. [ 122 ] On March 11, 2010, Gunn advised Wennekers that he and Quillian were meeting with “some financier/deal makers” the following day. He indicated that he and Quillian wanted to meet with Wennekers after that meeting. Also that day, Quillian asked both Wennekers and Gunn for short career biographies.

That proposed meeting of the three of them was postponed. [ 123 ] On March 15, 2010, Wennekers emailed Quillian and Gunn, saying “Lately, have not heard about what is up with Frac Energy. I would like to meet to get updated and talk about forward plans.” [ 124 ] On March 29, 2010, Wennekers communicated with Gunn, offering insights regarding senior executives of a particular corporation. [ 125 ] Gunn and Wennekers met on March 31, 2010. On April 1, 2010, Quillian emailed Wennekers.

Quillian’s email implied, for the first time, that he and Gunn had just become aware that Wennekers did not want to leave Husky and join Frac as a full time geologist. Quillian went on to state that discussions the day before between Gunn and Wennekers, directed at allowing Gunn and Quillian to acquire Wennekers’ share of Frac, would allow Wennekers to monetize his Frac shares and allow Frac to acquire a full time geologist, assuming they had a successful financing.

He stated that Wennekers was “fully entitled to keep your shares and ride-out this venture” but pointed out that “raising funds is not going well”. [ 126 ] Later in this email, Quillian states: If we have to pay these amounts out of our own pockets, you will have the opportunity to acquire an equal amount of shares as Darryl and I to fund these costs. … I understand this is a difficult decision for you but I implore you for your own sake and for the sake of Frac to consider our offer to find a

buyer for your shares. [ 127 ] On April 7, 2010, Wennekers advised Gunn and Quillian that he was not yet ready to meet and that he was putting his “Frac Energy ducks in a row”.

Gunn advised that the three of them must meet on Thursday because he and Quillian had meetings on Friday and noted that “Frac Energy needs to make a couple of decisions regarding share issues and discuss a potential business transaction that will have an impact on all shareholders.” [ 128 ] On April 8, 2010, Wennekers responded that he could not meet because he was sick. [ 129 ] Chuck Charlton emailed Gunn and Quillian on April 9, 2010 indicating that a meeting could take place at 10:00 a.m. or 2:00 p.m. that day.

It would appear that this meeting was deferred until April 12, 2010. [ 130 ] Chuck Charlton sent draft agreements between Frac and Charlton Capital for review by Quillian and Gunn. In those agreements, the “Shareholders” of Frac, who were not named, undertook to make payments to Charlton Capital in certain circumstances. It appears that discussions with Charlton Capital did not prove successful. [ 131 ] On April 15, 2010, Wennekers responded as follows to Quillian’s email of April 1, 2010: (

a) He noted that Quillian had acknowledged that Wennekers had the right to keep his shares in Frac; (

b) He indicated what information he and his lawyers would require to arrive at an estimate of the value of his shares; (

c) He disparaged Quillian’s and Gunn’s business judgment and their efforts to promote Frac; (

d) He noted that there was no agreement among the parties that would mandate cash calls; and (

e) He challenged Quillian’s assertions that he and Gunn would need to be compensated for their efforts. [ 132 ] Also on April 15, 2010, Wennekers emailed Quillian and Gunn, asking them to keep him advised as a director. [ 133 ] On April 17, 2010, Gunn attempted to arrange a meeting of the three parties. Wennekers responded that he could not meet until after the weekend.

A meeting appears to have been arranged for April 20, 2010. [ 134 ] On April 21, 2010, Wennekers communicated with Gunn, stating that he believed Gunn and Quillian were not forthcoming with him in their meeting the day before and accusing them of pursuing another deal that they had not told him about.

He indicated that he had talked to his lawyer and that “…there is no reason at all for me to cut my shares down to 20% as suggested by you or to 22% as suggested by me.” Wennekers also communicated with Quillian, thanking him for a phone call and explaining the source of his anxiety. [ 135 ] Quillian twice emailed Wennekers and Gunn, discussing technical issues and proposing that the three of them meet. [ 136 ] On April 22, 2010, Wennekers advised Quillian and Gunn that he was meeting with his lawyers to see “what can be done about maintaining my 1/3 of the shares in Frac Energy”. [ 137 ] On April 23, 2010, Wennekers communicated with Gunn, advising: I agree with a 20% shareholding for me in Frac Energy.

Please have it drawn up by a lawyer for my signature. [ 138 ] Gunn advised Wennekers that Quillian was preparing documentation for completion by a lawyer so that matters could be signed up. He also asked Wennekers for technical advice. Wennekers responded positively. [ 139 ] On April 24, 2010, Wennekers advised Gunn as follows: While you and/or Jim’s lawyer is preparing the paperwork for the 20% share holding, he or she mi g ht as well prepare the paper work for the additional 13.33333% for my signature to arrive at the 33.3333% (33 1/3) originally agreed upon shareholding.

As Jim so aptly said during our infamous past Tuesday meeting: “A deal is a deal”. [ 140 ] On April 26, 2010, Quillian advised Gunn and Wennekers that there had been an expression of interest in buying “our Lochend property”. [ 141 ] On April 27, 2010, Gunn advised Wennekers that he and Quillian wanted to meet with him to discuss ownership and go forward plans. [ 142 ] On April 28, 2010, Wennekers advised Quillian and Gunn as follows: There is little reason for me to meet with you regarding the shareholding percentage going forward. You know what our respective shareholdings were on January 14, 2010.

Please, let me know what you and Jim did to increase the value of the shares in such a way that allows you to demand an increase in shareholdings from 33 1/3 to 40 % from between January 14, 2010 and today. As it stands, a lot of effort, talk, but little results. After your response yesterday given to me through Jim, regarding my shareholding, I feel a lot better after meeting with lawyers at Miller Thomson… [ 143 ] Quillian and Gunn continued their efforts to market Frac in May through August of 2010. Sayer appears to have become involved in August 2010.

They assisted in compiling marketing materials, which indicate that Frac has two shareholders. [ 144 ] Ultimately, an agreement was reached with Birch Lake effective April 15, 2011. Gunn and Quillian agreed to sell their shares of Frac to Birch Lake for $2,000,000 and 5,000,000 shares of Birch Lake. Wennekers agreed to a consent Order dated April 12, 2011

allowing the sale to proceed, provided that one-third of the shares and of the cash after payment of expenses would be held in trust pending resolution of this dispute. [ 145 ] Eventually, counsel for Gunn and Quillian accepted cash in the amount of $630,337.56 for deposit to an interest bearing account, together with shares of Birch Lake, pending resolution of this action. VI. Parties’ Positions and Findings of Fact [ 146 ] There are numerous issues upon which the parties differ.

First, Gunn and Quillian assert that there were two conditions precedent to Wennekers’ entitlement to Frac shares: that he bring his own plays to the joint undertaking and that he leave Husky to work full-time with Frac. Wennekers denies that these were ever conditions precedent to his right to an equal equity interest in Frac. He argues that it would have been unreasonable for him to agree to quit a lucrative job with Husky during a period of economic downturn to work full-time in a company that had no funds and no need of full-time employees.

Wennekers asserts that the understanding among the parties was that they would work jointly towards the development of a Cardium play and, if they succeeded, it would be held by a corporation of which they would be equal shareholders. [ 147 ] Gunn’s and Quillian’s position is that it was understood Wennekers would be working up plays in the Manville zone and would contribute those plays to the joint undertaking. It is noteworthy that, with one exception, the email correspondence contains no reference to Wennekers contributing Manville plays.

The one exception is the email from Quillian to Wennekers on April 1, 2010, just as the joint undertaking was coming to an unhappy conclusion. I consider that email self-serving and its assertions dubious. [ 148 ] In direct examination, Gunn testified that he did not need Wennekers for his opinion on a play. He says he wanted him for plays. He reiterated that what adds value to a presentation and the company is more plays, more assets.

That assertion is in stark contrast to the continuous requests of Wennekers for technical input and evaluation and to the complete absence of inquiry regarding plays Wennekers was supposed to bring to Frac. [ 149 ] Further, I note that in an email dated November 19, 2009, Gunn told Wennekers that the three of them give a better presentation than just Gunn and Quillian.

On cross-examination, Gunn attempted to distance himself from that comment but did acknowledge that having a senior geologist say your play is good adds weight to it. [ 150 ] Gunn and Quillian make much of Wennekers’ alleged reluctance to access a computer program, such as AccuMap or GeoScout, that would have allowed him to work up plays on his home computer. Instead, they argue, he wanted to find employment, which led to the commencement of his employment with Husky. For his part, Wennekers testified that he did not want another program on his home computer.

He claims the understanding among the parties did not require him to search a data base for logs but to make use of logs supplied by Gunn to construct cross-sections and maps. [ 151 ] As to the second alleged requirement, Gunn and Quillian assert that Wennekers understood he would have to leave Husky and join Frac full-time in order to become a shareholder. Again, the email correspondence is silent as to such a requirement. Quillian said Wennekers understood that an absence of financing meant that he had to leave Husky, bring plays and work for no salary in order to acquire an equity interest in Frac.

Quillian testified that Wennekers did not challenge that expectation and only argued over performance bonus. These alleged understandings were not reduced to writing. [ 152 ] Gunn explains the absence of supporting emails by asserting that Wennekers would not embarrass himself asking for shares he knows he does not own. That alleged reticence did not prevent Wennekers from asking Gunn in January 2010 about his equity interest.

On January 13, 2010, Gunn confirmed Wennekers’ equity interest without mentioning the two alleged conditions precedent. [ 153 ] Wennekers did testify that he was prepared to come to Frac full-time if funds were ever raised. I do not, however, view this as affirmation that leaving Husky was a condition precedent to Wennekers’ acquisition of an equity interest in Frac. [ 154 ] Gunn and Quillian claim the email correspondence evidences an understanding that, upon his return from his expected deployment to China, Wennekers could go to work for Frac because financing would be raised through JOG Capital.

I do not find this assertion credible. I see nothing in the email correspondence that corroborates any linkage between Wennekers’ return from China, financing through JOG Capital and Wennekers’ employment prospects at Frac. Even if that link existed, it would not necessarily add credibility to Gunn’s and Quillian’s assertions that all of these elements had to come together before Wennekers could have an equity position in Frac.

On the contrary, the balance of this email, as set out above, suggests that Wennekers had an equal interest even if he went to China. [ 155 ] Gunn testified that Quillian objected to this email, saying it was not 100% true. However, I see nothing in the email correspondence to suggest that Quillian disavowed Gunn’s comments. If he were upset by the email, I would have expected him to send a clarifying email to Wennekers and Gunn.

He did not do that, leaving uncontradicted the assertion that Wennekers was an equal participant. [ 156 ] The email correspondence establishes to my satisfaction the roles played by each of Wennekers, Gunn and Quillian. While there was some overlap of responsibility and a sharing of intellectual capital, I conclude that Wennekers’ role was to provide geological expertise. Gunn’s role was to advise on completion engineering and fracking. Quillian’s role was to raise money and provide expertise in negotiating with potential participants and sources of financing.

The email correspondence depicts Wennekers doing exactly what was intended from the start of the joint undertaking: offering technical and business advice, preparing work product and attending meetings when invited and able. Gunn and Quillian engaged Wennekers in technical analysis and made requests for work product, progress updates and the occasional meeting. This corroborates Wennekers’ version of the parties’ understanding. [ 157 ] I consider it implausible that the email correspondence would contain no discussion of the two alleged conditions precedent.

I would have expected Quillian and Gunn to have peppered Wennekers with inquiries as to the status of his promised Mannville plays. I

also would have expected discussion of the terms of Wennekers’ full-time employment with Frac. The email correspondence contains no such discussion. [ 158 ] The second issue is as to the importance of Wennekers’ expertise. Gunn and Quillian assert that their efforts did not require a geologist or geological expertise.

Wennekers disputes that assertion, pointing to Gunn’s testimony about the difference between vertical drilling and horizontal drilling and fracking. [ 159 ] Gunn and Quillian assert that knowledge of particular wells, as opposed to the larger geologic picture, was the important aspect of what was really a recompleting/exploitation undertaking.

Wennekers asserts that his extensive knowledge of exploration geology and the Western Canadian sedimentary basin was important to an understanding of how a particular formation such as the Cardium, which may lend itself to horizontal drilling and fracking, may trend and extend. [ 160 ] Contrary to Gunn’s and Quillian’s assertion that the Lochend play was merely an engineering play, the email correspondence satisfies me that Wennekers’ extensive knowledge of geologic formations in the Western Sedimentary Basis was considered important in assessing Cardium prospects in this part of Alberta.

Gunn’s testimony convinces me that an understanding of the geology of a formation which has been vertically drilled is very important in determining the likely economics of a horizontal drilling and fracking undertaking in that particular formation. Wennekers possessed that understanding. [ 161 ] I am satisfied that all of the parties were necessary to the success of the joint undertaking. While Gunn identified particular wells that were of interest and merited further study, Wennekers’ knowledge was important to the determination of which wells to recomplete in pursuit of a “sweet spot”.

The email correspondence, particularly between Gunn and Wennekers, satisfies me that Gunn and Quillian sought Wennekers’ expertise in the formation of geological structures to ensure that they were maximally efficient in identifying plays to be pursued with limited resources. Of course, turning a sweet spot into cash required much more than knowledge of exploration geology. Both Gunn and Quillian had skills necessary to complete the picture. [ 162 ] A third, related issue pertains to the quality of Wennekers’ contributions.

Gunn and Quillian testified that Wennekers’ work added no value to the Lochend play or to Frac generally. They claim that his work was substandard and had to redone and that participants in a meeting at Sproule laughed at his maps. Gunn and Quillian also testified that they could do everything Wennekers did. [ 163 ] Gunn’s and Quillian’s testimony is in sharp contrast to the email correspondence. On October 19, 2009, Quillian emailed Gunn and Wennekers requesting the preparation of additional cross-sections. He defers to Wennekers to prepare these cross-sections, referring to him as the “expert”.

It is difficult to reconcile this compliment and request for additional work product with Quillian’s testimony that Wennekers’ work product was valueless and that potential investors would laugh at it. [ 164 ] Gunn testified that he did not ask Wennekers to prepare maps, but that Wennekers volunteered to make them. However, the email correspondence is replete with requests from Gunn for Wennekers to prepare maps and cross-sections.

Wennekers did demonstrate initiative in suggesting that he prepare certain maps and cross-sections but the bulk of his work product was the result of direct requests from Gunn. [ 165 ] At no point does the email correspondence reveal dissatisfaction with the quality of Wennekers’ work. Nor does it reveal any dissatisfaction with Wennekers’ timeliness until close to the end of the joint undertaking. On one occasion, in early March 2010, Wennekers was not able to produce the necessary work product in the time frame given to him. I do not fault Wennekers for this.

The email correspondence demonstrates sustained effort on Wennekers’ part and I note that even then, in the face of an admonition for late delivery, Gunn requested additional work product from Wennekers. [ 166 ] Gunn and Quillian disparage Wennekers’s contribution to the preparation of materials ultimately used by Sayer to market Frac. The evidence satisfies me that Gunn and Quillian, in conjunction with Sayer, prepared most of the materials forming part of this presentation.

By the time Sayer was engaged and promotional materials were being prepared, Wennekers had already commenced litigation against Gunn and Quillian. He was not invited to contribute to the preparation of those materials. Nevertheless, the email correspondence leaves no doubt that Wennekers helped lay the foundations for an eventual sale. [ 167 ] In any endeavor, skilled professionals will take different amounts of time to perform their assigned tasks. It is impossible for this Court to conclude that any of the parties spent too little or too much time performing their respective functions.

What is established by the evidence is that Quillian and Gunn continually requested work product from Wennekers and did not complain about his work. The lack of evidence in the email correspondence of dissatisfaction with the quality of Wennekers’ work satisfies me that Gunn’s and Quillian’s testimony in this regard is revisionist. [ 168 ] Frac signed a joint venture agreement with Bernum on December 16, 2009. Gunn and Quillian assert that Wennekers contributed nothing to the formation of this joint venture agreement. They raise uncertainties regarding Wennekers’ participation in meetings with Bernum.

Based on the email correspondence, I have determined that he did not attend a meeting on November 27, 2009, at which the formation of a joint venture became highly probable. [ 169 ] Nevertheless, Wennekers contributed work product, advice and strategy that helped to lay the foundation for productive discussions with Bernum. The email correspondence clearly shows that Wennekers was responding to requests for work product, offering technical advice, commenting on business strategy and generally backing Gunn’s and Quillian’s efforts to successfully conclude a joint venture agreement.

It is devoid of indications that Wennekers’ efforts were inadequate. [ 170 ] Gunn’s and Quillian’s assertions that Wennekers contributed nothing to the joint venture agreement with Bernum are simply not credible. It was not reasonable for Gunn and Quillian to have expected Wennekers to attend every meeting convened with potential investors/participants. Wennekers was employed full-time and could not be expected to be absent from Husky for every meeting during the normal workday, often with little notice.

There is no evidence to support assertions by Gunn and Quillian in their Amended Statement of Defence that Wennekers represented to them that he would be able to leave Husky during the workday to attend meetings they might convene. Neither does the email correspondence evidence any confrontation with Wennekers over this alleged shortcoming.

[ 171 ] In addition, I conclude that Wennekers’ presence at each and every meeting would not necessarily have added value. I find that a significant component of Wennekers’ true value to Gunn and Quillian came from lending his reputation and credibility to their initiatives. He did not have to attend every meeting to do that.

Quillian appears not to have consulted Wennekers on deal formation, to have required or even encouraged his attendance at more than a smattering of meetings or even to have reported to Wennekers regarding the outcome of meeting he did not attend. [ 172 ] Further, the email correspondence satisfies me that Wennekers may not have been invited to every meeting. Some meetings appear to have taken place without his knowledge. Again, I find this entirely consistent with the understandings among the parties.

Once a potential investor/participant had expressed sufficient interest in working with Frac to discuss moving to the next stage, Wennekers’ presence may have added value. [ 173 ] Gunn and Quillian claim that Wennekers contributed nothing in April 2010. I am satisfied that, by then, conscious steps were being taken to limit his participation in Frac. The email correspondence reveals a developing pattern in March 2010. [ 174 ] As noted above, this dispute ultimately is about the extent of each of the parties’ interests in Frac.

Regrettably, the circumstances and documentation surrounding Frac’s incorporation only add to the uncertainty. [ 175 ] The email correspondence reveals ongoing discussion and some lack of agreement, at least initially, about whether to carry on the joint undertaking through a new corporation or an existing one owned by Gunn and Wennekers. Ultimately, Frac was incorporated in October 2009, but Gunn and Quillian assert that discussion and lack of agreement evidences a level of uncertainty that shows the parties were not ad idem .

They would have the Court conclude there was no enforceable agreement among the parties. [ 176 ] In my view, the initial uncertainty about the choice of business vehicle does not indicate a lack of agreement that the parties would be equal participants in the joint undertaking. There could be innumerable business reasons to choose to utilize an existing corporation, a newly formed corporation, a joint venture or a partnership.

The choice of vehicle says nothing about the proportions in which the parties agreed to participate. [ 177 ] The organizational documents for Frac include a director’s resolution dated October 15, 2009 issuing 1,000 shares of Frac to each of Gunn and Quillian. Gunn’s evidence was that this resolution was contemporaneous with Frac’s incorporation. Wennekers asserts that this resolution was prepared much later and reflects the Defendants’ revisionist position regarding his participation in Frac. It is impossible to tell if this resolution was prepared at the time Frac was incorporated or long after.

Its evidentiary value is limited. [ 178 ] The parties were oblivious to the importance of properly documenting the joint undertaking. Shares issued to Gunn and to Quillian from treasury appear not to have been paid for until months later. No shareholders agreement was prepared. No attempt was made by Quillian and Gunn to reduce to writing the two alleged conditions for Wennekers’ equity position in Frac. No bank account appears to have been opened for Frac.

Even though Wennekers was named as a director in the incorporating documents, he was not given copies of the incorporating documents or notice of an organizational meeting. His consent was not sought and he was not asked to sign any resolutions, particularly the one authorizing the issuance of shares to Gunn and Quillian. [ 179 ] Gunn and Quillian use their lack of attention to these important matters as a sword, alleging that it reflects the lack of an enforceable agreement.

I believe Wennekers bears equal responsibility for the fact that these matters were not attended to, but it does not follow that inattention to detail reflects a lack of agreement. [ 180 ] In contrast to the incorporating documents, the email correspondence supports Wennekers’ assertion that the parties intended to share equally in Frac. On September 22, 2009, Gunn emailed Wennekers stating that Quillian had suggested developing the joint undertaking through Arcadia, Wennekers’ and Gunn’s existing company, with Quillian buying into it.

This supports the assertion that Wennekers was to be an equity participant in the joint undertaking. [ 181 ] Gunn and Quillian point to Wennekers’ comments in a later email exchange. On November 14, 2009, Gunn reported on various developments involving potential participants, commented on a potential divergence of interests among the three parties and suggested that he and Wennekers consider starting a Frac II. Later in the exchange, Gunn indicated he was glad that Wennekers shared his point of view and suggested that he and Wennekers pursue another opportunity independently of Quillian.

Wennekers inquired if Quillian is “continuing with us and Frac Energy or has he lost faith?”. [ 182 ] Gunn and Quillian argue that Wennekers’s query reveals the uncertain and tenuous nature of any agreement the parties may have had. I do not attach such significance to this email exchange. All of the parties were pursuing other oil and gas opportunities besides Frac. Quillian had a company called Sojourn and Gunn and Wennekers owned Arcadia.

The reference to Quillian possibly having “lost faith” suggests to me that Wennekers was committed to Frac. [ 183 ] Further, the email correspondence establishes unequivocally that Wennekers worked evenings and weekends, usually on short notice, to produce work product. He was clearly committed to the joint undertaking and the suggestion that he would have maintained that level of commitment in the absence of a clear understanding of his right to share in the rewards is not credible. [ 184 ] Much uncertainty surrounds the parties’ subsequent discussions about Wennekers’ interest.

At a meeting on March 31, 2010, Gunn proposed that Wennekers grant Gunn and Quillian an option to sell Wennekers’ shares. The evidence satisfies me that Wennekers did not accept that proposal, but it does show that he was acknowledged as the beneficial owner of some equity interest in Frac. [ 185 ] Quillian followed up with an email to Wennekers on April 1, 2010 confirming that Wennekers could retain his shareholdings in Frac. Gunn and Quillian claim this referred to a limited shareholding they would be prepared to issue to Wennekers which he would sell to a geologist who would then come to work for Frac.

Wennekers never accepted any such arrangement. The evidence satisfies me that, by then, Gunn and Quillian were intent on entering a “post-Wennekers” phase of Frac’s history. [ 186 ] The parties met again on April 20, 2010 and, according to Gunn, Wennekers accused him and Quillian of having another deal in the works. Gunn testified that he and Quillian had talked about giving Wennekers a one third interest but that it seemed too generous.

Gunn proposed giving Wennekers a 20% interest but Wennekers would be expected to contribute plays to earn that interest. Wennekers, Gunn claims, wanted 22%. They did not reach an agreement at that meeting. [ 187 ] Gunn’s email following that meeting does not state that Wennekers’ interest was dependent upon him bringing plays. It is devoid of any detail regarding the value, timing or nature of plays to be brought by Wennekers and I do not find Gunn’s assertion credible. [ 188 ] Wennekers’ email of April 21, 2010 rejects any assertion that his interest in Frac should be reduced to 22% or 20%.

That rejection is consistent with his assertion that he had a 33 1/3% interest, as confirmed in Gunn’s email of January 13, 2010. [ 189 ] Quillian testified that shortly after the meeting at JOG Capital, the parties had breakfast together. He testified that he and Gunn explained to Wennekers that, if the financing did not come together, they were back to the requirement that Wennekers had to bring plays and work for Frac without salary. It is clear that these discussions did not operate to alter the understanding expressed in Gunn’s email of January 13, 2010. [ 190 ] In

summary, the evidence satisfies me that the parties had agreed that they would each share equally in the equity of Frac. VII. Pre-Incorporation Contract [ 191 ] While none of the parties devoted much argument to it, Wennekers made reference to the pre-incorporation provisions of the ABCA .

Section 15 of the ABCA provides as follows: Pre-incorporation contracts 15(1) This

section applies unless the person referred to in subsection (2) and all parties to the contract referred to in that subsection (

a) believe that the body corporate exists and is incorporated under, or (

b) intend that the body corporate is to be incorporated under the laws of a jurisdiction other than Alberta.

(2) Except as provided in this section, if a person enters or purports to enter into a written contract in the name of or on behalf of a body corporate before it comes into existence, (

a) that person is deemed to warrant to the other party to the contract (

i) that the body corporate will come into existence within a reasonable time, and (ii) that the contract will be adopted within a reasonable time after the body corporate comes into existence, (

b) that person is liable to the other party to the contract for damages for a breach of that warranty, and (

c) the measure of damages for that breach of warranty shall be the same as if the body corporate existed when the contract was made, the person who made the contract on behalf of the body corporate had no authority to do so and the body corporate refused to ratify the contract.

(3) A corporation may, within a reasonable time after it comes into existence, by any act or conduct signifying its intention to be bound by it, adopt a written contract made before it came into existence in its name or on its behalf, and on the adoption (

a) the corporation is bound by the contract and is entitled to the benefits of the contract as if the corporation had been in existence at the date of the contract and had been a party to it, and (

b) a person who purported to act in the name of or on behalf of the corporation ceases, except as provided in subsection (5), to be liable under subsection (2) in respect of the contract.

(4) If a person enters or purports to enter into a contract in the name of or on behalf of a corporation before it comes into existence and the contract is not adopted by the corporation within a reasonable time after it comes into existence, that person or the other party to the contract may apply to the Court for an order directing the corporation to restore to the applicant, in specie or otherwise, any benefit received by the corporation under the contract.

(5) Except as provided in subsection (6), whether or not a written contract made before the coming into existence of a corporation is adopted by the corporation, a party to the contract may apply to the Court for an order (

a) fixing obligations under the contract as joint or joint and several, or (

b) apportioning liability between or among the corporation and a person who purported to act in the name of or on behalf of the corporation, and on the application the Court may make any order it thinks fit.

(6) A person who enters or purports to enter into a written contract in the name of or on behalf of a body corporate before it comes into existence is not in any event liable for damages under subsection (2) if the contract expressly provides that the person is not to be so liable.

[ 192 ] Counsel for Gunn and Quillian argues that the conditions precedent set out in those provisions were not met. I agree. This dispute pertains to the issuance of shares of Frac, not to a contract entered into by that corporation. There was here no written contract purporting to be made on behalf of Frac. Neither was any such contract “adopted” by Frac as contemplated in the statute. I find that these provisions are not applicable to this case. VIII.

Contract Analysis [ 193 ] Gunn and Quillian posit three impediments to the formation of a contract in respect of the shares of Frac: (1) there was never an agreement among the parties; (2) if there was any agreement, its terms were so vague as to be unenforceable; and (3) there were two conditions precedent to Wennekers’ acquisition of an interest in Frac, neither of which was fulfilled. [ 194 ] As I found above, neither of the two alleged conditions precedent is borne out in the evidence.

I find that Wennekers was not required to bring plays to the joint undertaking or to work full-time for Frac in order to acquire an equity interest. [ 195 ] Further, I find that the evidence establishes an agreement among the parties, the terms of which were sufficiently certain to render that agreement an enforceable contract. While the parties’ understanding was not reduced to a written contract, that is not necessary in these circumstances.

I note that in the case of Pedersen v Soyka , 2014 ABCA 179 to which the parties referred, the only evidence of the contract sued on was the respondent’s testimony, which the appellant disputed. The trial judge disbelieved the appellant and found an enforceable contract; a majority of the Court of Appeal upheld that decision. [ 196 ] Based on Wennekers’ evidence, as corroborated by the email correspondence, I find that there was an agreement among the parties that each would contribute his efforts and expertise to the joint undertaking and that they would share equally in the fruits of that undertaking.

Wennekers was to contribute work product, technical and business advice and would receive 1/3 of the equity of Frac. This conclusion is supported by: (

a) Gunn and Quillian’s innumerable requests for work product and the delivery thereof, the requests for technical advice and the provision thereof, the requests to attend certain meetings and Wennekers’ attendance thereat; (

b) Gunn’s email of January 13, 2010; and (

c) Quillian’s advice in his email of April 1, 2010 that Wennekers was entitled to keep his shares. [ 197 ] I note the words of Lord Wright in Scammell v Ouston [1941] All ER 14 (HL) at para 25: The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance, and not mere form. It will not be deterred by mere difficulties of

interpretation. Difficulty is not synonymous with ambiguity, so long as any definite meaning can be extracted. [ 198 ] In John W Page Welding Consulting Ltd v Canonbie , 2014 ABQB 465 at para 54 , Madam Justice Pentelechuk helpfully discusses the requirements for contract formation: “The test for

interpretation and for certainty of terms is objective; one party’s subjective views about the agreement, or how it would later work, not agreed to by the other side, are irrelevant”: Hillview Homes at para 27. In Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co. , 2003 ABCA 221 (Alta. C.A.) at para 9 , (2003), 330 A.R. 353 (Alta.

C.A.), our Court of Appeal explained the test this way: …[T]he parties will be found to have reached a meeting of the minds, in other words be ad idem , where it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty… [ 199 ] Clearly, the parties’ documentation of their understanding was woefully inadequate and certain details are missing.

But the essential terms of the contract may be ascertained from the correspondence among the parties and those omissions did not prevent them from contributing to the joint undertaking in accordance with their defined roles, leading ultimately to the agreement with Bernum. In this regard, I find particularly instructive Côté JA’s statement at para 53 of Pedersen : How to value the shares or to treat the transaction for tax purposes is surely not necessary to the validity of the contract. For example, “I will trade your bus business for my farm near Wainwright.” That is a valid contract.

Filing income tax returns later may involve a lot of work, but that is no impediment to a valid contract. [ 200 ] I find that the work of all three parties contributed to the sale to Birch Lake. The actions of the parties support the existence of this contract: Fedel v Tan et al , 2010 ONCA 473 , 101 OR (3d) 481 at para. 50 . [ 201 ] Gunn and Quillian assert that the disagreement regarding the requirement for Wennekers to work for Frac and to bring plays means there is uncertainty regarding a material term of the oral contract.

However, as discussed above, the evidence does not support Gunn and Quillian’s position that these were terms of the contract, let alone essential terms. [ 202 ] Gunn and Quillian refer me to Community Investments Ltd. v Hardman , [1983] 125 APR 273 (NSSC) in support of the assertion that Wennekers failed to fulfill his contractual undertakings to leave Husky and come to Frac full-time, as well as to bring plays to Frac. Gunn and Quillian assert that they were entitled to treat the contract as discharged. Again, I have found that the evidence does not establish these requirements as contractual terms.

Accordingly, it follows that Wennekers did not breach the contract by failing to fulfill them. I find Gunn and Quillian, not Wennekers, breached the contract.

[ 203 ] Accordingly, I find that Wennekers was entitled to 1/3 of the shares of Frac under the terms of the contract among the parties. IX. Unjust Enrichment [ 204 ] Given my conclusion in respect of the contract argument, I need not address Wennekers’ arguments in respect of unjust enrichment or oppression. Nevertheless, I will do so for the sake of completeness. [ 205 ] As noted in Scott & Associates Engineering Ltd v Finavera Renewables Inc , 2013 ABQB 273 , 79 Alta LR (5 th ) 172 at para 153 : Unjust enrichment may be advanced when three elements are proved: 1.

That there has been an enrichment in favour of the respondent; 2. That there has been a corresponding deprivation on the part of the claimant; and 3. That there is an absence of juristic reason for the enrichment and deprivation. [ 206 ] I find that Gunn and Quillian were enriched by Wennekers’ efforts. The email correspondence establishes his considerable contribution to the join undertaking. I am satisfied that he made important contributions, at critical times, in response to requests from Gunn and Quillian.

I also find that Wennekers suffered a deprivation in that he has not received his 1/3 share of Frac. [ 207 ] With respect to the absence of juristic reason, Martin J’s comments at paras 165 and 166 of Scott are instructive: Determining whether there is an “absence of juristic reason” is the opportunity for the Court to consider what is fair. In the case at bar, Finavera freely accepted the benefits conferred by Scott’s status and labours while Scott prejudiced itself with some expectation that it would eventually receive a benefit.

These kinds of circumstances make it unfair or unjust for Finavera to retain the benefit provided by Scott. The Court in Garland v. Consumers' Gas Co , 2004 SCC 25 at paras 44-46 , [2004] 1 SCR 629, set out a two-step analysis to determine the absence of juristic reason: the plaintiff must first show that no juristic reason from an established category exists to deny recovery, with established categories including a contract, a disposition of law, a donative intent, or other valid common law, equitable or statutory obligations.

Second, in the absence of the established categories, the Court may consider the reasonable expectation of the parties and public policy considerations to assess whether recovery should be denied. [ 208 ] I find that there is no applicable established category which would justify the enrichment. On the contrary, the email correspondence confirms the expectation of the parties that Wennekers would acquire a 1/3 interest in Frac in exchange for his efforts.

It would be manifestly unfair from a policy perspective to deny him that interest. [ 209 ] Upon a finding of unjust enrichment, the court has discretion to grant an appropriate remedy. A court may order a monetary remedy consisting of an accounting for quantum meruit or a proprietary remedy consisting of the imposition of a constructive trust. [ 210 ] Gunn and Quillian point to Wennekers’ testimony that he considered his work for Frac to be “voluntary”. They would have the Court infer from this that Wennekers was working without expectation of reward or compensation. I reject that argument.

Wennekers was, in my view, simply confirming that he had no legal obligations to Frac under some form of contract of employment or contract for services. Wennekers was merely asserting that he voluntarily entered into an agreement with Gunn and Quillian to become involved in the joint undertaking. It does not follow that he expected nothing for his efforts.

Gunn and Quillian’s suggestion that Wennekers would expend the effort he did without expectation of return is not credible. [ 211 ] Counsel for Gunn and Quillian acknowledged that I could infer on the evidence that the parties agreed “broadly” on a 1/3 sharing. He also conceded that I could award “something” on the basis of quantum meruit even if there was no valid agreement. [ 212 ] However, Gunn and Quillian argue that Wennekers did not add value equivalent to 1/3 of the sale proceeds of Frac shares. They assert that on March 31, 2010 Wennekers was prepared to accept between $50,000 and $100,000.

Based on the salary Wennekers was receiving at Husky, they argue that he would have to have spent approximately 971 hours to have arrived at a contrib

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