Athabasca Minerals Inc v Syncrude Canada Ltd, 2017 ABQB 47

Court of Queen ’ s Bench of Alberta Citation: Athabasca Minerals Inc v Syncrude Canada Ltd, 2017 ABQB 47 Date: 20170124 Docket: 1201-13727 Registry: Calgary Between: Athabasca Minerals Inc. Plaintiff/Respondent - and - Syncrude Canada Ltd. Defendant/Applicant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice C.M. Jones _______________________________________________________ I.

Introduction [ 1 ] This matter involves two participants in the Alberta oil sands and concerns the rights conferred on them under various agreements with and approvals issued by the Province of Alberta. [ 2 ] The participants are Syncrude Canada Ltd. (“Syncrude”) and Athabasca Minerals Inc. (“AMI”). Syncrude carries on an oil sands extraction and processing operation.

AMI manages the removal of sand and gravel on behalf of the Province from a deposit in northern Alberta known as “the Susan Lake pit”. [ 3 ] In 2012, AMI commenced an action against Syncrude, alleging an outstanding debt in the approximate amount of $620,000.00.

AMI asserts that Syncrude removed surface materials from the Susan Lake pit and failed to pay for those materials and for the full amount of management fees payable to AMI. [ 4 ] Syncrude responded with a counterclaim in the amount of $68 million, alleging that AMI wrongfully permitted excavation, removal and use of reclamation material from an area of Syncrude’s mineral lease that overlaps with the area under management by AMI (the “Overlapping Area”). Syncrude asserts a right to exclusive use and possession of that material for purposes of meeting its reclamation obligations.

The resulting litigation will require

interpretation of various agreements, directions, approvals and licences. [ 5 ] Syncrude seeks prejudgment relief. Briefly, it wants the Court to attach AMI’s assets and management fees. With certain exceptions described below, it also wants the Court to prohibit further extraction of sand and gravel from the Overlapping Area. [ 6 ] AMI claims that Syncrude’s request is a litigation tactic designed to put it out of business and deprive it of the financial

resources it will need to advance its action against Syncrude. A. Syncrude’s Application [ 7 ] Syncrude seeks the following interim and interlocutory orders: 1. Preserving all reclamation soil – in situ and stockpiled subsoil and overburden - within the boundaries of Mineral Surface Lease 973220 granted by the Province in favour of Syncrude pending trial and judgment (the “Preservation Order”); 2. Alternately, directing AMI to pay $55 million or such other amount as the Court deems just, into Court, and delivering possession of the reclamation soil to Syncrude; 3.

Attaching the assets of AMI pursuant to s. 17 of the Civil Enforcement Act, RSA 2000, c-15 (“ CEA ”), pending trial and judgment (the “Attachment Order”); 4. Enjoining AMI from dealing with, conveying, selling, encumbering or otherwise disposing of any interests in personal or real property or assets in its possession or control and wherever located, without further order of the Court, pending trial and judgment (the “Mareva Injunction”); and 5. Costs. B.

Arrangements with Other Parties [ 8 ] Syncrude’s application was attended initially by representatives of five entities that engage with AMI for removal of sand and gravel from the Susan Lake pit (“G5”). Syncrude had not named the G5 as Respondents nor had the G5 sought intervener status. The Court was advised that the G5 do not represent all of the entities actively engaged with AMI. [ 9 ] The Court was advised that Syncrude had arrived at an understanding with the G5.

They would neither consent to nor actively oppose the relief sought by Syncrude, provided that relief did not go beyond the provisions of an Order (the “Draft Order”) that they apparently had worked out with Syncrude. [ 10 ] The Draft Order narrowed somewhat the scope of relief sought by Syncrude in its original application.

Subject to certain exceptions, the Draft Order contemplates, inter alia : (1) directions for preservation of any material currently in situ in the Overlapping Area; (2) an Order prohibiting AMI from dealing with cover soil stockpiled within the Overlapping Area; (3) an Order prohibiting AMI from dealing with stockpiled sand and gravel within the Overlapping Area; (4) payment into Court of management fees collected by AMI at a specified rate for sand and gravel to be removed by specified persons; and (5) attachment of any legal or beneficial interest in all real and personal property of AMI. [ 11 ] Syncrude’s counsel acknowledged that the scope of the attachment provisions of the Draft Order, if granted, would render the Mareva Injunction sought in Syncrude’s application redundant. [ 12 ] AMI expressed the view that Syncrude’s application should not proceed unless the Province was named as a Respondent.

One line of argument is that the Province’s conflicting grants to Syncrude and to AMI have created uncertainty regarding the parties’ respective rights to sand and gravel in the Overlapping Area. [ 13 ] I was advised that the Province was made aware of Syncrude’s application and had indicated in writing that it would not participate. It is the prerogative of the Province, the G5 and others who may have an interest in sand and gravel in the Susan Lake pit to decline to take

part in Syncrude’s application. As the Court advised the G5, they do so at their own risk. II. Factual Background and Applicable Documents [ 14 ] As alluded to above, the dispute between these parties arises from their potentially competing rights under a series of leases, agreements and approvals. Accordingly, it is necessary to consider the terms of the applicable documents. A.

Syncrude Mineral Surface Lease [ 15 ] Syncrude produces oil sands bitumen from lands encompassed by Mineral Surface Lease 973220 (the “Syncrude MSL”) initially issued on November 28, 1997 by the Alberta Department of Environmental Protection, Land and Forest Service, Land Administration Division and subsequently amended on March 15, 2002, April 5, 2005 and November 28, 2008. [ 16 ] The 2008 amendment to the Syncrude MSL included the following provision: 4.

The holder shall ensure that its operations do not conflict with the recovery of aggregate materials by AMI in their operation of the Susan Lake Pit under SML 980110. Accordingly, the holder shall consult with AMI on an ongoing basis to discuss the status of their operating plan and completion

schedule for removal of aggregate resources within the affected lands and provide written confirmation to the department prior to proceeding with any mining activity. [ 17 ] Attached to the original Syncrude MSL as

Schedule A are “Conditions” setting out Syncrude’s reclamation obligations, both ongoing and at the end of operations. Paragraphs 23, 41, 38, 39 and 43 of these Conditions are of special interest.

[ 18 ] Paragraph 23 requires Syncrude to strip and pile topsoil separately from any woody material and subsoil in such a manner that it can be distributed evenly over the disturbed area when operations have been completed. Paragraph 41 prohibits Syncrude from selling, removing or carrying away sand and gravel found in situ or from using any such sand and gravel in connection with any construction work except under authority granted by the Minister.

Paragraph 38 requires that sand and gravel discovered during mining activity and not used for ancillary/construction purposes must be stockpiled while paragraph 39 provides that Syncrude must stockpile sand and gravel deposits greater than 1000 m 3 in size and greater than 1m in depth. Finally, paragraph 43 requires Syncrude to obtain a surface materials license to use sand and gravel for construction purposes.

These Conditions were carried through to the most recent version of the Syncrude MSL. [ 19 ] Syncrude asserts that the Syncrude MSL gives it “exclusive possession and use of all reclamation soil in the Syncrude MSL”. It also asserts that reclamation materials include subsoil and that subsoil, in turn, includes sand and gravel. B. AMI Surface Materials Lease [ 20 ] AMI asserts that the Province granted it Surface Materials Lease 980110 (the “AMI SML”) on March 17, 1998. Despite attempts to acquire a copy from the Province, AMI cannot produce the AMI SML.

Nevertheless, there is sufficient indirect evidence to satisfy me that it exists and is currently in force. Indeed, Syncrude acknowledged in argument that the AMI SML exists. However, Syncrude would have me draw the adverse inference that the AMI SML does not convey any property rights to AMI. [ 21 ] Syncrude alleges that an Encroachment Agreement between AMI and Syncrude entered into on October 14, 2008 was to permit Syncrude to enter the Overlapping Area to excavate, stockpile and use materials, including sand and gravel, in Syncrude’s mining operations.

It takes the form of a letter from Syncrude to AMI’s predecessor, Aggregates Management Inc., and provides that Syncrude may encroach on the AMI SML subject to two conditions. The conditions are

(1) Syncrude shall ensure that its operations do not conflict with the recovery of aggregate materials by AMI in its operation of the Susan Lake pit under the AMI SML and

(2) Syncrude shall consult with AMI on an ongoing or at minimum annual basis to discuss the status of their operating plan and completion

schedule for the removal of aggregate resources within the affected lands and to provide written confirmation to the Department. [ 22 ] I find this Encroachment Agreement noteworthy because: 1) Syncrude acknowledges the existence of the AMI SML; 2) Whatever right to encroach on the AMI SML Syncrude may have been granted is subordinated to AMI’s right to recover sand and gravel; and 3) Syncrude agreed to consult with AMI regarding “their” plans and completion schedule. It is not clear on the face of the Encroachment Agreement if this means Syncrude’s plans or AMI’s. C.

First Management Contract [ 23 ] AMI manages the Susan Lake pit on lands owned by the Province. It collects a fee from all users and ensures that a royalty is paid to the Province as the owner of the sand and gravel. AMI entered into its first management contract with the Province on March 17, 1998. D. Second Management Contract [ 24 ] AMI entered into its second management contract (“Second Management Contract”) with the Province on December 1, 2007, for a term of 10 years, expiring in 2017.

Clause 2(1) of the Second Management Contract provides that AMI is to “manage removal of surface materials for public use, and reclaim the tendered location in accordance with

Schedule ‘A’.” [ 25 ]

Schedule “A” sets out several of AMI’s obligations. Clause 8 provides that AMI is to manage and operate the Susan Lake pit so as to maximize utilization of the surface material resource. Clause 5 provides that AMI is to collect a royalty from all users and pay it to the Minister. Clause 2 provides that AMI and its affiliates shall not use the Susan Lake pit as a source of surface materials for their own purposes or to meet any contractual obligations made with third parties, other than for maintaining the Susan Lake pit and access roads.

Clause 25 provides that AMI can permit users to establish and maintain stockpiles of material on the Susan Lake pit location while clause 33 provides that all surface material on the Susan Lake pit location, whether stockpiled or otherwise, remains the property of the Department until removed from that location and paid for by the user. Clause 3 provides that the term “surface material” has the meaning defined in s. 8 of the Dispositions and Fees Regulation , Alta AR 541/2000, as amended, which includes sand and gravel. [ 26 ]

Schedule “A” deals extensively with reclamation obligations. Clause 4 provides that AMI is responsible for reclamation and re-forestation of the Susan Lake pit in accordance with applicable legislation and standards. Clause 10 states that “The Minister reserves the right to permit exploration and development of the oilsands resource on land within the tendered location. The Minister may, without compensation to [AMI], withdraw that portion of the lands from this Agreement by notice in writing to [AMI]. That portion of the lands withdrawn shall cease to be the responsibility of [AMI] with respect to reclamation.

The reclamation plan shall be amended accordingly.” [ 27 ] This withdrawal appears to have occurred by virtue of a letter dated May 29, 2008 from Alberta Sustainable Resource Development, Land Division, to AMI’s predecessor, Aggregates Management Inc., stating that: The area covered by [AMI] SML – 980110, referred to as the Susan Lake Gravel Pit, is an area that is scheduled to be part of an oil sands strip mining operation in the near future. The Department will therefore not require you to conduct reclamation activity on any area of your lease that will be part of the mine or affiliated infrastructure.

[ 28 ] The letter appears to implement a shift in reclamation obligations. Syncrude asserts that, notwithstanding this removal of AMI’s reclamation responsibility, AMI had an obligation to stockpile sand and gravel for use by Syncrude in its reclamation efforts. Syncrude asserts that AMI had such an obligation in recognition of the exclusive use and possession of sand and gravel conferred by the Syncrude MSL. AMI disputes that it had any such obligation or that Syncrude has any such right. [ 29 ] Clause 1 of

Schedule “A” provides that AMI is to manage the removal of surface materials from the Susan Lake pit for public use in accordance with the Conservation and Reclamation Plan dated May 2006. Further, clause 32 requires AMI to submit an annual report and operating plan, including a

summary of reclamation activities and a reclamation plan. Documents on this application included AMI’s plan dated March 1, 2015 and entitled “Susan Lake Gravel Pit SML 980110 2015 Operational Plan” (the “2015 Operational Plan”). E. Syncrude Approvals [ 30 ] Syncrude’s activities also are governed by approvals issued under the Environmental Protection and Enhancement Act , RSA 2000, c E-12. Syncrude’s materials included one such approval dated June 24, 2007.

Parts 3.2 and 6 of the “Terms and Conditions Attached to Approval” deal with “Land Conservation” and “Land Reclamation,” respectively. [ 31 ] Clauses 3.2.13 and 3.2.14 require Syncrude to place “coversoil” on disturbed land and to salvage “upland surface soil” to specified depths on disturbed land.

Clauses 3.2.16 through 3.2.27 address salvage issues and provide, first, that Syncrude must reclaim the land so that the reclaimed soils and land forms are capable of supporting a self-sustaining, locally common boreal forest, regardless of the end land use and second, that Syncrude is to “place in reclamation” all coversoil and subsoil salvaged in accordance with

Part 3. Clause 3.2.15 provides that where there is insufficient upland surface soil to meet the reclamation objectives in the approval, Syncrude must salvage other coversoil. [ 32 ] The

definitions set out in

Part 1 of the approval are relevant to this dispute. Clause 1.1.2(

t) defines “coversoil” as (

i) peat- mineral mix, (ii) organic horizon, or (iii) upland surface soil. Clause 1.1.2(jjj) defines “peat-mineral mix” in part as “a mixture of an organic horizon and the underlying mineral soil, or an organic horizon and mineral soil from another source”. Clause 1.1.2(hhh) defines “organic horizon” as “the surface soil horizon in Organic soils containing more than 17% organic carbon by weight.” Clause 1.1.2(cccc) defines “upland surface soil” as “a stratum salvaged from an upland soil that includes the LFH, A horizon and in some cases part or all of the B horizon”. All of these

definitions make reference in some manner to “soil” which is defined in clause 1.1.2(sss) as “the naturally occurring, unconsolidated mineral or organic material at least 10 cm thick that occurs at the earth’s surface and is capable of supporting plant growth.” Syncrude alleges that coversoil includes sand and gravel. F. Syncrude Surface Materials Lease [ 33 ] The current version of the Syncrude Surface Materials Lease (the “Syncrude SML”) is dated July 17, 2014.

The following provisions of the Syncrude SML are relevant to this application. [ 34 ] The second recital states that “…the director may grant a lease of public land for removal of clay, marl, sand, gravel, silt, topsoil and peat.” Clause 1 provides that the Syncrude SML carries with it …. “the right to work and remove out of the surface thereof Sand and Gravel…”.

This grant does not expressly refer to a right to exclusive use and possession. [ 35 ] Clause 6 provides that Syncrude “…shall pay the royalties, specified by the Regulation in force at the time the surface materials are removed…”. [ 36 ] Clause 20 provides that the Minister may, by order, authorize the Minister of Infrastructure, the Minister of Transportation or any other person to enter the land under a lease and remove surface materials required for the construction or maintenance of public roads or other public works.

This would suggest that use of surface materials, including sand and gravel, is not exclusive to Syncrude. [ 37 ]

Schedule “A” to the Syncrude SML sets out a number of conditions. Notably, clause c) states as follows:

Schedule “B”, attached, lists any prior and subsisting authorizations and dispositions (prior rights) issued on the quarter sections included in this authority. The holder shall not conduct any activity on the land where prior rights have been issued without the consent of the holder of these prior rights. [ 38 ] Oddly,

Schedule “B” does not list any prior authorizations. However, clause 7 of

Schedule “A” provides that the “…purpose of this authority is for Surface Materials Extraction on lands under the related disposition indicated.” The related disposition referenced is the Syncrude MSL. Clause 9 provides that Syncrude shall ensure that operations and reclamation for the Syncrude SML is consistent with the Syncrude MSL.

As noted above, the 2008 amendment to the Syncrude MSL specifically provides that Syncrude’s operations may not conflict with the activities of AMI. [ 39 ] As noted above, the Encroachment Agreement entered into by Syncrude and AMI on October 14, 2008, just before the current version of the Syncrude MSL was issued, provides that: The holder (Syncrude) shall ensure that its operations do not conflict with the recovery of aggregate materials by AMI in their operation of the Susan Lake Pit under Agreement with the crown and SML 980110. [ 40 ] In addition, in a letter from Alberta Sustainable Resource Development to AMI dated November 25, 2011, the Province notes the issue between AMI and Syncrude regarding Syncrude’s removal of aggregate materials from the Susan Lake Pit and states, inter alia : AMI can charge Syncrude user fees for the 432,948 1cm of mixed aggregate material deemed to be reclamation material…

As AMI’s Agreement/SML with the Crown does constitute a prior and existing activity and in respect of that AMI requires access to all lands affected by it, Syncrude must ensure AMI has unlimited access, subject to agreed upon terms and coordination of activities… Syncrude has been advised of the clause noted determinations… As AMI manages these lands as a public pit on behalf of the Crown there should be no reason for AMI to refuse requests for aggregate materials from any operation. III.

Issues Arising in the Overlapping Area [ 41 ] The parties take the position that the existence of a shortfall in reclamation materials available to Syncrude and the scope of its right to exclusive use and possession of reclamation material are “threshold” issues which ultimately will determine the outcome of the litigation. [ 42 ] Syncrude’s request for prejudgment relief depends upon its claim that its “obligations” under the Syncrude MSL are, of necessity, accompanied by the “right” to exclusive use and possession of sand and gravel to satisfy its reclamation obligations.

Syncrude asserts that exclusive use and possession flows as a necessary incident of its obligation to stockpile and reclaim. [ 43 ] However, none of the documents discussed above appear to grant Syncrude exclusive use and possession of sand and gravel in the Overlapping Area. Indeed, some of the provisions of those documents would seem to undermine Syncrude’s position. Interestingly, clause 1 of the 2008 amendment to the Syncrude MSL required Syncrude to provide an “Aggregate Management Plan” that identifies the location, quality and quantity of all gravel resources.

This obligation seems consistent with the notion that the Province continues to assert ownership of sand and gravel. It would seem strange for Syncrude to be required to inventory gravel it discovers if it has exclusive use and possession. [ 44 ] Syncrude argues in its brief that “AMI has created a shortfall of reclamation materials, contrary to AMI’s reclamation requirements arising from its agreement with the Province …”.

Syncrude asserts that AMI has failed to preserve adequate reclamation materials in the Overlapping Area which means that AMI is in breach of its obligations to the Province and that Syncrude must assume responsibility for AMI’s alleged default. [ 45 ] Syncrude states that the Alberta Energy Regulator (“AER”) has concluded that Syncrude presently suffers a deficit of 8.51 million cubic meters of reclamation material and points to an unsigned draft letter from the AER dated December 22, 2015.

This deficit, Syncrude asserts, arises from AMI’s activities in Overlapping Area. [ 46 ] It is significant that the AER expressed the following view in the unsigned draft letter: The Alberta Energy Regulator recognizes that overlap between Surface Material Lease (SML 980110) of Athabasca Minerals Inc. (AMI) and dispositions (SML 000002 and Mineral Surface Lease; MSL 973220) of Syncrude Canada Ltd. (Syncrude) at the Aurora North mine has created a shortfall of reclamation material in stockpile for Syncrude. [ 47 ] The AER does not state that unlawful activity by AMI has created this shortfall, but that the “overlap” between various grants made by the Province has “created a shortfall of reclamation material…”.

This suggests to me that, while the Province recognizes a possible shortfall of reclamation material, it at least leaves open the question of who, if anyone, is at fault.

It could even be seen as implicit recognition that the Province’s grant of coincident rights has created the problem. [ 48 ] This recognition may be evidenced by this comment in the unsigned AER letter: The AER will accept reclamation to an end-pit lake (without fluid tailings) for the area that overlaps with Syncrude’s MSL. [ 49 ] This would appear to solve the reclamation problem, but Syncrude asserted in argument before me that fluid tailings cannot be placed in an end-pit lake and would have to be spread over a large area, with further disturbance to surface areas, requiring additional reclamation material. [ 50 ] AMI argues that any concerns about Syncrude’s obligations should be addressed with the Province.

Further, AMI takes the position that there is no shortfall in any event and points to the data contained in the 2015 AMI Operational Plan. Clause 2.1.2 states that there is “suitable coversoil” on the Syncrude MSL lands sufficient to provide coversoil thickness of 0.32m and that test results indicate “very conservatively” that there are 11,965,259 m 3 of overburden available on the Syncrude MSL for a minimum 1.2 m depth of material suitable for reclamation. [ 51 ] Appendix G to the 2015 AMI Operational Plan is entitled Susan Lake Public Pit, Reclamation Materials Assessment May 2015.

This assessment is extensive, detailed and supported by sampling. It concludes that even when the strictest criteria and most conservative assumptions are applied in areas without data points, it is estimated that the Overlapping Area has sufficient coversoil and overburden to meet its reclamation obligations. [ 52 ] Clause 2.3 of the 2015 AMI Operational Plan provides that AMI has agreed with various oil sands companies that AMI shall salvage and stockpile “coversoil” but that it will remain stockpiled until it is ready to be used by the oil sands companies for reclamation.

I deduce from this that AMI does not consider coversoil to include sand and gravel. This view is bolstered by clause 2.2.9 of the 2015 AMI Operational Plan entitled “Gravel Extraction” which provides that “AMI is required to sell aggregate used for its highest end use and to maximize the yield of the resource.” I note that this is also consistent with my view of the definition of “coversoil” in the Syncrude Approvals. [ 53 ] The 2015 AMI Operational Plan goes on to state that “The reclamation strategy has been developed to harmonize the future

mining development plans of oil sands leases that overlap the pit lease with AMI development and reclamation plans. AMI will continueto progressively mine aggregates in a sequence that will maximize the resource while at the same time being consistent with the plans ofoilsands companies in the immediate area.” [54] Interestingly, the Volume Calculation included in the 2015 AMI Operational Plan indicates that “Aggregate includes gravel,mixed sand and gravel and sand.

Aggregate is not considered suitable material for reclamation.” Clearly, AMI takes the position thatsand and gravel are not, at least primarily, to be harvested for reclamation purposes. [55] It is important to note that the 2015 AMI Operational Plan is extensive and detailed and that its conclusions regarding theavailability of coversoil and overburden suitable for reclamation in required quantities were based on a series of soil material testingprojects. [56] AMI’s claim that Syncrude has sufficient reclamation material is supported by evidence of detailed analysis.

By contrast,Syncrude’s shortfall claim is not. The AER’s expression of opinion in the unsigned draft letter provides no indication of what analysisunderlies its conclusions regarding a shortfall of reclamation material. Accordingly, AMI’s evidence is to be preferred in this regard. IV.

Principles Governing Prejudgment Remedies [57] As noted above, Syncrude asserts that the Syncrude MSL gives it exclusive use and possession of sand and gravel in theOverlapping Area for reclamation purposes and that AMI’s operation of the Susan Lake pit has interfered with that right, notwithstandingthat AMI has been conducting these operations pursuant to the Second Management Contract.

Accordingly, the trial of this matter willinvolve, as a “threshold” issue, a determination of what rights, if any, the Syncrude MSL grants with respect to sand and gravel.Resolution of this issue will require reconciliation of the terms and provisions of the Syncrude MSL, the Syncrude SML, the AMI SMLand the Second Management Contract. [58] The Court’s task at this juncture is to determine what, if any, prejudgment relief should be granted to Syncrude. While thiswill require consideration of the documents referred to above, some restraint must be shown.

The matter did not proceed before me as atrial, but only as an interlocutory application. I am deciding neither AMI’s claim nor Syncrude’s counterclaim. While I am to assess theevidence before me for purposes of determining if injunctive relief is justified, I am not to make determinations that would fetter thediscretion of the trial judge. [59] I turn now to the legal principles underlying the granting of preservation orders, attachment orders and Mareva injunctions. [60] There appears to be no dispute between the parties regarding the extraordinary nature of prejudgment relief.

In one of itsbriefs, AMI asserts that “The Court exercises extreme caution in granting prejudgment relief.

In fact, prejudgment relief is such anextraordinary remedy that there is a general rule against granting it.” In support of this proposition, AMI cites Aetna Financial ServicesLtd v Feigelman, (SCC), [1985] 1 SCR 2 and quotes as follows from that case at para 43: There is ... a profound unfairness in a rule which sees one’s assets tied up indefinitely pending trial of an action which may not succeed,and even if it does succeed, which may result in an award for far less than the caged assets. [61] AMI also cites this Court’s comment in Rea v Patmore, 1999 ABQB 759 at para 4 that “...the court will be guided by the‘judicial abhorrence for prejudgment execution.’” V.

Preservation Order [62] This Court’s authority to make a preservation order is derived from Rule 6.25 of the Rules of Court, which provides that, onapplication, the Court may make an order for the preservation or custody of property that is in dispute or that may be evidence in anaction. However, judicial restraint must be exercised when deciding, first, whether to grant a preservation order and, second, theappropriate scope of the order. A.

Test [63] The parties disagree on the appropriate test for the granting of a preservation order. [64] Syncrude argues that a preservation order is interlocutory injunctive relief and therefore the test is the well-known tripartitetest established in RJR-MacDonald Inc v Canada (Attorney General), (SCC), [1994] 1 SCR 311.

I note that in RJR-MacDonald, the Supreme Court of Canada adopted the tripartite test set out in American Cyanamid Co v Ethicon Ltd, [1975] 1 All ER504 (HL); whether one cites RJR-MacDonald or American Cyanamid, the test is the same: 1. there is a serious issue to be tried; 2. the applicant will suffer irreparable harm in the absence of relief; and 3. the balance of convenience favours granting relief. [65] AMI submits that the test for granting a preservation order is more onerous than the tripartite test.

In addition to meeting thetripartite requirements, the applicant must also meet the requirements of the CEA. AMI relies on Interclaim Holdings Ltd v Down, 1999ABCA 329, 250 AR 94 at paras 82-83:

It is also arguable that [ sections 16 and 17 of the CEA ] are a codification of the requirements of the case law, without categorizations such as a Mareva injunction, a preservation order, or other like remedies at common law or in equity.

Section 17 of the Act refers to an "attachment order," a term not defined in the legislation. "Attachment" has been defined as (t)he act or process of taking, apprehending or seizing a person or property by virtue of a writ, summons or other judicial order and bringing the same into custody of the court for the purpose of securing satisfaction of the judgment ultimately to be entered in the action. ... We proceed on the basis that the existence of the [ CEA ] does not preclude the grant of a Mareva injunction or, by analogy, a preservation order, but we do not decide this is so.

This issue was never squarely put before us or the learned chambers judge. But in granting either a Mareva injunction or a preservation order, a court should be guided by the principles of the [ CEA ]. Were it otherwise, the will of the Legislature might be thwarted. The following observation is apt: The best way to obtain a coherent, consistent system of prejudgment remedies for unsecured claimants is to replace the various existing prejudgment relief mechanisms with a single, well thought-out procedure for obtaining provisional relief. Our recommendations are intended to accomplish this result.

Every claimant seeking a prejudgment remedy would be required to follow the same basic procedure and to satisfy the same general considerations in order to obtain relief. Once the claimant had made out a case for a remedy, the court could provide it by making what we shall call an "attachment order." The proposed attachment order should not be confused with the present writ of attachment.

The attachment order would be a flexible device by means of which the court, subject only to broad legislative constraints, could grant whatever sort of relief seemed most appropriate in the circumstances. ... [Citations omitted.] [ 66 ] AMI also relies on Gilks v Green Clean Squad Inc , 2015 ABQB 83 , 610 AR 186 in which Veit J. stated at para 4 that “[a]t a minimum, an applicant for a preservation or attachment order must satisfy the requirements of s. 17 of the [ CEA ].” Veit J. held at para 6 that an applicant for a preservation or attachment order must meet a higher standard than that for an interlocutory injunction: Moreover, every application for pre-judgment relief asks for exceptional relief and must meet general standards.

For example, an applicant for an interlocutory injunction must satisfy a tri-partite test. When one party is, prior to a trial, asking the court to prevent another party from dealing with property which they could ordinarily dispose of, the application should be assessed in light of the requirements of an interlocutory injunction. Statutorily, an applicant for an attachment order must meet a higher test than the one set for an interlocutory injunction.

An applicant for the latter type of relief must satisfy the court only that there is a serious issue to be tried, that they will suffer irreparable harm if the relief is not granted and that the balance of convenience favours the granting of the relief.

An applicant for relief in the nature of a preservation or attachment order must satisfy the last two tests, but must satisfy a higher standard on the first test, i.e. that "there is a reasonable likelihood that the claimant's claim against the defendant will be established". [ 67 ] AMI’s position is that an applicant for a preservation order must establish the following: 1. there is a reasonable likelihood that the claim against the defendant will be established; 2. the applicant will suffer irreparable harm if the relief is not granted; 3. the balance of convenience favours the granting of the relief; and 4. there are reasonable grounds for believing that the defendant is dealing with the defendant’s exigible property, or is likely to deal with that property, (

i) otherwise than for the purpose of meeting the defendant’s reasonable and ordinary business or living expenses, and (ii) in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgment against the defendant. [ 68 ] In Interclaim at para 39, the Court of Appeal said this about the test for a preservation order: There is some authority for the proposition that an injunction sought in a bankruptcy court is not subject to the requirements for a common law injunction such as irreparable harm and balance of convenience. ...

This was not the position taken by the IR during the appeal, however. Accordingly, we proceed on the assumption that the test to be applied in relation to a preservation order is the tripartite test set out in [ American Cyanamid ] , which requires firstly that there be a serious issue to be tried. ... [Emphasis added.] [ 69 ]

Interpretation of this comment has given rise to two conflicting lines of authority. [ 70 ] The first, cited by Syncrude, is that Interclaim is authority for the proposition that the tripartite test applies to a preservation order: HF1 Fuels Ltd v Olsen , 2001 ABQB 117 , 10 CPC (5 th ) 385 at para 13 , cited in Ridge Development Corp v Crestwood Condominiums Inc , 2008 ABQB 599 , 463 AR 341 at para 25 ; Peregrym v Peregrym , 2015 ABQB 176 , 608 AR 340 at paras 379-80 . [ 71 ] I note that in 518152 Alberta Ltd v Helmut Berndt Professional Corp , 2005 ABCA 151 , the Court of Appeal, at para 2, took no position on whether the tripartite test is the appropriate test, but assumed that it was and proceeded with the analysis on that basis. [ 72 ] Subsequently, Veit J. held in Gilks at para 23 that it is "appropriate" on a preservation order application to weigh an applicant’s compliance with s.17 of the CEA .

She relied on the Court of Appeal’s statement at para. 83 of Interclaim that all prejudgment remedies ought to be guided by the principles of the CEA , though at para 29 she acknowledged the Court of Appeal in Interclaim “left open the issue of the existence of a preservation order application which is not governed by s.17 of the CEA". [ 73 ] I adopt the first line of analysis because the Court of Appeal in Interclaim did not require expressly that the provisions of s.17 of the CEA formed part of the test for a preservation order.

Rather, the Court of Appeal said only that in granting preservation orders, courts ought to be guided by the principles of the CEA .

[ 74 ] The trial judge in Interclaim had erred, not in granting a preservation order on the basis of the tripartite test, but in granting an order that was too broad. The Court of Appeal relied on the common law principle that prejudgment remedies should not tie up more assets than necessary to respond to the applicant’s claim. The Legislature has codified this principle in s. 17(6) of the CEA .

The Court of Appeal stated at paras 84-85: Our function is not to re-weigh the evidence before the learned chambers judge, but to determine whether she made an error of law or principle or a palpable and overriding error of fact. In our view, she did not. She was entitled to grant the order. For reasons already mentioned, however, she did not address s. 17(6) of the Act in the context of the Statement of Claim. To recapitulate, that

section provides:

(6) An attachment order shall not attach property that exceeds an amount or a value that appears to the Court to be necessary to meet the claimant's claim, including interest and costs, and any related writs, unless the Court is of the view that such a limitation would make the operation of the order unworkable or ineffective.

Section 17(6) reflects a principle underlying the law prior to the enactment of the [ CEA ], namely, that a preservation order should only attach property of a value which reflects the value of the claim in relation to which there is a serious issue to be tried. [ 75 ] Accordingly, I find that Interclaim does not require an applicant for a preservation order to meet the provisions of the CEA , specifically s. 17(2) . I note that s. 17(2) of the CEA refers to the “defendant’s exigible property”. A preservation order applies to property ownership of which is yet undetermined.

Therefore, s. 17(2) of the CEA cannot apply to the type of property targeted by a preservation order. B. Analysis [ 76 ] It is important to recall that an applicant for interlocutory relief must satisfy each of the three requirements of the tripartite test. If any one of the three elements is missing, the application will fail. 1. Serious Issue to be Tried [ 77 ] First, Syncrude argues that there is serious issue to be tried. Syncrude’s alleged entitlement to exclusive use and possession of sand and gravel in the Overlapping Area remains to be litigated.

In essence, its argument is that its reclamation duty under the Syncrude MSL engenders a right to exclusive use and possession of reclamation material.

AMI’s position is that the various agreements, grants, approvals and licenses do not operate to vest that right in Syncrude and it disputes that Syncrude’s claim to exclusive use and possession of sand and gravel constitutes a serious issue to be tried. [ 78 ] AMI asserts that the Province is the owner of the sand and gravel in the Overlapping Area and that Syncrude’s obligation to stockpile sand and gravel resources in accordance with the Syncrude MSL does not mean that the public no longer has rights to those resources. [ 79 ] Further, AMI argues that the absence of any right to exclusive use and possession vested in Syncrude in respect of sand and gravel in the Overlapping Area undermines Syncrude’s assertions that AMI has committed trespass in respect of sand and gravel or wrongfully converted sand and gravel. [ 80 ] The threshold for determining that there is a serious issue to be tried is low, requiring only that I am satisfied on a preliminary assessment of the merits of the case that the claim is not frivolous or vexatious; see RJR-MacDonald at para 49 and Foundation Capital Corp v Saxon , 2011 ABQB 102 , 60 Alta LR (5 th ) 31 at para 9 .

Given the uncertainty arising from the interplay of the above-discussed documents, I find that there is a serious issue to be tried. 2. Irreparable Harm [ 81 ] Syncrude initially sought an order preserving all reclamation soil in situ and stockpiled, including sand and gravel, within the boundaries of the Overlapping Area.

It argues that refusal to grant a preservation order will cause it irreparable harm in that its interests will be adversely affected in a manner that cannot be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application: RJR-MacDonald at para 58. [ 82 ] As noted above, this request was modified in the Draft Order negotiated among Syncrude and the G5. The Draft Order lists corporations that are to be permitted to purchase and remove sand and gravel currently stockpiled within the Overlapping Area.

Further, those corporations are to be permitted to continue to excavate, process and stockpile sand and gravel in situ within the Overlapping Area. Essentially therefore, the Draft Order purports to allow a select group of users to continue their activities in the Overlapping Area provided any management fees otherwise payable to AMI are paid into Court or attached. [ 83 ] Syncrude asserts a proprietary claim to reclamation material, including sand and gravel and argues that there will be a permanent loss of this material if a preservation order is not granted.

While Syncrude may lose access to such material without a preservation order, it has not been established that such access is exclusive to Syncrude.

The sand and gravel are owned by the Province, subject to various grants it may have made. [ 84 ] With respect to the potential for permanent loss of natural resources, AMI argues that sand and gravel is not unique or irreplaceable and that an award of monetary damages would be sufficient, obviating the risk of irreparable harm. [ 85 ] Syncrude argues that if the Susan Lake pit becomes exhausted in 2017, its shortfall in reclamation material will rise from 8.5 million cubic meters to 10.2 million cubic meters. The increase in shortfall from 8.5 to 10.2 million cubic meters is not trivial and the

deficit cannot be recovered from users who have removed sand and gravel. Thus, a preservation order securing stockpiled or in situ sandand gravel would be of some value to Syncrude. This value, however, seems to me to be diluted by Syncrude’s agreement to allow theG5 to extract significant volumes of sand and gravel. [86] Further, Syncrude argues that sand and gravel in the required quantities cannot simply be purchased to fulfill its reclamationobligations.

Yet the evidence before me is that Shell and Suncor have done exactly that, entering into agreements with AMI to purchasesand and gravel in the areas representing an overlap between their respective mineral surface leases and land governed by the SecondManagement Contract. Moreover, in a letter dated November 25, 2011, Alberta Sustainable Resource Development refers to Syncrudepaying user fees to AMI for mixed aggregate material at a price of $1.49 per cubic meter.

Accordingly, it would appear that Syncrudecould purchase reclamation material from AMI to the extent there remains sand and gravel capable of extraction from the Susan Lake pit.AMI asserts that the report appended to the 2015 Operational Plan, which found that Syncrude had adequate access to reclamationmaterial to meet its obligations, took into account new reclamation obligations resulting from removal of reclamation material from otherparts of the Syncrude MSL or SML. [87] I appreciate that Syncrude would prefer to utilize sand and gravel from the Overlapping Area, rather than purchasingreclamation material or acquiring it from other locations in the Syncrude MSL and SML.

Nevertheless, I find that the sand and gravel indispute is not an irreplaceable natural resource akin to the old growth forest at issue in MacMillan Bloedel Ltd v Simpson, (SCC), [1996] 2 SCR 1048. [88] Syncrude also sought a direction that management fees otherwise payable to AMI under the Second Management Contract bepaid into Court as part of a preservation order. This request is premised on the notion that these monies represent proceeds of sale of sandand gravel over which Syncrude asserts a proprietary claim.

In oral argument, Syncrude described these monies as “liquidated funds ofsand and gravel that is removed from existing stockpiles”. [89] This characterization raises the appropriateness of a preservation order in these circumstances. A preservation order isintended to maintain the status quo pending determination of the ownership of an asset. If Syncrude has a proprietary interest in sand andgravel, that interest would extend to the proceeds of sale thereof: see Quikjets Inc v Q Private Jets Limited Partnership, 2015 ABCA158, 600 AR 229 at para 17. [90] In my view, that analysis is not appropriate in this case.

The Province, not AMI, owns the sand and gravel. AMI does not sellits sand and gravel to users, but facilitates removal of the Province’s sand and gravel from the Susan Lake pit, for which those users pay aroyalty to the Province. AMI is not entitled to a royalty; it is paid a user fee “in consideration for services” pursuant to clause 8 of theSecond Management Contract. [91] Accordingly, I do not believe that an order intended to preserve access to an asset pending determination of its ownershipshould be granted with respect to AMI’s management fees.

Management fees are compensation for services rendered, not for transfer ofan asset. [92] Further, since Syncrude takes the position that it cannot simply purchase sand and gravel for reclamation, the value attachingAMI’s cash flow is questionable. AMI notes that Syncrude has abandoned its request for a preservation order relating to stockpiledmaterial, but continues to seek payment into Court of management fees arising from the sale of these materials. [93] AMI argues that this request effectively amounts to a request for security for Syncrude’s claim against AMI.

Citing 1400467Alberta Ltd v Adderley, 2014 ABQB 439, 591 AR 40 at paras 51-53, AMI asserts that none of the three exceptional circumstances wheresecurity for judgment can be posted exists in this situation: 1) Security as a condition of being able to appeal; 2) Assets are being dealt with so as to escape judgment; 3) Where the court is “almost, but not quite, satisfied that the defendant has no defence”. [94] Syncrude asserts that it is trite law that harm is irreparable where damages cannot be collected, citing Moses v Weninger,2006 ABCA 52, 380 AR 230.

AMI admits that it does not have sufficient funds to pay the $68 million Syncrude seeks in itscounterclaim, but Syncrude goes further, arguing that it will not be able to enforce any award because AMI is impecunious. [95] Of course, Syncrude’s argument on this front rests on the premise that its counterclaim is valid and that a Court will agreewith its calculation of damages.

The Supreme Court of Canada held in RJR-MacDonald at para 59 that one party’s impecuniosity doesnot automatically determine the application in favour of the other party, though it may be a relevant consideration. [96] AMI’s position is that its inability to pay $56 million into Court or to satisfy a judgment in that amount does not render itimpecunious, especially given that Syncrude’s counterclaim remains to be adjudicated. The magnitude of Syncrude’s counterclaimcompared to AMI’s assets cannot be allowed to overwhelm a reasoned consideration of the equities inherent in Syncrude’s request forprejudgment relief.

Care must be taken to ensure the quantum of damages sought by counterclaim is not allowed to lead the Courtinexorably to the conclusion that an unsatisfied judgment is inevitable. Further, given AMI’s admission that its resources would fallvastly short of discharging so large a damage award, one might conclude that the incremental value to Syncrude of a preservation order isde minimus. [97] Syncrude makes much of the irreparable harm its reputation will suffer if it cannot meet its reclamation obligations.

Based onSyncrude’s representations, I fail to see how having what would otherwise be AMI’s cash flow from the Overlapping Area will addressthat concern, if it cannot purchase the necessary reclamation material elsewhere. [98] AMI argues that Syncrude must do more than merely assert the possibility of irreparable harm to its reputation and quotes asfollows from Centre Ice Ltd v National Hockey League (1994), 166 NR 44 (FCA) at para 11:

Loss of good will, of reputation, of distinctiveness, if established after a full hearing at trial may well constitute irreparable harm and leadto the issuance of a permanent injunction. However, as this Court’s jurisprudence has shown, in the absence of clear evidence thatirreparable harm would result at this juncture, an interlocutory injunction should not be issued. [99] In addition, AMI argues in its brief that if it is responsible for Syncrude’s inability to meet its reclamation obligations, thatshould not reflect adversely on Syncrude’s reputation.

Conversely, if AMI is not responsible for Syncrude’s inability to reclaim, then anydamage to Syncrude’s reputation is not caused by AMI. [100] Taking all of the foregoing into account, the evidence does not establish to my satisfaction that Syncrude will suffer irreparableharm if I do not grant a preservation order. 3. Balance of Convenience [101] With respect to the balance of convenience, Syncrude argues that the harm it will suffer if prejudgment relief is not granted, asoutlined above, outweighs the harm to AMI if relief is granted.

For its part, AMI asserts that a preservation order will put it out ofbusiness and points to para 59 of RJR-MacDonald where the Supreme Court of Canada held that a party put out of business has sufferedirreparable harm. [102] Syncrude attempts to justify potentially putting AMI out of business on the basis that it may be heading that way in any event.AMI may indeed encounter difficulties continuing operations if its cash flow is attached by a preservation order. The evidence of AMI’sChief Financial Officer, William Woods, suggests that operation of the Susan Lake pit is central to AMI’s economic survival.

However,Syncrude has not provided persuasive evidence that AMI’s business is in jeopardy in the absence of a preservation order. In contrast tothe case before the Court in Greater Vancouver (Sewerage & Drainage District) v Ambassador Industries Ltd (1982), (BC CA), 41 BCLR 292 (BCCA), I am not satisfied that AMI is not a going concern. I have not been presented with evidence to suggestthat AMI’s contract regarding the Susan Lake pit will not be renewed when the Second Management Contract expires on November 30,2017.

Neither has Syncrude provided any persuasive evidence to support its assertion that AMI has no other potentially viable prospects. [103] Syncrude suggests in its brief that AMI is considering responding to a preservation order by “walking away from themanagement contract” or “selling any other assets”.

Syncrude’s claim that these actions do not give rise to significant harm to AMIseems to ignore AMI’s claims that the impact of such an order cannot be overstated. [104] The cases cited by Syncrude suggesting that it is acceptable to force an entity to cease operations by means of an interlocutoryinjunction involved respondents that had acted in flagrant breach of some proprietary interest belonging to the applicant: Bell ExpressVuLtd Partnership v Tedmonds & Co, [1999] OJ No 3679 (SCJ) at para 25; 3058354 Nova Scotia Co v OnSite Equipment Ltd, 2007 ABQB 695, 84 Alta LR (4th) 358; Adler Firestopping Ltd v Rea, 2008 ABQB 95, 441 AR 18.

It is by no means established that that hasoccurred in this case. [105] An additional factor is that, as AMI points out, the Second Management Contract requires it to manage the removal of surfacematerials from the Susan Lake pit for public use.

Noting the Supreme Court’s comments at para 71 of RJR-MacDonald, AMI takes theposition that when the authority involved is charged with protecting the public interest and the impugned action was taken pursuant tothat responsibility, the court should in most cases assume that irreparable harm to the public interest would result from restraint of thataction. [106] The evidence satisfies me that a preservation order that attaches AMI’s cash flow from its operations at the Susan Lake pitwould adversely impact AMI’s ability to perform its duties under the Second Management Contract.

That may operate to frustrate theProvince’s intention that sand and gravel be made available for public use.

It would indeed be ironic if the Province engaged AMI tomake sand and gravel available to the public but prevented AMI from fulfilling that objective by granting Syncrude exclusive use andpossession of that sand and gravel. [107] Based on the foregoing analysis, I find the requirements of the tripartite test for injunctive relief are not satisfied in this case.Further, as indicated earlier, I do not consider it appropriate to grant a preservation order attaching AMI’s management fees. [108] AMI asserts that, since a preservation order is inappropriate here, payment into Court in lieu of a preservation order is also inappropriate.

In support of its view, AMI cites Vaccaro v Twin Cities Power Canada, 2013 ABCA 252, 97 Alta LR (5th) 193 at para 16.There, the Court of Appeal noted that orders requiring the posting of security for judgments must meet the requirement for a strongprima facie case as well as the requirement for a real risk that assets within the jurisdiction are about to be removed, rendering nugatoryany judgment obtained. [109] I agree and decline to grant an order for payment into Court in lieu of a preservation order. VI.

Attachment Order [110] Syncrude attempts to overcome the objection to a preservation order in respect of management fees by seeking attachment underthe provisions of the CEA of all of AMI’s assets, including management fees. [111] The purposes of preservation orders and attachment orders are different. A preservation order targets property the ownership ofwhich is in dispute. Attachment orders target property that belongs to the respondent. This distinction recently was made by O’FerrallJ.A. in Gemba LLC v Nixious Investments Inc, 2016 ABCA 241 at paras 20-21: As explained in Canadian Imperial Bank of Commerce v.

Credit Valley Institute of Business & Technology …, a "proprietary" injunctionis one granted to preserve an asset in the possession of a defendant which the plaintiff says belongs to it. The authority for making suchan order in Alberta may be found in Rule 6.25(1)(

a) which provides that the court may make an order for the preservation of property

which is in dispute. The purpose of a proprietary injunction is to preserve the disputed property until trial so that the property will be available to be returned to the plaintiff if successful at trial. Other types of injunctions (for example, Mareva injunctions) do not involve a claim to ownership to the asset sought to be the subject of the injunction. The Mareva injunction typically restricts a defendant from dealing with assets which he or she clearly owns. Injunctions prohibiting a defendant from dealing with his own property are governed by

section 17 of the [ CEA ]. Such injunctions represent an exception to the rule that the civil courts ordinarily have no jurisdiction to attach the assets of an alleged debtor for the protection of the claiming creditor prior to the creditor obtaining judgment: Lister & Co. v. Stubbs ... [Citations omitted.] A. Test [ 112 ] The parties disagree on the appropriate test for granting an attachment order. The issue is whether a common law test applies in addition to the statutory test. [ 113 ] Syncrude’s position is that the test for an attachment order is encompassed within the four corners of s. 17(2) of the CEA .

Sections 17(1) and 17(2) of the CEA provide: 17(1) A claimant may apply to the Court for an attachment order where (

a) the claimant has commenced or is about to commence proceedings in Alberta to establish the claimant’s claim, or (

b) the claimant has commenced proceedings before a foreign tribunal to establish a claim if (

i) a judgment or award of the foreign tribunal could be enforced in Alberta by action or by proceedings under an enactment dealing with the reciprocal enforcement of judgments or awards, and (ii) the defendant appears to have exigible property in Alberta.

(2) On hearing an application for an attachment order, the Court may, subject to subsection (4), grant the order if the Court is satisfied that (

a) there is a reasonable likelihood that the claimant’s claim against the defendant will be established, and (

b) there are reasonable grounds for believing that the defendant is dealing with the defendant’s exigible property, or is likely to deal with that property, (

i) otherwise than for the purpose of meeting the defendant’s reasonable and ordinary business or living expenses, and (ii) in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgment against the defendant. [ 114 ] AMI’s position is that the tripartite test is only the starting point for an attachment order and that an applicant also must establish the requirements of s. 17(2) of the CEA . AMI submits that the four-part test it argued for a preservation order also applies to an attachment order.

AMI argues that an attachment order is a form of injunctive relief, so it would be inappropriate not to consider the two branches of the tripartite test that are not included in s. 17 of the CEA : balance of convenience and irreparable harm. [ 115 ] I do not accept AMI’s argument that the requirements of s. 17(2) of the CEA are to be augmented with the tripartite test. In my view, s. 17(2) of the CEA is the complete test for an attachment order, though I note that it is discretionary.

The Court in Rea v Patmore held at para 4 : Although pre-judgment relief is incorporated into the [ CEA ], it remains an extraordinary remedy. Even a litigant who meets all the statutory prerequisites for the remedy may be denied the remedy: the court retains discretion to grant the remedy. While there is no catalogue of factors that will necessarily apply in all situations, when deciding whether to grant the remedy, the court will be guided by the "judicial abhorrence for prejudgment execution". In this case, while it is true that Mr.

Patmore has dealt with the truck in a surreptitious and underhanded way, there is nothing to suggest that he is operating all of his business and personal affairs in such a way. The mere fact that Mr. Rea probably has a good action against Mr. Patmore is not reason enough to tie up a substantial amount of Mr. Rea's property until judgment. [ 116 ] AMI did not cite any authority other than Gilks for its position. Gilks was an application for a preservation order, which Veit J. held was not appropriate. Her comments about the test for an attachment order are obiter and rely on a single sentence from Interclaim .

As discussed above, Interclaim is not authority for AMI’s position nor, with respect, does it support the obiter comments in Gilks . [ 117 ] Further, in Chipewyan Prairie First Nation No 470 v Kent , 2008 ABQB 157 , 443 AR 56, Veit J. cited Industrial Rewind & Supply Inc v Kuntz & Kramer Services Inc , 2001 ABQB 123 , 11 CPC (5 th ) 76, where the Court found that the balance of convenience favoured the applicants even though they had not met the requirements of s. 17(2) of the CEA .

Nevertheless, she held at paras 65-66 that the tests for an injunction and for an attachment order are distinct, though possibly similar in application. [ 118 ] Much like AMI, the respondent in Alberta (Treasury Branches) v Pocklington , 1998 ABQB 810 , 231 AR 84 argued that the Court is not compelled to grant an attachment order where the balance of convenience test is not met.

At paras 34-36, the Court noted the discretion afforded by s. 17(2) of the CEA but left open the question of whether it compelled a consideration of irreparable harm or the balance of convenience. [ 119 ] The Court of Appeal, however, has taken a narrow view of the discretion afforded by s. 17(2) . In Tycholis v Teem Energy Ltd , 2007 ABCA 219 , 417 AR 135, the Court of Appeal reversed Veit J.'s decision to deny an attachment order on the basis of “dissipation”.

The Court of Appeal stated at para 35 that as the CEA does not make dissipation a requirement, it is irrelevant in a technical and legal sense. This suggests that s. 17(2) of the CEA is a complete code. [ 120 ] Similarly, in 1773907 Alberta Ltd v Davidson , 2016 ABQB 2 , one party sought to rely on a common law exception to obviate the requirement in s. 17(2) (b)(

i) of the CEA . At para 83, this Court declined to adopt the common law exception because “the requirements for an attachment order are set out in statutory form and not in the common law". [ 121 ] Finally, AMI argued that attachment orders are a form of injunctive relief and therefore the tripartite test cannot be ignored. This argument must fail as the Court of Appeal has held that attachment orders are not injunctions.

In Proprietary Industries Inc v Workum , 2006 ABCA 225 , 397 AR 243, the Court of Appeal held that a Master had jurisdiction to issue attachment orders under the CEA and stated at para 22: Though attachment orders have an injunctive element to them, they differ from injunctions in several material respects. Attachment orders are limited in that they are designed to preserve property and are of limited duration; until the matter goes to trial. They cannot restrain underlying wrongful conduct or compel a defendant to action unrelated to preservation of property.

In addition, the legal test and the proof required to obtain an attachment order differs from the requirements for an injunction order. [ 122 ] Accordingly, I accept Syncrude’s position that the test for an attachment order is contained entirely in s. 17(2) of the CEA . There is no additional requirement that an applicant meet the tripartite test established in RJR-MacDonald . B. Application [ 123 ] Turning to the criteria in s. 17(2) of the CEA , Syncrude asserts that it is reasonably likely that its claim in conversion against AMI will be established.

Syncrude states in its brief that conversion may be described as a “wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession”. As noted above, Syncrude asserts that it has an exclusive right to use and possess reclamation material. [ 124 ] Syncrude also asserts in its brief that there is a reasonable likelihood that its counterclaim against AMI in trespass to chattels will be established.

It cites Sprung Instant Structures Ltd v Royal Bank of Canada, 2008 ABQB 30 , 439 AR 334 at para 15 for this proposition: A trespass to a chattel will be established where the plaintiff has possession or an immediate right of possession and that right of possession is wrongfully interfered with, physically, by the defendant, but without the intention or effect of denying or negating the plaintiff’s title. [ 125 ] I note, however, that while the Syncrude MSL requires Syncrude to stockpile reclamation material, including sand and gravel, I can find no reference therein to an exclusive right to use and possess sand and gravel.

Rather, the evidence before me suggests that Syncrude’s rights have been subordinated to AMI’s right to operate the Susan Lake pit. [ 126 ] Regarding the second criterion, Syncrude asserts that there are reasonable grounds for believing that AMI is dealing with its exigible property, or is likely to deal with that property, other than for the purpose of meeting its reasonable and ordinary business expenses. [ 127 ] AMI denies this and explains decreases in its total assets, retained earnings and equity as the result of “one off” events, including the writing down of certain inventories and other assets. [ 128 ] Syncrude also asserts that there are reasonable grounds for believing that AMI’s dealings with its property are likely to seriously hinder Syncrude’s ability to enforce judgment against AMI, but it has provided no evidence to support this assertion. [ 129 ] AMI asserts that these claims must be supported by evidence beyond merely Syncrude’s belief: First Mortgage Fund (

V) Inc (Receiver Manager of) v Boychuk , 2003 ABQB 217 , 336 AR 319 at para 30 . It cites this Court’s comments in 1482221 Alberta Ltd v Haney Farms

(1985) Ltd , 2009 ABQB 760 , 486 AR 12 at para 58 : However, an attachment order cannot be granted simply on the basis that the defendant may not later be solvent enough to satisfy a judgment that may ultimately be awarded; the requirements of the Act must still be met: [ First Mortgage ], para 30.

The Court must examine the debtor’s situation to determine whether the creditor is likely to be seriously hindered in the enforcement of its Judgment as a result of the manner in which the debtor is, or is likely to, deal with its property. [ 130 ] Syncrude asserts that AMI does not have sufficient funds to satisfy a judgment of $68 million and that it cannot raise such funds. AMI readily acknowledges that it does not have the resources to satisfy a $68 million judgment.

However, I believe there is danger in forging too strong a link between the quantum of an applicant’s claim for damages and a respondent’s balance sheet. [ 131 ] The fact that Syncrude’s counterclaim so vastly overwhelms AMI’s ability to satisfy that claim should not in itself be viewed as justification for attaching AMI’s assets. The reality here is that if Syncrude is only moderately successful in its counterclaim it will put AMI out of business.

An attachment order at this stage of the action would not appear to significantly enhance Syncrude’s chances of recovery. [ 132 ] In the result, I decline to grant an attachment order. VII. Mareva Injunction [ 133 ] A Mareva injunction would have essentially the same effect as an attachment order, ensuring that management fees are secured

pending trial. Syncrude acknowledged that if I granted an attachment order, a Mareva injunction would not be necessary. Given that Ihave declined to grant the attachment order, however, Syncrude’s request for a Mareva injunction remains a live issue. [134] Authority to order a Mareva injunction derives from the Court's equitable jurisdiction to grant injunctive relief pursuant to theJudicature Act, RSA 2000, c J-2, s 13(2): 1007374 Alberta Ltd v Ruggieri, 2013 ABQB 420, 565 AR 329 at para 23.

As with theattachment order application, the parties disagree on whether the tripartite test is relevant for a Mareva injunction. A. Test [135] Syncrude’s position is that an applicant for a Mareva injunction must establish: (

i) a strong prima facie case and (ii) a real andsubstantial risk that the respondent will dispose of its assets such that the applicant would be hindered or delayed in the recovery ofjudgment. Syncrude relies on Aetna at para 30 and on Agrium Inc v Pocha, 2000 ABCA 296 at para 2. [136] AMI’s position is that the applicant must establish: (

i) a strong prima facie case, (ii) irreparable harm, and (iii) a real risk thatthe defendant will remove assets from the jurisdiction or dissipate those assets to avoid the possibility of a judgment. AMI relies onAetna at para 30 and on Cho v Twin Cities Power-Canada, 2012 ABCA 47 at para 5. [137] Both AMI and Syncrude cite Aetna as authority for the proposition that the applicant must establish a strong prima facie case.On a close reading, Aetna actually does not stand for that proposition.

In Aetna, the Court surveyed U.K. and Canadian authority onMareva injunctions and noted at para 29 that the Ontario Court of Appeal in Chitel v Rothbart (1982), (ON CA), 39OR (2d) 513 chose a different threshold from that in the U.K. The U.K. authorities required a “good arguable case”; see Lord Denning inRasu Maritima SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1977] 3 All ER 324 (CA). The Ontario Court ofAppeal held that the appropriate threshold was whether the applicant demonstrated a strong prima facie case.

In Banco AmbrosianoHoldings SA v Dunkeld Ranching Ltd, 1987 ABCA 243 , [1987] 85 AR 278 (CA), an early Alberta Mareva injunction case,the Court declined to adopt the strong prima facie case threshold and held that Aetna had not decided the standard of proof required. Insubsequent cases, however, Alberta has adopted the strong prima facie case threshold: Agrium at para 2; Cho at para 5; Vaccaro at para16.

Moreover, a strong prima facie case versus a good arguable case is likely a difference in words without practical consequences: Tracy v Instaloans Financial Solutions Centres (BC) Ltd, 2007 BCCA 481, 48 CPC (6th) 157 at para 54. [138] The purpose of creating the attachment order remedy under the CEA was to eliminate the uncertainty surrounding thecircumstances in which a Mareva injunction could be obtained: Alberta Institute of Law Research and Reform, Prejudgment Remediesfor Unsecured Claimants, Report No 50 (Edmonton: ALRI, 1988) at 146-47.

After the creation of the attachment order it was thought bysome that while the Mareva injunction remained in existence in Alberta it would be granted in very rare occasions: Ray Rutmen et al,Creditors’ Remedies in Alberta, loose-leaf, 2d ed (Carswell, 1999), 6-2. This has not proved to be the case and Alberta courts continue togrant Mareva injunctions: Interclaim at para 83; Ruggieri at para 24. [139] Mareva injunctions are granted, however, on the basis of a test that differs from that in s. 17(2) of the CEA.

In MetalworksCanada Ltd v Warrack, 2014 ABCA 389, 588 AR 54 at para 25 the Court of Appeal held that the grounds for obtaining a Marevainjunction differ from those for obtaining an attachment order in two ways: (

i) the strength of the plaintiff’s claim, and (ii) how probativethe evidence must be that the respondent has dealt or will deal with the subject assets. [140] First, the strength of the applicant’s claim required for a Mareva injunction is higher than for an attachment order: 1498587Alberta Inc v Devani, 2012 ABQB 324, 540 AR 335 at para 22 citing Osman Auction Inc v Belland, 1998 ABQB 964, 235 AR 180 atpara 39; see also Lyons v Creason, 2008 ABQB 550 at para 10.

An applicant for a Mareva injunction must show a strong prima faciecase, whereas an applicant for an attachment order must show only that there is a reasonable likelihood that he will establish his claimagainst the defendant. [141] Second, Alberta courts require evidence that the respondent intends to remove, hide or dissipate assets in order to avoidjudgment: Cho at para 10; Vaccaro at para 16. By contrast, s. 17(2)(

b) of the CEA does not require intent to defeat judgment:Pocklington at para 25. [142] This brings me to the question of whether the tripartite test applies to Mareva injunctions. AMI relies on the following statementfrom Cho at para 5: The tests for a Mareva injunction are not new. There are a number of procedural requirements, and the usual tripartite test for ordinaryinjunctions probably also must be satisfied.

On the merits, the plaintiff must show a strong prima facie case for his suit, and also thatthere is a real risk that the respondent will remove assets from the jurisdiction, or dissipate them, in order to avoid execution(enforcement) under a judgment. See [Aetna] (para 30); Clark v. Nucare PLC, 2006 MBCA 101, 208 Man R (2d) 102 (para 41); Eli LillyCan v. Novopharm, 2010 FC 241, 364 FCR 265, 82 CPR (4th) 401; Sharpe, Injunctions and Specific Performance, para 2.880 (looseleaf,Dec 2011 issue). [143] The Federal Court stated in Eli Lilly Canada Inc v Novopharm Ltd, 2010 FC 241, 364 FTR 265 at paras 19-20: In

summary, in Canada the following requirements for a Mareva injunction must be established: 1. The plaintiff must establish a strong prima facie case for potential success at trial: [Aetna] at 27; 2. The plaintiff must meet the five guidelines set out in Third Chandris Shipping as re-articulated and modified in Chitel, namely (

a) fulland frank disclosure, (

b) particulars of the claim, (

c) assets within the jurisdiction, (

d) risk of removal or dissipation of assets in order tofrustrate judgment, and (

e) an undertaking as to damages; and 3. The plaintiff must satisfy the regular tripartite test for an interlocutory injunction described in [RJR-MacDonald] at 334, namely (a)the presence of a serious question to be tried, (

b) irreparable harm should the injunction not be granted, and (

c) that the balance of

convenience favours the moving party. If the applicant fails to meet any of these, the Court should refuse the Mareva injunction. [ 144 ] AMI has not pointed to any authority since Cho where an Alberta court applied the tripartite test to a Mareva injunction. In fact, it is unclear whether the Court of Appeal has followed Cho . In Vaccaro , decided after Cho , O’Ferrall J.A. said at para 16 that the test for a Mareva injunction required only two things: a strong prima facie case and a risk of removal or dissipation of assets in order to frustrate any judgment.

However, Vaccaro was a security for costs case, not an application for a Mareva injunction. [ 145 ] In 1007374 Alberta Ltd v Ruggieri , 2013 ABQB 278 , the respondent relied on Cho to argue that the tripartite test must be satisfied for a Mareva injunction. Hawco J. held at para 25 that requiring that the tripartite test be met in addition to the two-part Mareva injunction test did not result in a higher test.

His reasoning is consistent with the general consensus that if the applicant establishes a strong prima facie case, it will have met the “less exacting” test of a serious issue to be tried: Interclaim at para 46 citing Aetna ; see also Interclaim Holdings Limited v Down , 1999 ABCA 214 at para 6 . There is no authority, however, on whether the tests of irreparable harm and balance of convenience are subsumed within the Mareva injunction test. [ 146 ] In Cho and Eli Lilly , the Courts did not have to determine whether the tripartite test was met.

In Eli Lilly , the applicant had not provided an undertaking as to damages. In Cho , the applicant failed to show that the respondents were removing, hiding or dissipating assets to avoid execution. [ 147 ] Interestingly, in Front Carriers Ltd v Atlantic & Orient Shipping Corp , 2006 FC 18 , the Federal Court held at paras 33-37 that the serious issue to be tried test is subsumed within the requirement that an applicant set out the particulars of the claim. The Court held at para 15 that the three branches of the tripartite test “are merged with the separate distinct criteria of a Mareva injunction”.

The Court granted a Mareva injunction without explicitly addressing balance of convenience and irreparable harm. Perhaps this is because if there is a real risk that the assets will be dissipated or moved to avoid judgment, the applicant has established irreparable harm and the balance of convenience favours granting the order. [ 148 ] In

summary, I find that an applicant for a Mareva injunction in Alberta must establish (

a) a strong prima facie case for potential success at trial, and (

b) a real risk that the respondent will remove assets from the jurisdiction, or dissipate them, in order to avoid a judgment. Further, the applicant must meet procedural requirements: (

a) full and frank disclosure, (

b) particulars of the claim, (

c) assets within the jurisdiction, and (

d) an undertaking as to damages. Finally, the applicant must satisfy two branches from the tripartite test: irreparable harm and balance of convenience. B.

Application [ 149 ] I note the comments of the Court of Appeal in Modry v Alberta Health Services , 2015 ABCA 265 , 606 AR 373 at para 37 : For a definition of “strong prima facie case”, see IBM Canada Ltd v Almond , 2015 ABQB 336 at para 29 (a strong prima facie case is one that will “probably prevail at trial” or is “likely to succeed at trial”), … [ 150 ] Syncrude asserts that it has a strong prima facie case premised on its claim to exclusive use and possession of reclamation material.

Can it be said at this stage that Syncrude will probably prevail at trial in its claims of conversion and trespass to chattels? [ 151 ] In my view, there is more than sufficient doubt about the outcome of the trial Court’s attempt to reconcile the various agreements impacting on the Overlapping Area to prevent me from concluding that Syncrude will probably prevail at trial. [ 152 ] Consequently, I find that Syncrude has not established a strong prima facie case.

Further, I am not, from the evidence submitted, prepared to find that there is real risk that AMI will dissipate assets. [ 153 ] Syncrude’s request for a Mareva injunction is denied. VIII. Conclusion [ 154 ] To summarize, Syncrude’s applications for a preservation order, for an attachment order and for a Mareva injunction are denied.

If the parties are unable to agree on costs they may submit written argument within thirty days of the date of these Reasons. [ 155 ] I mention in passing that AMI pointed out that a prejudgment preservation order should not be used as a tactical weapon against a defendant who has a valid defence to the claim: see 1773907 Alberta Ltd v Davidson at para 73 . I have had some disquiet at the fact that Syncrude’s response to AMI’s action against it included a counterclaim for more than one hundred times the amount sought by AMI. To be sure, Syncrude is free to assert a counterclaim in whatever amount it thinks fit.

Nevertheless, the Court must exercise great care to ensure that the quantum of an as yet unproven claim does not, by itself, influence the assessment of the merits of the application for prejudgment relief. Prejudgment relief, especially when it has the potential to limit the respondent’s ability to carry on business and to proceed with litigation, must not be allowed to be used improperly. Heard on the 13 th and 14 th days of October, 2016. Dated at the City of Calgary, Alberta this 24th day of January, 2017.

C.M. Jones J.C.Q.B.A. Appearances: Marco Poretti Reynolds Mirth Richards & Farmer LLP for the Plaintiff/Respondent Joshua A. Jantzi Dentons Canada LLP for the Defendant/Applicant