PetroFrontier Corp v Macquarie Capital Markets Canada Ltd, 2021 ABQB 54

Source: Court of King's Bench of Alberta

Date: 2021-01-22

Jurisdiction: Alberta

Docket: 1401 07429

Citation: 2021 ABQB 54

Opinion

Court of Queen’s Bench of Alberta Citation: PetroFrontier Corp v Macquarie Capital Markets Canada Ltd, 2021 ABQB 54 Date: 20210122 Docket: 1401 07429 Registry: Calgary Between: PetroFrontier Corp., PetroFrontier (Australia) Pty Ltd., and Texalta Australia Pty Ltd. Plaintiffs - and - Macquarie Capital Markets Canada Ltd. Defendant And Between: Macquarie Capital Markets Canada Ltd. Plaintiff by Counterclaim - and - PetroFrontier Corp. Defendant by Counterclaim

_______________________________________________________ Memorandum of Decision of the Honourable Madam Justice G.A. Campbell _______________________________________________________ I. Introduction [ 1 ] The Plaintiffs PetroFrontier Corp., PetroFrontier (Australia) Pty Ltd., and Texalta Australia Pty.

Ltd. (Texalta) (collectively, the Plaintiffs) applied to a Master seeking an order directing the corporate representative of the Defendant, Macquarie Capital Markets Canada Ltd. (the Defendant) and its former employee witnesses (all of whom held senior management positions at the relevant time) to answer 120 questions objected to (the Objected To Questions) and seven undertakings refused (the Refused Undertakings) at questioning in a commercial litigation action relating to a terminated underwriting agreement entered into between the parties in June 2012 (the Underwriting Agreement). [ 2 ] On March 3, 2020, Master Farrington gave oral reasons in which he granted the Plaintiffs' application in part and directed the Defendant's witnesses to answer all but 11 of the Objected To Questions and one of the Refused Undertakings (the Order). [ 3 ] The Defendant appeals the Order arguing that all of the Objected To Questions directed by the Master to be answered (the Appealed Questions) and three of the Refused Undertakings (the Appealed Undertakings) need not be answered by the Defendant witnesses.

The Defendant does so on the grounds that (1) questions about the Defendant's motivations for terminating the Underwriting Agreement are irrelevant and immaterial; (2) questions that seek to solicit opinions, understandings or legal conclusions from fact witnesses are improper; and, finally (3) questions about the Defendant's communications with its external legal counsel infringe on solicitor-client privilege. II.

Background [ 4 ] This action arises out of the Plaintiffs' offering of their securities (the Offering) to the public under a financing method that is referred to in the capital markets as a "bought deal", with the Defendant acting as the sole underwriter.

Pursuant to the Underwriting Agreement, the Defendant agreed to purchase for resale all of the Plaintiffs' securities offered for sale under the Offering, thereby effectively guaranteeing that the Plaintiffs would receive a minimum of $15 million, which was the amount sought to be raised under the Offering. [ 5 ] When the Plaintiffs failed to file a final prospectus by the deadline (the Deadline) as stipulated in the Underwriting Agreement, the Defendant terminated the Underwriting Agreement, which included its obligation to purchase any of the securities under the Offering.

The Plaintiffs sued the Defendant for damages suffered from the termination. [ 6 ] In its pleadings, the Plaintiffs claim that a series of representations were made by the Defendant whereby the Defendant agreed to extend the Deadline and had thereby agreed it would not terminate the Underwriting Agreement on the basis that the Plaintiffs failed to meet the Deadline. However, notwithstanding its repeated representations and confirmed agreement not to terminate, at the stroke of midnight as the Deadline passed, the Defendant advised the Plaintiffs it was terminating the Underwriting Agreement.

Its basis for so terminating was that the Plaintiffs had not met the Deadline as required under the Underwriting Agreement. [ 7 ] The Plaintiffs claim that the Defendant terminated the Underwriting Agreement for reasons other than alleged breaches of the Underwriting Agreement. These reasons included the Defendant's desire to avoid incurring an economic loss and from owning more than 10% of the Plaintiffs' outstanding securities if it could not resell them. [ 8 ] In its pleadings, the Defendant denied making any representations or agreement on its part to extend the Deadline.

The Defendant claimed that it was entitled under the terms of the Underwriting Agreement to terminate it because the Plaintiffs failed to meet the Deadline and, as required by the Underwriting Agreement, there was no agreement in writing to extend the Deadline. III. Issues [ 9 ] The sole issue for determination is whether the Master erred in directing the Defendant's witnesses to answer the Appealed Questions and Appealed Undertakings, which in turn raises the following issues: 1. Is it necessary to provide separate reasons for each one of the Objected To Questions and Refused Undertakings?

2. Are questions regarding the Defendant's motivations for terminating the Underwriting Agreement relevant to the pleadings and material to the determination of the issues raised in the pleadings? 3. Are questions that seek to solicit opinions, understandings, and expectations that a fact witness held in the past, including questions regarding the witness's state of mind, motive, opinion or legal conclusion, proper questions that are relevant and material? 4.

Did the Defendant waive solicitor-client privilege over communications with its external legal counsel regarding an alleged oral agreement to extend the Deadline? IV. Standard of Review [ 10 ] The standard of review for an appeal of a Master's decision is correctness. An appeal of a Master's decision is essentially a de novo hearing as fresh evidence may be introduced before this Court. [ 11 ] No fresh evidence was introduced in this matter. However, the Defendant on appeal referred to some dictionary

definitions of "instruct" or "instruction" that were not before the Master. V. Analysis [ 12 ] The applicable law relevant to the four issues is summarized below and has informed my decisions on the Appealed Questions and Appealed Undertakings as detailed in Schedules 1 through 7 attached to this Decision. A.

Expressly Stated Reasons for Each Objection Not Necessary [ 13 ] The Defendant contends that Master erred in law because he failed to separately consider the merits of, and, provide an expressly stated reason for, his decision regarding each one of the Objected To Questions and Refused Undertakings. [ 14 ] The Plaintiffs say there was no such error. [ 15 ] While not expressly stated, it is apparent after reviewing the Appealed Questions and Appealed Undertakings and the Master's

summary of the pleadings, issues and rulings in this matter that the Master had considered each individual objection made by the Defendant. [ 16 ] In making his rulings, the Master did not explicitly review and issue a separate ruling on each and every one of the Objected To Questions and Refused Undertakings. However, the Master determined that three common themes emerged from amongst them.

This determination was obviously made after review of all of the Defendant's objections as he specifically stated that he viewed the Defendant's objections as falling under one of three broad categories or topics (the Three Categories): 1. Relevance and materiality; 2. Solicitor/client privilege involving external counsel; and 3. Solicitor/client privilege involving internal counsel. [ 17 ] The Master then concluded that the majority of the Objected To Questions and Refused Undertakings were relevant and material as they fell into one or more of three broad sub-sets: 1.

Questions regarding the Defendant's motivations for terminating the Underwriting Agreement; 2. Questions that sought to solicit opinions, understandings, and expectations that a fact witness held in the past - specifically those held during the time period surrounding the facts raised in the pleadings, including questions regarding the witness's state of mind, motive, opinion or legal conclusion; and 3.

Questions that sought communications regarding the alleged extension of the Deadline. [ 18 ] It was on the basis of the Three Categories and three sub-sets that the Master proceeded to group the Objected To Questions and Refused Undertakings and make his determinations as to whether they were relevant and material and not privileged, and therefore, to be answered. [ 19 ] In his reasons for the Order, the Master concluded that the substantial majority of the Objected To Questions and Refused Undertakings were relevant and material.

His conclusion is consistent with a consideration of each objection. [ 20 ] I see no error in the Master's approach of finding a common theme and creating the Three Categories, given the broad commonalties and repeated themes present in the Objected To Questions and Refused Undertakings. This was an efficient way in which to conduct his review and make his determinations on the Objected To Questions and Refused Undertaking.

Importantly, it is clear from the Master's reasons why he determined that the Appealed Questions and Appealed Undertaking were to be answered: because they were relevant, material and not privileged. B. Relevance and Materiality

[ 21 ] The next question is whether the Master erred in his assessment that the Appealed Questions and Appealed Undertakings were relevant and material to the issues raised in the pleadings. 1. Applicable Legal Principles [ 22 ] A party under questioning is only required to answer questions that are relevant and material: Rule 5.2(1) of the Alberta Rules of Court , Alta Reg 124.2010 .

Rule 5.2(1) limits what is relevant and material to those questions where the answer could reasonably be expected to significantly determine one or more of the issues (primary relevance), or ascertain evidence reasonably expected to significantly help determine one or more of the issues (secondary relevance) raised in the pleadings. [ 23 ] When determining whether a question or undertaking sought to be answered is relevant and material, the starting point is the pleadings.

Whether a question or undertaking is relevant is determined by the pleadings, whereas their materiality concerns whether the information sought from the question or undertaking can help, directly or indirectly, to prove a fact in issue : Dow Chemical Canada Inc v Nova Chemicals Corp , 2014 ABCA 244 at para 17 . As Slatter J. (as he then was) observed in Weatherill (Estate of) v Weatherill , 2003 ABQB 69 at para 17 [ Weatherill ], "… relevance is determined by the pleadings, while materiality is more a matter of proof…". [ 24 ] Thus, the facts as pled in the pleadings are key considerations in this determination.

The facts define the issues to be decided and dictate what is or is not relevant or material. [ 25 ] Great latitude should be given during questioning so that the fullest inquiry may be made as to all matters which can possibly affect the issues between the parties: Rule 5.1(1). 2. Motivations for Terminating the Underwriting Agreement are Relevant and Material i.

Scope of the Pleadings [ 26 ] The Defendant argues that the Master was incorrect in concluding that the Plaintiffs had pleaded ulterior motives regarding termination of the Underwriting Agreement in a way that made those allegations relevant and material to the issues to be determined.

The Defendant points to no such allegation in the Plaintiffs' Statement of Claim and that there is no allegation, generalized or other, of bad faith behavior conduct. [ 27 ] The Defendant further asserts that while the Plaintiffs pleaded a motive in their Reply, because they did not link their ulterior motive allegation to any possible cause of action or wrongful act in support of any damages, it is an offhand comment and thus, not determinative of any issue joined in the Statements of Claim or Defence. [ 28 ] In the result, the Defendant argues that the reasons why it terminated the Underwriting Agreement, and what factors it considered when it decided to terminate are irrelevant and immaterial to the issues raised in the pleadings. [ 29 ] The Plaintiffs disagree.

They contend that the Defendant has once again attempted to recharacterize their pleadings in an inaccurate manner, ignoring the material facts pled, which make the Defendant's motives for its conduct relevant and material to the issues to be decided in this action. [ 30 ] As correctly noted by the Master, the pleadings here are broad and extensive. There is a statement of claim, a statement of defence, a counterclaim, a statement of defence to the counterclaim and a reply to the defence.

The Master also correctly noted that the parties "do not agree on what the case is about when the pleadings are reviewed as a whole". [ 31 ] In his decision, the Master summarized the parties' respective views of the issues in dispute. He set out the Plaintiffs' view of the issues as follows: The Plaintiff[s] assert[] ulterior motives on the part of the Defendant in breach of contractual duties of good faith performance.

The Plaintiff[s] also argues that an extension was granted for meeting outstanding matters under the share issuance, and, if an extension was not granted, there were misrepresentations relating to extension discussions, or at least something less than honest good faith performance in the failure to grant an extension. [ 32 ] The Master rejected the Defendant's restrictive approach to the issues raised by the pleadings.

He noted that the Defendant's view of the issue is that "it had the right not to proceed with the transaction based upon a strict wording of the agreements and, as such, there is no need to delve into any of the other issues raised by the Plaintiffs". [ 33 ] I see no error in either the Master's analysis of the pleadings or of the parties' respective positions. [ 34 ] The pleadings clearly raise more issues than the three narrow issues identified by the Defendant, which are restricted to determining the parties' contractual rights and obligations under the Underwriting Agreement. [ 35 ] As recognized by the Master, the Plaintiffs' pleadings claim more than a breach of an alleged general duty of good faith in respect of the need to agree to extensions of time.

Specifically, the Plaintiffs' pleadings claim that the Defendant made a series of representations that led the Plaintiffs to believe that the Defendant had expressly agreed to extend the Deadline in the Underwriting Agreement and would not terminate on that basis but then did so. The Plaintiffs allege that the act of termination was the very act the Defendant expressly represented to the Plaintiffs that it would not do if the Plaintiffs missed meeting the Deadline.

As a result of these representations and agreements, the Plaintiffs allege the Defendant, who they allege was in a special relationship (fiduciary or otherwise) with them, deliberately misled them and thereby breached its duty to act in good faith in relation to its contractual relationship and in its dealing with the Plaintiffs. [ 36 ] The facts pleaded in the Statement of Claim make it clear that the Defendant's motives for its conduct are relevant and

material to the Plaintiffs' allegation that the Defendant owed it a duty of good faith to it in all dealings, whether contractual or otherwise. [ 37 ] Here, the Plaintiffs allege the Defendant deliberately led them to believe, through its express representation and agreements, that the Defendant would not terminate the Underwriting Agreement if the Plaintiffs missed the Deadline.

The Plaintiffs allege that the Defendant's motive for misleading them was to create a basis that would permit it to use the terms of the Underwriting Agreement to terminate so that it would, among other things, avoid economic loss and not breach the 10% share ownership threshold. That is, the allegation is that the Defendant would not have been entitled to terminate but for the deceitful scheme that it created and implemented.

It was not the exercise of its right to terminate but the way in which the Defendant obtained its entitlement to this termination right that the Plaintiffs' allege gives rise to its good faith claim. [ 38 ] In deciding a common law good faith claim, motive can help in proving actionable deliberate misleading conduct that breaches the duty of honest performance.

These are the allegedly actionable acts that the Plaintiffs contend would support their claim for damages. [ 39 ] Key questions for the trial judge will likely include: • to determine whether the Plaintiffs can rely on what it claims are the deceitful, deliberate actions taken by the Defendant, which then gave to the Defendant the right to use the terms of the Underwriting Agreement to terminate it; • whether these acts were deliberate misleading dishonest acts done in breach of the duty of honest performance in contract; and, • whether this misconduct gives rise to a cause of action and finding of damages as against the Defendant. [ 40 ] These are questions that will not be decided here.

As noted by the Master, "to a large extent, some of the Defendant's arguments on relevance and … materiality amounted to an argument that its position on the merits was correct". [ 41 ] These possible legal issues provide the context within which to determine the relevance and materiality of the Appealed Questions and Appealed Undertakings. ii.

The Principle of Good Faith, the Duty of Honest Performance and Motives for Termination [ 42 ] The parties disagree about the application of the organizing principle of good faith and the duty of honest performance in contract to the examination of motives. [ 43 ] The Defendant argues that questions about its motives are irrelevant because the alleged breach of duty of good faith as pleaded and framed by the law does not permit an examination of its motive for termination. It says there is no duty to disclose information relevant to motives regarding terminating a contract.

The Defendant suggests that the law precludes the Plaintiffs from attempting to challenge a contractually exercised right of termination for allegedly being done contrary to the organizing principle of good faith as a means to expose the other party's selfish motivations in order to receive some "palm tree justice". [ 44 ] The Plaintiffs assert that the uniqueness of their claim in which it alleges that the Defendant deliberately lied and misled it about matters directly linked to the performance of the Underwriting Agreement, namely the right to terminate if the Deadline was not met, distinguishes it from other contractual termination cases.

The Plaintiffs assert that what is challenged is the bona fides of the Defendant's statements and actions that the Deadline would be extended but then used the resulting missed Deadline as its basis to exercise the act of termination itself. The Plaintiffs note further that their cause of action rests on proving the deceitful scheme, what it says undermined its interests in bad faith and what the Supreme Court in Bhasin v Hrynew , 2014 SCC 71 at para 73 [ Bhasin ] said it was illegal to do. [ 45 ] Bhasin was issued in November, 2014, approximately four months after the statement of claim was filed here.

However, the claims made in the Plaintiffs' Statement of Claim and the duty of honest performance recognized in Bhasin are similar. [ 46 ] The Supreme Court in Bhasin created a new duty of honest contractual performance as a manifestation of the general organizing principle of good faith contractual performance.

At a minimum, acting in good faith in relation to contractual dealings means being honest, reasonable, candid and forthright and that the parties must not lie, actively mislead or deceive the other about matters directly linked to performance of their contract, including termination of the contract: Bhasin , at para 66 . This good faith or honest contractual performance do not impose a duty of loyalty or a unilateral duty to disclose information relevant to the termination of a contract or to forego contractual advantages: Zenex Enterprises v Promenade Limited Partnership , 2019 ONSC 3262 at para 31 .

The principle of good faith in contractual performance includes a requirement to act honestly by not lying or misleading the other party in the performance of the contract: Bhasin at para 73 . [ 47 ] Subsequent to hearing this appeal, the Supreme Court issued its decision in in CM Callow Inc v Zollinger , 2020 SCC 45 , at para 53 [ Callow ]. Further submissions were not sought from the parties as the Supreme Court simply clarified the application of the duty of honest contractual performance recognized in Bhasin in the exercise of a seemingly, unfettered, unilateral termination clause.

The Supreme Court found a breach of the duty of honest performance and resulting liability flowing from active deception in the exercise of a termination clause. In Callow , the Supreme Court held that while a party is not required to subvert its legitimate contractual interests to those of another party and there is no positive obligation of disclosure, actively deceiving the other party regarding their intention to terminate undermines the other party's interests in bad faith: Callow at para 39 .

Further, where the facts disclose dishonest conduct, a contracting party may be required to correct a false impression created by its own actions: Callow at para 38 . [ 48 ] In this case, the Plaintiffs' Statement of Claim clearly alleges that there was a duty of good faith owed in the performance of all of the parties' contractual obligations and dealings. The Plaintiffs are also clearly alleging deceit and dishonesty on the facts alleged and call into question the Defendant's motives in deliberately creating a situation in order to give it a basis to terminate under the Underwriting Agreement.

[49] However, the Supreme Court made clear that the principle of good faith is not to be used as a pretext for scrutinizing themotives of the contracting parties: Bhasin, at para 70. But motive can be relevant and material in some cases. In this case, motive isrelevant and material because it could assist in proving that the Defendant deliberately created a situation that would give it a basis toterminate the Underwriting Agreement.

Until the Deadline was missed, the Defendant arguably had no discretionary right to terminate. [50] Where the temporal knowledge of the party's actual obligation, as compared to what the party did, is relevant, the answers toquestions that relate to it and motive are material: Romanow v Nexen Energy ULC, 2016 ABQB 339 at para 16 [Romanow]. [51] As Master Robertson stated in Romanow, at para 22: When the actions taken by a party are said to have been taken knowing that they were illegal, or contrary to the terms of the agreement,questions about who made the decision, exactly what the decision was, when that decision was taken, and why the decision was takenare all not only relevant to the claim, they are facts that lie at the core of the dispute… [52] The alleged misconduct is similar here.

Given the Plaintiffs' direct allegation that the Defendant, as part of its deceitfulscheme, had agreed and represented it would not terminate the Underwriting Agreement if the Plaintiffs missed the Deadline but then,contrary to those representations and agreement, did so the moment the Deadline passed, questions about who made the decision, whenit was taken and why the Defendant made the decisions it did in terminating the Underwriting Agreement are "facts that lie at the core ofthe dispute" and as such are relevant and material to the issues to be decided at trial. [53] For example, the trial judge will have to determine whether the Defendant's conduct and actions go beyond or fall within thepermissible scope of honest contractual performance and the role that motive will have in proving actionable dishonest conduct. [54] Therefore, facts about the Defendant's motives as to why it allegedly represented and agreed that it would not carry out aspecific act in the performance of the Underwriting Agreement,

an act of termination, if the Plaintiffs missed meeting a specific act, theDeadline, but then did exactly what it represented and agreed it would not do, and terminated the Underwriting Agreement the momentthe Deadline passed, are relevant and material to the issues raised in the Statement of Claim. 3. Conclusion [55] This is not a simple contract termination case as the Defendant has alleged.

In these circumstances and for these reasons, theDefendant's motivations, the "why" for terminating the Underwriting Agreement and acting as it did, are relevant and material to theissues raised in the pleadings. [56] I see no error in the Master's determination that questions asked that related to the Defendant's motives for terminating theUnderwriting Agreement are relevant and material to the issues raised in the pleadings. C.

Questions Regarding Opinions, Understandings, and Expectations Held at theTime [57] The Defendant resists answering any questions that solicit the opinions, understandings or expectations held by its corporaterepresentative and former senior management on the basis that such questions being asked of these fact witnesses are neither relevant normaterial. The Defendant also says that asking questions of law or opinion of these witnesses is improper and impermissible. [58] The Plaintiffs agree that, generally, opinion evidence from a non-expert witness is not permitted.

However, the Plaintiffscontend that this is not what was asked here. [59] The Plaintiffs emphasize that the questions asked were only for opinions, understandings and expectations held by these factwitnesses at the time, which was some years ago. As such, these questions seek to elicit a fact, not an opinion, answer. Further, thesetypes of questions seek to elicit the state of mind of the Defendant at the time of termination, namely, the "why" questions about theDefendant's decision to express agreement to extend the Deadline, yet then did the exact opposite and terminated the UnderwritingAgreement. 1.

Proper and Permissible Questions [60] In general, questions about a witness's understanding or what they thought about their obligations are not relevant or materialto what those obligations were or whether they were breached.

This is because the law considers parties' words and conduct asobjectively construed, without regard for their subjective views: Eli Lilly & Co v Novopharm Inc, [1998] 2 SCR 129, ;Bhasin v Hrynew, 2013 ABCA 98 at paras 26-27; Gainers Inc. v Pocklington Holdings Ltd., 2000 ABCA 151. [61] But questioning is about facts. [62] Questions about a witness's understanding, expectation or opinion that they held at a specific time in the past are questions offact: Opron Construction Co. v Alberta, [1988] AJ No 232, (ABQB). [63] Further, the state of mind of a witness is a fact.

The scope of questioning in this circumstance was discussed by Slatter, J. (ashe then was) in Weatherill, at para 16: There are some facts that can only be proven by essentially eliminating all the competing scenarios, thereby leaving the fact in issue asthe sole logical inference. When a state of mind is in issue, it can generally only be proven by demonstrating a pattern of conduct of theperson whose state of mind it is. In deciding whether a particular document is material, one must take a very pragmatic view, viewing thesituation from the perspective of the party who must prove the fact in question.

At an interlocutory stage of proceedings, the Court

should not measure counsels' proposed line of argument too finely; if counsel can disclose a rational strategy in which the disputed document plays a material part, that should be sufficient.

Again it must be remembered that the purpose of the Rule was to avoid abusive, excessive, and unnecessarily expensive discovery, not to cut off legitimate lines of inquiry. [ 64 ] Questions regarding what a witness did, why they did it, or why they did not do it, and whether at the time they believed they were right in what they did or did not do may demonstrate that the party knew what its obligations were and deliberately acted contrary to them, making this line of questioning relevant and material: Romanow , at para 29 .

As Master Robertson stated in Romanow , at para 40 : …But in many cases the understanding that a party had when it did the things in question is germane to the issue pled because the party's state of mind is in issue, and the party's current understanding may be relevant as well. [ 65 ] Thus, in certain circumstances, what a witness thought, understood or expected at the time of the events in issue are facts that may well be relevant and material. The relevant query is whether the question can help determine any of the issues raised in the pleadings. [ 66 ] Questioning is to seek facts, not law.

Questions about conclusions of law are not proper questions. A witness's view about the legal effect of a legal requirement or provision, such as the meaning of a provision in a contract, is irrelevant because that is the domain of legal argument, judicial

interpretation and determination. However, it is permissible to ask a witness to provide their understanding of the facts represented in a document or legal circumstance, which is neither an opinion nor

interpretation. [ 67 ] I accept that questions regarding opinions, understandings, and expectations held at the time are questions seeking facts and are proper and permissible. However, the general principles of relevance and materiality articulated above must still be met in order to find that a question must be answered. 2. Relevant and Material Questions [ 68 ] In this case, the Plaintiffs' pleadings have put in issue the Defendant's state of mind; what its senior management understood, expected and opined at the time of termination.

Questions were directed at determining the intended purpose behind certain actions taken by the Defendant. In that regard, such questions that seek to solicit opinions, understandings, and expectations that a fact witness held in the past - specifically those held at the time period surrounding the facts raised in the pleadings, including questions regarding the witness's state of mind, opinion or understanding - are relevant and material to the issues raised by the pleadings and are to be answered. 3.

Conclusion [ 69 ] I see no error in the Master's determination that questions asked that relate to the opinions, understanding and expectations held by the Defendant's senior management or corporate representative at the time it decided to terminate the Underwriting Agreement, are relevant and material to the issues raised in the pleadings and were to be answered. D.

Solicitor-Client Privilege [ 70 ] The Defendant argues that it did not waive privilege over its communications with its external counsel when, in its Statement of Defence, it denied that its external legal counsel had agreed to the extension, had neither the authority nor instructions to agree to an extension, and that the Plaintiffs knew that this was the case.

The Defendant asserts that it did not voluntary puts its communications with its external legal counsel at issue but was forced to reply to the Plaintiffs' claims with a "very carefully delineated and narrow denial" akin to saying "prove it". [ 71 ] The Defendant argues that the Master erred when he concluded that because the Defendant had "squarely placed [the authority of and instructions that were or were not given to external counsel] into issue" it had waived its privilege over those communications with its external legal counsel and ordered the Defendant's witnesses to answer questions relating to those communications. [ 72 ] The Plaintiffs argue that the Master was correct in concluding that there had been a waiver by the Defendant of the privilege over its communications with its external legal counsel when the Defendant clearly chose to put in issue the authority of, and instructions that were or were not given to, its counsel on the extension issue. 1.

Implied Waiver of Solicitor-Client Privilege [ 73 ] Fairness and consistency may require a finding that privilege has been waived when a party acts in a manner that makes the continued protection of the communication inappropriate. Waiver occurs when a party uses or makes the legal advice a substantial element or an issue in its claim or defence. However, there can be no waiver of privilege where it is the party seeking disclosure and not the party claiming privilege who puts reliance on legal advice at issue: Manson Insulation Products Ltd v Crossroads C & I Distributors , 2014 ABQB at para 67.

Such pleadings relying on another party's legal advice cannot be used as a sword to pierce privilege: Lloyds Bank Canada v Canada Life Assurances Co. , [1991] OJ No 135, 25 ACWS (3d) 25 (OCJ (Gen Div)). [ 74 ] In this case, the Plaintiffs pled in their Statement of Claim that the factual representations made by the Defendant's external legal counsel to the Plaintiffs led them to believe that the Defendant had agreed to the alleged extension.

The Plaintiffs stated in paragraph 25 that, "Torys LLP had authority, or alternatively, ostensible authority, to bind the Defendant to the [alleged extension agreement]". [ 75 ] In reply, the Defendant's paragraph 86 of its Statement of Defence stated that: Contrary to the assertions in paragraphs 22 to 25 of the statement of claim, counsel for the parties did not agree to an extension, nor did

they have authority to do so. PetroFrontier and its counsel knew that Macquarie's counsel (

i) did not agree to an extension, (ii) had no instructions to agree to an extension, and (iii) had no actual or ostensible authority to bind Macquarie to any extension agreement. [ 76 ] The opening proviso of paragraph 86 is a complete denial to the four paragraphs in the Plaintiffs' Statement of Claim that claim the circumstances of the involvement of the Defendant's external legal counsel in the alleged extension agreement.

The Defendant could have stopped there but, instead, chose to say more. [ 77 ] First, there is no allegation in the Statement of Claim that the Defendant's external counsel had "instructions" to agree to the extension. This was a fact volunteered by the Defendant and the inclusion of this fact by the Defendant put its external counsel's receipt of instructions and its communications regarding the alleged extension agreement, at issue. [ 78 ] The Defendant argued the synonymous nature of the terms "instructions" and "authority" in its Statement of Defence providing dictionary

definitions of the word "instruct" and "instruction". The suggestion was that both terms were used to deny the same allegation: that the Defendant's external legal counsel had the authority to agree to the extension. [ 79 ] I do not accept this suggestion. While there may at times be overlap in meaning, typically, "authority" describes the scope of power granted by a client to its lawyer, whereas "instructions" describe the communications by which the authority is granted from a client to its lawyer. In its pleadings, the Defendant chose to expressly deny both concepts.

The Defendant used "instructions" to deny a positive act, the existence of any communications and used "authority" to deny the end result, that any such authority existed. [ 80 ] Finally, the Defendant chose to positively assert a new fact, that the Plaintiffs knew that the Defendant's external legal counsel had not agreed to the extension and had no instructions or authority to agree to or bind the Defendant to any such extension. [ 81 ] The result is the communications with external legal counsel regarding the alleged extension agreement were brought into issue by the Defendant in its defence. 2.

Conclusion [ 82 ] I agree with the Master that there was an implied waiver by the Defendant of its solicitor-client privilege over its communications with its external legal counsel concerning the alleged extension agreement.

The Defendant clearly chose to put into issue the knowledge and involvement of its external legal counsel on the alleged extension agreement, including the instructions that were or were not given to counsel on the extension issue, the authority if any, given to counsel and the Plaintiffs' knowledge about the Defendant's external legal counsel's instructions and authority. [ 83 ] However, I agree with the Defendant that the scope of the questioning must be narrowed to questions regarding only those communications between the Defendant and its external legal counsel in relation to the alleged extension agreement.

VI. Decision [ 84 ] The appeal is allowed in part. [ 85 ] When I consider the above principles in the context of the pleadings and the facts of this case, I conclude that, with the exception of a few, the Appealed Questions and Appealed Undertakings are relevant and material, are not protected by solicitor-client privilege and are to be answered.

With regard to the few exceptions, I either found that the Plaintiffs have not established relevance or materiality under any of the categories discussed above or that the question must be narrowed. [ 86 ] Attached as Schedules 1 through 7 to this Memorandum of Decision are the specific Appealed Questions and Appealed Undertakings, the Defendant's objections, the Plaintiffs' comments in reply, and my ruling on each one of them. [ 87 ] In the result, the Plaintiffs were substantially successful on the appeal. In the usual course, costs would be awarded to the Plaintiffs under the appropriate column of

Schedule C of the Alberta Rules of Court . If there is some reason why costs would not follow the event here, the parties may arrange for an appearance to address any cost issues. Heard on the 28 th day of October, 2020. Dated at the City of Calgary, Alberta this 22 nd day of January, 2021. G.A. Campbell J.C.Q.B.A. Appearances:

Andrew W. Wilkinson for the Plaintiffs/Defendant by Counterclaim Robert W. Staley and Justin R. Lambert for the Defendant/Plaintiff by Counterclaim

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling Questions that Need Not be Answered. 25. You know that if a shareholder owns 10 percent or more that they have to file insider trading reports. Do you know that from your knowledge in the industry? p.249 This calls for the witness to give a personal view of an understanding of applicable securities laws. It is an impermissible question.

Further, this fact witness's understanding or opinion about the impact of crossing a share ownership threshold is irrelevant to any issue to be decided in the lawsuit. These are a proper questions as to Mr. Colcleugh’s understanding at the time. See the comments with respect to Q22 in this

Schedule 1. This is not a proper question as Mr. Colcleugh's understanding of securities law and how he acquired that knowledge will not assist in resolving the issues in this matter. 35. With respect to underwriting deals that Macquarie participates in, is there a protocol in terms of who gives instructions to counsel? p.270 Any "protocol" about who gives instructions to counsel is irrelevant to any issue in the lawsuit. Further, it is not a question respecting the facts of this particular lawsuit. See comments with respect to Q14 in this

Schedule 1. Mr. Colcleugh is not required to answer this question as its relevance has not been established. I adopt the Defendant's reasoning. Questions Directed at Motive for Termination

30. Did you ever give any explanation, whether July 9th or any other time, to anyone at PetroFrontier about why Macquarie backed out of the deal? p.261 Any explanation to PetroFrontier about the motivation or rationale for terminating the Underwriting Agreement is irrelevant. It does not go to any issue to be determined in the lawsuit. See the lengthy discussion in the body of the Brief regarding the multiple reasons why questions about Macquarie's motives for terminating the Underwriting Agreement are irrelevant. This is a proper question of fact. See the comments with respect to Q7 in this

Schedule 1. This is a proper question of fact. See the comments with respect to Q7 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

33. What did you understand the termination – the reasons were for terminating the underwriting agreement? p.263 See the comments with respect to Q30 in this

Schedule 1. This is a proper question of fact for Mr. Colcleugh’s understanding at the time. See the comments with respect to Q7 in this

Schedule 1. This is a proper question of fact. See the comments with respect to Q7 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with Macquarie's motivation for terminating the Underwriting Agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Questions Directed at Communications with External Counsel Regarding the Alleged Extension Agreement - Privilege Waived 18. Was an extension agreement ever provided to you for signing? p.232 The fact is that no extension agreement was ever signed. Whether a draft was ever provided for signing is therefore irrelevant. See comments with respect to Q5 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

19. Was an extension agreement, to your knowledge, ever provided to Mr. Dundas for signing? p.232 The fact is that no extension agreement was ever signed. Whether a draft was ever provided for signing is therefore irrelevant. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. 5. What communications were there with Torys with respect to an extension? p.189 Privileged. In these circumstances, all of these questions are proper and fair and no solicitor-client privilege exists because Macquarie waived it.

This question is proper and obviously relevant and material to the issue of whether Macquarie agreed to extend the Final Prospectus Filing Date, or whether its counsel did. It is also relevant and material to whether Macquarie’s counsel had the instructions to agree to an extension, which is a live issue created by Macquarie’s denial that its counsel had any such instructions. In other circumstances, the instructions Macquarie gave to its counsel likely would be protected by solicitor- client privilege.

However, Macquarie has impliedly waived a right to rely on that protection by denying its counsel had the instructions to agree to any extension of the Final Prospectus Filing Date. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

6. Did you have discussions with Ms. Dickie or Mr. Cochlan [Note: Lawyers at Torys] about an extension, on July 5th or 6th or 7th? p.189 Privileged. This question is limited to the topic of the extension of the Final Prospectus Filing Date. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 9. Did you, on July 5th, have a discussion with Ms. Dickie or Mr. Cochlan about an amending agreement? p.213 Privileged. See comments with respect to Q5 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

10. Did you give any instructions to [Ms. Dickie or Mr. Cochlan] as to what Macquarie was prepared to agree to? p.214 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with instructions regarding a possible extension or amending agreement. 11. Did you give [Ms. Dickie or Mr. Cochlan] any instructions as to what they were to say to PetroFrontier or its counsel? p.214 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question as it relates to any extension or amending agreement. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

12. And did you ever discuss with your counsel or instruct your counsel as to what they could agree to? p.215 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question as it relates to any extension or amending agreement. This question is relevant and material as it deals with the alleged extension agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 13. You never, I take it, contacted your counsel when you received that first email and said, There is no agreement? p.215 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with instructions regarding a possible extension or amending agreement.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

14. Who was dealing with Torys, you or Mr. Dundas? p.223 Privileged. Facts ancillary to communications between solicitor and client are not protected by solicitor-client privilege. This question is relevant and material as Macquarie has put its instructions to its counsel with respect to the extension and termination into question. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

Further, Macquarie has waived privilege with respect to the alleged extension agreement. However, the scope of this question must be narrowed to deal with instructions regarding a possible extension or amending agreement. 15. Did you ever talk to Ms. Dickie about delaying the final prospectus until Friday, July 13th? p.230 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 16. Do you know if anyone else [talked to Ms. Dickie about delaying the final prospectus until Friday, July 13th]? p.230 Privileged. See comments with respect to Q5 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

17. Did you ever receive any email from [Ms. Dickie], whether a blind copy or otherwise, confirming that? p.230 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 28. Did you have any discussions with [Ms. Dickie or Mr. Cochlan] with respect to the extension agreement? p.255 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 36. [Did you have] any discussions with Torys instructing them with respect to the extension agreement? p.271 Privileged. See comments with respect to Q5 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

27. Did you have any discussions at all with Ms. Dickie or Mr. Cochlan on Monday, July 9th? p.255 Privileged. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with discussions regarding a possible extension or amending agreement only. 29. And what were you told about what was discussed at that call? p.258 Privileged.

The call in question took place on July 9, 2012, the Final Prospectus Filing Date. See comments with respect to Q5 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with discussions regarding a possible extension agreement only. Questions Directed at Opinions, Understandings, Expectations at the Time

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

1. Do you recall having any view about PetroFrontier's target price in that time frame? p.42 This question asks the witness for an opinion and is improper. In any event, the witness's view about a target price for PetroFrontier's shares is irrelevant in that it will not help determine any issue in the lawsuit. This is a proper question of fact as to whether Mr. Colcleugh held a view at the time.

It is relevant and material because of the connection between Macquarie’s expectation for the future value of PetroFrontier’s shares when it entered into the Bought Deal and how that deal in fact performed on the open market, and the difference between those things all relate to and explain the challenges and losses Macquarie faced but for the Termination. This question also is relevant in that it helps explain the genesis and aim of the Bought Deal from Macquarie’s perspective, which are part of the relevant factual matrix. Mr. Colcleugh is required to provide a response to the question.

This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

4. And what was it in that letter that gave you any concern? [MAC0016572] p.173 Whether the witness had any concern about the content of a letter is irrelevant in that it will not help determine any issue in the lawsuit. This is a proper question of fact as to what views and concerns Mr. Colcleugh held at the time.

In order to explore and test the reasons and decisions of Macquarie with respect to the Termination, it is fair to ask about the circumstances surrounding the Termination and the factors that went into the decision, as well as the circumstances surrounding the discussions and alleged agreement to extend the Final Prospectus Filing Date. This question is relevant and material as there are allegations of bad faith and the decision of Macquarie to terminate having been put into question.

It is relevant and material to consider the state of mind of Macquarie and its senior management in so far as how they perceived, understood and justified their decisions and actions. When the actions taken by a party are said to have been taken knowing that they were contrary to the terms of the agreement, questions about who made the decision, exactly what the decision was, when that decision was taken, and why the decision was taken are all not only relevant to the claim, they are facts that lie at the core of the dispute. Mr. Colcleugh is required to provide a response to the question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

7. Did you have some discussions with someone within Macquarie that caused you to believe that if the filing did not occur on July 9th that Macquarie would exercise its right to not proceed? p.208 Whether the witness believed Macquarie would terminate in certain circumstances is irrelevant. It will not help materially determine any issue in the lawsuit. This is a proper question of fact.

In order to explore and test the reasons and decisions of Macquarie with respect to the Termination, it is fair to ask about the circumstances surrounding the Termination and the factors that went into the decision, as well as the circumstances surrounding the discussions and the agreement to extend the Final Prospectus Filing Date. This question is relevant and material as there are allegations of bad faith and Macquarie’s decision to terminate having been put into question, along with Macquarie’s pleaded good faith motivations for making such a decision.

The state of mind of Macquarie and its senior management is relevant and material in so far as how they perceived, understood and justified their decisions and actions, in particular with respect to the extension and the Termination. Those perceptions and understandings can reasonably be expected to possibly inform further actions taken by Macquarie leading to the Termination.

When the actions taken by a party are said to have been taken knowing that they were contrary to the terms of the agreement, questions about who made the decision, exactly what the decision was, when that decision was taken, and why the decision was taken are all not only relevant to the claim, they are facts that lie at the core of the dispute. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations.

In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

8. [S]o in terms of your answer at page 183 about your feeling that – or your concern that others in Macquarie would take advantage to terminate if the filing did not occur on July 9th, who, then, had you had discussions with that gave you that concern? p.210 The identity of any person who caused the witness concern is irrelevant. That the witness had concern is itself irrelevant. Neither piece of information will determine any issue in the lawsuit. This is a proper question of fact. See the comments with respect to Q7 in this

Schedule 1. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

22. Was there a concern within Macquarie that if this deal did go ahead, they would end up owning about 18.9 percent of the shares? p.246 Whether there was a "concern" calls for the witness to give an opinion. Further, whether there was "concern" or not is simply not relevant to determining any issue in the lawsuit. This is a proper question of fact as to whether a concern was or was not held or expressed to Mr. Colcleugh. Counsel for PetroFrontier was not, and is not, looking for Mr. Colcleugh to provide any legal advice or opinion with respect to the same and should not be taken to be asking for the same.

However, questions about Mr. Colcleugh’s understanding of the consequences for Macquarie should it have become the owner of more than 10% shares in PetroFrontier are proper, relevant and material. Any consequences for Macquarie, and Macquarie’s knowledge of the same, could reasonably allow for inferences to be drawn about its decision and motivations to terminate the Bought Deal.

In this Action, where there are allegations of bad faith, the bona fides of Macquarie’s decision to terminate being challenged, along with Macquarie’s motivations for making such a decision, it is relevant and material to consider all the factors which may have motivated Macquarie to decide and to act as it did. Any and all consequences which Macquarie faced if the Bought Deal proceeded could reasonably be expected to inform further actions taken by Macquarie leading to the Termination, allowing for inferences to be drawn about Macquarie’s motivations to Mr.

Colcleugh is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

terminate. 23. Was there a concern about share ownership in the range of 18.9 percent if the deal went ahead? p.247 See answer to Q22 in this

Schedule 1. This is a proper question of fact as to whether a concern was or was not held or expressed to Mr. Colcleugh. See the comments with respect to Q22 in this

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

26. And does that mean if a deal is not selling, they try and reprice it? Is that what you're saying? p.251 This calls for a witness to give opinion evidence about practices utilized generally on other hypothetical deals. None of this is relevant to the facts of this lawsuit. Past practice in respect of a deal that was not selling would not help determine any of the issues in the lawsuit. In the pages before these questions, which are all in the Iverach Affidavit, Mr. Colcleugh is asked about his email (mac024543) to Mr.

Kozak and he explained he sent it in anticipation of a discussion coming from the CRC (Canadian Risk Committee) regarding repricing discussions and to provide a head’s up to Mr. Kozak to get him thinking about repricing. Mr. Colcleugh explained his anticipation came from years of working with the CRC. These are proper questions as to Mr. Colcleugh’s understanding at the time and with respect to what he viewed and experienced as the normal practices of the CRC.

Macquarie has put the issues related to the “repricing” in issue by pleading in its Statement of Defence that any discussions with PetroFrontier regarding extending the Final Prospectus Filing Date were predicated on the parties coming to an agreement upon new financial terms or a “repricing”. Mr. Colcleugh is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion.

I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 1: Objections of Mr. Colcleugh No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling Questions that Need Not be Answered

19. Were you aware that there was any discussion -- were you involved in any discussion about not billing for those fees? p.158 This question relates to Macquarie's fees for advisory work in advance of the Underwriting Agreement. Any internal discussions at Macquarie about the possibility of not billing for those fees – if there were any such discussions – are irrelevant. Those discussions would not help determine any issue in the lawsuit. The question is relevant and material because questions such as this go to Macquarie’s state of mind.

When a state of mind is in issue, it can generally only be proven by demonstrating a pattern of conduct of the person whose state of mind it is. The facts surrounding Macquarie’s own perception and understanding of its entitlement to its fees, and discussions regarding the same, are relevant because of the primary issues raised in the action regarding whether the Termination was carried out in good faith and evidence of Macqaurie’s own perception, understanding and discussion could lead to inferences that it was aware of its legal obligations and made a choice to deliberately act contrary to them. Mr.

Mackasey is not required to answer this question as its relevance has not been established. While these are factual questions, the Plaintiffs have failed to demonstrate relevance or materiality to the issues raised in the pleadings. Questions Directed at Communications with External Counsel Regarding the Alleged Extension Agreement - Privilege Waived 13. Well, let's ask who was at the meeting. p.111 This question followed the witness having given evidence that legal counsel was present at the meeting in question. As a result, this question seeks privileged information. This is proper question of fact.

Even if the contents of the meeting were protected by solicitor-client privilege, which has not been shown, this ancillary fact about who was at the meeting is not protected under any circumstances. Mr. Mackasey is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement.

However, the scope of this question must be narrowed to deal with instructions regarding a possible extension or amending agreement.

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

20. Are you aware of anyone at Macquarie's ever instructing Torys to agree to the extension? p.159 Privileged. This question is proper and obviously relevant and material to the issue of whether Macquarie agreed to extend the Final Prospectus Filing Date, or whether its counsel did. It is also relevant and material to whether Macquarie’s counsel had the instructions to agree to an extension, which is a live issue created by Macquarie’s denial that its counsel had any such instructions. Mr. Mackasey is required to provide a response to the question.

This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. 21. The people instructing Torys would have been Mr. Colcleugh and Mr. Dundas and who else? p.159 Privileged. Facts ancillary to communications between solicitor and client are not protected by solicitor-client privilege.

This question is relevant and material as Macquarie has put its instructions to its counsel with respect to the extension and termination into question. Mr. Mackasey is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement.

However, the scope of this question must be narrowed to deal with instructions regarding a possible extension only.

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

1. In terms of instructing counsel as to -- anything involving the deal. I just want to understand who was that person. p.14 Privileged. Facts ancillary to communications between solicitor and client are not protected by solicitor-client privilege. This question is relevant and material as Macquarie has put its instructions to its counsel with respect to the extension and termination into question. Mr. Mackasey is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement.

I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with instructions regarding a possible extension only. 2. Were you involved in instructing counsel? p.15 Privileged. See comments with respect to Q1 in this

Schedule 2. Mr. Mackasey is required to provide a response to the question. This question is relevant and material as it deals with the alleged extension or amending agreement. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. Further, Macquarie has waived privilege with respect to the alleged extension or amending agreement. However, the scope of this question must be narrowed to deal with instructions regarding a possible extension only. Questions Directed at Opinions, Understandings, Expectations at the Time

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

4. So if you turn to Tab 51, sir, this is document mac0024064. This is an e-mail chain involving Mr. Dundas and Mr. Vetters. It doesn't appear that you are copied on it; but in the first e-mail at the bottom -- or second e- mail from Mr. Dundas to Mr. Vetters, he says: (as read) Just finishing up. PR attached. The math RC just talked about is a bit aggressive but nonetheless. Does this help you remember whether there were any discussions about the pricing of the deal that was aggressive? p.43 What the deal was priced at, and whether any witnesses viewed the pricing as "aggressive", is irrelevant.

It does not assist in determining any of the issues in the lawsuit. Mr. Vetters email of June 19th stated “the math RC just talked about is a bit aggressive but nonetheless”. RC refers to Rob Colcleugh. This document was produced by Macquarie in its Affidavit of Records. Asking a witness if a document refreshes his memory is proper and fair. Assuming it was positively answered, the follow up questions about what Mr. Mackasey remembers would also be fair. See the comments with respect to Q6 in this

Schedule 2. Mr. Mackasey is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question. 6.

Did you ever conclude that there was a price that the PetroFrontier bought deal would clear at, in other words, sell at? p.60 This question explicitly calls for the witness to give an opinion on a hypothetical price at which the deal could hypothetically have sold. It is improper and, in any event, is irrelevant to the determination of any issue in the lawsuit. The evidence leading to this question is that Centennial, an institutional fund, and its representative Mr. Mecca wanted out of his expressed interest in $3.4 million worth of Subscription Receipts which would negatively impact the price of the same.

That lead to a discussion about whether there was a lower price Centennial may still be interested to purchase at (or the price the bought deal would “clear” or sell at). This question is a proper question of fact with respect to a conclusion made by the witness at the time. Even if it was his own opinion, it is a question about what opinion he held at the time. Mr. Mackasey is directly involved in the discussions arising from the Centennial withdrawal and was expressly asked by Mr. Catellier in his email about re-pricing as an option.

It is relevant and material because of the difficulties with the sale of the Mr. Mackasey is required to provide a response to the question. This question is relevant and material. It deals with Macquarie's opinions, understandings, and expectations. In particular, this question is one of fact dealing with past state of mind, opinion, or legal conclusion. I adopt the Plaintiffs' reasoning, which establishes the relevancy and materiality of this question.

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

PetroFrontier Subscription Receipts, which lead to Macquarie facing a large loss, which they handled by dealing with PetroFrontier and the Bought Deal, as they did, namely terminating the same.

Questions related to the agreed pricing or any re-pricing are relevant and material because if the price was too high, or if there was not any viability to the re- pricing option, these facts can lead to reasonable inferences about the motivations and reasons behind Macquarie’s decision to terminate, which is a live issue in this Action as a result of the allegations of that a decision and action were taken, in bad faith, contrary to an express representation and agreement not to do so. 7. You talked later about re-pricing. Did you ever --and you talked among your group and with others about re- pricing.

Did you ever determine at any point at a price where the shares would sell at? p.60 See comments with respect to Q6 in this

Schedule 2. See comments with respect to Q6 in this

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

8. Did you ever or did Macquarie people ever conclude there was a price at which the deal would be able to sell? p.61 See comments with respect to Q6 in this

Schedule 2. See comments with respect to Q6 in this

SCHEDULE 2: Objections of Mr. Mackasey No. Question Trans. Pg. Macquarie Comments PetroFrontier Comments Court Ruling

9. Did you have a discussion with him or others about the significance of this loss? Mr. Altaras or anyone else in your group about how significant this was? p.91 This question explicitly calls for the witness to give a subjective opinion about the "significance" of the loss. That is improper. In any event, the "significance" of the loss is irrelevant to the determination of any of the issues in the lawsuit. These questions are proper questions of fact regarding whether discussions did or did not take place.

It is not denied that losses suffered by Macquarie on other deals are not relevant or material to the issues in this Action. However, in this Action, where there are allegations of bad faith, the bona fides of Macquarie’s decision to terminate are being challenged, along with Macquarie’s motivations for making such a decision, it is relevant and material to

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