TAQA Drilling Solutions Inc v Yar Holdings Inc, 2021 ABQB 625

Court of Queen’s Bench of Alberta Citation: TAQA Drilling Solutions Inc v Yar Holdings Inc, 2021 ABQB 625 Date: 20210809 Docket: 2003 08740, 2003 06013 Registry: Edmonton Between: Action 2003 08740 TAQA Drilling Solutions, Inc. Applicant - and - Yar Holdings Inc. Respondent Action 2003 06013 Yar Holdings Inc . Plaintiff - and - Industrialization and Energy Services Company (TAQA), TAQA Drilling Solutions Inc., Computershare Trust Company of Canada, and Cougar Drilling Solutions Saudi Arabia LLC Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice B.R. Burrows _______________________________________________________

Every knot was once straight rope [ 1 ] TAQA Drilling Solutions Inc. and Yar Holdings Inc. each claim to be entitled to be paid $US 28.5 million held by Computershare Trust Company in an escrow account. [ 2 ] The dispute between TAQA and Yar arises out of a complex transaction entered between them in 2019. In the transaction, Yar sold, and TAQA bought, essentially Yar’s entire business.

It was an international oilfield supply and service business with operations in several countries including Saudi Arabia. [ 3 ] Among the interests TAQA acquired in the transaction were Yar’s interest as a vendor or supplier under two contracts, essentially purchase orders, for the supply of oilfield services and equipment to Saudi Aramco. Yar had entered each of those two contracts through an agent, Midad, a Saudi Arabian company.

Use of a Saudi Arabian agent by companies foreign to Saudi Arabia was common, if not necessary, at the time of the Aramco contracts because of the policies of Aramco. [ 4 ] One of the main reasons for TAQA acquiring Yar was so that it could take advantage of Yar’s somewhat advanced position among oilfield service and supply firms seeking to do business with Aramco. However, it wanted to do business directly with Aramco – not through an agent, that is, not through Midad.

Accordingly, a significant aspect of the contract between TAQA and Yar was directed toward taking the agent, Midad, out of the picture. [ 5 ] This significant aspect of the contract was reflected in the agreed purchase price. The contract contemplated a full purchase price of $US 95 million. That full purchase price was payable by TAQA if Midad was removed by December 31, 2019 – if the two contracts between Midad (Yar) and Aramco were either assigned to TAQA or replaced by novated contracts between TAQA and Aramco – so that TAQA would be dealing with Aramco directly.

Yar agreed to have Midad take the steps necessary to effect the assignment or novation of the Aramco contracts. If Midad was unable to do so by December 31, 2019, the purchase price payable by TAQA in the transaction would be $US 66.5 million. [ 6 ] At the closing of the agreement, on July 31, 2019, TAQA paid the difference between those two amounts, $US 28.5 million, into an escrow account held by Computershare. The escrow agreement contemplated that those funds would be paid out of escrow on the joint instruction of TAQA and Yar.

If the “Full Payment Condition” was satisfied, the escrow funds would be paid to Yar.

If it was not, the escrow funds would be returned to TAQA. [ 7 ] More specifically, Yar’s obligation was, first, to secure Aramco’s consent to the assignment of the Aramco contracts unless contracts between TAQA and Aramco had been entered to replace those contracts and second, to effect “deregistration” of Midad as agent of Yar. [ 8 ] The dispute giving rise to this litigation is as to whether or not the “Full Payment Condition”, securing Aramco’s consent to the assignment or novation of the Aramco contracts and the removal of Midad as Yar’s agent, occurred by December 31, 2019. [ 9 ] Yar’s position is that by December 31, 2019 Aramco had consented to the assignment of the Aramco contracts from Midad to CDS KSA, though the formalities of such assignment had not been completed.

Alternatively, Yar’s position is that, if Aramco had not consented by the deadline, it was TAQA’s fault and Yar should be entitled, in equity, to relief from the December 31, 2019 deadline. [ 10 ] TAQA takes the position that Aramco had not consented to the assignments or novations by December 31, 2019, and that it, TAQA, had nothing to do with the fact that the deadline was not met. [ 11 ] The foregoing description of the fundamental dispute admittedly ignores much complication and detail which it is necessary to review and consider in determining the issues in this action.

So, into the woods of detail: Yar’s Business Prior to the Transaction [ 12 ] The vendor in the contract giving rise to this dispute was actually Cougar Drilling Solutions Inc. Its name has been changed, since the contract, to Yar Holdings Inc. It is an Alberta company. Prior to the transaction, its business was the manufacture and supply of specialized oil drilling equipment and downhole drilling services in many international markets including North America, Turkey, Pakistan, Southeast Europe, Central and South America, North Africa, Eurasia, and the Middle East including the Kingdom of Saudi Arabia.

In the transaction it sold that entire business to TAQA. [ 13 ] Cougar Drilling Solutions Inc. conducted this business through a chain of subsidiaries. That chain included Cougar Drilling Solutions Global Inc, (CDS Barbados) a company incorporated in Barbados, and Cougar Drilling Solutions Kingdom of Saudi Arabia (CDS KSA), a Saudi Arabian company owned by a subsidiary of CDS Barbados, Cougar Drilling Solutions Global DMCC, a UAE company. CDS Barbados was sold to TAQA in the transaction.

In purchasing CDS Barbados, TAQA automatically acquired CDS Global and CDS KSA. [ 14 ] Even though Cougar Drilling Solutions Inc. did not become Yar Holding Inc. until sometime after the transaction giving rise to these proceedings, I shall refer to the vendor company as Yar in these reasons. [ 15 ] The principal of Yar was Blaine Labonte. The Chief Executive Officer of the vendor, Yar, prior to the transaction, and of the purchaser, TAQA, after the transaction, was Gregory A. Mittelsteadt.

Yar’s Business in Saudi Arabia [ 16 ] The focus of these proceedings is on two contracts to supply oilfield equipment and services to the Saudi Arabian Oil Company, usually referred to as Saudi Aramco or Aramco, which is one of the largest corporations in the world. At the time these two contracts were entered, Aramco required entities with which it did business to be Saudi Arabian. Because Yar was not Saudi Arabian, it was necessary for it to operate through an agent which was Saudi Arabian.

At the relevant time that agent was a company called Midad Holding Company Ltd., a company incorporated in Saudi Arabia. [ 17 ] The two Aramco contracts were the “Mid-Form Contract” and the “Long-Form Contract”. They were both purchase orders issued by Aramco to Midad for the supply of various oil field equipment and services which, formally, Yar would supply to Midad, and Midad would supply to Aramco. Yar would invoice Midad in relation to what it supplied. Midad would pass that invoice on to Aramco.

When Aramco approved the invoice, it would pay Midad and Midad would remit the payment it received, less its commission, to Yar. [ 18 ] Aramco was fully aware that Midad was Yar’s agent and was supplying goods and services to it in that capacity. [ 19 ] The Mid-Form Contract Purchase Order, which, as I understand the evidence, was the more valuable contract in terms of potential revenue for Yar, was issued by Aramco to Midad on April 15, 2018 and was to be in force until April 14, 2021 – a term of three years.

The contract document indicated that the net value of the goods and services to be supplied under the contract was SAR 8.2 million or about $US 2.2 million. [ 20 ] The Mid-Form Contract contained this provision: . . . this Contract may neither be assigned nor transferred, either in whole or in part, by [Midad] without first obtaining the written consent of Saudi Aramco. [ 21 ] The Long-Form Contract was entered between Aramco and Midad on February 1, 2019, and was to continue in effect until January 31, 2022, also a term of three years.

As I understand it, the Long Form Contract required Midad, as Yar’s agent, to provide materials and services as described in the contract when they were ordered by Aramco. The Long Form Contract set out the terms and conditions that would apply to orders for the supply of goods and services of a certain description which Aramco would issue to Midad during the term of the agreement. As I understand it, the Long Form Contract amounted to Aramco’s recognition and acceptance of Midad as a supplier. Its monetary value would depend on what purchases Aramco actually made during the term of the contract.

Its business value was in the fact that Aramco had recognized and accepted Midad as a supplier. [ 22 ] The Long-Form Contract contained this provision: . . . this Contract may neither be assigned nor transferred, either in whole or in part, by [Midad] without first obtaining the written consent of Saudi Aramco. [ 23 ] I will refer to the Mid-Form Contract and the Long-Form Contract, together, as “the Aramco Contracts”. [ 24 ] There is another aspect of Yar’s business in Saudi Arabia which, as will appear, is significant to the issues in this action.

On February 11, 2019, Aramco issued a “Registration Approval Letter” to “Cougar Drilling Solutions”. I understand that such a Registration Approval Letter was one of several formal registration requirements which a company seeking to supply goods or services to Aramco must meet. This was reflected in the Registration Approval Letter itself.

It provided: All procurement instruments including but not limited to service contracts, purchase agreements, or purchase orders will be issued based on the name and address included in your commercial registration (CR), as stated in your Supplier Registration. [ 25 ] In questioning in these proceedings, Mr. Mittelsteadt was asked what entity was registered under this document. He answered that the registration was for the trade name, Cougar Drilling Solutions – that the Registration Approval Letter did not reference a specific entity.

Cougar Drilling Solutions was not the legal name of any of the corporations in the CDS corporate family. The legal names of the relevant CDS corporate family members are referenced in para. [13] above. Mr. Mittelsteadt testified: (Examination, July 8, 2020, transcript page 15, lines 12 to 19) My understanding is that the purpose of this registration was in preparation to facilitate Cougar Drilling Solutions being the entities to be in a position to tender on long-form contracts for the jar and shock.

Since the commercial registration for CDS KSA was in process, we did need a vendor number, we were advised by our local agent at the time that this was acceptable to put into the Aramco system. The Letter of Intent [ 26 ] On November 28, 2018, TAQA issued a “Letter of Intent” to Yar stating that it wished to acquire Yar’s entire business and describing, in general terms, the transaction it proposed. [ 27 ] The letter contained these statements concerning TAQA’s reasons for its proposal: We have a high regard for [Yar] and the management team.

We see [Yar’s business] as a new growth platform for us (we have no overlapping activities in directional drilling and tools) and believe that our involvement will create additional opportunities for the enlarged business in the Middle East and North Africa region. . . . TAQA is a corporation with a long-term investment horizon and emphasis on integrity, team work, responsible stewardship and good citizenship. TAQA’s vision is to be one of the leading Oilfield Services and Equipment companies in the region, providing integrated

products and services to enhance the safety, reliability and competitiveness of our customers. . . .

As at the date of this Letter and based on the information provided to us, our interest in the Transaction is based on TAQA’s intention to continue operating [Yar’s business] in a manner similar to that carried on historically with a view to growing [Yar’s business] further and increasing profitability. [ 28 ] The Letter of Intent indicated that subject to TAQA’s due diligence investigation of Yar’s records, and several assumptions, the anticipated price TAQA would pay to purchase Yar’s business would be $US 95,000,000. [ 29 ] There was no mention of Yar’s business in Saudi Arabia specifically or of the Long or Mid Form Contracts.

However, the letter contained this paragraph: All parties recognize the sensitivity of the existing agency arrangement in the Kingdom of Saudi Arabia between [Yar] and “Midad” and will, as part of the negotiations of the Definitive Agreements discuss and work together on a mutually acceptable approach to such agency arrangement. [ 30 ] The Letter of Intent was endorsed “Received and agreed to on November 20, 2018” by Yar’s CEO and the owner of Yar’s parent company.

There were subsequent amendments to the Letter of Intent changing the date during which the letter would be in force to a later date than originally contemplated. The Purchase and Sale Agreement [ 31 ] The Purchase and Sale Agreement was entered (signed) on April 30, 2019. It consists of 125 pages not including its 49 attached schedules. The “Closing Date” of the agreement was July 31, 2019. [ 32 ] The agreement provided that the purchase price TAQA would pay for Yar’s business would depend on whether or not a defined condition, the “Full Payment Condition” was satisfied.

The payment would be $US 95,000,000 if the Full Payment Condition was satisfied. The payment would be $US 66,500,000 if the Full Payment Condition was not satisfied. The difference, $US 28,500,000 was paid into escrow pending satisfaction by Yar of the Full Payment Condition. The Full Payment Condition [ 33 ] The “Full Payment Condition” had two parts. 1. The Additional Escrow Condition [ 34 ] The first part of the Full Payment Condition was that the “Additional Escrow Condition” be satisfied. The Additional Escrow Condition itself had two parts. A.

The Close-Out Agreement [ 35 ] The first part of the Additional Escrow Condition required that on or before July 31, 2019, Yar and Midad would enter a “Close-Out Agreement”, in a form satisfactory to TAQA. In the required Close-Out Agreement, Midad would agree to terminate the agency agreement between Yar and Midad, and assign Midad’s position under the Aramco Contracts to CDS KSA, which by then would be owned by TAQA.

The Additional Escrow Condition provided: The effectiveness of the above-noted operative provisions of the Close-Out Agreement shall be conditional solely on Midad obtaining the consent of Saudi Aramco to effect the Mid-Form Assignment and the Long Form Assignment, and in case such is not obtained on or before December 31, 2019, the Close-Out Agreement shall automatically terminate on such date without further action of the Parties. [ 36 ] The provision concerning the Close-Out Agreement contemplated an alternative to Aramco consenting to the assignment of the Aramco contracts.

It would be satisfactory if, instead of the Aramco Contracts or either of them being assigned to CDS KSA, Aramco and CDS KSA entered into replacement contracts on substantially the same terms as the Aramco Contracts – that is, a novation of the contract. [ 37 ] So, the Close-Out Agreement required that Midad would obtain Aramco’s consent to either the assignment by Midad of its interest in the Aramco Contracts to CDS KSA or that Aramco agree to the replacement of the Aramco Contracts with Mid-Form and Long-Form contracts between Aramco and CDS KSA – assignment or novation.

Assignment of one of the Aramco contracts and novation of the other would be satisfactory. B.

The Support Agreement [ 38 ] The second part of the Additional Escrow Condition required that Yar and CDS KSA enter a “Support Agreement” in a form satisfactory to TAQA, pursuant to which CDS KSA would provide the goods and services to Yar required for Yar to perform its obligations to Midad under the Aramco Contracts from the closing date of the Purchase and Sale Agreement (July 31, 2019) until: . . . such time as the Full Payment Condition is satisfied, or if the Full Payment Condition is not satisfied, until the date on which both the Mid-Form Contract and the Long-Form Contract shall have expired in accordance with their terms, or been terminated. [ 39 ] In this second part of the Additional Escrow Condition, YAR and TAQA specifically contemplated the possibility that Aramco Contracts might not be assigned or novated by the agreed deadline, December 31, 2019.

If the Aramco Contracts, or either of them, were not assigned or novated, it would be necessary that the vendor’s obligations under the Aramco Contracts continue to be performed. What had been Yar’s capacity to supply the goods and services would be owned by TAQA. TAQA would not be in a position to deal with Aramco directly. TAQA would have to supply the goods and services to Yar, which would supply them to Midad which would supply them to Aramco. TAQA would invoice Yar, which would pass the invoice on to Midad, which would pass the

invoice on to Aramco. When Aramco approved and paid the invoice amount to Midad, it would pay the funds received to Yar, which would pay them to TAQA. 2.

The Second Part of the Full Payment Condition [ 40 ] The second part of the Full Payment Condition required that on or before December 31, 2019, Midad would have obtained the consent of Saudi Aramco to the assignment of the Aramco Contracts unless novations of those contracts had been obtained, and would have taken all necessary action to effect its deregistration as agent of Yar or any of Yar’s products from any applicable registry. [ 41 ] As noted, the central issue in this litigation is whether or not the Full Payment Condition, in particular, the requirement that Aramco’s consent to the assignment or novation of the Aramco Contracts be obtained by Yar by December 31, 2019, was satisfied.

Time is of the Essence [ 42 ] The Purchase and Sale Agreement expressly provided: Time is of the essence in the performance of the Parties’ respective obligations. [ 43 ] As I understand it, there is no dispute that this provision applied to Yar’s obligation to obtain Aramco’s consent to the assignment or novation of the Aramco Contracts. However, Yar takes the position that if the required Aramco consent was not obtained by December 31, 2019, it was because of omission on the part of TAQA so that it is, in the circumstances, inequitable to enforce the “time is of the essence” provision against it.

Yar says equity requires that it be relieved of the December 31, 2019 deadline. Assignment of TAQA’s Position under the Purchase and Sale Agreement [ 44 ] The corporate entity which was the purchaser under the Purchase and Sale Agreement of April 30, 2019 was Industrialization and Energy Services Company (TAQA). As I understand the evidence, that corporate entity was a Saudi Arabian corporation. On May 15, 2019, Industrialization and Energy Services Company (TAQA) assigned its position as purchaser under the Purchase and Sale Agreement to a subsidiary, TAQA Drilling Solutions Inc., a British Columbia company.

I shall refer to the entity that purchased Yar as TAQA despite this assignment. The Close-Out Agreement [ 45 ] Yar and Midad entered an agreement which meets the Purchase and Sale Agreement’s description of a Close-Out Agreement, on July 26, 2019, a few days before the closing of the Purchase and Sale Agreement.

The agreement required Midad to obtain Aramco’s consent to the assignment of the Aramco Contracts from Midad to CDS KSA by December 20, 2019 – 11 days before the deadline in the Purchase and Sale Agreement. [ 46 ] Under the Close-Out Agreement, Yar agreed to pay Midad $US 1,375,000 for it consenting to the assignments (the Consent Payment) and $US 4,125,000 upon Aramco providing “written consent” to the assignment or novation of the Aramco Contracts by December 20, 2019 (the Incentive Payment).

Yar agreed to pay the Incentive Payment within 15 days of Aramco providing written consent to the assignments or novating the Aramco Contracts. The Support Agreement [ 47 ] On July 31, 2019, Yar and CDS KSA entered an agreement, the Support Agreement, which satisfied the second part of the Additional Escrow Condition as described in paragraphs [38] and [39] above. [ 48 ] As of July 31, 2019, the Close-Out Agreement and the Support Agreement having been put in place, only the second part of the Full Payment Condition had yet to be satisfied in order to entitle Yar to receive the escrow funds.

That is, Aramco’s consent to the assignment or novation of the Aramco Contracts had yet to be secured. Gregory Mittelsteadt [ 49 ] As noted, the Chief Executive Officer of Yar prior to the Purchase and Sale Agreement was Gregory A. Mittelsteadt. When Yar’s business was sold to TAQA, Mr. Mittelsteadt became the Chief Executive Officer of TAQA Drilling Solutions Inc. [ 50 ] Prior to the date upon which TAQA’s acquisition of Yar’s business closed, July 31, 2019, Mr. Mittelsteadt’s holding company entered an agreement with Yar pursuant to which Mr.

Mittelsteadt would be involved in securing the closing of the Purchase and Sale Agreement and in securing satisfaction first, of the Additional Escrow Condition and second, of the Full Payment Condition. [ 51 ] The written agreement between Yar and Mr. Mittelsteadt is less than clear as to what exactly Mr. Mittelsteadt was expected to do, but it provided that Yar would pay Mr.

Mittelsteadt’s company a “Retention Fee” of $300,000 upon the closing of the Purchase and Sale Agreement, and a “Success Fee” the amount of which would depend on whether or not the Full Payment Condition was satisfied and on what was paid to Midad to secure its cooperation. The calculation of the Success Fee in the agreement is complicated. It is sufficient to observe that it would be somewhere between $366,600 and $872,200. [ 52 ] The agreement provided that Mr.

Mittelsteadt would continue to provide services relating to “bringing the [Purchase and Sale Agreement] to a successful close” until December 31, 2019, if the Full Payment Condition was not satisfied, or until such date as Yar received payment of the purchase price payable under the Purchase and Sale Agreement if the Full Payment Condition was satisfied. There were other events which would end Mr. Mittelsteadt’s involvement listed in the agreement. [ 53 ] As I understand it, during the time that Mr. Mittelsteadt was providing services to Yar under this agreement, he was also

acting in the capacity of CEO of TAQA. All parties were apparently aware of, and not concerned by, the obvious potential conflict of interest. Yar and TAQA both wanted the goal which Mr. Mittelsteadt was to work toward achieving – a goal largely out of the control of either of them – the securing of Aramco’s consent to the assignment or novation of the Aramco Contracts. Efforts Directed Toward Effecting Assignment of the Aramco Contracts [ 54 ] The evidence indicates that Mr. Mittelsteadt assembled a team of officers and employees under his direction to work towards obtaining Aramco’s consent.

From July 31, 2019 to mid- December, 2019 various efforts were made toward obtaining the mutually desired consent from Aramco. The details of those efforts were canvassed in the evidence but I see no need to discuss most of them. I will focus on the details that appear, to me, to be significant to the issues in dispute. [ 55 ] On October 15, 2019, Mr. Mittelsteadt reported by email to Mr. LaBonte as to the status of the novation/assignment process. He reviewed the steps that had been taken and the steps he anticipated Aramco’s internal processes would involve.

As to the latter, he noted: - [Aramco] Contracting will review, clarify and then check with [Aramco’s] Drilling and Work Over (DWO) group for any objections. - Once contracting hears back from DWO, and there are no objections and it has been determined that there is a net benefit to Aramco, [Aramco] contracting would then send the request onto [Aramco’s] Legal [Department] to novate or assign the contracts. [ 56 ] Mr.

Mittelsteadt, in the same report, referred to a need, in dealing with Aramco and requesting attention to the assignment/novation process, to not “be seen as heavy handed or conflicting with Midad.” [ 57 ] Mr. Mittelsteadt advised Mr. LaBonte: At this stage, I believe Aramco officials are well aware of the acquisition [by TAQA of Yar’s business] and we just need to let this process percolate through the system for a bit. As we know Aramco needs time to move through its processes. [ 58 ] Mr.

Mittelsteadt also observed in the report that The fact that Aramco requested the letter from CDS KSA, the one stating that we [CDS KSA] agree to the contract assignment/novation process should be viewed as a good sign. I will let this process play out into next week and then do another status update call with Midad. [ 59 ] In a series of emails at the beginning of December 2019, Mr. Mittelsteadt and a Midad representative discussed an issue concerning outstanding Midad to Aramco invoices which could delay progress in securing Aramco’s consent.

On December 4, 2019, in the last email of that series, the Midad representative reported to Mr. Mittelsteadt that, conceivably, the Aramco process in relation to an invoice which Midad had resubmitted to Aramco on December 3 created a potential risk that might delay the novation process. In the same email, the Midad representative observed: Midad understands that [Yar] has offered to extend the deadline for completing the novation from 20 December 2019 until 31 December. However, even this extension may not be sufficient for Midad to complete the novation process.

Amendment of the Close-Out Agreement [ 60 ] The deadline extension offered by Yar to Midad was formalized.

On December 19, 2019, Yar and Aramco agreed to change the deadline to December 29, 2019 – two days before the deadline in the Purchase and Sale Agreement. [ 61 ] In the agreement extending the deadline, Yar and Midad expressly recognized in the recitals that Aramco had not yet consented to the assignment: Whereas, the Parties recognize that, due to delays caused by certain invoice issues, Midad requires further time than December 20, 2019 to procure Aramco’s consent to assign the Aramco Contracts. [ 62 ] The agreement amended the provision of the Close-Out Agreement which defined when the Incentive Payment of $US 4,125,000 would be payable by Yar to Midad.

The amendment changed the deadline from December 20, 2019 to December 29, 2019 and added a third scenario to the two which had been set out in the original agreement. The entire amended provision stated that Midad would be entitled to the payment: In consideration for Midad obtaining Aramco’s written consent to assign the Aramco Contracts to CDS KSA . . . subject to the following scenarios: 1 the assignment of (

a) the [Mid-Form Contract] or (

b) both Aramco Contracts to CDS KSA (i.e. Aramco’s written consent to the assignment and execution of an assignment document) on or before December 29, 2019; or 2 on or before December 29, 2019, Aramco entering into a new agreement with CDS KSA in place of (

a) the [Mid-Form Contract] or (

b) both the Aramco Contracts with the same rights, obligations, and compensation stipulated to the satisfaction of CDS KSA in accordance with this Agreement; and 3 if the assignment or the entering into a new agreement in [1] or [2] above is satisfied by scenario (

a) the assignment of or entering into a new agreement with CDS KSA of the [Mid-Form Contract] then a further condition of payment of the Incentive Payment shall be Midad and CDS KSA entering into the Long-Form Contract Supply Agreement to enable Midad to continue to perform its obligations under the Long-Form Contract.

[ 63 ] The agreement extending the deadline also required Midad, as a condition precedent to the extension of the deadline being effective, to issue a letter to Yar, dated December 19, 2019, the effective date of the amendment to the Close-Out Agreement . The required letter would confirm: . . . that Aramco has consented to the assignment under scenario (

a) assignment of the [Mid-Form Contract] or both of the Aramco Contracts to CDS KSA and the current status of the assignment (including furnishing copies of the correspondence with Aramco that demonstrate the status of the assignment).

Logical Inconsistency in the Amended Close-Out Agreement [ 64 ] There appears to me to be a logical inconsistency in the agreement amending the Close-Out Agreement which I have just discussed. [ 65 ] In the recitals the agreement states that Yar and Midad recognized as of December 19, 2019 that further time was required for Midad to secure Aramco’s consent to assign the Aramco Contracts – indicating that such consent had not yet been obtained.

But the condition precedent just described in para. [63] above, required Midad to confirm in writing that as of the very same date, December 19, 2019, Aramco had consented to the assignment and also to confirm the “current status of the assignment”. [ 66 ] In my view, the only way to reconcile this inconsistency, is to interpret the agreement to amend the Close-Out Agreement as making a distinction between Aramco having indicated consent to the assignment on the one hand and having provided written consent to the assignment and having executed assignment documentation on the other hand.

The Incentive Payment would be payable by Yar to Midad only when the latter had been achieved.

But the extension of the deadline by which Midad would be required to secure Aramco’s written consent and execution of the assignment documentation by 19 days depended on Midad formally representing to Yar that Aramco had consented in fact and that, in effect, the only thing that still needed to be accomplished was obtaining Aramco’s consent in writing. [ 67 ] Yar was willing to extend the deadline upon Midad confirming that Aramco had consented though it had not yet given written confirmation of that consent or signed the assignment documentation.

But Yar was not willing to be obliged to pay Midad the Incentive Payment until Aramco had provided written consent to the amendment and had signed the assignment documentation. [ 68 ] That Yar insisted that Midad obtain Aramco’s written consent to the assignment by December 29, 2019 suggests that Yar understood that what it needed to obtain by the December 31, 2019 deadline in the Full Payment Condition, was Aramco’s written consent to the assignment or novation of the Aramco Contracts.

At the very least, Yar’s insistence on written consent from Aramco supports the conclusion that Yar did not consider Midad’s representation that Aramco had consented as sufficiently reliable to justify payment to Midad of the Incentive Payment – or sufficiently reliable to satisfy its obligation to TAQA under the Full Payment Condition. [ 69 ] It strikes me as ironic, that, as will appear, the position Yar took with Midad in the context of extending Midad’s deadline by 19 days – that Midad’s understanding that Aramco had consented to the assignments was not sufficient to entitle Midad to the Incentive Payment – is significantly different from, one might say the polar opposite of, the position for which it argues in this trial – that it is entitled to the funds in the Escrow Account because Midad understood that Aramco had consented to the assignments though Aramco had neither provided written confirmation of that consent nor signed the assignment documentation. [ 70 ] It seems reasonable to conclude that, in fact, Yar recognized that in order to be entitled to payment of the escrow funds under the Full Payment Condition, it was required to provide to TAQA by December 31, 2019, that which it had required Midad to provide to it by December 29, 2019 – Aramco’s written consent to the assignment of the Aramco Contracts and its execution of the assignment documents or the novation of the Aramco Contracts, or the assignment of one and the novation of the other – or, if not Aramco’s written consent, some form of solid evidence, more solid than the evidence that existed on December 19, 2019, that Aramco had in fact consented.

Midad’s Letter of December 19, 2019 [ 71 ] The agreement amending the Close-Out Agreement just discussed required Midad to provide a letter confirming that Aramco had consented to the assignment of the Aramco Contracts. The letter which Midad provided to Yar on that date, December 19, 2019, stated: As YAR Holdings and CDS KSA are aware, Saudi Aramco has already consented to the assignment of the Aramco Contracts to CDS KSA and has requested a letter from CDS KSA consenting to the assignment.

Such letter was furnished by CDS KSA to Saudi Aramco on October 10, 2019 (see Exhibit 1) wherein CDS KSA acknowledges our formal requests to assign the Aramco Contracts to CDS KSA, which written requests were submitted by us several times including on October 20 2019 (see Exhibit 2). With Saudi Aramco’s consent by email to the assignment of the Mid-Form Contract #6510871402 (see Exhibit 3), Midad is now working with Saudi Aramco to complete the administrative process of the assignment.

As such, Midad hereby confirms that Saudi Aramco has consented to the assignment of the Aramco Contracts. [ 72 ] Most of the wording of this letter had been provided to Midad by Mr. Mittelsteadt prior to the execution of the agreement extending Midad’s deadline. [ 73 ] The exhibits referenced in this letter were: 1. A letter from CDS KSA to Aramco dated October 10, 2019 stating that CDS KSA agreed to the assignment/novation of the Aramco Contracts from Midad to CDS KSA. 2. A letter from Midad to Aramco dated October 20, 2019 requesting the assignment of the Aramco Contracts to CDS KSA. 3.

A collection of emails in three chains:

a. Chain 1: Seven emails passing between Aramco and Midad between November 18, 2019 and December 12, 2019. The emails indicate that there were telephone discussions between Aramco’s representative and Midad’s representative on the subject of the assignment/novation of the Aramco Contracts, in particular the Mid-Form Contract. In the third message, the Aramco representative asked if there were any pending invoices under Midad – which I take to mean any invoices submitted by Midad to Aramco for payment which had not yet been paid.

Midad’s first response to this inquiry was that there were “12 service tickets pending submission due to IT issue where we are in contact with Tool House to solve the issue.” As I understand it, Midad was indicating to the Aramco representative that some IT problem prevented it from presenting 12 invoices for payment but steps were being taken to resolve the IT issue. About two weeks later Aramco’s representative asked for an update on the “status of pending invoices”.

Midad’s representative responded that there were no pending “service tickets” to be submitted and requesting that Aramco proceed with the novation. On December 12, 2019, in the last email of this chain, the Aramco representative advised the Midad representative, “As we discussed, please be informed that the action has been taken and it is in progress”. b. Chain 2: Two emails from Midad and Aramco, the first on December 4, 2019 and the second on December 12, 2019.

In the first, the Midad representative observes that the assignment/novation of the Mid-Form Contract is in progress, requests that the novation of the Long-Form Contract be fast tracked, and asks if Aramco needs any further action or documents from Midad. In the second, the Midad representative states that he would like to make sure that the email of December 4 had been received and that nothing further is required from Midad. There is no email from Aramco to Midad in this chain. c. Chain 3: Two emails passing between Midad and Aramco, the first dated December 9, 2019 and the second dated December 16, 2019.

In the first, the Midad representative (higher ranking that the Midad representative in Chain 2) observed that the Aramco representative to whom the first email in Chain 2 had been sent had not responded and requested help to expedite novation of the Long- Form Contract as securing the novation was “time critical”.

In the second email, the Aramco representative advised that he had checked and the “Procurement team” was “working on the Novation agreements.” [ 74 ] There is no documentary evidence that Yar was satisfied that the information in Midad’s December 19, 2019 letter satisfied the precondition to the extension of the deadline for Midad to secure Aramco’s written consent to the assignment/novation of the Aramco Contracts to December 29, 2019. But the fact that Mr.

Mittelsteadt, acting as Yar’s agent, had suggested most of the wording of the letter indicates, in my view, that Yar was content that the letter satisfied the precondition to the deadline extension. [ 75 ] I note that neither the letter nor its exhibits provided evidence that Aramco had consented to the assignment/novation. At most the communications from Aramco indicated that it was considering and had not rejected the assignment/novation requested. One Aramco representative advised that “Action had been taken and it was in progress”.

Another had advised that the “Procurement team” was “working on the Novation agreements.” Yar might have interpreted this as an indication that Aramco was positively disposed to the assignment/novation request, but, in my view, it fell far short of evidence that Aramco had in fact consented. The communications from Aramco representatives established no more than that the Aramco process was still percolating as Mr. Mittelsteadt had expected it would need to. [See para. [57] December 19 to December 31, 2019 [ 76 ] On December 23, 2019, a representative of Midad advised Mr. Labonte and Mr.

Mittelsteadt by email that: . . . we got confirmation today that the novation is approved for the midform contract. We are following up on the next steps. [ 77 ] On December 25, 2019, another representative of Midad emailed Mr. Labonte and Mr. Mittelsteadt: We would like to congratulate all of us for achieving the objective of MFC novation.

Please find the attached letter Saudi Aramco Final Consent and Approval of MFC contract. [ 78 ] The referenced Saudi Aramco Final Consent and Approval of MFC contract was a letter from Midad to Yar (not from Aramco) which stated: . . . we are pleased to inform you that Saudi Aramco has given us its final consent and approval of the assignment of the MFC Contract. There was nothing to indicate how the referenced Aramco consent had been communicated. There was no evidence of Aramco consent beyond Midad’s statement that Aramco had consented. [ 79 ] Mr.

Mittelsteadt forwarded the email and, apparently, the letter attached to it, to Yar’s legal counsel both in Edmonton and in the Middle East on December 25. On the same day, Yar’s Middle East legal counsel replied: Please note that the attachment did not include evidence of Aramco’s consent to assign the MFC, but was only Midad’s letter stating that Aramco assigned the MFC. Was there any other documents provided by Midad? . . . [ 80 ] Mr. Mittelsteadt replied to Yar’s Middle East legal counsel on December 26: . . .

Currently, we understand that Aramco has consented to the assignment/novation of the MFC, which the CDS KSA staff are working to address and confirm the new contract issuance. CDS also understands that Aramco is currently working to expedite the assignment/novation of the LFC contract, however this may not be facilitated prior to December 31, 2019, . . . [ 81 ] It appears this explanation satisfied Yar’s Middle East legal counsel. It is not clear to me why it did so. As I understand it, there was still no evidence of Aramco’s consent except the understanding of Mr.

Mittelsteadt and Midad representatives that Aramco had consented – the basis of which understanding appears to be that Aramco had put Midad’s request to have the Aramco Contracts assigned or novated in process. [ 82 ] On December 26, 2019, in an email, Midad confirmed to Yar information which, it appears, Midad had learned the day before

that Aramco could not issue “the new contract” to CDS-KSA due to “an issue with the vendor ID”. Yar’s officer visited Aramco’s Central Contracting office in person and learned that the name of the company, that is, the name of the company to which the Aramco Contracts were to be assigned/novated did not match the name which Aramco had in its system. [ 83 ] I understand the problem to have been that “Cougar Drilling Solutions Kingdom of Saudi Arabia” was not the corporate entity identified in the February 11, 2019 Registration Approval Letter issued to “Cougar Drilling Solutions”.

The Registration Approval Letter was discussed above at paras. [24] and [25]. [ 84 ] The evidence includes extensive email correspondence from December 26 to December 31, 2019 relating to this “Vendor ID issue” and what would be required to resolve it. As I understand the evidence, the issue was not resolved by December 31, 2019.

It does not appear, however, that this was because the officers of either Yar or TAQA failed to give appropriate attention to resolving the issue. [ 85 ] On December 29, 2019, the Long-Form Supply Agreement between Midad and CDS KSA, which the Amended Close-Out Agreement contemplated would be required if only the Mid-Form Contract was assigned from Midad to CDS KSA (see para. [62] above) was signed.

The recitals in this agreement stated inter alia : AND WHEREAS as of the date of this Agreement Midad confirms and warrants that Aramco approved the assignment of the Mid-Form Contract to CDS KSA, and the assignment to CDS KSA is pending resolution of an issue with CDS KSA’s registration with Aramco’s vendor registration management system.

AND WHEREAS the New Aramco Contracts have not been entered into as of the date of this Agreement. [ 86 ] The basis for Midad’s warranted representation in the first of these recitals that Aramco “approved the assignment of the Mid- Form Contract to CDS KSA” is not in evidence. [ 87 ] On December 30, 2019, Yar sent a letter to TAQA stating that it had satisfied the Full Payment Condition.

To establish that Aramco had consented to the assignment or novation of the Aramco Contracts, Yar provided Midad’s letter of December 19, 2019, (see para. [71] above) including the three “exhibits” to that letter (see para. [73] above), Midad’s letter of December 25, 2019 described above in para. [78] and an exact duplicate of that December 25 letter dated December 29, 2019. [ 88 ] In its December 30, 2019 letter to TAQA, Yar claimed that it was entitled to the funds in escrow and asked TAQA to sign an instruction to the Escrow Agent to release the funds to Yar and to return the instruction within two days. [ 89 ] On December 31, 2019, Midad advised CDS KSA that another issue had arisen: [Aramco’s] Central Contracting notified us that Cougar GOSI and Saudization certificate are expired and that the cause of the delay [ sic ]. [ 90 ] December 31, 2019, ended without the vendor ID issue being resolved, without it being clear that there was no other impediment to Aramco consenting to the assignment/novation of the Aramco contracts, without Aramco having provided written consent to the assignment or novation of the Aramco Contracts, and without Aramco having signed either an assignment or a novation. [ 91 ] On December 31, Midad sent a letter to Yar claiming that the requirements of the Amended Close Out Agreement had been met, and that it was entitled to payment of the Incentive payment of $US 4,125,000.

The letter stated: . . . we have procured Saudi Aramco’s consent to the assignment of the MFC before the relevant deadline, as further detailed in each of the Aramco Consent Letter and Aramco Final Consent Letter. We have informed YAR Holding of (1) a significant delay to the assignment process caused by the Invoice issue, as further described in the Invoice Issue Letter, (2) another delay caused by the VMS issue and (3) yet another delay caused by the Certificate issues.

We reiterate that the Invoice Issue, VMS Issue, and Certificate Issues, among other documented causes of delays to the assignment process, were beyond Midad’s control and in the sole control of Yar Holdings. Since the execution of the Agreement, Midad has worked with Yar Holdings, CDS KSA and Saudi Aramco in good faith to assist with the assignment of the Aramco Contracts, prepared the necessary documents, performed all acts and taken any actions necessary to facilitate and effect the assignment of the Aramco Contracts.

I do not understand the references to the “Aramco Consent Letter” or the “Aramco Final Consent Letter” in Midad’s letter to be references to anything issued or signed by Aramco. [ 92 ] As I understand the evidence, Yar has never paid the Incentive Payment to Midad. After December 31, 2019 [ 93 ] On January 6, 2020, CDS KSA received, by email, information from Aramco that “Aramco e-Marketplace has approved the updates to Supplier Registration Questionnaire that submitted on Mon, 06 Jan, 2020.” Mr. Macpherson, the head of CDS KSA operations in Saudi Arabia, reported to Mr.

Mittelsteadt, “We have approval, Bandar [an Aramco officer] will follow up with Contracts tomorrow morning for the PRS & PO.” Mr. Mittelsteadt testified that the reference to “PRS & PO” in this message was to the Aramco Contract. (Examination of Greg Mittelsteadt, July 8, 2020, page 86, line 27) [ 94 ] Also, on January 6, 2020, Mr. Mittelsteadt informed Mr.

Labonte and Yar legal counsel that given this approval, “The CDS KSA staff expect the MFC to be issued/assigned to the CDS KSA entity by the end of this week.” That did not occur. [ 95 ] It appears, that notwithstanding this development (Aramco’s approval of the updates to Supplier Registration Questionnaire) Aramco was requesting further information. Mr. Macpherson advised Midad, Mr. Mittelsteadt and others by email, on January 6, 2020, “We have had several requests, rather than one, for various pieces of information.

We are pending review today and will let you know as soon as the process is confirmed as complete.”

[ 96 ] On January 8, 2020, Midad advised Mr. Macpherson that, “Our contacts at Aramco’s contracting department advised us that CDS KSA’s vendor registration had certain issues that he could not disclose to us, but rather only to a representative of CDS KSA.” Midad requested that CDS KSA contact Aramco to resolve the issues with its vendor registration. [ 97 ] On January 9, 2020, Aramco advised Mr.

Macpherson, by email: Upon continuing to research your case, I notice that your entity (Cougar Drilling Solutions Saudi Arabia) country of ownership is the UAE and it has not ( sic ) reference to the new ownership by TAQA which the main issue why we cannot finalize the contract assignment. [ 98 ] The same day, a TAQA representative, who was informed of the issue raised by Aramco, provided a “chain of ownership explanation” which he had obtained from TAQA’s legal department, directly to Aramco.

The chain of ownership was detailed as follows: Cougar Drilling Solutions Saudi Arabia is owned by TAQA indirectly through a chain of companies (which is a legacy of the Cougar structure after completing the acquisition). The current chain of ownership is as follows: 1. Industrialization and Energy Services Company (TAQA) – Saudi Arabia – the ultimate beneficial owner 2. TAQA Drilling Solutions, Inc. – Canada – owned 100% by TAQA 3. Cougar Drilling Solutions Global Inc. – Barbados – owned 100% by TAQA Drilling Solutions, Inc. 4.

Cougar Drilling Solutions Global DMCC – DMCC, UAE – owned 100% by Cougar Drilling Solutions Global Inc. 5. Cougar Drilling Solutions Saudi Arabia – Saudi Arabia – owned 100% by Cougar Drilling Solutions Global DMCC [ 99 ] Also, on January 9, 2020, the TAQA representative, in addition to providing this chain of ownership, sent some share ownership documentation to the TAQA representative.

His email said: I’m not sure if this will help but attached are the ownership certificates for Cougar Drilling Solutions Global DMCC (UAE) and TAQA Drilling Solutions, Inc. (Canada) along with the Articles of Association for Cougar KSA. We should receive the ownership certificate for Cougar Drilling Solutions Global Inc. Barbados over the weekend. I believe these can help to show the ownership link of Cougar KSA to TAQA KSA.

I spoke to the Chamber of Commerce to update the Articles of Association but the issue with this is that the ownership of Cougar KSA has not changed with the Acquisition as it is still owned by Cougar DMCC. [ 100 ] There is a suggestion in the testimony of Mr. Mittelsteadt in these proceedings, that verbal communications between CDS KSA and Aramco sometime after January 7, 2020, indicated that a high-ranking officer of Aramco was reluctant to do business with TAQA because one of the companies in the chain was Canadian. The point is very poorly developed in the evidence. Mr. Mittelsteadt, in questioning by Mr.

Cotter, gave hearsay testimony as to what a TAQA representative who had direct contact with Aramco representatives had been told: . . . he was informed verbally that it wasn’t a specific problem with CDS KSA’s vendor registration. There was a high level director ( sic ) of Aramco that not (sic ) business was to be done.

And hence CDS KSA effectively was on a black story list.” [Questioning of Greg Mittelsteadt, July 8, 2020, page 89, line 5]. [ 101 ] The suggestion that the issue had to do with the one corporation in the ownership chain being Canadian comes from this exchange in the Questioning of Greg Mittelsteadt by Mr. Cotter: (Questioning of Greg Mittelsteadt, July 8, 2020, page 91, line 13) Q. So it is fair to say as of January 7 th this issue had not yet been identified that Saudi Aramco was refusing to do business with what it alleged was a Canadian business? A. That is correct. [ 102 ] Perhaps on the same point, Mr.

Labonte (owner of Yar) hinted that Aramco’s concern was as to something other than a mere typo in the vendor registration in his evidence at the trial in these proceedings. He said: (Trial Transcript, June 10, page 478, line 25) Well, there was an issue with a typo on a -- on the vendor ID. And then later on we found out the issue the vendor ID was a little deeper than that. [ 103 ] Whatever Aramco’s issue was or appeared at the time to be, the parties seemed to me to avoid making it clear in the evidence.

I am left with the impression that the whole of what the parties know, or believe, about why Aramco had not provided written consent or signed assignments or novations by December 31, 2019, has not been revealed at this trial. The suggestion that something more than a concern about CDS KSA’s vendor registration was involved, however, clearly does not advance Yar’s position – that Aramco had consented in fact. [ 104 ] Meanwhile, also, on January 9, 2020, TAQA’s Calgary counsel responded to Yar’s December 30, 2019 letter in which Yar stated that the Full Payment Condition had been satisfied. (See para. [87] above).

The letter rejected Yar’s position. TAQA’s Counsel observed: . . . neither [Yar’s December 30 letter] nor any of the documents appended to it provide evidence that [Aramco] has granted its consent to the Mid-Form Assignment (as such term is defined in the Purchase Agreement) on or before December 31, 2019 as required by branch (b)(

i) of the definition of the “Full Payment Condition.”

. . . . . . it appears that the Full Payment Condition has not been satisfied. In due course, unless we receive evidence of the relevant consents being granted by Saudi Aramco on or prior to December 31, 2019, we will share with you the form of Joint Escrow Notice for release of the Additional Escrow Amount to the Purchaser. [ 105 ] The “ownership certificate for Cougar Drilling Solutions Global Inc. Barbados” was not received over the weekend as expected (see para. [99] above).

On Monday, January 13, 2020, the TAQA representative advised the Aramco representative, by email: We have not received the Share Certificate from Barbados yet but our lawyer was able to share the attached which shows the transfer for 100% of the Barbados shares to TAQA Drilling Solutions Inc. This should close the loop with the documentation showing the chain of ownership for Cougar Drilling Solutions KSA being 100% owned by TAQA KSA.

The document attached to this email was the Instrument of Share Transfer dated July 31, 2019 by which Cougar Drilling Solutions Inc. transferred its shares in Cougar Drilling Solutions Global Inc. (Barbados) to TAQA Drilling Solutions Inc. [ 106 ] The Aramco representative responded on January 14, 2020, thanking the TAQA representative for the information sent and advising: I will proceed to send these document ( sic ) to the appropriate unit within the Contracting Department in order to complete some internal processes required prior to beginning the contract reassignment since we have to get approval from our senior management to proceed with the contract reassignment . ( emphasis added) [ 107 ] This January 14, 2020 communication is, in my view, significant.

It indicates that the internal Aramco processes involved obtaining all information relevant to the assignment/novation request received from Yar and TAQA, and once the information was complete, getting approval from senior management. The clear inference is that senior management had not approved the assignment/novation request as of January 14, 2020. [ 108 ] Also, on January 14, 2020, TAQA wrote to Yar confirming that it concurred with the position taken by its Calgary counsel in the letter of January 9, 2020 (para. [104] above).

TAQA observed that: . . . no affirmative evidence of the consent of Saudi Aramco to the Mid-Form Assignment having been obtained on or before December 31, 2019 (or at all) was presented by [Yar]. There is no other evidence of such consent having been obtained.

Accordingly, we conclude that the required consent was not obtained.” The letter included a Joint Escrow Notice directing the Escrow Agent to pay TAQA the funds in escrow and requested that Yar execute and return it within two days. [ 109 ] On January 17, 2020, TAQA’s Calgary Counsel wrote to Yar’s Edmonton counsel advising that as the requested executed Joint Escrow Notice had not been received, TAQA took the position that Yar was in breach of Purchase and Sale Agreement and that appropriate proceedings would be commenced.

After January, 2020 [ 110 ] After Yar’s efforts to secure Aramco’s consent to the assignment/novation failed (according to TAQA), TAQA representatives took steps to attempt to secure that consent. It continued to be important to TAQA to obtain the advantage of being Aramco’s supplier under the Mid-Form and Long-Form contracts so as to put it in a strong position vis-à-vis other possible suppliers of the type of oilfield equipment and services that it could supply, in the long term. [ 111 ] At trial, Mr. Alaa Dashah, Business Development Manager for TAQA, testified by video-link from Saudi Arabia.

He testified that in March 2020, he met with a representative of Aramco to encourage Aramco to complete the assignment/novation process. In the meeting, he testified, he explained the importance to Aramco of having a supplier of TAQA’s capability. Mr. Dashah testified that the Aramco representative told him, “that it’s going full bore and compliance reviews and he’ll let us know if he needed anything from us.” (Trial transcript, June 7, page 95, line 14). Mr.

Dashah testified that the Aramco representative said the assignment/novation request was still going through the process and that it was in “the compliance and review step”. [ 112 ] Mr. Dashah further testified: (Trial transcript, June 7, page 96, line 16) So in November 2020, the mid-form contract was assigned to CDS KSA. The long-form contract under Midad name, although it has been ready. We got communication from Aramco to come and novate, but Midad never showed up. [ 113 ] Mr.

Dashah testified that prior to November 2020, operations continued under the Long-Form Contract, but that Aramco put the Mid-Form Contract on hold around May 2020 until the assignment was complete. TAQA did not realize any revenue under the Mid- Form Contract between May and November 2020. Though CDS KSA continued to supply Aramco, through Midad, under the Long- Form Contract, and Aramco paid Midad for what CDS KSA supplied, Midad did not pay CDS KSA. Rather, the funds paid by Aramco were paid into Yar’s Edmonton Solicitors trust account where they continue to be held.

TAQA continued to supply Aramco, despite not being paid, because, “. . . we can never stop the work because that would affect our reputation and will damage the whole business, if we stop executing work”. (Trial transcript, June 7, page 98, line 20.) [ 114 ] Mr. Dashah testified that Midad has never “shown up” to sign the novation documents in relation to the long-form contract. TAQA continues to perform without receipt of the payments Aramco continues to make to Midad. [ 115 ] Mr. Dashah’s testimony on these points was not challenged on cross-examination.

The Litigation [ 116 ] TAQA commenced proceedings by Originating Application filed in the Judicial District of Calgary on March 5, 2020. It sought a declaration that the Full Payment Condition was not satisfied and that it should be paid the funds in escrow and a direction that the parties both sign the necessary direction to the escrow agent. [ 117 ] Yar commenced proceedings by Statement of Claim filed in the Judicial District of Edmonton on March 18, 2020. Defendants in addition to TAQA were named, as indicated in the style of cause above.

The relief sought was, first, 25 declarations, including: - that Yar was “ready, willing and able” to perform its obligations under the Purchase and Sale Agreement, - that due to the conduct of TAQA, by December 29, 2019, time had ceased to be of the essence of the Purchase and Sale Agreement, - that TAQA had breached its various agreements with Yar by “not taking all commercially reasonable steps, honestly and in good faith,” in particular by - “not doing all they could have done to ensure that Saudi Aramco consented to the Mid Form Assignment or the Long Form Assignment” - failing to provide Mittelsteadt and others with information required in respect of the Vendor ID issue in order to ensure that Aramco consented to the assignment/novations, - not using commercially reasonable efforts to secure the consent of Aramco - that TAQA has been unjustly enriched and that the funds in escrow are the subject of a constructive trust in favor of Yar. - that “This Honourable Court direct that what in good conscience should be done be done.” [ 118 ] In addition to the 25 declarations, the relief sought by Yar included: - Judgment for the $US 28,500,000 in escrow with such interest as that sum has earned while in escrow, or, alternatively, interest determined by Yar’s cost of borrowing in the time the funds have been in escrow, or, alternatively, interest as prescribed in the Judgment Interest Act, or, alternatively, in the amount earned by TAQA pursuant to the Support Agreement since December 29, 2019, - Damages of $US 10,000,000 for loss of opportunity, - An accounting of all revenues received by TAQA from Aramco under the Support Agreement after December 29, 2019. - Costs on a solicitor client, full indemnity basis. [ 119 ] TAQA filed a Statement of Defence in Yar’s action on July 17, 2020. [ 120 ] The parties agreed to consolidate the proceedings they each had commenced.

TAQA’s action was transferred to Edmonton for that purpose. Originally the parties conceived that their dispute could be dealt with in a three-day

Summary Trial. They filed at least 12 binders of documents and transcripts of questionings held for the purpose of that

Summary Trial. I was assigned to hear the matter. I became concerned that it was not likely that a

Summary Trial would provide me with sufficient understanding of the issues, evidence and positions of the parties to permit me to made a just disposition. I directed that the matter instead be heard in a conventional trial which occupied 7 trial days. Four witnesses testified. All of the documentation that had been filed in relation to the

Summary Trial was, by agreement, received as evidence on the trial. The Primary Issue – Did Aramco Consent by December 31, 2019 [ 121 ] Both sides acknowledge that the primary issue in these proceedings is whether or not Aramco consented to assign or novate the Mid-Form Contract to CDS KSA by December 31, 2019. [ 122 ] Yar submitted, accurately, that the Full Payment Condition required only that it obtain Aramco’s consent to the assignment/novation of the Aramco contracts. It did not expressly require that Aramco’s consent be evidenced in writing. TAQA submitted that such an

interpretation of the Full Payment Condition was commercial nonsense – that nothing short of written evidence of Aramco’s consent could possibly have been intended to be sufficient. [ 123 ] A significant portion of the argument was addressed to the principles of contractual

interpretation and their application in this context. [ 124 ] In my view, it is not necessary for me to address most of those submissions because, as I shall explain, in my view, the evidence does not establish that Aramco in fact consented – in writing or otherwise. [ 125 ] As previously noted, it appears that Yar understood as late as December 19, 2019, if not later, that in order to satisfy the Full Payment Condition it needed to provide TAQA with Aramco’s written consent to the assignments/novations. (See paras. [64] to [70] above.) It appears to me that Yar’s present position that written evidence of Aramco’s consent was not required is a position taken because Aramco’s written consent did not exist by the December 31, 2019 deadline.

It is to some extent, in my view, a disingenuous position. [ 126 ] However, even assuming that the Full Payment Condition did not require that Aramco’s consent be evidenced in writing, clearly both sides intended that evidence sufficient to establish that Aramco had consented by December 31, 2019 would be required. It is

inconceivable that the parties intended that Yar would be entitled to the escrow funds by simply asserting that Aramco had consented to the assignment/novation by December 31, 2019. Something providing reasonably clear evidence of that consent, although perhaps not writing from Aramco, was obviously intended. [ 127 ] Exactly what the parties conceived that evidence might consist of, if not writing, is not clear. It is perhaps difficult to accept that sophisticated business people would agree to leaving that point unclear when so much was left to ride on it.

Be that as it may, at the very least, in my view, it is clear that the parties intended that Yar demonstrate to TAQA by December 31, 2019 that Aramco had consented. [ 128 ] I am satisfied that the evidence presented in these proceedings does not demonstrate that Aramco consented to the requested assignment/novation by December 31, 2019. [ 129 ] In the Statement of Claim, Yar appears to take the position that Aramco’s consent was evidenced by Aramco’s request, in response to Midad’s request that it consent to the assignment of the Aramco Contracts from Midad to CDS KSA, that Midad provide a letter from CDS KSA agreeing to the assignment.

I reference paragraphs 41 and 42 of Yar’s Statement of Claim: 41. On October 10, 2019, Saudi Aramco in considering Midad’s request for Saudi Aramco to consent to the assignment of the Aramco Contracts to CDS KSA, requested a letter from CDS KSA agreeing to the assignment. By letter furnished by CDS KSA to Saudi Aramco on October 10, 2019, CDS KSA confirmed to Saudi Aramco that it was in agreement with Midad’s request for the assignment or novation of the Aramco Contracts by CDS KSA and the assumption of such obligations under the Aramco Contracts by CDS KSA. 42.

On October 10, 2019, Saudi Aramco consented to the assignment of the Aramco Contracts to CDS KSA and thereafter Midad was working with Saudi Aramco and CDS KSA to complete the administrative process of such assignment to CDS KSA. [ 130 ] So far as I am aware, the evidence contains no communication from Aramco on October 10, 2019 or on any other date, to Midad, or to any other party, in which Aramco expressed consent to the assignment/novation.

Nor, in my view, can any communication from Aramco which is referenced in the evidence be fairly interpreted as an expression of such consent. [ 131 ] Further, I note, that the position taken by Yar and Midad at the time of the amendment of the Close-Out Agreement on December 19, 2019 was directly inconsistent with the position taken by Yar in the above quoted pleading. The recitals to that amending agreement recognized that as of December 19, 2019 Midad needed further time to “procure Aramco’s consent to assign the Aramco Contracts.” (See para. [61] above).

Logically, Yar could not have understood that as of December 19, 2019 – or as of October 10, 2019, as pleaded – Aramco had consented. [ 132 ] It is clear from the record that before the December 31, 2019 deadline: - the request to Aramco for the assignment had been made by both CDS KSA and Midad, and Aramco’s significantly bureaucratic process required for the approval of the request had been engaged, - there was no communication from Aramco suggesting that it rejected the request, - the officers of Yar, Midad, and even TAQA, were unanimously under the impression that the Aramco officers with whom they dealt were positive to the request, and many were of the view that Aramco had in fact consented. - Midad, which was entitled to a substantial payment if Aramco consented by December 31, 2019, represented that Aramco had consented. [ 133 ] But, it is also clear from the evidence that: - there was no written communication from Aramco prior to December 31, 2019, which said anything more than that the request for assignment was in progress, - the impression of the members of Mr.

Mittelsteadt’s team which was working on getting Aramco’s consent, that Aramco had consented, appears to be based on no more than their understanding that the Aramco officers they dealt with were treating the request positively. - on December 19, 2019, Yar stipulated in its dealings with Midad that, even though Midad had represented that Aramco had consented, it would be necessary that Aramco have consented in writing or have signed the assignment documentation by December 29, 2019 in order for Midad to be entitled to the $US 4,125,000 incentive payment – which suggests that Yar was not satisfied that Midad’s representation could be relied upon (see para. [68] above) - the written communications from Aramco to Midad upon which Midad relied to show that it had done what was necessary to

entitle it to the incentive payment, did not in fact establish that Aramco had consented. At best, they established no more than that Aramco had not rejected the request, had started the process which would lead either to its approval or rejection, and that Midad believed Aramco had consented. - communication from Aramco on January 14, 2020 indicated that once “internal processes” were completed, approval from Aramco’s senior management would be required before the assignment could proceed further.

The required senior management approval had clearly not been obtained 14 days after the expiry of the Full Payment Condition deadline. (See paras. [106] and [107] above) - long after the deadline, in March 2020, Aramco advised TAQA that Aramco’s process for considering the assignment request was “in full bore” and was at the “compliance review” stage. (See para. [111] above) - the assignment of the Mid-Form Contract was not actually completed until November, 2020 about 10 months after the deadline in the Full Payment Condition and about 5 months before the term of the Mid-Form Contract would end. (See para. [113] above) - the Long-Form Contract was never assigned or novated. [ 134 ] Mr.

Labonte conceded in his testimony at trial that as of December 31, 2019 there was only a weak indication that Aramco had consented to the assignment (Trial Transcript, June 10, page 465, lines 2 and 11). In my view, that assessment was an overstatement – the indication was less than weak. [ 135 ] In my view, even assuming that the Full Payment Condition did not require Aramco’s consent to the assignment be in writing, the evidence did not and does not now show, that Aramco had in fact consented by December 31, 2019.

The Vendor ID Issue [ 136 ] Yar submits that if, contrary to its position and submissions, Aramco’s consent had not been secured by December 31, 2019, equity requires that it be relieved of the obligation to meet that deadline – that it would be inequitable to permit TAQA to rely on the “time is of the essence” provision of the Purchase and Sale Agreement – because Aramco’s consent was not obtained “due solely to the actions of [TAQA]” in permitting the Vendor ID issue to arise and in not resolving it by December 31, 2019. [ 137 ] The Vendor ID Issue and the events surrounding its emergence were previously described in para. [82] to [84] above.

To review, on December 26, 2019, Midad advised Yar that Aramco could not process the requested assignment or novation because the name of Midad’s assignee, CDS KSA, did not match the name Aramco had in its vendor identification system. The vendor registration, which had been obtained by Yar in February, 2019, was of the trade name “Cougar Drilling Solutions”, not the name of any corporation in the CDS family including CDS KSA. [ 138 ] I have previously observed that officers of Yar and TAQA gave appropriate attention to attempting to resolve this issue when it arose (see para. [84] above).

I have also observed that it appears the issue had not been resolved by December 31, 2019 (see para. [90] above). [ 139 ] I reject Yar’s submission that the emergence of the Vendor ID Issue and the fact that it remained unresolved as of December 31, 2019, justifies relieving Yar of the “time is of the essence” provision of the Purchase and Sale Agreement – relieving Yar of the December 31, 2019 deadline in the Full Payment Condition. [ 140 ] In my view, that the Vendor ID Issue arose at all is not the fault of TAQA.

It was Yar, not TAQA, that registered a trade name instead of the name of the Saudi Arabian corporation, CDS KSA, which it had incorporated, as a vendor in Aramco’s system. There is no evidence that anyone – anyone at Midad, Yar, TAQA or Aramco – recognized an issue with the name in Aramco’s vendor registration system until December 26, 2019 – well over 4 months after Yar took on the obligation of securing Aramco’s consent to the assignment/novation. When the issue was recognized, everyone who might be able to do something about it – including officers of Yar, Midad and TAQA made reasonable efforts to resolve it.

That Aramco did not respond to those efforts by acknowledging that CDS KSA had been properly registered as a vendor in its system by December 31, 2019 is certainly not TAQA’s fault. Equity does not require that the December 31, 2019 deadline be considered waived because of anything TAQA did or failed to do in respect of this issue. [ 141 ] Further, in my view, the evidence does not support the conclusion that whatever concern the Vendor ID issue raised for Aramco, it was a concern relevant to the question of whether Aramco would consent to the assignment/novation.

In my view, the evidence supports the conclusion that Aramco’s processes required, first, that all of the documentation supporting a request for its consent to an assignment/novation be provided, and all its internal administrative requirements, such as registration of the proposed assignee in its vendor registration system, be satisfied before Aramco senior management determined whether or not to consent to the requested assignment.

I make this finding on the basis of the previously cited evidence that on January 14, 2020, Aramco advised TAQA that Aramco’s internal processes were required to be completed prior to obtaining “approval from senior management to proceed with the contract reassignment.” (See para. [106] above) [ 142 ] It is not a reasonable conclusion that but for the Vendor ID Issue, Aramco would have consented to the assignments by December 31, 2019.

The Barbados Share Transfer Registration Issue [143] Yar raised a similar issue in relation to the registration of the transfer of shares of CDS Barbados, one of the companies in theCDS chain purchased by TAQA. [144] As previously noted, Yar owned CDS Barbados which owned CDS Global UAE, which owned CDS KSA. Yar sold CDSBarbados to TAQA in the Purchase and Sale Agreement.

Yar takes the position that Aramco had not consented to the assignment of theAramco Contracts by the December 31, 2019 deadline because the shares of CDS Barbados had not been transferred from Yar to TAQAby that date and Aramco could not see that TAQA was at the head of the ownership chain that ended with CDS CSA. Yar had provideda transfer of the share to TAQA at the closing of the Purchase and Sale Agreement. TAQA had not taken the necessary steps to have thattransfer properly registered in Barbados by December 31, 2019. [145] Yar devoted very considerable time and attention to this issue at trial.

Accordingly, TAQA devoted very considerable time andattention to responding to Yar’s position. Both parties called lawyers specializing in corporate law in Barbados to give expert evidencein relation to the issue. Both of those lawyers testified at the trial, by video link, from Barbados. TAQA objected to the admissibility ofthe opinion evidence of the Barbadian corporate lawyer called by Yar.

I heard the evidence of that lawyer conditionally – reserving thequestion of its admissibility for later determination. [146] The point of difference between the evidence of the two Barbadian lawyers was as to when, under Barbadian corporate law, ashare certificate showing CDS Global as owner of the shares of CDS Barbados could be legally issued by the corporate secretary of CDSBarbados.

The Barbadian corporate lawyer called by Yar testified that the share certificate could not be legally issued until theBarbadian corporate registry (Chancery) certified that all the requirements of Barbadian corporate law had been complied with. TheBarbadian corporate lawyer called by TAQA testified that adjudication of the share transfer by Chancery was not required in order forthe corporate secretary to issue a share certificate. [147] As previously noted, Aramco raised a question about the ownership of CDS Global and CDS KSA on January 9, 2020 (seepara. [97] above).

The point of the inquiry seems to have been that Aramco records did not show that the ownership of the CDScompanies was now held by TAQA and not Yar. In response to the inquiry, TAQA provided by email a “chain of ownershipexplanation” to Aramco (see para. [98] above). TAQA also provided some share ownership documentation to Aramco in the sameemail. The TAQA officer who sent the email indicated that he expected to receive the “ownership certificate” for CDS Barbados in afew days. He also confirmed that the transaction between Yar and TAQA had not changed the ownership of CDS KSA.

It was stillowned by CDS Global. (See para. [99] above). When the expected share certificate had not been received within a few days, the TAQAofficer sent Aramco the share transfer document which showed that 100% of the shares of CDS Barbados had been transferred to TAQADrilling Solutions. (See para. [105] above). Aramco acknowledged receipt of these documents. The acknowledgement did not suggestthat TAQA’s responses had not sufficiently answered Aramco’s inquiry regarding ownership issues. (See para. [106] above.) [148] That appears to be the end of the story regarding Aramco’s inquiry.

There is no evidence that the subject ever arose again. Theevidence is that the share transfer which had been submitted to the appropriate Barbadian registry was eventually adjudicated andreturned to the CDS Barbados corporate secretary in March 2021. About 5 months before that, in November 2020, Aramco gave itswritten consent to the assignment of the Mid-Form Contract from Midad to CDS KSA. Aramco never asked for and was never given acopy of the adjudicated share transfer or the share certificate.

It appears it was satisfied with the information it had been given asdescribed in the previous paragraph. [149] In my view, the Barbados share transfer registration issue was nothing more than a time and cost consuming red herring. Nothing relating to the registration of the transfer of shares in CDS Barbados from Yar to TAQA delayed Aramco’s consent to theassignment of the Aramco Contracts beyond December 31, 2019.

Nothing relating to the share transfer registration issue justifiesrelieving Yar of the “time is of the essence” provision of the Purchase and Sale Agreement or from the requirement of the Full PurchaseCondition that Aramco’s consent be obtained by December 31, 2019. [150] I have not dealt with TAQA’s objections to the admissibility of the opinion evidence adduced by Yar from the Barbadiancorporate lawyer it called. I find it unnecessary to do so.

Waiver of the Deadline [151] Yar further submitted that TAQA’s attempts after December 31, 2019 to secure Aramco’s consent to the assignment or novationof the Aramco Contracts constituted a waiver by TAQA of the deadline imposed on Yar by the Full Payment Condition. TAQA’sactions after December 31, 2019 are outlined beginning at para. [93] above. [152] Yar cited several authorities in relation to this submission. The legal point upon which the submission relies is stated in Shaw v.Holmes (ON CA), [1952] 2 D.L.R. 330 (Ont. C.A.) at 334: Time may be insisted upon as the essence of the agreement by a litigant, (

a) who has shown himself ready, desirous, prompt and eager tocarry out his agreement, (

b) who has not been himself the cause of the delay or in default, and (

c) who has not subsequently recognizedthe agreement as still subsisting; he must not play fast and loose at his pleasure. . . . Recent case law describes this more generally, requiring the party seeking to rely on a time of the essence clause to be acting in goodfaith. (Authorities cited in this passage have been omitted.) [153] Yar says that by dealing with the Vendor ID Issue and the Barbados Share Transfer Registration Issue for the purpose offacilitating obtaining Aramco’s consent to the assignment/novation of the Aramco Contracts, after December 31, 2019, TAQA by its

conduct waived the deadline imposed by the Full Payment Condition on Yar. Therefore, Yar submits, when many months later Aramco eventually consented, Yar became entitled to the funds in Escrow. [ 154 ] I reject this submission. Yar’s letter of December 31, 2019 indicated that it took the position that it had completed its performance under the Full Payment Condition. It did not suggest t

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