Perpetual Energy (Re), 2021 ABQB 718

Court of Queen’s Bench of Alberta Citation: Perpetual Energy (Re), 2021 ABQB 718 Date: 20210907 Docket: 2101 09593 Registry: Calgary In the Matter of

Section 193 of the Business Corporations Act , RSA 2000, c B-9 , as amended And In the Matter of a Proposed Arrangement Involving Perpetual Energy Inc., Rubellite Energy Inc. and the Shareholders of Perpetual Energy Inc. Perpetual Energy Inc. Applicant _______________________________________________________ Endorsement of the Honourable Mr. Justice M. J.

Lema _______________________________________________________ [ 1 ] I have decided to approve the plan of arrangement (under the Business Corporations Act ) as submitted. [ 2 ] Concerning the objections raised by PricewaterhouseCoopers Inc and by the Orphan Well Association, I find that both are effectively focusing on the pre-arrangement transaction by which the Clearwater assets were moved to Rubellite Energy Inc.

That is, they are barking up the wrong tree here. [ 3 ] If those assets were moved out of Perpetual Energy Inc for insufficient consideration (on which I make no finding), thus (in theory) causing prejudice to any claimant, present or future, against Perpetual, any such parties can pursue whatever creditors’-rights- based remedies may apply i.e. to seek relief for any consideration shortfall that occurred in that transaction .

Any such rights do not extend to objecting to the plan itself, which (on its own) is neutral on the “Clearwater assets and their proceeds” front. [ 4 ] My fundamental finding is that, whatever happened in that upstream transaction (i.e. whether it was for fair market value or something less), it created a status quo on which the proposed arrangement operates .

The various arrangement steps (described at pp 20-23 of the Information Circular), on their own, do not, and cannot, create any prejudice, incremental or otherwise, to any claimants against Perpetual. [ 5 ] PWC’s and OWA’s legal, economic or other rights or positions to seek recourse (if any) in respect of the upstream transaction moving the Clearwater assets to Rubelite are not affected by the plan.

Viewed from whatever perspective, the plan does not affect any legal, or other, rights or interests held by those parties . [ 6 ] Fundamentally, with the plan not aimed at and, in any case, not having any possible impact on the legal or other interests of PWC and OWA (or either of them), I find that they have no standing to offer opposition to the proposed plan .

[ 7 ] Assuming that either or both had standing, and concerning their “ solvency-focused submissions ”, I am not convinced that solvency is a precondition of a s 193 ABCA arrangement. Accordingly I do not have to rule (even if standing were conceded or assumed) on whether Perpetual is presently solvent or will be solvent once the arrangement is completed [ 8 ] In a nutshell, while the ABCA imposes solvency or solvency-like tests elsewhere in the statute (e.g. ss 34(2), 35(3), 36(2), 38(2), 43, and 191(20)), s 193 is silent on this aspect. [ 9 ]

Section 193 also lacks an insolvency-based stop sign like s 207. [ 10 ] More fundamentally, I do not see a shareholders’-rights-focused arrangement as constituting, in pith and substance, a “bankruptcy and insolvency” matter.

Even if Perpetual were insolvent now or post-arrangement (on which I make no ruling), the adjustment of shareholder rights proposed by the arrangement, on its own, does not conflict with any outcome otherwise directed by the BIA , the CCAA , or the WURA , with none of those statutes explicitly or implicitly addressing shareholder arrangements. [ 11 ] The solvency test from ss 192(2) CBCA , invoked by PWC, has no application here. [ 12 ] OWA effectively raised no additional argument (i.e. beyond what PWC argued) about prejudice arising from the proposed plan of arrangement.

Implicitly, it too is arguing that the pre-plan Clearwater transaction somehow diminished its potential (down-the- road) position against Perpetual i.e. if Perpetual is, someday and somehow, called on perform certain abandonment and reclamation obligations associated with the Goodyear assets (described in other ABQB and ABCA decisions involving Perpetual).

In any case, as found above, nothing in the proposed plan itself diminishes Perpetual’s present ability to meet any claims, present or future . [ 13 ] Accordingly, I accept Perpetual’s submissions about the true focus here i.e. the other (shareholder) parties whose rights are in fact affected i.e. whose rights are being “arranged” by the arrangement.

With PWC and OWA falling outside that circle, their interests do not come into play when weighing the fairness and reasonableness of the plan. [ 14 ] This is not a “form over substance” finding: what comes to the Court for approval is a particular arrangement, not every transaction that precedes or follows it.

It is the adjustment of shareholders’ rights that engages the Court’s supervisory role here, with (as noted) other legal principles (in the creditors’ rights realm) governing any disputes about the upstream Clearwater transaction. [ 15 ] In effect, PWC and OWA are asking the Court to step outside its plan-weighing role and embark on a creditors-rights- protection mission possibly engaged (again, I am not ruling on that here) by non-Plan activities. [ 16 ] In other words, the PWC and OWA perspectives, compelling (or not) in the creditors’ rights zone, simply do not weigh on the “plan scales” here. [ 17 ] Turning to the other requirements for plan approval, I find that the statutory procedures are satisfied here, that the plan has been put forward in good faith, and that the arrangement is fair and reasonable, here adopting, and approving, the submissions made by Perpetual in paras 48-72 of its plan-approval-application brief. [ 18 ] For all these reasons, I approve the plan as submitted. [ 19 ] I thank all the parties for their helpful written and oral submissions.

Heard on the 31 st day of August, 2021. Released in email format on September 2 nd , 2021. Dated at Calgary, Alberta this 7th day of September, 2021. M. J. Lema J.C.Q.B.A. Appearances: Paul G. Chiswell and Michael S. Deyholos Burnet, Duckworth & Palmer LLP for Perpetual Energy Inc. Rinus de Waal and Luke Rasmussen

De Waal Law for PricewaterhouseCoopers Inc. Kenneth T. Lenz, Q.C. and Andrea Stempien Bennett Jones LLP for the Orphan Well Association