J. IN THE MATTER OF AN APPLICATION MADE BY THE PLAINTIFFS IN ACTIONS STYLED AS Q.B. No. 95 of A.D. 1996 Q.B. No. 96 of A.D. 1996 Q.B. No. 97 of A.D. 1996 Q.B. No. 98 of A.D. 1996 Q.B. No. 99 of A.D. 1996 IN THE COURT OF QUEEN'S BENCH JUDICIAL CENTRE OF ESTEVAN K.M. Rondeau R.M. Baumgartner for the applicants A.A. Fox for Herc P. Foley, Q.C. G.A. Zabos for Long Riders Rig Corporation E.C. Lothian for Rigel Oil Gas Poco Petroleums W.T. Stodalka for PetroCan R.M. Van Beselaere for Canadian Western Bank G.J. Moran for Department of Energy Mines (Saskatchewan) FIAT MacPHERSON C.J.Q.B. September 12, 1996 Briefly stated, the plaintiffs ("applicants") seek anorder preserving and detaining certain proceeds from certainoil production properties, those proceeds now being held by anescrow agent pursuant to an order of the bankruptcy court inAlberta, and a further order preserving and detaining allfuture proceeds from those properties. The applicants claim such orders are necessary to protect their claims under builders' liens which they have filed against those oil properties under the terms of The Builders' Lien Act, S.S. 1984‑85‑86, c. B‑7.1 ("BLA"). copy of the notice of motion is annexed as appendix "A". FACTS This is joint application by the applicants in each of the above actions. The respondents who appeared on this application are among the defendants named in each of the above applications. The full style of cause in each of the actions is attached hereto as appendix "B". The applicants claim to have provided goods and services to various oil wells and their associated facilities in the southeast Saskatchewan oil patch at the request of Williston Wildcatters Oil Corporation ("WWOC"). The applicants have filed, according to the affidavit of Mr. Baumgartner, counsel for the applicants, approximately 408 builders' liens (which presume includes liens registered in the Mineral Rights Branch of the Department of Energy and Mines (Saskatchewan) ("SEM") pursuant to ss. 51(1) of the BLA) against the various oil properties, the total amount of those liens being $3,846,420.00. Each of the respondents, with certain exceptions, has an interest in one or more of those oil wells and the production of oil therefrom. The exceptions constitute 20 defendants whose only interest in any of the properties arise from builders' liens which they have registered against one or more of the properties; none of these have commenced actions to enforce those liens against any of the other defendants. After failing in an application under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C‑36, WWOC was petitioned in bankruptcy on October 13, 1995. The respondent, Herc Oil Corp. ("Herc"), was formed for the purpose of advancing proposal for the restructuring of the assets and liabilities of WWOC, and on October 31, 1995, Herc obtained an order from the Alberta Bankruptcy Court imposing stay of proceedings upon creditor's actions and protecting WWOC's assets pending the filing by Herc of creditors' sponsored Plan of Arrangement and Compromise (the "Plan") and this Plan was sanctioned and approved by the Alberta Bankruptcy Court on May 11, 1996. Details of the Plan and the events leading up to the present application are set out in the brief filed by Herc, and portion thereof is attached as appendix "C" to this fiat. Except for the names of the parties and the details of the claims of the various plaintiffs, the contents of the statements of claim in each of the five actions are identical. The notice of motion herein is supported by the affidavit of Greg Cousins, president of Greg Cousins Construction Ltd., which company is plaintiff in each of the five actions. Also filed in support of the notice of motion, in addition to Mr. Baumgartner's affidavit, are the affidavits of Ray Frehlick, president of the plaintiff, Prairie Mud Chemical Service Ltd., Gary W. Hyer, former chief of petroleum engineering of WWOC, and the affidavits of two geologists, Robert W. Shirkie and Donald Williams, the last two stating that the oil properties involved in this application have declining rate of production resulting in the value of the properties continually declining unless there is "further development or recovery efforts to maintain or increase production". Paragraph 17 of the Cousins affidavit reads: 17. believe that unless the production proceeds from the Lands are paid into court pending the resolution of the builders' liens on the Lands, Cousins and the other Plaintiffs in the Actions may suffer irreparable harm as full recovery of the amount of the builders' liens on the Lands may not be possible. On June 14, 1996, Allbright J. granted to the applicants an ex parte order that the lien property revenue already paid to the escrow agent shall remain in the possession of the escrow agent until the hearing of this notice of motion, and on June 25, Dawson J. ordered that continuing lien property revenue received by Herc shall be retained by Herc until further order of the court. By hearing full argument on paragraph of the notice of motion, it was implicit that had granted the order requested in paragraph thereof. To remove any doubt, hereby confirm my order that pursuant to ss. 91(2) of the BLA that permission was granted for the applicants to proceed with the interlocutory motion. Also, at the outset of the hearing before me, heard the application by counsel for the SEM to intervene herein and to be added as party defendant pursuant to Queen's Bench Rule 39. granted that application. The following affidavits were filed by the respondents: For Herc the affidavit of Nathan Hollick, President and Chief Executive Officer of Herc, and two supplementary affidavits. For Long Riders Rig Corporation ("Long Riders") the affidavit of Gerald N. Diamond, Secretary of Long Riders. For Poco Petroleums Ltd. ("Poco") the affidavit of John de la Mare, manager of accounting operations for Poco. For Rigel Oil Gas Ltd. ("Rigel") the affidavit of Donald R. Gardner, Vice‑President of Finance of Rigel. For Petro Canada ("PetroCan") and Prairie Leaseholds Ltd. ("Prairie") the affidavit of Dennis Chase, land consultant to PetroCan and Prairie. The affidavit of Bruce Wilson, Executive Director of the Petroleum and Natural Gas Division of SEM. Briefs were filed by: the applicants Rigel Long Riders SEM All counsel appearing were in agreement that the principles to be applied in considering paragraph of the notice of motion are those that apply to an application for injunctive relief. ANALYSIS In Bean on Injunctions, 2nd Ed., (London: Oyez Longman Publishing, 1982) at p. 3, we find the following: An injunction is an order of court requiring party either to do specific act or acts (a mandatory or positive injunction) or to refrain from doing specific act or acts (a prohibitory or negative injunction). In Sharpe, Injunctions and Specific Performance, 2nd ed. (Aurora: Canada Law Book, 1993, updated 1995, Release No. 3) at p. 1‑1, para. 1.10: mandatory injunction is one which requires the defendant to act positively. mandatory injunctions look to the future and require the defendant to carry out some unperformed duty to act. Applying the forgoing to our factual situation, it is apparent that the plaintiffs are seeking mandatory injunction. In Cupar School Division No. 28 v. Trustees of Dysart School District consisting of Peter Kolody, Paula Bradshaw, Janet Bradshaw, Gerry Zatylny, Dale Czemeres, Lori Shindle and Mary Goff, Sask. C.A. No. 2525, September 4, 1996, unreported, the Court of Appeal at p. summarized the test for the granting of mandatory injunction found in Bean, supra, at p. 17 as follows: Bean, supra, provides useful summary of the criteria for mandatory perpetual injunction. These being potentially more significant than interim ones, are to be granted rarely. The tests are: 1. mandatory injunction can only be granted where the plaintiff shows very strong probability upon the facts that grave damage will accrue to him in the future. 2. The plaintiff must also show that damages will not be sufficient or adequate remedy if such damage does happen. 3. Unlike the case where negative injunction is granted to prevent the continuance or recurrence of wrongful act the question of the cost to the defendant to do works to prevent or lessen the likelihood of future apprehended wrong must be an element to be taken into account. 4. If in the exercise of its discretion the court decides that it is proper case to grant mandatory injunction, then the court must be careful to see that the defendant knows exactly what he has to do, and this means not as matter of law but as matter of fact. Turning again to Sharpe, supra, in paras. 2.640 and 2.650 at p. 2‑38 dealing with interlocutory mandatory injunctions, we 2.640 As the defendant would be required on an interlocutory basis to take positive action, the potential inconvenience is usually substantial. It is rare case, indeed, where the risk of harm to the defendant will be less significant than the risk to the plaintiff resulting from the court staying its hand until trial. 2.650 However, it is also clear that interlocutory mandatory orders can be made in appropriate cases. Where the risk of harm to the plaintiff is substantial and can only be alleviated by requiring positive steps at the interlocutory stage, such an order is appropriate. [Emphasis added] In setting for the following test, recognize that they really state, in different forms, the generally recognized test of prima facie case, irreparable harm and balance of convenience, but with more stringent requirements for the mandatory injunction. To begin, wish to comment on the sufficiency of the evidence put before this Court by the applicants. As mentioned earlier, the applicants submitted the affidavit of Greg Cousins, president of Greg Cousins Construction. Annexed to this affidavit were copies of the claims of lien which were registered by Greg Cousins Construction. At paragraph of his affidavit, Mr. Cousins claims that these liens are in "substantially the same form" as the liens registered by the other applicants. The applicant did not, however, file any of those other liens with this Court. It is difficult to consider the relative strength of the applicants case (that being their entitlement to compensation based upon the liens registered by them) when those liens are not before the court. Even if can travel past the disturbing fact that only one lienholder filed an affidavit upon which am supposed to grant an order for all the applicants, and the fact that no invoices or other information were filed substantiating the amount claimed in any of the liens, must note that there also exists many other vacancies of information within the material filed. For example, the Greg Cousins liens, to my mind, raise question as to compliance with ss. 50(2)(b) of the BLA which requires that the claim of lien shall set out, inter alia, "a short description of the services or materials that have been provided" added]. Each and every lien filed by Greg Cousins Construction, as filed herein, contains the same description: All labour, equipment and material supplied in connection with transporting oil or water, oilfield equipment, machinery and materials; constructing, servicing and repairing oilfield facilities; snow clearing; tank truck services; or earth moving, lease preparation/restoration in connection with the oilfield facility located on The word "or" indicates that either the services or materials provided were those before "or" after that word not both. From reading the above description, person purportedly subject to the lien does not know: whether oil or water was transported whether the services or materials provided are those before the last semicolon or those after that semicolon. I do not suggest that Cousins loses his lien securityas a consequence of this confusion, but I do point out that ifthese liens are substantially the same as those of all theclaimants, then whatever prima facie case they might otherwisehave is certainly weakened by this confusion, particularly inthe absence of any invoices. Despite any misgivings as to whether the material filed by the applicants is sufficient to support prima facie case, will go on to discuss the four tests which were enunciated in Cupar, supra, and set out above. The First Test 1.A mandatory injunction can only be granted where the plaintiff shows very strong probability upon the facts that grave damage will accrue to him in the future. This test goes much further than the "prima facie", or strong prima facie, case that must be proven in negative injunction application. In the case before me the applicants must prove "very strong probability" that grave damage will accrue. In my view, the plaintiffs have not established "avery strong probability upon the facts that grave damage willaccrue to him in the future". In the prayer for relief at page of the statement of claim the plaintiff claims firstly declaration as to their entitlement to builders' liens on the properties owned by the various defendants and, secondly, in default of payment of the builders' liens, the interests of the defendants in the properties "may be sold and the proceeds applied in and towards payment of the plaintiffs claims. ." Thirdly, the plaintiffs seek mandatory injunction in respect of the proceeds of those properties. The plaintiffs have submitted no evidence that in the event they choose to go to trials in their actions, and if they succeed, any of the defendants will not be in position to pay whatever amounts the court finds as being owing under the liens. On the other hand, if the preservation and detention order should issue, the affidavits of the respondents, and particularly the affidavits of Mr. Hollick, make it clear that Herc would then have no funds, or insufficient funds to perform the necessary functions as outlined in paragraph 10 of his first affidavit which could or would mean that oil production would be drastically reduced or even halted, and thus the properties become worthless. Both geologists' affidavits filed by the applicants state that the oil properties will continually decline "without further development or recovery efforts to maintain or increase production" and Herc obviously must have funds to perform these functions. This is not denied by the applicants. The result of this comparison is obvious ‑ asstated in Sharpe, supra, the risk to the respondents if theorder should be granted is far greater than the risk to theapplicants if the order is not granted. Furthermore, there is distinct possibility that should the preservation order issue, SEM will exercise its extensive powers under The Oil and Gas Conservation Act, R.S.S. 1978, c. O‑2 and The Oil and Gas Conservation Regulations, R.R.S. 1985, O‑2, Reg. 1. If necessary, those powers extend to the shutting down of Herc's operations should Herc fail to meet any of the environmental obligations. See ss. 17(1)(g), 18(j) and (t) of The Oil and Gas Conservation Act. While s. 33 of the BLA provides that the lien is charge on the holdback on any trust funds held by the contractor, it does not give the lienholder charge against any other moneys. builders' lien cannot be looked on as "proof" that the amount claimed as owing in the lien is, in fact, what is actually owed to the lienholder. If the owner against whom builders' lien is filed chooses not to pay the amount of the lien because the owner questions its validity or for any other reason, the only remedy open to the lienholder is to "enforce" its "claim of lien" under the provisions of Part VIII of the BLA. There is no other means under the BLA by which lienholder can enforce its claim. Section 28(3) of the BLA reads: 28(3) Subject to Part IV, in determining the amount of lien under subsection (1) or (2), there may be taken into account the amount that is, as between payer and the person he is liable to pay, equal to the balance in the payer's favour of all outstanding debts, claims or damages, that are related to the improvement. The words "all outstanding debts, claims or damages" would bring into play the claims of those lienholders against the properties in question who have been joined as defendants but who have no other interest in the properties. These claims could significantly reduce the amounts the plaintiffs could recover should their action go to trial. Another difficulty faced by the plaintiffs arises because nowhere in the statement of claim or in their supporting affidavits is it set forth with any specificity the dates or times when any of the applicants performed the services for which they claim. The statement of claim says nothing about these dates or times. On the material filed we do not and cannot know if any of the respondents are "intervening parties" within ss. 49(5)(a) of the BLA. Paragraph of Mr. Baumgartner's affidavit simply says the services were supplied "in or about 1994" and states as well that most of the applicants' liens were filed in May and June of 1995. rough survey of the certified copies of titles to the property as filed by the applicants indicates that about five or six builders' liens were registered in December, 1994, about seven from January to April, 1995, 480 in May and June of 1995, 74 from July to December, 1995, and about 63 in 1996. The total of these registered liens (about 630) considerably exceeds the 480 liens in paragraph 13 of the Baumgartner affidavit, which indicates there are substantial number of lienholders who have not joined the applicants in the four actions. This apparent late‑filing of builders' liens by the applicants could bring into play positions taken by several opposing counsel during the hearing, and set forth with some particularity in the brief filed by PetroCan. It is acknowledged that ss. 22(2) of the BLA expands the lien rights contained in ss. 22(1). have reservations as to the validity of that argument, but see no need to pursue it because feel there are other strong grounds for rejecting the applicants' application under the first test. The Second Test 2.The plaintiff must also show that damages will not be sufficient or adequate remedy if such damage does happen. Here again the applicants fail in meeting this test for much the same reason as they fail in the first test. emphasize again that the applicants have not shown that if they pursue their builders' liens actions in the court under Part VIII of the BLA, and prove their lien claims as they must do, that the judgments thus obtained will not be sufficient remedy for them. Each of the applicants has claim for money as set out in each of the liens. If they pursue their lien actions under Part VIII of the BLA and obtain judgments against the various respondents, there is nothing in the material to suggest that the respondents will not pay those judgments with the result that the applicants will recover whatever amounts the courts hold that they are entitled to recover under their liens. See RJR MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] S.C.R. 311 at p. 341: "Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured,usually because one party cannot collect damages from the other [Emphasis added] The applicants suggest also that they will suffer irreparable harm if the order sought is not granted because the fruits of any successful litigation will be no longer available at the time the litigation comes to an end, and they suggest the liened lands will not have enough value in them to satisfy judgment. The question is not whether the properties are declining in value. Such conclusion is inevitable by virtue of the very nature of the property. Oil is non‑ renewable resource with limited lifespan. The real issue is whether this decline in value will occur at such rapid rate as to rob the applicants of the fruits of potentially successful litigation, and therefor cause them irreparable harm. The geologists do not state that this decline in value is imminent. They simply state that the value will decline without further development or recovery efforts to maintain or increase production. The order sought will hasten, if not create, the very irreparable harm that the applicants assert. The order will surely guarantee the harm predicted by freezingthe capital necessary to hinder the inevitable decline invalue. In this way, the applicants' assertion of irreparableharm will become a self‑fulfilling prophecy. The Third Test 3.Unlike the case where negative injunction is granted to prevent the continuance or recurrence of wrongful act the question of the cost to the defendant to do works to prevent or lessen the likelihood of future apprehended wrong must be an element to be taken into account. This, in effect, is the balance of convenience test. Above, have already dealt to some extent with the considerably greater inconvenience to the respondents should the desired order be granted, than would be the inconvenience to the applicant should it not be granted. In addition, should point out the submissions made and affidavit filed by SEM. The affidavit of Bruce Wilson sets forth in paragraph the environmental problems in respect of the Herc properties, it explains the reserve fund which has been established by Herc and Herc's undertaking in that respect. This affidavit points out in paragraph 14 that it is unacceptable to SEM that lien creditors should receive the income from the properties in question without being responsible for the environmental costs associated with those properties. Furthermore, at paragraphs 11, 12 and 13 of his affidavit, Mr. Wilson clearly indicates the Crown's willingness to wield its statutory powers under The Oil and Gas Conservation Act and Regulations to ensure that these environmental obligations are met. In fact, this result would arguably cause harm not only to the respondents, but also to the applicants themselves. This test, of course, refers specifically to negative injunction rather than positive or mandatory injunction, which is the situation before me. However, note that this test refers to the "continuance or recurrence of wrongful act" by the respondents and think it is worth pointing out that the respondents, in the context of the matter before me, have not been guilty of any wrongful acts. The respondents have been caught up in the problems created by the bankruptcy of WWOC just as the applicants have been caught up in those problems. The Fourth Test 4.If in the exercise of its discretion the court decides that it is proper case to grant mandatory injunction, then the court must be careful to see that the defendant knows exactly what he has to do, and this means not as matter of law but as matter of fact. In view of my previous findings, there is really no need to deal with this test. However, it is worth mentioning that if were to issue the order applied for would have grave difficulty in determining the appropriate amount of the lien property revenue that should be paid to an escrow agent, or in some other manner preserving and detaining that revenue. For example, paragraph 3.6(a) of the Plan provides that the "net revenues" from the properties shall be paid to the trustee. There is no definition of "net revenues" the section does not state what should be deducted in order to arrive at the net revenue. Paragraph 3.6(b) uses the phrase "Lien Property Revenue" but seems to adopt the words of 3.6(a) so that "Lien Property Revenue" means "net revenues". In Royal Bank v. Rice (1921), 60 D.L.R. 169 at 171, the Manitoba Court of Appeal defined "net" as meaning "with all deductions (such as charges, expenses, discounts, commissions, taxes, etc.)". So far as Herc is concerned, would such deductions include the environmental reserve, royalties, operating maintenance of the wells, capital expenditures as set out in paragraph 10 of Mr. Hollick's first affidavit on behalf of Herc, and/or necessary injections of further capital, etc.? There is no material before me that would have been of any assistance in making this determination. In the course of argument, Mr. Baumgartner indicated that the applicants would be agreeable to lessors' royalties, Crown production taxes, and normal operating expenses being deducted but would not agree to gross royalties or environmental reserve costs being deducted. The respondents did not agree to this proposal and, in particular, were of the view that if such an order were to be made, gross royalties and environmental reserve costs should be included in the deductions. As final note, though perhaps unnecessary given my decision to deny this application, the applicants would be required, under Rule 390 of the Queen's Bench rules, to pay full compensation before the order sought was issued. It has not done so. CONCLUSION For the reasons stated above, and my findings thatthe applicants have not met the first and second tests, andtaking into account the factors to be considered in the thirdtest, I hold and order:(a)that the plaintiffs' application under paragraph 2 of itsnotice of motion must be, and is hereby dismissed;(b)that the escrow agent, being the firm of McLellan, Cundall,Bridges and Baumgartner, as set forth in the Plan shallforthwith;(i)in accordance with paragraph 3.6(c) of the Plan,remit to Herc the lien property revenues which the escrowagent has received, and interest earned thereon;(ii)remit to Herc the lien property revenues(including interest earned thereon), if any, paid to theescrow agent by Herc,after deduction of the escrow agent's appropriate costs inacting as such escrow agent. (c)with the exception of the SEM, the other parties appearing through counsel on this application will have their costs against the applicants. C.J.Q.B. APPENDIX "A" NOTICE OF MOTION TAKE NOTICE that an application will be made to the presiding judge in chambers at the Court House, 101 Fourth Street, Estevan, Saskatchewan, on Tuesday the 25th day of June, 1996 at 1:00 o'clock in the afternoon or so soon thereafter as counsel can be heard on behalf of the Applicants for the following relief, namely: 1. An order pursuant to section 91(2) of The Builders' Lien Act, S.S. 1984‑85‑86, c. B‑7.1 permitting the within interlocutory application. 2. An order pursuant to rules 387, 387A and 390 of The Queen's Bench Rules: (a)preserving and detaining, on such terms as may be ordered by this Honourable Court that Lien Property Revenue paid to McLellan, Cundall, Bridges Baumgartner as Escrow Agent pursuant to Section 3.6(c) of an Amended Plan of Arrangement and Compromise dated February 13, 1996 as approved and ordered on March 11, 1996 by the Honourable Mr. Justice M.E. Lomas of the Alberta Court of Queen's Bench on such terms as may be ordered by this Honourable Court; and (b)preserving and detaining, all future production proceeds of oil recovered on certain lands upon which the Applicants have registered builders' liens on such terms as may be ordered by this Honourable Court. AND TAKE FURTHER NOTICE that the Applicants claim to be entitled to the relief requested on the following grounds: 1.The property sought to be preserved is precisely ascertainable and identifiable. 2.The Applicants are lien claimants who have provided services or material preparatory to or in connection with the recovery of the said oil pursuant to subsections 22(2)(a) and 22(2)(b) of The Builders' Lien Act. 3.The Applicants have strong prima facie case entitling them to lien upon the said funds as specified in the Statements of Claim upon which this application is based. 4.The said production proceeds are the subject matter of the said liens, and failure to preserve these production proceeds would result in irreparable harm to the Applicants by seriously jeopardizing or depriving the Applicants of the remedy provided to each of them by subsection 22(2)(e) of The Builders' Lien Act. AND TAKE FURTHER NOTICE that in support of this application shall be read: 1. This Notice of Motion with proofs of service thereof; 2.The Affidavit of Greg Cousins; 3.The Affidavit of Donald Williams; 4.The Affidavit of Robert Shirkie; 5.Certain certified copies of titles against which claims of lien have been registered as specified in the Statements of Claim; 6.Certain searches of leases provided by the Department of Energy and Mines, Province of Saskatchewan, against which claims of lien have been registered as specified in the Statements of Claim; and, 7. The pleadings and proceedings had and taken herein. DATED at the City of Estevan, in the Province of Saskatchewan, this 19th day of June, 1996. APPENDIX "B" Q.B. No. 95 of A.D. 1996 IN THE QUEEN'S BENCH JUDICIAL CENTRE OF ESTEVAN BETWEEN: CARSON WELDING MAINTENANCE LTD., CHAMPION TECHNOLOGIES, INC., COULTER and McGILLICKY SALES AND SERVICE LTD., DOSCO SUPPLY, division of Westburne Industrial Enterprises Ltd., FOSTER'S ELECTRIC LTD., GREG COUSINS CONSTRUCTION LTD., HANK'S MAINTENANCE AND SERVICE CO. LTD., LONGHORN ANCHOR SERVICE LTD., MAHER'S ELECTRIC HARDWARE LTD., PRAIRIE MUD CHEMICAL SERVICE LTD., QUINN'S OILFIELD SUPPLY LTD., RAINBOW WELL SERVICING LTD., ROCKET SALES RENTAL CO. LTD., TECHNICAL SALES MAINTENANCE LTD., THREE STAR TRUCKING LTD. and VIKING SURPLUS OIL FIELD EQUIPMENT LTD. and HERC OIL CORP., CANADIAN WESTERN BANK, TRANSWEST ENERGY INC., T. BIRD OIL LTD., CANADIAN FRACMASTER LTD., DeGEER EXCAVATING LTD., DIAMOND OILFIELD SALES RENTAL INC., RICHARD McNAIR DEFENDANTS Q.B. NO. 96 of A.D. 1996 BETWEEN: GERALD BIG EAGLE, carrying on business under the firm name and style of BIG EAGLE TRUCKING, CARSON WELDING MAINTENANCE LTD., CHAMPION TECHNOLOGIES, INC., DOSCO SUPPLY, division of Westburne Industrial Enterprises Ltd., FAST TRUCKING SERVICE LTD., FOSTER'S ELECTRIC LTD., GREG COUSINS CONSTRUCTION LTD., LONGHORN ANCHOR SERVICE LTD., MAHER'S ELECTRIC HARDWARE LTD., PRAIRIE MUD CHEMICAL SERVICE LTD., QUINN'S OILFIELD SUPPLY LTD., RAINBOW WELL SERVICING LTD., ROBERT POTT, carrying on business under the firm name and style of SPRUCE GROVE TRUCKING, TPZ SERVICES LTD., TECHNICAL SALES MAINTENANCE LTD., THREE STAR TRUCKING LTD., TORNAC OILFIELD SERVICES LTD., VENTURE WELL SERVICING LTD. and WATERFLOOD SERVICE SALES LTD. and HERC OIL CORP., THE LONG RIDERS RIG CORPORATION, TRIP RESOURCES LTD., TRIASSIC RESOURCES LTD., MODUS RESOURCES LTD., TARRAGON OIL AND GAS LIMITED, CANADIAN WESTERN BANK, PARAFFIN SERVICES LTD. and RICHARD McNAIR DEFENDANTS Q.B. No. 97 of A.D. 1996 BETWEEN: BECKER OIL TOOLS LTD., GERALD BIG EAGLE carrying on business under the firm name and style of BIG EAGLE TRUCKING, CARSON WELDING MAINTENANCE LTD., CHAMPION TECHNOLOGIES, INC., CLIFFORD L. KIRBY, COULTER AND McGILLICKY SALES AND SERVICE LTD., DAY CONSTRUCTION LTD., DOSCO SUPPLY, division of Westburne Industrial Enterprises Ltd., EAGLE ENERGY LTD., FOSTER'S ELECTRIC LTD., GREG COUSIN'S CONSTRUCTION LTD., HOMCO, division of Weatherford Oil Tool Co. (1983) Ltd., JOHNSTONE TANK TRUCKING LTD., LAFRENTZ CHRISTENSON TRUCKING LTD., LONGHORN ANCHOR SERVICE LTD., MAHER'S ELECTRIC HARDWARE LTD., PENDEMAK INDUSTRIES LTD., PRAIRIE MUD CHEMICAL SERVICES LTD., QUINN'S OILFIELD SUPPLY LTD., RAINBOW WELL SERVICING LTD., SEBCO CORING TONGS LTD., ROBERT POTT, carrying on business under the firm name and style of SPRUCE GROVE TRUCKING, TPZ SERVICES LTD., TECHNICAL SALES MAINTENANCE LTD., THREE STAR TRUCKING LTD., TORNAC OILFIELD SERVICES LTD., VENTURE WELL SERVICING LTD., VIKING SURPLUS OIL FIELD EQUIPMENT LTD., and WATERFLOOD SERVICE SALES LTD. and HERC OIL CORP., CANADIAN FINA OIL LIMITED, DANFORTH OIL GAS LTD., THE LONG RIDERS RIG CORPORATION, MIDALE PETROLEUMS LTD., MODUS RESOURCES LTD., PETRO CANADA, PRAIRIE LEASEHOLDS LTD., REID‑BICKNELL LAND LTD., RICHLAND PETROLEUM CORPORATION, T.D.L. PETROLEUMS INC., TRIASSIC RESOURCES LTD., TRIP RESOURCES, VISTA INTERNATIONAL PETROLEUMS LTD., WALKING STICK OIL GAS CORP., CANADIAN WESTERN BANK, TAMMY BONOKOSKI, CANADIAN FRACMASTER LTD., RICHARD McNAIR, OILFIELD ELECTRONICS ESTEVAN LTD., PARAFFIN SERVICES LTD. and TAC WELL SERVICES DEFENDANTS Q.B. No. 98 of A.D. 1996 BETWEEN: BECKER OIL TOOLS LTD., BERT BAXTER TRANSPORT LTD., GERALD BIG EAGLE, carrying on business under the firm name and style of BIG EAGLE TRUCKING., BLACK MAX DOWNHOLE TOOL LTD., CARSON WELDING MAINTENANCE LTD., CAMERON COLLINS, carrying on business under the firm name and style of COLLINS CONSTRUCTION, CHAMPION TECHNOLOGIES, INC., COULTER AND McGILLICKY SALES AND SERVICE LTD., DOSCO SUPPLY, division of Westburne Industrial Enterprises Ltd., FOSTER'S ELECTRIC LTD., GREG COUSINS CONSTRUCTION LTD., HANK'S MAINTENANCE AND SERVICE CO. LTD., HOMCO, Division of Weatherford Oil Tool Co. (1983) Ltd., JOHNSTONE TANK TRUCKING LTD., WAYNE KING, carrying on business under the firm name and style of King's Water Hauling, LAFRANTZ CHRISTENSON TRUCKING LTD., LONGHORN ANCHOR SERVICE LTD., MAHER'S ELECTRIC HARDWARE LTD., NORJET GEOTCHNOLOGIES INC., PENDEMAK INDUSTRIES LTD., PRAIRIE MUD CHEMICAL SERVICE LTD., QUINN'S OILFIELD SUPPLY LTD., RAINBOW WELL SERVICING LTD., RED HAWK WELL SERVICING LTD., ROCKET SALES RENTAL CO LTD., SEBCO CORING TONGS LTD., TPZ SERVICES LTD., TECHNICAL SALES MAINTENANCE LTD., TANNER TRUCKING LTD., THREE STAR TRUCKING LTD., TORNAC OILFIELD SERVICES LTD. and VENTURE WELL SERVICING LTD. and HERC OIL CORP., POCO PETROLEUMS LTD., THE LONG RIDERS RIG CORPORATION, VOYAGER ENERGY INC., CANADIAN WESTERN BANK, ARCOLA CO‑OPERATIVE ASSOCIATION LIMITED, TAMMY BONOKOSKI, BRENT'S TRUCKING LTD., CANADIAN FRACMASTER LTD., CANADIAN TOOLMASTER LTD., ELDON COTE and GERALD COTE, TERRENCE GREEN, GRIMES SALES SERVICE CO. LTD., LOW TRAILER RENTALS INC., RICHARD McNAIR, SCHLUMBERGER CANADA LIMITED, SCIENTIFIC DRILLING INTERNATIONAL (CANADA) INC. DEFENDANTS Q.B. No. 99 of A.D. 1996 BETWEEN: BECKER OIL TOOLS LTD., BERT BAXTER TRANSPORT LTD., GERALD BIG EAGLE, carrying on business under the firm name and style of BIG EAGLE TRUCKING, BLACK MAX DOWNHOLE TOOL LTD., CARSON WELDING MAINTENANCE LTD., CHAMPION TECHNOLOGIES, INC, CAMERON COLLINS, carrying on business under the firm name and style of COLLINS CONSTRUCTION, COULTER AND McGILLICKY SALES AND SERVICE LTD., DAY CONSTRUCTION LTD., DOSCO SUPPLY, division of Westburne Industrial Enterprises Ltd., EAGLE ENERGY LTD., FAST TRUCKING SERVICE LTD., FOSTER'S ELECTRIC LTD., GREG COUSINS CONSTRUCTION LTD., GUARDIAN OILFIELD SERVICES, division of Shaw Industries Ltd., HANK'S MAINTENANCE AND SERVICE CO. LTD., HOMCO, division of Weatherford Oil Tool Co. (1983) Ltd., JOHNSTONE TANK TRUCKING LTD., LAFRENTZ CHRISTENSON TRUCKING LTD., LONGHORN ANCHOR SERVICE LTD., PENDEMAK INDUSTRIES LTD., PIONEER EXPLORATION INC, POLAR OILFIELD SERVICES, division of Enserv Corporation, PRAIRIE MUD CHEMICAL SERVICE LTD., PRAIRIE PETRO‑CHEM LTD., QUINN'S OILFIELD SUPPLY LTD., RAINBOW WELL SERVICING LTD., ROCKET SALES RENTAL CO. LTD., SEBCO CORING TONGS LTD., ROBERT POTT, carrying on business under the firm name and style of Spruce Grove Trucking, TPZ SERVICES LTD., TECHNICAL SALES MAINTENANCE LTD., THREE STAR TRUCKING LTD., TORNAC OILFIELD SERVICES LTD., VENTURE WELL SERVICING LTD., VIKING SURPLUS OIL FIELD EQUIPMENT LTD. and WATERFLOOD SERVICE and HERC OIL CORP., RIGEL OIL GAS LTD., CANADIAN WESTERN BANK, TAMMY BONOKOSKI, CANADIAN FRACMASTER LTD., CANADIAN TOOLMASTER LTD., DOUG COLLINS, HARRIS OILFIELD CONSTRUCTION LTD., BRENT HAYWARD, LOW TRAILER RENTALS INC., RICHARD McNAIR, SCHLUMBERGER CANADA LIMITED DEFENDANTS APPENDIX "C" PORTION OF BRIEF OF LAW FILED ON BEHALF OF HERC 5. Herc was formed for the purpose of advancing proposal for the restructuring of the assets and liabilities of Williston Wildcatters. On October 31, 1995 Herc obtained an Order from the Alberta Court of Queen's Bench imposing stay of proceedings upon creditor's actions and protecting Williston Wildcatters' assets pending the filing by Herc of creditor's sponsored Plan of Arrangement. 6. On December 20, 1995, Herc filed Plan of Arrangement and Compromise (the "Plan") which was sanctioned and approved by Mr. Justice M.E. Lomas of the Alberta Court of Queen's Bench on May 11, 1996. 7. Relevant provisions of the Plan which can be referred to as Exhibit "YY" to the affidavit of Greg Cousins filed on behalf of the applicants, provides as follows: 2.2 Claims Not Compromised by Plan This Plan does not compromise the following Claims and rights that arise in the following capacities: (b)Claims of the Lienholders to the extent of their rights to enforce their respective Liens against the specific Lien Properties subject thereto; 3.3 Sale of assets to Herc On the Implementation Date, the Trustee shall sell and transfer to Herc effective as of the Effective Date and subject to the CWB Security and the Liens. 3.5 CWB Security and Liens The CWB Security shall continue to attach to the Assets transferred to Herc and/or its Nominee, pursuant to this Plan. With respect to the Liens: (a)each Lien which validly attaches to Lien Property as of the Implementation Date shall continue to attach to such Lien Property after the transfer thereof pursuant to this Plan; (b)the recourse of each Lienholder shall be restricted to those Lien Properties which are attached to its Lien; and (c)Herc and its Nominee shall not assume, and shall have no obligation or responsibility to the Lienholders in respect of, any indebtedness, liability or obligation of WWOC to the Lienholders; and the Lienholders shall have no claim against or recourse to Herc, its Nominee or to any Assets transferred to Herc or its Nominee (other than to those Lien Properties to which their respective Liens attach). Nothing in this Plan of the implementation thereof shall affect the relative priority of the CWB Security and the Liens. 3.6(c) Lien Property Revenue All Lien Property Revenues received by the Trustee or Herc prior to the 60th day following the Stay Termination Date shall be paid to the Escrow Agent. The Escrow Agent shall hold such funds pursuant to escrow arrangements which shall include the requirements that: (i)except as provided for in Sections (ii) and (iii) immediately below, the Lien Property Revenues shall be invested in an interest bearing trust account until the 60th day of following the Stay Termination Date; (ii)unless otherwise ordered by court of competent jurisdiction in the Province of Saskatchewan, all funds held by the Escrow Agent pursuant to such arrangements (including all interest accrued thereon) shall be paid by the Escrow Agent to Herc (and/or its Nominee) on the 60th day following the Stay Termination Date; and (iii)The Escrow Agent may apply to Court for advice or direction with respect to the Lien Property Revenue or the rights of any Person thereto. 3.8 Status of Liens and Rights of Set Off; No assumption by Herc or its Nominee Nothing in this Plan shall directly or indirectly constitute: (a)a determination or admission or other finding whatsoever by the Court, WWOC, the Trustee, Herc, its Nominee or any other Person with respect to the validity, enforceability of priority of any Lien or right of set off, or any indebtedness, liability or obligation of WWOC secured or affected thereby; (c)any increase in any rights or remedies of any Lienholder, or any Unsecured Creditor entitled to any right of set off, beyond the rights and remedies of the holders thereof but for the Plan. 8. The Plan further provided that the stay granted by the Alberta Court of Queen's Bench on October 31, 1995 was to expire on April 18, 1996 the "Stay Termination Date"). The 60th day following the Stay Termination Date was June 17, 9. Pursuant to Article 3.6(c) of the Plan, the net revenue from liened properties received by the trustee or Herc prior to the 60th day following the Stay Termination Date was to be paid to McLellan, Cundall, Bridges Baumgartner (the "Escrow Agent"). The Escrow Agent has received the sum of $144,001.06. These funds will have accrued interest as they were to be invested in an interest bearing trust account. 10. Herc has made diligent efforts to attempt to settle with the various lien claimants which number some 600 in 11. On May 24, 1996 Herc provided proposal regarding settlement which was subsequently rejected by Mr. Baumgartner's clients on June 3, 1996. 12. Five statements of claim were issued on June 12, 1996 by Mr. Baumgartner's clients. On June 13, 1996 the plaintiffs brought an ex parte motion and supporting material requesting leave to commence interlocutory proceedings by way of notice of motion and that the Lien Property Revenue paid to McLellan, Cundall, Bridges Baumgartner, the Escrow Agent pursuant to Article 3.6(c) of the Plan remain in the possession of the Escrow Agent until the hearing of this motion returnable in
FIAT. The plaintiffs sought an order preserving and detaining certain proceeds from oil production properties which were being held by an escrow agent pursuant to an order of the bankruptcy court in Alberta and a further order preserving and detaining all future proceeds from those properties. The applicants claimed such orders were necessary to protect their claims under the approximately 408 builders' liens filed against those oil properties. The contents of the statements of claim in each of the five actions were identical. HELD: The application was dismissed. The escrow agent was ordered to remit to Herc the lien property revenues with any interest earned less the agent's appropriate costs. With the exception of SEM the parties appearing through counsel were awarded their costs against the applicants. 1)The tests set out in Bean on Injunctions for granting a mandatory injunction were summarized in Cupar School Division. The tests really state in different forms the generally recognized test for prima facie case, irreparable harm and balance of convenience but with more stringent requirements. 2)Only one lien holder filed an affidavit, no invoices or other information were filed substantiating the amount claimed in any of the liens. The word 'or' used in one of the liens indicated that the person subject to the lien did not know whether the water or oil was transported. Whatever prima facie case the lien holders might have was weakened. 3)The applicants had not established a very strong probability that grave danger will accrue. The risk to the respondents if the order should be granted was far greater than the risk to the applicants if the order were not granted. The oil properties would continue to decline without further development or recovery efforts to maintain or increase production. If a preservation order issued SEM would likely exercise its extensive powers under the Oil and Gas Conservation Act. 4)While s33 of the Builders' Lien Act provides for a lien on the holdback of any trust funds held by the contractor, it does not give the lienholder a charge against any other moneys. A builder's lien cannot be looked on as 'proof' that the amount claimed is what is actually owing. The only remedy open to the lienholder is to enforce its claim under Part VIII of the Builders' Lien Act. The statement of claim said nothing about dates and times. On the material filed it was impossible to know whether any of the respondents were intervening parties within s49(5)(a). 5)The second and third tests were not met. The order would guarantee irreparable harm by freezing the capital necessary to hinder the decline in value. It would be unacceptable to SEM that lien holders should receive the income from the properties without being responsible for the environmental costs. 6)The fourth test required that the defendant know exactly what he has to do. If the order were to issue it would be difficult to determine the proper amount of lien property revenue that should be paid to an escrow agent. There was no definition of net revenues in the Plan. The applicants would have been required pursuant to Rule 390 to pay full compensation before the order was issued.