Executive Summary: Key Legal and Evidentiary Issues

• Two related applications turned on how long a "reasonable best efforts" development covenant and an associated "Success Fee" survived under a 2007 share purchase agreement for two Alberta wind farm projects.
   
• Justice Dario found the covenants and the Success Fee were not clearly limited to two or five years, contrary to the position NaturEner advanced.
   
• Whether the transfer of the wind farm assets to Capstone entities amounted to an assignment triggering joint and several liability could not be resolved on the existing record.
   
• Claims of fraudulent conveyance, fraudulent preference, and oppression against NaturEner and related Capstone defendants survived summary dismissal because the evidentiary record was incomplete.
   
• An appeal from an Applications Judge's summary dismissal decision was reviewed on a correctness standard given that no new evidence was introduced.
   
• Discoverability principles under the Limitations Act meant the plaintiffs were not confined to conduct that occurred before they filed their statement of claim.
   

Facts of the case

David Boileau, Claude Mindorff, and Ron Barg, together with a fourth shareholder, Lois Morys, sold their shares in West Windeau Inc. to NaturEner Energy Canada Inc. under a Share Purchase and Sale Agreement dated August 10, 2007. West Windeau's main assets were two wind farm developments in southern Alberta, Wild Rose 1 and Wild Rose 2. The agreement entitled the sellers to a "Success Fee" tied to when NaturEner achieved a "Construction Commencement Date" for each project, with an earlier commencement producing a larger fee for Wild Rose 1. Each seller also took on an employee, officer, or consultant role with NaturEner after closing, and each had left the company by roughly a year later.

On July 25, 2009, Boileau, Mindorff, and Barg commenced Action #1, alleging NaturEner breached section 7.6 of the agreement by failing to use reasonable best efforts to contact reputable wind turbine suppliers, to place a purchase order for Wild Rose 1 turbines, and to proceed diligently with developing both projects. The parties entered two standstill agreements between 2011 and 2020 during which NaturEner provided periodic progress reports, but NaturEner never produced an Affidavit of Records or submitted to Questioning. It filed a summary dismissal application in Action #1 on May 31, 2022 (Application #1).

Late in 2021, the sellers learned NaturEner had reorganized and was selling the two projects to Capstone Infrastructure Corporation's subsidiaries. All four sellers, including Morys, filed Action #2 on August 3, 2022, later amended in March 2023, naming NaturEner along with WR One Portfolio Corp., WR2 Holding Corp., PH2 Holding Corp., Wild Rose 2 Wind LP, and NaturEner USA LLC. Action #2 alleged fraudulent conveyance or fraudulent preference in the transfer of the projects, and oppression under Alberta's corporate statute. NaturEner and the other defendants applied to strike or summarily dismiss Action #2; Applications Judge Farrington dismissed that application in a four-page endorsement, finding the record insufficient to resolve the contractual interpretation questions or the fact-dependent oppression and fraudulent-transfer claims. NaturEner appealed that ruling to the Court of King's Bench as Application #2, and the two applications were heard together given their overlapping subject matter.

Policy and legislative provisions at issue

Section 7.6 of the share purchase agreement required NaturEner to use reasonable best efforts to contact reputable wind turbine suppliers and place a purchase order for Wild Rose 1 turbines, subject to conditions including licence retention, turbine availability, and supplier capability. A separate obligation in section 7.6(b) required reasonable best efforts to proceed diligently with developing both projects toward a construction-commencement notice, subject to conditions including a finding that a project's economic viability had been materially and negatively affected by an intervening change. Section 9.3(c) limited the sellers' remedy for breach of these covenants to the Success Fee payment set out in the agreement's definitions.

Rule 7.3(1)(b) of the Alberta Rules of Court allows a defendant to seek summary judgment where a claim, or part of it, has no merit. The governing framework comes from Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49, itself derived from the Supreme Court of Canada's decision in Hryniak v Mauldin, 2014 SCC 7. An appeal from an Applications Judge, where no new evidence is introduced, proceeds as a correctness review under rule 6.14(3) of the Rules.

Section 3(1)(a) of the Limitations Act sets a two-year period running from when a claimant knew, or ought to have known, that an injury occurred, that it was attributable to the defendant's conduct, and that it warranted a proceeding. The sellers' fraudulent-transfer and oppression claims invoked the Fraudulent Preferences Act, R.S.A. 2000, c. F-24, the Statute of Elizabeth, 1571 (13 Eliz 1, c 5), and the oppression remedy under the Business Corporations Act (Alberta). Principles of contractual interpretation from Sattva Capital Corp v Creston Moly Corp and IFP Technologies (Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157, framed how the court read section 7.6 and the Success Fee definition against their commercial context.

Reasoning and analysis

Justice Dario addressed Application #2 first because it shared the central question with Application #1: how long the section 7.6 covenants and the Success Fee obligation lasted. Both parties agreed the Weir-Jones framework governed, which asks whether the record permits a fair summary resolution, whether the moving party proved its case on a balance of probabilities, and whether the responding party has shown a genuine issue requiring trial. The court found Applications Judge Farrington's four-page endorsement, while brief, correctly concluded the record did not support summary dismissal, and undertook a largely fresh analysis given the difficulty assessing the correctness of such compressed reasons.

Applying ordinary contractual interpretation principles, the court held that section 7.6 does not clearly impose the two- or five-year limits NaturEner advanced for either the conduct covenants or the Success Fee payment obligation. The Success Fee obligation could extend beyond any initial call-option period, potentially until the relevant Construction Commencement Date is achieved, unless satisfied earlier through a call option or repurchase postponement payments. The conduct covenants likewise were not shown to expire at two or five years; the court found arguments that they persist for the same duration as the Success Fee obligation.

On the limitations question in Application #1, the court applied Court of Appeal authority holding that discoverability under section 3(1)(a) turns on knowledge of the injury rather than of a specific cause of action, and does not require perfect knowledge before the limitation clock starts. Because the alleged failure to diligently pursue the projects began before the Plaintiffs filed their claim and continued afterward, the court held their claim was not confined to pre-filing conduct; ongoing conduct and resulting damages after the filing date remained relevant.

On the fraudulent conveyance, fraudulent preference, and oppression claims in Action #2, the court found the evidentiary record incomplete on both sides: the transfers to Capstone entities were not denied, NaturEner's evidence about its asset position was incomplete, and the appellants' rebuttal evidence was sparse. The court was not satisfied on a balance of probabilities that these claims lacked merit, and found at least a triable issue on whether the sellers qualified as creditors or stakeholders and whether the Capstone transfers constituted an assignment under the agreement. The court also noted it did not rely on a late-filed affidavit from Mr. Mindorff and ordered any settlement communications within it struck from the record.

Turning to the economic-viability qualification in section 7.6(b)(ii), the court considered competing evidence about Alberta's transmission infrastructure constraints and whether they justified delay. NaturEner pointed to the pace of the Southern Alberta Transmission Reinforcement project as limiting the projects' viability, while the plaintiffs pointed to Capstone's success in securing a power purchase agreement within less than a year of acquiring Wild Rose 2 as evidence viable alternatives existed. The court found the present record insufficient to determine whether the transmission developments materially and negatively affected the projects' economic viability or primarily served to reduce NaturEner's own costs, describing further evidence and live testimony as necessary to resolve the point.

Ruling and overall outcome

The court dismissed NaturEner's appeal in Application #2, upholding the Applications Judge's refusal to strike or summarily dismiss any part of Action #2, and found there remain triable issues on every point the appellants raised, including whether the Capstone transfers breached the agreement, whether the sellers are creditors or stakeholders under the fraudulent-transfer and oppression statutes, and whether the achievement of a Construction Commencement Date by Capstone triggered the Success Fee. In Application #1, the court likewise declined to summarily dismiss any of the Plaintiffs' claims against NaturEner, finding the record insufficient to resolve the duration of the section 7.6 covenants, the reasonable-best-efforts standard, or the economic-viability qualification without a trial. The court directed that outstanding procedural matters, including amendment of the statement of claim, disclosure timing, and whether the two actions should proceed together, be addressed through case management, and suggested the parties consider a trial of an issue to narrow the dispute. On costs, the decision left the parties to agree on the costs of both applications, with liberty to bring any dispute over quantum back before the court within 45 days, so no specific costs amount was fixed in the decision itself.