C · 2018-03-13 · c) The Receiver's counsel raised the issue that Mr, Daniel Jalbert, a former director of Grand Valley, had sent an email clarifying the position of "former management",

L~~F;K OF ~~HE COURT

COURT FILE NUMBER 1701-11927 ~~ ~~~ 'p

COURT COURT OF QUEEN'S BENCH OF ALBERTA ~ ~

NDICIAL CENTRE CALGARY ~~' ;~,'~L'~;~ G~~~7~~ Y t~A~~'` ~~:

PLAINTIFF H&C S HOLDINGS PTE. LTD.

.C't:4~,r( ~

-' u --~~

DEFENDANT GRAND VALLEY RESOURCES CORP.

IN THE MATTER OF THE RECEIVERSHIP OFGRAND VALLEY RESOURCES CORP.

DOCUMENT SECOND REPORT OF THE RECEIVER,HARDIE &KELLY INC.MARCH~L, 2018

d~

ADDRESS FOR Cassels Brock &Blackwell LLPSERVICE AND 1250, 440 — 2°d Ave. SWCONTACT Calgary, Alberta T2P SE9INFORMATION OF Phone: 403-351-2921 / 403-351-2922PARTY FILING THIS Fax: 403-648-1151DOCUMENT Email: ioliver~?a.casselsbrock.com / dmarechalna.casselsbrock.com

Attention: Jeffrey Oliver /Danielle Marechal

SECOND REPORT OF THE RECEIVERHARDIE &KELLY INC.MARCH 12, 2018

I NDEX

INTRODUCTION....................................................................................................... 1

BACKGROUND......................................................................................................... 2

PENGROWTH'S APPLICATION ............................................................................. 3

COLLECTION AND REVIEW OF THE RECORDS ............................................... 4

THE ADVICE AND DIRECTION APPLICATION .................................................. 4

'STEPS TAKEN SINCE THE ADVICE AND DIRECTION APPLICATION ..:..:.... 6

PROPOSED ASSIGNMENT AGREEMENT ............................................................ 6

CONCLUSIONS AND RECOMMENDATIONS ...................................................... 9

INTRODUCTIOI~1

1. Hardie &Kelly Inc. was appointed as receiver (the "Receiver'') over Urand Valley

Resources Coi-p.'s ("Grand Valley" or' the ̀ 'Company") right, title and interest in

the P~'Op~l`Ly ~UI'SLla.11t t0 ~I1 OI•der• of~ the COLIPt ~1'ariteC~ 017 SErJtL111beI.7, 2017.

2. This is the Receiver's second report (the ̀ `Second Report") to the Court and should

be read in conjunction with the first report of the Receiver dated February 21, 2018

{the "First Report") end the Supplement to the First Report dated Febt~uary 23,

2018 (the "Supplemental Report"). Capitalized tet-ms not defined in the Second

Repot•t are as defined in tale First Report ot- the Supplemental Report.

3. The purpose of this Second Report is to:

a) Provide the Court with additional bacicground on the various Court

applications that have occurred as part of these receivership proceedings;

b) Advise the Court of the steps Taken by the Receiver since the February 28,

201$ application for advice and direction (the "Advice and Direction

Application") before the Honourable Mr. Justice Jeffrey; and

c) Provide the Court with some additional information in light of the

upcoming application by H&CS, retut-~Zable March 16, 2018 to, lt2tC'1~ alicr,

seek t11e Cout-t's approval of an Assignment Abreement (as that te~•m is

defined blow) between H&CS and the Receiver.

BACKGROUI0ID

4. As set out in greater detail in the First Report, the Receiver's appointment is

limited in scope to being appointed over the Property and is not aware of any other

assets of the Company.

2

5. Grand Valley's entitlement to the Deposit under the terms of the PSA is in dispute

by Pengrowth. Consequently,. on August 29, 2017, Pengrowth filed an Originating

Application returnable September 8, 2017 (the "Originating Application"j to have

the matter of the entitlement of the Deposit determined by the Court. However, the

Receivership Order was granted on September 7, 2U 17, which had the effect of

staying the Originating Applieatian. A copy of the Receivership Order is attached

as Appendix "A" to this Second Report.

6. Pursuant to paragraph 3 of the Receivership Order, the Receiver is empowered and

authorized, but not obligated to, inter alias

a) Take possession of and exercise control over the Property and any and all

proceeds, receipts and disbursements axising out of or fi~onl the Property

(paragraph 3 (a}};

b) Execute,. assign, issue and endorse documents of whatever .nature in respect

of any of the Property, whether in the Receiver's name or in the name and

on behalf of the Debtor, for any purpose pursuant to the Receivership Order

(paragraph 3(e)); and

e) Initiate, prosecute and continue the prosecution of any and all proceedings

and to defend all proceedings pending or instituted with respect to the

Property or the Receiver, and to settle or• compromise any such

proceedings, provided that nothing in the Receivership Order authorized

the Receiver to defend or settle the action in which the Receivership Order

is made unless otherwise directed by the Court (paragraph 3(~).

3

7. The Receivership Order, as amended pursuant to the September 22, 2017 Order of

the Honourable Mr. Justice Yamauchi (the "Amending Order"), also permits

McCarthy to continue to hold the Deposit pursuant to a Deposit Escrow Agreement

between Grand Valley and Pengrowth dated March 17, 2417, until the Court

determines whether or not Pengrowth is entitled to the Deposit (in whole or in

part) and authorizes and directs McCarthy, as escrow agent to pay the Deposit (in

whole or in part), together with accrued interest thereon, either to Pengrowth or to

the Receiver. A copy of the Amending Order is attached as Appendix "B" to this

Second Report.

P~1vGR4WTH'S APPLICATION

8. Pengrowth filed a further application returnable on September 22, 2Q 17, seeking

inre~ alia, a determination as to the person entitled to the Deposit ("Pengrowth's

Application"). A copy of the transcript from Pengtowth's Application is attached

as Appendix "C" to this Second Report.

9. At the hearing of Pengrowth's Application, the Honourable Mr. Justice Yamauchi

instructed the Receiver to take a neutral role in its reporting and to act as a

provider of infol•mation (including Grand Valley's records) rather than to take a

position as to any entitlement any party tnay have to the Deposit.

10. In light of the instructions received during Pengrowth's Application, the role of the

Receiver (in consultation was H&CS and Pengrowth) was delineated as follows:

a) Determine the validity and enforceability of H&CS's security interest;

b) Locate and review the available books and records of Grand Valley; and

c) Determine which, if any, of the Company's books and records should be

disclosed to Pengrowth and/or H&CS in furtherance of settling or litigating

the Dispute.

4

COLELCTION AND REVIEW OF THE RECt~RDS

1 1. As set out in more detail in the First Report, the Receiver obtained and reviewed

the Electronic Records. for relevance and privilege. The Relevant Records were

further categorized into the following three categories:

a) Not priviiebed;

bj Privileged (either- solicitor-client or litigation); and

c) Potentially privileged {litigation or common interest).

12. Following its completion of the review of the Electronic Records, the Receiver

was particularly concerned with those records that were identified as both relevant

and potentially privileged (the "Potentially Privileged Records").

13. Consequently, the Receiver ultimately sought the advice and direction of the Court

with respect to the production of the Relevant Records to H&CS and/or Pengrowth

during an application returnable Februat•y 28, 2018 {the "Advice and Direction

Application").

T IE ADVICE ANI) DIRECTIOI~1 APPLICATION

14. The Advice and Direction Application proceeded on February 28, 2018 before the

Honourable Mr•. Justice Jeffrey. A copy of the transcript from the advice and

Direction Application is attached as Appendix "D" to this Second Report.

15. At the hearing of the Advice and Direction Application, Mr. Justice Jeffrey

instructed the Receiver to, inter aria:

a) Produce all of the Relevant Records listed in Schedule 1, Appendix C to the

First Report to both Pengrowth and H&CS;

b) Withhold the Relevant Records listed in Schedule 2, Appendix C to the

First Report (the "Privileged Records") on the understanding that the

Receiver's characterization and/or the withholding of the Privileged

Records shall not prejudice the rights of H&CS and/or Pengrowth to argue

that the Privileged Records should be re-characterized and/or produced at a

later date; and

a

c) Undertake a further. review of the Potentially Privileged Records for a clear

demonstration of an expectation of privacy of the contents of the

Potentially Privileged Records on the part of an entity (the "Recipient

Party"} other than Grand Valley. To the extent that such an expectation of

privacy is found, the Receiver shall provide those records (the "Applicable

Records") to the Recipient Party for its review. The Recipient Party shall

then have a 30 day period within which to review the Applicable Records,

and assert with some evidence, a basis for keeping the Applicable Records

confidential. To the extent that the Recipient Party does not assert or

cannot establish a basis for keeping the Applicable Records confidential,

the Receiver shall disclose the Applicable Records to both H&CS and

Pengrowth.

.An un-entered copy of the Order formalizing Mr. Justice Jeffrey's directions to the

Receiver is attached as Appendix "E" to this Second Report.

16. At the hearing of the. Advice and Direction Application some additional concerns

were raised including:

a) There appeared to be a concern on the part of Pengrowth as to whether

H&CS was entitled to take a position and/or has standing in respect of the

Dispute given Pengrowth's understanding that Grand Valley was not taking

a position on the Dispute;

b) H&CS took issue with Pengrowth's position noted above; and

c) The Receiver's counsel raised the issue that Mr, Daniel Jalbert, a former

director of Grand Valley, had sent an email clarifying the position of

"former management", which we understand to include himself, Mr.

Haxold Oppelt, Mr. Paul Weevers and Mr. Guy Jones,. in respect of some of

the information put forward in the First Repot and the Supplemental

Report. A copy of the email received by the Receiver from Mr. Jalbert is

attached as Appendix "F" to this Second Re~oirt.

G

STEPS TAKEN SINCE THE ADVICE AND DIRECTION APPLICATION

17. On Monday March 5, 2018, the Receiver produced all of the Relevant Records

listed in Schedule 1, Appendix C to the First Report to both Pengrowth and H&CS.

18. The Receiver is currently in the process of reviewing and distributing the

Applicable Records to the respective Recipient Party as per the directions of Mr.

Justice Jeffrey summarized in paragraph 15 of this Second Report. The Receiver

expects to be in a position to distribute the Applicable Records to the respective

Recipient Party on or before March 14, 2018.

PROPOSED ASSIGNMENT AGREEMENT

19. The Receiver has been advised that H&CS intends to bring an application

returnable March 16, 2018 (the "Assignment Application") seeking, inter' ulia, the

Count's approval of an assignment agreement between H&CS and Hardie &Kelly

Inc., in its capacity as Receiver of Grand Valley (the "Assignment Agreement")

The Assignment Agreement is attached as Appendix "G" t0 tI11S SeC0I1d RepOI'~.

20. The purpose of the Assignment Agreement is to assign to H&CS the right to

initiate, prosecute, continue to prosecute and defend, in the name of Grand Valley,

any and all proceedings with respect to the Property, including the Deposit

(collectively referred to as the "GVR Proceedings");

21. The key terms of the Assignment Agreement can be summarized as follows:

a) The Receiver shall assi;n to H&CS the right to initiate, prosecute or defend

the GVR Proceedings, including without limitation:

i. The right to file any applications or amended applications as may be

necessary or appropriate in the name of Grand Valley or otherwise to

advance Grand Valley's claim to the Deposit (the "GVR Claim");

ii. The right to defend or oppose Pengrowth's Application or any

application pending or hereafter instituted by Pengrowth with respect to

the Property including the Deposit; and

iii. The right to appeal or apply for judicial review in respect of any order or

judgment pronounced in any GVR Proceedings.

b) The Assignment Agreement is subject to Court approval and the approval

of certain cost protections in favour of the Receiver;

c) H&CS agrees not to advance in Court the H&CS Independent Claim (as

that term is defined below} until the earlier of such time as: (i) a

determination is made by the Court that the GVR Claim is unsuccessful; or

(ii) H&CS has re-assigned the GVR Claim to the Receiver;

d) H&CS shall be entitled to concurrently advance the H&CS Dependent

Claim (as that term is defined below) to the Deposit and, in the name of

Grand Valley, it will have the right to advance any and all of Grand Valley's

rights including the GVR Claim and to defend all GVR Proceedings in

respect of the Property, including but not limited to Pengrowth's

Application;

e) H&CS will have no obligation to continue to prosecute or defend in Grand

Valley's name any GVR Proceedings and it may, at its sole option ZI1Cl

without compensation, assign the same back to the Receiver at any time on

10 days' prior notice to the Receiver;

~ Any settlement or compromise of the GVR Claim shall be subject to Court

approval;

g) The Receiver shall continue to act in its opacity as the Receiver of Grand

Valley. If the Court determines that Grand Valley is entitled to the Deposit,

any and all rights to collect and receive the Deposit shall belong to the

Assignor in its capacity as the Receiver and shall be distributed according

to a distribution order which shall be obtained by the Receiver; and

8

h} The Receiver shall have no liability, and- H&CS shill be solely liable, for-

any costs (whether court-ordered or otherwisej, arising out of the GVR

Proceedings for any steps taken by H&CS in the name of Grand Valley

under the Assignment Agreeme~lt.

22. The Receiver is supportive of the Assignment Agreement for, inter alia, the

following reasons:

a) The Receiver was instructed at the September 2?, 2017 hearing before Mr.

Justice Yamauchi to take a neutral role in the action on behalf of Grand

Valley and to act as a provider of information (including Grand Valley's

records) rather than take a position as to any entitlement any party may

have to the Deposit;

b) The Receiver has been advised by H&CS that ~-I&CS is asserting two

forms of claim against the Deposit;

i. A claim which is dependent upon success by GVR in a claim for the

Deposit (the "H&CS Dependent Clainl"); and

ii. A direct claim to the. Deposit that is not derivative of or dependent upon

GVR's success in obtaining the Deposit (the "H&CS Independent

Claim"), which claim is distinct from the Dependent Claim.

c) Grand Valley's only financial asset is a claim to the Deposit (the "GV R

Claim") and neither Grand Valley nor the Receiver have the ~lI1~IlClal

means to advance the GVR Claim or defend Pengrowth's Application;

d) The interests of the Receiver and H&CS are aligned in relation to the

H&CS Dependent Claim, and are not aligned with respect to the H&CS

Independent Claim;

e) Given that H&CS is advancing the H&CS Dependent Claim, even if it

were financially feasible, it would not be fiscally responsible fox the

Receiver to also incur costs to advance the GVR Claim;

0

~ H&CS is willing to take an assignment of the GVR Claim and advance the

same concurrently with advancing the H&CS Dependent Claim, on the

terms set forth in the Assignment Agreement;

g) The primary parties with an interest in the outcome of the Dispute are

H&CS and Pengrowth. The Dispute is primarily a contractual dispute for

which the Receiver's ongoing involvement would practically represent an

incremental. layer of unnecessary expense; and

h) The Receiver has completed (or is in the process of completing) its primary

function, which was to review and produce the Relevant Records where

appropriate. It is the view of the Receiver that its continued involvement in

the Dispute will not add anything to the resolution of the Dispute.

23. The Receiver takes no position with respect to the proposed revision of the

timeline established pursuant to the Amending Order which is anticipated to be

addressed at the upcoming application on IViarch 16, 2018.

CONCLUSIOI~iS AND ~ZECOMM~NDATIONS

24. Based on the forgoing, the Receiver respectfully recommends that this Honourable

Court grant an Order approving the Assignment Agreement, which would assign to

H&GS the right of the. Receiver to advance the claims of Grand Valley and. defend

and oppose the application by Pengrowth for a determination of the person entitled

to the funds currently held by the Escrow Agent.

25. Following the disclosure of the Applicable Records (if any) to H&CS and

Pengrowth, and if the Assignment Application is granted, it is the intention of the

Receiver to remain in place but to step back and allow H&CS and Pengrow~th to

pursue the Dispute, subject to any request for the further assistance on the part of

the Receiver by H&~S, Pengrowth or the Court. Should it ultimately be

determined that Grand Valley is entitled to the Deposit, the Receiver will exercise

its duties with respect to the administration of the Deposit as pant of the

Receivership. If it is determined that Pengrowth is entitled to the Deposit, the

Receiver will seek its discharge at the appropriate time.

All of which is respectfully submitted this 12~' day of March 2018.

Hardie &Kelly Inc., in its capacity asReceiver in respect of Grand Valley Resources Inc.and not in its personal capacity ~

Pei : ✓ ~/Ma ~ belly' ~~~ior Vice r~ dint

hereby certify th:s to t~~ ~ trufl~ copy of

the original~„~~,~~. .P~•-...

gated this ~` ' ~Y

#perk . '' CouCt

COURT FILE NUMBER

COURT OF QUEEN'S BENCH OF ALBERTAJ UDICIAL CENTRE

PLAINTIFF

DEFENDANT

DOCUMENT

ADDRESS FOR SERVICE AND CONTACTINFORMATION OF PARTY FILING THISDOCUMENT

DATE ON WFIICH ORDER WAS PRONOUNCED:

1701-/~~~7

CALGARY

C

I N THE MATTER OF THE BANKRUPTCY ANDINSOLVENCY OF [THE DEBTOR]

H&C S HOLDINGS P7E. LTD.

GRAND VALLEY RESOURCES CORP.

CONSENT RECEIVERSHIP ORDER

JENSEN SHAWA SOLOMON DUGUID HAWKES LLPBarristers and Solicitors500, 304 - 8 Avenue SW

Calgary, Alberta T2P 1C2

Christa NicholsonPhone: 403 571 1053Fax. 403 571 1528File: 13995.001

NAME OF JUDGE VVHO MADE THIS ORDER:

LOCATION OF HEARING:

SeptemUer 7, 2017

Justice K. D. Yamauehi

Calgary Courts Centre601 - 5`'' Street SW, Calgary, AB

UPON the ex parte application of H&C S Holdings Pte, Ltd. ("H&C S") in respect of

Grand Valley Resources Corp. (the "Debtor" ox "GVR"); AND UP01,1 having read tl~e Affidavit

of Wang Kaiyang, sworn September 7, 2017, filed, and the Affidavit of Alyssa Okabe, sworn

September 7, 20 ] 7, to be filed, AND UPON reading the consent of Hardie &Kelly Inc. to act as

receiver ("Receiver") in respect of the Debtor's Property (as hereinafter defined), filed; AND

(01620788 v4}

-~-

UF4N noting the consent endoxsed hereon of counsel for GVR; A1~ID YJPO~T heaxz~~g couns~Ifox H&C S; YT IS ~YEREI3Y ORDERED AND DECLARED 7'k~:AT:

SERVICE

1, The tinge for service of the notice of application for this order zs hereby abxidged andservice thereof is deemed good and sufficient.

A~PPOINTNN~NT

2. Pursua~lt sections 13(2} of the J~dicat~r^e Act, R..S.A. 2000, c.J-~, 99(a) of the Busines.~Corporations Aet, R.S.A. 2040, c.B 9 and 65(7) of tie Personal Property ,Secut,ity pct,R.S,A. 20x4, c.P-7, Handy &Kelly Inc. is hereby appointed Receiver, without security, inall of fhe Debtor's right, title, and intezest in the purchase and sale agreement entered intoon March I7, 20I7 between P~ngrowth Energy corporation {`~.'e~growth") , as Vendor,and the Debtor, as Purchaser (the "PSA"} and:

(a~ any of the PSA's related agreements together with all ameildmei~ts,modifications, supplennents, restatements or replace~neiits, i~ any, from tune totime thereafter made fi.~ereto, (collectively, the "Ass~gn~d Agreements"~,

(b) aII deeds, documents, writings, papers, books, books of account and ot~le~r z-ecordsrelating to the assigned Agreements {collectively, the "Records"),

(c) all revenues and other moneys due and payable or to become due and payable toG'VR under or in connection with the Assigned Agreements, v~~iuding fihe Funds(as hereinafter defined);

(d) t.~e benefit of any guara~~tees or indeinniti~s relating to ax~y of the foregoing; and

(e} ali benefit, power and advantage of the Debtor to be derived therefrom, u~cluditlgthe benefit, power and advantage to enforce the righfis of the Debtor thereunder inthe name of the Debtor after the occurrence and during the Gontznuance of anEvent of Default {as defined in the Credit Ag~-eernent dated March 17, 2017between the Debtor and H&C S) that has not been either cured or waived,

(collectively, the "Property").

{O16207S8v4}

-3-

RECEIVER'S POWERS

3. The Receiver is hereby empowered and authorized, but not obligated, to act ~t once inrespect of the Property and, without in any way limiting the generality of the foregoing,the Receiver is hereby expres~sIy empowered and authorized to do any off' the fallowingwhere the Receiver considers it necessary or desirable:

{a) to take possession of and exercise control over the Property and any a~ld allproceeds, receipts and disbursements arising out of or from the Property andMe~arthy Tetrault LLP ("Mc~arthy's") shall deliver to Receiver the funds itholds pursuant to the Deposit Escrow Agreement ar~nong it, GVR, and Pengnvothdated l~farch 17, 2017 including the sums of USD $14,000,000 and CND$400,OQ4 (collecfiively, the "Funds") which it shall hold on interest;

(b} to receive, preserve and protect the Property, or any part or parts thereof,including, but not Iirui~ed to, the changing of locks and security codes, there~Qcating of Property to safeguard it, the engagi~~g of independent securitypersonnel, tk~e taling of physical inventories and the placement of such insurancecoverage as may be necessary or desirable;

(c) to engage consultants, appraisers, agents, experts, auditors, accounta~lts,managers, counsel and such other persons from time to time and on ~~vha~everbasis, including on a temporary basis, to assist with the exercise of the Receiver'spowers and duties, including without li.mitatian those conferred by this Order;

(d) to settle, extend or compromise any indebtedness owing to or by the Debtor;

(e) to execute, assi~i, issue and endorse documents of whatever natu.xe in respect ofany of the Property, whe~h~r in the Receiver's name or in the name and on behalfo~ the Debtoz•, for a1~y purpose pursuant to tlus Order;

(~ to initiate, prosecute and continue the prosecution of any and all proceedi~lgs andto defend all proceedings now pending or hereafter instihited with respect to theProperty or the Receiver, and to s+ettie or compromise any such proceedings. Theauthority hereby conveyed shall extend to such appeals or applications for judicial

{Q]b20788 v4}

-4-

review in respect of any order or judgYnent pronounced in any such proceeding,

and provided further that nothing in this Order shall authorize the Receiver to

defend or settle the action in which this Order is made unless otherwise directed

by this Couirt;

(g) to market any or all the Property, including advertising a~1d soliciting offers in

respect of the Property or any part or parts thereof and negotiating such terms and

conditions of sale as the Receiver in its discretion may deem appropriate;

(h) to sell, convey, transfer, lease or assign the Property or any part or parts thereof.

out of the ordinary course of business:

(i) without the ap~~-oval of this Court iii respect of any transaction not

exceeding $7~,000.00, provided that the aggregate consideration foz all

such transactions does not exceed $150,000.00; and

(7i) with the approval of this Court in respect of any transaction ii1 which the

purchase price or the aggregate purchase price exceeds the applicable

amount set out u~ the preceding clause,

and in each such case llotice under subsection 60($) of the Personal P~opei~ty

Security Act, R.S.Q.. 2000, c. P-7 shall not be required.

(i) to apply for any vesting order or other orders necessary to convey the Property or

any part or parts thereof to a purchaser or purchasers thereof, free and clear of any

liens or encumbrances affecting such Property;

(j) to report to, meet with and discuss with such affected Persons (as defined .below)

as the Receiver deems appropriate all matters relating to the Property and the

receivership, and to shaxe information, subject to such terms as to confidentiality

as the Receiver deems advisable;

(k) to register a copy of this Order and any other Orders in respect o~ the Property

against title to any of the Property;

(1) to enter into agreements with any trustee iii bankruptcy appointed iii respect of the

Debtor, including, without limiting the generality of the foregoing, the ability to

(01620788 v4}

-5 -

enter into occupation agreenlen~s for any propei-t~ owned ar leased by the DeUtor;

and

(m) to take any steps reasonaUly incidental to the exercise of ~11ese powers or theperformance of any statutory obligations;

and in each case where the Receiver takes any such actions or steps, it shall Ueexclusively authorized and e~napowered to do so, to the exclusion of all other Persons (as

defzned below), including the Debtor, and without interference from any other Person.

DUTY '~'4 PRCIVIDE ACCESS AND CO-(~PER.ATION TO T~-ZE REC~TVER

4, {i) The Debtor, (i~) all of its current and former directors, o~~icers, employees, agents,accountants, legal counsel and sh~.reholders, and all other persons acting on itsinstructions or behalf, and (iii) all other i~►dividuals, ~rrns, corporations, governmentalbodies oz agencies, or o#her entities having notice of this Order (all of the foregoing,collectively, beu2g "Persons" and each Ueing a "Person"} shall forthwith advise theReceiver of the existence of any Property in st~~h Person's possession or control, shallgrant immediate and continued access to the Property to the Receiver, and shall deliveralI such Property (exclLiding Property subject to liens the validity of which is dependanton maintaining possession) to the Receiver upan the Receiver's request.

5. All Persons shall for-tlawith advise the Receiver of tlae existence of any books, documents,securities, contracts, ordez-s, corporate and accounting records, and any other papers,records and information of any kind related to the Property and any computer programs,eamputer tapes, computer disks, or other data storage media containing any suchinformation (the foregoing, collectively, the "Records") in that P~z-son's possession orcontrol, and shall provide to the Receiver or p~rxz~zt the Receiver to make, retain and takeaway copies thereof and grant to the Receiver unfettered access to and use of accounti~b,computer, software and physical facilities xelatuzg thereto, provided however that nothingin this paragraph 5 or in paragraph 6 of this Order shall require the delivery of Records,or the granting of access to Records, which may not be disclosed ox provided to theReceiver due to the privilege attaching to solicitor-client communication ox documents

{01620788 v4}

~~

prepared in contemplation of litigation or due to statutory provisions prohibiting s.uc~disclosure.

6, If a~~~+ Records are stored or otherwise co~~tained on a computer or other electronic system

of information storage, whether by independent service provider or ot~.~t-wise, all Persons

in possession or control of such Records shall forthr~vith give uilfe~tered access to theReceiver for the purpose of allowing the Receiver to recover and fully copy all of theinformation contained therein whether by way of printing the information onto paper ormaking copies off' computer disks or such other manner of retrieving and copyzxag the

in~ormatron as the Receivex zri its discretion deems expedient, and shall not alter, erase ordestroy any Records without the prior written consent of the Receiver. Further, for the

purposes of this paragraph, alI Persons shall provide the Receiver with alI such asszsfiance

in gaining immediate access to the information in the Records as the Receiver may ul its

discretion ~•equire including providing the Receiver with instructions on the use of any

computer or other system and providing the Receivex with any and all access codes,account names and account numbers that may be required to gain access to the

information.

N~ PROCEEDINGS AGAINST THE RECEIVER

7. No proceeding ox enforcement process in any court or tribunal (each, a "Proceeding"),

shall be commenced or continued against the Receiver except with the written consent of

the Receiver or with heave of this Court.

NO PROCE~DYNGS A~A.YN'ST THE DEBTOR OR THE PR+UPERTY

8. No Proceeding against or in respect of: the Dehtor regarding tie Property; or the

Property; shall be commenced or continued except will the written consent of the

Receiver or with leave of this Court and any and alI Proceedings currently under way

against or in respect of the Debtor regaxdang the Property or the Property are herebystayed az~d suspended pend~n~ ftarther Order of this Court, provided, however, that

nothing in this Order shall: {i) prevent any Person from commencing a proceeding

regarding a claim that might otherwise become barred by statute or an existing agreement

{01620788 va}

— ~ a.

if such proceeding is not commenced before the expzratian of the stay provided Uy this

paragraph 8; and {ii) a~~ec~ a Regulatory Body's investigation in respect Qf tl~e debtor or

an action, suit or proceeding that is taken in respect of the debtor by or before the

Regulato~ty Body, other than the ex~forcem~nt of a payment order by the Reg~lato~y Body

or the Caurt. "Regulatory Body" means a perscn or body that has powers, duties or

functions relaying to the enforcement or administration of an Act of Parliament or of the

legislature of a province.

CIO ~~E~tCISE OF RIG~ITS OF REMEDIES

9. All rights and remedies (including, without limitation, set-nff rights) against the Debtor

respecting the Property, the Receiver, ar affecting the Property, are hereby stayed and

suspended except with the written consent of the Receiver or leave of this Count,

provided however that nothing in this paragraph shall (i} empower the deceiver or the

Debtor to carry an any b~usYness which ~IZe Debtor• is not Iawfiilly entitled to carry on, (ii)

exempt the Receiver or the Debtor from compliance ~~ith statutory or regulatory

provisions relating to health, safety ox the environment, (iii} prevent the filing of any

registration to preserve or perfect a security interest, or (iv) pzevent the registration of a

claim for lien.

NO INTERFERENCE WITH THE RECEIVER

10. No Person shall discontinue, fail to honour, alter, interfere with, repudiate, tex~rninate. or

cease to pezfozm any right, renewal right, contract, agzeement, licence or pertxi~t in favour

of oz• held by the Debtor respecting the Propez~ty, without written consent o~ the Receiver

or leave of this Court.

R~C~IVER 'FQ Ht~LD F~JN~DS

11. All funds, monies, cheques, instruments, and other forims of payments received or

collected by the Receiver from and after the makzng of this Order from ar~y source

whatsoever, including without limitation, the Funds, or the sale of all or any of the

Propet~y and the collection of any accounts receivable respecting the Property in whole

or in part, whether i~l existence o1i the date of this Order or hereafter corning into

{01620788 v4}

-8-

existence, shall be deposited into ane or more l~ew accounts to be opened by the Receiver(the "Post Receivership Accouzlts"} and the monies standing to t11e credit o~ such Post

Receivership Accounts from time to time, net of any disbursements provided for herein,

shall be ~~ead by the Receiver to be paid in accordaz~.ce vsrith the terms of this Order or any

further order o~ this Couz-~.

EMPLO~'~EES

].2. The Receiver shall not be liable for any employee-related liabilities, including any

successor employer liabilities as provided for in section X4.06(1.2} o~ the BIA, other than

such amounts as the Receiver may specifically agree in writing to pay, or in respect of its

obiigation.s under sections 81.4{5) or 81.6(3) of the BIA or under the Wage Earner

Protection Pf~ogram ~4ct, S.C. 2005, c.47 ("WE].'P.A.").

13, Pursuant to clause 7(3)(c) of the Pe~sona~ In}orma~ion .Protection anc~ Electronic

Documents .~4ct, S.C, 2000, c. 5, the deceiver shall disclose personal information of

identifiable individuals to prospective purchasers or bidders for the Property and to their

advisors, but only to the extent desirable or required to negotiate and attempt to complete

one or more sales of the Property (each, a "Sale"). Each prospective purchaser or bidder

to whom such personal information is disclosed shall nlaintaul and protect the privacy of

such information and limit the use of such information to its evaluation of the Sale, and if

it does not complete a Sale, shall rEturn all such infoi-matian to the Receiver, or ~n the

alternative destroy all such ~nformatian. The purchaser of any Property shad] be entitled

to continue to use the personal information provided to it, and related to the Property

purchased, in a manner which is in all nna~eria~ respects identical to the prior use of such

information by the Debtor, and shall rettun all other personal information to the Receiver,

or ensure that all other personal information is destroyed.

LLMxTATI(}N ON ENVITlONIVIENTA►.L LIABILITIES

14. (a) Notwithstanding anythu~.g in any federal or provincial law, the Receiver is notipersonally liable in that position for any envirorunental condition that arose orenvironmental damage that occurred:

{01620788 v4~

(i) before the Receiver's appo'vltrnent; or

(ii) after the Receiver's appointment unless ~t is established that the condition

arose or the damage occurred as a result of the Receiver's gross negligence

or wilful misconduct.

(b) Nothing in suU-paragraph (a) exempts a Receiver from any duly to report or makedisclosure imposed by a Iaw referred to in that sub-paragraph.

(c} Notwithstanding anything in any federal or provincial law, but subject to sub-paragraph {a} hereof, where an order is made which has t1~ze effect of requiring the

Receiver to remedy any envi~roiunenfal condition or environmental damage

affecting the Propert~r, the Receiver is not personalty liable for ~aiiure to cat~nply

with the order, and is not personally liable for any costs that are or would be

incurred by any person in carrying out the terms of the order,

(i) if, within such dune as is specif ed in the order, withal I O days after the

order is made if no time is so specified, within 10 days after the

appointment of t11e Receiver, if the order is i~ effect when the Receiver is

appointed, or Bluing the period of the stay referred to in clause (ii) below,

the Receiver:

A. complies with the order, or

B. on notice to ~l~.e person who issued the ozder, abandons, disposes of

or otherwise releases any interest in any real property affected by

the conditiozi or damage;

(iii during the period of a stay of the order granted, on application made

within the tithe specified in the order referred to in clause (i} above, within

IO days after the order is made or within 10 days after the appointrr~ent of

the Receiver, if the order is in effect when the Receiver is appointed, by,

A. the court or Uody having jurisdiction under the Iaw pursuant to

which the order was made to enable the Receiver to contest the

order; or

{01620788 v4}

_~o_

B. the court having jurisdiction in bankruptcy for the purposes of

assessing the economic viability of combtying with the order; ox

(iii) if the Receiver had, before the order was made, abandoned or renounced

ox Veen divested of a~~y interest in any real property affected by the

condition or darr~age.

LIIVxITATION ~l~T THE RECEN~~' S LIABILITI'

15. Except for gross negligelzce or tivilful miscon.~uct, as a result of its appo~nt~nent or

carrying out the provisions of this Order the Receiver shall incur no Iiabi~zty or obligation

that exceeds an amount for which it may obtain full indemnity from the Property,

Nothing i~ this Order shall derogate from any lunitation on liability or other pratec~ion

afforded to the Receiver under any applicable law, including, wi~out limitation, Section

14.06, 81.4(5) or $ Z ,6(3} of the BIA..

RE+CENER'S ACCOUNTS

16. The Receiver and counsel to the Receiver shall be paid their reasonable fees and

disbursements, in each case, incurred at their standard rates and charges. The Receiver

and counsel to the Receiver shall be entitled to and are hereby granted a charge (the

"Receiver's Charge") on the PY~operty, as security for such fees and disbursements,

incurred both before. and after the making of this Order in respect of these proceedings,

and the Receiver's Charge shall form a f~r~t change on the Property i~ priority to a1I

security interests, trusts, liens, charges and encumbrances, stat~rtory or o~~erwise, in

favour of any Person but subject to section 14.06(7), 81.4{4) and 81.6(2) of the BIA.

17. The Receiver and its legal counsel shall pass their accounts from time to time.

18. Prior to the passing of its accounts, the Receivez- shall be at Liberty from time to time to

apply reasonable amounts, out of the mollies in its hands, against its fees and

disbursements, including the legal fees and disburseinen~s, incurred at the normal rates

and charges of the Receiver or its counsel, and such amounts shall constitute advances

agauLst its remuneration and disbursements when and as approved by this Court.

{4] 620788 v4}

-11 -

FUNDING OF TIIE RECEIVERSHIP

19. The Receiver be at liberty and it is hereby empowered to borrow by way of a revolving

credit or otherwise, such nnonies from time to time as it may consider necessary or

desirable, provided that the outstanding principal amount does not exceed $75,000.00 (or

such greater amount as this Court may by further Order authorize) at any tin~.e, at such

rate or rats of interest as it deems advisable for such period or periods of tzme as it may

arrange, ~'or the purpose of fundinb the exercise of the powers and duties conferred uponthe Receiver by this Order, including interim expenditures. The whole of the Property

shall be and zs hereby charged by way of a fixed and specific charge {the "Receiver's

BorroVvrngs C~iarge"} ~s security for the payment of the monies borrowed, toget~~er with

interest and charges thereon, in priority to all security interests, trusts, Xiens, charges and

encumbrances, sta~.atory or otherwise, in favour of any Person, but subordinate in priority

to the Receiver's Charge aaad the charges set out Yn sections 14.Ob(7), 81..4{4) a.nd $1.5{2}

of ~e BIA.

2d. Neither the Receiver's Borrowings Charge nor any other security granted by the Receiver

in connection with zts borrowings under this C7rder shall be enforced without leave of this

Court.

21, The Receiver is at liberty and authorized to issue cert~cates substantially in the form

atlnexed as Schedule "A" hereto (the "Receiver's Certificates") for any amount borrowed

by it pursuant to this Order.

22. ~'he monies from time to tune borz-owed by the Receiver pursuant to this Order or any

furthea- order of this Court and any and aI~ Receiver's Certif Cates evzdencin.g the same or

auy part thereof shall rank on a pari passu basis, unless othearwise agreed to by the

holders of any prior issued Receiver's Certificates.

{ois~o~as ~a}

-12-

ALLOCATION

23. Any interested party may apply to this Court on notice to a~ly other party likely to beaffected, for an order allocating the Receiver's Charge and Receiver's BorrowingsCharge amongst the various assets comprising the Property.

~~NERAL

24. The Receiver may from time to time apply to this Court for advice and directions vi, thedischarge of its powers and duties hereunder.

2S. Natwithsta.ndzng Rule 6.11 of the Alberta Rules of Court, unless otherwise ordered bythis Court, the Receiver wi11 report to the Court from fiir~e to tune, which reporting is notrec{uired to be in affidavit fornl acid shall be considered by this Court as evidence.

~6. Nothing in this Qrder shall prevent the R~cei~er from acting as a trustee in bankruptcy ofthe Debtor.

27. This Court hereby requests the aid and recognition o~ any court, tribunal, regulatory oradininistra~ive body having jurisdiction in Canada or in the United States to give effect tothis Order and to assist the Receiver and its agents in carrying out the terms of this Order,All courts, triUunals, re~latory and administrative bodies are hereby r~spect~ullyrequested to ~nnake such orders az~d to provide such assistance to the Receiver, as anofficer of this Court, as may be necessary or desirable to give effect to this Qrder or to.assist the Receiver and its agents in carr}~ing out the terms of this Order.

28. The Receiver be at liberty and is hereby authorized and empowered to apply to any court,tribunal, regulatory or administrative body, wherever located, for the recogxlition of thisOrder and for assistance in carrying out the terms of this Order and that the Receiver isauthorized and empowered to act as a representative u1 respect of the within pzoceedings

for the puzpose of having these proceedings recognized in a jurisdiction outside Canada.

29. The Plaintiff shall have its costs of this motion, up to and including entry and service ofthis Order, provided for by the terms of the Plaintiffs security or, if not so provided by

{01620788 v4}

-13-

the Plaintif'f's security, then on a substantial indemnity baszs to be paid by the ReceYverfrom the Debtor's estate with such prioxity and at such tune as this Court may determine.

30. This Consent Receivership Oder is without prejudice to ar~y rights and claims ofPengrowth to the Funds and any interested party i~nay~ apply to this Court to vary oramend this Order on not less than 7 days' notice to the Receiver and to any other partylikely to be affected by the order sought or upon such othEr notice, if any, as this Cou.~-tmay order.

FIX,~YNG

31. The Receiver shall establish aild maintain a website in res~~ect of these proceedings athrip://relieffromdebt.ca/grand~vallev-resources-corpl and sl~ail post there as soon aspracticable:

(a) all materials prescribed by s~~tue or regulation to be made publi~aZly availaUle;

and

(b) all applications, reports, affidavits, orders and other materials filed in these

proceedings by or on behalf of the Receiver, or served upon it, except such

materials as are confidential and the subject of a seaiin~ order or pending

application for a sealing order.

t~ it • ~ ~ ~ ~. ~ ,I ~ j ~'~1 4 ~ t~~ ~"Ut

Justice of the Court of Queen's Bench of Alberta

{0162078 v4}

CONSENTED to this 7th day of Se~tei~nber,2017

B(~Itll~N ~, I~1ER G .~'~~:

Per.obyn Guro~,y"ounsel for the Defer d ~ ic~~i~'Valley Resources Corp,

{p1;620788 v4~

SCHEDTJLE "A"

RECEIVER CERTIFICATE

CERTIFICATE NO.

AM4U1~T $ e

1. THIS I5 TO CERTITY that [RECEIVER'S NAME], the interim reeeivez and receiverand manager (the "Receiver") of all of the assets, undertakings and properties of[DEBTOR'S NAME] appointed by Order of tae Court of Queen's Bench of Alberta andCourt of Queen's Bench of Alberta in Banl~ruptcy and Insolvency {collectively, the"Court") dated the day of _.~ ...._...`, ~fhe "Order"} made inaction numbers ,has received as such l~eceiver from the holder of thiscertificate {thy "Lender") the przz~cipal sum of $ ,being part of the totalprincipal sum of $ which the Receiver is authorized to borrow underand puzsuant to the Order.

2. The principal sum evidenced by this certificate is payable oi~ demand by the Lender withinterest thereon calculated axed compounded [daily] [monthly nod in advance on theday of each month] after the date h~reot at a notional rate per annum equal to the rate of

per cent above the primp commercial lending rate of Bank of from timeto time.

~. Such principal siun with interest thereon is, by the terms of the Order, together with theprincipal sums and interest thereon of all other certificates issued by the Receiverpursuant to the Qrder or to any further order of the Court, a charge upon the whole o~ theProperty, in priority to the security interests of any other person, brat subject to theprioritx of the charges set out in the Order and the ~an1~•~pt~y and Insolvency Act, andthe right of the Rece~vex to indemnify itself out of such Property in respect of itsremuneration and expenses.

4. All sums payable in respect of principal and interest under this certif cafe are payable atthe ~Yiain office of Elie Lender at •.

5. Until all liability in respect of this certificate. has been termi~~ated, no Certificates creatingcharges ranking or purporting to rank in prio~•zty to this certif~cafe shall be issued by theReceiver to any person other than the holder of this certificate without the prior writtenconsent of the holder of this certificate.

6. The charge securing this certificate shall operate so as to permit the Receiver to deal withthe Property as authorized by the Order and as authorized by any further or other orderof the Court.

{Q1620788 v4}

7. The Receiver• sloes not undertake, and it is not under and personal liability, to pay anysum ~n respect of which it inay issue ce~-ti~c~.tes under ~h~ terms of the Order.

DATED the day of , 20_.

[RECEIVER'S NAME], solely in its capacitya~ Receiver of the Property {'as defined in theOrdex), and not in its persona] capacity

Per:Name:Title:

{01620788 v4}

1 f7er~by e;t i°tifiy tr~i~ to be a true ct~~y ui'

l~~tated ~17i~~~

COURT FILE NUMBER 1701-11927

COURT

APPLICANT

c~fi

Cc~:urt

COURT 4F QUEEN' S BENCH OFALBERTA

~aL~1Ls~.\~~1

~.w.~~;f, ,w..rer~.. ~,~ta7z~p

~ ~•`~ a ~~~N~~~~S~ ~ ~a

~.<~ ~

~°'z•.~~ip Cj~~y C3~' ~-l..t~.TN THE MATTER OF THEBANKRUPTCY AND INSOLVENCYOF GRAND VALLEY RESOURCESCORP.

PENGROWTH ENERGY CORPORATION

RESPONDENTS HARDIE &KELLY 1NC., AS RECEIVER OF GRANDVALLEY RESOURCES CORP., GRAND VALLEYRESOURCES CORP., and H&C S HOLDINGS PTE. LTD.

DOCUMENT

ADDRESS FORSERVICE ANDCONTACTINFORMATIONOF PARTYFILING THISDOCUMENT

O1~DER AMIENDXNG RECEIVERSHT~' ORDER Al~ilDESTABLI~HTNG TIME LINE

Gowling WLG (Canada} LLP16Q0, 421 7 Avenue SWCalgary, AB T2P 4K9

Telephone 403-298-I986 / 403-298-1938Facsimile 403-695-3559

File No. A156746

Attention: David Bishop /Tom Cumming

DATE ON WHICH ORDEit WAS PY20NOUNC~D: September 22, 2017

NAME OF JUDGE'~~HO MADE Tl~][S ORDER: Justice K.D. Yamauchi

LOCATION OF FIE~RING: Calgary Courts Centxe601 — 5th Si~eet SWCalgary A.B

UPON THE APPLICATION by Pengrowth Energy Corporation ("Pengrowth"} filed

September 19, 2017 in these proceedings (the "Pengrowth Applieatian") far an order, inter alia, (a)

CAL~LA11V12$2609711

amending the Consent Receivership Order pronounced on September 7, 2017 whereby Hardie &Kelly

Inc. was appointed as receiver (fhe "Receiver") of all the rights of Grand Valley Resources Corp.

("Gramd Vaile~") in a purchase and sale agreement dated March 17, 2017 (the "Sale Agreement")

between Pengrowth and Grand Valley, and (b} fox a determination as to the person entitled to the Funds

(as defined below) and far an order authorizing and directing McCarthy Tetrault LLP as escrow agent

to pay the Funds to such person; AND iTPON HA`VTNG REAT) the Affidavit of Derek W. Evans

sworn September 1 ~, 2017, filed; AMID UP()l~T RE.A.D~tG the Consent Receivership Order; .AND

UPON ~EAI2xI~IG the submissions of counsel for Pengrovv~h, the Receiver and H&C S Holdings PTE.

Ltd.; AND UPUN I~OTIl~G no one appearing for any other person on the service list;

YT IS ]HEREBY 012I)EREI) T~-IAT:

1. Service of notice of the Pengrowth Application and supporting materials is hereby

declared to be good and sufficient and the time for service of this application is abridged to that

actually given.

2. Paragraph 3(a) of the Consent Receivership Order is hereby amended to read as follows:

"(a) , to take possession of and exercise control over fhe Property and any andall proceeds, receipts and disbursements arising out of or from the Property,provided that McCarthy Tetrault LLP, in its capacity as an escrow agent (tl~e"Escrow Agent") under a deposit escrow agreement dated March 17, 2017 (the"Escrow Agreement") between the Escrow Agent, Grand Valley andPengrawth, sha11 continue to hold certain funds held by it under the EscrowAgreement (the "Funds") until such time as this Court determines whether oxnot Pengrovvth is entitled to the Funds and authorizes and directs the EscrowAgent to pay the Funds (together with accrued interest thereon) either toPengrowth oz fhe Receiver;"

3. Paragraph 19 of the Consent Receivership Order is amended to replace $75,000 with

$125,000.

4. In the Pengrovvlh Application and any other application to be filed respecting the Funds,

the following steps will be taken within the following time periods:,

(a} all applications respecting the Funds (collectively, the "Applications") sha11 be filed

and served by 5:00 pm on September 29, 2017;

(b} wifhi.n one (I) week of the Receiver filing a report with respect to the evidence in

possession of Grand Valley relating to (1) the Applications; (2) entitlement to the

Funds; and (3} any oY~.er evidence the Receiver determjnes should be disclosed to the

Court, all persons participating in the Applications shall have filed and served the

affidavit evidence that they intend to xely upon therein tthe date that is one week

following the filing anal service of such report being the "lEvgdlence Ffling Date");

(c~ within one (1) week of the Evidence Filing Date; alb persons who have filed affidavit

evidence for the Applications shall make the ~ ants available in Calgary (or by video

conference if agreed by Pengrowth, the. Receiver and H&C S) foY questioning by other

parties (the date that is one week following the Evidence Filing Date being the

"QuestionYmg I)~adline ]Date"};

(d} within one (1} week of the Questioning Deadline Date, all under~aki~gs arising from

such questionings shall be satisfied and served (the date that is one week following the

Questioning Deadline Date being the "~nde~-6ca~~r~g Deadline Date"'};

(e} within one (1) week of the Undertaking Deadline Date, all briefs of argument to ~e

relied upon by such pexsons in the Applications shall be served and filed (the date that is

one ,week following the Unde~talcing Deadline Date being the "3~rief Deadline date");

(~ by the end of the fourth (4~'} day following the Brief Deadline Date, all reply briefs that

a pai~y effects to rely upon sha11 be served and filed; and

(g) ~ the hearing of the Applications shall held be on November 24, 2017 or such other date

as determined by this Court,

provided that if the time frame within which the Receiver serves and files.i~s report results in t1~is time

line being unachievable,, the parties wi11, acting reasonably, promptly agree upon a revised schedule.

~~

Justice of the Coux-~ of Queen's Bench of Alberta

3

TAB C

Action No.: 17Q 1-11927B-File Name:CVQ 18H&CSHOLDINGS

Appeal No.:

THE COURT OF QUEEN'S BENCH OF ALBERTAJUDICIAL CENTRE OF CALGARY

BETWEEN:H&C S HOLDINGS PTE. LTD.

Plaintiff

and

GRAND VALLEY RESOURCES CORP.

Defendant

PROCEEDINGS

Calgary, AlbertaSeptember 22, 2017

Transcript Management ServicesSuite 1901-N, 601 — 5th Street SW

Calgary,. Alberta T2P SP7

Phone: (403) 297-7392 Fax: (403) 297-7034

i

TABLE ~F CONTENTSDescription

September 22, 2017

DiscussionSubmissions by Mr. CummingSubmissions by Ms. NicholsonFinal Submissions by Mr. CummingSubmissions by Mr. OliverDecisionDiscussionCertificate of RecordCertificate of Transcript

Afternoon Session

Page

1

1

791012131718

1

1 Proceedings taken in the Court. of Queen's Bench of Alberta, Calgary Courts Centre, Calgary,2 Alberta3456789101 1121314151617181920212223242526272829303132333435363738394041

September 22, 2017

The Honourable Mr. Justice Yamauchi

T. S. CummingD. C. BishopJ. L. OliverC. L. NicholsonW. KatzE. CochraneN. Arevalo

Afternoon Session

Court of Queen's Bench of Alberta

For Pengrowth Energy Corp.For Pengrowth Energy Corp.For Receiver Hardie &KellyFor H&C S Holdings Pte. Ltd.For H&C S Holdings Pte. Ltd.For McCarthy Tetrault LLPCourt Clerk

Discussion

MS. NICHOLSON:

THE COURT:

MR. GUMMING:

THE COURT:

Good afternoon, My Lord.

Please be seated.

Good afternoon, My Lord.

Good afternoon.

MR. GUMMING: For the record my name is Cumming, initial T,and I represent Pengrowth Energy Corporation. The -- I'll first start by introducing thepeople in the court today. We have my partner David Bishop sitting to my right. To my leftwe have my friend Christa Nicholson and her colleague William Katz, and we have JeffOliver of Cassels Brock acting for the receiver, and from McCarthy Tetrault --

MS. COCHRANE: Elsbeth Cochrane.

THE COURT: All right.

MR. GUMMING: And in court today is Mark Kelly from Kelly &Hardie.

THE COURT: Mr. Kelly.

2

123456789

101 1121314151617181920212223242526272829303132333435363738394041

MR. GUMMING:

THE COURT:represent?

MS. C~CHR.ANE:kind of a party or the escrow agent.

THE COURT:

MS. COCHRANE:no position on this matter.

THE COURT:

So --

Submissions by Mr. Cumming

Just before you go on, Ms. Cochrane, who do you

I'm simply here from McCarthy to, as I guess

Right. Okay.

Yes. So, I'm simply here to set out that we take

Yes. Fair enough. Okay.

MR. GUMMING: So, where we are at today is we're not going totalk about entitlement to the 14,400,000 and odd held in escrow by McCarthy Tetraultbecause it's going to be fairly contentious and there are a lot of steps that need to be takenin between. But there are two issues that we needed to address right off, and just by wayof quick background, Pengrowth and Grand Valley were parties to agreements -- anagreement of purchase and sale.

THE COURT:

MR. GUMMING:

Just before you go on, I have read your materials.

Okay.

THE COURT: And Ms. Nicholson gave me a little bit of abackground that led up to the ex pane application that she made.

I~I;~~l~Juluii~[~i

THE COURT:are.

Okay.

So, I have a pretty good sense of what the issues

MR. CUMNIING:

THE COURT:

MR. GUMMING:

Excellent. Then Y won't bore you with --

Oh, it would not bore me at all.

-- an exhaustive review of the materials. But

3

1 right now we have paragraph 3(a) of the receivership order and it requires -- well, it2 empowers the receiver to take possession of and exercise control over the property, blab,3 blah, blab, and McCarthy Tetrault shall deliver to receiver the funds it holds pursuant to4 the deposit escrow agreement dated March 17 blab, blah, blah, which it shall hold on5 interest.67 This does not -- we're very concerned about that language because we don't know what the8 effect of it is. We don't even know what it means. So, one of the heads of relief that we're9 asking for today is that paragraph 3(a) be changed to make clear that McGarthy's should10 continue to hold the funds in accordance with the escrow agreement.1 11213141516171819202122232425262728293Q3132333435363738394041

The other -- there's three paragraphs --the second paragraph just increases the charge from75,000 to 125,000. That was inserted at the request of my friend. which it came -- thatrequest came from the receiver. The reason for that is that the receiver believes it isincumbent upon it to review the information in the possession of Grand. Valley and tosubmit a report to the Court for the purposes of providing some clarity as to who is entitledto the funds and that affects, of course, the time line because the receiver doesn"t evenhave -- doesn't have the records. It doesn't even have the computers.

So as a result, it has no idea what that exercise looks like, Sa, what we did is we tried. tocreate a time line that is triggered off the receiver's delivery of the. report, but we do havea timing complexity because my friend Ms. Nicholson is unavailable between Novemberthe 2nd and November the 13th.

The anticipated hearing of this matter would be end of November but the timing, if thereport is anything more than a fairly simple report, probably will not work, So, at the endof the time line there is a provision that says if it doesn't work then the parties will, actingreasonably, revise the time line accordingly.

THE. CDURT: What time line aye you talking about?

MR. CUIVIMING Let me give that to you.

THE COURT: Oh, I thought it was inhere somewhere and I wassupposed to --

MR. GUMMING: It is not. The -- and I have the claim copy. Thiscame from my friend but if I may approach the Bench --

THE COURT: Please do.

1 MR. GUMMING: -- I can give you the draft order. There are a2 number of elements in that order that are still in contention and I can go into that in a couple3 of minutes, but would you like to take a moment to review the order?45 THE GO~[JRT: Yes, please, yes. Okay.67 MR. GUMMING: Okay. So, on one hand Pengrowth would very8 much like to get the money released. This matter was originally to be heard on September9 8th. Your receivership order was made on September the 7th.

1011 THE COURT: Correct.1213 MR. GUMMING: Obviously that required a change in the process.14 We filed an application within the receivership proceedings and hopefully this time line15 works but it may not, depending on how, what the timing is like with the report. So --1617 THE COURT: Just with respect to this report, I know that Mr.1 S Kelly is going to want access to a bunch of information but I guess at the end of the day,19 and I am sort of -- and Mr. Kelly knows this well enough -- that really he is just, he is20 preparing what I would consider to be a neutral report in the sense that he is my officer.2122 MR. GUMMING: Yes.2324 THE COURT: He is acting on behalf of the Court as my agent25 and Ijust -- he's an information provider and not a position provider.2627 MR. CCJMMING: Correct.2829 THE COURT: Correct?3031 MR. GUMMING: Correct.3233 THE COURT: And I think that that has to be made clear because34 I dan't know how your client feels about it but there. was the ex parte application. T granted35 the order based on representations made to me by Ms. Nicholson and now we have a court-

36 appointed receiver, and I just wanted to be -- I really wanted to emphasize the part that this37 is a report from. a court officer.3839 MR. GUMMING: Is there some wording we could perhaps add to40 the paragraph or --41

5

1 THE COURT:234567891Q1 1121314151617181920212223242526272829303132333435363738394041

IuI:~~1~~uiTil~[!3i

THE COURT:reinforce that role.

Mr. -- Mr. Kelly knows his role.

Yes. Yes.

And I am not sure we need to, you know,

MR. Ci.TNIMING: Okay. And that was -- that was certainly in allparties' contemplation. Everybody here does a lot of insolvency work, so.

THE COURT: Of course.

MR. CUMMTNG: It is understood what his role is, and everybodywill have to put their best evidence as this matter forward.

So let's talk about the matters in dispute and we -- Ms. Nicholson and I are still not therebut in paragraph 3(a), as amended, which is in paragraph 2, we were going to put in theone, two, three, four, five, six -- the sixth line down which starts with, Pengrowth, shallcontinue to hold, and then insert the following: "in its lawyer's general trust account inaccordance with section 5(b) of -- and then we will delete the words, "intrust certain fundsheld by it under", and then it will continue to read, the escrow agreement. And then wewould add, "certain funds delivered to it thereunder, and those funds would be defined asfunds".

Sa just to go through that again:

Shall continue to hold in its lawyer's general trust account inaccordance with section 5(b) of the escrow agreement certainfunds delivered to it thereunder, and then defined as the funds.

The reason that is important to Pengrowth is if you go to the escrow, the deposit escrowagreement which is Exhibit B to the affidavit of Derek Evans which was filed -- filed bymy friend in her receivership application, it attaches the escrow agreement and section 5(b)states:

The escrow agent will forthwith deposit the deposit in lawyer'sgeneral trust account, and then will withdraw the aforesaid moniesin accordance with lawyer's internal trust policies, et cetera.

And so we want confirmation that it continues to be held in that trust account until thismatter is determined.

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THE COURT: But why hold it in -- maybe I missed sflmething.Why hold it in your trust account or are we still --

MR. GUMMING:

THE COURT:account?

MR. GUMMING:

THE COURT:

MR. GUMMING:

THE CURT:

MR. GUMMING:

THE COURT:

McCarthy's.

-- we are still talking about McCarthy's trust

We are indeed.

Okay.

Yeah.

All right.

I'm not suggesting it come to Gowling's.

Okay.

MR. GUMMING: My friend expressed the concern that the use ofthe words trust somehow buttress our position. We disagree with that and we want itabsolutely certain court ordered that McCarthy's will continue to do what they're supposedto be doing under section 5(b).

My friend would prefer, I believe, and I'm putting words in her mouth, the deletion of thewords "general trust account" and just have "hold the funds in accordance with section5(b)". It gives Pengrowth greater comfort that that relationship continues to be what wassaid in that agreement. So that is an area of difference.

Another change to that order, which we have agreed to, is the receiver would like it to beclear that when the Court finally determines whether or not Pengrowth is entitled to thefunds, if indeed Pengrowth is not entitled to the funds then the funds go ~o the receiver, andthat makes sense to us. So we've changed the wording a little because the way it wasworded -- and this was my wording but I think what the receiver is suggesting is better --theway it was worded, it was based on any party's entitlement to the funds and there could beother people who come out of the woodwork claiming the funds but don't care if it's in thereceiver's account or not.

So that clause I think is agreeable to all parties, but the trust comes at the argument over

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whether it should be referring to the language in 5(b} or not is not settled.

So unless you have any questions --

THE COURT:

MR. GUMMING:

THE COURT:

Submissions by Ms.1~Ticholson

No.

Okay. Thank you, My Lord.

Thank you, Mr. Cumming. Ms. Nicholson.

MS. NICHOLSON: Thank you, My Lord. Now, you have heard fromMr. Cumming, I want to tell you as well we originally tried, we worked had to get this far,so I think it's quite positive really. We tried to get November 1st for a hearing date and wetried to do that before you and I actually spoke with Brent, the coordinator, and he had setaside November 1st subject to your direction, obviously.

We obviously know now from the receiver's need to file the report that we're nat going tomake that date so therefore. I will release -- I will tell, with your permission, Brent that youwon't be hearing. this on November 1st and he will release those dates, so that's now thefirst thing.

THE CURT: I don't think I am sitting commercial betweennow and Christmas or between -- I am sitting.. that one week but I think I originally hadscheduled asix-week trial from near the beginning of November right through to theChristmas break. So, I don't think I am --

MS. NICHOLSON: And I think you had some small availabilityduring that week, the last week of October, and into early November.

THE COURT:

MS. NICHOLSON:

THE COURT:

Right.

But we can't make that date.

Yes, okay.

MS. NICHOLSON: We're now working, as you have heard, towardsthe 24th, and I appreciate my friends have been accommodating in terms of my week away.So, the way the scheduling works, if it happens during that week, we are going to work tonegotiate around that, but just, you know, and I mean hopefully we can still make the 24th.

1 But if not, we'll manage it, you have heard that. So, I appreciate what my friends have said2 about that.34 And just as far as the order goes, you will see in paragraph 4 -- I'll come to the contentious5 part in a moment -- but paragraph 4(a), I just wanted to just explain that the intention is6 that my client, the secured creditor which is H&C S Holdings Pte. Ltd., you'll recall will7 file an application as well in the same way that Pengrowth has filed an application seeking8 a determination that it is entitled to it. We will seek the same and so that's why we're9 contemplating another application being brought on.1011 The evidence that will be filed in support of that is set out and referred to in paragraph (b)12 where we set the evidence filing date and we go through all of the questioning deadline13 date and the rest of it leading up to that. So that's, as a heads-up, what the intention is, but14 why this order is set.1516 Now, I will now deal with this one outstanding issue. I think we're -- I wasn't entirely sure17 of the exact wording that dealt with the tail end of paragraph -- the amendment to 3(a)18 which deals with whether Pengrawth gets it or the receiver gets it. So, I just need to clarify19 that exact language. So that's I think conceptually we agree. And then the only thing is this20 business about describing the money. And so, in our submission what it should say is that21 McCarthy Tetrault shall hold the money in accordance with the escrow agreement. That is22 the intent -- we had originally wanted the receiver to receive the money. We have come23 back -- the concern on the part of Pengrowth was that if that was to happen, that could24 maybe -- they wanted to maintain the status quo. And so, I understood that, so my thinking25 was okay, our client is willing to have the money stay at McCarthy Tetrault, but what we26 don't want you to be doing is changing or declaring or make -- or telling them how they are27 to hold that money.2829 They are to hold it in accordance with the escrow agreement. That's what you are going to30 tell them to do, and I don't think the Court should be weighing into precisely how it holds31 it. So, for example, we don't know how McCarthy gets the money. I don't know that. I'm32 sure Mr. Cumming doesn't know that, but what we -- he wants the status quo, we want the33 status quo, so they should -- my understanding is that they are holding it and there`s been34 no suggestion that they are not holding it pursuant to the escrow agreement. So they should35 hold it pursuant to that escrow agreement.3637 Why are we looking at these definitions in paragraph 5(b)? There's definitions. There's38 deposit, there's lawyers, there's all sorts of things in 5(b) that the Court ought not to be39 weighing into that now and declare -- and making declarations about the status of that40 money. That status of that money is very integral to both of our positions. So, our goal is41 to keep the status quo.

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So in our respectful submission, the Court should maintain the status qua by tellingMcCarthy's it should hold the money in accordance with the escrow agreement, and itshouldn't be going into exactly how that is, whether it is to be held in a lawyer's generaltrust account and then withdrawn -- nothing like that. It's not the Caurt's business rightnow, if the goal is to maintain the status quo, and not to start shifting things up so now wehave different arguments about how McCarthy has held it, how it is holding it, et cetera.That's why we oppose this -- this extra language.

THE COURT: So, what are you suggesting then? Are yousuggesting taking paragraph (a) and just basically saying --

MS. NICHOLSON:

THE COURT:

No, we're pretty good with paragraph (a).

Yes.

MS.1vICHOLSON: Except all of his changes to it. So, we're sayingthat they should hold the money in accordance with the escrow agreement. That's what weare saying.

THE COURT: Okay.

MS. NICHOLSON: And he wants hold money in accordance with theescrow agreements.

THE COURT: Paragraph 5(b).

MS. NICHOLSON: And hold it in their general trust account and doa bunch of stuff that is in the escrow agreement.

THE COURT.:

MS. NICHOLSON:

THE COURT:

Okay.

Thank you.

Mr. Cumming, anything further on that?

Final Submissions by Mr. Cumming

MR. GUMMING; My Lord, with respect, I don't actually see therelevance of the defined terms. There are two defined, perhaps three, defined terms in thatclause -- deposit, escrow agent, and lawyers. General trust account is not defined. It's not

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particularly confusing. The -- it is simply factual that they will continue to hold it in thegeneral trust account. I am not sure how that could prejudice the interests of my friend'sclient.

I am quite certain that if the funds were moved over to the receiver in accordance with theoriginal3{a), it would be prejudicial.

THE COURT: Nobody is suggesting. that, Mr. Cumming.

MR. GUMMING: No, they are not suggesting it now, but I justdon't see the issue because we're not even saying -- we changed the words in an earlierdraft -- shall continue to hold in trust the funds. We changed it so it would be more neutraland hopefully address my friend's concern that it would hold it in its lawyer's general trustaccount which doesn't characterize the relationship. It simply describes, parrots the wordsin the agreement. That can't possibly change the positions of the parties.

So I am uncertain what the concern is. It is troubling because I can imagine what anargument might be later on in terms of whether my client has a proprietary interest in thedeposit funds. So, I think this just clarifies what it is. You are not declaring it's held intrust,you are simply saying you will hold it in that account, which is very precise, very easy tounderstand, and there is no room for McCarthy's to misunderstand where those fundsshould be held.

THE COURT:anything.

u~~ ul~ ~

THE COURT:

MR. GUMMING:

THE COURT.:

MR. GUMMING:

THE COURT:

Submissions by Mr. Oliver

MR. OLIVER:

I do not think McCarthy's is misunderstanding

I don't think they are either but --

Okay.

-- my client would like it to be ver}~ clear.

Okay.

Those are my submissions.

All right. Mr. Oliver, anything?

Very briefly, Sir. The receivers are not taking

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any position on the trust language issue. I just wish to quickly,. I guess, advise YourLordship of how we came to be here in part. When the application was brought before you,it was obviously done on quite an expedited basis. The view at the time was the receiver'srole was likely going to be limited to a security opinion and aholding -- holding funds.

As these matters evolved, we have realized that there are likely records in the position -- inthe possession of Grand Valley that for the sake of resolving this dispute this Court needsto be aware of and needs to be brought to the Court's attention. So, it was at that point thatwe discussed with the parties the fact that we felt that we were obliged to do a report alongthe lines that you suggested. So that's the reason for the increased Cowling's request andthe changed timing.

As I am before you right now, we currently don't have funding to actually do the workthat's contemplated by the order. I do expect it's going to be -- that's not going to be anissue but I just wish to make the Court and the parties aware. that as I stand here now, weare not. adequately funded but I am confident that's going to be resolved.

THE COURT: So am I, and it should be.

MR. OLIVER: Agreed. Agreed. A final issue, Sir, I just wish tomake it clear that everyone is on the same page on this. This is paragraph 4(b) of the order.You will see, Sir, it says within one week of the receiver filing a report with respect to interalia the evidence in possession of Grand Valley relating to the applications, including itsentitlement to the funds.

I'm just going to pause there. I don't believe and consistent with what you said, we're goingto be opining on entitlement to the funds. However, if there is evidence in the possessionof GVR that deals with entitlement, we'll obviously put it forward. So, I just want it to beclear that I read that as evidence in relation to entitlement, rather than an expectation thatwe are going to advise the Court what may actually happen.

THE COURT: Well, I guess that perhaps the word "its" shouldbe excised from that, including entitlement to the funds, because "its" may be modifyingsomething in particular.

NIR. OLIVER: That's agood -- yes.

THE COURT: So, I think you would ditch the word "its".

MR. OLIVER: Yes.

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THE COURT: Because I think that leaves it a little more vague,if you will, which is what we are trying to do here, I think.

MR. OLIVER: Agreed. Yes, yes. Okay. Thank you very much.

Decision

THE COURT: Thank you, Mr. Oliver. Anything else? Okay.

Well, subject to that very minor change, I think the wording as it stands is sufficient, and Iwill tell you why. By simply adding the wording that was suggested by Mr. Cumming, it'sreally adding belts to the suspenders and it is my view that McCarthy Tetrault LLP wellknows its role as escrow agent. It is specified in the escrow agreement and I think it wouldbe demeaning to McCarthy Tetrault LLP to insert that additional wording. They know whattheir role is. They know what their responsibilities are. They are bound by the escrowagreement and to put in specificity with respect to how they handle the funds and directthem in a particular way I think would be improper in these circumstances.

Again, the funds are being held in escrow pursuant to the escrow agreement. That is whatthis wording says, and that is -- I am satisfied that that sufficiently protects the parties. SoMr. Cumming, would you like me to just cross out the word "its" and initial that?

MR. GUMMING: I think we still have to deal with the receiver'scomments on the end of the paragraph. However --

THE COURT: End of what paragraph?

MR. GUMMING: 3(a), the amended 3(a) and I believe I spoke toyou about those in my earlier submission. I can hand you up my notes if you wanted towrite them in.

THE COURT: Let me see -- I don't know what you are -- youare speaking in tongues here, Mr. Cumming. I have no idea what you are talking about.

MR. GUMMING: Okay. I'll maybe pass up then the notes so youcan see.

THE COURT: Well, isn't the Court going to be making thatruling?

MR. GUMMING: Well, «~e'd be asking the Court to make that

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ruling.

THE COURT: Right.

MR. GUMMING: And the receiver's concern was that there maybeother parties who might have a claim to the funds, but it only wants the funds to be held byMcCarthy so long as there is an issue between Pengrowth and I guess the secured creditoras to entitlement. If the Court declares Pengrowth is entitled, then --

THE COURT: It is easy.

NIR. GUMMING: -- easy. If the Court determines Pengrowth is notentitled, then the funds, what the receiver would like to happen and Pengrowth is content,is that the funds would. then ga to the receiver.

THE COURT: Okay. Ms. Nicholson.

Discussion

MS. NICHOLSON: Yes, I agree conceptually. I just didn't -- hadn'tseen the wording so I just wouldn't know where we are on that.

THE COURT: Well, it says authorizes and directs the escrowagent to pay the funds together with accrued interest either to Pengrowth or the receiver.

MS. NICHOLSON:either Pengrowth or the receiver?

So, they are going to hold it until such time it's

THE COURT:

MR. GUMMING:

THE COURT:

MS. NICHOLSON:

THE COURT:receiver.

MS. NICHOLS4N:under -- in the receivership.

Yes. Yes, i.e., it is not going to your client.

Yeah, and --

Which makes sense.

-- fine.

Because it should go to the court-appointed

Go to the receiver and then it should get paid out

14

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THE COURT: Yes.

MS. NICHOLSON: Yes.

MR. CUIVIMING: So, we could either send over to you a clean copyof the order or if you wanted to hand write in, that would be fine.

THE COURT: Whatever you wish. It does not matter to me.

MR. GUMMING: I'm content either way.

THE COURT: Well --

MS. NICHOLSON: I don't know if you'd be willing but just to makeit nice and pretty, if you would be willing to sign it on the understanding and theundertaking of Mr. Cumming that he would use, insert those words.

THE COURT:

MS. NICHOLSON:

MR. GUMMING:

THE COURT:

MR. GUMMING:that --

THE COURT:cross that off and initial it.

MR. GUMMING:

Slip sheet, ship sheet it.

Slip sheet in and then it's nice.

Yeah, I could do that.

Okay.

Just let me check it isn't a proper page break so

Well, there isn't for the "its", so I am going to just

Okay.

THE COURT: And then you can slip sheet the second page, andsubject to Ms. Nicholson and Mr. Oliver's agreement to it.

MS. NICHOLSON: Thank you.

THE COURT: Okay?

15

1 MS. NICHOLSON: Yeah, maybe you'll just shoot it to us, so we can2 check.34 MR. GUMMING: Yeah.56 THE COURT: Okay, yes.78 MS. NICHOLSON: Thank you.910 THE COURT: Okay. Anything else?1 112 MS. NICHOLSON: Thank you, My Lord.1314 THE COURT: Okay, I will pass that back. Madam Clerk, could15 you pass that back.1617 Now, this was -- was this filed, Mr. Cumming, this letter, this beautiful binder you sent to18 me?1920 MR. GUMMING: Was it filed?2122 THE COURT: Yes.2324 MR. GUMMING: It ought to have been.2526 THE COURT: Well, I don't know if it was. There is no filing27 stamp on it.2829 MS. NICHOLSON Isn't that your binder, Tom?3031 THE COURT: It's just your binder with a whole bunch of32 documents in it.3334 MR. CUNIMING: Oh, is it my -- is it the -- was it the application35 record?3637 THE COURT: Yes, it was.3839 MR. GUMMING: I don't personally do that so --4d41 MR. BISHOP: I think I can assist, Sir. We had Alison Gray of

16

1 our office assist and I think it was to be filed and it was a separate copy was to be sent to2 you.34 THE COURT: A courtesy copy.56 MR. BISHOP: In view of the timing we were not sure that in7 sending it and you getting it.

9 T'HE COURT: Sure. Okay. Thank you, Mr. Bishop. I don't10 think -- if there's a filee copy I'm going to return this to you and you can carry it back to11 your office, okay? We are running out of space in this brand-new courthouse, Mr.12 Cumming.1314 MR. GUMMING: That is very understandable. My office is a15 disaster ground.1617 TIC COURT: All right. Is there anything else, ladies and18 gentlemen?1920 MR. GUMMING: I think that's it, My Lord.2.122 THE COURT: Okay. Thank you. Thank you, all.2324 MS. NICHOLSON: Thank you, My Lord.2526 MR. BISHOP: Thank you, Sir.2728 THE COURT: Thank you. Thank you, Madam Clerk.2930 THE COURT CLERK: Order in court. You are welcome.3132 THE COURT: Have a good weekend.3334 THE COURT CLERK: You too, Sir.353637 PROCEEDINGS CONCLUDED38394041

17

1 Certificate of Record234

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I, Nancy Arevalo, certify that this retarding is the record made of the evidence in theproceedings in the Court of Queen's Beneh held in courtroom 1702 at Calgary, Alberta, onthe 22nd day of September, 2017, and that I was the court official -- and that I and SusanDurant were clerk officials in charge of the sound-recording machine during theproceedings.

18

1 Certificate of Transcript2

3 I, Carol Barrett, certify that45 (a) I transcribed the record, which was recorded by asound-recording machine, to the best6 of my skill and ability and the foregoing pages are a complete and accurate transcript of7 the contents of the record, and8

9 (b) the Certificate of Record for these proceedings was included orally on the record and10 is transcribed in this transcript.1 112 Order No. 1000-147213141516171819202122

Digitally signed by Carol

24 Carol Barrett pate 2018.03.0511:56:55

-06'00'25262728293031

32333435363738394041

Action No.: 1701-11927E-File No.: CVQ18H&CSHOLDINGS

Appeal No.:

IN THE COURT OF QUEEN'S BENCH OF ALBERTAJUDICIAL CENTRE OF CALGARY

BETWEEN:

H&C S HOLDINGS PTE LTDPlaintiff

and

GRAND VALLEY RESOURCES CORPDefendants

P ROCEEDINGS

Calgary, AlbertaFebruary 28, 2018

Transcript Management ServicesSuite 1901.-N, 601-5th Street SW

Calgary, Alberta T2P SP7Phone: (403} 403-7392 Fax: (403) 297-7Q34

1

'TABLE OF CONTENTS

Description

February 28, 2018

DiscussionSubmissions by Mr. OliverDecisionSubmissions by Mr. OliverSubmissions by Ms. NicholsonSubmissions by Mr. BishopSubmissions by Mr. OliverSubmissions by Mr. Bishop (Response)Submissions by Ms. Nicholson (Response)Submissions by Mr. Oliver (Response)Certificate of RecordCertificate of Transcript

Afternoon Session

Page

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12447993150647071

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1 Proceedings taken in the Court of Queen's Bench of Alberta, Calgary Courts Centre, Calgary,2 Alberta

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February 28, 2018

The HonourableMr. Justice Jeffrey

J.L. OliverD.C. BishopA. GrayC.L. NicholsonW. KatzG. Squirrel

Afternoon Session

Court of Queen's Bench of Alberta

For Hardie and KellyFor Pengrowth Energy CorporationFor Pengrowth Energy CorporationFor H&C S Holdings Pte LtdFor H&C S Holdings Pte LtdCourt Clerk

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Discussion

THE COURT: Mr. Oliver?

MR. OLIVER: Thank you, Sir. For the record Jeffery Oliverappearing on behalf of the receiver Hardie and Kelly Inc. I'll introduce the other partieswho are in the courtroom. To my right is Mr. Bishop and Ms. Gray on behalf of PengrowthEnergy Corporation. Sitting behind me is Ms. Nicholson, Mr. Katz on behalf of H&C SHoldings Pte Ltd. And Mr. Kelly is in the back of the courtroom on behalf of the receiver.Thank you.

So, Sir, as you. are aware this is an application essentially seeking three hags of relief. AndI can advise that there remains one issue in dispute and the rest has been seeminglyresolved. Subject to the direction of Your Lordship and confirmation from my friends. Thefirst item that we are seeking is advice and direction on the court with respect -- or of theCourt with respect to the disclosure of certain records --

THE COURT: M-hm.

MR.OLIVER: -- that the receiver has reviewed and YourLordship will recall there's essentially three categories of those --

THE COURT:

MR. OLIVER:

Yes.

-- of those records.

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THE COURT:saves you --

MR. OLIVER:

THE COURT:

MR. OLIVER:

THE COURT:

I u-~as able to get through all the materials if that


Okay.

-- some of the background but --

Thank you.

Yes. Okay.

MR. OLIVEft: So at this point we -- I understand, and myfriends will correct me if I'm - if I'm wrong. We have an agreement that the records thatthe receiver has determined are not subject to privileges and may be disclosed -- may bedisclosed, there is no disagreement I believe about that. So those are the main schedule 1records. The schedule 2 records were the ones that were nor -- that in our - in our viewwould be presumptively entitled to solicitor or client privilege.

THE COURT: M-hm.

MR. OLIVER: And on that I understand we have an agreementthat those records shall not be produced but Mr. - Mr. Bishop retains the right to challengeat a - at a future date whether any of those records are actually released --

THE COURT:

MR. OLIVER:

Are in fact privileged.

Correct and the receiver --

THE COURT: Okay. And the description of them in theschedule is sufficient for you to start that process?

MR. BISHOP: Sadly no, My Lord, and -and that's somethingyou' 11 --

THE COURT: It looked a bit crypt -- sorry Mr. Oliver but --

MR.. BISHOP: I - I'm happy to get into a bit about now. But Iwill be getting into it when I get to my submissions.

3

1 THE COURT: Yes, okay. Thanks.23 MR. OLIVER: And I had understood I had been away a little bit,4 Sir, so this is -- it's possible this may not have happened. But I do understand that some5 of those schedules with better descriptions were circulated to the parties.67 THE COURT: Okay.89 MR. OLIVER: But if I'm -- If I'm correct we have -- we have10 them available and have na issue sending them along so that Mr. Bishop can have a closer1 1 look at them. Where there remains a dispute is the documents that may be subject to12 common interest privilege or where solicitor client privilege is somewhat difficult to13 discern. And just to put a bit of a - a fence around those. Since the initial materials have14 been served there had been a few records which have moved between schedules. Where15 we are now is -there is approximately 85 documents that are the subject of dispute at this16 point. So that's roughly 3 percent of what -- of - of the documents --1718 THE COURT: Right.1920 MR. OLIVER: -- that would be produced.2122 THE COURT: Okay.2324 MR. OLIVER: So that -- on that issue that is roughly where we25 .are. I believe there is no opposition to the requested borrowings increased that I am aware26 of --27?g

29303132333435363738394041

THE COURT: Okay, is that correct, I was going to start there.Any issue with extending to 175 from 125? The receiver's borrowing authority?

MS. NICHOLSON:

THE COURT:

MR. BISHOP:

THE COURT:

MR.. BISHOP:

THE COURT:

No, we -- we are fine with that.

Thank you. Bishop?

We have no involvement in that process, Sir --

No. Yes. Okay.

-- and the previous orders protect us from --

You are sitting here so I looked at you for a com

0

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to1 112l3

MR. BISHOP:

THE COURT:

Yeah.

-- okay. Thank you.

MR. BISHOP: I - I just like saying that so that I'm remindingeveryone that they're not spending my money.

MR. OLIVER:

THE COURT:

14 MR.OLIVER:1516171819202122232~25262728?9

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Decision

THE COURT:

MR. OLTVER:

Now, Sir, I - Y --

Okay. So --

Sorry.

So that we have covered off that part is granted.

Thank you very much.

THE COURT: I also wanted to cover the outset service. Forexample has Mr. Sun (phonetic) been notified of this attrition?

MR. OLIVER:

THE COURT:


Yes, I will run through service.

You cover that, okay.

MR. OLIVER: Sure. So there is an affidavit of service in the filefrom Richard Comstock (phonetic), service is as follows; on February 21 st the service listwas -was served by email with our notice of application, bench brief and first report. Thatservice list was comprised of counsel to the debtor company, former and currentmanagement and directors which includes Mr. Sun. As well as those parties who may havean interest in the deposit which would be essentially Ms. Nicholson's client.

On February 23rd we expanded service to include parties that may have an interest or inthe common interest privilege issue if this Court were to find that that in fact was alegitimate issue. So that was McCarthy Tetrault was served, Bob Lowe (phonetic), GabrielWang (phonetic) and Giackwe Ni (phonetic).

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THE COURT:

MR. OLIVER:

THE COURT:

Whoever he is.

Yes. Yes.

Any more insight into that?

MR. OLIVER: Well hot off the press at about 1:00 this afternoonI had the receiver received an email from Mr. Jalbert.

THE COURT: Ol~ay. Yes.

MR. OLIVER: Who is -- is referenced in the materials. And hehas given more information. This is obviously in an email form if you'd like to hear it I'dbe -- or - or see it I'd be happy to pass it up or read it but there is some information.

THE COURT: Does it suggest he has an interest for which heshould have an opportunity to comment on what these other parties have consented to?

MR. OLIVER: Well he was served.

THE COURT: Okay.

MR. OLIVER: But if - if I may just have a moment.

THE COURT: Yes, yes.

MR. OLIVER: To be frank, Sir, it's somewhat non-definitive. It- it's based on representations that he apparently made.

THE COURT: Okay. And -and let me just interrupt you Mr.Oliver because sometimes when the bench sees counsel with a quizzical look on their face,it is for reasons entirely unrelated to the litigation. But just in case in this occasion it isrelated to the litigation. The -the genesis of my question about Mr. Ni, Mr. Sun and so oncomes back to well the threshold curiosity I have. The litigation -- the dispute as it isdefined is between parties on the basis of originating applications. Not statement of claim.

MR. OLIVER: M-hm.

THE COURT: And as I recalled the rules there is not anobligation on either party to disclose all relevant material information that they have. There

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is other ways you get at it.

MR. OLIVER: M-hm.

THE COURT: In those context. But -- so for the receiver to sayyou know we will disclose everything that is relevant and the other parties may be happyto receive a bunch of it. I am not sure they would normally be entitled to it anyway unlessthey took other litigation steps. So if they are consenting to some access to information Tmay want to have confidence that every other party that may have an interest also agreesthat it should be disclosed so easily.

MR.OLIVER: Sure. There's some additional backgroundinformation I can provide --

THE COURT: Okay.

MR. OLIVER: -- in part on that question. There was a previousappearance before Justice Yamauchi at which the terms of the receivership order wereamended --

THE COURT: Amended. Yes.

MR. OLIVER: And unfortunately we don't to my knowledge.have transcript of that - of that hearing available at this point. But my recollection at thathearing vas the concept of the receiver disclosing documents. At least in a general sensewas canvassed an was at least --

THE COURT: Was it proved or condoned or is that the sensethat --

MR. OLIVER: M-hm. I'd be - I'd be interested --

THE COURT: Okay.

MR. OLIVER: -- in hearing the -the parties' views. My - myview, Sir, was it was essentially -- wa -was -- was directed. And it was on the basis --

THE COURT: Okay.

MR. OLIVER: -- that essentially there was no other party inGVR's possession -- or and ~vho -- who have access to these records that may be material

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to the dispute between the parties. But I'd be open to the views oFmy friends because I -I don't have a transcript and that's from -that's from memory.

THE COURT: Okay. Anybody want to speak to it now or evewill just carry on with the ground work?

Submissions by Ms. Nicholson

MS. NICHOLSON: I'm - I'm happy just to comment and jump in on- an that if it's useful.

THE COURT: I am sure it will be.

MS.IVICHOLSON: The -the idea was when we appeared beforeJustice Yamauchi I - I confirmed that the -- that -- what the receiver said, is that werepresent H&C S and. Peng -- and -and GVR was in effect in here and in - in the form ofthe receiver in effect. The receiver is appointed over the assets of GVR which specificallyinclude the record relating to this dispute. And so it would -- it -- it ought to go ahead andthose records for -for the parties so that we could -- in effect they -- could it be advancingor give the -give the information that the receiver had obtained from GVR in GVR'spossession about the deposit. So the idea was, according to Justice Yamauchi, yes go andreview -- collect the records, go an review them but don't -- I want you to remain neutraland I don't want you -- for example to become an advocate in terms of who is -- whoseentitled, you know, I want you to just bring forward what you find and not advance aposition and let H&C S, my client, and Pengrowth fight it out. That was -- that was theidea. And we ordered that he -- I just went back to look at the actual order.

THE COURT: M-hm.

MS. NICHOLSON: He granted the order on September 22nd. And it-- it says this -- it's not perfect, I think the transcripts would be better, but it says -- it'ssetting out a number of time lines and (4)(b) it says; (as read}

Within 1 week of the receiver filing a report with respect to theevidence in possession of Grand Valley relating to, 1, theapplications; 2, entitlement to the funds, and; 3, any other evidencethe receiver determines should be disclosed to the Court. Allpersons participating in the application shall file and be serveaffidavit, et cetera.

4041 THE COURT: Okay.

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MS. NICHOLSON:

THE COURT:

So that's kind of what it speaks to.

That is helpful.

MS. NICHOLSON: As far as the one point you made earlier was howthe matters have been advanced and come before you. Pengrowth's application was --original application was by originating application. Then there was the appointment of thereceiver in these proceedings which were commenced by a statement of claim. H&C S --

THE COURT: So H&C S commenced its action by statement ofclaim?

MS. NICHOLSON: Against GVR.

THE COURT: Okay.

MS. NICHOLSON: Yes. And then under the orders made in thisreceivership proceeding there was a direct disorder of Justice Yamauchi required thebringing of applications by the parties.

THE COURT:

MS.1vICHOLS4N:

THE COURT:

MS.1vICHOLSON:

THE COURT:

MS.1vICHOLS~N:

THE COURT:ahead.

Yes.

By September --

in 30 days or something.

-- 29th. And then we advanced -- we advanced -

Seven days.

Pardon?

Seven days, it is a tight time line. Anyway go

MS. l~1ICHOLSON: Yes. So -- and then H&C S advanced an - anapplication, so in our sense we have before the Court H&C S claiming the -the deposit,Pengrowth claim -claiming the deposit with the receiver as kind of stake -- merestakeholder giving forth documentation that it has on behalf of GVR.

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THE COURT:

MS.IVICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:

Submissions by Mr. Bishop

9

Okay.

That's --

Thank you.

-- how I see it. Thank.you.

Mr. Bishop anything to supplement?

MR. BISHOP: Well, just -just, Sir, I agree with much of myfriend's submissions. The one I don't agree with is that Justice Yamauchi purported tofetter in any way the receiver's mandate in terms of getting into who should be entitled tothe deposit proceeds inter se H&C S and Pengrowth. So that's still a live issue. And -andmy --

THE COURT: Okay.

MR. BISHOP: -- and my sense of what's happened is that thereceiver, as officer of the court, formed his own view with respect to the practicality of thereceiver, opining on the - on the -- the particulars of that commercial dispute. And you' 11hear more from me on this later but Pengrowth is now in the unique opportunity of havinginitiated a claim against GVR. H&C S who have common interests with GVR, then withno notice on the 11th hour before the. Pengrowth --

THE COURT: The hearing of your application.

MR. BISHOP: -- originating notice is to occur. Puts GVR intobankruptcy -- or into receivership and now we're in the position where -where Mr - Mr.Sun is the defacto controlling mind of H&C S and the sole remaining director of GVR. Soyou're going to hear a lot from me about how that's not fair and how I should be entitledto these documents. And even more than that -even better stuff, Sir.

THE COURT:


MR. OLIVER:

Mr. Oliver. Thank you.

So you can see we're somewhat the bol -the

10

1 bologna in the sandwich here, Sir. So we're just --23 THE COURT: That is an opening. That is hard to resist..4

5 MR. OLIVER: Fair enough.67 THE COURT: I will just let it -- I will just let that go by. Thank8 you.9

10 MR. OLIVER: So one point just in housekeeping, I - I should1 1 put on the record, Sir, which Mr. Jalbert did mention in his email. He does take issue with12 a provision -- or a paragraph of the receivers report. 37 in particular with respect to whether13 former management intends to advance a claim to the $400,000 deposit.1415 THE COURT: Yes.1617 MR. OLIVER: My recollection and that of the receiver was that18 Mr. Jalbear's former counsel advised us that they were not intending to. But now that view19 may have -may have changed. So they may be --2021 THE COURT: Okay.2223 MR. OLIVER: -- intending to do that. So I just wish to - to24 clarify the record.2526 MR. BISHOP: And, not to further muddy the waters but my27 understanding was that the position of Mr. Jalbear was they take the view that the funds28 are properly payable to Pengrowth. But in the event Mr. Sun through H&C S is claiming29 over those proceeds and is successful in getting those proceeds they will object to that30 allocation. But there will be no objection to --3132 THE COURT: They will object to which allocation? 10033 percent to H&C S in priority to creditors of GVR?3435 MR. BISHOP: They -- so there's 14,000,400 that was put up.3637 THE COURT: Yes.3839 MR. BISHOP: And then the 400,000 --4041 THE COURT: The 400.

11

12 Mlt. BISHOP: -- from Jalbert and another former director an3 employee. The directors and the employees take the position under the contract that those4 funds are properly payable to Pengrowth. What they don't want to see happen is that if5 somehow H&C S is successful under the contract claim that they should be entitled to allh or swine of those proceeds. They would then articulate an objection under those7 circumstances only.89 THE COURT: Okay. So the receiver may not be done for quite

10 some time?1 112 MR. OLIVER: We shall see, yes.1314 THE COURT: Okay.1516 MR. OLIVER: So, Sir, in light of your knowledge of what has17 happened and the fa -- the process of where we are now. Perhaps I'll just get right to the18 sort of germane issue here which is --1920 THE COURT: About common interest privilege?2122 MR.OLIVER: Yes.2324 THE COURT: Before you do that just anything else I should25 know about service?2627 MR. OLIVER: No Sir. I -- that's -- that is the extent of --2829 THE COURT: So, all the parties that I read about that are30 defined as subject parties, for example, have all be served, have an opportunity to assert31 privilege if they wish or to --3233 MR. OLIVER: The --3435 THE COURT: -- help the Court with the context or the details36 they are --373 8 MR. OLIVER: The --3940 THE COURT: -- nowhere to be seen.41

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MR. OLIVER: The -the only party he --that was no served wasDeloitte and it was on the basis that I -- I frankly could no conceive of a privilege that afinancial advisor would be -would be entitled to assert. So Deloitte was not served butevery other party has been.

THE COURT; Okay. And the common interest privilege that -- for the most part that is at issue here, is it associated with solicitor client privilege, I takeit or litigation privilege?

MR. OLIVER: It -- from our view of the records, Sir, it's both.But it seems to be -- if you look at the body of the records that are -- that have been putbefore you on a confidential basis --

THE COURT:

MR. OLIVER:on the litigation privilege basis --

Yes.

I - I think it is fair to say that more of them are

THE COURT:

MR. OLIVER:

Okay.

-- than solicitor --

THE COURT: And so for those if there is someone like personthat -- Deloitte's that is copied. That is typically within the scope of the litigation privilege,the advisors all that. But not so with solicitor client privilege. And so if they are associatedor tied in or copied on some of these at issue records is that a waiver of privilege for whichcommon interest privilege doesn't set aside?

MR. OLIVER: Well --

MR. BISHOP: Well can I assist briefly, Sir?

THE COURT: Yes.

MR. BISHOP: I'm not very -- I'm not - I'm not very good --

THE COURT: No I - I don't mind if (INDISCERNIBLE).

MR. BISHOP: -- at insolvency law but I am pretty good atcommercial litigation and the rules of privilege. Let me try and suggest it this way.

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THE COURT: M-hm.

MR. BISHOP: And. if my friend disagrees with me jump up. ButI think what Mr. Oliver is saying is that the receiver has gone through a process where theyhave grouped these documents --

TIC COURT: Yes.

MR. BISHOP: -- in -into documents that should. be produced,documents that may be subject of privilege.

THE COURT:

MR. BISHOP:common interest privilege.

THE COURT:

That is the only category I am talking about.

Yes. But -but -- and the third group which is

Qh, well --

MR. BISHOP: So - so there are two subsets of - of thepotentially privileged categories. But I just want to make sure that we are all --

THE COURT: Okay. But I am -- I am -- wasn't operating fromthat mindset.

MR. BISHOP: Yeah. And -and that's why I'm - I'm --

THE COURT: Thank you. Yes.

MR. BISHOP: -- just trying to clear this up. But I think anotherissue for the Caurt in that regard, Sir, is that -- and correct me if I'm wrong but from readingthe report Mr. Oliver isn't here saying we have 100 percent satisfaction that tranche one ofthe potentially privileged documents are privileged.

THE COURT: Understood. Yes.

MR. BISHOP: And less so is he saying on the commercialinterest piece, we don't have 100 percent or anything like 100 percent confidence that thesedocuments are subject of common interest privilege. What he is saying is we're -we're inthis problem and -and part of the reason --

THE COURT: Right.

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MR. BISHOP: --they're in this problem is because Mr. Sun whois a director and officer of H&C S and a former CEO of H&C S and is a director and officerof Grand Valley.

THE COURT:just so you l:no~~-. But --

That is the only piece I think I have in evidence

MR. BISHOP: Who has -- lie has tint cooperated. He hasn'teven returned the phone calls. So - so --

THE COURT: I see that. But -but --

MR. BISHOP: -- it - it puts the receiver in a bad position. So inthe ordinary course from -from Pengrowth's perspective we would have affidavits fromthe parties that purport to assert privilege over those documents. And it would be set out -

THE COURT: I was going to comment on that. But --

MR. BISHOP: -- solicitor -- yes and Iknow --

THE COURT: Okay. But I was just inquiring of that thirdcategory.

MR. BISHOP: Yes, Sir.

THE COURT: The ones for which there is this cloud ofuncertainty as to whether or not common interest privilege applies. And I am asking is thatgroup open to a further split of contents, into two categories. Those for which commoninterest privilege may relate to solicitor client privilege documents, those for whichcommon interest privilege may relate to litigation privilege documents. I heard, yes, thereis some of both in there. And then I was just asking if any in the first of those categoriesthe solicitor client privilege documents were copied to a third party, even a valued advisor,is that a waiver of that privilege? In which case I won't even need to bother with whetheracommon interest --

MR. BISHOP:

THE COURT:

In - in the --

-- privilege applies to those.

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MR. BISHOP: -- ordinary course, yes. Although there is somenew jurisprudence out of Ontario and Alberta.

THE COURT: Okay.

MR. BISHOP: That says you have to look at the circumstancesunder which the documents were shared with the other party.

THC COURT:

MR. BISHOP:articulated is right.

THE COURT:

MR. BISHOP:

THE COURT:

Thank yau.

And in the ordinary course, what you just

M-hm.

But it is not an absolute rule. And --

Okay.

MR. BISHOP: -- you know. Whether if I send a file over witha view to having a third party review a portion of it, much of the litigation in that arearelates to have I waived privilege over the file, or have - have I waived privilege over thethree documents that I sent over.

THE COURT: That part. Yep, yes, yes, yes.

MR. BISHOP: And then that goes back and forth and there isconflicting decisions.

THE COURT: And I would probably lean towards the narrowerbut either here or there right now. Okay.

MR. BISHOP:

THE COURT:

MR. BISHOP:

Right.

Thank you.

Thank you, Sir.

MR. OLIVER: So, Sir, I actually wonder if what makes sense isI -I've given some thought as to what some options are that may be available to you inthese circumstances. Knowing of course that he -- you know, you have received the

16

23456

information but I - I can't claim to read your mind as to exactly where you are on it. Andthe information before you is not perfect. And this -- these are just some -some thoughtsif - if - if they're helpful I - I --

THE COURT: M-hm.

7 MR. OLIVER: I - I offer them and this is not necessarily an8 e~austive list. But seems to me the options are either one if you have the information9 before you that adequately satisfies you with respect to the categorization of either all or -10 or a portion of the specific documents that could be given. Alternatively if from your1 1 review there are general themes that you wish to provide advice and direction on for the12 receiver to go away and- do a further review and then --13141516171819202122232425262728293031323334353637383940

THE COURT: M-hm.

MR. OLIVER: -- exercise its discretion based on your feedbackand disclose or not disclose records, that's a second option. A third option which in fairnessmay -- my friends may have something to say about. But would be -- if there is commoninterest privilege based on our review of the documents it would appear that the party --with the primary interest in the common interest privilege is Ms. Nicholson's client. Ms.Nicholson has not seen these documents, at least not from us. And query if it makes sensefor the documents to be produced to Ms. Nicholson provided we are satisfied that they arethe primary party that has an interest in protecting privilege if it exists other than GVR ofcourse. And then the receiver can effectively step back and allow the -the parties to - toproceed with arguing the issue if you are of the view that further or better evidence orfurther service is necessary. So those -those are a few thoughts.

THE COURT: Are there -are there any -- related to the thirdcategory. Are there any -- or third option. Are there any for which it appears to you theremight be common interest privilege as between GVR and Pengrowth?

MR. OLIVER:

THE COURT:those parties? In your --

MR. OLTVER:

THE COURT:

Not that I -- not that comes to mind, Sir, no.

For a time was there a common interest between.

I don't believe so.

Okay.

41 MR. OLIVER: I don't believe so.

17

12 MR. BISHOP: I would - I would suggest the opposite. I would3 suggest that in the absence of an affidavit from someone that provides evidence as to what4 the to and fro of the negotiations were and with respect to the deposit there may very well5 be common interest privilege inter se those two entities. How -how could there not be?67 THE COURT: Okay.89 MR. OLIVER: And of course we're --101 1 THE COURT: So --1213 MR.OLIVER; Sorry.1415 THE COURT: No. I was just going to -- I have got some bullets16 here I wanted to cut it off. Some of them I no longer need to before we get into the heart17 of that. I appreciate the -- the range of options you are saying may be considered at this18 point by me. So I have had the materials the receiver provided with great things. And I19 the -- in the midst of those is the invitation to your friends and their clients to come today20 and to provide alternate views or comments or suggestions and (INDISCERNIBLE) didn't21 get those advance. And so I wanted to cover off what may be obvious but I just want to22 make sure of it. And I take it that neither of the parties in attendance today have any23 evidence to dispute how the receivers presented the background, the context, there is no24 other approach to the facts I should rely on in considering this. I have seen all your25 evidence. But may you have come today to say I have got an affidavit,2627 MR. BISHOP: I don't have an affidavit, My Lord, but I do have28 some submissions on matters that the Court should rightfully take into account in assessing29 which of the three mechanisms or another mechanism of the proceeding would be best and30 result in the fairest result from the perspective of all of the stakeholders.3132 THE COURT: Okay. And so when I get to it I may inquire33 about whether it should be in evidentiary form or not. But right now no dispute with the34 context and the information the receiver has presented to the Court?3536 MS. NICHOLSON: No. And -and --3738 MR. BISHOP: Well one -one nit-picky point. The -the receiver39 I think says in the report and I think my friend said verbally now that this is a dispute40 between the Pengrowth and H&C S. In my view it's a dispute between Pengrowth and41 GVR.

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THE COURT: Right.

MR. BISHOP: And that is the original commercial dispute. Andgiven that Mr. Sun was arguably a controlling mind of both entities at the same time thatpresents a horrific conflict of interest for Mr. Sun. So to the extent part of my argumentfavouring disclosure of at least the tranche 3 documents which are the corrunon interestprivilege documents no one from GVR has shown up to say we have any issue with any ofthose documents being disclosed. And as you know, Sir, in the ordinary course without anaffidavit and without a clear articulation of the basis for the common interest privilegebeing asserted, the -the law favours disclosure. So, it's not appropriate in my humblesubmission for Ms. Nicholson's client to make submissions with respect to whether or notthose documents should be disclosed and indeed I think that's her position here today. Shetakes no position.

THE COURT: Okay. I was just asking whether there is anydispute with the presentation of background by the receiver. If there is any contraryevidence to be presented to the Court I would just --

THE COURT:

And the one --

-- like to get it before I hear the submissions.

MR. BISHOP: And maybe Iwas - I was picking, you know, theproverbial pepper on the plant but -- that the only -the only distinction is my friendcharacterized it as a dispute between H&C S, in my view it's a dispute between --

THE COURT: Yes. No, I -- understood. And I - and I took thatas these are the two adversaries that are really --

MR. BISHOP: Right.

THE COURT: -- going to be at play. It is - it is like the receiveris an inter-pleader in some -some fashion. Any -- Ms. Nicholson, any concerns with thereceiver's background and evidence?

MS. NICHOLSON: No, and based on your comments about the inter-pleader and how the receiver is responding, that -that's how we take it and we understand

THE COURT: Okay.

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MS. NICHOLSON:consistent with that approach.

-- we also feel that Justice Yamauchi's were

I would also just add --

THE COURT:

MS. NICHQLSON:

And so, before you move on from that --

Yes.

THE COURT: -- can you just tell me that Justice Yamauchiorder and approach -- until the amended order, maybe after, there was a say in place andhe ordered that there be any further claims started, they be started and he set some deadlinesabout how those would all be against --

MS. NICHOLSON:

THE COURT:stay or for the two or --

CROWN LAWYER:

THE COURT:

That's right. And we haven't --

-- and -and so is that notionally a lifting of the

Yeah. Well --

-- how was that operated?

MS. NICHOLSON: -- first of all, to my knowledge, the Jalbert teamthat's associated with Pengrowth that you've heard about from -- who the formermanagement of GVR that you've heard about --

THE COURT:

MS. NICHOLSON:

lul~:~(.y:[~~~

MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

MR. BISHOP:

Yes, I thought they were -- yes, okay.

Yeah.

But -but they're not associated with Pengrowth.

Oh, well they're -well, they're --

No. They are the former management of --

-- they are the former management --

GVR.

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THE COURT:

MR. BISHOP:

GVR.

That's what they are.

MS. NICHOLSON: Yeah. They're the former management of GVRthat is - is siding with Pengrowth insofar as they wish their des -- their 400,000 and believeit ought to bepayable to - to Pengrowth. Those individuals have not filed a claim and wereserved, to the best of my knowledge, with the Yamauchi order just -just saying.

THE COURT: Okay.

MS. NICHOLSON: So, that's the first I've heard that they are nowquote re -- purporting to potentially reassert a claim not having brought an application tocourts with the Yamauchi order.

THE COURT: Well, do you think the. Yamauchi orderprevented an unsecured creditor from putting in a claim with the receiver for --they -- there- there were two of 454,000 and some other thousands so --

MS, NICHOLSON:

THE COURT:claiming as creditors of GVR.

MS. IVICHOLSON:

THE COURT:were doing?

MS. NICHOLSON:

THE COURT:

No. No, I mean, it - it - it --

-- it doesn't - it doesn't affect those that are

No, it - it doesn't.

Okay. And that is what these former managers

Yes. Yeah --

They -they are saying --

MS. NICHOLSON: They're claiming that -- it's -it's hard to knowwhat they are claiming. I don't know if their claim's against GVR. --

THE COUP.T: That is not really alone, is it?

MS. NICHOLSON: -- or if their claim is to the dis -- deposit monies.Right?

21

12 T~iE COURT: Yes, but that -that was provided to GVR with an3 expectation of certain things being reciprocated that weren't and so they -they would have4 a claim against GVR, wouldn't they?56 MS. NICHOLSON: I -- poss -- I - I - I think that's how the receiver7 has -has --89 THE COURT: Right.

101 1 MS. NICHOLSON: -- viewed that.12] 3 TI-I~ COURT: So, I was just -just testing whether that fell14 within the category of things that Justice Yamauchi referred to as requiring a15 commencement of action by September 29.1617 MS. NIGHOLSON: I - I think he is looking for applications re -- he18 says, the Pengrowth application, that's the original one they filed and any other application19 to be filed respecting the funds. 50, to the extent --20212223242526272829303132333435363738394041

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:

Was the funds just 14,000,000 or 14,400,000?

14,400,000 plus interest.

Yes. Okay.

So --

Okay.

I just -- that -that's how - how I view that.

Okay.

MS. NICHOLSON: I - I would just also add one comment that withrespect to the Mr. Bishop's comments about Mr. Sun being an officer and director of H&CS, I - I don't know that there's evidence on that. He -- the evidence is that he's a directorof H&C S,

THE COURT: I am told he is the sole remaining director.

22

1 MS.I~TICHOLSON: Pardon?23 THE COURT: That he is the sole remaining director.45 MS. NICHOLSON: Of GVR?67 THE. COURT: Yes.89 MS. NICHOLSON: Yeah, but vis-a-vis H&C S.

101 1 MR. BISHOP: On - on H&C S, he is also a director and if - if12 you look at the credit agreement, he signed the credit agreement on behalf of H&C S as13 CEO.1415 THE COURT: Okay.1617 MR. BISHOP: And that's the client my friend --1819 THE COURT: And -and that may be in, you know, a few of the20 pages I didn't see but --2122 MR. BISHOP: Well --2324 THE COURT: -- if that is in the record, that is --2526 MR. BISHOP: -- the point I'm trying to make is, my friend's27 standing up today saying that she doesn't know who the CEO is of H&C S, the client she28 purports to represent.2934 MS. NICHOLSON: No, I -- what I'm saying is --3132 THE COURT: Another question is --3334 MS. NICHOLSON: -- that there is enough --3536 THE COURT: -- what is in the evidence?373 8 MS. NICHOLSON: Yeah, that's what I'm saying. I'm saying the -the39 evidence does not --4041 MR. BISHOP: It's in the evidence.

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THE COURT: Okay.

MR. BISHOP: I -I'll show you the -the documents, where hesigns on in a credit agreement as CEO.

THE COURT: Just tell me where I would find it. That is fine.

MR. BISHOP: With your leave, Sir?

THE COURT: M-hm. Oh, what is this you are passing up?

MR. BISHOP: The credit agreement.

THE COURT: Okay. So, that maybe in the box of stuff that is inthe - in the courthouse but not what was presented to me for this application. That is why Isaid I am not familiar with it.

MS. NICHOLSON: I --

THE COURT: It shows a line for Mr. Sun to sign but nosignature. But it does say he is Chief Executive Officer.

MR. BISHOP:signature and CEO.

(INDISCERNIBLE) signature -- there's a

THE COURT: As well as Mr. Jalbert, not of Mr. Sun but it says-- oh, it is 2 pages. There we go. Thank you. Sun, Williams, thanks, Mr. Clerk.

MS. NICHOLSON:

THE COURT:

MR. BISHOP:

THE COURT:

So - so I think --

I - I can deal with it later, what --

Just -- right --

-- what to take of that or not.

MS. NICHOLSON: -- but just -just -just the point is, the evidencethat - that is before you says that he's a director and there's that, that says that he --whateverthat means, it -- Mr. Bishop says it means that he is currently an officer. I - I -- there's noevidence to that effect. That is what it is and -and --

24

12 THE COURT: Okay.34 MS. NICHOLSON: -- so, that's all I'm saying.56 THE COURT: Okay. I have your points. There is no issue from7 the parties is there that what the receiver has listed as being irrelevant?89 MR. BISHOP: No, Sir.

l UI l THE COURT: Is, you know, just accept that? Okay. And Mr.12 Oliver's already told me --1314 MS. IVICHOLSON: Sir, just -just --151 b THE COURT: -- about the privileged categories. Yes, Ms.17 Nicholson?1819 MS. NICHOLSON: So, just for clarity, My Lord, that's the -- that --20 so we can all be clear. It's the things that are listed in schedule 1. Those are the things that21 they're proposing to provide to us. No issue between us rela -- in relation to that as I22 understand it.2324 THE COURT: Yes.2526 MS.IVICHOLSON: Then, schedule 2 are the ones that are27 presumptively subject to solicitor --2829 THE COURT: Privilege?3031 MS. NICHOLSON: -- client privilege.3233 THE COURT: Yes.3435 MS. NICH~LSON: My understanding, no issue between us on that.3637 THE COURT: All right.3839 MS. NICHOLSON: Schedule --4041 THE COURT: Sub -subject to a right --

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MS. NICHOLSON:

THE COURT:It may not. be privileged but -- yes.

MS. NTCHOLSON:

THE COURT:you would any other litigation.

MS. NICHOLSQN:

THE COURT:

Subject to --

-- that you may want to press for disclosure of it.

Yeah, and --

And they can do that in the normal course like

Yeah, and we' d seek the same proviso --

I think that is fair.

MS. NICHOLSON: -- and right and then schedule 3 is the commoninterest -- those are the common interest documents which you've broken into two issuesand you -- and now --

THE COURT: Right.

MS. NICHOLSON: -- we're back to you to --

THE COURT: And I was saying all three categories are in thatcategory because the receiver has said they are relevant. And if all the parties are acceptingthat they are -- take the receiver's ward on that, I am happy. I don't have to look at thestatement of claim, I don't have to look at the originating application, I don't have toconcern myself with whether or not they are relevant issues between the parties. I am noteven asking about materiality. This -this -- I am just wanting to make that sure all theparties. are right now, on the record, agreed that we are looking at the third category only.And I will try to give some advice and directions on them. Okay.

This may not be germane, Mr. Oliver, just indulge me because I had some questions as Iwent through the first report. At paragraph 34, receiver says he is not taking a position onthe determination of the entitlement to the deposit. But a few paragraphs earlier I read thatthe receiver made a demand for a return of the deposit to the receiver and that seemed tome like taking a position,. so...

MR. OLIVER: So, what that was intended to convey, Sir, iswe're not taking a position in relation to the. entitlement of the deposit as between the

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parties. The demand that was made for the deposit earlier on was because it was with theescrow agent and the --

THE COURT: McCarthy's, yes.

MR. OLIVER: -- the receiver at the time in the a - in the absenceof assurances from the agent which we did receive later. We just wanted to --

THE COURT:

MR. OLIVER:

THE COURT:we are - we are out of the dispute --

Okay. So, at the email --

-- protect it.

-- fram Mr. Stern (phonetic) came later saying

MR. OLIVER:

THE COURT:sense. Thank you.

Correct.

-- we are taking... Okay. Okay. That makes

Any chance, did Mr. Burgess as once counsel for GVR offer any insights into his view ofwhat he thought was his client's privilege and interest?

MR. BISHOP: Mr. Burgess was inclined to participate in theprocess fully at the front end. Ms. Nicholson advised him that he was in a conflict of interestsituation and that if was inappropriate for him to be cooperating and ultimately he got offthe file in - in view of Ms. Nicholson comments.

THE COURT: Okay.

MS. NICHOLSON: Mr. Bishop said it was inappropriate for him tobe cooperating. Our position was that it was inappropriate for him to be acting in -insofaras he was in a conflict of interest.

THE COURT: Acting for GVR --

MS. NICHOLSON: Yes.

THE COURT: -- in respect to this receivership I take it? Is that

27

1 MS. NICHOLSON: Yes.23 THE COURT: And so, help me, what -what is his conflict at4 that point?56 MS. NICHOLSON: He - he was acting for the directors, Mr. Jalbert7 and --

9 THE COURT: I see.1011 MS. NICHOLSON: -- company.1213 THE COURT: Not -- in addition to acting for GVR.1415 MS. NICHOLSON: Per --1617 THE COURT: Couldn't do both.1819 MS.IVICHOLSON: Couldn't do both.2021 THE COURT: I see. Okay. I think, Mr. Oliver, all of my22 preliminary questions are addressed. So --2324 MR.. OLI VER: Thank you very much.2526 THE COURT: -- I look forward to your comments on the heart27 of the matter, category 3. What does common interest privilege apply to at law and if you28 want to hint at any anything the receiver thinks without taking a position, I welcome your29 independent view.3031 MR. OLIVER: Well, I -- we are -- as I said, Sir, somewhat in the32 middle here. I can advise that we obviously have categorized these documents as such33 because of concerns that they -- that there was at least an arguable case that the documents34 were -- could be -could be subject to that, to either common interest privilege or the35 uncertainty around solicitor client privilege in light of the McCarthy's role and in - in - in36 saying that, not to waffle from that, but I - I do wish to make clear the unique circumstance37 we're in of course is we disclose them, the opportunity for anyone to argue otherwise is38 arguably gone. So, I - I - I don't -- I - I say that to say that we aren't taking a position on it.39 And just because we've categorized it as such doesn't mean that we are either.4d

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I guess the only comment in a general sense I would make is the -the trends in the caselaw do at -- seem to suggest the doctrine expanding or being interpreted in a way that issomewhat purposive in its - in its - in its interpretation.

THE COURT: f~Tii~

MR. OLIVER: It's intended to ensure that a certain category ofthe communications which are untaken I suppose with the expectation of a certain amountof confidentiality. But --

THE COURT: Is that -- and sorry to interrupt you there but isthat something for which the Court ought to have evidence before it accedes to thatassertion?

MR. OLIVER: I -- possibly yes. Yeah, I -- it's --

THE COURT: Right. And -and so it seems to be that GVR hasno interest in asserting that or anything. The question is whether either or both of the partiespresent today wish to rely on a common interest privilege that may be available to them.

MR. OLIVER:

THE COURT:

MR.. OLIVER:

THE COURT:third option at least in that respect?

I think that's fair, Sir.

Okay.

Yes.

Which would militate, I would think, towards the

MR. OLIVER: Agreed.

THE COURT; If I remember the three right, which -which is togive party that is more likely to have a common interest privilege to coirunent before thereis release of any records. A lot of times what we do of course is - is the Court looks at themand makes a say on them but --

MR. OLIVER: Yes. And, you know, I - I certainly acknowledge,Sir, there - there's a desire on the part of both parties here to frankly get on with this and -and --

THE COURT: Sure.

za

12 MR.OLIVER: -- resolve this. However, the circumstances3 we're in as receiver, we're -we're here as - as we are and -and the information as I4 acknowledged before is imperfect. We've done the best we can without incurring excessive5 costs. So --67Sy

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THE COURT: Is it the receiver's view that either or both of theparties present here today by counsel may have additional information that the Court oughtto consider before making a final determination about disclosure ornon-disclosure?

MR. OLIVER: Well, it would seem to me, Sir, that certainly Iwould imagine Ms. Nicholson's client, because of the fact that a significant number ofthese communications come from McCarthy's, who was counsel to both GVR and -and H- HC&S (sic). That party I - I would expect would have something to say about that. Now,they've had a chance to put it forward as well but here -here -here we are.

THE COURT:relevant to the capital D dispute?

And all the records we are talking about are

MR. OLIVER:

TIC COURT:

In - in - in my view they are, yes.

Okay.

MR. OLIVER: Yes. In terms of Mr. Bishop, I - I - I have notseen documents that jump to mind that would involve Pengrowth claiming that they havean - an interest --

THE COURT: Okay.

MR. OLIVER: -- a common interest in them but that's frommemory.

THE CURT: In the materials that are filed by your client,. thereis a number of references to the confidentiality agreement and. what is confidentialinformation and subject to what I might hear from the other parties, it seems to me thatwould have little bearing, the documents are either relevant or not. Only if there issomething the Court might infer by the existence of that agreement that supports aconclusion there is a common interest or not but the definition, it seemed it relates to thesubject matter of the assets, not the process of conveying the assets.

MR. OLIVER: Yes.

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THE COURT: So, I -- it is hard to imagine they fall in therelevant category at all.

MR. OLIVER: I -- and I apologize, sir. We had -- that issue Ibelieve we have resolved as well and Iforgot --

THE COURT:

MR. OLIVER:

THE CURT:

Okay.

-- to mention that.

Okay.

MR. OLIVER: The -- just to begin with, the -the -the concernon our part was while I agree most of it is sort of a - of a technical basis, it was not clear tous that -- or at least it was sort of suggested to us at one point that actually one of thedefences may be in part based on technical information, so the line of relevance was a -was alittle blurred. With that said --

THE COURT: Okay.

MR.OLIVER: -- my understanding is the agreement is theinformation can be produced subject to the usual litigation under -undertakings of --

THE COURT:

MR. OLIVER:

THE COURT:

Sure.

-- of --

Confidential.

MR.OLIVER: -- confidentiality so perhaps my friends canconfirm that but that's my under -understanding of --

THE COURT:

MR. OLIVER:

THE COURT:

MR. OLIVER:

Thank you.

-- where we settled on that.

Okay.

Okay. Thank you.

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THE COURT: How do I decide who goes next? I see how thereceiver does -does these things so well suggesting I flip a coin. Who is -who is first inthe alphabet? So, Bishop I guess before -- here we go.

MS. NICHOLSON:

THE COURT:top down, bottom up.

He's closer to you, too.

What I will do though is what we used to call a

MR. BISHOP: Yes.

THE COURT: So, after Ms. Nicholson has made whateversubmissions, she has the opportunity to respond to whatever she has heard.

MR. BISHOP: Yes.

THE COURT: But then you will have the opportunity to replyback and then Mr. Oliver last if he wishes to --

MR. BISHOP:

THE COURT:

Certainly.

-- add something. Go ahead, Sir.

Submissions by Mr. Bishop (Response)

MR. BISHOP: Certainly. So, I'll try not to be repetitive, Sir, butthere are things I think that it's very important the Court understand that may have aprejudicial or unfair impact on Pengrowth, depending on how things proceed.

THE COURT: Okay.

MR. BISHOP: And it stems largely from Mr. Sun'sinvolvement. So, a brief recap. Mr. Sun is --

THE COURT:

MR. BISHOP:

THE COURT:

Or non-involvement?

Pardon me?

Sorry. Go ahead.

32

1 MR. BISHOP: Well, he's involved insofar as he makes2 decisions with respect to petitioning companies into receivership and he's involved in that3 he's on the board and an officer of -- or previous officer of at least one of the companies.4 But then when it comes time to actually responding to the receiver's requests for5 information, he's silent and he doesn't participate in the process. So, just to quickly6 summarize, Mr. Sun is the present, sole director of Grand Valley. He is the past and7 ostensibly present CEO of H&C S. He is a present director of H&C S. In his role as a8 director of both companies, he purported to instruct Grand Valley to consent to the 11th9 hour ex parte receivership order despite being fully aware of Pengrowth's application filed

1 U August 29, 2017, returnable September 8, 2017. This is notwithstanding that he was at - at1 1 a minimum, a director of both companies and at a maximum, a director and officer of H&C12 S and a director of GVR.1314 Mr. Fun has -- Sun has steadfastly refused to cooperate with the receiver. Indeed, he has15 failed to even respond to the receiver's attempts to contact him. Notwithstanding that Ms.16 Nicholson represents H&C S, a company of which he is a current director and a past and17 ostensibly present CEO.1819 Sa, what flaws from that, Pengrowth hasn't had the usual context in which to assess the20 claims of privilege. Had Mr. Sun participated in the prot -- the process, we would have21 more granular information with respect to the circumstances surrounding the creation of22 the documents and we would be in a better position, and when I say we I mean the receiver23 and counsel, would be in a better position to assess the merits of any potential privilege24 claim.2526 Grand Valley has taken no position an its entitlement to the deposit which has resulted in27 a limited and unnecessary role for the receiver. Indeed, Grand Valley has taken no role or28 advocacy with respect to the potential privilege issues and I submitted earlier and I will29 submit again that that is a very significant point that the Court ought to take into30 consideration in deciding whether or not to release those documents that pertain solely to31 Grand Valley and where there was a potential or an allegation that there may be some32 common interest privilege concerns with respect to those documents.3334 THE COURT: So, that lack of conduct by Grand Valley should35 wipe out any interest another party may have under common interest privilege.3637 MR. BISHOP: Well, what party --3839 MS.1vICHOLSON: That is what you are saying?40

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MR. BISHOP: What party? Depends on what party. It shouldwipe aut any interest that Grand Valley has in a document that would otherwise beprivileged, it should wipe. out any interest in any dflcument that H&C S has on the basisthat its common interest privilege inter --

THE COURT:..interest privilege they have?

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COiJRT:

Any document that they have or any common

Any common interest privilege --

Okay.

-- they have on --

And -and why?

MR. BISHOP: -- the basis -- because Mr. Sun is a controllingmind and acts for both companies and it's --

THE COURT: How do I know that? Even if what yourepresented is correct that he is a director, ostensibly an active officer, doesn't make himthe controlling mind necessarily, It would take a -lot snore information to know whether heis the directing mind.

MR. BISHOP:

THE COURT:

MR. BISHOP:second -- for a second.

THE COURT:

Well --

I want to -- go ahead.

That's a fair point but bear with me far the

Okay.

MR. BISIIOP: If I can establish he is a controlling mind or closeto a controlling mind, or the ultimate chess player moving the pawn pieces around in thecontext of this litigation and I think I can demonstrate that --

THE COURT: Okay.

MR: BISHOP: -- then they should not be entitled to anyprivilege protection because you can't on the one hand --

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THE COURT:

NIR. BISHOP:

THE COURT:

Okay.

-- go to the Court --

No, then I follow that --

MR. BISHOP: -- and say, I want to put this company intobankruptcy, oh and by the way, I also have a say and speak for this company and I'm adirector, so I'm going to get them to consent to the bankruptcy with a view, at leastpartially, to precluding Pengrowth from having access to documents that it would otherwisehave access to.

THE COURT: Well, it could have been for any number ofmotives none of which would he appropriate but that would just be one of them.

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:

MR. BISHOP:

Exactly.

But it could be for some proper motives also. But

To not participate --

-- it just --

-- in the receivership?

I - I don't have -- hook in too deeply in this one.

Okay.

THE COURT: But do I take your earlier point to mean just withrespect to GVR, not any common interest privilege from any other party but just GVR notparticipating, silent, that that amounts to a waiver by GVR of its privilege?

MR. BISHOP: Yes.

THE COURT: It -- has there been some jurisprudence to thateffect?

MR. BISHOP: N -- well,

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THE COURT: I thought - I thought waiver had to be prettyexpress. That is -that is all.

MR. BISHOP: Well, it's not a waiver argument insomuch as it'sa - it's a fairness argument that in the ordinary course, but for -but for H&C S doing. whatthey've done, had we proceeded in the normal course to dispute who's entitled to thedeposit pursuant to the deposit agreement, we would have exchanged all manner ofdocuments in the usual course.

THE COURT: On an originating application?

MR. BISHOP: Well, yes on an originating application becausethe first thing that happens in an originating application is what paper you're prepared togive me and what paper do you want in return? And then if there's a fight, you go to thecourt and you say, this is a matter that can only be determined with -with these records. I- I appreciate the distinction under the rules with respect to the automatic process where aparty --

THE COURT: Yes.

MR.. BISHOP: -- is obligated to execute an affidavit of recordsbut that's still how it works. But we're in the unusual circumstance where Grand Valleyitself and through the receiver has taken no position with respect to its entitlement to thedeposit, nor with respect to its -its --

THE COURT:

MR. BISHOP:

THE COURT:

That part seems --

-- its assertion --

-- to be undisputed.

MR. BISHOP: Yes. Nor has it taken any position with respect toits entitlement to assert privilege. The burden of proof on privilege is on the party thatpurports to assert it once it's been challenged.

THE COURT: Well, we have a party called the receiver in theshoes of --

MR. BISHOP: Yes.

3b

1 THE COURT: -- that person who has basically said on a bunch2 of documents we are asserting privilege, on another bunch maybe we should be. We don't3 know, we need some help.4~ MR. BISHOP: Yeah, well Ithink - I think largely did --67 THE COURT: So, it has been asserted and so does that not8 affect the burden?9

10 MR. BISHOP: Well, I haven't been assert --1112 THE COURT: Can I just automatically say they've waived13 privilege because they have not taken further steps beyond what the receiver has done in14 its shoes to say here is possible privilege?1516 MR. BISHOP: Well, well I think that's up to you, with respect,17 My Lord.1819 THE COURT: Okay.2021 MR. BISHOP: I would have thought that the Court would be22 loath on a application for advice and direction to say, in response to what is in essence,23 well, we've looked at this batch of documents and they're all producible so we don't think24 there'll be a fight there. We've looked at this batch of documents and we think likely --2526 THE COURT: M-hm.~~

28 MR. BISHOP: -- they're privileged but we haven't fully formed29 our views on that nor have we filed any affidavits with respect to why we think they are30 privileged, nor have we characterized them under which category of privilege but we're31 concerned that some or all of these documents may be privileged, with no efforts to say32 well, this one is, this one probably is, this one likely isn't but here are the documents that33 we're concerned over. Help us; Court, with respect to how we deal with these documents.J~

3 5 And then we've got this third tranche of documents which is even more amorphous, which36 is, well, depending on the relationships between the companies and the precise37 communications that were going on at the time, there maybe, some parties may have some38 common interest privilege in this third tranche of documents. And with respect, I don't39 think that that's an undertaking that the Court is normally interested in doing. And I'm40 saying when you layer that on top of the obvious conflict that Mr, Sun has, when you lay41 that on the position of potentially being prejudiced in the face of Pengrowth, and you look

37

1 at the jurisprudence that says, in the absence of real compelling documentation to support2 a privilege assertion, the document generally, the jurisprudence favours disclosure. So, let's3 disclose it.45 THE COURT: So, would you -- what would your client's6 position be on the third approach? It seems engaged by what you were just talking about?7 Mr. Oliver's third approach, if I understood it correctly,. was to say probably they all go toS the -- both parties but only after H&C S has the first opportunity to review them and -and9 then it would be their onus to assert common interest privilege having understood actually

1 U what the record is.1 112 MR. BISHOP: We're only talking about that subset of13 documents that deals with. H&C S. We're not talking about the other documents that fall14 within that tranche that don't have anything to do with H&C S, is that right?151617181920212223242526272$29303132333435363738394D41

THE COURT:

MR. BISHOP:

Yes.

Yeah. I think that's acceptable.

THE COURT: And -and some of them may. The receiver istelling me he doesn't think there is any in that third tranche for which there may be aPengrowth argument to common interest privilege and I would think if there are some, thereciprocal would apply, they go first to Pengrowth before they would go out in the open toall parties. And -and maybe --

MR. BISHOP:

THE COURT:

And the GVR --

-- you -you could --

MR. BISHOP: -- documents that don't have anything to do withPengrowth and don't have anything to do with H&C S --

THE COURT: Well, and -and that may be the difficulty thereceiver finds itself in --

MR.. BISHOP: Right.

THE COURT: -- is just because the name isn't on -- or justbecause let's say it is not copied, the communication isn't copied to somebody at H&C Sbut it is referred to, it is discussed in it. Does that mean it's not in the category where H&CS would have the opportunity to see it first?

38

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MR. BISHOP: No.

THE COURT: Okay. And the other- side of it. If it is copied tothem, it makes no reference to H&C S, would they have the opportunity to first review t11edocument?

MR. BISHOP: No.

THE COURT: So, in your view, it has to satisfy sort of both -bothtests, both boxes. Got to refer to H&C S and it has got to be copied to somebody therebefore common interest privilege would be engaged?

MR. BISHOP: And it has to be the type of communication thatone can legally say is subject to common interest privilege.

THE COURT: Yes. There has to be something that seems prettyclear. There is an expectation of confidentiality --

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:received would be checking?

MR. BISHOP:

Exactly.

-- about the communication.

Exactly.

But maybe that would be the only box the

Yeah.

THE COURT: Not -- doesn't matter if they copied or not toH&C S? Doesn't matter if it is referred to or not? But if there would be an expectation ofconfidentiality on the part of H&C S or Pengrowth, then that party would have the -- itwould go to them first and they have, I don't know, 30 days and -and they assert with someevidence, a basis for keeping it confidential or it goes into the disclosed pool. Moves up tocategory 1.

MR. BISHOP: Correct. And none of this would delay theimmediate disclosure of the category 1 documents.

THE COURT: Okay. And that is me asking the questions based

39

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upon an array of options. your friend pointed aut but you came w~inting to urge upon mesomething. What was that?

MR. BISHOP: Well, I wanted you to take -- look at it through adifferent lens which is to say because to some extent, we have a creditor purporting toassert a privilege claim that belongs to a counter party, GVR --

THE COURT: M-hm.

MR. BISHOP: -- that insofar as the creditor, H&C S, has nainterest in the GVR documents, and since no one has articulated a concern with respect toany GVR documents being. the. subject of either privilege an its face or common interestprivilege, that entire group of documents should be produced as well. Because what I think

THE COURT: You don't think there is a sufficient --

MR. BISHOP: -- that what -what --

THE COURT: -- nexus -- sorry to interrupt..

MR. BISHOP: Yeah.

THE COI7RT: ~'ou don't think there is a sufficient nexusbetween the -the creditor relationship in respect. of a $180,000,000 transaction and the$184,000,000 transaction? Whether the PSA is being performed properly or not?

►~~: . . •

THE CURT;

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT::

If - it --

That is at the heart --

-- it is communications inter se H&C S and --

Sorry. What do you --

-- GVR --

What do mean, inter se?

As between.

40

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THE COURT:

MR. BISHOP:

THE COURT:communications as between the --

MR. BISHOP:

THE COURT:acquisitor of assets and borrower --

u1:~3f.~:[~7~

THE COURT:

Okay. Thank you. Was there a therefore?

Pardon me?

Was there a therefore? So, if it is

If there's --

-- the lender, potential lender and potential

Right. That --

-- then --

MR. BISHOP: -- that come within the scope of all of the otherindices of something that could give rise to cainmon interest privilege, then Y agree. Thosego through the process that you just articulated.

THE COURT: Okay. Okay.

MR. BISHOP: But if there's GVR documents that aren't sent toH&C S but may have been sent to other parties that were put on notice today, thosedocuments should be produced.

THE COURT: Okay.

MR. BISHOP: Ie, it's not fair for H&C S as creditor and relatedcompany through Mr. Sun to GVR, to be in the position to making determinations as towhether GVR documents are producible.

THE COURT:

MR. BISHOP:

THE COURT:GVR to assert the privilege or not.

Well, I think it would be --

Unless it's --

I think it would be if Mr. Sun was here directing

MR. BISHOP: Well, that's the point.

41

1 THE COURT: But - but that is a different --23 MR. BISHOP: Mr. --45 THE COURT: Yes.67 MR. BISHOP: Mr. - Mr. Sun notwithstanding the fact that he8 initiated these proceedings, Mr. Sun -- it - it -it's worse than it sounds. Mr. Sun wouldn't9 even return the phone calls. The receiver made real efforts to get him involved. They --10I 1 THE COURT: I read that.1213 MR. BISHOP: The -the -the first phones went to him and said14 we're trying to get the records. Can you help us? He didn't return the calls. So --1516 THE COURT: And with resp --1718 MR. BISHOP: -- so, why should my clients be prejudiced in any19 way by his entire failure to comply?20? 1 THE COURT: Because he may not be the directing mind of22 H&C S. Tliat --2324 MR. BISHOP: Well, he's a director.2526 THE COURT: That is the piece that needs a -- yes but maybe27 the only director of GVR. but I don't have a basis to conclude he is also controlling and28 directing H&C S.2930 1VIR. BISHOP: Okay. Well, if he's the CEO, he is. So, I would31 have thought it' d be a relatively simple matter for Ms. Nicholson to tell us whether or not32 he's the CEO of the company today. And if he not, when. did he get off and that'll inform33 these discussions.3435 THE COURT: Okay. With respect to the possibility that some3 6 of the documents in category 3 have associated with them a common interest privilege with3 7 your client, with Pengrowth?3839 MR. BISHOP: Yes.40

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THE COURT: How would those be recognized by the receiver?And. -and. what is your basis for -- when I raise that possibility, you were nodding yourhead up and down.

MR. BISHOP: Yeah.

THE COURT: Why is it your view that there very well may besome in category 3 for which your client has a common interest privilege?

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:

I doubt it, having reviewed --

Okay.

-- the material --

Okay.

MR. BISHOP: -- but ifthe - if the - if the receiver forms the viewthat are you- worried about- this document, you having some contingent common interestprivilege in this paper and does it cause you any concerns, Y would be more than happy toreview the document right back transparently and say --

THE COURT: Okay.

MR. BISHOP: -- no, there's nothing here or yes, there is.

THE COURT: Okay..

MR. BISHOP: But the challenge --

THE COURT: But -but --

MR. BISHOP: -- the way the process works on the other side isit's basically H & SC (sic) writing to H & SC. Right? How is anyone going to speakindependently for Grand Valley?

THE COURT:

MR. BISHOP:

THE COURT:

Okay. Anything else?

Yes. I have a few more --

Okay.

43

12 MR. BISHOP: -- submissions and they deal with again, the fact3 that this is a challenging situation for the Court, the receiver, and the parties. As we sit right4 now, Sir, H&C S has a wholly contingent interest in some of the deposit proceeds which5 interest is wholly contingent on Grand Valley's contractual entitlement to the deposit at --6 deposit funds. However, as I've said before, there is no contract between H&C S and7 Pengrowth. The only contract is the contract between Pengrowth and GVR. If Pengrowth8 is entitled to the deposit, the deposit does not form part of GVR's assets, and there will be9 no monies payable to GVR's creditors. I think everyone in Court is ad idem on that point

10 in agreement. This begs the question as to how, in circumstances where the receiver takes1 1 no position on the contractual issue, how H&C S can purport to participate in a dispute12 involving a contract to which it is not a party when GVR and the receiver are taking no13 position.1~15 THE COURT: Maybe I missed something, but I thought by16 September 29, it had to file its own claim if there would be an additional claim and it did,17 and so that's what it is pursuing.1819 MR. BISHOP: Okay. And --2021 THE COURT: Right?2223 MR. BISHOP: -- we'll pursue our claim against GVR?2425 THE COURT: Isn't that what is happening?2627 MR. BISHOP: Well --2829 THE CURT: I - I am asking.3031 MR. BISHOP: there's -there's --3233 THE COURT: You are -you are asking me rhetorical questions.3435 MR. BISHOP: No.363 7 THE CURT: I would prefer it if you give me answers..3839 MR. BISHOP: I - I thought we were here for advice and40 direction, My Lord but I - I'm happy to provide my view --41

.~

1 THE. COURT: That is a good comeback.23 MR, BISHOP: -- of what the advice and direction should be.45 THE COURT: Good.67 MR. BISHOP: So, we layer on top of that Mr. Sun's conflict of8 interest and. his failure to cooperate. I submit it prejudices Pengrowth and the receiver to9 take no position as to Grand Valley's contractual entitlement to the deposit. And not to

10 tender any evidence from the management of Grand Valley who were involved in the1 1 transaction and are independent of H&C S. So --1213 THE CQURT: That went -- do you mind giving me that once14 more?l~16 MR. BISHOP: Sure. So, we're now in the -- we've got a conflict17 with Mr. Sun --]S19 THE COlJRT: You say. Okay.2U21 MR. BISHOP: -- we have GVR taking the position that while:22 we're not going to take a position with respect to Pengrowth's entitlement to the proceeds.23 We know that some of the former management of GVR tales the position that Pengrowth24 is entitled to the proceeds. How is it fair for Pengrowth to be fighting both the party with2 ~ whom it had its contract and another party with whom it had no contractual privity that26 purports to assert a contingent security interest in the deposits that it could only have if27 GV~Z is successful in its case defending. the action commenced by Pengrowth saying28 Pengrowth is entitled to the deposit proceeds.2930 THE COURT: M-hm.3132 MR.. BISHOP: And let me take it one step further. There is, in33 my submission, a very real question as to where -- whether the receiver even needs to34 remain involved at all in the process given it will have fully completed its role as set out in35 paragraph 38 of the first report.. And you'll recall, Sir -=3637 THE COURT': I - I kind of thought your client might be happy38 to have the receiver continue actually.3940 MR. BISHOP: Ta do what?41

',

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THE COURT: Because -because before starting this afternoon,T contemplated maybe the receiver would be aut of all of this.

MR. BISHOP: Yes..

THE COURT: That changed when T heard that there, you know,depending on who succeeds in the main bouts, there may be some dollars that requiredistribution to creditors.

MR. BISHOP: Sure. But -but,. you know, that's more aform --

THE COURT: And apriority --

MR. BISHOP: -- of a substance

THE COURT: -- question.

MR. BISHOP: Either we win, it's all ours, either they win, inwhich case. it's almost all theirs and some of it may go back to the 400,000 of the18,000,000 may go back to the two former employees. But -but in between --

THE COURT:

MR. BISHOP:receiver to do. And I'm --

THE COURT:

MR. BISHOP:

Is this --

-- that determination, there's nothing for the

Right.

I'll be --

THE COURT: But -but that is different than discharging untilmaybe there is some activity at the end, maybe not. Okay.

MK. BISHOP: As I said, I've been quite candid that I'm not --

THE- COURT: I just thought --

1VIR. BISHOP: -- normally --

.~

1

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THE COURT: -- your party would be pleased that there'sanother one in there to help get some this GVR information out in the open and you canpursue your client's claim. But for the receiver being involved --

MR. BISHOP:

'THE COURT:

1VIR. BISHOP:

THE COURT:records, all that sort of stuff, the --

Well, this is it.

-- I am not sure that would have happened.

Which?

The dis - the disclosure df the listing of the

(111: C * • ' No, but --

THE COURT: -- chasing about for the past participants in GVRthat provided the information, brought the --

MR. BISHOP: Do you mean but for GVR being put intoreceivership? Because there was communications between Pengrowth --

THE COURT: It wouldn't have been a happy experience whenyou got that notice but there. was an ancillary benefit, that is all I am saying.

MR. BISHOP:up.

Ex parte the day before we had our motion lined

THE COURT:

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:

MR. BISHOP:

THE COURT:talking practically now?

Yes.

Right. We were ready to go that day, Sir.

I am sure. Okay.

But --

It would have --

--I'dbe--

-- been adjourned, wouldn't it? Just -- we are

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MR. BISHOP: It might have been adjourned, Sir. I - I can't say.

THE COURT: Yes.

MR. BISHOP: But it ~~vouldn't have been put into receivership

THE COURT: Right. Anyway, I have taken you off track.

MR. BISHOP: Okay. So --

THE COURT: ~o, go ahead.

MR.. BISHOP: So, the -the bottom line -- and -and don't get mewrong, I'm not in any vvay criticizing or taking issue with anything that the receiver andMr. sliver and his team have done but I would be grateful to hear from him that what thereceiver views its role as being, once we resolve this document issue. And -and if I'mright, and if he agrees with me, and there is either a nominal or a very minimal role, Isubmit that the quickest way to resolve this matter is to get. back to what it was in the firstinstance, which was a case between Pengrowth and GVR on a simple contract with respectto whether or not the deposit proceeds are payable.

THE COURT: Okay. And -and you may be right. It is not infront of me right now but, you know, I - I hear you on that. Am I wrong. though inunderstanding that despite the stay, your client is in the process of prosecuting its claim?Coincident or concurrent with H&C S prosecuting their claim. Isn't that what is happening?

MR. BISHOP: Well, H&C S's application was to get its securityto be determined as valid. The receiver has said it's received an --

THE COURT:

IU1:~:3(.~:[i7~

THE COURT:

MR. BISHOP:contingent upon --

THE COURT:

An opinion --

-- an opinion --

-- that it is.

-- confirming it's valid but that it's wholly

Sure.

1 MR. BISHOP: -- the underlying contract. So, I'in happy --

3 THE COURT: Okay.4

5 MR. BISHOP: -- to proceed against GVR.67 THE COURT: I thought you were, aren't you?89 MR. BISHOP: I can't. There's a stay.

l01 1 THE COURT: Well, what are the steps that Justice Yamauchi12 put in place? Weren't they a light lifting of the stay I will call it?1314 MR. BISHOP: Pardon me?1516 THE COURT: I thought there were litigation steps and17 deadlines put in place --1819 MR. BISHOP: Yeah, they -- those --2021 THE COURT: -- in respect of --2223 NIR. BISHOP: -- were all --2425 THE COURT: -- the capital --2627 MR. BISHOP: -- put on hold pending --2829 THE COURT: -- ̀ D' dispute which is your claim.3031 MR. BISHOP: -- the -- pending the monitor's report and32 pending dealing with these document issues.3334 THE COURT: Well, they are only document issues if you are35 dealing with the litigation. So, it's not stayed, is it? Practically?3637 MR. BISHOP: Well --3839 MS. GRAY: Sorry, My Lord, but my --4041 MR. BISHOP: Yeah.

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THE COURT:

MS. GRAY:

MR. BISHOP:

Yes.

-- this is my --

Let my friend speak to that.

MS. GRAY: -- friend here --. What happened is, effectivelyour action is -- or our application is not being prosecuted against GVR because the receiveris taking no position with respect to that application. The parties axe now basically the waythat Justice Yamauchi's order was, is that H&C S is now the party that is contestingPengrowth's application because GVR is not participating at all. And so, if we're in asituation where the receiver is not taking a position on our application on behalf of GVRand nobody from GVR is taking a position, then it - it is --

THE COURT: Should be an easy lawsuit for you.

MS. GRAY: Exactly. Because H&C S has no role to play inour application.

MR. BISHOP: That's our point. Said much elegantly by mycolleague than by me. But I would be keen to hear from my friend, My Oliver, his views.on the ongoing --

THE COURT: Okay. You -you can do that at the end and that -

MR. BISHOP: Yeah, okay.

THE COURT: -- that is fine. That is --

MR. BISHOP: Because if it's simply a - a contingent conduitthat comes into play to transfer a portion of the deposit proceeds in the event GVR --

THE COURT: Right.

MR. BISHOP: -- is successful --

THE COURT: Yes.

MR. BISHOP: -- with respect, it doesn't make any sense for «s

50

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to continue to fight this dispute in the context of --

THE COURT: Of a receivership.

MR. BISHOP: -- the receivership action. Just let us go. We'll goagainst DVR (sic) and we'll get that determined quickly.

THE COURT:

MR. BISHOP:

THE COURT:

Okay. Thank you.

Thank you, Sir.

Ms. Nicholson.

Submissions 6y Ms. Nicholson (Response)

MS. NICHOLSON:

MR. BISHOP:

MS. NICHOLSON:

MR. BISHOP:

MS. NICHOLSON:thanks.

My Lord. Are these your notes, Dave?

Yeah.

Thank you.

You want to use them?

I'm going to pass. I've had enough for them,

THE COURT: That is all the test answers.

MS. NICHOLSON: My Lord, we really need to start at first things.Okay? So, the starting point might be the consent receivership order. We need tounderstand what it is that the receiver was appointed over. It was -- it is an appointment ofthis receiver, not over the company, but in a sense over its only asset, which is this potential

THE COURT: Deposit.

MS. NICHOLSON: -- interest in the deposit. Plus it is appointed inrespect of the PSAs related agreements, amendments to those, and essentially theagreements that are an issue. It's appointed over that and I'm now referring to paragraph2(a) of the receivership order. Do you have that?

51

THE COURT: I have it open.

MS. NICHOLSON: Thank you.

THE COURT: des.

7 MS. NICH4LSON: The deeds and the documents, the writings and8 the papers, and the books and the records relating to those agreements, the revenues and9 monies in relating -- and that includes this deposit, the benefit of the guarantees, and ̀ E',

10 importantly, all benefit, power, and advantage of the debtor that's GVR to be derived1 1 therefrom. So, namely the PSA, including the benefit, power, and ad -and advantage to12 enforce the rights of the debtor thereunder in the name of the debtor after the occurrence13 and during the continuance of an event of default. That puts the receiver in charge of14 advancing GVR's position in relation to the deposit. That is why it brought forward and15 brought for -- the documents forward. But -but Justice Yamauchi limited the role of the16 receiver, I think it was in a -- inconsistent, quite frankly with what the receiver sought from17 Justice Yamauchi, which was, look, we are a court officer. We do not want to get into the18 fray of this. We'd like to provide the documents and as we see it, allow the parties that19 have an interest, who are claiming into the money, to - to fight the dispute. That's -that's20 what that is.2122 So - so GVR, while there may a director, Mr. Sun of that, I - I don't know about his - I23 don't know his position with GVR. I have no control over GVR or whatever GVR is doing.24 They are insolvent. They have no money. So, you -- to your point about, boy, it's good that25 the receiver's been involved. H&C S is also happy that the receiver's been involved in26 order to try and get the records which hopefully, they will now get. So, that's been the role27 of the receiver and it has performed that -that role. So, the -the concept or the assertion28 that GVR hasn't asserted its rights in respect of the deposit, those rights are sitting with the29 receiver who essentially has been told. to take a neutral role by the Court in this.3031 So, if - if the answer is the -the receiver should be advancing and should be taking an active32 role, and should be asserting the rights, then -then that's one thing. And it -- what it did, is33 it wanted to and I understand why, sidestep the issue and bring the two parties who have34 the dispute to the Court. So - so, to say that GVR -- so - so that GVR is not -- has no funds,35 is not in a position, does not have the even right to do -- to assert this. It is the solely within36 the right of the receiver to assert GVR's claim. That's what it's -- it - it is -- it -- GVR does37 not have the right to do that. The receiver does. It's appointed and it is to enforce that right.38 The Court has said no, it's going to have a more neutral role.3940 So, then --41

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THE COURT: M-hm. I - I want to take it to the records at issueand --

MS. NICHOLSON: Oh, yeah. I'm only --

THE COURT: -- what -what your client's --

MS.I~TICHOLSON: -- going on because of the --

THE COURT: -- position is.

MS. NICHOLSON: -- context here.

THE COURT: I - I know. I know.

MS. NICHOLSON: This is a simple --

THE COURT: You -you have hooked in and --

MS. NICHOLSON: -- application and -and -and - and I - I will -- I -I - I really want to deal with all -all -- cause I feel like we're off on a tangent. What wehave is a process, a receivership process --

THE COURT: Yes.

MS.1vIGHOLSON: -- that says, claim in to the money. Everyonebring in your claims to the money and now my friends don't like it anymore for whateverreason. They -they don't want to be in the receivership process. They want to get rid ofthe receiver on the one hand and then say, oh by the way, you have no standing. So,receiver's gone and -and you H&C S have no standing, the claim to the - to the deposit.That's -- talk about prejudice. Talk about unfair. That's unfair and prejudicial.

THE COURT: Okay.

MS. NTCHOLSON: Moreover --

THE COURT: In - in all of that --

MS.1vICHOLSON: More -moreover --

THE COURT: -- is entailed by something Justice Yamauchi

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made by order and it is what it is. We are here to deal with some records. What is yourview on the third approach of Mr. Oliver?

MS. NICHOLSON: I support the third approach.

THE COURT: Ah. Okay.

MS. IVICHOLSON: The only issue to - to me, I - I came here with no- no position and you ask, what's the evidence? What -what -- we - we don't know theevidence. Well,. of course,. we haven't seen the documents. So, we're not in a position andweren't in a position to - to effectively respond. My instructions were -were to - to ineffect, take -take no position because --

THE COURT:

NIS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

Well, it is --

-- we can't --

-- hard for me not --

-- take a position..

THE COURT: -- to hook in at some point but when -when yourclient filed a statement of claim by September 29, you are. saying --

MS. NICHOLSON:this by that date.

THE COURT:

MS. NICHOLSON:

THE CQURT:this context.

MS. TTICHOLSON:

THE COURT:

MS. IVICHOLSON:

THE. COURT:

Oh, the -- no, the app -- it was an application in

Okay. What was the statement of claim then?

To commence the receivership.

Oh. Okay. So, your client filed an application in

Yeah, and what's important in the --

Without --

-- application --

Without having the information or any evidence

~4

1 that it was all with GVR? So, how --

3 MS. NICHOLS4N: I just -- it ~~~as July --4

5 THE COURT: -- were you --6

7 MS. NICHOLSON: No. The -the -the -- what it did is it said,8 receiver, please bo and get all of UVR's --9

101 1

THE COURT: Get the --

12 MS. NICHOLSON: -- informations.1314 THE COURT: -- record.151 h MS. NICHOLSON: And please bring it forward. We were --1718 THE COURT: Okay.1920 MS. NICHOLSON: -- behind. Please, please bring the --2122 THE COURT: No, I understand.2324 MS. NICHOLSON: -- evidence.2526 THE COURT:. Justice Yamauchi .said good idea.2728 MS. NICHOLSON: Good idea.2930 THE COURT: Get on it.3132 MS. NICHOLSON: You should do that.3334 THE COURT: He's done it.3536 MS. NICHOLSON: And that way, everyone can get the evidence --3738 THE COURT: Okay.3940 MS. NICHOLSON: -- of GVR and put that forward. So - so, the im -41 -another one -- you asked about the application that we brought. The one other point we -

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we -- that needs to be raised --

THE COURT: Yes.

MS. NICHOLSON: -- is our claim, just for the record, is notderivative only of our -- of GVR succeeding. Okay? So, our -our -- we also have a directclaim under our application --

THE COURT: M-hm.

MS. NICHOLSON: -- to the -- that we have security over the depositnow that is sitting in McCarthy's trust aceaunt.

THE COUNT: Insofar as GVR is entitled to it, no?

MS. NICHOLSON: Not, I mean, that's the alternative argument,yeah.

MR. BISHOP: No, Ghrista --

THE COURT: So, so help me with how your client would havean entitlement to it regardless of GVR not having the right to it?

MS. NICHOLSON: Well, we're -we're getting into the merits of thething but we --

THE COURT: Yes.

MS. NICHOLSON: -- of the -- but, I mean, the --

THE COURT: We have been for most of the afternoon.

MS. NICHOLS~N: No, but -but -but _just -just to be clear, I mean,you can read our application. It was filed on September 29th. We are -- we ask for adeclaration that we have security now in that deposit.. Alternatively, we say the depositought to be paid to GVR and as an -- GVR is entitled to it.

THE COURT: I see.

MS. rTICHOLSON: So --

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THE. COURT: Olcay.

MS. NICHOLSON: -- just saying,. if that's the alternative argument,.we have a --

THE COURT: Right.

MS. NICHOLSON: -- direct claim. Not a mere con -- only ancontingent claim, we also have a contingent claim --

THE COURT: Okay.

MS. NICHQLSON: -- too. And that may -may well be the betterargument but that's for another -another day. So, the only --

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NICHOLSOl~T:

THE COURT:

Okay. So, we are into --

-- issue is --

-- the third --

-- -back to the --

-- category?

-- documents.

Yes.

MS. NICH~LSON: I --we're happy to review the documents that arethe subject of the common interest. Now, of course, what is that? Really, what we're tryingto get at is - is the scope of that. And how -how does the receiver determine what H&C Sgets that might --

THE COURT: Right.

MS. NICHOLSON: -- be the subject to that. And we - we would arguefor the -- of - of the broader interpretation which would not be limited to us being a copiedon or a recipient of the -- a - an email.

THE COURT: Well, I think where we got to in my discussion

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32333435363738394041

with Mr. Bishop is that he won't like this raising perhaps but it doesn't matter if H&C S iscopied on it,

MS. NICHOLSON: Yeah.

THE COURT: It doesn't matter if H&C S is named in it butthere must be compelling basis for the receiver to conclude that there is an expectation ofconfidentiality over the content of the communication.

MS. NIGHOLSON:

THE COURT:

MR. BISHOP:

MS. rTICHQLSON:

MR. BISHOP;

MS. NICHOLSON:

THE COURT:with us Mr. Bishop.

MS. NICHOLSON:is --

THE COURT:

Yes. I think that's --

Okay.

Sir, for the record --

-- totally fair and --

-- and for your articulation over mine --

I -- and, Imean --

Oh. Oh. I don't know if that's. ever happened

And -and the only -only thing I would say there

Yes.

MS. NICHOLSON: -- my understanding of -- from discussions withthe receiver and including what he -- I think you said, was that he - he would have thoughtthe vast ma -majority of what is in schedule 3 --

THE. COURT: Would -would be your client, yes..

MS. NICHULS4N: -- would -would be -- fall within that category.But -but the iss --

THE COURT: But -- or the vast majority of any to whichcommon interest privilege may apply --

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MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NICHOLSON:

THE COURT:records:, that is the only --

MS. I~IICHOLSON:

THE COURT:

Yes.

-- it would be your client --

Yes.

-- that would have the. common interest.

Yes. Because --

As opposed to majority by number of the

Yes.

-- difference I was providing. Okay.

THE COURT: That's my understanding too, Sir, because I - Idon't think the intention and -and maybe Pm wrong and -and the receiver is your officerbut is not to have the receiver now spend oodles and oodles, hopefully -- Pm hoping. it'snot, of going and re-reviewing all of the records which it has al -already kind of --

THE COURT: No.

MS.IVICHOLSON: -- presumptively --

THE COURT: No, no.

MS. NICHOLSON: -- constitute common interest privilege --

THE COURT: No.

1VIS. NiCHOLSON: -- in which H&C S --

THE COURT: Just the third category --

MS. NICHOLSON: -- may wish --

THE COURT: -- and on the basis we talked about. There is leftoutstanding though, the possibility that either of the parties may want- to take a run at thepresumptive privilege in category 2. What should the receiver's role be in that context? I

59

1 am not discharging the receivers, by the way.23 MS. NICHOLSON: I -- my own view is that we should defer on - on4 that --56 THE COURT: Okay.78 MS. NICHOLSON: -- until we've seen the records that are9 producible, until we deal with this process through potentially giving over to Pengrowth

10 perhaps via the receiver any documents over which we are not asserting common interest1 1 privilege in cat -- from category 3. And then maybe we can all regroup around and get12 some further information and elucidation that might impact how -how category 2 is dealt13 with.1415 THE COURT: Okay.1617 MS. NICH~LSON: That's what I would suggest.1819 THE COURT:. Okay. And -and early on in the conversation,20 Mr. Oliver said there had been some further developments as amongst all the parties about21 the description of the records in the presumptive category? Is that -- do you understand22 me?23~4 M.S. NICH4LSON: Yes. Yes but I ---252b THE COURT: Be - beyond what the Court got in the27 spreadsheet --?g

29 M5. NICHOLSON: Yeah.JO31 THE COURT: -- just a little more information?3233 MS. r1ICHQLSON: I think there's a little bit more but it's not --3435 MR, BISHOP: That is -that is from recollection, Sir, and --3637 THE COURT: Okay. So --3839 MR. BISHOP: We have no objection to providing. it to the

40 parties, Sir.41

•1

1 THE COURT: That was my question, It is always awkward2 doing that when you are acting for a party without disclosing what is privileged and giving3 more description of the record but so, it is a fine line but it -- if you are comfortable you4 can go further, and leave it on that basis, the parties may have. specific ones of that based5 on time, based on recipients, something where they say can you -can you give us a bit6 more about that and the a receiver can accommodate?78 MR. BISHOP: Yes, Sir.9

10 THE COURT: Yes? Olcay. Olcay.1 112 MS. NICHOLSON: And I - I -- the only other final comment I - I13 would make is to draw you -- everyone's attention and Your -Your Lordship's attention14 to paragraph 2 of the Mr. Justice Yamauchi order which just speaks --lj1617181920212223242526272829303132333435363738394041

THE COURT:

MS. NICHOLSON:October the --filed October 4th.

THE COURT:

MS. NICHOLSON:

THE COURT:

The first or the amended?

The order -- yes, sorry. The second order granted

Fourth? Thank you..

Granted September 22nd.

I am there.

MS. NICHOLSON: And it just. specifies the amendment to the orderthat explains that the funds are to be held under the escrow until such time as this Courtdetermines whether or not Pengrowth is entitled to the. funds and authorizes and directs theescrow into paying -- to pay the funds. So, either to Pengrawth or to the receiver. So, thepoint -- the concept is that it is in place is Pengrowth's application and -and H&C S'application are to be heard and the receiver, while -- and you'll hear from them maybe asto what they envision their next role to be --

TIIE COURT: M-lun.

MS. NICHOLSON: -- but I would have thought once they deal withthese documents, .and these issues, they -they would stand down and. we would - we wouldargue as to who was entitled to the deposit.

MR. BISHOP: But who is they? Me and GVR or me and you?

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MS. NICHOLSON: Well, there. - there's a fund of money, you -you

are arguing for that fund of money, Pengrowth, H&C S is arguing for that fund of money,

that's that's how -- that's how the whole process is envisioned.

MR. BISHOP: Disagree.

MS. NI~HOLSON: Well, that -that's the whole point of what we've

tried to set up. So --

THE COURT; Okay.

MS. NICHOLSON: -- anyway to the extent that there needs to be

other applications because this is like a collateral attack, in my view on the order -the

various orders that we've heard today or potentially --

THE COURT:

MS. NICHOLSON:

THE COURT:

MS. NIGHOLSON:

well need to --

THE COURT:but --

I am just ordering --

Right.

-- with respect to the documents.

Right. So, fair enough. What Ijust -- we may

And extending the receiver's borrowing power

MS. NICHOLSON: Thank you. And -- but, I mean, we - we may needto make a provision for other applications and as well --

THE COURT:

MS. NICH~LSON:

I think so.

Yes, and -and --

THE COURT: From the sounds of it.

MS. NICHOLSON: Yes. And so, the question would be ought we tode -- do you care who -who hears those applications or should we just -- are we -- can wehave a direction that we are at liberty to bring this forwaxd for the --

62

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THE COURT: Oh, you are. I - I think if you run aground onwhether there is a privilege, .common int -- whatever, in the process of the records, there isan efficiency to have me try and --

MS. NICHOLS~N:

THE. COURT:

MS. NICHOLSON:

Okay.

-- finish that of'f.

Good.

THE COURT: But I have seen some of the records which thereceiver anticipates may well be privileged. T don't think I should hear the final -issue.

MS. NICHOLSON:

THE COURT:the deposit --

MS. NICHOLSON:

THE GOUT:

MS.I~TICHOLSON:

THE COURT:beholding to come back to me.

MS. NICHOLSON:

Pardon?

I don't think I should hear the final issue, as -- on

Yes, I - I thought --

-- because I --

-- the same.

Yes. And - and I am not saying that you are

No.

THE COURT: You may have a problem given my jury trialassignment is going to take me a number of months coming up, starting Monday. So, if Iam available for an hour before court hours, I am happy to do it. But just with respect towhat falls out of the advice and directions from today.

MS. l~TICHOL501~T: Yes. Okay.

THE COURT: Okay?

MS. I~IICHOLSON: And -and there -- and my friend's --

THE COURT: And -and before you are seated, there. is a rea --

63

1 application for a sealing order which has a presumptive merit from my perspective. Do you2 have any objection to that, Ms.Nicholson`?34 MS. NICHOLSON: No.56 THE COURT: Okay.78 MS. NICHOLSON: No. And -and - and on that, my friend and -- my9 - my friend, Mr. Bishop and I are under this court order of Mr. Justice Yamauchi to also10 agree on a schedule for the bringing fot~vard of the hearing. So, ghat we may need the court1 1 order to --1213 THE COURT: Yes.1415 MS. NICHOLSON: -- address that too.1617 THE COURT: Okay. Sure.1819 MS. NICHOLSON: Just as a heads up. Thank you.2021 THE COURT: Sure. Mr. Bishop, anything arising?2223 MK. BISHOP: No, Sir. Thank you very much.2425 THE COURT: Okay. Thank you. Mr. Qliver?2627 MR. OLIVER: Thank you. A few points.2829 THE CURT: Oh, and -and no objection to the sealing order,30 Mr. Bishop? Application for a sealing of the supplemental report from the receiver that had31 same --3233 MR. BISHOP; No.3435 THE COURT: -- potentially confidential -- okay. So, that is36 granted. also.3738 MR. OLIVER: Thank you.3940 THE COURT: It seems the test in Sierra is met.41

64

1 MR. (OLIVER; Thank you, yes.23 THE COURT; Oka~~.45 Subrrei~sions by 1VIre Oliver (l~es~onse)67 MR. OLIVER: On sealing, Sir, one paint that dawned on - on ine8 as we were preparing the order. And I'll just -I'll just pause at this point to say that in terms9 of the order, my thinking was we would wait until everything was resolved and I would

10 send you something that -that encompassed all of this. But on sealing, I know one of the1 1 Court's concerns is timing in terms of when the sealing is lifted just because there's some12 uncertainty as to exactly how this is all going to play out.1314 THE COURT: M-hm.1516 MR. OLIVER: What I was going to suggest at this point, it be17 until application of the parties or the discharge of the receiver by --1~19 THE COURT: Yes. The later of --

MR. OLIVER: Yes.

THE COURT: -- resolution of the capital `D' dispute ordischarge of the receiver, whichever is later. I - I think that covers the interests affected bythe --

MR. OLIVER:

THE COURT:

Okay.

-- sealing order. Okay.

MR. OLIVER: Thank you. very much. Just a few very quickcomments, Sir. The -- from the receiver's perspective, the point of Justice Yamauchi toorder was to funnel all of the disputes effectively into the receivership proceeding.

THE COURT:

MR. OLIVER:

Sorry, I am just going back to my last order.

Sure.

THE COURT: I have to think about some of the records. Thosefor which litigation privilege is the part of the common interest privilege asserted, mydecision makes sense. If it is solicitor client that never goes so, T - T ain not sure sealing

b5

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should -should ever lapse.

MR. OLIVER: I - I wonder, Sir, if ~ should be until further orderof the Court with my undertaking as --

THE COURT:

MR. OLIVER:

THE CURT:

MR. OLTVER:

THE COURT:that dis --

17 MIZ.OLIVER:1819 THE C4iJRT:2021 MR.OLIVER:2223 THE COURT:2425262728293Q3132333435363738394441

MR. OLI VER:

THE COURT:

Maybe you can --

-- the issues resolves --

-- do that. It - it is --

-- to revisit the issue.

-- the attachments, the illustrative exhibits there

Okay.

Okay. Sorry. So I will --

Sure. I'll just --

-- just revise it in that way.

-- change my note on that.

Thank you.

MR.OLTVER: Thank you. Very -very quickly, from tl~ereceiver's perspective, the -the point of Justice Yamauchi's order both -- well, theamending.. order was to effectively funnel the resolution of all of the disputes in -into thereceivership proceedings. And -and -and why we hold that view is these -theseproceedings are typically collective in nature and whether property is subject to theproceedings or not are typically addressed in the context of the collective proceeding. So,certainly the. receiver's understanding was the timeline for the -for the delivery ofmaterials, which certainly has to be revisited at this point --

THE COURT: M-hm.

MR.OLIv'ER: -- largely as a result of a large volume of

documents. But this -this was supposed to encompass, from our prospecti~re, Pengrowth

•.

1 and H - HC & S (sic) and the matter was - was to be resolved largely under the framework2 that he suggested.34 In terms of how we see our role, once the document issue is resolved from the receiver's5 prospective, we do intend to, unless the Court directs otherwise, to - to stand back, let the6 parties argue the issues as between them. Tf there's. assistance we are requested to offer in7 the interim, whether it's further records or whatever,. we're certainly willing. to do that as8 an officer of the Court.9

10 THE COURT: Okay. And so, none of that is in front of me and1 1 I am not going to say this as an order or anything but the -the one option that I would12 contemplate is having the receiver broker a litigation plan between the parties. So, they13 work between themselves as they would in the normal course in a matter in front of the14 Court --l~16 MR.OLIVER: M-hm.1718 THE COURT: -- to develop that, agree on that and then perform19 it. But sometimes, they don't agree on the deadlines --202l MR.OLIVER: M-hm.2223 THE COURT: -- and how it should go and it sounds like there24 is a fundamental issue at the heart here --2526 MR.OLIVER: M-hm.2728 THE COURT: -- and how it should proceed. But it would be the29 Court's thinking just as a - as a starting paint, that the rights of a litigant to either process30 commenced, a litigant to either .process commenced, their rights under the rules, same of31 which have. been stayed by the receivership would be relaxed.3233 MR.OLIVER: M-hm.3435 THE COURT: They would be able to pursue those rights ,just in36 the context of what the Gourt would like to think is an accelerated process to get --373 8 MR. OLIVBR: M-hm.394U THE COURT: -- a resolution by agreement or dec -decision of41 the Court.

1234S678910111213141516171S1920212223242526272829303132333435363738394041

MR. SLIVER: Yes.

THE. COURT: So, I - I will just throw that out there. It's not anobligation and it - it may not accord as fully with Mr. Bishop's view ofthe lay of the land,as with Ms. Nichalson's, so...

MR. OLIVER: Sure. Certainly, we'll do an`=thing we can -- wecan --

THE COURT: Olcay.

MR. OLIVER: -- do to assist --

THE COURT: Thank you..

MR. OLIVER: -- circumstances. Thank you very much. I havenothing else unless there's any questions.

THE COURT: None, except I think there ought to be a deadlineon the receiver in terms of completing that process and my question would be, what do youthink, Mr. Oliver? It is going to fall to your office I think substantially.

MR. OLIVER:

THE COURT:

I - I ..guess --

What amount of time do you need?

MR. OLIVER: I guess- first of all, Sir, what I was going to dowas order a transcript so I had a - a much more accurate --

THE COURT: Okay.

MR. OLIVER: -- tra -transcription of the process but could Iperhaps trouble you -- just because there's been an exchange as between counsel to recapwhere you believe things ended and then I will offer an -offer an estimate. just -just toensure that I've followed everything.

THE" COURT:

MR. OLIVER:

Here is what I understand you will be doing --

C?kay.

~:

12 THE COURT: -- on behalf of your client, is - is you will be3 taking the category 3 documents and you will be reviewing them a further time looking for4 a demonstration, clear demonstration of an expectation of privacy of the content of that5 communication on the part of an entity other than GVR. I have been told it is -- if any other6 party has such an expectation, it is likely to be H&C S. It is possible that it is Pengrowth.7 Nobody thinks that is likely. But whichever party that is, they would then have the8 opportunity to receive those specific records which would start a clock running, how long,9 30 days?101 1 Ms. Nicholson, if it is going to mostly be you? By the end of that time, you would have to12 take a step to assert that privilege. If nothing is done within that tiineframe, the document13 automatically moves up to category 1 and is disclosed.141 ~ With respect to the documents in category 1, by agreement of the parties, tomorrow I16 presume, you can send them to both parties. That will keep them busy for a few days.17l 8 MR. OLIVER: You can say that again.1920 THE COURT: And so, with that restatement --2122 IVIR. 4LIVER: Thank you.2324 THE COURT: -- instead of waiting for the transcript, how long25 would you need?2627 MR. OLIVER: My -- it's February 28th today. At - at most, 228 weeks --2930 THE COURT: Okay. That is --3132 MR. OLIVER: -- I would assume.3334 THE COURT: -- what I would have thought.3536 MR. ULIVER: Okay.3738 THE COURT: Unless you are out of pocket for some reason but39 -- so, 2 weeks from today I expect will be about March 14.4041 MR. OLIVER: That's fine with us, yeah.

~•

1

234

6789

101 1121314151617181920212223242526272829303132

33J~

35363738394U41

THE COURT: You are good with that deadline?

MR. OLIVER: Yes, Sir. Yes.

THE COURT: Okay. And so the parties can expect from you anotice and the -- you will communicate with each party which line item has been providedto one or the other so they all know which ones have flow -flowed which way. And anyfor which that test is not satisfied, as I say, they go up to category 1 and in 2 weeks, thosedocuments would be produced --

MR. OLIVER: Okay. Understood.

THE COURT: -- to both parties. Okay.

MR. OLIVER: Thank you very much.

THE COURT: Yes. Thank you.

MR. BISHOP: Thank you, Sir.

THE COURT: Thank you all. Adjourned.

MR. OLIVER: So, in terms of an order, Sir, I will circulate oneto my friends and hopefully we'll have something back in the next day or two.

THE COURT: Sure.

MR. OLIVER: Thank you.

THE COURT: Thank you.

PROCEEDINGS CONCLUDED

1 Certificate of Record23 I, Garry Squirell, certify that this recording is the record made of the evidence in the4 proceedings in the Court of Queen's Bench held in courtroom 1702, at Calgary, Alberta on5 the 28th day of February, 2007 - 2018, and that I was the court official in charge of the6 sound-recording machine during the proceedings.789

101 1121314l~1617]81920212223?4

252627~g

2930313233343~363738394041

71

1 Certificate of Transcript23 I, Debra Gagne, certify that45 (a) I transcribed the record, which was recorded by asound-recording machine, to the best6 of my skill and ability and the foregoing pages are a complete and accurate transcript7 of the contents of the record, and89 (b) the Certificate of Record for these proceedings was included orally on the record and

10 is transcribed in this transcript.1 112131~

1516171819202122232425262728~9

30313233343~363738394041

Order No. ; AL-JO-1000-1470

digitally signed by Debra

Debra Gagne~a9"eDate: 2018.03.05 062621-oroo~

COURT FILE NUMBER 1701-11927

COURT COURT OF QUEEN'S BENCH OFALBERTA

JUDICIAL CENTRE CALGARY

APPLICANT H&C S HOLDINGS PTE. LTD.

RESPONDENT GRAND VALLEY RESOURCES CORP.

DOCUMENT ORDER

ADDRESS FOR Cassels Brock &Blackwell LLPSERVICE AND Suite 1250 Millennium Tower,CONTACT 440 — 2nd Avenue SW,INFORMATION Calgary, Alberta, T2P 5E9OF PARTYFILING THIS Telephone 403-351-2921DOCUMENT Facsimile 403-648-1151

File No. 49328-3

~;I^ r~`~ ~t~rr~~a

Attention: Jeffrey OliverlDanielle Marechal

Date On Which Order Was Pronounced:

Name Of Judge Who Made This Order:

Location Of Hearing:

February 28, 2018

The Honourable Mr. Justice P.R. Jeffrey

Calgary, Alberta

UPON the application (the "Application") of Hardie &Kelly Inc., in its capacity as the

Receiver (the "Receiver") of Grand Valley Resources Corp. ("Grand Valley"); AND UPON

having read the Notice of Application returnable February 28, 2Q18, filed; the Bench Brief and

Book of Authorities of the Receiver, filed; the First Report of the Receiver dated February 21,

2018, filed; and the Supplement to the First Report of the Receiver, filed (the "First Report");

AND UPON hearing counsel for the Receiver and other interested parties present;

IT IS HEREBY ORDERED AND DECLARED THAT:

LEGAL"45392479.1

SERVICE

1 , Service of the Notice of Application and supporting materials is deemed to be good and

sufficient and time for service of this application is abridged to that actually given.

BORROWING POWERS

2. The amount which the Receiver is permitted to borrow pursuant to paragraph 19 of the

Receivership Order in the within proceedings pronounced September 7, 2017, and as

amended pursuant to the Order of the Honourable Justice Yamauchi dated September

22, 2017, is hereby increased from $125,000 to $175,000.

DOCUMENT DISCLOSURE

3. The Receiver is hereby authorized and directed to:

(a) disclose to Pengrowth Energy Corporation ("Pengrowth"} and H&C S Holdings

Pte. Ltd. (collectively, the "Parties") those documents enumerated at Schedule 1,

Tab C to the First Report, as subsequently amended by the Receiver (the

"Schedule 1 Documents");

(b) withhold from production those documents enumerated in Schedule 2, Tab C to

the First Report (the "Schedule 2 Documents"}, without prejudice to the rights of

the Parties to object at a later date to the classification of any Schedule 2

Documents;

(c) disclose to the Parties any Schedule 1 Documents that may otherwise be subject

to the Confidentiality Agreement between Grand Valley and Pengrowth dated

December 9, 2016;

(d) in relation to those records enumerated on Schedule 3, Tab C to the First Report

(the "Schedule 3 Documents"):

(i) by no later than March 14, 2018, the Receiver shall deliver to any party (a

"Recipient Party") that the Receiver determines, in its discretion, has an

expectation of privacy or confidentiality with respect to any Schedule 3

Records a copy of all such Schedule 3 Records related to that party (the

"Applicable Records"), along with a copy of this Order;

LEGAL'45392479.1

(ii) any of the Schedule 3 Documents which the Receiver does not provide to

any Recipient Party pursuant to paragraphs 3(d)(i) above shall be

reclassified by the Receiver as a Schedule 1 Document, and shall be

immediately disclosed by the Receiver to the Parties;

(iii) co-incident with the delivery of any of the Schedule 3 Documents to any

Recipient Party, the Receiver shall deliver to the Parties a list of all

Schedule 3 Documents that have been delivered to all Recipient Parties;

(iv) any Recipient Party who wishes to oppose the production of the

Applicable Records must file an application with supporting affidavit

evidence within 30 days of the Recipient Party's receipt of the Applicable

Records;

(v) Any Recipient Party who does not file an application pursuant to

paragraph 3(d)(iv) is deemed to not object to the disclosure of the

Applicable Records, and provided that no other party with an expectation

of confidentiality or privacy in relation to an Applicable Record has filed an

application opposing their production, the applicable Schedule 3

Documents shall be reclassified by the Receiver as Schedule 1

Documents, and shall be immediately disclosed by the Receiver to the

Parties.

4. Any party is entitled to apply for advice and directions of this Honourable Court in

relation to the matters that are the subject of this Order.

J.C.C.Q.B.A.

LEGAL'45392479.1

TAB F

1111arechal, Danielle

Subject: FW: Clarifications to the first Report of Receiver and Supplemental Report byformer GVRManagement

Frorr~: Daniel Jalbert <dj~f'r~e~@p~nt~no.ea>Sent: Wednesday, February 28, 2018 11:53 AMTo: Marc KellyCc: g_~~ones•j~don _sh~w.ca; ̀ Harold Oppelt'; 'Paul 1Neevers'Subject: Clarifications to the first Report of Receiver and Supplemental Report by former GVR Management

Good Morning Marc,

Further to the Court filings received from your legal counsel regarding the First Report of the Receiver dated 21 Feb,

2018, and The Supplement to the 1st report of the receiver dated 23 Feb, 2018 (Court file # 1701-11927) in thereceivership matter of H&CS Holdings Pte Ltd. vs Grand Valley Resources Corp, the former management members ("the

Management") of the Grand Valley Resources Corp ("the Company") are respectfully providing our clarification and

corrections to the above mentioned reports via this email.

Regarding Paragraph 22(b): the report states that "CDN $400,000 which the Receiver understands was advanced by the

Former Management on an unsecured basis" while the dollar amount is correct, these funds were advanced on March

17th, 2017 as a loan to the Company by the Management, in which these funds were to be placed intrust with the

Escrow Agent in favor of the Management as deposit for closing of the Pengrowth Acquisition. The Trust documents

recognize the deposit separate from H&CS Holdings and originating firom the Management.

Regarding paragraph 31: references an Amending Order granted on September 22, 2017 which allows for applications

regarding the direction of the escrowed funds to be received by 5:00 pm on September 29, 2017, and in particular

paragraph 4(b) regarding entitlement to the Funds, the Management of the Company who advanced the funds in trust,

believe that they were not provided an opportunity to submit any evidence or claim prior to the Evidence Filing Date as

ordered by the Court.

Regarding paragraph 34, regarding the contractual dispute between H&CS and Pengrowth, as previously stated in the

submissions to the Receiver, the former Management's opinion as it pertains to the performance of Pengrowth of

contract terms under the Purchase and Sale agreement is that Pengrowth fully performed its obligations. This position is

significantly contrary to that of H&CS Holdings Pte.

Regarding Paragraph 37: states that "the former Management has indicated to the Receiver that the Former

Management does not intend to attempt to pursue recovery of their CDN $400,000 in unsecured loans that farm part of

the Deposit" and further Paragraph 38 states that the Former Management .... have no interest in pursuing the Deposit"

This is an inaccurate statement by the Receiver. Solely on behalf of the Former Management and not on behalf of H&CS

Holdings, the Former Management have ful l intention and desire to pursue the return afithe CDN$400,000 that was

placed in trust with the Escrow Agent by the Management. As evidenced in the filings, H&CS Holdings has a secured

interest on the US$14 million deposit but not on the $400,000 deposit provided by the Management of the Company.

Regarding Paragraph 59 of the First Report of the Receiver: states that the Receiver is unaware of claims for priority

under WEPPA and that claims of former officers and directors are ineligible. To clarify these amounts, on June 16, 2018,

the Company terminated al l staff by notice given to al l employees, including the Management. The cutoff date of the

last pay period was June 15th, thereby owing employees for one day pay and all accrued vacation pay for their

respective lengths of employment. Documentation for the outstanding payment amounts has previously been supplied

to the Receiver. In addition, the Management of the Company were under employment service contracts with the

Company which dictates severance of 18 months of salary for termination without cause. The Management were al lterminated by the Company, as demanded by H&C S Holdings Pte, prior to the Receivership order granfed by the Courts.

Respectfully, the following is Management's clarifications relating to the Supplement to the 1st report of the receiverdated 23 Feb, 2018 (Court file ## 1701-11927):.

McCarthy Tetrault acted as counsel for H&CS as it pertained to completion and review of due-diligence materials,including the P&S agreement, prior to H&C S authorizing the signing of the agreement and placement of deposit funds.

M r. Gabriel Wang represented to the Former Management that he was CFO for H&CS Holdings Pte and is based inSingapore. Mr. Wang advised that H&CS Holdings Pte was the 100% shareholder in Horizon Resources InvestmentLimited, which was to be a 98% shareholder of the Company upon closing of the transaction. The 25% ownership inHorizon Resources Investment Ltd referred to in the documentation was, in our belief and sated to us by Mr. Bob Lo, aresult of Mr. Sun attempting to reduce his ownership in the Company by bringing in additional external investors. Thiswas announced to the Management on or about May 29th, 2018.

For clarification of individuals employed by and during the period of involvement with H&C S Holdings Pte, Mr. JackieNie represented to fihe Management that he was an investment advisor for and reported to Mr. William Sun. Mr. Bob Lowas retained by H&C S Holdings to provide advisory services for their investments and, subsequent to signing of thePengrowth Purchase and Sale agreement, was appointed as CFO for the Company at the direction of Mr. Sun ascondition of financing by H&C S Holdings Pte.

trust that this note more clearly outlines the relationship of the parties through the transaction. If there are anyadditional questions or concerns, please do not hesitate to contact me at 403-880-2949.

Regards,Dan Jalbert403-880-2949

TAB G

ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT made this day of March, 2018

I:

HARDIE &KELLY INC. in its capacity as COURT APPOINTED RECEIVER of certain property of GrandValley Resources Corp. (hereinafter•, "GVR" or the "Debtor") and not in its personal capacity (hereinafter, the

"ASSIGNOR or the "RECEIVER")

- in favour of -

H&C S HOLDINGS PTE. LTD. (hereinafter, the "ASSIGNEE or "H&C S")

WHCREAS:

A. The Assignor, by virtue of the Consent Receivership Order granted by Mr. Justice Yamauchi of the AlbertaCourt of Queens Bench ("Court") in Action No. 1701-11927 (the "Action") an September 7, 2017 (the"Receivership Order"), is the Receiver of all of GVR's right, title, and interest in the purchase and sale agreemententered into on March 17, 2017 between Pengrowth Energy Corporation ("Pengrowth"), as Vendor, and GVR, asPurchaser (the "PSA") and certain related agreements, documents, revenues, benefits and powers

(collectively, the "Property");

B. Pursuant to paragraph 3 of the Receivership Order, the Receiver is empowered and authorized, but notobligated to, inte►~ alias

(a) take possession of and exercise control over the Property and any and all proceeds, receipts anddisbursements arising out of or from the Property (para 3 (a));

(b) execute, assign, issue and endorse documents of whatever• nature in respect of any of theProperty, whether in the Receiver's name or in the name and on behalf of the Debtor, for any purposepursuant to the Receivership Order (para 3(e)); and

(c) initiate, prosecute and continue the prosecution of any and al] proceedings and to defend allproceedings pending or instituted with respect to the Property or the Receiver, and to settle orcompt•omise any such proceedings, provided that nothing in the Receivership Order authorized theReceiver to defend or settle the action in which the Receivership Order is made unless otherwisedirected by the Court (para 3(fj);

C. The Receivership Order, as amended pursuant to the September 22, 2017 Order of the Honourable Mr.Justice Yamauchi (the "Amendment and Timeline Order"), permits McCarthy Tet~•ault LLP ("McCarthy's") to

~~173~34R v3~

-2—

continue to hold funds pu~•suant to a Deposit Escrow Agreement between GVR and Pengrowth dated March 17,

2017 including the principal sums of USD $14,000,000 and CDN $400,000 (collectively, the "Deposit" or the

~~Funds") until the Court determines whether or not Pengrowth is entitled to the Deposit (in whole or in part) and

authorizes and directs McCarthy's, as the escrow agent to pay the Funds (in whole or in part), together with accrued

interest thereon, either to Pengrowth or the Receiver;

D. Pengi•owth filed an application in the Action originally returnable on September 22, 2017 seeking, inter•

alia, a determination as to the person entitled to the Funds ("Pengrowth's Application");

E. The Receiver was instructed at the September 22, 2017 hearing by Mr. Justice Yamauchi to take a neutral

role in the Action on behalf of GVR and to act, in its capacity as the Receiver, as a provider of information

(including GVR's records) rather than take a position as to any entitlement any party may have to the Funds;

F. H&C S is asserting two forms of claim against the Funds:

a. a claim which is dependent upon success by GVR in a claim for the Funds (the "H&C S

Dependent Claim"); and

b. a direct claim to the Funds that is not derivative of or depende~lt upon GVR's success in obtaining

the Funds (the "H&C S Independe~~t Claim"), which claim is distinct from the Dependent Claim.

G. GVR's only financial asset is a claim for the Deposit (the "GVR Claim") and neither it nor the Receiver

have the financial means to advance the GVR Claim or defend or oppose Pengrawth's Application;

H. The interests of the Receiver and H&C S are aligned in relation to the H&C S Dependent Claim, and are

not aligned with respect to the H&C S Independent Claim;

I. Given that H&C S is advancing the H&C S Dependent Claim, even if it were financially feasible, it would

not be fiscally responsible for the Receives• to also incur costs to advance the GVR Claim or defend or• oppose

Pengrowth's Application;

J. H&C S is willing to take an assignment of the GVR Claim and advance the same concurrently with

advancing the H&C S Dependent Claim, on the terms set forth herein;

K. In all of the circumstances and having regard to the interests of GVR and those claiming under or throubh

GVR, subject to Court approval, the Receiver has agreed to enter into this Assignment Agreement on the terms set

forth hel•ein.

NOW THEREFORE THIS AGREEMEI~IT WITNESSES that foi• good and valuable consideration, the receipt

and sufficiency of which is hereby acknowledged, the parties hez•eto agree as follows:

1. The Receives• hereby assigns to H&C S the right to initiate, prosecute and continue the prosecution, in the

name of GVR, of any and all proceedings with respect to the Property including the Deposit and to defend, in

the name of GVR, any and all proceedings now pending or hereafter instituted with respect to the Property

including the Deposit (collectively, the "GVR Proceedings"), and to, with the approval of the Court, settle

or compromise any such GVR Proceedings, which GVR Proceedings shall include, without limitation:

(a) the right to file any applications or amended applications as may be necessary or appropriate in the

name of GVR or otherwise to advance the GVR Claim;

~~173~34A v3~

-3-

(b) the right to defend or oppose Pengrowth's Application or any proceedings instituted by Pengrowth

with respect to the Property including the Deposit; and

(c) the right to appeal or apply for judicial review in respect of any order or- judgment pt•onounced in any

GVR Proceedings.

2. This Assignment Agreement is subject to:

(a) the Court approving the within Agreement; and

(b) the Court specifically approving the cost protections for the Receiver provided for in paragraph 6(d)below;

and if Court approval under this paragraph is not obtained, no sections of the within Assignment Agreement

are of any force or effect and this Assignment Agreement shall not be binding as between the pa~~ties hereto.

3. H&C S hereby agrees to not to advance in Court the H&C S Independent Claim until the earlier of such time

as: (i) a determination is trade by the Caurt that the GVR Claim is unsuccessful; or (ii) H&C S has exercised

the Put (as defined in and pursuant to paragraph 5 below) such that the Receiver again has the rights to the

GVR Claim ;after which time, H&C S would be free to pursue the H&C S Independent Claim.

4. H&C S shall be entitled to concurrently advance tale H&C S Dependent Claim to the Deposit and, in the

name of GVR, it will have the right to advance any and all of GVR's rights including the GVR Claim and to

defend o►• oppose all GVR Proceedings in respect of the Property, including but not limited to Pengrowth'sApplication.

5. Notwithstanding paragraph 1 above, H&C S will have no obligation to continue to prosecute or defend inGVR's name any GVR Proceedings and it may, at its sole option and without compensation, put the sameback to the Receiver at any time by providing 5 days' prior notice to the Receiver (the "Put") ,whereuponH&C S shall continue to have the right to advance all of H&C S' rights, including both the H&C SIndependent Claim and the H&C S Dependent Claim as it, in its unfettered discretion, sees fit.

6. The parties agree that:

(a) the Receiver shall continue to act in its capacity as the Receiver of GVR in the Action, including toawait the Court's determination as to the person entitled to the Deposit;

(b) any settlement or compromise of the GVR Claim shall be subject to Court approval;

(c) if the Court determines that GVR is entitled to the Deposit, any and. all rights to collect and receivethe Deposit shall belong in their entirety to the Assignor in its capacity as the Receiver to be receivedby it and distributed according to a distribution order which shall be obtained by the Receiver; and

(d} The Receiver shall have no liability, and H&C S shall be solely liable, for any costs (whether court-ordered or otherwise), arising out of the GVR Proceedings for any steps taken by H&C S in thename of GVR hereunder, including any steps taken in the GVR Proceedings up to the date of anyPut of the GVR Proceedings back to the Receiver pursuant to paragraph 5 hereof.

7. H&C S accepts the Assignment Agreement and acknowledges that the Receiver has made no representationsoz• warranties whatsoever, including with respect to the position of GVR or the GVR Claim.

;~173A34A v3~

~~

8. This Assignment Agreement constitutes the entire agreement between the parties with respect to its subject

matter and no representations or warranties have been made by the parties other than the terms expressly set

forth herein.

9. This Assignment Agreement shall be governed by and construed in accordance with the la~~~s of the Province

of Alberta.

IN WITNESS WHEREOF the ASSIGNOR and ASSIGNEE have executed this Assignment as of the day and year

first above written.

HARDIE &KELLY INC, in its capacity as Court Appointed Receiver of

certain property of GVR and not in its personal capacity

Per:

I have authority to bind the corporation

Name a~1d title

H&C S HOLDINGS ~'T~. LTD.

Per•:

I have authority to bind the corporation

Name and title

~~17>~34R v3 ~