Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- take-over bid offer and auditor's consent-- applicant required to provide an auditor's report as partof take-over bid circular -- auditors were Arthur Anderson --Arthur Anderson ceases practising public accounting and no longerconsents to the use of previously issued auditors' reports --applicant's inability to obtain consent letter form Arthur Andersonan exceptional situation outside control of applicant -- inthe absence of a consent from Arthur Anderson, applicant includedin the take-over bid circular certain prominent disclosure --applicant exempt from consent requirement in connection withthe take-over bid.

Applicable Statutory Provision

Securities Act, R.S.O. 1990, c. S.5, as amended,s. 104(2)(c).

Applicable Regulatory Provision

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as amended, s. 196.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN AND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

DUVERNAY OIL CORP.

 

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") ineach of British Columbia, Alberta, Saskatchewan and Ontario(the "Jurisdictions") has received an applicationfrom Duvernay Oil Corp. ("Duvernay") for a decisionunder the securities legislation of the Jurisdictions (the"Legislation") that Duvernay be exempt from therequirement in the Legislation to include a consent (the "ConsentRequirement") of Segue Energy Corporation's ("Segue")former auditors, Arthur Andersen LLP ("Arthur Andersen")to the incorporation by reference of the auditors' reportsof Arthur Andersen LLP on the financial statements of Seguefor the fiscal year ended March 31, 2002 in a take-over bidcircular dated July 7, 2003 (the "Circular") inconnection with a proposed take-over bid (the "Bid")by Duvernay for all of the outstanding common shares of Segue;

2. AND WHEREAS under the Mutual Reliance ReviewSystem for Exemptive Relief Applications (the "System"),the Alberta Securities Commission is the principal regulatorfor this application;

3. AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions;

4. AND WHEREAS Duvernay has represented tothe Decision Makers that:

4.1 Duvernay is incorporated under the lawsof the Province of Alberta and Duvernay's head office islocated in Calgary, Alberta;

4.2 neither Duvernay nor Segue is a reportingissuer in any jurisdiction;

4.3 on June 20, 2003, Duvernay and Segueentered into a pre-acquisition agreement under which Duvernayagreed to purchase all of the issued and outstanding shares(the "Shares") of Segue on a basis of share considerationof 0.178571 of a Duvernay Class A Share for each Segue Share;

4.4 under the terms of the pre-acquisitionagreement, Duvernay is required to mail the Circular toall holders of the Shares on or before July 15, 2003, orat such other time that is agreed to by Duvernay and Segue;

4.5 the proposed acquisition of the Sharesconstitutes a "significant probable acquisition"by Duvernay within the meaning of Legislation and accordingly,Duvernay is required to include or incorporate by referencein the Circular, among other things:

4.5.1 the audited financial statementsof Segue and the notes thereto as at and for the fiscalyear ended March 31, 2003, together with the report ofthe auditors thereon (the "Segue 2003 Audited FinancialStatements"); and

4.5.2 the audited financial statementsof Segue and the notes thereto as at and for the fiscalyear ended March 31, 2002, together with the report ofthe auditors thereon (the "Segue 2002 Audited FinancialStatements");

4.6 the audit report in respect of the Segue2003 Audited Financial Statements was delivered by Deloitte& Touche LLP;

4.7 the consent of Deloitte & ToucheLLP regarding the Segue 2003 Audited Financial Statements,as required by the Legislation, has been filed togetherwith the Circular;

4.8 the audit report in respect of Segue's2002 Audited Financial Statements was delivered by ArthurAndersen;

4.9 on June 3, 2002 Arthur Andersen ceasedpractising public accounting and as a result, Arthur Andersenwill no longer consent to the use of previously issued auditors'reports for the purposes of securities filings;

4.10 the inability of Duvernay to obtaina consent letter from Arthur Andersen to the inclusion ofits auditor's report on Segue's 2002 Audited Financial Statementsis an exceptional situation that is outside of the controlof Segue;

4.11 the Canadian Securities Administrators(the "CSA") issued CSA Staff Notices 43-304, 62-302,and 81-308 Prospectus Filing Matters -- Arthur AndersonLLP Consent (the "Andersen Notice") to provideguidance to issuers with respect to the inclusion in, amongother things, securities exchange take-over bid circularsof financial statements previously audited by Arthur Andersen;

4.11 the Andersen Notice states that CSAstaff will consider applications from issuers to waive therequirement to obtain the consent of Arthur Andersen foraudit reports relating to financial statements incorporatedby reference in a prospectus, provided that the prospectusincludes certain prominent disclosure; and

4.12 in the absence of a consent from ArthurAndersen, Duvernay has included on the cover page of theCircular the disclosure set forth in Appendix A attachedhereto and included a cross-reference to such disclosurein the relevant paragraph of the list of documents incorporatedby reference in the Circular;

5. AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

6. AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to makethe Decision has been met;

7. THE DECISION of the Decision Makers underthe Legislation is that Duvernay is exempt from the ConsentRequirement in connection with the Bid.

July 24, 2003.

"Glenda A. Campbell"
"Stephen R. Murison"

 

APPENDIX A

"Note with Respect to Arthur Andersen LLP

Arthur Andersen LLP is no longer engaged inthe practice of public accounting in Canada. Accordingly, Duvernayis unable to obtain the consent of Arthur Andersen LLP withrespect to the incorporation by reference in the Circular ofthe auditors' report of Arthur Andersen LLP on the consolidatedfinancial statements of Segue Energy Corporation for the yearended March 31, 2002. Because Arthur Andersen LLP has not providedthis consent, Shareholders of Segue will not have the statutoryrights of action for damages against Arthur Andersen LLP prescribedby applicable securities legislation. Generally, in accordancewith applicable securities legislation, holders of securitiesmay only exercise a statutory right of action against a personor company that has prepared a report, opinion or statementthat is included in a take-over bid circular if that personor company has filed a consent in respect of such report, opinionor statement and such right of action may only be exercisedin respect of the report opinion or statement that has beenmade by such person or company. In addition, Arthur AndersenLLP may not have sufficient assets available to satisfy anyjudgments against it.