Mutual Reliance Review Systemfor Exemptive Relief Applications - Offeror granted relief fromthe requirement to include the consent of former auditor tothe inclusion of an auditors' report on the offeror's financialstatements which are incorporated by reference in a take-overbid circular, because the auditor was no longer engaged in thepractice of public accounting in Canada.
Applicable Ontario StatutoryProvisions
Securities Act, R.S.O., 1990,c. S.5, as amended, s. 104(2)(c).
Applicable Ontario Regulations
Regulation made under the SecuritiesAct, R.R.O. 1990, Reg. 1015, as amended, s. 196.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTAAND ONTARIO
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
ENERFLEX SYSTEMS INC.
1. WHEREAS the Canadian securitiesregulatory authority or regulator (the "Decision Maker")in each of British Columbia, Alberta and Ontario (the "Jurisdictions")has received an application from Enerflex Systems Inc. (the"Filer") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that the Filer be exempt from the requirement in the Legislationto include a consent of the Filer's former auditors, ArthurAndersen LLP, to the incorporation by reference of the auditors'report of Arthur Andersen LLP on the financial statementsof the Filer for the years ended December 31, 2000 and December31, 2001 (the "Consent Requirement") in a take-overbid circular (the "Circular") in connection witha proposed share exchange take-over bid (the "Bid")for all of the outstanding common shares of EnSource EnergyServices Inc. ("Ensource");
2. AND WHEREAS pursuant tothe Mutual Reliance Review System (the "System"),the Alberta Securities Commission is the principal regulator(the "Principal Regulator") for this application;
3. AND WHEREAS it was representedby the Filer to the Decision Makers that:
3.1 the Filer is a reportingissuer in all of the provinces of Canada, its common sharesare listed on The Toronto Stock Exchange ("TSX"),it is qualified to file a short form prospectus in accordancewith the requirements of National Instrument 44-101 ("NI44-101"), and its head office is located in Calgary,Alberta;
3.2 EnSource is a reportingissuer in Alberta, British Columbia and Ontario, its commonshares are listed on the TSX, and its head office is locatedin Calgary, Alberta;
3.3 on May 28, 2002, theFiler and EnSource entered into a pre-acquisition agreementunder which the Filer agreed to purchase all of the issuedand outstanding common shares of EnSource on the basis of0.26 of a common share of the Filer for each EnSource share;
3.4 Enerflex and EnSourceannounced the proposed transaction after the close of marketson May 28, 2002;
3.5 under the terms of thepre-acquisition agreement, the Filer is required to mailto EnSource shareholders a takeover bid circular (the "Circular")on or before June 12, 2002;
3.6 on June 3, 2002, ArthurAndersen LLP resigned as auditor of the Filer and advisedthe Filer that it would be unable to provide a consent tothe inclusion of its audit report in the Circular;
3.7 on June 10, 2002, theFiler appointed Deloitte & Touche LLP as auditor;
3.8 in the absence of aconsent from Arthur Andersen LLP, the Filer proposes toinclude in the Circular the disclosure set out in AppendixA;
4. AND WHEREAS pursuant tothe System, this MRRS Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");
5. AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the Jurisdictionto make the Decision has been met;
6. THE DECISION of the DecisionMakers in the Jurisdictions pursuant to the Legislation isthat the Filer is exempt from the Consent Requirement in connectionwith the Bid.
June 12, 2002.
"Glenda A Campbell" "EricT. Spink"
Arthur Andersen LLP has advisedEnerflex that it is no longer engaged in the practice of publicaccounting in Canada. Accordingly, Enerflex is unable to obtainthe consent of Arthur Andersen LLP with respect to the incorporationby reference in the Circular of the auditors' report of ArthurAndersen LLP on the financial statements as at and for the yearsended December 31, 2001 and 2000.
Generally, in accordance withapplicable securities legislation, holders of securities mayonly exercise a statutory right of action against a person orcompany that has prepared a report, opinion or statement thatis included in a take-over bid circular if that person or companyhas filed a consent in respect of such report, opinion or statementand such right of action may only be exercised in respect ofthe report, opinion or statement that has been made by suchperson or company. As a result, the absence of a consent fromArthur Andersen LLP to the inclusion in the Circular of theirauditors' report may limit the statutory right of action ofEnSource Shareholders against Arthur Andersen LLP. Enerflexis not aware of the extent to which there may be assets available,if any, to satisfy any judgment against Arthur Andersen LLP.