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Lawyers. They may not wear capes and they certainly don’t have x-ray vision, but a good one can save your company from the perils and pitfalls of the business world. Take contracts – signing one you don’t entirely understand can bring a promising start-up business to a grinding halt, or bog a more established one down with debts and lost revenues. Sarah Bradley saw this happen to a young manufacturing company that was brimming with potential until its owners signed an agreement with a large distributor.

“Without legal advice, they entered into a very large contract with an important customer that relied on them to produce this product in very large quantities,” says Bradley, a professor at Dalhousie University’s Schulich School of Law. “However, their production method wouldn’t work on a large scale and, because of the way the contract was worded, they were unable to get out of it and were on the hook for some very significant damages.”

The company ultimately went out of business, which is something that would not have happened if its owners had sought out legal advice before signing the dotted line. A lawyer would have identified any risks connected to the contract, drafted cautionary clauses to protect the company and provided some negotiating assistance. “They would have certainly not had the big downside that they ultimately had, or at least would have fully understood the risk before they entered into the contract,” says Bradley.

It’s a problem that’s all too familiar to Maureen Ryan, Stephen Winter and Tauna Staniland – all corporate lawyers with the firm of Stewart McKelvey. Despite the complex language used in a contract, and despite its ability to make or break a business, they say too many people just decide to write their own or recycle an old one without getting professional advice. But it’s a decision that can result in future disputes, hefty legal fees and, in the worst cases, litigation or bankruptcy.

“That’s the danger sometimes in non-lawyers writing up contracts,” says Ryan. “They don’t always understand the ramifications of how they’ve said something or what they’ve said. Businesspeople take risks all the time and I think that sometimes they’re afraid that lawyers are too conservative and all we do is point out all the risks.”

All three say it’s cheaper for businesspeople to visit a lawyer before signing a contract – or even before starting a company – than it would be to fix any mistakes made along the way. “We all see time and again that when they don’t do that, it ends up costing them more in the long run,” says Staniland. “Whether it’s that you have to go back and re-do what was done or whether it results in litigation.”

Litigation Limbo If a problem does result in litigation, it could mean years of court battles and tens of thousands of dollars in legal fees. One of the most high-profile and lengthy court cases to come out of Atlantic Canada involves Knowledge House – a Halifax-based educational software company that was worth $100-million in 2000 but went bankrupt one year later. During a single week in August 2001, the company’s shares nosedived from five dollars to a mere 65 cents. Investors lost millions virtually overnight and the Toronto Stock Exchange issued a cease trading order on the company. Knowledge House announced it could not meet its payroll and other obligations in September 2001, leaving 70 employees suddenly out of work and with no severance pay.

In the wake of the collapse came a flood of lawsuits and counterclaims alleging that stock manipulation and insider trading had made the company’s shares appear to be worth more than they actually were. It’s a difficult case to keep track of – the various lawsuits have dragged on for years and involved more than a dozen high-profile defendants, including Knowledge House CEO Dan Potter, some of the company’s major shareholders, a corporate lawyer who was both Knowledge House counsel and one of its directors, and National Bank Financial Ltd., which lost millions when the company collapsed.

The heaviest litigation began in August 2003, when National Bank Financial launched a suit against Potter and 18 other defendants alleging they conspired to manipulate the stock price of company shares. The institution even named one of its own former brokers as a defendant, claiming he helped to orchestrate the alleged scheme. In return, Potter, who denies any wrongdoing, filed a countersuit against National Bank, claiming the institution laid charges against him in an attempt to cover up its own operational failings and inability to control one of its brokers.

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The North Atlantic is one of the most inhospitable environments on the planet. Fierce winds and frigid temperatures are commonplace, sudden storms can materialize without warning, and all manner of floating ice can trap, damage or even sink maritime vessels. Yet it is here that Atlantic Canada’s offshore oil and gas industry has been operating for years and with an impressive amount of success. Since 1997, Newfoundland and Labrador’s three producing offshore fields have extracted more than 1-billion barrels of oil.

To remain prosperous under such harsh conditions, the offshore industry relies on a variety of innovative technologies. One example is the 15-metre thick ice wall that surrounds the Hibernia platform and shields it from giant icebergs. Another is a sophisticated radar system produced by Newfoundland and Labrador company, Rutter Technologies. Known as the Sigma S6 Ice Navigator, the system can detect and track small chunks of floating ice, such as bergy bits and growlers, that are often too small to appear on conventional radar systems. 

These little chunks of ice pose a large threat to the industry. “A small bergy bit has the consistency of a block of cement, so if you run into it with a boat, chances are you’re going to put a hole in your boat,” says Paul Snow, director of Sales and Marketing for Rutter Technologies. “There’s always an interest in learning more about the ice and picking up the small bits of ice that could come and interrupt production, because when you’re producing 100,000 barrels of oil a day, you don’t want to have to stop production.”

Engineers originally developed the Sigma S6 technology for the Newfoundland and Labrador offshore oil industry, which was searching for some practical way to detect small bits of floating ice. Today, Snow says all three of the province’s offshore platforms (Hibernia, Terra Nova and White Rose) are using Rutter’s Ice Navigator. The company, however, quickly recognized that its technology had applications far beyond the local offshore industry. “As we recognized that the Arctic was opening up and more tankers and oil developments were happening in the Arctic, we kind of coined the phrase ice navigator because it was of such value,” says Snow. “More of those developments are going to require ice navigation technology both on the platforms and then the supply boats.”

Snow says the Ice Navigator is ideal for ships travelling through icy waters because it provides a much more detailed image of pack ice and other objects on the water’s surface than conventional radar can generate. This in turn allows ship crews to identify the safest and most efficient routes through ice-choked seas. “You want to take the path of least resistance because it reduces your hull damage and it saves you fuel,” says Snow. “We say that a vessel operating in icy waters for a full season will pay for our Ice Navigator in fuel savings.”

Many international vessels have adopted Rutter’s Ice Navigation system: German research vessels, Russian tankers and icebreakers (including one of the world’s largest icebreakers, the Yamal), and vessels with the Swedish, Norwegian and Canadian Coast Guards. It’s also used by some ships performing seismic surveys in Arctic regions, such as those with the French-based geophysical services company CGGVeritas. 

Rutter is proud of its accomplishments with the Ice Navigator and is eager to build on its success. The company has expanded its core Sigma S6 radar technology into two new directions: oil-spill recognition and small-target detection and surveillance. In 2008, independent trials hosted by the Norwegian Coast Guard proved that Rutter’s Sigma S6 radar processor can detect oil slicks on the water’s surface. Since then, the company has developed a Sigma S6 Oil Spill Detection System and in October 2009 sold two units to Castalia Ecolmar, an Italian company working to protect marine environments.

“This is our newest product so we’re just kind of cracking the market now,” says Snow. “We also are just now completing some software that will give us wave and current direction to go with that. So we’ll be able to detect the oil, estimate its volume, estimate which way it’s drifting.”

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Atlantic Canada’s offshore oil and gas industry is one of the fastest growing sectors in the country. Propelled by such mega-projects as Hibernia, Sable and White Rose, the industry has pumped billions of dollars into federal and provincial economies and provided jobs for thousands of workers. The region has four major fields currently producing, a fifth (Deep Panuke) scheduled to come online in 2010, and Hebron about eight years later. Ongoing exploratory drilling also holds the promise of future discoveries, such as the additional 60 million barrels of oil Husky Energy found last year in a White Rose extension area. Here’s a glimpse of what’s going on in one of Canada’s most lucrative industries.

HIBERNIA 

• Hibernia was discovered in 1979 and produced first oil on November 17, 1997. It is Newfoundland and Labrador’s oldest and largest producing offshore oilfield.
• Located in the Jeanne d’Arc Basin on the Grand Banks, Hibernia is about 315 km east-southeast of St. John’s.
• It is owned jointly by ExxonMobil Canada (33.125 per cent), Chevron Canada Resources (26.875 per cent), Suncor (Petro-Canada) (20 per cent), Canada Hibernia Holding Corporation (8.5 per cent), Murphy Oil (6.5 per cent) and StatoilHydro Canada Ltd. (five per cent).
• Hibernia produces conventional light crude oil.
• It holds an estimated 1.244 billion barrels of oil.
• Workers have recovered 666 million barrels as of December 31, 2009.
• Hibernia produced an average of 125,622 barrels of oil per day in 2009.
• Industry and government officials reached a tentative agreement in June 2009 to develop the Hibernia Southern Extension. They are now working toward a formal agreement to develop the Southern Extension.
• Hibernia originally had an estimated lifespan of 20 years. The Southern Extension is expected to extend production until about 2033.
• In August 2009, the province approved development of the AA blocks from the existing Hibernia platform. The blocks are part of the main Hibernia field and are estimated to contain more than 48 million barrels of oil.
• Drilling on the AA blocks is currently underway and production is expected to begin during the first quarter of 2010.

TERRA NOVA 

• The Terra Nova oilfield was discovered in 1984 and produced first oil on January 20, 2002.
• It is located on the Grand Banks in the Jeanne d’Arc Basin, about 350 km east-southeast of St. John’s.
• Terra Nova is owned jointly by Suncor (33.99 per cent), ExxonMobil (22 per cent), StatoilHydro (15 per cent), Husky (12.51 per cent), Murphy Oil (12 per cent), Mosbacher Operating (3.5 per cent) and Chevron (one per cent).
• It produces conventional light crude oil.
• Industry officials estimate that 354 million barrels of recoverable oil exist in the Terra Nova field. However, the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) is conducting a reassessment of the Terra Nova reserves.
• The field has produced 286 million barrels of oil as of December 31, 2009.
• It has an estimated lifespan of 20 years.
• Terra Nova produced an average of 79,534 barrels of oil per day in 2009.
• Terra Nova’s production will remain steady during 2010 and Suncor will continue development drilling within the field.

WHITE ROSE

 The White Rose oilfield was discovered in 1984 and produced first oil on November 12, 2005.

• It is situated about 350 km east of St. John’s in the Jeanne d’Arc Basin.
• The project is owned by Husky Energy (72.5 per cent) and Suncor (27.5 per cent).
• It produces conventional light crude oil.
• White Rose is believed to hold approximately 305 million barrels of recoverable oil.
• It has produced 137 million barrels of oil as of December 31, 2009.
• White Rose has an estimated lifespan of 20 years; the discovery of additional reserves may extend this.
• It produced an average of 62,457 barrels of oil per day in 2009.
• Exploratory drilling in 2003 and 2006 revealed that White Rose has three satellite pools: North Amethyst, West White Rose and the South White Rose Extension.
• North Amethyst will be the first developed; it is expected to start producing oil during this year’s first quarter.
• North Amethyst holds an estimated 130 million barrels of oil, including the 60 million barrels of oil Husky Energy discovered in late 2009.