QUESTION 2 Smith Company Ltd ("Smith Co") and Jones Enterprises Limited ("Jones Co.") are both in the forestry business and have done business together for decades. Smith Co has supplied raw lumber products to Jones Co. and Jones Co produces plywood and other finished wood products. As well as being a supplier to Jones Co, sometimes Smith Co also purchases finished product from Jones Co. because Smith also carries on a "sideline carpentry / home renovation business." Unfortunately, these are hard times in that industry and Smith Co tells you that they have "heard a lot of bad rumours" about Jones Co "being on the verge of some kind of insolvency filing." They say that they have heard that part of the problem is that Jones Co has been discharging a pollutant into the land next to their plant and now the Provincial Environmental Protection Agency is "after them." Over the years, both Smith Co and Jones Co extended credit to each other. Mr Smith asks to meet with you. He says that right now Jones Co owes $350,000 to Smith Co. He says that Smith Co owes $85,000 to Jones Co. Mr. Smith says that the companies have tended to operate on "handshake deals" and that the contracts between the parties are "pretty rough." He also says that he hears that the cost of remediating the environmental problem at the Jones Co plant "could run into the multiple millions." Mr Smith