Bank of Montreal v. Enchant Resources Ltd. et al., (2002) 299 A.R. 1 (SCC)

JudgeMcLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and LeBel, JJ.
CourtSupreme Court of Canada
Case DateNovember 09, 2001
JurisdictionCanada (Federal)
Citations(2002), 299 A.R. 1 (SCC);2002 SCC 7;30 CBR (4th) 168;281 NR 113;1 RPR (4th) 1;208 DLR (4th) 155;19 BLR (3d) 159;299 AR 1;[2002] 1 SCR 146;[2001] SCJ No 70 (QL)

Bk. of Mtrl. v. Enchant Resources Ltd. (2002), 299 A.R. 1 (SCC);

    266 W.A.C. 1

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

....................

Temp. Cite: [2002] A.R. TBEd. JA.163

Bank of Montreal (appellant) v. Enchant Resources Ltd. and D.S. Willness (respondents)

(27766; 2002 SCC 7)

Indexed As: Bank of Montreal v. Enchant Resources Ltd. et al.

Supreme Court of Canada

McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and LeBel, JJ.

January 24, 2002.

Summary:

The Bank of Montreal was a secured creditor of Dynex Petroleum Ltd., a corporation in liquidation. The trustee in bankruptcy wanted to sell all of Dynex's oil and gas properties. The respondents, Enchant and Willness, held overriding royalties arising from Dynex's working interest. The respondents argued that their royalty rights comprised interests in land and claimed priority over the Bank because their interests, as protected by caveats, preceded the Bank's loans to Dynex and its predecessors. The Bank submitted that at common law an interest in land could not arise from an incorporeal hereditament and therefore the respondents' overriding royalties (which arose from a working interest, an incorporeal hereditament) did not rank higher in priority than the Bank's security interest. The bank applied for a preliminary determination that the overriding royalty interests did not constitute interests in land.

The Alberta Court of Queen's Bench, in a decision reported at 39 Alta. L.R.(3d) 66, allowed the application, holding that a lessee of an oil and gas lease, which was a profit à prendre, which was in itself an interest in land, could not pass on an interest in land to a third party. An appeal was brought from the decision.

The Alberta Court of Appeal, in a decision reported at 255 A.R. 116; 220 W.A.C. 116; 74 Alta. L.R.(3d) 219, concluded that overriding royalty interests could constitute interests in land if intended by the parties. The Bank appealed.

The Supreme Court of Canada dismissed the appeal, holding that overriding royalty interests could be interests in land if that was the intention of the parties.

Common Law - Topic 1201

Application - General - [See Mines and Minerals - Topic 4 ].

Mines and Minerals - Topic 4

Common law concepts - The Supreme Court of Canada stated that "[t]he oil and gas industry, which developed largely in the second half of the 20th century and continues to evolve, is governed by a combination of statute and common law. The application of common law concepts to a new or developing industry is useful as it provides the participants in the industry and the courts some framework for the legal structure of the industry. It should come as no surprise that some common law concepts, developed in different social, industrial and legal contexts, are inapplicable in the unique context of the industry and its practices" - See paragraph 17.

Mines and Minerals - Topic 8166

Oil and gas - Royalty agreements - Whether royalty rights constitute interest in land - At issue was whether an overriding royalty issued from a working interest (an incorporeal hereditament) could be an interest in land - The Supreme Court of Canada held that the prohibition on the creation of an interest in land from an incorporeal hereditament was inapplicable and that a royalty which was an interest in land could be created from an incorporeal hereditament such as a working interest or a profit à prendre, if that was the intention of the parties.

Real Property - Topic 67

Definitions - Legal estate in land defined - [See Mines and Minerals - Topic 8166 ].

Cases Noticed:

Berkheiser v. Berkheiser, [1957] S.C.R. 387, refd to. [para. 9].

Saskatchewan Minerals v. Keyes, [1972] S.C.R. 703, refd to. [para. 10].

Scurry-Rainbow Oil Ltd. et al. v. Galloway Estate, [1993] 4 W.W.R. 454; 138 A.R. 321 (Q.B.), affd. [1995] 1 W.W.R. 316; 157 A.R. 65; 77 W.A.C. 65 (C.A.), refd to. [para. 13].

Canco Oil and Gas Ltd. v. Saskatchewan (1991), 89 Sask.R. 37 (Q.B.), refd to. [para. 13].

St. Lawrence Petroleum Ltd. et al. v. Bailey Selburn Oil & Gas Ltd. et al., [1963] S.C.R. 482, refd to. [para. 14].

Vanguard Petroleums Ltd. v. Vermont Oil & Gas Ltd. et al., [1977] 2 W.W.R. 66; 4 A.R. 251 (T.D.), refd to. [para. 14].

Isaac v. Cook (1982), 44 C.B.R. 39 (N.W.T.S.C.), refd to. [para. 14].

Guaranty Trust Co. of Canada v. Hetherington (1987), 77 A.R. 104; 50 Alta. L.R.(2d) 193 (Q.B.), varied [1989] 5 W.W.R. 340; 95 A.R. 261 (C.A.), refd to. [para. 14].

Vandergrift et al. v. Coseka Resources Ltd. et al. (1989), 95 A.R. 372; 67 Alta. L.R.(2d) 17 (Q.B.), refd to. [para. 14].

Nova Scotia Business Capital Corp. v. Coxheath Gold Holdings Ltd. et al. (1993), 128 N.S.R.(2d) 118; 359 A.P.R. 118 (S.C.), refd to. [para. 14].

Friedmann Equity Developments Inc. v. Final Note Ltd. et al., [2000] 1 S.C.R. 842; 255 N.R. 80; 134 O.A.C. 280, refd to. [para. 20].

Authors and Works Noticed:

Davies, G.J., The Legal Characterization of Overriding Royalty Interests in Oil and Gas (1972), 10 Alta. L. Rev. 232, p. 233 [para. 2].

Dukelow, Daphne A., and Nuse, Betsy, The Dictionary of Canadian Law (2nd Ed. 1995), generally [para. 8].

Ellis, W.H., Property Status of Royalties in Canadian Oil and Gas Law (1984), 22 Alta. L. Rev. 1, p. 10 [para. 15].

Newman, J.F., Can a Gross Overriding Royalty Be an Interest In Land? in Oil and Gas Agreements Update (1989), generally [para. 16].

Counsel:

Richard B. Jones, for the appellant;

James C. Crawford, Q.C., Frank R. Dearlove and Scott H.D. Bower, for the respondents.

Solicitors of Record:

Jones, Rogers, Toronto, Ontario, for the appellant;

McDonald Crawford; Bennett Jones, Calgary, Alberta, for the respondent.

This appeal was heard on November 9, 2001, before McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and LeBel, JJ.A., of the Supreme Court of Canada. The judgment of the Supreme Court was delivered in both official languages by Major, J., on January 24, 2002.

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72 practice notes
  • Court Of Appeal Summaries (April 25 - 29, 2022)
    • Canada
    • Mondaq Canada
    • May 2, 2022
    ...Interests in Land, Mining Rights, Royalty Interests, Rules of Civil Procedure, Rule 20.01, Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, Third Eye Capital Corp. v. Dianor Resources Inc., 2018 ONCA 253 , Blue Note Mining Inc. v. Fern Trust (Trustee of), 2008 NBQB 310 , Sattva Capit......
  • Table of cases
    • Canada
    • Irwin Books Personal Property Security Law - Third Edition
    • July 26, 2022
    ...183 , [1997] AJ No 341 (QB) .................................156, 536, 537 Bank of Montreal v Dynex Petroleum Ltd, 1999 ABCA 363 , af’d 2002 SCC 7 ...........................................................................................177 Bank of Montreal v Featherstone (1989), 58 DLR ......
  • Other Interests in Land
    • Canada
    • Irwin Books The Law of Property
    • August 5, 2021
    ...at 8 & 1359. See also Pegg v Pegg (1992), 1 Alta LR (3d) 249, 21 RPR (2d) 149 at para 15 (QB); Bank of Montreal v Dynex Petroleum Ltd , 2002 SCC 7 at para 8. THE L AW OF PROPERTY 130 distinction, all legal interests are “incorporeal,” and it is only the unconfronted force of a long history ......
  • Table of Cases
    • Canada
    • Irwin Books Archive Personal Property Security Law. Second Edition
    • June 18, 2012
    ..., [1997] AJ No 341 (QB) ........................................ 483, 484 Bank of Montreal v Dynex Petroleum Ltd, 1999 ABCA 363 , aff’d 2002 SCC 7 .......................................................................................... 169 Bank of Montreal v Featherstone (1989), 58 DLR ......
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42 cases
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    • Court of Appeal (Alberta)
    • April 17, 2003
    ...279 (Q.B.), refd to. [para. 62]. Bank of Montreal v. Enchant Resources Ltd. et al. (1999), 255 A.R. 116; 220 W.A.C. 116 (C.A.), affd. [2002] 1 S.C.R. 146; 281 N.R. 113; 299 A.R. 1; 266 W.A.C. 1, refd to. [para. Bank of Montreal v. Dynex Petroleum Ltd. - see Bank of Montreal v. Enchant Resou......
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    • Superior Court of Justice of Ontario (Canada)
    • July 19, 2018
    ...the ordinary course of regulated activities. See R. v. Jarvis, [2002] 3 S.C.R. 757, 2002 SCC 73. [21] In R. v. Jarvis, [2002] 3 S.C.R. 757, 2002 SCC 7, the Court held that with respect to s. 8 of the font-family:"Times New Roman";color:windowtext;background:transparent;...
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    ...v. Dynex Petroleum Ltd. - see Bank of Montreal v. Enchant Resources Ltd. et al. Bank of Montreal v. Enchant Resources Ltd. et al., [2002] 1 S.C.R. 146; 281 N.R. 113 ; 299 A.R. 1 ; 266 W.A.C. 1 , refd to. [para. Envirodrive Inc. v. 836442 Alberta Ltd., 2005 ABQB 446 , refd to. [para. 47]......
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    • Court of Queen's Bench of Alberta (Canada)
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    ...v. Dynex Petroleum Ltd. - see Bank of Montreal v. Enchant Resources Ltd. et al. Bank of Montreal v. Enchant Resources Ltd. et al., [2002] 1 S.C.R. 146; 281 N.R. 113; 299 A.R. 1; 266 W.A.C. 1, refd to. [para. Scurry-Rainbow Oil Ltd. et al. v. Galloway Estate (1993), 138 A.R. 321; 8 Alta. L.R......
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19 firm's commentaries
  • Court Of Appeal Summaries (April 25 - 29, 2022)
    • Canada
    • Mondaq Canada
    • May 2, 2022
    ...Interests in Land, Mining Rights, Royalty Interests, Rules of Civil Procedure, Rule 20.01, Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, Third Eye Capital Corp. v. Dianor Resources Inc., 2018 ONCA 253 , Blue Note Mining Inc. v. Fern Trust (Trustee of), 2008 NBQB 310 , Sattva Capit......
  • ONTARIO COURT OF APPEAL SUMMARIES (MARCH 12 – MARCH 16)
    • Canada
    • LexBlog Canada
    • March 16, 2018
    ...& Insolvency, Receiverships, Property Law, Interests in Land, Mining Rights, Royalty Rights, Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, Civil Procedure, Jurisdiction, Vesting Orders, Appeals, Mootness, Regal Constellation Hotel Ltd., Re (2004), 71 O.R. (3d) 355 (C.A.)Bankruptcy......
  • Ontario Court Of Appeal Summaries (March 12 – March 16)
    • Canada
    • Mondaq Canada
    • March 19, 2018
    ...& Insolvency, Receiverships, Property Law, Interests in Land, Mining Rights, Royalty Rights, Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, Civil Procedure, Jurisdiction, Vesting Orders, Appeals, Mootness, Regal Constellation Hotel Ltd., Re (2004), 71 O.R. (3d) 355 (C.A.)Bankrupt......
  • Ontario Court of Appeal Clarifies and Reaffirms Dynex: Gross Overriding Royalties and Interests in Land
    • Canada
    • JD Supra Canada
    • April 19, 2018
    ...Resources Inc., 2018 ONCA 253, both reaffirms the test established in the 2002 landmark decision Bank of Montreal v Dynex Resources Ltd., 2002 SCC 7, and implements a practical approach to the application of this test, sensitive to the underlying business realities. Notably, the Court of Ap......
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10 books & journal articles
  • Table of cases
    • Canada
    • Irwin Books Personal Property Security Law - Third Edition
    • July 26, 2022
    ...183 , [1997] AJ No 341 (QB) .................................156, 536, 537 Bank of Montreal v Dynex Petroleum Ltd, 1999 ABCA 363 , af’d 2002 SCC 7 ...........................................................................................177 Bank of Montreal v Featherstone (1989), 58 DLR ......
  • Table of Cases
    • Canada
    • Irwin Books Archive Personal Property Security Law. Second Edition
    • June 18, 2012
    ..., [1997] AJ No 341 (QB) ........................................ 483, 484 Bank of Montreal v Dynex Petroleum Ltd, 1999 ABCA 363 , aff’d 2002 SCC 7 .......................................................................................... 169 Bank of Montreal v Featherstone (1989), 58 DLR ......
  • Other Interests in Land
    • Canada
    • Irwin Books The Law of Property
    • August 5, 2021
    ...at 8 & 1359. See also Pegg v Pegg (1992), 1 Alta LR (3d) 249, 21 RPR (2d) 149 at para 15 (QB); Bank of Montreal v Dynex Petroleum Ltd , 2002 SCC 7 at para 8. THE L AW OF PROPERTY 130 distinction, all legal interests are “incorporeal,” and it is only the unconfronted force of a long history ......
  • Table of Cases
    • Canada
    • Irwin Books The Law of Property
    • August 5, 2021
    ...R 151 (QB) .................................................................................274–75 Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC 7, [2002] 1 SCR 146, 208 DLR (4th) 155 ........................................... 129, 133–34 Bank of Nova Scotia v Boisselle (1985), 63 AR 28......
  • Request a trial to view additional results

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