Freyberg v. Fletcher Challenge Oil and Gas Inc.,

• Judge: Conrad, O'Leary and Ritter, JJ.A.
• Neutral Citation: 2005 ABCA 46
• Date: 05 December 2003
• Court: Court of Appeal (Alberta)

Freyberg v. Fletcher Challenge Oil (2005), 363 A.R. 35 (CA);

    343 W.A.C. 35

MLB headnote and full text

Temp. Cite: [2005] A.R. TBEd. FE.053

Lady Ivry Freyberg (appellant/plaintiff) v. Fletcher Challenge Oil and Gas Inc., Fletcher Challenge Energy Canada Inc., Apache Canada Ltd., Tudor Corporation Ltd., Kalta Energy Corp., Rife Resources Ltd., Wilshire Oil of Canada. Ltd., Westpoint Energy Inc. (Formerly Slade Energy Inc.), Zargon Oil & Gas Ltd., Bonavista Petroleum Ltd., Hillcrest Investments Ltd., Tarsus Oils Ltd., Altacanada Energy Corp., Alberta Selecta Corporation, NV Resources Corporation Ltd., Direct Energy Marketing Limited, Midfield Supply Ltd., and Pricewater- houseCoopers Inc., As Receiver and Manager of Kalta Energy Corp. (respondents/defendants)

(0201-0276-AC; 0301-0128-AC; 2005 ABCA 46)

Indexed As: Freyberg v. Fletcher Challenge Oil and Gas Inc. et al.

Alberta Court of Appeal

Conrad, O'Leary and Ritter, JJ.A.

February 10, 2005.

Summary:

The plaintiff, a lessor under a freehold natural gas lease, sought a declaration that the lease had terminated.

The Alberta Court of Queen's Bench, in a decision reported 323 A.R. 45, dismissed the action. The parties sought directions respecting costs.

The Alberta Court of Queen's Bench, in a decision reported at 337 A.R. 127, determined the costs issues accordingly. The plaintiff appealed the dismissal of the action and the order respecting costs.

The Alberta Court of Appeal, O'Leary, J.A., dissenting, allowed the appeal and granted the plaintiff a declaration that the lease had terminated.

Equity - Topic 4630

Election - When applicable - Selection of one of two inconsistent courses of action - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the failure of the lessees to produce a shut-in well at a time when there was an economic or profitable market for production - The lessee argued that the plaintiff had elected to accept shut-in royalty payments and therefore ought to be estopped - The Alberta Court of Appeal rejected the argument - To be estopped by her acceptance of the payments, the plaintiff must have made an unequivocal election with knowledge of not only her right to elect but also of the facts underlying the election - When the plaintiff received the payments, she did not make an informed and unequivocal choice - She did not possess the requisite knowledge to elect - See paragraphs 123 to 133.

Estoppel - Topic 1426

Estoppel in pais (by conduct) - Acceptance - Of money or property - [See Equity - Topic 4630 ].

Mines and Minerals - Topic 8123

Oil and gas - Leases - Interpretation - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the late payment of shut-in royalties - A clause in the lease provided for the payment of delay rentals by cheque or draft - The plaintiff argued that, given that a royalty payment was post-dated, it did not meet the requirements of the lease because a post-dated cheque was not a cheque within the meaning of the Bills of Exchange Act, R.S.C. 1985, c. B-4 - The trial judge held that the reference to "cheque" in the lease clause bore the ordinary commercial meaning of the word, and included a post-dated cheque as long as such cheque was not post-dated later than the anniversary date of the lease - The Alberta Court of Appeal held that the trial judge did not err by finding that a post-dated cheque was included within the scope of the lease clause - See paragraphs 7, 134 and 135.

Mines and Minerals - Topic 8123.1

Oil and gas - Leases - Burden of proof - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the failure of the lessees to produce a shut-in well at a time when there was an economic or profitable market for production - The Alberta Court of Appeal held that the lessee bore the burden of proving the negative proposition that an economic or profitable market did not exist on any lease anniversary date while the well was shut-in - The burden should not fall on the plaintiff lessor to produce evidence about the lessee's business decisions and to explain why the lessee made the decisions that it did - This evidence laid particularly within the knowledge of the lessee - See paragraphs 74 to 83.

Mines and Minerals - Topic 8133

Oil and gas - Leases - Obligations of lessee - Production - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the failure of the lessees to produce a shut-in well at a time when there was an economic or profitable market for production - The trial judge found that there was an implied term in the lease such that the failure to produce did not terminate the lease but merely left the plaintiff with a right to damages - The Alberta Court of Appeal held that the implied term circumvented case law which stated that failure to produce, when economical and profitable to do so, resulted in termination of the lease - There were several policy reasons and sound legal principles which did not favour the implied term - There was no need for an implied term - If there was an economic and profitable market, on the anniversary date of the lease, there was no deemed production and the lease terminated - See paragraphs 44 to 68.

Mines and Minerals - Topic 8133

Oil and gas - Leases - Obligations of lessee - Production - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the failure of the lessees to produce a shut-in well at a time when there was an economic or profitable market for production - The Alberta Court of Appeal reviewed the proper test for determining whether an economic and profitable market existed - See paragraphs 70 to 73.

Mines and Minerals - Topic 8133

Oil and gas - Leases - Obligations of lessee - Production - The plaintiff, a lessor under a freehold natural gas lease, sought a declaration the lease had terminated due to the failure of the lessees to produce a shut-in well at a time when there was an economic or profitable market for production - The trial judge dismissed the action -The Alberta Court of Appeal held that the trial judge made palpable and overriding errors in finding that an economical and profitable market did not exist until 1999 -The trial judge erred, inter alia, by considering the expert evidence necessary - The factual basis to decide upon the existence of an economical and profitable market for the well was virtually overwhelming - See paragraphs 84 to 88.

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [paras. 41, 164].

Western Irrigation District v. Alberta et al. (2002), 312 A.R. 358; 281 W.A.C. 358; 2002 ABCA 200, refd to. [para. 42].

Meyer v. Partec Lavalin Inc. et al. (2001), 281 A.R. 339; 248 W.A.C. 339; 2001 ABCA 145, refd to. [para. 42].

Jager v. Liberty Mutual Fire Insurance Co. et al. (2001), 281 A.R. 273; 248 W.A.C. 273; 2001 ABCA 163, refd to. [para. 42].

Labbee et al. v. Peters et al. (1999), 237 A.R. 382; 197 W.A.C. 382; 1999 ABCA 246, refd to. [para. 43].

Nova, An Alberta Corporation v. Guelph Engineering Co. and Daniel Valve Co. et al. (1989), 100 A.R. 241 (C.A.), refd to. [paras. 43, 166].

Canadian Superior Oil of California Ltd. v. Kanstrup, [1965] S.C.R. 92, refd to. [para. 47].

East Crest Oil Co. v. Strohschein and Strohschein, [1952] 2 D.L.R. 432 (Alta. C.A.), refd to. [para. 47].

Suncor Inc. v. Norcen International Ltd. (1988), 89 A.R. 200 (Q.B.), refd to. [para. 57].

Canada-Cities Service Petroleum Corp. v. Kininmonth et al., [1964] S.C.R. 439, refd to. [para. 57].

Weyburn Security Co. v. Sohio Petroleum Co., [1971] S.C.R. 81, refd to. [para. 58].

Durish v. White Resource Management Ltd. and Royal Bank of Canada (1987), 82 A.R. 66; 55 Alta. L.R.(2d) 47 (Q.B.), affd. (1988), 63 Alta. L.R.(2d) 265 (C.A.), refd to. [para. 58].

T.D.L. Petroleums Inc. v. Montreal Trust Co. et al., 2001 SKQB 360, affd. (2002), 223 Sask.R. 276; 277 W.A.C. 276; 2002 SKCA 91, refd to. [para. 58].

Wolff v. Consumers' Gas Co., [1995] O.J. No. 4004 (C.J.), refd to. [para. 60].

549767 Alberta Ltd. v. Teg Holdings Ltd., [1997] A.J. No. 321 (Q.B.), refd to. [para. 70].

Northwestern Utilities Ltd. v. Peyto Oils Ltd. (1983), 49 A.R. 1 (Q.B.), refd to. [para. 70].

Farmers Mutual Petroleums Ltd. v. Smelting Refining and Mining Company and Agawam Oil Co. (1962), 39 W.W.R.(N.S.) 682 (Sask. Q.B.), refd to. [para. 70].

National Trust Co. v. Wong Aviation Ltd., [1969] S.C.R. 481, refd to. [para. 75].

Snell v. Farrell, [1990] 2 S.C.R. 311; 110 N.R. 200; 107 N.B.R.(2d) 94; 267 A.P.R. 94, refd to. [paras. 75, 177].

Blair Estate v. Altana Exploration Co. (1987), 53 Alta. L.R.(2d) 419 (C.A.), refd to. [paras. 83, 178].

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 85].

R. v. Abbey, [1982] 2 S.C.R. 24; 43 N.R. 30; 68 C.C.C.(2d) 394, refd to. [para. 86].

Kelliher (Village) v. Smith, [1931] S.C.R. 672, refd to. [para. 86].

R. v. G.C. (1996), 144 Nfld. & P.E.I.R. 204; 451 A.P.R. 204; 110 C.C.C.(3d) 233 (Nfld. C.A.), refd to. [para. 86].

R. v. D.D., [2000] 2 S.C.R. 275; 259 N.R. 156; 136 O.A.C. 201, refd to. [para. 86].

R. v. Khan, [1990] 2 S.C.R. 531; 113 N.R. 53; 41 O.A.C. 353, refd to. [para. 92].

R. v. Smith (A.L.), [1992] 2 S.C.R. 915; 139 N.R. 323; 55 O.A.C. 321, refd to. [para. 92].

R. v. F.J.U., [1995] 3 S.C.R. 764; 186 N.R. 365; 85 O.A.C. 321, refd to. [para. 92].

Bank Line Ltd. v. Capel, [1919] A.C. 435 (H.L.), refd to. [para. 93].

Maritime National Fish Ltd. v. Ocean Trawlers Ltd., [1935] A.C. 524 (P.C.), refd to. [para. 93].

Barton v. Agincourt Football Enterprises Ltd. (1978), 86 D.L.R.(3d) 133 (Ont. H.C.), affd. [1982] 1 S.C.R. 666; 42 N.R. 97, refd to. [para. 93].

McDermid, Buchanan, McDermid and McDermid Drug Co. Ltd. v. Food-Vale Stores (1972) Ltd. and Store Properties Ltd. (1980), 25 A.R. 301 (Q.B.), refd to. [para. 93].

Mesa Operating Limited Partnership v. Amoco Canada Resources Ltd. (1994), 149 A.R. 187; 63 W.A.C. 187 (C.A.), refd to. [para. 95].

R. v. Harper, [1982] 1 S.C.R. 2; 40 N.R. 255, refd to. [para. 112].

Roland Roy Fourrures Ltd. v. Maryland Casualty Co., [1974] S.C.R. 52, refd to. [para. 112].

Colautti Construction Ltd. v. Ottawa (City) (1984), 5 O.A.C. 74; 46 O.R.(2d) 236 (C.A.), refd to. [para. 116].

Kammin's Ballrooms Co. v. Zenith Investments (Torquay) Ltd., [1971] A.C. 850 (H.L.), refd to. [para. 128].

Compagnia Tirenna di Assicurazioni v. Grand Union Insurance Co., [1991] 2 L.L.R. 143 (Q.B.), refd to. [para. 128].

Mitchell and Jewell Ltd. v. Canadian Pacific Express Co. (1974), 44 D.L.R.(3d) 603 (Alta. C.A.), refd to. [para. 128].

Jeske and Waymore Management Ltd. v. Maritime Life Assurance Co. (1990), 105 A.R. 81 (Q.B.), affd. (1991), 117 A.R. 162; 2 W.A.C. 162 (C.A.), refd to. [para. 128].

Scarf v. Jardine (1882), 7 App. Cas. 345 (H.L.), refd to. [para. 129].

Saskatchewan River Bungalows and Fikowski v. Maritime Life Assurance, [1994] 2 S.C.R. 490; 168 N.R. 381; 155 A.R. 321; 73 W.A.C. 321, refd to. [para. 129].

Marchischuk v. Dominion Industrial Supplies Ltd. et al., [1991] 2 S.C.R. 61; 125 N.R. 306; 73 Man.R.(2d) 271; 3 W.A.C. 271, refd to. [para. 129].

Johnston v. Carlos (2002), 317 A.R. 155; 284 W.A.C. 155; 2002 ABCA 127, refd to. [para. 129].

Anguish v. Maritime Life Assurance Co. et al. (1987), 77 A.R. 189; 51 Alta. L.R.(2d) 376 (C.A.), leave to appeal dismissed [1988] 2 S.C.R. vii; 90 N.R. 319; 91 A.R. 80, refd to. [para. 129].

Federal Business Development Bank v. Steinbock Development Corp. (1983), 42 A.R. 231 (C.A.), refd to. [para. 129].

R. v. Paulson (1920), 54 D.L.R. 331 (P.C.), dist. [para. 131].

B&R Holdings Ltd. v. Western Grocers Ltd. (1982), 25 R.P.R. 1221 (Man. Q.B.), dist. [para. 131].

Sledz v. Edmonton Home Fair Ltd. (1997), 28 R.P.R.(3d) 132 (Alta. Q.B.), dist. [para. 131].

Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., [1970] S.C.R. 932, refd to. [para. 133].

Leduc v. Banque d'Hochelaga, [1926] S.C.R. 76, refd to. [para. 134].

Keyes v. Royal Bank of Canada, [1947] S.C.R. 377, refd to. [para. 134].

Toneguzzo-Norvell et al. v. Savein and Burnaby Hospital, [1994] 1 S.C.R. 114; 162 N.R. 161; 38 B.C.A.C. 193; 62 W.A.C. 193; 87 B.C.L.R.(2d) 1, refd to. [para. 166].

Allen v. University Hospitals Board et al. (2002), 312 A.R. 59; 281 W.A.C. 59 (C.A.), refd to. [para. 166].

Schreiber Brothers Ltd. v. Currie Products Ltd. and Gulf Oil Canada Ltd., [1980] 2 S.C.R. 78; 31 N.R. 335; 108 D.L.R.(3d) 1, refd to. [para. 166].

N.V. Bocimar S.A. v. Century Insurance Co. of Canada, [1987] 1 S.C.R. 1247; 76 N.R. 212, refd to. [para. 166].

Lapointe v. Chevrette, [1992] 1 S.C.R. 351; 133 N.R. 116; 45 Q.A.C. 262; 90 D.L.R.(4th) 7, refd to. [para. 166].

Pocklington Foods Inc. v. Alberta (Provincial Treasurer) (2000), 250 A.R. 188; 213 W.A.C. 188; 184 D.L.R.(4th) 152 (C.A.), refd to. [para. 166].

Lowe v. Larue (2000), 250 A.R. 220; 213 W.A.C. 220 (C.A.), refd to. [para. 166].

Stevens v. Morrisroe - see Stevens v. Crawford et al.

Stevens v. Crawford et al., [2001] A.R. Uned. 183 (C.A.), refd to. [para. 166].

St-Jean v. Mercier, [2002] 1 S.C.R. 491; 282 N.R. 310; 209 D.L.R.(4th) 513; 2002 SCC 15, refd to. [para. 166].

Tiesmaki et al. v. Wilson et al. (No. 2) (1975), 60 D.L.R.(3d) 19 (Alta. C.A.), refd to. [para. 167].

R. v. S.A.B. et al. (2001), 293 A.R. 1; 257 W.A.C. 1 (C.A.), refd to. [para. 167].

Canada Southern Petroleum Ltd. et al. v. Amoco Canada Petroleum Co. et al., [2001] 1 W.W.R. 520; 300 A.R. 201 (Q.B.), refd to. [para. 169].

Ontario Equitable Life & Accident Co. v. Baker, [1926] S.C.R. 297, refd to. [para. 177].

Smith v. Nevis, [1925] S.C.R. 619, refd to. [para. 177].

Paddon Hughes Development Co. v. Pancontinental Oil Ltd. et al. (1995), 173 A.R. 254; 33 Alta. L.R.(3d) 7 (Q.B.), affd. (1998), 223 A.R. 180; 183 W.A.C. 180 (C.A.), leave to appeal denied [1998] S.C.C.A. No. 600, refd to. [para. 177].

Kretschmer v. Engelbrecht (1989), 80 Sask.R. 291 (Q.B.), refd to. [para. 177].

Canada-Cities Service Petroleum Corp. v. Kininmonth et al. (1963), 44 W.W.R.(N.S.) 392 (Alta. C.A.), affd. [1964] S.C.R. 439, refd to. [para. 178].

Gas Initiatives Venture Ltd. v. Beck, [1979] 3 W.W.R. 741 (Alta. Q.B.), refd to. [para. 178].

549767 Alberta Ltd. et al. v. Teg Holdings Ltd. et al., [1997] A.R. Uned. 90 (Q.B.), refd to. [para. 179].

Anderson v. Amoco Canada Oil and Gas et al. (2002), 312 A.R. 112; 281 W.A.C. 112; 5 Alta. L.R.(4th) 54 (C.A.), refd to. [para. 216].

Labbee et al. v. Peters et al. (2000), 261 A.R. 141; 225 W.A.C. 141; 86 Alta. L.R.(3d) 67 (C.A.), refd to. [para. 219].

Larouche v. Shaw, [1981] A.J. No. 544 (C.A.), refd to. [para. 225].

Brown Estate v. Young (1990), 107 A.R. 134 (C.A.), refd to. [para. 225].

Forster v. MacDonald et al. (1995), 178 A.R. 98; 110 W.A.C. 98 (C.A.), refd to. [para. 230].

Authors and Works Noticed:

Sopinka, John, Lederman, Sidney N., and Bryant, Alan W., The Law of Evidence in Canada (2nd Ed. 1999), paras. 3.10, 3.15 [para. 181]; 3.30 [para. 184].

Counsel:

S. Carscallen, Q.C. and R. Twyman, for the appellant;

G.N. Stapon and C.D. Simard, for the respondent, Apache Canada Ltd.;

G.S. Watson, for the respondent, Tudor Corporation Ltd.;

D.S. Nishimura, for the respondents, Direct Energy Marketing Limited, Zargon Oil & Gas Ltd. and PricewaterhouseCoopers Inc., as Receiver and Manager of Kalta Energy Corp.

This appeal was heard on December 5, 2003, before Conrad, O'Leary and Ritter, JJ.A., of the Alberta Court of Appeal. The decision of the Court of Appeal was filed on February 10, 2005, when the following opinions were filed:

Ritter, J.A. (Conrad, J.A., concurring) - see paragraphs 1 to 140;

O'Leary, J.A., dissenting - see paragraphs 141 to 234.