Harris v. Nugent, (1995) 172 A.R. 309 (QB)

• Judge: MacLeod, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 22, 1995
• Jurisdiction: Alberta
• Citations: (1995), 172 A.R. 309 (QB)

Harris v. Nugent (1995), 172 A.R. 309 (QB)

MLB headnote and full text

Joe W. Harris (plaintiff) v. Larry B. Nugent, Enstar Petroleum Ltd., Ashland Oil Canada Limited, Kaiser Oil Ltd., Arctic Slope Oil Ltd., Cinnabar Enterprises Ltd., First Tier Energy Ltd., Black Gold Oil & Gas Ltd., Intensity Resources Ltd. and Amoco Canada Resources Ltd. (defendants)

(Action No. 8201-03044)

Indexed As: Harris v. Nugent et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

MacLeod, J.

July 22, 1995.

Summary:

With his employer Empire's per­mission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire. ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overriding royalty. The working interest passed through different hands. The defend­ant Larry B. Nugent, the predecessor in title and president of the defendant Cinnabar Enterprises Ltd., assigned its interest to Cinnabar without consideration. Harris sued to enforce the royalties payable under the agreement with ROCK. Harris argued that Cinnabar and Nugent should be considered as one entity for the purposes of any judg­ment against them.

The Alberta Court of Queen's Bench allowed the action. The court declined to lift the corporate veil, however, holding that Nugent and Cinnabar would be responsible for the time periods each held the working interest in the lands.

Company Law - Topic 310

Nature of corporations - Lifting the cor­porate veil - The plaintiff sued for royalty payments arising out of working interests in Crown leases of petroleum and natural gas - The defendant Larry B. Nugent, the predecessor in title and president of the defendant Cinnabar Enterprises Ltd., assigned its interest to Cinnabar without consideration - The Alberta Court of Queen's Bench declined to consider Nugent and Cinnabar as one entity for the purposes of judgment against them - The court considered that the corporate defend­ant was in existence for a considerable period of time, the assignments made to it appeared to have been regularly made, there was no evidence of any dishonesty or attempts to use the company as a mere shell, or representations it could not meet its obligations - See paragraphs 34 to 38.

Contracts - Topic 7164

Novation - Novation where new party introduced - Acceptance of sole liability by new party - With his employer Empire's permission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire - ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overriding royalty - The working inter­est passed through dif­ferent hands - Harris sued to enforce the royalties payable under the agreement with ROCK - He argued, inter alia, that the defendants, by their conduct, were novated into the position of ROCK in the Harris Royalty agreement - The Alberta Court of Queen's Bench rejected the argument where the defendants did not assume com­plete liability - See paragraph 27.

Mines and Minerals - Topic 8163

Oil and gas - Royalty agreements - Ter­mination - With his employer Empire's permission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire - ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overrid­ing royalty - The working interest passed through dif­ferent hands - Harris sued to enforce the roy­alties payable under the agreement with ROCK - The defendants argued that the plaintiff's royalty interest was terminated by reason of the actions of ROCK, by way of surrender, expiration or otherwise - The Alberta Court of Queen's Bench rejected the defendants' argument - See paragraphs 21 to 26.

Mines and Minerals - Topic 8166

Oil and gas - Royalty agreements - Whether royalty rights constitute inter­est in land - With his employer Empire's per­mission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire - ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overrid­ing royalty - The working interest passed through dif­ferent hands - Harris sued to enforce the roy­alties payable under the agreement with ROCK - He argued, inter alia, that the royalty interest was an inter­est in land and as such enforceable against subsequent holders of the working interest - The Alberta Court of Queen's Bench rejected the argument - See paragraphs 31 to 33.

Restitution - Topic 62

Unjust enrichment - What constitutes - With his employer Empire's per­mission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire - ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overriding royalty - The working inter­est passed through dif­ferent hands - Harris sued to enforce the roy­alties payable under the agreement with ROCK - The Alberta Court of Queen's Bench allowed the action on the basis, inter alia, of unjust enrich­ment - See paragraphs 31 to 33.

Specific Performance - Topic 3048

Practice - Parties - Strangers to the con­tract - Purchaser of the subject matter of the contract - With his employer Empire's permission, Harris, a geologist, put together a play involving Crown leases of oil and natural gas held by Empire - ROCK acquired an option to earn a 100% working interest from Empire and granted Harris's company an overrid­ing royalty - The working interest passed through dif­ferent hands - Harris sued to enforce the roy­alties payable under the agreement with ROCK - He argued, inter alia, that the defendants were liable in equity to pay the royalty - The Alberta Court of Queen's Bench agreed - See para­graphs 29, 30.

Cases Noticed:

Masai Minerals Ltd. and Canada Perma­nent Trust Co. v. Heritage Resources Ltd., Texas International Co. and Con Dumba, [1981] 2 W.W.R. 140; 7 Sask.R. 162 (C.A.), dist. [paras. 24, 25].

National Trust Co. v. Mead, [1990] 2 S.C.R. 410; 112 N.R. 1; 87 Sask.R. 161, appld. [para. 27].

Saskatchewan Minerals v. Keyes, [1972] 2 W.W.R. 108 (S.C.C.), refd to. [para. 28].

Publix Oil & Gas Ltd., Re, [1936] 3 W.W.R. 634 (Alta. C.A.), refd to. [para. 28].

Scurry-Rainbow Oil Ltd. et al. v. Galloway Estate (1994), 157 A.R. 65; 77 W.A.C. 65 (C.A.), refd to. [para. 28].

Irving Industries (Irving Wire Products Division) Ltd. et al. v. Canadian Long Island Petroleums Ltd. and Sadim Oil & Gas Co., [1975] 2 S.C.R. 715; 3 N.R. 430, appld. [paras. 29, 30].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384, appld. [para. 31].

Shibamoto & Co. et al. v. Western Fish Producers Inc. (Bankrupt) et al. (1991), 43 F.T.R. 1 (T.D.), refd to. [paras. 34, 35, 36].

Sun Sudan Oil Co. et al. v. Methanex Corp. et al. (1992), 134 A.R. 1; 5 Alta. L.R.(3d) 292 (Q.B.), refd to. [para. 36].

Authors and Works Noticed:

Fry On Specific Performance (6th Ed.), p. 90 [para. 30].

Counsel:

P.J. McGovern (Parlee McLaws), for the plaintiff;

J.P. Petch (Howard, Mackie), for the defendants.

This case was heard by MacLeod, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the fol­lowing decision on July 22, 1995.