James H. Meek, Jr. Trust v. San Juan Resources Inc., 2005 ABCA 448

• Judge: Hunt, Berger and Ritter, JJ.A.
• Neutral Citation: 2005 ABCA 448
• Citation: 2005 ABCA 448,(2005), 376 A.R. 202 (CA),376 AR 202,52 Alta LR (4th) 1,[2005] CarswellAlta 1880,[2005] AJ No 1754 (QL),[2005] A.J. No 1754 (QL),376 A.R. 202,(2005), 376 AR 202 (CA)
• Date: 14 September 2005
• Court: Court of Appeal (Alberta)

James H. Meek Trust v. San Juan Resources (2005), 376 A.R. 202 (CA);

    360 W.A.C. 202

MLB headnote and full text

Temp. Cite: [2006] A.R. TBEd. JA.012

James H. Meek, Jr. Trust, by its interested Trustee, Gary D. Fender, The Estate of Marian Meek Fender, by its Executor, Gary D. Fender, and Bessie M. Carrington (respondents/applicants) v. San Juan Resources Inc. (appellant/respondents) and Imperial Oil Resources Limited (respondents/applicants) and ConocoPhillips Canada Energy Partnership and Hampstead Trust Corporation (not parties to the appeal)

(0501-0110-AC; 2005 ABCA 448)

Indexed As: James H. Meek Trust et al. v. San Juan Resources Inc. et al.

Alberta Court of Appeal

Hunt, Berger and Ritter, JJ.A.

December 20, 2005.

Summary:

In 2002 Meek Trust et al. commenced proceedings against Imperial Oil and San Juan Resources Inc. to enforce the non-payment of a royalty respecting certain producing oil and gas properties in the Province of Alberta. This royalty arose under a 1952 agreement between Meek and a predecessor of Imperial Oil which granted a 3% gross overriding royalty on production from NE Section 35. An application was brought under rule 410(c) and (e) to determine whether: (1) the royalty was an interest in land; (2) to what interests the royalty attached; and (3) whether the royalty was subject to deductions for the expense of processing and trucking the petroleum substances.

The Alberta Court of Queen's Bench, in a decision reported 356 A.R. 72, held that the royalty was not an interest in land, the royalty attached to a 100% working interest in NE Section 35 and was not subject to deduction for processing and trucking costs. Three other issues were subsequently presented to the court: (1) whether any claim by the Meek Trust for payment of arrears accruing due more than 2 years prior to the date of filing of the originating notice were statute barred; (2) whether the Meek Trust et al. were entitled to interest on any arrears payable and, if so, should simple or compound interest be payable; and (3) whether Imperial was entitled to be indemnified by San Juan Resources for any arrears found to be payable by Imperial.

The Alberta Court of Queen's Bench, in a decision reported 364 A.R. 309, held that none of Meek Trust's claim was statute barred, that Meek Trust was entitled to simple interest and that Imperial was entitled to be indemnified by San Juan. San Juan appealed respecting the limitations and interest issues and raised an issue with respect to procedural irregularities. Meek Trust et al. cross-appealed claiming that the trial judge selected the wrong interest rate under the Judgment Interest Act and ought to have awarded compound rather than simple interest.

The Alberta Court of Appeal allowed the appeal and cross-appeal in part. The court determined that a portion of the Meek Trust claim was barred by the 10 year limitation period in s. 3(1)(b) of the Limitations Act. The court also ruled that interest should be paid at the applicable annual rate instead of applying the 2005 rate to the entire claim. The trial judge was correct in awarding simple interest.

Interest - Topic 3506

Statutory interest - On judgments - Rate of interest - [See Interest - Topic 5010 ].

Interest - Topic 5010

Interest as damages (prejudgment interest - General principles - Calculation of interest - Simple or compound - In 2002 Meek Trust et al. commenced proceedings against Imperial Oil and San Juan Resources Inc. to enforce the non-payment of a royalty respecting certain producing oil and gas properties which came into production in 1988 - An issue arose respecting interest on the unpaid royalties - The trial judge directed that simple interest be paid at the 2005 legal rate, with interest to run from the day the applicable royalty payment should have been made until the date payment was actually made - On appeal, the Alberta Court of Appeal ruled that interest was payable at the applicable annual rates, rather than applying the 2005 rate to the entire claim - The judge, however, did not err in awarding simple interest - See paragraphs 51 to 62.

Interest - Topic 5303

Interest as damages (prejudgment interest) - Interest on payment of money or debt withheld - Amount due under a contract - Royalties - [See Interest - Topic 5010 ].

Limitation of Actions - Topic 15

General principles - Discoverability rule - Application of - The Limitations Act, R.S.A. 2000, c. 12, provided that: "3(1) ... if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim" - The Alberta Court of Appeal discussed the test for "ought to have known" as the phrase was used in s. 3(1)(a), noting that the common law discoverability test was ousted by the statute - Rather, the test was that of "reasonable diligence" analyzed in light of the three s. 3(1)(a) factors - See paragraphs 19 to 21.

Limitation of Actions - Topic 15

General principles - Discoverability rule - Application of - In 2002 Meek Trust et al. commenced proceedings for non-payment of royalties under a 1952 agreement between Meek and Imperial Oil's predecessor - Well production began in 1988 - A limitations issue arose - The trial judge held Meek lacked knowledge that the royalty was not being paid until they had actual notice from Imperial in May 2002, and neither knew, or in the circumstances ought to have known of their claim prior to March 1, 1999 - Therefore, the new limitations rules contained in s. 3(1)(a) of the Limitations Act (2000) applied, and the claim, being commenced within two years of 2002, was not barred by s. 3(1)(a) - Further, since the conduct was ongoing, the 10 year limitation period in s. 3(1)(b) was inapplicable - On appeal, the Alberta Court of Appeal held although the trial judge applied the wrong test, he correctly concluded that the Meek ought not to have known of the claim prior to actual notification in May 2002 - However, the trial judge erred in ruling that the defendant's conduct was continuing such as to preclude the application of s. 3(1)(b) - Rather, each missed royalty payment gave rise to a separate claim - The claim was therefore barred for any payments due 10 years prior to the commencement of the 2002 action - See paragraphs 1 to 50.

Limitation of Actions - Topic 17

General principles - Continuing acts and continuing losses - [See second Limitation of Actions - Topic 15].

Limitation of Actions - Topic 1904

Actions - General - Ultimate limitation period - [See second Limitation of Actions - Topic 15 ].

Limitation of Actions - Topic 2023

Actions in contract - Actions for breach of contract - When time commences to run - [See second Limitation of Actions - Topic 15 ].

Limitation of Actions - Topic 9305

Postponement or suspension of statute - Discoverability rule - [See both Limitation of Actions - Topic 15] .

Cases Noticed:

Mahan v. Hindes et al. (2001), 308 A.R. 1; 2001 ABQB 831, refd to. [para. 7].

Bank of America Canada v. Mutual Trust Co. et al., [2002] 2 S.C.R. 601; 287 N.R. 171; 159 O.A.C. 1; 2002 SCC 43, refd to. [para. 9].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 211 D.L.R.(4th) 577; 2002 SCC 33, refd to. [para. 11].

Decock et al. v. Alberta et al. (2000), 255 A.R. 234; 220 W.A.C. 234; 2000 ABCA 122, refd to. [para. 16].

Peterson et al. v. Highwood Distillers Ltd. et al., [2005] A.R. Uned. 295; 2005 ABCA 248, refd to. [para. 20].

Seidel v. Kerr et al. (2003), 330 A.R. 284; 299 W.A.C. 284; 2003 ABCA 267, refd to. [para. 20].

J.N. v. G.J.K. et al. (2004), 361 A.R. 177; 339 W.A.C. 177; 2004 ABCA 394, refd to. [para. 21].

De Shazo v. Nations Energy Co. et al. (2005), 367 A.R. 267; 346 W.A.C. 267; 256 D.L.R.(4th) 502; 2005 ABCA 241, refd to. [para. 21].

Luscar Ltd. and Norcen Resources Ltd. v. Pembina Resources Ltd. (1994), 162 A.R. 35; 83 W.A.C. 35 (C.A.), refd to. [para. 28].

Bowes v. Edmonton (City) et al. (2005), 386 A.R. 1; 2005 ABQB 502, refd to. [para. 36].

Peixeiro v. Haberman, [1997] 3 S.C.R. 549; 217 N.R. 371; 103 O.A.C. 161, refd to. [para. 37].

Ruzicka v. Costigan (1984), 54 A.R. 385; 33 Alta. L.R.(2d) 21 (C.A.), refd to. [para. 48].

98956 Investments Ltd. (Receivership) v. Fidelity Trust Co. (1988), 89 A.R. 151; 61 Alta. L.R.(2d) 193 (C.A.), refd to. [para. 48].

Bowyer v. Woodman (1867), L.R. 3 Eq. 313, refd to. [para. 48].

Archbold v. Scully (1861), 9 H.L.C. 360, refd to. [para. 48].

Statutes Noticed:

Judgment Interest Act, R.S.A. 2000, c. J-1, sect. 2(1), sect. 2(3)(b), sect. 4(2) [para. 6].

Limitations Act, R.S.A. 2000, c. L-12, sect. 2(2), sect. 3(1), sect. 3(3), sect. 3(5) [para. 6].

Authors and Works Noticed:

Alberta, Law Reform Institute, Report on Limitations, Report No. 55 (1989), pp. 1 [para. 38]; 65 [para. 41]; 69 [paras. 41, 46]; 70 [para. 42]; 74 [para. 27].

Chitty on Contracts (29th Ed. 2004), generally [para. 48].

Counsel:

J. Gruber and A. Ovens, for the respondents/applicants;

M.W. Mudie, for the appellant/respondent;

J. Whitaker, for Imperial Oil Resources Ltd. (respondent/applicant).

This appeal was heard on September 14, 2005, before Hunt, Berger and Ritter, JJ.A., of the Alberta Court of Appeal. On December 20, 2005, in Calgary, Alberta, the following decision was delivered by Hunt, J.A.