Klemke Mining Corp. v. Shell Canada Ltd. et al., (2007) 419 A.R. 1 (QB)

• Judge: Smith, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: September 05, 2006
• Citations: (2007), 419 A.R. 1 (QB);2007 ABQB 176

Klemke Mining Corp. v. Shell Can. Ltd. (2007), 419 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. MR.089

Klemke Mining Corporation (plaintiff) v. Shell Canada Limited, Chevron Canada Resources Limited, Western Oil Sands Inc. and Albian Sands Energy Inc. (defendants)

(0103 16961; 2007 ABQB 176)

Indexed As: Klemke Mining Corp. v. Shell Canada Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Smith, J.

March 14, 2007.

Summary:

The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands. The defendants denied an agreement was made with KMC. Alternatively, if an agreement was made, the defendants asserted that it was a condition precedent to the agreement that KMC be competent to perform the work, and that KMC was not competent.

The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a Memorialization of that agreement. Alternatively, they entered into a written agreement. Competence was not a condition precedent. Nevertheless, KMC was both able and willing to perform the agreement. By refusing to honour the agreement, the defendants caused a loss to KMC of $21,805,122 for mining work plus $200,000 for consulting work. Prejudgment interest and costs followed.

Agency - Topic 1407

Authority of agent - Apparent authority - Reliance by person dealing with agent - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement, created by the defendants - However, the cover letter to the Memorialization was signed by Barber while Camarata was the person who had the necessary actual authority to bind the defendants - The court held that the agreement was binding nevertheless - Camarta represented that Barber had authority to bind the defendants - Through the defendants' actions and the events which led up to Barber signing the Memorialization, the defendants held Barber out to be the person with the authority to make the agreement for them - KMC relied on these representations - KMC was entitled to presume that the defendants were following their internal procedure regarding approval of contracts and was entitled to rely on Barber's signature - See paragraphs 250 to 254.

Agency - Topic 1409

Authority of agent - Apparent authority - Holding out - General - [See Agency - Topic 1407 ].

Agency - Topic 1410

Authority of agent - Apparent authority - Holding out by corporation - What constitutes - [See Agency - Topic 1407 ].

Contracts - Topic 1144

Formation of contract - Signing - Failure to sign - Effect of - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement, created by the defendants - The court held that the signature on the cover letter of the Memorialization manifested assent to the contents of the enclosures and of the intent to be legally bound - The signature on the cover letter was not for a limited purpose but was to submit the agreed contract terms in a form that the defendants had created to KMC for approval and endorsement - The purpose of the signature was to approve of the contents of the entire package - See paragraphs 194 to 202.

Contracts - Topic 1444

Formation of contract - Agreements that are not contracts - Agreements to agree - The Alberta Court of Queen's Bench stated that "It is trite law that an agreement to agree is not a legally enforceable contract. ... However, there are circumstances where parties agree on the essential terms of a contract and leave the details of the agreement to be sorted out in the future. This sort of arrangement may still constitute a contract on the essential terms so long as the agreed terms were in fact the essential terms ... " - See paragraphs 179 and 180.

Contracts - Topic 1503

Formation of contract - Consensus or agreement - What constitutes a consensus necessary for a binding contract - [See Contracts - Topic 1444 ].

Contracts - Topic 1503

Formation of contract - Consensus or agreement - What constitutes a consensus necessary for a binding contract - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement - The December 10 Memorialization was not a formal contract but a collection of documents that reflected the essential terms of a contract that the parties negotiated - Its purpose was to record the oral agreement and to serve as a map for the formal contract that would follow - The absence of a formal contract did not preclude there being a binding contract - The nature of the industrial/commercial environment in which the Project was planned required that details work themselves out as issues arose once a contract was already in place - To begin to work some of those details out, some of which could be generalized and would find their way into the formal contract, and others which could not be anticipated, a working contract had to be in place - See paragraphs 159 to 193.

Contracts - Topic 1505

Formation of contract - Consensus or agreement - Essential terms - What constitutes - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement - The court held that while the ultimate price for the work was not established, that did not mean that the contract under this particular factual matrix was uncertain or incomplete - The parties had put in place an effective and certain mechanism for determining price (a form of benchmarking) - The same was true of the scope of work - While it might to an uninformed outsider look uncertain, on this factual matrix, it was plain and obvious - See paragraphs 205 to 218.

Contracts - Topic 3563

Performance or breach - Performance of conditions precedent - Failure to perform - Effect of - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement - The court found that Executive Committee approval was not a condition precedent to the contract and that the contract was effective December 6 - The court held that if Executive Committee approval could be said to be a condition precedent, then the defendants could not rely on their own failure to present the agreement to the Executive Committee as planned on January 24, to negate the agreement - See paragraph 219.

Contracts - Topic 8025

Statute of Frauds - Memorandum - Generally - Sufficiency of - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement - The Memorialization contained all of the essential terms - Further, the cover sheet for the December 10 Term Sheet was signed by an agent of the defendants and this manifested assent to the contents of the entire package of documents - The Memorialization confirmed the oral agreement and was signed by the defendants' agent - It complied with the Statute of Frauds - See paragraphs 255 to 258.

Damage Awards - Topic 1608

Contracts - Services - Consulting - The plaintiff (KMC) alleged that the defendants orally agreed to grant to KMC certain mining and consulting work in connection with a mine to be built and operated in the oil sands - The Alberta Court of Queen's Bench found that the parties entered into an oral agreement followed by a December 10 Memorialization of that agreement - The court found, inter alia, that the parties were to act as one team to develop the mine plan - Further, KMC met two or three times with the defendants in this regard and then was pushed out of this work by them - KMC was ready and willing to comply with its obligations under this part of the agreement - The Memorialization set out the rates per hour - A reasonable blended rate was $100 per hour - A reasonable hour per day assumption was eight hour days - The total yearly charge would then be $40,000 per year or $200,000 - See paragraphs 264 to 267.

Damages - Topic 7068

Contracts - Contracts for services - Breach - Deprivation of work - [See Damage Awards - Topic 1608 ].

Cases Noticed:

Farnya v. Chorny (1951), 4 W.W.R.(N.S.) 171 (B.C.C.A.), folld. [para. 6].

Gemoto v. Calgary Regional Health Authority et al., [2006] A.R. Uned. 644; 2006 ABQB 740, refd to. [para. 7].

Lauzon et al. v. Davey et al. (2006), 402 A.R. 293; 2006 ABQB 499, refd to. [para. 7].

Atlanta Industrial Sales Ltd. et al. v. Emerald Management & Realty Ltd. (2006), 399 A.R. 1; 2006 ABQB 255, refd to. [para. 7].

Grams et al. v. Maple Leaf Meat Industries Ltd. et al. (2006), 393 A.R. 52; 2006 ABQB 146, refd to. [para. 7].

Pauloski v. Nascor Inc. (2002), 311 A.R. 67; 2002 ABQB 171, refd to. [para. 7].

R. v. Lin (C.W.), [1998] A.R. Uned. 728 (Q.B.), folld. [para. 8].

Browne v. Dunn (1893), 6 R. 67 (H.L.), refd to. [para. 17].

R. v. Lyttle (M.G.), [2004] 1 S.C.R. 193; 316 N.R. 52; 184 O.A.C. 1, refd to. [para. 17].

Friskie et al. v. Piovesan Estate et al., [1998] B.C.T.C. Uned. A80 (S.C.), refd to. [para. 17].

Ghitter (Ron) Property Consultants Ltd. v. Beaver Lumber Co. (2003), 330 A.R. 353; 299 W.A.C. 353; 2003 ABCA 221, refd to. [para. 159].

Langley Lo-Cost Builders Ltd. v. 474835 B.C. Ltd. et al. (2000), 140 B.C.A.C. 182; 229 W.A.C. 182; 2000 BCCA 365, refd to. [para. 163].

Kernwood Ltd. v. Renegade Capital Corp. (1997), 97 O.A.C. 3 (C.A.), refd to. [para. 178].

British Bank for Foreign Trade Ltd. v. Novinex Ltd., [1949] 1 K.B. 623 (C.A.), refd to. [para. 179].

Hillas & Co. v. Arcos Ltd., [1932] All E.R. 494 (H.L.), refd to. [para. 180].

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 53 O.A.C. 314; 79 D.L.R.(4th) 97 (C.A.), dist. [para. 180].

Calvan Consolidated Oil & Gas Co. v. Manning, [1959] S.C.R. 253, refd to. [para. 182].

Hatzfeldt-Wildenburg v. Alexander, [1912] 1 Ch. 284, refd to. [para. 182].

Harris v. Darroch (1908), 1 Sask. L.R. 116 (S.C.), refd to. [para. 195].

Gibbins v. North Eastern Railway Co. (1847), 11 Beav. 1 (Rolls Ct.), refd to. [para. 196].

642718 Alberta Ltd. et al. v. Alberta (Minister of Public Works, Supply and Services) (2004), 368 A.R. 53; 2004 ABQB 539, dist. [para. 198].

Tilden Rent-A-Car Co. v. Clendenning (1978), 83 D.L.R.(3d) 400 (Ont. C.A.), refd to. [para. 201].

Scammell (G.) & Nephew Ltd. v. Ouston, [1941] A.C. 251 (H.L.), refd to. [para. 205].

Forrest v. Smith, [1988] B.C.J. No. 3016 (C.A.), refd to. [para. 206].

642718 Alberta Ltd. et al. v. Alberta (Minister of Public Works, Supply and Services) (2005), 371 A.R. 390; 354 W.A.C. 390; 2005 ABCA 292, refd to. [para. 210].

BJ Aviation Ltd. v. Pool Aviation Ltd., [2002] E.W.C.A. Civ. 163 (C.A.), refd to. [para. 215].

Deer Valley Shopping Centre Ltd. v. Sniderman Radio Sales and Services Ltd. (1989), 96 A.R. 321 (Q.B.), refd to. [para. 251].

Freeman & Lockyer (A firm) v. Buckhurst Park Properties (Mangal) Ltd., [1964] 1 All E.R. 630 (C.A.), refd to. [para. 252].

Keddie v. Horne and Canada Life Assurance Co. (1999), 129 B.C.A.C. 90; 210 W.A.C. 90 1999 BCCA 541, refd to. [para. 253].

Mason Homes Ltd. v. Oshawa Group Ltd., [2005] O.A.C. Uned. 452 (C.A.), refd to. [para. 262].

Atlanta Industrial Sales Ltd. et al. v. Emerald Management & Realty Ltd. (2006), 399 A.R. 1 (Q.B.), refd to. [para. 264].

Authors and Works Noticed:

Chitty on Contracts (29th Ed. 2004), vols. 1, 2 [para. 192].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), pp. 13 [para. 161]; 15 [para. 164].

Counsel:

Peter P. Taschuk, Q.C., and Michelle G. Crighton (McLennan Ross LLP), for the plaintiff;

R.B. Low, Q.C., B.G. Nemetz, Q.C., and Andrea L. Froese (Bennett Jones LLP), forthe defendants.

This action was heard on September 5, 2006, by Smith, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following decision on March 14, 2007.