Murphy Oil Co. et al. v. Predator Corp. et al., (2006) 408 A.R. 98 (QB)

• Judge: Nation, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: June 07, 2006
• Citations: (2006), 408 A.R. 98 (QB);2006 ABQB 680

Murphy Oil Co. v. Predator Corp. (2006), 408 A.R. 98 (QB)

MLB headnote and full text

Temp. Cite: [2006] A.R. TBEd. SE.080

Murphy Oil Company Ltd., Apache Canada Ltd. and Murphy Canada Exploration Ltd. (plaintiffs) v. The Predator Corporation Ltd., Ricks Nova Scotia Co., and Predator Energies Partnership, Blair Longdo, Robert V. Shields, and Gerry O'Reilly (defendants) and The Predator Corporation Ltd., Blair Longdo, Robert V. Shields and Gerry O'Reilly (plaintiffs by counterclaim) and Murphy Oil Company Ltd., Apache Canada Ltd., and Murphy Canada Exploration Ltd. (defendants by counterclaim)

(0001 19360; 2006 ABQB 680)

Indexed As: Murphy Oil Co. et al. v. Predator Corp. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Nation, J.

September 15, 2006.

Summary:

The plaintiffs sued the defendants for breach of confidence, alleging that they misused or made an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent. The defendants counterclaimed. The defendant Ricks Nova Scotia Co. dissolved the defendant partnership and settled with the plaintiffs.

The Alberta Court of Queen's Bench allowed the action and dismissed the counterclaim.

Editor's note: There are many other prior reported decisions in this proceeding.

Company Law - Topic 312

Nature of corporations - Lifting the corporate veil - Principals - "Directing mind and will" of company - The Alberta Court of Queen's Bench held that the defendants committed a breach of confidence by making an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The data had been obtained by the defendant Predator - The defendants used the data when bidding on lands in the area of the wildcat well, and other nearby wells, owned by the plaintiffs - The court refused to pierce the corporate veil and hold that Predator's three shareholders should be personally liable for damages assessed against it - All actions were taken in the persona of Predator, and no specific finding of fraud, bad faith, or the use of the corporate persona to shield the individuals had been made - See paragraphs 144 to 147.

Damages - Topic 1309.1

Exemplary or punitive damages - Breach of confidence or fiduciary duty - The Alberta Court of Queen's Bench held that the defendants committed a breach of confidence by making an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants used the data when bidding on lands in the area of the wildcat well, and other nearby wells, owned by the plaintiffs - The court imposed a constructive trust on the remaining 25% interest of one defendant (Predator) in the area and directed that it be transferred to the plaintiffs - The court refused to award punitive or exemplary damages - The defendants had a hard nosed attitude and their actions were clearly designed for profit - Little thought was given to ethics - However, the misconduct was not deeply personal to the plaintiffs, nor was there any harsh, vindictive or fraudulent conduct - Further, the result of imposing a constructive trust on the lands was to deprive Predator of any interest or benefit that it would have earned from the transaction - The defendant Ricks had dissolved the defendant partnership and settled with the plaintiffs - Predator would be dependent on any contractual arrangement which it had with Ricks as to whether it recovered any compensation for its time and effort - See paragraphs 138 to 143.

Equity - Topic 3902

Fiduciary or confidential relationships - Breach of confidence - What constitutes - The Alberta Court of Queen's Bench stated that "[t]he law is clear that where public information only is used, there is no action [for breach of confidence], although there may be an action if the information was public or ascertainable by the public, but there was a communication of confidential information that was used as a 'spring-board' to get ahead, or cut corners on what would be required to put that public information together. If the information is partly public and partly private, the recipient must take special care to use only the material in the public domain." - See paragraph 87.

Equity - Topic 3904

Fiduciary or confidential relationships - Breach of confidence - Elements of action for - The Alberta Court of Queen's Bench discussed whether, in order to prove a breach of confidence in law, detriment had to be proven in the event of unauthorized use of confidential information - The court stated that "[t]he discussion about detriment may be somewhat academic, because in cases in which it cannot be shown, it will usually be unlikely that an action will be pursued." - See paragraphs 104 to 110.

Equity - Topic 3905

Fiduciary or confidential relationships - Breach of confidence - Remedies - Damages - The Alberta Court of Queen's Bench held that the defendants committed a breach of confidence by making an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants used the data when bidding on lands in the area of the wildcat well, and other nearby wells, owned by the plaintiffs - The court imposed a constructive trust on the remaining 25% interest of one defendant in the area and directed that it be transferred to the plaintiffs - However, the court refused to award damages for what the plaintiffs claimed was an inflated amount that they had subsequently bid and paid for other lands in the area, after becoming aware that another party was interested in and had bid very large amounts for lands there - A constructive trust was an equitable remedy that followed a unique item - Where damages were claimed for land sales, the plaintiff had got what it wanted - It had to prove the level at which it would have bid and how that was inflated by the defendants' conduct - Here, the plaintiffs had not provided satisfactory evidence that the level of bid was not necessary, that it was over fair market value or too high - See paragraphs 124 to 131.

Equity - Topic 3907.1

Fiduciary or confidential relationships - Breach of confidence - Remedies - Constructive trust - The Alberta Court of Queen's Bench held that the defendants committed a breach of confidence by making an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants used the data when bidding on lands near the wildcat well, and other nearby wells, owned by the plaintiffs - The lands had been released for sale by the Alberta and British Columbia governments at the plaintiffs' request - The court held that the appropriate remedy was to impose a constructive trust on the remaining 25% interest of one defendant in the area and direct that it be transferred to the plaintiffs - The 25% interest had been isolated - By virtue of the factual background, the plaintiffs had actually paid all the expenses of the development of the wells and the bid prices for the lands (through a settlement with one defendant) - Further, they had operated the disputed lands and wells thereon and there was no evidence of expenditures by the defendants that needed to be reimbursed - See paragraphs 117 to 123.

Equity - Topic 3910

Fiduciary or confidential relationships - Breach of confidence - Defences - The plaintiffs sued the defendants for breach of confidence, alleging that they misused or made an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants raised the issue of policy considerations, and how the court's decision might affect any unique style of business in the oil patch - Witnesses testified that on a regular basis, lunches at the petroleum club might involve the hidden agenda of trying to glean information from an unsuspecting employee, director or executive, who might inadvertently while promoting stock, boasting of success, etc., give up otherwise confidential company information - The Alberta Court of Queen's Bench stated that that consideration had to be dealt with on a case by case basis - Clearly, it was preferable that the industry be self regulating and develop rules that made sense for and were endorsed by and practised by its members - However, where an industry lacked clear custom and its participants behaved in a way that conflicted with established legal principles, citizens had the right to bring those issues to court - Participants in the oil and gas industry, whether they were scouts, small edge shooting companies, or large multinationals, had to conduct their business in the awareness that if they committed a breach of confidence as understood by Canadian law, appropriate remedies would flow - See paragraph 83.

Equity - Topic 3910

Fiduciary or confidential relationships - Breach of confidence - Defences - The plaintiffs claimed that the defendant committed a breach of confidence by making an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants used the data when bidding on lands in the area of the wildcat well, and other nearby wells, owned by the plaintiffs - The plaintiffs sought a constructive trust on the remaining 25% interest of one defendant in the lands acquired by the defendants and damages in relation to what they claimed was an inflated amount that they had paid for other lands that they acquired in the area after becoming aware that another party was interested in and had bid very large amounts for lands there - The defendants argued that, by the time of the later sales, the plaintiffs knew or suspected that the defendant Predator had their pressure data and as a result, the plaintiffs were not taken by surprise - Thus, the plaintiffs were not entitled to a remedy in damages or constructive trust arising from those sales, as they should have bid higher in light of their suspicions and failed to submit the highest bid - The Alberta Court of Queen's Bench rejected the argument - In constructive trust, an equitable remedy, it was not helpful to argue that a party should have paid more for what would have and should have been that party's anyway - The overriding concept was that here, where the defendants misused confidential information and overbid the plaintiffs and obtained land that the plaintiffs bid for and wanted, the appropriate remedy was that the plaintiffs should have the lands, especially in circumstances where they were willing to pay (and had paid) for the costs of acquisition and development - See paragraphs 132 to 137.

Evidence - Topic 1527

Hearsay rule - Hearsay rule exceptions and exclusions - General - Where admission of hearsay necessary and evidence reliable - The plaintiffs sued the defendants for breach of confidence, alleging that they misused or made an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendants argued that the plaintiffs had the onus to specifically prove that one of the defendants (Ricks) invested in the defendant partnership only because of the pressure data and its interpretation - The plaintiffs argued that Toews' hearsay evidence that another person told him that Gaylord, an investor behind Ricks, would not have bid on certain property without the pressure data, should be admitted into evidence as truth of its contents because it was a statement against economic interest, and as such should be accepted as an exception to the hearsay rule - The Alberta Court of Queen's Bench rejected the argument - The principled approach to the reception of hearsay evidence stressed that exceptions to the hearsay rule still had to meet the necessity and reliability criteria - Toews' statement satisfied neither - The court was concerned about its truth - Further, there was no evidence that Gaylord was unwilling or unable to testify if his evidence was needed - See paragraph 103.

Evidence - Topic 1550

Hearsay rule - Hearsay rule exceptions and exclusions - Statements against interest - General principles - [See Evidence - Topic 1527 ].

Evidence - Topic 7154

Opinion evidence - Prohibited opinions - Re basic or ultimate issue to be decided - The plaintiffs sued the defendants for breach of confidence, alleging that they misused or made an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The Alberta Court of Queen's Bench discussed when experts' opinions crossed the line and offended the restriction against giving an opinion on the ultimate issue before the court - Here, the opinions of experts such as engineers or geologists who testified about putting together a play or material balance calculations were clearly necessary for the court to understand the concepts in general - When the opinion evidence turned to taking the facts of the case and giving an opinion on an issue to be decided by the court, the concern heightened (ex., opinions expressed as to how one plaintiff actually used the pressure data) - Where an expert looked at sworn evidence and technical information and suggested that in his opinion a witness was intentionally deceiving a tribunal, the line, in terms of admissibility, had been crossed - See paragraphs 154 to 168.

Torts - Topic 3002

Trespass - Trespass to land - What constitutes - The plaintiffs sued the defendants for breach of confidence, alleging that they misused or made an unauthorized use of confidential pressure data from one of the plaintiffs' wildcat wells without their knowledge or consent - The defendant Predator was the party who had obtained the information - Predator's three principals were Longdo, Shields and O'Reilly - The plaintiffs pleaded, inter alia, a trespass by Longdo and Shields on their lands at various well locations - The Alberta Court of Queen's Bench stated that to the extent that individuals such as Longdo or Shields had the impression they were not trespassing to go onto someone else's lease without permission (particularly when it was to gain information) they were wrong - See paragraphs 169 to 182.

Trusts - Topic 2308

Constructive trusts - General principles - Circumstances when imposed - [See Equity - Topic 3905 , Equity - Topic 3907.1 and second Equity - Topic 3910 ].

Cases Noticed:

Pharand Ski Corp. v. Alberta (1991), 116 A.R. 326; 80 Alta. L.R.(2d) 216 (Q.B.), appld. [para. 20].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57, refd to. [para. 21].

Saltman Engineering Co. v. Campbell Engineering Co. (1948), 65 R.P.C. 203 (C.A.), refd to. [para. 24].

Surveys & Mining Ltd. v. Morrison, [1967] Qd. R. 470 (S.C.), refd to. [para. 27].

Coco v. Clark (A.N.) (Engineers) Ltd., [1969] R.P.C. 41 (Ch. Div.), refd to. [para. 63].

Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al., [1994] B.C.T.C. Uned. G86 (S.C.), revd. (1996), 79 B.C.A.C. 56; 129 W.A.C. 56 (C.A.), revd. [1999] 1 S.C.R. 142; 235 N.R. 30; 117 B.C.A.C. 161; 191 W.A.C. 161, refd to. [para. 64].

Bank of Montreal 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. 65].

Scurry-Rainbow Oil Ltd. et al. v. Galloway Estate (1993), 138 A.R. 321; 8 Alta. L.R.(3d) 225 (Q.B.), affd. (1994), 157 A.R. 65; 77 W.A.C. 65 (C.A.), refd to. [para. 65].

Chevron Standard Ltd. v. Home Oil Co. and Leeson (1980), 22 A.R. 451 (Q.B.), refd to. [para. 66].

Guyer Oil Co. v. Fulton, [1972] S.J. No. 189 (Q.B.), refd to. [para. 67].

Mobil Oil Canada Ltd. v. Canadian Superior Oil Ltd. and Nielsen (1979), 19 A.R. 100 (Q.B.), refd to. [para. 67].

ICAM Technologies Corp. et al. v. EBCO Industries Ltd. (1993), 36 B.C.A.C. 298; 58 W.A.C. 298 (C.A.), refd to. [para. 106].

Colborne Capital Corp. et al. v. 542775 Alberta Ltd. et al. (1995), 171 A.R. 241 (Q.B.), refd to. [para. 106].

Ontex Resources Ltd. v. Metalore Resources Ltd. et al. (1993), 63 O.A.C. 258; 13 O.R.(3d) 229 (C.A.), refd to. [para. 108].

Soulos v. Korkontzilas et al., [1997] 2 S.C.R. 217; 212 N.R. 1; 100 O.A.C. 241, refd to. [para. 120].

Whiten v. Pilot Insurance Co. et al. (1999), 117 O.A.C. 201; 42 O.R.(3d) 641 (C.A.), revd. [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201, refd to. [para. 139].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2) (1999), 246 A.R. 272 (Q.B.), revd. in part (2000), 255 A.R. 329; 220 W.A.C. 329 (C.A.), refd to. [para. 140].

Authors and Works Noticed:

Gurry, Francis, Breach of Confidence (1984), c. 12, p. 275 [para. 62].

Counsel:

John J. Marshall, Q.C., Robert A. Rakochey and Roger F. Smith (Macleod Dixon LLP), for the plaintiffs, Murphy Oil Co. and Murphy Canada Exploration Ltd.;

David J. Cichy, Q.C. and Kent R. Anderson (Miller Thomson LLP), for the plaintiffs, Apache Canada Ltd.;

Raymond A. Coad, Q.C., and Jerome J. Patterson (Fraser Milner Casgrain), for the defendants, The Predator Corporation Ltd., Blair Longdo, Robert Shields and Gerry O'Reilly.

This action was heard on April 24 to June 7, 2006, by Nation, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on September 15, 2006.