Paddon Hughes Development Co. v. Pancontinental Oil Ltd. et al.,

• Judge: Côté, O'Leary and Russell, JJ.A.
• Neutral Citation: 1998 ABCA 333
• Citation: 1998 ABCA 333,(1998), 223 A.R. 180 (CA),[1999] 5 WWR 726,223 AR 180,67 Alta LR (3d) 104,[1998] AJ No 1120 (QL),183 WAC 180,[1998] A.J. No 1120 (QL),223 A.R. 180,(1998), 223 AR 180 (CA),183 W.A.C. 180
• Date: 20 October 1998
• Court: Court of Appeal (Alberta)

Paddon Hughes Dev. v. Pancontinental (1998), 223 A.R. 180 (CA);

   183 W.A.C. 180

MLB headnote and full text

Temp. Cite: [1998] A.R. TBEd. NO.003

The Paddon Hughes Development Co. Ltd. (appellant/plaintiff) v. Pancontinental Oil Ltd., Inverness Resources Inc. and Inverness Energy Ltd. (respondents/defendants)

(Appeal No. 96-16379; 1998 ABCA 333)

Indexed As: Paddon Hughes Development Co. v. Pancontinental Oil Ltd. et al.

Alberta Court of Appeal

Côté, O'Leary and Russell, JJ.A.

October 20, 1998.

Summary:

Paddon Hughes Development Co. commenced an action for a declaration, inter alia, that two freehold petroleum and natural gas leases held by Pancontinental expired because Pancontinental failed to make the 1985 delay rental payments to the lessors timely and properly.

The Alberta Court of Queen's Bench, in a decision reported 173 A.R. 254, dismissed the action. Paddon Hughes appealed.

The Alberta Court of Appeal, Côté, J.A., dissenting, dismissed the appeal.

Contracts - Topic 1381

Formation of contract - Deletions - General - Clause 21 of a freehold petroleum and natural gas lease originally provided that payments could be mailed and that such payments were deemed received by the lessor as of the date of mailing - Before the lease was executed, most of clause 21 was struck out and additions were inserted in handwriting providing that payments could be made at an address specified in paragraph 24 - The Alberta Court of Appeal stated that where there was no ambiguity justifying the admission of extrinsic evidence it was not proper to refer to the deleted words in construing the meaning of the words actually used by the parties in clause 21 - The deleted words were to be ignored and treated as if they never existed - See paragraphs 26 to 34.

Courts - Topic 103

Stare decisis - Authority of judicial decisions - American decisions - The Alberta Court of Appeal stated that American oil and gas cases are persuasive when not in conflict with authoritative Canadian decisions - See paragraph 50.

Mines and Minerals - Topic 8123

Oil and gas - Leases - Interpretation - [See Contracts - Topic 1381 and both Mines and Minerals - Topic 8138.1 ].

Mines and Minerals - Topic 8138.1

Oil and gas - Leases - Termination - Improper or untimely payment of delay rental - A freehold petroleum and natural gas lease between Thatcher as lessor and Pancontinental as lessee provided that payments under the lease, including delay rental payments, shall be paid to the lessor at a California address - An issue arose respecting the manner of payment required by the lease (i.e., whether payments could be made by mail) - The Alberta Court of Appeal interpreted the lease as allowing payment by mail - Further, the court held that the date of mailing was the relevant date in determining the timeliness of the payments, rather than the date of receipt - See paragraphs 1 to 64.

Mines and Minerals - Topic 8138.1

Oil and gas - Leases - Termination - Improper or untimely payment of delay rental - Two freehold petroleum and natural gas leases contained clauses providing that if well drilling was not commenced within one year, the lease would terminate on the first anniversary date, unless the lessee (Pancontinental) paid the lessors on or before the anniversary date the sum of $53.34 (i.e., delay rental), and such a payment would allow the lessee to defer the commencement of drilling for another year - An issue arose respecting whether the leases expired because of untimely and improperly made delay rental payments - The Alberta Court of Appeal affirmed that the delay rental payment cheques were mailed by Pancontinental before the anniversary dates in the leases, therefore, the payments were made timely and properly and neither lease expired on its own terms - See paragraphs 1 to 64.

Cases Noticed:

East Crest Oil Co. v. Strohschein, [1952] 2 D.L.R. 432 (Alta. C.A.), refd to. [para. 5].

Canadian Superior Oil of California Ltd. v. Kanstrup, [1965] S.C.R. 92, refd to. [para. 5].

Nova, An Alberta Corp. v. Guelph Engineering Co. et al. and Daniel Valve Co. et al. (1989), 100 A.R. 241 (C.A.), refd to. [para. 21].

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; [1994] 2 W.W.R. 609; 18 C.C.L.T.(2d) 209; 110 D.L.R.(4th) 289; 87 B.C.L.R.(2d) 1, refd to. [para. 21].

Northwestern Mechanical Installations Ltd. v. Yukon Construction Ltd., [1982] 5 W.W.R. 40; 37 A.R. 132 (C.A.), refd to. [para. 29].

St. Lawrence Petroleum Ltd. v. Bailey Selburn Oil & Gas Ltd. (1962), 41 W.W.R.(N.S.) 210 (Alta. C.A.), affd. [1963] S.C.R. 482, refd to. [para. 29].

Calvan Consolidated Oil & Gas Co. v. Manning (1958), 25 W.W.R.(N.S.) 641 (Alta. C.A.), affd. [1959] S.C.R. 253, refd to. [para. 29].

Home Oil Co. v. Page Petroleum Ltd., [1976] 4 W.W.R. 598 (Alta. T.D.), refd to. [para. 29].

Knight Sugar Co. v. Webster, [1930] 4 D.L.R. 343 (S.C.C.), refd to. [para. 32].

Inglis v. Buttery (1878), 3 App. Cas. 552 (H.L.), refd to. [para. 32].

Indian Molybdenum Ltd. v. Canada, [1951] 3 D.L.R. 497 (S.C.C.), refd to. [para. 33].

Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen; Yngvar Hansen-Tangen v. Sanko Steamship Co., [1976] 1 W.L.R. 989 (H.L.), refd to. [para. 36].

Bank of British Columbia v. Turbo Resources Ltd. (1983), 46 A.R. 22; 148 D.L.R.(3d) 598 (C.A.), refd to. [para. 36].

Mitsui Construction v. Hong Kong (1986), 71 N.R. 285 (P.C.), refd to. [para. 38].

32262 B.C. Ltd. v. 271617 B.C. Ltd. (1996), 24 B.C.L.R.(3d) 21 (C.A.), refd to. [para. 39].

32262 B.C. Ltd. v. Smart et al. - see 32262 B.C. Ltd. v. 271617 B.C. Ltd.

Air Transit Ltd. et al. v. Innotech Aviation of Nfld. Ltd. et al. (1989), 78 Nfld. & P.E.I.R. 24; 244 A.P.R. 24 (Nfld. T.D.), refd to. [para. 39].

Ivany v. Lancaster Investment Inc. (1994), 119 Nfld. & P.E.I.R. 51; 370 A.P.R. 51 (Nfld. T.D.), refd to. [para. 39].

Hayward and Govier v. Mellick and Mellick (1984), 2 O.A.C. 161; 45 O.R.(2d) 110 (C.A.), refd to. [para. 43].

Turner v. Visscher Holdings Inc. (1996), 77 B.C.A.C. 48; 126 W.A.C. 48; 23 B.C.L.R.(3d) 304 (C.A.), refd to. [para. 44].

Gloyd v. Midwest Refining Co. (1933), 62 F.2d 483 (C.C.A., 10th Cir.), refd to. [paras. 48, 81].

Texas Gulf Sulphur Co. v. Ballem (1970), 72 W.W.R.(N.S.) 273 (Alta. C.A.), affd. [1971] 1 W.W.R. 560 (S.C.C.), refd to. [paras. 48, 81, 97].

Paramount Petroleum & Mineral Corp. v. Imperial Oil Ltd. (1970), 73 W.W.R.(N.S.) 417 (Sask. Q.B.), refd to. [paras. 48, 101].

Scurry-Rainbow Oil Ltd. et al. v. Galloway Estate (1994), 157 A.R. 65; 77 W.A.C. 65 (C.A.), refd to. [para. 50].

Canadian Fina Oil Ltd. v. Paschke (1957), 21 W.W.R.(N.S.) 260 (Alta. C.A.), refd to. [paras. 60, 90].

A/S Tankexpress v. Compagnie Financière Belge de Pétroles S.A., [1949] A.C. 76 (H.L.), refd to. [para. 77].

Zim Israel Navigation Co. v. Effy Shipping Corp.; Ship Effy, Re, [1972] 1 Lloyd's Rep. 18, refd to. [para. 77].

Bordo v. 403512 Ontario Inc. (1983), 41 O.R.(2d) 68 (H.C.), refd to. [para. 77].

Saskatchewan River Bungalows Ltd. and Fikowski v. Maritime Life Assurance Co., [1992] I.L.R. 1-2895; 127 A.R. 43; 20 W.A.C. 43 (C.A.), revd. [1994] 2 S.C.R. 490; 168 N.R. 381; 155 A.R. 321; 73 W.A.C. 321; [1994] 7 W.W.R. 37; [1994] I.L.R 1-3077, refd to. [para. 79].

Canadian National Railway Co. v. Volker Stevin Contracting Ltd. et al. (1991), 120 A.R. 39; 8 W.A.C. 39 (C.A.), refd to. [para. 85].

Henthorn v. Fraser, [1892] 2 Ch. 27 (C.A.), refd to. [para. 95].

Plummer Enterprises (1983) Ltd. v. R., [1997] G.S.T.C. 35 (T.C.C.), refd to. [para. 103].

Authors and Works Noticed:

Chitty on Contracts (27th Ed. 1994), vol. 1, paras. 12-039, 12-040 [para. 26]; 12-089 [para. 44].

Counsel:

J. Ballem, Q.C., H. Locke, R.F. Smith and P. Edwards, for the appellants;

J.W. Rose, Q.C., and T.J. Coates, for the respondent.

This appeal was heard before Côté, O'Leary and Russell, JJ.A., of the Alberta Court of Appeal.

On October 20, 1998, the judgment was delivered for the Court of Appeal and the following opinions were filed:

O'Leary, J.A. (Russell, J.A., concurring) - see paragraphs 1 to 64;

Côté, J.A., dissenting - see paragraphs 65 to 107.