Stewart Estate v. TAQA North Ltd., 2016 ABCA 143

• Judge: Rowbotham, McDonald and O'Ferrall, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: Friday May 06, 2016
• Citations: 2016 ABCA 143;[2016] A.R. TBEd. MY.033

Stewart Estate v. TAQA North Ltd., [2016] A.R. TBEd. MY.033

MLB being edited

Currently being edited for A.R. - judgment temporarily in rough form.

Temp. Cite: [2016] A.R. TBEd. MY.033

Lynda Calder in her capacity as Executrix of the Estate of Merville V. Stewart (Deceased), Lynda Calder, Morgan Stewart, Cody Stewart, Cody Stewart in her capacity as Administrator or Litigation Representative for the Estate of James D. Stewart (Deceased), and as Litigation Representative for Morgan Stewart, Jerome Development Limited, Bowen Family Properties Ltd., Ronald B. Pole, Kevin R. Pole, Danny G. Oneil in his capacity as Executor of the Estate of Mabel B. Oneil (Deceased), Robert Copley, Karen Nell Copley, Margaret Alice Demers, Mary Jean Biggar, Goldie Alberta Danielsen, Edna Keam, Wilma Marshall, Laurel Lee McLaren (appellants/not parties to the cross-appeal of Coastal Resources Ltd./not parties to the cross-appeal of Nexen Inc. and ExxonMobil Canada Ltd./plaintiffs) and 1088294 Alberta Ltd. (appellant/cross-respondent to the cross-appeal of Coastal Resources Ltd./cross-respondent to the cross-appeal of Nexen Inc. and ExxonMobil Canada Ltd./plaintiff/defendant by counterclaim) and J. Timothy Bowes (appellant/not a party to the cross-appeal of Coastal Resources Ltd./cross-respondent to the cross-appeal of Nexen Inc. and ExxonMobil Canada Ltd./defendant by counterclaim) v. TAQA North Ltd., Esprit Exploration Ltd., Bonavista Energy Corporation, and Triquest Energy Corp. (respondents/not parties to the cross-appeal of Coastal Resources Ltd./not parties to the cross-appeal of Nexen Inc. and ExxonMobil Canada Ltd./defendants) and Coastal Resources Limited (respondent/cross-appellant/not a party to the cross-appeal of Nexen Inc. and ExxonMobil Canada Ltd./defendant/plaintiff by counterclaim) and Nexen Inc. and ExxonMobil Canada Ltd. (respondents/cross-appellants/not a party to the cross-appeal of Coastal Resources Ltd./defendants/plaintiffs by counterclaim)

(1301-0360-AC; 2016 ABCA 143)

Indexed As:Stewart Estate et al. v. TAQA North Ltd. et al.

Alberta Court of Appeal

Rowbotham, McDonald and O'Ferrall, JJ.A.

May 6, 2016.

Summary:

The defendant oil and gas companies were the lessees under five freehold petroleum and natural gas leases. The plaintiffs were some of the current landowners and a top-lessee, whose top-lease became effective only if the leases were terminated. At issue in the plaintiffs' action was whether the leases were terminated when the defendants ceased operations and production from a well between 1995 and 2001. Specifically, the issue was whether the leases required the defendants to operate the well at a loss or nominal return to preserve the leases. Preliminary issues were: (1) whether the registered landowners to which two of the leases applied were the proper parties to seek a declaration that those leases had terminated; (2) whether the top-lessee plaintiff had standing; (3) whether any of the plaintiffs' claims were barred by the Limitations Act; and (4) whether any of the claims were barred in whole or in part by estoppel, laches or acquiescence. The defendants counterclaimed, alleging champerty and maintenance.

The Alberta Court of Queen's Bench, in a judgment reported (2013), 576 A.R. 57, determined the preliminary issues as follows: (1) the registered landowners to which two of the leases applied were not the proper parties to seek a declaration that those leases had terminated, because there were other interested parties not before the court; (2) the top-lessee plaintiff had standing to argue the issue of lease validity, but had no claim for damages; (3) the plaintiffs' claims for unjust enrichment, trespass and conversion were barred by the expiration of the limitation period; and (4) no claims were barred in whole or in part by estoppel, laches or acquiescence. The court dismissed the plaintiffs' action. The well was shut-in for reasons permitted under the leases. The leases had not terminated. Alternatively, if the claims succeeded, damages would have been in restitution based on a royalty or royalty plus bonus approach, and not on the basis of disgorgement of profits. The court dismissed the counterclaim. The plaintiffs appealed. The defendants cross-appealed.

The Alberta Court of Appeal, in a judgment reported (2015), 607 A.R. 201; 653 W.A.C. 201, allowed the appeal in part and dismissed the cross-appeal. On the core issue of whether the oil and gas leases terminated, O'Ferrall, J.A. (McDonald, J.A., concurring), held that the leases terminated in 1995 and that there was a sufficient basis for finding that all five leases terminated. Rowbotham, J.A., found that the leases terminated in January 2000, and would have upheld the trial judge's provisional conclusion that no declaration of lease validity could be made on two of the five leases in the absence of all the parties vying for the fee simple title to those quarter sections (the Snell/Wheatland issue). On the issue of the standard of appellate review of the trial judge's interpretation of the leases, McDonald, J.A. (O'Ferrall, J.A., concurring), determined the standard of review to be correctness. Rowbotham, J.A., found the standard to be reasonableness. On the issue of the date when the plaintiffs were entitled to a remedy, Rowbotham, J.A. (McDonald, J.A., concurring), found it to be August 9, 2003, two years prior to the issuance of the statement of claim. O'Ferrall, J.A., determined that the plaintiffs were entitled to a remedy from the date it was made clear to the defendants that the plaintiffs no longer consented to continued production. The court unanimously agreed that the so- called "royalty and bonus" remedy provisionally applied by the trial judge was inappropriate. Rowbotham and O'Ferrall, JJ.A., ordered the defendants to disgorge revenues less production, gathering and processing costs (i.e., on a net basis in accordance with the January 6, 2012 "Agreed Statement of Facts Pertaining to Revenues, Expenses and Royalties" (the so-called "mild rule"). McDonald, J.A., would have ordered disgorgement of the defendants' gross revenues (the so-called "harsh rule"). Rowbotham and McDonald, JJ.A., agreed that the Irwin Group gave leave and licence from December 5, 2005 to January 12, 2007. The court unanimously agreed with the trial judge that the top lessee had no independent claim for damages. As regards the liability of Esprit to disgorge the royalties it earned and account for the royalties it actually received, O'Ferrall, J.A. (McDonald, J.A., concurring), allowed the appeal. Rowbotham, J.A., would have dismissed the appeal. The cross appeal respecting champerty and maintenance was dismissed for the reasons of O'Ferrall, J.A. (Rowbotham and McDonald, JJ.A.,concurring). The parties made submissions on trial costs and appeal costs. At issue was whether trial costs should be remitted to the trial judge or determined by the Court of Appeal.

The Alberta Court of Appeal determined that it would fix the costs of both the trial and the appeal. The court determined the quantum of trial and appeal costs accordingly.

Practice - Topic 6923

Costs - General principles - Power to award or fix costs - The defendant oil and gas companies were the lessees under five freehold petroleum and natural gas leases - The plaintiffs were some of the current landowners and a top-lessee, whose top-lease became effective only if the leases were terminated - At issue in the plaintiffs' action was whether the leases were terminated when the defendants ceased operations and production from a well between 1995 and 2001 - The trial judge dismissed the plaintiffs' action, finding that the leases had not terminated - The Alberta Court of Appeal held that the leases had terminated and the plaintiffs were entitled to damages - At issue was whether the Court of Appeal should remit the matter of trial costs to the trial judge, who had heard submissions and reserved a decision, or whether it should fix both trial and appeal costs itself - The Alberta Court of Appeal stated that "it will be less costly and more expeditious for all parties if this court determines trial costs. If we were to remit the matter of costs to the trial judge, her decision might be appealed (with leave) and this court could be called upon to assess trial costs in any event." - See paragraphs 6 to 10.

Practice - Topic 7118.1

Costs - Party and party costs - Special orders - Multiplier - The defendant oil and gas companies were the lessees under five freehold petroleum and natural gas leases - The plaintiffs were some of the current landowners and a top-lessee, whose top-lease became effective only if the leases were terminated - At issue in the plaintiffs' action was whether the leases were terminated when the defendants ceased operations and production from a well between 1995 and 2001 - The trial judge dismissed the plaintiffs' action, finding that the leases had not terminated - The Alberta Court of Appeal held that the leases had terminated and the plaintiffs were entitled to damages - At issue was costs - Since the claim exceeded $1.5 million, Column 5 applied - The successful plaintiffs argued that the complexity of the proceedings warranted a multiplier of four of the tariff amounts in Column 5 - The court held that "Alberta courts have typically awarded a multiplier of the tariffs in Column 5 in three circumstances: when the complexity of the action warrants it, when the amount in dispute significantly exceeds the $1.5 million threshold for Column 5 or when the conduct of one of the parties warranted a multiplier. However, generally courts also rely upon the other considerations set out in Rule 10.33 in determining whether a multiplier should be applied. There is nothing in the cases surveyed to suggest that the analysis for applying a multiplier differs in an oil and gas context. ... Having considered the factors in Rule 10.33, especially the trial's complexity (volume of documents, days of question, agreed exhibits, number of lay and expert witnesses and volume of written arguments) and the complexity of the appeal (five respondents, the issues were complex and varied and the appeal hearing was two days in length), we award a two times multiplier" - See paragraphs 11 to 28.

Practice - Topic 7248

Costs - Offers to settle - Costs to successful plaintiff - The defendant oil and gas companies were the lessees under five freehold petroleum and natural gas leases - The plaintiffs were some of the current landowners and a top-lessee, whose top-lease became effective only if the leases were terminated - At issue in the plaintiffs' action was whether the leases were terminated when the defendants ceased operations and production from a well between 1995 and 2001 - The trial judge dismissed the plaintiffs' action, finding that the leases had not terminated - The Alberta Court of Appeal held that the leases had terminated and the plaintiffs were entitled to damages - At issue was costs, including the plaintiffs' entitlement to double costs where their judgment exceeded settlement offers that they made to the defendants prior to trial and prior to the appeal being heard - The court awarded the plaintiffs double costs at trial from the date of the formal settlement offer and double costs of appeal where the informal offers constituted a sincere attempt to settle the dispute without the need for a lengthy appeal hearing - See paragraphs 43 to 54.

Counsel:

P.T. Linder, Q.C., and S.B.G. Matthews, for the appellants and appellants/cross-respondents;

M.D. Aasen (no appearance), for the respondent, TAQA North Ltd.;

A.D. Grosse, for the respondent, Esprit Exploration Ltd. (now Pengrowth Energy Corporation);

R.C. Steele, for the respondent, Bonavista Energy Corporation;

C.A. Crang, for the respondent/cross-appellant, Coastal Resources Limited;

R.F. Steele and P.G. Chiswell, for the respondents/cross-appellants, Nexen Inc. and ExxonMobil Canada Ltd.

This matter was heard by way of written submissions filed on January 26 and February 2, 4 and 6, 2016, before Rowbotham, McDonald and O'Ferrall, JJ.A., of the Alberta Court of Appeal.

On May 6, 2016, the following memorandum of judgment was filed by the Court.