Penalty Clauses: Inequitable, but Not Inherently Extravagant

By: Jassmine Girgis

PDF Version: Penalty Clauses: Inequitable, but Not Inherently Extravagant

Case Commented On: Super Save Disposal (Alberta) Ltd v Shenwei Enterprises Ltd, 2017 ABQB 805 (CanLII)

Overview

This is an appeal from a decision of the Provincial Court, which found that a purported liquidated damages clause was, in fact, a penalty clause. The court struck the clause down for being “extravagant and unconscionable”.

It was legitimate to find a clause comprised of gross profits to be “unfair and inequitable” in principle, but without knowing the value of the net profits and the difference between the two figures, it was problematic in this case to find its use to be “extravagant and unconscionable”, and “unreasonable and oppressive”. Continue reading

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Posted in Contracts | Leave a comment

Specific Performance of a Right of First Refusal in the Context of a Facilities Agreement

By: Nigel Bankes

PDF Version: Specific Performance of a Right of First Refusal in the Context of a Facilities Agreement

Decision Commented On: Canlin Resources Partnership v Husky Oil Operations Limited, 2018 ABQB 24 (CanLII)

Canlin and Husky are successors in interest to a Construction, Ownership and Operation (CO & O) Agreement for the Erith Dehydration and Flow Splitter Facility (Facility Agreement). The agreement was based on the standard form CO & O Agreement (1999) developed by the Petroleum Joint Venture Association (PJVA). The Facility Agreement provides both parties with mutual rights of first refusal (ROFR) in the event that either decides to sell the facility but also provides a number of exceptions. In particular, the Agreement provided that the ROFR would not be triggered in the event of (at para 3) “(a) disposition made by an Owner of all or substantially all … of its petroleum and natural gas rights in wells producing to the Facility …”. Husky was disposing of its interests in the area (the Ikkuma transaction) but the challenge was that there had been no wells producing into the facility since 2016 when Husky installed a “jumper” pipeline. This pipeline served to by-pass the Erith Facility with the result that gas previously processed at Erith was now processed at the Blackstone Facility. The question therefore was whether Husky could rely on the exception, there being no wells producing into the facility. Husky took the view that the exception was triggered since the wells in question were still associated with the Erith Facility in the sense of being tied-in to the Facility. Justice Romaine concluded that the exception was not triggered and accordingly declared that Canlin could exercise the ROFR; furthermore she concluded that Canlin was entitled to an order of specific performance. Continue reading

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Posted in Oil & Gas, Property | Leave a comment

Letter of Support

PDF Version: Letter of Support

Editor’s note

This letter of support is endorsed by concerned faculty members at the University of Calgary Faculty of Law.


Letter of Support

As professors at the University of Calgary Faculty of Law we are concerned regarding the recent incident that occurred in one of our classes. A sitting judge of the Alberta Court of Queen’s Bench and our then Judge in Residence, Justice Kristine Eidsvik, made comments to our second-year students that reflected racist myths and stereotypes about people, and particularly men, of colour.

Justice Eidsvik’s remarks are now being considered by the Canadian Judicial Council.  We appreciate that further facts may to come to light through that process, and that it will serve to identify the appropriate response to Justice Eidsvik’s comments in relation to ensuring public respect for the administration of justice. We also note that Justice Eidsvik has resigned her position as Judge in Residence.

Nonetheless, over the past week we have assessed how best to respond to Justice Eidsvik’s reported remarks, and have reflected on our responsibilities as professors in light of what occurred in one of our classrooms.

Based on that assessment and reflection, as faculty members we believe it is important to emphasize the following:

  • Racist attitudes, including explicit and implicit bias, are an ongoing problem in our legal system.
  • Every actor in the legal system has a responsibility to work positively to redress racism, and to improve the justice and fairness of the law and how it is applied.
  • Judges bear a particular responsibility to ensure that they make decisions free of bias and in accordance with the values and principles enshrined in the Canadian Charter of Rights and Freedoms, including the right to equality.
  • Legal educators are responsible to ensure that law school admissions and classrooms redress rather than reinforce inequality.
  • The judiciary, the legal profession and the legal academy ought to reflect and respect race, class and other forms of diversity.

We note Justice Eidsvik’s apology for her comments, but believe it essential to identify her initial remarks as categorically inconsistent with our core values, both institutionally and personally, as lawyers and legal educators. We express support for our students and colleagues who are personally impacted by the comments and thank those who came forward to express their concerns. We welcome dialogue with the students as we move forward.

As legal educators we are committed to ensuring that our classrooms reflect and reinforce equality as a core legal, constitutional and professional value. We are grateful for the steps taken by the two professors in this course, both of whom are new to the University of Calgary, to address this challenging situation swiftly and empathetically.

As concerned faculty members, we commit to taking our own steps to learn from this. We recommend that the Faculty include seminars on equality and bias in our annual teaching workshops, including strategies for dealing with racist and other comments reflective of inequality in the classroom.

Regardless of the outcome of the Canadian Judicial Council complaint, we encourage the Alberta Courts, along with the National Judicial Institute, to adopt educational initiatives to ensure that judges understand the problems of inequality and racialization in our legal system, and the central role of judges in redressing rather than reinforcing those inequalities.

This letter is written in support of our students and colleagues and we will not be speaking to the media about it.


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Posted in Legal Education | 1 Comment

The Complaint Jurisdiction of the AUC with Respect to the AESO

By: Nigel Bankes

PDF Version: The Complaint Jurisdiction of the AUC with Respect to the AESO

Decisions Commented On: (1) AUC Decision, 22367-D01-2017, Enel Alberta Wind Inc. General Partner of the Castle Rock Ridge Limited Partnership Complaint Pursuant to Section 26 of the Electric Utilities Act Regarding Conduct of the Alberta Electric System Operator December 23, 2017; (2) AUC Decision 21867-D01-2017, ENMAX Corporation Written Complaint About the Conduct of the Independent System Operator October 23, 2017; (3) AUC Decision 2010-104, Lavesta Area Group Written Complaint about the Conduct of the Independent System Operator March 10, 2010

The Alberta Electric System Operator (AESO) (aka the ISO, the Independent System Operator) established by the Electric Utilities Act, SA 2003, c E-5.1 (EUA) has two principal functions. It is responsible for the operation of the power pool and for the procurement of ancillary services, and it is responsible for engaging in transmission system planning and for providing system access to the transmission system. In furtherance of the latter it must prepare and submit to the Alberta Utilities Commission (AUC) for approval a tariff (EUA, s 30) setting out the rates to be charged by the AESO for system access service and the terms and conditions that apply. Continue reading

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Cowper-Smith and the Law of Proprietary Estoppel: Implications for the Oil and Gas Lease?

By: Nigel Bankes

PDF Version: Cowper-Smith and the Law of Proprietary Estoppel: Implications for the Oil and Gas Lease?

Case Commented On: Cowper-Smith v Morgan, 2017 SCC 61 (CanLII)

The Supreme Court of Canada handed down its decision in Cowper-Smith v Morgan in December 2017. The decision is an important decision on proprietary estoppel. While it arises in the context of a family dispute it deserves to be read by commercial lawyers including oil and gas lawyers. It is one of the curiosities of the Canadian law of estoppel that some of our leading cases have come out of fact patterns involving the “unless” form of the oil and gas lease from the 1960s and 1970s from Alberta and Saskatchewan. These cases include Canadian Superior Oil Ltd. v Paddon-Hughes Development Co., [1970] S.C.R. 932, 1970 CanLII 3 (SCC) and Sohio Petroleum Co. v Weyburn Security Co., [1971] S.C.R. 81, 1970 CanLII 137 (SCC). These cases continue to be influential in oil and gas lease matters and beyond. The typical fact pattern involves a missed or late payment during the primary term or a missed or late shut-in payment during the secondary term which automatically terminates the lease unbeknownst to either party. The parties continue to act as if the lease is in force and in some cases the lessee expends considerable monies on the leased lands including drilling a new well. But in the end, all is for naught. The lease is dead and to this point estoppel arguments aimed at reviving the lease have largely failed; in some cases on the basis that estoppel cannot be used as a sword (to create a new lease), and in other cases, and most commonly, on the basis that the lessee never acted to its detriment on the basis of a representation made by the lessor that the lease was still in effect; typically there was no such representation, the lessee was simply proceeding on the basis of its own understanding of the legal position. Continue reading

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Posted in Oil & Gas, Wills and Estates | Leave a comment