By: Nigel Bankes
Case Commented On: PrairieSky Roy2alty Ltd v Yangarra Resources Ltd, 2025 ABCA 240 (CanLII)
PDF Version: When Is An Interest In Land A Legal (As Opposed To An Equitable) Interest?
The principal issue in this case by the time the matter reached the Court of Appeal was the question of whether a gross overriding royalty (GORR) carved out of an Alberta Crown petroleum and natural gas (png) lease was a legal or an equitable interest in land. Justice Michel Bourque at trial (2023 ABQB 11) concluded that the GORR in question was an interest in land (applying Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC 7 aff’g 1999 ABCA 363). Furthermore, Justic Bourque went on to conclude that the GORR was a legal interest in land. The GORR was therefore binding on Yangarra as the successor in interest to the Crown png lease, even though Yangarra had no notice of PrairieSky’s GORR. As a result, Justice Bourque did not need to consider Yangarra’s alternative argument to the effect that if the GORR were only an equitable interest in land Yangarra was entitled to be treated as equity’s darling (i.e. the bona fide purchaser of the legal estate without notice (actual or constructive) of the prior outstanding equitable interest (i.e. the GORR)). The Crown png lease originally granted in 1979 was held by a number of parties in succession over the years until 2011, when Home Quarter Resources (HQR) granted the GORR to Range Royalty (the HQ GORR or the 2011 GORR). The lessee’s interest subsequently became vested in Yangarra, while Range Royalty’s interest became vested in PrairieSky. I commented extensively on the trial judgment here and I refer the reader to that comment for a more detailed summary of the facts.