Total Energy Services Inc. (Chinook Drilling) v. Tamarack Valley Energy Ltd., 2011 ABQB 787

Court of Queen ’ s Bench of Alberta Citation: Total Energy Services Inc. (Chinook Drilling) v. Tamarack Valley Energy Ltd., 2011 ABQB 787 Date: 20111212 Docket: 1101 04899 Registry: Calgary Between: Total Energy Services Inc., carrying on business as Chinook Drilling Plaintiff - and - Tamarack Valley Energy Ltd. and MSL Land Services Ltd. Defendant _____________________________________________________ Memorandum of Decision of Jodi L.

Mason, Master in Chambers _____________________________________________________ Introduction [ 1 ] The Plaintiff Total Energy Services Inc., carrying on business as Chinook Drilling, issued invoices for drilling work to the Defendant Tamarack Valley Energy Ltd. pursuant to a Canadian Association of Oilwell Drilling Contractors - Master Daywork Contract (“Master Daywork Contract”) signed by the parties in September 2010 .

[ 2 ] A dispute arose and the parties discussed potential resolution of the $250,000.00 balance outstanding on the invoices. Tamarack then sent Chinook a cheque for $125,000.00 under cover of a without prejudice letter. Chinook immediately cashed the cheque but later asserted the right to pursue the balance owing on its invoices. Chinook commenced this action against Tamarack for the remaining $125,000.00 and also filed a builder’s lien. Tamarack’s defence is accord and satisfaction. Both Tamarack and Chinook apply for

summary judgment. [1] Tamarack ’s complaints about the work and subsequent discussions between the parties [ 3 ] Two incidents occurred at the well site during the course of Chinook’s work, including a drilling pipe fracture. Tamarack took the position that Chinook was responsible for these incidents, and that they caused delay and significant damages to Tamarack.

Ultimately, Tamarack withheld the outstanding balance of $250,000.00, pending resolution of this dispute. [ 4 ] Through January and February, 2011, Tamarack’s President and Chief Executive Officer, Brian Schmidt and Total’s President and Chief Executive Officer, Dan Halyk discussed resolution of the matter. Chinook also met to discuss the incidents with a consultant retained by Tamarack. Chinook maintained that it was not responsible for these incidents, and following its meeting with Tamarack’s consultant, retained its own consultant to look into the matter.

Tamarack ’s offer on February 17 th , 2011 [ 5 ] After Chinook had retained its consultant, but prior to Chinook’s receipt of the consultant’s report, Mr. Schmidt sent Mr. Halyk a letter dated February 17 th , 2011. The letter details the nature of Tamarack’s concerns with Chinook’s work in reference to Chinook’s obligations under the Master Daywork Contract. It goes on to describe the drawbacks of public resolution of the dispute.

It concludes as follows: As you are aware, Tamarack and Chinook have been engaged in discussions in an attempt to resolve their outstanding issues in relation to the Chinook invoice and the drilling at the well located at 16-32-2-3 W5 (the “Dispute”). Enclosed is a Tamarack cheque payable to Chinook in the amount of $125K, in full and final satisfaction of the Dispute (the “Settlement Funds”).

By accepting the Settlement Funds and cashing the enclosed cheque, Chinook and Total will be deemed to have: [1]. waived any further rights to pursue a claim against Tamarack in relation to the Dispute; and [2]. agreed not to speak negatively about, or otherwise disparage, Tamarack in the market, to corporations, or to individuals, including but not limited to its employees.

Furthermore, if Chinook cashes the enclosed cheque, Tamarack will be deemed to have [1]. waived any further rights to pursue a claim against Chinook and Total in relation to the Dispute; and [2]. agreed that it will not speak negatively about, or otherwise disparage, Chinook and Total in the market, to corporations, or to individuals, including but not limited to its employees.

If [the] Settlement Funds are not accepted by Tuesday, February 22, 2011, then this offer for Settlement (and all terms included with that Settlement) will be withdrawn and the cheque will be cancelled and no longer able to be cashed. [ 6 ] Chinook received the letter on February 18 th , 2011 and cashed the cheque that day. Prior to doing so, Chinook received advice from in house counsel that it was entitled to cash the cheque and continue to claim for the balance of its invoices. [ 7 ] There were no further communications between the parties until March 7, 2011.

On that date, Chinook received a report from its consultant which opined that Chinook was not responsible for the problems at the well. Mr. Halyk e-mailed this report to Tamarack that day and demanded payment of the remaining balance under Chinook’s invoices of $125,000.00. [ 8 ] The following issues are raised:

1. Is there a genuine issue for trial as to whether Chinook expressly accepted part performance by cashing the cheque enclosed with Tamarack’s February 17, 2011 letter? 2. Is there a genuine issue for trial as to whether Chinook and Tamarack reached an agreement for part performance? [ 9 ] For the reasons that follow, Tamarack’s application for

summary dismissal of Chinook’s claim is granted. Chinook’s application for

summary judgment is dismissed. The test for

summary judgment [ 10 ] A party bringing a motion for

summary judgment bears the legal onus of showing no genuine issue for trial: Murphy Oil Co. v. Predator Corp. , 2006 ABCA 69 , 384 A.R. 251. [ 11 ] The Court of Appeal confirmed in Dow v. Shell , 2010 ABCA 126 , 477 A.R. 112 at paragraph 15 , that: In order to establish that there is a “genuine issue for trial” the party resisting

summary judgment should be able to articulate what facts are in dispute that could be resolved at trial. Those could be the background facts of the case, or facts that are needed to provide context to the issues of law: Tottrup at paragraph 11. Are there any unproven facts needed to resolve this case, and if so, what admissible evidence would be available? Section 13(1) of the Judicature Act [ 12 ] The parties’submissions focussed on section 13(1) of the Judicature Act , R.S.A. 2000, c. J-2, which states: 13(1) Part performance of an obligation either before or after a breach thereof shall be held to extinguish the obligation (

a) when expressly accepted by a creditor in satisfaction, or (

b) when rendered pursuant to an agreement for that purpose though without any new consideration. [ 13 ] Tamarack submits that it clearly meets both statutory avenues to extinguish Chinook’s claim. Chinook argues that it did not communicate acceptance of the offer of part performance contained in the February 17, 2011 letter, and further, that it is uncertain in its terms, rendering it incapable of acceptance in any event. Alternatively, Chinook asserts there is a genuine issue for trial as to express acceptance or agreement for part performance. 1.

Is there a genuine issue for trial as to whether Chinook expressly accepted part performance by cashing the cheque enclosed with Tamarack ’s February 17, 2011 letter? [ 14 ] There is a heavy onus on a debtor to show that part performance has been expressly accepted by the creditor: Beneficial Canada Inc. v. Supria (1996), A.R. 367 (Q.B.) at paragraph 20. Courts should not lightly or easily find that a part payment constitutes full satisfaction of the debt. Whether part performance has been expressly accepted is a question of fact in each case: Beneficial Canada Inc. v.

Supria at paragraphs 20, 27. [ 15 ] At paragraph 19 of Beneficial Canada Inc. v. Supria , Fruman J. (as she then was) held that the word “expressly” as found in

section 13(1) of the Judicature Act does not necessarily require a written agreement or even a discussion directly on the issue. Rather, itcan be satisfied by whatever is “necessarily or even naturally implied”. “Expressly” often means no more than plainly, clearly, or thelike. [16] A frequent scenario where express acceptance is not found involves the debtor who sends a cheque of less than the fullamount, but with a notation that it is “payment in full”, see for example, Champlain Ready-Mixed Concrete v. Beaupre (1971), (ON CA), 21 D.L.R. (3d) 164 (Ont.

C.A.); CIBC v Renyk, 1993 CarswellAlta 1068, [1994] A.W.L.D. 025 (Q.B.). Thecourts take a dim view of such attempts by debtors. In CIBC v. Renyk, for example, Master Funduk described Mr. Renyk as a “craftydebtor” trying to trap the bank into accepting a settlement.

Under those circumstances, the courts find that the creditor cashing thecheque and its subsequent silence are not determinative of whether the creditor accepted part performance. [17] There are other examples in the case law where the debtor sends a cheque of less than the full amount, accompanied by aletter stating that the cheque is sent in full and final settlement and if cashed, the creditor will be indicating its agreement to accept partperformance.

In those cases, the letter accompanying the cheque is the focus of inquiry. [18] Conrad J. (as she then was) addressed this scenario of cashing a cheque enclosed under cover of a letter in Bank of NovaScotia v. Lockhart (1987), (AB KB), 49 Alta. L.R. (2d) 378 (Q.B.). There, the debtor sent the creditor a letter asfollows: Please find enclosed my cheque in the amount of $1418.87 in full and final settlement of the above loan. The attached cheque is sent to you in trust that you will return my notes and acknowledge that the loan has been repaid.

Thank you for your co-operation. [19] The creditor certified the cheque and about two months later demanded the balance owing, which was made up of the intereston the principal covered by the cheque. [20] Conrad J. concluded that when the bank certified the cheque that was delivered to them on those express conditions, itsactions fell squarely within the meaning of the words “expressly accepted by a creditor in satisfaction”in section 13(1)(

a) of theJudicature Act. [21] She observed that the letter was very specific, in its statement that the cheque was sent in full and final settlement of the loan,and further that it was sent in trust that the bank would return the notes and acknowledge the loan has been repaid. She stated that thecreditor was not inexperienced such that the term “in trust” would have no meaning. She observed that the letter was clear andunequivocal in its intent, and that it followed a discussion between the parties as to payment of the balance of this loan.

Conrad J. notedthat, rather than contact the debtor and advise him that they would not accept the cheque on that basis, the bank sent the cheque forcertification, and it was not until the end of July that the bank demanded payment of the interest. [22] Master Funduk conducted a similar analysis in CIBC v. Cramer.

There, the debtor wrote a letter to the creditor which stated inpart: ...I propose to settle this debt in 10 equal installments of $240.00 for a total repayment of $2400.00...By processing any one of thecheques which I have enclosed, you will have indicated your acceptance of this proposed settlement of my debt...(at paragraph 8) [23] The creditor cashed the first cheque, then sued for the full balance owing.

[24] Master Funduk noted the similarities to the facts in Bank of Nova Scotia v. Lockhart, and Amesco

(1967) Ltd v. Beanland(1985), (MB KB), 39 Man. R. (2d) 196 (Q.B.) and concluded at paragraphs 32-34: The case before me is not one where a crafty debtor is trying to trap his creditor. The Defendant’s letter is very straightforward and veryunderstandable. Like Bank of Nova Scotia this is a very experienced creditor. An offeror always decides what he will offer. That is always solely his choice as a matter of law. The offer can contain within it whatpositive act the offeree need or can do to indicate acceptance. The law does not require that the offeree must contact the offeror and say“I accept your offer”.

The offeree can signify his acceptance in the positive manner specified in the offer. Here the acceptance was to be signified by negotiating the first cheque. [25] Master Funduk dismissed the creditor’s application for

summary judgment, finding that there was a “strong” triable issue ofaccord and satisfaction. The debtor did not apply for

summary dismissal, as is the case here. [26] Chinook relies on the decision of the British Columbia Supreme Court in IBI Group v. LeFevre & Co. Property Agents Ltd.,2004 BCSC 298, 33 C.L.R. (3d) 302, where the creditor was not found to have expressly accepted part payment by cashing a chequeaccompanied by a letter describing that doing so would constitute acceptance of part payment in full satisfaction. [27] In that case, a developer hired an architectural firm to provide consulting services for $25,000.00. Upon receipt of thearchitect’s report and bill, the developer expressed dissatisfaction with the work.

Subsequently the developer sent a cheque for$16,500.00 to the architect, accompanied by a letter stating that it was in full payment of, and not a partial payment on the outstandingbill. The principal of the architect firm who was handling the matter was away when the letter and cheque arrived. It was received by areceptionist who passed the cheque on to accounting, where it was cashed. The letter was left on the architect’s desk. When the architectreturned and saw the letter, he promptly called the developer several times and left messages. He then invoiced the developer for thebalance.

The court held that the cashing of the cheque and the delay in claiming the balance in these circumstances did not amount toaccord and satisfaction. [28] Those circumstances are clearly distinguishable from those before the court in this case. Here, the letter and the cheque werereceived by Mr. Halyk, the individual who had been handling the matter on Chinook’s behalf, and who is licensed to practice law inAlberta. Mr. Halyk went ahead and instructed staff to deposit the cheque, having considered the terms of the letter and received in houselegal advice.

This dispute turns on the construction of the February 17, 2011 letter. [29] Chinook emphasizes that it could not have accepted the settlement proposed by simply cashing the cheque because the letterrequired something more than this, pointing to the statement in the February 17, 2011 letter that “By accepting the Settlement Funds andcashing the enclosed cheque...”. Chinook asserts that the use of the word “and” created two distinct steps, and called for it to take somefurther positive step beyond cashing the cheque to indicate to Tamarack that it accepted the Settlement Funds.

Chinook says that it had toaccept the offer in some positive way beyond the cashing of the cheque, and did not do so. Chinook further submits that the reference tothe parties not speaking negatively about each other lacked clarity, and in any event the parties had never discussed that term. [30] I disagree with Chinook’s

interpretation. Tamarack’s letter makes plain that accepting the Settlement Funds and cashing thecheque are one and the same. [31] Acceptance of the Settlement Funds is expressed by accepting the cheque; “Settlement Funds” is defined in the letter as the“cheque... in the amount of $125,000, in full and final satisfaction of the Dispute”. The letter goes on to say that if Chinook cashes thecheque, the consequences are that Chinook will be deemed to have waived its right to pursue the remaining balance under its invoices,and further that Tamarack will be deemed to have waived its right to pursue a claim against Chinook for the alleged problems inChinook’s work. If Chinook’s

interpretation were accepted, the result would be that although by cashing the cheque but not “acceptingthe Settlement Funds”, Chinook did not waive its claim against Tamarack for the balance on the invoices, yet Tamarack would have beendeemed to waive its claim against Chinook for the problems at the well. Further, the letter describes that if the Settlement Funds (thecheque) were not “accepted” by February 22, 2011, the cheque would be cancelled and no longer able to be cashed. This is also

consistent with cashing the cheque as the necessary step to accept the Settlement Funds. [ 32 ] The term relating to non-disparagement, while broad in scope, is sufficiently clear and capable of being accepted as a condition of cashing the cheque. As a matter of law, the offeror chooses what it will offer: see for example, CIBC v. Cramer at paragraph 33, reproduced above.

The offeree chooses whether it will accept. [ 33 ] Chinook further submits that evidence of its intent in cashing the cheque, its understanding of the consequences of doing so, and its reasons for retaining a consultant is needed to complete the factual matrix necessary to determine whether Chinook in fact expressly accepted part payment. [ 34 ] A party’s intention in cashing a cheque must be objectively, not subjectively ascertained: see for example, H.G. Beale, ed., Chitty on Contracts , 30 th ed., Vol. I (London: Thomson Reuters (Legal) Limited, 2008); Barnett v. Rademaker , 2004 BCSC 1060 ,47 B.L.R.(3d) 159.

In the absence of ambiguity, subjective intent cannot be considered to interpret the written words: Gainers Inc. v. Pocklington Holdings Inc. , 2000 ABCA 151 , 255 A.R. 373. [ 35 ] A reasonable person in Chinook’s position would have understood that Tamarack was offering a one time payment of $125,000.00 in full and final settlement of Chinook’s invoices and Tamarack’s complaints about the problems at the well site, and that by cashing the cheque prior to February 22nd, both matters would be concluded. This is not a case of a crafty debtor trying to trap its creditor, as in Champlain Ready-Mixed Concrete v.

Beaupre and CIBC v. Renyk , or of an unwitting receptionist sending a cheque to the accounting department for processing, as in IBI Group v. LeFevre & Co. Property Agents Ltd. . Rather, this case is akin to the situations in Bank of Nova Scotia v. Lockhart and CIBC v. Cramer . [ 36 ] In

summary on the issue of express acceptance, Chinook and Tamarack are sophisticated parties that appreciated the practical benefits of resolution of their respective claims. The February 17 th letter was sent by one President and CEO to another, following discussions by these individuals about resolving the matter.

While Chinook maintained it was not responsible for the problems at the well site and had retained a consultant in this regard, it cashed Tamarack’s cheque that it received under cover of a letter that was plainly offering a settlement and not a payment on account, and which spelled out the consequences of cashing the cheque. By cashing the cheque, Chinook took the positive step contemplated by the letter and expressed acceptance of its terms.

Chinook then remained silent for 18 days, only raising the outstanding balance after receiving a report from its consultant which confirmed Chinook’s view that it had no responsibility for the problems at the well site. In these circumstances, Chinook expressly accepted part payment. There is no dispute in the material facts. It is not necessary to explore Chinook’s subjective intent in cashing the cheque. There is no genuine issue for trial. Chinook’s claim is summarily dismissed on this basis. 2.

Is there a genuine issue for trial as to whether Chinook and Tamarack reached an agreement for part performance? [ 37 ] Given my conclusion on express acceptance, it is not necessary to address this issue. Conclusion [ 38 ] Chinook expressly accepted a payment of $125,000.00 from Tamarack in full payment of its remaining invoices within the meaning of section 13(1) (

a) of the Judicature Act . Tamarack’s application for

summary dismissal of Chinook’s claim is granted. Chinook’s application for

summary judgment is dismissed. [ 39 ] If the parties cannot agree on costs, they may approach me. Heard on the 27 th day of September, 2011, further submissions received October 26, 2011 and November 2, 2011. Dated at the City of Calgary, Alberta this 12 th day of December, 2011.

Jodi L. Mason M.C.C.Q.B.A. Appearances: Bennett Jones LLP Michael P. Theroux for the Plaintiff Osler, Hoskin & Harcourt LLP Lauren Tomasich for the Defendants [1] No relief is sought against the registered owner of the lands, MSL Land Services Ltd. in these applications.