1301905 Alberta Ltd. Applicant - v. -, 2013 ABQB 113

Court of Queen ’ s Bench of Alberta Citation: 1301905 Alberta Ltd. v. Sword Energy Inc., 2013 ABQB 113 Date: 20130221 Docket: 1103 18020 Registry: Edmonton Between: 1301905 Alberta Ltd. Applicant - and - Sword Energy Inc. Respondent Corrected judgment: A corrigendum was issued on March 28, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Donald Lee _______________________________________________________ Introduction [ 1 ] This is an application for

summary judgment by 1301905 Alberta Ltd. ("Applicant" or "1301905 Ltd." or "Lessor") against Sword Energy Inc. ("Respondent" or "Sword" or "Lessee") for alleged breach of the terms of a Petroleum and Natural Gas Lease (the "Lease") dated July 29, 2006, particularly in relation to its Offset Wells and Default clauses.

[ 2 ] The Applicant is the Lessor by assignment and the freehold owner of the mines and minerals except coal ("Leased Substances") on the lands legally described as South ½ of

Section 15-43-18-W4 in the Province of Alberta (the "Lands"). The Respondent is the Lessee by assignment of the Leased Substances, including petroleum, natural gas and related hydrocarbons "within, upon or under" the Lands. Background Facts [ 3 ] The material facts in this application are not in dispute and a "Reply to Notice to Admit Facts" was filed on January 9, 2012. [ 4 ] In July 2006, Thunder Energy Inc. originally entered into a petroleum and natural gas lease agreement with Forrest Hagen.

Through a lease assignment, the Respondent Sword became the successor in interest to Thunder Energy Inc. in respect of the Lease. Sword is currently known as Journey Energy Inc. and is successor in interest to Sword (see, Affidavit of Tony Cadrin, sworn and filed on January 04, 2013). [ 5 ] The Applicant 1301905 Ltd. is a body corporate which, by a lease assignment, became the successor in interest to Forrest Hagen under the Lease. Mr.

Hagen is presently an officer of the Applicant1301905 Ltd. [ 6 ] On or about February 26, 2007, the Respondent spudded a well (the "Well") on the Lands and commenced commercial production pursuant to the Lease. [ 7 ] The relevant terms/clauses of the Lease dealing with Offset Wells and Default are reproduced as Appendix "A" at the end of this "Reasons for Judgment." Significantly, Clause 15(

a) provides, inter alia , that: (

a) If, before or after the expiry of the primary term, the Lessor considers that the Lessee has not complied with any provision or obligation of this Lease … the Lessor shall notify the Lessee in writing, describing in reasonable detail the alleged breach or breaches. The Lessee shall have 30 days after receipt of such notice to:

i) remedy or commence to remedy the breach or breaches alleged by the Lessor, and thereafter diligently continue to remedy the same; or ii) commence and diligently pursue proceedings for a judicial determination as to whether the alleged acts or ommisions [sic] constitute a breach or breaches on the part of the Lessee. [ 8 ] On January 26, 2010, the Applicant sent a Default Notice to the Respondent, pursuant to Clause 15 of the Lease.

In the Default Notice, 1301905 Ltd. alleged that Sword was in breach of Clause 8 of the Lease (which deals with Offset Wells) and claimed compensatory offset royalties from Sword, based on the commercial production from the spudded Well. [ 9 ] Sword did not pay the requested offset royalties in remedy of the breach alleged by 1301905 Ltd., nor commence proceedings within 30 days of the Default Notice for a judicial determination as to whether or not the alleged refusal or failure to pay compensatory offset royalties to 1301905 Ltd. constitute a breach on the part of Sword, as required by Clause 15(

a) of the Lease. [ 10 ] However, on February 24, 2010, Sword sent a letter to 1301905 Ltd. stating that in its opinion there had been no breach or default of the Offset Clause in the Lease and, as such, Sword was not required to commence proceedings for a judicial determination of whether the alleged act or omission constituted a breach.

[ 11 ] On June 22, 2011, Sword in a notice/letter to 1301905 Ltd. terminated the Lease and surrendered the offset zones in the Well. Issue [ 12 ] The primary issue before me is whether a

summary judgment should be granted in the circumstances of this matter. Law [ 13 ] The Alberta Rules of Court , Alta Reg 124/2010, rule 7.3 provides that:

(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single and undivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee; (

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances require. Parties' Arguments Applicant's Position [ 14 ] 1301905 Ltd. submits that its application for

summary judgment is based on the

interpretation of the terms of the Lease in the context of the undisputed material facts and the records of the matter. The oil and gas lease is a contract which must be interpreted by a court or tribunal conducting an objective search for the intention of the parties as expressed in "the specific words used with regard to the whole contract and the demonstrated intention of the parties": Omers Energy Inc v Alberta (Energy Resources Conservation Board) , 2011 ABCA 251 at para 33 [ Omers Energy Inc ]. What the parties subjectively believe their rights to be is not important.

It is the inference that a reasonable person would draw from the words used in the contract that is material: Omers Energy Inc at para 34 .

[ 15 ] In True North Land Services v Hamilton (5 September 1996), Calgary 9601-05486 (Alta QB) [ True North ], Bensler J conducted a judicial determination proceeding pursuant to a notice filed under the provisions of an oil and gas lease with offset wells and default clauses similar to those in the Lease under consideration in the present matter. In True North , the Court observed, inter alia, that: (a) "The purpose of a default clause is to let everyone know what the problem is and to rectify it as soon as possible" (p 5); and (b) "The purpose of an offset well clause is to protect the land owner.

That is to impose upon the Lessee, an obligation to drill if certain conditions are met. It is to protect the Lessor against the loss of oil and gas underlying their land through drainage" (p 7). [ 16 ] The Applicant contends that the provision of Clause 15(

a) of the Lease is clear and unambiguous. It provides that once the Lessor serves the default notice on the Lessee in writing, describing the alleged breach, the Lessee has 30 days after receipt of such notice to either: (

i) remedy the breach or (ii) commence proceedings for a judicial determination as to whether there is a breach on the part of the Lessee. [ 17 ] 1301905 Ltd. argues that if proceedings for judicial determination are not commenced by the Lessee within the specified 30-day period, the Lessee no longer possess the ability to seek a judicial determination in a later defence to the Lessor's claim. The Applicant submits that to allow judicial determination proceeding under that late circumstance would defeat the purpose of the time limit and the primary obligation of the Lessee in the Lease.

Contractual rights and obligations under the Lease are objectively determined by the terms and mandatory procedure set out in the contract and not by a unilateral, self-determination of the Lessee based on its subjective "belief that it was not in default": Omers Energy Inc at paras 33-34 . Respondent's Position [ 18 ] Sword objects to the application for

summary judgment. It concedes that the material facts of this matter are not in dispute, but "the law and the

interpretation of the Lease are [in] dispute." The Respondent submits that "in fact, [there was] no drainage to the lands of the Lessor." That prior to its commercial production, Sword's engineers and geologists conducted some tests and analysis which confirmed the absence of hydrocarbon on the Applicant's Lands (Respondent's Brief, paras 30-32).

Based on this report from its professionals, Sword submits that the Applicant is not entitled to any offset royalties or damages. [ 19 ] Sword agrees that if failed to commence proceedings for judicial determination of the alleged breach of the Offset Wells clause within 30-days subsequent to the Default Notice issued by the Applicant. That this default on Sword's part will ordinarily result in a termination of the Lease after which it becomes lawful for the Applicant as Lessor to re-enter the leased Lands and repossess them pursuant to Clause 15(b).

Sword also agrees that because it had an operating Well capable of production on the Lands of the Applicant/Lessor at that time, Clause 15(

c) applies such that "the Lessor's remedy for any default under this Lease shall be for damages only." [ 20 ] However, Sword contends that there is an outstanding question as to whether or not it breached the Offset Wells Clause of the Lease. And this legal issue can only be determined by a weighing of evidence at trial.

Sword submits that the Lessor has not suffered any losses that would entitle it to substantial damages. [ 21 ] The Respondent indicates that it had advised the Applicant's legal counsel of its preparedness to enter into a Consent Order to the effect that the Applicant is entitled to damages for breach of the Default Clause of the Lease based on Sword's failure to commence proceedings for judicial determination of the alleged breach within the required limitation period.

However, it disputes the quantum of the damages and submits that the Applicant/Lessor is only entitled to damages directly related to the breach of the Default Clause. Analysis The Test for

Summary Judgment

[ 22 ] Kent J in Encana Corporation v ARC Resources Ltd , 2011 ABQB 431 [Encana] discussed the test for

summary judgment in the context of Rule 7.3 of the Alberta Rules of Court as follows: [7] The test for

summary judgment under new rule 7.3 is the same as under the old rules: Manufacturers Life Insurance Co. v. Executive Centre at Manulife Place Inc ., 2011 ABQB 189 at para. 11 ; BA Capital Inc. v. Stream Oil & Gas Ltd. , 2011 ABQB 91 (Master) at paras. 3-4 . [8] An expression of this rule was given by the Alberta Court of Appeal in Tottrup et al. v. Clearwater No. 99 (Municipal District) , 2006 ABCA 380 , 401 A.R. 8.

The Court noted at paras. 11-12 that "trials are primarily to determine questions of fact" and that a trial is therefore not required if the facts are not in dispute and the legal issues involved are sufficiently settled that they can be "fairly decided on the record before the court". [9] The Court of Appeal in Tottrup noted that different types of cases call for different approaches. For an application based simply on the factual merits of the case courts apply a two-stage test. First, the moving party must prove on a balance of probabilities that there is no genuine issue for trial.

This being done, the evidentiary burden then shifts to the respondent to show that there is a genuine issue for trial. In the end, for

summary judgment to be granted, "[i]t must be beyond doubt that no genuine issue for trial exists": Tottrup at para. 10 citing Pioneer Exploration Inc. Estate (Bankrupt) v. Euro-Am Pacific Enterprises Ltd. , 2003 ABCA 298 , 339 A.R. 165 at para. 19 . Similarly, in the context of an application for

summary dismissal of an action, "it must be 'plain and obvious', or 'clear' or 'beyond real doubt' that the action should be summarily disposed of": Tottrup at para 10 … When considering an application for

summary judgment, "the court has an obligation to conduct a careful review with an eye to determining whether there are undisputed facts sufficient to resolve the matter, even when the action is complex." ( De Shazo v. Nations Energy Co. , 2005 ABCA 241 , 367 A.R. 267 at para. 18 ). [10] On the other hand, the Court of Appeal in Tottrup notes there are other types of

summary judgment applications: [11] ... In some cases the facts are clear and undisputed. The ultimate outcome of the case may depend on the

interpretation of some statute or document, or on some other issue of law that arises from undisputed facts. In such cases the test for

summary judgment is not whether the issue of law is "beyond doubt", but whether the issue of law can fairly be decided on the record before the court. If the legal issue is unsettled or complex or intertwined with the facts, it is sometimes necessary to have a full trial to provide a proper foundation for the decision. In other cases it is possible to decide the question of law summarily[.] (Emphasis supplied) See also, Excelsior Properties Ltd v Cosentino Developments Inc , 2011 ABQB 666 at paras 30-32 [Excelsior Properties].

Is This an Issue of Law or Fact? [ 23 ] Both parties agree that the material facts are not in issue. [ 24 ] However Sword argues that there is an issue of law that can only be determined at a full trial. In support of this position, it points to a portion of

section of Clause 8 which provides: "If commercial production is obtained after the date of this Lease from an offset well, then unless (

i) a well has been or is being drilled on the spacing unit of the said lands laterally adjoining the spacing unit of the offset well and into the zone or formation from which commercial production is being obtained from the offset well …" [ 25 ] Based on the above Lease provision, Sword submits that "in fact, [there was] no drainage to the lands of the Lessor." This submission, in my view, speaks for itself as one dealing with a factual issue. And on this record, Sword spudded a well on or about

February 26, 2007 on the Lessor's Lands "after the date of [the] Lease" and commenced commercial production pursuant to the Lease. [ 26 ] Although Sword did not identify the

interpretational problem presented by the Lease provision recited above, it is clear to me from its written and oral submissions that the Respondent's position is that there is an outstanding issue regarding whether or not the Offset Wells Clause is breached, given Sword's admission that it breached the Default Clause. [ 27 ] 1301905 Ltd. argues that the analysis of the breach of both the Offset Wells Clause and the Default Clause should be done in the context of the entire Lease.

There is a legal presumption that the Respondent was in breach or default of the Lease (and specifically the Offset Clause), due to Sword's failure to remedy the alleged breach or commence proceedings pursuant to Default Clause 15(

a) for a judicial determination as to whether the refusal to pay offset royalties constituted a breach. It contends that the only real outstanding issue in this application is the determination of the damages to which it is entitled as remedy under the Lease. [ 28 ] From the foregoing submissions and analyses, I conclude that what is involved here is clearly an issue of law regarding whether the Offset Wells Clause is breached or not, given Sword's admission of its breach of the Default Clause.

In other words, has the Offset Wells Clause in the Lease been breached or not by reason of Sword's failure to commence proceedings for a judicial determination of that issue within the time limit stipulated in the Lease as required by the Default Clause? [ 29 ] The next step is for me to determine whether the identified legal issue can fairly be decided on the record before me.

This exercise would entail my consideration of whether the legal issue "is unsettled or complex or intertwined with the facts" such that a full trial is necessary or whether it is possible to decide the question of law summarily: Encana at para 10, citing Tottrup at para 11 .

Can the Issue be Decided on the Basis of the Record? [ 30 ] Neither the Applicant nor the Respondent takes the position that the relevant terms or provisions of Clauses 8 and 15 of the Lease are unclear, complex or ambiguous. [ 31 ] Sword suggests that the determination of the legal issue in this case is intricately intertwined with facts and as such requires a full trial. Sword states that " in fact , [there was] no drainage to the lands of the Lessor" based on the alleged report from Sword's engineers and geologists which indicated that there was no hydrocarbon on the Applicant's Lands.

I disagree with that suggestion for the reasons that follow. [ 32 ] First, on the basis of the record before me, the fact is clear and undisputed that Sword drilled Offset Wells on the Lessor's Lands.

And further, the Applicant in its Affidavit of Records provided production records from Alberta Energy Resources Conservation Board (ERCB) which confirmed commercial production from the Offset Wells on the Lessor's Lands. [ 33 ] Secondly, I do not agree that the determination of the legal issue as to whether the Offset Wells Clause has been breached based on the breach of the Default Clause in the Lease would require an extensive weighing of additional evidence in a full trial outside the facts that are already known in this application.

Certainly at this point of the litigation, the issue of migration or drainage of the leased substances in the context of the alleged absence of hydrocarbon on the Applicant's Lands has presently become more difficult to establish or moot by Sword's surrender of the Offset Wells, approximately one year and five months from the date the Applicant issued a Default Notice. [ 34 ] In the result, I conclude that the legal issue in this application can be fairly decided summarily. Decision [ 35 ] Significantly, Sword by its own admission and analysis agrees that it was in breach of the Default Clause.

The Default Notice filed by the Applicant pursuant to the Default Clause 15 of the Lease alleged that the Respondent was in breach of the Offset Clause in the Lease. In True North, Bensler J stated that these clauses have their purposes which both the Applicant and the Respondent in this

application are presumably aware of as actors in the oil and gas industry. An Offset Well Clause is to protect the land owner as "theLessor against the loss of oil and gas underlying their land through drainage" while the Default Clause "is to let everyone know what theproblem is and to rectify it as soon as possible." [36] The said Default Clause in the Lease requires Sword as the Lessee to take certain actions within 30 days after receipt of DefaultNotice from the Lessor.

This time limit is clearly articulated in the Lease. [37] Although the Applicant and the Respondent did not cite any case law in support of their divergent positions directly on the issueof legal presumption of default, I believe that the law dealing with the effect of limitation period beams some clarifying lights on thelegal issue in this matter and would be helpful in summarily resolving the legal issue identified in this application. [38] In Castillo v Castillo, 2005 SCC 83, 260, DLR (4th) 439 at para 24 [Castillo], the Supreme Court of Canada recognized that "alllimitation periods, regardless of their particular wording, were substantive" because they are determinative of the rights of both parties ina cause of action.

In the same case, Bastarache J (concurring with the majority) confirmed that "[l]imitation periods have the effect ofcancelling the substantive rights of plaintiffs, and of vesting a right in defendants not to be sued in such cases": Castillo at para 35.

Seealso, Tolofson v Jensen, (SCC), [1994] 3 SCR 1022, 120 DLR (4th) 289 at paras 84-88 [Tolofson] where the SupremeCourt earlier indicated that limitation periods destroy the right of the plaintiff to bring suit and vest a right in the defendant to be freefrom suit. [39] Sword was fully aware of its obligation to commence the requisite judicial determination proceedings pursuant to Clause 15 ofthe Lease.

Under the Lease, it was not enough for Sword to unilaterally determine that there was no hydrocarbon in the relevant Well andrefuse to commence proceedings for a judicial determination of that subjective position.

In my view, it makes better commercial sense toput an end to a potential dispute by complying with the Lease contractual provision and thereby commence the required proceeding ratherthan adopt a different approach that was not within the contemplation of the Lease. [40] By analogy and for the purpose of a limitation period analysis, the requirement that Sword as a Lessee should commenceproceedings for judicial determination of an issue under the Lease puts Sword in a position akin to that of a plaintiff. [41] In my opinion, since Sword failed to commence the required proceeding within the specified and mandated 30-day period, itssubstantive right to "bring a suit" defending its position on the alleged breach of the Offset Wells Clause in the Lease (or later defenditself in a full trial on the same issue) was extinguished or cancelled: Castillo at para 35; Tolofson at paras 84-88; Clark v Naqvi, (1989), (NB CA), 99 NBR (2d) 271 (NBCA) at 275-76. [42] This jurisprudential analysis is consistent with the provision in Clause 15(

b) of the Lease that reads, inter alia: "if proceedingshave not been commenced for a judicial determination as aforesaid, this Lease, except for the Lessee's right with respect to the removalof equipment and its obligation to remove any registered document in relation to this Lease, shall thereupon terminate." In other words,Sword's failure to commence proceedings within time for a judicial determination of the alleged breach of the Offset Wells Clause wouldresult in a termination of the Lease, which legally signifies the destruction or cancellation of Sword's substantive rights as a Lessee underthe Lease, subject to the other relevant provisions of the Lease. [43] In effect, the logical implication or result that flows from the legal analysis above is that Sword is legally presumed to be inbreach of the Offset Wells Clause in the Lease based on its failure to commence proceedings for judicial determination of (i.e. challengeto) the alleged breach of the Offset Wells Clause within 30 days after Sword's receipt of the Default Notice from the Applicant.

Andconsequently, the Applicant Lessor becomes entitled to its remedy for damages in the context of the terms of the entire Lease, includingClause 15(c). [44] Even if I am wrong in my conclusion that Sword is presumed to be in default of the Offset Clause, its breach of the DefaultClause and continued refusal or failure to commence the required proceedings for a prolonged period of time after receipt of the DefaultNotice and prior to its surrender of the Offset Wells on June 22, 2011 (almost one year and five months from the date the Applicantissued a Default Notice) is troubling, and in itself is sufficient legal basis to determine this matter summarily.

I find the developmentprejudicial to the Applicant Lessor such that a damage award that is more than nominal would be appropriate in the circumstances. [45] From both substantive and procedural perspectives, it would be unfair and inequitable to allow Sword to do indirectly and outside

the limitation period specified in the Lease what it ought to have done directly on receipt of the Default Notice from the Applicant. [ 46 ] In the result, I find that the Respondent is in breach and default of the Lease. Disposition [ 47 ] The application for

summary judgment is granted. The issue of assessment of damages to which the Applicant is entitled is hereby referred to a referee, pursuant to Alberta Rules of Court , Rule 7.3(3)(b). [ 48 ] If the parties are unable to agree on costs, they should arrange to speak to me within 30 days of this decision. Heard on the 29 th day of January, 2013. Dated at the City of Edmonton, Alberta this 28 th day of March, 2013. Donald Lee J.C.Q.B.A. Appearances: Ronald J. Young Ronald J. Young Professional Corporation for the Applicant Candice A. Ross Burstall Winger LLP for the Respondent Appendix “ A ”

8. OFFSET WELLS If commercial production is obtained after the date of this Lease from an offset well, then unless (

i) a well has been or is being drilled on the spacing unit of the said lands laterally adjoining the spacing unit of the offset well and into the zone or formation from which commercial production is being obtained from the offset well, or (ii) all or part of the spacing unit of the said lands laterally adjoining the spacing unit of the offset well has been pooled or included in a unit in which the pooled or unitized substances include production from the same zone or formation from which production is being obtained from the offset well, the Lessee shall within 6 months from the later of the date of the offset well being placed on commercial production or, if information with respect to the amount of production from the offset well is restricted pursuant to any statute, regulation, order or directive of any government or governmental agency and such information is unknown to the Lessee, until one month after such information is made public: (

a) commence or cause to be commenced operations for the drilling of a well on the spacing unit of that portion of the said lands which comprises or is included in the spacing unit laterally adjoining the spacing unit of the offset well and thereafter drill, or cause to be drilled the same zone or formation from which production is being obtained from the offset well; (

b) pool or unitize that portion of the said lands which comprises or is included in the spacing unit laterally adjoining the spacing unit of the offset well, such pooling or unitization to include production from the same zone or formation from which the offset well is being produced; (

c) surrender all or any portion of the said lands pursuant to the provisions hereof, provided that the surrender shall include but may be limited to the zone or formation from which production is being obtained from the offset well underlying that portion of the said lands which comprises or is included in the spacing unit laterally adjoining the spacing unit of the offset well; or (

d) pay to the Lessor at such times as royalty would be payable pursuant to the provisions of this Lease, until the provisions of paragraphs (a), (

b) or (

c) of this clause are met, a royalty which shall be proportionately equivalent on an acreage basis to such royalty as would have been payable to the Lessor if the leased substances produced from the offset well were actually being produced from a well on the said lands which commenced production on the last day of the said 6-month period; provided however, that should any spacing unit of the said lands laterally adjoin more than one spacing unit upon which is located an offset well from which commercial production is being obtained, the royalty which the Lessee may elect to pay to the Lessor pursuant to this subclause shall be calculated on the average of the production from the said offset wells, such average to be calculated by dividing the total production from all of the said offset wells by the number of all of the said offset wells.

Notwithstanding anything herein contained, the obligations imposed by this clause shall be deemed not to have arisen if (

a) the offset well shall cease to be capable of or ceases commercial production during the said 6-month period, or (

b) the offset well is productive primarily or only of natural gas and the Lessee has not previously arranged an adequate and commercial market for the natural gas which might be produced from any well to be drilled pursuant to this clause. 15. DEFAULT (

a) If, before or after the expiry of the primary term, the Lessor considers that the Lessee has not complied with any provision or obligation of this Lease, including but not limited to a failure to give notice or to pay in the manner specified any rental, suspended well payments, royalty or other sums for which specific provision is made in this Lease, the Lessor shall notify the Lessee in writing, describing in reasonable detail the alleged breach or breaches. The Lessee shall have 30 days after receipt of such notice to:

i) remedy or commence to remedy the breach or breaches alleged by the Lessor, and thereafter diligently continue to remedy the same; or ii) commence and diligently pursue proceedings for a judicial determination as to whether the alleged acts or ommisions [sic] constitute

a breach or breaches on the part of the Lessee. (

b) The performance of any act by the Lessee intended to remedy all or any of the alleged breaches shall not be deemed an admission by the Lessee that it has failed to perform its obligations hereunder.

If the Lessee fails to remedy or commence to remedy a breach or breaches within the 30-day period, or if having so commenced to remedy a breach or breaches thereafter fails to continue diligently to remedy the same, and if proceedings have not been commenced for a judicial determination as aforesaid, this Lease, except for the Lessee's right with respect to the removal of equipment and its obligation to remove any registered document in relation to this Lease, shall thereupon terminate and it shall be lawful for the Lessor to re-enter the said lands and to repossess them.

If proceedings for a judicial determination are commenced within the aforesaid period of time, this Lease shall not terminate until the existence of such breach has been finally judicially determined; nor shall it terminate if the Lessee within 30 days of such final determination has remedied or commenced to remedy the breach or breaches, and having so commenced to remedy the breach or breaches, thereafter diligently continues to remedy the same. (

c) Notwithstanding anything contained in this Lease, this Lease shall not terminate nor be subject to forfeiture or cancellation if there is located on the said lands or on the pooled lands or on the unitized lands a well capable of producing leased substances or any of them, or on which operations are being conducted; and, in that event, the Lessor's remedy for any default under this Lease shall be for damages only. _______________________________________________________ Corrigendum of the Memorandum of Decision of The Honourable Mr. Justice Donald Lee _______________________________________________________ Appendix ‘A’ now added as attached