Shell Canada Products v. Sunterra Beef Ltd., 2013 ABQB 193

Court of Queen ’ s Bench of Alberta Citation: Shell Canada Products v. Sunterra Beef Ltd., 2013 ABQB 193 Date: 20130402 Docket: 0901 07955 Registry: Calgary Between: Shell Canada Products and Shell Canada Limited Applicants - and - Sunterra Beef Ltd. Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A. G. Park _______________________________________________________ [ 1 ] In 2004 the Applicants, Shell Canada Products and Shell Canada Limited (Shell) were the registered owner of one

section of land described as [1-29-26 W4M] which was located to the north of the City of Calgary’s city limits. Before 2004 Shell had located a refinery on the SW quarter and the SE quarter of that section. By mid 2004 Shell nearly had completed a remediation of those lands. [ 2 ] On March 7, 2005 Shell sold the SW quarter to Rancher’s Beef Ltd. (Rancher’s). Rancher’s was incorporated by a group of Alberta farmers and ranchers to develop and operate a meat processing facility as a result of the importation ban on live Canadian cattle into the United States of America’s beef market and other foreign beef markets.

After its incorporation Rancher’s had proposed to locate a beef processing plant in the City of Calgary. However such a location was not meant to be. As a result Rancher’s approached Shell in

2004 to purchase the SW quarter which contained a water supply provided by the City of Calgary. It was essential that the plant have access to a water supply. At the time Rancher’s was under some urgency to construct its plant. This urgency dovetailed into Shell’s plans to begin actively marketing its

section of land after August of 2004. [ 3 ] When Rancher’s initially approached Shell both companies understood land values in the area were escalating. Shell understandably wished to obtain the best possible price for its lands. Nevertheless, Shell in the interests of continuing good corporate relations with the executive of Rancher’s, was prepared to sell the SW quarter to Rancher’s, if a mutually beneficial arrangement could be achieved in the face of some existing problems. [ 4 ] In addition to the escalating land value issue, there was an issue involving Shell’s remediation of part of the SW quarter.

For a number of years earlier Shell had been engaged in running a land farm on the SW quarter. That involved Shell bringing contaminated soil from its various facilities onto the SW quarter and treating the contaminated soil to remove any hydrocarbon contaminates before taking the treated soil elsewhere.

Shell wished to continue to run the land farm on the SW quarter. [ 5 ] The parties were able to overcome these issues and on August 25, 2004 Shell and Rancher’s executed a letter agreement which would form the basis for the final March 7, 2005 purchase and sale agreement of the SW quarter. [ 6 ] The land farm issue was resolved under the agreement of purchase and sale in that Shell was allowed to continue to operate the land farm under a separate five year lease for a portion of the SW quarter at an annual rental of $1.00.

At the expiry of the lease Shell was required to remediate environmentally the land farm area and restore it to a level condition. At the conclusion of the remediation both the lease and the agreement to purchase and sale required Shell to provide an environmental assessment conducted by an independent third party consultant. SNC-Lavalin Inc. had been retained by Shell to assess and remove the hydrocarbon contaminates on the land farm. Shell further asked SNC-Lavalin Inc. to conduct the environmental assessment as the independent third party consultant.

In this connection on December 24, 2008 SNC-Lavalin Inc. provided a Soil Recycling Decommissioning Report conducted under the provisions of Alberta Environment’s “Alberta Tier One Soil and Ground Water Remediation Guidelines”. [ 7 ] On this application Shell takes the position SNC-Lavalin Inc.’s remediation meet the requirements for remediation under its agreements with Rancher’s and later under a successor lease it entered into with the Respondent, Sunterra Beef Ltd. (Sunterra) on March 31, 2008 respecting the land farm.

Sunterra takes the position SNC-Lavalin Inc.’s assessment was not one conducted by an independent third party consultant. There is disagreement between the parties on this issue due to the disputed and somewhat limited evidence tendered by each party on this application. [ 8 ] In addition the agreement for purchase and sale of March 7, 2005 provided Shell with an option to re-purchase a portion of the SW quarter. [ 9 ] The central issue on this application revolves around Shell’s concern it had not fully explored the rising market in land values for the SW quarter and the surrounding land at the time of the sale.

At that time Shell was worried it might sell the SW quarter at less than the best price available. Accordingly it accepted a proposal from Rancher’s which would see an “additional consideration” clause inserted into the agreement of purchase and sale.

In essence the clause provided Shell was to receive additional consideration for the land sale, if within a specified time period, Shell sold one or any of the remaining 3 quarter sections as unimproved land at a price higher than the then current appraised values for each of the remaining 3 unimproved quarter sections. [ 10 ] The agreement of purchase and sale of March 7, 2005 attributed a value of $1,728,000.00 for the land component of the SW quarter. It was based on an appraisal obtained by Shell. The completion date of the sale was June 10, 2005.

Rancher’s paid a total purchase price of $2,465,000.00 to Shell subject to Shell’s entitlement under the additional consideration clause. [ 11 ] The additional consideration clause is set out at para. 1.02 of the purchase and sale agreement. It stated: 1.02 (a) (

i) The Vendor and the Purchaser acknowledge that the Purchase Price is based upon negotiation between the parties and reflects, in part, an appraisal of the Property. By agreement, the Vendor and the Purchaser have allocated the Purchase Price between the land component and the improvement component as follows:

Land component: 160 acres at $10,800.00 per acre $1,728,000.00 Improvements: $ 737,000.00 Purchase Price: $2,465,000.00 (ii) The Vendor and the Purchaser each acknowledge that the Purchase Price specifically excludes any market adjustment in respect of the land component of the Purchase Price which shall be determined as hereinafter set out in

Section 1.02(

b) of this Agreement (the " Additional Consideration ''). (

b) For the purpose of calculating the Additional Consideration, the Vendor has obtained a current updated appraisal for the balance of Shell's holdings at Balzac (the '' Balance of Shell Lands '') which are legally described, and have the per acre appraised value ascribed to them (the " Current Appraised Values "), on

Schedule "A2" hereto. In the event that within a period of five (5) years from the Completion Date as herein defined (the " Comparison Period "), one or more of the three (3) quarter sections (the " Quarter Section(s) ") comprising the Balance of Shell Lands is sold, on an unimproved basis (for clarity the subsequent addition of water and sewer connections to the boundary of one or more Quarter

Section shall not be deemed to render an otherwise unimproved parcel as improved), for more than the Current Appraised Value ascribed to such Quarter

Section in

Schedule "A2" hereto, then in such event the Additional Consideration for the Property shall reflect that increase by an amount equivalent to the difference between the Current Appraised Values set forth on

Schedule "A2" and the sale price for such Quarter

Section during the Comparison Period. If one or more Quarter

Section is sold on an unimproved basis during the Comparison Period then the Purchase Price for the Property shall, subject to

Section 1.02(

c) hereof be increased by the average difference between the Current Appraised Values and the sale prices during the Comparison Period for such Quarter Sections. (

c) If the option referenced hereafter in

Section 15 has been exercised and the acquisition of the Option Parcel completed by the Vendor before any Additional Consideration is payable pursuant to this

Section 1.02, then the Additional Consideration shall apply only to the remaining portion of the Property owned by the Purchaser. (

d) Subject to the provisions of

Section 13(

h) hereof, the Additional Consideration shall be paid by the Purchaser to the Vendor upon ninety (90) days' written notice by the Vendor to the Purchaser to that effect accompanied by reasonable evidence of the sale price of such Quarter

Section or Quarter Sections; provided that such notice shall be given not earlier than the second anniversary, nor later than the ninetieth day following the fifth anniversary of the Completion Date. [ 12 ] This additional consideration clause provided Shell a further window of five years from June 10, 2005 for an additional payment from Rancher’s for the purchase of the SW quarter if Shell sold one or more of the remaining three quarter sections at a sale price greater than each quarter’s current appraised value as set out in the agreement of purchase and sale. [ 13 ] The clause contemplated two possible scenarios.

The first scenario involved Shell receiving additional consideration for the SW quarter if Shell within the five years only sold one quarter

section for a value greater than the value for that respective quarter. The formula for calculation of the additional consideration was based on the increase in value of the sale price of that particular quarter

section compared to the original appraised value for that particular quarter section. [ 14 ] The second scenario involved Shell receiving additional consideration for the SW Quarter if Shell within five years sold two of the remaining quarter sections or all three remaining quarter sections. The formula for calculating the additional consideration involved taking the average difference between the earlier appraised values of the sold quarter sections and the sale prices of the sold remaining quarter sections. [ 15 ] It was common ground that in order for the additional consideration clause to take effect each quarter

section had to retain its original unimproved condition upon its sale. If any quarter

section was sold in an improved condition, Shell would not receive any additional consideration calculated on the sale of that particular quarter section.

[ 16 ] Shell was required under the additional consideration clause to provide 90 days written notice to Rancher’s of its claim for the additional consideration together with reasonable evidence of the sale price of each quarter. The notice had to be given between June 10, 2007 and not later than the 90 th day following June 10, 2010. [ 17 ] The current appraised values for each remaining quarter

section were set out in the agreement of purchase and sale as follows: (

a) NW quarter - $1,584,000.00 (

b) NE quarter - $1,760,000.00 (

c) SE quarter - $1,920,000.00 [ 18 ] On June 10, 2005 following execution of the agreement of purchase and sale, Shell filed a vendor’s lien caveat against the SW quarter. [ 19 ] The two northern quarter sections were separately set out and described in one certificate of title at the Land Titles Registry for the Province of Alberta while the SE quarter

section was set out and described in a separate title at the Land Titles Registry. [ 20 ] The agreement of sale and purchase between Shell and Rancher’s referenced each of the NW quarter, the NE quarter and the SE quarter on an individual basis and it set out separate appraised values for each quarter section. The Affidavit of Arthur R. Price for Sunterra in this application referenced the NW quarter and the NE quarter as individual quarter sections.

Finally the caveat of Rockyview County (Rockyview) referencing the right of way agreement for its water line was registered only against the NW quarter section. [ 21 ] Shell learned in November 2004 that Rancher’s and Rockyview had negotiated an agreement to bring municipal water to the SW quarter

section by a southward extension of a water line situated north of the Shell lands. This extension would run through the Shell lands which were zoned agriculture by Rockyview. This knowledge placed Shell in a difficult position. It wished to accommodate Rancher’s ability to access essential water from Rockyview in order to operate the meat processing facility on the S.W. quarter but it was concerned the potential route of the water line through its remaining quarter sections would allow Rancher’s to advance an argument that the presence of such a water line on any particular quarter

section would convert the description in a potential sale of such a quarter

section such that it would be classified as an improved parcel of land from its original classification as an unimproved parcel of land. In turn such a possible conversion might impact the additional consideration clause and cause Shell not to be able to rely on it for an eventual higher purchase price for the SW quarter.

To resolve this ethical quandary Shell and Rancher’s worked on a solution to allow Rancher’s to receive the essential potable water and not have Shell block such access, while at the same time protecting Shell respecting its concern that a water line from Rockyview passing through any of its lands before terminating on the SW quarter, would result in a possible reclassification of an otherwise unimproved quarter

section of the remaining lands to that of an improved quarter section. [ 22 ] The solution is set out in parentheses in clause 1.02(

b) of the agreement of purchase and sale. The words in parentheses state: (for clarity the subsequent addition of water and sewer connections to the boundary of one or more Quarter

Section shall not be deemed to render an otherwise unimproved parcel as improved) [ 23 ] Those words were termed “the deeming provision”. It was prepared by Shell’s legal team in November 2004 with some input from Arthur Price, the chairman of Ranchers. It was inserted because neither Shell or Rancher’s knew in what form or by what mechanism any water access to the SW quarter

section would take. [ 24 ] In March of 2005 the City of Calgary was providing water to the SW quarter. The remaining quarters did not have water or sewer services on or to them. However in June 2005 the City of Calgary terminated the water supply to the SW quarter. In accordance with the prior knowledge of both Shell and Rancher’s that Rocky View would provide alternative water and sewer services to the SW quarter, Rancher’s tendered $200,000 under an infrastructure assistance program of the Province of Alberta.

This payment of funds allowed Rocky View to qualify for additional funding from the Province of Alberta to extend municipal water and sewer service infrastructure to the Rancher’s plant. In turn Rocky View had to own or control the water and sewer facilities in order to make them available to other ratepayer users.

[ 25 ] On November 7, 2005 Shell was provided with a right of way agreement for a water line to be located on the NW quarter. At the same time Shell discussed easements with Rocky View for water and waste water on the NW quarter and SE quarter. On February 17, 2006 Shell granted to Rocky View a right of way for a waterline on the NW quarter and a further right of way for a sewer or waste water line on the SE quarter. The waterline on the NW quarter was installed by May, 2006. This right of way on the NW quarter permitted Rocky View to provide potable water to the SW quarter.

It ran in a north-south direction across the north boundary, along the west edge and across the south boundary of the NW quarter. Rocky View completed construction of the water and sewer infrastructure in early 2007. [ 26 ] Sunterra submitted the existence of the waterline increased the value of the lands as it improved the developmental potential for future industrial and commercial uses. Sunterra referenced the Affidavits of Rob McElhoes, Edward Braun, Arthur Price and Michelle Harradence in support of its submission.

In addition Sunterra noted the evidence of one Adrian Munro as contained in his Affidavit sworn on behalf of Sunterra in this application. Munro was a key negotiator for the CLT Group which purchased the NW quarter and the NE quarter from Shell in mid 2007. CLT made its purchase for the potential industrial development of the land. Munro opined in his Affidavit the existence of the waterline increased the value of the lands to CLT at the time of the purchase of the lands by CLT.

However, under cross-examination on his Affidavit Munro admitted the presence of a waterline on the NW quarter without water flowing through it, did not add value to the NW quarter. [ 27 ] In reality, tie-ins to the waterline for servicing the lands would have to be completed at a future date under the auspices of the Balzac East Area Structure Plan and the adoption of a conceptional scheme as put into place for water flow.

Membership in the Balzac East Area Structure Plan and the preparation of a conceptual scheme were requirements imposed by Rockyview before development was permitted on those lands. [ 28 ] On May 31, 2008 the CLT Group acquired from Shell the NW quarter and the NE quarter for a total purchase price of $16 million dollars. The sale price was $12,656,000.00 higher than the appraised value attributed to the north half

section of lands in the March 7, 2005 agreement of purchase and sale with Rancher’s. [ 29 ] Prior to the sale of the two north half sections of the land Shell had neither the physical ability or a plan formulation to access water from the waterline along the western boundary of the NW quarter section. Both the NW quarter

section and the NE quarter

section were unserviced lands (save for the untapped waterline on the western boundary of the NW quarter section) and were designated as ranch and farm district lands which allowed agricultural activities as primary land use. In addition as noted before, Shell would be required to gain membership in the Balzac East Area Structure Plan before Rocky View would entertain a development application. Integral to such a development application would involve further qualifying steps requiring submissions of a duly prepared conceptional scheme to Rocky View and submission of an Outline Plan to Rocky View.

The latter plan was necessary to provide the proper frame work for re-designation, subdivision and development on the two quarter sections. [ 30 ] By way of illustration the CLT Group paid approximately $825,000 to Rocky View for implementation of those qualifying steps. CLT further expended 4 ½ years of time before Rocky View gave its permission for development and allowed the NW quarter to be serviced by potable water which could not be used for irrigation of agricultural land.

Finally, once service was allowed, the CLT Group was required to pay an initial water access fee of over $3 million dollars for the NW quarter. [ 31 ] Shell noted from the time of construction of the waterline on the western boundary of the NW quarter in 2006 and up until the time of the CLT sale, it did not: (

a) Access or attempt to access water from the waterline; (

b) Make or attempt to make any connections to the waterline; (

c) Tie off or attempt to tie off the waterline at any point along the NW quarter; (

d) Extend or attempt to extend the waterline across the NW quarter; or (

e) Use, access, share, or attempt to use, access, or share in the water provided to Rancher’s via the waterline.

[ 32 ] Shell further noted, other than the waterline on the western boundary of the NW quarter, no waterline or sewer line was constructed in any part of the NW quarter or NE quarter by it during its ownership tenure.

Shell submitted no steps were taken by it to improve the NW quarter or the NE quarter since the agreement of purchase and sale to Rancher’s and the CLT Group sale were completed. [ 33 ] Shell retained two independent certified land appraisers, Massey and Telford, who opined in affidavits and cross-examination thereon, that the NW quarter was not improved nor was it increased in value by the presence of the waterline.

In their opinions they included the possibility a decrease in value might occur on the NW quarter because the waterline’s presence might cause a non-desired configuration and interfere with the size of a potential development. Shell noted this decreased value possibility contrasted with the opinions of Rob McElhoes, a real estate broker and Edward Braun, a certified appraiser, both retained by Sunterra and who believed the waterline’s presence increased the value of the NW quarter.

In support of its submissions Shell pointed out the opinions of McElhoes and Braun should be discounted due to each failing to conduct an appraisal of either quarter. Shell argued such a failed analysis must form an integral part of any analysis comparing their evidence to the evidence of Massey who conducted a timely and detailed formal appraisal of both quarters.

Shell further pointed earlier referenced cross-examination admission of Munro that a waterline, absent of water, did not add value to the NW quarter. [ 34 ] Massey and Telford noted the existence of a strong economy and surrounding land development increased overall land values. Massey appraised the NW quarter, the NE quarter and the SE quarter and provided a formal report on May 28, 2007.

He believed the market value for “an unserviced” NW quarter and “unserviced” NE quarter should be set at $8,000,000,00 each based on a comparison to neighbouring similar lands. [ 35 ] August 2007 marked a new development in that Rancher’s sought creditor protection under the Companies ’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended. By this time the SW quarter had been subdivided, 20 acres of it sold and Rancher’s was now the registered owner of an 80 acre parcel and a 60 acre parcel.

Shell’s unpaid vendor’s lien detailing its interest under the additional consideration clause under the March 7, 2005 agreement of purchase and sale was registered against the 80 acre parcel and the 60 acre parcel. Shell and Rancher’s subsequently agreed the full amount secured by the lien would be recoverable from those 2 parcels. [ 36 ] These relevant documents arose out of the Companies ’ Creditors Arrangement Act proceedings: (

a) A confirmatory agreement between Shell and Rancher’s on October 29, 2007; (

b) A Vesting Order of this Court of December 6, 2007; and (

c) An acknowledging agreement between Shell and Sunterra of March 31, 2008. [ 37 ] Sunterra was comprised of a smaller number of ranchers and farmers from those involved in Rancher’s. This smaller group wished to carry on the objectives of Rancher’s. [ 38 ] The December 6, 2007 Vesting Order vested title and right in and to the 80 acre parcel and 60 acre parcel subject to the vendor’s unpaid lien.

Sunterra submitted it was not asked to, nor did it ever accept or assume the covenant of Rancher’s in the March 7, 2005 agreement of purchase and sale to pay the additional consideration to Shell, if and when it became payable. [ 39 ] In effect Sunterra replaced Rancher’s as the registered owner of the SW quarter. Further Shell on March 31, 2008 agreed to discharge the unpaid vendor’s lien from the 60 acre parcel. Shell and Sunterra confirmed by the acknowledging agreement that any additional consideration secured by the lien would be fully recoverable from the 80 acre parcel.

The acknowledging agreement further set out Sunterra’s agreement to extend Shell’s lease to run the land farm. [ 40 ] In a letter of June 11, 2008 without attachments Shell under

section 1.02(

d) of the March 7, 2005 agreement of purchase and sale, notified each of Sunterra and Sunterra’s counsel that the NE quarter and the NW quarter had been sold. It referenced the specific sales price for each quarter and advised that additional consideration of $6,328,000 was due and payable by Sunterra not later than September 11, 2008 (90 days). No notice was provided to Rancher’s. [ 41 ] In a letter of July 8, 2009 Shell sent to each of Sunterra and Sunterra’s counsel a complete copy of the agreement of purchase

and sale with the CLT Group covering the sale of the NE quarter and the NW quarter. [ 42 ] In reaching the additional consideration of $6,328,00.00 Shell calculated the average difference between the sale prices for the two quarter sections and the current appraised values set out in the March 7, 2005 agreement of purchase and sale.

If the SE quarter had been sold before the expiration of the comparison period Shell understood it would have been obligated to include its sale price in the calculation as well. [ 43 ] Neither after the receipt of the June 11, 2008 Shell letter or the July 8, 2009 Shell letter did Sunterra or its counsel advise Shell that any further information was required respecting the sale of the two quarter sections. Sunterra admitted through the cross- examination of Price on his affidavit that no further information was required by it.

Further Sunterra did not advise Shell of its current position that Shell’s notice was insufficient and that Shell did not satisfy the requisite notice under the additional consideration clause. [ 44 ] Shell’s land farm lease was terminated effective April 1, 2008. However, as noted earlier, Sunterra and Shell executed an acknowledging agreement on March 31, 2008 . In the recitals of that acknowledging agreement Sunterra acknowledged it purchased from Rancher’s on November 9, 2007 the lands owned by Rancher’s as a result of the March 7, 2005 agreement and purchase and sale.

Sunterra recognized in the recitals of the acknowledging agreement this Court provided an Approval Order and a Vesting Order in December 2007 under the CCAA Proceedings wherein at the time of the Sunterra purchase from Rancher’s, Shell’s unpaid vendor’s lien was registered by caveat against the lands Sunterra purchased from Rancher’s.

In the acknowledging agreement Sunterra further agreed in one of the recitals that it recognized the intention of Shell and Rancher’s in the March 7, 2005 agreement of purchase and sale to have the additional consideration, as secured by the vendor’s lien caveat, be recoverable from the land sold to Rancher’s.

The acknowledging agreement between Shell and Sunterra further confirmed an agreement between Shell and Sunterra that the additional consideration secured by Shell’s unpaid vendor’s lien remained fully recoverable from the 80 acre parcel which Sunterra purchased in part from Rancher’s under the CCAA Proceedings. [ 45 ] The acknowledging agreement further extended Shell’s land farm lease of the 80 acre parcel until September 30, 2008.

This lease required Shell to maintain its earlier covenant given in the initial lease to restore the leased lands to the original condition; to environmentally remediate the lands; and to restore the lands to a level condition. Finally, as earlier referenced, Shell was required to provide Sunterra with an environmental assessment conducted by an independent third party consultant confirming a proper remediation was attained. Years earlier Shell had contracted with SNC-Lavalin Inc. to operate and manage the land farm.

Subsequently Shell also retained SNC-Lavalin to carry out the environmental activities and decommission or shut down the land farm. In doing so, Shell provided Sunterra by letter of January 12, 2009 SNC-Lavalin Inc.’s Environmental Assessment Report dated December 24, 2008. (see para. 6 of these reasons). In the letter Shell stated: (

a) Shell makes no representation or warranty concerning (

i) the content of the report (ii) the scope, nature or methodology of the investigations upon which it was based (iii) the qualifications of the person who conducted the assessment or prepared the report (iv) the fitness of the report for any purpose; (

b) Shell will not be bound by any assertions, conclusions, statements of fact or determination contained in the report; and (

c) Sunterra may not rely upon the report. [ 46 ] In this application Shell maintained the Environmental Assessment Report met or exceeded the requirement for environmental remediation as set out in the 2008 land lease agreement between Shell and Sunterra. Sunterra maintained the Environmental Assessment Report is not acceptable to it under s.12(

c) of the land farm lease in that SNC-Lavalin Inc., as the author, is not the required independent third party consultant. In addition in this application Sunterra listed six specific complaints respecting omissions or inadequate work quality detailing its position that Shell has failed to remediate the lands properly under the land farm lease.

Sunterra produced a number of photographs taken on September 11, 2009 as evidence of Shell’s remediation failure. [ 47 ] In this connection Sunterra argued its agreement to allow Shell to remain on the land farm after the expiration of the lease term was linked to Shell’s obligation to remediate and restore the lands and further linked to Shell’s entitlement to the additional consideration.

[ 48 ] In response Shell pointed to the inferior and insufficient quality of evidence produced by Sunterra in this application to demonstrate any alleged improper remediation and restoration.

Shell further submitted the land farm lease, the soil recycling facility and the environmental remediation all relate to the 20 acre land parcel which is separate and distinct from the 80 acre parcel of land against which the unpaid vendor’s lien caveat is registered. [ 49 ] In support of its submissions Shell argued the remediation obligation arose from the farm land lease and not the March 7, 2005 agreement of purchase and sale.

Shell finally pointed out that Sunterra filed and served a Statement of Claim on December 20, 2010 in a separate legal action which detailed the Sunterra environmental claim respecting the improper and insufficient remediation. Reasons [ 50 ] Sunterra submitted the Originating Notice filed by Shell in this action does not constitute the proper procedure to determine the relief sought by Shell. When it was filed, Rule 410 of the former Rules of Court governed proceedings commenced by Originating Notice. Shell’s Originating Notice did not reference under which subrule it was proceeding.

In this application Sunterra surmised Shell was proceeding under either Rule 410(c)(

i) and Rule 410(e)(i). These Rules state: 410 Proceedings may be commenced by originating notice in the following cases: (

c) proceedings related to land (

i) for the declaration of a beneficial interest in or a charge upon land and of the character and extent thereof; (

e) proceedings for the determination of any question where there are no material facts in dispute and the rights of the parties depend upon the construction of (

i) a written instrument and for a declaration of the rights of the persons interested; [ 51 ] Sunterra argued a proper

interpretation of Rule 410(c)(

i) would allow Shell perhaps to ask for a declaration that at the time of the registration of the caveat Shell had an equitable interest in the land as an unpaid vendor under a contingent entitlement to additional consideration. However Sunterra argued that would be the extent of the relief which Shell could obtain under such a procedure. Sunterra submitted Rule 410(c)(

i) does not provide for Shell to receive a declaration that the lien amounts to $6,328,000.00 plus G.S.T. Sunterra argued such consequential relief calls upon the Court to determine the rights of the parties under the March 7, 2005 agreement of purchase and sale. That determination by the Court exceeds the criteria contemplated by Rule 410 (c)(

i) in Sunterra’s submission. [ 52 ] If Shell launched its action under Rule 410(e)(

i) Sunterra noted the Rule is discretionary and cannot be utilized in a proceeding where there are material facts in dispute. In this connection Sunterra pointed to the current Rules of Court and Rule 3.2 in particular. It states in part: How to start an action 3.2(2) A statement of claim must be used to start an action unless (

a) there is no substantial factual dispute, in which case an originating application may be used to start the action. [ 53 ] In both the old Rules and the current Rules it is common ground an Originating Notice should not be used to commence a

legal action where there is a substantial factual dispute between the parties. [54] Sunterra referred to the decision of Ritter, J. (as he then was) in Edmonton Telephones Corp. v. Stephenson (1994), (AB KB), 24 Alta. L.R. (3d) 96 (Q.B.) aff’d (1994), 1994 ABCA 379 , 26 Alta. L.R. (3d) 33 (C.A.); leave refused(1995) 1 S.C.R. 399 and a subsequent Alberta Court of Appeal decision of Guaranty Properties Limited, et al v. The City of Edmonton,2000 ABCA 215. [55] These two decisions drew a number of technical principles which could be taken from a review of prior Alberta decisionswhich considered Rule 410(e).

Seven principles were set down by Ritter, J. at p. 106 of Edmonton Telephone Corp. (supra): 1. Rule 410(

e) is a discretionary rule which should be exercised with restraint. 2. The question must be a real and not a theoretical question. 3. The person raising it must have a real interest to raise it. 4. The person raising the question must be able to secure a proper contradictor, that is to say, someone presently existing who has atrue interest to oppose the declaration sought. 5.

Once the foregoing considerations have been met, the Court should endeavour to make a practical determination as to whetherthere is a sufficient likelihood of relevant evidence being admitted at trial which will significantly assist the Court in interpreting thewords of the document or documents to warrant the expense and delay of a full trial process. 6. Voluminous evidence will not take the matter outside of R. 410(

e) by itself. 7. If there are no material facts in dispute, then the matter may be brought to the Court by virtue of affidavit or affidavits. [56] Ritter, J. went on to state at p. 106 that in his view the purpose of Rule 410(

e) is to enable

interpretation of documents wherethere is no underlying factual dispute. [57] Finally Ritter, J. stated at para. 24 on p. 107 the following: 24 It is my view that the proposition that R. 410(

e) is a discretionary rule which should be exercised with restraint, provides theCourt with an overriding authority to compel proceedings by way of Statement of Claim, discovery process and full trial even where thecircumstances technically fit within the parameters of R. 410(

e) if the interests of justice demand such process. I will therefore considerwhether this matter meets the technical requirements of R. 410(

e) and then, if it does, direct myself to the discretion available to theCourt. [58] The Alberta Court of Appeal approved the analysis of Ritter, J. in its subsequent decision in Guaranty Properties Limited(supra). [59] In its submission Sunterra referenced these three questions must be decided in the application of the technical requirements asdefined by Ritter, J. The three questions are: (

i) Is it likely that evidence at trial would affect the outcome? (ii) Are there material facts in dispute? and (iii) Does the question turn on a construction of the contract involved? [60] Sunterra submitted its answers turned on the legal principles of contract

interpretation and the parol evidence rule. Sunterraemphasized a proper application of these principles will demonstrate that there are no material facts in dispute between its position andthe position of Shell and which will warrant the dismissal of Shell’s claim for additional consideration based on the clear and

unambiguous contractual language. [61] The first principle of contract

interpretation advanced by Sunterra recognizes that contractual provisions are to be given theirplain and ordinary meaning unless an absurdity would result. Secondly the words of the contract will reveal the intention of thecontracting parties. [62] With respect to a proper application of the parol evidence rule Sunterra quoted paras. 20, 24 and 25 of the Alberta Court ofAppeal decision in Guaranty Properties Limited (supra).

The three paras. stated: The Parol Evidence Rule [20] The parol evidence rule generally bars extrinsic evidence that alters, adds to, subtracts from, or varies the meaning of the writtendocument. The parties intentions are to be found in the document itself: Paddon-Hughes Development Co. v. Pancontinental Oil Ltd.(1998), 1998 ABCA 333 , 223 A.R. 180, 183 W.A.C. 180 at para. 27 (C.A.), leave to appeal to S.C.C. refused [1998] S.C.CA.No. 600, online; QL (S.C.C.). Therefore, unless the evidence falls within an exception to the parol evidence rule, it would beinadmissible at trial. [24] In Eli Lilly & Co. v.

Novopharm Ltd., [l998] 2 S.C.R. 129, the Supreme Court of Canada restated the three salient features of theparol evidence rule. First, where the written language of an instrument is clear and unambiguous on its face, it is unnecessary to considerextrinsic evidence. Second, where the words are ambiguous, evidence of surrounding circumstances may be permitted to enable the courtto properly construe the language. Third, such evidence must shed light on the surrounding circumstances, not merely on the subjectiveintention of the parties. (

a) Is there any ambiguity on the face of the agreement? [25] External evidence will be allowed to resolve ambiguity, but the ambiguity must arise from the language itself and not from external circumstances: Fridman, The Law of Contract, 3rd ed. (Toronto: Carswell, 1994) at 458. [63] I agree with Sunterra’s submission respecting the three questions needed to be answered in the application of the technicalrequirements defined by Ritter, J. I further agree with Sunterra’s submission on the principles of contractual

interpretation and the parolevidence rule. [64] Indeed I agree with Sunterra’s position that there are no material facts in dispute in the case at bar respecting an analysis ofthe clear and unambiguous language contained in the documentation. The analysis can be accomplished without a need to reference anyinadmissible evidence of the parties’ intentions. [65] One of the few instances present in this application where material facts are in dispute related to the evidence contained in theaffidavits of Michelle Harradence and Arthur Price referencing the provisions of the deeming provision clause.

Price, the Chairman ofRancher’s, and Michelle Harradence, one of the legal team for Shell drafting the March 7, 2005 agreement of purchase and sale,provided differing

interpretations on the intention and meaning of the deeming provision clause. [66] Price believed the deeming provision’s purpose was to eliminate any

interpretation the presence of water and sewer facilitieson the SW quarter would be seen as an improvement to the remaining quarters of the Shell lands. Harradence interpreted the inclusion ofthe deeming provision was to cover the situation where a waterline or sewerline was brought to or built through any of the balance of theShell lands. Harradence conceded the addition of words such as “through”, “on”, or “across” would have been beneficial if the intentionof the parties was to exclude the presence of a waterline on the lands as an improvement.

[67] It is clear from the use of the words “intended” as argued by Sunterra in paras. 16 and 17 of its written brief and “purpose” asargued by Shell in para. 19 of its written brief, that the specific evidence of Price and Harradence on any

interpretation to be afforded tothe subjective intention of the parties in their pre-agreement negotiations is not admissible. [68] I am further strengthened in my view that evidence of the intention of the parties as expressed in the opinions of Price andHarradence is not admissible by the absence of any evidence from either Rancher’s or Shell providing any written communicationsbetween Rancher’s and Shell respecting the purpose of the deeming provision clause. [69] As a result the meaning of the deeming provision clause must be found within the language employed in the clause and in theagreement itself.

The Alberta Court of Appeal in Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd. 2010 ABCA 126 at paras.16, 19 - 20 set out the restrictions on the use of evidence by the parties as the meaning of a contract. In those paras. the Court stated: [16] The respondent acknowledges that the parties to the contract are not entitled to provide evidence on what they think the contractmeans. Neither contracting party is entitled to call evidence that “I think it means X”: Eli Lily & Co. v. Novopharm Ltd., (SCC), [1998] 2 S.C.R. 129 at p. 166; Gainers Inc. v. Pocklington Financial Corp., 2000 ABCA 151,81 Alta.

L.R. (3d) 17, 255A.R. 373 at para. 20; Marthaller v. Lansdowne Equity Venture Ltd. (c.o.b. Canadian Heritage Homes), 1997 ABCA 258 ,[1998] 1 W.W.R. 428, 52 Alta. L.R. (3d) 329, 200 A.R. 226 (C.A.). [17] It is also clear that the parties cannot call expert evidence on the meaning of the contract: Lunenburg Industrial Foundry andEngineering Ltd. v. Commercial Union Assurance Co. of Canada, 2005 NSSC 62, 231 N.S.R. (2d) 378, 21 C.C.L.I. (4th) 140, 10C.P.C. (6th) 376 at paras. 24-5; Michael Santarsieri Inc. v. Unicity Mall Ltd., 2000 MBQB 202, 152 Man.R. (2d) 215; LHS HoldingsLtd v.

Laporte plc., [2001] EWCA Civ 278 at paras. 20, 36. For example, neither party could retain a professor of law or English toprepare an expert report on the meaning of the terms of the contract: Gorgichuk v. American Home Assurance Co. (1985), 5 C.P.C.(2d) 166 (Ont. H.C.). [18] It follows that no third party can provide an opinion on what the contract means. That is the case even if the third party is aknowledgeable member of the same industry; his or her opinion on what the contract means is not admissible: Harris v. Nugent (1996),1996 ABCA 388 , 46 Alta. L.R. (3d) 264, 193 A.R. 113 (C.A.).

It is also clear that the opinions of third parties about thecommercial context after the contract was signed are inadmissible. If any evidence about the contract was admissible, it would have to beevidence about the situation prior to and at the date of signing of the contract, in this case 1999: Dumbrell v. Regional Group ofCompanies Inc., 2007 ONCA 59, 85 O.R. (3d) 616 at para. 53; McDonald Crawford v. Morrow, 2004 ABCA 150, 28 Alta. L.R. (4th)62, 348 A.R. 118 at para. 72. [19] There is a narrow exception for technical terms of art, which can be proven by extrinsic evidence: Canadian National RailwayCo. v.

Volker Stevin Contracting Ltd. (1991), 1991 ABCA 287 , 120 A.R. 39, 1 Alta. L.R. (3d) 167, 48 C.L.R. 134 (C.A.). Thisexception is contemplated and narrowed by

Article 1.5 of the agreement. Any technical terms specifically defined in the agreementcannot be given another meaning, even if the industry would use those words in a different sense. But there is no evidence that the keyterms “information”, “manner” or “contemplated” have any special meaning in the styrene business. [20] Where a contract is ambiguous, there is a limited ability to call evidence on the circumstances surrounding the formation of thecontract and the commercial context in which it was made.

But where the contact is clear, the parties’ intention is to be derived primarilyfrom the words they have used in the contract: Eli Lily & Co. at paras. 52-6, explaining Consolidated-Bathurst Export Ltd. v. MutualBoiler and Machinery Insurance Co., (SCC), [1980] 1 S.C.R. 888; Gilchrist v. Western Star Trucks Inc., 2000 BCCA70, 73 B.C.L.R. (3d) 102 at paras. 17-8. This is especially so when the contract contains a “whole agreement clause”. Evidence ofcontext cannot in any case be allowed to overwhelm the words of the contract, or to contradict those words: Black Swan Gold MinesLtd. v.

Goldbelt Resources Ltd. (1996), (BC CA), 25 B.C.L.R. (3d) 285 (C.A.) at para. 19. [70] However despite the non-reception of evidence of the intentions of the parties as expressed by Price and Harradence, I canlook to the factual undisputed background known to the parties at the date of the agreement. Virtue, J. in Qualico Developments Ltd. v.Calgary (City), 1987 Carswell Alta. 147 (Q.B.) at paras. 42 and 43 stated: 42 The meaning of a document or of a particular part of it is to be sought for in the document itself.

This does not mean that one mustdiscover the meaning of a particular word or phrase from that word or the words of that phrase alone. The document must be read andinterpreted as a whole in order to extract the meaning of any particular part or expression.

43 Further assistance as to what the parties intended by the words they used can be gained from “the matrix of facts in which they were set”. [ 71 ] An excellent

summary of the legal principles governing the use of the factual matrix evidence to assist in the

interpretation of the deeming provisions clause is found in paras. 17, 19-22 inclusive of the decision of Poelman, J. in Nexxtep Resources Ltd. v. Talisman Energy Inc. , 2012 ABQB 62 . He stated: [17] The factual matrix of a contract is properly considered as part of the interpretive task of ascertaining the parties' intentions having regard to the relevant background context known to the parties. In other words, no special justification is needed to consider extra-textual evidence, provided it is within the prescribed limitations.

Indeed, as already seen, some of the PSA's words (MRE, for example) cannot be understood at all without such evidence. [19] The function of factual matrix evidence helps define its scope. Lord Wilberforce is credited with first using the term “matrix of facts” in Prenn v. Simmonds , where he explained that “we must ... enquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view.” Later, in Reardon Smith Line Ltd. v.

Hansen-Tangen , he recognized the difficulty of defining the scope of what he then referred to as “surrounding circumstances,” but offered that “it is certainly right that the court should know the commercial purpose of the contract and this in tum presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.” He emphasized that this evidence was to be used only to arrive at the intention of the parties objectively that is, as it would appear to reasonable persons in the same situation. [20] Lord Wilberforce's expositions of the function of factual matrix evidence are part of our law.

In Gainers Inc. v.

Pocklington Holdings Inc. , while strongly cautioning against considering subjective intention, the Court of Appeal used the term “armchair rule” as letting “the courts see what the authors of the contract knew when they wrote it, in order indirectly to assist in resolving any difficulties in what certain words of the contract refer to.” The court explained that knowing what the parties knew could help determine what the parties were referring to by their words, and found Reardon Smith to be a good explanation of the doctrine - it “lets the court find what a reasonable person would have thought was the aim of the transaction, if that person knew the facts available to the parties.” The Court of Appeal also adopted the statement of Lord Hoffman, succinctly summarizing the use and purpose of factual matrix evidence in relation to words in a document: The construction of a document is not a game with words.

It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objectives which it was intended to achieve.

Or, in Conrad J.A.'s words, “it is from the whole of the document coupled with the surrounding circumstances that the general intention of the party or parties is to be ascertained.” [21] The authorities, hold, however, that evidence of the factual matrix should not include the parties' negotiations. Lord Wilberforce explained that evidence of prior negotiations is not admitted because it is not helpful, rather than for technical reasons or efficiency. Where negotiations are difficult, positions change until the parties achieve consensus.

Evidence of the use of different expressions or the same expressions does not usually help

interpretation of the contract's words, and may occur in a context of different surrounding circumstances. [22] Evidence of the factual matrix may therefore be considered to the extent it is instructive as to the genesis of the transaction; its background and context; the subject matter meant to be described by the words; and the aim, commercial purpose and practical objectives sought to be achieved.

It will not be helpful to consider how, in their negotiations, the parties might have modified the contractual language or changed their bargaining positions. [ 72 ] In addition to agreeing with Sunterra’s position, I am of the view there does not appear to be any further evidence which could be called at a trial of this action which would affect the issues to be determined in this application. The issues can be determined referencing the undisputed facts as submitted by Sunterra and the construction and

interpretation of the March 7, 2005 agreement of

purchase and sale. This agreement contains clear and unambiguous language. The issues raised by the parties in this application can be answered through the exercise of my discretion applied with restraint. In my view both the former Rules, 410(c)(

i) and Rule 410(e)(i), and the current Rule 3.2 can be utilized in this application. There is no necessity to compel proceedings by way of Statement of Claim and a full trial process under that Statement of Claim. There are undisputed facts which can be considered in the face of clear and unambiguous contractual language in the agreement. [ 73 ] In my opinion Shell was not incorrect in using an Originating Notice to commence this application. Its Originating Notice falls within the provisions of the current Rule 3.2. It further falls within the former Rule 410(c)(

i) or Rule 410(e)(i). Under Rule 410(c) (

i) Shell can on the undisputed facts seek a declaration of the extent of its beneficial interest or charge upon Sunterra’s land. The word “extent” in the former Rule 410(c)(

i) can define the numerical monetary value of the lien as long as the facts giving rise to that numerical monetary value are not in dispute. Further the word “extent” similarly can refer to the descriptive size of the charge upon the land respecting the geographical area or topographical area as a component of the land description. [ 74 ] As an aside I note Shell’s use of the Originating Notice will promote a timely and cost-effective resolution of the issues in this application as opposed to making a procedural order to correct and continue the proceeding under Rule 3.2(6) of the current Rules of Court .

To do the latter would delay and lengthen the litigation through issuance of a Statement of Claim and the subsequent trial process. The issues presented by the parties can be determined in the present process in the interests of justice. The present process meets the intent of current Rule of Court 1.2 which states: 1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost-effective way. [ 75 ] Sunterra argued any improvement of any nature or degree to the remaining quarters of the whole

section of land will not entitle Shell to receive any additional consideration for the sale of the SW quarter to Rancher’s. In advancing this argument Sunterra referenced the following undisputed facts: 1) The SW quarter, which contained no water or sewer lines on it at its March 2005 sale date, was appraised at its current 2005 value by Shell’s appraiser. The remaining quarter sections were appraised at that time for the purpose of calculating the additional consideration if Shell was entitled to additional consideration under

section 1.02 of the agreement of purchase and sale. 2) The NW quarter’s appraised value was set at $1,584,000.00 and the NE quarter’s appraised value was set at $1,760,000.00. 3) A little over two and a quarter years later in July 2007, Shell sold both the NW quarter and the NE quarter for $16,000,000.00.

At the time of the sale the Rockyview waterline had been put in place inside the western boundary of the NW quarter. 4) Shell’s appraiser, Massey, in his 2007 appraisal conducted for the July 2007 sale, believed the market value for these two northern quarter sections would be founded on the principle of the land’s highest and best use.

He further believed an accurate market value would best be derived invoking the principle as to the price a properly informed willing buyer was prepared to pay for the land. (I note Massey considered the highest and best use for the land was based upon a land designation of commercial and industrial use, despite the two quarter sections still retaining a land designation of agricultural use at the time of the 2007 sale.) 5) Industrial development of land requires water access.

A water infrastructure contained on any land will provide a competitive advantage over land lacking such infrastructure due to the uncertainty inherent in the future installation of a water infrastructure. Any future water infrastructure development will also require additional investments involving money and time. 6) The purchaser of the two northerly quarter sections intended to use the land for future industrial development. As such the existence of the waterline on the NW quarter caused the purchaser to pay an increased price for such higher valued land.

This increase in value was directly related to the purchaser’s belief the current presence of the waterline would provide the basis for future land use planning and development approval. 7) Shell believed the waterline’s presence added monetary value to the area. Shell further believed access to railway lines in the area

caused the area to possess a “unique advantage” over other area industrial lands which lacked rail access. [76] Based on these undisputed facts it is my opinion the existence of the waterline running in a north-south direction on the NWquarter meant this quarter was serviced or had the ability to be serviced (through water tie-ins off the water pipe line) by water. As setout in Musqueam Indian Band v. Glass (2000) 2000 SCC 52 , S.C.J.

No. 54 Gonthier, J. for the majority of the Supreme Courtof Canada stated in part at para. 55: On the basis of the plain meaning of the word “unimproved” and of its use in the leases I conclude that “unimproved lands” means “unserviced” lands, not just lands without buildings. As the Federal Court of Appeal noted, “Black’s Law Dictionary, 6th ed., (at p. 757)defines ‘improved land’ as ‘(r)eal estate whose value has been increased by landscaping and the addition of sewers, roads, utilities, andthe like’.

Similarly, the term ‘improvement’ generally refers ‘to buildings, but may also include any permanent structure or otherdevelopment, such as a street, sidewalks, sewers, utilities, etc.’” (para. 87). In Re Planet Parking Ltd. and Assessment Commissioner ofMetropolitan Toronto, (ON SC), [1970] 3 O.R. 657 (H.C.), the court found that the word “unimproved” in the contextof the Assessment Act related to the “ordinary and natural” meaning of “improvement” as in “making... better” (p.661).

The court rejected“the contention that unimproved land as distinguished from improved land means land without buildings erected thereupon” (p.662). [77] The subsequent addition of the waterline improved the NW quarter. It made it better and it increased the value of the NWquarter despite Shell having no immediate right to access the waterline. [78] However the NE quarter was not improved. It was not serviced by the waterline. Shell granted Rockyview a right of way forthe waterline on the NW quarter but Shell never granted Rockyview a right of way for a waterline on the NE quarter.

The right of waypermitted Rockyview to provide potable water to the SW quarter. Once constructed the waterline ran in a north-south direction across thenorth boundary, along the west edge and across the south boundary of the NW quarter. The waterline never physically existed on the NEquarter at the time of its sale or at any subsequent time. [79] Sunterra argued the purchaser of the NW quarter and the NE quarter believed the purchase price paid to Shell reflected thevalue of the land being increased by the existence of the waterline and this increase in value in turn reflected the quarters beingimproved.

That argument fails on the basis that an increase in value is not restricted to improved land. Unimproved land can and doesincrease in value. Land can be increased in value by a variety of factors which are not improvements to that land. [80] Such factors can include construction of industries, railroads, roads, housing suburbs, commercial development, wellextraction or development of petroleum wells and mines on nearby land. The close proximity of such projects can cause the unimprovedland to increase in value.

However the lack of the projects on the unimproved land dictates that the unimproved land remainsunimproved. An increase in land value does not necessarily go hand in hand with improvement to land. [81] In support of its argument the NE quarter was improved, Sunterra noted the NW quarter and the NE quarter were contained onthe same certificate of title. Sunterra noted the Land Titles Act, R.S.A. 2000, c. L-4 in sections 1(

b) and 1(

m) considers all the land setout in a single certificate of title as singular lands.

These sections state: 1(b) “certificate of title” means the record of the title to land that is maintained by the Registrar; ... 1(m) “land” means land, messuages, tenements and hereditaments, corporeal and incorporeal, of ever nature and description, andevery estate or interest therein, whether the estate or interest is legal or equitable, together with paths, passages, ways, watercourses,liberties, privileges and easements appertaining thereto and trees and timber thereon, and mines, minerals and quarries thereon andthereunder lying or being, unless any of them are specially excepted: It argued both quarter sections had to be sold together or they had to be sub-divided in order to be sold separately.

Sunterra submitted anysubdivision would constitute an improvement. It noted in the case at bar an easement or other interest which applied to only one quartersection would have to be removed from the title to the other quarter

section to relieve it of any interest or claim in respect to these

matters. [ 82 ] However it is my opinion if a subdivision was required, it would not constitute an improvement. Shell would not be required to apply to Rockyview for a subdivision of land under the Municipal Government Act R.S.A. 2000, c. M-26, in this factual instance to determine if subdivision approval was needed. Rather Shell would make an application to the Registrar of the Land Titles Office under s. 75(1) of the Land Titles Act to separate the two quarter sections contained on one certificate of title into two separate certificates of title.

Section 75(1) states: 75(1) On the application by or on behalf of the registered owner of land, the Registrar may separate or consolidate parcels or interests in land by cancelling the existing certificate of title for that parcel or interest and issuing in substitution for that certificate of title one or more new certificates of title. Such an application should proceed without any difficulty and the Registrar would issue two separate certificates of title, one for each quarter section. In the result the Rockyview caveat would be registered against the certificate of title for the NW quarter.

Such procedure is expressly dealt with in the Alberta Land Titles Procedural Manual under the heading “Separation of Title”. [ 83 ] I am strengthened in my view the NE quarter was not improved due to it sharing the same certificate of title with the NW quarter in that I observed each quarter

section was set out as a separate quarter

section on that certificate of title. Further the March 7, 2005 agreement of purchase and sale between Shell and Rancher’s specifically set out each of the NW quarter, the NE quarter and the SE quarter as “one or more of the three (3) quarter sections”. As well the appraised values in that agreement set out separate and distinct values for those three quarter sections. Further Sunterra’s affiant, Price, provided evidence in his affidavit and cross-examination referring to the NW quarter and the NE quarter as individual quarter sections.

Finally Rockyview registered its caveat protecting the right of way agreement only against the NW quarter. [ 84 ] Based on the undisputed facts as submitted by Sunterra and in considering the clear and unambiguous language contained in s. 1.02(

b) of the March 7, 2005 agreement of purchase and sale, it is my opinion the NE quarter was not sold by Shell on an improved basis. [ 85 ] In that I determined the addition of the waterline to the NW quarter improved it, I must next decide whether the “deeming provision” in s. 102(

b) applies. [ 86 ] Sunterra submitted the wording in the deeming provision clause, s. 1.02(b), contained clear and unambiguous language which excepted out only the instance of the addition of water and sewer connections to the boundary of one or more of the quarter sections as being deemed not to constitute an improvement. Sunterra’s submission argued that had the parties intended to exclude water and sewer connections “on” or “across” or “through” or “within” the quarter sections the parties would have inserted those latter words.

In that sense Sunterra noted the waterline is located on the NW quarter and not outside of it. Further Sunterra noted the waterline intersects with the north and south boundaries of the NW quarter but it does not connect to those boundaries. As a result it was the position of Sunterra that the exception to improvement set out in s. 1.02(

b) did not apply. [ 87 ] I do not agree with Sunterra’s submission in this respect. It is a contradiction to suggest the subsequent addition of water and sewer connections to the boundary of one or more quarter

section is not deemed to be an improvement under s. 1.02(

b) but at the same time to suggest a situation where those very connections carried onto such quarter sections via a continuing waterline would cause the deeming provision not to apply. In other words an untapped waterline extending only to the boundary of a quarter

section would be deemed to be an unimproved quarter

section but at the same time such an unimproved quarter

section would become improved once the untapped waterline crossed the boundary and laid on or partly laid on that same quarter section. In either instance water could be obtained on that quarter

section once the waterline was tapped. In my opinion s. 1.02(

b) of the agreement of purchase and sale would provide two different contradictory descriptions to be applied to the quarter section. This is not what s. 1.02(

b) states. Rather s. 1.02(

b) is clear and unambiguous and it does not allow for two contradictory

interpretations as argued by Sunterra. [ 88 ] Secondly in s. 1.02(

b) the word “connections” is employed as a noun. It is an undisputed fact that the subsequent addition of the Rockyview water and sewer line connection met with the northern boundary of the NW quarter section.

Section 1.02(

b) could not be any clearer. Simply put it means the subsequent addition of any water or sewer line connections (a noun) to meet with the boundary of an

unimproved quarter

section deems the quarter

section to remain in an unimproved state. In connecting with the boundary the water or sewer line becomes an integral part of the quarter section. To extend it further past the boundary onto the quarter

section does not make the water or sewer line a greater integral part of the quarter section. Once the water or sewer line connection to the boundary is achieved s. 1.02(

b) applies and the quarter

section remains as an unimproved quarter

section regardless whether the water or sewer line carries onto the quarter

section past the boundary. [ 89 ] Sunterra submitted Shell’s notice provided to it did not meet the provisions of s. 1.02(

d) of the March 7, 2005 agreement of purchase and sale. In order to receive the additional consideration Shell had to meet the following requirements under that section: a. Shell had to provide 90 days written notice of the claim; b. The notice be given to the purchaser, Rancher’s; c. The notice be accompanied by reasonable evidence of the sale price of the quarter sections involved; and d. The notice not be given earlier than June 10, 2007 and not later than the 90 th day following June 10, 2010. [ 90 ] In its submission Sunterra set out the following undisputed facts: a.

The agreement of purchase and sale was completed on June 10, 2005. b. Shell provided a letter to Sunterra dated June 11, 2008, advising that the NW and NE quarter sections comprising the North ½

section of the balance of the Shell land had been sold. c. That notice was not accompanied by any evidence of the sale prices of the sold quarter sections; d. No notice was provided to Rancher’s. e. Where one or more quarter sections are sold during the comparison period, the calculation of any additional consideration requires a determination of the average difference between the current appraised values and the sale prices of such quarter sections [see s. 1.02(b)]; f. Had Shell sold 2 or more of the quarter sections, it had to include all sold quarter sections in the averaging calculation; it could not pick and choose which quarter

section went into the calculation; g. Shell made claim for additional consideration prior to it being determined whether the 3 rd quarter

section would sell before the expiration of the comparison period and thereby included in the averaging calculation; and h. Sunterra did not accept nor assume the covenant given by Rancher’s in the March 7, 2005 agreement of purchase and sale to pay additional consideration. [ 91 ] When s. 1.02(

d) is examined it is clear the referenced notice only relates to the consideration being due or being paid after the expiration of 90 days within the calendar window. That is seen by the use of the words “to that effect” in s. 1.02(d).

Section 1.02(

d) is

not a clause dealing with calculation methods. Additionally s. 1.02(

d) required Shell to accompany that notice with reasonable evidence of the sale price of each quarter

section or quarter sections. I am of the opinion reasonable evidence in that respect was achieved by Shell’s June 11, 2008 letter to Sunterra. The letter referenced the specific sale price for each quarter section. Further reasonable evidence was supplied by Shell in that calendar window when it sent the letter of July 8, 2009 to Sunterra. It enclosed the complete copy of the CLT Sale Agreement. Sunterra did not object or request further clarification from Shell at any time. [ 92 ] The calculation of the additional consideration is not to be found in s. 1.02(

d) but in s. 1.02(b). Shell was under no obligation to wait until the 3 rd quarter

section (the SE quarter) sold before the expiration of the comparison period and before it made its claim for additional consideration.

Section 1.02(

b) or s. 1.02(

d) do not state that all quarters had to be sold before notice for additional compensation could issue. If the third quarter had sold after the initial notices had been issued, Shell could have issued a third notice advising of its sale. Shell could have provided evidence of the third quarter sale price and provided the average calculation for all three quarter sections under s. 1.02(b). [ 93 ] Shell provided clear and unambiguous notice in writing in the proper form within the appropriate time. It was in compliance with the contractual requirements as determined by the plain and unambiguous relevant provisions.

Shell is entitled to be paid the additional consideration. [ 94 ] Sunterra made the argument it did not accept nor assume the covenant to pay additional consideration in the March 7, 2005 agreement of purchase and sale because it is not a party to that agreement between Shell and Rancher’s.

However other documents involving Sunterra in the CCAA Proceeding certainly established the validity and prior charge of Shell’s caveat protecting its interest as an unpaid vendor on the land Shell sold to Rancher’s and which land Sunterra acquired from Rancher’s in the CCAA Proceedings. [ 95 ] The Vesting Order of Horner, J. in the CCAA Proceeding required that Sunterra take title to the land it purchased from Rancher’s subject to the vendor lien’s caveat.

It makes no difference that Sunterra was not asked to agree or assume the covenant of Rancher’s in the March 7, 2005 agreement of purchase and sale wherein Rancher’s agreed to pay additional consideration if the additional quarter sections of land were sold. [ 96 ] The caveat protecting Shell’s unpaid vendor’s lien was on the land when Sunterra took title under the purchase and sale agreement between it and Rancher’s. Sunterra obtained title subject to the Shell unpaid vendor’s lien encumbrance.

The Vesting Order of this Court contemplated Sunterra obtaining title of the lands from Rancher’s subject to the caveat protecting Shell’s interest under its unpaid vendor’s lien. [ 97 ] Further the Acknowledging Agreement between Sunterra and Shell executed on March 31, 2008 and as detailed in para. 44 of these Reasons certainly set out Sunterra’s recognition of Shell’s unpaid vendor’s lien as a prior charge secured by Shell’s caveat on the land Sunterra purchased from Rancher’s.

In effect Sunterra acknowledged Shell’s unpaid vendor’s lien would be recovered from the land Shell sold to Rancher’s and purchased subsequently by Sunterra. [ 98 ] Sunterra argued that Shell did not comply with its obligation under s. 9(b)(ix) of the March 7, 2005 agreement of purchase and sale to conduct an environmental remediation of its land farm to a specified criteria and specified condition as assessed and provided to Sunterra by an independent third party consultant. Sunterra submitted the third party consultant (SNC-Lavalin Inc.) retained by Shell was not an independent third party consultant.

Further Sunterra submitted the assessment was presented to it by Shell under terms and conditions which effectively nullified the use of the results for their intended purpose. As a result Sunterra argued Shell’s failure to demonstrate it had properly remediated the land farm should preclude Shell from claiming any additional consideration in relation to the sale of the SW quarter.

Sunterra alleged a contractual nexus between the sale of the SW quarter and Shell’s obligation to deliver its land farm situated on it properly remediated. [ 99 ] It must be remembered that Sunterra has commenced a separate action in that respect. Further the evidence in this area is not undisputed. There is conflicting evidence as to whether SNC-Lavalin Inc. is an independent third party consultant and conflicting evidence as to whether the environmental remediation was properly completed.

Further there is a dispute whether Shell’s duty to remediate arises under its land farm lease or the March 7, 2005 agreement of purchase and sale or both. If it is under the lease, there is no contractual nexus between Shell’s right to receive additional consideration under the March 7, 2005 agreement and Sunterra’s environmental remediation claim. In

summary this allegation by Sunterra is a separate issue in a separate litigation proceeding. It is not relevant or connected to the issues presented in this application. There is no link in this application between Shell’s obligation to remediate the lands and Shell’s right to receive additional consideration tied to the subsequent sale of other quarters of land at a higher

price. The litigation based on an improper, wrongful or absence of remediation may result in Sunterra receiving some remedy in that litigation. However in this application Sunterra has not demonstrated any loss or that there is a contractual nexus entitling it to a remedy in this application. [ 100 ] Accordingly Shell is entitled to a declaration of validity of its vendor’s lien caveat against title to the 80 acre parcel in the amount of $6,328,000.00.

The declaration is based upon my finding the NE quarter was sold on an unimproved basis and the NW quarter was sold on an improved basis but the deeming provision applies to the sale of the NW quarter. Shell is further entitled to the applicable G.S.T. and interest pursuant to the Judgment Interest Act , R.S.A. 2000, c. J-1.

This declaration is based on the undisputed factual background known to the parties at the time of the March 7, 2005 agreement as advanced by Sunterra and the clear and unambiguous language of the documentation. [ 101 ] Shell further asked for an order that if the $6,328,000.00 awarded to it was not paid by Sunterra within 30 days from the granting of the award, it would have leave to apply to this Court on 2 clear days’ notice for further relief necessary to satisfy the vendor’s lien caveat. I decline to grant that order as it was not argued fully before me.

Shell is entitled to proceed to apply for such further relief as it sees fit bearing in mind the relief granted. [ 102 ] Counsel may make an appointment with me to speak to costs, if necessary. Heard on the 20 th and 21 st days of March, 2012. Dated at the City of Calgary, Alberta this 28 th day of March, 2013. A. G. Park J.C.Q.B.A. Appearances: Bryan C. Duguid and Andrew Culos of Jensen Shawa Solomon Duguid Hawkes LLP for the Plaintiffs Havelock B. Madill, Q.C. of Brownlee LLP for the Defendant