Canadian Natural Resources Limited v. ShawCor Ltd., 2013 ABQB 230

Court of Queen ’ s Bench of Alberta Citation: Canadian Natural Resources Limited v. ShawCor Ltd., 2013 ABQB 230 Date: 20130417 Docket: 1001 01541 Registry: Calgary Between: Canadian Natural Resources Limited Plaintiff - and - ShawCor Ltd., Shaw Pipe Protection Ltd., Bredero Shaw Company Limited, IMV Projects Inc., Flint Field Services Ltd., Flint Pipeline Services Ltd., formerly Transline Energy Services Ltd., ABC Ltd., and XYZ Inc. Defendants - and - Ram River Pipeline Outfitters Ltd., and Dunn Hiebert & Associates Ltd.

Third Party Defendants Corrected judgment: A corrigendum was issued on April 17, 2013; the corrections have been made to the text and the corrigendum is appended to this judgment.

_______________________________________________________ Reasons for Judgment of the Honourable Chief Justice Neil Wittmann _______________________________________________________ [ 1 ] The Defendants ShawCor Ltd., Shaw Pipe Protection Ltd. and Bredero Shaw Company Limited (“the Shaw Defendants”) seek an Order compelling the Plaintiff, Canadian Natural Resources Limited (“CNRL”) to provide a further and better Affidavit of Records. 1.

Background [ 2 ] On January 3 rd , 2009, there was a blow out of a heavy oil well in the Primrose East Field, in Northeastern Alberta, resulting in the flow of bitumen emulsion to the surface (the “Oil to Surface Event”). Following the blowout, boiler feed water into CNRL’s Primrose East Plant was shut down, resulting in hotter than usual bitumen flowing into the 32 kilometre pipeline (“the Pipeline”) running between the Primrose East Plant and CNRL’s Wolf Lake Plant.

For a period of time the Pipeline operated at a temperature above its maximum operating temperature of 160 degrees Celsius. [ 3 ] On or about January 14 th , 2009, CNRL personnel observed a number of ground “hot spots” where the snow appeared to have melted along the Pipeline right of way. The presence of the hot spots suggested to CNRL that the Pipeline’s insulation system was not working properly. In the following weeks, CNRL personnel excavated at a number of the hot spots and exposed the Pipeline.

CNRL inspected the condition of the Pipeline and conducted an airborne thermal scan (the “Initial Investigation”). CNRL contends that the purpose of the Initial Investigation was to determine what was causing the hot spots and assess whether the Pipeline could continue to operate as intended.

CNRL concluded on the basis of the Initial Investigation that the Pipeline’s insulation system had catastrophically failed and that the pipeline would have to be completely replaced. [ 4 ] On February 4 th , 2009, Jerry Harvey, Executive Advisor of Commercial Operations for CNRL asked Paul Mendes, CNRL’s Director of Legal Services for its Horizon Oil Sands Project, to provide legal advice to CNRL personnel with respect to further investigation and testing of the Pipeline.

CNRL has taken the position that from this point on, the dominant purpose of the investigation was not to determine whether the Pipeline could continue to function or would have to be replaced, but was rather for litigation assessment and preparation (the “Litigation Investigation”). [ 5 ] On February 5 th , 2009, Mendes sent an email to various CNRL personnel involved in the Litigation Investigation, setting out that the investigation would be conducted under the guidance of legal counsel in order to continue and pursue available legal remedies and that all material communication, reports and information regarding the investigation should be provided to legal counsel together with a rider to the effect that the communication was made pursuant to an ongoing investigation being directed through legal counsel.

Mendes further directed that a protocol be put in place for identifying, classifying and storing all communication, reports and information regarding the Litigation Investigation such that it could be segregated from all other information relating to the Pipeline failure. He also directed that the retention of all third party experts must be made through legal counsel. A third party consulting engineering firm was retained by Mendes that same day. This same consultant was later retained separately by CNRL’s outside legal counsel in connection with this litigation. 2. The Pleadings and Production

[ 6 ] CNRL filed its Statement of Claim on January 29 th , 2010. In it, CNRL alleges that the insulation and coating and corrosion barrier system for the Pipeline and pipeline joints manufactured and supplied by the Shaw Defendants had degraded and failed.

Paragraph 23 of the Statement of Claim states: Further testing and investigation relating to the Pipeline… revealed a total or substantial failure of the Insul-8 HT Coating and the Pipeline’s insulation and corrosion protection system… [ 7 ] The Statement of Claim also alleges that IMV Products Inc. (“IMV”) agreed with CNRL to provide a number of engineering consulting services, procurement and construction management and that IMV breached its duties owed to CNRL as stipulated in the agreement and that IMV was otherwise negligent.

In addition, the Statement of Claim names as defendants, Flint Field Services Ltd., Flint Pipeline Services Ltd., formerly Transline Energy Services Ltd. (the Flint Defendants) who were the primary construction contractors and alleges that the Flint Defendants breached duties owed to CNRL under the terms of their contract, were negligent and in breach of the Sale of Goods Act . CNRL claims $85,000,000 against the defendants and each of them. [ 8 ] In its response to the Request for Particulars of IMV, CNRL stated: (

a) A comprehensive field investigation, which involved, among other things, observation of Pipeline conditions and gathering of data and materials. Pursuant to this field investigation, the Pipeline was excavated at a number of dig sites along its 32 kilometre length in a variety of soil conditions. The condition of the Insul-8 HT Coating was assessed at each of these dig sites. Pristine, unused samples of the Insul-8 Coating were also collected; (

b) Extensive lab testing and evaluation of collected samples of Insul-8 HT Coating for, among other things, the foam cell structure, the presence of moisture, thermal degradation and thermal reactions with water; and (

c) Development of a formal root cause analysis procedure based on a “Fishbone” or “Cause Factor” diagram to determine the cause of the Pipeline failure. [ 9 ] In its Reply to the Statement of Defence of the Shaw Defendants, CNRL pleaded as follows: CNRL’s testing of the Pipeline and the Insul-8 HT Coating following the discovery of the Hot Spots on or about January 15 th , 2009 revealed that the Coating could not survive in wet environments, degrading extensively at 120 degrees Celsius within seven days and completely decomposing at 135 degrees Celsius within two days (temperatures well below the design temperature for the Pipeline).

CNRL’s Testing also revealed that the Insul-8 HT Coating had materially less degradation in areas with drier soil conditions and no observable degradation where the Pipeline was above ground and not subject to damp soil or to water and water vapour migration.

CNRL’s replies to the Statements of Defence of IMV and the Flint Defendants contained references to its Pipeline testing that are essentially identical. [ 10 ] CNRL acknowledges that the term “Testing” as described in its Statement of Claim, the Responses to the Statements of Defence and its Response to IMV’s Request for Particulars includes elements of both the Initial Investigation and the Litigation Investigation. [ 11 ] In furtherance of the case management of this matter, the parties consented to a Major Issues List dated April 5 th , 2012 (the “Major Issues List”), which identified six issues that are shared by more than one litigant in this action.

Those issues are Roles and Responsibilities, Design Specifications, Pipeline Problems, Culpable Conduct, Causation and Damages (the “Major Issues”). CNRL has subsequently circulated an updated list of major issues, but this has not been consented to by the Shaw Defendants and IMV.

[ 12 ] CNRL’s Affidavit of Records was sworn by Jerry Harvey on June 14 th , 2012.

Schedule 1 was replaced and then supplemented with an unsworn supplemental

Schedule 1 on August 17 th , 2012.

On that same day, the Shaw Defendants advised CNRL by letter that CNRL’s production was incomplete, outlining a number of identified deficiencies, including records relating to the Oil to Surface Event, and records relating to the investigation and testing conducted by CNRL after the Pipeline failure, records relating to the daily operation of the Pipeline and regulatory documents. [ 13 ] On September 17 th , 2012 counsel for CNRL responded, taking the position that records from the Oil to Surface Event are irrelevant to the matters at issue in this action, that CNRL had produced all of the investigation and testing records in respect of the Pipeline failure that were not privileged, that it had produced all records in its possession related to the daily operation of the Pipeline and that it was in the process of reviewing regulatory documents relating to the Pipeline failure, but not the Oil to Surface event.

An additional six records, consisting of log book entries and process data, and the Final Investigation Report into the Oil to Surface Event submitted by CNRL to the Energy Resources Conservation Board were produced by CNRL on October 19 th , 2012. 3. The Alberta Rules of Court [ 14 ] The objectives of the disclosure provisions in the Alberta Rules of Court are set out in Rule 5.1: 5.1(1) Within the context of rule 1.2, the purpose of this

Part is (

a) to obtain evidence that will be relied on in the action, (

b) to narrow and define the issues between parties, (

c) to encourage early disclosure of facts and records, (

d) to facilitate evaluation of the parties’ positions and, if possible, resolution of issues in dispute, and (

e) to discourage conduct that unnecessarily or improperly delays proceedings or unnecessarily increases the cost of them.

(2) The Court may give directions or make any order necessary to achieve the purpose of this Part. [ 15 ] The requirements for an Affidavit of Records are set out in Rule 5.6: 5.6(1) An affidavit of records must (

a) be in Form 26, and (

b) disclose all records that (

i) are relevant and material to the issues in the action, and (ii) are or have been under the party’s control.

(2) The affidavit of records must also specify (

a) which of the records are under the control of the party on whose behalf the affidavit is made, (

b) which of those records, if any, the party objects to produce and the grounds for the objection, (

c) for those records for which there is no objection to produce, a notice stating (

i) the time when the record may be inspected, which must be within 10 days after the affidavit is served, and (ii) the place where the record may be inspected, which must be (

A) the address for service of the party serving the affidavit, (

B) a place agreed on by the parties or ordered by the Court, or

(

C) if the record is in constant use, the place where it is usually kept, (

d) which relevant and material records the party previously had under the party’s control, and (

i) the time when, and the manner in which, those records ceased to be under that party’s control, and (ii) the present location of the records, if known, and (

e) that the party does not have and has never had any other relevant and material record under the party’s control.

(3) If a party does not have and has never had any relevant and material records under the party’s control, the affidavit must say so. [16] This Application is brought under Rule 5.11: 5.11(1) On application, the Court may order a record to be produced if the Court is satisfied that (

a) a relevant and material record under the control of a party has been omitted from an affidavit of records, or (

b) a claim of privilege has been incorrectly or improperly made in respect of a record.

(2) For the purpose of making a decision on the application, the Court may (

a) inspect a record, and (

b) permit cross-examination on the original and on any subsequent affidavit of records. [17] The requirements for the identification of privileged records in an Affidavit of Records are set out in Rule 5.8: 5.8 Each record in an affidavit of records that a party objects to produce must be numbered in a convenient order, and the affidavit mustidentify the grounds for the objection in respect of each record. 4. Relevant and Material Records [18] The parties agree on the principles governing the disclosure and production of records in an affidavit of records.

Relevanceand materiality are determined by reference to the issues raised in the pleadings: Liu v. West Edmonton Mall Property Inc. (2000), (AB KB), 279 A.R. 305 (Q.B.) at paras. 19-22. A record is relevant if it elicits facts of primary relevance (those directly inissue) or facts of secondary relevance (facts from which the existence of the primary facts in issue may be directly inferred). A record ismaterial if it is reasonably expected to significantly help determine one or more of the issues raised in the pleadings: Hunka v.

Degner,2011 ABQB 195 at para. 41. [19] The law presumes good faith on the part of litigants in complying with their obligations to produce all relevant and materialrecords: Shell Canada Ltd. v. Superior Plus Inc., 2007 ABQB 739 at para. 22. However, where one party can produce sufficient evidencethat relevant and material records exist that have not been produced, the Court may make an Order for a further and better affidavit ofrecords.

Speculation, intuition and guesswork that certain documents must exist is not sufficient to warrant an order for a further andbetter affidavit of records, but the Court must take into account the fact that one party has access to records that the requesting party doesnot. The test was set out by Slatter J. (as he then was) in Weatherill (Estate of) v.

Weatherill, 2003 ABQB 69 at paras. 16-17: … At an interlocutory stage of proceedings, the Court should not measure counsels’ proposed line of argument too finely; if counsel candisclose a rational strategy in which the disputed document plays a material part, that should be sufficient. Again it must be rememberedthat the purpose of the Rule was to avoid abusive, excessive, and unnecessarily expensive discovery, not to cut off legitimate lines ofinquiry.

That relevance is determined by the pleadings, while materiality is more a matter of proof can be seen by the wording of the Rule. The Rule talks about records that can “help determine” an issue, or that can “ascertain evidence” that will determine an issue. These are words of proof, and materiality must be determined with that in mind. 5. Analysis [ 20 ] The Shaw Defendants’ specific complaints with respect to the state of CNRL’s production are set out in an Affidavit sworn by Pamela Nutter, a law clerk with Shaw Defendants’ counsel, and summarized in their brief.

In short, the Shaw Defendants complain that CNRL’s production is deficient and incomplete and identify four broad categories of records in this regard. These are: (

a) pipeline failure records; (

b) operation records; (

c) investigation and testing records; and (

d) regulatory filings. The investigation and testing records raise an additional issue because CNRL has acknowledged the existence of these but has claimed privilege over some of them. (

a) Pipeline Failure Records [ 21 ] The Shaw Defendants contend that there is a significant gap in CNRL’s production, evidenced by a lack of records from January 2009, the month that the Oil to Surface Event occurred and problems with the Pipeline were discovered.

They define the Pipeline Failure Records as documents relating to the events that caused CNRL’s extended operation of the Pipeline at temperatures higher than those provided for in its design (the “Out of Scope Operation”), and in particular, documents regarding or relating to the cause of the Out of Scope Operation and CNRL’s response to it. [ 22 ] CNRL’s production from January 2009 consists of only 79 out of the 10,550 records produced. The Shaw Defendants contend that it is “implausible” that CNRL would have in its possession only 79 records from that month.

They point out that CNRL’s production does not contain any internal communications to senior CNRL management notifying them of the Oil to Surface Event and does not include any records from instant or smart phone messaging programs, calendar entries or meeting requests from that month. [ 23 ] CNRL does not deny that additional records from the month of January 2009 may exist. Indeed, Harvey in his Affidavit, refers to tens of thousands of documents relating to the Oil to Surface Event. The crux of this issue is the relevance of the Oil to Surface Event as a cause of the Out of Scope Operation.

CNRL has acknowledged that it operated the Pipeline at temperatures higher than those provided for in its design. It acknowledges that the decision to do so was CNRL’s alone and makes no claim against any of the Defendants in this action in regard to the cause of the Oil to Surface Event. It is Harvey’s evidence that CNRL has produced all documents relating to the temperature at which CNRL operated the Pipeline.

No reference to the Oil to Surface Event itself has been made in any of the pleadings. [ 24 ] The scope of relevance and materiality for the purpose of determining the records to be disclosed in an Affidavit of Records is determined by the pleadings: Innovative Health Group Inc. v. Calgary Health Region , 2008 ABCA 219 . Taking an expansive view of this general rule, one might in this case include in the pleadings the Major Issues List. None of the pleadings, nor the Major Issues List, refer to the Oil to Surface Event. While causation is clearly in issue, causation relates to the cause of the Pipeline failure.

The Oil to Surface event is closely connected in time to the Pipeline failure. It may or may not have been connected to the decision CRNL concedes it made to operate the Pipeline at a temperature above that for which it was designed for a period of time.

But I agree with CNRL that, having conceded that it made that decision, and having provided all of the temperature records in its possession, the Oil to Surface Event can itself have only tangential relevance to the matters at issue in this action. [ 25 ] Given this tangential nature of the relationship of the Oil to Surface Event to the matters at issue in this action, it is helpful to remember that, while fulsome document disclosure is well recognized as valuable and important in facilitating litigation and the timely disposition of claims, the principle of proportionality operates to impose limits upon disclosure requirements where necessary.

In this instance, to require CNRL to review and produce tens of thousands of records relating to the Oil to Surface event, would, in my view, be disproportionate in view of CNRL’s admissions regarding the operation of the Pipeline. Relevance and materiality has not been demonstrated on the evidence before me in this application. Great expense, in both money and time would be incurred, perhaps for naught.

I hasten to add that as the litigation progresses, if new evidence on this subject is proffered, the issue may be revisited. [ 26 ] In my view, it has not been proven that both Pipeline Failure and Operations records relating to the Oil to Surface Event are sufficiently relevant and material to the matters at issue in this action to warrant an order for a further and better Affidavit of Records at this time.

(

b) Operations Records [ 27 ] The Shaw Defendants point to log books produced by CNRL and contend that they provide some insight into the records that are missing from CNRL’s production. The log books are handwritten notes made by CNRL employees.

The Shaw Defendants contend that the information contained in these notes “must have been provided to more senior CNRL employees in a more polished and understandable format.” They further point out that CNRL’s operations documents consist almost exclusively of temperature records, and that CNRL’s production is therefore deficient with respect to other operational aspects of the Pipeline. [ 28 ] With respect to summaries of log book entries, CNRL states that these simply do not exist.

The Shaw Defendants have their answer in this regard and may explore the issue of how technical information was shared with CNRL management in the course of questioning. Similarly, the Shaw Defendants’ contention that there must be additional operations records, such as pressure and volume data, is contrary to Harvey’s clearly stated evidence. He has sworn in his Affidavit that all Pipeline operations records in CNRL’s possession have been produced. Again, this is a proposition that CNRL may explore in questioning.

I agree with CNRL, that at this time, the Shaw Defendants have not produced any evidence that would allow me to conclude that relevant, material and non-privileged operations records have not been produced. (

c) Regulatory Filings [ 29 ] The Shaw Defendants describe the missing Regulatory Filings as documents that CNRL has provided to government regulatory agencies regarding or relating to the failure of the Pipeline. [ 30 ] It is Harvey’s evidence that CNRL searched for and produced all relevant and material regulatory documents and that upon receipt of further correspondence from counsel for the Shaw Defendants, produced additional regulatory filings relating to the Pipeline failure.

He says that there are currently no regulatory documents in respect of the decommissioning of the Pipeline because it has not yet been removed, abandoned or decommissioned. To the extent that there are other regulatory filings in issue, it appears that these relate to the Oil to Surface Event. These have not been produced, save for the Oil to Surface ERCB Report which, while it was produced by CNRL, was done without acknowledging its relevance to the issues in this action.

Harvey’s evidence in this regard is not challenged by the Shaw Defendants. [ 31 ] I agree with CNRL that the Shaw Defendants have not provided any evidence upon which I can conclude that CNRL has failed to produce regulatory filings in its possession in relation to the Pipeline failure. To the extent that there are regulatory filings in its possession with respect to the Oil to Surface Event, those records have not been shown to be sufficiently relevant and material to warrant a further and better Affidavit of Records at this time, for reasons set out above. (

d) Investigation and Testing Records [ 32 ] There are two categories of Investigation and Testing Records: those that were generated in the course of CNRL’s Initial Investigation into the Pipeline failure and those generated after February 4 th , 2009 in the Litigation Investigation, over which CNRL claims privilege.

It is Harvey’s evidence that all Investigation and Testing Records generated prior to February 4 th , 2009 have been produced, and the Shaw Defendants have not provided evidence upon which I can conclude otherwise. [ 33 ] Harvey’s evidence with respect to the course of the investigation is that after the discovery of the hot spots along the Pipeline right of way, an Initial Investigation was conducted to determine the cause of the hot spots and whether the Pipeline could continue to operate as intended.

CNRL personnel noted dramatic damage to the Pipeline’s insulation system, including, according to Harvey, at locations where the temperature of the bitumen never reached the Pipeline’s maximum design temperature. Given these findings, and the fact that the Pipeline had been in operation for only a few months, it became immediately clear to CNRL that the failure of the Pipeline would become the subject of litigation. The nature of the investigation changed very quickly, from one intended to determine cause and whether the Pipeline could continue to operate, to one for the purposes of litigation.

As early as February 24 th , 2009, in correspondence to Alberta Environment, CNRL advised that it was “in the process of pursuing legal action against the contractor(

s) responsible for the design and installation of the pipeline”.

6. Solicitor-Client Privilege and Litigation Privilege [34] The parties are in broad agreement with respect to the law of privilege in general. Solicitor-client privilege protects thesanctity of the confidence between client and lawyer. Generally, it protects from disclosure communications between a client and asolicitor which entail the seeking or giving of legal advice and which the client intended to be confidential.

It applies to communicationswith external counsel and with in-house counsel if the in-house lawyer is conveying advice that would be characterized as privileged. [35] Litigation privilege is not restricted to communications that are strictly in connection with the provision of legal advice, butattaches to documents that are prepared, or gathered, for use in actual or contemplated litigation.

Litigation need not be the sole purposefor the creation or gathering of the document, but it must be the dominant purpose. [36] A party invoking solicitor-client and litigation privilege bears the onus of establishing the privilege.

If privilege is established,a party claiming waiver of privilege bears the onus of establishing the waiver. [37] The Shaw Defendants contend that the investigation efforts conducted by CNRL after February 4th, 2009 had severalpurposes other than litigation, including understanding the extent of the Pipeline failure, correcting the problems that had occurred andavoiding them in future; repairing the Pipeline; providing the necessary information to CNRL management to respond to the failure;satisfying any internal CNRL policies regarding management of pipeline failures; demonstrating the implementation of its own policies;satisfying regulatory requirements and advancing a claim under any applicable insurance policy.

I agree with the Shaw Defendants that,even if this litigation had not occurred, CNRL would have conducted an investigation for some or all of these purposes. [38] The Shaw Defendants further contend that CNRL has not provided any explanation as to why litigation and/or solicitor-client privilege attached to the investigation records over which CNRL has claimed privilege on and after February 5th, 2009.

Here, I disagree.It is apparent that in the wake of an incident such as the Pipeline failure, the operator will immediately undertake to investigate the causeand to attempt to determine what, if anything, must be done in terms of repair, replacement, advancing an insurance claim and satisfyingregulatory requirements. Documents generated in connection with this initial investigation may not be privileged. At some point,however, the operator will turn its mind to the potential for litigation.

The proximity of this date to the date of the failure may dependupon the results of the operator’s initial investigation. [39] The explanation for the February 5th, 2009 date is in Harvey’s evidence.

He states that given the extremely short lifetime ofthe Pipeline and the conclusions of the Initial Investigation, it was clear very early that litigation would occur and that he made contact with Mendes, a lawyer employed by CNRL, on February 4th, 2009, to discuss the failure and the further investigation and testing thatwas going to be necessary to determine fault and damages and to pursue litigation. [40] This is not a case where it appears from the documentary evidence available to the Court that one party has consciouslychannelled otherwise non-privileged communications through legal counsel so as to attempt to shield them from disclosure.

Nor, contrary to the Shaw Defendants’ assertion, has CNRL claimed privilege over every investigation and testing record created after February 4th,2009. Harvey’s evidence is that CNRL has produced all documents that touch on the testing and investigation conducted after that datethat were not created for the dominant purpose of litigation. These include a number of photographs of the Pipeline taken on February 4th, 2009. The Shaw Defendants contend that it is clear that the photographs were taken for the purpose of investigating the cause andimpact of the Pipeline failure and are therefore not privileged.

I do not take issue with that proposition. I disagree however, that anyaccompanying correspondence, reports, results or analyses relating to these photographs must also not be privileged. It seems to meobvious, that counsel or a third party expert retained to assist in the litigation, might use the photographs to generate a privileged analysisfor litigation purposes.

It would surprise me if the Shaw Defendants did not also use these photographs for that purpose. [41] The Shaw Defendants also argue that CNRL has made an improper “blanket” claim of litigation privilege and has not listed inits Affidavit of Records which records it claims privilege over as required by Rule 5.6. The leading case in Alberta with respect to therequirements for listing privileged documents remains Dorchak v. Krupka (1997), 1997 ABCA 89 , 196 A.R. 81. In AttilaDogan Construction v.

AMEC Americas Ltd., 2011 ABQB 794, this Court held at para. 57: There is nothing in Rule 5.8 that would suggest that privileged documents should be identified in a manner that would allow the

opposing party to assess the claim of privilege. I further agree that Dorchak is not distinguishable on the basis of the number ofprivileged records in question, nor the complexity of the lawsuit. It is clear that in Dorchak the Court of Appeal intended to establish aset of principles that would guide the identification of privileged documents in all litigation in Alberta, not merely litigation involving asmall number of documents and a low level of complexity.

Complex actions involving many thousands of documents were not unknownto the Courts of this Province in 1997, when Dorchak was decided. [42] Both CNRL and the Shaw Defendants have categorized their privileged documents, in their respective Affidavits of Records,in accordance with the requirements in Dorchak. Neither list the individual documents over which they claim privilege and neither isrequired to do so. 7.

Waiver [43] Litigation privilege can be waived expressly, inadvertently, by implication, or where required for fairness and consistency.Here, the Shaw Defendants contend that fairness and consistency requires the waiver of privilege over CNRL’s Litigation Investigationrecords because CNRL has referred to the findings of the Litigation Investigation in its Statement of Claim, in its Reply to the Requestfor Particulars of IMV, in its Replies to the Statements of Defence of the Shaw Defendants, IMV and the Flint Defendants. The ShawDefendants point to O’Scolai v.

Antrajenda, 2008 ABQB 77 at para. 30: When evidence will be relied on by a party, any privilege claimed over it will almost certainly be waived to comply with fairness andconsistency... Further, if there is a danger that partial disclosure will mislead the Court or inaccurately present the content of certainfacts, fairness will require disclosure ... However, where there is no reliance on a document, waiver is less likely. They also cite the decision in Petro Can Oil & Gas Corporation Ltd. et. al. v. Resource Services Group Ltd. (1988), (AB KB), 59 Alta.

L.R. (2d) 34 (Q.B.) at para. 18: It would be unfair to permit a party who has set up a claim or defence based on privileged communications to preclude his opponentfrom discovering against that claim by relying upon the privilege. If privilege were successfully raised, the opponent would be left withno reasonable method for exploring the validity of the claim or defence ...

To hold otherwise would in effect amount to providing theDefendant with an unfair advantage in this litigation which the Plaintiffs would quite likely be unable to overcome. [44] It is possible to waive litigation privilege by referring to certain evidence in pleadings. Such a waiver was found to haveoccurred in Mathieson v. Abarent Construction Ltd., 2010 ABQB 783, where Marceau J. concluded that litigation privilege had beenwaived over an engineer’s report referred to in the Statement of Claim. He concluded that the circumstances were indistinguishable fromthose in Hunter v.

Rogers, (BC SC), [1982] 2 W.W.R. 189 (B.C.S.C.). In that case solicitor-client privilege was foundto have been waived in circumstances where the existence of legal advice was referred to in the course of discoveries and was directlylinked to a matter at issue in the litigation. This is consistent with Hart J.’s succinct

summary of the appropriate principle in TalismanEnergy Inc. v. Petro-Canada Inc., 2000 ABQB 147 at para. 27: ... [W]aiver is triggered by demonstrating reliance on legal advice for the resolution of an issue, not by the mere reference to havingreceived it. Accordingly, with respect to legal advice taken regarding the initial defence, Talisman has not waived privilege by virtue ofMs.

Croft’s affidavit simply referring to having received that advice. [45] To suggest that CNRL has waived privilege over its Litigation Investigation by referring to elements of that investigation inits pleadings amounts to a mischaracterization of the CNRL claim. CNRL has not “set up its claim based on privileged communications”,to use the phrasing in Petro Can Oil & Gas. It has not placed its reliance upon the findings of its Litigation Investigation in issue in thislitigation.

It is well recognized in this Province that in the course of drafting pleadings, counsel may rely upon privileged informationwithout necessarily waiving privilege. This should be readily apparent to any lawyer experienced in the drafting of claims, but in anyevent it was made clear by the Court of Appeal in Can-Air Services Ltd. v. British Aviation Insurance Co. (1988), 1988 ABCA 341, 63 Alta. L.R. (2d) 61. Côté J.A. stated at p. 65: ... Haines, J. suggested that privilege for information disappears the moment that the lawyer uses the information to draft a claim or

defence: Rubinoff v. Newton (ON SC), [1967] 1 O.R. 402 at 404. He cited no authority for that extraordinaryproposition, and I know of none. The leading cases on litigation privilege belie it: those contests arose after pleadings closed, and theprivileged research was on relevant issues. Litigation lawyers interview non-party witnesses and investigate records, so learning factsunknown to their clients. They then use their training and libraries to select legal authorities. All that information is and stays privileged,though the facts they plead must partly reflect that knowledge. Rubinoff v.

Newton means that by filing any pleading a party waivesvirtually all the privilege he and his lawyer possess. That is not the law; a party need not choose between loss by default and privilege.Privilege is not to be whittled away: Descoteaux v. Mierzwinski (SCC), [1982] 1 S.C.R. 860, 880-81. This statement of principle does not become any less applicable where a litigant has made reference to the privileged material in multiplepleadings, rather than one. [46] Finally, it is worth reiterating that the governing principle is fairness and consistency.

I agree with CNRL that what the ShawDefendants seek would amount to the premature disclosure of an early draft of CNRL’s expert report, in a case in which it is likely that anumber of expert reports will be filed by both parties and will be disclosed, likely with any foundational documents relied on, inaccordance with the Alberta Rules of Court. 8. Conclusion [47] The Application for a further and better Affidavit of Records is denied. [48] Costs will follow the event, unless spoken to. Heard on the 15th day of January, 2013. Dated at the City of Calgary, Alberta this 17th day of March, 2013.

Neil Wittmann C.J.C.Q.B.A. Appearances: J. Sharpe, A. Sunter, J. Varzari and R. Martz for Canadian Natural Resources Ltd. C. Feasby and M. Burkett for ShawCor Ltd. S. Delblanc for Ram River Pipeline

A. Rudakoff, Q.C. and J. Sadovnic for Dunn Hiebert & Associates Ltd. K. Drozdowski for IMV Projects Inc. A. Hurley for Flint Pipelines Ltd. _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Chief Justice Neil Wittmann _______________________________________________________ The name of one of the Defendants was incorrectly spelled: Flint Field Servies Ltd. should have been: Flint Field Services Ltd.