Royal Well Servicing Ltd v Murphy Oil Company Ltd, 2016 ABQB 418

Court of Queen’s Bench of Alberta Citation: Royal Well Servicing Ltd v Murphy Oil Company Ltd, 2016 ABQB 418 Date: 20160727 Docket: 1603 01192 Registry: Edmonton Between: Royal Well Servicing Ltd Plaintiff - and - Murphy Oil Company Ltd Defendant _______________________________________________________ Reasons for Judgment of R.P. Wacowich , Master in Chambers _______________________________________________________ [ 1 ] This is an application to summarily dismiss an action as being statute barred under

Section 3 of the Limitations Act , RSA 2000, cL – 12. [ 2 ] Royal Well Servicing Ltd (Royal Well) and Murphy Oil Company Ltd (Murphy Oil) were parties to a service agreement for several years by which Royal Well provided labour and equipment to Murphy Oil at various oil drilling sites in Alberta. The agreement ended in July 2014.

At that time Murphy Oil questioned some previous invoices that Royal Well had issued to it and which had been paid by Murphy Oil. [ 3 ] In what turned out to be an extensive review of past invoices Royal Well had issued to Murphy Oil, Royal Well discovered that service charges were missed in many of its invoices.

Royal Well issued a Statement of Claim on January 22, 2016, for charges that had they say had been missed. [ 4 ] The agreement between the parties indicated, “payment shall be made by [Murphy Oil] within 45 days after receipt of Royal Well’s invoice.” [ 5 ] Employees working at oil well sites for Royal Well completed a daily work record on site. The daily work record included check boxes for some of the services provided on site including whether Blowout Prevention Equipment was used.

Once the daily record was complete, it was provided to an onsite superintendent who was contracted to Murphy Oil, for his approval. Murphy Oil’s representative reviewed the daily work records and would sign it if he believed it was accurate. [ 6 ] Royal Well discovered numerous inadvertently missed Blowout Prevention Equipment charges and fuel surcharges. They

had not been checked off on a daily field work records by the field workers nor noted by Murphy Oil’s onsite superintendent. [ 7 ] The Statement of Claim alleges the amount owed by Murphy Oil to Royal Well for mistaken invoices is $536,532.06. Murphy Oil counterclaims for inappropriate and double billing that did not conform to the terms of the agreement between the parties. It claims $388,000.00 for invoices issued between 2011 and 2014. [ 8 ] In November 2014, Royal Well generated new invoices for amounts allegedly missed when preparing the original invoices.

The majority of the charges being sought by Royal Well are charges arising from jobs that were completed before December 5, 2013. It is the position of Murphy Oil that any portion of a claim arising from a job completed prior to December 5, 2013, is statute barred and should be summarily dismissed.

That is the matter in question. [ 9 ] Murphy submits that any claims for debts arising from jobs completed more than 2 years and 45 days prior to the filing of the statement of claim are statute barred by the Limitations Act as Royal Well knew, or ought to have known, that the debt wasn’t paid at the time the debt arose.

The extra 45 days arises from the time provided for by agreement between the parties for the provision of an invoice after the work had been completed. [ 10 ] Royal Well is of the position that the limitation period runs from the time that the later, correcting, invoices were issued to Murphy Oil. Limitations Act [ 11 ] Section 3(1) of the Limitations Act provides the applicable limitation period of 2 years as well as the conditions that give rise to the start of the limitation period: 3(1) Subject to Subsections (1.1) and (1.2) and

Section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances, ought to have known; (

i) That the injury for which the claimant seeks a remedial order had occurred; (ii) That the injury was attributable to conduct of the defendant, and (iii) That the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. ...

(3) For the purpose of Subsection (1)(

b) and (1.1)(b),... (

b) a claim based on a demand obligation arises when a default in performance occurs after a demand for performance is made; [ 12 ] The Limitations Act defines injury in

Section 1 as meaning: (iv) personal injury; (

v) property damage; (vi) economic loss; (vii) non-performance of an obligation, or; (viii) in the absence of any of the above, the breach of a duty. [ 13 ] For the limitation to have commenced, the legislation requires that the claimant suffer an injury. In the context of an agreement, an injury is defined within the legislation as “non-performance of an obligation”. [ 14 ] A Plaintiff cannot unilaterally impose a standstill agreement by delaying the preparation of an invoice. Delaying the issuance of an invoice has no effect on the start of a limitation period.

Strohschein v Alford , 2015 ABPC 243 , Sinnott Farm Services Ltd v Municipal District of Pincher Creek (MD#9) , 2004 ABPC 201 . Both the Ontario Superior Courts and the Ontario Court of Appeal have held that a service provider cannot suspend the limitation period by delaying the issuance of an invoice. GJ White Construction Ltd v Palermo (1999) , 2 CPC (5 th ) 110 (Ont SCJ) at para 22 , Hugh Munro Construction Ltd v Moschuk , 2012 ONCA 109 .

[ 15 ] The Court should imply a term of reasonable time for invoicing into commercial agreements that did not expressly provide for one as was done in the cases noted. In the present case the original invoices were actually issued in a reasonable amount of time. The issuance of late invoices for missed charges cannot extend limitation period for charges left off the original invoices. [ 16 ] The case of Felesky Flynn LLP v SCL Engineering Ltd , 2013 ABPC 10 , is provided as support for the position of Royal Well.

In that case, the law firm of Felesky Flynn discovered that it had not sent an invoice to a client three years after its work was completed. In reviewing a Corporate Minute Book of their client, the law firm realized there were services rendered and disbursements incurred that had not been billed. As a result, it sent the Defendant an invoice for services and disbursements in October 2009 for work completed in the fall of 2006. Judge Sharek made the following finding: 17 Firstly, the Defendant alleges that the invoice was not rendered within two years of the date the services were provided, which is correct.

However, it is clear that the initial cause of action in this matter did not arise when the services were provided, but rather when the invoice was rendered and provided to the Defendant. While doctrine of laches may come into play, and I am permitted to consider it by virtue of

section 10 of the Limitations Act , I find that the delay here in invoicing the Defendant was not so inordinate as to amount to laches or otherwise prohibit invoicing for these services some two years later. The corporation was brought into existence through the efforts of the Firm and it continued to exist and provide benefit to the Defendant until the date of dissolution in 2012. [ 17 ] In my view, Felesky Flynn is not applicable to this case as in this case there was an invoice issued initially. It is clear that there was a mistake which was unknown to either party. The delay in invoicing was not intentional.

Neither party knew that the invoices issued did not cover all of the amounts that should have been charged. [ 18 ] In fact, as indicated, there is a Counterclaim by Murphy Oil wherein they allege that Royal Well overcharged them on invoices issued prior to December 2013. It is my view that neither party can commence an action for mistaken invoices prior to 2 years and 45 days from the time of the invoice.

That applies to both the Statement of Claim and Counterclaim. [ 19 ] The key to this decision is whether, “the Claimant first knew, or in the circumstances ought to have known, that the injury for which the Claimant seeks remedial order had occurred”. In my view both parties ought to have known whether or not the invoices issued were accurate. They ought to have known that within the limitation period that there was an error. They cannot later attempt to recover those mistaken amounts through an action. [ 20 ] A careful consideration of

section 3 of the Limitations Act was made by Justice Renke in Condominium Plan 0125764 v Amber Equities , 2015 ABQB 235 : [93] The three elements of discoverability in s. 3(1)(

a) must be considered in relation to what the claimant ‘knew, or in the circumstances ought to have known.’ According to Justice Hunt, the test for “ought to have known” is that of ‘reasonable diligence’ analyzed in the light of the three s. 3(1)(

a) factors.... [94] With respect to s. 3(1)(a)(i), ‘knowledge’ refers to knowledge of the facts supporting a claim – not knowledge that, in law, the facts support a claim... To know that an ‘injury’ has occurred, a plaintiff is not required to know that the elements of a cause of action have occurred... [95] The Court of Appeal has warned against adding language to the Limitations Act . In particular, there is no statutory requirement that a claimant have ‘clear information’ respecting an injury...

The test, as set by the Limitations Act , is whether the claimant ‘ in the circumstances ought to have known’ of the claim – whether the claimant was reasonably diligent in determining whether it had a claim, in the claimant’s circumstances. [ 21 ] The commencement of the limitation period is further clarified by the Alberta Court of Appeal: [41] ...[T]here will be cases where the claimant will have sufficient knowledge to throw an obligation on it to make reasonable inquiries about its rights.

That will start the running of the limitation period, even if the claimant’s knowledge could not be described as ‘clear information.’ Canadian Natural Resources Limited v Jensen Resources Ltd , 2013 ABCA 399 at para 41 . [ 22 ] Master Schulz considered the decision of Justice Renke in BMO Harris Bank, NA v Reid, 2015 ABQB 749 . She stated: [35] The Bank is a lending institution. It has a Risk Department and a “probate-deceased department”. It has in-house counsel and access to outside counsel.

In other words, the Bank is a sophisticated lender/litigant and what it “knew or ought to have known” must be examined in that light as well as in the context of the events that occurred. [36] By August 1, 2011, the Bank had the following information and the following events had occurred: • January 1, 2009: Death of Arthur • January 29, 2010: The value of real estate in Arizona was trending downward and Bank employees anticipated a deficiency if payments on the Note were to stop.

Employees of the Bank sought legal advice regarding its ability to pursue the Estate should there be a default under the Note. • April 20, 2010: Bank employees knew that a sale of the property would likely result in a $1 million dollar shortfall on the Note. • February 28, 2011: The Bank received a copy of the Grant of Probate of the Estate plus an email from a representative of Reid Worldwide Corporation to Diane Vandenberg, BMO Account Manager and Asset Disposition Specialist, stating that “Emilie [Ms.

Reid] now owns everything from the [E]state (shares of corporations as well as personal assets) and is indicated as such in the Probate [emphasis added]”.

• February 28, 2011: Bonnie Tobin, Residential CART Manager, emailed Diane Vandenberg, BMO Account Manager and AssetDisposition Specialist, asking inter alia, “We need to know what is to happen with the decedent’s estate/assets.” Diane Vandenbergresponds “...everything went to his wife, Emilie Ann Reid [emphasis added]”.

The Bank sought legal advice from in-house counsel atthis point. • March 2, 2011: The matter was referred to external counsel to review and advise the Bank “on the best way to handle so that theBank retains their deficiency rights if the loan should go into default”. • August 1, 2011: The Note went into default. [37]The Bank had sufficient knowledge by August 1, 2011 to throw an obligation on it “to make reasonable inquiries about its rights”and to start the limitation period running (See CNR Ltd, para 41). [23] In my view, following Justice Renke’s reasoning and that of Master Schulz, both Royal Well and Murphy Oil should haveknown that the invoices were incorrect.

If they chose to rely on what was provided by their employee and contractor then they must livewith that within the confines of the Limitations of Actions Act. [24] In the De Shazo v Nations Energy Company Ltd, 2005 ABCA 241, our Court of Appeal commented on s 3(1) of theLimitations Act as follows: [26] This provision codifies the common law discoverability rule and applies it to all actions for remedial orders. The common law rulewas described by the Supreme Court of Canada in Central Trust Co. v.

Rafuse, (SCC), [1986] 2 S.C.R. 147 at 224: “[A]cause of action arises for purposes of a limitation period when the material facts on which it [the cause of action] is based have beendiscovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence.” [27] The Supreme Court revisited the common law discoverability rule in Peixeiro v. Haberman, (SCC), [1997] 3S.C.R. 549, confirming that since the decisions in Kamloops (City of) v.

Nielsen, (SCC), [1984] 2 S.C.R. 2 and CentralTrust, discoverability is a “general rule applied to avoid the injustice of precluding an action before the person is able to raise it.”:Peixeiro at 563.

The court emphasized the concept of reasonable discoverability: “In balancing the defendant’s legitimate interest inrespecting limitations periods and the interest of the plaintiffs, the fundamental unfairness of requiring a plaintiff to bring a cause ofaction before he could reasonably have discovered that he had a cause of action is a compelling consideration”: Peixeiro at 565. [31] The principle of discoverability does not require perfect knowledge. As this court noted in Hill v. Alberta (South Alberta LandRegistration District) (1993), 1993 ABCA 75, 100 D.L.R. (4th) 331 at 336 (Alta.

C.A.) (leave to appeal to S.C.C. denied): Even if the discoverability rule of limitations applies to this case (which I need not decide), it does not call for perfect certainty. It doesnot require discovery at all: it says something else will do instead. It suffices that “the material facts on which [the cause of action] isbased ... ought to have been discovered by the plaintiff by the exercise of reasonable diligence...”: Central Trust v. Rafuse... . If theplaintiff is told a fact by someone who is likely to know, surely that makes the fact known or discoverable, even if someone else disputesthe fact.

Very few people who sue have perfect certainty.

Summary Judgment [25] Since the Supreme Court of Canada’s decision in Hyrniak v Mauldin there have been numerous appellate cases concerningthe current test for

Summary Judgment. Decision makers have their own choices as to which decision they prefer. The wordings differbut they all come to, in my view, the same conclusion. In my view, the 776826 Alberta v Ostrowercha, 2015 ABCA 49, case states itwell at paras 9-11: [9] The governing test for

summary judgment in Alberta finds expression in Windsor v CPR, 2014 ABCA 108 at para 13, 572 AR 317; Sherwood Steel Ltd v Odyssey Construction Inc., 2014 ABCA 320 at paras 7 and 8, 59 CPC(7th)22; Maxwell v Wal-Mart, 2014 ABCA383 at para 12; W.P. and cases mentioned therein, inter alia. From the process perspective,

summary judgment can be given if adisposition that is fair and just to both parties can be made on the existing record by using that alternative method for adjudication: Hyrniak v Mauldin, 2014 SCC 7 , 2014 SCC7, [2014] 1 SCR 87. [10] From the substantive perspective,

summary judgment can be granted if, in light of what that fair and just process reveals, there is nomerit to the claim.

No “merit” means that, even assuming the accuracy of the position of the non-moving party as to any material andpotentially decisive matters—matters which would usually require ordinary forensic testing through a trial procedure with viva viceevidence and which could not be resolved through the fair and just alternative—the non-moving party’s position viewed in the round hasno merit in law or in fact. [11] Stated another way, in order for the non-moving party’s case to have merit, there must be a genuine issue of a potentially decisivematerial fact in the case which cannot be summarily found against the non-moving party on the record revealed by the “fair and justprocess”.

The mere assertion of a position by the non-moving party that something will turn up at trial, does not suffice. The key iswhether the circumstances require viva voce evidence in order to properly resolve the case: see Canada v Lameman, 2008 SCC 14 atparas 10to 11, [2008] 1SCR 372. [26] The evidence here is clear and undisputed. The allegations are that there was a mistake in invoices issued which mistake wasoutside the limitation period. An attempt was made to address that mistake by the issuance of a further invoice. In my view this does notpreclude a Limitation defence.

The injury occurred at the time the work was done and the invoice issued. The parties cannot rescuethemselves from their mistake by the mere issuance of an invoice outside of the limitation period. Accordingly, all claims arising fromjobs completed prior to December 5, 2013, are statute barred and summarily dismissed.

[ 27 ] The Limitations Act is a statute of repose. The parties should be able to rely on the fact that invoices were issued and paid and matters were resolved. They should not have to face six figure actions, or any actions, more than two years after the invoice was provided, subject of course to any contractual agreements to the contrary. [ 28 ] Costs follow the event. Murphy Oil is granted their costs of this application. Heard on the 14 th day of July, 2016. Dated at the City of Edmonton, Alberta this 27 th day of July, 2016. R.P. Wacowich M.C.C.Q.B.A. Appearances: David D.

Risling McLennan Ross LLP for the Plaintiff, Royal Well Servicing Ltd Beamer Comfort Bennett Jones LLP for the Defendant, Murphy Oil Company Ltd