Chesterwold Holdings Ltd v Computershare Trust Company of Canada, 2017 ABQB 43

Court of Queen’s Bench of Alberta Citation: Chesterwold Holdings Ltd v Computershare Trust Company of Canada, 2017 ABQB 43 Date: 20170124 Docket: 8901 10340 Registry: Calgary Between: Chesterwold Holdings Ltd. Applicant - and - Computershare Trust Company of Canada Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice A.G. Park _______________________________________________________ Facts [ 1 ] Manley Hugo Unland was a gentleman who farmed 7 quarter sections of land near Falun in the Province of Alberta.

He died on or about the 22nd day of August 1949 at Wetaskiwin, Alberta leaving his wife and 10 children surviving him. The day before his death he executed his last Will and Testament.

A Grant of Probate was issued on the 7th day of September 1949 in the District Court of Northern Alberta. [ 2 ] The Grant of Probate appointed his widow, Alice Lucia Unland, and his two sons, Edwin Manley Unland and Kenneth George Unland, as executors of the estate and as nominated under the Will. [ 3 ] The Will set out the following bequests: I give devise and bequeath all my real and personal estate which I may die possessed of or interested in, in the manner following, that is

to say: To my dear wife Alice Lucia Unland the home Quarter Section, namely, the South East Quarter of

Section 18 in Township 45 and Range 27 West of the Fourth Meridian in Alberta, as long as she shall live, and after her death to my son Manley Hugo Unland. To my son Walter Dan Unland the North West Quarter of

Section 18 in Township 45 and Range 27 West of the Fourth Meridian in said Province. To my son William Fred Unland the South East Quarter of

Section 12 in Township 45 and Range 228, West of the Fourth Meridian in the said Province. To my daughter Rita Alice the North East Quarter of

Section 1 in Township 45, and Range 28, West of the Fourth Meridian in the said Province. To my 4 grandchildren, children of my daughter Nettie Patterson, the South West Quarter of

Section 34, in the Township 44 and Range 27, West of the Fourth Meridian in the said Province, my said daughter Nettie Patterson to be the guardian of the property of her said 4 children during their minority, and the said 4 children of the said Nettie Patterson to share equally in this bequest. The 2 pasture Quarter Sections, being the East Half of

Section 15 in Township 45 and Range 28 West of the Fourth Meridian in the said Province, I give devise and bequeath to the said Manley Hugo Unland, my son Walter Dan Unland, William Fred Unland and my daughter Rita Alice Kimmel in equal shares. It is my will that all the oil rights or other mineral rights in any of my real estate be retained for a reasonable time and all monies that may be realized from them be equally divided among all my children.

All the residue of my Estate I give devise and bequeath to my said wife Alice Lucia Unland. [ 4 ] Before his death Manley Hugo Unland (the testator), executed a Lease with Rio Bravo Oil Limited (Rio Bravo), on the 16 th day of August 1948.

The Lease granted Rio Bravo all the petroleum and natural gas and related hydrocarbons except coal and valuable stone within, upon or under the NE ¼ and SE ¼ to have and enjoy the same as tenant for the term of 10 years from August 16, 1948 and so long thereafter as the leased substances or any of them are produced from the said lands, subject to the sooner termination of the said term as in the said Lease provided. [ 5 ] In addition to Rio Bravo’s Lease payment the Lease provided that Manley Hugo Unland was entitled to a gross royalty of 12.5% of the leased substances produced and marketed from the two quarter sections (the said lands). [ 6 ] There has never been a producing well on the said lands. [ 7 ] On January 6, 1953 the 3 executors executed the Hugo Unland No.2 Gross Royalty Trust (the No.2 GRT) and the Hugo Unland No.3 Gross Royalty Trust (the No.3 GRT) with a trustee, the Prudential Trust Company Limited (Prudential).

The No.2 GRT relates to the lands contained in the NE ¼ and the No.3 GRT relates to the lands contained in the SE ¼. The 3 executors signed as the executors but were referred to as the “Owner” in the 2 GRT Agreements. The GRT Agreements assigned the 12.5 % per cent gross royalty from any well or wells that may be drilled upon the said lands to Prudential.

In turn Prudential for payment would issue royalty trust certificates covering the Gross Royalty Units in the names of such persons, firms or corporations as the Owner may instruct the Trustee. [ 8 ] In this connection, on January 6, 1953 the 3 executors by letter instructed Prudential to issue one Gross Royalty Certificate to each of the 10 children of the testator for each of the No.2 GRT and the No.3 GRT. [ 9 ] On January 7, 1953 the 3 executors by letter advised each of 8 Unland children that each will be receiving a certificate for each Gross Royalty Trust.

Each child was asked in the letter to acknowledge and consent to the executors’ action in setting up the Gross Royalty Trusts.

Each child, save and except the 2 sons, who were the executors, acknowledged and consented to the action taken by the executors in setting up the 2 Gross Royalty Trusts. [ 10 ] The 2 sons, Edwin Manley Unland and Kenneth George Unland, as the executors did not send a letter to themselves as a child, because it was the two of them along with their mother, Alice Lucia Unland, as the 3 rd executor, who were responsible for setting up the Gross Royalty Trusts belonging to the estate of the testator. [ 11 ] Two caveats numbered 5184JF and 5186JF were registered at the Land Titles Office for the Province of Alberta on January 23, 1953 in connection with the Trustee’s interest under the Gross Royalty Trust Agreements. [ 12 ] On February 27, 1971 a Lease was executed by Edwin Manley Unland and Kenneth George Unland (2 of the 3 executors of the estate of Manley Hugo Unland) as Lessors and McArthur Land Consultants Ltd (McArthur) as Lessee.

The Lease was not executed by the 3 rd executor, Alice Lucia Unland, due to her death in or about 1957. The two executors were described in the Lease as the registered owners or entitled to become the registered owners of the leased substances to the East Half (“E ½”) of

Section Fifteen (“15”) and the North East ¼ (“NE ¼”) of

Section One (“1”), containing 477 acres more or less, in Township 45, Range 28, West of the 4 th Meridian in the Province of Alberta. However, the NE ¼ of

Section 1 in Township 45, Range 28, and West of the 4 th Meridian was gifted under the Will respecting both the surface rights and the mineral rights to the testator’s daughter, Rita Alice. The E ½ of

Section 15 in Township 45, Range 28 and West of the 4 th Meridian was gifted under the Will respecting the surface rights and the mineral rights to the testator’s sons, Manley Hugo Unland, Walter Dan Unland, William Fred Unland and daughter, Rita Alice in equal shares. The Lease was for a term of 5 years or so long thereafter as the leased substances or any of them were produced from the said lands subject to a sooner termination as detailed in the Lease. The Lease provided that the Lessor receive a gross royalty of 12.5 % of the leased substances produced and marketed from the said lands.

[ 13 ] In this Lease the Lessor acknowledged and affirmed the separate Agreement earlier assigned to Prudential of all royalties payable by the Lessee in respect of the leased substances produced from the said lands. The Lessor further agreed notwithstanding anything to the contrary contained therein, the Lessee shall pay to Prudential all of the royalties provided for in the Lease.

This Lease was executed nearly 18 years after the original Gross Royalty Trusts were executed and over 21 years after the testator died. [ 14 ] However, for the purposes of this Application the Applicant is not asking the Court to grant any relief as sought in its Notice of Motion reading this Lease between the 2 executors and McArthur. [ 15 ] Again, I note during the term of the McArthur Lease there was no production on the said lands. [ 16 ] On March 10, 1993 a Supplementary Agreement was signed by Kenneth Unland, Mary Helen Robins (by her executors Clifford Robins and Gloria Kijewski), Rita Kimmel, John M.

Unland, William F. Unland, Ruby McKenney, Inez Unland, Manley Unland, Donna L. Bray, Maxwell Unland, Darwin Patterson and Colleen Stewart, described as the Mineral Owners and Central Guaranty Trust Company (Central Guaranty – the predecessor trustee to Computershare) as the Trustee. [ 17 ] This Supplementary Agreement (the Patch Agreement) identified the mineral owners in 1993 as the registered owners of the mineral rights to the SE ¼ and the NE ¼ of

Section 15 Township 45, Range 28, and West of the 4 th Meridian and the NE ¼ of

Section 1 Township 45, Range 28 and West of the 4 th Meridian, all in the Province of Alberta. Those mineral owners were more particularly described as owning the following interests:

a) Darwin Hugo Patterson as to an undivided 1/20 th interest plus an undivided 1/180 th interest;

b) Colleen Patricia Stewart as to an undivided 1/20 th interest plus an undivided 1/180 th interest;

c) Clifford Robins and Gloria Kijewski (executors for Mary Helen Robins) as to undivided 1/10 th interest plus an undivided 1/90 th interest;

d) Edwin Manley Unland as to an undivided 1/10 th interest plus an undivided 1/90 th interest;

e) Ruby Brown as to an undivided 1/10 th interest plus an undivided 1/90 th interest;

f) John Myron Unland as to an undivided 1/10 th interest plus an undivided 1/90 th interest;

g) Kenneth Unland as to an undivided 1/10 th interest plus an undivided 1/90 th interest;

h) Manley Hugo Unland as to an undivided 1/10 th interest plus an undivided 1/90 th interest;

i) William Unland as to an undivided 1/10 th interest plus an undivided 1/90 th interest; and

j) Rita Kimmel as to an undivided 1/10 th interest plus an undivided 1/90 th interest. [ 18 ] In this application the Trustee submitted all of the registered Mineral Owners or the executors of their respective estates, to the East Half of

Section 15 in Township 45, Range 28, and West of the 4 th Meridian signed the Patch Agreement. [ 19 ] The Patch Agreement set out the following sections which are relevant to the issues to be determined in this application. SUPPLEMENTARY AGREEMENT WHEREAS: A. The Trustee, through one of its predecessors, is the trustee under the Royalty Trust Agreement described in

Schedule “A” (hereinafter called the “Royalty Trust Agreement”); B. The Mineral Owner is the registered owner of the Mineral Rights (as hereinafter described); C. The Mineral Owner has always intended and continues to intend to have the Mineral Rights be subject to the provisions of the Royalty Trust Agreement; D. The Mineral Owner has always intended and continues to intend to have the Royalty Trust Agreement operate forever and to create an interest in land in favour of the Trustee; E.

As a result of recent judicial decisions from the courts of the Province of Alberta, there may be doubt with respect to the intentions of the parties as presently stated or implied in the Royalty Trust Agreement and the parties wish to remove these doubts and any other ambiguities with respect to those intentions and to provide for other matters of mutual interest and concern; and F.

The parties have agreed to execute this supplementary agreement for the purposes of removing doubts and ambiguities with respect to their original and continuing intentions and providing each other with further assurances with respect to these matters; [...] 2. Acknowledgments and Estoppel - Royalty Trust Agreement

2.1 The parties acknowledge that from and after the date that the Mineral Owner acquired the Minerals Rights, the Royalty Trust Agreement has been and remains valid and binding upon and enforceable by each of them as if they were original parties thereto. 2.2 The parties acknowledge that it was and remains their mutual and continuing understanding and intention that, from and after the Effective Date and pursuant to the Royalty Trust Agreement: 2.2.1 the Royalty Rights were and continue to be settled upon the Trustee forever; 2.2.2 there was conveyed to or otherwise created in favour of the Trustee forever, an unimpeachable interest in the Mineral Rights supportable or capable of being represented by one or more caveats, encumbrances or other notifications contemplated by the Land Titles Act (Alberta) , all of which were intended to run with the Mineral Rights and all titles thereto; 2.2.3 all dispositions, if any, of the Mineral Rights were and continue to be subject to the reservation, assurance, settlement and transfer of the Royalty Rights to the Trustee; and 2.2.4 all monies payable pursuant to the Royalty Rights were and are to be paid to the Trustee pursuant to the Royalty Trust Agreement. 2.3 The Mineral Owner acknowledges that, to his knowledge, the Trustee has received in trust and properly accounted for and distributed all monies payable pursuant to the Royalty Rights and Royalty Trust Agreement from and after the Effective Date. 2.4 Neither of the parties shall advance any claim or commence or maintain any action asserting or based upon facts, allegations,

interpretations or circumstances contrary to the understandings, intentions and acknowledgments stated herein. 2.5 The Mineral Owner acknowledges that, to his knowledge the Trustee has, pursuant to the Royalty Trust Agreement, given valuable, sufficient, adequate and full consideration for both: 2.5.1 the settlement of the Royalty Rights upon the Trustee forever, as referred to in paragraph 2.2.1; and 2.5.2 the transfer, assignment, grant, settlement and conveyance unto the Trustee of those Royalty Rights, if any, that are the subject of paragraph 4.1.1. 3.

Representations and Warranties 3.1 The Mineral Owner represents and warrants to the Trustee and acknowledges that the Trustee is relying upon these representations and warranties that: 3.1.1 the Mineral Owner lawfully acquired and is the legal owner of the Mineral Rights; 3.1.2 except as set out in

Schedule “A”, the Mineral Owner has not disposed of the Mineral Rights or of any interest therein; and 3.1.3 the Mineral Owner has done no act or thing whereby the Royalty Rights or any of them have been or will be disposed of other than as reserved, assured, settled upon and transferred to the Trustee pursuant to the Royalty Trust Agreement. 4.

Conveyance and Charge 4.1 For the purposes of providing the Trustee with greater security under the Royalty Trust Agreement and for removing any doubts or ambiguities with respect to the limitations on or restrictions of the rights, if any, of the Mineral Owner to dispose of the Royalty Rights and furthering and acting on and carrying out the original and continuing intentions of the parties, all as acknowledged herein: 4.1.1 the Mineral Owner hereby transfers, assigns, grants, sets over and conveys unto the Trustee those of the Royalty Rights, if any, which are not already reserved, assured, settled upon or transferred to the Trustee at law or otherwise, pursuant to the Royalty Trust Agreement; and 4.1.2 the Mineral Owner hereby grants to the Trustee in perpetuity a charge upon the Mineral Rights in an amount equal to all monies now and hereafter payable pursuant to the Royalty Rights. [...] 9.

Royalty Trust Agreement 9.1 The parties acknowledge and declare that this Agreement is not an amendment to or a variation of the Royalty Trust Agreement or of the trusts therein contained and, to the extent that the provisions herein establish trusts, rights and obligations not dealt with in the Royalty Trust Agreement, those trusts, rights and obligations are hereby deemed to be supplemental to those established in the Royalty Trust Agreement. [ 20 ] Bearing in mind the provisions of the Will it is important to trace the chain of title to the surface rights and more importantly to the mineral rights to the SE ¼ and the NE ¼. [ 21 ] The testator was the registered owner of the East Half of

Section 15, inclusive of all surface and mineral rights (except coal) at May 9, 1934. On December 22, 1950 (after his death) the East Half of

Section 15 was registered in the names of his 3 executors. On March 10, 1951 the executors transferred the surface title to the East Half of

Section 15 to the 4 named beneficiaries in equal shares. They were his son, Manley Hugo Unland; his son, Walter Dan Unland; his son, William Fred Unland; and his daughter Rita Alice in equal shares.

[ 22 ] The executors retained the mineral rights of the East ½ of

Section 15 until 1975. Surface Rights [ 23 ] On December 10, 1951 Rita Alice transferred her undivided ¼ interest in the surface rights in the East Half of

Section 15 to her mother Alice (the wife of the testator). [ 24 ] On May 7, 1954 William Fred Unland transferred his undivided ¼ interest in the surface rights of the East Half of

Section 15 to his mother Alice (the wife of the testator). [ 25 ] Alice died and her executors, Edwin Unland, Kenneth Unland and Helen Robins became the registered owners of the undivided ½ interest of Alice in the surface rights of the East Half of

Section 15. [ 26 ] On July 5, 1957 Alice’s executors transferred her ½ undivided interest in the surface rights of the East Half of

Section 15 to Manley Hugo Unland and Walter Unland. As a result Manley Hugo Unland and Walter Unland then owned an undivided 100% of the surface rights to the East Half of

Section 15. On that same date new titles were issued wherein the surface rights of the NE ¼ of

Section 15 were registered in the name of Walter Unland and the surface rights of the SE ¼ of

Section 15 were registered in the name of Manley Hugo Unland. (The mineral rights to each of those two ¼ sections remained in the names of the executors of the testator) [ 27 ] In 1977 the surface rights to the NE ¼ of

Section 15 were sold by Walter Unland’s executors. [ 28 ] In 1992 the surface rights to the SE ¼ of

Section 15 were sold by the executors of the son, Manley Hugo Unland. Mineral Rights [ 29 ] In 1975 Edwin Unland and Kenneth Unland, as the testator’s executors (Alice Unland, the 3 rd executor died in or around 1957) split the mineral rights in the East Half of

Section 15 into 10 fractional interests.

The 10 fractional owners of the mineral rights at September 1975 were: • Edwin Unland • Ruby Brown • Kenneth Unland • Manley Hugo Unland • William Unland • Helen Robins • John Unland • Nettie Patterson • Walter Unland • Rita Kimmel [ 30 ] Helen Robins and John Unland, as children of the testator, were not named as specific beneficiaries in the Will save and except indirectly in the clause providing all monies realized from the retention of the oil rights or other mineral rights be equally divided amongst all of the testator’s children for a reasonable time. [ 31 ] The Land Titles Office in and for the Province of Alberta created a separate title evidencing Walter Unland’s 1/10 interest in the mineral rights and a separate title evidencing Nettie Patterson’s 1/10 interest in the mineral rights.

A third title evidenced the other 8 1/10 interests in the mineral rights for Edwin Unland, Ruby Brown, Kenneth Unland, Manley Hugo Unland, William Unland, Helen Robins, John Unland and Rita Kimmel. [ 32 ] Helen Robins passed away in 1988 and a new title issued for 8 fractional mineral interests. [ 33 ] The 8 fractional mineral interests encompassed the surviving 7 children of the testator and the executors of Helen Robins, being Clifford Robins and Gloria Kijewski. Each of the surviving children retained their original 1/10 interest and Clifford Robins and Gloria Kijewski held a single undivided 1/10 interest.

Walter Unland’s Interest [ 34 ] Walter Unland passed away in 1980. His executors were William Unland and Kenneth Unland. [ 35 ] Edwin Unland and Kenneth Unland, the surviving executors of the testator, caused a new mineral title on September 9, 1980 to be issued dividing Walter Unland’s 1/10 fractional mineral interest nine ways. The following eight persons each received an undivided

1/90 th interest: • Edwin Unland • Ruby Brown • Kenneth Unland • William Unland • Helen Robins • John Unland • Manley Hugo Unland • Rita Kimmel [ 36 ] The following 2 persons each received an undivided 1/180 th interest: • Darwin Hugo Patterson (co-executor of Nettie Patterson’s estate) • Colleen Patricia Stewart (co-executor of Nettie Patterson’s estate) [ 37 ] After Helen Robins died in 1988, a new mineral title was issued reflecting Walter Unland’s original 1/10 th interest.

The following persons now were holders of Walter Unland’s original 1/10 interest: • Edwin Unland - 1/90 th fractional interest • Ruby Brown - 1/90 th fractional interest • Kenneth Unland - 1/90 th fractional interest • William Unland - 1/90 th fractional interest • John Unland - 1/90 th fractional interest • Manley Hugo Unland -1/90 th fractional interest • Rita Kimmel - 1/90 th fractional interest • Clifford Robins and Gloria Kijewski - 1/90 th fractional interest (Executors of Helen Robins) • Darwin Patterson – 1/180 th fractional interest (Executor of Nettie Patterson) • Colleen Stewart - 1/180 th fractional interest (Executor of Nettie Patterson) [ 38 ] The foregoing persons held these fractional interests until April 26, 2002.

Nettie Patterson’s 1/10 Interest in the Mineral Rights [ 39 ] Nettie Patterson died in 1980. Her executors were Darwin Patterson and Colleen Stewart. They each received an undivided 1/20 mineral interests in Nettie Patterson’s 1/10 mineral interest in addition to each receiving the 1/180 th fractional interest derived from Walter Unland’s original 1/10 interest as detailed in Paragraph 36 herein. They held these interests until January 20, 2015. The Patch Agreement [ 40 ] At the time of the execution of the Patch Agreement on March 10, 1993 the 8 1/10 th holders of the mineral rights for the East Half of

Section 15 can be summarized as follows: • Edwin Unland - 1/10 interest • Ruby Brown - 1/10 interest

• John Unland - 1/10 interest • Kenneth Unland - 1/10 interest • Manley Hugo Unland - 1/10 interest • William Unland - 1/10 interest • Rita Kimmel - 1/10 interest • Clifford Robins and Gloria Kijewski (who as executors of Helen Robins held the single, undivided 1/10 interest of Helen Robins) [41] At the time of the execution of the Patch Agreement on the 9 1/90th holders of the mineral rights for the East Half of Section15 can be summarized as follows: • Edwin Unland - 1/90th interest • Ruby Brown - 1/90th interest • Kenneth Unland - 1/90th interest • William Unland - 1/90th interest • John Unland- 1/90th interest • Manley Hugo Unland -1/90th interest • Rita Kimmel - 1/90th interest • Clifford Robins and Gloria Kijewski - 1/90th interest • Darwin Patterson – 1/180th interest • Colleen Stewart – 1/180th interest [42] Darwin Patterson and Colleen Stewart each held a further 1/20th interest derived from the 1/10th original mineral interest of Nettie Patterson in addition to the aforementioned 1/180th interest each derived from Nettie Patterson flowing from Walter Unland’s original 1/10th interest as set out in paragraph 39 herein. [43] Together this comprises 100% of the mineral interest of the NE ¼ and SE ¼ of

Section 15. To summarize the mineral ownerswere Edwin Unland, John Unland, Kenneth Unland, Manley Hugo Unland, William Unland, Ruby Brown, Rita Kimmel, CliffordRobins, Gloria Kijewski, Darwin Patterson, and Colleen Stewart. [44] The Patch Agreement was signed by all persons who were the mineral owners as determined by actions of the testator’sexecutors who directed the mineral rights in the East Half of

Section 15 be divided into 10 fractional interests in September 1975. [45] Each of the 4 children who were devised specifically the surface rights and the mineral rights of the East Half of

Section 15 inequal shares by the Will of the testator were alive in 1975, which was the year the testator’s executors divided those mineral rights into10 fractional interests. The Position of the Applicant [46] Chesterwold Holdings Ltd. (Chesterwold) seeks an order declaring that the No.2 GRT and the No.3 GRT have expired andthe caveats filed by the Trustee, against the lands described in those 2 GRT Agreements be discharged. [47] Chesterwold submitted that each GRT relates only to the royalties payable under the Lease executed by Manley Hugo Unlandon August 16, 1948 to Rio Bravo.

The Applicant noted the Lease expired in 1958 without a producing well drilled on the said lands.

Inaccordance with the decision of the Alberta Court of Appeal in Guaranty Trust Co. of Canada v Hetherington (1989), 1989 ABCA 113, 67 Alta L.R. (2d) 290, Chesterwold noted each GRT, being of the type reviewed in Hetherington, was never meant to imposea continuing obligation after the expiry of the original Lease and accordingly each GRT expired with the expiration of the Lease. [48] Chesterwold further submitted the Patch Agreement entered into by individuals purporting to be the mineral owners of thelands described in the Patch Agreement and the Trustee cannot demonstrate each GRT is and was always intended to be valid andperpetual. [49] In essence Chesterwold maintained the Patch Agreement cannot save each GRT and allow them to be valid trust instrumentsand effective in perpetuity. [50] Chesterwold next argued that in executing each GRT the original executors of the Estate of Manley Hugo Unland did notpossess the legal power and capacity to enable each GRT to effectuate the purported provisions set out.

[ 51 ] In respect of the Patch Agreement, Chesterwold asserted it was not a valid contract due to a lack of consideration flowing to the purported mineral holders from the Trustee. [ 52 ] As a final point, Chesterwold noted the Patch Agreement was registered improperly as a caveat against the said lands due to non-compliance with the Land Titles Act of Alberta, RSA 1980, c L-5.

The Position of Computershare [ 53 ] Computershare submitted an analysis of all of the evidence demonstrated each GRT was intended by the executors of Manley Hugo Unland to create a perpetual interest in mineral rights notwithstanding the expiry of the Rio Bravo Lease.

Accordingly such an analysis proves the validity of each GRT Agreement. [ 54 ] In the alternative Computershare argued each GRT was perfected by the Patch Agreement and continued to bind the lands for the benefit of the unit holders [ 55 ] In a third submission Computershare contended Chesterwold is estopped from contesting the validity of each GRT. [ 56 ] Finally Computershare requests a collapse order, as set out in the decision of Montreal Trust Co. of Canada v Astl , 1999 ABQB 872 , be granted should each GRT be declared invalid.

Chain of Title [ 57 ] Both parties responded to my request for additional evidence, information and submissions regarding the chain of title for the NE ¼ and the SE ¼ of

Section 15 from the date of the testator’s death until the 1993 execution of the Patch Agreement. [ 58 ] In its submissions Computershare pointed to a clear chain of title for each of the mineral owners for that time period. It noted all of the parties who were registered owners of the mineral rights in 1993 executed the Patch Agreement.

With such a clear chain of title illustrated, Computershare asserted each registered mineral owner possessed a valid entitlement to the lands and as a result each GRT is valid and subsisting. [ 59 ] Chesterwold responded that the testator’s executors did not carry out the instructions in the Will. Reasons [ 60 ] The Will of Manley Hugo Unland specifically bequeathed the NE ¼ and the SE ¼ of

Section 15 to Manley Hugo Unland, Walter Dan Unland, William Fred Unland and Rita Alice in equal shares. [ 61 ] The Will further provided that all the oil rights or other mineral rights in any of the real estate be retained for a reasonable time and all monies that may be realized from them be equally divided among all his children. [ 62 ] This last clause must be interpreted such that the executors were not to transfer any oil rights or mineral rights in the manner they did in 1975 respecting the NE ¼ and SE ¼ of

Section 15. [ 63 ] All bequests of lands gifted by the testator, including the two quarter sections, being the NE ¼ and SE ¼ of

Section 15, were to have the surface rights immediately transferred to the named beneficiaries but all oil rights or other mineral rights were to be retained and held in the estate (in the name of the testator or the executors). [ 64 ] At the conclusion of a reasonable time it was the duty and responsibility of the executors in accordance with the wishes of the testator to transfer the oil rights or other mineral rights in each specific bequest of land to the named beneficiaries. In the instance of the NE ¼ and the SE ¼ of

Section 15 the executors were required to transfer the mineral titles to the four named beneficiaries, namely Manley Hugo Unland, Walter Dan Unland, William Fred Unland, and Rita Alice Kimmel in equal shares. Once that transfer took place each of those four children would own an equal share in the mineral title to the NE ¼ and the SE ¼ of

Section 15. [ 65 ] However, the executors did not transfer the mineral titles to the four named beneficiaries. Instead the executors signed each GRT on January 16, 1953 and provided Unit Certificates representing a 1 ¼ interest in each GRT for each of the 10 children. [ 66 ] To comply with the direction in the Will that all the oil rights or other mineral rights in any of the lands be retained for a reasonable time in order that all monies which may be realized from them be divided among all his children, the executors had a minimum of two options.

One option would be to have the monies derived from any oil or other mineral rights paid to the estate (which would hold those rights until a reasonable time had expired). In turn the executors could take the monies from the estate and cause the monies to be paid equally to all of the children. [ 67 ] The second choice would be exactly the course of action the executors took. That course of action was to create each GRT. By virtue of each child holding a certificate for each GRT that child would receive his or her proportionate share of any revenue payments made by Rio Bravo to the Trustee.

Once the Trustee had received the funds from Rio Bravo under each GRT, it would pay each certificate holder. [ 68 ] It is my view that the testator’s executors properly created each GRT under the second option. They were signed by all three executors and the Trustee which properly created and issued unit certificates. Each of the testator’s children received those unit certificates. All children, save and except the two executors (namely Kenneth George Unland and Edward Manley Unland) signed,

acknowledged and consented to the executors’ actions in creating each GRT. It was not necessary for the two executors, Kenneth George Unland and Edwin Manley Unland, to execute, acknowledge and consent to their own actions creating each GRT as they comprised two of the three executors of the estate of Manley Hugo Unland. Each GRT allowed the executors to retain the oil rights or other mineral rights for a reasonable time and distribute the monies received from the Trustee, if any, amongst the testator’s children.

The executors had the power under the provisions of the Will to create each GRT. [ 69 ] Similarly, the February 27, 1971 Lease between the executors and McArthur was valid and properly entered into by the executors.

However in this application Chesterwold does not seek an Order discharging any caveat registered against the lands by McArthur and it does not seek any relief respecting that February 27, 1971 Lease. [ 70 ] The Lease between the testator and Rio Bravo commenced on August 16, 1948 and had a term of ten years from that date, and so long thereafter as petroleum and natural gas and related hydrocarbons were produced from the lands. [ 71 ] There never was a producing well on the lands at any time before the ten year expiration of the Lease on August 15, 1958 or at any time thereafter.

The Rio Bravo Lease expired through the passage of time and the lack of a producing well. The Rio Bravo Lease expired through the effluxion of the primary term of the Lease. In this application each GRT is in the form and type of the “PTC- 1”agreement reviewed in the Hetherington decision, supra. Each GRT attached to the Rio Bravo Lease at the time each came into effect. On the facts of this application I find each GRT expired with the expiration of the Rio Bravo Lease through effluxion of the primary term of that Lease.

The royalty assigned under each GRT was limited to the royalty payable under the Lease to Rio Bravo. Each GRT did not bind subsequent petroleum and natural gas leases of the same oil rights or other mineral rights. [ 72 ] The true intent of the testator is found within the provisions of his Will. He directed the oil rights or other mineral rights in any of his real estate be retained for a reasonable time and all monies that may be realized from them be equally divided amongst all his children.

He did not direct that the oil rights or other mineral rights be retained by the estate or the executors beyond a reasonable time. At the conclusion of a reasonable time the mineral titles to the NE ¼ and the SE1/4 of

Section 15 were to be transmitted or conveyed to the four named specific beneficiaries. [ 73 ] In this case the Rio Bravo Lease expired on August 15, 1958. There were no producing wells on the lands. Computershare argued there existed new evidence respecting the true intention of the parties.

Computershare submitted the original No.2 GRT and the original No.3 GRT intended to create a perpetual interest in mineral rights, with the result the two trusts are valid, notwithstanding the expiry of the Rio Bravo Lease. [ 74 ] In this respect Computershare pointed out that Manley Hugo Unland in his Will directed that his oil rights and other mineral rights only be retained for a reasonable time before being realized upon and proceeds thereof distributed amongst his children.

Computershare submitted such a direction is inconsistent with the suggestion that the No.2 GRT and No.3 GRT were limited temporarily to the terms of the Rio Bravo Lease, after which the oil rights and other mineral rights would revert to the Estate. [ 75 ] However, upon a reading of the Will it is plain that Manley Hugo Unland never used the wording as urged by Computershare. He never used the word “before”. He did not state that his oil rights and other mineral rights only be retained for a reasonable time before being realized upon and proceeds thereof distributed amongst his children.

To the contrary he directed that his oil rights or other mineral rights in any of his real estate be retained for a reasonable time and all monies that may be realized from them be equally divided among all his children. The executors were not to retain the oil rights and other mineral rights for reasonable time before being realized upon and the proceeds distributed amongst his children.

Rather the oil rights or other mineral rights were to be retained for a reasonable time and any monies realized from them in that reasonable time were to be distributed amongst his children. [ 76 ] The oil rights or other mineral rights were to be held by the estate for a definitive time (reasonable) and were not to be held in perpetuity by the creation of trust agreements. Rather at the conclusion of a reasonable time the specific bequests of the mineral tittles were to be recognized and the mineral titles to the NE ¼ and the SE ¼ of

Section 15 were to be transmitted or transferred to the specific beneficiaries. [ 77 ] I note further the testator did not execute the No.2 GRT or the No.3 GRT. It was his executors who signed them. The testator did not direct a perpetual gift. He only provided his children were to receive the monies realized from any oil rights or other mineral rights for a reasonable time. After that it was his intention to have his mineral titles transferred to his 4 named beneficiaries. [ 78 ] Computershare further submitted the testator’s intention, as set out in its

interpretation that he directed his oil rights and mineral rights only be retained for a reasonable time before being realized upon and proceeds thereof distributed amongst his children, is further demonstrated in the McArthur Lease.

Computershare noted that Lease specifically recognized and confirmed each original GRT when it stated: Whereas the Lessor has by separate agreement assigned to Prudential Trust Company Limited, Edmonton, Alberta all royalties payable by the Lessee in respect of the leased substances produced from the said lands, it is agreed that notwithstanding anything to the contrary herein contained the Lessee shall pay to Prudential Trust Company Limited all of the royalties in Clause No. 2 or elsewhere in this Agreement provided for and such payment shall have the same effect as though paid to the Lessor. [ 79 ] In this connection Computershare drew attention to the recognition in the Hetherington decision, supra, that evidence of subsequent conduct of the original mineral owners is admissible.

It further referenced the decision in this Court of Mason J in Montreal Trust Company of Canada v Astl , supra at para 25: Mineral owners also continued to obtain orders collapsing trusts similar to those litigated in the Hetherington case. Other GRTs were reaffirmed by way of special agreements between the mineral titleholders and the unit holders. In the result, the number of applications for termination that were successful were roughly equal to the number of GRTs that were reaffirmed by agreement between the mineral titleholders and the certificate unit holders.

On this basis, it is not unreasonable to infer that of the Hetherington type of GRTs, as many mineral owners elected to reaffirm their GRTs as those who sought termination.

[ 80 ] Relying on those decisions Computershare focussed on the mineral owners executing the 1993 Patch Agreement which in the following words expressly confirmed the validity of each original GRT in these words: As a result of recent judicial decisions from the courts of the Province of Alberta, there may be doubt with respect to the intentions of the parties as presently stated or implied in the [Original GRTAs] and the parties wish to remove these doubts and any other ambiguities with respect to those intentions and to provide for other matters of mutual interest and concern. [ 81 ] Consequently Computershare argued the evidence discloses it was the intention of the signatories of the Patch Agreement that the Trusts be perpetual and survive the expiry of the initial Rio Bravo Lease.

Such perpetuity means the Trusts are valid and subsisting based on its argument. [ 82 ] I do not accept the arguments of Computershare respecting the validity of the original Trusts in this factual situation. It is clear from the evidence that each of the No.2 GRT and the No.3 GRT Agreement expired when the Rio Bravo Lease concluded through effluxion of its primary term. The testator’s executors were to retain the oil rights or other mineral rights in any of his real estate for a reasonable time and distribute all monies that may be realized from them equally amongst his children. The testator died in 1949.

The Rio Bravo Lease expired in 1958. In 1975 the executors determined they would divide the mineral titles into ten fractional interests and award each of the 10 children with 1 fractional interest. In the years between 1949 and 1975 no production of oil or other minerals took place on the lands. That was a period of 26 years with no monies being realized. In my opinion the reasonable time had expired. The executors had no authority or power to divide the mineral rights in 1975 into the ten fractional interests.

Rather they had the duty and the legal obligation to carry out the intention and the direction of the testator and transmit or transfer the mineral titles to the NE ¼ and SE ¼ of

Section 15 to the four named beneficiaries. These 4 beneficiaries were the mineral owners and not the 10 children as directed in apparent error by the testator’s executors. [ 83 ] Indeed by 1975 it must have become apparent to the executors that a reasonable time had passed in that no monies have been realized from the oil rights or other mineral rights. Rather than transferring the mineral titles to the 10 children, the executors were under duty to follow the Will’s direction and transmit or transfer the mineral titles to the 4 beneficiaries respecting the NE ¼ and the SE ¼ of

Section 15. [ 84 ] As a result, the Patch Agreement is of no consequence for the purpose of this application in that it was executed by persons who were not the correct mineral owners. I note that Manley Hugo Unland, William Unland and Rita Kimmel as beneficiaries and mineral title owners, did execute the Patch Agreement. But they did not execute it as mineral title owners holding their gifted original equal quarter shares. Nor was there any evidence adduced which demonstrated they were aware of their mineral title each being limited to an 11/90 th fractional interest.

This fractional interest was limited due to the testator’s executors’ actions in transferring fractional interests to the remaining surviving children and the heirs of their deceased siblings. [ 85 ] In

summary the testator’s executors did not convey the mineral title interests to the proper beneficiaries. The Patch Agreement was executed by some persons who were not entitled to be mineral title owners and by three mineral title owners who executed it with incorrect and lesser mineral title interests to which they were entitled. In consequence the Patch Agreement could not confirm the validity and perpetuate each original GRT. Each original GRT is not perpetual. Rather each GRT does not survive the expiry of the initial Rio Bravo Lease.

The royalty assigned under the No.2 GRT and the No.3 GRT is limited on the facts of this case, to the royalty payable under the original Rio Bravo Lease. Each GRT expired and the Patch Agreement does not save either. [ 86 ] Computershare directed my attention to s.62 of the Land Titles Act , supra, as authority for the entitlement of the mineral title owners, who executed the Patch Agreement, to the NE ¼ and the SE ¼ of

Section 15. Computershare submitted the demonstration of a name on a title is conclusive proof of ownership subject to the implied conditions set out in s.61 of that Act. Under Computershare’s argument that would mean all of the 10 mineral title owners, set out in the Patch Agreement, would be the rightful legal title holders to the mineral rights due to their respective names being set out on the certificate of title. Section 62(1) and (2) state:

(1) Every certificate of title granted under this Act (except in case of fraud in which the owner has participated or colluded), so long as it remains in force and uncancelled under this Act, is conclusive proof in all courts as against Her Majesty and all persons whomsoever that the person named in the certificate is entitled to the land included in the certificate for the estate or interest specified in the certificate, subject to the exceptions and reservations mentioned in

section 61, except so far as regards any portion of land by wrong description of boundaries or parcels included in the certificate of title and except as against any person claiming under a prior certificate of title granted under this Act or granted under any law heretofore in force relating to titles to real property in respect of the same land.

(2) For the purpose of this section, that person is deemed to claim under a prior certificate of title who is holder of or whose claim is derived directly or indirectly from the person who was the holder of the earliest certificate of title granted, notwithstanding that the certificate of title has been surrendered and a new certificate of title has been granted on any transfer or other instrument. [ 87 ] However, I note the 4 specific named beneficiaries receiving bequests of the surface title and mineral title under the Will would receive a prior entitlement to the lands in that their title is derived from the testator’s bequest.

Under s 61(1) and (2) the 4 specific named beneficiaries received their title from the testator who was the holder of a prior certificate of title compared to the certificate of title granted to the 10 mineral title holders set out in the Patch Agreement.

The 4 specific named beneficiaries are deemed to claim under the prior certificate of title of the testator. [ 88 ] Accordingly, I do not accept Computershare’s submissions in this respect. [ 89 ] I find it unnecessary to consider the other arguments of Chesterwold, including a lack of consideration in the Patch Agreement and improper registration of the Patch Agreement by the Land Titles Office in Alberta. [ 90 ] Chesterwold has met its burden of proof and its application is granted. The No.2 GRT and No.3 GRT and the Patch Agreement are declared invalid and are terminated with respect to the East Half of

Section 15. The caveats protecting Computershare’s interests in those GRT Agreements and Patch Agreement are to be discharged for the East Half of

Section 15.

[ 91 ] At the request of Computershare a collapse Order in ordinary form will issue. It will become effective 60 days after all the GRT unit holders; the purported mineral owners; the executors of the estate of the testator; and the 4 specific beneficiaries of the mineral titles all respecting the East Half of the

Section 15 have been personally served with it. If any of those persons are deceased, service will be affected upon their executors or their heirs as necessary. This 60 day period will provide each with the opportunity to launch any appropriate intervention application to this Court to uphold each GRT or the Patch Agreement. Counsel will draft the appropriate Order. [ 92 ] Each party to the present application will bear their own costs. Heard on the 26 th day of May, 2016. Dated at the City of Calgary, Alberta this 24 th day of January, 2017. A.G. Park J.C.Q.B.A. Appearances: Mr. R. Alex Kennedy for the Applicant Mr. Derek Pontin and Mr. John Regush for the Respondent