Geophysical Service Incorporated v Encana Corporation, 2017 ABQB 466

Court of Queen’s Bench of Alberta Citation: Geophysical Service Incorporated v Encana Corporation, 2017 ABQB 466 Date: 20170726 Docket: 0701 04061 Registry: Calgary Between: Geophysical Service Incorporated Plaintiff - and - Encana Corporation Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice K.M. Eidsvik _______________________________________________________ Introduction [ 1 ] The Plaintiff, Geophysical Service Incorporated (“GSI”), brings this application for

summary judgment against the Defendant, Encana Corporation (“Encana”), in relation to one contractual claim. GSI alleges that Encana possessed, in violation of two licensing agreements, unlicensed seismic data obtained from the National Energy Board (the “NEB”) in 1999 (the “Accessed Data Claim”). [ 2 ] Encana brought a cross-application seeking to have GSI’s entire action dismissed.

In order to do so, this application must deal with the claim by GSI that Encana submitted GSI seismic data to government boards in violation of its licensing agreements with GSI (the “Submitted Data Claim”); and that it owes GSI licensing fees arising from its involvement in Exploration Groups with a variety of Exploration Group partners (the “Exploration Groups Claim”).

[ 3 ] The parties’ applications are part of a broader series of

summary judgment/dismissal applications brought by and against GSI in a number of actions (the “Sister Applications”). The decisions in the Sister Applications were filed concurrently with this one and include Geophysical Service Incorporated v Plains Midstream Canada ULC , 2017 ABQB 462 , Geophysical Service Incorporated v Devon ARL Corporation , 2017 ABQB 463 , Geophysical Service Incorporated v Murphy Oil Company Ltd , 2017 ABQB 464 , and Geophysical Service Incorporated v Suncor Energy Inc , 2017 ABQB 465 .

Factual Background [ 4 ] On September 2, 1998, GSI entered into a General Licence Agreement with PanCanadian Petroleum Limited. This agreement contains no provisions dealing with accessing data from the NEB or other regulatory boards. [ 5 ] On November 1, 2001, GSI and PanCanadian entered into a Master Data Licence Agreement (the “2001 Agreement”). The 2001 Agreement contains provisions dealing with accessing and possessing data obtained from the NEB and other government boards. Mr. Einarsson, GSI’s Chief Operating Officer and corporate representative in this action, negotiated the 2001 Agreement.

He recalls that PanCanadian represented that it did not have any data accessed from government bodies.

PanCanadian’s legal team had tried to arrange the removal of the clause disallowing possession from the 2001 Agreement, but it was left in. [ 6 ] Through a series of transactions in early 2002, Encana became the legal successor to PanCanadian Petroleum Limited, PanCanadian Energy Corporation and Alberta Energy Corporation. [ 7 ] On October 3, 2002, GSI and Encana entered into their own Master Data Licence Agreement (the “2002 Agreement”), which contained virtually the same terms as the 2001 Agreement. [ 8 ] Back in November 1999, representatives of PanCanadian attended at the NEB and borrowed mylars of seismic data related to offshore areas in the Beaufort Sea that had been collected by GSI’s predecessor in 1983 and 1984.

PanCanadian returned the data within a few days after making working copies. This material is identified in paragraph 6 of the Amended Statement of Claim as the “Beaufort Material”. [ 9 ] In February 2000, the North American Frontiers Group of PanCanadian prepared a power point presentation providing an analysis of geological trends and possible prospects for future development in the MacKenzie River Delta and Beaufort Sea.

According to Encana’s evidence, however, management did not pursue any opportunities in the Beaufort Sea area. [ 10 ] After the PanCanadian/Encana merger in 2002, Encana submits that the Beaufort Material was moved from one floor to another. There was no disclosure or licencing of the Beaufort Material at that time. There is no evidence that the term dealing with possession of data accessed from government bodies came up in the negotiations of the 2002 Agreement. [ 11 ] In May 2006, Encana was engaged in a “clean-up” process of its northern data.

An Encana employee contacted GSI to determine if there was any field data to accompany the paper sections of the Beaufort Material. Mr. Einarsson attended at Encana’s offices and after searching his records, noted that the Beaufort Material was not licenced. He subsequently sent a demand letter and invoice dated May 30, 2006 to Encana for $2,914,351.61. Apparently this amount represented 150% of the 2005 licencing fees for the Beaufort Material, although this calculation is not apparent on the face of the invoice.

The invoice states it is for 4125.176 km of 1983 and 1984 Beaufort lines, priced between US $840/km to US $438/km, plus 7% GST. The invoice contains a note that “1.5%/Mo. Interest” would be added to accounts over 30 days. [ 12 ] On August 9, 2006, Encana advised GSI that it had elected to destroy the Beaufort Material. The parties agreed thereafter that the Beaufort Material would not be destroyed, without prejudice to their respective legal positions. [ 13 ] GSI amended its claim in 2014. It added paragraph 29, which makes the following allegation in the Submitted Data Claim: In breach of

section 6.3(f)(

i) of the Second PanCanadian Agreement and the EnCana Agreement, EnCana and its predecessors submitted GSI data or work products to a government agency, without GSI’s authorization and thereby GSI data or work product was substantially disclosed and distributed by the government agency to third parties, causing damages and loss of profits to GSI. [ 14 ] GSI also claims that Encana, on May 13, 2006, along with Anadarko Canada Corporation and ConocoPhillips Canada Resources Corp., obtained exploration leases on 140,000 acres in the offshore MacKenzie Delta.

It claims that these leases are in “close proximity” to the Beaufort Material. As a result, it claims that Encana, Anadarko and ConocoPhillips created an “Exploration Group” as defined in the Agreements and that Anadarko and ConocoPhillips have not obtained a license from GSI as required under the Agreements. It follows, according to GSI’s submissions, that Encana is obligated to indemnify GSI for Anadarko’s and ConocoPhillip’s failure to pay the licencing fees, pursuant to clause 11.5 of the 2002 Agreement. Issues [ 15 ] The issues on these

summary judgment applications are as follows: 1. Is GSI entitled to

summary judgment on its Accessed Data Claim? 2. Is Encana entitled to

summary dismissal of GSI’s Submitted Data Claim? 3. Is Encana entitled to

summary dismissal of GSI’s Exploration Groups Claim? 4. Is Encana entitled to

summary dismissal of all of GSI’s remaining claims?

Legal principles 1. Law of

summary judgment [ 16 ] The principles applicable to

summary judgment applications are set out more fully in the Sister Application of GSI v Plains Midstream Canada ULC . The main principle is to determine whether a disposition that is fair and just to both parties can be made on the existing record. If the judge can make the necessary findings of fact and apply the law to those facts, then

summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result than trial. [ 17 ] If materials facts are in serious dispute, however, the record will not support a fair and just disposition by

summary judgment. Thus, if there is evidence on the record that could defeat the applicant at trial, then

summary judgment will not be granted. If, however, there are no material facts in serious dispute, then the court may go on to determine whether the claim is otherwise suitable for

summary determination. 2. Principles of contractual

interpretation [ 18 ] The key principles of contractual

interpretation are set out more fully in the Sister Application of GSI v Plains Midstream Canada ULC . The main principle is that contractual clauses to be considered within the context of the contract as a whole and its entire matrix, including the circumstances surrounding its creation. The court must search for an

interpretation that, from the whole of the contract, promotes or advances the true intent of the parties and commercial or business efficacy. Discussion 1. Is GSI entitled to

summary judgment on its Accessed Data Claim? [ 19 ] GSI claims that Encana, directly and as successor to the PanCanadian companies, breached a term of the 2001 and 2002 Agreements by obtaining and maintaining possession of the Beaufort Material without a licence. GSI seeks

summary judgment for a declaration of Encana’s breach and between US $2 and $3 million in damages. [ 20 ] Initially, GSI sought damages of 150% of the licence fee amount based on clause 6.3(f)(iii), which is almost identical in the two Agreements: 6.3(f)(iii) The Licensee shall not knowingly obtain, directly or indirectly from any source, seismic data from any governmental agency that is owned by GSI....

Should the Licensee obtain any such seismic data it shall immediately notify GSI and enter into a Supplemental Agreement with respect to such seismic data at a licencing fee equal to 150% of the then current licencing fees charged by GSI for such Seismic Data and the Reprocessed Seismic Data, if any.

In addition, in the event that, as of the date hereof , the Licensee or any of its affiliates or Related Entities, or any of their respective agents, Consultants or representatives are in possession of any Seismic Data or Reprocessed Seismic Data that is owned by GSI, the Licensee shall cause such Seismic Data and Reprocessed Seismic Data to be destroyed immediately or the Licensee shall immediately enter into a license from GSI based on GSI’s current licensing fees .

In the event the Licensee or any of its affiliates or Related Entities acquires a company, assets, or a dataset that contain unlicensed GSI Seismic Data or Reprocessed Seismic Data it shall be either licensed, transferred if applicable, or destroyed immediately. [Emphasis added.] [ 21 ] Encana submits that the 150% licensing fee applies only if it obtained data from a government agency. In this case, the Beaufort Material was obtained before the two Agreements were signed, so it argues the first part of

section 6.3(f)(iii) setting out the 150% licensing fee does not apply. In its amended application and in oral argument, GSI more or less conceded that the 100% fee would be appropriate. It led evidence as to the correct amount based on licensing fees in 2006. [ 22 ] Encana admits that it was in possession of the Beaufort Material “as of the date” of the two Agreements. It argues, however, that it did not realize that it was in possession until it performed its “clean-up” operation in the spring of 2006.

The Beaufort Material was never scanned or digitized, so it was not stored in any electronic filing system at Encana. When Encana “discovered” the Beaufort Material, it “immediately” took the appropriate steps under the Agreements – it offered to destroy the Beaufort Material. [ 23 ] Encana takes the position that this satisfies the terms of the two Agreements.

In any event, Encana submits that it would have elected to destroy the Beaufort Material no matter when it discovered its possession, as it sat unused over the years so damages would be de minimus. [ 24 ] Further, Encana argues that the Beaufort Material is not “Seismic Data”, as defined under the two Agreements. The definition of Seismic Data includes “data...which has been invoiced for or identified in the Supplemental Agreements” entered into between the parties. The Beaufort Material does not fit this definition. Encana argues

section 6.3(f)(iii), with its use of the capitalized phrase “Seismic Data” does not apply. [ 25 ] Finally, in the further alternative, Encana argues that GSI’s Accessed Data Claim is statute barred. It submits that GSI learned by way of a letter from the NEB on June 9, 2003 that PanCanadian had accessed certain seismic programs of the Beaufort Material. Since 1999, GSI was aware that parties were accessing and copying its data from the NEB and it had been submitting numerous Access to Information requests to learn the names of the specific parties who had accessed its data.

Encana argues that when its name was released, GSI should have been fully aware of whom to sue, its injury, and that it warranted bringing a claim. GSI’s filed its Statement of Claim on April 19, 2007, beyond the 2 year limitation period, according to Encana.

[ 26 ]

Summary resolution of this claim requires

interpretation of the 2001 and 2002 Agreements to determine whether Encana’s possession of the Beaufort Material breached the Agreements. It also requires an assessment of the limitations arguments.

a) Analysis

i) Did PanCanadian and Encana breach clause 6.3(f)(iii)? [ 27 ] Encana admits that it, and PanCanadian before it, was in possession of the Beaufort Material when the Agreements were signed in 2001 and 2002. It argues, however, that as unlicensed material, the Beaufort Material is not Seismic Data. [ 28 ] The context and whole of the contract are necessary to properly interpret this clause. The context here is the licensing and protection of seismic data. The

interpretation of the contract must recognize commercial or business efficacy based on the intentions of the parties and should not result in an absurdity or be unworkable considering all of the circumstances. [ 29 ] Clause 6.3(f)(iii) addresses seismic data that has been obtained from a government agency. It is, by its nature, unlicensed data like the Beaufort Material.

Inserting the defined meaning of “Seismic Data” into this clause makes no sense; there is no need to destroy or license data that is already licensed. [ 30 ] In my view, it would not reflect the intention of the parties to accept Encana’s submission that since the capitalized words “Seismic Data” were used, instead of the lower case “seismic data” that should have been used, that the

section should not apply. Reading clause 6.3(f)(iii) within the context of the Agreements as a whole and taking into account the intention of the parties, it becomes clear that the capital “S” and “D” are typographical errors and that the unlicensed Beaufort Material is exactly the type of seismic data that was intended to be covered by this clause. [ 31 ] Alternatively, I accept that when GSI learned that Encana had possession of the Beaufort Material, it sent an invoice, thereby making it “Seismic Data”.

Further, I agree with GSI that had Encana, and PanCanadian before it, properly advised GSI that it was in possession of the Beaufort Material upon the execution of the Agreements, GSI would have immediately invoiced Encana (or PanCanadian under the 2001 Agreement), such that the Beaufort Material would have become “Seismic Data” at that time. [ 32 ] Encana further argues that it offered to destroy the Beaufort Material “immediately” upon receiving GSI’s invoice, since it was not “in possession” of “Seismic Data” until it was invoiced.

There is some merit to this argument, although on the whole of the intention of the parties in these Agreements it is not, in my view, a reasonable way to interpret the obligations between them. PanCanadian and Encana had an underlying duty upon signing these Agreements to ensure that they were not in possession of seismic data like the Beaufort Material, and if they were in possession, to destroy it or licence it immediately in 2001 and 2002. [ 33 ] Encana argues that it did not know that it was in possession of the Beaufort Material until 2006.

It explains that it did not digitize the data so it did not become part of its file records. I note, however, that the Beaufort Material had been analyzed only a short time before the 2001 Agreement, so the dust had not really settled on it, nor was it likely out of the minds of the PanCanadian employees who had worked on it. It is not GSI’s fault that the knowledge of these employees failed to reach the legal team working on the terms of the 2001 Agreement.

Further, negligence in PanCanadian’s and Encana’s file recording system is not an excuse for a potential breach of contract. [ 34 ] Finally, there is evidence that the Beaufort Material was moved in 2002 – the very year of the Encana 2002 Agreement. Perhaps one of the employees at that time became aware of the contents of the box, perhaps not. Regardless, “possession” in this part of clause 6.3(f)(iii) does not mean “knowledgeable” possession. Earlier on in the clause, the contractual language uses the words “knowingly obtain”, but in the latter part of the clause “knowing” is not applied to possession.

Mere possession is sufficient to trigger this clause – and this has been acknowledged by Encana. [ 35 ] Encana also submits that there would have been little difference between its offer to “immediately” destroy the data in 2006 versus a similar offer in 2001 or 2002, since the Beaufort Material had not been used. Again, this argument has some merit; however, the clause does not require use of the seismic data, merely possession.

This argument goes more to the question of damages. [ 36 ] In my view, Encana breached clause 6.3(f)(iii) by being in possession of the Beaufort Material and by not destroying it or licencing it within a reasonable time after signing the Agreements. Four or five years later is not “immediately” as intended by the Agreements. ii) Is GSI’s claim barred by the expiry of the limitation period? [ 37 ]

Section 3 of the Limitations Act , RSA 2000, c L-12 provides that a claimant must seek a remedial order within 2 years of the date when it first knew, or in the circumstances ought to have known, three things:

i) that it was injured; ii) that the injury was attributable to the defendant; and, iii) that the injury warranted bringing a proceeding. [ 38 ] GSI has the onus to show that it started its claim on time. GSI argues that it did not know of PanCanadian and Encana’s wrongful possession of the Beaufort Material until May 2006.

It filed its statement of claim on April 19, 2007, so GSI submits its action is well within the limitation period. [ 39 ] Encana, on the other hand, argues that regardless of GSI’s actual knowledge in May 2006, it ought to have known in June 2003, or shortly thereafter, that Encana possessed the Beaufort Material. Encana argues GSI’s claim is statute barred. [ 40 ] The record shows that GSI became suspicious many years ago that its seismic data was being copied from government boards.

Indeed, as discussed in Geophysical Service Incorporated v Encana Corporation , 2016 ABQB 230 , affirmed 2017 ABCA 125 (the “Common Issues Decision”), GSI was lobbying government to change the Regulatory Regime, as that phrase is described in the Common Issues Decision, to stop such copying from occurring. GSI also took steps to alleviate this problem by changing its licencing

agreements, adding clauses similar to 6.3(f)(iii) in as many agreements as possible. [ 41 ] GSI also took steps to find out who was copying its data. It wrote many letters to the boards in question, including the NEB. After dealing with confidentiality issues and a federal court order, it finally found out, in June 2003, that PanCanadian had indeed accessed the Beaufort Material back in 1999. [ 42 ] Thus, I accept Encana’s argument that in June 2003 GSI knew that Encana had accessed its data and that it could have assumed that such access likely would have included copying.

The form signed by PanCanadian included a statement that this was its main purpose in accessing the data and GSI was fully aware that such copying was going on. [ 43 ] What I am not prepared to accept, however, is Encana’s further submission, namely, that GSI’s knowledge of the potential copying should have led it to the knowledge that PanCanadian, and later Encana, were in breach of the 2001 and 2002 Agreements by virtue of their continued possession of the copied Beaufort Material. [ 44 ] First, according to GSI, PanCanadian represented during negotiations that it did not possess any unlicensed material. Mr.

Einarsson, in an affidavit sworn in September 2016, attached an undated email outlining the negotiation of some of the terms of the 2001 Agreement, including clause 6.3(f)(iii). He swears that PanCanadian made this representation. Encana does not accept this fact. It suggests that Mr. Einarsson’s evidence should not be accepted since it was filed late in these proceedings. Further, the email is not dated and is not reliable since Mr.

Einarsson, on cross-examination, could not correctly remember with whom he was negotiating. [ 45 ] It is difficult to determine this issue without hearing the testimony at trial as to whether such a representation was made.

I note, however, that Encana earlier pointed out that the Beaufort Material was neither digitized, nor electronically filed, so it could well be that legal counsel who was negotiating the deal was unaware of this unlicensed material – even if some employees within PanCanadian knew of it (as discussed above). [ 46 ] Certainly, if I accept that PanCanadian made a representation that it did not possess any unlicensed seismic material in 2001, including the Beaufort Material, it would be reasonable to conclude that GSI should have been able to rely on this representation and ought not to have presumed otherwise once they learned in 2003 that PanCanadian had accessed data from the NEB. [ 47 ] Secondly, Encana had contractual obligations (clause 6.3(f)(iii)) coupled with the obligations of good faith, which would have required PanCanadian and later Encana to disclose that it had unlicensed material in its possession so that an election to destroy or licence it could be made. [ 48 ] Encana argued that the case of DeShazo v National Energy Co 2005 ABCA 241 applies here to show that GSI had enough knowledge of potential possession to bring a claim against Encana in 2003.

It argued that DeShazo stands for the proposition that even if one is misled on the facts, this does not stop the limitation from tolling. [ 49 ] In DeShazo , it appears there was contrary information going back and forth that the Court found should have alerted the claimant to a breach. In my view, the facts here are distinguishable. In DeShazo the information included a substantive report outlining the impugned actions of the Defendants, and the Plaintiff had a legal opinion that an action could be brought.

The court found that this information was sufficient to have brought the claim and that the information that the Plaintiff learned of later “did not add significantly to the picture”. [ 50 ] Here, on the other hand, GSI had apparently been advised that PanCanadain was not in possession of unlicenced material, and even if I cannot rely on this representation in this

summary judgement application, the fact that any such possession was obligated to be made pursuant to contractual obligations changes the nature of the overall picture compared to the facts in DeShazo in my view.

Certainly the discovery of the possession of the material in 2006 did “add significantly” to GSI’s knowledge at that time. [ 51 ] Encana also argues that had GSI fulfilled its obligations of due diligence, by writing to Encana in 2003 after it found out that PanCanadian had accessed unlicensed data, GSI would have learned that Encana did indeed possess the Beaufort Material. [ 52 ] I find this argument hard to accept, particularly since Encana basically admits that it was negligent in its own filing of the Beaufort Material, and attempts to argue that it should be excused from having knowledge of its own breach of the Agreements until 2006.

If Encana itself suggests that it was unaware of its possession of the Beaufort Material, it seems unfair to suggest that GSI would have necessarily found out anything different by further due diligence inquiries before 2006. [ 53 ] As such, I accept that GSI has met the burden of showing that the limitation period does not bar its action on this part of the claim. iii) What are GSI’s damages? [ 54 ] GSI claims as damages either 100% or 150% of the 2006 licencing fees for the Beaufort Material on the basis that Encana did not immediately destroy or licence it.

Encana submits that there are no damages because it did not use the Beaufort Material after signing the Agreements, or in the alternative, that damages are de minimus because it is prepared to destroy the Beaufort Material. It further argues that licencing fees are not an appropriate measure of damages because the Beaufort Material is quite old.

Finally, it submits that GSI selected the wrong licensing fees, using the fees at the time of the discovery of the breach in 2006, rather than the 2001 or 2002 fees. [ 55 ] In my view, Encana breached the Agreements by being in possession of the Beaufort Material upon entering the Agreements. I note, as an aside, that the possession of this material, were it not for these Agreements, would have been perfectly legal since the seismic data was publicly available from the NEB as a result of the Regulatory Regime (as I found in the Common Issues Decision). [ 56 ]

Section 6.3(f)(iii) sets out potential remedies for its breach – i.e. the destruction of the seismic data or its licencing. Yet these options must be exercised “immediately”, which did not happen, so what then are the resulting damages?

[ 57 ] The evidence led in this application shows that the Beaufort Material formed the basis of recommendations to explore. Later on, Encana apparently licenced other Beaufort seismic data that intersected some of Encana’s exploration licences in the area. As I will come to later, however, the Beaufort Material did not intersect or come close to these same exploration licences. [ 58 ] Nonetheless, GSI argues that the knowledge obtained from the Beaufort Material would have been useful in some of these decisions.

Further, GSI suggests that Encana was reviewing and analyzing the Beaufort Material in 2006, which is why it requested further raw data from GSI. Encana denies this allegation and says that the Beaufort Material stayed in its box and that it was not used in any way; it says the 2006 efforts were merely “clean-up”. [ 59 ] It is not possible for me to fairly decide the damages issue on the existing record.

It is possible that a licence fee would be appropriate, since Encana could have used the Beaufort Material for several years – GSI does not monitor how its licenced data is used for internal exploration analysis by companies who properly licence its data, so arguably it matters little if Encana actually used the Beaufort Material.

On the other hand, if Encana is able to prove that the Beaufort Material was not used, so that the breach of being in possession without destroying or licencing it was of no real consequence, then it could be that damages will not be significant, or may be something far less that a full 100% licencing fee. [ 60 ] Before leaving this topic, I should point out that I accept Encana’s position that a 150% licensing fee would not be an appropriate calculation of damages.

I agree that this amount would only potentially apply if PanCanadian or Encana had obtained the Beaufort Material after it had signed the Agreements; it is clear here that the Beaufort Material was obtained beforehand. [ 61 ] In sum, the damages assessment for being in breach of the Agreements by possessing the Beaufort Material must be determined at trial.

b) Conclusion [ 62 ] In conclusion, I find that Encana is in breach of clause 6.3(f)(iii) by having been in possession of the Beaufort Material at the time of signing the 2001 and 2002 Agreements. This claim is not barred by any of the applicable limitation periods. The damages for this breach will have to be assessed at trial. 2. Is Encana entitled to

summary dismissal of GSI’s Submitted Data Claim? [ 63 ] GSI alleges that Encana submitted GSI’s data to a government agency without its authorization. Encana seeks to have GSI’s Submitted Data Claim dismissed on the basis that any such submission was “required by law” and as such was specifically permitted by the Agreements. GSI, on the other hand, argues that the law does not require Encana to submit its licenced seismic data to the government; rather Encana’s submissions were voluntary and in breach of the Agreements.

Further, GSI submits that the evidentiary record on this matter is contradictory and the issue should go to trial. [ 64 ] GSI’s claim is based on clause 6.3(f)(i). The exact wording is important because, unlike other seismic data licence agreements entered into between GSI and various clients, the clause in this Agreement does not require Encana to obtain GSI’s approval before submitting data to a government board unless the board specifically makes such a request or demand. [ 65 ] GSI quoted from the wrong agreement in its pleadings and written brief.

It plead at para 29 of its Amended Statement of Claim that “In breach of

section 6.3(f)(

i) of the Second PanCanadian Agreement and the EnCana Agreement EnCana and its predecessors submitted GSI data or work products to a government agency, without GSI’s authorization and thereby GSI data or work product was subsequently disclosed and distributed by the government agency to third parties, causing damages and loss of profits to GSI.” GSI plead at para 20 a clause that included that data could be disclosed to government agencies “only if, in the opinion of GSI’s legal counsel, such disclosure is required by law”. GSI conceded in argument that it had mistakenly relied on the wrong agreement.

In the agreements in question, there is no need from an opinion from GSI’s legal counsel. [ 66 ] The correct clause 6.3(f)(

i) reads as follows: 6.3(f)(

i) This Agreement, the Seismic Data and the Reprocessed Seismic Data may be disclosed by the Licensee to federal or provincial government agencies only if, such disclosure is required by Canadian law in effect, from time to time. Only that portion of this Agreement, the Seismic Data and the Reprocessed Seismic Data, which is required to be disclosed under any law or regulation, may be disclosed. The Licensee agrees to immediately inform GSI upon receipt of any request or demand for disclosure made upon the Licensee by a government agency.

GSI shall have the right to dispute such government agency’s right to access the Seismic Data and the Reprocessed Seismic Data at its sole expense and the Licensee shall co-operate with such dispute. In the event GSI specifically prevents disclosure due to a dispute with any governmental agency, GSI shall fully indemnify the Licensee with regard to any direct or indirect costs or liabilities resulting from a delay or termination of disclosure. [ 67 ] The short answer to this part of Encana’s

summary dismissal application is that this part of GSI’s claim is dismissed, since there is no need to seek or obtain GSI’s “authorization” before submitting Seismic Data or Reprocessed Seismic Data to a government agency as plead, therefore there can be no breach.

GSI needs to amend its pleadings if it wants to allege that Encana breached the agreement by submitting data that was not “required by Canadian law”. [ 68 ] Despite the failure in the pleadings, and considering that the parties argued the alternative argument on the correct agreement, I will address the arguments made that the submission of the seismic data was not “required by Canadian law”. [ 69 ] The data submissions in question are various applications for allowable expenditure credits and one seismic

interpretation “report”. There is a dispute in the evidence about whether the applications include any seismic data – Encana says that they do not and GSI suggests that they may, although the evidence it relies on is sketchy in this regard. It is difficult to sort out this dispute since Encana only put one such application into evidence and GSI argues that without full disclosure a determination cannot be made. On the other hand, there is no dispute that the “report” did include an

interpretation of seismic data.

[ 70 ] In my view, the evidentiary dispute about whether the application contained seismic data need not be decided to address Encana’s argument that there is no breach in any event. Encana submits that to the extent the applications included seismic data such submission was “required by Canadian law”. GSI argues to the contrary, that the applications were voluntary, thus not “required by Canadian law”. [ 71 ] Exploration companies like Encana make applications for allowable expenditure credits to recoup portions of deposits that are paid to develop an exploration area.

The costs of obtaining seismic data for exploration purposes is a cost that can be credited against the deposit, so it is part of the ordinary business of exploration companies to make applications showing the amount that was spent on seismic data in the area. [ 72 ] In addition to clause 6.3(f)(i), which allows submission of data to a government agency if “required by Canadian law”, Encana also relies on clause 2.1, which defines the rights upon the grant of a licence to Seismic Data. The licence is granted to use the Seismic Data for the Licensee’s “own business operations”.

In the exploration business, obtaining credits to be applied against deposits made for exploration is an ordinary business operation. [ 73 ] Further, with respect to the report in question, Encana argues that it was required by the Newfoundland Offshore Area Petroleum Geophysical Operations Regulations , SOR/95-334 (the “Regulations” – Appendix A to this judgement) to submit such reports, even though they may contain seismic data.

This is a requirement of the Regulatory Regime that arises as part of the exploration licence granted by government. [ 74 ] At the hearing, GSI made further oral submissions that the Regulations relied upon only apply when seismic data is “purchased” and that they do not apply when the data is merely “licenced”. Encana replied that the meaning of the word “purchase” in the Regulations must include licencing costs.

The NEB sought, and I granted it, leave to file further submissions in writing on this issue. [ 75 ] GSI subsequently took issue with the NEB’s right to make these further submissions on the basis that the NEB did not follow the procedural orders of the case management judge, Chief Justice Wittmann, which specified certain deadlines for submissions and did not expressly allow the NEB to make written submissions in this application even though it was given the right to cross examine the GSI affiant, Mr.

Einarsson (and did so). [ 76 ] These case management orders were not brought to my attention when I ruled on this issue at the end of the two days of oral argument. Upon reviewing these orders now and taking into consideration that GSI added this new argument in its oral submissions, in my view it was fair to permit the NEB to submit a written brief on this narrow issue. GSI was, of course, allowed to respond and did so in writing as well. As a result, I will deal with the arguments made by the NEB, as well as GSI’s reply.

a) Analysis

i) Was Encana’s submission of an application and a report required by Canadian law? [ 77 ] First, with respect to the applications for allowable expenditure credits, I agree with Encana that the law is clear that when the court is interpreting a commercial contract, the commercial purpose of it, the context and the market in which the parties are operating, must be taken into account: Sattva Capital Corp. v Creston Moly Corp. , 2014 SCC 53 at para 47 . [ 78 ] GSI argues that the applications for allowable expenditure credits are “voluntary,” thus not “required by Canadian law”.

The problem with this argument is that it completely ignores the business context in which these agreements operate. It is clearly part of the “business operations” of exploration companies like Encana to apply for these credits.

Indeed, GSI complained in the trial on the Regulatory Regime issue that it was discriminated against because it could not apply for these same credits (an argument that I accepted.) [ 79 ] In my view, for the reasons that follow, to the extent that an application had any seismic data in it (which I doubt but need not determine), Encana was allowed to use the data in this way under its grant of license in the Agreement since the data was being used for its “own business operations.” Further, such submission was “required by Canadian law” to obtain the credits against the deposits it made with the government for exploration licenses. [ 80 ] Second, with respect to the submission of reports (and in particular the one identified in the evidence before me), I agree for the reasons outlined by Encana and the NEB that the submission of these reports was required by the Regulations in question, thus “required by Canadian law”. [ 81 ] Since the report in evidence is one that was submitted to the Canada Newfoundland and Labrador Offshore Petroleum Board (the “CNLOPB”), I will reference the relevant Newfoundland Regulations, the Regulations cited above. (These Regulations are almost identical to those that apply to the NEB and the Nova Scotia Board).

Section 25(5) requires companies like Encana to submit reports: 25(5) Every purchaser of geophysical data that arise from a geophysical operation in an area that is subject to an interest, where the costs of the purchase of the data are credited against deposit or rental requirements of the interest, and every participant shall submit to the Chief Conservation Officer a report that contains all of the information and materials described in paragraphs (1)(

n) to (

q) that have been prepared by or for that purchaser or participant. [ 82 ] The first issue is whether Encana is a “purchaser” of geophysical data. GSI submits that a purchaser of data can only mean a purchaser of the title to the data, not just the rights to the data that are obtained under a license. It argues, in effect, that internal consistency of

section 25 is maintained only if the word “purchase” or “purchaser” is interpreted to mean full purchase not just license. In effect, GSI argues that if an exploration company merely licenses seismic material, then it has no obligation to file a report and the exemption found in section 25(3) (discussed in more detail below) to file the material in subsections 25(1)(

n) to (

q) held by operators who conduct non-exclusive surveys, continues to be maintained. See Appendix A for the full text of

section 25 of the Regulations .

[83] There are many problems with this

interpretation; in particular, I do not accept that this

interpretation coincides with themarket reality in which the parties are operating. Nor does it coincide with the modern approach to statutory

interpretation, whichrequires the words of

an Act to be read in their entire context and in their grammatical and ordinary sense harmoniously with the schemeof the Act, the object of the Act, and the intention of Parliament: Elmer Driedger in Construction of Statutes (2nd ed. 1983) at p 87 asquoted by the Supreme Court of Canada in Re Rizzo & Rizzo Shoes Ltd, (SCC), [1998] 1 SCR 27 at para 21.

Theentire context includes not only the immediate context, but also other legislation that may inform its meaning or the surroundinglegislative and regulatory regime: Reference Re Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC2010-168, 2012 SCC 68 at para 12 and Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 at para 27. [84] First, I turn to the exemption in section 25(3). It reads that an operator who has conducted a “non-exclusive survey” need notprovide the material in subsections 25(1)(

n) to (q). In

section 2 of the Regulations, a “non-exclusive survey” is defined as a“geographical operation that is conducted to acquire data for the purpose of sale, in whole or in part, to the public.” So, unlike what GSIhas argued, there is no need to offer the full title to the seismic data, “part” of a title, or a licence will suffice, in order to take advantageof the exemption. If a licence is sufficient to take advantage of the exemption, then a “purchaser of geophysical data”, to remainconsistent within the meaning of the Regulation, must include a purchaser of “part of” the geophysical data, or, in essence, a licensee toit. [85] This

interpretation of the Regulation also fulfills the purpose of the Regulation, since it continues to exempt the reports frombeing filed only if the operator of the non-exclusive survey, like GSI, does not sell a licence for the data it collected. But if it does sell alicence, then this exemption is lost since the purchaser must file the report. [86] This

interpretation also coincides with the Guidance Note that is published by the Federal Government and administered bythe NEB with respect to reporting requirements.

GSI is right to point out that the Guidance Note does not have the force of law, like aregulation, but it is a useful reference in determining the purpose and consequential analysis of the Regulation. [87] I note that the according to the Guidance Note (at p. 20) a claim for credit must include a copy of the “purchase invoice” and“a copy of the licencing agreement, providing evidence that rights to the data have passed from the original owner to the applicant” and“a map...”.

It is notable that there is no need to show that all rights to the data have been passed or that full title to the data has passed.Indeed, the words “licensing agreement” by themselves connote a licence and not a full purchase. [88] GSI’s other main argument is that the report, like the applications, is voluntary and not required by law. In essence, GSIsubmits that if Encana chose not to seek a credit, then it would not need to file a report. For the same reasons as elucidated above, I do notaccept that this

interpretation makes any contextual sense in the industry and does not meet, in this situation, the modern test forinterpreting statutes. It is reasonable to expect that exploration companies will seek credits for their exploration costs when they can. GSIdid not provide any examples of an exploration company that did not apply for such credits, nor could it likely do so, because it does notfollow common sense business practice.

b) Conclusion [89] In sum, I allow Encana’s

summary dismissal on the breach of agreement plead in the Amended Statement of Claim since, asconceded by GSI, neither the 2011 or 2002 Agreements required GSI’s authority to send material to government authorities. [90] I also accept, in any event, that Encana was “required by Canadian law” to file the applications and report in question. Further,with respect to the applications, it was within the scope of Encana’s license, to use GSI data in its own business operations, whichincludes applications for allowable expenditure credits. [91] I find that Encana did not breach the correct clause 6.3(f)(

i) of the 2001 and 2002 Agreements. Accordingly, in the alternative,even if properly plead, I would allow Encana’s

summary dismissal application on this point as well. 3. Is Encana entitled to

summary dismissal of GSI’s Exploration Groups Claim? [92] Encana’s simple answer to the Exploration Groups Claim, in which GSI seeks indemnification from Encana for allegedExploration Group members Anadarko Canada Corporation and ConocoPhillips Canada Resources Corp., is that these explorationcompanies do not meet the definition of “Exploration Group” in the Agreement. [93] An “Exploration Group” only includes those companies who join together to participate or develop areas or interests “coveredby or within five (5) miles of any Seismic Data or the Reprocessed Seismic Data”.

The area that was the subject of the joint venture hereis more than 25 kms away from the nearest of the Beaufort Material lines. [94] After much to and fro in the briefs, GSI finally conceded at the oral hearing that the Beaufort Material was not within 5 milesof the area of interest. [95] GSI argued that this court should expand the definition of Beaufort Material as plead in paragraph 6 of the AmendedStatement of Claim to include licenced lines in the Beaufort area – not just the material obtained from the NEB.

If I did not accept thissubmission, GSI sought leave to apply for an amendment and suggested that I set out parameters for such an application as the Court ofAppeal did in Zukiwski v Yakmac Investments Ltd, 1999 ABCA 193. [96] I grant Encana’s

summary dismissal application on this portion of GSI’s claim. It is clear that the parties in question are notan “Exploration Group” with reference to the Beaufort Material as plead. Therefore there can be no breach of clause 11.5 of theAgreement as plead. It would be unfair to allow the definition of Beaufort Material to be amended without a proper application. I will notset out parameters for such an application since this action and the other 25 or so GSI actions dealing with alleged misuse of its seismicdata are under case management. I will leave it to the case management judge to manage these next steps.

4. Is Encana entitled to

summary dismissal of all of GSI’s remaining claims? [ 97 ] Encana seeks dismissal of the whole of the action against it. In addition to the contract based claims set out above, GSI has claimed for damages arising from breach of copyright stemming from the use of the unlicensed Beaufort Material and breach of confidence. Both of these claims fall as a result of my reasons in the Common Issue Decision, so

summary dismissal follows from that decision. Conclusion [ 98 ] GSI is entitled to

summary judgment on the liability portion of the Accessed Data Claim because Encana was in possession of the Beaufort Material at the time the 2001 and 2002 Agreements were entered into and failed to notify GSI. This Claim is not barred by the limitation period.

The determination of damages for the breach remains a question for trial. [ 99 ] GSI’s Submitted Data Claim is dismissed because there is no breach as plead, and in any event, Encana had the right to submit reports and data to government agencies pursuant to the Agreements. [ 100 ] Finally, GSI’s Exploration Groups Claim is dismissed since there is no breach of the Agreements as plead. [ 101 ] In sum, I grant Encana’s application to summarily dismiss GSI’s entire claim, except for the Accessed Data Claim. Heard on the 23 rd and 24 th days of February, 2017.

Dated at the City of Calgary, Alberta this 26 th day of July, 2017. K.M. Eidsvik J.C.Q.B.A. Appearances: Timothy C. Platnich, Caron & Partners LLP for the Plaintiff Michael W. McCachen and Lindsay Rowell, Blake Cassels & Graydon LLP for the Defendant Marko Vesely, Lawson Lundell LLP for the National Energy Board Appendix A Newfoundland Offshore Area Petroleum Geophysical Operations Regulations , SOR/95-334,

section 25

Final report 25

(1) Subject to subsection (3), within 12 months after the date of termination of a geophysical operation, every operator shall submit to the Chief Conservation Officer a report that includes (

a) a title page that indicates the number that is assigned to the operation that is the subject of the geophysical operation authorization, the report title, the type of operation conducted, the location of the operation, the duration of operations at that location, the names of the contractors, the operator, the interest owners, if any, as defined in

section 47 of the Act, and the author, and the date of the report; (

b) a table of contents; (

c) an introduction or abstract; (

d) location maps that show the boundaries of the area that is subject to each interest covered by the operation and the identification number of each such interest; (

e) a

summary of significant dates, the number of members of the complement, the number of members of the geophysical crew, the type and number of each type of equipment used, the production data, the total distance surveyed, the downtime per day, and the number of kilometres of data recorded per day; (

f) a

summary of weather, sea and ice conditions and their effect on the operation; (

g) a general description of the operation including the instrument type, the accuracy of the navigation, positioning and survey systems, the parameters for the energy source and recording system and the configuration of the seismic energy source and deployed recording system; (

h) a detailed description of the geophysical data processing method including the processing sequence and the processing parameters for seismic, magnetic, gravimetric and other geophysical surveys; (

i) shotpoint maps, track plots, flight lines with numbered fiducial points, gravity station maps and, for seabed surveys, location maps for core holes, grab samples and seabed photographs; (

j) a fully processed, migrated seismic

section for each seismic line recorded and, in the case of a 3-D survey, each line generated from the 3-D data set; (

k) a high-resolution

section for each line recorded in a well-site seabed survey or a pipeline route survey; (

l) a series of gravity and magnetic profiles across all gravimetric and magnetic surveys for which interpretative maps have not been made; (

m) shotpoint location data; (

n) bathymetric maps that are compiled from the data collected;

(

o) interpretative maps that are appropriate to the data collected including (

i) structure and isopach maps, time structure and time interval maps, velocity and residual velocity maps, and seismic amplitude and character change maps, (ii) final Bouguer gravity maps and any residual or other processed gravity maps, and (iii) final total magnetic intensity contour maps and any residual, gradient or other processed magnetic maps; (

p) synthetic seismograms and seismic modelling studies that use synthetic seismograms, vertical seismic profiles at wells that were used in the

interpretation of the operation data, amplitude versus offset studies, and seismic inversion sections, if any; and (

q) the

interpretation of maps and seismic sections including (

i) geological and geophysical correlations, (ii) where applicable, correlations between gravity, magnetic and seismic data, (iii) in the case of seabed surveys, the geophysical correlation of shallow seismic data with data from cores and geotechnical boreholes, (iv) details of corrections or adjustments that were applied to the data during processing or compilation, and (

v) the operator's velocity information that was used in a time-to-depth conversion.

(2) An operator shall incorporate in a map submitted pursuant to paragraph (1)(

o) any previous data collected by the operator that are related to the area covered by the map and that are of a type similar to the data from which the map was produced.

(3) An operator who has conducted a non-exclusive survey need not, in the report required by subsection (1), provide the information and materials described in paragraphs (1)(

n) to (

q) in respect of data that are available for purchase by the public.

(4) Where an operator who has conducted a non-exclusive survey ceases to make available for purchase by the public any data from that survey that were so available, the operator shall, within 12 months after the date on which the operator ceased to make the data available, submit to the Chief Conservation Officer a supplementary report that contains the information and materials described in paragraphs (1) (

n) to (

q) in respect of the data, unless the Chief Conservation Officer has received a report pursuant to subsection (5) that includes such information and materials.

(5) Every purchaser of geophysical data that arise from a geophysical operation in an area that is subject to an interest, where the costs of the purchase of the data are credited against deposit or rental requirements of the interest, and every participant shall submit to the Chief Conservation Officer a report that contains all of the information and materials described in paragraphs (1)(

n) to (

q) that have been prepared by or for that purchaser or participant.

(6) Where a purchaser of geophysical data that arise from a geophysical operation in an area that is subject to an interest has reprocessed the data and the costs of the reprocessing are credited against deposit or rental requirements of the interest, the purchaser shall submit to the Chief Conservation Officer a report that contains the information and materials described in paragraphs (1)(a), (h), (

j) to (

l) and (

o) to (

q) that have been prepared in respect of the reprocessed data by or for the purchaser.

(7) The reports required by subsections (5) and (6) shall be submitted (

a) in the case of a participant, within 12 months after the date of termination of the geophysical operation; and (

b) in the case of a purchaser, by the time the costs referred to in subsection (5) or (6) are credited.

(8) A person who has submitted a report referred to in this

section shall, in respect of data that pertain to the location of shotpoints or stations, immediately notify the Chief Conservation Officer of any errors, omissions or corrections identified in or made to the data subsequent to the submission of the report.

(9) A report referred to in this

section shall be submitted in the form, manner and quantity approved by the Chief Conservation Officer.