Signalta Resources Limited v Canadian Natural Resources Limited, 2021 ABQB 867

Court of Queen’s Bench of Alberta Citation: Signalta Resources Limited v Canadian Natural Resources Limited, 2021 ABQB 867 Date: 20211102 Docket: 1001 17217 Registry: Calgary Between: Signalta Resources Limited Plaintiff - and - Canadian Natural Resources Limited Defendant _______________________________________________________ Reasons for Decision of the Honourable Justice E.J. Sidnell _______________________________________________________ Introduction [ 1 ] This decision was delivered orally on October 27, 2021.

Only minor editorial edits for readability have been made, together with the inclusion of citations and quotations. There have been no changes made to the substance of my oral decision. [ 2 ] This action relates to a claim by Signalta Resources Limited (SRL), who holds the petroleum and natural gas rights in the Waseca formation in the Frog Lake area in Alberta, against Canadian Natural Resources Limited (CNRL), who holds the heavy oil rights in the same formation. SRL claims that CNRL has produced SRL’s gas in CNRL’s oil wells.

[ 3 ] At the conclusion of SRL’s case, it presented numerous read-ins as part of its evidence, including read-ins which consisted of undertakings and responses to undertakings. CNRL objected to five of the undertaking read-ins. These objections fall into two categories: firstly, CNRL sought to clarify its response to its response to one undertaking; and, secondly, CNRL sought to replace its original undertaking response by substituting a different response. [ 4 ] This decision relates to CNRL’s objection to SLR’s read-ins. Background [ 5 ] This action was commenced on November 19, 2010. Initially, Mr.

Trevor Kratz was appointed as the corporate representative for CNRL. Mr. Kratz was questioned on four occasions: April 11, 2014, November 21, 2014, July 29, 2015 and February 24, 2017. During the questioning, in addition to the questions he answered on the record, Mr. Kratz accepted, and responded to 294 undertakings. [ 6 ] This matter was originally set for trial commencing June 17, 2019. However, the trial was adjourned and rescheduled for April 2020, due to the unavailability of one of SRL’s witnesses.

The Covid-19 pandemic interrupted civil trials in Alberta in early 2020 and the trial was once again adjourned and finally commenced on October 18, 2021. [ 7 ] In the intervening period, counsel for CNRL says that Mr. Kratz retired. SRL took the opportunity to question Mr. Kratz’s replacement, Mr. Jeff Bergeson. When Mr. Bergeson replaced Mr. Kratz, SRL did not question Mr. Bergeson as to why Mr. Kratz was no longer with CNRL or why Mr. Bergeson was chosen to replace him. Counsel for SRL says that it had no reason to question the replacement of Mr.

Kratz as corporate representative. [ 8 ] Counsel for CNRL says that Mr. Bergeson retired on June 30, 2021 and that Mr. Jerry Harvey was appointed as corporate representative in September 2021. [ 9 ] There is no affidavit evidence regarding Mr. Kratz’s retirement, Mr. Bergeson’s retirement or the appointment of Mr. Harvey’s as CNRL’s current corporate representative. However, counsel for CNRL is an officer of the court and for the purposes of this application I am prepared to accept his submissions in relation to the retirement and replacement of CNRL’s corporate representatives. [ 10 ] In relation to Mr.

Kratz’s responses to undertakings, counsel for CNRL says that during the adjournment of the trial, CNRL obtained additional information pertinent to two of Mr. Kratz’s undertakings and provided that additional information to counsel for SRL on April 14, 2021. SRL did not indicate any objection to those amended undertaking responses. [ 11 ] In addition, counsel for CNRL says that Mr. Harvey reviewed the materials produced by the parties in the action to prepare himself for trial and to fulfil his duties as a corporate representative. That review included Mr. Kratz’s responses to the 294 undertakings.

Counsel for CNRL says that, in his review, Mr. Harvey noted several undertaking responses which he believed required explanation or clarification. On October 13, 2021, five days before the trial began, CNRL provided to SRL its additional amended undertaking responses. The five undertaking responses that are in issue in this application were included in the amended undertaking responses provided on October 13, 2021.

Applicable rules [ 12 ] This application engages several rules in the Alberta Rules of Court , Alta Reg 124/210, including the following: 5.4(1) Unless the Court otherwise orders, every corporation that is a party must appoint a corporate representative.

(2) Corporate representatives must (

a) inform themselves of relevant and material records and relevant and material information before being questioned under this Division, (

b) if questioned under this Division, bring to the questioning any records likely to be required in respect of which there is no claim of privilege, and (

c) give appropriate evidence of the relevant and material records and relevant and material information.

(3) The corporate representative’s evidence is evidence given by the corporation. . . . 5.17

(1) A party is entitled to ask the following persons questions under oath about relevant and material records and relevant and material information: . . . (

b) if the party adverse in interest is a corporation, . . . (ii) the corporate representative; . . . 5.27

(1) A person who is or has been questioned must, by affidavit, correct an answer if (

a) the answer was incorrect or misleading, or (

b) the answer becomes incorrect or misleading as a result of new information.

(2) The correcting affidavit must be made and served on each of the other parties as soon as practicable after the person realizes that the answer was or has become incorrect or misleading. 5.29(1) The evidence given by a corporate witness during questioning may not be read in as evidence at trial unless a corporate representative of the corporation, under oath, acknowledges that the evidence forms some of the information of the corporation. . . . 5.30(1) If, during questioning, a person answering questions (

a) does not know the answer to a question but would have known the answer if the person had reasonably prepared for questioning, or if as a corporate representative the person had reasonably informed himself or herself, or (

b) has under the person’s control a relevant and material record that is not privileged, the person must undertake to inform himself or herself and provide an answer, or produce the record, within a reasonable time. . . . 5.31(1) Subject to rule 5.29 , a party may use ... at trial as against a party adverse in interest any of the evidence of that other party in a transcript of questioning under rule 5.17 or 5.18 . . .

(3) If only a portion of a transcript or a portion of the answers to the written questions is used, the Court may, on application, direct that all or each other portion of the transcript or answers also be used if all or any other portion is so connected with the portion used that it would or might be misleading not to use all or any other portion of the transcript or other answers. Disputed undertaking responses [ 13 ] CNRL takes issue with five undertaking responses which SRL seeks to read-in. I will address the responses to undertakings using the two categories noted above.

Clarification of undertaking response [ 14 ] The disputed undertaking response clarification is as follows: Undertaking 127 Q To confirm that the 14-33-56 well was shut in in December 2010 until September 2011, and was completed in the upper Waseca in May 2011.

Original Undertaking Response: Yes Amended Undertaking Response: The 14-33-56 well was shut in on October 2010, recompleted in May 2011, and put back on production in August 2012. [ 15 ] SRL says that it only objects to the last portion of the amended undertaking response, that being the words “and put back on production in August 2012”. [ 16 ] SRL submits that the test to determine whether CNRL can clarify its response to Undertaking 127 must be considered in the context of Rule 5.31(3) and, in particular, the ability of the Court to direct more context to be included if “any other portion is so connected with the portion used that it would or might be misleading”.

SRL submits that if the undisputed portion of the undertaking response is not misleading, then the portion objected to ought not to be permitted to be used to clarify the read-in. SRL also relies on 410675 Alberta Ltd v Trail South Developments Inc , 2011 ABQB 151 and Annett v Enterprise Rent-A-Car Canada Ltd , 2019 ABQB 734 , where Rule 5.31 was invoked to limit read-ins. [ 17 ] Often, Rule 5.31(3) is used to argue that an additional portion of a transcript or undertaking should be read-in to provide more context so that the original read-in is not misleading.

In this application, the argument is the other side of that same coin. SRL submits there should be less context because a portion of the clarified undertaking response goes beyond what was asked in the undertaking and should not be permitted to clarify that undertaking response. [ 18 ] Neither CNRL nor SRL explained how this additional information could be, or would not be, misleading. That is perhaps because there has been no opportunity to cross-examine CNRL on the clarification to Undertaking 127.

Although SRL presented its argument on the disputed undertakings by categorizing them as between the clarified undertaking response and the amended undertaking responses, it is my view that both categories must be first considered in the process analysis, discussed below, specifically, the steps that must be taken to amend a response to an undertaking. In this case, the proposed clarification of Undertaking 127 is resolved by the analysis below and I do not need to address the argument about misleading evidence.

Undertaking responses amended by substituting a different response [ 19 ] As can be seen in the amended undertaking responses to the following four undertakings, the amendments proposed by Mr. Harvey change the evidence given by Mr. Kratz:

Undertaking 49 Q To inquire as to whether, as at 2007, CNRL had performed any analysis of solution gas or volumes of solution gas and the rates of production of gas from other wells in the Fishing Lake area. Original undertaking response: It was likely not done as it is not the normal practice to conduct such work on a heavy oil well. Amended undertaking response: CNRL conducts ongoing analysis of production and reviews reserves on an annual basis. While the primary focus of the analysis is on oil reserves and production, analysis of gas reserves and production is included in the assessment.

Undertaking 86 Q To confirm whether anyone at CNRL, between 1999 and 2010, investigated or raised any concerns that high-producing GORs would be depleting the gas drive mechanism for the wells. Original undertaking response: It is not our practice to monitor GOR on heavy oil wells and we did not monitor it on this well. No concerns were raised internally on this well. Amended undertaking response: CNRL monitors gas production and the 4-4 well was shut in; however, there were no improvements observed at the other wells to suggest the 4-4 well had to remain shut in.

Undertaking 105 Q To confirm, with respect to all of the wells in the Fishing Lake area, whether the high GORs prompted any analysis or investigation at any time by CNRL. Original undertaking response: We do not generally monitor the GOR on a well and we did not on this well. No concerns were raised internally on this well. Amended undertaking response: The Area Production Engineer and Exploitation Engineer would periodically examine gas production and GOR. Concerns were not raised by these engineers.

Undertaking 148 Q To determine and advise as to what specific investigations, if any, were conducted by CNRL between April 2010 and November 2010 in relation to the issue of production of native gas; and if there was any analysis or investigation done, to produce same. Original undertaking response: No investigations were done. Amended undertaking response: CNRL examines the production as well as the logs. CNRL’s production aligned with the expectations for heavy oil wells. Accordingly, CNRL did not believe that non-solution gas was being produced.

Requirements for correcting evidence [ 20 ] At trial, evidence can be entered by different methods and Rule 5.29(1) permits evidence given by a corporate witness to be read-in where the corporate representative, under oath, acknowledges the evidence as the evidence of the corporation. In this application, Mr. Kratz was the corporate representative, the person providing evidence and he acknowledged under oath that it was the evidence of the corporation. Under Rule 5.4(3), Mr. Kratz’s evidence is the evidence of CNRL.

Rule 5.30(1) provides for undertakings to be given during questioning and these undertakings are part of the questioning which is given under oath. Responses to undertakings can be the subject of cross-examination and a transcript can be produced. Allowing read-ins from testimony or responses to undertakings at trial contributes to trial efficiency and at the same time maintains the reliable evidence safeguard by requiring such evidence to be given under oath. [ 21 ] The corporate representative has an obligation under Rule 5.4(2) to be reasonably prepared to answer questions on behalf of the corporation. Mr.

Kratz answered questions on the record and 294 undertakings, all of which were given under oath. [ 22 ] However, even the most honest and hardworking corporate representatives can make errors or come across information that

brings into question an earlier answer to a question or undertaking. In that case, under Rule 5.27(1), the corporate representative mustcorrect the initial answer if that answer was incorrect or misleading, or becomes incorrect or misleading as a result of new information.This correction must be made by affidavit which is served on each of the other parties as soon as practicable after the person realizes thatthe answer was, or has become, incorrect or misleading. Requiring affidavit evidence maintains the safeguard of evidence being givenunder oath.

Requiring the affidavit to be produced as soon as practicable avoids ambush at trial. Upon receipt of the affidavit correctingthe earlier evidence, the opposing party has the opportunity to cross-examine the corporate representative to delve into the reasons whythe evidence changed, who was involved in identifying the changes to the evidence, how it changed and when the corporation knew itchanged.

Depending on the case, these may be critical lines of enquiry. [23] If Rule 5.27 is not complied with, and there is no affidavit setting out the corrections to the earlier evidence, the opposingparty loses the opportunity to cross-examine the corporate representative on the changes to the evidence and may be prejudiced. Partiesare entitled to rely on evidence from questioning in preparation for trial and to read-in that evidence at trial. [24] In this case, the parties have been ready to proceed to trial for more than two years.

Five days before trial was set to begin,CNRL issued corrections to the evidence which SRL relied on, and, if those corrections are permitted, SRL will lose its evidence withoutknowing the reasons for the changes. While this situation may not be indicative of purposeful ambush at trial, the result is clearlyprejudicial to SRL. I find that it does not matter whether the evidence SRL seeks to rely on evaporates on the eve of trial as a result of acorporate officer being highly diligently, as CNRL asserts that Mr. Harvey is being, or as a result of nefarious or obstructionist actionstaken by an opposing party.

In either scenario, the party receiving corrected evidence, without an affidavit pursuant to Rule 5.27(1), isprejudiced by not having the opportunity to cross-examine the affiant on the changes to the evidence and by being put in the position ofnot having the evidence that it planned to rely on at trial.

In certain cases, last-minute changes to evidence, even if corrected by anaffidavit pursuant to Rule 5.27(1), could entirely derail a trial. [25] CNRL asserts that Rule 5.27(1) states that a “person” must file an affidavit under Rule 5.27(1) and that since a “person” canbe a corporation, and the corporate representative is giving evidence on behalf of a corporation, that the corporation can provide therequired affidavit. There is no definition of “person” in the Rules. The definition of “corporate representative” is “a person appointed asthe representative of a corporation under rule 5.4”.

Clearly, the reference to “person” in Rule 5.27(1) means an individual as acorporation cannot be the corporate representative of a corporation under Rule 5.4. As a result, the “person” referred to in Rule 5.27(1)means the person who gave the evidence under oath in the first place, in this case, Mr. Kratz. If Mr. Kratz is no longer available to makea correcting affidavit, then that would have to be addressed, but that was not asserted in this case. [26] Regardless of how Rule 5.27(1) is to be interpreted, there was no affidavit setting out the corrections to CNRL’s evidence.

Asa result of CNRL failing to follow the Rule 5.27(1), SRL had no opportunity to cross-examine on the corrections to the evidence that itrelied on. The prejudice created by CNRL’s non-compliance with Rule 5.27(1) can only be overcome by disallowing the amendedresponses to undertakings. As a result, SRL is permitted to read-in the original responses to undertakings and rely on them as part of itsevidence in this trial, without any reference to the amendments. [27] Counsel for SRL noted the Ontario decision in Capital Distributing Co v Blakey (1997), (ON SC), 33 OR(3d) 58 (ONSC), which arose on a

summary judgment application by the plaintiff. The defendant sought to change his answers alreadygiven. Greer J found that it would be appropriate to permit the changed answers to be evidence, but also found that the original evidencehad to also remain as part of the record, and said: ... Holmested and Watson in Ontario Civil Procedure (Toronto: Carswell, 1984), vol. III, comments on the application of rule 31.09 at p.31-111 as follows: While the writing may be treated at a hearing as if it formed part of the original examination, it should not be treated as eradicating theanswers originally given.

By merely correcting or supplementing his or her answers a party should not be entitled to hide the fact that ontwo separate occasions he or she gave two different accounts, or to remove an admission already made. ... [28] In Capital Distributing Co, the wording of the relevant Ontario rules considered in that case are different than the Ruleswhich apply to this application. However, the greatest distinguishing feature is that the plaintiff argued that prejudice would arise if theoriginal response was not read-in along with the corrected response.

That position is distinguishable from this application where I havefound that allowing the amended undertaking responses, presented without affidavit evidence of the corporate representative who gavethe initial answers relied upon, and provided days before trial, would prejudice SRL. [29] I make no ruling on what evidence CNRL can present relating to the amended undertaking responses as part of its case as thatis not yet before me. Heard on the 26th day of October, 2021. Delivered orally on the 27th day of October, 2021. Dated at the City of Calgary, Alberta this 2nd day of November, 2021. E.J. Sidnell J.C.Q.B.A.

Appearances: Randall W. Block QC, David T. Madsen QC, Chidinma B. Thompson and Colin LaRoche for the Plaintiff G. Scott Watson, Shannon Kelley and Christiana Hadzoglou for the Defendant