Savanna Well Servicing v Cleo Energy, 2022 ABKB 769

Court of King’s Bench of Alberta Citation: Savanna Well Servicing v Cleo Energy, 2022 ABKB 769 Date: 20221121 Docket: 1701 13016 Registry: Calgary Between: Savanna Well Servicing Inc. and Fort McKay – Savanna Energy Services Limited Partnership Plaintiffs - and - Cleo Energy Corp. Defendant _______________________________________________________ Reasons for Decision of Applications Judge J.T. Prowse _______________________________________________________ [ 1 ] The plaintiffs provided well services to the defendant for which they have not been paid. They bring this application for

summary judgment and to summarily dismiss Cleo’s counterclaim. [ 2 ] Cleo says it has never refused to pay the plaintiffs for the services provided, but that the plaintiffs’ invoices exceed what was agreed by the parties and are unreasonably high. However, rather than Cleo paying what Cleo considers a reasonable amount, Cleo has paid nothing. [ 3 ] Cleo raises a number of defences. [ 4 ] On a

summary judgment application the onus is not on Cleo to establish those defences. Rather the onus is on the plaintiffs to show that there is no defence and that the evidentiary record is sufficient to achieve a fair result: Weir-Jones Technical Services Incorporated v. Purolator Courier Ltd. , 2019 ABCA 49 , 2019 CarswellAlta 204 at para 47 .

[5] In my view, the plaintiffs have shown that there is no defence to their claim and no triable issues, and they are entitled tosummary judgment. [6] Cleo’s primary defence is based on pre-contractual misrepresentations said to have been made by Savanna, primarily withrespect to the speed with which Savanna would carry out the work. [7] Assuming (for this

summary judgment proceeding) that such misrepresentations were made by Savanna, this does not raise atriable issue because Savannah and Cleo entered into a standard written industry contract which precludes either party to the contractfrom relying on such unwritten statements. [8] The contract provided as follows: Each Services Agreement shall constitute the entire agreement between Operator [Cleo] and Contractor [Savanna] in connection with thesubject matter thereof and shall supercede all prior agreements, arrangements, negotiations, representations or understandings by orbetween them, whether written or otherwise.

No amendment to this Master Well Service Contract or to any Services Agreement made hereunder shall be effective or binding upon theparties hereto (except modifications requested by the Operator [Cleo] and subsequently confirmed in writing) unless it is set forth inwriting band duly executed by each of the parties hereto. [9] This exact same defence (unwritten pre-contractual representations) under the exact same contract was reviewed in HorizonResource Management Ltd. v.

Blaze Energy Ltd., 2011 ABQB 658, 2011 CarswellAlta 1914, where the Court held as follows: 155 Blaze alleges that Roll'n made a number of pre-contractual negligent misrepresentations to Blaze regarding the similarity of theBlaze re-entry to previous reentries Roll'n had conducted, the capability of Rig 4 to conduct the Blaze operations, and the experience andqualifications of the Roll'n crew to conduct the Blaze operations.

It argues that these alleged negligent misrepresentations induced Blazeto enter into the MWS Contract and that Blaze suffered damages as a result. 353 The more generally-accepted principle appears to be that where there is a clause that provides that there are no otherrepresentations other than those in the written contract, a claim for negligent misrepresentation will fail, especially when the contract isbetween two sophisticated commercial parties … [10] When the Horizons decision was reviewed by the Alberta Court of Appeal at 2013 ABCA 139, 2013 CarswellAlta 446, theCourt (at para 47) noted: The Master Well Service Contract contained an entire agreement clause.

Clause 17.1 provided, "Each Service Agreement shall constitutethe entire agreement between Operator and Contractor in connection with the subject matter thereof and shall supersede all prioragreements, arrangements, negotiations, representations or understandings by or between, whether written or otherwise." Blaze submittedthat the clause did not exclude liability for the tort of negligent misrepresentation, because it did not expressly address liability for tort.The trial judge concluded that entire agreement clauses need not expressly exclude liability in tort in order to exclude an action innegligence: see Carman Construction Ltd. v.

Canadian Pacific Railway, (SCC), [1982] 1 S.C.R. 958, 136 D.L.R. (3d)193 (S.C.C.) and Gainers Inc. v. Pocklington Holdings Inc., 2000 ABCA 151 (Alta. C.A.) at para 16, (2000), 255 A.R. 373 (Alta. C.A.).His conclusion was correct. [11] The written contract in question was between sophisticated commercial entities.

Astoundingly, in that circumstance, Cleo’sdeponent takes a position almost approaching non est factum when he deposes: [the representatives of Savanna] subsequently verbally indicated to myself [and another Cleo representative] they would personallyensure that the representations and further representations would be implemented within the agreement between Cleo and Savanna. [12] But of course the representations are nowhere to be found in the contract, and the contract says that it supercedes all priornegotiations. Did Cleo’s deponent not read or understand the contract?

And, if so, does that mean Cleo is not bound by its terms? Whatis the point of having a written contract between two commercial entities if its provisions are ineffective if one party did not read orcomprehend its clear provisions? [13] Further, it is noteworthy that the contract between the parties was for daily services only.

If Savanna’s performance was poorand inefficient (as asserted by Cleo and its expert witness – I will comment on that later in these reasons) and/or less than promised inpre-contractual discussions, all that Cleo had to do was to stop using Savanna’s services. [14] While I am obliged to accept (for the purposes of this application) that Savanna made the alleged unwritten representations asto the speed with which it would carry out the work, no such promise was included in the written contract between the parties. [15] Nor is there any written (email, text etc.) complaint by Cleo, while the work was being done, that Savanna was not living upto its alleged representations as to the pace of work being done.

The one written complaint provided by Cleo did not raise Savanna’s paceof the work. [16] Cleo ultimately decided not to carry on the daily assignment of work to Savanna (and brought in Precision Drilling tocomplete the work), but prior to that Cleo’s well supervisors daily signed off on the work being provided by Savanna. Cleo continued touse Savanna’s services, knowing the pace at which it was being done, until invoices totaling $605,867 were rendered.

As stated, none ofthe invoices have been paid. [17] After this considerable work was done by Savanna and unpaid, Cleo now brings forth an expert witness, with a report datedfive years later, who deposes that Savanna was disorganized and inefficient in carrying out the work. Surely this is something that wouldhave been obvious to Cleo’s well supervisors, who daily signed off on the work and daily called for ongoing work to be done the next

day, until Savanna had provided 1,037 hours of (unpaid) work. Cleo would obviously have known that Savanna was not completing two wells per rig per day, which it alleges had been promised. [ 18 ] In his responsive affidavit, Cleo’s deponent pointed to a statistical analysis showing that Precision Drilling completed far more wells per day than Savanna. However, during submissions, counsel for Savanna pointed out that Savanna’s performance was being evaluated by looking to four hour days while Precision’s performance was being evaluated by looking to ten hour days.

Needless to say this showed Precision completing more wells per day. When the figures are adjusted for an ‘apples to apples’ comparison, the number of wells being completed per day was almost identical. [ 19 ]

Section 8.2 of the contract between the parties provides that Cleo could dispute any invoices by written notice within 30 days of receiving the invoice. Cleo provided only one written notice that it was disputing charges of $19,114 (the dispute did not raise the pace of the word), and Savanna is not seeking

summary judgment for that amount. [ 20 ] As Savanna’s invoices (other than the $19,114) were not disputed within the 30 days set forth,

section 8.2 applies, which states: Operator [Cleo] expressly releases Contractor [Savanna] in respect of any claim not communicated to Contractor [Savanna] by Dispute Notice timely delivered and waives any claim it may have against Contractor [Savanna] in respect thereof . (emphasis added) [ 21 ] This provision seems designed to avoid the current scenario, in which Cleo brings forth an expert witness report, contesting the pace and efficiency at which work was done, five years after the work was done.

Under the contract, complaints were to be brought forward within 30 days of the receipt of invoices, presumably so that they could be addressed while witnesses were available and memories not yet faded by the passage of time. [ 22 ] The result of Cleo not bringing forth its complaints on a timely basis, as quoted above, is that Cleo waives any claim it may have against Savanna in respect thereof. This is an entirely separate ground (than the entire agreement clause) for concluding that there is no defence to Savanna’s claim.

The claims of Fort-McKay-Savanna Energy Services Limited Partnership (“Fort McKay partnership”) [ 23 ] It is true that Cleo’s contract was with Savanna Well Servicing Inc. and not the Fort McKay partnership. [ 24 ] Savanna’s deponent gives this description of the background to why some of the work in question was done by the Fort McKay partnership: Fort McKay-Savanna was one of nine aboriginal partnerships with Savanna Energy Services Corp. (the then parent company of Savanna Well Servicing Inc.).

Fort McKay-Savanna was formed on August 26, 2013 as a limited Alberta partnership between subsidiaries of the Fort McKay First Nation and subsidiaries of Savanna Energy Services Corp. The original purpose of the limited partnership was to encourage relations with the Fort McKay First Nation and provide oilfield services (including drilling, well servicing and rentals) in Fort McKay First Nation's traditional area.

When such service work was not available in the Fort McKay First Nation's traditional area, Fort McKay-Savanna requested that Savanna use the partnership equipment for projects elsewhere in Alberta. [ 25 ] The written proposal which Savanna submitted to Cleo contained the following paragraph: ABORIGINAL INVOLVEMENT Savanna has nine partnerships with First Nation communities across Alberta whose communities have traditional lands that expand into British Columbia and Saskatchewan.

These partnerships provide both economic and employment benefits to the community and provide opportunities for the community to invest in a piece of equipment and a long-term partnership with a reputable service provider. Savanna makes a best efforts commitment to all of our partners to train and employ community members, and we believe we have been successful in doing so. At present, Savanna has approximately 38 employees of Aboriginal decent working in both field and office positions.

Savanna is proud to be an active participant in the Aboriginal community, as wells as a member of the Canadian Council for Aboriginal Business and full member of the Northeastem Alberta Aboriginal Business Association. [ 26 ] Underneath the above paragraph was a chart indicating that Savanna had a partnership with the Fort McKay First Nation involving two drilling rigs, two service rigs and rental equipment. [ 27 ] Cleo was given the particulars of rig #42 in Savanna’s bid, although not the fact that rig #42 was owned by the Fort McKay partnership.

That would have become apparent, however, when invoices were first provided to Cleo in early March of 2017.

The invoices for rig #42 were in the name of the Fort McKay partnership. [ 28 ] The contract between Savanna and Cleo provided as follows with respect to use of equipment or crews of another party, such as the Fort McKay partnership: 8.1 – Upon completion of well services pursuant to a services work order, Contractor [Savanna] shall submit an itemized invoice to Operator [Cleo], prepared in accordance with the items of the applicable services work order, for all equipment, materials, supplies and labour furnished and services rendered and shall include with such statement copies of all third party invoices in regard to the equipment, supplies, labour or services covered by the statement together with all applicable receipts. (emphasis added) [ 29 ] While the Fort McKay partnership invoices should have been provided as an attachment to a Savanna invoice, I do not think this provides Cleo with a defence to the amount claimed, which should be paid to Savanna as a third party invoice pursuant to

article 8.1.

Cleo’s counterclaim [ 30 ] Cleo counterclaims for defamation. Particulars of the defamatory statements were sought by Savanna and some particulars were provided. The gist of the allegedly defamatory communications made by Savanna were that Cleo was a business that refused to pay for services provided. This statement is true. [ 31 ] Cleo’s evidence is to the effect that the charges of Savanna were roughly double what it expected pursuant to the alleged pre- contractual representations, but Cleo has refused to pay anything for the services provided.

As a result of the truth of the statements to the effect that Cleo was refusing to pay for services provided, the counterclaim should be summarily dismissed. [ 32 ] If I had not dismissed the counterclaim I would have exercised my discretion under rule 1.4(2) to direct that the counterclaim proceed separately and not delay the advancement of Savanna’s liquidated claim in debt. It would be unjust to delay Savanna’s obtaining of a judgment in debt for services rendered pending trial of the counterclaim. Judgment I grant Savanna the

summary judgment claimed, including interest at 18% per annum (as provided in the contract) from 30 days following provision of each invoice until the date of this judgment, and thereafter under the Judgment Interest Act . Costs [ 33 ] If the parties cannot agree on the costs outcome of this decision, they may make written submissions in that regard. Heard on the 20 th day of October, 2022 and the 16 th day of November, 2022. Dated at the City of Calgary, Alberta this 21 st day of November, 2022. A.J.C.K.B.A. Appearances: Shannon Hayes Lawson Lundell LLP for the Plaintiffs Jennie Buchanan Lawson Lundell LLP for the Plaintiffs Ram Sankaran Gowling WLG (Canada) LLP for the Defendant