CHRISTOPHER CURRY Plaintiff - v. -, 2022 SKKB 221

KING’S BENCH FOR SASKATCHEWAN Citation: 2022 SKKB 221 Date: 2022 09 30 Docket: QBG-SA-01102-2009 Judicial Centre: Saskatoon ___________________________________________________________________________ BETWEEN: CHRISTOPHER CURRY Plaintiff - and - ATHABASCA RESOURCES INC., CSIT CONSULTING INC. and RUBY ENERGY INC. Defendants Counsel: Jordan P. Hardy, K.C. for the plaintiff Gregory A. Thompson, K.C., and Nikita Rathwell for the defendants ___________________________________________________________________________ JUDGMENT ELSON J. September 30, 2022 ___________________________________________________________________________ Introduction [ 1 ] There are two

summary judgment applications before the Court, both brought pursuant to Rule 7-2 of The Queen’s Bench Rules . The defendants served and filed the first application, seeking dismissal of the plaintiff’s action. The plaintiff has responded with his own application, seeking judgment against the defendants amounting to more than $400,000. [ 2 ] The central focus of this action is the existence, or not, of a 2006 contractual arrangement between the plaintiff and the defendants for exploration geology services in the Saskatchewan oil and gas industry.

The plaintiff, who works both as a firefighter and a professional geologist, had performed contract-based services for the defendants in 2005. He asserts that in 2006, the nature of the arrangement changed based on a proposal he had sent to the principal of the defendants in response to her invitation to do so. The plaintiff posits that the new arrangement called for him to perform a variety of tasks that were well beyond the scope of work he had done previously.

In return for these services, the plaintiff says the agreed-upon compensation included an hourly fee plus a royalty arrangement described as a “gross overriding royalty”, colloquially known as a [GORR]. [ 3 ] The defendants, on the other hand, deny that the initial contractual arrangement evolved in the manner asserted by the plaintiff. They maintain that the initial arrangement simply continued throughout 2006.

Moreover, they expressly deny any agreement for compensation that would include any form of royalty, such as a GORR. [ 4 ] For the reasons that follow, I am satisfied that the plaintiff’s action must be dismissed. Although I have serious misgivings about the manner in which the principal of the defendant companies conducted herself in 2006, I cannot find that a contract of the kind described by the plaintiff was unequivocally accepted.

I am also satisfied that even in the absence of this new contract, the existing contractual relationship between the parties afforded sufficient juristic reason to deny the plaintiff’s claim for restitution based on his alternative claim for unjust enrichment. Background Evidence The Parties [ 5 ] The Court received five affidavits, four filed on behalf of the plaintiff and one filed on behalf of the defendants. The two central affidavits were deposed by the plaintiff and Danyaun (Dawn) Zhou, the principal of all three corporate defendants.

It is the communication between these two deponents, and their subsequent conduct, that informs the existence, or not, of the alleged contract. [ 6 ] The evidence discloses that the plaintiff is a firefighter with the Regina Fire Department [RFD]. While working with the RFD, the plaintiff attended the University of Regina, where he obtained a Bachelor of Science degree in geology in 1988. In or around 1990, the plaintiff started a geological consulting business as a sole proprietorship. He continues to carry on that endeavour.

[ 7 ] Meanwhile, Ms. Zhou immigrated to Canada from China in 1989. She also has training in geology, receiving a Master of Science in that field in 1988. Since moving to Canada, she also completed accounting courses from the University of Saskatchewan and became a certified general accountant in 1999. [ 8 ] Ms. Zhou had been active in the operation of all three corporate defendants. At the material time, she remained actively involved in two of them. Athabasca Resources Inc. [Athabasca] was incorporated in the summer of 2005. According to Ms.

Zhou, Athabasca’s purpose was to pursue investment in Saskatchewan natural resource projects. Eventually, the company became more involved in leasing and permits related to oil and potash in southern Saskatchewan. Athabasca is no longer in business and was struck from the Saskatchewan Corporate Registry in or about January 2008. Ms. Zhou served as a director of the company during its existence. [ 9 ] CSIT Consulting Inc. [CSIT] was incorporated in early 1993 primarily to provide accounting services for small business. It eventually transitioned to resource investment in the mid-2000s. Ms.

Zhou has been and remains a director of CSIT throughout its corporate life. [ 10 ] Ruby Energy Inc. [Ruby] was incorporated in the summer of 2006. Its principal purpose was to take over oil leases originally pursued by Athabasca. Ms. Zhou deposed that Ruby remains active in the oil resources sector in Saskatchewan and that she has been its president throughout. [ 11 ] The details of the connection between Athabasca and Ruby were not made as clear as they could have been. I suspect this is the reason the plaintiff named all three companies in this action.

That said, it is apparent that while Ruby may not have been a true corporate successor to Athabasca, it was an operational successor in the sense that the two operations blended with each other. Accordingly, when I refer to the entities with whom the plaintiff contracted, I will not distinguish between the two. Rather I will reference them as [Athabasca/Ruby]. Relationship between the plaintiff and Athabasca/Ruby in 2005 [ 12 ] As mentioned, the parties agree that a business relationship developed between the plaintiff and Athabasca/Ruby in 2005. The plaintiff and Ms. Zhou first met in September of that year.

The plaintiff deposed that their first meeting included a very brief discussion about Ms. Zhou’s business needing a consulting geologist for upcoming land sales. The discussions became more earnest in early November, including a lunch meeting where they discussed the possible acquisition of mineral interests in two specific areas in southeastern Saskatchewan. It is agreed that Ms. Zhou asked the plaintiff to review the subsurface geology for the two areas, provide a write-up for her use and make recommendations.

It is further agreed that the plaintiff’s compensation for these services would be at the rate of $60.00 per hour. [ 13 ] The plaintiff completed his work as requested and submitted invoices for his services in late 2005. They were paid without any expressed concerns about the work done. The plaintiff also deposed to his understanding, not disputed by the Athabasca/Ruby, that one of Ms. Zhou’s companies bid on and successfully acquired one of the mineral interests. [ 14 ] I digress from the narrative to note a matter related to the work the plaintiff did for Athabasca/Ruby in 2005, which the plaintiff emphasizes.

Specifically, the plaintiff says that the 2005 work did not involve any prospecting, exploration or identification of geographic locations for resource development. Rather, he says the work he did in 2005 involved analysis of geological samples brought to him from locations near Browning, Saskatchewan. As the plaintiff’s counsel emphasized in his submissions, this was strictly analysis work. In the plaintiff’s submission, it differed substantively from the nature of the work done in 2006.

Communications about future relationship: late 2005 - early 2006 [ 15 ] The plaintiff deposed that the success of the 2005 work led to subsequent conversations with Ms. Zhou, followed by the work performed in 2006. He said that Ms. Zhou asked him if he was interested in continuing to work with her going forward and to expand the work to include locating, prospecting and making recommendations on properties in which Athabasca/Ruby might be interested. While the plaintiff was interested in the offer, he said he told Ms.

Zhou that he needed time to consider the arrangement, including the appropriate compensation. [ 16 ] Subsequently, Ms. Zhou sent the plaintiff an email message on December 9, 2005. It pertained to work on a specific project Ms. Zhou was considering. The email message included the following passage: It looks like we will be rushed to set up a precise

schedule for raising capital until we know exactly how we are going to pursue the project. I would like to have your advice on the following aspects: A. Long term goal which we will pursue right away 1. Decide a strategic area and target pools 2. Negotiate and reach conditional agreements with freeholders with the facilitation of Gwen 3. Negotiate and reach conditional joint venture agreements with existing oil producers. Hope that Keystone will talk with us. 4.

Prepare documentations on more geology evaluation seismic, proposal of developments and drilling on the parcel we acquired and freeholds we get into contract if we decide it as our strategic area 5. Prepare budget, cash flow projections and dress up an investment ‘memorandum’ for raising capital in full speed B. Concurrently, we will try 1. Write up a simple proposal with what we have done plus seismic and try to get someone put the capital for drilling

2. Need a drilling team and caretaker arrangement before we could achieve above #1 C. Concurrently, we will try 1. Negotiate and reach conditional purchase agreements of existing wells with existing oil producers, pending on capital available 2. Approach investors for selling existing production wells if we could have the above arrangements in above 1 on hand. 3. If we could not get the agreements in above 1, we might try to use undisclosed wells for sale to approach investors. As you know, producers are selling some of their wells all the time.

May we try to get A. 1 done in next two weeks and try our best to keep the rest going? [ 17 ] This communication was followed by an email exchange between the plaintiff and Ms. Zhou in mid-December 2005. The relevant passages of that exchange begin with the plaintiff’s message to Ms. Zhou on the morning of December 16, 2005, which was in response to her message from the day before.

After some general discussions about the circumstances at that time, the plaintiff wrote the following: Things we should consider for 2006. 1) Building the land base through freehold acquisitions and some Crown postings. 2) Decide on a level of comfort for participating in a drilling program; the more input, the higher the return. 3) Have some idea for the extent of Athabasca developing the land base i.e. do we offer a farm-in for a look at someone else’s 3D?, do we go 100%?, or just target land where we know Keystone et al will always be interested.

There are a number of options that will be available as the land base is strengthened. A course of action I would suggest is to have you or myself search with Accumap for opportunities in the freehold market and some occasional Crown postings. We would build the prospects, and then rank them based on risk, cost, expected return and availability for farm-outs. Once they are ranked, we would commit to tie up the land for development of the most lucrative opportunities. Through this we would build and keep positive relationship’s [ sic ] with the other junior operator’s [ sic ] in S.E. Sask. [ 18 ] Ms.

Zhou responded to this message later that evening. In the message, she recited verbatim the last paragraph quoted above. She immediately followed this recital with the following comment: … – This is very right direction. Though I may be able to learn some of this work, you will be a much qualified and experienced person to do this job. May you suggest a small monthly fee for you to keep going and add hourly charge for particular work? … [Emphasis (bold) in original; emphasis (underlined) added] Two paragraphs later, in the same message, Ms.

Zhou said that her “main duty should be to get some one [ sic ] [to] write a cheque”. [ 19 ] Ms. Zhou’s message lacked specifics about what she meant by a “small monthly fee” or the nature of the work the plaintiff would do to “keep going”. She also did not describe her expectation about an added “hourly charge for particular work”. Her affidavit is not much clearer. At paragraph 20 of her affidavit sworn November 5, 2020, Ms. Zhou deposed to a retrospective and somewhat scrambling explanation of her intentions at that time: 20.

The “small monthly fee” referred to in my December 16, 2005, email was a gesture of goodwill, and intended to compensate the Plaintiff for general discussions and time related to his geological consulting services which are not always captured in regular invoices, such as short telephone discussions or appointments, referrals to others in the industry, time dealing with technical software, etc.

Such a “small monthly fee” could also be referred to as a “retaining fee.” This was a suggestion, and I did not have any particular amount in mind in relation to what an appropriate “small monthly fee” might be in these circumstances. The term “keep going” as used in my December 16, 2005, email referred to my wish to continue to retain the Plaintiff for his geological consulting services into 2006. [ 20 ] If the perspective described above formed part of Ms. Zhou’s expectations, the plaintiff was obviously unaware of it.

He deposed that during the Christmas break of 2005-06, he gave serious consideration to the subject of his ongoing compensation, believing that it would be part of a new role for him going forward – one with more emphasis on exploration. Instead of an additional hourly charge, he concluded that a more appropriate arrangement would involve an hourly fee of $60.00 and a 1.0% override, or GORR, attached to all production from successfully acquired lands. The plaintiff submitted this proposal to Ms.

Zhou in an email message on January 3, 2006, which included the following passage: … As for future work, I am going to try to keep everyone busy by looking for new drilling plays using 16-20 hours/week. If we could continue the same rate as agreed to ($60.00/hr) plus having a 1.0% production and performance over-ride attached to all production from lands that we successfully acquire and develop , that would be suitable. … Let me know if this fits in with your ideas . [Emphasis added] [ 21 ] According to Ms. Zhou’s affidavit, she did not regard this message as a response to her email of December 16, 2005.

In her view, the plaintiff’s response came a few weeks earlier, in his email message dated December 17, 2005, which was the immediate reply to Ms. Zhou’s affidavit. In this message, the plaintiff addressed operational and joint venture issues but said nothing about his compensation. In Ms. Zhou’s view, this silence was significant. At paragraph 21 of her affidavit, she deposed as follows (exhibit reference omitted): 21. The Plaintiff responded to my December 16, 2005 email on December 17, 2005. … It did not include any response to my

suggestion regarding his billing arrangement. As such, ultimately no changes to the terms of the Agreement were made, and the Plaintiff continued to provide his consulting services and charge on an hourly rate basis. [ 22 ] As for the plaintiff’s message of January 3, 2006, Ms. Zhou deposed that she did not consider the GORR at all. Initially, she said she was unfamiliar with the concept of a “production and performance override”. Later, when she gained more information about the concept, Ms.

Zhou said she regarded a GORR as a “serious and significant alteration” of the agreement with the plaintiff – one that would require “thorough negotiation and discussion of terms” and a formal written agreement. She observed that none of this occurred. [ 23 ] As for not formally responding to the plaintiff’s proposal, as he clearly invited her to do, Ms. Zhou deposed as follows at paragraphs 28 and 29 of her affidavit: 28. I did not respond to the January 3 Email. I anticipated that the Plaintiff would raise the issue of the GORR again if he was serious about pursuing such an alteration to the Agreement.

He did not raise it again for approximately six months, and he continued providing geological consulting services billed on an hourly basis consistent with the Agreement in the interim. 29. The Plaintiff’s role and duties did not change in any significant manner on or after January 3, 2006. Contrary to the suggestion in Ms. Zhou’s affidavit, there is no specific evidence of the plaintiff having raised the GORR issue until she addressed it with him in October 2006.

Relationship between the plaintiff and Athabasca/Ruby in 2006 [ 24 ] There is considerable dispute as to whether the plaintiff’s role changed after the plaintiff’s email of January 3, 2006. The plaintiff deposed that, he took on an expanded role with Athabasca/Ruby almost immediately after the January 6 message, a role he maintained for the next eight months, until Ms. Zhou responded to his proposal. [ 25 ] The plaintiff’s affidavit describes the nature of the work he did during this time, as well as Ms. Zhou’s regard for it. According to his evidence, not substantively contradicted by Ms.

Zhou, the plaintiff became solely responsible for all of Athabasca/Ruby’s exploration activities, including all oil and gas prospecting work. This included locating, evaluating and recommending parcels of real property for acquisition. The plaintiff also deposed that he prepared detailed reports for Ms. Zhou, which reports identified prospective acquisitions, bid parameters and something known as “step-out” prospects. [ 26 ] The plaintiff also deposed that he actively participated in the bidding process for prospective acquisitions.

His detailed reports, three of which were exhibited to his affidavit, included suggested bid parameters. As part of this work, the plaintiff liaised with various people, including Gwen Lydiate and Cam Taylor. Ms. Lydiate was described as a “landperson” Ms. Zhou had retained on the plaintiff’s recommendation. Mr. Taylor was an officer with Keystone Energy, a company with which Athabasca was then in joint venture discussions. [ 27 ] The evidence discloses that, throughout the exploration and bidding work, the plaintiff was in frequent, almost daily, contact with Ms. Zhou.

At paragraph 18 of his affidavit sworn February 26, 2021, the plaintiff identified examples of his correspondence with Ms. Zhou on these activities, ostensibly documented in 38 exhibits to his affidavit. Most of these exhibits consisted of email messages. [ 28 ] While it is not necessary to set out each of these exhibits, I think it helpful to identify two email messages or exchanges which typified the extent and nature of the plaintiff’s work and illustrated Ms. Zhou’s recognition of his role.

The first is an exchange over the period from January 25 to 27, 2006, pertaining to prospective land acquisitions in southeastern Saskatchewan, near Midale and Stoughton, respectively. In the first email message, from the plaintiff to Ms. Zhou on the evening of January 25, the plaintiff discussed three parcels of land, including the Midale and Stoughton prospects. One paragraph in the message, referencing contact with Mr. Taylor, read: Please let me know when you are back in touch with Cam. I have held off getting in touch with him directly since the both of you look like you’re starting a productive dialogue.

Ms. Zhou responded that same evening with the following: Hi Chris, 1& 2 Before Cam closes the deal of Natural Valle, it does not look very likely that he would have the mind to draw up anything. I would just have to give him some more days. I really wish that I could have something and get some more money for the Feb.’s landsale [ sic ]. We just got to do the same as last time and do more in April. 3 I would not get into any agreement until we have funds in our account. Can you put a pending provision to the offer? As soon as we get the fund [ sic ], for sure we will pursue good project.

Any potential JV partners nearby? Thank you, Dawn [Emphasis added] The plaintiff followed up on January 26 with this message: Hello Dawn,

Here are some core descriptions for some rock I looked at for the Midale prospect, Parcels 128-131. I am putting together the Stoughton package and a package for the Midale land. I will need Gwen to do some investigating on Parcels 128-131 as I think the surrounding area has been skewed by Deep Rights Reversion. If this is the case, I would expect parcels 130 and 131 to go for $1200.00/ha or more. Check the production around this parcel, I think it is quite acceptable. Who is the person(

s) that needs to see the prospects before there is more money allotted? Would I be able to contact her/him directly, or vice versa? I will try to get in touch with Cam tomorrow. He knows there is a deal on the table but he also knows we are all handcuffed until the fall because of rig time. As usual, I’ll be in touch, Chris In the last email message in this exchange, Ms. Zhou wrote the following: Chris, I need to fully understand the potential and more important to have a business arrangement in place before I know what I am talking and put something in writing.

I am trying to get investors for you and me not business partners. Thus, we would not need show any one [ sic ] any thing [ sic ] until it is likely to get a cheque. You are the geologist. I am an investment consultant/accountant who has some geological background. We need geophysics, engineer and operator to make the project feasible . Thank you, Dawn [Emphasis added] [ 29 ] The second exhibit covers an email exchange between the plaintiff and Ms. Zhou on February 16 and 17.

In the first message of that exchange, on the evening of February 16, the plaintiff again addressed the Stoughton and Midale prospects and the interaction with Mr. Taylor. The message included the plaintiff’s opinion about bid strategy and land prices. The relevant portions of that email message were as follows: Hi Dawn, Attached are some maps for your N. Stoughton files. I put a call into [ sic ] Cam and I am going to send him an e-mail to encourage some action. I think you should also send Cam an e-mail stressing to him the importance of his input to move this project ahead on our side.

Further to our phone conversation today, I believe a change to our bid strategy is in order. I knew over a year ago that land prices were increasing dramatically, but I even underestimated this parcel. I am now further convinced that any land position that has any possibility of commercial oil production, someone will bid at least $1000.00/ha to tie it up. With that, we should follow your suggestion and go back to aggressive priority bids. I also feel we should still focus on the Midale Beds while continuing to move Stoughton ahead.

Maybe we should post our own Midale Beds prospect in a future land sale. … Thanks Dawn, Chris Ms. Zhou replied the next morning, signifying her agreement with aspects of the plaintiff’s recommendations. Her message read as follows: Good Morning Chris, I 100 percent agree with you that “we should still focus on the Midale Beds while continuing to move Stoughton ahead. Maybe we should post our own Midale Beds prospect in a future land sale.” Let us use the Stoughton to raise enough capital for a strategic planning.

There are many venture / small cap funds and Flow Through limited Partnerships are looking for good project. I attended a luncheon presentation yesterday and got one more contact. Another guy phoned last week and I did not think we are ready. Also I call one of my friends on finding capital. She has a friend who is number two Ketchup producer in the world. We just got to know where we are heading and work determinedly on that. It is a very good start when I had you in the team. … Take care, Dawn [Emphasis added]

The portion of Ms. Zhou’s message that I have not recited sought the plaintiff’s advice on the draft of an email message she planned to send to Mr. Taylor. [ 30 ] Further to the plaintiff’s exploration and acquisition efforts, the evidence also discloses that in September 2006, the plaintiff accompanied Ms. Zhou to a meeting in Calgary in relation to a prospective joint venture, where he was introduced as Manager of Exploration for Athabasca/Ruby. He was also described as part of the “Professional Team” in a promotional document prepared specifically for Ruby, along with Ms.

Zhou and Kevan Bender. [ 31 ] The evidence suggests that, as part of this team, the plaintiff provided Ms. Zhou with assistance and advice during negotiations with other entities in the oil and gas industry, including joint venture prospects. To some extent, this evidence was reflected in the exhibits already referenced. Illustrations of the plaintiff’s involvement in joint venture negotiations also appeared in other exhibits. By way of example, two email communications describe the nature of that involvement. The first message, dated July 27, 2006, was from Ms. Zhou to the plaintiff and Mr.

Bender, where she forwarded a message from a prospective partner about considerations for a joint venture proposal near Colgate, Saskatchewan. One of the considerations involved “pooling” of land from each partner. In forwarding the message, Ms. Zhou wrote the following: I believe that these are very good offer. I would like pooling better. For this, we need to know how good their lands are and the well they are drilling now on our east to know where we are sitting at. We are talking to drill a well in 60 days. Please Chris do some research on in the area around Sec.34-5-14W2M (400 acres).

Cheers, Dawn [Emphasis added] [ 32 ] The second email communication is dated August 24, 2006. At that time, Ms. Zhou asked the plaintiff to inquire about the way oil companies keep track of production numbers in a joint venture. He made this inquiry of a petroleum engineer he knew and whom he had introduced to Ms. Zhou. The plaintiff’s message to the petroleum engineer, Brian Fletcher, was as follows: Hi Brian, Dawn asked me about how an oil company keeps track of their production interests when they are doing a joint venture?

She is worried that ARI/REI may get the short end when production numbers are calculated. I just assumed that ethical business practices would be in effect. Would you be able to email her back … Chris Mr. Fletcher responded almost immediately with a message to Ms. Zhou, in which he also forwarded the plaintiff’s original message. In the second paragraph of that message, he identified specific steps that could be taken to protect the business interests of Athabasca/Ruby. Before identifying those steps, Mr. Fletcher wrote the following: Chris is exactly right. It does come down to ethical practices.

There are some things that can be done to ensure that ARI/REI has balanced production books from what has been produced but it is not exact and there is always room for discretion. We need to trust that if we enter into an agreement with another that sound business practices will be made. [ 33 ] The plaintiff also deposed that during the eight-month period between January and October 2006, he continued to submit monthly invoices. That said, he also deposed that he decided not to record or invoice a substantial portion of the time he spent on matters relating to Athabasca/Ruby.

This decision was premised on the belief that any additional effort on his part would be compensated through the GORR that would eventually be payable on successful land acquisitions. Termination of the plaintiff’s relationship with Athabasca/Ruby [ 34 ] The plaintiff’s belief that there was an agreement was not based on any express acceptance on the part of Ms. Zhou. There wasn’t one. As earlier mentioned, Ms. Zhou did not formally respond to the plaintiff’s January 3 proposal until October 2006. Moreover, the evidence also discloses that the plaintiff did not remind Ms.

Zhou about the GORR proposal or question her about a response. [ 35 ] When the proposal resurfaced, it led to the end of the relationship between the plaintiff and Athabasca/Ruby. The series of events began on October 17, 2006, while the plaintiff, Ms. Zhou and Mr. Bender attended a conference in Regina. During the first afternoon of the conference, there was a conversation during which Ms. Zhou asked the plaintiff how much the GORR would cost her. When told that the amount of the 1% royalty could not be determined until there was production, she informed the plaintiff she would not pay the taxes on that amount.

In response, the plaintiff says he told her this was not an issue as he would be responsible for any income taxes owing on the dollar amount of the percentage he received. The plaintiff deposed to being surprised by the conversation and questioned whether Ms. Zhou was backing out of an agreement he thought was in place. [ 36 ] The dispute crystalized the next day while still at the conference. During the lunch break, Ms. Zhou and Mr. Bender approached the plaintiff and showed him a document typed out on Ms. Zhou’s laptop.

The document, described as a “counter-proposal”, took the form of a letter and read as follows: Oct. 18, 2006 showed to Chris Hello Chris,

I would like to take this opportunity to extend my sincere appreciation for your great geological consulting on the oil projects the past eleven months. Sorry that it has taken me so long to get back to you about your proposed compensation beyond your hourly consultant billings, invoices charged by SK IR and the software provided at no cost. The main reason is that I would not be able to agree on the override on consulting work on crown posted lands because it does not sound right and that nor could I be able to decline the proposal because I was not familiar with the industrial practices.

I have talked to Melinda, Keith, Don and other people in industry on ways that geologists receive compensation. What I learnt from them has confirmed my understanding and is in line with other professional services and business ventures and is as follows: • If a geologist works as an employee, he will receive wages or salary.

Depending on the experience, service level and contract, an employee may receive performance bonus and stock options in addition to his regular pay. • If a geologist works as an independent consultant, hourly or daily fees will be invoiced for any kind of engagement plus certain out of pocket expenses as negotiated. As a consultant, there would no ties to the company other than their services offered at the agreed and accepted negotiated rate.

The standard industry practice is there is no bonus or options based on the success of the company, just as there is no risk in the failure of the company based on the independent consultants [ sic ] services (consultant gets paid the agreed rate regardless). • If a geologist develop [ sic ] a prospect on his own cost and time and approach’s [ sic ] an investor or a company for a joint venture, a business arrangement will be negotiated which could include finding fees and override. I would think our situation falls into the second scenario (consultant).

However, I do recognize your outstanding contribution to Ruby Energy Inc. and its continued progress and I look forward to a long term [ sic ] mutual relationship with you. After careful discussion with Kevan, we would like to offer you 100,000 shares of Ruby Energy Inc. for the first year ended December 31, 2006; 100,000 shares of Ruby Energy Inc. for each of the next two years with a non-competition agreement signed. The 100,000 share offer for the second and third year would vested [ sic ] and be tied to your continued participation and commitment to Ruby Energy Inc in each year.

We would formalize this rough draft offer via a formal agreement and this proposed offer is for discussion only. We certainly look forward to developing the company together with you as a team for many years to come beyond the next two years. The offering share price now to the public investors is $0.60 (before any production). We expect that the share price will continue to appreciate in the next two years and we will declaim cash dividends if profit and cash flows are in the range of our projections.

Before the company potentially goes public, shares can still be transferable with approval of the board of directors and a private arrangement in finding a buyer. I believe this offer is very reasonable and encouraging synergy among all of us. It will also not create a red flag from the legal council [ sic ] of our investment banker. Yours truly, Dawn Zhou [Emphasis added] [ 37 ] There were no meaningful negotiations that followed. Bluntly stated, the plaintiff did not accept Ms. Zhou’s proposed arrangement. In his affidavit, he stated that he believed there was already an agreement and that Ms.

Zhou was simply seeking to amend it or back out of it. That said, Ms. Zhou did send a follow-up email message on October 22, 2006, which the plaintiff regarded in his affidavit as a request that he “agree to the proposed change to our agreement.” The specific wording of her message was as follows: Hello Chris, I believe that you have received my e-mail dated October 18, 2006. I also tried quite few times to call you at both your phone numbers I have without success.

What I am trying to make it clear to you is that I do appreciate your work and the shares offered only cost you $0.001 per share though the shares are priced at $0.60 per share now and we are expecting it would not be less than $1 by the end of next year. We will have all oil related business carried under Ruby Energy. No officers of Ruby Energy, especially Kevan and I, should have any conflict of interest activities with Ruby Energy. Increasing share price is our obligation to our investors and our family. We need all stakeholders in the same direction.

Best regards, Dawn [ 38 ] The plaintiff responded to this message with his own email on November 7, 2006, which, in turn, prompted another response from Ms. Zhou. In his message, the plaintiff set out his reasons for believing that an agreement was in place, which were based on advice from other geologists. His message read as follows: Hello Dawn, I obviously acknowledged the receipt of your letter which was presented to me October 18th, during lunch at the Symposium. However, I took time in the days following to speak with Dr. Don Kent, Melinda Yurkowski and Keith Schneberger about the issue.

They have all reported that in their discussions with you, they did not understand the facts. When I explained the actual circumstances, namely that you asked for my services to do the land selecting and evaluation, that I sent you a letter on 01/03/06 setting out my terms

and you thereafter began to utilize my services, they have all agreed that my letter governs the terms of the engagement. In light of the current circumstances, I will require a written acknowledgement of the terms of our agreement in lieu of which I willprovide no further services and be forced to consider my legal remedies. Yours truly, Chris Curry [Emphasis added] Ms. Zhou responded to the same day, roughly three hours later.

Her response read as follows: Chris, As you said on Wednesday, October 18, I understood that you had obtained legal counsel’s advices [sic] in your communication with me.In my professional ethic and business obligation, I would not have discussed a business matter in a social conversation. I would certainlyrequire all stakeholders conducting business professionally. I will appreciate that you send an invoice for the hours you worked for me in September and October, 2006 and I will not need yourfuture geological evaluation on the posted parcels of crown sale effective immediately.

Yours sincerely, Dawn Zhou [39] Upon this last email and the payment of the last invoices, the relationship between the plaintiff andAthabasca/Ruby ended abruptly. He left the project and ceased any further work on operations for Athabasca/Ruby. Calculation of gross overriding royalty [40] Before concluding the description of the background evidence, I think it appropriate to include some discussionabout the nature of a GORR, along with a brief

summary of the evidence about its valuation that was received in this case. [41] Both the history and the concept of a GORR are concisely described in Michael A. Thackray, Canadian Oil andGas, loose-leaf (Rel 186, Nov 2021) 3d ed, vol 1 (Toronto: LexisNexis Canada, 2017). At §7.65 to §7.67, under the “Commentary” tab,the author briefly reviews the contextual history of royalty schemes that have developed in Canada and the United States, including alessor’s royalty and an overriding royalty.

The passage in this regard reads as follows: §7.65 The use of royalties in the energy industry is a vestige of the feudal system in England. During the early middle ages the title toall mines and minerals was vested in the Crown. Tenants held the right to cultivate the land and work the mines (the “working interest”).The Crown or occasionally a landlord, reserved a share of all minerals produced by the tenant which share was termed a royalty. Theconcept of reserving a royalty on the disposition of a fee simple or working interest was transplanted to the English colonies in NorthAmerica.

In 1880, the first company established to trade exclusively in mineral royalties was incorporated in Pennsylvania. Trading inroyalties increased with the opening of the mid-continent oil fields and continued to gain popularity throughout the 1920s and 1930s. §7.66 The lessor’s royalty, which is reserved by the fee simple owner when a mineral lease is granted, is the most common type ofroyalty and was the first to be traded on a wide scale. In the search for investment vehicles, however, two other types of royalties evolvedin Canada and the United States.

The first was the perpetual non-participating royalty, which is granted out of the fee simple estate. Theperpetual non-participating royalty was very popular in Alberta in the 1950s and is now commonly referred to as a “royalty trust”. Anamendment to the securities legislation effectively ended the popularity of this royalty.

The second was the overriding royalty which isreserved or carved out of the lessee’s working interest. §7.67 The overriding royalty is the right to take, in kind or money, a share of future mineral production from a well without theobligation to pay a proportionate share of drilling or producing costs. The overriding royalty is limited to an interest in the production ofspecified substances from the land and does not include any of the possessory rights normally associated with a working interest.

Thistype of royalty is extremely versatile and is used as a means of raising funds, providing incentives, or spreading risk by retaining aneconomic interest in a mineral prospect without retaining any associated liability (such as in a farmout).

This versatility has led to a greatvariation in the language found in royalty agreements and a royalty agreement may consist of a two or three-sentence letter or a lengthyand complex document. [Emphasis added] [42] The above description of an overriding royalty, or GORR, is consistent with comments in the per curiamjudgment of the Alberta Court of Appeal in Bank of Montreal v Dynex Petroleum Ltd., 1999 ABCA 363, 182 DLR (4th) 640 [Dynex],aff’d 2001 CarswellAlta 1461 (WL) (SCC). [43] Before referencing the comments, it may be helpful to summarize the facts in Dynex.

In that case, an oil and gasproducer had been petitioned in the bankruptcy by its banker, who held an interest under its debenture. At the time of the bankruptcy, theproducer had obligations under overriding royalty agreements, one of which was to be paid in consideration for the interest holder’sservices in introducing the original purchaser to the holders of the freehold leases from which petroleum substances were produced. Thebanker took the position that the overriding royalty interests were not interests in land and that its security took priority.

The Courtconcluded that on the facts of the case before it, the overriding royalty interests were interests in the land. That said, the Courtacknowledged that the question whether an overriding royalty constituted an interest in land depended on the intentions of the parties atthe time it was created. Relying in part on the decision of this Court in Canco Oil & Gas Ltd. v Saskatchewan, (SKKB), [1991] 4 WWR 316 (Sask QB), the Court concluded that the parties may create overriding royalties that are interests in land if they

manifest their intention to do so.

It then set out certain indicia which would assist a court in making this determination. [ 44 ] In its analysis, the Court in Dynex began with a brief description of a lessor’s royalty and an overriding royalty at paragraphs 30 and 31: Royalties and Overriding Royalties [30] A lessor’s a royalty is a share of the product or the proceeds reserved to the owner for permitting another to use the property and also a right to receive, either in kind or its equivalent in money, a stipulated fraction of the oil and gas produced and saved from the property covered by the lease, free of all costs of development and production: E.

Kuntz, A Treatise on the Law of Oil and Gas (Cincinnati, Ohio: Anderson, 1991) Vol. 1, s. 15.1. [31] An overriding royalty or a gross overriding royalty is an unencumbered share or fractional interest in the gross production granted to a third party in exchange for performing duties ( e.g. drilling). Commonly, it is reserved in an assignment, part assignment or sublease of an oil and gas lease, often carved out or reserved by lessees who have a working interest created by a lease: G.J. Davies, in “The Legal Characterization of Overriding Royalties in Canadian Oil and Gas Law” (1971), 10 Alta. L.

Rev. 232 at p. 233. [Emphasis added] The Court followed these comments with its observations about the functions that royalties serve in the oil and gas industry, including overriding royalties. In these regards, the Court wrote the following at paragraphs 34 to 36: The Function of Royalties [34] A partial list of the ways in which royalties are used was set out by W. H. Ellis, “Property Status of Royalties in Canadian Oil and Gas Law” (1984), 22 Alta. L. Rev. 1 at pp. 2-3. They include financing the costs of drilling and spreading the risks of exploration.

For the buyer, it is a chance to invest in areas where he or she may not own enough interest to consider drilling. For the seller, it is a way to realize immediately on part of the investment against the chance the hole will be dry and keep part of the investment on the chance that an oil or gas well will be drilled. This results in further economic benefits by stabilizing the volatile industry and raising money for exploration.

Additionally, overriding royalties are used to compensate employees whose efforts determine the success of a project. [35] Ellis described two further characteristics important to understanding the function of royalties in the oil and gas industry. Oil and gas ventures require huge amounts of capital but only a small fraction are successful. The oil and gas investor is betting that the many losses will be made up by the small fraction of successes. Therefore, the industry needs first, the incentive to induce such high risk investments by offering the hope of a share of production from successful ventures.

Second, good investment decisions in the oil and gas industry depend on good geological information. Geological information is information about specific land. [36] Royalties fit these characteristic needs because they are investments in a particular piece of property, not in a particular operator or company. There are other means for investing in the owner or operator. The investment return on a royalty results from the success of the property regardless of who owns or is working the property. These unique functions and characteristics apply equally to overriding royalties as well as royalties.

The fact that overriding royalties are not granted from the whole of the mineral interest but from the working interest does not change their role in oil and gas production. [ 45 ] In the present case, the plaintiff presented expert evidence on the valuation of the GORR that he believes Ms. Zhou had accepted and agreed to pay. This evidence came through the affidavit and exhibited report of Stan Devaleriola , a retired professional engineer, with over 40 years experience in the oil and gas industry. Given that the Court is dismissing the plaintiff’s claim, I will neither set out Mr.

Devaleriola’s background in detail nor delve deeply into his opinion. With respect to his background, suffice it to say that Mr. Devaleriola’s experience includes a 21-year stint as a general manager of resource and oil operations, during which he managed capital and operating budgets, supervised production accounting, completed revenue and royalty calculations as well as joint venture accounting. [ 46 ] In his evidence, Mr. Devaleriola opined that the value of the GORR the plaintiff should receive amounts to $401,012 (rounded).

This valuation consists of a cumulation of three separate calculations, summarized below: a. Calculation based on the actual gross revenue from six wells during the period from December 2006 to May 2011, compiled from operating statements. The actual gross revenue totaled $17,932,208.40, and the corresponding 1% gross overriding royalty would amount to $179,322.10. b. Calculation of gross revenue expected from the same six wells from July 2010 to the end of the wells’ economic life.

This figure was drawn and adjusted from an AJM Petroleum Consultants Reserve Study, effective June 30, 2010, which was exhibited to the plaintiff’s affidavit. The expected gross revenue amounted to $11,270,221.30, and the corresponding 1% gross overriding royalty would amount to $112,702.20. c. Calculation of gross revenue expected from incremental recoverable reserves multiplied by an average price of $60.91/barrel. The expected gross revenue amounted to $10,898,809 and the corresponding 1% gross overriding royalty would amount to $108,988.

The Pleadings [ 47 ] The plaintiff issued his statement of claim in this matter, initially out of the Judicial Centre of Regina, on March 20, 2009. In his claim, the plaintiff asserts that there was an agreement between Athabasca and/or Ruby based on the January 3, 2006 proposal. In essence, the plaintiff says that, after he stated the terms upon which he would agree to a compensation package, Athabasca had engaged him on that basis, thereby forming a new contract.

In the prayer for relief portion of the claim, the plaintiff seeks a full and complete accounting from Athabasca and/or Ruby of all oil and natural gas production and all gross revenues and profits from any land acquired in 2006 and subsequently. He also seeks damages for breach of contract, interest and costs. The plaintiff later amended his statement of claim to include an alternative allegation of unjust enrichment.

[48] After the initial statement of defence was filed, the action was transferred to the Judicial Centre of Saskatoon.Subsequently, the defendants amended their statement of defence in response to the amended claim. As amended, the defence denies theexistence of a new contractual arrangement and expressly denies agreeing to a form of compensation that included an overriding. Thedefendants also deny that they, or any of them, were unjustly enriched by the plaintiff rendering services for them. [49] It must be noted that a considerable period of time passed before this matter proceeded to

summary judgment. Iam satisfied that it is not necessary for the Court to dwell on that. It is clear that there were personal and family-related issues thatimpacted the plaintiff’s ability to pursue this litigation more expeditiously than he did. Law and Analysis

Summary Judgment [50] Both parties in this action agree that this action can be determined, one way or the other, by

summary judgment.Despite this consensus, the Court is not bound by it. As I observed in Melnick v Tapp, 2018 SKQB 163, the Court, on its own analysis,must still be satisfied of four things. These are: (1) that the Court can make the necessary findings of fact; (2) that it can apply the law tothose facts; (3) that

summary judgment is a proportionate, expeditious and economical means to achieve a just result between the parties;and (4) that there appears to be no genuine issue requiring a trial. Also see Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87;Auchstaetter v Evolution Homes Ltd., 2016 SKQB 360; and Tchozewski v Lamontagne, 2014 SKQB 71, [2014] 7 WWR 397. [51] In the present case, I find the parties’ agreement to determine this matter by

summary judgment is well advised.I am more than satisfied that this case includes all the necessary considerations for a determination by

summary judgment. In particular, Iam comfortable making the findings of fact necessary to determine whether there is liability under the one remaining cause of actionasserted by the plaintiff. Law: Existence of a new contract – the need for consensus ad idem [52] The parties agree that the question whether there was a new contract created between the parties depends, inlarge measure, on whether the plaintiff can meet the burden of proving, on the balance of probabilities, that the agreement he assertsactually exists. See Fairway Farms Ltd. v SPI Marketing Group, 2010 SKQB 461 at para 59, 364 Sask R 287.

The existence of anagreement requires a meeting of the minds, also identified by the Latin phrase “consensus ad idem”. Without consensus ad idem, therecan be no contract. [53] The importance of consensus ad idem is particularly reflected in a court’s endeavour to interpret and understandthe essence of a particular contractual relationship. This is underscored in the per curiam judgment of the Saskatchewan Court of Appealin Mosten Investments LP v The Manufacturers Life Insurance Company (Manulife Financial), 2021 SKCA 36. [2021] 9 WWR 1[Mosten].

In Mosten, the Court observed that consensus ad idem serves as the “object of contract

interpretation”. At paragraph 67, theCourt addressed the essential features of consensus ad idem as well as its importance in the exercise of contract

interpretation: [67] There can be no enforceable contract without consensus ad idem. The concept it expresses underpins the fundamentalrequirements of contract formation, namely, offer, acceptance, consideration and communication. It holds that every party to anenforceable contract must have the same understanding as to the content of each of its fundamental requirements. For an enforceablecontract to come into existence, the parties must reach consensus ad idem as to what has been offered and accepted and as to theconsideration therefor.

This can only occur where those promises have been communicated to, and understood by, all of the parties.Consensus ad idem is essential to contract formation and enforcement and it is, therefore, the object of contract

interpretation. [54] To determine whether the parties have the “same understanding”, a court is not to apply a purely subjective test.Rather, the authorities make it clear that a court must engage an objective exercise, based on what the parties have demonstratedoutwardly, to an objective and reasonable bystander. The essence of this exercise is captured in Gerald H. L.

Fridman, The Law ofContract in Canada, 6th ed (Toronto: Carswell, 2011) at 15: Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to theoutside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law isconcerned not with the parties’ intentions but with their manifested intentions.

It is not what an individual party believed or understoodwas the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation ofthat party would have believed and understood that the other party was consenting to the identical terms. … [55] As observed in Mosten, the parties to a purported contract must reach consensus ad idem about: (1) what hasbeen offered; (2) what has been accepted; and (3) the consideration therefor.

Where an offer is tendered with reasonably clear andunderstandable terms, there can be no contract until the offeree signifies an unequivocal willingness to enter a contract based on theoffer’s terms. Given the objective test for determining consensus ad idem, it necessarily follows that the test whether an offer is acceptedturns on how an objective reasonable bystander would view the offeree’s actions. [56] While express acceptance is a clear indication of an offeree’s willingness to enter into the proposed contract,other forms of unequivocal conduct will suffice.

This can include silence on the part of the party said to have accepted an offer orproposal. [57] Such was the case in Saint John Tug Boat Co. v Irving Refining Ltd. (SCC), [1964] SCR 614[Saint John Tug]. In that case, the defendant operated an oil refinery and contracted for tug boats to assist in docking large tanker ships.In the past, tugs had been provided by a company that had, in turn, enlisted tugs owned by the plaintiff. When arrangements had not beenmade to use its tugs, the plaintiff wrote to the company with which it had previously contracted, offering to provide one of its tugs on astand-by basis.

The defendant received a copy of the letter and then entered into an oral agreement directly with the plaintiff for ashort-term agreement based on the terms of the letter. The plaintiff continued to provide the stand-by tug beyond the duration of theshort-term agreement and issued monthly invoices for the entire time the tug was on stand-by. Except for protesting the

interpretation of

one item, the defendant gave no indication that it accepted or rejected the stand-by arrangement. Despite having the benefit of a stand-by tug, the defendant did not pay any of the plaintiff’s invoices. At trial, the plaintiff was awarded damages equal to all the unpaid invoices, including the invoices issued for provision of the tug after the short-term agreement. On appeal, the damages were reduced by excluding the amounts invoiced after the short-term agreement. [ 58 ] On further appeal, the Supreme Court of Canada restored the trial judgment.

Writing for a unanimous court, Ritchie J. held that the defendant must be taken to have known that the plaintiff kept the tug on stand-by for its use beyond the period covered by the short-term agreement and that the plaintiff reasonably expected to be paid for the special service at the rate specified in the monthly invoices. In his view, an agreement was to be implied from the defendant’s acquiescence to the tug’s availability. In identifying the legal principles for this analysis, Ritchie J. accepted that liability could not be forced on unknowing parties.

That said, he also recognized that conduct, including silence, can signify acceptance of an offer where the circumstances permit such an inference to be drawn.

Ritchie J. identified the reflected in this analysis at pages 621 and 622: The test of whether conduct, unaccompanied by any verbal or written undertaking, can constitute an acceptance of an offer so as to bind the acceptor to the fulfilment of the contract, is made the subject of comment in Anson on Contracts, 21st ed., p. 28, where it is said: The test of such a contract is an objective and not a subjective one, that is to say, the intention which the law will attribute to a man is always that which his conduct bears when reasonably construed, and not that which was present in his own mind.

So if A allows B to work for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liable to pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constitutes the acceptance. In this connection reference is frequently made to the following statement contained in the judgment of Lord Blackburn in Smith v.

Hughes [(1871), LR 6 QB 597 at 607], which I adopt as a proper test under the present circumstances: If, whatever a man’s real intention may be he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms. The American authorities on the same subject are well summarized in Williston on Contracts, 3rd ed. vol.

I, para. 91A where it is said: Silence may be so deceptive that it may become necessary for one who receives beneficial services to speak in order to escape the inference of a promise to pay for them. It is immaterial in this connection whether the services are requested and the silence relates merely to an undertaking to pay for them, or whether the services are rendered without a preliminary request but with knowledge on the part of the person receiving them that they are rendered with the expectation of payment.

In either case, the ordinary implication is that the services are to be paid for at their fair value, or at the offered price, if that is known to the offeree before he accepts them. It must be appreciated that mere failure to disown responsibility to pay compensation for services rendered is not of itself always enough to bind the person who has had the benefit of those services. The circumstances must be such as to give rise to an inference that the alleged acceptor has consented to the work being done on the terms upon which it was offered before a binding contract will be implied.

As was observed by Bowen L.J., in Falcke v. Scottish Imperial Insurance Company [ (1886), 34 Ch D 234 at 248 ] : Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.

Like the learned trial judge, however, I would adopt the following excerpt from Smith’s Leading Cases, 13th ed. at p. 156 where it is said: But if a person knows that the consideration is being rendered for his benefit with an expectation that he will pay for it, then if he acquiesces in its being done, taking the benefit of it when done, he will be taken impliedly to have requested its being done: and that will import a promise to pay for it. [ 59 ] Recently, the same Court reaffirmed this analysis in in Owners, Strata Plan LMS 3905 v Crystal Square Parking Corp ., 2020 SCC 29 .

In that case, members of a strata (condominium) corporation were taken to have accepted the terms of a pre-incorporation agreement signed by the developer. The majority, speaking through the judgment written by C ô t é J., concluded, inter alia , that the post-incorporation conduct of the members of the strata corporation signified the acceptance of the agreement signed by the developer. [ 60 ] Saint John Tug has been considered in more than 150 published cases.

While I have not reviewed all the decisions from those cases, certain of the authorities suggest that objective findings of implied contract terms, based on unequivocal conduct, is more discernible in circumstances where the intention to contract is manifested by reasonably unequivocal evidence that the receipt of contractual consideration is expected. Often, but not exclusively, this intention is manifested by the issuance of invoices for services that go unchallenged, as was the case in Saint John Tug .

It can also be manifested by a combination of previous payment for issued invoices and communication signifying contractual intention, as was the case in Yanke Multimodal Services Ltd. v Jastek Master Builder 2004 Inc. , 2014 SKQB 382 . Such intention can also be shown in circumstances where a party could not reasonably be expected to act as it did without the kind and amount of consideration it alleges – and the conduct of the other party is not inconsistent with that expectation.

I sense this to have been the situation in O’Neill v Kings County Construction , 2019 PECA 13 . [ 61 ] An objective finding may be somewhat less discernible where there is a pre-existing contractual relationship and one of the parties asserts the existence of a new or amended contract. In the absence of an express agreement by both parties, the party making this assertion bears the burden of showing that the other party’s conduct unmistakably signifies acceptance of the new bargain.

The burden will not be met if the conduct is consistent with former contractual relationship or with an altogether different arrangement.

[ 62 ] A modestly relevant illustration of this is apparent in Hotchkiss v Budding Gardens Inc , 2020 ABQB 794 [ Hotchkiss ] ; additional reasons at 2021 ABQB 333 . In that case, a farmer entered into a three-year agreement to lease two buildings to a tenant for a cannabis growing operation. In the first year of the lease, the landlord was to pay maintenance, utility and structural repair costs, while the tenant agreed to pay a minimum rent of $90,000. For each of the remaining two years, the lease stipulated an adjusted monthly rent, to be negotiated one month prior to the anniversary dates of the agreement.

The adjustments were to be based on a review of actual utility and upkeep costs. Negotiations for the second year of the lease did not go well. In an effort to entice an agreement, the landlord proposed a low rent framework provided the tenant agreed to pay utility and upkeep costs. The tenant did not object to the low rent framework but did not accept the other aspects of the landlord’s position. When the parties came before the Court in conflicting applications, the landlord argued that the underlying lease was uncertain and of no force and effect.

As part of its resistance to this argument, the tenant relied on Saint John Tug and posited that by continuing to allow a tenancy based on the low rent proposal, the landlord had ratified an agreement that pertained only to the lower rent. [ 63 ] The tenant’s argument did not prevail. More particularly, Eamon J. was satisfied that the landlord had not accepted a separate arrangement on rent. He concluded that the landlord’s proposal was a reasonable bargaining position and that the conduct throughout, including the ongoing tenancy, was consistent with that perspective.

Moreover, it was noted that the landlord had made it clear throughout the negotiations that the leasing arrangement was dependent upon a completed written agreement. Analysis: Was there a new contract that included a GORR? [ 64 ] At the outset, I am compelled to observe that this is a rather exceptional and curious case, primarily because neither of the central figures conducted their negotiations in a professional and businesslike manner. As such, it is not hard to cast blame on both sides. On the defence side, it was inexplicable for Ms.

Zhou to have waited eight months before responding to the plaintiff’s proposal – particularly after expressly inviting him to make one, and after the plaintiff specifically invited her response. This raises questions about lack of good faith. On the other side, it is equally inexplicable that, in the eight months after submitting his proposal, the plaintiff did not remind Ms. Zhou about his proposal and request a definitive response. This raises questions about lack of diligence. [ 65 ] Despite this curious and exceptional behaviour, the evidence satisfies me as to certain specific findings of fact.

Firstly, I am satisfied that the work the plaintiff performed for Athabasca/Ruby in 2006 was both different and larger in scope than that which he performed in 2005. The evidence satisfies me that his work for Athabasca/Ruby in 2006 was considerably more significant and more substantial than the geological analysis he had done in the previous year. This evidence suggests that he took on a greater role in the business Athabasca/Ruby was pursuing, including prospective joint ventures. [ 66 ] Secondly, I am also satisfied that, despite her evidence to the contrary, Ms.

Zhou both knew and recognized the plaintiff’s enlarged role. In my view, one cannot read the plaintiff’s evidence, or the communications from Ms. Zhou, and conclude otherwise. My finding in this regard is also supported by Ms. Zhou’s offer of additional compensation in the form of shares in Ruby. Irrespective of the plaintiff’s view on the value of those shares, the offer cannot be seen as insignificant. At the very least, it supports the finding that Ms.

Zhou knew of the plaintiff’s expanded role, acknowledged its importance and she understood the plaintiff’s expectation of greater compensation associated with it – an expectation he expressly set out in his January 3, 2006 proposal. [ 67 ] Having made these findings of fact, the question then turns to whether, against the backdrop of all the other evidence, they assist the plaintiff in proving the agreement he asserts. On that score, the plaintiff had to prove that Ms.

Zhou’s eight-month silence, coupled with his enlarged role with Athabasca/Ruby, would lead a reasonable observer to believe that she had unequivocally accepted the terms of his proposal. Somewhat regretfully, I have concluded that the plaintiff failed to meet this burden. I will explain. [ 68 ] At the outset, it is important to emphasize that the circumstances of this case, like those in Hotchkiss , are complicated by the existence of a pre-existing contractual relationship between the parties.

As already mentioned, it is much easier to prove that a business interaction between parties reveals binding contract where there is no prior history of similar interactions to explain it away. That was the very situation in Saint John Tug . Here, however, there was a prior business history between the parties, one in which the plaintiff rendered invoices in much the same way he later did in 2006.

In my view, this heightened the plaintiff’s burden, requiring him to prove consensus ad idem for a new arrangement that supplanted the earlier one. [ 69 ] There is little doubt that the parties contemplated an arrangement that would be different from what they had in 2005 and that greater compensation would be due to the plaintiff under such an arrangement. That said, I am not able to say that this contemplation crystallized into a consensus ad idem . In this respect, I find the Ms. Zhou’s eight-month silence is ambiguous at best. The suggestion that Ms.

Zhou’s silence demonstrated acceptance of the plaintiff’s proposal may be arguable, but it is no more tenable than the suggestion that she simply chose to ignore it in the hope the royalty idea would go away. As such, I am satisfied that application of the objective test would leave the reasonable bystander with considerable doubt – doubt which would resolve the matter in favour of the defendants. [ 70 ] In saying this, I accept and understand that the plaintiff honestly believed that his proposal and subsequent efforts, coupled with Ms.

Zhou’s lengthy silence, formed the basis of a binding agreement that included compensation partly based on a GORR. Respectfully, this belief was ill-founded. As I read the plaintiff’s evidence, including his email message of November 7, 2006, his belief in the existence of such an agreement was informed by advice from geologists with whom he had conferred. It was not based on legal advice or a specific understanding, informed by evidence of industry custom. In this regard, there was no evidence of any such custom. [ 71 ] In the end, I am satisfied that there was no agreement of the kind claimed by the plaintiff.

It necessarily follows that his action for breach of such a contract cannot succeed. Law: Unjust enrichment as a cause of action [ 72 ] The concept of unjust enrichment has had an interesting history, some of which has generated a good deal of confusion about its meaning. In Lionel D. Smith, “The Mystery of ‘Juristic Reason’” (2000), 12 SCLR (2d) 211 , Professor Smith aptly

opined that unjust enrichment was a “slippery” term. As I wrote in Chatfield v Bell Mobility Inc., 2014 SKQB 82 at para 36, 440 Sask R201, this slipperiness may well be attributable to the evolution of unjust enrichment from a principle, which served as a rationale for thelaw of restitution, to a discrete cause of action. [73] The understanding of unjust enrichment as a cause of action was first articulated by the Supreme Court ofCanada in Rathwell v Rathwell, (SCC), [1978] 2 SCR 436.

This decision was followed by subsequent decisions in Pettkusv Becker, (SCC), [1980] 2 SCR 834; Peel (Regional Municipality) v Canada, (SCC), [1992] 3 SCR 762;Peter v Beblow, (SCC), [1993] 1 SCR 980; Garland v Consumers’ Gas Co., 2004 SCC 25, [2004] 1 SCR 629[Garland]; Kerr v Baranow, 2011 SCC 10, [2011] 1 SCR 269 [Kerr]; and Atlantic Lottery Corporation Inc. v Babstock, 2020 SCC 19[Atlantic Lottery]. As with the principle, the cause of action is similarly founded on the concept of reversing gains attained incircumstances where it would be against conscience that the gains should be kept.

See Fibrosa Spolka Akcyjna v Fairbairn LawsonCombe Barbour Ltd., [1942] 2 All ER 122 (UK HL). [74] As a cause of action, unjust enrichment involves three essential elements. At paragraph 30 of Garland,Iacobucci J. identified these elements as: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) anabsence of juristic reason. [75] Of these essential elements, the absence of juristic reason has attracted the most attention, along withconsiderable criticism.

As observed by Iacobucci J., this is partly attributable to the conceptual difference between the Canadian and theEnglish perspectives. Instead of requiring an absence of juristic reason for the enrichment, the English courts require simply “that theenrichment be unjust”. Some commentators, such as Professor Smith, have questioned the Canadian approach in that it requires theaggrieved party to prove a negative – the absence of juristic reason.

This is a difficult task without some conceptual understanding oridentification of the kind of reasons that would permit a plaintiff to say that a given circumstance does not exist. [76] In Garland, Iacobucci J. addressed this problem directly by identifying and “closing the list” of establishedcategories of juristic reason that a plaintiff must negate to establish a prima facie case. In this regard, he wrote the following atparagraph 44: [44] ...

By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, Smith’sobjection to the Canadian formulation of the test that it required proof of a negative is answered. The established categories that canconstitute juristic reasons include a contract (Pettkus [ (SCC), [1980] 2 SCR 834]), a disposition of law (Pettkus, supra), adonative intent (Peter [ (SCC), [1993] 1 SCR 980]), and other valid common law, equitable or statutory obligations(Peter, supra).

If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under thejuristic reason component of the analysis. [77] The plaintiff’s counsel in this case relies on the comments of Cromwell J. in Kerr, where the comments inGarland were referenced as suggesting that there is some flexibility in measuring whether a particular enrichment is unjust. If counsel issuggesting that the categories of juristic reason are not closed in the prima facie case analysis, I must respectfully disagree.

In my view,there is no difference between the respective analyses in Garland and Kerr. Both approaches recognize the existence of closed categoriesof juristic reason such that where a case falls within a closed category of juristic reason, the plaintiff will have failed to establish a primafacie case such that the second step, which engages flexibility, is not available. [78] This view was recently reaffirmed by the same Court in Atlantic Lottery.

In that case, the plaintiff advanced aputative class action alleging that the defendant’s video lottery terminal games [VLTs] were deceptive, harmful and inherently addictive.The alleged causes of action included, among other causes, breach of contract and unjust enrichment.

Interestingly, the claim expresslydisclaimed damages, choosing to confine its prayer for relief to a gain-based remedy equal to the profit the defendant earned from VLTs.The action was certified in both courts below, but later reversed by the Supreme Court of Canada. [79] On the unjust enrichment claim, Brown J., speaking for the majority, addressed the element of juristic reason. Indoing so, he summarily reaffirmed the two-stage inquiry for its absence, at paragraphs 70-71: [70] The juristic reason element of the unjust enrichment analysis proceeds in two stages.

First, the plaintiff must demonstrate that thedefendant’s enrichment cannot be justified by any of the established categories of juristic reason. If none of the established categories ofjuristic reason are present, the plaintiff has a prima facie case for unjust enrichment. At the second stage, the defendant can rebut theplaintiff’s prima facie case by showing that there is a residual reason to deny recovery (Moore [2018 SCC 52, [2018] 3 SCR 303], atparas. 57-58). [71] Here, I do not have to go beyond the first stage of the analysis.

The plaintiffs’ own pleadings allege that there was a contractbetween ALC [Atlantic Lottery Corporation Inc.] and the plaintiffs under which the plaintiffs paid to play VLTs. A defendant thatacquires a benefit pursuant to a valid contract is justified in retaining that benefit (Moore, at para. 57). Nothing in the pleadings, apartfrom perhaps the allegations of criminal conduct that I have determined are bound to fail, could serve to vitiate the alleged contractbetween the plaintiffs and ALC.

It follows that I agree with the appellants that the plaintiffs’ unjust enrichment claim has no reasonablechance of success. Analysis: Has the plaintiff made out a claim for unjust enrichment? [80] In the circumstances of the present case, I am satisfied that the plaintiff has not made out a case for unjustenrichment. In particular, I find that the plaintiff’s claim does not pass the first stage of the applicable analysis.

While I accept thatAthabasca/Ruby received a benefit from the enlarged scope of the work performed by the plaintiff in 2006, I do not believe it can be saidthat such a benefit was received in the absence of a juristic reason, namely, a contract. In this respect, it is undeniable that there was aprevious contractual arrangement between the parties – one for which the parties were contemplating a change for greater consideration.While that greater consideration was not subsequently agreed upon, I am not persuaded that this should translate into the absence of acontract.

As imperfect and imprudent as the contract may have been, it was still sufficient to afford juristic reason for whatever benefitAthabasca/Ruby received from it.

[ 81 ] It necessarily follows that the plaintiff’s claim for restitution based on unjust enrichment must be dismissed. Conclusion [ 82 ] In the result, this action is decided on

summary judgment in favour of the defendants. The plaintiff’s action is dismissed on the merits. It is not necessary for me to consider the defence based on application of The Limitations Act , SS 2004, c L-16.1 . [ 83 ] The defendants shall have their costs of the action under Column 2 of the applicable Tariff of Costs. “R.W. Elson” J. R.W. ELSON