CHANCE OIL v. GAS LIMITED, 2021 YKSC 44

SUPREME COURT OF YUKON Citation: Chance Oil and Gas Limited v Yukon (Energy, Mines and Resources ), 2021 YKSC 44 Date: 20210901 S.C. No. 17-A0002 Registry: Whitehorse BETWEEN: CHANCE OIL AND GAS LIMITED PLAINTIFF AND THE GOVERNMENT OF YUKON, DEPARTMENT OF ENERGY MINES AND RESOURCES (OIL AND GAS BRANCH), AND THE MINISTER OF ENERGY, MINES AND RESOURCES AS REPRESENTATIVE OF THE GOVERNMENT OF YUKON DEFENDANTS Before Justice E.M. Campbell Appearances: Counsel for the plaintiff Raymond Chartier, Chase Holthe and Oz Douglas Counsel for the defendants I.H.

Fraser and Megan Seiling REASONS FOR DECISION Introduction [ 1 ] Chance Oil and Gas Limited (“Chance”), formerly known as Northern Cross (Yukon) Ltd., has filed an action against the Government of Yukon (“Yukon”) seeking compensation in excess of two billion dollars for the damages it allegedly suffered as a result of Yukon’s decision to impose a Moratorium on hydraulic fracturing in the territory and, more particularly, in the Eagle Plain Basin.

The Moratorium came in effect on April 9, 2015, and is still in force. [ 2 ] Chance is an oil and gas company that holds a number of oil and gas exploratory permits in the Eagle Plain Basin. Chance seeks compensation for cancellation and/or expropriation of its alleged oil and gas rights associated with its permits, negligent misrepresentation, unjust enrichment, and nuisance. Yukon denies any liability as a result of its decision to impose a Moratorium.

It also denies that Chance has suffered damages or is entitled to compensation. [ 3 ] Chance and Yukon disagree on the scope of document discovery required in this matter. They both take issue with the other party’s affidavit of documents. Their disagreement is no better reflected than in the difference in the number of documents they each produced. Yukon listed 445 documents in its affidavit of documents, whereas Chance listed over 34,000 documents. [ 4 ] Both Chance and Yukon have filed an application seeking to compel the other to comply with its document discovery obligations.

On the one hand, Chance submits that Yukon has grossly under produced and seeks an order compelling Yukon to produce a further and better affidavit of documents. On the other hand, Yukon submits that Chance has grossly overproduced and seeks an order striking Chance’s affidavit of documents and compelling Chance to produce a much more limited one.

In the end, both parties are seeking an order compelling the other to entirely redo their document production. [ 5 ] In addition, Chance seeks an order compelling Yukon to produce unredacted copies of certain documents over which Yukon has claimed case-by-case privilege. Chance also contends that Yukon has waived litigation privilege over two documents and seeks an order compelling Yukon to produce a number of other documents on the basis of the doctrine of waiver by implication.

Issues [ 6 ] The two applications raise the following issues: 1. What test governs document discovery between parties to a civil action before the Supreme Court of Yukon pursuant to Rule 25(3)? 2. Is Yukon’s affidavit of documents defective?

i) Has Yukon under produced? If so, should Yukon be compelled to provide a further and better affidavit of documents? ii) Are two documents produced by Yukon (a chain of emails and a Timeline) subject to litigation privilege? If so, does Yukon’s waiver of privilege over these two documents constitute an implied waiver of privilege over a number of other documents over which Yukon has asserted privilege and possibly others? iii) Are First Nations confidential communications with Yukon pursuant to s. 14 of the Oil and Gas Act protected from disclosure pursuant to the common law case-by-case privilege? 3. Is Chance’s affidavit of documents defective?

i) Has Chance overproduced? If so, should Chance’s affidavit of documents be struck and Chance compelled to provide a more limited affidavit of documents? 1. What test governs document discovery between parties to a civil action before the Supreme Court of Yukon pursuant to Rule 25(3)? Overview [ 7 ] I find that the test governing document discovery between parties to a civil action in the Yukon is the possible relevance test.

In coming to this conclusion, I have considered the wording of Rule 25(3), read together with Rule 25 as a whole, as well as case law from the Supreme Court of Yukon and other jurisdictions, whose discovery rules are similar to Rule 25(3). However, the possible relevance test must be applied in any given case in a manner that gives effect to the object and purpose of the rules, including the proportionality principle, which is embedded in Rule 1(6) of the Supreme Court of Yukon Rules of Court , (“ Rules of Court ”).

Chance ’ s position [ 8 ] Chance submits that the standard of relevance at the discovery stage is broader than at trial, and that the test to apply to determine what is relevant for document discovery is the semblance of relevance (possible relevance) test. [ 9 ] Chance submits that Yukon’s position that it only has the obligation to disclose documents that are “actually in dispute in the litigation” is legally untenable and incorrect. [ 10 ] Chance submits that courts have taken a broad and inclusive approach in interpreting the meaning of the expression “any matter in issue”.

According to Chance, Yukon’s position that no production is required if it does not dispute a broad topic discussed in the pleadings, runs contrary to the case law.

Yukon’s position [ 11 ] Yukon submits that Chance’s expansive view of what is the test for document discovery and what is a matter in issue in this case is not in line with the state of the law regarding document discovery nor with the pleadings. [ 12 ] Yukon submits that the obligation of a party to produce documents under the Rules of Court is confined to those documents that contain information relating to the material facts in dispute in this litigation (or to secondary facts leading to the proof of those material facts), as identified and defined in the parties’ respective pleadings.

[13] Yukon submits that courts across the country have recognized the need to adopt a narrower approach to relevance at thediscovery stage than tangential or semblance of relevance in order to better circumscribe the scope of document discovery, which canquickly spiral out of control when not limited by an appropriate

interpretation and application of the Rules of Court. [14] Yukon submits that the Rules of Court should be interpreted and applied in a manner consistent with the principle ofproportionality and the shift in culture required to ensure that pre-trial processes, including document discovery, are conducted in a waythat further the ends of justice, rather than obstruct them with unnecessary burdens and delays. [15] Yukon acknowledges that the concept of relevance in the context of document discovery is broader than relevance at trial.However, Yukon submits that, contrary to what Chance suggests, the semblance of relevance test is not the test adopted and applied inthis jurisdiction.

Yukon submits that in order to have meaningful document discovery that achieves the purpose of the pleadings and aidsthe litigation process rather than hindering it, the test should be closer to relevance at trial than to semblance of relevance.

Analysis [16] The Rules of Court govern the discovery and production for inspection of documents (including electronic records) in a civilaction. [17] Rule 25(3) provides that: Every document relating to any matter in issue in an action that is or has been in the possession, control or power of a party to the actionshall be disclosed as provided in this rule whether or not privilege is claimed in respect of the document. (my emphasis) [18] In Ross River Dena Council v Canada (Attorney General), 2009 YKSC 4 at paras. 10-11, Gower J. stated that Rule 25(3)mandates the production of documents containing information that may, not must, assist (directly or indirectly) a party either to advanceits own case or to damage the case of its adversary with respect to a matter in issue between them. [19] In that case, one of the issues Gower J. had to determine was whether an historical and anthropological report – in the possessionof the defendant and prepared in relation to the Kaska Dena Council’s submission for recognition of their comprehensive land claim innorthern British Columbia – was relevant to the specific claims of the Ross River Dena Council in Yukon.

In determining that the reportmet the test of relevance for production under Rule 25(3), Gower J. stated the following: [10] The leading case for the test for relevance in this context is Peter Kiewit Sons Co. of Canada Ltd. v. British Columbia Hydro &Power Authority, (1982) (BC SC), 134 D.L.R. (3d) 154 (B.C.S.C.). In that case, McEachern C.J. referred to thePeruvian Guano case from the English Court of Appeal.

At para. 19 of McEachern C.J. quoted Lord Justice Brett in Peruvian Guano: It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, butalso which, it is reasonable to suppose, contains information which may--not which must--either directly or indirectly enable the partyrequiring the affidavit either to advance his own case or to damage the case of his adversary.

I have put in the words 'either directly orindirectly,' because, as it seems to me, a document can properly be said to contain information which may enable the party requiring theaffidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train ofinquiry, which may have either of these two consequences...

Although McEachern C.J. declined to follow Peruvian Guano on the facts before him, he did describe it as “an ancient and wellestablished” authority “which has stood unchallenged in Britain and in [British Columbia] for 100 years” (para.22). [11] As mentioned, with the agreement of counsel, I was provided a copy of the Report to review, as well as copies of subsequent legal opinions obtained by Canada, which refer to the Report (dated September 30, 1982 and August 3, 1983, respectively).

There are anumber of references in the Report to the Kaska people in the Liard River drainage basin and in the Frances Lake area, which I take tobe the Frances Lake in Yukon, north of Watson Lake. There is also specific reference to the Kaska Dena people residing in WatsonLake, Yukon. There are general references to the archaeological and cultural history of the Kaska Dene, including those Kaska in theYukon.

Whether and to what extent these references will assist RRDC in addressing the issues raised by Canada with respect to theidentity of the Kaska tribe or the Kaska Nation, the relationship between RRDC and the Kaska, and the existence and location of theKaska traditional territory, is not for me to decide at this stage. I agree with the submission of RRDC’s counsel that the Report isrelevant if it contains any evidence going to those issues. As I interpret Peter Kiewet, it is sufficient if this information “may” assistRRDC either to advance its own case or to undermine that of Canada’s.

I am satisfied that the Report meets this test of relevance. (my emphasis) [footnotes omitted] [20] In light of this passage and of Gower J.’s decision as a whole, I am unable to agree with Yukon that Gower J. adopted andapplied a test for document discovery that is narrower than the possible relevance test. He did not, as submitted by Yukon, adopt a testwith a higher threshold for relevance, one closer to the notion of relevance at trial, based on the concept of material facts in dispute in thelitigation. Gower J. adopted a broad relevance test, one of possible relevance.

[21] In addition, I note that the test proposed by Yukon based on the notion of “material issue” is the test specifically set out in Rule25(25) that allows a party to seek an order from the court to compel document production from a third party to an action. [22] Rule 25(25) provides that the court may compel production of documents from a third party, if: … (

a) the document is relevant to a material issue in the action, and (

b) it would be unfair to require the applicant to proceed to trial without having discovery of the document. [23] Reading Rule 25(3) and Rule 25(25) harmoniously, and in the context of the Rules of Court, I conclude that the Rules of Courtrefer to different terminology to indicate that a higher threshold of relevance is required before ordering a third party, who is not involvedin the litigation, to produce documents. [24] This is also the conclusion that the Court of Appeal of Prince Edward Island reached and recently reiterated in interpreting Rule30.02(1) of the Prince Edward Island Rules of Civil Procedure, which is worded similarly to our Rule 25(3)[1]. [25] In Creighan v MacPhee, 2018 PECA 1 (“MacPhee”) at paras. 31 and 33, the Court of Appeal reiterated that Rule 30.02(1)requires production of documents based on possible relevance, not actual relevance.

It also recognized that the expression: “everydocument relating to any matter in issue in an action” has been given a broad and liberal

interpretation. [26] The court in MacPhee also cited McCabe v Wawanesa Mutual Insurance Co, 2017 PECA 12, with approval, regarding what itfound to be the higher threshold that applies to compel document production from a third party under Rule 30.10. The court comparedthe two thresholds as follows: [31] In McCabe v. Wawanesa Mutual Insurance Co., 2017 PECA 12, Mitchell J.A. described the different tests for relevance: Relevance [20] The test for relevancy in relation to non-party documents is not the same as that for parties to an action.

Rule 30.02 is the ruledealing with discovery of documents in possession, control or power of a party. That rule mandates production of "every documentrelating to any matter in issue in an action." This phrase has been given a wide and liberal

interpretation. It is the possibility of relevancethat governs productability between parties. This has been called the broad relevance test (Aluma Systems Canada Inc. v. Strait CrossingInc., 2002 PESCTD 19). [21] The test for relevance under Rule 30.10 is whether or not the documents sought are "relevant to a material issue in the action."This is clearly a higher test than that relating to document production for a party (Lowe v. Motolanez, supra; Tribax Management Ltd. v.Laswind Investment Ltd., [2006] O.J. 3439 (ONSC)). Firstly, the possibility of relevance is insufficient.

The documents must be relevant.Secondly, it is not enough to find that the documents are relevant to a matter or any matter in issue; rather, the document must be relevantto a material issue in the action. What is material is determined by the governing substantive and procedural law and the pleadings.Evidence is material if what it is offered to prove is in issue according to the governing substantive and procedural law and the pleadingsin the proceeding (R. v.

Candir, 2009 ONCA 915, at para.49). (my emphasis) [27] I note that prior to British Columbia amending their Supreme Court Civil Rules to move to a two-tier disclosure process (Yahey vBritish Columbia, 2018 BCSC 123 (“Yahey”) at paras. 5-6), British Columbia’s rule of document production between parties to a civilaction was worded similarly to our Rule 25(3) and interpreted in a broad and liberal way.

In Richard v British Columbia, 2009 BCCA 77at para. 21 (which postdate Peter Kiewit Sons Co. of Canada Ltd v British Columbia Hydro & Power Authority (1982), (BC SC), 134 DLR (3d) 154 (BCSC) (“Kiewit”)), the British Columbia Court of Appeal stated at para. 21: I acknowledge the evident tension between systemic allegations and individual occurrences in class actions of this nature. However, I amnot persuaded that the chambers judge erred in finding that the Class Member Files are relevant and producible at this stage of theproceeding. As she pointed out, this case is at the stage of discovery.

Relevance is broadly defined, and covers any document thatdirectly or indirectly may enable a party to advance his case or to destroy that of the opposing party, or which may lead to a train ofinquiry or disclose evidence: Fraser River Pile & Dredge Ltd. v.

Can-Dive Services Ltd., 2002 BCCA 219, 100 C.L.R. (3d) 146 atpara.12 (my emphasis) [28] Even under the new British Columbia disclosure process (which came into effect on July 1, 2010), after the initial obligation toproduce documents, subject to privilege, limited to those that could be used at trial to prove or disprove “material fact” under Rule 7-1(1),a party may request broader document discovery on the basis of the possible relevance test: Rule 7-1(11) allows a party to request further documents that “relate to any or all matters in question in the action.” The standard fordisclosure under this provision requires parties to disclose documents that may provide a “train of inquiry” that could lead to relevant

evidence ( Biehl v. Strang , 2010 BCSC 1391 ; Przybysz v. Crowe , 2011 BCSC 731 ; Yahey at para.6) [ 29 ] In addition, in Kiewit , McEachern C.J. declined to follow the possible relevance test established in Peruvian Guano in the specific circumstances of the case before him on the basis that the plaintiff in that major civil litigation was seeking the disclosure of several categories of documents that were of only questionable relevance and could only be sorted through at great expense.

In that case, the defendant had already disclosed approximately 30,000 documents and had just provided a further 12-page inventory of documents for inspection. McEachern C.J. noted that the defendant’s production of documents, up to that stage, was “entirely appropriate” (para. 29). It is in that context that he stated at paras 23 and 24: I respectfully decline to follow the Peruvian Guano case, supra, or slavishly to apply Rule 26(1) in a case such as this, where thousand or possibly hundreds of thousands of documents of only possible relevance are in question.

I do not intend to suggest, however, that the Peruvian Guano case does not correctly state the law in most cases. That question does not arise for considerations here. It does not follow that this motion should be dismissed because, notwithstanding the foregoing, every reasonable effort must be made to enable the Plaintiffs to locate any documents which may assist the parties to ascertain the truth.

What is not permissible, or reasonable, in my view, is to require a party, in a case such as this, to incur enormous expense in what may be a futile search for something which may not exist. [ 30 ] Rule 25(3) has not been amended since Gower J.’s decision in 2009; and, I see no reason to depart from his conclusions, with which I agree, regarding the broad scope of document discovery required from parties to a civil action under Rule 25, and more specifically Rule 25(3).

The test that applies is the test of possible relevance - a party has the obligation to disclose every document, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may--not which must--either directly or indirectly enable the party requiring the affidavit either to advance their own case or to damage the case of their adversary. [ 31 ] Having said that, I agree that Rule 25(3) cannot be applied blindly and mechanically in isolation from the pleadings and the nature of the case before the court. [ 32 ] When a judge is being asked to exercise their discretion to order production, they must consider the broad obligations to disclose and produce documents that parties have under the rules in light of the object and context of the rules, including the principle of proportionality (see Fraser v.

Runinghan , 2020 PECA 3 at para. 38 ) that is embedded in Rule 1(6) as follows: The object of these rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits and to ensure that the amount of time and process involved in resolving the proceeding, and the expenses incurred by the parties in resolving the proceeding, are proportionate to the court’s assessment of (

a) the dollar amount involved in the proceeding, (

b) the importance of the issues in dispute to the jurisprudence of Yukon and to the public interest, and (

c) the complexity of the proceeding [ 33 ] In addition, while the Supreme Court of Yukon has not adopted specific rules or practice directions (except for Rule 25(18)) regarding discovery of electronically stored information (e-discovery), it is clear that the principle of proportionality plays a central role in determining the required scope of e-discovery in a given case. [ 34 ] The Sedona Canada Principles, which have been widely accepted by the courts and the legal community in Canada, provide guidance on best practices regarding e-discovery.

They identify proportionality and cooperation between the parties as being the overarching principles that should guide e-discovery in civil cases. [ 35 ] More particularly, the second Sedona Canada Principle outlines factors that parties involved in an e-discovery process should consider to ensure that steps they take are proportionate and reasonable (how much time, effort and expense a party should reasonably put into e-discovery) in the circumstances: Principle 2 : In any proceeding, the parties should ensure that steps taken in the discovery process are proportionate, taking into account: (

i) the nature and scope of the litigation; (ii) the importance and complexity of the issues and interests at stake and the amounts in controversy; (iii) the relevance of the available electronically stored information; (iv) the importance of the electronically stored information to the Court’s adjudication in a given case; and (

v) the costs, burden and delay that the discovery of the electronically stored information may impose on parties. [ 36 ] Those factors largely align with the factors to consider under Rules 25(3) and 1(6) in determining the parties’ document

discovery obligations in a given case. [ 37 ] Accordingly, when a party applies for further production, proportionality requires the court to balance a number of elements including the burden, costs, and delay associated with additional production against the likely probative value of the requested documents and the potential prejudice to the moving party if the application were denied in light of the type of case opposing the parties based on the factors set out in Rule 1(6). [ 38 ] As previously stated, the Sedona Canada Principles, not only speak to the importance of proportionality but also to the importance of cooperation between the parties (Sedona Canada Principles 7, 8 and 9).

While each party has relied on the Sedona Canada Principles in support of their respective positions on the role of proportionality in document discovery, both sides appear to have overlooked the strong recommendations made by the Sedona Conference Working Group for parties to communicate and cooperate early on and throughout the e-discovery process. [ 39 ] While there is evidence that the parties corresponded on the scope of their respective document discovery obligations, there is no evidence before me that they have meaningfully done so early on or prior to exchanging their affidavit of documents and completed their e-discovery process.

It may well be that counsel’s opposite views on the scope of their document discovery obligations under the Rules of Court would have prevented them from finding common grounds in any event.

However, they would have been in a position to identify their disagreements prior to expending time, energy and money on their respective production of documents. [ 40 ] I would therefore strongly invite parties to major litigation in this jurisdiction involving e-discovery to, at least, discuss early on in the discovery process their views regarding the scope of document discovery required in a case, as well as the format and organization of the information subject to production. I would also invite parties to cooperate on these issues, whenever possible. [ 41 ] I now turn to Chance’s application. 2.

Is Yukon’s affidavit of documents defective?

i) Has Yukon under produced? If so, should Yukon be compelled to provide a further and better affidavit of documents? Overview [ 42 ] Considering my finding that the scope of document discovery (possible relevance test) required under the Rules of Court is broader than the test applied by Yukon to its production of documents.

Considering as well that Yukon’s admissions are narrower than contended by Yukon, I find that Yukon’s affidavit of documents is deficient, as Yukon has under produced, and that it shall file a further and better affidavit of documents after a final determination is made on its application to strike. Chance’s position [ 43 ] Chance submits that Yukon’s document production is wholly inadequate and seeks an order compelling Yukon to:

a) start its documents collection process anew, and

b) provide a further and better affidavit of documents. [ 44 ] Chance submits that it is entitled to proper and full discovery. Chance contends that due to the complexity of the factual matrix underlying the dispute between the parties, the lengthy timeframe at issue, and the various causes of action pled in its Statement of Claim, there is a sizeable number of documents relating to the matters in issue in this case.

According to Chance, it is clear that by only producing 445 records, Yukon has failed to produce several relevant records. [ 45 ] Chance submits that Yukon’s position that it only needs to produce documents it perceives as related to an “issue in dispute” has led to Yukon producing an affidavit of documents that does not comply with its obligation to disclose “every document relating to any matter in issue in this action”.

Chance submits that, as it bears the burden of proof in this dispute, Yukon’s improper application of a narrow test for relevance unfairly works to Chance’s disadvantage. [ 46 ] In addition, Chance submits that Yukon’s narrow and selective framing of what it considers the “issues in dispute” excludes, or arbitrarily narrows, issues essential to the determination of Chance’s claims on their merits. Chance submits that, as most of the documents relevant to its claims are in the possession and control of Yukon, Chance is greatly prejudiced by the deficient approach Yukon followed.

Chance adds that Yukon’s narrow and defective approach to document production has prevented Chance from being able to determine for itself what documents help to establish its claims. Chance submits that by denying access to thousands of relevant documents, and by further making the subjective determination of what issues “are not in dispute” and not subject to production, Yukon has improperly prejudiced Chance’s ability to make its case. [ 47 ] Chance also submits that Yukon’s collection of documents is defective because:

a) the initial issues list Yukon used to identify custodians of documents ignores a number of issues raised by Chance’s Statement of Claim. Chance also submits that the defective issues list has resulted in the exclusion of numerous key officials who likely possess relevant records as custodians;

b) the list of keywords Yukon used to search its records fails to include a number of relevant terms and variations of important terms;

c) the short list of questions (eight in total) that Yukon used for its manual review, significantly and arbitrarily narrowed some of the

issues raised in the pleadings and wholly excluded others; and

d) a number of relevant categories of documents are missing from Yukon’s collection of documents. [ 48 ] In addition, Chance submits that the fact it produced a number of relevant records that Yukon did not produce, even though they should also have been in Yukon’s possession, demonstrates that Yukon’s production of documents is deficient. [ 49 ] Finally, Chance submits that Yukon is acting in contravention to the principle of proportionality, as its document discovery is not reasonable. [ 50 ] With respect to the scope of the Case Management Conference Order of February 20, 2020, Chance submits that Yukon’s position does not reflect nor align with the order made.

Chance submits that the Order compels Yukon to produce documents regarding all causes of action pleaded, not only the ones that are not the subject of Yukon’s application to strike. Yukon’s position [ 51 ] Yukon submits that it has complied with its document discovery obligation, and that Chance seeks to obtain documents that Yukon cannot or does not have the obligation to produce as they:

a) do not relate to matters of fact in dispute in this case; or

b) are not in Yukon’s possession, control or power. [ 52 ] Yukon submits that, contrary to Chance’s assertions, there is a modest number of disputed facts of limited complexity in this matter. Yukon also submits that it has made a number of factual admissions in this case and that an admitted fact is no longer in issue. Yukon adds that documents regarding admitted facts are not subject to document discovery because evidence regarding those facts are irrelevant and inadmissible.

Yukon contends that facts that are immaterial or irrelevant to Chance’s causes of action are not “in issue” even if they are pleaded. [ 53 ] In addition, Yukon submits that Chance seeks discovery on a number of issues that are not issues of fact, but issues of law, which are not amenable to document discovery unless the information sought is related to the proof of disputed material facts from which legal conclusions may be drawn. [ 54 ] With respect to the tort of negligent misrepresentation, Yukon submits that Chance did not plead that Yukon positively made any false or misleading representation that Chance would be permitted to use hydraulic fracturing to explore for or exploit hydraulic fracturing.

Yukon submits that, instead, Chance relies on the concept of misrepresentation by silence. In any event, Yukon submits that, according to Rule 20(12), particulars of every false representation Yukon allegedly made to Chance regarding hydraulic fracturing or every instance where Yukon remained silent when it allegedly had a duty to speak on that issue must be pleaded before Yukon is required to produce documents on those particular representations or communications.

Yukon submits that pleading generally that Yukon failed to explicitly tell Chance, prior to the imposition of the Moratorium, that Chance would not be permitted to use hydraulic fracturing to explore for or exploit oil and gas resources is not sufficient to comply with Rule 20(12).

Yukon points out that it has disclosed and produced all of its relevant documents regarding the only meeting that Chance specifically referred to in its pleadings in relation to the tort of negligent misrepresentation. [ 55 ] Yukon also submits that Chance seeks documents that are not in the possession, control or power of Yukon, but of third-party entities that are distinct and apart from Yukon and that Yukon does not have the obligation to seek to obtain documents from third parties. [ 56 ] With respect to the e-discovery process it followed, Yukon submits that it has appropriately identified the individuals who currently hold relevant government records (custodians), and that these individuals have access to the records of former government employees or officials identified by Chance in its application as missing from Yukon’s list.

Yukon also submits that the list of issues and keywords it applied during its e-discovery process are adequate and sufficiently broad to capture all relevant records in this matter. [ 57 ] In addition, Yukon submits that it should not be compelled to produce records related to Chance’s claims that are the subject of its application to strike, until its appeal on this issue is heard and a final determination made. [ 58 ] Yukon submits that since, at the initial case management conference in this matter, it advised Chance and the Court that it intended to bring an application to bifurcate the trial into a liability stage and a damages stage, it should not be compelled to produce documents on the issue of damages until its application is heard and determined.

Yukon submits that, if its application to bifurcate is successful, document discovery on damages should not take place until after a final decision is rendered on the liability portion of Chance’s claims. [ 59 ] In the alternative, Yukon submits that Chance’s alleged damages, as pleaded, are expressed in round numbers, and not particularized in any way. Yukon takes the position that, until particulars are provided, damages, as pleaded, do not constitute a “matter in issue” over which production can take place.

In the further alternative, Yukon submits that once the claims for damages are particularized, the quantum of some claims will likely not be contested, and, as such, document discovery will not be required. The Case Management Order of February 20, 2020 [ 60 ] Chance and Yukon have differing views regarding the scope of Veale C.J.’s, as he then was, Case Management Order of February 20, 2020 (the “CMC Order”) regarding the timing and scope of their production of documents.

Chance submits that both parties had to complete their document production in relation to all of Chance’s claims by June 30, 2020, whereas Yukon submits that the CMC

Order only compelled the parties to produce documents relating to Chance’s claims that were not the subject of Yukon’s application to strike. [ 61 ] The CMC Order provides, among other things, for a timeline for the filing of Yukon’s application to strike. The wording of the order reveals that Yukon communicated its intention to file an application to strike to Chance and the Court before or at the time of the case management conference. [ 62 ] The CMC Order also sets out a timeline for Chance to file a Fresh Statement of Claim and for Yukon to file a Statement of Defence.

Yukon has filed a Statement of Defence in which it states that it will not plead to the causes of action it applied to strike until a final determination is made on its application to strike. [ 63 ] On January 20, 2021, I granted Yukon’s application to strike the tort of unlawful interference with economic interests, and the order of mandamus sought by Chance against the Minister of Energy Mines and Resources from Chance’s Statement of Claim with leave to amend. I dismissed Yukon’s application regarding the other causes of action pleaded by Chance. Yukon has appealed my decision. The appeal is ongoing.

Chance has, since then, decided to abandon its claim in unlawful interference with economic interests. In addition, it is no longer seeking an order of mandamus against the Minister of Energy, Mines and Resources. [ 64 ] Considering the CMC Order as a whole, the context in which it was made as well as the Statement of Defence Yukon filed, I find that the scope of the CMC Order did not extend to compelling Yukon to provide its affidavit of documents in relation to all of Chance’s claims by June 20, 2020.

The CMC Order only compelled the parties to produce their documents regarding the two causes of action that Yukon did not apply to strike, namely, Chance’s claims of negligent misrepresentations and statutory cancellation of its permits.

As a result, I am of the view that Yukon shall not be compelled to produce its documents in relation to the causes of action that are the subject of its application to strike until a final decision is made on that application. [ 65 ] However, there is nothing in the wording of the CMC Order that would ground a finding that Yukon’s obligation to produce documents excluded the issue of damages for the two causes of action that are not the subject of Yukon’s application to strike.

In addition, while Yukon may have indicated its intention to bring an application to bifurcate the trial of this action into a liability stage and a damages stage, Yukon has yet to file anything in that regard. Chance’s Amended Fresh Statement of Claim [ 66 ] Chance’s and Yukon’s applications are to be decided on the basis of the pleadings, including the amendments contained in Chance’s Amended Fresh Statement of Claim (“AFSOC”) that I recently authorized Chance to file.

However, as I am of the view that it is premature to order Yukon to produce documents in relation to Chance’s claims that are the subject of its application to strike until a final determination is made on appeal, I will only review the allegations that are relevant to the two causes of action that are not covered by Yukon’s appeal (the claims of negligent misrepresentation and statutory cancellation of Chance’s permits). The allegations are as follows: [ 67 ] Chance is a corporation that carries on business in the area of energy exploration and development.

The corporation officially changed its name from Northern Cross to Chance on April 12, 2017. Chance’s acquisition of exploratory licences in the Eagle Plain Basin [ 68 ] In or around 2006, the oil and gas industry nominated locations in the Eagle Plain Basin for exploration under the Oil and Gas Act , RSY 2002, c. 162 (the “ Act ”), by way of a Request for Posting (“RFP”). As a result, Yukon launched a disposition process under the Act . Consultations took place. A report to the Minister was prepared in relation to each of the permits later acquired by Chance.

None of the reports indicated any concerns about hydraulic fracturing.

Calls for Bids were then issued. [ 69 ] In 2006-2007, Chance became the successful bidder on 13 exploration permits in the Eagle Plain Basin in exchange for capital spending of over 21 million dollars. [ 70 ] In 2009-2010, Chance obtained two additional exploration permits in the Eagle Plain Basin following the same regulatory bidding process. [ 71 ] In total, Chance’s 15 exploration permits encompassed 1.3 million acres in the Eagle Plain Basin. [ 72 ] Chance states that an appropriate time to have indicated any concerns regarding the use of hydraulic fracturing would have been at the RFP stage.

However, at no time during that stage and the bidding process did Yukon express any concerns regarding the use of hydraulic fracturing. In contrast, in March 2017, in response to 15 new RFPs, Yukon publicly stated that there was a Moratorium on hydraulic fracturing in the Yukon, and that no fracking would be allowed in the exploration for and the development of oil and gas in the territory. [ 73 ] Chance states that neither the Calls for Bids nor the Permits themselves indicated any restrictions on hydraulic fracturing, nor did they limit Chance’s activities to the pursuit of conventional resources.

In addition, there was no indication that any restrictions on hydraulic fracturing would be imposed in the future. [ 74 ] Chance states that Yukon knew and understood all along that Chance obtained its permits with the expectations that the lands subject to its permits contained unconventional resources, which would require hydraulic fracturing to extract. The grouping applications [ 75 ] In 2011, Chance successfully applied to Yukon to group its 15 permits into five areas of contiguous land.

Chance states that it made its grouping applications in anticipation of a major exploration program for unconventional geological opportunities. Chance also states that the unconventional opportunities it had identified were the primary reason for applying to group its permits.

[ 76 ] Chance states that grouping of permits is not usually done in cases where conventional resources are sought, as these resources are, by their very nature, typically geographically limited.

Instead, grouping is commonly done where the resources expected to be found are unconventional ones, as shale formations tend to be geographically pervasive, making the evaluation in a given well relevant over a broader region. [ 77 ] In addition, Chance states that the technical requirements of drilling, evaluating and completing wells for unconventional resources locked in shale are also quite different from those for conventional resources. [ 78 ] Chance states that, at the time, hydraulic fracturing was a permitted and recognized method associated with the pursuit of unconventional resources.

In addition, some amount of hydraulic fracturing is required both in exploration work and as a well stimulation technique to commercially extract conventional resources. [ 79 ] Chance states that, based on the content of its applications, including the depths of its planned wells (which were significantly greater than those typically drilled for conventional resources), the communications it had with Yukon surrounding its grouping applications, and Yukon’s decision to approve its grouping applications, Yukon understood, knew and accepted that Chance’s goal was to pursue unconventional resources activities, which necessarily requires the use of hydraulic fracturing. [ 80 ] However, Chance states that although there was every opportunity to do so during the grouping process, Yukon never indicated any concerns with the use of hydraulic fracturing.

Chance’s oil and gas exploration activities in the Eagle Plain Basin [ 81 ] In 2012 and 2013, Chance drilled four wells (McParlon A-25, East Chance E-78, West Chance H-28 and Ehnjuu Choo B-73). [ 82 ] Through its 2013-2014 drilling program, Chance acquired 325 square kilometers of 3D seismic data and 25 kilometers of 2D seismic data. [ 83 ] Chance sent the 2D and 3D seismic data as well as the data gathered through a number of Significant Discovery Licenses in the Eagle Plain Basin - Chance had acquired a majority working interest in and operatorship since 1994 - for

interpretation. The Resource evaluation revealed a large area of shale holding approximately 8.6 billion barrels of oil equivalent in place in the lands subject to Chance’s permits. Chance states that these resources can only be extracted by way of hydraulic fracturing. [ 84 ] In addition, Chance states that some amount of hydraulic fracturing is required in exploration work and as a well stimulation technique to commercially extract conventional resources.

Chance states that the Moratorium has impaired and impeded its ability to enhance production of low/high permeability conventional reservoirs, and that, as a result, the pursuit of conventional resources in the lands subject to Chance’s permits has also been harmed. [ 85 ] Chance undertook its exploration activities at a cost of approximately $115,000,000. [ 86 ] Chance states that if it had known hydraulic fracturing would not be permitted in the future, it would not have embarked on the type of capital-intensive exploration program that it conducted.

Chance states that this information was well known to Yukon as it either formed part of its application materials or was disclosed as part of Chance’s reporting requirements. Tenure of Chance’s Permits [ 87 ] Chance’s 15 permits (0005 to 0017, 0019 and 0020) were valid for an initial term of six years with a renewal term of four years. Since the initial extensions, Chance has applied for and received further tenure extensions on Permits 0008 to 0011, and 0019. [ 88 ] However, the most recent extensions were for tenures less than requested.

Despite formal requests by Chance, tenure extensions on Permits 0006 and 0007 were not approved and have since expired.

In addition, Chance voluntarily surrendered Permit 0005 (see Response to Notice to Admit (#31)) Rentals for Chance’s permits [ 89 ] Chance paid annual rent on its permits, as required under the regulatory scheme, from August 31, 2013, until August 30, 2015. [ 90 ] Following the imposition of the Moratorium, Chance obtained deferrals on payments of rent due on August 13, 2015, and August 31, 2016 (Accrued Rentals). [ 91 ] No further annual rentals have accrued since August 31, 2016, as the regulatory requirement for payment of annual rentals has been replaced with a requirement to provide a lease renewal deposit. [ 92 ] In or about November 2016, Chance communicated to Yukon a formal refusal to pay the Accrued Rentals on the basis that its exploration rights had been impaired by the Moratorium. [ 93 ] In August 2017, Chance paid a portion of the Accrued Rentals under protest. [ 94 ] To date, Chance has paid a total of $3,375,121.73 in rent to Yukon for its permits.

Work deposits for Chance’s permits [ 95 ] Chance also paid work deposits, as required by the regulatory scheme, for its permits. [ 96 ] On or about October 15, 2013, Yukon fully reimbursed Chance’s work deposits on permits 0005-0011, 0019 and 0020 for a total amount of $1,125,194.25. It partially reimbursed Chance’s work deposits on permits 0012-0017 in the amount of $3,544,061.73 from the

principal amount of $4,401,230.24. [ 97 ] Chance states that the reimbursements were made in acknowledgment that expenditures made by Chance were within the regulatory parameters. The Moratorium [ 98 ] In May 2013, the Yukon Legislative Assembly established the Select Committee Regarding the Risks and Benefits of Hydraulic Fracturing (“the Committee”). The Committee held hearings at the legislature and in communities across the territory. [ 99 ] Chance participated in the process.

It made a presentation to the Committee on January 31, 2014. [ 100 ] The Committee issued its final report and recommendations in January 2015. Chance alleges that none of the recommendations included a ban or a Moratorium on hydraulic fracturing. [ 101 ] According to Chance, one of the recommendations was that further study of the potential economic impacts of developing a hydraulic fracturing industry was important and should be undertaken. Chance states that no such studies have been undertaken or commissioned by Yukon. [ 102 ] On April 9, 2015, Yukon formally adopted all of the Committee’s recommendations.

The same day, Yukon announced a ban on hydraulic fracturing in all areas of the territory, except for the Liard Basin in southeast Yukon. [ 103 ] The Moratorium is still in effect. Chance states that there is no indication as to if and when it will be lifted, or what preconditions would need to be fulfilled before it is lifted.

I note that in its Response to the Notice to Admit, Yukon stated that while the Liard Basin was exempted from the Moratorium when it was first announced, it is no longer exempted. [ 104 ] At the time the Moratorium was announced, Chance’s permits in the Eagle Plain Basin were the only ones affected by the Moratorium, as Chance was the only oil and gas company conducting activities in the affected area. [ 105 ] At the time of the Committee’s review, Chance states that it was proposing and seeking approval for an extensive development program that focused on unconventional resources and would contemplate hydraulic fracturing at some point.

Chance further states that such development was only possible through the use of hydraulic fracturing and represented, to Chance’s knowledge, the only significant existing hydraulic fracturing plan in Yukon. That plan was stopped by the announcement of the Moratorium in April 2015.

Chance alleges that the timing and impact of the Moratorium are indications that it was implemented or ordered to prevent Chance from moving forward with its planned development of its resources under its permits. [ 106 ] Beginning in April 2015, Chance communicated its concerns relating to Yukon’s acceptance of the Committee’s recommendations and the Moratorium. [ 107 ] Following the Moratorium, Chance requested that Yukon grant it a number of concessions. [ 108 ] Chance states that the initial permit extensions that were granted on its 15 permits as well as Yukon’s substantial reimbursement of Chance’s outstanding work deposits were made in recognition that the Moratorium stripped Chance of its sub-surface rights. [ 109 ] Chance states that its tenure continues to run on its remaining permits.

Chance also states that its losses continue to accrue. [ 110 ] Chance states that the Moratorium continues to impair or prevent it from being able to complete or fulfill certain regulatory requirements - associated with converting some of its permits into oil and gas leases - that are mandated by Yukon. In addition, Chance states that, due to the Moratorium, it is unable to conduct workovers on certain wells as is being demanded by Yukon.

Chance states that these demands, made impossible by Yukon’s own Moratorium, may force Chance to abandon some of its wells, compounding the impact of the Moratorium and inflicting further losses on Chance. [ 111 ] Furthermore, Chance states that in October 2016, China National Offshore Oil Company Ltd. (“CNOOC”) withdrew as an investor due to the implementation of the Moratorium and its impact on Chance.

Chance states that the uncertainty of tenure caused by the Moratorium has and continues to cause harm to Chance by, among other things, making it difficult or impossible for Chance to attract or secure investments (which investment became necessary with CNOOC’s withdrawal) or financing, or to make any type of long- term plans. Misrepresentations [ 112 ] In June 2011, Chance secured CNOOC as a major investor in order to fulfill work commitments under its permits.

An affiliate of CNOOC invested over $115,000,000 in Chance on the understanding that they would be pursuing unconventional resources. [ 113 ] Soon after, Chance took various CNOOC representatives on a tour of the territory. The delegation was introduced to a variety of Yukon’s representatives. On June 30, 2011, as part of the tour, Chance attended a meeting with Yukon’s representatives and presented a plan to focus on evaluating unconventional resources based on CNOOC’s interest and investment objectives.

At no time during these discussions did Yukon indicate that hydraulic fracturing might not be permitted. [ 114 ] Chance states that over the course of many years including before, at the time of, and subsequent to granting the permits to Chance, Yukon engaged in a course of conduct and made representations that encouraged Chance and its principal investor, CNOOC, to expend capital on developing the lands covered by its permits and the rights granted under its permits. [ 115 ] Chance states that, prior to imposing the Moratorium in April 2015, no representatives of Yukon had ever represented to Chance, its investors or the public generally, that any limitation would be imposed on the use of hydraulic fracturing to explore and develop the rights granted by the permits.

Specifically, all representations made over the course of several years were expressly (or impliedly by

omission) confirmatory of Chance, or any other party, being able to use hydraulic fracturing as a means of exercising rights held under oil and gas dispositions, including Chance’s rights granted by the permits.

This included, among other things, representations directly to Chance, such as formal correspondence including granting of the permits, grouped permits, informal correspondence including letters, emails and meetings and representations to the public at large including the RFP process and the Government of Yukon’s other general encouragement of industry to expend capital in the territory. [ 116 ] Chance states that Yukon actively promoted and encouraged oil and gas exploration and development in the Yukon, and thereby communicated to Chance that it should invest and continue to invest in the territory.

Chance states that Yukon has benefitted from such investment. [ 117 ] Chance states that from the RFP phase onwards, Yukon represented to Chance that it supported oil and gas development, that its dispositions granted rights to oil and gas, and that hydraulic fracturing would be, subject to regulatory compliance, permitted. [ 118 ] Chance states that Yukon’s representatives made those types of representations at both formal and informal meetings and phone calls including but not limited to the following dates: March 10, 2009; June 2009; December 2, 2010; May 19 and 20, 2010; June 29, 2011; November 2011; January 30, 2012; June 19, 2012; August 31, 2012; August 22, 2014; February 3, 2014; December 2, 2014; October 26, 2015; March 2016, a meeting at the 2016 Summer Meeting of Canada’s Premiers. [ 119 ] Chance also refers specifically in its AFSOC to a representation made in a Yukon Energy Prospectus issued with the Eagle Plain 2010 Call for Bids highlighting the presence of unconventional resources in that area. [ 120 ] Chance states that Yukon made representations that the oil and gas rights granted under its permits encompassed rights to explore and exploit oil and gas resources without any differentiation between conventional and unconventional resources. [ 121 ] Chance states that it relied on Yukon’s representations as well as on the regulatory framework, which does not differentiate between unconventional and conventional resources, and spent over $140,000,000 in pursuit of its rights to explore, develop and produce its resources.

Chance states that Yukon ought to have foreseen such reliance. [ 122 ] In addition, Chance alleges that Yukon benefited from Chance’s investment. Chance submits that over 20,000,000 of its expenditure directly benefitted Yukon’s businesses and citizens. [ 123 ] Chance alleges that it has suffered loss and damages as a result of its reliance on Yukon’s misrepresentations (including the annual rentals and Accrued Rentals it paid, as well as capital expenditures, operating and administrative costs and cost of capital it incurred).

Chance also alleges that the Moratorium has fundamentally impaired its ability to meaningfully exercise its rights to oil and gas in the lands subject to its permits, resulting in damages for loss of opportunity. The damages Chance claims for negligent misrepresentations are pleaded at para. 95 of its AFSOC. Statutory cancellation of Chance’s permits [ 124 ] Chance states that it has not breached any terms or conditions of its permits nor has Yukon alleged any breaches.

In its Response to the Notice to Admit, Yukon stated that, in 2016, Chance refused to pay $1,191,551.73 of rental fees owing on its permits and that Yukon notified Chance repeatedly that the payment was required under the Act and was overdue. [ 125 ] Under this claim, Chance states that the Moratorium amounts to a cancellation of its permits under s. 28(1)(

a) of the Act and that it is entitled to the compensation provided by s. 58 of the Oil and Gas Disposition Regulation , OIC 1999/147. [ 126 ] Chance adds that it was not provided notice of Yukon’s intention to cancel its permits pursuant to s. 60 of the Act . [ 127 ] The amount of statutory compensation claimed by Chance is outlined at para. 95 of its AFSOC.

Analysis [ 128 ] While Rule 25(3) governs the disclosure and production obligation of a party to a civil action, Rule 25(6) addresses the content of a party’s affidavit of documents and the timing of its delivery: A party to an action shall, within 30 days after the close of pleadings under Rule 23(5), deliver to every other party an affidavit of documents in Form 110 or 111 disclosing to the full extent of the party’s knowledge, information and belief all documents relating to any matter in issue in the action that are or have been in the party’s possession, control or power. … (

i) that are in the party’s possession, control or power and that the party does not object to producing; (ii) that are or were in the party’s possession, control or power and for which the party claims privilege, and the grounds for the claim; and (iii) that were formerly in the party’s possession, control or power, but are no longer in the party’s possession, control or power, whether

or not privilege is claimed for them, together with a statement of when and how the party lost possession or control of or power overthem and their present location. (

b) The affidavit shall also contain a statement that the party has never had in the party’s possession, control or power any documentrelating to any matter in issue in the action other than those listed in the affidavit. [129] Pursuant to Rule 25(21), the court may order the disclosure or production for inspection of documents that are not privileged, ormay order service of a further and better affidavit of documents when it is satisfied by any evidence that relevant documents in a party’spossession, control or power have been omitted from the party’s affidavit of documents. [130] As I have already stated, a broad relevance test, one of possible relevance, applies at the document discovery stage of aproceeding.

The test is to be applied in light of the principle of proportionality embedded in the Rules. [131] My finding that the disclosure obligation of a party to an action is broader than the test advocated and applied by Yukon to itsproduction of documents directly leads to the conclusion that Yukon’s affidavit of documents falls short of listing all the documents it isrequired to disclose and produce, subject to privilege, under the Rules of Court. [132] In addition, I find that Yukon’s broad view of the scope of its admissions contributed to Yukon delivering to Chance an affidavitof documents that is too narrow. [133] Yukon has made a number of admissions in its Statement of Defence.

It has clarified the scope of some of its admissions in itsResponse to Chance’s Notice to Admit that was filed as part of the record on this application. Yukon’s non-binding views regarding itsadmissions were also communicated to Chance in exchanges that were filed on this application. [134] I agree with Chance’s position that Yukon’s admissions are not as broad and far reaching as contended by Yukon.

What is inissue between the parties cannot be determined simply by looking, in isolation, at the specific factual allegations admitted by Yukonwithout considering the impact of other relevant factual allegations it has not admitted and their combined effects on the action beforethe court. [135] In addition, given the long timeframe at issue (Chance obtained its first 13 permits at issue in or about 2006 and the Moratoriumwas imposed in 2015) and the nature of the two causes of action that are not the subject of Yukon’s application to strike (moreparticularly whether there exists a “special relationship” between the parties that gives rise to a duty of care with respect to the tort ofnegligent misrepresentation, and whether the Moratorium amounts to a cancellation of Chance’s permits), I agree with Chance that thereis a sizeable number of relevant documents relating to the matters in issue in this case that have not been included in Yukon’s affidavit ofdocuments and that, as a result, Yukon has under produced. [136] As what is in issue between the parties is determined by the pleadings, I now turn to the two causes of action that are not subjectto Yukon’s appeal.

The tort of negligent misrepresentation [137] The tort of negligent misrepresentation has five elements:

a) The existence of a duty of care based on a “special relationship” between the representor and the representee;

b) The representation is untrue, inaccurate, or misleading;

c) The representor acted negligently in making the representation;

d) The representee reasonably relied on the negligent misrepresentation; and

e) The reliance was detrimental to the representee in the sense that damages resulted (Queen v Cognos, (SCC),[1993] 1 SCR 87 at 110). [138] In addition, in cases of misrepresentation by silence, the plaintiff also has to establish that the representor had a duty speak in thecircumstances when it remained silent. (Scotsburn Co-Op Services v W.T.

Goodwin Ltd, (SCC), [1985] 1 SCR 54 atparas. 24-27; Fletcher v Manitoba Public Insurance Co, (SCC), [1990] 3 SCR 191 at para. 211; and Sidhu Estate vBains, (BC CA), [1996] BCJ No 1246 (BCCA) at para. 31). [139] As Chance’s case largely rests on its allegation that Yukon remained silent regarding its concerns on the use of hydraulicfracturing or restrictions that may be imposed on the use of hydraulic fracturing, when it had a duty to speak, this additional element mustbe considered when determining what is in issue between the parties. [140] However, I note that Chance also pleads that Yukon positively misrepresented to Chance that Yukon supported oil and gasdevelopment, that Chance’s permits granted rights to both conventional and unconventional oil and gas resources, and that hydraulicfracturing would be, subject to regulatory compliance, permitted.

[141] In R v Imperial Tobacco Canada Ltd, 2011 SCC 42 (“Imperial Tobacco”), the Supreme Court of Canada, at para. 42, restated theelements to consider when determining whether a duty of care based on a “special relationship” exists: … In a claim of negligent misrepresentation, both these requirements for a prima facie duty of care are established if there was a “specialrelationship” between the parties: Hercules Managements Ltd. v Ernst & Young, (SCC), [1997] 2 S.C.R. 165, at para.24.

In Hercules Managements, the Court, per La Forest J., held that a special relationship will be established where; (1) the defendantought reasonably to foresee that the plaintiff will rely on his or her representation, and (2) reliance by the plaintiff would be reasonable inthe circumstances of the case (ibid.). Where such a relationship is established, the defendant may be liable for losses suffered by theplaintiff as a result of a negligent misstatement. [142] In addition, the existence of a duty of care based on a “special relationship” may arise:

a) explicitly or by implication, from the relevant statutory scheme; or

b) from specific interactions between the plaintiff and the government, where a duty of care is not negated by the statute; or

c) from both interactions between the parties and the government’s statutory duties. (Imperial Tobacco, at paras. 43-46) [143] As I have already reviewed Chance’s allegations of negligent misrepresentation, I will now turn to the admissions Yukon made inits Statement of Defence and Response to Notice to Admit in relation to this cause of action. [144] Yukon concedes that the relevant features of the oil and gas disposition process operate as pleaded by Chance. [145] Yukon also admits to publicly promoting investment in oil and gas exploration (both before and after the Moratorium).

Yukonadds, however, that, prior to the Moratorium, the topic of hydraulic fracturing never came up in promotional efforts. [146] Yukon admits that it encouraged Chance to expand resources on oil and gas exploration.

Yukon states that it was aware thatanyone seeking to produce oil and gas in the Yukon might at some point consider hydraulic fracturing as a technique to support theproduction of oil and gas resources if the geology of the deposits made the use of the technique appropriate and economically attractive. [147] Yukon also admits that no restriction on the use of hydraulic fracturing was contained within any of the Calls for Bids, RFPprocesses and permits. [148] In addition, Yukon states that its public statements on the acceptability of hydraulic fracturing in shale gas development are notinconsistent with the recommendations of the Select Committee.

I note, that, by so stating, Yukon expressly admits to making publicstatements at some point in the past about the acceptability of hydraulic fracturing. [149] However, Yukon does not admit that it represented to Chance that Chance would be entitled to utilize hydraulic fracturing inorder to access and extract resources, including through the Calls for Bids, RFP processes and permits granted to Chance. [150] Yukon does not admit that it represented to potential investors that the use of hydraulic fracturing would be permitted.

Yukonadds that this statement is inaccurate and not a matter in issue in the litigation. [151] With respect to the grouping of Chance’s permits, Yukon admits that Chance successfully applied to group its permits into fiveareas of contiguous land. However, it does not admit that it knew that Chance’s rationale for grouping its permits was to facilitate theefficient exploration of unconventional resources. Instead, Yukon states that the grouping applications were explicitly made on the basisthat Chance intended to explore for both conventional and unconventional resources.

Yukon does not admit that it knew thatunconventional resources typically cover a larger geographic area than conventional resources. In addition, Yukon does not admit thatChance’s drilling program was designed to assess several shale intervals in the Eagle Plain Basin.

The parties also disagree on thevarious depths of the wells drilled by Chance. [152] Yukon also states that Chance repeatedly disavowed any immediate intention to use hydraulic fracturing techniques. [153] Also, Yukon does not admit that hydraulic fracturing is required to access the resources Chance has discovered or that arecontained in the lands covered by its permits. Yukon states that it has no information one way or another relating to the issue of physicalimpossibility of extracting unconventional resources without hydraulic fracturing.

Yukon adds that it seems very unlikely that therecould be any oil and gas that could not be extracted without the use of hydraulic fracturing. [154] Yukon takes the position that the question of economic viability is not one that can be answered because Chance’s pleadings donot specify a time at which the economic viability of hydraulic fracturing is to be assessed as opposed to other resources extractionmethod.

However, Yukon states that it is prepared to admit that, at some times, at some price levels, some oil and gas resources can onlybe profitably extracted using hydraulic fracturing. [155] With respect to damages, Yukon admits the amount that Chance paid in rent in relation to its permits. However, it states thatChance has refused to pay $1,191,551.73 in rental fees that it owes to Yukon on its permits. In addition, Yukon admits the amount thatChance has paid in work deposits. Yukon also admits the amount it reimbursed to Chance on its work deposits.

However, Yukon hasmade no admission regarding the amount that Chance alleges it invested in its exploration program or other investment it made orexpenses it had in relation to its permits.

[ 156 ] Finally, Yukon does not admit the value of the oil and gas resources Chance allegedly identified through its exploration program. [ 157 ] I note that Yukon’s admissions regarding the regulatory disposition process as well as the content of its representations are very general in nature.

In addition, Yukon’s admissions are not sufficient or broad enough in scope to address and cover the entire factual matrix required to make a determination on each of the elements of the tort of negligent misrepresentation. [ 158 ] For example, while Yukon has admitted that no restriction on the use of hydraulic fracturing was contained within any of the Calls for Bids, RFP processes and permits, that admission, even in light of Yukon’s admission regarding the RFP statutory process generally, is not broad enough to cover or provide the context in which Yukon allegedly remained silent on this issue during that time.

That contextual information is relevant to the determination of whether Yukon had a duty of care based on a “special relationship” between the parties, and whether Yukon had a duty to speak, both of which are not conceded by Yukon. In addition, Yukon has not made any admissions as to whether it had any concerns regarding hydraulic fracturing or was considering a ban on fracking at the material times, such as during the RFP processes, when it is alleged that Yukon remained silent on that issue.

That information is relevant to the determination of whether Yukon had a duty to speak and whether its silence constitutes a representation that was untrue, inaccurate, or misleading. [ 159 ] Furthermore, Yukon’s admissions regarding the amounts of Chance’s payments to Yukon relating to its permits, and the amounts and general timing of Yukon’s refunds to Chance are not sufficient to fully address the issue of damages as raised by Chance in its pleadings in relation to this tort.

For example, considering Chance’s statutory reporting requirements, one could expect Yukon to have records in its possession containing information regarding Chance’s investment or spending in its exploration program. As stated earlier, as Yukon has not brought an application to bifurcate the trial into a liability stage and a damages stage it cannot rely on its intention to do so to justify its position that it should not be compelled, at this point, to produce documents on the issue of damages.

In addition, Yukon cannot rely on the fact that Chance has not particularized its damages, when there is no evidence that Yukon has requested particulars on that issue, to delay Yukon’s disclosure on damages until particulars are provided. [ 160 ] Those few examples of areas where I find that Yukon’s production of documents is deficient, coupled with my finding that Yukon has applied a narrower test for production than provided by the Rules of Court and has taken a broader view of the scope of its admissions, lead me to conclude that Yukon has under produced and shall review its production of documents to ensure that its affidavit of documents lists all of the documents in its possession, control or power containing information relating to any matters in issue regarding each of the elements of the tort of negligent misrepresentation listed above.

As explained later in my decision, I arrive at the same conclusion regarding the claim of statutory cancellation of Chance’s permits. [ 161 ] However, as it is the obligation of the parties to a civil action to provide an affidavit of documents that complies with the Rules of Court , and as counsel have the ultimate responsibility of ensuring that disclosure is provided in accordance with the Rules of Court ( LTS Infrastructure Services Limited Partnership v Rohl Enterprises Ltd , 2019 NWTSC 10 (“ LTS Infrastructure Services ”) at para. 22 ), I am of the view that it is not for the Court to craft for the parties an exhaustive list of all the matters in issue and all the categories of records related to the matters in issue that shall be included in their respective affidavit of documents, and I decline to do so. [ 162 ] Instead, as per the Sedona Canada Principles, I invite counsel for Yukon and Chance to discuss and agree on a list of issues as well as on categories of records that should be included in Yukon’s affidavit of documents based on my findings regarding the broad test applicable to document disclosure and production in this jurisdiction, and the limited scope of Yukon’s admissions. [ 163 ] In case of disagreement, the parties may, after a final determination is made on Yukon’s application to strike, submit their respective lists of issues and categories of records subject to disclosure, taking into consideration my findings, in case management where a decision will be made. [ 164 ] Nonetheless, I believe it useful to address some of the specific examples raised by the parties regarding the categories of documents to be included in Yukon’s affidavit of documents based on the matters in issue with respect to the tort of negligent misrepresentation to illustrate my finding.

Yukon’s promotional efforts to attract investment in oil and gas exploration in the territory. [ 165 ] Chance’s description of the oil and gas regulatory disposition process, generally admitted by Yukon, is sufficiently detailed to reveal that Yukon issued public documents and made public statements prior to, during, and after the RFP processes through which Chance bid and obtained 15 exploratory permits.

In its AFSOC, Chance provides an example of a promotional document, a prospectus issued by Yukon as part of the Eagle Plain Basin 2010 Call for Bids process that specifically refers, amongst other things, to the presence of unconventional resources in that area. The prospectus, which is part of Chance’s production of documents, states that the “Eagle Plain Basin is an under-explored region of oil and gas resources in Yukon” and invites potential investors to “Seize the Opportunity”.

The prospectus is included at pages 178 to 181 of the Joint Application Record. [ 166 ] Chance states in its AFSOC that it relied on Yukon’s efforts to promote and encourage oil and gas exploration when it invested in oil and gas exploration in the Eagle Plain Basin. [ 167 ] Yukon takes the position that because it does not dispute that it publicly promoted investment in oil and gas exploration in the Yukon (before and after the Moratorium), it does not have to produce records relating to its promotional efforts as they do not relate to any matter in issue in the litigation. [ 168 ] However, I note that Yukon’s position does not take into consideration its own admission in its Statement of Defence that it made public statements regarding the acceptability of hydraulic fracturing in shale gas development without indicating when, how and in what context it made those statements.

I note that Yukon also stated in its response to Chance’s Notice to Admit that the topic of hydraulic fracturing never came up in its promotional efforts.

[ 169 ] In addition, Yukon’s position does not take into consideration that this category of records may provide information that is relevant to the question of how it attracted investment and the context in which Chance participated in the RFP processes in or around 2006 and 2009-2010 as well as the context in which it continued to invest in its exploration programs before the announcement of the Moratorium, which are matters in issue raised by the essential elements of the tort of negligent misrepresentation as pleaded by Chance. [ 170 ] As a result, I find that Yukon has the obligation to disclose and produce, subject to privilege, all the records in its possession, power or control relating to its efforts to promote investments in oil and gas resources in the Yukon from, at least, 2004 (a few years prior to the 2006 RFP process by which Chance became the successful bidder on its first permits at issue in this case) and April 2015 (when the Moratorium was announced) that were issued or published for Chance specifically, the oil and gas industry in general and the public at large.

I am of the view that one could reasonably expect these documents to contain information that may, not must, assist Chance or Yukon either to advance their own case regarding the issues of:

a) how Yukon attracted investment;

b) whether it made false or misleading representations regarding the use of hydraulic fracturing, and the rights to explore and exploit unconventional resources, for which, according to Chance, hydraulic fracturing is required,

c) if Yukon had a duty to speak about restrictions on hydraulic fracturing, or concerns it may have had with hydraulic fracturing at the time;

d) if it was reasonable for Chance to rely on the alleged misrepresentations; and

e) The existence of a “special relationship” between Chance and Yukon.

Yukon’s representations to Chance, the oil and gas industry and the public in general (including, but not limited to, promotional records) [ 171 ] Yukon also takes the position that it does not have to produce documents relating to its representations or silence on the permissibility of hydraulic fracturing or the right of successful bidders to explore and extract both conventional and unconventional resources to the industry or the public at large because Chance has not pleaded to whom those representations were made, that it was aware of those specific representations, and that it relied on those representations.

Yukon is of the view that Chance is going on a fishing expedition when it seeks disclosure of those documents. [ 172 ] However, Yukon’s position does not take into consideration its own admission that it publicly made representations regarding the acceptability of hydraulic fracturing in shale gas development. [ 173 ] In addition, Yukon relies on Rule 20(12) to submit that the full particulars of a representation must be pleaded before it can be compelled to disclose documents regarding that representation. [ 174 ] Considering the number of years between the RFP processes that led to Chance acquiring 15 permits in the Eagle Plain Basin and the Moratorium, I am of the view that Yukon’s position that Chance has to particularize every representation it alleges that Yukon made about the permissibility of hydraulic fracturing and the rights of successful bidders to explore and extract both conventional and unconventional resources, as well as every instance where Yukon remained silent when it had a duty to speak about the concerns it may have had regarding fracking or restrictions that may be imposed on the use of fracking before it has to disclose documents regarding those representations is not tenable in this case.

In addition, I note that, in its AFSOC, Chance specifically identified a number of steps in the regulatory process where Yukon would have remained silent when it had a duty to speak about the issue of hydraulic fracturing. It also identified a number of specific representatives and officials with which it had communications about its oil and gas permits and operations during those years at different times.

Chance also provided in its AFSOC a number of dates where those representations would have been made by Yukon. [ 175 ] I am also of the view that as a member of the oil and gas industry and as a successful bidder and holder of 15 exploratory permits in the Eagle Plains Basin that has performed exploratory work in that area, Chance would have been the recipient of at least, several of Yukon’s representations published for the oil and gas industry or the public in general on those topics. [ 176 ] As a result, I am of the view that Yukon shall disclose all the documents in its possession, power or control that contain representations by Yukon about the permissibility of hydraulic fracturing and the right of successful bidders to extract both conventional and unconventional resources, at least, between 2004 and April 2015, not only to Chance specifically but also to the oil and gas industry and the public at large. [ 177 ] Yukon’s obligation to disclose and produce relevant documents only extends to those documents that are in its possession, power or control.

I am satisfied, and Chance does not dispute, that the following entities are not part of the Government of Yukon, that they are third parties to this litigation: the Yukon Environmental and Socio-Economic and Assessment Board (“YESAB”), the Water Board for the Yukon Territory, and the Select Committee Regarding the Risks and Benefits of Hydraulic Fracturing. As a result, Yukon does not have the obligation to seek out documents from these third parties.

Nonetheless, Yukon has the obligation to disclose relevant records of communications it had, documents it received from third parties or documents it sent to third parties, including the third parties listed above, that are in its possession, power or control. Statutory Cancell

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