Deep Rights Trespass Judgment Under Appeal

On June 30, 2005, the Alberta Court of Appeal dismissed an appeal and a cross-appeal from a judgment of nearly $9 million obtained by Xerex Exploration Ltd. against Petro-Canada. In the course of drilling within shallow rights it held in Northern Alberta, Petro-Canada negotiated an acquisition of the deeper rights held by Xerex without disclosing to Xerex information obtained during drilling. Alberta Court of Queen’s Bench Justice Sal LoVecchio imposed liability for trespass, conversion and misrepresentation by non-disclosure. An alternative overriding royalty claim against subsequent purchasers Progress Energy Ltd. and Highland Energy Inc. was dismissed, in consequence of Xerex’ success on the main claim.

The Court of Appeal sustained the finding of misrepresentation by non-disclosure, and also imposed liability for actual misrepresentation and breach of fiduciary duty by Petro-Canada, upholding the damage award but dismissing Xerex’ cross-appeal for an increased damage award.

Xerex was represented by Clarke Hunter and Julie Whitaker of Macleod Dixon LLP, with advisory assistance from Tom Hirst, Q.C. Petro-Canada was represented by Gerry Scott, Q.C., and Gordon McCue of Fraser Milner Casgrain LLP. Progress and Highland were represented by Doug Mills and Melanie Teetaert of Burnet, Duckworth & Palmer LLP.