CITATION: Farmers Oil v. Her Majesty the Queen et al., 2015 ONSC 223

COURT FILE NO.: CV-01-219653

DATE: 20150114

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

FARMERS OIL & GAS INC.

Plaintiff

– and –

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES and TALISMAN ENERGY INC.

Defendants

Jonathan Lisus and Andrew Winton, for the Plaintiff

William MacLarkey, William Manuel and Eric Wagner, for the Defendants

HEARD: 8 October 2014

REASONS FOR DECISION

(Motion for Summary Judgment)

Mew J.

[1] The defendant, Her Majesty the Queen in Right of Ontario Represented by the Ministry of Natural Resources (HMQ) brings this summary judgment motion on a limitation defence which it pleaded on 24 January 2002, nearly 13 years ago.

[2] No doubt the decision by HMQ to bring such a motion so long after it first raised a limitation defence was to some extent influenced by the Supreme Court of Canada’s decision in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87, released in January 2014, which ushered in a culture shift directed at creating an environment that promotes timely and affordable access to the civil justice system. The process of summary judgment provided for by Rule 20 of the Rules of Civil Procedure, and its recently implemented fact-finding powers, are at the core of this culture shift.

[3] A good deal of the discussion in Hryniak builds upon the advantages and opportunities provided by early judicial intervention in a civil action.

[4] While early judicial intervention greatly enhances the objectives of summary judgment, the expected culture shift is one of general application. Judges at this court of have, since Hryniak, repeatedly held that it goes beyond summary judgment and infuses all aspects of civil procedure.^[1]

[5] Through the devices of motions for directions (Rule 1.05), case conferences (Rule 50.13) and, of course, the fact finding and trial management powers contained in rule 20, judges and masters of this court are now better equipped to assist parties to guide civil disputes to proportionate, timely and affordable resolution.

[6] The general principles in Rules 1.4(1) and (1.1) form part of the foundation for this culture shift. The rules should be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits and to make orders and give directions that are proportionate to the importance and complexity of the issues, and the amount involved, in the proceeding.

[7] In Hryniak, Karakatsanis J. writes (at para. 32) of the need for all players in the system to participate in the culture shift:

This culture shift requires judges to actively manage the legal process in line with the principle of proportionality. While summary judgment motions can save time and resources, like most pre-trial procedures, they can also slow down the proceedings if used inappropriately. While judges can and should play a role in controlling such risks, counsel must, in accordance with the traditions of their profession, act in a way that facilitates rather than frustrates access to justice. Lawyers should consider their client's limited means and the nature of their case and fashion proportionate means to achieve a fair and just result.

[8] The challenge of appropriately allocating the court’s finite resources is also a relevant concern in determining how the general principles set out in Rule 1.04 should be applied.^[2]

[9] The events giving rise to this action go back to at least 1988, if not before. It was in that year that the Ministry of Natural Resources (the “Ministry”) informed the defendant of its intention to impose a “Spacing Unit” pattern for what is known as the Romney 3-8-II oil pool which lies beneath an 80 acre parcel of land on Lot 10 of Concession I in Romney, Ontario and the surrounding lands.

[10] At the times material to the events giving rise to this dispute, “Spacing Units” were areas of land within which an operator who wished to drill for, produce and market a property’s oil and gas reserves, had to acquire all of the oil rights from the landowners in the spacing unit. The practical effect was that if an operator did not own all of the land covered by a spacing unit, that operator needed to acquire the oil rights from the other landowners involved. Spacing units can and did straddle the Lake Erie shoreline. The Crown owns the mineral rights under the lake bed. As a result, in order for an operator to drill for oil on-shore in a spacing unit which included near-shore areas, the on-shore operator would have had to lease contiguous Crown-owned near-shore rights to “complete” the spacing unit.

[11] The statement of claim alleges that the spacing plan introduced by the Ministry in 1988, which affected lots 8, 9, 10 and 11 as well as Crown near-shore property had the effect of locking the freehold oil rights interests of the affected property owners with the Crown’s property interests.

[12] At that time the Ministry did not have authority to allow any person to produce and sell resources under the near-shore portion of the spacing unit. As a result, the on-shore property owners’ ability to produce and sell their oil reserves was impaired.

[13] In February 1993, however, the Ontario government published Regulation 72/93 under the Mining Act, RSO 1990, Chap. M.14, which provided the Ministry with the authority to grant leases of near-shore rights.

[14] In 1994 the Petroleum Resources Act, RSO 1990, Chap. P.12^[3] under which spacing units were established, was amended to permit the establishment of spacing units by the Minister, rather than by enactment of a regulation as had hitherto been the case.

Procedural History

[15] This action, which was commenced by statement of claim on 30 October 2001, seeks damages of $20 million and declaratory relief against the Ministry on the basis of three sets of alleged contraventions of the plaintiff’s rights and interests, as delineated by the headings used in the statement of claim:

a. the Ministry’s grant in August 1995 of an oil lease including near-shore area of the Spacing Unit affecting Lot 10 to Pembina Oil (now Talisman Energy Inc.);

b. the Ministry’s denial on 28 October 1996 of the plaintiff’s application to amend the Lot 10 Spacing Unit so as to allow the plaintiff to proceed with production; and,

c. the Ministry’s renewal in 2000 of the lease to Talisman.

[16] It should be noted that, on 4 August 1998, and therefore well before the commencement of this action, the plaintiff brought an application for judicial review of the Ministry’s decision to award the Lot 10 near-shore rights to Pembina. In November 2000 lawyers for the Ministry and Talisman objected to the plaintiff proceeding by way of judicial review. That application was dismissed, on consent, by order of Chapnik J. dated 15 November 2001.

[17] HMQ delivered its statement of defence on 24 January 2002. It pleaded that the claims advanced by the plaintiff both in the present action and in the previous application for judicial review are statute barred by the “applicable limitation periods”. The Public Authorities Protection Act, the Proceedings Against the Crown Act and the Mining Act are all pleaded.

[18] No doubt anticipating that there might be issues raised by the plaintiff as to discoverability of its claims, the Crown pleaded that the plaintiff learned on or about 5 September 1995 that a lease had been issued to Pembina. That lease was renewed on 26 October 1999. Accordingly, any reasonable cause of action the plaintiff may have had relating to the original issuance of the lease arose on or about 5 September 1995 and any reasonable cause of action relating to the renewal arose on or about 26 October 1999.

[19] The only limitation period raised on the motion is section 7(1) of the Public Authorities Protection Act, RSO 1990, c. P.38^[4] (“PAPA”) which provides that proceedings against a public authority must be commenced within six months after the cause of action arose. This provision was repealed by the Limitations Act, 2002^[5] which came into force on 1 January 2004 with the result that the limitation period would be the general two year limitation period that is applicable to most civil claims.

[20] In 2002, the parties participated in a mediation (which did not result in settlement).

[21] In 2003, the parties exchanged documentary productions.

[22] In 2003 and 2004, the parties attempted to schedule examinations for discovery, without success.

[23] In 2003, the plaintiff applied to the Mining and Lands Commissioner for an order to utilise the centre portion of Lot 10. Had this application succeeded, it would have resolved most, but not all, of the dispute between the parties.

[24] In September 2004, the parties agreed, at the plaintiff’s request, not to incur further costs in the litigation until the Commissioner released her decision.

[25] On 11 March 2005, the Commissioner released her decision denying the plaintiffs request.

[26] Between 2005 and 2010 the action did not advance.

[27] On 13 January 2011 the court issued a status notice pursuant to Rule 48.14(1). This led to a contested status hearing by way of special appointment before Master Graham on 28 May 2012. Master Graham concluded that, despite the delay, the action should be permitted to proceed in accordance with a timetable submitted at the status hearing by counsel for the plaintiff.

[28] In the meantime, the action against Talisman had been dismissed on consent, without costs, on 4 July 2011.

[29] HMQ appealed Master Graham’s decision. On 23 November 2012, Ducharme J. dismissed that appeal.

[30] HMQ then sought leave to appeal from the decision of Ducharme J. HMQ’s motion for leave to appeal was dismissed by Molloy J. on 15 March 2013.

[31] Examinations for discovery were conducted in June 2013.

[32] Master Graham, having assumed case management responsibilities for this matter, conducted a case conference on 16 October 2013.

[33] The parties attended in motion scheduling court on 25 February 2014 to schedule summary judgment motions, including this motion relating to the limitation defence (which is the only summary judgment motion that ultimately went ahead).

[34] The plaintiff then moved to amend its statement of claim. The defendant says that these proposed amendments attempt to raise for the first time allegations of intentional misconduct on the part of the Ministry. The plaintiff argues that it is simply seeking to particularise the claims of negligence and negligent misrepresentation which are already evident from the existing statement of claim and to delete the claims which were only relevant to the now-dismissed claim against Talisman. On 3 April 2014, Master Graham ordered that the pleadings amendment motion should not proceed until after the summary judgment motion is disposed of.

[35] On 24 and 25 April 2014, the video-taped evidence was taken of Dr. Pentti Palonen, who had held senior positions in the petroleum resources section of the Ministry at times germane to the events giving rise to this action. This examination was conducted to ensure that Dr. Palonen’s evidence would be available at trial.

The Issue Submitted for Summary Determination

[36] Section 7(1) of PAPA only applies to the exercise of a “public” power or duty. The issue raised on this summary judgment motion is whether the plaintiff’s claims relate directly to the Ministry’s exercise of its core statutory powers to grant oil leases and decide regulatory applications. In that case the special limitation period under s. 7(1) would apply and the plaintiff’s claims would be statute-barred.

[37] The plaintiff asserts that this case is about the Ministry’s commercial dealings with potential lessors, activities which had a predominantly private aspect, and therefore fall outside the application of the special limitation period contained in section 7(1) of PAPA. If the plaintiff is correct, no other limitation defence having been maintained, the action should proceed.

[38] The defendant takes the position that the issue of whether the plaintiff’s causes of action against it relate to a “public” or “private” power can be fairly and properly decided based only on the statement of claim. According to the defendant, there are no facts, let alone contested facts that the court must find in order to dispose of the motion.

[39] Whereas the defendant seeks a dismissal of the action based on what it says should be the application of its limitation defence, the plaintiff asks only that the defendant’s motion is dismissed with the result that the plaintiff is able to proceed to an adjudication at trial of the issues it has raised.

Timeliness of the Motion

[40] Given that the defendant’s position that this motion can be determined based only on the statement of claim, it is extraordinary that it let this action continue for 12 years before bringing its motion. The record does not disclose the merest whisper that a motion on the limitation issue was being contemplated until February 2014. If the defendant genuinely believed that the court does not need to make any findings of fact in order to dispose of the motion, why was the motion not brought sooner, before significant costs and utilisation of the court’s resources had occurred?

[41] The conventional wisdom, post-Hryniak, is that summary judgment motions must be granted whenever there is no genuine issue requiring a trial (Rule 20.04(2)(a) and Hryniak, at para. 47). The rule is not, however, an absolute one. Under rule 20.04 (2.1), in determining whether there is no genuine issue requiring a trial of a claim or defence pursuant to Rule 20.04(2)(a), the court shall consider the evidence submitted by the parties and may weigh the evidence, evaluate the credibility of a deponent or draw any reasonable inference from the evidence unless it is in the interest of justice for such powers to be exercised only at a trial.

[42] The plaintiff argues that this action is, at last, trial ready. The defendant disputes that, pointing to the possibility of the statement of claim being amended which, it asserts, would fundamentally recast the plaintiff’s complaint and effectively start the action over.

[43] I considered long and hard whether to deny the defendant’s motion for summary judgment solely on the basis that it has been brought too late in the action for the objectives of a just, expeditious and least expensive resolution of the case to be achieved.

[44] As I have alluded to earlier, much of the discussion in Hryniak and the cases that have followed it focuses on the need for timely, cost-effective resolution of disputes. Part of that calculation would have entailed consideration of how the court’s resources could be most effectively deployed.

[45] In the present case, if I were to grant summary judgment, justice would hardly have been timely or cost effective. That ship sailed some time ago. This action has already consumed days of the court’s resources, not to mention the time and money spent on discovery (documentary and oral), the failed mediation and the de bene esse examination of Dr. Palonen.

[46] Ultimately, I talked myself out of simply dismissing the defendant’s motion based solely on the basis that it has been brought too late in the life of the action. But I would suggest that there may be cases, for example where a case is close to, if not ready for trial, and there are no, or weak, excuses for the moving party not to have brought its motion sooner, where the court goes further than I have chosen to be on this occasion and simply declines to entertain a motion for summary judgment.

The Evidence

[47] Despite the defendant’s position that this motion can be decided on the pleadings alone, the defendant did in fact include in its motion record extracts (comprising of six pages in total) from the examination for discovery of Randy Robinson, a representative of the plaintiff, taken on 26 June 2013, as well as the plaintiff’s affidavit of documents, sworn on 15 December 2011 (without documents attached) and one letter from the plaintiff’s former lawyers to the Ministry.

[48] The defendant’s reply factum and the submissions of its counsel made numerous references to the Robinson affidavit, the examination of Dr. Palonen and the exhibits filed in connection with those examinations.

[49] The plaintiff’s responding materials on this motion comprised of a record of three volumes, including a 25 page affidavit from Randy Robinson with 52 exhibits, an affidavit from David Malamed, the damages expert retained by the plaintiff, an affidavit from Alex Wilson, a representative of Talisman Energy Inc, which was sworn in February 1999 in connection with the judicial review application and some 50 exhibits marked during Dr. Palonen’s examination. In addition, there are transcripts of the two-day de bene esse examination of Dr. Palonen.

[50] The court is entitled to assume that the record contains all of the evidence that the parties will present at trial (Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 164 DLR (4^th) 257, 1998 ON CA 4831 at para. 17; Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at para 27).

The Claim

[51] The statement of claim was drafted a long time before the plaintiff’s current lawyers became involved. It might be said that it does not represent the best example of the legal draftsman’s art. Indeed, the defendant complains that it does not properly articulate any causes of action (although in the twelve plus years that this action has been extant, there has been no request for particulars and no motion under Rule 21).

[52] The relief sought includes damages (without specifying a cause of action); a declaration that the 1997 lease entered into between HMQ and Pembina was granted in contravention of the applicable regulation; a declaration quashing the 1997 lease or in the alternative to that an order removing the lot 10 near-shore rights from the 1997 lease; a declaration that the renewed and current production lease the lot 10 in favour of Talisman was granted in contravention of the applicable regulation; and, an order requiring the Minister to enter into a production lease with the plaintiff for the lot 10 near-shore rights (references to relief sought only against Talisman have been excluded).

[53] The three areas of concern identified in the statement of claim can be summarised as follows.

1. The Ministry’s Decision to Grant the Lot 10 Near-Shore Rights

[54] The claim that the lease of the lot 10 Crown near-shore rights were wrongfully granted to Pembina is founded on alleged representations by the Ministry in 1991 and 1993 that the Crown near-shore rights would be reserved for the operator who owned the land-based petroleum rights in the spacing unit that straddled the shore line. The grant of lease to Pembina in 1995, allegedly done without public notice, was "contrary" to this "advice" and contrary to the Ministry's "longstanding policy” on disposing of the near shore rights.

[55] More specifically the plaintiff alleges that in April 1991, the Ministry advised it that the Ministry was developing a new regulation that would authorise it to dispose of the near-shore rights. The plaintiff pleads that it relied on this advice and requested that it be kept informed of any amendments to regulations or policies relating to the disposition of near-shore rights.

[56] In 1993, as already noted, a regulation was promulgated. The plaintiff pleads that the Ministry advised it that the new regulation would grant the near-shore rights only to the developer that had discovered a viable well on a spacing unit straddling the Lake Erie shoreline. Accordingly, the plaintiff says it understood it would be granted the near-shore rights because it required them for production purposes in Lot 10. The plaintiff also alleges that it was advised by the Ministry that no other company would be able to "tie up" another company's development within that spacing unit.

[57] In August 1995 the Ministry made the first public announcement that it was accepting applications for the Crown's near shore rights. The plaintiff read the announcement on 5 September 1995. It contacted the Ministry about the Lot 10 near-shore rights and was advised that they had already been granted to Pembina.

[58] The plaintiff alleges that the Ministry's decision to grant near-shore rights to Pembina was contrary to its "longstanding policy" to grant the lease to the developer who had a well in the spacing unit that straddled the near-shore as well as the plaintiff’s understanding that the Lot 10 near-shore production rights would be granted to it when required for production purposes.

[59] Farmers Oil "immediately" objected to the Ministry's commitment of the lease to Pembina.

[60] In granting the Lot 10 near shore rights to Pembina in 1995, the plaintiff alleges that the Ministry erred in law, failed to act in accordance with the principles of natural justice, denied the plaintiff procedural fairness and exceeded its jurisdiction by making what was then a patently unreasonable decision.

2. The Ministry’s Refusal to Amend the Lot 10 Spacing Unit so as to Allow Farmers Oil to Proceed with Production

[61] The plaintiff complains that the Ministry wrongfully denied the requested amendment to the spacing units for Lot 10, Concession 1, Township of Romney.

[62] More specifically, in September 1996, the plaintiff applied to the Ministry to amend the Lot 10 spacing units, as had allegedly been recommended in a prior meeting with the Ministry (if the amendments were granted, the plaintiff would have been able to proceed with production within the land-based portion of Lot 10 and Pembina would have been able to produce oil from the Lot 10 near-shore areas). The Ministry denied the application, allegedly based on an objection made by Pembina and not received until after the deadline for objections had passed. The Ministry denied plaintiff any information concerning that objection.

3. The Ministry’s Decision to Renew the Lot 10 Production Rights to Talisman Lease and Refuse Farmers Oil’s Application

[63] The plaintiff alleges that the Ministry's renewal of the Lot 10 near-shore lease to Talisman Oil Inc. (Pembina's successor in interest) in 2000 was contrary to statutory requirements.

[64] In October 1999, the plaintiff had made its own application for the Lot 10 near-shore lease in, which was set to expire at the end of 1999, on the basis that the plaintiff (but not Talisman) had, allegedly with the knowledge and approval of the Ministry, drilled within Lot 10 since 1995.

[65] The plaintiff pleads that Pembina had made no efforts during the tenure of its lease to advance production within Lot 10, and, in contrast to the plaintiff, had not satisfied the requirements for having its lease renewed.

[66] The plaintiff asserts that it had a reasonable expectation of receiving the Lot 10 lease and was the party with whom the production lease should have been entered into to meet the regulatory objectives. Accordingly, in deciding to renew the Talisman lease for the Lot 10 near shore, the Ministry erred in law, failed to act in accordance with principles of natural justice, denied the plaintiff procedural fairness, exceeded its jurisdiction, and made a patently unreasonable decision.

Public or Private Duties and Powers?

[67] The viability of the limitation defence raised by the defendant is dependent upon whether the matters complained of by the plaintiff involve the exercise by the defendant of “public” or “private” duties and powers.

[68] The leading decision is Des Champs v. Conseil des écoles séparées catholiques de langue française de Prescott Russell, 1999 SCC 660, [1999] 3 S.C.R. 281. That case involved an action brought by a school board superintendent who, as a result of a reorganisation by the school board, was moved to a teaching position. He considered that he had been unfairly dealt with and, eight months after the events giving rise to his cause of action, he commenced a proceeding. The school board pleaded that the action was statute barred pursuant to s. 7(1) of PAPA. Binnie J., writing for the majority offered the following general observations (at paras 12 and 13):

The wording of s. 7 of the Act indicates that the legislature did not intend to throw the protective net of s. 7 around public authorities in Ontario as a matter of status. The reference to the “intended execution of any statutory or other public duty or authority” (emphasis added) limits the protection to public duties and powers and confirms inferentially that a public authority may well have other duties and powers that are essentially of a private nature. In drawing the line between the public aspects and private aspects, the general principle is that the wording of s. 7 is to be read narrowly and against the party seeking its special protection. This produces an inevitable line drawing exercise that requires the court to examine the nature of the statutory power or duty imposed on the defendant public authority as well as the character of the particular conduct about which the plaintiff complains. The School Board, to take this case, is required to provide educational services to the public. In order to carry out its program, it has to build schools and hire teachers. If the Board were sued by an injured child for operating an unsafe school, or by parents for wrongly refusing to admit their child to classes, the claims would properly engage the public duties of the school, and be covered by the special limitation. On the other hand, a claim by a disgruntled builder under a school construction contract, or an unpaid caterer who had provided food services, would stand on a different footing. Although the subject matter of their claim clearly relates to the execution by the school of its public mandate, it is incidental thereto. The builder or caterer would be asserting private rights under private contracts. Their claims would not be within the intended scope of the disability imposed by the special limitation period.

For purposes of this analysis, it does not matter whether the claim arises in contract or in tort. The analysis is directed to whether the claim, whatever it is, “correlates” to a public power or duty exercised or owed by the authority.

[69] The Supreme Court concluded that although the school board’s reorganisation was a public initiative (delivery of an educational programme being a responsibility owed by the board to all members of the public alike), the plaintiff’s claim arose from the school board’s implementation of the reorganisation and raised only labour relations issues against the board as the plaintiff’s employer. This was distinct, separate, subordinate and incidental to the board’s execution of its public duty and powers. The six-month limitation period was therefore not applicable.

[70] Des Champs set out a five-part test to decide whether the PAPA limitation period applies (at para 50):

a. whether the defendant is a public authority within the class of entities for whom the limitation period was intended;

b. what the public authority was doing, and pursuant to what duty or power;

c. whether the power or duty relied on as part of the cause of action is properly classified as entailing a public aspect or connotation or whether it is more readily classifiable as a private executive or administrative power;

d. whether the activity that is the subject matter of the complaint is inherently public in nature or more of an internal or operational nature with a predominantly private aspect; and

e. from the plaintiff's perspective, does the claim correlate to the exercise by the defendant of a public power or duty or does it relate to the breach of a public duty or does it complain about an activity of a public character?

The Facts

[71] Because of the position taken by the defendant the evidence filed by the plaintiff is largely unchallenged.

[72] The defendant does make the bald assertion in its factum that much of the evidence filed by the plaintiff is inadmissible according to the rules of evidence, not relevant to the allegations pleaded in the statement of claim and, in any event, not relevant to the Ministry’s motion for summary judgment based only on the PAPA limitation period.

[73] The defendant also suggests that the evidence filed by the plaintiff on the motion all but ignores its pleading and instead raises an allegation of intentional misconduct. It argues that the plaintiff should not be permitted to “bootstrap” allegations of deliberate, unlawful conduct onto its existing negligence claim.

[74] The defendant also points out that Rule 25.06(8) requires that where fraud, misrepresentation, breach of trust, malice or intent are alleged, a plaintiff must plead full particulars.

[75] The difficulty with these submissions is that the statement of claim as presently framed is broadly worded. It does not identify any nominate torts or even use the word negligence. I make that observation without wishing to pre-empt any evaluation of the plaintiff’s proposed amendments to the statement of claim which may be subsequently undertaken by Master Graham.

[76] What can be said, however, is that in January 2002, long before the evidence that the plaintiff now relies upon had emerged, HMQ felt it appropriate to deny in its statement of defence that it had “acted at any time with the knowledge that its actions would or could harm the plaintiff’s legitimate business interests”, that any of its actions were “illegal” or that its actions have been “unfair to the plaintiff”. Significantly, HMQ pleads that at all material times “it acted in good faith”.

[77] Having regard to the Des Champs criteria, there are allegations in the statement of claim which, depending on the evidentiary context, could relate to either “public” or “private” acts. Take, for example, the allegation in paragraph 13 of the statement of claim:

The Ministry advised Farmers Oil that no company would be able to tie up the near shore rights so as to interfere with another company’s development within a spacing unit. The Ministry explained that the regulation was not intended to create a conflict between interest holders but rather to promote development by allowing the freehold oil rights developer to produce and market the oil from that spacing unit. The Ministry as well as the freehold landowners within the producing spacing unit would then receive a portion of the oil revenue.

[78] The plaintiff is saying that the Ministry made certain representations (that it goes on to plead were, effectively, misleading or false). The Ministry is said to have explained the purpose of its regulation which, on the surface this might seem like the normal discharge of a public duty: explaining to a citizen the intended operation and effect of a regulation under the Ministry’s jurisdiction. But the information given is also alleged to have contained a representation – that the intention was to allow the freehold rights developer to produce and market oil, to the financial benefit of the landowners (such as the plaintiff) as well as the Ministry, which (as the owner of the near-shore property) would receive a portion of the oil revenue. Such an allegation would seem to be moving into the territory of “private” activities.

[79] If one then turns to the evidence, the commercial aspect becomes more prominent, as does the basis for the plaintiff’s allegations that its rights and interests were ignored, contrary to the Ministry’s representations and its longstanding policies.

[80] The allegations in paragraph 13 of the statement of claim stem from a telephone call between Dr. Palonen and Mr. Robinson in March 1993. By that time, Dr. Palonen’s representations to Mr. Robinson notwithstanding, the Ministry had, unbeknown to the plaintiff, already received what the plaintiff characterises as “applications” for near-shore rights from Telesis (subsequently Pembina, then Talisman) which the Ministry was keeping on file to “activate” at a later date. Dr. Palonen was asked about these earlier “applications” when he was cross-examined in 1999 in the judicial review proceedings and again during the course of his Rule 36 examination in April 2014. While there may be debate about whether there was one or more earlier “application”, the record does indicate that although at the time (circa 1989) the Ministry had no authority to lease near-shore rights, Dr. Palonen received an “application” from Mr. Wilson, then of Telesis, and put it in a pending file. In cross-examination he agreed that he had done so “essentially [to be] kept alive for the day that [the Ministry] was able to grant the leases”.

[81] When examined in 2014, Dr. Palonen said:

Q. So, if I understand this, when you accepted Pembina’s application, put it in a file that you were going to activate later, you didn’t consider yourself to be exercising any statutory power you had.

A. I did not.

Q. You did not consider yourself to be exercising any power under any regulation, correct?

A. No.

Q. And you didn’t consider yourself to be exercising any power under any policy, correct?

A. That’s correct.

[82] Dr. Palonen also admitted that he had no authority to award the near-shore rights:

Q. Okay and you had input only. And you didn’t have authority to give away any Great Lakes nearshore oil and natural gas rights, correct?

A. I – I did not have any authority to give them away, no.

Q. Right, and you didn’t have any authority to create legal enforce – enforceable rights or interests in Great Lakes nearshore oil and natural gas rights? You didn’t have that authority, correct?

A. In terms of land tenure?

Q. Yes.

A. I did not have that right.

Q. Okay. That’s a right that can only be exercised by the policy uh, group pursuant to an established regulation and policy, right?

A. Uh, no, that – that right would have been uh, the manager or supervisor of the Lands Program who’s authorized to sign. Gary Sherman was his name actually at the time.

Q. Okay and until there’s a regulation and a policy in place, no one can acquire an enforceable right or interest in nearshore oil and natural gas rights, correct?

A. That would be correct, yes

[83] What becomes evident from the record is that the near-shore rights were subsequently granted to what is now Talisman. In his 1999 affidavit, sworn in relation to the application for judicial review, Dr. Palonen stated:

The decision made to issue a lease to Pembina (now Talisman Energy Inc.,) was a commercial decision made by the Ministry and does not contravene the legislative intent and policy objectives of Regulation 72/93.

[84] On cross-examination on that statement, Dr. Palonen re-affirmed that the Ministry’s decision to lease the Lot 10 near-shore rights to Pembina was a commercial decision:

65. Q. Now in paragraph 3 of your Affidavit, you say in the last sentence that the decision made to issue a lease to Pembina was a commercial decision made by the Ministry and does not contravene the legislative intent and policy objectives of Regulation 72 for 93. Now what exactly do you mean, it was a “commercial decision”?

A. The Ministry of Natural Resources, as a land owner, as responsible for lands owned by the Crown in the Province of Ontario, intends to realize return from those lands and wishes to make money out of them by the sale of natural resources, where it is possible, and there is no environmental, serious environmental consequences. So we wished to allow operators to produce oil or gas from those Crown lands and return the royalty to the Crown. In other words, we wanted to make money out of the lands controlled by the Crown.

66. Q. So in that respect you are saying it was a commercial decision?

A. That’s correct.

67. Q. Now what was the criteria that you looked at in determining what decision to make?

A. Those criteria, the criteria for issuing the lease?

68. Q. Well, for making, I suppose it is for issuing the lease, for making that what you say was a commercial decision, was there a specific criteria that you had in making the decision to issue that lease?

A. Well, there are criteria for issuing any lease and that is that the leases are intended to make money for the Crown for payment for royalties, normally for extraction of natural resources, be they fish, be they timber, be they mineral resources.

69. Q. We are talking here about mineral resources and, in fact, we are talking specifically about petroleum resources?

A. That’s correct.

[85] When examined in 2014, Dr. Palonen re-affirmed this evidence:

Q. Right and to the extent that the Crown owned um, mineral rights, for instance in the nearshore portion of – of Lake Erie, it wanted to uh, exploit those rights and generate, uh, revenue for the Crown; fair?

A. Well obviously uh, any uh, oil that was produced from Crown lands would – would be of benefit to the Crown, that’s correct.

Q. Of course, I’m not saying it in a disparaging way. It was a commercial opportunity for the Crown to exploit just as oil on private land is a commercial opportunity for private landowners to exploit.

A. That would be correct, yes.

[86] A similar analysis could be undertaken in respect of other paragraphs in the statement of claim.

Has HMQ Met Its Burden of Satisfying the Court That There is No Genuine Issue for Trial With Respect to its Limitation Defence?

[87] On this motion for summary judgment, the threshold question is whether or not there is a genuine issue with respect to the limitation defence pleaded by the defendant requiring a trial: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(2). According to Hryniak v. Mauldin, 2014 SCC 7, at para. 49, no genuine issue requiring trial will exist

… when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[88] To reach a fair and just determination, the summary judgment process must give “the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute”: Hryniak, at para. 50.

[89] This much is clear from the evidence that has been adduced so far: when it comes to dealing with the oil industry in south-western Ontario, the MNR wears two hats. It is, of course, a regulator, discharging a responsibility to all members of the public alike. But is also a commercial actor. It owns the oil resources on Crown lands, specifically in this case, the near-shore areas. And in that capacity it deals with potential lessors.

[90] I pause to note that the fact that in the purported exercise of his or her employment a public official may have exceeded his or her authority does not necessarily deprive his or her actions of their public quality (Bellemare v Caisse Populaire de Saint-Boniface Ltee. (2001), 154 Man. R. (2d) 103, 2001 MBQB 25 at para 21). But the actions of Dr. Palonen in relation to the Pembina “application” form only part of what the plaintiffs complain about.

[91] Looking at the evidentiary record as a whole, I cannot with confidence distill from it the relative measures of the defendant’s “public” and “private” activities. At the risk of repetition, in Des Champs, Binnie J. said (at para 12):

In drawing the line between the public aspects and private aspects, the general principle is that the wording of s. 7 is to be read narrowly and against the party seeking its special protection. This produces an inevitable line drawing exercise that requires the court to examine the nature of the statutory power or duty imposed on the defendant public authority as well as the character of the particular conduct about which the plaintiff complains.

[92] The plaintiff argues that if the activities of the defendant were “predominantly” “private” in nature, the defendant cannot rely on s. 7(1) of PAPA. It is not necessary for me to decide whether that is the correct yardstick or not. What I can say at this juncture is there is sufficient evidence in the record for me to conclude that there are some “private” aspects of the defendants activities which, viewed in isolation, would not attract the application of s. 7(1) of PAPA. Furthermore, and particularly having regard to Binnie J.’s admonition that s. 7(1) should be read narrowly against the defendant, I cannot, on the present record, draw the line with confidence and say that the evidence demonstrates that the plaintiff’s claim relates to public activities of HMQ to a sufficient degree to find that there is no triable issue with respect to the limitation defence.

[93] I therefore decline to grant the summary judgment sought by the defendant.

[94] The plaintiff has not requested that I decide the limitation issue once and for all (with the effect that it cannot be raised again at trial, if that is where this action now heads). While it would be open to me to do so (see King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215; Whalen v Hillier (2001), 2001 ON CA 24070, 53 O.R. (3d) 550 (CA)), I am not confident that I could find the necessary facts and, thus, definitively resolve the limitation issue on the present record. As Karakatsanis J. states in Hryniak (at para. 50), “a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute.”

Next Steps

[95] Having declined to grant the defendant motion for summary judgment based on the present record, I have considered whether the deployment of the court’s powers to order a mini-trial (Rule 20.04(2.2) would be appropriate.

[96] In my view, a mini-trial is unlikely to be an effective aide to the resolution of this dispute. It seems likely to me that the “public” and “private” qualities of the defendant’s activities are woven into the threads of evidence in this case, and that extricating them by any means other than a trial is likely to be a fruitless exercise. This case strikes me as the sort of matter that Lauwers J.A. had in mind in Baywood Homes Partnership v Haditaghi, 2014 ONCA 450, when he said that there will be times when fairness requires that the “trial judge sees and hears it all” before, in this case, being able to determine what really went on and, hence, whether s. 7(1) of PAPA is applicable or not.

[97] Furthermore, having regard to the concerns I have already expressed concerning the timing of this motion, it would not serve the interests of justice to insert yet another costly procedure, which would, in my view, have a limited chance of disposing of the issue, between now and trial.

[98] Rule 20.05 provides that where summary judgment is refused, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to a trial expeditiously.

[99] I do not read rule 20.05 only permitting the court to order a matter to trial expeditiously if it has also made orders specifying what material facts are not in dispute and defining the issues to be tried. The antiquity of this matter alone demands that it now proceed to trial expeditiously, and, accordingly, I so direct. As this matter is already being case managed by Master Graham, it may well be duplicative for me to purport to personally exercise the powers given to the court under Rule 20.05(2). But in my view, and I so direct, it would be open to Master Graham, if he considers it appropriate, to fully exercise those powers and, in the event that there is any issue that any aspect of the exercise of such powers falls within the exclusive domain of a judge, I am at the disposal of the parties and Master Graham to assist.

Costs

[100] I am provisionally of the view that the plaintiff should have its costs of the motion. The plaintiff should provide a costs summary and may also deliver a written submission of not more than three pages in length addressing the appropriate scale of costs, by no later than 30 January 2015. The defendant’s costs submissions, not exceeding three pages in length, should be provided by 9 February 2015.

Mew J

Date: 14 January 2015

Correction made: 20 January 2015

Paragraph 1: the word “motion” has been inserted after the words “…brings this summary judgment…

CITATION: Farmers Oil v. Her Majesty the Queen et al., 2015 ONSC 223

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

FARMERS OIL & GAS INC.

Plaintiff

– and –

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES and TALISMAN ENERGY INC.

Defendants

REASONS FOR DECISION

Mew J.

Released: 14 January 2015

[1] For a recent example see Letang v. Hertz Canada Limited, 2015 ONSC 72

[2] It is instructive to record that in other jurisdictions the allocation of court resources is an express consideration in the application of general principles akin to those found in Rule 1.04(1) and (1.1). The Civil Procedure Rules in England & Wales (The Civil Procedure (Amendment No. 8) Rules 2014, SI 2014 No. 3299 (L. 36)) provide, at Part 1.1(2) as the “Overriding Objective” of the rules “[d]ealing with a case justly and at proportionate cost” which “includes, so far as is practicable …. (d) ensuring that it is dealt with expeditiously and fairly; (e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases….

[3] Replaced by the Oil, Gas and Salt Resources Act, RSO 1990, Chap. P.12 in 1997

[4] Section 7(1) provides:

No action, prosecution or other proceeding lies or shall be instituted against any person for an act done in pursuance or execution or intended execution of any statutory or other public duty or authority, or in respect of any alleged neglect or default in the execution of any such duty or authority, unless it is commenced within six months next after the cause of action arose, or, in the case of continuance of injury or damage, within six months after the ceasing thereof.

[5] S.O. 2002, c.24, Sch. B