Desoto Resources Limited v. Encana Corporation.

In this case Justice William Tilleman dismissed an appeal from Master Jodi Mason’s decision in chambers in which she had granted summary judgement in favour of the defendant in the action, Encana. Desoto had been seeking a declaration that it had a number of valid leases notwithstanding that the primary term of the leases had expired in the 1970s and that there had been no production on the leases for a period beginning in the late 1990s. On appeal, Desoto focused on estoppel arguments urging that the leases should survive on the basis of promissory estoppel, estoppel by acquiescence, or estoppel by deed. All of the arguments failed. Promissory estoppel failed on the basis that promissory estoppel can only be relied upon if there is an existing relationship. Here the legal relationship was already dead because each of the leases had expired of their own terms by virtue of the absence of production. Estoppel by acquiescence failed because there was nothing in the pleadings to suggest that Desoto would be able to establish all of the five “probanda” of Wilmott v Barber (1880), 15 Ch.D. 96 and in particular the last two: Encana’s knowledge of Desotos’s mistaken belief as to its entitlement, and encouragement by Encana to Desoto for it to continue spending money on the property. In estoppel by deed there must be a clear and close nexus between the subject of the deed and the rights that the plaintiff seeks to enforce. This is not contentious, but Justice Tilleman seems to go on to suggest that an agreement between relevant parties compromising the royalty payable (apparently under the terms of the leases) cannot be used as a foundation for an estoppel by deed argument in relation to the validity of the leases (at para. 66).