Desoto Resources Limited v. Encana Corporation.

At issue in this case is the validity of certain petroleum and natural gas leases granted by PanCanadian (Encana’s predecessor in title) in 1974 to Desoto’s predecessor in title. The fact pattern was complicated by Jofco’s (Desoto’s previous corporate name) bankruptcy in 1999. As part of the judicially approved bankruptcy settlement it appears that PanCanadian was prepared at that time to forego its position that the leases had terminated. A Desoto well drilled in 2003, which Encana argued that Desoto had no right to drill. following which Encana sent Desoto a notice to commence proceedings on its caveats. Desoto commenced this action seeking a declaration that the leases were in good standing. After pleadings closed Encana applied for summary judgement, which was granted in 2009. Justice Tilleman declined to interfere with that conclusion and hence the present appeal. The Court of Appeal set aside the summary judgement against the lessee. The Court noted that summary judgement is not available when the record discloses genuine issues of fact that must be resolved at trial. And the Court identified several issues that met this test and in particular a set of issues with respect to the terms of the 1999 bankruptcy arrangement, the interpretation of that arrangement, an d the possible interaction of estoppel and reliance arguments with the terms of the bankruptcy arrangement.The Court went on to offer a number of possible interpretations of the 1999 arrangement that might be available in order to illustrate that there were genuine issues for trial.