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FRAUD AND MISREPRESENTATION - Fraudulent misrepresentation - Specific elements - Recklessness of truth or falsity

Friday, December 01, 2017 @ 9:02 AM  

Lexis Advance® Quicklaw®
Appeal by the defendant, Yangarra Resources, from a chambers decision granting summary judgment in favour of the plaintiff, Precision Drilling Canada Limited Partnership. The plaintiff sought payment of unpaid fees for drilling three oil wells for the defendant. The parties utilized a standard form contract reflecting a "no-fault" industry practice in which each party bore any risk of damages to its own assets. The defendant refused payment on the basis of breach of contract, gross negligence, willful misconduct, fraudulent misrepresentation, and breach of duties of honesty and good faith. The defendant relied upon drilling difficulties acknowledged by the plaintiff that resulted in the defendant losing $300,000 worth of equipment. The plaintiff relied upon the risk and liability exclusion provisions within the parties' contract. A Master granted summary judgment in favour of the plaintiff. The defendant's request for set-off and/or counterclaim for damages was dismissed. On appeal, a chambers judge affirmed the decision. The defendant appealed to the Court of Appeal.

HELD: Appeal allowed. A summary judgment application was unsuitable for determining whether fraud occurred given the significance of a credibility assessment. It was a palpable and overriding error to find that there was no evidence of fraud, as there were facts that, taken together, indicated active steps were taken to deceive the defendant in respect of the drilling conditions. The initial failure to convey the true state of conditions suggested recklessness. Additionally, the chambers judge failed to consider the appropriate test for fraud by importing a requirement of intention of concealment. No examination was made of whether recklessness of the plaintiff provided a legitimate pathway to a finding of fraud. Even if the parties' contract barred a fraudulent misrepresentation claim, no analysis was made of whether such provision was unenforceable on public policy grounds. Such determination was a matter for trial.

Precision Drilling Canada Limited Partnership v. Yangarra Resources Ltd., [2017] A.J. No. 1194, Alberta Court of Appeal, M.S. Paperny, B.K. O'Ferrall and B.L. Veldhuis JJ.A., November 10, 2017. Digest No. TLD-November272017009