(Judgment Day is a new feature profiling business-related Alberta court decisions)

In lawsuits there are usually winners and losers. But in this case, everyone wins.

Both Husky Oil Operations Ltd. and Ledcor Industries Ltd. were awarded damages in their suits against each other in the Court of Queen’s Bench on Sept. 5.

The two companies had entered a fixed price contract in January 1998, but shortly into the project, realized there was a change in the scope of the work. By the end of February, they agreed to shift to a “cost-plus” arrangement. A battle ensued over who would bear the cost of repairs when welding specifications were not met.

Husky contended Ledcor, according to the contract, was responsible and sued for damages. Ledcor argued the cost-plus arrangement meant that the original contract was vacated, that all work was to be compensated by Husky, and sued for outstanding amounts.

The court found in favour of both: Husky owes Ledcor around $6.5 million, and Ledcor owes Husky about $5.05 million. The net result is that Ledcor has a judgment against Husky for just under $1.5 million.

HOW DORIS GOT HER GAS BACK
In a double-negative-sounding judgment, a Calgary producer was recently ordered to reverse its reversal of gas flow.

Following a long battle with AltaGas Services Inc., BelAir Corp., through its subsidiary BelAir Royalty Fund Ltd., had reversed flow on some pipelines to divert its production away from the Doris facility in central Alberta. On September 10, the Court of Queen’s Bench ordered BelAir to send the flow back to Doris.

The dispute between the companies began in October 2001 when BelAir, producer for the two processing plants and system of gathering pipelines at Doris, approached AltaGas, the administrative operator, about reducing operating costs at the facility. The two companies agreed to decommission one plant, although not specifying which one.

In June 2002, BelAir wrote a letter seeking approval for an “enlargement” to Doris, for which BelAir and a partner had already paid around $3.5 million. Court documents say AltaGas concluded from the expense detail supplied that BelAir was trying to recover drilling and completion costs, not activities that would qualify as enlargement as defined in their agreements.

AltaGas denied approval, and with its majority ownership, won a “no” vote in August 2002 on a mail ballot that was asking for the expenditures to be qualified as enlargement.

BelAir noted that had AltaGas voted in favour, the value of the entire facility would have increased, shifting the relative ownership to a point where BelAir could assume majority ownership.

In the fall of 2002, BelAir told AltaGas that since it believed operating costs were high and AltaGas refused to transfer ownership, BelAir intended to transfer all of its production (including reversing the flow on some pipelines that were part of the Doris facility) to another company’s facility. On EUB approval, granted despite AltaGas’s objections, production was transferred away from Doris in the spring of 2003.

The court disagreed with BelAir’s defence arguments, and found that by diverting gas, BelAir was in breach of an agreement it had made with AltaGas. AltaGas was granted an injunction restraining BelAir from diverting the gas, and was awarded transfer of all pipeline licences from BelAir. The judge has invited company lawyers to speak to costs.

HEARTBREAK OVER A HOTEL
An Edmonton company has lost an appeal after claiming it was “left without remedy” when its newly purchased hotel was torn down.

In May 2000, the International Hotel in Edmonton had fallen into disrepair. The Safety Codes Council issued a series of orders to the International’s owner requiring that certain repairs be completed within a certain time frame. By February 2001, the repairs had not been completed, and the owner received notice from the council and the City of Edmonton of the intent to demolish. The owner then obtained a temporary stop-work order.

In May 2001, Kristel Homes Ltd. purchased the mortgage, foreclosed and took title to the hotel. By November of that year, the courts denied the previous owner’s applications and a request for stay filed by Kristel. The building was demolished later that month.

Kristel appealed, saying that having succeeded the owner in title after the expiration of the proper appeal period, it was left without remedy.

However the Alberta Court of Appeal dismissed the argument this month, saying Kristel, being fully aware of the demolition order and pending application when it took title to the hotel, effectively stepped into the shoes of the previous owner and therefore had the same rights.

(Cases taken from recent judgment records for Alberta’s Court of Appeal, Court of Queen’s Bench and provincial courts. Nicole Strandlund can be reached at nicole@businessedge.ca)