Limitation Periods And The Issuance Of Invoices

• Law Firm: Miller Thomson LLP
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Tax, Energy and Natural Resources, Law Practice Management, Oil, Gas & Electricity, Construction & Planning, Sales Taxes: VAT, GST, Privilege, Facilities
• Author: Ms Emma Johnston, Joyce Bolton and Jordon W. Magico
• Published date: 26 April 2023

Introduction and overview

Harvest Operations Corp v Obsidian Energy Ltd, 2022 ABKB 848¹ is an appeal of a decision of Application's Judge Prowse granting summary judgment in favour of the plaintiff, Harvest Operations Corp ("Harvest"), as operator of four petroleum facilities, regarding unpaid invoices from its joint venture partner, the defendant, Obsidian Energy Ltd ("Obsidian"). While not strictly construction related, this decision is of interest in all industries where the payment of invoices is typically longer than contractually provided, an issue that the Alberta construction industry is attempting to address by the implementation of the new Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4.

Harvest sued Obsidian on June 26, 2019² for unpaid invoices for the years 2012 to 2016, in the amount of approximately $2.9 million.³ Obsidian opposed the application by arguing that Harvest's claim was statute barred by the Limitations Act,⁴ (although in this case, the limitation was four years owing to the agreements between the parties). Obsidian also claimed it was owed approximately $750,000 by Harvest, as the operator of several other unrelated joint ventures.

The main issues before both the Applications Judge and Justice Romaine were whether all or portions of Harvest's claim were statute barred, whether there was admissible evidence of an acknowledgement of debt that prevented the limitation period from expiring, and whether Harvest would set off a limitation barred claim against Obsidian's counterclaim.

Background facts

Harvest and Obsidian were parties to four petroleum facilities agreements that provided that Harvest, as operator, would issue bills on a monthly basis (joint interest billings). At the end of every year, Harvest was also required to perform certain adjustments and issue equalization credits or invoices.⁵ According to the agreements, these equalization invoices were to be issued within 180 days of the preceding year.⁶ Specifically, three of the facilities agreements provided that the operator "shall within [180] days of the end of the preceding year adjust the distribution of the costs, fee income and Surplus Capacity usage charges made [in monthly invoices]".⁷ The other agreement provided that Harvest would "make reasonable efforts to adjust within... [180] Days of the end of the proceeding year, the distribution of the costs, fee income and Surplus Capacity usage charges made" [in monthly invoices]."⁸

Harvest completed and...