Executive Summary: Key Legal and Evidentiary Issues

• CNOOC NA alleged that Sunstone Projects Ltd. and Wood Group Canada, Inc. failed to properly design and oversee the construction of two pipelines, one of which failed in 2015.

• Appellants sought production of records held by non-party CNOOC Affiliates under Rules 5.11 and 5.13, arguing CNOOC NA had "control" over those records through contractual audit rights and operational integration.

• The case management judge found that contractual audit provisions did not extend to litigation-related document access, that the CNOOC Affiliates are separate legal persons, and that there was no basis to pierce the corporate veil.

• Requests for records from the CNOOC Affiliates under Rule 5.13 were denied as overly broad and insufficiently particularized, amounting to improper non-party discovery.

• Questioning of CNOOC Affiliates under Rule 5.18 was refused because the appellants failed to demonstrate a "near employee" relationship between those entities and CNOOC NA.

• Costs awarded to three CNOOC Affiliates at four times Column 5 of the Schedule C tariff were upheld as proportionate and reasonable, despite the entities sharing the same counsel.

Background of the pipeline dispute

CNOOC Petroleum North America ULC ("CNOOC NA") alleges that the appellants, Sunstone Projects Ltd. and Wood Group Canada, Inc., failed to properly design and oversee the construction of two pipelines. One of the pipelines failed in 2015. The litigation has been ongoing since 2017 and has been in case management for several years. The matter is scheduled for trial in October 2026.

The appellants' application for third-party records and questioning

In late 2024, the appellants applied under Rules 5.11 and 5.13 of the Alberta Rules of Court seeking an order directing CNOOC NA and several affiliated CNOOC entities (collectively, the "CNOOC Affiliates") to produce records related to replacement of the two pipelines. The appellants also sought an order directing the CNOOC Affiliates to appoint corporate representatives for questioning. Each of the CNOOC Affiliates is affiliated with CNOOC NA, but none are parties to the underlying action. The appellants submit that the CNOOC Affiliates were involved in making decisions regarding replacement of the pipelines and have records related to those decisions and that work.

The chambers decision and the question of "control"

Associate Chief Justice D.B. Nixon denied the application in a chambers decision dated June 11, 2025 (2025 ABKB 360). Under Rule 5.11(1)(a), the court may order a record produced if it is satisfied a relevant and material record under the control of a party has been omitted from an affidavit of records. The appellants argued that CNOOC NA had "control" over the records held by the CNOOC Affiliates because CNOOC NA had contractual audit rights allowing it access to those records and there was operational integration between CNOOC NA and the CNOOC Affiliates. The case management judge was not satisfied control had been established. In his view, the contractually limited ability to request records for the purposes of an audit did not give CNOOC NA the right to access the records for the purposes of the litigation, and doing so would grant "greater power and meaning" to the contractual audit rights "than that anticipated by the parties." He was also not convinced he could ignore that the CNOOC Affiliates are separate legal persons, finding no basis to "pierce (or lift) the corporate veil" and concluding he was not persuaded that CNOOC NA "actually controls any of the bodies corporate within the CNOOC Affiliated Entities."

Non-party production and the specificity requirement

Under Rule 5.13(1), a court may order a non-party to produce a record if it is under their control, there is reason to believe it is relevant and material, and they might be required to produce it at trial. Production under this rule is related to specific documents and is "not a form of discovery of a non-party." The case management judge held that the appellants' request for records was "overly broad" and not sufficiently particularized, amounting to "document discovery of" the non-party CNOOC Affiliates. The appellants disagreed, arguing their requests were tied to named entities, specific contracts, and discrete decisions about a specific project. The case management judge reasonably concluded that the appellants' requests for "all supporting documentation," "all records identifying," and "any records concerning" were not sufficiently specific in the circumstances.

Questioning under Rule 5.18 and the "near employee" test

Under Rule 5.18, a party may question "a person who has provided services for" a corporate party, subject to certain requirements. The person being examined must have some sort of connection with the corporate party akin to that of an employee or officer. The appellants argued the requisite connection exists because the CNOOC Affiliates performed core project functions including engineering, procurement, construction, fabrication, and technical analysis. The case management judge did not agree. He considered the argument and the underlying evidence and concluded the appellants had "not demonstrated ... on the evidence presented that there is a 'near employee' relationship between CNOOC Canada and any one of the CNOOC Affiliated Entities."

The costs appeal

The appellants also appealed the costs order dated December 15, 2025 (2025 ABKB 748), which awarded each of three CNOOC Affiliates — Offshore Oil Engineering Co. Ltd., COOEC Canada Co. Ltd., and CenerTech Canada Ltd. — their own set of costs for the application, at four times Column 5 of the Schedule C tariff, despite all three being represented by the same counsel. The appellants argued the case management judge failed to articulate the parameters governing his discretion, failed to apply core efficiency and proportionality principles, and improperly rewarded unnecessary duplication. The case management judge, however, properly recognized that the "overriding issue is proportionality." With proportionality and reasonableness in mind, he determined it was appropriate to award costs for each of the three CNOOC Affiliates, "because all three ... submitted their own responding briefs based on their specific circumstances." He was "not convinced that this was inefficient or a waste of resources, particularly considering the specific circumstances of each of the CNOOC Affiliated Entities being located in different geographic regions." He also noted the appellants had brought their application against "these varied entities and they were entitled to respond as they thought appropriate."

Ruling and outcome

The Alberta Court of Appeal, in a memorandum of judgment filed on February 17, 2026, by Justices Antonio, Kirker, and Fagnan, dismissed both appeals. The Court found no reviewable error in the case management judge's interpretation of the contractual audit provisions, his factual determination that CNOOC NA did not have "control" over the affiliates' records, or his conclusion that the document requests were insufficiently particularized. The Court also found no basis to interfere with the case management judge's exercise of discretion on costs. CNOOC NA and its affiliates were the successful parties on appeal. No specific monetary amount was awarded or ordered, as this decision concerns interlocutory discovery disputes ahead of the October 2026 trial.