Executive Summary: Key Legal and Evidentiary Issues

• Dispute centers on unpaid fracking invoices versus allegations of defective products and negligent services across five wells.
• Central contractual issue is whether Interra’s standard form Terms & Conditions, including limitation of liability clauses, were effectively incorporated into the parties’ agreement.
• Evidentiary conflict arises over Yangarra’s failure to read the Ts&Cs and Interra’s failure to specifically highlight the limitation of liability provisions or draw any particular clauses to Yangarra’s attention.
• Expert evidence filed on appeal raises unresolved factual questions about whether Interra’s fracking system caused under-performance of the wells and production shortfalls.
• Procedural controversy concerns the propriety of granting summary judgment/dismissal where new affidavits and cross-examinations substantially expand the evidentiary record on appeal.
• Court finds a genuine issue for trial on notice and enforceability of limitation of liability clauses, requiring the intertwined claim and counterclaim to proceed to a full trial.

Factual background and commercial relationship

Interra Energy Services Canada Ltd and Yangarra Resources Ltd were engaged in a commercial oil and gas relationship for the supply of hydraulic fracturing products and services for wells operated by Yangarra in 2023. Interra issued several proposals to Yangarra beginning on March 1, 2023, offering to provide fracking products and services. Each proposal enclosed Interra’s General Terms and Conditions, commonly referred to as the Ts&Cs, and the cover emails indicated that the Ts&Cs were included. The pages of the proposals and the Ts&Cs were numbered sequentially, suggesting they formed a single, integrated document. The parties did not execute a formal, signed master agreement; instead, their contract was formed by the exchange of proposals and Yangarra’s acceptance, including acceptance by conduct when it allowed Interra to proceed with the work. Over several months, from March through August 2023, Interra provided fracking products and services on five wells. Both parties accepted that there were operational challenges in fracking the wells, but they disagreed sharply on the cause and legal consequences of those problems.

Invoices, non-payment, and the emergence of the dispute

Interra initially invoiced Yangarra for its work, and Yangarra paid the first invoice. Subsequent invoices, however, became the focal point of the dispute. On site, certain invoices were adjusted downward after discussions between Interra and Yangarra personnel, and Yangarra representatives approved the revised totals. Despite these adjustments, Yangarra ultimately refused to pay the remaining invoices, leaving an unpaid balance before interest of $853,889.40. Yangarra maintained that it did not fully appreciate the extent of the fracking problems until after the wells were brought into production and actual production volumes were measured against expectations. Once production data became available, Yangarra concluded that output was significantly below what would have been expected if the wells had been successfully fracked with proper zonal isolation, and it attributed this underperformance to Interra’s products and services.

Allegations of defective fracking work and production losses

Yangarra’s position was that the wells were not properly fracked because of defective components in Interra’s system or negligent execution of the fracking operations. As the case progressed, Yangarra retained experts whose opinions were later put before the Court on appeal. One expert opined that Interra’s fracking system did not perform as intended, but emphasized that determining the precise root cause required further engineering analysis and additional design and manufacturing data for the fracking darts. Another expert concluded that the wells had not been fully fracked and that this incomplete fracking explained the disappointing production results. That expert drew a contrast between these wells and offsetting wells that had been fracked using a different supplier’s products, which performed significantly better; he attributed the performance gap to Interra’s fracking system. Yangarra framed its counterclaim as seeking “additional costs” and “production losses” arising from the alleged failure of Interra’s system and services, in addition to resisting Interra’s claim for payment of the invoices.

Contract structure and standard form terms and conditions

The structure of the parties’ contract was central to the legal issues. The agreement consisted of Interra’s proposals, which expressly indicated that Ts&Cs were attached, and Yangarra’s acceptance or acceptance by conduct. The Ts&Cs were standard form terms generated by Interra and were presumed by Interra to govern all work performed under the proposals. The Ts&Cs contained important limitation of liability clauses. Although the specific wording of those clauses is not reproduced in the judgment, they were significant because Interra relied on them to argue that Yangarra’s claims for production losses and other consequential damages were contractually barred or sharply limited. The parties agreed that Yangarra personnel knew that Ts&Cs were included, but they disputed whether those Ts&Cs, and particularly the limitation clauses, were sufficiently brought to Yangarra’s attention to be enforceable.

Limitation of liability clauses and the notice requirement

The heart of the case lay in whether the limitation of liability provisions in the Ts&Cs were effectively incorporated into the contract so as to bind Yangarra. Yangarra contended that its personnel, including the key employee who received the proposals, did not read the Ts&Cs and that Interra never specifically drew the limitation of liability language to their attention. On this point, the earlier Applications Judge found that although there was no express effort to highlight the Ts&Cs, they had been provided with the very quotes that formed the basis of the contract, and that both parties were sophisticated commercial actors in the oil and gas industry. The Applications Judge concluded that Yangarra had every opportunity to review the Ts&Cs and rejected Yangarra’s argument that the terms were not part of the contract. On appeal, however, Justice Feasby revisited the legal framework governing notice of exclusion and limitation clauses in standard form contracts. The judgment canvasses classic ticket-case authorities and Canadian decisions, emphasizing that where a party seeks to rely on a limitation of liability in a standard form document that is not expressly negotiated, a higher standard of notice applies. Under this higher standard, the party relying on the clause must take reasonable measures to draw such limitations to the other party’s attention so that they can fairly be taken to have known and agreed to them. The Court distinguished earlier Alberta authority involving bespoke, transaction-specific contracts and held that those cases did not displace the line of cases requiring clear and prominent notice for standard form limitation clauses.

Evidence on incorporation of the limitation clauses

The evidentiary record regarding incorporation was mixed. On the one hand, Interra did send proposals that included the Ts&Cs as part of a unified, paginated package, and its cover emails expressly indicated that Ts&Cs were attached. On the other hand, Yangarra’s key employee, Mr. Latos, swore that he had not read the Ts&Cs at all. More importantly, Interra’s own sales manager, Mr. Malin, acknowledged on cross-examination that he had not pointed out the limitation of liability provisions, or indeed any particular clause in the Ts&Cs, to anyone at Yangarra. There was no evidence of any specific discussion, highlighting, or requirement that Yangarra initial or otherwise acknowledge the limitation clauses. Given this, the appellate judge concluded that the question of whether the limitation clauses were sufficiently “brought home” to Yangarra—under the higher notice standard applicable to limitation provisions in standard form contracts—could not be definitively resolved on summary judgment and instead raised a genuine issue for trial.

Procedural history and summary judgment applications

Procedurally, Interra had pursued a two-pronged summary route: it sought summary judgment for the unpaid invoices on the basis that the products were supplied and services rendered, and it sought summary dismissal of Yangarra’s counterclaim, relying heavily on the limitation of liability provisions. The Applications Judge accepted these arguments, granting Interra summary judgment on its claim and dismissing Yangarra’s counterclaim. Yangarra appealed. By the time of the appeal, Yangarra had filed four additional affidavits, including new expert reports, and Interra had cross-examined two of the expert witnesses, with transcripts filed as part of the record. Justice Feasby criticized the procedural rule that effectively allows a de novo hearing with new evidence on appeal from an Applications Judge, noting that it undermines the expectation, central to modern summary judgment practice, that parties must put their best foot forward at first instance. Nonetheless, bound by the existing procedural framework, he treated the appeal as functionally a fresh summary application on a considerably expanded record.

Determination that there is a genuine issue for trial

Applying the modern test for summary judgment—that the Court may only finally dispose of the matter if it can make necessary findings of fact, apply the law, and do so through a proportionate, expeditious procedure—Justice Feasby concluded those conditions were not met here. The unresolved factual questions about the efficacy of Interra’s fracking system, causation of the poor production results, and the proper interpretation and applicability of the limitation clauses could not fairly be resolved on the paper record, particularly in light of the new expert evidence. More fundamentally, the core contractual question—whether Yangarra was given sufficient notice of the limitation of liability provisions so that they became binding terms—was, in the Court’s view, a genuine issue requiring a full trial. The judge also emphasized that Interra’s claim and Yangarra’s counterclaim were closely intertwined: if the limitation clauses are ultimately found not to be part of the contract, Yangarra’s substantive negligence and product-defect theories might well reduce or extinguish the amounts otherwise payable under the invoices, or support a set-off based on proven production losses.

Outcome of the appeal and unresolved monetary issues

In the result, Justice Feasby allowed Yangarra’s appeal, set aside the earlier decision of Applications Judge Farrington, and directed that both Interra’s claim and Yangarra’s counterclaim proceed to trial together. The judgment did not order payment of Interra’s claimed $853,889.40 in unpaid invoices, nor did it award or quantify any damages to Yangarra for alleged production losses or additional costs. On the question of costs of the appeal, the Court simply directed that if the parties could not agree, they might file brief written submissions supported by a bill of costs, leaving the quantum and allocation of costs to be determined later or by agreement. Accordingly, the procedurally successful party on this appeal is Yangarra Resources Ltd, but no definitive monetary award, damages figure, or specific costs amount was granted or ordered in its favour at this stage, and the exact sums—if any—will only be determined in subsequent costs proceedings or at the eventual trial.