Executive Summary: Key Legal and Evidentiary Issues

• Steelhead LNG alleges that ARC Resources misused confidential information and copyrighted material developed during a four-year business relationship to advance a competing LNG export project.
   
• Federal Court proceedings concerning a related patent infringement claim, including the Tabib and Manson Judgments, raised questions of issue estoppel and abuse of process in this action.
   
• The court permitted the plaintiffs to amend their pleading and dismissed the defendant's application to strike portions of the claim, directing that estoppel and abuse of process be resolved at trial.
   
• Ongoing disputes over document production centred on the timing and independence of a competing LNG facility design attributed to Western LNG.
   
• A later ruling rejected the defendants' reliance on an October 1, 2020 cut-off date for document searches because it presupposed the very issue in dispute.
   
• Proportionality considerations shaped both parties' disclosure obligations, expanding some categories of production while narrowing others as overbroad or irrelevant.
   

Facts of the case

Steelhead LNG Limited Partnership and Steelhead LNG Corp. (together, "Steelhead") are BC-based entities that specialize in developing LNG export projects. ARC Resources Ltd. is the successor by amalgamation to Seven Generations Energy Ltd. ("7G"), an Alberta natural gas producer. From 2014 to 2018, Steelhead and 7G pursued a business relationship intended to develop LNG export facilities in British Columbia, with 7G supplying natural gas and Steelhead handling design, permitting, and commercial arrangements. Steelhead alleges that under this relationship it disclosed extensive confidential information and copyrighted material relating to its LNG facility design and development strategy to 7G, and that the relationship deteriorated by 2017–2018 amid disagreements over natural gas pricing.

Steelhead further alleges that 7G, together with a group of natural gas producers known as the Producer Consortium (later formalized in 2020 as Rockies LNG Limited Partnership and Rockies LNG GP Corp.), pursued a competing near-shore LNG project using misappropriated confidential information. That competing project is alleged to have evolved into the Ksi Lisims LNG Project, developed jointly with Western LNG and the Nisga'a Nation. The original Notice of Civil Claim was filed on July 4, 2019, naming 7G as defendant.

A related, separate proceeding was commenced in the Federal Court in December 2020 by Steelhead LNG (ASLNG) Ltd. and Steelhead LNG Limited Partnership, alleging infringement of Canadian Patent No. 3,027,085. In that action, Case Management Judge Tabib dismissed an application to add Western LNG as a defendant and to compel further document production (the "Tabib Judgment"), a decision upheld on appeal. Justice Manson subsequently dismissed the patent infringement action on summary trial (the "Manson Judgment"), finding that presenting conceptual designs to third parties for promotional purposes did not constitute "use" of the patented invention and that no commercial benefit had been shown; this was upheld by the Federal Court of Appeal in April 2024.

In the BC Supreme Court action, the plaintiffs applied by Notice of Application filed March 21, 2023 to add Rockies LNG Limited Partnership and Rockies LNG GP Corp. as defendants and for leave to file a Further Amended Notice of Civil Claim. By the time of the hearing, however, the plaintiffs were no longer pursuing that request to add the two Rockies entities. The defendant applied by Notice of Application filed August 2, 2023 to strike certain paragraphs of the pleading, arguing that findings in the Tabib and Manson Judgments gave rise to issue estoppel or amounted to abuse of process if the plaintiffs were permitted to re-litigate them.

A subsequent dispute arose over document disclosure, with ARC Resources Ltd., Rockies LNG Limited Partnership, and Rockies LNG GP Corp. named as defendants in the action by the time of that dispute; the documents provided do not indicate how or when the Rockies entities were added as defendants following the plaintiffs' earlier decision not to pursue that request. An earlier disclosure decision (2025 BCSC 1963) addressed some disclosure issues, and a further application was heard by Justice Basran in July 2026. The plaintiffs sought drafts of a technical design description ("Schedule A") to a Cooperative Endeavours Agreement through January 1, 2022, related correspondence, and documents withheld on the basis of an October 1, 2020 cut-off date used by the defendants. The defendants sought eight categories of documents from Steelhead, including records concerning the pause of its Kwispaa LNG Project, valuations of its confidential information, development cost records, and communications with third-party contractors and the Canada Revenue Agency.

Policy and legislative provisions at issue

The 2024 decision engaged the doctrines of issue estoppel and abuse of process, as addressed in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, and Toronto (City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79, 2003 SCC 63, along with the application of Supreme Court Civil Rule 9-5(1) governing the striking of pleadings. Section 42 of the Patent Act, R.S.C. 1985, c. P-4, which defines the exclusive rights conferred by a patent, formed part of the underlying Federal Court proceedings referenced in the estoppel analysis.

The 2026 decision turned on Rule 7-1 of the Supreme Court Civil Rules, which establishes a mandatory first tier of document disclosure under Rule 7-1(1) for documents relevant to a material fact, and a broader, discretionary second tier under Rule 7-1(11). The demand-and-response process under Rules 7-1(10) through 7-1(14) governed how each party's requests were raised and resolved, while Rules 7-1(6) and (7) addressed the requirements for asserting privilege over listed documents. Proportionality under Rule 1-3(2), assessed against the amount involved, the importance of the issues, and the complexity of the proceeding, was applied throughout.

Reasoning and analysis

In the 2024 decision, Justice Kent found that the breach of confidentiality alleged by Steelhead extended beyond the design of any single facility to Steelhead's broader "LNG Development Strategy," and that if such information were confidential and improperly used by the defendant in pursuing the Ksi Lisims Project, a viable claim could succeed at trial. The court held that it retained residual discretion to decline to apply issue estoppel even where the technical prerequisites were met, and that determining whether it would be fair to rely on the Federal Court findings required a fact-specific inquiry best conducted at trial rather than on a strike application.

In the 2026 decision, Justice Basran rejected the defendants' use of an October 1, 2020 cut-off date for their document searches, finding that this date presupposed the outcome of a live trial issue — when the defendants' allegedly independent LNG facility design was actually adopted — and that the version of the design schedule produced for that date did not definitively establish that an independent design had been adopted. The court also emphasized that the defendants' disclosure obligations were ongoing and should not depend on repeated disclosure applications by the plaintiffs. On the defendants' cross-application, proportionality considerations, including the seriousness of the allegations and the scale of the parties involved, supported broader production in some respects, but the court declined to order production of third-party valuations, an unrestricted forensic accounting of Steelhead's development costs, Steelhead's communications with two engineering contractors, or Steelhead's complete tax credit file with the Canada Revenue Agency, finding these categories either irrelevant or disproportionate.

Ruling and overall outcome

In the 2024 decision, Justice Kent permitted the plaintiffs to amend their Notice of Civil Claim as proposed, dismissed the defendant's application to strike portions of the pleading, granted the defendant leave to amend its Response to Civil Claim to specifically plead issue estoppel and abuse of process, and directed that those issues be determined at trial. Costs of the applications were ordered to be in the cause, with the amount not specified.

In the 2026 decision, Steelhead was the successful party on its own disclosure application and was granted all of the documents it sought, including drafts of the design schedule through January 1, 2022 and related correspondence, with the court also ruling that the defendants could not rely on the October 1, 2020 cut-off date to limit their searches. The defendants were only partially successful on their cross-application: they were granted the documents sought in categories 1, 2, and 8, Steelhead's internal (but not third-party) valuations under category 3, a year-by-year expense breakdown under category 4, and non-privileged documents relevant to Steelhead's investigation of the defendants' business activities from 2018 to March 21, 2023 under category 5, but were denied the documents sought under categories 6 and 7. Steelhead was awarded costs of the one-day application, with the amount not specified in the decision.