Fraudulent concealment fails in failure to disclose case

In Geophysical Service Incorporated v. Total SA, 2020 ABQB 730, the Court interpreted the scope of fraudulent concealment under section 4(1) of the Limitations Act, RSA 2000, c. L-12. In particular, the Court assessed whether a failure to notify a counterparty of its breach of contract constituted “fraudulent concealment,” thereby extending the limitation period under the Limitations Act.

Background

Geophysical Service Incorporated (“GSI”) was in the business of acquiring, processing, and licensing seismic data. Since 1999, GSI had been the sole owner of the seismic data at issue in the Action.

Under regulatory requirements, seismic data was routinely filed with the Canada-Newfoundland & Labrador Petroleum Board (the “Board”). This data became available to the public, through data requests to the Board, upon expiration of a ten-year privilege period.

In 2000, GSI entered into a Master Data License Agreement (the “Contract”) with one of the Defendants (“Total France”). The Contract prohibited direct procurement of GSI’s seismic data from the Board, stating:

“The Licensee shall not obtain from any governmental agency any seismic data noted as owned by GSI. Should the Licensee obtain any such seismic data it shall immediately enter into a Supplemental Agreement with respect to such Seismic Data at a licensing fee equal to 150% of the current licensing fee charged by GSI for such Seismic Data.”

In breach of this clause, Total France obtained GSI’s data from Board.

Fraudulent concealment

As one of the breaches occurred in 2001 (the “2001 Claim”)— thirteen years before the litigation commenced—Total France asserted the 2001 Claim was barred by the ultimate ten-year limitation period, as set out at section 3(b) of the Limitations Act. In response, GSI argued that Total France fraudulently concealed the breach, staying the ten-year limitation period.

In considering the issue, Madam Justice Nation canvassed the prevailing law relating to fraudulent concealment, including Huet v. Lynch, 2000 ABCA 97. Five key themes emerged:

1. In the limitations context, deceit or common law fraud is not necessary. Rather, equitable fraud will be sufficient.

2. Equitable fraud is conduct which, having regard to some special relationship between the parties, is an unconscionable thing for the one to do toward the other. This may be active concealment of a wrongdoing, or passive failure to inform of a wrongdoing that was knowingly or recklessly committed.

3. Lack of malice or dishonest motives on the defendant’s part may be irrelevant.

4. The plaintiff must show that fraud concealed the existence of the plaintiff’s cause of action. In other words, the fraud must have concealed some material fact which the plaintiff must prove to succeed at trial.

5. The plaintiff may still be required to exercise reasonable diligence to discover the fraud and uncover the cause of action.

In the present circumstances, GSI failed to demonstrate a special relationship between the parties, in which it would be unconscionable for Total France to act as it did. The Contract did not set up a special relationship between the parties. There was no fiduciary relationship; there were also no express notice clauses or audit provisions.

Obliquely, the Court also referenced GSI’s failure to exercise reasonable due diligence. Although GSI suspected there were data requests, in the thirteen intervening years between the breach and notification by the Board, GSI never inquired whether Total France accessed the data (whether in person, by email, or via other correspondence).

As a result, GSI failed to bring the 2001 Claim within the fraudulent concealment provisions of the Act. Accordingly, the 2001 Claim was barred by the ten-year ultimate limitation period.

Take-away

Geophysical Service Incorporated v. Total SA reaffirms the difficulty of suspending the ultimate ten-year limitation under the Limitations Act. Establishing fraudulent concealment is a high bar, and public policy generally supports enforcement of the ultimate limitation period.

Additionally, the doctrine of fraudulent concealment does not impose a notice obligation on contracting parties. Accordingly, if a party wishes to impose a positive obligation on a counterparty to advise of breaches, an express clause should be included in the written contract. Notwithstanding the presence or absence of such a clause, parties should also exercise diligence in uncovering potential causes of action — and make reasonable inquiries when suspicions arise.

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