This article was first published on The Lawyer's Daily
website on June 8, 2017.
Recently, in Third Eye Capital Corp. v. Dianor Resources
Inc., 2016 ONSC 6086, the Ontario Superior Court of Justice
rendered a decision that illustrates the importance of carefully
drafting and arranging royalty agreements if the intended result is
to have the royalty interest "run with" the land —
i.e., to be enforceable against third parties, such as new owners,
instead of just a contractual right enforceable against the grantor
personally.
The court followed the test enunciated in Bank of Montreal
v. Dynex Petroleum Ltd., [2002] 1 SCR 146, 2002 SCC 7, in
which the Supreme Court of Canada had held that a royalty interest
can create an "interest in land", provided (i) it is
clear from the agreement that the parties intended to grant such an
interest instead of just a contractual right to a portion of the
oil and gas substances recovered from the land, and (ii) that the
interest, out
