Gross Overriding Royalty Interests Not Interest In Land Absent Clear Language

Two recent decisions of Canadian courts have reiterated the critical requirement of clear language in contracts creating royalties where parties intend such royalties to be "interest in land," that is, real property. The Supreme Court of Canada had established in Bank of Montreal v. Dynex Petroleum Ltd. 2002 SCC 7 (Dynex) that gross overriding royalty interests (GORR) could constitute interest in land provided the parties so intended and that intention was sufficiently evidenced in an agreement. Based on Dynex, the status of GORR must be determined on a case-to-case basis. Both Walter Energy Canada Holdings Inc, (Re), 2016 BCSC 1746 (Walter Energy) and Third Eye Capital Corporation v Dianor Resources Inc, 2016 ONSC 6086 (Dianor), provide recent examples of how courts approach the exercise of determining whether a specific GORR constitutes an interest in land. The British Columbia Supreme Court and Ontario Superior Court of Justice considered the types of provisions