Mining in the Courts 2010 Year in Review
Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, 2010 SCC 43
This is the fourth decision from the Supreme Court of Canada to address the Crown's duty to consult to aboriginal peoples. The Court held that the British Columbia Utilities Commission had the authority to consider whether adequate Crown consultation with aboriginal peoples occurred in connection with its review of whether an electricity purchase agreement was in the public interest. BCUC reasonably considered and addressed the issue of consultation in its proceedings.
The Court reaffirmed its general approach set out in Haida Nation v. B.C. that the duty to consult arises "when the Crown has knowledge, real or constructive, of the potential existence of the Aboriginal right or title and contemplates conduct that might adversely affect it." The Court stated that the Crown's failure to consult can lead to a variety of remedies including injunctive relief, an order to carry out additional consultation, and damages.
The Court's clarification regarding the need for a direct causal relationship between the potential for an adverse effect and the government decision or action at issue is significant and will likely have a direct impact on how all parties involved in consultation approach the issue. An ancillary effect may also be to limit the ability of aboriginal peoples to argue that the cumulative effects of projects in a particular area need also be considered as part of consultation given that drawing a direct causal relationship to potential cumulative effects (regarding unknown future events or projects) will be challenging.
Equally important is the Court's rejection of consultation being appropriate for past events or decisions that may adversely affect aboriginal interests, including the lack of past consultation. The Court confirmed that consultation must be focused on the action or decision at hand and not focused on past events. The Court made several references to compensation and damages being an appropriate remedy in cases where the Crown did not consult. Up until Rio Tinto, the issue of compensation for breaches of section 35 generally has been focused around infringements of established aboriginal or treaty rights. It remains unclear how damages to unproven rights would be established and why an aboriginal group would ever need to establish an aboriginal right in the first place if compensation is payable simply upon not be consulted. Finally, the Court did not set out the nature of the cause of action to pursue the compensation remedy.
Regarding the issue of the role of tribunals, the Court has taken the view that tribunals must be expressly or implicitly empowered to consider whether consultation has occurred and to conduct consultation in a given instance. The Court appeared not to provide any support for the proposition that tribunals' publicly available hearing processes, by themselves, are a form of consultation – notwithstanding that many tribunals across Canada have relied on such hearing processes as, at minimum, assisting the Crown in carrying out its duty.
The conclusions concerning tribunals will likely raise significant issues for governments and industry proponents across Canada as they attempt to establish whether a given tribunal has the concomitant authority and jurisdiction to decide questions relating to consultation and/or actually carry out consultation. In any event, it will likely result in governments and tribunals reviewing all of their existing statutes to determine what, if any, regulatory or consultation vacuums need to be filled.
For further information, see McCarthy Tétrault LLP's Aboriginal Law Update on this decision, dated November 2010.
Beckman v. Little Salmon/Carmacks First Nation, 2010 SCC 53
Little Salmon concerned an application for judicial review of a decision of the Yukon Territory government in October 2004 to approve the grant of 65 ha of Crown land ("Land") to a Yukon resident (Larry Paulsen). The Land bordered the treaty settlement lands of the Little Salmon/Carmacks First Nation ("First Nation") and was part of the First Nation's traditional territory on which its members had a treaty right to hunt and fish for subsistence.
At issue was whether the Little Salmon/Carmacks First Nation Final Agreement (ratified in 1997) ("Treaty") precluded any duty on the Yukon Territory government to consult the First Nation. There was no express requirement for such consultation set out in the Treaty. The government argued that the Treaty was a "complete code" and all of its consultation obligations were set out therein.
Binnie J. for the majority held that the Treaty was not a "complete code". The honour of the Crown and the duty to consult aboriginal peoples exists independently of contract or the Treaty. It also held that the duty was met in this instance.
The SCC framed the issue as not only being about the rights and expectations of the First Nation but also about the rights and expectations of other Yukon residents to “good government”. Binnie J. stated that Mr. Paulsen was entitled to a government decision that was procedurally fair and made within a “reasonable timeframe”. Binnie J. also stated that the entitlement of Johnny Sam (the First Nation trapper whose trapline could be affected by the Land grant) was a “derivative benefit” based on the collective interest of the First Nations and confirmed that, as an individual, he was not a “necessary party to the consultation.”
The SCC held that there is no “substantive right” of accommodation – it is not found in the Treaty, in general law, constitutional law or otherwise. Courts will be focused on ensuring that whatever outcomes result from consultation that they be within a range of what would be “reasonable”. There was no evidence that the Director made a “palpable error” of fact in his conclusion. Binnie J. stated that whether a court would have made a different decision “is not relevant”.
For further information, see McCarthy Tétrault LLP's Aboriginal Law Update on this decision, dated November 2010.
West Moberly First Nations v. British Columbia (Chief Inspector of Mines), 2010 BCSC 359
In issuing amendments to two mining permits and a license to cut and clear for a First Coal mining operation, the Crown was found to have failed to meaningfully consult West Moberly First Nations. It also failed to provide reasonable accommodations of their traditional right to hunt caribou on land affected by the mining operation. Although the Crown recognized its duty to consult, the consultation undertaken was not found to have been meaningful in the circumstances. The Crown was unduly slow in providing the petitioners with the assessment of potential adverse effects of the project on their treaty rights.
The petitioners provided the Crown with a detailed report of the danger to the caribou and its relationship to their right to hunt. The Crown's failure to put in place an active plan for the protection and rehabilitation of the caribou herd was a failure to accommodate. It was held not to be an accommodation to direct the petitioners to hunt elsewhere. If caribou herds in the affected territories were extirpated, First Nations' treaty rights could not be found to be balanced with the public's interest in development of resources.
The remedy was to stay one of the amendments and the license to cut for 90 days to permit proper accommodation of the petitioners' concerns with respect to protection and augmentation of the caribou herd.
For further information, see McCarthy Tétrault LLP's Aboriginal Law Update on this decision, dated April 2010.
BHP Billiton Diamonds Inc. v. Wek'èezhii Land and Water Board, 2010 NWTSC 23
BHP had negotiated an agreement with the federal Department of Fisheries and Oceans, pursuant to which BHP paid compensation for the destruction of fish habitat caused by its mining operations. The agreement was in respect of BHP's diamond mine northeast of Yellowknife. The agreement provided that the compensation payment had no relevance to any other legal obligation that BHP might have. The Wek'èezhii Land and Water Board had regulatory authority over land and water use in the area where the mining operations took place. It engaged in a review of BHP's mine interim closure and reclamation plan. The Board called for BHP to include in its plans a provision for reclamation of open pits created on the lands in order to return them to fish habitat. BHP took the position the Board lacked jurisdiction to require such a reclamation, given its payment to the federal government. The Board issued a decision holding it did have jurisdiction to make this order. BHP brought an application for judicial review of the decision by the Wek'eezhii Land and Water Board, which was dismissed as being premature.
The Superior Court held that the Board had authority to make decisions with respect to reclamation in the mined area. BHP had an obligation to make a reclamation plan. It was premature to seek review of the Board's decision on BHP's reclamation plan where it was not yet clear whether or not the decision would conflict with BHP's agreement with the Federal government.
Creston Moly Corp. v. Sattva Capital Corp., 2010 BCCA 239
This decision concerns the application of s. 31(2) of the Commercial Arbitration Act, which relates to leave to appeal an arbitration award.
Creston appealed from the dismissal of its application for leave to appeal an arbitrator's award of damages to Sattva in the amount of $4,140,000. The arbitration award concerned the interpretation of a finder's fee agreement between the parties in relation to an opportunity to acquire a molybdenum property in Mexico.
Sattva applied for leave to appeal the award pursuant to s. 31(2) of the Commercial Arbitration Act which states that the court may grant leave on a question of law where, inter alia, the importance of the result of the arbitration to the parties justifies the intervention of the court and the determination of the point of law may prevent a miscarriage of justice. The chambers judge denied leave, finding that the interpretation of the finder's fee agreement involved a question of mixed fact and law rather than a question of law alone, as required by the Act. Regardless, the chambers judge would have exercised his discretion against granting leave on the basis that (i) there had been misconduct on the part of Creston in misrepresenting the status of the finder's fee issue to the TSX Venture Exchange and to the principal of Sattva, and (ii) granting leave would have been inconsistent with one of the goals of the Act, namely to foster and preserve the integrity of the arbitration system.
The decision of the chambers judge was overturned on appeal. The Court of Appeal held t hat the arbitrator's failure to address the meaning of a provision in the agreement dealing with the quantum of the finder's fee raised a question of law and that the arbitrator and chamber's judge had erroneously reduced issues of the agreement's interpretation and construction to questions of fact. The Court of Appeal also addressed the chamber's judge's “additional findings”, stating that (i) Creston's conduct was not directly relevant to the question of law advanced on appeal and that, (ii) the existence of an appeal was part of the arbitration process and would have been understood as such by both parties before they agreed upon that forum. Accordingly, the Court of Appeal allowed the appeal, finding that the requirements of s. 31(2) of the Commercial Arbitration Act had been satisfied.
Contracts and shareholders remedies
Stahlke v. Stanfield, 2010 BCCA 603
This case involves an oppression claim by minority shareholders. Twelve minority shareholders brought an oppression claim against Ross Stanfield, the President and Chairman of the Board of Gallowai and Bul River, as well as against both of those corporations.
At the time of the trial, $100 million had been spent developing the mine and 13 miles of underground tunnel had been built. The trial judge held that an oppression claim had not been made out because the shareholders could not demonstrate a reasonable expectation that the mine would go into operation within a reasonable period of time. The shareholders pointed to a number of statements regarding the progress of the mine but the court held that the expectation was not reasonable for three reasons. First, the minority shareholders were aware that the investment was highly speculative. Second, they knew that the ore deposit was said to be large and that a large ore deposit is more expensive to bring into production than a smaller deposit. Third, the shareholders knew that Mr. Stanfield was not prepared to borrow money to finance the development of the mine.
The Court of Appeal upheld this reasoning in its entirety. Two other issues were raised on appeal. First, it was argued that the trial judge failed to properly consider the shareholders claims related to alleged misrepresentations. The Court of Appeal declined to deal with this issue on the basis that the misrepresentation claim had not been asserted at trial and was not pleaded. Second, the Court of Appeal refused to admit fresh evidence on the appeal with regard to a proceeding commenced before the B.C. Securities Commissioner. It dismissed the motion for leave to file new evidence because the evidence was not determinative on the issue of the alleged misrepresentations.
Computershare Trustco of Canada v. Crystallex International Corp., 2010 ONCA 364
There were two significant issues in the case, one being an oppression claim and the other being the interpretation of the triggering of a change of control provision.
The mining company was denied a permit for Las Cristinas mine in Venezuela four years after raising $100 million for development of the project. At the time the money was raised via the sale of senior $1,000 unsecured notes and 65 common shares, the investors were aware necessary permits had not yet been obtained. The prospectus for the notes stated that Crystallex expected to receive the permit and approvals necessary to commence project development in 2005. However, in 2008, the application for the permit was formally denied, and the Venezuelan government subsequently issued statements that it was "taking back" the mine.
With respect to the oppression claim, the court held that that the reasonable expectations of debenture holders are more limited than those of shareholders. The claimants purchased their holdings based on trust indentures and the prospectus. These were negotiated documents and so the court held it ought to preserve the balance of those contract rights. The noteholders wanted Crystallex to sell its interests and commence arbitration against Venezuela. The court held that the noteholders had no reasonable expectation with respect to how Crystallex would deal with Venezuela's denial of the permit. The decision of Crystallex's board was entitled to deference under the business judgment rule. The prospectus did not contain any discussion as to the steps that Crystallex might take in the event of a delay or denial of the permit. There was, however, plenty of warning that delay or denial of a permit was a possibility. In the prospectus, prospective purchasers were warned of the history of the property, including the prior expropriation of the site from Placer Dome, the fact that permits were required for virtually every aspect of the project, and that it was possible there could be changes to the laws and regulations or their interpretation that could have a significant impact on the operations of Crystallex. The prospectus warned that Crystallex's activities might be adversely affected by political instability which could result in delays or the inability to obtain necessary government permits or the deprivation of contractual rights, including expropriation without fair compensation. It warned that Crystallex could not assure whether the necessary permits would be obtainable on acceptable terms or in a timely manner or at all. The noteholders were themselves aware of the property's history and although they were sophisticated parties they did not obtain additional protection with respect to these risks.
Under the trust indentures in Crystallex, the project change of control was defined as:
the occurrence of any transaction as a result of which the corporation ceases to beneficially own, directly or indirectly, at least a majority interest in the Las Cristinas project assets.
The court held that the change of control provision was not triggered because there was no transaction and because Crystallex did not cease to beneficially own the assets. A transaction requires more than one party and the denial of a permit is a unilateral act. The events at issue amounted to a threat of expropriation by Venezuela and this too did not amount to a transaction. While Crystallex faced obstacles to the exploitation of the mine, it had equitable title to the assets.
Fawcett v. Western Canadian Coal Corp., 2010 BCCA 70
This decision involves the application of the criminal interest provisions in the Criminal Code to a royalty sharing agreement (“RSA”).
Western Canadian Coal Corp., a publicly-listed mining company, sought to avoid its obligations under the RSA on the basis that the RSA offended the criminal interest rate provisions of the Criminal Code.
The RSA was an agreement between the mining company and three individuals, two of whom were directors of the company when then the agreement was made. The individuals had expended their own funds to secure mining licenses when the company was financially unable to do so. The RSA initially provided, inter alia, for payment of a royalty if and when the various properties were developed. Later, a “royalty pooling” arrangement was agreed upon, which rolled up all the existing agreements into one and contemplated another final transaction which included payment of a single royalty in proportion to the respective advances made by the individuals. The company ended up suspending royalty payments once the amount payable in a year exceed 60% of the particular individual's advance, asserting that the royalty offended the expanded definition of “interest” in the Criminal Code because the payments constituted a “charge paid or payable for the advancing of credit”.
The British Columbia Court of Appeal upheld the decision of the chambers judge in part. Although the Court of Appeal determined that the wording of the RSA was ambiguous, at least with respect to its use of the terms “advances” and “advanced”, the Court concluded that these terms were “neutral” when used in reference to the various transactions that were rolled into the RSA, some of which constituted sale/purchase transactions and another of which constituted a loan. The Court ultimately concluded that the RSA did not change the nature of the underlying transactions. Accordingly, the sale/purchase transactions were not captured by the criminal interest provisions in the Criminal Code, but the loan transaction was. For the loan, the portion of the total royalty payable was severed from the non-interest portion by an order which essentially capped the interest payable at 60% per year.
Fawcett highlights the need for clear unambiguous drafting. Companies may wish to consider inclusion of a pre-emptive clause capping payable yearly interest so as to avoid infringing the criminal interest rate provisions in the Criminal Code.
Indotan Inc. v. Invincible Resources Corp., 2010 BCCA 318 (leave to appeal denied,  S.C.C.A. 350)
This case deals with the enforceability of a Letter Agreement respecting a mining property (the “Property”) in Indonesia, and the consequences of making time of the essence.
In April 2005, Indotan and Invincible signed a Letter Agreement pursuant to which Invincible was to acquire from Indotan title to the Property in return for, inter alia, Invincible issuing 1.8 million shares (the “Shares”) to Indotan. By the terms of the Letter Agreement, the Shares were to be held in trust by Invincible's solicitors until the solicitor was in receipt of a legal opinion that Indotan held clear title to the Property and that such title could be transferred to Invincible. Moreover, by the terms of the Letter Agreement Indotan undertook to deliver title to the Property within four months of signing the agreement and if it failed to do so, Indotan agreed to reimburse Invincible for all monies it had spent on the property. The Letter Agreement expressly contemplated that the parties would execute a formal agreement that would supercede the terms of the Letter Agreement.
Notwithstanding that a formal agreement was never executed, that Indotan never delivered title to the Property to Invincible and that Indotan's rights in the Property lapsed, Indotan sued Invincible for the delivery of the Shares.
The Supreme Court of British Columbia dismissed Indotan's claims on the basis that the Letter Agreement was not a contract but merely an “agreement to agree”. The Court of Appeal, on the other hand, ruled that it was unnecessary to determine whether the Letter Agreement was a contract or not, because Indotan's failure to comply with its obligation to deliver an opinion as to title to the Property disentitled it to the Shares.
The Supreme Court's decision that the Letter Agreement was not a binding contract is based on the court's findings that the parties had never come to an agreement on a number of “important and essential” matters, including: (i) who was responsible for incorporating the required Indonesian Foreign Direct Investment Company that was a necessary component of the mechanism by which Indotan was to transfer its interest in the Property to Invincible; (ii) who was obligated to apply to the Indonesian Government for the required legislatively defined Contract of Work; (iii) the nature of Indotan's interest in the property; and probably most importantly, (iv) what was to happen to with respect to the Shares if the Indotan's interest in the Property was not delivered to Invincible.
One may quibble with the correctness of this decision given that parties had clearly operated on the basis that they had a contract in place and that the basic fundamental terms had been settled upon. The decision, however, starkly illustrates the risks involved in operating under a Letter Agreement or Letter of Intent, without going to the next step of formalizing an agreement.
It is also clear that the trial judge was displeased with the fact that Indotan's position at the summary trial was inconsistent with its pleadings. Its pleadings alleged that the Letter Agreement was an agreement whereby Invincible was to acquire the Property in return for the Shares (consistent with the wording of the Letter Agreement). At the summary trial, Indotan took the position that what it had granted Invincible was an option to acquire the Property and that the Shares were the consideration for the option and not for an acquisition of the Property. Indotan was essentially forced to take this position because by the time of the trial it had no ability to transfer any interest in the Property. Indotan's position in this regard was entirely contrary to the words used in the Letter Agreement and would have, if accepted, resulted in the Letter Agreement failing to address numerous additional essential components of what the agreement was between the parties, including the length of the option period and how the option could be exercised.
The Court of Appeal's decision essentially ignores all of this and rests on the following facts:
- the April 2005 Letter Agreement called for Indotan to deliver a legal opinion respecting its legal title to the property within four months of signing;
- on December 23, 2005 (some 8 months after signing) counsel for Invincible wrote to Indotan advising that it had received neither a transfer of title to the Property or an opinion respecting its title. In closing, counsel for Invincible put Indotan on notice that, if invincible is not in receipt of the opinion by December 30, 2005 (i.e. within 7 days), it will consider itself in a position to cancel the Letter Agreement and require Indotan to reimburse it for all of its expenses incurred on the Property; and
- no opinion was forthcoming within the 7 days. In fact no opinion was delivered until May 2006 and the court was provided no explanation for the delay.
Based on the foregoing, the Court of Appeal held that Invincible had by its counsel's letter of December 23, 2005 made time of the essence under the Letter Agreement and that Indotan had failed to fulfill its obligations within a reasonable time. In the result, Invincible was entitled to cancel the Letter Agreement and Indotan was not entitled to receive the Shares. While a Christmas Eve “time is of the essence” letter may not always be acceptable, it worked for Invincible in these circumstances.
Hidden Rock Drilling Ltd. v. Klassen, 2010 BCSC 963
The central issue in this case was the nature of the business relationship between Mr. Buchan, a prospector and owner of Hidden Rock Drilling, and Mr. Klassen, a securities lawyer, in relation to an aggregate gravel quarry operation in northern British Columbia. Mr. Klassen had performed solicitor's work for Hidden Rock and related companies, but he claimed to have been engaged with Mr. Buchan in a joint venture as equal partners. The particular question for the Court was whether the parties were in fact engaged in a joint venture, or, whether they were merely engaged in an owner/solicitor relationship.
Notwithstanding the fact that the terms of the relationship had not been reduced to writing, the Court found that the relationship contained all the characteristics of a joint venture, which the Court described as follows:
- the requirement that the parties manifest an intention to be contractually bound;
- a contribution of money, property, effort, knowledge, or other asset to a common undertaking;
- a joint property interest in the subject matter of the venture, which is usually a single or ad hoc undertaking;
- a right of mutual control or management of the venture; and
- an expectation of profit and the right to participate in the profits.
Findings of credibility were central to the Court's decision. In particular, the Court found that Mr. Buchan's evidence left his credibility “wanting” in several respects. Mr. Buchan's assertion that Mr. Klassen was merely Hidden Rock's solicitor was actually undermined by evidence based on his own conduct during the relevant time, as well as the contemporaneous documentation (much of it created or signed by Mr. Buchan himself) and the evidence of the various consultants and businessmen who dealt with the two men and the group of companies. Conversely, Mr. Klassen's evidence that the two men agreed to pursue the gravel quarry as joint owners was amply corroborated.
Adriana Resources Inc. c. Bedford Resources Partners Inc., 2010 QCCA 2030 (application for leave to appeal filed December 30, 2010,  S.C.C.A. No. 503)
Following a dispute concerning an agreement to acquire mining rights in northern Quebec, a motion for a declaratory judgment was deposited in Quebec. The agreement contained a forum selection clause favoring the courts and laws of British Columbia. However, because the clause was not drafted to be imperative, the plaintiff was able to choose a jurisdiction that suited him, namely Quebec.
Under art. 3148, Quebec courts have jurisdiction when one of the obligations arising from the contract is to be performed in Quebec. The trial judge found that the majority of the obligations arising from the contract were to be performed in Quebec. The trial judge refused to decline jurisdiction for a more convenient forum because the other forums weren't more appropriate, the mine situation, the advantage for the parties of not starting against from scratch, and, most importantly, the fact that the doctrine of forum non conveniens should only be declined exceptionally as provided in art. 3155 CCQ.
The forum selection clause at issue was the following:
This Agreement will be governed and construed according to the laws of the Province of British Columbia and the laws of Canada applicable therein and the parties hereby attorn to the jurisdiction of the Courts of British Columbia in respect of all matters arising hereunder.
The courts determined that it was a mere attornment clause, recognizing the jurisdiction of British Columbia's courts without conferring upon them an exclusive jurisdiction. The two levels of Quebec courts agreed that based on recent jurisprudence, a forum selection clause may only give rise to an exclusive jurisdiction if the clause is drafted in a clear and precise manner, imperatively and irrevocably obliging one or both of the parties to institute all actions before a precisely designated court, and exclusively before that court. The clause did ensure that the laws of British Columbia and Canada would apply, regardless of the court.
The jurisdiction of the Quebec courts was established because the majority of the obligations under the agreement were to be executed in Quebec, including a $9 million initial investment, thus prima facie satisfying one of the elements of art. 3148 C.C.Q.
Finally, the defendants argued that Quebec should decline jurisdiction in favour of British Columbia or Ontario, based on the doctrine of forum non conveniens (codified in art. 3135 C.C.Q.). The plaintiff's head office was in Ontario and it had a business address in British Columbia where it was incorporated. Two of the defendants were located in Ontario and the third in the Turks and Caicos Islands. The courts rejected this claim, noting that the provision's language as well as the jurisprudence indicates that forum non conveniens is an exceptional remedy, to be used only to avoid a severe injustice to the defendant. The fact that the parties, witnesses or pieces of evidence are located in different places, or that the contract was formed elsewhere, is not sufficient to consider Ontario or British Columbia to be a more appropriate forum than Quebec. Rather, given that the mine and the mining rights are in Quebec, Quebec is the appropriate forum. It was also found to be in the parties' interest that the action continues in Quebec, rather than recommencing elsewhere.
Cliffs Mining Company c. Royal Bank of Canada, 2010 QCCA 1126
In Cliffs Mining, the purchase option price was in dispute. The evaluation of the purchase price depended on the interpretation of the contractual term “fair market value”, and the meaning given to it in an expert evaluation. The Quebec Court of Appeal (the “QCCA”) upheld the trial judge's decision in this respect, but overturned the judgment to the extent that it ought to have acknowledged the $819,029.95 payment made by the appellants to the respondent in March 2007. In the respondent's cross-appeal, it claimed that other legal entities should be held solidarily (similar to joint and severally) liable with the appellants. The QCCA allowed the cross-appeal in part, holding one other entity, Stelco Inc., solidarily liable.
In determining the purchase price, both the QCCA and the lower level court agreed that the expert did not exceed his mandate in interpreting the term ‘fair market value' contrary to the way in which it was defined in the contract. Specifically, the QCCA noted that the expert was correct to apply the term while considering the particularities of the mining operations in which the equipment was used (para 5). Further, the courts agreed that although the contract did not provide a mechanism to resolve a disagreement regarding the evaluation of the equipment, the contract did set out two alternatives: a maximum purchase price and the purchase price based on the average of two evaluations. Therefore, the courts dismissed the appellants' request to modify the agreement based on the theory of unforeseeability regarding the purchase price (whereby a party can revise or resile from a contract if its terms become more onerous due to an unforeseeable event).
The appellant Cliffs Mining Company also claimed that it was not a debtor of the respondent, as it was acting only in the capacity of a “managing agent, acting only for and on behalf of Wabush Mines”. Although the appellant was not a lessee under the contract, in its own procedures it alleged its right to exercise the option to purchase and declared that it was prepared to pay the purchase price. Being bound by these allegations, the courts held that the appellant was liable for paying the entire purchase price in accordance with the contract, including interest.
With respect to the cross-appeal, the QCCA allowed it in part, finding Stelco Inc. solidarily liable with the appellants, as it had assumed obligations under the contract. However, the QCCA found that Mines Wabush was not liable, as it was simply an unincorporated joint venture which regrouped three other entities.
Quebec (Attorney General) v. Moses, 2010 SCC 17
The issue in this decision was whether a proposed vanadium mine within territory covered by the James Bay and Northern Quebec Agreement (the “Treaty”) was exempt from independent scrutiny by federal authorities prior to issuing a fisheries permit.
A mining project in Canada that puts fish habitat at risk cannot proceed without a fisheries permit, which itself cannot be issued without compliance with the Canadian Environmental Assessment Act (CEAA). In this case, all parties involved acknowledged the harmful impact that the proposed mine would have on fish and fish habitat. The question was whether the review processes provided by the Treaty itself were exhaustive of the environmental assessment requirements, or, whether the CEAA continued to apply.
The Treaty established a comprehensive governance scheme and set out detailed and comprehensive procedures for provincial and federal environmental impact assessments. In this particular case, proposed mine was considered a provincial project and so the provincial assessment process was instituted. The impact assessment conducted pursuant to the Treaty acknowledged significant impact on fish habitat, including risks associated with the tailings ponds. In addition, both the provincial Review Committee and governmental authorities at the federal and provincial levels identified a serious lack of pertinent information in the impact assessment. Federal officials concluded that the proposed mine's impact on fisheries engaged s. 35(2) of the Fisheries Act and required a comprehensive study under CEAA. Federal officials informed the parties that the study would be conducted by a review panel under CEAA, and not through the federal assessment process provided for in the Treaty. At this point, the Cree sought declaratory relief that the only assessment processes applicable were the federal and provincial processes contemplated by the Treaty. The Attorney General of Quebec went one step further and argued that there should only be one review by way of the provincial process set out in the Treaty, relying on s.22.6.7 of the Treaty which states the following:
... a project shall not be submitted to more than one (1) impact assessment and review procedure unless such project falls within the jurisdictions of both Quebec and Canada or unless such project is located in part in the Territory and in part elsewhere where an impact review process is required.
A majority of the Supreme Court of Canada, in reasons delivered by Binnie J., determined that s.22.6.7 must be read in the context of the Treaty as a whole. Read in context, the majority found that the “impact assessment” described in the Treaty referred to the internal process leading up to the decision of the provincial Administrator to approve a proposed project. The provision did not limit or eliminate the post-approval permit requirement contemplated by the Treaty itself, insofar as (i) such approval was imposed externally by a law of general application such as the CEAA or the Fisheries Act, and (ii) such law is not inconsistent with the Treaty. The majority stated the following:
The CEAA is a federal law of general application respecting the environment. The question, then, is whether there is any inconsistency between the CEAA and the Treaty. I believe not. As stated, s.22.7.1 of the Treaty provides that once the proposed development is approved by the Administrator following consultation and receipt of “recommendations”, the mine promoter is required notwithstanding such approval to obtain “the necessary authorization or permits from responsible Government Departments and Services”. Nothing in the Treaty relieves the proponent from compliance with the ordinary procedures governing the issuance of the necessary authorization or permits.
The majority added that while the CEAA procedure governs, it must be applied by the federal government in a way that fully respects the Crown's duty to consult.
Mining Watch Canada v. Canada (Fisheries and Oceans), 2010 SCC 2
This decision concerns the proper process for determining which environmental assessment “track” a project should be placed on under the Canadian Environmental Assessment Act (CEAA). Depending on the nature of the project, CEAA and its regulations provide for different levels of intensity with which environmental assessments are to be performed. In practice, the intensity of the assessment determines the track on which the assessment proceeds, whether by “screening”, “comprehensive study”, “mediation” or “review panel”. The issue on appeal was whether the assessment track should be determined by (i) the project “as proposed” by the proponent, or (ii) the discretionary scoping decision of the federal authority.
Red Chris Development Company Ltd. and BCMetals Corporation (“Red Chris”) sought to develop a copper and gold open pit mining and milling operation in northwestern British Columbia. Red Chris submitted an application to the federal Department of Fisheries and Oceans (the “DFO”) for dams required to create a tailings impoundment area. The DFO initially found that a “comprehensive study” was required because the project fell within the Comprehensive Study List Regulations. However, the DFO subsequently scoped the project to exclude the mine and mill, with the result that the assessment could proceed by way of a less intensive “screening”.The screening report concluded that the project was not likely to cause significant adverse environmental effects. At that point, MiningWatch filed an application for judicial review of the DFO's decision to conduct a screening rather than a comprehensive study. The Federal Court allowed the application, finding that the DFO's scoping and decision to proceed by screening had breached the CEAA. The Court also quashed the permits and approvals and prohibited further action by the DFO until a public consultation and comprehensive study had been conducted. The Federal Court of Appeal reversed the Federal Court's decision. The Supreme Court of Canada confirmed that, generally, the assessment track will be determined based on the “project as proposed” rather than the “project as scoped”. Once the appropriate track is determined, the federal authorities have a discretion to determine the scope of the project for the purpose of the assessment. However, there are limits on this discretion to scope the project as set out in s. 15 of the CEAA. In particular, the federal authority has a discretion to enlarge the scope of a project when required, and may also combine related projects into single projects for purposes of assessment, but the minimum scope is the project as proposed. The discretion to scope can also act as an exception to the general proposition that the project as proposed determines the assessment track. Where a federal authority decides to combine projects or enlarge the scope of a project pursuant to s. 15, a more intense track may be required. The Supreme Court of Canada limited its remedy to allowing the application for judicial review and issuing a declaration that the federal authorities erred in failing to conduct a comprehensive study.
Enviro West Inc. v. Copper Mountain Mining Corporation, 2010 BCSC 1443 and 2011 BCSC 107
This decision involves the duty of care and standard of care owed by mining companies and related parties in relation to the handling of toxic waste oil.
Enviro West was hired to drain the waste oil from the defendant mining company's transformer at Copper Mountain mine near Princeton, British Columbia. The waste oil contained a high level of Polychlorinated Biphenyl (“PCB”), well in excess of regulatory requirements. As a result, the PCB laden waste oil contaminated the waste oil in the plaintiff's tanker truck and storage facility tank. All of the contaminated waste oil had to be specially disposed of at a hazardous waste facility for approximately $895,000, which the plaintiff sought to recover as damages. The plaintiff sued the defendant mining company, the electrical contracting firm, and the firm responsible for recycling the transformer (who had arranged for the plaintiff to pump the oil out of the transformer). The plaintiff claimed damages for a failure to warn by the defendants that the oil contained high levels of PCBs.
The court held that all of the defendants owed a duty of care to the plaintiff. While not all of the defendants knew the precise identity of plaintiff, they knew that someone would have to collect, transport and dispose of the PCB waste oil. The court found that:
- the mining company breached its standard of care by (i) not taking steps to ensure the hazardous was being properly entrusted to a party experienced and qualified to handle the waste, (ii) not communicating the PCB concentration to the firm responsible for recycling the transformer, and (iii) providing insufficient verbal warnings to the plaintiff's truck driver;
- the electrical contracting firm breached its standard of care by failing to properly inform the firm responsible for recycling the transformer of the high PCB levels; and
- the firm responsible for recycling the transformer breached its standard of care by failing to turn its mind to the risks or hazards associated with bringing a waste oil collection company to the site to drain the PCB laden oil.
The court found that there was no contributory negligence on the part of the plaintiff. The court allocated 60% of the responsibility for the loss to the mining company, 20% to the electrical contracting firm, and 20% to the recycling firm.
At the time of the trial the plaintiff had not yet disposed of the entirety of the waste oil, and so, for the purpose of awarding damages, the Court relied on an estimate of the plaintiff's disposal costs. The plaintiff's actual disposal costs were approximately $120,000 less than estimated. The amount of the judgment was reduced by consent, with each party's share allocated according to the division of liability percentages determined by the Court. In additional reasons indexed at 2011 BCSC 107, the Court determined that it was the actual amount of damages and not the amount awarded at trial that should be used for purposes of deciding applications by the plaintiff and the defendant Boundary Electric for double costs.
R. v. Syncrude Canada Ltd., 2010 ABPC 229
This decision involves charges pursuant to Alberta's Environmental Protection and Enhancement Act ( EPEA ) and Canada's Migratory Birds Convention Act ( MBCA ) in relation to the death of approximately 1,600 ducks in Syncrude's settling pond in Northern Alberta. The settling pond was operated as part of Syncrude's oil sands operations in Fort McMurray. Syncrude was found guilty on both charges.
The main issue for the Court was whether Syncrude had a due diligence defence, and in particular, whether Syncrude had taken all reasonable steps to ensure that waterfowl would not be contaminated in the settling pond. Pursuant to its EPEA approval, Syncrude was obligated to have a system in place to prevent waterfowl from landing on the tailings pond and to ensure effective operation of that deterrent system. The Court found that Syncrude had failed to deploy the deterrents early enough and quickly enough, and that the failure could be attributed to: an absence of an effective documented deterrence procedure, lack of training and expertise; a reduction in deterrent staff and the unavailable of basic equipment needed. As a result, Syncrude's due diligence defences failed.
Syncrude raised a number of additional defences, including act of God, abuse of process and officially induced error. Each of these defences failed as well.
The Provincial Court of Alberta ultimately sentenced Syncrude to pay $3,000,000, a penalty that is clearly at the upper end of the sentencing range. Of this amount, $800,000 were fines under the EPEA and MBCA. A portion of the EPEA fine was ordered to be paid to develop wildlife curriculum and the reminder of the $3,000,000 was to be paid to fund research and acquire acreage for conservation purposes. The sentence follows the trend toward higher penalties and the increased use of creative sentencing for environmental offences.
As with many sentences in environmental cases, Syncrude's sentence was arrived at by a joint submission agreed to between the Crown and Syncrude, and then approved by the Court. As a result a number of important sentencing questions were not expressly considered:
- Whether convictions should have been entered on both charges when the offences alleged under each act arose out of the same facts and a conviction on both arguably runs counter the rule against double jeopardy set out in the seminal case of R. v. Kienapple,  1 S.C.R. 729 ;
- Whether Syncrude's culpability warranted the maximum fine under the EPEA and arguably the maximum fine under the MBCA ; and
- Whether imposing a total monetary penalty, under the guise of creative sentencing, in excess of the maximum fines provided for in the acts abrogates the “totality of sentence” principle that may exist in Canada following the decision in Canada v. Domtar Specialty Papers, 2001 Carswell Ont. 1572, 39 C.E.L.R. (N.S.) 56 (Sup. Ct.).
Syncrude's conviction received considerable media attention and has been heralded as a monumental victory for environmentalists. The message in this decision is not that tailings ponds are per se illegal or contrary to the prohibitions in environmental legislation, as some commentators have suggested. Rather, the Court was not satisfied that Syncrude had taken its environmental obligations seriously enough to deal with a clearly identified risk.
For further information, see McCarthy Tétrault LLP's two updates on this decision, dated July 16, 2010 and October 29, 2010, respectively.
Fullowka v. Pinkertons of Canada Limited, 2010 SCC 5
During a bitter strike at the Giant Mine near Yellowknife, one of the strikers evaded security and surreptitiously entered the mine. He set an explosive device which, as he intended, was detonated by a trip wire, killing nine miners. Their survivors sued the mine owner, its Chief Executive Officer and one of its directors, as well as its security firm and the territorial government for negligently failing to prevent the murders. The claims largely succeeded at trial, but were dismissed by the Court of Appeal. The principle issue before the Supreme Court was whether the security firm and the territorial government should be liable in negligence for failing to prevent the murders. The claims involving the mine owner, its Chief Executive Officer and its director were settled before the case reached the Supreme Court.
The Supreme Court found that the relationship between the murdered miners and security firm and territorial government met the requirements of foreseeability and proximity to give rise to a prima facie duty of care. This finding was based largely on the fact that the security firm and territorial government were aware of prior incidents of violence and vandalism at the mine, including a prior explosion and bomb threat. The Court also found that the miners reasonably relied on the security firm to take precautions to reduce the risk, and that the territorial government had a statutory duty to inspect the mine and to order the cessation of work if it was found to be unsafe. The Court found no residual policy considerations sufficient to negate the prima facie duty of care.
The Supreme Court found that the trial judge erred in finding that the security firm and the territorial government failed to meet the requisite standard of care. The trial judge failed to take into account the limitation of resources imposed on the security firm by its contract with the mine owner, and the striker's determination to commit an intentional, criminal act; he imposed an absolute duty, rather than a duty of reasonable care. The trial judge also erred in failing to take into account the fact that the territorial government relied in good faith on legal advice that it did not have jurisdiction to close the mine.
The Supreme Court also found that the trial judge erred by applied the “material contribution” test for causation, rather than the usual “but for” test, despite the absence of any exceptional circumstances justifying the more relaxed standard.
Monument Mining Limited v. Balendran Chong & Bodi, 2010 BCCA 373
This decision concerns allegations of defamation and slander of title.
Monument, a public company listed on the TSX Venture Exchange, owned two mining concessions in Malaysia, together known as the “Selinsing Gold Mine”. The defendant Balendran Chong & Bodi, a law firm in Malaysia, sent four letters on the instruction of its clients (who were also defendants in the lawsuit), including one letter to a Vancouver law firm. The letters claimed that Monument had entered into an agreement to sell the Selinsing Gold Mine when it did not in fact own the mine because the law firm's clients held a controlling ownership interest. The letters also claimed that there was ongoing litigation in Malaysia against two of Monument's directors. Monument sued the Malaysian law firm and its clients for defamation and slander of title.
The chambers judge struck out the action as disclosing no reasonable claim. She determined that the words complained of could not be interpreted as referring to Monument. The British Columbia Court of Appeal overturned the decision of the chambers judge. The Court of Appeal found that the defamatory language drew no distinction between Monument and its directors. The statements could have led a reasonable investor to believe that Monument was not being run properly or was being run by dishonest persons. Further, the words complained of could reasonably be understood as disparaging Monument's title to the property. Accordingly, the appeal was allowed.
Potash Corp. of Saskatchewan Inc. v. Mosaic Potash Esterhazy Limited Partnership, 2010 SKQB 106
In this decision, the court dismissed an application by Mosaic to strike a portion of the statement of claim filed by the plaintiff (“PCS”) as disclosing no reasonable cause of action.
Both Mosaic and PCS have potash reserves surrounding the Esterhazy mine, which is owned and operated by Mosaic. The parties had been operating under a mining agreement pursuant to which Mosaic was required to mine potash within the PCS reserves in a similar fashion as Mosaic mined within its own reserves. In the statement of claim, among other allegations, PCS alleged that Mosaic had failed to adhere to good mining practices and that as a result, PCS had suffered losses arising from a December 1985 flood of portions of the mine (the “inflow” claim).
Mosaic brought its application on two bases: (i) that PCS claim was not a proper claim for declaratory relief, but rather, a claim for damages, and (ii) PCS was time-barred from bringing the inflow claim.
The Court found that it was not plain and obvious that the declaratory relief sought was not a proper cause of action in the circumstances of the case, nor was the claim an abuse of process. The merits of the claim remained to be determined by the trial judge on a proper evidentiary basis. Further, in the absence of an agreed statement of facts, the question of whether the action was time-barred could also only be determined by the trial judge. Accordingly, the application to strike the inflow claim was dismissed with costs to PCS.
R. v. Xstrata Canada Corporation, 2010 ONCJ 42
This case involves the application of Regulation 854 made under the Ontario Occupational Health and Safety Act.
A worker at Xstrata's Kidd Creek Mine suffered a fatal injury while using a scooptram to push scrap metal into a stope that had not been designated for that purpose. At issue was whether Xstrata was in contravention of sections 74 and 118(1) of Regulation 854, breaches of which are considered offences pursuant to the Occupational Health and Safety Act. Xstrata plead not guilty to both counts. For the second count, involving s. 118(1) of the Regulation, Xstrata conceded that the actus reus was made out. The issue that remained was whether Xstrata had a due diligence defence.
Section 74 of the Regulation requires that:
A shaft, raise or other opening in an underground mine shall be securely fenced, covered or otherwise guarded.
The Court determined that Xstrata was not in contravention of s. 74, finding that a 5.5 foot snow fence chained to both sides of the wall in front of the stope, together with the training provided to the employee and the standard operating procedures, satisfied the definition of “otherwise guarded” in the Regulation. With the actus reus not satisfied, Xstrata was found not guilty on this count.
With respect to a due diligence defence under s. 118(1), the issue was whether Xstrata had proven on a balance of probabilities that all reasonable steps were taken to avoid the incident. The Court concluded that, given the thorough training the deceased received, his safe work history, standard operating procedures and the directions of the supervisor, it was not reasonably foreseeable that the deceased would being pushing scrap material into a non-scrap stope. The due diligence defence was accordingly made out, and Xstrata was found not guilty on this count as well.
Rex Diamond Mining v. Ontario Securities Commission, 2010 ONSC 3926
This case involves disclosure obligations under the Ontario Securities Act.
The Ontario Divisional Court upheld a finding made by the Securities Commission that Rex had, in breach of the Securities Act, failed to issue a material change report in relation to its operations in Sierra Leone where Rex held leases for the purpose of diamond mining, and in particular, Rex had failed to disclose that the leases were at risk of being lost.
Rex argued that the Commission had erred in concluding that the leases in question were material to the business of Rex (and therefore triggered disclosure obligations under the Securities Act ) and that the Commission had relied on uncorroborated hearsay evidence in preference to the evidence provided by Rex executives.
The Court rejected Rex's argument and dismissed the appeal. The Court noted that the Commission is expressly entitled by statute to consider hearsay evidence, and that hearsay is not necessarily less reliable than direct evidence. The Court also found that various communications from Sierra Leone government officials and the actions of the Rex executives -- e.g. spending six million USD in connection with the leases, actively pursuing every avenue to hold onto the leases when the government threatened to cancel them, and Rex's own chief geologist advising the CEO that the potential loss of the leases would be material -- supported the Commission's reasonable conclusion that Rex had failed to disclose a material change. Additionally, the court did not accept Rex's submission that the market impact of the eventual disclosure of the loss of the leases proved that the loss of the leases was not material.
Algoma-Talisman Minerals Limited v. HMQ (Ont) et al., 2010 ONSC 2090 (affirmed 2010 ONCA 789)
The issue in this case was whether the applicant was liable for taxes imposed under s.189 of the Ontario Mining Act, which states:
Except as provided in this Part, all mining rights howsoever patented or acquired which are severed from or held apart or separate from the surface rights, are liable for, and the owner thereof shall pay, the tax.
In 1968, Algoma's predecessor conveyed lands to the Province of Ontario while reserving certain rights, including an option to acquire mineral rights and to work and exploit any ore bodies found on or under the lands. Algoma subsequently exercised the option. For purposes of s.189 of the Mining Act, Algoma claimed that what had been conveyed to it was “mineral rights”, not “mining rights”, and that such mineral rights did not attract taxation under the Act. Algoma argued that mineral rights cannot be considered mining rights until the mineral rights have been accessed, which had not happened yet.
The Superior Court dismissed the claim, finding that s.189 of the Mining Act captures both mineral rights and mining rights. In making this determination, the Superior Court cited s.1 of the Mining Act which broadly defines “mining rights” as meaning “the right to minerals on, in or under any land”. Notwithstanding this finding, the Court held that what was transferred to the applicant was in fact “mining rights”, based on:
- the plain wording of the agreement which reserved the right “to work and exploit any ore bodies found on or under the lands in accordance with usages customary to mining”;
- the applicant's interchangeable usage of the terms “mining rights” and “mineral rights” in communications regarding notice of Algoma's intention to exercise the option;
- the fact that no objection was raised to government documents, including an Order in Council, that used the term “mining rights” to refer to the reserved rights; and
- the implied right of entry at common law on surface rights in order to allow access to mineral rights.
Accordingly, the Superior Court determined that Algoma's mining rights were taxable pursuant to s.189 of the Mining Act, a decision that was affirmed by the Court of Appeal.
Carom v. Bre-X Minerals Ltd., 2010 ONSC 6311 (see also 2010 ONSC 6564 regarding costs)
This action was certified in 1999 as a class proceeding by shareholders of Bre-X against the company and its insiders for various claims of negligence, negligent misrepresentation and breaches of the Competition Act. In the 1999 certification decision, claims against the wives of two insiders based on the creation of constructive trusts were stayed pending determination of the proceedings against their husbands. In 2010, the plaintiffs sought to revive the claims against the wives and add those claims as common issues in the proceeding. The motion judge found that the circumstances had not changed since the earlier ruling, and that it would be procedurally unfair to revive the claims as common issues since the parties had conducted their claims and defences in the intervening decade on the basis that these claims were stayed.
Estate of Bre-X Minerals Ltd. v. Felderhof et al., 2010 ONSC 6921 (see also R. v. Felderhof, 2007 ONCJ 345)
This was a motion by a former officer of Bre-X, Felderhof, for an order requiring the Trustee of the Estate of Bre-X to indemnify him for his legal fees and disbursements in two actions (a derivative action brought against him by the Estate of Bre-X and the class action brought by Donald Carom, discussed above). Felderhof brought the motion after being acquitted by the Ontario Securities Commission of eight counts relating to insider trading and misleading press releases. Felderhof sought indemnification for his costs under the provisions of Bre-X's By-laws. While noting the extraordinary nature of the award, the motion judge made an interim costs order in favour of Felderhof in the amount of $1 million (payable in the cause, and subject to certain conditions).
Pysznyj v. Orsu Metals Corp., 2010 ONSC 1151
This action was commenced by a shareholder of Orsu Metals Corp. against Orsu, and its President and Chief Executive Officer (who was also a member of the board of directors), and Chief Financial Officer. The action was commenced after Orsu restated its financial statements for the first three quarters of 2007. The plaintiff alleged that Orsu made misrepresentations in its financial statements as a result improperly accounting for a forward sales contract for the sale of gold produced at its mine in Kazakhstan. The plaintiff sought certification of the action as a class proceeding for settlement purposes.
The motion judge certified the action on behalf of a global class that included persons that purchased securities over both the Toronto Stock Exchange and the Alternative Investment Market of the London Stock Exchange in London, England. The motion judge certified a world wide class despite the fact that she refused to do so in a similar restatement class action only a few months earlier (see McCann v. CP Ships Ltd.,  O.J. No. 5182). The motion judge also approved settlement of the action for $2.2 million, $550,000 of which was paid to the plaintiff's lawyers.
McKenna v. Gammon Gold Inc. et al., 2010 ONSC 1591, leave to appeal granted in part 2010 ONSC 4068 (Div. Ct.)
This putative class action was commenced by a shareholder of Gammon Gold against Gammon Gold, its senior officers and directors, and members of a syndicate that underwrote a public offering of its securities. The plaintiff alleged that the defendants made various misrepresentations, including overstating Gammon Gold's actual and anticipated production rates at gold and silver mines in Mexico. The plaintiff alleged that the value of Gammon Gold's securities was inflated as a result, and that the plaintiff and other proposed class members lost money once the true state of affairs was disclosed. The plaintiff claimed under s. 130 of the Ontario Securities Act in relation to securities sold under a prospectus. The plaintiff also alleged negligent misrepresentation, reckless misrepresentation, negligence, conspiracy, unjust enrichment and waiver of tort. The plaintiff sought certification of the action as a class proceeding on behalf of a world wide class that included all primary and secondary market purchasers of Gammon Gold's securities during the proposed class period.
The motion judge certified the action as a class proceeding against all of the defendants with respect to the cause of action under s. 130 of the Securities Act (the motion judge was not required to decide whether to certify a claim under s. 138.3 of the Securities Act with respect to secondary market disclosure). The motion judge also certified the additional claim for unjust enrichment and waiver of tort against the underwriters. However, the motion judge refused to certify a world wide class, and instead limited the class definition to those who acquired their shares through the underwriters in Canada. The motion judge adjourned the motion for certification of the conspiracy claim until the plaintiff delivered particulars of his alleged special damages. The motion judge refused to certify any of the remaining causes of action – he found that the pleading did not disclose a cause of action in fraudulent misrepresentation, declined to certify any part of the claim on behalf of the secondary market purchasers, and declined to certify any common law misrepresentation claim because he found that reliance had to be proven on an individual basis.
The plaintiff sought leave to appeal the certification decision. The Division Court granted leave only with respect to the motion judge's decision to adjourn the certification motion with respect to conspiracy. Leave was denied with respect to all other aspects of the certification decision.
Henault v. Bear Lake Gold Ltd., 2010 ONSC 4474
This action was commenced by a shareholder of Bear Lake Gold against Bear Lake and its current and former officers and directors. The action related to a press release in which Bear Lake stated that “potentially important zones of gold” had been intersected in the first of two drill holes on its Larder Lake property in Timiskaming, Ontario. A year later, the Investment Industry Regulatory Organization of Canada halted trading of Bear Lake's shares on the TSX Venture Exchange. A few days later, Bear Lake disclosed that an independent consulting firm had discovered inconsistencies in the exploration data, and that the company's Vice-President Exploration had been suspended pending an internal investigation. The company later confirmed the inconsistencies in the exploration data and indicated that the Vice-President Exploration had “altered certain assay certificates by manually changing the assay results”. This action for damages for misrepresentation was commenced less than a month later.
The motion judge approved certification of the action as a class proceeding for settlement purposes. The motion judge also approved settlement for $1,305,000, $250,000 of which was paid to the plaintiff's lawyers. In approving the settlement amount, the motion judge noted that the company's financial position at the time seriously hindered its ability to fund a settlement, and that the settlement funds were largely from insurance coverage of the individual defendants.
Jallema v. American Bullion Minerals Ltd., 2010 BCCA 495
This putative class action was commenced against American Bullion Minerals by two of its shareholders. The motion judge refused to certify the action as a class proceeding on the basis that the plaintiffs were entitled to bring a representative action against the company for oppression, and the BC Class Proceedings Act does not apply to “a proceeding that may be brought in a representative capacity under another Act.” The Court of Appeal overturned the decision of the motion judge. The Court of Appeal found that the oppression provisions in the Business Corporations Act were not intended to provide “for the applicant to act as the representative of anyone else.” Rather, the language was intended to describe oppressive action which, if experienced by a plaintiff, would qualify the plaintiff to bring an oppression claim.