On Thursday, December 5, 2013, Martine Ouellet, the Québec Minister of Natural Resources, tabled Bill no. 70 entitled An Act to amend the Mining Act. The fourth and latest installment in a long line of attempts to reform Québec’s mining legislation, unlike its predecessor Bill no. 43, Bill no. 70 would make amendments to the current Mining Act rather than replace it completely. Interestingly, Bill no. 70, as was the case in Bill no. 43, contains a preamble that explains the reasons and the objectives upon which the amended Mining Act is based.
In the recent case of Baker et al. v. Director, Ministry of the Environment, a number of former directors and officers of Northstar Aerospace, Inc. (Northstar) and its parent Northstar Aerospace (Canada) Inc. (Northstar Canada) found themselves as the last line of defence between Ontario Ministry of the Environment (MOE) and a contaminated property located at the site of the now insolvent company’s former manufacturing and processing facility in Cambridge, Ontario (Site). Read more.
The proposed new Québec Mining Act, also known as Bill 43, was defeated today at the Québec National Assembly. Originally tabled on May 29, 2013 by the Québec Minister of Natural Resources, Bill 43 was the latest in several recent attempts by the government of Québec to reform Québec mining legislation. Bill 43 was the subject of several special consultations and public hearings with various stakeholders throughout the months of September and October.
As a result of this process, the government had undertaken to modify certain aspects of the new Mining Act. They had agreed to consult with First Nations groups, to remove the government’s veto right with respect to the designation of zones that were compatible or incompatible with mining activities, and to lessen the burden of mining producers to prove the economic non-feasibility of processing ore mined within Québec. Despite these undertakings, the authority of the government to require a mining operator to process minerals in Québec in exchange for the issuance of a mining lease remained a feature of Bill 43. In addition, the government refused calls to establish criteria for the designation of zones that were compatible or incompatible with mining activities.
Following the tabling of a report on Bill 43 by the Committee on Agriculture, Fisheries, Energy and Natural Resources on October 2, 2013, the bill was put to debate before the National Assembly on October 3, 2013. After several debates, Bill 43 was defeated today with 51 votes in favour, 57 against and 2 abstentions.
For further information on the defeated Bill 43, please see our previous blog post.
The Nova Scotia Court of Appeal recently addressed what the government must do to ensure a fair process takes place before making an order transferring private land to a mining company. In Higgins v Nova Scotia (Attorney General), 2013 NSCA 106, the Court considered the first vesting order made by the Minister of Natural Resources (the Minister) pursuant to the Mineral Resources Act, SNS 1990, c 18 (MRA) in Nova Scotia. Read more.
Global commerce, especially in the mining industry, transcends borders. When related litigation ensues, it can give rise to thorny jurisdictional issues. For instance, when an Ontario-headquartered mining company relies — based on recommendations from its technical staff in its Vancouver satellite office — upon the engineering reports of US-based consultants to build a gold mine in Costa Rica which then collapses, does an Ontario court have jurisdiction over the subsequent legal dispute between the parties?
The Ontario Court of Appeal addressed this very scenario recently in Central Sun Mining Inc. v. Vector Engineering Inc., 2013 ONCA 601. Central Sun was an Ontario company with its head office in Toronto. It retained various American engineering consultants to assist with the siting and the design of a proposed mine which was to be built in Costa Rica. The American consultants prepared various reports, some of which were sent to technical staff in Vancouver (some reports were sent to Ontario directly). The Vancouver staff then made recommendations to the head office in Toronto where the strategic decisions regarding the mine were made. The mine was constructed in Costa Rica but then suffered a catastrophic collapse which led to the shutdown of the mine, significant remediation costs and the plummeting of Central Sun’s stock prices in Toronto. Central Sun then sued the US engineers in Ontario for negligent misrepresentation (among other causes of action). The US engineers sought to stay the Ontario action, claiming that Ontario courts did not have jurisdiction.
The essence of the engineers’ argument was that the tort of misrepresentation did not occur in Ontario (but rather in Vancouver or Costa Rica), or that only a minor part of the tort occurred in Ontario. The Court of Appeal rejected this argument. The appeal court ruled that a misrepresentation takes place where it is received and relied upon. The misrepresentations, the Court concluded, were received and relied upon in Toronto as the controlling mind of the company was in Ontario, even though the misrepresentations were first sent in some cases to Vancouver. The commission of the tortious misrepresentation gave rise, in the Court’s view, to presumptive jurisdiction by an Ontario court. Furthermore, the presumptive jurisdiction was not rebutted as the receipt of, and reliance upon, a misrepresentation are “core” aspects of a misrepresentation and such receipt and reliance took place in Ontario.
In a significant victory for Central Sun, which was represented by our firm, the Court of Appeal concluded that Ontario courts have jurisdiction over the misrepresentation claim and, by extension, the other pled causes of action.
The next battle is whether Ontario is the forum conveniens.
The decision in Central Sun demonstrates that a negligent misrepresentation will be deemed, for jurisdictional purposes, to have been committed in the jurisdiction in which the misrepresentation is ultimately relied upon by the controlling mind of a company, even if it is received elsewhere first, particularly when this is in the reasonable contemplation of the party making the misrepresentation.
On September 26, 2013, the British Columbia Court of Appeal (BCCA) released an important decision regarding the scope of the Crown’s duty to consult Aboriginal peoples in regard to government approvals for existing resource extraction operations.
In Louis v. British Columbia (Minister of Energy, Mines, and Petroleum Resources) (Louis), the BCCA confirmed that consultation regarding a government approval for an existing operation (in this case, an open-pit molybdenum mine located in northeastern British Columbia that had been in operation since 1965) need focus only on the impacts, if any, of the specific activities for which government approval was being sought. The BCCA rejected the argument of the Stellat’en First Nation (Stellat’en) that the approvals sought for a mine expansion project (including a permit amendment to allow the construction of a larger, more technologically advanced mill) should be viewed as an application to extend the life of the mine beyond the previously projected closure date. The BCCA held that the Crown could not use its regulatory discretion as a tool to undermine the existing rights of the applicant – which included previously granted rights to the minerals to be mined – by trying to arbitrarily control whether the mine could remain in operation. Read more.
The Supreme Court of Canada’s (SCC) decision in Lac Minerals Ltd. v. International Corona Resources Ltd. (Lac Minerals) established that where a dispute arises regarding entitlement to a mining asset, the successful plaintiff may be awarded possession of the mine (a proprietary award), instead of simply a monetary award of damages as compensation. Indeed, in the 20 years since Lac Minerals was decided, courts have demonstrated a general preference for proprietary awards where possible, often citing the difficulties in adequately valuing a mining property for the purposes of awarding monetary damages. That said, a proprietary award is never guaranteed and should not be expected as a matter of course. Rather, Canadian courts have repeatedly noted their willingness to undertake the exercise of quantifying an appropriate monetary award, difficult though that task may be. Parties to litigation are well advised to give careful consideration to the evidence they choose to lead on the question of the value of the property because the choices they make may inadvertently drive the court to a remedy that the party is seeking to avoid. Continue Reading
- follow the Supreme Court of Canada’s (SCC) lead in circumscribing Aboriginal rights;
- adopt a more balanced approach to Aboriginal claims; and
- consider the impacts of Aboriginal claims on third party interests. Continue Reading
Rights of First Refusal (ROFR) are common in the partnership, joint venture and shareholder agreements that permeate the mining industry.1 In broad strokes, a ROFR is engaged when one party seeks to exit the project. It functions by granting the non-exiting party the first opportunity to acquire the exiting party’s interest. In some quarters, there is a perception that ROFRs primarily benefit senior producers, their principal purpose being to allow a senior to consolidate 100% ownership of an asset, often after commencement of production when its junior partner seeks to monetize its position to fund new exploration activities. Alternatively (or additionally), the ROFR may serve to protect the non-exiting party from being saddled with an unwanted partner, provided that it has the financial capacity to do so. In either case, the perception exists that junior partners will often lack the financial capacity to purchase their majority partner’s interest, let alone assume the full burden of the capital and operating expenditures associated with a producing mine and, as a result, some may believe that a ROFR is of limited value to a junior partner. However, as starkly illustrated in the recent Ontario Superior Court of Justice (OSCJ) case of Barrick Gold Corporation v. Goldcorp Inc., 2011 ONSC 3725 (Barrick), a ROFR can be incredibly valuable in the hands of a junior partner. A potential purchaser of a senior’s share who fails to appreciate the potential power of a ROFR in the hands of a well-represented junior does so at its own peril. Continue Reading
In Quebec, as elsewhere in Canada, net smelter return (NSR) and similar royalties are often granted, along with cash and/or share consideration, to sellers in mining property option transactions. Recently, the Quebec Court of Appeal provided a reminder in Anglo Pacific Group PLC v. Ernst & Young Inc. (“Anglo Pacific”) of the complexity of creating enforceable NSR royalties in Quebec.
In Anglo Pacific, the Court considered the nature of an NSR royalty granted by the holder of mining claims to a lender and the legal publicity regime applicable to such a royalty. The prevailing view in Quebec had been that such a royalty did not constitute an ownership or property right, but rather a personal right. This is an important distinction because a royalty holder with a personal right only has a recourse against the grantor of the royalty. As a personal right, the royalty could effectively be worthless if the underlying mining claim is transferred to a third party or if the grantor becomes insolvent. Continue Reading