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Mining - General. Iamgold Corporation v. Treelawn Capital Corp.
In Iamgold Corporation v. Treelawn Capital Corp. (Div Court, 2023) the Divisional Court considered (and dismissed) a Mining Act (MA) appeal [under s.133-134] brought from an order under the Ontario Land Tribunal (OLT). In these quotes the court illustrates procedures in a rare MA s.181 ['Default of Co-Owners, etc.'] dispute regarding responsibility for expenditures between co-owners:[12] On August 7, 2018, IGC brought an application for an order under s.181(2) of the Mining Act, R.S.O. 1990, c. M.14, claiming that TCC had neglected or refused to reimburse it for a proportionate share of the expenditures made in connection with the development of the Chester 2 Properties.
[13] Section 181(2) of the Mining Act states that co-owners of a property are to pay their share of expenditures relating to the development of land and mining claims. As the first step of a two-step process, a co-owner may apply for an order from the Tribunal to enforce a claim against another co-owner for payment of rents or expenditures incurred. This provision is intended to be a streamlined and expeditious procedure for the recovery of unpaid rents or expenditures.
[14] As the second step in the process, a co-owner against whom a s. 181(2) order for payment is made may bring an application before the Tribunal under s. 181(4) of the Mining Act to dispute its liability to pay for development expenditures. The Tribunal may affirm, amend or rescind the order made under s. 181(2), or make any other order it considers just.
[15] At the time of the commencement of the proceedings before the Tribunal, the percentage ownership interests in the Chester Properties were as follows:(a) Chester 1: TCC (30%), IGC (49%) and SMM Gold Coté Inc. (21%);
(b) Chester 2: TCC (7.5%), IGC (64.75%), SMM Gold Coté Inc. (27.75%); and
(c) Chester 3: TCC (7.5%), Various Other Owners (92.5%). [16] IGC’s application pursuant to s. 181(2) proceeded as of right and with no hearing. On March 29, 2021, the Tribunal issued an order requiring TCC to pay to IGC the amount of $2,065,492 for its share of development expenses for Chester 2 incurred between June 2012 and May 2018.
[17] TCC then brought an application under s. 181(4) for an order rescinding the s. 181(2) order requiring it to contribute to development expenses. Among other things, TCC alleged that it had entered into a prior oral agreement with Trelawney that served to relieve it of any obligation to contribute to any development expenses incurred by IGC.
[18] At the 12-day hearing before the Tribunal, evidence and arguments were advanced by the parties on several issues relating to the question of TCC’s liability for the payment ordered, including the impact of the Vesting Order that established TCC’s interest in the Chester Properties as well as the legal effect of the termination of a letter agreement entered into by the previous owners of the interests acquired by TCC as a result of that Vesting Order. However, it was the existence of the alleged oral agreement between Wood and Gibson and its enforceability that were the central issues identified. In particular, IGC denied the existence of any such oral agreement while TCC relied heavily upon it to justify its argument that it need not contribute to development expenses.
[19] Following the hearing before the Tribunal, on November 15, 2022 the Tribunal decided as follows (at paras. 125-129):[125] Upon the whole of the evidence, it is the Tribunal's view that ultimately the finding that the 7.5% interest effectively became a non-contributing carried interest when Young-Shannon Ltd. terminated the JV Letter Agreement, and/or by virtue of the Vesting Order is of lesser significance than the existence of the Oral Agreement as identified by the Applicant and considered by the Tribunal (hereafter referred to as the “Oral Agreement”).
[126] The Tribunal was compelled to first determine the Applicant's very comprehensive submissions relating to the status of the 7.5% interest as it was acquired by the Applicant, as opposed by the Respondent. However, upon the overview of the operation of sections 181(2) and 181(4) above, the central question is really whether, as between the two co- owners, the Applicant and Trelawney entered into a binding agreement that the Applicant's interest was a free carried interest and non-contributing.
[127] If within the context of the development of a mining project, parties enter into contractual terms which determine their respective obligations to contribute to expenditures for its further development, which are relevant to the question of liability for contributions under s. 181(4), that is the primary focus of the Tribunal's assessment of the evidence and determination of liability.
[128] For the reasons that follow, the Tribunal has determined on the balance of probabilities, that there was an Oral Agreement binding upon Trelawney and the Respondent.
[129] That Oral Agreement within the context and framework of the concurrent transactions for Chester 1 and 3, that resulted in the Applicant and Trelawney becoming co-owners, ultimately established that the 7.5% interest in Chester 2 was a perpetual free carried interest in all respects as was established and clarified to be in place for Chester 3, and Chester 1. That free carried interest provided that the Applicant was not required to perform any duties or contribute or pay any monies to Trelawney whatsoever in respect of Chester 2 including costs related to exploration, development, mining, operations or production. It was clarified to be a Net Profits Interest upon the definitions provided for in the Restated Amending Agreement dated March 26, 2012. [20] As a result of these findings, the Tribunal determined that TCC and WFWC were not required to pay any contribution to the development expenses claimed by IGC as described in the previous order of the Tribunal.
[21] IGC brought an appeal of this decision as is provided for in the Mining Act. . Prism Resources Inc. v. Detour Gold Corporation
In Prism Resources Inc. v. Detour Gold Corporation (Ont CA, 2022) the Court of Appeal considered when mining royalties are an 'interest in land':[2] The motion judge granted summary judgment, concluding that Prism’s royalty interest was an interest in land under the principles of law set by the Supreme Court in Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, [2002] 1 S.C.R. 146, as explained by this court in Third Eye Capital Corp. v. Dianor Resources Inc., 2018 ONCA 253, 141 O.R. (3d) 192.
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[10] It is common ground that Dynex changed property law in Canada, and that Prism and Conquest were both aware of that change when they negotiated the 2004 Letter Agreement.
[11] At para. 22 of Dynex, Major J. noted that Canadian common law should recognize that a “royalty interest” or an “overriding royalty interest” can be an interest in land under two conditions: first, if “the language used in describing the interest is sufficiently precise to show that the parties intended the royalty to be a grant of an interest in land, rather than a contractual right to a portion of the oil and gas substances recovered from the land”; and, second, if “the interest, out of which the royalty is carved, is itself an interest in land”.
[12] The motion judge was well-aware of the reasoning in Dynex, noting, at para. 18: “The ruling in Dynex specifically changed the law to bring it in line with industry practice, to permit a royalty that consists of a right to payment of profits to be an interest in land”. After specifying the two-part test in Dynex, the motion judge said, at para. 19: “There is no issue in this case that the second part of the test set out in Dynex is satisfied in that the property interest claimed by Prism has been carved out of Conquest’s property interest”. This finding was not appealed, and is incontestable in any event because Prism’s interest in the lands owned by Boliden was registrable although never registered. The 1999 Agreement provided that: “A party will be entitled to register this Agreement or notice thereof against the Property, subject in the case of the Leases to the consent of the Ministry, and each party will cooperate in effecting the registration of any such notice and execute any documentation required in connection therewith”.
[13] Writing for this court in Third Eye, in glossing Dynex, I made several statements that are pertinent to this appeal. I noted that the Supreme Court had upheld the approach of the Court of Appeal of Alberta in Dynex, which was that “[t]he parties’ intent could be inferred”: at para. 46. About the application of Dynex, I noted, at paras. 54-55:Several points in the decision are of continuing importance. Justice Major noted, at para. 6: “For substantially the same reasons as the Court of Appeal, I conclude that overriding royalty interests can be interests in land.” He added, at para. 19, that he much preferred that court’s “compelling insight into the evolution of the law”. In my view, this language gives continuing relevance to the approach and the ruling of the Court of Appeal of Alberta, especially its statement, at para. 73, that a court must “examine the parties’ intentions from the agreement as a whole, along with the surrounding circumstances, as opposed to searching for some magic words.”
I also note that Major J. approved the holding of Laskin J. in dissent in Saskatchewan Minerals. He noted, at para. 11, that: “[t]he effect of Laskin J.’s reasons was to render inapplicable, at least insofar as overriding royalties, the common law rule against creating interests in land out of incorporeal interests.” He described Laskin J.’s holding, at para. 12: “[T]he intentions of the parties judged by the language creating the royalty would determine whether the parties intended to create an interest in land or to create contractual rights only.” This was the Supreme Court’s ultimate holding in Dynex. [14] This analysis led me to conclude, at para. 65 of Third Eye, that “contractual terms are not necessarily determinative of whether an interest in land was intended; the language does not require magic words to demonstrate the parties’ intention”. The New Brunswick courts took a similar approach in Blue Note Mining Inc. v. Fern Trust (Trustee of), 2008 NBQB 310, 337 N.B.R. (2d) 116, aff’d 2009 NBCA 17, 342 N.B.R. (2d) 151. . Attawapiskat First Nation v. Ontario
In Attawapiskat First Nation v. Ontario (Div Ct, 2022) the Divisional Court sets out basics of the Mining Act regime in Ontario:The Regulatory Framework for Early Exploration Activities
[13] The Mining Act regulates mining in Ontario. Early mineral exploration activities are regulated by ss. 78 to 78.6 of the Mining Act and O. Reg. 308/12: Exploration Plans and Exploration Permits (the “Exploration Regulation”.)
[14] The purpose of the Mining Act is “to encourage prospecting, registration of mining claims and exploration for the development of mineral resources, in a manner consistent with the recognition and affirmation of existing Aboriginal and treaty rights in s. 35 of the Constitution Act, 1982, including the duty to consult.” In addition, s. 2(b) of the Exploration Regulation requires early exploration proponents to conduct early exploration activities in a manner consistent with the protection provided for existing Aboriginal and treaty rights in s. 35 of the Constitution Act.
[15] Generally, under the Exploration Regulation, some exploration activities only require a ‘plan’ while more intrusive activities require a ‘permit.’ Applications for exploration permits require information about the nature, dates, and locations of the proposed activities, as well as maps showing both regional and more specific locations of proposed exploration activities.
[16] After an exploration permit application is submitted to the Ministry, it is circulated to First Nations whose asserted or established Aboriginal and/or treaty rights may be adversely affected. They may provide written comments to the Director and the proponent (s. 14). Where concerns are raised regarding potential adverse effects to Aboriginal or treaty rights, Ministry staff usually will liaise with the proponent and the First Nation in an effort to address the concerns.
[17] Under s. 15 of the Exploration Regulation, if the Director is satisfied that appropriate consultation has occurred, the Director shall make a decision within 50 days of the permit being circulated. Section 16 of the Exploration Regulation allows the Director to put a temporary hold on the permit for the enumerated reasons, including concerns raised by a First Nation.
[18] Once granted, the permits authorize early exploration activities for three years from the date of issuance. Such activities are intended to gather further data about potential mineral occurrences.
[19] In addition to the requirement under s. 2(b) of the Exploration Regulation that early exploration activities be conducted in a manner consistent with the protection of existing or asserted Aboriginal and treaty rights, certain standard terms and conditions apply to all early exploration permits and must be complied with by the permit holder in carrying out exploration activities. Those requirements are found in Schedule I to the Exploration Regulation and the Ministry’s Provincial Standards for Early Exploration. Pursuant to s. 17(2) of the Exploration Regulation, the Director may also stipulate any other terms and conditions in an early exploration permit, including mitigation of potential adverse impacts to a First Nation’s rights, as identified through consultation.
[20] Additionally, when the Exploration Regulation came into force in 2012, Ontario developed an implementation policy, the Consultation and Arrangements with Aboriginal Communities at Early Exploration Policy (the “Consultation Policy”). The Consultation Policy was intended to provide guidance to proponents and communities about the Ministry’s approach to consultation, as well as guidance to proponents to whom aspects of the duty to consult was delegated. The Ministry states that its approach to consultation has evolved, and that it no longer delegates any procedural aspects of consultation to early exploration proponents.[2]
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