Troilus Gold advances project financing with additional LOIs for $500m
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Mining overburden Boggabri Coal. Credit: Max Phillips (Jeremy Buckingham MLC)
A mineral exploration company faced an unusual situation recently, when Ontario mining officials enforced foreign orders against mining claims for which the company had recorded its interest. The company ultimately had to escalate the matter to the courts to correct this conduct, with the judge finding that the mining authorities had acted beyond their jurisdiction.
Toronto-based Temex Resources Corp. had contracted with a few prospectors whereby they granted Temex an option to purchase 12 unpatented mining claims in northeastern Ontario following a series of annual payments of cash and shares to the optionors, plus the fulfilment of an obligation for annual expenditures of exploration and development work to be performed on the claims.
It subsequently transpired that one of the optionors—in whose name six of the claims were recorded with Ontario’s Ministry of Northern Development and Mines (MNDM)—was in the midst of divorce proceedings in Nevada, USA, where his ex-wife, also a prospector, resides. Unbeknownst to Temex, prior to the execution of the option agreement, the Nevada court had issued its judgment in the divorce, purporting to divide the mining claims as a marital asset by awarding the ex-wife a 50 per cent interest in them.
The ex-wife’s Nevada lawyer then asked the provincial mining recorder, an MNDM official, to transfer the optionor’s claims to the ex-wife.
The recorder obliged this request, without notifying the optionor or Temex, and without holding a hearing, despite the fact that Temex’s interest was recorded on the claims abstracts. Temex learnt of this transfer by letter from the Nevada lawyer.
When Temex enquired of the recorder as to the basis for the transfer, he referred the matter to MNDM’s legal section for review. Following this review, an MNDM lawyer advised the recorder that the Nevada order would not be sufficient to facilitate transfer of the claims as it was made by a foreign court; for the claims to be transferred, the foreign order would first have to be recognized by an Ontario court, and then the Ontario recognition order could be enforced against the claims. Accordingly, the recorder reversed the transfers.
The very day after the recorder reversed himself, the ex-wife applied to the Mining and Lands Commissioner, a statutory tribunal responsible for hearing disputes under Ontario’s Mining Act. The ex-wife requested that the Nevada divorce judgment be recognized and the claims be recorded in her name.
Again, without notifying the optionor or Temex, and without holding a hearing, the commissioner that same day issued an order granting the ex-wife’s application and directed the recorder to transfer a 50 per cent interest in the claims to the ex-wife. In her order, the commissioner asserted that she had the ability to enforce the Nevada orders pursuant to her exclusive jurisdiction over unpatented mining claims in Ontario under the Mining Act.
The optionor’s Ontario lawyers requested that the commissioner reconsider her order, and Temex sought standing before the commissioner, which the ex-wife’s Ontario lawyers opposed. The proceedings before the commissioner, and negotiations therein, ground to a halt.
Given the summary manner in which the commissioner’s order came about and the implications such an order would have on security of mineral tenure in Ontario if it were allowed to stand, Temex escalated the proceedings to Ontario’s Superior Court in order to resolve the matter expeditiously.
The judge found1 that Ontario’s mining authorities had not followed the procedure set out in the Mining Act. No notice had been provided to the optionor or Temex, so there was no opportunity for those parties to file evidence or make submissions. Further, the commissioner allowed the ex-wife to raise the matter with the commissioner directly as an application, rather than as an appeal from the recorder’s reversal (which would have required that Temex and the optionor be served with notice of the appeal).
The court set aside the commissioner’s order on the basis that the jurisdiction to recognize foreign orders is not found in the Mining Act, nor can such jurisdiction be implied as necessary to accomplish the object of the statute, namely the administration of mining resources owned by the provincial Crown to promote their development and exploitation in private ownership.
Accordingly, and contrary to the commissioner’s view that she had the ability to enforce foreign orders pursuant to her jurisdiction over mining claims, the judge found that this power was within the court’s jurisdiction and not that of the commissioner. Indeed, the judge expressed surprise that the commissioner took the position that she had jurisdiction when it was contrary to the opinion the MNDM lawyer had previously provided.
As a result of finding that the commissioner had acted beyond her jurisdiction, the judge did not need to consider Temex’s arguments that foreign courts lack jurisdiction to adjudicate on rights in respect of Ontario mining claims.
Mining companies should diligently record their interests in mining claims, and in any event may need to vigilantly protect such interests before the mining officials and the courts. Statutory tribunals should observe procedural fairness with respect to all parties, and may only recognize foreign orders if such is expressly granted in their enabling statute, or is a necessary implication to carry out the objects of such legislation.
Norton Rose Fulbright’s Mining Disputes team were the lawyers for Temex Resources in these proceedings.
Authors: Erik Penz, Michael Sabusco
