Court File and Parties

COURT FILE NO.: CV-19-00618850-0000 DATE: 2021-04-01

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

PRISM RESOURCES INC. Plaintiff (Moving Party) – and – DETOUR GOLD CORPORATION Defendant (Responding Party)

Counsel: Bonnie Roberts Jones, for the Plaintiff (Moving Party) Zohar R. Levy, for the Defendant (Responding Party)

HEARD: March 5, 2021

Papageorgiou J.

[1] The defendant, Detour Gold Corporation (“Detour”), is the registered owner of certain mining claims and leases in Northern Ontario (the Properties, as defined below). Prism Resources Inc. (“Prism”) has brought this action and this summary judgment motion seeking a declaration that it has a valid and enforceable royalty which is an interest in land in two properties known as the Aurora Property and the Sunday Lake Property (collectively the “Properties”).

[2] Detour denies that any such alleged royalty agreements encumber the Properties or that it has any contractual or other obligations to Prism.

[3] For the reasons that follow I am granting Prism summary judgment as requested.

What is the test on a summary judgment motion?

[4] In accordance with r. 20.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), the court shall grant summary judgment if:

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[5] In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and a judge may exercise any of the following powers under r. 20.04(2.1): (1) weighing the evidence; (2) evaluating the credibility of a deponent; and (3) drawing any reasonable inference from the evidence.

[6] The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49, explained when there will be no genuine issue for trial:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process: (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[7] In order to defeat a motion for summary judgment, the responding party must put forward some evidence to show that there is a genuine issue requiring a trial. A responding party on a summary judgment motion cannot rest solely on allegations in a pleading. Each side must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 32-33, aff’d 2014 ONCA 878.

[8] Furthermore, “the motion judge is entitled to presume that the evidentiary record is complete and there will be nothing further if the issue were to go to trial”: Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 54. Parties must present sufficiently precise evidence to show there is a genuine issue for trial: “a summary judgment motion cannot be defeated by vague references as to what may be adduced if the matter is allowed to proceed to trial”: Diao v. Zhao, 2017 ONSC 5511, at para. 18.

Background

[9] Prism is a Canadian-based precious metal explorer and developer incorporated in British Columbia.

[10] Detour is a Canadian intermediate gold producer and current owner of the lands in issue, as described below.

[11] The Properties in question are Crown lands and over time, various corporate entities have obtained mining rights over the Properties. It is important to understand that the various transactions described below relate to the transfer of leases and mining rights which various parties have held over time, as opposed to the ownership of the land itself.

[12] Boliden Westmin (Canada) Limited (“Boliden”) was the initial owner of these Properties. On or about December 31, 1999, Prism entered into Joint Venture Agreement with Boliden to develop the Properties (the “Boliden Agreement”). Pursuant to the Boliden Agreement, it also acquired the right to earn an undivided 100 percent interest in the Properties through an option.

[13] On March 7, 2002, Prism and Conquest Resources Inc. (“Conquest”) entered into a joint venture to explore, acquire and if warranted develop the Properties (the “Prism/Conquest Joint Venture Agreement”).

[14] On June 29, 2004, Prism and Conquest entered into a subsequent letter agreement (the “Prism/Conquest Letter Agreement”) which set out various obligations between Prism and Conquest.

[15] Thereafter, through a series of transactions between 2010 and 2014, Detour acquired the Properties from Conquest. The agreements between Detour and Conquest specifically referenced Prism’s royalty interest in the Properties as a permitted encumbrance and for a long time, Detour acknowledged that Prism had a royalty interest which encumbered the Properties.

[16] However, in 2017, Detour advised Prism that having reviewed the matter further, it had been mistaken in this belief. Detour now asserts that Prism’s royalty claim is not a property interest and that any rights which it had were merely contractual rights against Conquest which do not bind Detour.

[17] The issue in this proceeding is whether the agreements which Prism and Conquest had entered into created an interest in land and/or whether Detour is otherwise obligated to acknowledge and abide by Prism’s claim to royalty rights in the Properties.

Do the agreements between Conquest and Prism create an interest in land?

[18] In Bank of Montreal v. Dynex Petroleum, 2002 SCC 7 (“Dynex”), the Court held that a royalty interest is an interest in land if: 1) 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 2) the interest, out of which the royalty is carved, is itself an interest in land. 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: Dynex, at para. 18.

[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.

[20] With respect to the first part of the test set out in Dynex, in Blue Note Mining Inc. v. Fern Trust (Trustee of), 2008 NBQB 310, aff’d 2009 NBCA 17, at para. 34, the Court held that there are no particular words required for such a property interest to be recognized. See also Third Eye Capital Corporation v. Resources Dianor Inc., 2018 ONCA 253, at para 65, where the Court of Appeal for Ontario stated that “The 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.”

[21] Therefore, I must examine the Letter Agreement between Prism and Conquest to ascertain whether, properly construed, it creates an interest in land.

[22] With respect to the first branch of the Dynex test, in Sattva Capital Corp. v. Creston Moly Corp, 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47 (“Sattva”), the Court held that to interpret a contract, “a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.” As explained, admissible evidence of surrounding circumstances is “objective evidence of the background facts at the time of the execution of the contract […] that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting”: Sattva, at paras. 58, 60. Subjective evidence of the parties’ intentions, however, is generally inadmissible: Sattva, at paras. 59-61; 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, 150 O.R. (3d) 481.

[23] Detour’s position is that properly construed, the ordinary and grammatical meaning of the words used do not show an intention to create an interest in land. Detour points out that Prism never registered the Letter Agreement against the Properties.

[24] Detour further says that Prism has failed to adduce evidence of surrounding circumstances (such as emails, letters, draft agreements, or contemporaneous evidence of discussions between the parties) to support its claim. Detour argues that this should give rise to an adverse inference that the surrounding circumstances would demonstrate that the parties intended only to create contractual rights and not an interest in land. Detour further says that in the alternative, in the absence of admissible evidence of surrounding circumstances, there are genuine issues requiring a trial.

[25] In order to consider this issue, it is important to understand all the various interests which Prism has held in the Properties pursuant to the various agreements before me. In my view, these are part of the surrounding circumstances.

The Boliden Agreement

[26] As noted above, Prism’s initial involvement with the Properties began when it entered into the Boliden Agreement. Pursuant to the Boliden Agreement, Prism acquired a right and option to acquire a 60 % interest in Boliden’s mining claims and leases in the Properties upon payment of certain sums as well as an option to acquire the remaining 40 %. It is clear that this agreement created an interest in land. Section 6.3 specifically provided that the Agreement could be registered against the Property. The Joint Venture Agreement between Boliden and Prism, which formed a schedule to the Boliden Agreement, also confirmed that an interest in land was created. See for example section 3.1.

[27] Prism ultimately acquired a 100 % interest in the Properties. Prism conducted exploration activities on the Properties until on or about March 7, 2002 when it granted an option to Conquest.

The Prism/Conquest Joint Venture Agreement

[28] Pursuant to the Prism/Conquest Joint Venture Agreement, Prism granted Conquest an option to acquire 60 percent of Prism’s interest under the Boliden Agreement. As well, Prism and Conquest formed a joint venture to explore, acquire, and, if warranted, develop the Properties.

[29] It is also clear that this agreement acknowledged Prism’s property rights based upon the following terms:

Recital B: Prism has agreed to grant to Conquest the sole and exclusive right and option to acquire up to an undivided (60%) percent right title and interest in and to Prism’s interest in the Property pursuant to the Boliden Agreement subject to the terms and conditions of this agreement.

1.1(p) “Interest” means the undivided beneficial percentage interest of a Participant in the Assets following the Participation Date and shall be equal to the right, title and interest in and to the Property as determined pursuant to this Agreement.

1.1(ll) “Property” means the contiguous unpatented mining claims and the mining leases collectively totaling hectares described in Schedule “B” together with all mineral interests acquired within the Area of, other Tenements, and all surface rights, mineral rights, personal property and permits and associated therewith and shall include any renewal thereof and any other form of successor or substitute title thereto or tenure derived therefrom.

[30] Pursuant to section 3.1 of the Prism/Conquest Joint Venture Agreement, Prism agreed that it would make required payments pursuant to the Boliden Agreement to ensure that it remained in good standing and that if Prism could not, then Conquest could make such payments on its behalf, whereupon Conquest’s interest in Prism’s interest in the Property would increase from 60 to 90 percent.

[31] Pursuant to section 10.5, if a Participant’s Interest in the Property was reduced to less than 10 percent or if the participant elected not to pay its share of the costs, then that participant’s interest would be deemed to be transferred to the other participant and the party whose interest was deemed to be transferred would be entitled to Net Smelter Returns Royalties calculated in accordance with the Agreement. Further, the remaining participant would not be permitted to transfer any of its interest in the Properties without first causing the transferee to assume the Net Smelter Returns Royalty.

The Prism/Conquest Letter Agreement

[32] As set out above, on June 25, 2004, Prism and Conquest entered into the Letter Agreement which I have reproduced in full below because of its centrality to the issues in this motion. (Note that at the time of this Letter Agreement, Prism’s interest stated to be reduced to 10 % because of its non-payment of expenses)

I have had a telephone conversation this morning with Jim Jock of Boliden who advises me that their arrangement to sell Boliden Westmin Canada Limited to Breakwater Resources is effective as of June 1, 2004 but will not actually close until later in July.

Jim has advised me that he would prefer to have Conquest shares rather than Prism shares for the $200,000 payment due on June 30, 2004. As I understand him he is not receptive to the idea that if he accepted Prism shares that they would be facing a possible 10:1 roll-back. He indicated to me that he is not in a position to enter into fresh negotiations with respect to an alternative arrangement of cash and a smelter number of shares as you were proposing.

Under the terms of our agreement, Prism is responsible for making the payment due on June 30. However, Conquest would be prepared to entertain the following:

1. Conquest would make the $200,000 payment to Boliden in cash or shares of Conquest;
2. Conquest would forgive Prism’s outstanding contribution to the earning and subsequent exploration expenditure;
3. Prism would relinquish its current participating interest (10% less current dilution for non-payment of outstanding contributions and cash calls and right to any net smelter royalty) in return for a carried interest in the project equal to seven and one-half percent (7.5%) of Conquest’s net profit from the Aurora property after deduction of interest charges, income and other applicable taxes, depreciation and amortization determined in accordance with generally accepted accounting principles applied in Canada. [Emphasis added] In the event Conquest’s interest in the Property is converted to a net smelter return royalty, Prism’s entitlement shall be to receive 7.5 % of all royalty payments actually received by Conquest. Any disagreement between the parties as to the amount or determination of such net profit or royalty shall be resolved by Conquest’s auditors whose determination shall be final and binding on the parties.
4. These terms will replace the original letter agreement (as amended) between Prism and Conquest in its entirety. Conquest agrees to remise, release and forever discharge Prism Resources Inc., its officers directors and shareholders from any claim, right of action, account, debt or other demand relating directly or indirectly to the Aurora Property, or as a consequence of any other understanding, correspondence, negotiation or other matter respecting the Aurora Property however arising to the date of this Agreement.

On payment of $200,000 to Boliden as described in paragraph 1, Conquest will use reasonable commercial efforts to obtain a release from Boliden in favour of Prism Resources Inc., whereby Boliden shall remise, release and forever discharge Prism, its officers, directors and shareholders from any claim, right or action, account, debt or other demand relating directly or indirectly to the Aurora Property, or as a consequence of any other understanding, correspondence, negotiating or other matter respecting the Aurora Property however arising to the date of this Agreement.

The benefit to Prism would be (1) 1.7 M shares loss dilution; (2) forgiveness of current $19,883 due to Conquest; (3) no need to contribute to planned $1.2 M program commencing in August or to future programs.

If this proposal is not agreeable to you, then we will have to seek immediate reimbursement of the outstanding cash contribution due from Prism for past and current exploration programs and seek Prism’s shares of the drill program ($120,000) due in August. I will be away from Toronto as of Wednesday of next week and need to have this resolved prior to then. Please let me have your thoughts by return. Time is of the essence as the June 30 deadline is quickly approaching and Jim Jack’s ability to influence decisions on this agreement will evaporate after July 1. [Emphasis added.]

[33] Prism signed this Letter Agreement back. (I note that even though the Letter Agreement only specifically refers to the Aurora Property, there was no dispute that it was intended to apply to both the Aurora Property and the Sunday Lake Property.)

[34] What the Letter Agreement shows is that there were some issues with payments that Prism was required to make pursuant to the Prism/Conquest Joint Venture Agreement and the Boliden Agreement. Conquest was offering to make these payments and forgive any outstanding costs expenditures which Prism was required to make pursuant to the agreement if Prism gave up its 10 % participating interest in return for a carried interest in the project equal to seven and one-half percent (7.5%) of Conquest’s net profit from the Aurora Property after deduction of expenses.

[35] Detour says that this created only a contractual right in favour of Prism as opposed to an interest which would run with the land. It points to the inelegance of the language and the fact that the words “property interest”, or something similar, are not specifically used. Therefore, it argues, the parties did not clearly intend to create a property interest in favour of Prism as per Dynex. Detour argues that the parties would have used clearer language to comply with Dynex, but as the case law above cited, there is no magic language.

[36] I note that the Letter Agreement was not a formal agreement like the Prism/Conquest Joint Venture Agreement, but appears to have been drafted by Conquest’s President and CEO and accepted by one of Prism’s Directors. While there is no evidence before me as to whether they had legal training, this Letter Agreement is written in a very informal manner, is about one and one half pages long and contains no legalese. It is very different than the detailed and precise formal Prism/Conquest Joint Venture Agreement, which is more than 40 pages long, single spaced and appears to have been crafted by a team of lawyers, and it is important to take that into account. Comparisons of the wording used in the Letter Agreement and the wording used in the other complex agreements before me is not persuasive.

[37] If the parties intended to express a mere contractual right in favour of Detour, the words “carried interest in the project equal to” could be completely deleted and the phrase that is left would still give Prism a contractual right. In that regard, deleting these words would result in the following wording:

Prism would relinquish its current participating interest (10% less current dilution for non-payment of outstanding contributions and cash calls and right to any net smelter royalty) in return for [ Deleted: a carried interest in the project equal to ] seven and one-half percent (7.5%) of Conquest’s net profit from the Aurora property after deduction of interest charges, income and other applicable taxes, depreciation and amortization determined in accordance with generally accepted accounting principles applied in Canada. [Emphasis added.]

[38] The words “carried interest in the project” must mean something. The interpretation urged upon me by Detour would render the words “carried interest in the project” meaningless.

[39] In my view, the words “carried interest in the project” are arguably a layperson’s way or an informal manner of indicating an interest which would run with the land and be enforceable against whoever owned the property and earned profits which was Conquest at that time. However, I do note that the Letter Agreement says “carried interest in the project” and not “carried interest in the property.” As well, there is specific reference to Conquest as opposed to anyone who owns the land. This raises some ambiguity as to whether the carried interest may refer to the joint venture as opposed to the Properties, although Prism’s counsel argues that “project” means the mines. Recall that the property interests that various parties have held are not ownership of the lands in question, but interests in the mines and leases.

[40] However, there are some surrounding circumstances support the interpretation that the parties intended to create a property interest.

[41] First, as pointed out by Detour’s counsel, the Dynex decision was released in January 2002, and changed the law so that royalty interests could be property interests. Detour’s counsel argued, and I infer and accept, that people in the mining industry knew about this change in the law. Therefore, when the parties negotiated the Letter Agreement, I infer that they knew about the Dynex decision.

[42] Before it negotiated the Letter Agreement, Prism had a clear and well-defined property interest in the Properties pursuant to the Boliden Agreement and the Prism/Conquest Joint Venture Agreement. Even if its property interest was converted to Net Smelter Returns Royalty, as set out above, pursuant to section 10.5, Conquest agreed that it would not be able to transfer its interest in the Properties without first causing the transferee to assume the Net Smelter Returns Royalty. As well, section 10.6 of the Prism/Conquest Joint Venture Agreement provided that if Prism’s interest was ever converted to Net Smelter Returns Royalty, Conquest would have the right to purchase this from Prism for $1 million.

[43] It would not have been commercially reasonable for Prism to agree to give up its property rights and its protected Net Smelter Returns Royalty which appears to be valued at $1 million at that time, in exchange for a mere contractual right against Conquest which could evaporate instantly if Conquest sold the Property. In my view, this would only make sense because the parties knew that Dynex had changed the law and they could create a property interest in a royalty stream.

[44] While Detour’s counsel argues that the purpose of the Letter Agreement was to relieve Prism of expenses that it was required to make, the only consequence pursuant to section 10.5 of the Joint Venture Agreement of Prism not making these payments is that its remaining interest would be transferred to Conquest and then it would be entitled to Net Smelter Returns Royalties calculated pursuant to the Agreement, and as stated above, if Conquest ever sold the property, it would have to ensure that the purchaser assumed this obligation.

[45] Again, it makes no commercial sense for Prism to give up its property rights, its Net Smelter Returns Royalties which apparently were valued at $1 million in exchange for being relieved of required payments when it could have simply not paid these costs and still maintained a Royalty Interest which Conquest would have to protect if it ever sold its interest or which Conquest would have to purchase for $1 million.

[46] Prism also cites authority that the court may look to the subsequent actions of the parties to determine intent: Montreal Trust Co of Canada v. Birmingham Lodge Ltd (1995), 24 O.R. (3d) 97 (Ont. C.A.), at para. 23; Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, 424 D.L.R. (4th) 588, at paras. 62-32; London Medical and Dental Building Ltd. v. Middlesex Condominium Corp. No. 83, 2016 ONSC 6141, at paras. 93-95 (“London Medical”); Newman v. Beta Maritime Ltd, 2018 BCSC 1442, at paras. 31-32; Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512.

[47] In London Medical, for example, the Court found at paras. 93-95 that any doubt of the parties’ intention when they signed the agreement was “eliminated by their post-agreement conduct”. In 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, 130 O.R. (3d) 641, at paras. 41-43, when determining whether the parties’ intent was to create an interest in the land, rather than just a right of first refusal, the Court looked to a subsequent agreement that conveyed a portion of the land. The parties’ conduct with respect to that agreement supported the claim that the original agreement created an interest in the land.

[48] Similarly, in 2284064 Ontario Inc. v. Shunock, 2017 ONSC 7146, at paras. 58-63, the Court looked to a purchase agreement that contained a provision acknowledging that the property was subject to a “first right of refusal to purchase” in order to establish whether the intent of an earlier agreement was to create a right of first refusal or an option to purchase (thereby creating an interest in the land). The Court found that the clause, in a contract drafted five years later, was an acknowledgement of the interest created by the earlier agreement.

[49] In this case Conquest negotiated contracts with Detour which expressly acknowledged Prism’s property rights:

a. Asset Purchase Agreement dated September 27, 2010:

Section 5.5 states that Conquest is the beneficial owner of the purchased assets subject to Permitted Encumbrances.

Schedule 1.1(cc) entitled “Permitted Encumbrances” includes “Net profit interest in favour of Prism Resources Inc. equal to 7.5 % of the net profits from mining operations as provided in and calculated in accordance with the letter agreement dated June 25, 2004 between Prism Resources and the Vendor.

b. Sunday Lake Claim Block Option and Joint Venture Agreement dated September 27, 2010:

Section 1.1 (jjj) defines Royalty Holder as “Prism Resources Inc., who holds a carried interest in the Property equal to 7.5 % of the net profit from the Property after deduction of interest charges, income and other applicable taxes, depreciation and amortization determined in accordance with generally accepted accounting principles applied in Canada.”

Section 2.1(c) states “…Except for the permitted encumbrances there are no other agreements, options, contracts or commitments to sell or otherwise dispose of the Leases or Claims or which would restrict the ability of Conquest to transfer its interest in such Leases and Claims to Detour”

Section 2.1(e) states that “Conquest has the full legal right, power and authority to grant the Option, and thereinafter transfer the Property to Detour in accordance with the terms of this Agreement free of all Encumbrances other than the Permitted Encumbrances.”

Schedule 1.1(zz) entitled “Permitted Encumbrances” includes “Net profit interest in favour of Prism Resources Inc. equal to 7.5 % of the net profits from mining operations as provided in and calculated in accordance with the letter agreement dated June 25, 2004 between Prism Resources Inc and Conquest.

Section 21.1 states: The parties confirm that prior to the Effective Date, Conquest, as assignee or directly entered into the Underlying Agreement with the Royalty Holder. Detour acknowledges that the Property is subject to the Underlying Agreement and that any payments due under the Underlying Agreement to the Royalty Holder are attributable to the Property will be a cost to the Venture and considered part of the Costs pursuant to this Agreement. The Parties acknowledge that to the extent the payments are not attributable to the Property, that Conquest will be solely responsible for those portions of such payments to the Royalty Holder.

Section 1.1(mmm) states: “Underlying Agreement means the Prism Letter Agreement”

Section 1.1(bbb) states: “Prism Letter Agreement means the letter agreement dated June 25, 2004 between Prism Resources and Conquest.

[50] Detour’s response to these arguments is that subsequent conduct is only admissible if there is ambiguity: Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912 at para 50, Tham v. Bronco Industries Inc., 2018 BCCA 207 at para 14; Wade v. Duck, 2018 BCCA 176 at paras 27-28.

[51] Detour references Shewchuk, at para 46, where the British Columbia Court of Appeal cautioned that subsequent conduct “has greater potential to undermine contractual certainty in contractual interpretation and override the meaning of a contract’s written language” than evidence of surrounding circumstances. The dangers discussed by the Court were that: i) parties behaviour could change over time while performing the contract; ii) evidence of subsequent conduct may be ambiguous itself; and iii) it may reward self-serving subsequent conduct where a party deliberately conducts itself in a way that would lend support to its preferred interpretation of the contract.

[52] Counsel for Detour referred to a further agreement between Detour and Conquest dated November 21, 2014 which she says does not make reference to Prism’s interest. Section 1.1(e) states:

Conquest is the absolute registered and beneficial owner of the Purchased Interest and has good and marketable title thereto, free and clear of all Encumbrances. As of the date hereof, Conquest has the full legal right, power an authority to transfer the Purchased Interest to Detour in accordance with the terms of this Agreement free of all Encumbrances.

[53] Counsel argues that this is significant and is evidence of the parties’ changing behaviour over time which is ambiguous in itself. However, this November 21, 2014 agreement does not purport to deal with the Properties at all. It is a transfer of Conquest’s interest in the September 27, 2010 Joint Venture Agreement. The recitals make this clear:

A. Detour and Conquest are parties to an option and joint venture agreement entered into as of September 27, 2010 (the “Joint Venture Agreement”) in respect of the Property and Assets;

B. Detour is the beneficial owner of a 50% Participating Interest in the Venture, and Conquest is the beneficial owner of a 50 % Participating Interest in the Venture (the “Purchased Interest”)

C. Conquest desires to sell and Detour desires to purchase the Purchased Interest on the terms and subject to the conditions herein contained.

[54] I note again that the September 27, 2010 Joint Venture Agreement expressly acknowledged Prism’s property interest, and it is Conquest’s interest in this Joint Venture Agreement which is being conveyed pursuant to the November 21, 2014 Agreement.

[55] Therefore, in my view there is nothing inconsistent about the November 21, 2014 Agreement and concluding that Conquest’s subsequent conduct demonstrates that it had an intention to create a property interest with the Letter Agreement.

[56] In my view, the subsequent conduct evidence cited by Prism does not have any of the dangers cited by the Court in Shewchuk. In particular, all of this subsequent conduct occurred prior to any dispute between Prism and Detour—therefore, it could not possibly have been contrived to benefit Prism in this proceeding. It can only have been a sincere expression from Conquest as to what it intended by the Letter Agreement.

[57] Notably, in Shewchuk, despite remarking on the potential dangers of subsequent conduct evidence the Court also noted that evidence of subsequent conduct can be “useful in resolving ambiguities. It may help to show the meaning the parties gave to the words of their contract after its execution, and this may support an inference concerning their intentions at the time they made the agreement.”: para 48.

[58] As well, in Shewchuk, at para 57, the Court found that the trial judge had properly taken into account evidence of subsequent conduct in interpreting the contract in question.

[59] In my view, Conquest’s conduct in continually making reference to the Letter Agreement as a permitted encumbrance in its agreements with Detour is objective evidence from which I infer that Prism and Conquest intended at the time they made the agreement, that the Letter Agreement would create an interest in land. As directed in the case law, I have considered the weight to be given to this evidence, which in my view in this case is high given its consistency and the fact that it was demonstrably intentional given it involves what they included in detailed and elaborate negotiated agreements which appear to have been drafted by lawyers: Shewchuk at para 54. This subsequent conduct is overwhelmingly consistent with the interpretation that Prism and Conquest had intended to create an interest in land.

[60] Prism also relied on many documents where Detour acknowledged Prism’s proprietary interest in both properties including:

a. press releases made by Detour; b. annual filings it made on SEDAR; c. Annual Information Forms filed in 2011, 2012, 2013 and 2014; d. a letter to its auditor; and e. a Mineral Resource and Reserve Estimate dated January 25, 2016.

[61] I agree with Detour that this is subjective evidence about how Detour interpreted the Letter Agreement and is not relevant to the contractual issue before me. In his affidavit, Mr. Scott Ross, the Corporate Secretary & Interim Chief Financial Officer of Prism gave evidence that his father, John (Jock) Bethune Ross who negotiated the Letter Agreement on behalf of Prism told him that the parties intended to create an interest in land. Again, I agree with Detour that this subjective evidence of intention is not relevant to the contractual issue before me.

[62] Clearly, it would have been better if Prism had registered its interest. However, I am not influenced by Prism’s failure to do so because based upon the title abstract attached to Detour’s materials, it appears that Prism has never registered any of the agreements on title, even the ones cited above which clearly created a property interest, used the words “property interest” and even the Boliden Agreement which specified that it could be registered on title.

[63] In all the circumstances, I am satisfied that the Letter Agreement created a property interest which runs with the lands in question and that the value of this property interest is equal to 7.5 percent of the owner’s net profits after deduction of expenses as set out below. I recognize that this requires substitution of Conquest’s name for the current owners. However, Conquest was the owner at the time and in my view, in all the circumstances, it was intended that this property interest would run with the land and be calculated based upon the profits of the existing owner which is why Conquest’s name was specifically used.

[64] I do not agree with Detour that there is any need for any examination of any additional surrounding circumstances to interpret the Letter Agreement. Any ambiguity can be resolved on the basis of the surrounding circumstances and Conquest’s subsequent conduct in evidence before me. I note that the Letter Agreement was entered into in 2004, more than 16 years ago. The likelihood of discovering written drafts or other such documents is slim in my view in any event given the passage of time; so too would the possibility of obtaining reliable evidence of any verbal negotiations which may have taken place given the passage of time. In my view, Conquest’s subsequent conduct is compelling objective evidence of the parties’ intention and there is nothing to contradict it.

[65] If Detour thought that there are other relevant surrounding circumstances, like emails and drafts, then it should have led that evidence or sought to obtain it through cross-examination.

[66] On a motion for summary judgment I am entitled to assume that all the relevant evidence is before me.

[67] As I have determined that the Letter Agreement creates an interest in lands it is not necessary for me to consider Prism’s secondary arguments.

[68] I am satisfied that I have been able to fairly and justly determine this issue on the basis of the materials before me, that a motion for summary judgment in this case is a just and proportionate manner of determining this matter and that there is no genuine issue requiring a trial.

[69] Accordingly, I declare that the Letter Agreement creates a property interest in favour of Prism which is equal to seven and one-half (7.5) percent of the owner’s net profit from the Properties after deduction of interest charges, income and other applicable taxes, depreciation and amortization determined in accordance with generally accepted accounting principles applied in Canada.

Costs

[70] Pursuant to section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court. The general approach to fixing costs in Ontario is: (i) costs follow the event premised on a ‘loser pays’ approach; (ii) costs are on a partial indemnity basis; and (iii) costs are payable forthwith, being within 30 days. DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 at para 5.

[71] Rule 57 sets out the factors which courts should have regard to when awarding costs. The main overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant. The reasonable expectations of the unsuccessful party are also a relevant factor: Zesta Engineering Ltd. v. Cloutier, at para 4, Anderson v. St. Jude Medical Inc., at para 37.

[72] The parties have submitted Bills of Costs as follows:

	Partial Indemnity costs re motion inclusive of disbursements	Partial Indemnity costs of the action inclusive of disbursement	Total
Detour	76,157.25	97,132.33	$173,289.58
Prism	$38,370.11

[73] Prism is the successful party and presumptively entitled to its costs. This case involved medium complexity. However, the amount recovered and importance of the issues are significant in this case as Prism has obtained a declaration of an interest in lands. Given Detour’s costs request which is more than four times greater than Detour’s, I find Prism’s costs request fair and reasonable and in the reasonable expectations of Detour and award Prism $38,370.11 in costs inclusive of disbursements. Costs shall be payable within 30 days of this decision and shall bear post judgment interest at the rate set out the Courts of Justice Act, commencing after 30 days.

Papageorgiou J.

Released: April 1, 2021

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

PRISM RESOURCES INC. Plaintiff (Moving Party) – and – DETOUR GOLD CORPORATION Defendant (Responding Party)

REASONS FOR JUDGMENT

Papageorgiou J.

Released: April 1, 2021