ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 5659/14
DATE: 20140526
B E T W E E N:
TEMEX RESOURCES CORP.
Erik Penz and Andrew McCoomb,
for the Applicant
Applicant
- and -
MICHELLE WALKER, JAMIESON WALKER, DAVID BURDA AND DARLENE STUBBS
For the Respondents:
Richard Butler for Michelle Walker
Brigid Wilkinson, agent for Eric Fournie, for Jamieson Walker
Respondents
HEARD: April 16, 2014
APPLICATION UNDER S. 107 OF THE MINING ACT, R.S.O. 1990 c. M 14,
S. 21.2 OF THE STATUTORY POWERS AND PROCEDURE ACT, R.S.O. 1990 c. S. 22 AND RULES 14.05(3)(d) AND (g) OF THE RULES OF CIVIL PROCUDURE
DECISION ON THE MOTION
WILCOX, J.
[1] INTRODUCTION
[2] Temex brought an Application under the Mining Act and Statutory Powers and Procedure Act. Michelle Walker responded with an affidavit of March 18, 2014, and factum. Temex brought a Notice of Motion to strike or expunge various paragraphs of Michelle Walker’s affidavit and various exhibits to it, or parts of these, and parts of her factum. This was on the ground that they are protected by settlement privilege and should not have been disclosed by her.
[3] FACTS
[4] The facts in this matter are set out in the affidavits of the following:
Karen Rees, V.P. of Exploration and the Corporate Secretary of Temex, dated January 31, and February 10, 2014 Ronald Davidzon, solicitor with Norton Rose Fulbright Canada LLP, lawyers for Temex, dated January 31, and February 19, 2014 Michelle Walker, dated March 18, 2014 Ian Campbell, President and CEO of Temex, dated March 24 and March 31, 2014 Jamieson Walker, dated February 7, March 18 and April 3, 2014.
[5] Temex is an Ontario corporation trading on the TSX Venture Exchange (TSX (V.)). It is in the business of acquiring, exploring and developing precious metal properties in Northeastern Ontario.
[6] Michelle Walker is a resident of Henderson, Clark County, Nevada and a geologist and a prospector.
[7] Jamieson Walker is a resident of Blue Diamond, Clark County, Nevada, a consultant geologist and president of Jamieson Geological Inc., a Nevada-based corporation providing geological consultancy services to the mining industry and to local governments.
[8] The Walkers married in 1993 and divorced in 2011.
[9] On January 13, 2012, (the effective date), the Respondents Jamieson Walker, David Burda and Darlene Stubbs (the optionors) entered into an agreement (the Option Agreement) granting Temex an option to purchase all right, title and interest in
a) six mining claims recorded in the names of Jamieson Walker (the Walker claims), and b) six mining claims recorded in the name of David Burda in the Township of Tyrrell, mining division of Larder Lake, District of Temiskaming (together with the Walker claims, being the claims).
[10] The Walker claims are numbered 1221621, 1221622, 1221624, 1221625, 1221626 and 1221627. It is these that Temex’s application is about.
[11] Jamieson Walker held a 100 percent interest in the Walker claims from September 2, 2009, according to Ministry of Northern Development and Mines’ (MNDM) records.
[12] In the Option Agreement, the optionors granted to Temex during the option period the sole, exclusive and irrevocable right and option (the Option) to acquire 100 percent legal and beneficial title to the claims, free and clear of all liens (as defined in the Option Agreement). The option period was defined as the period commencing on the effective date and terminating on the earlier of the exercise date (the date during the option period on which Temex has elected to exercise the option by notice to the optionors) and the date which is not more than three years from the effective date.
[13] Pursuant to s. 2.5 of the Option Agreement, Jamieson Walker and David Burda delivered to Temex executed Transfers of the claims, which Temex was to hold in trust during the option period.
[14] In order to exercise the option, Temex was to make annual option payments to the optionors consisting of money and of common shares in Temex, totaling $500,000 and 500,000 shares, commencing January 13, 2012.
[15] In addition, Temex committed to a schedule of annual expenditures and drilling activities (the work commitment) as further consideration for the option.
[16] The Option Agreement requires each of the optionors, on request of Temex, to provide annual acknowledgement of receipt of the option payments of cash and shares and satisfaction of work commitment from time to time.
[17] Temex, as of January 31, 2014, is said to have fulfilled its obligations to date, having paid $300,000 cash and 400,000 shares, and incurred over $1.6 million of work commitment.
[18] While David Burda and Darlene Stubbs have provided acknowledgments of payments, shares and work expenditures to date, Jamieson Walker has for the first year, but not for the second.
[19] Under the Option Agreement, if Temex satisfies the consideration payable and the work commitment within the option period with the acknowledgment of the optionors, it shall have earned all legal and beneficial right, title and interest in the claims and it may exercise the option and record the Transfers of the claims that it holds in trust.
[20] In the recitals to the Option Agreement, the optionors are stated to be the beneficial and recorded owners of the claims. In s. 2.1 of it, the optionors granted Temex the right to acquire 100 percent of the legal and beneficial title to the claims (free and clear of all liens). “Lien” is defined to include:
... any claim, agreement or restriction which restricts, affects, limits or imposes a condition on the use or possession of the claims, including any restriction on the ownership, use, transfer, possession, receipt of income or other exercise of any attributes of ownership of the claims (whether tangible, intangible, or personal) …
[21] S. 3.1 of the Option Agreement includes the following representations and warranties by the optionors:
3.1.1 – they are the sole beneficial owners of the Claims … and ... Walker and Burda are the recorded owners of the Claims, free and clear of all Liens; … 3.1.3 – they are not aware of any agreement or adverse claim relating to the use of the surface or mining rights to the Claims which would encumber, limit or restrict in any way whatsoever, or cause interference, with Temex’s right to carry out exploration, development and mining of the Claims; 3.1.4 – they have the full and undisputed right to enter into this agreement and to transfer the Claims to Temex; 3.1.5 – they have not entered into any other agreement with respect to the Claims that is currently valid and outstanding, and they have not transferred or encumbered, or agreed to transfer or encumber, all or any of their beneficial interest in the Claims, and no person, firm, corporation or other entity (except Temex) has any agreement or option or any right or privilege capable of becoming an agreement or option or right or privilege to purchase the Claims from the Optionors; 3.1.6 – there are no actions, suits, claims, proceedings or litigation against the Optionors challenging their title to the claims, or that could, if continued, adversely affect the ability of the Optionors to fulfill their obligations under this agreement or adversely affect Temex’s ability to exercise its rights under this agreement; 3.1.7 – they are not aware of any pending or threatened litigation or adverse claims against or challenges;
i) to their ownership of the Claims by any person whatsoever, nor are they aware of any basis therefore, nor are they aware of any third party who claims to own or have any beneficial interest in the Claims; ii) …
3.1.11 – all consents, approvals, permits, authorizations or orders necessary to complete transfer of the Claims which are required to be obtained by them have been obtained and copies thereof have been delivered to Temex; …
3.1.16 –the Optionors are not aware of any material facts or circumstances that have not been disclosed in this agreement, which should be disclosed to Temex in order to prevent the representations and warranties in this agreement from being materially misleading …
[22] The Option Agreement also contains these covenants:
4.4 - No Interference by Optionors – the Optionors severally covenant and agree with Temex that they will not do any act or thing that would or might interfere with, prevent or obstruct in any way, the right of Temex to exercise to the fullest its rights under this agreement. 4.5 Optionors Not to Encumber Claims – the Optionors covenant and agree that, during the Option Period, they will not transfer, assign, mortgage, pledge, hypothecate, grant an interest, option or royalty in, or otherwise encumber or deal with the Claims, or suffer any Lien to attach to the Claims save as expressly provided in this agreement. 4.6 – Survival of Covenants – the covenants in this Article 4 shall survive the execution and delivery of this agreement and the execution and delivery of Transfers of the Claims to Temex. Notwithstanding any investigation made by or on behalf of Temex nor any knowledge of Temex, such covenants shall continue in full force and effect without limitation.
[23] The parties to the Option Agreement also acknowledged covenants of good faith and fair dealing.
[24] As previously mentioned, Michelle Walker and Jamieson Walker were divorced in 2011. The Decree of Divorce of the District Court of Clark County, Nevada, was signed November 15, 2011 by Judge Harter. It indicates that the matter went to trial on August 11, 2011 and that both parties were present. In addition to granting a divorce, the court dealt with corollary issues. Among other things, the Decree of Divorce states:
It is further ordered, adjudged and decreed that the two mining claims located near Indian Lake and Porphyry Lake in Canada shall be held by the parties as tenants in common with the parties splitting equally any annual profits (after offsets for reasonable expenses). If the parties agree to sell the claims, they will split any profits equally.
[25] There is a further, two part, document from that Nevada court. The first part, entitled “Stipulation and Order” and signed by the Walkers’ respective lawyers on January 22, 2013, speaks of an agreement between the parties, which includes the following:
It is further stipulated and agreed that pursuant to their Decree of Divorce the Defendant, Michelle Walker, is a fifty percent (50 percent) Shareholder in any and all of the Canadian Mining Claims in Defendant’s name as outlined therein. Further, Defendant shall provide Plaintiff with any and all relevant information and/or documentation with regard to his attempts to transfer title to the Plaintiff of the mining claims as previously ordered by this court. Additionally, the distribution contemplated in the parties’ Decree of Divorce shall be addressed and finalized forthwith. … It is further stipulated and agreed that should either party fail to execute any of the necessary documents to transfer interest to the other within ten (10) days of the entry of this Agreement, then this Stipulation and Order shall constitute a full transfer of the interest of one to the other, as provided in this Agreement. Additionally, pursuant to NRCP 70, the Clerk of the Court will be deemed to have been appointed and empowered to sign, on behalf of the non-signing party, in their place and stead, without further hearing in this matter.
[26] The second part, entitled “ORDER” and signed, like the Decree of Divorce, by Judge Harter, includes the following:
This matter having come before this Court without hearing, the parties having stipulated and agreed in good cause appearing; … IT IS FURTHER ORDERED that pursuant to their Decree of Divorce, Defendant, MICHELLE WALKER, is a fifty percent (50 percent) Shareholder in any and all of the Canadian Mining Claims in Defendant’s name as outlined therein. Further, Defendant shall provide Plaintiff with any and all relevant information and/or documentation with regard to his attempts to transfer title to Plaintiff of the mining claims as previously ordered by this court. Additionally, the distribution contemplated in the parties’ Decree of Divorce shall be addressed and finalized forthwith. … IT IS FURTHER ORDERED that should either party fail to execute any of the necessary documents to transfer interest to the other within ten (10) days of the entry of this Agreement, then this Stipulation and Order shall constitute a full transfer of the interest of one to the other, as provided in this Agreement. Additionally, pursuant to NRCP 70, the Clerk of the Court will be deemed to have been appointed and empowered to sign, on behalf of the non-signing party, in their place and stead, without further hearing in this matter.
[27] The transcript of the judge’s remarks in a further appearance on the Walkers’ family case in Nevada on July 17, 2013 makes it clear that his ruling granting 50 percent to Michelle Walker was final as far as he was concerned and would be the subject of enforcement measures.
[28] Temex first learned of Michelle Walker and her interest in the Walker claims on February 22, 2013 when she telephoned Temex’s Vice President of Exploration and Corporate Secretary, Karen Rees, and advised, without mentioning any court orders, that she was entitled as a result of her divorce from Jamieson Walker to a portion of the payments from Temex to him in relation to the optioned Walker claims.
[29] Subsequently in the winter of 2013, Karen Rees and Ian Campbell, the President and CEO of Temex, spoke with Jamieson Walker about Michelle Walker’s call. Jamieson Walker advised then that he was dealing with the family matter separately and the divorce would not affect the Option Agreement.
[30] Temex first learned of the Nevada Court Order from a letter received on May 10, 2013 from Michelle Walker’s Nevada lawyer, Kirk Kennedy. It inquired of the MNDM’s Provincial Recording Office (PRO) about this on May 14, and received from the PRO on May 16, 2013 the Nevada Stipulation and Order.
[31] Based on the Nevada Order, the Mining and Lands Commissioner for Ontario (the Commissioner) transferred a 100 percent interest in the Walker claims from Jamieson Walker to Michelle Walker. This was subsequently reversed (by registration in MNDM’s records on May 28, 2013) because of questions about the effect of a foreign order. The PRO sent on May 28, 2013 its explanation for its subsequent reversal of the transfer to both of Temex’s and Michelle Walker’s counsel (perhaps on the misunderstanding that Temex’s counsel acted for Jamieson Walker which Temex’s counsel immediately corrected).
[32] Next, at Michelle Walker’s request, the Commissioner issued an Order and Direction on May 29, 2013, directing the Provincial Mining Recorder (PMR) to record the ownership of the optioned Walker claims 50 percent in the name of Michelle Walker as tenant-in-common.
[33] On June 26, 2013, Jamieson Walker’s counsel filed a request for reconsideration of the May 29 Order. Consequently, the Commissioner issued its Order of June 27, 2013 staying the May 29 Order “pending proceedings” and directing the parties enter discussions with the MLC’s mediator/registrar.
[34] Temex became concerned that the Transfers of the Walker claims to it might not be effective at all or only to the extent of 50 percent.
[35] On June 27, 2013, Temex requested party status in the MLC proceedings. It filed formal materials for this on January 8, 2014. Party status was granted by the Commissioner on January 10, 2014. That Order notes that Temex has an interest in the subject matter of the Application, and may be adversely affected by the Commissioner’s decisions.
[36] In the interim from June, 2013 to January, 2014, Temex was in communication with Michelle Walker and Jamieson Walker’s lawyers seeking resolution. For example, Temex’s counsel emailed to Michelle Walker’s Nevada counsel on June 7, 2013. Among other things, it says that Temex “reserves all of its rights and remedies”. Following telephone calls from Michelle Walker’s counsel, Temex’s counsel emailed again to him on June 14, 2013. Among other things, it confirmed that Temex would “commence a proceeding in Ontario this month to set aside or quash the May 29, 2013 Order and Direction of the Mining and Lands Commissioner”. Notably, parts of both of those communications, which were filed in Michelle Walker’s affidavit of March 18, 2014, contain redactions.
[37] Starting in June, 2013, Temex ceased using its lawyer in this matter for a time and communicated with Jamieson Walker and Michelle Walker and their respective lawyers seeking a resolution.
[38] On August 8, 2013, Temex executives attended what it alleges was a mediation conducted by Mr. Pascoe in his capacity as a mediator for the Commissioner.
[39] On September 25, 2013, the Motion Record of Jamieson Walker was delivered, including to Temex, for his request for a reconsideration of the Commissioner’s May 29, 2013 Order, to which Michelle Walker responded.
[40] On November 7, 2013, Temex executives, Jamieson Walker’s counsel, Michelle Walker with counsel and David Burda attended a case conference with the Commissioner. It led to subsequent negotiations which were unsuccessful in resolving the matter.
[41] The reconsideration by the Commissioner has not been scheduled or taken place yet.
[42] On January 10, 2014 the Commissioner issued an order adding Temex as a party, as previously noted.
[43] APPLICATION
[44] On January 28, 2014, Temex issued a Notice of Application in this court seeking a transfer of the proceeding before the Mining and Lands Commission to this court, and a review and cancellation of the Commissioner’s Order and Direction of May 29, 2013, a declaration of the respective rights of Temex and Michelle Walker under the Option Agreement, and other relief. Both Michelle Walker and Jamieson Walker responded. David Burda and Darlene Stubbs did not.
[45] MOTION
[46] Temex then brought this Notice of Motion to strike or expunge various parts of Michelle Walker’s responding documents before the Application was heard.
[47] Jamieson Walker took no position on the Motion.
[48] In the Notice of Motion, Temex alleges that Michelle Walker’s responding materials disclose Temex’s settlement positions taken during the negotiations. It takes the position that these communications are protected by settlement privilege, will prejudice or delay the fair hearing of the Application and are an abuse of process and that the offending parts should be struck out or expunged. Michelle Walker opposes this.
[49] LAW
[50] Rule 25.11 provides that the court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
a) may prejudice or delay the fair trial of the action; b) is scandalous, frivolous or vexatious; or c) is an abuse of the process of the court.
[51] The Supreme Court of Canada set out the law with respect to settlement privilege in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623. I note in particular the following points from that case:
- the purpose of settlement privilege is to promote settlement. The privilege wraps a protective veil around the efforts parties make to settle their disputes by ensuring that communications made in the course of these negotiations are inadmissible. (paragraph 2)
- promoting settlement is sound judicial policy that contributes to the effective administration of justice. (paragraph 11)
- what is said during negotiations … will be more open, and therefore more fruitful, if the parties know that it cannot be subsequently disclosed. (paragraph 13)
- settlement extends beyond communications that are expressly designated to be “without prejudice”. Any negotiations taken with the intent to settle the matter are inadmissible. (paragraphs 15 to 16).
- settlement negotiations are protected whether or not settlement is reached. (paragraphs 15 to 17).
- it is a class privilege. There is a prima facie presumption of inadmissibility subject to exceptions, “when the justice of the case requires it”. (paragraph 12). To come within those exceptions, the public interest in encouraging settlement must be outweighed by a competing public interest. (paragraph 19).
[52] Bryant, Lederman and Fuerst’s The Law of Evidence in Canada sets out the conditions that are required for the privilege to arise:
- A litigious dispute must be in existence or within contemplation. It is not necessary that proceedings have commenced.
- The communication must be made with the express or implied intention that it would not be disclosed to the court even if negotiations failed, without consent. The use of the phrase “without prejudice” is not conclusive of intention, but its absence does not negate the intention of confidentiality. Where parties are clearly involved in settlement negotiations, the intention should be inferred unless something suggests otherwise.
- The purpose of the communication must be to attempt to effect settlement. The authors suggest that, where a communication does not contain an actual settlement offer, it must be part of a correspondence which the parties intend to lead to settlement or compromise to attract the privilege.
[53] ANALYSIS
[54] 1 - As of when was a litigious dispute in existence or within contemplation?
[55] There was an ongoing related family law dispute in Nevada between Michelle Walker and Jamieson Walker from at least 2011. This resulted in proceedings before and orders by the Commissioner under the Mining Act regarding the transfer of the Walker claims from Jamieson Walker to Michelle Walker. These proceedings were initially styled as being between Michelle Marie Walker, Applicant and Jamieson Scott Walker, Respondent.
[56] Michelle Walker’s attempt to assert her interest in the claims pursuant to the Nevada Order, resulting in the Commissioner’s Order of May 29, 2013, obviously engages the interests of both Jamieson Walker and Temex and possibly those of Burda and Stubbs. Proceedings with respect to those various interests have taken place in the context of the Mining Act. S. 105 of that Act gives the Commissioner the sole authority (subject to limited exceptions) to determine claims, questions and disputes under the Act. However, s. 107 provides for the transfer of a proceeding from the Commissioner to the Superior Court of Justice. I take the view then that it would be artificial to distinguish between the two forums for present purposes, and find that a litigious dispute in existence or within contemplation under the Commissioner’s jurisdiction may be characterized as such with respect to proceedings in the Superior Court.
[57] That Temex did not move sooner to formally become a party to the Mining Lands Commission proceedings is of no consequence. It was involved in the Commission’s proceedings from no later than June, 2013, and in the attempts to resolve the issues from then on.
[58] Nor am I persuaded that the engagement for a time in negotiations within the context of the Commission’s proceedings by Temex’s executives without counsel is significant. Unlike the requirements of the Rules of Civil Procedure, I have not been made aware of any requirement for corporations to be represented by counsel in proceedings before the Commissioner. Parties to such disputes may choose to engage counsel, or not, from time to time. One can think of various reasons why they might so choose without suggesting that there is no dispute ongoing or within contemplation.
[59] Furthermore, the fact that Temex attempted to negotiate a resolution of the issue of concern to it does not mean that, while the negotiations are going on, there was no litigious dispute in existence or within contemplation. Negotiations to resolve disputes which are subject to ongoing or contemplated litigation are common. Negotiations and litigation go hand in hand.
[60] Nor is it significant in my view that Burda and Stubbs were not involved much in the proceedings before the Commissioner. Their reasons are unknown, but they do not appear to be as affected as the other players, Temex and the Walkers, are and they might well not see a threat to their interests.
[61] So, taking a broad view of the matter, I have no hesitation in finding that a litigious dispute existed or was within contemplation as of June, 2013.
[62] 2. Were the communications in question made with the express or implied intention that they would not be disclosed to the court in the event that negotiations failed?
[63] The impugned passages and exhibits relate to the negotiations that went on in the latter half of 2013. They include references to concessions and offers made and positions taken in the negotiations, as well as references to draft agreements and copies of those drafts. It appears that what was being negotiated was a complete settlement of the matter, including the interests of each of the Walkers, Burda, Stubbs and Temex. There is nothing explicit about the parties’ intentions vis à vis disclosure of these. Therefore, one must look at implied intentions. Here, I am mindful of the comments of the Supreme Court in Sable indicating the importance of promoting efforts at settlement by protecting those efforts from disclosure, and that there is a presumption of inadmissibility. Also, Bryant et al indicate, without using the word, what I take to be a presumption that settlement privilege will arise when the parties are clearly involved in negotiating a settlement or buying peace. I find this to be the situation here, and would answer the question in the affirmative.
[64] 3 – Was the purpose of the communications to attempt to effect settlement?
[65] I would also answer yes to this question. The contents of the communications in issue were summarized above. They clearly were part of a correspondence directed towards settlement of the matter.
[66] Particular mention should be made of the letter of September 5, 2013 from Ian Campbell to the Walkers, found at Exhibit R of Michelle Walker’s affidavit and the argument that, because it was copied to various people, there should be no finding of implicit intent that it is subject to settlement privilege or, alternatively, that settlement privilege should be waived. I disagree. David Burda and Darlene Stubbs, although they did not choose to participate much, were clearly involved as signatories to the Option Agreement and as proposed signatories to the draft agreements which were being negotiated, as well as being named as parties in this action. Butler, Fournie, Badido and Rees were counsel to or executives of the Walkers and Temex. Their inclusion does not vitiate settlement privilege. Pascoe is more problematic, as there is disagreement over his role. He is a registrar with the Mining Lands Commission, but is also described as a mediator there. Given that and references in his correspondence on file to his playing such a role, I do not find that the copying of this particular letter to him negates an implicit intention that it be settlement privileged, nor constitutes waiver of settlement privilege. Therefore, I find that the passages and documents in question are protected by settlement privilege. I am not persuaded that there is a competing public interest in this case that would justify making an exception to the privilege. Therefore, I find that the motion succeeds and the passages and documents in question should be struck or expunged.
Justice James A. S. Wilcox
Released: May 26, 2014