Third Eye Capital Corp. v. Dianor Resources Inc., 2016 ONSC 6086

COURT FILE NO.: CV-15-11080-00CL

DATE: 20161005

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

B E T W E E N:

THIRD EYE CAPITAL CORPORATION

Applicant

and

RESSOURCES DIANOR INC. / DIANOR RESOURCES INC.

Respondent

BEFORE: Newbould J.

COUNSEL: Stuart Brotman and Dylan Chocla, for the Receiver of Dianor Resources Inc.

Shara N. Roy, for the Applicant

Daniel Matson, for 2350614 Ontario Inc.

Nicholas Kluge, for the Monitor of Essar Steel Algoma Inc.

HEARD: September 27, 2016

ENDORSEMENT

[1] The Receiver moves for an order approving a sale of the Ontario assets of Dianor Resources Inc. (“Dianor”) to Third Eye Capital Corporation (“Third Eye”). 2350614 Ontario Inc. (“235Co.”) does not oppose the sale but takes the position that the transfer is subject to royalty rights it says it has. If the position of 235Co. is correct, it will mean that the sale will not proceed.

[2] 235Co. has brought a cross-motion for relief including a claim for payment alleged to be owing under the Repair and Storage Lien Act and ordering Third Eye, Dianor and the Trustee to vacate premises allegedly owned by 235Co.

[3] 235 Inc. is controlled by Mr. John Leadbetter, the original prospector on the properties of Dianor. He controls a number of companies that have been involved in the various transactions on the properties.

Relevant facts

[4] On August 20, 2015, the Receiver was appointed on the application of Third Eye over the assets, undertakings and properties of Dianor pursuant to s. 243 of the BIA and s. 101 of the Courts of Justice Act. Dianor’s assets consist mainly of certain mining claims in Ontario and Quebec, both patented and unpatented. The asset sale to Third Eye covers the Ontario assets of Dianor but not the Quebec assets.

[5] Dianor obtained the mining rights to the property under a Crown Land Agreement and a Patented Land Agreement made with 3814793 Ontario Inc. (“381Co.”), a company controlled by Mr. Leadbetter, and his wife Paulette A. Mousseau-Leadbetter. The terms of the agreements and whether rights in the lands were granted in these agreements is a central issue in this motion. Under those agreements, as amended, royalties for the Ontario mining claims are payable as follows:

(a) a 15.44% gross overriding royalty (“GOR”) for diamonds and 1.5% GOR for all other metals and minerals to 381Co. and Paulette A. Mousseau-Leadbetter (unpatented (Crown) and patented mining claims);

(b) a 10% royalty for all minerals to Algoma Steel Inc. (patented mining claims only).

[6] It is not at all in the record how it is that 235Co. claims to be the holder of these royalty rights. The agreements were not made with 235Co. and there is nothing in the record to indicate that 381Co. and Paulette A. Mousseau-Leadbetter assigned or transferred these rights to 235Co. The parties have not raised this issue but in light of how I view the rights to the royalties, it perhaps does not matter.

[7] Dianor also obtained certain surface rights to the property under an agreement of purchase and sale between Dianor and 381Co. and Paulette A. Mousseau-Leadbetter dated November 27, 2008. Payment for the purchase was paid partly by a vendor take-back mortgage of the surface rights for $5 million registered in favour of 381Co. (as to 20%), Paulette A. Mousseau-Leadbetter (as to 10%) and 1584903 Ontario Ltd. (as to 70%), another Leadbetter company.

[8] On January 19, 2012, the lawyers for 1778778 Ontario Inc. (“177Co.”), another Leadbetter company, wrote to Dianor, demanding payment under the Vendor Take-Back Mortgage. The letter and notice stated that 177Co. was owed the money under the charge. The charge, however, was not in favour of 177Co. but rather 381Co. (as to 20%), Paulette A. Mousseau-Leadbetter (as to 10%) and 1584903 Ontario Ltd. (as to 70%). What right, if any, that 177Co. had to enforce the mortgage is not in the record.

[9] On October 3, 2012, 177Co. purported to commence power of sale proceedings. The notice of sale referred to a mortgage from Dianor to 3814793 Ontario Inc. (as to 20%), Paulette A. Mousseau-Leadbetter (as to 10%) and 1584903 Ontario Ltd. (as to 70%). A transfer of the surface rights was then registered from 177Co. to 235Co. The Land Transfer Tax affidavit said that the consideration was $800,000 paid by way of a mortgage given back to the vendor. This was clearly no arms’ length sale.

[10] On October 7, 2015, an order was made approving a bid process to be carried out by the Receiver and authorizing the Receiver to take steps in furtherance thereof. The market was broadly canvassed by the Receiver and two offers were received. Both offers contained a condition that the GORs be terminated or significantly reduced. Third Eye participated in the bid process, which culminated in Third Eye delivering a purchase and sale agreement dated November 23, 2015, which was accepted by the Receiver on December 11, 2015. It was amended on August 4, 2016 after the Receiver obtained a valuation of the mining claims in question. The valuation concluded that the Dianor mining claims have a total value of $1 million to $2 million, with the 15.44% GOR held by a Leadbetter entity having a value of $150,000 to $300,000 and the 10% GOR held by Algoma having a value of $70,000 to $140,000 (it being over only the patented mining claims).

[11] The terms of the purchase, as amended are:

(a) Third Eye has offered to purchase Dianor’s interests in the sale assets, which constitute substantially all of the company’s assets and business, other than the excluded assets;

(b) the purchase price consists of a credit bid for $2 million, the assumption of certain liabilities and $400,000 payable in cash; and

(c) the $400,000 payable in cash is to be allocated and distributed, subject to and upon direction of the Court, to Algoma in the amount of $150,000 and to the a Leadbetter entity in the amount of $250,000.

[12] Algoma has agreed to the payment of $150,000 for its royalty rights. The Monitor of Essar Steel Algoma Inc. (formerly Algoma) agrees that the amount to be paid is fair and reasonable compensation and in the circumstances represents the best available for Essar Algoma as a creditor.

[13] 235Co., purporting to be the holder of the 15.4% GOR rights, has refused to release its royalty rights for $250,000. In negotiations it wanted far more.

Analysis

[14] The manner in which the sale was conducted clearly met the principles of Royal Bank of Canada v. Soundair Corp. (1991), 1991 2727 (ON CA), 4 O.R. (3d) 1 (C.A.). The Receiver acted prudently and reasonably in canvassing the market for bids.

A. Vesting order

[15] Third Eye says that the royalty rights of 235Co. can be cancelled by a vesting order and in this case fair compensation is being paid for these rights. 235Co. says it has an interest in the lands that cannot be lost by a vesting order and that while the payment of $250,000 is acknowledged to be the fair market value now, Mr. Leadbetter is entitled to wait with the hopes that the diamond market will improve and cannot be forced to give up 235Co.’s interest in land.

[16] In Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC 7 Justice Major for the Court adopted the following as a test to determine if a royalty interest could be an interest in land:

... it appears reasonably clear that under Canadian law a "royalty interest" or an "overriding royalty interest" can be 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.

[17] A Crown Land Agreement and the Patented Land Agreement, both dated August 25, 2008, govern. The relevant terms of the Crown Land Agreement and the Patented Land Agreement are virtually identical:

5. […]

Once the Optionee [Dianor] becomes the owner of a one hundred percent (100%) undivided interest in the Mining Claims, the Optionors [now 235Co.] shall retain a twenty percent (20%) Gross Overriding Royalty (‘GOR’) for diamonds and a one and a half percent (1.5%) gross overriding royalty (GOR) for all other metals and minerals as calculated in accordance with Schedule ‘A’. The Optionee shall have the right of first refusal to purchase the Optionors’ GOR.

[18] Schedule A provides that the diamond GOR is to be calculated as follows:

2.1 The Optionors are entitled to a royalty (“Gross Overriding Royalty” or “GOR,” equal to the Royalty Percentage of the Average Appraised Value of the Diamonds”.

[19] The various definitions applicable to the above provision are:

1.10 “Royalty Percentage” means twenty percent (20%) less the percentage interest in the Mining Claims, if any the Optionors have then acquired pursuant to the Ten Percent Purchase Agreement.

1.2 “Average Appraised Value” means the value in Canadian dollars of the Diamonds after they have been cleaned and sorted, determined as provided in section 2.2 and 2.3 hereof, with no deductions for costs or expenses of any nature or kind.

1.4 “Diamonds” means all diamonds that are recovered or produced from the Property after the date of this Agreement, excluding any by-products or tailings that remain after the extraction and processing process.

[20] Schedule C provides that the metals and minerals GOR is to be calculated as follows:

2.1 The royalty interest which shall be payable to the Optionor by the Optionee pursuant to the Non-Diamond Mineral Rights Agreement shall be 1.5% of the Gross Revenue, as defined in Section 1.1 of this Section “C”.

[21] “ Gross Revenue” is defined as:

1.1 “Gross Revenue” means the aggregate of the following amounts received in each quarter:

(a) the revenue received by the Optionee or any of its Affiliates from arm’s length purchases of all Product;

(b) the fair market value of all Product sold by the Optionee or any of its Affiliates in such quarter to persons not dealing at arm’s length with the Payor; and

(c) any proceeds of insurance on Product.

1.2 “Products” means any minerals recovered from the Mining Claims defined in the Leadbetter Option Agreement.

[22] The Crown Land Agreement and the Patented Land Agreement state that the parties intend the GORs to run with the land:

4.1 It is the intent of the parties hereto that the GOR shall constitute a covenant and an interest in land running with the Property and the Mining Claims and all successions thereof or leases or other tenures which may replace them, whether created privately or through governmental action, and including, without limitation, any leasehold interest. If any right, power or interest of any party under the Leadbetter Crown Land Property Option Agreement would violate the rule against perpetuities, then such right, power or interest shall terminate at the expiration of 20 years after the death of the last survivor of all the lineal descendants of Her Majesty, Queen Elizabeth II of England, living on the date of this Agreement..

[23] However, this clause does not convey any interest in land but only states the intent of the parties. The issue is whether that intent was carried out in the agreements.

[24] Anglo Pacific Group PLC v. Ernst & Young Inc., 2013 QCCA 1323 involved mining royalty rights and an issue was whether the rights created an interest in the lands. The agreement in question contained a provision that the royalty was to be a benefit to run as a covenant with the property. The Court of Appeal adopted the test enunciated by Major J. in Dynex and concluded that while the parties expressed the wish to grant a right in the property, they did not do so and granted only a right to the a percentage of profits derived from the minerals extracted from the property. Thus the property was sold under a vesting order free of the royalties. Thibault J.C.A. for the Court stated:

77 The creation of an innominate real right is not solely the result of the use of these terms in a contract. In addition, the contract must contain the essential characteristics of a real right. The characteristics are, as I wrote earlier, the attribution to the innominate real right beneficiary of one or more of the attributes of ownership -- the right to use, enjoy and freely dispose of the property -- as well as a right of pursuit on the property and the capacity to abandon it.

84 To grant a person an innominate real right, a right of enjoyment (usus, fructus or abusus) in the property must be assigned to the person. The debtors had the capacity to grant such a right in their claims, the mining leases and the substances to be extracted. Reading the debenture and the royalty agreement confirmed that the debtors did not grant the appellant any of the attributes of ownership whatsoever in regard to their claims or the mineral substances to be extracted in the event that a mining lease was granted. The debtors retained all the attributes related to ownership and, although they expressed the wish to grant a real and perpetual right in the "Properties" and "Products", they instead granted the appellant the right to receive a percentage of the profits derived from the sale of the mineral substances extracted.

[25] In St. Andrew Goldfields Ltd v Newmont Canada Limited, 2009 40549 (ON SC), [2009] OJ No 3266; aff’d 2011 ONCA 377, Roberts J. (as she then was), dealt with a mining royalty case. One of the issues was whether the royalty rates ran with the land so that the purchaser of the land was liable for them. It was held that the royalty did not grant an interest in land. Roberts J. applied the test enunciated by Major J. in Dynex. In the course of her reasons she stated:

101 The use of the words "covenants and agrees to pay" and "produced" in the description of the Barrick royalty is the first indication that the parties intended to create only contractual rights to the payment of a royalty and not an interest in land.

102 The case law that the parties have submitted makes a valid distinction between the "granting" of royalties attached to or "in" the land or the minerals themselves, thus creating an interest in the land, and the payment of royalties attached to the minerals or revenues "produced" or "removed" from the land, resulting in the creation of contractual rights to the payment of a share of the revenue from the minerals after they have been extracted: [citations removed].

103 Other relevant factors to determine the parties' intention to create contractual rights or an interest in land are: whether the royalty holder retains a right to enter upon the lands to explore for and extract the minerals: Vandergrift v. Coseka Resources Limited, supra, at pp. 28 to 29; and whether the owner of the lands is in complete control of its interest in the lands acquired with the only right in the royalty holder being to share in the revenues produced from the minerals extracted from the lands: St. Lawrence Petroleum Limited v. Bailey Selburn Oil & Gas Ltd. (No. 2), supra, at pp. 32 to 33.

[26] In my view, the situation with 235Co. is exactly described by Roberts J. 235Co. has no right to enter the property to explore and extract diamonds or other minerals. That right belongs to Dianor. The only right 235Co. (or 381Co., Paulette A. Mousseau-Leadbetter and 1584903 Ontario Ltd.) obtained under the agreements was to share in revenues produced from diamonds or other minerals extracted from the lands. It is clear from the agreements that the royalties were to be a percentage of the value of the diamonds or other metals and minerals. The interest, out of which the royalty is carved, is not interest in land.

[27] Regarding the diamond royalties, the royalties were a percentage of the appraised value of the diamonds:

2.1 The Optionors are entitled to a royalty (“Gross Overriding Royalty” or “GOR,” equal to the Royalty Percentage of the Average Appraised Value of the Diamonds”.

1.2 “Average Appraised Value” means the value in Canadian dollars of the Diamonds after they have been cleaned and sorted.

1.4 “Diamonds” means all diamonds that are recovered or produced from the Property after the date of this Agreement, excluding any by-products or tailings that remain after the extraction and processing process. (Underling added)

[28] With respect of the other minerals, the royalties were to be

2.1 The royalty interest which shall be payable to the Optionor by the Optionee pursuant to the Non-Diamond Mineral Rights Agreement shall be 1.5% of the Gross Revenue, as defined in Section 1.1 of this Section “C”.

1.1 “Gross Revenue” means the aggregate of the following amounts received in each quarter:

(a) the revenue received by the Optionee or any of its Affiliates from arm’s length purchases of all Product;

(b) the fair market value of all Product sold by the Optionee or any of its Affiliates in such quarter to persons not dealing at arm’s length with the Payor; and

(c) any proceeds of insurance on Product.

1.2 “Products” means any minerals recovered from the Mining Claims defined in the Leadbetter Option Agreement. (Underlining added)

[29] This case is also akin to statements made in Vanguard Petroleums Ltd v Vermont Oil & Gas Ltd, 1977 648 (AB KB), [1977] 1 ACWS 172, 72 DLR (3d) 734 (Alta SC), citing Emerald Resources Ltd v Sterling Oil Properties Mgmt Ltd (1969), 1969 803 (AB CA), 3 DLR (3d) 630 (Alta CA), aff’d 1970 980 (SCC), 15 DLR (3d) 256:

14 Allen, J.A., of the Appellate Division of the Supreme Court of Alberta in Emerald Resources Ltd. v. Sterling Oil Properties Management Ltd. (1969), 1969 803 (AB CA), 3 D.L.R. (3d) 630, considered whether a gross overriding royalty was an interest in land. The granting provision is set forth at page 633 as follows:

"High Crest covenants and agrees to grant and assign to Sterling a gross overriding royalty of Two per cent (2%) of High Crest's share of all petroleum, natural gas and related hydro-carbons produced, saved and sold from each property acquired by or for High Crest after the date hereof and during the term of this agreement ..."

Allan, J.A., stated at page 640:

"The royalty clause in these agreements has been previously [*258] quoted in these reasons. Taking the High Crest agreement as typical it will be noted that there is to be assigned to Sterling 'a gross overriding royalty of two per cent (2%) of High Crest's share of all petroleum, natural gas and related hydrocarbons produced, saved and sold from each property acquired by High Crest after the date hereof and during the term of this agreement'. This clearly indicates that the royalty is to be calculated and payable only upon the products mentioned after they have been taken from the ground and severed from the realty. It may follow from this that the royalty share of production which accrues to Sterling is personalty and not land or an interest therein."

15 Although the Court of Appeal referred the matter back to the Trial Judge on another point, it is clear that the court was of the clear opinion that where the royalty relates to a share after the petroleum had been removed from the land that this is not an interest in land but is to be treated as personalty.

[30] I conclude and find that the GORs do not run with the land or grant the holder of the GORs an interest in the lands over which Dianor holds the mineral rights.

[31] The granting of vesting orders is a near daily occurrence in the Commercial List in receivership sales. The jurisdiction derives from the Courts of Justice Act, the BIA and common law.

[32] Section 100 of the Courts of Justice Act provides:

100. A court may by order vest in any person an interest in real or personal property that the court has authority to order be disposed of, encumbered or conveyed.

[33] Under section 243 of the BIA, a receiver can be appointed to take possession of assets of the debtor and exercise control over those assets. Under section 101 of the Courts of Justice Act, a court can make such order in appointing a receiver as it considers just. It is usual for a receivership order to contain a power to sale the assets of the debtor. This case is no different and the sale has been carried out in accordance with court approval of a bid process. Those sections provide a court with the authority that section 100 of the Courts of Justice Act requires.

[34] Under section 11 (2) of the Courts of Justice Act, the Superior Court of Justice has all the jurisdiction, power and authority historically exercised by courts of common law and equity in England and Ontario. This historical power included the making of vesting orders, and was described in Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA), 51 O.R. (3d) 641 (C.A.) as follows:

281 Vesting orders are equitable in origin and discretionary in nature. The Court of Chancery made in personam orders, directing parties to deal with property in accordance with the judgment of the court. Judgments of the Court of Chancery were enforced on proceedings for contempt, followed by imprisonment or sequestration. The statutory power to make a vesting order supplemented the contempt power by allowing the Court to effect the change of title directly: see McGhee, Snell's Equity 30th ed., (London: Sweet and Maxwell, 2000) at 41-42. As explained by Proudfoot V.C. in Robertson v. Robertson (1875), 22 Gr. Ch. 449 at 456, the statute gives the court the power "to make a vesting order whenever it might have ordered a conveyance to be executed". Quite apart from its equitable origins, by the very terms of s. 100, the power to grant a vesting order lies in the discretion of the court. Cases decided under s. 100 explicitly refer to the power to grant a vesting order in discretionary terms: see Ontario Housing Corp. v. Ong (1988), 63 O.R. (2d) 799 (C.A.); Holmsten v. Karson Kartage Konstruction Ltd. (1977), 1997 16261 (ON SC), 33 O.R. (3d) 54 (Gen. Div.). 1972 535 (ON CA), [1972] 2 O.R. 280

[35] In 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd. et al., 1972 535 (ON CA), [1972] 2 O.R. 280 (C.A.), Brooke J.A. for the Court said that the jurisdictions of this Court is broad. He said:

As a superior Court of general jurisdiction, the Supreme Court of Ontario has all of the powers that are necessary to do justice between the parties. Except where provided specifically to the contrary, the Court's jurisdiction is unlimited and unrestricted in substantive law in civil matters.

[36] Counsel for 235Co. has referred to the case of Trick v. Trick (2006), 2006 22926 (ON CA), 83 O.R. (3d) 55 (C.A.). In that case involving an issue as to whether the wife could garnishee all of the husband’s CPP and OAS benefits, Lang J.A. dealt with the limits of section 100 of the Courts of Justice Act which authorizes vesting orders. She said:

[19] The starting point referenced by the motion judge is s. 100 of the CJA, which provides a court with jurisdiction to vest property in a person but only if the court also possesses the "authority to order [that the property] be disposed of, encumbered or conveyed". Thus, s. 100only provides a mechanism to give the applicant the ownership or possession of property to which he or she is otherwise entitled; it does not provide a free standing right to property simply because the court considers that result equitable.

[37] That case if not the same as this case. In that case there was no right to order the CPP and OAS benefits to be paid to the wife. In this case, the BIA and the Courts of Justice Act give the Court that jurisdiction to order the property to be sold and on what terms. Under the receivership in this case, Third Eye is entitled to be the purchaser of the assets pursuant to the bid process authorized by the Court.

[38] I conclude that I do have the jurisdiction to grant a vesting order of the assets to be sold to Third Eye on such terms as are just. Mr. Leadbetter is not entitled to exercise tactical positions to tyrannize the majority by refusing to agree to a reasonable amount for the royalty rights. His counsel has conceded that the valuation obtained by Third Eye from Dr. Roscoe is the current value of the royalties, a concession that was rightly made as there is no other current valuation of the royalties. Dr. Roscoe’s report concluded that the Dianor mining claims have a total value of $1 million to $2 million, with the 15.44% GOR having a value of $150,000 to $300,000.

[39] In my view, it is appropriate and just that a vesting order in the usual terms be granted to Third Eye on the condition that $250,000 be paid to 235Co. or whatever entity Mr. Leadbetter directs the payment to be made. That is higher than the mid-point of the range of values determined by Dr. Roscoe.

[40] I need not consider the claim of Third Eye that even if the royalty rights were an interest in land, a vesting order could be made vesting clear title in the assets being sold on the proviso that fair value be paid to the holder of the royalty rights. I see no reason in logic however why the jurisdiction would not be the same whether the royalty rights were or were not an interest in land

B. Cross-motion by 235Co.

[41] 235Co. claims an entitlement under the Repair and Storage Liens Act for $67,800 plus a per diem charge of $92.88 (or almost $3,000 per month). Under that statute, a person who stores an article on the understanding that the person will be paid for the storage is entitled to a lien over the article. The Repair and Storage Liens Act provides:

1. (1) In this Act,

“article” means an item of tangible personal property other than a fixture; (“article”)

“storer” means a person who receives an article for storage or storage and repair on the understanding that the person will be paid for the storage or storage and repair, as the case may be. (“entreposeur”)

4. (1) Subject to subsection (2), a storer has a lien against an article that the storer has stored or stored and repaired for an amount equal to one of the following, and the storer may retain possession of the article until the amount is paid:

5. The amount agreed upon for the storage or storage and repair of the article.

6. Where no such amount has been agreed upon, the fair value of the storage or storage and repair, determined in accordance with any applicable regulations.

7. Where only part of a repair is completed, the fair value of the storage and the part of the repair completed, determined in accordance with any applicable regulations.

[42] The argument of 235Co. lacks merit. Under the Mining Act, there are both surface rights and mining rights. Dianor acquired the mining rights and then later the surface rights.

[43] The surface rights were obtained from 381Co. and Paulette A. Mousseau-Leadbetter and payment for the purchase was paid partly by a vendor take-back mortgage of the surface rights for $5 million registered in favour of 381Co. (as to 20%), Paulette A. Mousseau-Leadbetter (as to 10%) and 1584903 Ontario Ltd. (as to 70%), another Leadbetter company. As stated earlier, 177Co. purported to transfer the surface rights under the vendor take-back mortgage to 235Co.

[44] Before that transfer, Dianor constructed a fenced in area on part of the surface rights and constructed a dome structure with a concrete foundation, a utility building utilized as a core cutting room with a concrete foundation, a kitchen trailer, an office complex, a generator building with a concrete foundation, a pump house, a septic system and fuel tanks and pumps.

[45] 235Co. says that Dianor stored its assets on the surface rights it owned until 235Co. acquired the surface rights, and that since then, Dianor has stored its assets on the surface rights owned by 235Co. 235Co. says it can be inferred from the facts that there is a “storage relationship”. There are several reasons why the claim of 235Co. must fail.

[46] First, while 235Co. purports to be the owner of the surface rights under a transfer from 177Co., there is no evidence on the record that 177Co. had the right to transfer those surface rights to anyone. 177Co. was not the mortgagee. On the facts before me, Dianor has never lawfully been displaced of its ownership of the surface rights.

[47] Assuming that 235Co. became the owner of the surface rights, the argument ignores the definition of “article”. Most of the assets placed there by Dianor while it was the owner of the surface rights are not tangible personal property. The two exceptions might be drill cores stored in the utility building and two vehicles.

[48] There is no evidence at all that there was an understanding that 235Co. would be paid for the storage, if it can be said to be storage, as required by the definition of “storer”. Mr. Leadbetter’s evidence belies the notion of any understanding. In his affidavit he stated that he has attempted to negotiate with Dianor, Third Eye and the receiver respecting compensation for storage of the Dianor materials for years without success.

[49] The building structures and the vehicles were used to exploit the mining rights that Dianor had over the property, and the drill cores were obtained in that exploitation. That is why they are on the property, and not because of some understanding with 235Co. They were never given to 235Co. for storage.

[50] Under the Mining Act, the holder of mining rights has broad statutory rights to access the surface lands overlying their unpatented or patented mining claims without needing to obtain consent from, or provide notice to, the landowner:

50 (2) The holder of a mining claim does not have any right, title or claim to the surface rights of the claim other than the right, subject to the requirements of this Act, to enter upon, use and occupy such part or parts thereof as are necessary for the purpose of prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights therein.

51 (1) Except as in this Act is otherwise provided, the holder of an unpatented mining claim has the right prior to any subsequent right to the user of the surface rights, except the right to sand, peat and gravel, for prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights.

[51] Even if 235Co. had a storage lien, it would have no right to be paid what it claims. In its notice of motion it claims an order that it be paid $67,800 (inclusive of HST) “representing the fair market value of its storage lien claim from August 2014 to August 31, 2016” with per diem charges thereafter of $92.88. How this figure is calculated is unexplained. The lien that was filed claimed $124,000 to be owing and a notice of intention to sell dated September 15, 2014 claimed that $148,595 was owed and that a further $4,000 plus HST would accrue per month.

[52] The evidence filed by 235Co. is (i) an opinion of the market value of the entire property of 1,600 acres being $555,000 and (ii) a letter from a realtor offering to sell a property of 100 metres by 90 metres in Wawa, Ontario for $$250,000 or renting it for $2,500 a month net. These are not supported by an affidavit or an acknowledgment of an expert. In any event, under section 4(1) of the Repair and Storage Liens Act a storer is entitled only to the fair value of the storage and not some rental value for the land. In this case, the only articles on the lands are the drill cores and two motor vehicles. There is no evidence of any value for them.

[53] 235Co. also claims an order vacating all of the lands. In argument, it was said that the claim to vacate relates only to those lands that are fenced, as described above, (the “Compound” as described by Mr. Leadbetter). There is no legal basis for such a claim to be made. Dianor has the right under sections 50(2) and 51(1) to occupy the surface rights for the purpose of prospecting and exploration of its mining rights. There is no logic in 235Co. saying that Dianor can stay on the lands except the Compound that houses the cores and vehicles. If Dianor can stay on the lands outside the Compound, there is no right in 235Co. to remove Dianor from the Compound. It smacks of a self-help remedy to demand rental that 235Co. has no right to.

[54] Landowners are not permitted under the Mining Act to hinder or prevent a claimholder from accessing their lands for mineral exploration or mining purposes and are not entitled to demand compensation from the claimholder as a condition of entry on to the land. A landowner is entitled under section 79(2) of the Mining Act to be compensated by a mining claim holder only for “damages sustained to the surface rights” of the landowner that are caused by the claimholder’s exploration, development, or mining operations. If there is no agreement as to what the damages are, section 79(4) provides for an application to the Mining Commissioner to determine what should be paid. There is no basis for a claim to compensation to be made to this Court.

Conclusion

[55] The motion of the Receiver for the relief claimed in paragraph (a) (ii) and (iii) of its notice of motion is granted. The motion of 235Co. is dismissed.

[56] The Receiver and Third Eye are entitled to their costs. Brief written submissions along with a proper cost outline may be made within 10 days, including any submissions against whom the cost order should be made. Brief written reply submissions may be made within a further 10 days.

Newbould J.

Date: October 5, 2016