[CITATION](http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/): Canadian Mining Exchange Co. v. Zhaojin Mining et al., 2024 ONSC 3191 COURT FILE NO.: CV-19-00633014 DATE: 20240604

SUPERIOR COURT OF JUSTICE – ONTARIO

RE:

CANADA MINING EXCHANGE COMPANY LIMITED

Plaintiff

AND:

ZHAOJIN MINING INDUSTRY CO. LTD., ZHAOJIN INTERNATIONAL MINING CO. LTD., and ZHAOJIN PRINCIPLE MINING INVESTMENT INC.

Defendants

BEFORE: Koehnen J.

COUNSEL: Daniel Kuang, on his own behalf as sole shareholder of Canada Mining Exchange Company Limited

James Holloway, Jacqueline Chan for Zhaojin Mining Industry Co. Ltd, Zhaojin International Mining Co.

Anthony Labib for Zhaojin Principle Mining Investment Inc

HEARD: March 7, 2024

ENDORSEMENT

KOEHNEN J.

OVERVIEW

[1] The Defendants Zhaojin Mining Industry Co. Limited (“Zhaojin Mining”) and Zhaojin

International Mining Co. Limited (“Zhaojin International”) (collectively the “defendants”) move for summary judgment to dismiss the claim as against them.

[2] The action is based on a claim by the plaintiff, Canada Mining Exchange Company Limited (“CME”) that it had an agreement with the defendants pursuant to which it would introduce them to certain business opportunities. If the defendants pursued any of those business opportunities they would owe the plaintiff a commission. The agreement contained a confidentiality clause that prohibited the defendants from having any contact with the companies to which CME had introduced them without CME’S consent.

[3] CME alleges that it introduced the defendants to Sabina Gold & Silver Corp. (“Sabina”) and that the defendants subsequently entered into a transaction with Sabina without CME’s consent in respect of which the defendants owe the plaintiff a commission of $8,080,000 based on the defendants’ total investment in Sabina to date of $101 million.

[4] I grant the motion for summary judgment and dismiss the action against Zhaojin Mining and Zhaojin International. As a technical matter, the defendant Zhaojin Principal Mining Investment Inc. did not bring a motion for summary judgment. Given my reasons below, I would be prepared to hold a case conference to require the plaintiff to show cause why summary judgment should not issue against Zhaojin Principal for the same reasons as I am issuing it against Zhaojin Mining and Zhaojin International.

[5] Before I begin, I should briefly address the fairness of the proceeding. Mr. Kuang is a Cantonese speaker with limited knowledge of English who made his submissions through a translator. Mr. Kuang is not a lawyer. During the course of his submissions he expressed concern that there was inadequate time for him to cover everything he wanted to say. The motion was scheduled for a full day. CME had been represented by a lawyer whose retainer Mr. Kuang terminated 6 days before the hearing. This was the second lawyer whose retainer CME had terminated. I granted Mr. Kuang leave to make submissions on behalf of CME because he is its sole shareholder. At the outset of the hearing I indicated that I did not need to hear from the defendants initially. I gave Mr. Kuang until 3:15 PM to make his submissions which is more than the half-day to which he was entitled. I then gave the defendants a brief opportunity to respond. In addition, the defendants had filed a 30 page 1.5 spaced factum. I am more than satisfied that CME had a full opportunity to put his case forward.

THE TEST FOR SUMMARY JUDGMENT

[6] The test for summary judgment is not in dispute. The motions judge is first required to determine if there is a genuine issue for trial based on the evidence before them. If there appears to be a genuine issue for trial, the motions judge should determine if the need for a trial could be avoided by using the enhanced fact finding powers under rule 20.04 (2.1).[^1]

[7] While the moving party on a motion for summary judgment bears the initial onus of establishing the absence of a genuine issue requiring a trial, the responding party must thereafter demonstrate that its claim has a real chance of success.[^2] In doing so, it must put its best foot forward and cannot rest on the allegations in its claim. Instead, it must set out, through admissible evidence, specific facts that show the existence of a genuine issue that requires a trial. Put another way, it must “lead trump or risk losing”.[^3] The court is entitled to assume that the evidence before it is all the evidence the parties would present if the matter proceeded to trial.[^4]

FACTS AND ANALYSIS

[8] CME claims that it introduced the defendants to Sabina, gave the defendants confidential information about Sabina and that the defendants entered into a subsequent transaction with Sabina as a result of which CME is entitled to a commission. CME analogizes its claim to that of a real estate agent suing a client who has retained the agent to find a house only to have the client buy privately, a house to which the agent had introduced the client.

[9] The fundamental problem with CME’s claim in this regard is that the defendants and Sabina introduced themselves to each other before CME came into the picture. In addition, the only information about Sabina that CME gave the defendants was to forward to them Sabina’s NI-43-101 Report which is available to anyone on SEDAR, the freely available electronic filing portal for public issuers in Canada.

[10] On January 15, 2013, Zhaojin Mining’s president sent a letter to the CEO of Sabina to explore potential business opportunities. On March 8, 2013, Sabina’s CEO responded, providing an update on his company’s Back River Gold Project and suggesting that the companies stay in touch. He recommended that Zhaojin Mining review Sabina’s NI-43-101 Report which Zhaojin Mining did. Plainly, Zhaojin Mining and Sabina had introduced themselves to each other by this point.

[11] On April 3, 2013, two and a half months after Zhaojin Mining had written to Sabina, CME made a cold call to Sabina to see if it was interested in potential investors from China. In response, Sabina asked for more information about CME. Further communications ensued, in the course of which the CME employee who was in communication with Sabina, Chao Jun Zhu, noted that Sabina was “not comfortable” signing an agreement with CME. As a result, CME stopped calling Sabina in July 2013.

[12] At the same time as CME was pursuing Sabina, it was also pursuing Zhaojin Mining. On April 9, 2013 CME sent Zhaojin Mining an unsolicited email found at exhibit D of Mr. Wang’s affidavit. The text of that email reads in full:

Dear Mr. Wang:

Hello! Hi, some time ago, I called you and briefly talked about your company's investment in overseas gold mines. However, the conversation was not very detailed. If it’s convenient to you, you may send me an email to advise more specific ideas, so that I can recommend more suitable projects for your company based on your requirements.

In addition, the attachment is a gold mine project that I recommend to your company. The reserves are huge, but the grade is not very high. Not sure if your company is interested? If you are interested in more detailed information, or have any questions, please feel free to contact us.

Sincerely hope that we will have the opportunity to work together in the future!

[13] Attached to that email was the following chart beneath a heading reading : “(Gold) Detailed Survey of a Gold Mine in Canada”.

[13]

[14] It appears that the table related to Sabina although the defendants did not know this at the time.

[15] It is clear from the date on CME’s email that this unsolicited contact arose after the defendants and Sabina had already introduced themselves and exchanged information with each other.

[16] In oral argument, Mr. Kuang submitted that the two letters between the defendants and Sabina referred to in paragraph 13 above are forgeries prepared to give the impression of a contact between the defendants and Sabina before CME allegedly introduced them. In cross-examination on his affidavit for the summary judgment motion, Mr. Kuang admitted that he had no evidence to support any such concerns. On that record, there is no genuine issue for trial on the point. There simply is no conflict of evidence to resolve. At best, CME hopes to find evidence to support its forgery allegation between now and the time of trial. That, however, is not enough to avoid summary judgment.

[17] On April 15, 2013, CME sent Zhaojin Mining more unsolicited public information about a project that CME identified as Project 56. Zhaojin Mining did not know that this was CME's code name for Sabina. As Mr. Wang explains, Zhaojin Mining never expressed interest in that Project 56. CME has led no evidence to the contrary.

[18] On May 6, 2013, CME sent Zhaojin Mining an unsolicited draft nondisclosure agreement. Mr. Wang explained in his affidavit that Zhaojin Mining was not interested in the proposed arrangement because, among other things, it included a finders’ fee or commission.

[19] On July 15, 2013, Zhaojin Mining told CME that it would not sign an agreement the proposed engagement agreement. On August 5, 2013, CME sent Zhaojin Mining a revised "Confidentiality Agreement," which Zhaojin Mining ultimately signed.

[20] Article 7 of the Confidentiality Agreement contains two prerequisites to its application: an introduction and the provision of confidential information. Article 7 provides:

The Recipient agrees that, subject to the receipt of Confidential Information, neither the Recipient nor any affiliate of the Recipient shall, either directly or indirectly, or jointly or in concert with any other person, without the prior written consent of CAMECL, contact, initiate or engage in any discussions or enter into any agreement, commitment or Transaction with the companies introduced by the Company. The Recipient shall be liable to CAMECL for any damage caused by such breach or anticipated breach. (Emphasis added)

[21] In other words, the defendants are precluded from entering into any transaction with a company to whom it has been introduced by CME, provided CME as given the defendants confidential information about the target company.

[22] CME’s motion fails because it did not introduce Sabina to the defendants and did not provide any confidential information about Sabina to the defendants.

[23] During his cross-examination on his affidavit, Mr. Kuang admitted that no rights could arise under the agreement without an introduction.

[24] In Terry Martel Real Estate Ltd. v. Lovette Investments Ltd., the Ontario Court of Appeal held that the plain and ordinary meaning of the word “introduction” carries the connotation of bringing people together for the first time.[^5]

[25] On the record, it is clear that CME did not introduce Sabina to the defendants. Rather, Zhaojin Mining had introduced itself to Sabina.

[26] The second element in article 7 is the prerequisite that CME have delivered confidential information. Apart from the table reproduced in paragraph 13 above, the only other information about Sabina that CME sent to the defendants was in an email of August 7, 2013 which stated:

Hello Mr. Wang,

I have attached the NI 43-101 for one of the investing project 'Black River Gold Project' from the company Sabina Gold & Silver Corp.(TSX: SBB).

Please let me know if you need further information.

[27] The email attached Sabina’s NI 43-101 report which the defendants already had and which is available to the world at large on the SEDAR website.

[28] CME tries to avoid that fact by arguing that confidential information also includes public information that CME gave to the defendants because even such public information is the product of analysis by CME. In this regard it relies on a portion of the preamble to the Confidentiality Agreement which provides:

For the purposes of this Confidentiality Agreement, “Confidential Information” means any and all information (in whatever form, whether written, oral, electronic or otherwise) provided by the Company or its advisors to the Recipient or any of its Representatives (as defined below) that describes or is related, directly or indirectly, to the Properties, whether factual or interpretive, and howsoever obtained by the Recipient (whether in data books, physical or virtual data rooms, presentations or otherwise), all communications between the Company or any of its advisors and the Recipient or any of its Representatives and any and all notes, memoranda, summaries, analyses, reports, documents and other information developed by or for the Recipient that are based upon, contain or reflect any of the foregoing.

[29] There are several problems with CME relying on this provision. First, it does not override the fact that the overriding prerequisite of the agreement is that CME have made an introduction which it did not. Second, in my view, the clause quoted above does not have the effect of making Sabina’s NI 43-101 report confidential for purposes of the agreement. While I accept that, in certain cases, the analysis and aggregation of otherwise public information is capable of amounting to confidential information under an agreement of this sort because it may contain the work product and analysis of a party in the position of CME, it is the aggregation of the work product and the analysis which makes the information confidential. Simply pulling a publicly available report from the SEDAR website and forwarding it to the defendants without any analysis or the application of any work or thought does not turn an otherwise public document into confidential information.

[30] The third problem with the Confidentiality Agreement is that it does not say anything about any compensation to which CME might be entitled in the event of an introduction and resulting transaction. Mr. Kuang agreed during his cross-examination that CME and the defendants would have had to negotiate compensation in the event that a transaction which was captured by article 7 of the agreement occurred.[^6]

[31] According to the evidence of CME's Ms. Wu, Mr. Wang of Zhaojin Mining agreed on May 6, 2014 to pay CME a 3% commission if a project recommended by Zhaojin Mining led to an investment by Zhaojin Mining. Mr. Wang denies making that commitment, and notes that he did not have authority to bind Zhaojin Mining to any such arrangement. That does not amount to a conflict in the evidence which requires a trial to resolve because CME has met neither the prerequisite of an introduction nor of confidential information to trigger any obligation under the Confidentiality Agreement.

[32] When the transaction between Zhaojin International and Sabina did occur, it occurred in 2018, five years after CME was trying to develop a relationship with both of them. It occurred with the use of independent advisors on both sides and occurred without the involvement or knowledge of CME.

[33] In the alternative to a commission, CME claims quantum meruit compensation. The only tangible thing CME did in relation to the transaction was to send the defendants a copy of the public NI 43 – 01 report which the defendants already had. In the circumstances of this case, where the defendants were already aware of Sabina and where the report was provided without any tangible analysis or other value-added service, the quantum meruit value of that is nothing.

[34] Although there are many other issues raised by the defendant such as whether the confidentiality agreement is even enforceable and whether there was an oral agreement on the commission payable on any transaction, it is unnecessary to analyse those issues because I find as a fact that CME did not introduce any of the defendants to Sabina, did not provide any other services to the defendants in relation to Sabina and provided no confidential information to the defendants about Sabina.

[35] The CME’s submissions in response to the motion for summary judgment consist of high-level generalities without evidence. By way of example, in paragraph 6 of its factum it alleges:

a. CME’s entitlement to commission exists independently of the provision of confidential information, as their research, collection, and analysis of information, even if publicly available, provides valuable insights and investment opportunities to clients. Additionally, CME’s role as an intermediary referral firm and its extensive network within the mining industry warrant compensation for services provided.

b. Even if some information was publicly available, CME’s unique compilation, specialized knowledge, context, customized analysis, and contractual agreements transformed it into confidential data. This holds value for CME and the Defendants, and the latter must pay compensation in a proper case.

[36] Although the affidavit and factum of CME contain bald allegations in this regard, they contain no specifics. In oral argument, Mr. Kuang was unable to take me to any specifics other than general sales solicitations such as statements to the effect that 2013 was a good time to invest because prices of mining companies were down.

[37] The dynamic that emerges from the communications between the parties here is that CME was trying to develop a relationship with both Sabina and the defendants which would entitle it to a commission if a transaction occurred. The communications with both were in the nature of sales pitches rather than any value added services.

[38] Although CME’s factum contains a fair bit of detailed analysis of various cases setting out instances in which summary judgment will be denied such as a clear conflict in evidence, it points to no specific evidence to indicate that any of these factors are actually present on the motion before me.

[39] This is in fact a classic case for summary judgment. The plaintiff’s claim depends on it having introduced Sabina to the defendants. The plaintiff has not demonstrated that it did so. In fact, the evidence is directly to the contrary and demonstrates that the defendants and Sabina had been introduced to each other before CME purported to make any such introduction by delivering the NI – 43 report. Given the failure of that critical building block to the plaintiff’s case, all other issues fall by the wayside and summary judgment should be granted.

COSTS AND DISPOSITION

[40] For the reasons set out above I grant the defendants’ summary judgment motion and dismiss the action against Zhaojin Mining and Zhaojin International.

[41] As noted earlier in these reasons, Zhaojin Principle did not bring a motion for summary judgment. I was led to no information in the record relating to Zhaojin Principle although the statement of claim refers to an alleged conspiracy between the defendants. The absence of evidence in regard to Zhaojin Principle may, however, be attributable to the fact that it brought no motion for summary judgment. In the circumstances, I am prepared to hold a case conference to explore whether summary judgment should also issue in favour of Zhaojin Principle. On any such case conference, the plaintiff will be required to demonstrate enough of an issue involving Zhaojin Principle to warrant going to trial or scheduling another summary judgment motion by Zhaojin Principle.

[42] The defendants seek costs on a substantial indemnity scale. Their partial indemnity fees including HST come to $157,372.70. Their substantial indemnity fees come to $236,059.05, including HST. In addition, the defendants incurred disbursements of $28,291.76 for a total of $264,350.81.

[43] The plaintiff has submitted a bill of costs showing total fees of $143,581 of which $65,144 is on account of lawyers fees and the balance on account of fees for Mr. Kuang and translation services of $17,500. It is unclear whether those costs are on a partial, substantially or full indemnity scale. For present purposes I will assume they amount to full indemnity.

[44] The defendants submit they are entitled to substantial indemnity costs because of what they describe as the false narrative on which the plaintiff’s case is based. Courts have awarded substantial indemnity costs where parties have alleged but failed to prove allegations of fraud, criminal conduct, dishonesty or other reprehensible conduct.[^7] In Hamilton v. Open Window Bakery Ltd.,[^8] the Supreme Court of Canada noted that where a party makes allegations of fraud or dishonesty unsuccessfully at trial and does so “with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent … [as found by the trial judge] costs on a solicitor and-client scale are appropriate.”[^9] in December 2021, the defendants’ lawyers sent CME’s lawyers copies of the two letters dated January 15, 2013 and March 8, 2013 between the defendants and Sabina which demonstrate that the contact between them predated any contact that CME had with either Sabina or the defendants. The defendants nevertheless proceeded with the action.

[45] CME also engaged in other conduct that increased costs. By way of example, the plaintiff advised that it wanted to examine the defendant’s witnesses who were located in China. The witnesses travelled from China to Hong Kong. Defence counsel travelled from Canada to Hong Kong. At the last minute the plaintiff advised that he was not going to cross-examine but would instead send a list of written questions.

[46] In my view, those circumstances warrant an award of substantial indemnity costs. It should have been clear to the plaintiff in December 2021 that it could not meet the prerequisite of an introduction to claim any sort of compensation. It should have been clear to CME from the outset that it could not meet the prerequisite of having delivered confidential information.

[47] I would, however, adjust the defendants fees. Although the defendants serviced the file efficiently with one senior and one junior lawyer, an initial junior lawyer, Megan Patterson, was replaced early on in the piece. Ms. Patterson’s substantial indemnity time comes to $10,536.12 (including HST). I would deduct her time from the fees awarded to bring the claim for substantial indemnity costs down to $225,522.93. It also appears that those fees were subject to an additional 15% discount by agreement with the clients. I apply that discount to the cost award to bring substantial indemnity costs down to $191,694.49. I add to that disbursements of $28,291.76 for a total cost award of $219,986.25.

Koehnen J.

Released: June 6, 2024

[^1]: Royal Bank of Canada v 1643937 Ontario Inc., 2021 ONCA 98 at para 24.

[^2]: Sanzone v Schechter, 2016 ONCA 566 at para 30.

[^3]: Sweda Farms Ltd. v Egg Farmers of Ontario, 2014 ONSC 1200 at para 26 aff’d 2014 ONCA 878.

[^4]: Broadgrain Commodities Inc. v Continental Casualty Company, 2018 ONCA 438 at para 7.

[^5]: Terry Martel Real Estate Ltd. v. Lovette Investments Ltd. 1981 1659 (ON CA). See also: Real One Realty Inc. v. Liu 2021 ONSC 944, at para 31; see also Ariston Realty Co. v. Elcarim Inc., 2013 ONSC 1995; William Allan Real Estate Co. v. Robichaud (Ont. H.C.J.), 1990 6884 (ON SC); affirmed at 1993 8637 (ON CA).

[^6]: Kuang cross-examination q. 537 – 547.

[^7]: Hordo v. Zweig, 2021 ONSC 2244 at para 19; see also Lyons v. Todd, 2019 ONSC 2269, at para. 30; Investment Administration Solutions Inc. v. Pro-Financial Asset Management Inc., 2018 ONSC 2589, at para. 14.

[^8]: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9.

[^9]: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para 26