WM. Morrissey Ltd. et al. v. Ontario Racing Commission

On or prior to June 30, Harquail deposited the sum of $25,000 with the bank, to be paid to Oak, Amren, Daigle and Macinnon (hereinafter referred to as the prospectors) upon their depositing transfers of the mineral claims as provided. They, however, did not comply with the option, having decided to repudiate any liability under it and having granted another option to the respondent company Junder the circumstances to be hereinafter mentioned. Mineral claims in the Province of Saskatchewan are subject to the provisions of The Mineral Resources Act of that province, R.S.S. 1953, 47, and to the regulations made thereunder by the Lieutenant Governor in Council as authorized by s. Under these regulations persons desiring to prospect and make entries on mineral claims must obtain a licence in the form prescribed. A licensee desiring to acquire a mineral claim situate in unsurveyed lands such as the area in question must stake the claim in the manner prescribed by the regulations, and within a stated period apply to have such location recorded as a mineral claim with the Mining Recorder of the district. Upon compliance with these requirements the Recorder may issue a certificate of record of the claim in Form B prescribed by the regulations, which simply certifies that the claim has been recorded in the name of the applicant and describes generally its location. A claim thus recorded may be transferred to another licensee. The entry is effective for one year and from year to year thereafter for a maximum period of ten years, provided that work to a prescribed value is done in each year. Upon the required work being done the licensee may obtain a certificate of improvements from the Recorder and, obtaining this, is entitled to a lease of the claim for 21 years, with a provision for renewals such term at a rent prescribed.

The prospectors and Evelyn Oak, the wife of Alvar Oak, had staked the claims referred to in the option as EO-1-16 inclusive and recorded them with the Mining Recorder at Uranium City. Whether certificates of record in Form B had been issued in respect of these and the other claims is not clear from the evidence, but it is apparently undoubted that the parties who had staked the claims were entitled to such certificates. It is also common ground that Oak had been authorized by his wife to sign the option upon the claims recorded in her name.

On June 28, 1955, the respondents Morrisroe and Meschi, both of whom were officers of the respondent company and were aware of the option granted by the prospectors to Harquail, entered into negotiations with the prospectors J. to obtain an option in favour of the respondent company. As a result, Oak and MacKinnon left Uranium City and proceeded with Morrisroe to Regina. MacKinnon had been given a power of attorney by the other prospectors to deal with the claims other than those of Mrs. Oak. On arrival at Regina on June 29 they were taken to the office of the solicitors for the respondent and there signed an option prepared by one of these solicitors upon the claims mentioned in the option to Harquail. Morrisroe appears to have concealed from his solicitor the fact that the prospectors had already given an option upon the properties to Harquail, Mr. Ehmann, the solicitor who dealt with the matter, contenting himself with asking Oak and MacKinnon if they and their associates owned the claims, a question which they answered in the affirmative. He thereupon prepared an option agreement dated June 29, 1955, between Oak and MacKinnon as optionors and the respondent company as optionee.

This document recited that the optionors were the owners and recorded holders of the mineral claims referred to (though in the case of the EO group of claims this was inaccurate) and that they had agreed to grant "the sole and exclusive option to purchase the said mining claims to the respondent company" in consideration of a cash payment of $25,000 and a further sum of $175,000 to be paid in stated instalments on November 1, 1955, March 1, 1956, November 1, 1956, and July 1, 1957. As a further consideration for the granting of the option it was provided that the optionee would "at such time as it may deem advisable" incorporate public company for the development of the claims with a minimum authorised capital of four million shares. Of these shares the optionors were to receive 10 per cent. and of this percentage 10 per cent. were to be free shares and 90 held in escrow and released pro rata "as stock is released from escrow." It was provided that the optionors should forthwith execute transfers of the mining claims in blank and deposit such transfers LIMD. with the Bank of Commerce in Uranium City, with any other title papers which they might have in their possession, including a copy of the option agreement, to be held by ' the bank in escrow to be delivered to the optionee or his nominee upon the prescribed payments being made and the event of this option not being exercised the said bank is to hold the said documents to the order of the optionors." During the currency of the option the optionee was given the right to enter upon the mining claims and to develop and work them in such manner as it might deem advisable. The optionee covenanted to do the required assessment work upon the claims and to record such work with the Mining Recorder until such time as the company had been formed, at which time such work should be performed by it. Upon default in payment of any of the amounts stipulated to be paid the option agreement was to terminate and any payments made thereunder be forfeited.

While, by the terms of the option agreement, transfers of the claims in blank were to be placed in escrow with the bank at Uranium City, for some reason which I am unable to understand, the solicitor, who said that in preparing the document he was acting on behalf of MacKinnon and Oak as well as the respondent company, obtained from Oak transfers of 18 claims which included the 12 claims being part of 10 group 1 described in the option. It is not clear from the evidence in whose name these entries had been recorded or by whom the transfers were executed, and the transfers were not produced at the trial. According to Mr. Ehmann, he caused these transfers to be filed with the Mining Recorder, transferring these 18 claims to the respondent company on June 29. On the same date he prepared an agreement which was signed by Morrisroe on behalf of the respondent company, which recited that Alvar Oak "has entered into an agreement for sale to sell a certain group of claims known as the IO group" and that the respondent company undertook to transfer back to Oak Claims 14, 15, 16, 17 and 18. There had been in fact no agreement of sale entered into by Oak and it was not contemplated by the option that the claims should be transferred to the respondent company then or apparently thereafter. Clearly, the parties intended that the claims would be transferred to the new company if the option . payments were made, since otherwise the shares to be received by the prospectors would be worthless.

While the Mining Recorder at Regina was called and gave evidence of interviews which he had with Mr. Ehmann J. and Morrisroe on June 29 and 30, he made no mention of the recording of this transfer, the documents were not produced and there is no other evidence of the transfer of the claims than that given by the solicitor. The fact that such transfer was made was accepted by the learned trial judge and the matter dealt with in the manner hereinafter stated. On the morning of June 30 the respondent company filed a caveat with the Mining Recorder at Regina claiming to be interested in the mining claims under the option agreement referred to. On the same date Harquail filed a caveat based upon the option granted to him with the Mining Recorder at Uranium City. In view of the findings of fact made by the learned trial judge, the actual times at which these respective caveats were filed are not important. Transfers in blank of the entries made by Mrs. Oak and by Alvar Oak and MacKinnon were obtained by the respondent company and remained in their possession at the time of the trial. They were not deposited in escrow, as contemplated by the option, due apparently to the institution of this action.

Davis J. by whom the action was tried, found that the option agreement made between Harquail and the prospectors was a binding contract and directed that it should be specifically performed and carried into effect. It was directed that the respondent company cause the 12 mineral claims transferred to it to be recorded in the names of the prospectors jointly and, failing this being done, that the Mining Recorder do cancel the "title of the defendant Canadian Pipelines and Petroleums Limited to the said mineral claims" and record the same in the names of the prospectors and issue certificates of record in their names. The prospectors were directed to execute transfers of the said entries in blank and deposit the same in escrow in the Canadian Bank of Commerce at Uranium City in accordance with the terms of the agreement.

A further term of the judgment continued an injunction made by Dorion J. on July 20, 1955, and continued by Graham J., the terms of which enjoined the respondents from disposing of or drilling or developing the said mineral claims.

A further term of the judgment read as follows:

As to this it is to be noted that the option to Harquail did not contain any provision entitling him to enter upon the claims or do any work on them and, in the absence of such a term in the agreement, the optionee had no such right, in my opinion. The claim advanced in the statement of claim is upon the option agreement of June 25, 1955, as it reads: it is not alleged that there was a contemporaneous oral agreement that the optionee might enter and work the claims during the currency of the option and that by a mutual mistake such a term was omitted from the writing, nor is there any claim made to rectify the agreement on this or any other ground. The respondent company had expressly stipulated for such a privilege in the option of June 29, 1955.

The main grounds of defence to the action were that the agreement had been signed on a Sunday and so was unenforceable under the provisions of the Lord's Day Act, R.S.C. 1952, c. 171, and that the agreement was uncertain and, accordingly, an action for specific performance did not lie. The learned trial judge found as a fact that the respondents Morrisroe, Meschi and the company, which had obtained an option agreement for the same claims from the prospectors following July 25, 1955, had done so with full knowledge of the fact that they had entered into the agreement above quoted.

Towards the end of the trial the defendant company, Morrisroe and Meschi had applied for leave to amend their defence so as to plead regulations 8(1) and 9(1) above quoted, but this motion was refused.

The defendants Daigle and MacKinnon had counterclaimed in the action against the defendant company for an order declaring that the option agreement entered into by them with that company on June 29, 1955, became void and was terminated on November 1, 1955, and the judgment at the trial declared such agreement to have been terminated. The plaintiff, the defendant company and the prospectors appealed to the Court of Appeal'. The judgment of that Court dismissed the appeal of the defendant company, Morrisroe and Meschi as to the merits, but allowed it to the extent that the said defendants were permitted to amend their statement of defence to plead regulations 8(1) and 9(1) upon terms upon compliance with which a new trial restricted to the issue raised by the said amendment was directed. The appeal taken by the same defendants against the judgment in favour of Daigle and MacKinnon declaring the agreement of June 29, 1955, to have been terminated was allowed. The appeals taken by the present appellant and by Oak and Amren were dismissed.

On this appeal the defence that the agreement dated June 25, 1955, had been made on a Sunday was abandoned and the finding that the respondent company and its officers Morrisroe and Meschi were aware that the prospectors had entered into the agreement of June 25, 1955, when they obtained the option of June 29, 1955, was not questioned. In so far as the present appeal seeks to set aside the judgment appealed from on the ground that the amendment to plead the Mining Regulations should not have been permitted, it should fail, in my opinion. I consider that no sound reason has been advanced which would justify our LTD.interfering with the exercise of the discretion vested in the Court of Appeal.

The defence which raises what is in my opinion the only question of difficulty in the present appeal is based upon a contention that the agreement sought to be enforced gave to Harquail and his principal, the appellant, an equitable interest or estate in the mineral claims, that the acquisition of any such rights by an individual or a company not holding a miner's licence is prohibited by Regulation 9(1) and that the agreement is accordingly invalid.

This contention is based upon the decision of the Court of Appeal in London and South Western Ry. Co. v. Gomm.' It is necessary to consider with some care the facts of that case to determine just what was decided.

By an indenture dated August 10, 1865, made between the London and South Western Railway Company and one Powell, the company conveyed to the latter a parcel of land no longer required for its purposes. Powell, on his part, covenanted with the company that he, his heirs and assigns, owner and owners for the time being of the hereditaments intended to be thereby conveyed and all other persons who might be interested therein, would at any time thereafter whenever requested by the company, its successors or assigns, by a six calendar months' previous notice in