Klondyke Government Concession v. The King, (1908) 40 SCR 294

Supreme Court of Canada

Klondyke Government Concession v. The King, (1908) 40 S.C.R. 294

Date: 1908-05-29

The Klondyke Government Concession (Defendants) Appellants;

and

His Majesty The King (Plaintiff) Respondent.

1908: May 8; 1908: May 29.

Present: Girouard, Davies, Idington, Maclennan and Duff JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA.

Mining regulations—Hydraulic lease—Breach of conditions—Construction of deed—Forfeiture—Right of lessees—Procedure on inquiry—Judicial duties of arbiter.

Under circumstances similar to those involved on the appeal in the case of The Bonanza Creek Hydraulic Concession v. The King (40 Can. S.C.R. 281) this appeal was allowed with costs for the reason that there could be no right of cancellation of the lease or re-entry by the Crown until default by the lessees had been established upon an investigation of a judicial nature by the Minister of the Interior in the exercise of the functions vested in him by the hydraulic regulations and the terms of the lease.

Per Idington J:—The facts disclosed by the evidence could not justify the cancellation of the lease or re-entry or breach of the conditions thereof.

APPEAL from the judgment (dated 7th January, 1908), of Burbidge J. in the Exchequer Court of Canada, maintaining the plaintiff's action with costs. The reasons for the judgment appealed from were stated by the late Mr. Justice Burbidge in terms exactly similar to those mentioned in the report of the case of The Bonanza Creek Hydraulic Concession v. The King[1], at page 282; the same clause (12) of the hydraulic regulations of 3rd December,

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1898, was in question, as well as clauses in the appellants' lease in the same terms as those quoted in the Bonanza Greek Hydraulic Concession Case[2], at page 283.

The special circumstances of the case and the questions at issue on this appeal are stated in the judgments now reported.

Chrysler K.C. and Lar-month for the appellants.

Shepley K.C. for the respondent.

Girouard J.—I agree that this appeal should be allowed for the reasons stated by Mr. Justice Duff.

Davies J.—I also agree in the opinion of Mr. Justice Duff.

Idington J.—Parliament passed on the 13th June, 1898, the "Yukon Territory Act" setting apart the Yukon Judicial District which up to that time had formed a part of the North-West Territories, as a separate territory to be known under the name of the Yukon Territory.

The Governor in Council was given by that Act subject to the provisions thereof power to make ordinances for the peace, order and good government of the territory. It was provided subject to the provisions of the Act that the laws and ordinances as the same existed in the North-West Territories should remain in force until amended or repealed by Parliament or ordinances of the Governor in Council.

Prior to the passing of this Act there existed mining regulations applicable to the North-West Territories

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and thus applicable to the New Yukon Terri- tory. These regulations had been consolidated apparently by an ordinance of the 18th January, 1898, under the heading of—

Regulations governing placer mining in the provisional district of the Yukon, North-West Territories.

I do not find any definition of "placer mining" in these regulations or elsewhere in legislation affecting the territory in question, until 1906. Indeed I cannot find these words used in the enacting part of these regulations except in so far as they appear in the forms. One of these forms refers to "placer mining as defined in the said regulations," We must I think seek, therefore, for this definition and the meaning of "placer mining" so far as it has any meaning, in relation to the questions raised here, in the nature and quality of the rights and privileges defined in the said regulations, and the operations carried on thereunder or contemplated to be carried on thereunder. The rights or privileges provided therein were those conferred upon persons known as free miners enjoying a license (renewable yearly) from the Government under the said regulations. These licenses provided for the licensees each operating comparatively small parcels of land; 250 feet by 1,000 feet being the largest. Provisions were made for staking out such claims and for their allotment. No method of working is specified. The use of water, however, was provided for.

So far as I can see it would have been quite competent for a free miner having acquired a license conferring upon him the right to work one of these claims to have used any machinery, hydraulic or otherwise, that he saw fit. He could not receive a grant of more

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than one claim in a mining district but might in addition to one such hold a hill claim acquired by him under these regulations in communication with a creek, gulch or river-claim, and any number of claims by purchases. Any number of miners might unite to work their claims in common.

It is obvious that for the purposes of working such limited claims expensive machinery would not be expedient as a form of investment. It is quite as obvious that even if no machinery or very little machinery were used in operating, the system could not attract the investment of large capital and all its use implies.

A Mr. Anderson, in December, 1897, applied to the Department of the Interior for a lease of part of the lands now in question for "hydraulic mining" purposes.

The then minister reported that in his opinion it was desirable to introduce "hydraulic mining" in the Yukon District and that Mr. Anderson should be given an opportunity to ascertain whether or not this kind of mining was practicable on the tract applied for. A lease was given him subject to certain conditions on the 24th day of December, 1898. The phrase "the method of mining known as hydraulic mining" is used in the recital describing the nature of the application for the lease. The words "hydraulic mining," "hydraulic mining operations," "hydraulic machinery," repeatedly appear in this lease. Nothing appears therein defining the meaning of these terms.

Some other territory was added shortly after to Anderson's concession.

On the 3rd December, 1898, and prior to granting this lease to Mr. Anderson, a new set of mining regulations

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headed "for the disposal of mining regulations in the Yukon Territory to be worked by hydraulic or other mining process" was adopted.

On the 12th February, 1900, the lease now in question was made by Her late Majesty Queen Victoria represented by the Minister of the Interior of Canada thereinafter called "the minister" to the appellants. This lease was in substitution for all that which Anderson had acquired. I infer he had induced the formation of the appellants' company and made arrangements for it acquiring his rights and such further rights as the minister was induced to concede.

In this lease there are recitals almost identical with those in the Anderson lease but with this marked difference, that in the first recital the words "by hydraulic or other mining process" are substituted for the words "by method of mining known as hydraulic mining. In the second recital the words "hydraulic mining" stand unchanged as in the second recital of the original lease.

When we find that in this second recital the words "his own use and benefit" are continued although in this case it is a corporate body that is being spoken of, we realize fully that care had not been exercised in drafting the recital and to that may be attributed the repeating of the same phrase of "hydraulic mining" instead of "hydraulic or other mining process" as in the preceding recital and elsewhere throughout the lease, and in the regulations under which the lease is made.

The third recital seems identical except in regard to the date. It is, I think, quite clear that the parties concerned intended by the departure, thus evidenced, from the original phraseology respectively to give and

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to acquire more extensive rights than the words "hydraulic mining" might have restricted the lessees to.

This lease to the appellants purports to be given pursuant to the regulations of the 3rd December, 1898, but in the order in council permitting it to be made the express exception was made that the rental of $500 per annum then being paid for the location should be charged instead of the lower rental prescribed by the regulations.

It incorporates the regulations by rendering it subject thereto "as fully and effectually to all intents and purposes as if they were set forth" in the lease.

The appellants took possession under the said lease, brought certain machinery and mechanical appliances and had them installed as required in the first year of the term on the property in question and have carried on mining operations upon such property ever since, sometimes with all such appliances, sometimes with only part thereof.

The yearly rental of $500 was paid and accepted by the Department until the declaration of forfeiture about to be referred to.

On the 21st August, 1900, the mining inspector pursuant to request reported to the Assistant Gold Commissioner, an officer appointed pursuant to the statute and regulations, and under the Minister of the Interior, that there had been prior to the date of the second lease substantial machinery and subsequent thereto also very substantial machinery brought on and installed for the purposes of operating the mining location in question.

He amongst other things said:—

I must say that the company are doing their work in an excellent way under the direction of Mr. Martin who intends doing some

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winter sluicing in a most ingenious method the start of which I have seen and hope will prove successful.

He also remarked that the company were working ground quite unsuitable for individual mining as the dirt they were getting only averaged about $6 to the cubic yard.

On the 12th November, 1902, Mr. Beaudette, mining engineer, in answer to a telegram reported to the minister that the operations conducted on this concession were of a placer nature, only and the operations were; not conducted on as large a scale as some of the placer mining claims on the same creek, that the machinery used was only useful in connection with placer mining operations and could not be used for hydraulicing, but there was however a pump and hydraulic pipes on the ground which were used to hydraulic a hill about a year previously but then practically abandoned and useless as the ground within the location was situated on a creek bed with no water to operate, or grade and dumping ground to deposit the tailings on, and consequently unsuitable for such purposes.

There had been, he reported, $5,000 expended as near as he could judge in actual mining operations on this location in that year.

On the 10th December of the same year, Mr. Gosselin, Assistant Gold Commissioner, certified to the same effect, and reported to the Secretary of the Department of the Interior on the same day enclosing affidavits of Anderson and others as to the work and adding that even if shewn to be in excess of $5,000 it was by the ordinary placer mining methods, that in some cases placer mining was carried on upon a larger scale, repeated what was reported above by the mining: engineer, and closed by saying:

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Under the circumstances I have issued accordingly my certificate to the effect that the concessionnaires have done work on the concession to the extent of at least $5,000.

Similar complaints followed the next year.

It is quite noticeable that the officials in the Yukon were somewhat in doubt as to whether an expenditure in the way of what was called placer mining could be a fulfilment of the lease or not, and in the year previous to that now in question the matter was disposed of by the direct instructions of the Department to recognize what was done as complying with the lease.

On the 26th April, 1905, Mr. Finnie, Assistant Gold Commissioner, certified accordingly as the Secretary had instructed

that it had been proven to his satisfaction that the lessees of hydraulic mining location described in Lease No. 1, which was issued on the 12th February, 1900, in favour of the Klondyke Government Concession, Ltd., of London, England, have expended in actual mining operations, in, about or upon the said hydraulic location, the sum of at least $5,000 during the year commencing the twelfth day of February, 1904.

Whether this was done as the result of so interpreting the power of the minister in regard to what we are now called upon to deal with or as a mode of exercising the discretion given him regarding forfeiture for default, does not appear.

On the 21st December, 1905, Mr. Gosselin, as Assistant Gold Commissioner, notified the appellants of other complaints of breaches of conditions in the lease, and took steps in respect thereto by virtue of paragraph No. 10.

On the 26th January, 1906, Mr. Anderson makes an affidavit as agent of the company as follows, amongst other things:—

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2. That during the year which commenced on the 12th February, 1905, the following amount of cash has been paid by the company in connection with mining operations carried on upon the said leasehold during the said period, viz.:

In wages.............	$16,056.65
In wood......	4,101.55
In supplies.....	11,153.25
Making a total of.....	$31,314.45

That the mining operations represented by the said expenditure, were as follows, viz.:—

Sunk 6 shafts to bed-rock at an average depth of 30 feet each.

Drifted underground at the said average depth of 30 feet and uncovered approximately 33,000 square feet of bed-rock, hoisted and sluiced the payable gravel from said driving.

3. That the said mining operations were carried on by the company directly and not by miners working under any percentage agreements as to the gold recovered from the ground.

4. That besides those operations, about 100,000 square feet of bed-rock were uncovered, drifted, hoisted and sluiced by different parties of miners working under verbal agreements with the company, whereby those miners were permitted to work pieces of the company's property and to retain a certain percentage of the gold recovered by them in lieu of wages.

On the 2nd February, 1906, Mr. Beandette, Government Mining Engineer, reports as follows, to the Assistant Gold Commissioner, that

there were six outfits operating on the concession during the summer and I am positive that the amount of Work as represented in the affidavit has been performed. Taking that amount of work as correct, I would estimate the cost to le $14,666.60, as follows:—

33,000 square feet of bed-rock represent a cubic content of 7,533.03 cubic yards. The cost to remove a cubic yard of gravel by the ordinary placer method is estimated at $2, which is only for labour alone.

The property was operated by ordinary placer methods, the same as is found on ordinary individual claims.

There were no hydraulic operations conducted on the property during the year.

On the 30th April, 1906, the minister notified the appellants

that, after due inquiry, the undersigned Minister of the Interior has satisfied himself and has found as a fact that during the year

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last past of your tenancy under your lease from the Crown * * * your company has failed to expend the sum of $5,000 in active mining operations for the efficient working of the rights and privileges granted by the said lease * * * and thereupon declares the lease void.

A statement is put in supported by evidence that from first to last those lessees had spent a very large sum of money in each year making a total of something over $523,000. In crediting the amount of money realized from the operations there would be a large sum, largely in excess of $ 5,000 a year, spent by the appellants over and above their entire receipts. It was stated in argument and not contradicted, to be I think $ 150,000 in all.

The question is raised whether the minister can, as the result of an ex parte inquiry, in such a case declare such a lease as this forfeited.

In this case I am, by reason of the conclusion I have come to for the reasons I am about to give, not troubled with the necessity of determining that question of mode of inquiry in this case.

The operative part of the lease is as follows:—

Now this indenture witnesseth that in pursuance of the premises and in consideration of and subject to the rent, covenants, provisos, exceptions, restrictions and conditions hereinafter reserved and contained and by the lessee to be paid, observed and performed, Her Majesty doth grant, demise and lease unto the lessee the said tract of lands and the exclusive right and privilege of extracting and taking therefrom, by hydraulic or other mining process, all royal or precious metals or minerals from, in, under or upon the tract of lands hereby demised and leased with regard to which the said rights and privileges are hereby granted, which said tract is described as follows, that is to say:—

Then follows the descriptions of the properties and then habendum and reddendum clauses. Following the latter is this proviso: "provided always and this lease is subject to the following exemptions, restrictions,

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provisos and conditions," which are numbered from 1 to 18.

Of these Nos. 4 and 10 are those upon which the questions herein turn and are as follows:—

4. That the said lessee shall have sufficient hydraulic or other machinery in operation on the said demised premises within one year from the date hereof to permit of his beginning active operations for the efficient working of the rights and privileges hereby granted which active operations he shall begin within the said period; and that if during any year of the said term hereby granted, the lessee shall fail to expend in such mining operations, in, about or upon the said mining rights and privileges hereby granted, the sum of five thousand dollars—of the fact of which failure the Minister shall be the sole and final judge—this lease or demise and the remainder of the term hereby granted, and all benefits, rights and privileges hereby granted to the lessee shall become and be utterly and absolutely null and void, unless the Minister shall otherwise decide; and that in the event of such predetermination of this lease or demise and of the term hereby granted or the remainder thereof, Her Majesty, her successors, or assigns may thereupon re-enter upon the said demised premises and have, hold, use, occupy, possess and enjoy the same and every part thereof, as if these presents had never been executed, and without any compensation or payment of any kind to the lessee for any work done or improvement made thereon;-but nothing herein contained shall in any wise affect the right of Her Majesty or her successors or assigns to all arrears of rent or royalty to be paid as hereinbefore provided or to any remedy for the recovery of such arrears of rent or royalty.

No 10 is as follows:—

That if the lessee shall, at any time during the said term fail to pay the rent or royalty hereby reserved, or any part thereof, within sixty days after the same respectively shall have become due, or if he shall commit any breach or default in the observance of the above conditions or of any of them other than that referred to in the clause numbered "4"of these presents then, and in every such case, the Gold Commissioner may post a notice in a conspicuous place upon the said demised premises and may mail a copy of such notice to the last address of the lessee known to the Commissioner requiring such default to be remedied, and in case such default is not remedied within three months of the date of the posting of the notice upon the location, all the rights of the lessee under the said lease and under the said regulations of the Order in Council of the 3rd day of December, A.D. 1898, shall be and Become ipso facto null and void, provided that the claim of Her Majesty or her successors or assigns for any

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rent or royalty then due or accruing due, or any remedy for the recovery thereof shall be in no wise affected by such cancellation.

It is contended in support of the minister's finding that this paragraph 4 empowered him to do what is complained of in the manner he so did. On the other hand it is contended that he should either have proceeded by directing proceedings to be taken under paragraph 10 as done in cases mentioned above or if that were inapplicable for any reason, that he should have acted under section 12 of the regulations of the 3rd December, 1898, which provides a method somewhat similar to that of said paragraph 10 for dealing with breaches of conditions.

It is replied to this contention that the terms of section 10 of the proviso in the lease indicated clearly that everything arising under or out of section 4 of the same proviso is expressly excepted from the operation of section 10 by the words

or if he shall commit any breach or default in the observance of the above conditions or of any of them other than that referred to under the clause numbered 4 of these presents, etc.

Can it be said that these words necessarily referred to the whole of paragraph 4? Can they fairly be referred to as having such comprehensive operation? Do they grammatically permit of any such meaning?

There is more than one breach or default possible within paragraph 4. Can it be said that the phrase "other than that" referred to in the clause numbered 4 can cover more than one? Read grammatically it certainly cannot and of those which is the one that is the most obviously pointed at? Is it not that of the fact of which the minister shall be "the sole and final judge" according to paragraph 4? Read thus, restricted thus, and given no wider meaning, it seems fulfilled to the letter.

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Even if paragraph 10 of the lease should be thus excluded it does not appear that section 12 of the regulations is touched thereby.

It is said however that the minister is not confined to the mere words of the latter part of paragraph 4, but that we must read the words "such mining operations" therein, in respect of which the $5,000 a year is to be spent in so expansive sense as to include all that precedes them in this paragraph 4 and thereby make the test the minister has the power to apply to be the efficient working of the rights and privileges thereby granted. In this way a; man might from one cause or another have spent $10,000 in working with some hydraulic machinery and done neither himself nor the country any good yet have his lease declared by the minister to have become forfeited because his work had proved inefficient. I do not think such a thing was ever contemplated as confiding such a power to the minister.

It is to be observed that the phrase "such mining operations" has not necessarily any relation to the words "efficient working." I would say that the words "such mining operations" had relation to and referred to and were intended to be governed by the meaning of the terms "hydraulic or other mining process."

We are thus brought to a consideration of the bearing of the history I have already given of these words in this connection. We have the words "hydraulic mining" adopted in the first lease. We have the words changed to express evidently some wider idea than was expressed by the words in the lease to Mr. Anderson. Why were the words "or other mining process" used? Why are they used in the regulations? Why were the regulations framed?

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Was it not to give effect to the suggestion that the words "hydraulic mining" were too restricted? Was it not to give in a wider sense effect to what was the object for which the whole regulations of 3rd December, 1898, were provided? What was that object? It was clearly as was forcibly put forward by counsel for the Crown to induce capitalists to invest their money in projects for the development of the mining lands in the Yukon in a much more comprehensive and expansive way than was being done through the little grants of 250 feet by 1,000 feet renting from year to year and called placer mining. The idea originated with Mr. Anderson. The hydraulic mining method was that which occurred to him at first as being the most appropriate method by which those larger operations could be carried out, but just as clearly it appeared to him later, as the result of a year and a half's experience, that what was known as hydraulic mining might be too restricted a method to induce the investment of capital to bring about the mining development of the territory in the way in which he and the Government desired.

If we were to find any charm in the word "hydraulic" we find the placer miner regulations recognize an hydraulic process of some kind. The miners are possibly not given much to etymological derivations. But they evidently know, sometimes, how to use water when they see it. We have not been favoured in the legislation under review or even in the evidence with any satisfactory interpretation of the phrase "hydraulic mining." The officials use the term as one having to them a known meaning and that not to include sluicing though uninstructed people might call that a hydraulic process.

From what counsel and witnesses say no doubt the

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latter was known as a method of applying by a force pump water so as to resolve the hard earth and get thereby at the gold therein.

I do not suppose any one ever dreamt, in framing this forfeiting power, of it enabling the minister to determine in regard to the efficiency of the operations carried on. It seems to me the plan was adopted (and it was an ordinary business plan) of insisting upon an immediate large expenditure, and then $5,000 being spent annually in mining operations as simple tests of the earnestness of the lessees. No doubt it was supposed that self interest would in such case produce efficiency. It was not to be supposed that having spent the necessary money for equipment it would lie idle and $5,000 more be spent annually merely to duplicate the ordinary efforts of placer miners in rich territory.

The reason for the making of the lease of so large an area was its comparatively speaking poor and unproductive soil as compared with that much richer ground that was worked under the placer mining regulations.

It was to have this poor ground exploited and on the hypothesis that it could only be done profitably by the use of expensive machinery, hydraulic or otherwise, that all concerned proceeded.

It is quite evident that it was upon the supposition that the placer mining regulations and methods could not make this poorer soil productive that the new regulations as to "hydraulic or other mining process" were adopted.

It was to attract to the working of such poorer soil the necessary capital that these regulations were adopted and this experimental lease was given.

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If for example the substitution of electric for hydraulic force had become possible and even superior to the latter I do not think any one would have ever had the face to submit that it did not fall within the meaning of these words "hydraulic or other mining process" in the regulations or this lease.

Such are the inferences drawn by me from the history I have set forth and applied to enable me to see if the contention set up as to the construction of this lease be tenable. I think it utterly fails.

Of course if the lease had clearly and explicitly set forth such a power in the minister as any of these several contentions maintained by respondent's counsel, we could gather no justifiable assistance from that history or inferences therefrom.

Being anything but clear and explicit we must, I think, consider everything leading up to it and immediately following it in order that we, by understanding what those concerned were about or could have had in mind and desired to have done, can in light thereof better read the purport of what they have written.

It is not at all to be marvelled at if their expectations failed and the expected application of what is written as an adequate safeguard has failed also.

That is no reason for any extending of the meaning of the language of the lease or implying greater power in the minister than is clearly written.

Above all a power of forfeiture by the adoption of ex parte methods is not a thing arising from implication but must rest if at all on the clearest expression thereof.

It is properly conceded that the minister's action was in good faith.

The finding gives no explicit or detailed statement

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of the grounds on which he acted. We are driven to conjecture. His good faith and the admitted facts regarding expenditure can only be reconciled by assuming that he proceeded upon the assumption that he had the right to determine in what way the work should be carried on and the efficiency thereof before considering the amount of the expenditure and had a right to discard all done that did not fall within the meaning he saw fit to attribute to the words hydraulic mining without giving any effect or force to the words "or other mining process."

In so proceeding he was, I submit, exceeding his jurisdiction and therefore his finding was void.

I was at first disposed to think the case might have been tried and a finding reached on the evidence independently of the minister's finding,

For two reasons that is not open. The facts and method of the trial hardly warrant us in so treating the case, and what appears in the views expressed (as to the need to resort to the special methods prescribed by paragraph 10 or by section 12) by my brother Duff, whose opinion in Bonanza Creek Hydraulic Concession v. The King[3], I have read since writing the foregoing. That case was heard immediately before this and turns upon somewhat similar questions arising on a lease in same form. It may be that as I agree in his conclusion as to a need of hearing which was not had here in the way one would like, the allowance of appeal here might well rest on that ground alone.

The leading facts are, however, almost entirely dissimilar and there is something of a proffered but limited hearing in this case (non-existent in that) which

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as well as the differing facts may distinguish the two cases.

I think well therefore to rest my opinion of this appeal on the grounds I have set forth as well as on non-observance of right to be heard.

I think the appeal must be allowed with costs.

Maclennan J.—I do not think it necessary to express any opinion upon the various matters which were discussed before us in this case, on the question whether the appellants had or had. not been guilty of such violations of the conditions and. stipulations of their lease as to entitle the Crown to terminate it, being of opinion that the minister could not do so without acting judicially, and giving the appellants an opportunity of being heard.

Duff J.—This appeal is governed by the decision in The Bonanza Greek Hydraulic Concession v. The King[4]. The material provisions of the appellants' lease are identical with those considered on that appeal; and, although, in this case, there is evidence of communications and discussions between the minister and the solicitor of the company before the formal declaration of forfeiture, the minister's decision that the lessees had failed in making the expenditure required by the terms of the lease was not, I think, preceded by anything which, within the principle of that case, could be described as a hearing upon that question.

The appeal should be allowed with costs.

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Appeal allowed with costs.*

Solicitors for the appellants: Chrysler, Bethune & Larmonth.

Solicitor for the respondent: George F. Shepley.

*Leave to appeal to the Privy Council was refused on 18th July, 1908.