Supreme Court of Canada
Frobisher
Ltd. v. Canadian Pipelines & Petroleums Ltd. et al., [1960] S.C.R. 126
Date:
1959-12-14
Frobisher Limited (Plaintiff) Appellant;
and
Canadian Pipelines & Petroleums Limited,
Lawrence C. Morrisroe, E. George Meschi, A. Oak, A. Amren, S. Daigle, Jock
Mackinnon and D. J. Sheridan (Defendants) Respondents.
1959: February 2, 3, 4, 5; 1959: December 14.
Present: Locke, Cartwright, Abbott, Martland and Judson JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN.
Real property—Mines and Minerals—Option to purchase
mineral claims— Second option given to different company—Specific performance
of first option sought—Whether option created equitable interest in land—
Failure of optionee to comply with statutory requirement to hold
licence—Pleadings—Amendments at trial—Regulations 8(1), 9(1), 124 of the
Mineral Resources Act, R.S.S. 1953, c. 47.
On June 25, 1955, the plaintiff, through its agent H, took an
option to purchase certain mining claims from four prospectors. The option
provided that it should remain open to June 30, and set out the terms of
purchase involving the transfer of the claims on or as close as possible to
June 30 whereupon a certain sum would be paid; a further sum to be paid in
stated instalments and the formation of a new company in which the vendors
would receive 10 per cent, of the authorized stock. On June 29, the prospectors
gave an option to purchase the same claims to the defendant P Co., which not
only took with notice of the first option but actively induced the breach of
it. The plaintiff sued P Co. and the four prospectors for specific performance
and an injunction against any dealings with the claims by the defendants.
Towards the end of the trial, the defendants moved to amend by
pleading regulations 8 and 9 of the Regulations made under the Mineral
Resources Act, providing that no mining company shall be granted a licence
unless it is registered under the Companies Act and that no person or company,
not a holder of a licence, shall prospect for minerals, stake out or record any
location or "acquire by transfer,
[Page 127]
assignment, or otherwise howsoever, any mineral claim or any
right or interest therein". The trial judge refused leave to amend and
gave judgment for the plaintiff. The majority in the Court of Appeal ruled that
the amendment should have been allowed and ordered a new trial restricted to
the issue raised by the amendment. In all other respects the appeal was
dismissed.
The plaintiff appealed to this Court and two of the
prospectors cross-appealed. The plaintiff admitted before this Court that its
agent H had no licence until July 27, 1955; that the plaintiff did not register
under the Companies Act until March 9, 1956, and that it acquired its
Miner's licence on March 12, 1956. Counsel all agreed that this admission
should be regarded as evidence given before this Court under s. 67 of the Supreme
Court Act.
Held (Locke and Martland JJ. dissenting): The appeal
and the cross-appeals should be dismissed. The action must also be dismissed.
Per Curiam: The Court of Appeal exercised its
discretion rightly in permitting the defendants to amend their defence so as to
plead regulations 8(1) and 9(1).
Per Locke, Abbott, Martland and Judson JJ.: There was
no necessity to decide as to the validity of regulation 124, providing
compensation for the wrongful registration of a caveat, since it was clearly
shown that no damage arose from the registration of the caveat and that the
filing of it was completely justified under the circumstances.
Per Cartwright, Abbott and Judson JJ.: No valid
distinction could be drawn between the position of the plaintiff during the
period from June 25 to June 30 and what would have been its position if the
first payment had been made. The option created an equitable interest in the
claims and was rendered void because it was given and taken against the express
prohibition contained in regulation 9(1). London and South Western Railway
v. Gomm, 20 Ch. D. 562, followed.
The plaintiff's case was not assisted by the fact that the
claims were to be transferred not the plaintiff but to a company to be
incorporated. Its legal position was the same whether the transfer was made
direct to the new company or to the plaintiff and from the latter to the new
company.
The analogy which the plaintiff sought to draw with the cases
dealing with the rule against perpetuities did not lead to the suggested result
that the contract could still be enforced as a personal obligation. The case at
bar was not concerned with that rule. Whether or not the contract, on the true
construction of regulation 9, was forbidden, depended upon the rights which it
conferred. By the contract, specific performance of which the plaintiff was
seeking as construed by the trial judge, the plaintiff, during the currency of
the option, acquired the exclusive right to enter upon, drill and explore the
claims and the right to compel the conveyance of the claims upon completion of
the option payments. The plaintiff, therefore, acquired a right or interest in
the claims.
Per Abbott and Judson JJ.: The position of the optionee
under the agreement was the same throughout all its stages; the plaintiff
obtained an irrevocable offer for certain stipulated periods on payment of
certain stipulated sums. The payments, if completed, constituted the purchase
price and all that then would remain to be done was to form the new company,
transfer the claims and allot to the prospectors 10 per cent, of the stock.
[Page 128]
An option to purchase land creates an equitable interest
because it is specifically enforceable. There is a right to have the option
held open and this is similar to the right that arises when a purchaser under a
firm contract may call for a conveyance. In both cases there is an equitable
interest but in the case of the option it is a contingent one, the contingency
being the election to exercise the option. Judicial reexamination from time to
time since the case of London and South Western Railway v. Gomm, supra, has
resulted only in an affirmation of the rule that an option holder has an
equitable interest.
An interest in these claims having been acquired, the
agreement was void and of no effect because it was given and taken against the
express prohibition contained in regulation 9.
Regulation 124, if valid, has no application when there is a bona
fide dispute; registration of a caveat "wrongfully and without
reasonable cause" means something in the nature of an officious
intermeddling without any colour of right.
Per Locke J., dissenting: Assuming that on the
authority of the Gomm case an option to purchase land vests in the
optionee an equitable interest in the land in respect of which the option is
granted when the land is to be transferred to the optionee, the case at bar was
distinguishable in that the claims here were to be transferred not to the
optionee but to a company to be incorporated. Consequently, the optionee in this
case acquired no equitable interest in the claims. Its right was a personal
right enforceable in a Court of equity by a decree of specific performance, and
as such, was not affected by regulation 9.
Per Martland J., dissenting: The Gomm case
was not to be considered as laying down, as a general proposition of law, that
any option relating to land of necessity vests in the optionee, forthwith upon
the granting of it, an interest in land. The word "option" was not a
term of art; its meaning depended upon the context. Here, the option did not
confer upon its exercise a right to the optionee to call for a conveyance of
the title to the claims. Therefore, even on the reasoning of the Gomm case,
the optionee did not acquire an equitable property interest in the claims.
An option for the purchase of land creates contractual rights
and, accepting the reasoning in the Gomm case, its effect may be to
create also a contingent limitation of land which may take effect in the
future. If that limitation was rendered void by regulation 9, the contractual
right remained. Consequently, the option in the case at bar was not rendered
void by the regulation, and specific performance could be granted even though
no interest in land was created.
APPEAL from a judgment of the Court of Appeal for
Saskatchewan,
granting leave to amend the defence, ordering a new trial restricted to the
issue raised by the amendment and otherwise affirming the judgment at trial.
Appeal dismissed and action dismissed on admitted facts, Locke and Martland JJ.
dissenting.
C. F. H. Carson, Q.C., A. Findlay, Q.C., and J.
R. Houston, for the plaintiff, appellant.
[Page 129]
J. J. Robinette, Q.C, and W. M.
Elliott, for the defendants, respondents, Pipelines & Petroleums Ltd.,
Morrisroe and Meschi.
D. J. Murphy, for the defendants, respondents,
Oak and Amren.
Locke J. (dissenting):—This
is an action for specific performance and the plaintiff is the appellant.
The agreement sought to be enforced was signed at Uranium
City, Saskatchewan, and reads as follows:
Date—25th day of June, 1955.
We, the undersigned, the sole owners of mineral claims—EO—1
to 16 incl.
Missing Link 1 to 9 incl.
IO—1 to 12 incl.
In all 37 claims contiguous, Located on or near Stewart
Island, Lake, Athabasca, Province of Saskatchewan, Canada—do hereby grant to
James A. Harquail, Mining Engineer—Suite 2810, 25 King St. West, Toronto,
Ontario—in consideration of the sum of $1.00 (one dollar), receipt of which is
hereby acknowledged, an option effective to 12 noon— June 30, 1955—to purchase
said mineral claims from the undersigned under the terms of the following deal:
On receiving transfers to above claims in good order—on, or
as close as possible to June 30, 1955—said transfers to be turned over to
Uranium City Bank of Commerce branch at which time sum of $25,000.00
(twenty-five thousand dollars) will be issued to MacKinnon and partners.
(Vendors).
New company to be formed in which vendors will receive 10%
(ten per cent) of authorized stock.
$25,000. Firm cash.
Option Payments
1st option—Nov. 1, 1955
................................................. $ 25,000.00
2nd option—March 1, 1956 ............................................. 50,000.00
3rd option—Nov. 1, 1956 ................................................. 50,000.00
4th option—July 1, 1957 .................................................. 50,000.00
$8200,000.00
The above agreement shall be binding on the executors,
heirs, etc. of the people signing.
"A.
Oak"
"Albin
Amren"
"S.
Daigle"
"Jock
MacKinnon"
"A.
D. Wilmot"
Witness
to above four signatures.
Signed in the Settlement of Uranium City, Saskatchewan.
[Page 130]
On or prior to June 30, Harquail deposited the sum of
$25,000 with the bank, to be paid to Oak, Amren, Daigle and MacKinnon
(hereinafter referred to as the prospectors) upon their depositing transfers of
the mineral claims as pro-, vided. 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 under 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, c. 47, and to the regulations made thereunder by the Lieutenant Governor
in Council as authorized by s. 9. 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 of 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
[Page 131]
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 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 a 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
[Page 132]
that the optionors should forthwith execute transfers of the
mining claims in blank and deposit such transfers 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 "in 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 10 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
[Page 133]
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 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.
[Page 134]
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:
AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the date
of the first option payment of $25,000.00 under the said Agreement be fixed at
four months after the said certificates of Record and Transfers in blank of all
the said mineral claims are deposited in escrow at the said Bank, as aforesaid,
that the date of the second option payment of $50,000.00 be fixed at four
months thereafter, or so long as is necessary to assure to the Plaintiff the
privilege of drilling on the ice during the months of January and February,
that the date of the third option payment of $50,000.00 be fixed at eight
months thereafter, and that the date of the fourth and final option payment of
$50,000.00 be fixed at eight months thereafter.
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.
[Page 135]
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.
After the hearing of the evidence had been completed in the
matter, counsel for the plaintiff asked leave to amend the statement of claim
by claiming damages under regulation 124 of the Quartz Mining Regulations, which
provides that any person registering a caveat wrongfully and without
reasonable cause against a mineral claim shall make compensation to any person
who has sustained damage thereby, but this application was refused.
The defendants Daigle and MacKinnon had counter-claimed 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.
[Page 136]
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
interfering with the exercise of the discretion vested in the Court of Appeal.
In order that the issues in the action might be properly
dealt with in this Court and the cost of a new trial avoided, counsel for the
appellant admitted before us that Harquail did not acquire a miner's licence
until July 27, 1955, that the appellant company was not registered under the
provisions of the Companies Act of Saskatchewan until May 9, 1956, and
that it did not acquire a miner's licence until March 12, 1956. Counsel for all
parties agreed that these admissions should be treated as evidence given before
this Court under s. 67 of the Supreme Court Act.
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
[Page 137]
writing, reconvey the said lands to the company, its
successors or assigns, for a consideration of 100 pounds. Powell sold the lands
to Gomm in 1865 and the latter was in possession in 1880 when the company gave
notice of its desire to repurchase the property. It was shown that Gomm had
full notice of the provisions of the deed of 1865 when purchasing the property.
Kay J., who tried the action, rejected the argument of the
defendant that the covenant created an estate or interest in land in the
railway company and was, therefore, unenforceable as being contrary to the
rules against perpetuities. He held that Gomm was bound by the covenant in the
deed on the authority of Tulk v. Moxhay.
The appeal to the Court of Appeal was heard by a Court
consisting of Sir George Jessel, M.R., Sir James Hannen and Lindley L. J. The
passage from the judgment of the Master of the Rolls which is relied upon for
the proposition that an option to purchase land creates an equitable interest
or estate in the optionee reads:
If then the rule as to remoteness applies to a covenant of
this nature this covenant clearly is bad as extending beyond the period allowed
by the rule. Whether the rule applies or not depends upon this as it appears to
me, does or does not the covenant give an interest in the land? If it is a bare
or mere personal contract it is of course not obnoxious to the rule, but in
that case it is impossible to see how the present Appellant can be bound. He
did not enter into the contract, but is only a purchaser from Powell who did.
If it is a mere personal contract it cannot be enforced against the assignee.
Therefore the company must admit that it somehow binds the land. But if it
binds the land it creates an equitable interest in the land. The right to call
for a conveyance of the land is an equitable interest or equitable estate. In
the ordinary case of a contract for purchase there is no doubt about this, and
an option for repurchase is not different in its nature. A person exercising
the option has to do two things, he has to give notice of his intention to
purchase, and to pay the purchase-money; but as far as the man who is liable to
convey is concerned, his estate or interest is taken away from him without his
consent, and the right to take it away being vested in another, the covenant
giving the option must give that other an interest in the land.
In that case the option gave to the railway company the
right to require a conveyance to itself and its assigns upon the terms stated,
and this was held to give to it an equitable interest in the land. The present
agreement, as it reads and as it was understood by the prospectors as
[Page 138]
shown by their evidence, contemplated that the mineral
claims should be conveyed not to Harquail or his principal but to a new company
to be formed in which they would hold ten per cent, of the stock. Harquail, as
is stated in his evidence, understood that the transfers of the mineral claims
which were to be deposited in the bank would be in blank, the reason for this
being, no doubt, that the new company was not then in existence and its name
had not been determined. The name of the transferee would be inserted if the
terms of the proposed option were complied with by the optionee and the
completed transfers delivered to the new company. The judgment at the trial
which directed the deposit of the transfers in blank so interpreted the
agreement between the parties and that, in this respect, it properly construed
the document is not questioned by anyone. The agreement did not provide and
none of the parties to it contemplated that, upon making the payments specified
in the option, Harquail or his principal would acquire any interest or estate
in the claims. What they were to acquire was the majority share interest in the
company which would be the owner of the claims. It was not, in my opinion, an
option to purchase at all but an option upon the acceptance of which, by
compliance with its terms, the optionee would become entitled to require
delivery of the transfers to the new company. The fact that the agreement drawn
by Harquail, a layman, reads "an option to purchase" does not relieve
us of the duty of determining the true nature of the document.
In Gomm's case the covenant which was held not to
bind the defendant required him to reconvey the land to the railway company on
its demand, and this appears to have been the basis for the finding that it
gave to the optionee an equitable estate or interest in it. The phrase reading
"The right to call for a conveyance of the land is an equitable interest
or equitable estate" in the judgment of Sir George Jessel must be
construed in the light of the facts of the case, and thus as meaning a right to
call for a conveyance of the legal title to the optionee. Sir James Hannen said
in part (p. 586):
it appears to me to be a Startling proposition that the
power to require a conveyance of land at a future time does not create any
interest in that land.
and this, I consider, is to be construed in the like
manner.
[Page 139]
Here there is no such covenant.
It is altogether too easy a generality to say that an option
vests in the optionee an equitable interest in the land in respect of which the
option is granted. If it be assumed that Gomm's case was rightly
decided, its application depends, of necessity, upon the nature of the right
given to the optionee and that he may acquire upon its exercise.
I must confess my inability to understand how an option
agreement which, when exercised, would not entitle the optionee to any estate,
legal or equitable, in the mineral claims can be said to vest any equitable
interest or estate in him prior to the exercise.
The argument based upon Gomm's case proceeds upon the
assumption that the optionee, as of the time of the execution of the option,
acquired, in the language of Regulation 9(1), "some right or
interest" in the mineral claims. Since neither Harquail or the appellant
had at that time a prospector's, developer's or miner's licence, the contention
is that the transaction was prohibited by the regulation which, by virtue of
the statute, has the force of law.
The interests of the prospectors in the claims upon which
they had made entries which had been recorded are chattel interests, as
declared by Regulation 38. Such a chattel interest is assignable at common law
and Regulation 9(1), to the extent that it prohibits a transfer to a person not
a licensee, is in derogation of common law rights. It is thus to be construed
strictly (Maxwell, 10th ed., 292).
As I have pointed out, however, the option in question does
not provide that the optionors will transfer the claims or any interest in them
to the optionee, but rather, upon the exercise of the option, to a company to
be formed. It is not to be assumed that that company would not obtain the
required licence to enable it to accept a conveyance when the necessity arose.
The regulation does not say that a person who has made and recorded an entry in
a mineral claim may not lawfully agree with anyone to transfer such claim at
some future date to a third person other than the optionee or to a company to
be thereafter formed. We are asked to read into this regulation a prohibition
which it does not
[Page 140]
contain, a course for which there is no warrant. In my
opinion, the regulation as it reads does not affect the rights of the appellant
under this agreement.
Unless regulation 9(1) is to be construed as rendering
unenforceable a covenant to convey a mineral claim at some future time to a
company to be thereafter incorporated, the decision in Gomm's case has
no bearing on the matter to be decided. Whether that case should be followed in
this country has not been considered by this Court. Apart from the fact that it
was referred to with approval in Davidson v. Norstrant, in a dissenting judgment
of Duff J. (as he then was), the case does not appear to have been mentioned in
this Court. In that case, however, the option entitled the optionee to a
conveyance to himself or his nominee of a half interest in the land, his rights
in that respect being similar to those of the London and South Eastern Railway
Company. The case was not referred to by the other members of the Court.
Apart from the difference in the nature of the rights given
by the option, the facts in the present case differ from those in Gomm's case
in another material particular. Here the ownership of the mineral claims has at
all "times remained in the prospectors. The 12 claims transferred by
mistake to the respondent company have at all times been held by it as bare
trustee for the prospectors. The respondent company was a necessary party to
the action only for the purpose of obtaining a direction for a reconveyance of
these claims to the prospectors, a declaration that the company had no interest
in the claims, and to recover any damages caused by its interference with the
appellant's contractual rights.
The facts of the present case are in this respect similar to
those considered by the Court of Appeal in South Eastern Railway v. Associated
Portland Cement Manufacturers.
In that case the railway company had obtained a conveyance
of a strip of land from a landowner which reserved to himself, his heirs and
assigns the right to make a tunnel at
[Page 141]
his or their expense under the property conveyed. The
defendants were the assignees of the landowner and, when they commenced the
excavation of a tunnel, the railway company brought an action for an
injunction, contending that as the time within which the tunnel might be
constructed was unlimited the covenant offended against the rule against
perpetuities. The railway company relied upon the judgment in Gomm's case
and it was held by Swinfen Eady J. at the trial and by the unanimous judgment
of the Court of Appeal that the case had no application. The defendants had
succeeded to the rights of the landowner and, as expressed in the head note, it
was held that as against the original covenantors, the railway company, the
provision in the agreement as to the tunnel was a personal contract and was not
obnoxious to the rule against perpetuities.
Swinfen Eady J., referring to Gomm's case, said in
part (p. 25):
Jessel M.R. … said that if it was a mere personal contract
it would not be obnoxious to the rule against perpetuities, but, as Gomm had
not himself entered into the covenant, it was essential for the plaintiff to
prove that it ran with the land in order to succeed against the assignee.
The same difference in the facts was pointed out in the
judgments of Cozens-Hardy M.R. and by Fletcher-Moulton L.J. Farwell L.J.
referred to the judgment of the House of Lords in Witham v. Vane, the
only report of which appears to be in Challis's Real Property, 3rd ed., p. 440,
and said (p. 33):
But the fact that there is some connection with or reference
to land does not make a personal contract by A. less a personal contract
binding on him, with all the remedies arising thereout, unless the Court can by
construction turn it from a personal contract into a limitation of land, and a
limitation of land only. As regards the original covenantor it may be both; he
may have attempted both to limit the estate, which may be bad for perpetuity,
and he may have entered into a personal covenant which is binding on him
because the rule against perpetuities has no application to such a covenant.
In my opinion, the right of the optionee in the present case,
as above stated, is a personal right enforceable in a Court of equity by a
decree of specific performance. The covenant related to land, as did the
covenant in Witham v. Vane and the Associated Portland Cement case,
and was enforceable as between the contracting parties.
[Page 142]
I would add that if Gomm's case applied in the
present circumstances it would be necessary to consider the decision of the
Court of Appeal in the case of Manchester Ship Canal Co. v. Manchester Race
Course Co.,
which is in direct conflict with it. The right of first refusal upon which
the action was based in that case does not appear to differ from the right of
an optionee who has the right to purchase, and the Court there held that such
right was not an interest in land and rejected the argumet based upon Gomm's
case. The latter case has, it is true, been followed in a number of cases
by single judges in England who, apparently, considered themselves bound by it,
but I think this does not add to its weight.
As to the defendant company, as found by the learned trial
judge, the option agreement obtained by it was entered into with full knowledge
of the option theretofore granted to Harquail, and the principle followed in Lumley
v. Wagner,
applies.
The fact that the appellants obtained an interim injunction
restraining the respondents from entering upon and working the claims and that
the formal judgment at the trial, as above pointed out, read in part:
so long as is necessary to assure to the plaintiff the privilege
of drilling on the ice during the months of January and February
cannot conceivably, in my opinion, affect our decision
in this matter. The option required the prospectors to transfer the claims as
they were at the date of the option to the company to be formed if the option
was exercised and, clearly, during the currency of the option the optionee
would be entitled in an action on the covenant to restrain the respondents from
drilling on or removing material from the claims. However, equally clearly the
optionee was not entitled to enter upon the claims and to conduct drilling
operations since the agreement gave to it no such right and this term should be
stricken from the judgment. It is, however, the duty of this Court to decide
this matter upon its own view of the law, and the answer to the important
question of law here to be decided cannot be
[Page 143]
determined by the opinion of the parties to the action
as to the nature of those rights or the nature of the relief granted at the
trial.
The defence that the agreement was uncertain and that an
action for specific performance does not lie fails, in my opinion. I agree with
the learned trial judge and with the majority of the learned judges of the
Court of Appeal upon this aspect of the case.
The respondent company and Morrisroe and Meschi contend by
way of cross-appeal that a new trial should have been granted in any event by
reason of the refusal of the learned trial judge to permit the defendant Daigle
to be cross-examined in respect of the issues as between the plaintiff and the
company, on the ground that his interest as a defendant in the action was the
same as that of the company. As to this, I agree with the view of the majority
of the Court of Appeal that permission to cross-examine should not have been
refused. I, however, also agree with them that, applying Rule 40 of the Court
of Appeal Rules, a new trial should not be granted because no substantial
wrong or miscarriage of justice was occasioned by the refusal to permit the
cross-examination.
The application of the appellant for leave to amend its
statement of claim to permit it to raise a claim for damages against the
respondent company under regulation 124 above mentioned should, in my opinion,
be refused. There is no evidence that the appellant suffered any damage by
reason of the filing of the caveat and, without such proof, there can be
no recovery under the regulation and the amendment would be of no advantage to
the appellant. As to the claim advanced under that regulation by the
respondents Oak and Amren, not only is there no proof of any damage to them by
reason of the filing of the appellant's caveat, but filing it was neither
wrongful nor without reasonable cause, within the meaning of the regulation: on
the contrary, it was completely justified under the circumstances.
At the trial it was contended that regulation 124 was ultra
vires the Executive Council of Saskatchewan, and Davis J. directed that the
Attorney-General should be notified and permitted to be heard before the matter
was decided. After argument in which counsel for the Attorney-General took
part, the learned judge held the regulation to
[Page 144]
be ultra vires. The Attorney-General did not
intervene formally in the litigation but was represented by counsel in the
Court of Appeal and supported the regulation. The members of that Court did not
consider it necessary to determine the matter. Before this Court the
Attorney-General was again represented by counsel in support of the validity of
the regulation, though he had not formally intervened in this Court. In the
view of my conclusion that there can be in any event no recovery, either by the
appellant or by the respondents Oak and Amren, it is unnecessary to decide the
question as to the validity of the regulation. The matter does not come before
us as a reference and, in my opinion, we should not express any opinion in the
circumstances.
In the result, I would allow the appeal from that portion of
the judgment of the Court of Appeal which directed on terms a new trial in
respect of the issues raised as to noncompliance by Harquail and the appellant
with regulations 8(1) and 9(1). I would direct that the judgment at the trial,
however, be amended by striking out the words:
or so long as it is necessary to assure to the plaintiff the
privilege of drilling on the ice during the months of January and February
in that portion of the judgment above quoted. In all
other respects, save as to costs, I would confirm the judgment of the Court of
Appeal. The appellant should have its costs in this Court as well as in the
Court of Appeal. The cross-appeal should be dismissed with costs.
Cartwright J.:—The
relevant facts and the contentions of the parties are set out in the reasons of
other members of the Court.
I am in agreement with what I understand to be the opinion
of all the other members of this Court that the Court of Appeal exercised its discretion rightly
in permitting the respondents to amend their statements of defence so as to
plead regulations 8(1) and 9(1) of the Regulations under The Mineral
Resources Act, and the only point with which I find it necessary to deal is
the defence based on regulation 9(1).
[Page 145]
The contract which the appellant asks to have specifically
enforced was made on June 25, 1955, between the respondents Oak, Amren, Daigle
and MacKinnon, hereinafter referred to as "the prospectors", and
Harquail who was acting as agent for the appellant. On June 29, 1955, the
prospectors repudiated that contract by their conduct in entering into a
contract with the respondent Canadian Pipelines and Petroleums Limited giving
to that company the option to purchase the 37 mineral claims which formed the
subject matter of the contract of June 25, 1955.
For the reasons given by my brother Judson I agree with his
conclusions (i) that no valid distinction can be drawn between the position of
the appellant during the period from June 25 to June 30, 1955, and what would
have been its position if the first payment of $25,000 had been actually paid,
and (ii) that the option granted by the contract of June 25, 1955, created an
equitable interest in the claims and was rendered void because it was given and
taken against the express prohibition contained in regulation 9(1).
The second of these conclusions is based on the decision of
the Court of Appeal in London and South Western Railway v. Gomm. It has been suggested that we
ought not to follow that case, but in my opinion it was rightly decided. It is
said that the decision of the Court of Appeal in Manchester Ship Canal
Company v. Manchester Racecourse Company, conflicts
with Gomm. In the Manchester case it was sought to enforce a
conditional "right of pre-emption" contained in a contract which had
been validated by Statute; no price was named in the contract but the trial
judge, Farwell J., and the Court of Appeal held, against the argument of the
defendant, that the price was ascertainable. Farwell J. used the expression
"I think that clause 3 creates an interest in the land… But even if it
does not create an interest in the land…" and went on to hold the
plaintiff entitled to succeed on another ground based on the decision in Willmott
v. Barber. In
the judgment of the Court of Appeal Gomm's case is not mentioned by name
[Page 146]
although it had been cited in argument. The only reference
to the question whether the right of pre-emption created an interest in land is
found in the following passage at p. 50:
Then it was objected that clause 3 could not be enforced
against the Trafford Park Company, who are only alienees of the land. Farwell
J., thought that clause 3 created an interest in land, and that this objection
could fee thus answered. We do not think that clause 3 does create an interest
in land, nor do we think that there is anything in the decisions ' in Tulk
v. Moxhay or in London and County Banking Co. v. Lewis which gets
over the objection.
The Court then went on to uphold the decision of
Farwell J. on the ground that the case fell within the principle of Willmott
v. Barber, supra and of Lumley v. Wagner.
An expression of opinion by the learned Lords Justices who
composed the Court in the Manchester case is, of course, entitled to
great weight but if they had intended to negative the principle enunciated in Gomm
it seems to me that they would have stated their reason for so doing. Be
this as it may, in so far as the two cases are in conflict I prefer the
decision in Gomm on the point with which we are concerned and think that
we should follow it.
I wish to add some observations as to two other suggested
objections to the conclusion that the option was rendered void by regulation
9(1).
First, it is said that the contract contemplates that, upon
performance of all its terms by the appellant, the 37 claims are, to be
transferred not to the appellant but to a company to be incorporated.
Accepting this as the correct construction of the contract, I am unable to find
that the appellant's case is assisted. The appellant cannot be heard to say
that there did not exist on June 29, 1955, a contract, specifically enforceable
in equity, binding the prospectors to hold the option open, and, ultimately, if
all the stipulated payments were made, to convey the claims, nor can it be
heard to say that it had not the right to enforce that contract, for it seeks
to support a judgment in its favour decreeing specific performance thereof. I
have already indicated my agreement with the view that the specifically
enforceable contractual right to require the holders of the claims to convey
them constitutes an interest in the claims; that interest must on the critical
date, June 29, 1955, have been held by someone and unless that someone was the
holder
[Page 147]
of a licence as required by regulation 9(1) the acquisition
of that interest was forbidden. The appellant is not assisted by saying
"True, I had no licence but I was acquiring the interest for someone else
who likewise had no licence, and indeed no existence". In my view, the
effect of the contract Was that on the execution of the agreement of June 25,
1955, the appellant acquired an interest in the claims which interest by the
terms of the contract it was obligated to cause to be transferred to a company
to be incorporated at some future time. The legal position would be the same
whether the actual transfer of the claims were made from the prospectors direct
to the new company or from the prospectors to the appellant and from the latter
to the new company.
Secondly, it is said that, by analogy with certain cases
dealing with the rule against perpetuities, even if in so far as it creates an
interest in the claims the contract of June 25, 1955, is rendered void by regulation
9(1) it may still be enforced as a personal obligation binding the prospectors.
The effect of the cases referred to is conveniently
summarized as follows, in Halsbury's Laws of England, 2nd ed., vol. 25, at p.
109:
A contract relating to a right of or equitable interest in
property in futuro may be intended to create a limitation of land only,
in which case, if the limitation is to take effect beyond the perpetuity
period, the contract is wholly void and unenforceable; or the contract may,
upon its true construction, be a personal contract only, in which case the rule
does not apply to it; or it may, upon its true construction, be, as regards the
original covenantor, both a personal contract and a contract attempting to
create a remote limitation, in which case the limitation will be bad for
perpetuity, but the personal contract will be enforceable, if the case
otherwise admits, against the promisor by specific performance' or by damages,
or against his personal representatives in damages only. In all cases it is a
question of construction whether the contract is intended to create a
limitation of property only, or a personal obligation only, or both.
In my respectful view the supposed analogy does not lead to
the suggested result. Contracts in so far as they are merely personal are
outside the rule against perpetuities altogether. We are not concerned with
that rule in the case at bar. The question before us is whether or not on the
true
[Page 148]
construction of regulation 9(1) the contract of June 25,
1955, was forbidden by that Regulation, which has the force of a statute.
The regulation reads as follows:
9. (1) No person or mining partnership not a holder of a
Prospector's, Developer's and Miner's licence shall prospect for minerals upon
land subject to these regulations, or stake out or record any location, and no person,
mining partnership or company not a holder of a Prospector's, Developer's and
Miner's licence shall acquire by transfer, assignment or otherwise howsoever
any mineral claim or any right or interest therein for which a lease or a
patent has not been issued.
To determine whether the contract contravenes the regulation
it is necessary to consider the nature of the rights which it conferred upon
the appellant. The argument of counsel for the respondents that the contract
was too vague and uncertain to be specifically enforceable was rejected by the
learned trial judge and by the majority in the Court of Appeal and the
appellant is seeking to uphold a judgment for the specific performance of the
contract as construed by the learned trial judge. The manner in which he
construed it appears from paras. 2, 3 and 5 of the formal judgment of April 10,
1956, which read as follows:
2. AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the
Defendant Canadian Pipelines and Petroleums Limited do cause the said mineral
claims known as I.O. 1 to 12 inclusive, to be recorded in the names of the
Defendants A. Oak, A. Amaren, S. Daigle and Jock MacKinnon jointly, failing
which that the Mining Recorder do cancel the title of the Defendant Canadian
Pipelines and Petroleums Limited to the said mineral claims and do record the
same in the names of the Defendants A. Oak, A. Amaren. S. Daigle and Jock
MacKinnon jointly, that the Mining Recorder do issue Certificates of Record of
the said mineral claims to the said Defendants A. Oak, A. Amaren, S. Daigle and
Jock MacKinnon jointly, that the Defendants A. Oak, A. Amaren, S. Daigle and
Jock MacKinnon do execute in blank a Transfer of the said mineral claims, that
the said Defendants and the Defendant Canadian Pipelines and Petroleums Limited
do thereupon deposit in escrow at the Canadian Bank of Commerce at Uranium
City, in the Province of Saskatchewan, in accordance with the said Agreement,
the Certificates of Record and Transfers in blank of the said mineral claims
known as I.O. 1 to 12 inclusive, Missing Link 1 to 9 inclusive, and E.O. 1 to
16 inclusive, that in the event of the Defendants A. Oak, A. Amaren, S. Daigle
and Jock MacKinnon, or any of them, neglecting or refusing to execute or
deliver to the said Bank any of the said Certificates of Record and Transfers
in blank, that the Mining Recorder do execute and deliver over to the said Bank
the necessary Certificates of Record and Transfers in blank of the said mineral
claims, and that upon the receipt by the Bank of the said Certificates of
Record and Transfers in blank of all the said mineral claims the Plaintiff do
pay to the Defendants A. Oak, A. Amaren, S. Daigle and Jock MacKinnon, the sum
of $25,000.00.
[Page 149]
3. AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the
date of the first option payment of $25,000.00 under the said Agreement be
fixed at four months after the said Certificates of Record and Transfers in
blank of all the said mineral claims are deposited in escrow at the said Bank,
as aforesaid, that the date of the second option payment of $50,000.00 be fixed
at four months thereafter, or so long as is necessary to assure to the
Plaintiff the privilege of drilling on the ice during the months of January and
February, that the date of the third option payment of $50,000.00 be fixed at
eight months thereafter and that the date of the fourth and final option
payment of $50,000.00 be fixed at eight months thereafter.
* * *
5. AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the
Injunction with respect to the said mineral claims granted by The Honourable
Mr. Justice Dorion on the 20th day of July, 1955, and continued by the
Honourable Mr. Justice Graham on the 6th day of September, 1955, be continued,
except as herein otherwise ordered, until further order.
The injunction granted by Doiron J. which is continued by
the terms of para. 5 is not copied in the appeal case but its effect is stated
as follows in the appellant's factum:
On July 20th, 1955, Frobisher commenced this action for
specific performance of its agreement with the prospectors and on the same date
obtained an injunction restraining the Respondents from selling, transferring
or otherwise disposing of or entering upon, drilling, exploring, developing,
operating or otherwise dealing with the mining claims until the final
disposition of the action.
It appears from this that the contract has been construed as
conferring upon the appellant not only the right to call for a conveyance of
the claims to a company to be incorporated when all the payments stipulated
have been made, but also the right during the currency of the option, to the
exclusion of all of the respondents, to enter upon drill and explore the mining
claims. It is my opinion that on this construction of the contract the
appellant, during the currency of the option, could have maintained an action
of trespass not only against a stranger who entered on the claims but also
against the respondents if they did so. I find myself quite unable to say that
the appellant in these circumstances did not "acquire by transfer,
assignment or otherwisehowsoever … any right or interest in the claims".
It appears to me that it acquired, by contract, the exclusive right to enter
upon drill and explore the claims during the currency of the option and the
right to compel their conveyance upon completion of the option payments. On any
reasonable view of the meaning of the words "right" and
[Page 150]
"interest" as used in the regulation I am of
opinion that what the appellant acquired under the contract falls within one or
other or both of those words. The very wide meaning ordinarily attributed to
both of these words may conveniently be found in "The Dictionary of
English Law" by Earl Jowitt at p. 1560, sub. verb. "Right" and
p. 991, sub. verb. "Interest".
Authority is scarcely needed for the proposition that a
contract which is expressly or implicitly prohibited by statute is illegal and
that what is done in contravention of the provisions of an act of the
legislature cannot be made the subject matter of an action, but reference may
be made to the judgment of Lord Ellenborough in Langton v. Hughes.
I would dispose of the appeal as proposed by my brother
Judson.
Abbott J.:—For
the reasons given by my brothers Cartwright and Judson, with which I am in
agreement, I would dispose of the appeal of Frobisher and the cross-appeal of
Oak and Amren as proposed by my brother Judson.
Martland J. (dissenting):—On
June 18, 1955, the respondents Oak and MacKinnon made a discovery of uranium
ore on Stewart Island in the Lake Athabaska district of Saskatchewan. The
discovery was made on mining claims owned jointly by the respondents Oak,
Amren, Daigle and MacKinnon (hereinafter referred to as "the
prospectors").
By an agreement in writing, dated June 25, 1955, the
prospectors granted to James A. Harquail, a mining engineer and geologist
employed by the appellant (which company is hereinafter referred to as
"Frobisher"), an option in the following terms:
Date—25th day of June, 1855.
AGREEMENT
We, the undersigned, the sole owners of mineral claims—EO—1
to 16 incl.
Missing Link 1 to 9 incl.
IO—1 to 12 incl.
In all 37 claims contiguous,
Located on or near Stewart Island, Lake Athabasca, Province of Saskatchewan,
Canada—do hereby grant to James A. Harquail, Mining Engineer—Suite 2810,
25 King St. West,
[Page 151]
Toronto, Ontario—in consideration of the sum of $1.00 (one
dollar), receipt of which is hereby acknowledged, an option effective to 12
noon—June 30, 1955—to purchase said mineral claims from the undersigned under
the terms of the following deal:
On receiving transfers to above claims in good order—on, or
as close as possible to June 30th, 1955—said transfers to be turned over to
Uranium City Bank of Commerce branch at which time sum of $25,000.00
(twenty-five thousand dollars) will be issued to MacKinnon and partners.
(Vendors).
New company to be formed in which vendors will receive 10%
(ten percent) of authorized stock.
$25,000. Firm cash.
Option Payments
1st option—Nov. 1,
1955..................................................... $25,000.00
2nd option—March 1, 1956
................................................ 50,000.00
3rd option—November 1, 1956
.......................................... 50,000.00
4th option—July 1, 1957
..................................................... 50,000.00
$200,000.00
The above agreement shall be
binding on the executors, heirs, etc. of the people signing.
"A. Oak"
"Albin
Amren"
"S.
Daigle"
"Jock
MacKinnon"
"A. D.
Wilmot"
Witness to above four signatures.
June 25, 1955.
Signed in the Settlement of Uranium
City, Saskatchewan.
S—Numbers
Claims
IO—1 to 12 incl—S-30628 to S-30639 inc.
Claims Missing Link—1-9
incl—S-46551 to S-46559 inc.
Claims EO—1 to 16 incl.—Being
recorded June 27—No S numbers as yet.
The respondents Morrisroe and
Meschi, although they had knowledge of the existence of the agreement made
between the prospectors and Harquail, subsequently persuaded the prospectors to
enter into a written agreement, dated June 29, 1955, under which the
prospectors purported to grant to Canadian Pipelines and Petroleums Limited
(hereinafter referred to as "Pipelines") an option on the same mining
claims on terms similar to those contained in the agreement with Harquail.
[Page 152]
On June 30, 1955, both Pipelines and Harquail filed caveats
against the mining claims. Harquail had deposited $25,000 with the Canadian
Bank of Commerce at Uranium City on June 28, 1955.
Pipelines obtained from the prospectors the documents of
title with respect to the mining claims, together with transfers executed in
blank by the persons in whose names the claims were recorded. Certain of the
claims were actually transferred into the name of Pipelines.
On July 20, 1955, Frobisher commenced action for specific
performance of its agreement with the prospectors and on the same date obtained
an injunction restraining the respondents from selling, transferring or
otherwise disposing of, or entering upon, drilling, exploring, developing,
operating or otherwise dealing with the mining claims until the final
disposition of the action.
The various respondents, in their statements of defence,
pleaded that the agreement between Frobisher and the prospectors was invalid
because it had been made on Sunday, June 26, 1955. They also contended that no
consideration had been paid by Harquail to the prospectors and that Harquail
did not enter into the agreement as agent of Frobisher.
Pipelines, Morrisroe and Meschi also counterclaimed against
Frobisher, claiming compensation, pursuant to Reg. 124 of the Quartz Mining
Regulations of Saskatchewan, enacted pursuant to The Mineral Resources
Act, on the ground that the caveat filed by Harquail had been registered
wrongfully and without reasonable and probable cause. A similar counterclaim
was also made against Frobisher by Oak and Amren. Pipelines, Morrisroe and
Meschi did not submit this contention in the present appeal, but Oak and Amren
did.
The respondents Daigle and MacKinnon did not make any
counterclaim against Frobisher, but did counterclaim against Pipelines, seeking
a declaration that the agreement between Pipelines and the prospectors had been
terminated, or, alternatively, that it should be rescinded on the grounds of
undue influence and misrepresentation.
[Page 153]
The main issues at the trial, which was a lengthy one, were
those raised by the statements of defence as to the validity of the agreement
between Frobisher and the prospectors. The learned trial judge, on ample
evidence, found that these defences failed, that the agreement was made on
Saturday, June 25, 1955, that there was consideration for the agreement and
that it had been made by Harquail as agent for Frobisher. These findings were
subsequently upheld by the Court of Appeal of Saskatchewan and these issues were not involved in
the hearing before this Court.
Toward the end of the trial a motion was made on behalf of
the respondents Pipelines, Morrisroe and Meschi to amend their statement of
defence so as to plead regulations 8(1) and 9(1) of the Quartz Mining
Regulations. This motion was refused by the learned trial judge. The Court
of Appeal, Gordon J.A. dissenting, was of the opinion that the amendment should
have been allowed and that there should be a new trial restricted to the issues
raised by the amendment.
At the conclusion of the trial it was contended by Frobisher
that it should be entitled to compensation, pursuant to regulation 124, on the
ground that the caveat filed by Pipelines had been registered wrongfully and
without reasonable cause. Argument was subsequently presented regarding the
validity of the regulation in question at a hearing at which the
Attorney-General of Saskatchewan was represented. The learned trial judge later
held that regulation 124(4) was ultra vires and he refused Frobisher's
application to amend its statement of claim to claim damages pursuant to that
particular regulation.
With respect to this issue, in the Court of Appeal, Martin
C.J.S. agreed with the learned trial judge that regulation 124(4) was ultra
vires. Procter J.A., McNiven J.A. and Culliton J.A. were of the opinion
that there was no valid claim under regulation 124(4), since no damage had been
proved by Frobisher. Gordon J.A. was of the opinion that leave should not have
been given to Frobisher to raise this issue by an amendment to its statement of
claim.
[Page 154]
The counterclaim of Daigle and MacKinnon as against Pipelines,
which had been allowed by the learned trial judge, was dismissed by the Court
of Appeal and no appeal was taken to this Court from that part of the judgment
of the Court of Appeal.
At the trial the learned trial judge ruled that counsel for
Pipelines, Morrisroe and Meschi was not entitled to cross-examine MacKinnon and
Daigle, except only in respect of the issues raised in the counterclaim of
MacKinnon and Daigle as against Pipelines.
On appeal it was contended by Pipelines that, because of
this refusal to permit cross-examination by the learned trial judge, a new
trial should be ordered. Four of the five judges of the Court of Appeal held
that the learned trial judge should have permitted the cross-examination of
MacKinnon and Daigle by counsel for Pipelines, Morrisroe and Meschi. Martin
C.J.S. was of the opinion that the ruling of the learned trial judge was
correct. However, four of the five judges held that in the light of the other
evidence no substantial wrong or miscarriage of justice had been occasioned by
the ruling the learned trial judge and accordingly held that a new trial should
not be granted on this ground. Procter J.A. would have granted a new trial.
On the present appeal the following questions were in issue:
1. Was the Court of Appeal right in allowing the amendment
to the statement of defence, so as to plead non-compliance by Frobisher and
Harquail with the provisions of Regs. 8(1) and 9(1) of the Regulation made
under the Mineral Resources Act, and in directing a new trial in respect
of the issues thus raised?
2. Was the Court of Appeal right in refusing to order a new
trial because of the refusal of the learned trial judge to permit
cross-examination of Daigle and MacKinnon by counsel for Pipelines,; Morrisroe
and Meschi?
3. Was there any claim for damages established by Frobisher
against Pipelines, or by Oak and Amren against Frobisher, pursuant to Reg.
124(4), in respect of the caveats filed respectively by Pipelines and by Frobisher?
I agree with the view of the majority in the Court of Appeal
that the learned trial judge ought to have granted the amendment to the
statement of defence so as to plead the non-compliance by Harquail and
Frobisher with the provisions of regulations 8(1) and 9(1).
[Page 155]
Rule 209 of the Queen's Bench Rules provides that the
Court
may at any stage of the proceedings allow either party to
alter or amend his pleadings in such manner and upon such terms as may be just
and all such amendments shall be made as may be necessary for the purpose of
determining the real questions in controversy between the parties.
Lord Esher, in Steward v. North Metropolitan Tramways
Company, stated
the general rule as to amendments as follows:
The rule of conduct of the Court in such a case is that,
however negligent or careless may have been the first omission, and however
late the proposed amendment, the amendment should be allowed, if it can be made
without injustice to the other side. There is no injustice if the other side
can be compensated by costs: but, if the amendment will put them into such a
position that they must be injured, it ought not to be made.
The issue raised by the proposed amendment was one which
questioned the legal validity of the agreement of June 25, 1955. If decided in
favour of Pipelines, the claim of Frobisher would fail. It was, therefore, an
issue of vital importance which Pipelines should have been entitled to raise,
unless by making the amendment Frobisher would have been put into a position
that it must be injured. I do not think, despite the weighty arguments of
Gordon J.A. to the contrary, that Frobisher would have been placed in such a
position and consequently I am of the opinion that the amendment should have
been allowed.
Regulations 8 and 9(1) of the Quartz Mining Regulations provide
as follows:
MINING
COMPANY
8. (1) No mining company shall be granted a licence under
these regulations unless such company is licensed or registered under the
provisions of the Companies Act of Saskatchewan and in the case of a mining
syndicate unless such syndicate is registered under The Securities Act.
(2) Notwithstanding anything contained in these regulations,
except as provided in Part XIV hereof, a Prospector's, Developer's and Miner's
licence issued to a company shall only convey the authority to hold mineral
claims by transfer or assignment. A licence held by a company does not include
the privilege of staking claims and shall not entitle any shareholder, officer
or employee thereof to the rights and privileges of a licensee.
[Page 156]
LICENCE
REQUIRED
9. (1) No person or mining partnership not a holder of a
Prospector's, Developer's and Miner's licence shall prospect for minerals upon
lands subject to these regulations, or stake out or record any location, and no
person, mining partnership or company not a holder of a Prospector's,
Developer's and Miner's licence shall acquire by transfer, assignment or
otherwise howsoever any mineral claim or any right or interest therein for
which a lease or a patent has not been issued.
Counsel for Frobisher admitted on the argument before this
Court that Harquail did not acquire a miner's licence until July 27, 1955, that
Frobisher was not registered under the provisions of The Companies Act of
Saskatchewan until March 9, 1956, and that it did not acquire a miner's licence
until March 12, 1956. This admission was made for the purpose of avoiding a new
trial on incontrovertible facts and counsel for all parties agreed that it
should be regarded as evidence given before this Court under s. 67 of the Supreme
Court Act.
Accordingly the issue which was argued was as to whether or
not the agreement of June 25, 1955, was rendered void by reason of the
provisions of these regulations.
The argument of Pipelines was that the agreement, being an
option in respect of the mineral claims described in it, created an interest in
Frobisher in the claims. It was contended that the acquisition of any interest
in the claims by a company not holding a miner's licence being forbidden by
regulation 9(1), the agreement was, therefore, illegal and was void.
For Frobisher it was contended that at the time the
agreement was made with the prospectors on June 25, 1955, Frobisher did not
acquire any interest in the claims, but only an option which gave time for it
to decide whether, on the turning over of the transfers to the mineral claims
by the prospectors, it would pay the cash sum of $25,000 and thus acquire an
option in respect of the claims on the terms provided in the agreement. It was
also urged that the agreement did not contemplate an ultimate transfer of the
mineral claims to Frobisher, but to a new company for the incorporation of
which the agreement provided.
[Page 157]
The argument of Pipelines is based upon the judgment of the
Court of Appeal in England in the case of London and South Western Railway
Company v. Gomm, which
is the decision chiefly relied upon by the majority of the Court of Appeal in
directing that there be a new trial. Counsel for Pipelines also referred to
other cases in which that judgment had been followed.
That case involved an indenture dated August 10, 1865,
between the London and South Western Railway Company and George Powell, by
which the railway company conveyed to Powell a parcel of land no longer
required for the purposes of the railway. Powell, for himself, his heirs,
executors, administrators and assigns, convenanted with the railway company,
its successors and assigns, that he, his heirs and assigns, owner and owners
for the time being of the lands intended to be conveyed, and all persons who
should or might be interested, should, at any time thereafter, whenever the
land might be required for the railway or works of the company, whenever
requested by the company, its successors or assigns, by six months' previous
written notice and on payment of 100 pounds, reconvey the land.
In 1879 Powell sold the lands to Gomm, who had full notice
of the contents of the deed of 1865. Notice was given by the railway company to
Gomm on March 12, 1880, claiming to repurchase. Gomm refused to reconvey and
the railway company sued for specific performance of the covenant in the deed.
The case was first heard by Kay J., who held that the
covenant did not create any estate or interest in land and, therefore, was not
obnoxious to the rule against perpetuities. He held that Gomm was bound by the
covenant in the deed on the principle of Tulk v. Moxhay.
On appeal it was held that the covenant gave to the railway
company an executory interest in land, to arise on an event which might occur
after the period allowed by the rules as to remoteness, and was invalid.
Jessel M.R., at p. 580, after referring to the covenant
giving the right of repurchase, said:
If then the rule as to remoteness applies to a covenant of
this nature, this covenant clearly is bad as extending beyond the period
allowed by the rule. Whether the rule applies or not depends upon this as it
appears
[Page 158]
to me, does or does not the covenant give, an interest in
the land? If it is a bare or mere personal contract it is of course not
obnoxious to the rule, but in that case it is impossible to see how the present
Appellant can be bound. He did not enter into the contract, but is only a
purchaser from Powell who did. If it is a mere personal contact it cannot be
enforced against the assignee. Therefore the company must admit that it somehow
binds the land. But if it binds the land it creates an equitable interest in
the land. The right to call for a conveyance of the land is an equitable
interest or equitable estate. In the ordinary case of a contract for purchase there
is no doubt about this, and an option for repurchase is not different in its
nature. A person exercising the option has to do two things, he has to give
notice of his intention to purchase, and to pay the purchase-money; but as far
as the man who is liable to convey is concerned, his estate or interest is
taken away from him without his consent, and the right to take it away being
vested in another, the covenant giving the option must give that other an
interest in the land.
Sir James Hannen and Lindley L.J., the other members of the
Court, agreed.
On principle it would appear to me that the decision of Kay
J., who later, in Mackenzie v. Childers, described the proposition
thus enunciated as "entirely novel", was right. An option to purchase
land is nothing more than an offer to sell and differs only from other offers
in that for a stipulated period it is irrevocable. No contract for the
acquisition of land results unless the offer is accepted.
In this connection the decision of the House of Lords in Helby
v. Matthews,
is of some interest. In that case there was under consideration the effect
of an option to purchase a chattel. The owner of a piano let it on hire, the
hirer agreeing to pay rent by monthly instalments. The hirer could terminate
the hiring by delivering up the piano to the owner, the hirer remaining liable
for all arrears of hire. If the hirer paid all of a stipulated number of
monthly instalments, he would then acquire title to the piano, but, until that
time, it remained the sole property of the owner. The question in issue was as
to whether the hirer was "a person having agreed to buy goods" within
the meaning of the Factors Act, he having pledged it to a pawnbroker
after paying only a few instalments of rent and the pawnbroker claiming title
to the piano under that Act.
The Lord Chancellor, Lord Herschell. said at p. 477:
It was said in the Court of Appeal that there was an
agreement by the appellant to sell, and that an agreement to sell connotes an
agreement to buy. This is undoubtedly true if the words. "agreement to sell"
be
[Pages 159]
used in their strict legal sense; but when a person has, for
valuable consideration, bound himself to sell to another on certain terms, if
the other chooses to avail himself of the binding offer, he may, in popular
language, be said to have agreed to sell, though an agreement to sell in this
sense, which is in truth merely an offer which cannot be withdrawn, certainly
does not connote an agreement to buy, and it is only in this sense that there
can be said to have been an agreement to sell in the present case.
It is of interest to note that the grantee of a mineral
claim under the Quartz Mining Regulations acquires a chattel interest.
Regulation 38 provides:
38. The interest of a grantee of a mineral claim shall,
prior to the issue of a lease, be deemed to be a chattel interest, equivalent
to a lease of the minerals in or under the land for one year, and thence from
year to year, subject to the performance and observance of all of the terms and
conditions of these regulations.
In the Gomm case itself the option to the railway
company was a term of the agreement by which Powell himself acquired title to
the land from the railway company and it might be regarded as a limitation upon
the grant of that title. The decision, however, appears to be based on an analogy
between the option itself and the agreement to purchase which would result upon
its acceptance. In that case the terms of the option were such that the
optionee, by accepting it, immediately became entitled to a conveyance of
title. It will be found that the options considered in other cases which have
followed the Gomm case were similar to it in that respect. It seems to
me that it is only on this basis that an option might, perhaps, be considered
as analogous to an agreement for sale so as to create an interest in land.
In the case of Manchester Ship Canal Company v.
Manchester Racecourse Company, the
Court of Appeal had to consider a provision in an agreement between these two
companies which read, in part, as follows:
3. If and whenever the lands and hereditaments belonging to
the racecourse company, and now used as a racecourse, shall cease to be used as
a racecourse, or should the aforesaid lands and hereditaments be at any time
proposed to be used for dock purposes, then and in either of such cases the
racecourse company shall give to the canal company the first refusal of the
aforesaid land and hereditaments en bloc….
This agreement was scheduled to an Act of Parliament, which
declared it to be valid and binding upon the parties thereto.
[Page 160]
The racecourse company had offered to sell the lands in
question to the canal company for 350,000 pounds. At that time the racecourse
company already had an offer to purchase from the Trafford Park Company, which
wished to use the land for dock purposes, for 250,000 pounds. The canal company
offered 200,000 pounds, which was not accepted, and the racecourse company
later sold the land to the Trafford Park Company for 280,000 pounds. The latter
company had knowledge of the provision in question and agreed to indemnify the
racecourse company in respect of any claim under that clause.
Farwell J., at the trial,
held that the racecourse company could not sell the racecourse without offering
it to the canal company at the actual price offered by the Trafford Park
Company. He held, on the authority of London and South Western Railway
Company v. Gomm, that the right of first refusal gave the canal company an
interest in the land which could be enforced by it against the Trafford Park
Company.
The Court of Appeal held that the clause did not create any
interest in the land in the railway company, but also held that the clause
involved a negative covenant whereby the racecourse company agreed not to part
with one racecourse to anyone else without giving the canal company first
refusal and that consequently the clause could be enforced as against the
Trafford Park Company by the canal company within the principle of Lumley v.
Wagner.
London and South Western Railway Company v. Gomm was
followed by Warrington J. in Woodall v. Clifton. That was a case in which a
lease of land for a term of ninety-nine years contained an option to the
lessee, his heirs or assigns, to purchase the freehold at a price of 500 pounds
per acre. An assignee of the lease sought to exercise the option as against the
assigns of the lessor.
Warrington J. held that the option gave to the lessee an
interest in land which might not vest within the period fixed by the rule
against perpetuities. He held that the option was invalid on the ground of
remoteness.
[Page 161]
The Court of Appeal upheld his decision on other grounds,
holding that the covenant did not come within 32 Hen. VIII, c. 34, so as to
make the liability to perform it run with the reversion and that consequently
the action could not be maintained against the lessor's assigns.
Warrington J. again followed London and South Western
Railway Company v. Gomm in Worthing Corporation v. Heather. As in the case of Woodall
v. Clifton, this decision related to an option contained in a lease and the
only material difference in the facts was that the option was given for
charitable purposes. The option to purchase was held to be void for remoteness
and the fact that it was for charitable purposes did not cure it because the
interest of the charity did not become effective until the happening of the
future event.
Although it was held that specific performance could not be
granted, Warrington J. held that the plaintiff was entitled to damages for
breach of contract by the defendant for failure to convey upon the exercise of
the option. His reasoning on this point was stated at p. 540:
It is not in my opinion the contract which is void because
it infringes the rule against perpetuities, but it is the limitation which, by
the operation of the doctrines of the Court of Equity, it is the effect of the
contract to create, that is void. The contract remains a valid contract in
every respect, but it is the limitation it creates in the contemplation of the
Court of Equity, and it is that alone, which is void.
The Gomm case was considered again by Wynn-Parry J.
in Wright v. Dean. In
explaining why the option under consideration by him in that case created an
interest in land, he says at p. 693:
The option confers upon its exercise a right to call for a
conveyance of the freehold and, therefore, it creates an interest in land.
In Griffith v. Pelton, Jenkins L.J., at p. 533,
defines what he refers to as an "option in gross" to purchase land in
the following manner:
An option in gross for the purchase of land is a conditional
contract for such purchase by the grantee of the option from the grantor, which
the grantee is entitled to convert into a concluded contract of purchase, and
to have carried to completion by the grantor, upon giving the prescribed notice
and otherwise complying with the conditions upon which the option, is made
exercisable in any particular case.
[Page 162]
The Gomm case was cited with approval by Duff J. (as
he then was) in his dissenting opinion in Davidson v. Norstrant.
Reference has been made to the foregoing authorities because
they are of assistance in deciding the extent of the judgment of the Court of
Appeal in the Gomm case. Is it to be considered as laying down, as a
general proposition of law, that any option which relates to land of necessity
vests in the optionee, forthwith upon the granting of it, an interest in land?
I do not think that it does.
The word "option" is not a term of art. It does
not, by itself, necessarily mean an option to purchase or to call for the whole
of the interest of the person giving the option in the subject-matter. Its
meaning depends upon the context. Its acceptance results in a contract, the
nature of which must depend upon the terms of the offer which is made.
In each of the cases above cited in which the Gomm case
has been followed the offer which was made for valuable consideration was to
convey a title to land to the optionee forthwith upon payment of a stipulated
sum of money.
The initial option given to Harquail did not, to paraphrase
Wynn-Parry J. in Wright v. Dean, confer upon its exercise a right to
Frobisher to call for a conveyance of the title to the mineral claims. For that
reason, even assuming the correctness of the decision in the Gomm case,
I do not think that Frobisher acquired, by virtue of the agreement, any
property interest in the mineral claims. What it had was the right, upon
payment of the $25,000 when the transfers of the mineral claims had been turned
over to the Uranium City Bank of Commerce branch, to acquire an option under the
terms of which, upon the payment of the option payments in accordance with the
agreement, the mineral claims would, in due course, become the property of a
new company to be formed, in which the prospectors would have 10 per cent, of
the authorized capital stock. It was that company, not yet in existence, which
the agreement contemplated as becoming the ultimate owner of the mineral
claims. It was that company which could, in due course, acquire a property
interest in the mineral claims, but it was. not yet. a legal entity and there
was no certainty that it would ever exist. If the periodic payments
[Page 163]
called for by the agreement were not made by Frobisher there
would never be any occasion for it to be created. Frobisher acquired only a
contractual right, by making the various stipulated payments, to see that the
mineral claims were dealt with in this way. In view of this, I do I not think
that Frobisher could be regarded, even on the reasoning of the Gomm, case
as having acquired an equitable property interest in the mineral claims.
There is a second ground upon which I think that the
contention of Pipelines fails on this issue. To sum up that argument again, it
is this: (1) Applying the rule in the Gomm case, Frobisher purported to
acquire, by the option, an interest in the mineral claims. (2) Regulation 9(1)
says that Frobisher, not having a miner's licence, shall not acquire such an
interest. (3) Therefore, the contract is illegal and void.
An option for the purchase of land creates contractual
rights and, if the reasoning in the Gomm case be accepted, its effect
may be to create also a contingent limitation of land which may take effect in
the future. This is what is referred to by Warrington J. in Worthing
Corporation v. Heather in the passage from his judgment previously quoted.
The point, is well stated by Farwell L.J. in South Eastern Railway v. Associated
Portland Cement Manufacturers (1900), Limited, where he says:
But the fact that there is some connection with or reference
to land does not make a personal contract by A. less a personal contract
binding on him, with all the remedies arising thereout, unless the Court can by
construction turn it from a personal contract into a limitation of land, and a
limitation of land only. As regards the original covenantor it may be both; he
may have attempted both to limit the estate, which may be bad for perpetuity,
and he may have entered into a personal covenant which is binding on him
because the rule against perpetuities has no application to such a covenant.
The real answer to the argument founded on the inconvenience
of tying up land is that the action upon the covenant sounds in damages only
unless the defendant has still got the land to which the covenant relates. If
he has still that land, then in an action, on the covenant the plaintiff may
claim specific performance, and it is for the "Court to see whether in
such circumstances it is inequitable to grant specific performance, or whether
the covenantor" ought to pay damages in lieu 'of it. There is no defence
to such an action in the present case.
[Page 164]
If the option did create an interest in the mineral claims in
Frobisher, such limitation would be rendered void by regulation 9(1), as, in
the Worthing case, the limitation was rendered void by virtue of the
rule against perpetuities. However, the contractual right still remains.
In other words, Frobisher, by the effect of regulation 9(1),
did not, when the option was made, have the capacity to acquire, at that time,
an interest in the mining claims, but it could acquire contractual rights as
against the prospectors to require that the mineral claims should be dealt
with, in the future, in accordance with the terms of the agreement.
The Quartz Mining Regulations in question are a part
of a code of rules laid down by the Government of Saskatchewan regarding the
acquisition of quartz mining claims, the property of the Crown in the right of
the Province of Saskatchewan. The Crown does not recognize any interest in a
mining claim in anyone not possessing a miner's licence. In the case of a
company, the authority to hold mining claims by transfer or assignment is
acquired by the obtaining of a miner's licence as provided in regulation 8(2).
It does not seem to me that these regulations make it illegal for a
company which does not possess a miner's licence to obtain contractual rights
as against persons who have acquired title to mineral claims regarding the
disposition of those claims in the future. Their effect is that such a company
is not recognized, in law, as having the capacity to acquire any property
interest in mineral claims.
For the foregoing reasons I do not think that the agreement
of June 25, 1955, was rendered void by regulations 8 and 9 of the Quartz
Mining Regulations.
It was contended by Pipelines that specific performance of
the contract could not be granted unless it did create an interest in land.
With respect to this point I agree with the proposition
stated by Jenkins J. in Hutton v. Watling, that the jurisdiction to
grant specific performance of a contract for the sale of land is founded, not
on the equitable interest in land
[Page 165]
which the contract is regarded as conferring on the
purchaser, but on the simple ground that damages will not afford an adequate
remedy. Specific performance is merely an equitable mode of enforcing a
personal obligation.
While specific performance is granted normally only against
a party to the contract, if a stranger gets possession of the subject-matter he
may be made a party to the action for specific performance of the contract on
the equitable ground that his conscience is affected by the notice.
I turn now to the second point raised on this appeal;
namely, as to whether a new trial should be ordered because of the refusal of
the learned trial judge to permit cross-examination of Daigle and MacKinnon by
counsel for Pipelines.
During the course of the cross-examination of Daigle the
learned trial judge ruled that he could not be cross-examined in respect of the
issues as between Frobisher and Pipelines because his interest as a defendant
in Frobisher's action, as disclosed in the pleadings, was the same as that of
Pipelines. This view was also adopted by Martin C.J.S. in the Court of Appeal.
I agree with the view of the majority of the Court of Appeal
that permission to cross-examine should not have been refused. However, I also
agree with the majority of the Court of Appeal that, applying Rule 40 of the Court
of Appeal Rules, a new trial should not be granted because no substantial
wrong or miscarriage of justice had been occasioned thereby.
The third question is in respect of the claims for damages
sought to be made by Frobisher against Pipelines and by Oak and Amren against
Frobisher by reason of the filing of the caveats by Pipelines and Frobisher.
These claims are based upon regulation 124 of the Quartz
Mining Regulations, which provides as follows:
124. (1) Any person registering or continuing a caveat
wrongfully and without reasonable cause shall make compensation to any person
who has sustained damage thereby.
(2) Such compensation with costs may be recovered by
proceedings at law, if the caveator has withdrawn his caveat and no proceedings
have been taken by the caveatee as herein provided.
(3) If proceedings have been taken by the caveatee the
compensation and costs shall be determined by the court and judge acting in the
same proceedings.
[Page 166]
(4) Where compensation is determined by the court, the
compensation to the claim owner and all other persons who have sustained damage
by the wrongful registration or continuation of the caveat without reasonable
cause shall be not less than $25.00 per claim affected thereby for every
day such caveat has been so wrongfully registered. or continued, to be
apportioned by the court as it deems fit.
No claim can be made under this regulation unless the person
claiming can establish that he has sustained damage thereby. I do not find any
evidence of damage having been sustained by Frobisher by reason of the filing
of the caveat by Pipelines. Any damages sustained by Frobisher resulted from
the making of the agreement by the prospectors with Pipelines and the turning
over of the documents relating to the mineral claims to Pipelines in breach of
the prospectors' agreement with Frobisher. There was no increase in such
damages because of the filing of the caveat by Pipelines and the position as
between Frobisher and Pipelines was not altered by the filing of it.
No damages were sustained by Oak and Amren as a result of
the filing of the Frobisher caveat.
In view of the above conclusions, it is not necessary to
express any opinion as to the validity of regulation 124.
In the result, in my opinion, the appeal of Frobisher from
that portion of the judgment of the Court of Appeal which directed, on terms, a
new trial in respect of the issues raised as to non-compliance by Harquail and
Frobisher with regulations 8(1) and 9(1) should be allowed. In all other
respects, save as to costs, I think the judgment of the Court of Appeal should
be affirmed. Frobisher should be entitled to its costs in this Court as well as
in the Court of Appeal.
Judson J.:—On
June 25, 1955, the appellant, Frobisher Limited, through its agent James A.
Harquail, took an option to purchase certain mining claims from four
prospectors. On June 29, 1955, the prospectors gave a similar option on the
same claims to Canadian Pipelines and Petroleums Limited. This company not only
took with notice of the first agreement but actively induced the breach of it.
Frobisher, immediately after hearing of the second agreement, began this action
against Canadian Pipelines, its two officers Morrisroe and Meschi and the four
prospectors, for specific performance of its agreement and an injunction;
[Page 167]
against any dealings with the claims by the defendants. The
main defence was that the Frobisher agreement was made on Sunday and the
greater part of the evidence was directed to this issue. The learned trial
judge, on ample evidence, made a clear finding that this defence failed and
that the Frobisher agreement was made on Saturday, June 25, 1955, and not on
Sunday, June 26, 1955, as alleged by the defence. The Court of Appeal agreed with this finding and this
matter is no longer in issue.
Towards the end of what had proved to be a very long-trial,
the defence moved to amend by pleading regulations 8 and 9 of the Regulations
made under The Mineral Resources Act, The learned trial judge refused
leave to amend and gave judgment for the plaintiff. The Court of Appeal1
was of the opinion, Gordon J.A. dissenting, that the amendment should have been
allowed and that there should be a new trial restricted to the issue raised by
the amendment. In all other respects the appeal was dismissed. Frobisher now
appeals to this Court from the order of the Court of Appeal allowing the
amendment and seeks the restoration of the judgment given at trial.
Briefly, the regulations provide that no mining company
shall be granted a licence unless it is registered under the Companies Act of
Saskatchewan and that no person or company, not a holder of a licence shall
prospect for minerals, stake out or record any location or "acquire by
transfer, assignment or otherwise howsoever, any mineral claim or any right or
interest therein." The appellant now admits that its agent Harquail had no
licence until July 27, 1955; that Frobisher did not register under the Companies
Act of Saskatchewan until March 9, 1956, and that it acquired its Miner's licence
on March 12, 1956. This admission is made for the purpose of avoiding a new
trial on incontrovertible facts and all counsel agree that it should be
regarded as evidence given before us under s. 67 of the Supreme Court Act. The
question, therefore, is whether Frobisher or its agent acquired any "right
or interest" in the claims on June 25, 1955, the date of the Frobisher
agreement when neither company nor agent held
[Page 168]
any licence. If they did and if, in consequence, the
Frobisher agreement is null and void, then, on the admissions made, the action
must be dismissed.
The Frobisher agreement, signed by the four prospectors, is
in the following terms:
Date—25th day of June, 1955.
AGREEMENT
We, the undersigned, the sole
owners of mineral claims—EO-1 to 16 incl.
Missing Link 1 to 9 incl.
IO—1 to 12 incl.
In all 37 claims contiguous,
located on or near Stewart Island, Lake Athabasca, Province of Saskatchewan,
Canada—do hereby grant to James A. Harquail, Mining Engineer—Suite 2810, 25
King st. West, Toronto, Ontario—in consideration of the sum of $1.00 (one
dollar), receipt of which is hereby acknowledged, an option effective to 12
noon— June 30, 1955—to purchase said mineral claims from the undersigned under
the terms of the following deal:
On receiving transfers to above
claims in good order—on, or as close as possible to June 30th, 1955—said
transfers to be turned over to Uranium City Bank of Commerce branch at which
time sum of $25,000.00 (twenty-five thousand dollars) will be issued to Mackinnon
and partners. (Vendors)
New company to be formed in which
vendors will receive 10% (ten percent) of authorized stock.
$25,000. Firm cash
Option Payments
1st option—Nov. 1, 1955
.................................................... $ 25,000.00
2nd option—March 1, 1956 ................................................ 50,000.00
3rd option—November 1, 1956
.......................................... 50,000.00
4th option-July 1,
1957........................................................ 50,000.00
$200,000.00
The above agreement shall be binding on the executors,
heirs, etc. of the people signing.
Frobisher submits that during the interval from June 25 to
June 30, it acquired no interest in the claims and that the prospectors granted
this period of time to Harquail to enable him to find out whether his principal
would make the payment of $25,000 on June 30; that, on the other hand, the
prospectors needed time to record claims E.O. 1-16 and to complete their
deposit of their title papers with the bank to be delivered on payment of the
$25,000; and further that the option did not begin until the $25,000
[Page 169]
had been paid. During this five day period Frobisher says
that it held no more than an option to decide whether it would take an option.
It was conceded that an interest in land would arise when the payment of
$25,000 was made.
I am quite unable to see any valid distinction between
Frobisher's position during the five day period and what it would have been had
the first $25,000 actually been paid. It was during this five day period that
the prospectors repudiated their obligation to Frobisher by making the other
agreement with Canadian Pipelines and refusing to deposit their title papers
with the bank. Frobisher did everything that it could do in the circumstances
to make the payment on June 30. What Frobisher had during the five day period
was an irrevocable offer, obtained for the consideration of one dollar, which
was actually paid. What it would have had on June 30 on payment of $25,000 was
an irrevocable offer for the period ending November 1, 1955. The further
payments provided for in the agreement would hold the offer irrevocable until
the dates specified and on the making of the last payment Frobisher would be
entitled to the title papers for the purpose of transfer to the new company.
The position of Frobisher as the optionee under this agreement is the same
throughout all its stages. It has the right to have the offer kept open on
payment of the stated consideration. The payments, if completed, constitute the
purchase price and all that then remains to be done is to form the new company,
transfer the claims and allot to the prospectors 10 per cent, of the authorized
stock.
Does an option to purchase land give rise to an equitable
interest in land? The question has usually been considered in connection with
conveyances and leases and the rule against perpetuities, and it has been held
that the option is too remote if it can be exercised beyond the perpetuity
period. The underlying theory is that the option to purchase land does create
an equitable interest because it is specifically enforceable. There is a right
to have the option held open and this is similar to the right that arises when
a purchaser under a firm contract may call for a conveyance.
[Page 170]
In both cases there is an equitable interest but in the case
of the option it is a contingent one, the contingency being the election to
exercise the option.
In London & South Western Railway Co. v. Gomm, Kay J. held that such an
interest did not arise, that an option to purchase was not within the rule
against perpetuities and that a purchaser for value without notice of the
option would not be bound by the covenant to re-convey. In the particular case
before him, he held that the defendant Gomm had taken with notice and that he
was bound in Equity by the covenant, on the principle of Tulk v. Moxhay. The facts of the case may be
stated in very simple terms for the purpose of these reasons. The Railway
Company conveyed surplus lands to one Powell in fee simple and exacted a
covenant that the grantee, his heirs or assigns would re-convey on payment of
the consideration of £100, should the lands at any time be required for railway
purposes. The Court of Appeal, reversing the judgment of Kay J., held that
Gomm, the purchaser from Powell, was not bound by the covenant because it
created an equitable interest in the land, which offended the rule against
perpetuities. The two conflicting views of the problem are thus stated in the
plainest terms in this decision. Is the matter one of contract or property?
Since the decision in Gomm, I am unable to find in any judicial decision
in England any deviation from the rule that the matter is one of a property
interest and not merely of contract. Even though Kay J. in the subsequent case
of Mackenzie v. Childers, expressed
the opinion that the doctrine enunciated in Gomm was "entirely
novel", judicial re-examination from time to time has resulted only in an
affirmation of the rule that an option holder has an equitable interest—for
example, by Warrington J. in Woodall v. Clifton, and in Worthing, v.
Heather, and
by Jenkins L.J. in Hutton v. Watling, and
in Griffith v. Pelton.
[Page 171]
In this Court, Duff J. in Davidson v. Norstrant, in a dissenting opinion which
alone referred to this matter, stated:
It seems quite clear that the option if validly created
would vest in the optionee an interest in land. The decision of the Court of
Appeal in London and Southwestern Railway Co. v. Gomm (1882) 20 Ch. D.
562, seems to be conclusive. Each one of the three judges, Sir George Jessel,
Sir James Hannen, and Lindley L.J. explicitly hold that the grant of an option
has the effect of creating an interest in. land and these opinions are not mere
dicta; they are the foundation of a distinct ground upon which the judgment of
the court was based.
Further, in Auld v. Scales, where there was option to
purchase contained in a lease which, at the time of the litigation, had become
one from year to year, it was held that the option did not offend the rule
against perpetuities, because the lease and with it the option could be
terminated at any time on proper notice. Although the decision in Gomm is
not expressly mentioned, the judgment is based on the assumption that the
option to purchase under consideration did create an interest in land.
The New Zealand Court of Appeal, in Morland v. Hales, also reached the same
conclusion. An owner of land, for valuable consideration, gave an option to
purchase for a period of ten days. Under the mistaken impression that the
option had been abandoned by the optionee, the owner gave a similar option to a
second person, and then the first optionee exercised his option by acceptance
within the ten days. It was held, following the decision in Gomm, that
the option created an interest in land and that the holder of the first option
had therefore a superior equity to that of the holder of the second option.
In the present case, in view of my opinion that Frobisher's
attempt to distinguish its position at the first stage of the option from the
later stages fails, there is no conclusion possible other than the one that in
the period June 25 to June 30 it did acquire an interest in these claims. This
was also the opinion of the Court of Appeal and once they had reached this
conclusion, which is really decisive of the whole case, they had no choice but
to rule that the rejection of the amendment by the learned trial judge was an
erroneous
[Page 172]
exercise of discretion. I am in respectful agreement with
their order based, as it is, upon the theory that the option created an
equitable interest in the claims. Gordon J.A. dissented and would have rejected
the motion to amend on many grounds, all of them substantial; that it was made
too late; that the point should have been raised in the statement of defence;
that the litigant should be bound by his conduct of the case; and finally, that
the amendment might leave the plaintiff open to a large claim for damages under
regulation 124 for "wrongfully and without reasonable cause"
registering a caveat against the claims. The force of most of these objections
to the amendment largely disappears when one has in mind that the facts on
which the application was based were not open to controversy. In the view I
take of regulation 124 no claim for damages can arise in this case.
My conclusion therefore is that this option, creating as it
did an equitable interest in these claims, was rendered void and of no effect
because it was given and taken against the express prohibition contained in
regulation 9. I reach this conclusion with regret and with knowledge that an
honest bargain is being defeated on technical objections, taken late in the
proceedings by defendants who, by concurrent findings of fact, have been found
guilty of a conspiracy to induce a breach of contract. The appeal of Frobisher
must be dismissed with costs and in view of the admission that the necessary
licences were not held at the date of the taking of the option and that a new
trial is unnecessary, the action must be dismissed. I would maintain the
disposition of the Court of Appeal as to costs of the trial and the appeal to
the Court of Appeal.
Two of the prospectors, Oak and Amren, counter-claimed
against Frobisher for damages for breach of regulation 124 in connection with
the registration of a caveat against the claims. Regulation 124 reads:
124. (1). Any person registering or continuing a caveat
wrongfully and without reasonable cause shall make compensation to any person
who has sustained damage thereby.
(2) Such compensation with costs may be recovered by
proceedings at law, if the caveator has withdrawn his caveat and no proceedings
have been taken by the caveatee as herein provided.
[Page 173]
(3) If proceedings have been taken by the caveatee the
compensation and costs shall be determined by the court and judge acting in the
same proceedings.
(4) Where compensation is determined by the court, the
compensation to the claim owner and all other persons who have sustained damage
by the wrongful registration or continuation of the caveat without reasonable
cause shall be not less than $2.5.00 per claim affected thereby for every day
such caveat has been so wrongfully registered or continued, to be apportioned
by the court as it deems fit.
The learned trial judge, on proper notice to the
Attorney-General held this regulation to be void as going beyond the authority
contained in the statute. In the Court of Appeal only the Chief Justice dealt
with this matter and he agreed with the trial judge. In this Court counsel for
Oak and Amren opened the question again and argued in favour of the validity of
the regulation and sought an assessment of damages. I agree with the majority
in the Court of Appeal that it is unnecessary in this case to determine whether
or not regulation 124 is intra vires because it was clearly shown that
no damage arose from the registration of the caveat. The damage, if any,
resulted from the litigation which followed almost inevitably when the
prospectors gave two options for the same claims to competing interests. I am
also of the opinion, although it is unnecessary to base my judgment on this
ground, that registration of a caveat "wrongfully and without reasonable
cause" means something in the nature of an officious intermeddling without
any colour of right and that the regulation, if valid, has no application when
there is a bona fide dispute.
The result is that the appeal of Frobisher and the cross-appeal
of Oak and Amren are dismissed with costs. Judgment should be entered
dismissing the action and the counterclaim both with costs to the plaintiff
because of the shortcomings of the defendants in the conduct of their defence.
The costs of the appeal to the Court of Appeal should stand as ordered by that
Court. The cross-action of the two prospectors Daigle and MacKinnon against
Pipelines was finally disposed of in the Court of Appeal.
Appeal and cross-appeals dismissed with costs, Locke and Martland JJ.
dissenting.
Solicitors for the plaintiff, appellant: Davidson,
Davidson & Blakeney, Regina.
[Page 174]
Solicitors for the defendants, Canadian Pipelines
& Petroleums, Morrisroe and Meschi: MacPherson, Leslie & Tyerman,
Regina.
Solicitors for the defendants, Oak and Amren:
Pitcher, Ehmann & Murphy, Regina.
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