Lac Appeal : Each eyebrow’s twitch sets courtroom humming

On the first day of the Hemlo appeal, George Cohen, a Buffalo- based criminologist, jotted down notes about the five judges hearing the case noting their relative ages, appearance and demeanor. Each eyebrow’s twitch, it seemed, was noteworthy.

He studied the inflections in their voices, scribbled excitedly if one yawned and eagerly noted each of their witticisms. That’s important,” he leaned over and whispered as one of the judges asked which colored binder contained what information.

Mr Cohen, who provides his services in some of the more spectacular American criminal cases, has already done a socio-linguistic analysis” of the trial transcript for Lac Minerals, searching for the subtlest of strengths and weaknesses in the company’s case. He has been retained by Lac fo r the appeal in the company’s attempts to get every edge it can. He scrutinizes the interplay of judge and lawyer in this his first involvement in a civil suit.

This is the largest of all Canadian mining court cases and the courtroom is filled with stockbrokers, analysts, mining executives and journalists all similarly looking for a hint of how the black- robed judges behind the bench will view the case.

Will they uphold the trial judge’s March 7 decision ordering Lac to hand over the largest of the three Hemlo, Ont., gold mines to International Corona Resources? Will it overturn that decision and order a new trial? Will it uphold the decision but alter the damages awarded to Corona by the trial judge?

The trial judge found that in 1981 Lac had violated a fiduciary duty not to use the confidential information it gained from Corona for its own use while negotiating towards a joint venture. But for Lac’s actions, Corona would have acquired the 11 patented mining claims where Lac has since built the Page-Williams mine, ruled the trial judge.

The mine could produce gold worth close to $5 billion based on proven and probable reserves at current gold prices. Analysts at Brown, Baldwin Nisker hypothesize that the mine could eventually produce up to one million oz of gold a year at a cash cost of $146(US) per oz.

What’s more important to those in the courtroom gallery, however, is the future of investments that hinge on the decision. The market capitalization of Lac dropped about $700 million the day trading resumed after the March 7 decision was handed down while the value of Corona increased by about $230 million.

It took Justice R.E. Holland, the trial judge, 15 days to deliberate before handing down his decision after a trial that took 56 days in court over a 5-month period. He ordered the property be transferred to Corona from Lac once Corona pays Lac $154 million to offset the money Lac has already spent on the mine and mill.

At the request of both Lac and Corona he estimated the cash settlement value of the mine at $700 million.

Lac says the trial judge did not consider all of the facts as presented through evidence during the trial and erred in some inferences he made from the evidence.

Earl Cherniak, the London- based lawyer brought in by Lac for the appeal, began the proceedings by outlining five points he plans to make to the court during the five days allotted him.

* The trial judge ruled that Lac had violated a fiduciary trust without analysing the relationship between the two companies to determine the nature of the relationship.

* The trial judge ruled that Lac misused confidential information without examining the nature of the information and whether it truly was confidential.

* That transferring the property to Corona is not the correct remedy even if a fiduciary trust was violated.

* That the trial judge erred in assessing damages by using a personal injury approach.

* That the trial judge erred in calculating the cost of building the mine.

Corona has filed a cross appeal that it should not have to pay the $154 million because Lac had invested that money after Corona had filed its original statement of claim.

Corona also says the mine is worth double the $700-million price tag put on it by Judge Holland.

In Osgoode Hall’s courtroom one, the proceedings are intense. Mr Cherniak, a tall, slim man with a fringe of curly, graying hair, stands for four hours each day in his Queen’s Counsel robes and, sometimes with a slight stammer, addresses the five judges.

To the layman, the judges frequent and sometimes curt questions are a curious mix of common sense and legalese. Interspersed with references to legal precedents, fiduciary trusts and breach of confidence law come more down to earth questions: for example, while Mr Cherniak took the better part of the first afternoon to show that others as well as Lac and Corona were interested in the Williams claims back in early 1981, Judge Krever interjects with an abrupt So what?”

Mr Cherniak says a fiduciary trust exists only if one party undertakes to do something for another or if two parties are working toward a joint venture or partnership arrangement. Neither of those conditions existed between Lac and Corona in 1981, he said.

The two companies were clearly negotiating towards a joint venture,” said the trial judge in his decision: His Lordship is dead wrong,” says Mr Cherniak.

Even if they were, they had never embarked upon the joint venture,” he added. Not one single term of this joint venture had been agreed upon.”

What’s more, once Lac acquired the Williams property it didn’t stop talking to Corona about their mutual interest in the entire Hemlo area: There’s no indication of Lac had the property and ‘bye ‘bye Corona.”

What do you mean by that?” asked Judge MacKinnon. It was ‘bye ‘bye Corona.”

Lac was allotted five days to present its case. Corona has been allowed four days to state its case, then a final day is set aside for Lac. The judges have no deadline to meet in bringing down their decision and it’s unlikely one will be handed down before January.

The decision will not necessarily be unanimous. If there is any dissenting opinion, it will be put in writing and probably used to buttress the application for an appeal. With a panel of five judges it is possible to have two dissenting opinions that may be put into one written dissenting opinion or two separate ones.