Thou shalt not sever or partition.” What am I talking about? Well, if two or more people have an interest in a property and they get into a dispute, the y may have available to them the legal remedy of partition or severance. By usin g this remedy the courts may order that title to a piece of real property be div ided between the owners so that they may go their separate ways — provided that consent to the severence of the local land division committee can be obtained under the Planning Act (the property is severable without such consent) and that there are no buildings or other improvements, easements, topographical features, etcetera, that prevent the equitable division of the property. For practical purposes, this means the courts will order that the property be sold and that the owners split the proceeds between them. I am, of course, assuming that the owner s can not arrive at a mutually acceptable solution to their dispute among themse lves.
Remember, unpatented mining claims are not at law, in most jurisdictions, considered to be real property. Therefore the above will not be a problem.
If a court orders the sale of a property, it will also indicate the appropriate method of sale. This will usually be by auction or some other method that invo lves offering the property to the public at large. Most certainly, the individua l property owners can bid for the property (or, rather, the other party’s half o f it) themselves.
How is this related to mining and exploration? In a joint venture, if the join t venturers can’t agree upon the methods by which a property is to be developed or upon exploration programs, etcetera (use your imagination), and the agreement does not provide an appropriate procedure for reaching a binding decision, one of the parties may try to have title to the property severed. If a potential min e is involved you can imagine the “interest” that would be created within the in dustry.
Now that we have identified the potential problem and agreed that we do not particularly want to go around finding good prospects only to have them “put up fo r grabs” by some judge, what can we do to protect ourselves? The obvious answer is to provide, in the agreement, that no party will take severance or partition proceedings. The perfect answer] But surely it can’t possibly be that simple. In some jurisdictions it is simple, but in others it is not.
First, we must look at the law of the jurisdiction where the property is situated. It does not make any difference where the agreement was made or what law is specified to govern the agreement — the law of the jurisdiction where the property is situated governs. In most instances this will be provincial or territori al law, but confirm this because there are federal lands. Now that we have deter mined what laws govern, find out whether those laws permit parties to “contract out”of them (i.e. agree among themselves that a particular law will not extend t o the situation at hand). If the parties want to “contract out,” they must clear ly so provide in their agreement. In addition it is advisable to provide that, i f any provision of the agreement is found to be unenforcable, then it is to be s evered from the agreement and the balance of the agreement is to continue in for ce. If we are wrong and can not contract out, we do not want a judge deciding th at the unenforcable provision is so basic to the agreement that the entire agree ment fails. In Ontario parties may contract out of the right to sever or partiti on, but in Quebec they may not. Be careful, but don’t be shy. Even if, at law, p arties can not contract out in the agreement for moral suasion purposes. Just ma ke sure that the presence of the provision does not endanger the entire agreemen t.
While we are on the topic of title I will pass on a couple of other comments: * Title should always be searched. If unpatented claims are
involved, most jur isdictions permit a party to rely upon the records of the mining recorder so that virtually anyone who can read can search title to see who the owner is and whe ther or not the claims are in good standing or if there are any encumbrances. Wi th real property it is a different situation and the person searching the title must know what he/she is doing and what to look for. For example, in Ontario, un der the land titles system, title is guaranteed. Right? Wrong. Title is not guar anteed. Rather, if title is not correct, the wronged party will be able to recou p damages for his/her loss from the compensation fund if the damage or loss is a result of one of the limited specified title problems. In the case of mineral rights, damages are limited to two times what was paid for the issue of the paten t by the Crown. That’s super compensation for the loss of a mine the patent for which was acquired from the Crown for nomimal consideration in 1916] The answer is to have the title to the mineral rights searched right back to the patent by someone who knows what he is doing.
* The normal practice in the industry is to “get on with the agreement” and worry about title searches later. This is insane. One of the cheapest pieces of in surance you can get is a good title search carried out and reported upon before you have spent a cent on the property.
* Do not misunderstand me. Under no circumstances can a “hot” prospect be passed up just because there isn’t time to carry out a proper title search. Sometime s we must “go for it.” Do it (and don’t lose a good prospect just because you ha ve a cautious lawyer), but get a title search done as soon as possible and, if p ossible, leave yourself an “out.”
If you are dealing with property (unpatented claims are, in most jurisdictions , not a property interest, but the following is equally applicable to them), the re are a lot of side issues to be concerned about. It is suggested that you thin k about them and the “whole deal” and then decide how much protection you want. It is always best to go into any deal with your eyes wide open. Karl Harries is a partner with the Toronto law firm Fasken & Calvin. The information in this article is summary and general in nature and is not intended to be taken or acted upon as legal advice.
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