With several tart comments about the ethical conduct of its management, Mr. Justice Robert J. Sharpe of the Superior Court of Justice, Ontario, has dismissed the suit in which
The suit, brought by Scintilore against John Larche and Donald McKinnon in 1987, alleged that the two Timmins prospectors had colluded to deprive Scintilore of an interest in the properties, which were later developed as mines.
Scintilore took the two prospectors to court over duties it said Larche owed in staking in the Hemlo area. Larche and McKinnon staked the ground that ultimately was developed for the Hemlo gold mines owned by
Larche was in the Hemlo area in December 1979 to stake a set of 17 claims for Robert Schaaf, a consultant to Scintilore. Finding that 10 of the claims had already been staked by McKinnon, he asked for instructions and was told to go home. Instead, he staked more claims — outside the area specified by Scintilore — in partnership with McKinnon.
Scintilore sued Larche for breach of fiduciary duties, claiming Larche should have staked those claims for Scintilore. The company sought the royalties earned by Larche and McKinnon from the David Bell and Golden Giant mines, and shares the prospectors hold in Homestake and Battle Mountain.
Scintilore’s central claim, that Larche and McKinnon had colluded to deprive Scintilore of the claims where the Hemlo mines were later developed, was identical to a claim made by Lac Minerals in an earlier attmept to launch retrial of the Lac vs. Corona suit over ownership of the Williams mine.
Lac’s motion for retrial was dismissed in 1988, a dismissal upheld a year later by the Supreme Court of Canada.
The court rejected Scintilore’s collusion claim, citing both the earlier dismissal of Lac’s claim and the poor credibility of Scintilore’s case.
Justice Sharpe also found that the principal witnesses among Scintilore officers and associates — president Theodore Polisuk, consulting geologist Robert Schaaf and informal advisor Walter Hryniw — were not credible. He also said it was a “virtual certainty” that Polisuk, Hryniw and Schaaf intended to vend the claims into Scintilore, rather than have the company acquire them directly from the staker.
The second Scintilore complaint, that Larche had breached a fiduciary duty to Scintilore in staking claims for himself while in the area, was dismissed on multiple grounds. Larche, who was staking for Scintilore as a subcontractor to Timmins-based consulting firm Geoex, had been given definite instructions on what ground to stake, and that ground did not include any of the mines.
Scintilore had not instructed Geoex to acquire any other ground, nor asked Geoex or its subcontractor not to stake elsewhere in the area. Justice Sharpe rejected the idea that an unspecified “area of influence” exists around claims a contractor has been engaged to stake. Sharpe said Scintilore was “attempting to impose a contractual term it simply failed to bargain for.”
Justice Sharpe condemned Scintilore for tampering with evidence in visits its investigators made to the property in 1993, and refused to admit Scintilore’s evidence of staking irregularities. He also found it unusual that Scintilore had not made any further attempt to stake the open portion of the ground it originally instructed Geoex to stake.
The court found that Larche and McKinnon’s counterclaim of abuse of process by Scintilore was not proven. Sharpe agreed that the two prospectors had suffered real damages, but because Scintilore’s action was not for an “indirect, collateral and improper purpose” distinct from the goal of the suit itself, it was not an abuse of process under the law.
Justice Sharpe dismissed McKinnon’s counterclaim of malicious prosecution, which arose from a Criminal Code charge laid against McKinnon in February 1988. McKinnon had submitted applications to record the first Hemlo claims over the name and signature of Edward O’Neill, a friend and prospecting associate. The charges were dropped the following August, and a subsequent investigation by Ontario Provincial Police exonerated McKinnon.
The court found that private investigator Bruce Dunne, who had been working for both Scintilore and Lac Minerals, had made efforts to have the OPP and the Thunder Bay municipal police charge McKinnon, but found that Dunne had not been the sole cause for the charge. Sharpe did find, however, that Scintilore’s defence that Dunne was a “rogue operator” was not credible, and that, had the malicious prosecution suit been sustained, Scintilore would have been liable for Dunne’s actions.
Scintilore has not announced whether it is appealing the decisions.
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