Bacanora Minerals Ltd v Orr-Ewing (Estate), 2021 ABQB 670

Court of Queen’s Bench of Alberta Citation: Bacanora Minerals Ltd v Orr-Ewing (Estate), 2021 ABQB 670 Date: 20210823 Docket: 1701 15523 Registry: Calgary Between: Bacanora Minerals Ltd. Plaintiff/Defendant by Counterclaim - and - The Estate of Ian Colin Orr-Ewing Defendant/Plaintiff by Counterclaim _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice J.T. McCarthy _______________________________________________________

I. Introduction [ 1 ] The parties in this action are engaged in a dispute concerning the validity of a royalty granted over lithium produced from certain mineral claims located in Mexico. The Plaintiff, Bacanora Minerals Ltd (“Bacanora”) asserts that the royalty in question was obtained by way of a fraudulent misrepresentation either made or perpetuated by Mr. Ian Colin Orr-Ewing, or in the alternative, that the royalty was provided to Mr. Orr-Ewing absent any consideration. Mr. Orr-Ewing passed away in August of 2016 and the matter has proceeded against his estate (the “Estate”). [ 2 ] In December of 2019, I heard an application brought by the Estate for

summary trial seeking dismissal of Bacanora’s claim. The Estate’s application was based on two grounds, namely: (

a) whether Bacanora was able to establish that the royalty had been improperly obtained; and (

b) whether Bacanora’s claim against the Estate was statute-barred. I found that the limitations question was a suitable issue for

summary trial, pursuant to rules 7.5-7.8 of the Alberta Rules of Court . I deferred determining the threshold issue on the question regarding the validity of the royalty until the limitations issue had been determined. II. History [ 3 ] A brief overview of the history of the parties and the circumstances surrounding the granting of the royalty is helpful in determining the limitations issue. [ 4 ] Mr. Orr-Ewing was the principal shareholder of a number of corporations involved in holding or acquiring mineral rights in northern Mexico.

Specifically, he was the principal shareholder and director of Tubutama Borax PLC (“Tubutama”) which held all of the issued and outstanding shares of Tubutama Ltd. Tubutama Ltd. was the 100% owner of Mineramex Limited (“Mineramex”), which in turn was the majority shareholder of two subsidiary corporations: Minera Sonora (“Sonora”) and Minerales Industrials Tubutama SA de CV (“MIT”). Both Sonora’s and MIT’s primary assets were comprised, at the time, of borate mining and mineral rights in northern Mexico. Tubutama Ltd. and Mineramex were holding companies, with no assets outside of those held by Sonora and MIT.

It is not disputed that Tubutama and Mr. Orr-Ewing periodically advanced funds to MIT and/or Tubutama Ltd. [ 5 ] In May of 2009, Bacanora completed its initial public offering (the “IPO”) and qualified as a capital pool company on the TSX Venture Exchange (the “TSX-V”). Mr. Paul Conroy was Bacanora’s president and CEO at the time. Soon after the issuance of the IPO, Bacanora began moving toward formalizing its acquisition of Mineramex, a step which would serve as the qualifying transaction of Bacanora, as required under the TSX-V rules (the “Qualifying Transaction”).

The acquisition would be structured by way of a reverse takeover, the terms of which were outlined in a Letter Agreement, dated July 17, 2009 (the “Letter Agreement”). The parties provided detailed evidence respecting the structure of the Qualifying Transaction as well as the history and nature of the loans made by Tubutama and Mr. Orr-Ewing. While such evidence demands a detailed review in order to resolve the issue of the validity of the royalty, for the purpose of resolving the limitations issue, a

summary will suffice. [ 6 ] Essentially, as a part of the acquisition, Bacanora was to acquire all loans owing from MIT to Tubutama and Mr. Orr-Ewing. In exchange for the loan assignment, Mr. Orr-Ewing was to be reimbursed through a cash payment, a share exchange, and through Tubutama the grant of a 3% royalty over all minerals produced from the lands held by MIT and Sonora, as outlined in various schedules attached to the Letter Agreement. The acquisition of Mineramex and the execution of the initial 3% royalty grant were completed in April of 2010.

The parties sometimes refer to this initial grant as the ‘borate royalty’. [ 7 ] In the spring of 2010, Bacanora joined Sonora to begin the process of acquiring certain lithium claim titles in northern Mexico, then held by Mr. Martin Fernando Vidal Torres. On July 21, 2010 Bacanora entered into a Letter of Intent with Mr. Torres (the “LOI”). As a part of the transaction, Mr. Torres received shares in Bacanora and a cash payment covering those expenses he had personally incurred in developing the lithium claims to date. The LOI also acknowledged a pre-existing 3% royalty payable to Mr.

Orr- Ewing on all production from the lithium claim. [ 8 ] In August of 2010, a royalty agreement was papered as between Mr. Orr-Ewing, as royalty holder, Sonora, as the grantor, and Bacanora, as the parent company (the “Royalty Agreement”). While the lithium claim had been assigned to Bacanora, title was held by Sonora, as required under Mexican law. The royalty agreement was fully executed in September of 2010. Under its terms, and specifically pursuant to paragraph 2.1, Sonora granted Mr.

Orr-Ewing a gross overriding royalty (“GOR”) amounting to 3% of the revenues derived from production of the lithium claim, with Bacanora acting as guarantor. I have sometimes referred to this agreement in a general sense as the “Lithium Royalty” or the “GOR”. [ 9 ] As I understand it, Bacanora takes the position that the completion of the Qualifying Transaction put an end to any ability of Mr. Orr-Ewing to obtain the Lithium Royalty. That is, as Mr.

Orr-Ewing was fully compensated for his earlier contributions through the provisions granted as a part of that transaction, no consideration was provided in exchange for the GOR. Bacanora further takes the position that there is no basis for any claim that the GOR was pre-existing or otherwise encumbering the lands at the time the LOI was entered into. It asserts that because Mr. Orr-Ewing did not hold any pre-existing royalty over lithium production, he had no entitlement to the grant under the Royalty Agreement. Bacanora alleges that Mr. Orr-Ewing and/or Mr.

Conroy made certain misrepresentations which led the Bacanora Board of Directors to believe that a pre-existing royalty existed over the lithium claim. [ 10 ] Bacanora asserts that this mistaken basis for entitlement led the lawyer who was acting as Bacanora’s corporate counsel during the acquisition to essentially assume that the 3% royalty was payable to Mr. Orr-Ewing. Language to this effect was therefore

added into the closing documents as described above. Bacanora further asserts that Mr. Torres was also led to believe that the claims would be subject to a pre-existing 3% royalty payable to Mr. Orr-Ewing. [ 11 ] Again, the validity of the GOR grant is not in issue for the purposes of this

summary trial. Rather, the question is whether the Limitations Act , RSA 2000, c L-12 (the “ Act ”) applies to this action, and if so, whether Bacanora brought its claim in time. III. Issues

a) Does the Limitations Act apply? [ 12 ] The Limitations Act does not apply to all forms of relief sought by an applicant, meaning that the limitation periods outlined therein are inapplicable to certain claims.

Section 3 of the Act refers to time periods in which a claimant seeking a “remedial order” must act. “Remedial Order” is defined in

section 1 (

i) of the Act as follows: “remedial order” means a judgment or order made by a court in a civil proceeding requiring a defendant to comply with a duty or to pay damages for the violation of a right, but excludes: (

i) a declaration of rights and duties, legal relations or personal status… [ 13 ] The Act defines “claim” as follows at

section 1 (a): “claim” means a matter giving rise to a civil proceeding in which a claimant seeks a remedial order. [ 14 ] According to paragraph 59 of its November 2019 amended statement of claim, Bacanora sought the following relief against the Estate:

a) a declaration that the Royalty Agreement is null and void and unenforceable or alternatively, an Order rescinding the Royalty Agreement;

b) a declaration that any related, predecessor or subsequent agreement or any arrangement granting a GOR to Orr-Ewing is null and void and unenforceable; […] [ 15 ] In addition to the above, it also sought damages related to the costs associated with the investigation into the legitimacy of the royalty agreement, a general costs award, as well as punitive damages related to the alleged misconduct of Mr. Orr-Ewing in concealing his role in obtaining the GOR.

Finally, it included a claim for “any further and other relief as may be appropriate as this Honourable Court deems just”. [ 16 ] Upon receipt of further argument on this point, counsel for Bacanora undertook to prepare a draft order providing that Bacanora may further amend its amended statement of claim in order to remove certain remedies sought. Specifically, it sought to remove any claim for damages (including the removal of those paragraphs pleading entitlement to punitive or exemplary damages as well as full indemnity costs based upon what it alleged to be high-handed behavior on the part of Mr.

Orr-Ewing ) or pre-judgment interest, as well as to remove its claim for a secondary declaration pertaining to any “related, predecessor or subsequent agreement” . In revising the grounds for its action, Bacanora advised that it wished to remove the reference to it suffering loss or damage as a result of certain fraudulent misrepresentations made by Mr. Orr-Ewing, including the costs associated with the related investigation.

An Order permitting Bacanora to further amend its amended statement of claim was approved as to form content by counsel on July 9, 2021. [ 17 ] In sum, the only remaining relief sought by Bacanora is: (

a) a declaration that the GOR is null and void or unenforceable, or alternatively an order that it be rescinded; (

b) costs on a solicitor and his own client basis; and (

c) any further and other relief as deemed appropriate by the Court.

i) The position of the parties [ 18 ] Bacanora takes the position that because it is seeking chiefly declaratory relief, the Limitations Act does not apply. It argues that it is seeking an order which merely clarifies and defines the existing rights and positions of the parties pursuant to the GOR and does not require that any further step be taken. As the declaration sought is not remedial in nature it is therefore not subject to the time limits set out in the Act . [ 19 ] The Estate disagrees with Bacanora’s characterization of the remedy sought.

It takes the position that Bacanora is simply attempting to avoid a limitations issue by either characterizing actual remedial relief as declaratory relief, or by conjoining both forms of relief, or by otherwise requesting some form of discretionary relief which would ultimately result in a remedial order. The Estate asserts that the true nature of Bacanora’s claims for relief is discernable if analyzed contextually against the allegations it has made against Mr.

Orr-Ewing. [ 20 ] As much of the Estate’s argument relates to the nature of, and inter-relation between, the various agreements in play, certain provisions of the agreements bear a more detailed scrutiny. [ 21 ] While earlier, undated, versions of the Letter Agreement between Mr. Torres and Bacanora (being the parties to the LOI) referenced slightly different versions of the overriding royalty, its final version was included in the July 21, 2010 LOI.

Pursuant to paragraph 5 of the LOI: Each of the Vendor [Torres] and Bacanora acknowledge [sic] agree that a 3% royalty is payable to Colin Orr-Ewing on all production of lithium from the Assets and that they will serve him with not less than sixty (60) days notice if they intend to relinquish ownership of

any of the Assets. [ 22 ] “Assets” is a defined term in the LOI and includes, pursuant to

Schedule “A” of that agreement, four existing “lithium claim titles” in Sonora, Mexico in relation to four specified parcels of land, and one “pending lithium claim title” on lands still to be staked in Sonora. The total area of land covered by the lithium claims measures approximately 4,550 hectares. [ 23 ] The

preamble of the LOI states that the matters set forth within constitute a binding legal agreement between the parties, again being Mr. Torres and Bacanora. Paragraph 2 of the LOI sets out certain conditions of closing, including establishing, to Bacanora’s satisfaction, title to both the claims and pending claims comprising the Assets. Paragraph 12 provides that “this [LOI] constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements between the Parties”. [ 24 ] The parties then formalized the deal as laid out in the LOI.

The related closing agenda, dated August 20, 2010, incorporates additional documents pertaining to the royalty. Specifically, the agenda references both the related General Conveyance and the GOR, each of which is also dated August 20, 2010. The General Conveyance is entered into between Mr. Torres and another individual as vendors and Bacanora as purchaser, as well as Sonora, as Bacanora’s wholly-owned subsidiary. The

preamble to the terms in the General Conveyance provides that in accordance with the provisions in the LOI, Bacanora agreed to purchase the vendors’ “interests in the Assets, as defined by the [LOI], subject to the terms and conditions set forth in the [LOI]”. [ 25 ] Pursuant to paragraph 2 of the General Conveyance, the vendors agreed to sell the “entire right, title, estate and interest in and to the Assets”. Paragraph 4 provides that in the event of a conflict between the LOI and the General Conveyance, the LOI shall prevail.

Paragraph 12 provides that the General Conveyance is entered into “pursuant to and for the purposes of the provisions of the [LOI] and that provisions for the [LOI] shall prevail and govern in the event of a conflict” between the two documents. [ 26 ] The Royalty Agreement defines “Assets” in paragraph 1.1(

d) as: Those mining claims and pending claims described in

Schedule A [being identical to

Schedule A in the LOI] and any mining concessions, mineral claims, mining leases or other mineral tenures that may replace them…whether extending to a greater or lesser area than that of the specified claim. [ 27 ] Pursuant to paragraph 2.1, of the Royalty Agreement: The Grantor [Sonora] hereby grants, sells assigns , transfers and conveys and agrees to pay the Royalty Holder [Mr. Orr-Ewing] a gross overriding royalty (the “Royalty”) on the Products to be obtained from the Assets and all successions deriving thereof equal to 3% (the “Royalty Percentage”) of the Revenues.

For greater certainty the Royalty shall be calculated on all Revenues without any deduction for any costs of expenses incurred by or on behalf of the Grantor….including, without limitation, any costs or expenses in respect of the mining, exploration, extraction, processing or sale of any of the Products. [ 28 ] “Products” is also a defined term, essentially covering ore produced on the Property, whether in raw or processed form. “Property” is defined as “the area, including the surface and subsurface, which from time to time is within the boundaries of the Assets”. “Revenues” means “the amounts payable to the Grantor from the sale of Raw and Processed Products. [ 29 ] Paragraph 12.1 addresses the term of the royalty and provides that the GOR “shall constitute a covenant running with the Assets”.

Finally, paragraph 15.1 provides the royalty holder the right to register the GOR with the public registry of mining in Mexico. [ 30 ] Having laid out the salient features of the various agreements between the parties, I turn now to the specific aspects of their arguments. [ 31 ] The position adopted by the Estate can be summarized as follows. First, it asserts that the tenor of Bacanora’s allegations are that Mr. Orr-Ewing fraudulently and/or negligently misrepresented his entitlement to the GOR.

It says that the available remedies for an action founded in misrepresentation are rescission and damages, and that conjoining a plea for damages with a declaratory remedy ultimately results in a remedial order.

In a similar vein, the Estate takes the position that Bacanora’s final requested remedy of “any further and other relief as may be appropriate as this Honourable Court deems just” provides for the granting of any remedy and is not limited to a remedy in a declaratory form. [ 32 ] Further, the Estate asserts that Bacanora is seeking an in rem remedy, which it argues, is inherently remedial. [ 33 ] Finally, it takes the position that given the interconnectedness between the LOI, the GOR and the General Conveyance, the remedy of partial rescission simply is not available. [ 34 ] Not surprisingly, Bacanora disputes the Estate’s characterization of its claim, and urges this Court to simply read its prayer for relief at face value: it is essentially asking for a declaration that the GOR be set aside.

With Mr. Orr-Ewing’s interests negated in this way, the remaining entities involved in the underlying lithium claims transaction are free to proceed in the usual course, without further resort to this Court. [ 35 ] Specifically, Bacanora asserts that with the amendments to the amended statement of claim, the foremost remaining request is for a declaration of invalidity of the GOR. It takes the position that while rescission is requested as an alternate form of relief, this in no way amounts to an implicit alternate claim for damages.

Bacanora states that as no monies have yet been paid pursuant to the GOR, this is simply not an instance where there would be an assessment of damages in lieu of rescission, even assuming such an approach is recognized in law. [ 36 ] In addition, Bacanora asserts that the Estate is mischaracterizing the relief sought as an in rem remedy. Rather, based upon the definition of “Assets” in the LOI, the GOR creates a contractual right to payment calculated on production, as opposed to creating an interest in land.

[ 37 ] Finally, in relation to the Estate’s ‘interconnectedness’ argument, Bacanora takes the position that the GOR is the only contract connected to the underlying lithium claims arrangement to which Mr. Orr-Ewing is a signatory. It argues that with the invalidation of the GOR, the transfer of the existing interests in the lithium claim will simply proceed as though the Assets were unencumbered. That is, the whole of the interest is transferred to Bacanora.

It takes the position that the rights and obligations contained in the LOI and the General Conveyance will be unaffected by the declaration, and that it is not seeking any form of “partial rescission’.

As such, no subsequent step in the form of a conveyance or additional order will be necessary. ii) Analysis [ 38 ] The rationale for drawing a distinction between remedial and declaratory remedies was discussed in some detail in Limitations (Report No. 55) (Edmonton: Alberta Law Reform Institute, 1989) in which the Institute made a number of recommendations in putting forward a model form of a revised limitations act.

In discussing the types of the claims to be expressly excluded from the application of limitations legislation, the Institute notes as follows, at page 38: A declaration defines right-duty relationships, clarifies them and may recognize the existence of a right-duty relationship sufficient to justify granting a remedy. Declarations should not be subject to a limitations system. In the Report for Discussion, we excepted them on the basis that a declaration merely declares rights.

While we continue to recommend this exception, we think it only fair that we do so recognizing the potential of the declaration for use to circumvent the limitation periods set out in the Act . Declarations constitute a growth area in the law, rendering the effect of their exception from the Act something of an unknown factor. For example, what would be the result were a claimant to seek remedial relief that is ancillary to a declaration? The definition of "remedial order" in s. l(

i) of the Act is the control mechanism. [ 39 ] As noted above, the definition of a ‘remedial order’ (acting as control mechanism) contains three features. It must: (

i) be an order or judgment; (ii) which is made by the court in a civil proceeding; and (iii) it must enforce a duty owed by a defendant in respect of a right of the claimant (page 52). The Institute goes on to state that: Remedial orders fall into two categories. The order may be performance oriented, requiring a defendant to comply either with an affirmative duty to do something, or with a negative duty to refrain from doing something.

Alternatively, the order may be substitutionary in nature, requiring a defendant to pay damages for the violation of a right in substitution for the performance of a duty which is no longer either possible or feasible. There is no difference between the two categories as a matter of application. … [ 40 ] In contrast, the Institute described the function of a declaratory remedy as follows: A declaration is excluded because, strictly speaking, it has no creative effect: it does not order anyone to do, or to refrain from doing, anything.

Rights and duties, legal relations and personal status exist under the law without any necessary reference to the courts, and persons usually comply with their duties without judicial coercion. A claim for a declaration may be brought where persons have a genuine dispute as to the scope of their respective rights and duties, legal relations or personal status. The interested persons may leave the court in peace and comply with their duties as defined in the declaration without further resort to the judicial process.

A declaration simply recognizes and defines rights and duties, legal relations or personal status that already exist (page 52). [ 41 ] In noting that declaratory remedies constitute a growth area in the law, the Institute further commented that “their exclusion from the operation of the general limitations scheme leaves room for creative play by lawyers and courts” (page 3) and that “used creatively, the declaration may provide an avenue by which to avoid the limitations periods in the Act .

That is because, strict legal theory notwithstanding, a declaration often yields practical benefits” (page 53). [ 42 ] At bar, Bacanora is seeking declarative remedies in relation to fraudulent misrepresentations and a lack of consideration which it argues invalidate the GOR. In examining the ‘rights and duties’ exclusion in relation to actions concerning contracts, the Institute opined that limitations legislation should not apply where the claimant is seeking a declaration of rights and duties based on contract, trust, restitution, property or statute.

It is clear that declaratory relief may issue in contractual matters, notwithstanding the form or nature of the contract, and that a party may seek a declaration that a contract is null and void in a variety of circumstances: L Sarna, The Law of Declaratory Judgments , 4 th ed (Toronto: Thomson Reuters, 2016) at 231. As similarly noted by this Court in Brennenstuhl v Trynchy , 2002 CarswellAlta 1857 at para 70 : Declaratory relief may be sought to determine whether a contract was formed, whether it has been breached or terminated, and indeed whether in the circumstances of the case it is enforceable.

It may also be used to establish what the true relationship is between the parties. [ 43 ] Both parties agree that the test for determining the distinction between declaratory and remedial relief was laid out by Slatter J, as he then was, in Yellowbird v Samson Cree Nation No 444 , 2006 ABQB 434 (aff’d 2008 ABCA 270 ) at para 35: …In my respectful view, an attempt to define the boundary between remedial orders and declaratory orders by searching for the "thrust of the claim" is unproductive. This test is too vague to be helpful, and will lead to results-oriented jurisprudence.

The statutory test is whether the relief requires the defendant to comply with a duty or pay damages for violating a right. The coercive nature of a remedial order is captured in the words "requiring a defendant to comply". A helpful test to determine if the relief is truly declaratory, or only declaratory in form, is: If the Court granted the declaration, and the defendant resisted the implementation of the declaration, could the plaintiff "leave the court in peace" and enjoy the benefits of the declaration "without further resort to the judicial process"?

This is the wording used by the [Alberta Law Reform] Institute, supra , para. 23. If the fruits of the "declaration" cannot be enjoyed without further legal execution or intervention (by garnishee, seizure, appointment of a receiver, or other enforcement mechanism), then the supposed declaratory order is really remedial in nature.

[44] How a party classifies the relief it seeks is not determinative of the issue: Chinese Benevolent Association of Edmonton vChinatown Multilevel Care Foundation, 2019 ABCA 339 at para 26. That is, simply labeling your remedy as declaratory does not makeit so. [45] Certain authorities relied upon by the Estate are, in my view, distinguishable in that the claimant clearly conjoined a claim fordamages with a request for declaratory relief.

For example, in Huang v Telus Corp Pension Plan (Trustee of), 2005 ABQB 40, theplaintiffs (former Telus employees) brought an action against the trustees of the company’s pension plan seeking a declaration thatcertain incentives be included as earnings in calculating payable pension. In finding that the Limitations Act could not be circumventedby framing the relief as declaratory, Moreau J, as she then was, found that the former employees were seeking the retroactive institutionof benefits, based on the impugned incentives, to be included in their pensionable earnings.

Of note, the prayer for relief included arequest for monetary judgment: para 56. Conversely, as pointed out by Bacanora, any express claim for damages have been removedpursuant to the recent amendments to its amended statement of claim. [46] In my view, the decision at bar does not turn on whether a claim for remedial relief is being made ancillary to a declarativerequest. The express claims for remedial relief were expunged with the most recent amendments to the amended statement of claim.

Tobe fair to the Estate, Bacanora’s request to make such amendments came very late in the proceedings, as evidenced, in part, by the “withprejudice” language used in the July 2021 Order. Given that the claims for damages have been removed, the crux of the issue is theproper characterization of the (now, essentially sole) remedy actually being sought. Remedies where misrepresentation has been alleged [47] The Estate correctly points out that if no juristic reason exists for the GOR to have been granted to Mr.

Orr-Ewing (given alack of consideration or fraudulent misrepresentation), one of the available remedies is rescission of the impugned contract. As stated byBacanora, rescission “is merely another way of pleading that the contract is voidable or void”: 527375 Alberta Ltd v EPCOR EnergyServices (Alberta) Inc, 2003 ABQB 997 at para 35. The effect of rescission is to essentially set aside or “unwind” the agreement, thusterminating the contractual rights of the parties and restoring the pre-contractual status quo. Such “unwinding” may result in an order ofrestitution of any benefits conferred under the agreement.

It is accepted that this restitutionary form of relief “…may be either proprietary(the restoration of property) or personal (repayment of money)”: J Cassels & E Adjin-Tetty, Remedies: The Law of Damages (Toronto:Irwin Law, 2014) at 303. [48] In my view, the fact that rescission is available as a remedy in instances where formation of a contract is in issue, coupled withthe fact that a remedy based in rescission carries with it the alternative possibility of a damages award, is not fully determinative of theissue before me.

Indeed, given the fact that the GOR is still held by the Estate and that no royalties have yet been paid, this is not aninstance where damages are necessarily the preferable remedy. [49] That is not to say there is no intrinsic value to the GOR; both parties have led evidence as to its possible value, which appearsto be substantial. What is meant, rather, is that the fact that a remedy in rescission, may (in certain circumstances) provide an alternateclaim in damages does not prevent a party from seeking declaratory relief based upon restitutionary principles.

As held in Brennenstuhlat para 70, declaratory relief may be available to determine whether a contract has been formed or whether it is enforceable. [50] I reach a similar conclusion regarding the Estate’s argument that Bacanora’s prayer for “any further and other relief as may beappropriate” may, given the exercise of the Court’s discretion, amount to a remedial remedy. The Estate asserts that a request for suchrelief could result in an award of damages. [51] As I understand the Estate’s argument, it is not the mere inclusion of this prayer for relief in and of itself that creates an issuefor Bacanora.

Such a request – using similar or identical wording – is very commonly pled in statements of claim in this province as aform of ‘basket’ or ‘boilerplate’ inclusion, although not strictly required.

Indeed, both parties acknowledge that the Court possesses thejurisdiction to grant what it views, in its discretion, as a just remedy to which the parties appear to be entitled as a right, whether or not itis claimed in an action: Judicature Act, RSA 2000 c J-2 ss 8 and 11; Alberta Rules of Court, rule 1.3. [52] I additionally note that declaratory relief may be granted even if not expressly requested by a party, including through relianceupon a general prayer for relief: Phillips v 707739 Alberta Ltd, 2000 ABQB 139 at para 241. See also Meisner v Mason, (NS CA), [1931] 2 DLR 156 (NSCA) at para 161.

An order for declaratory relief may also stand on its own. [53] Bacanora asserts that the Estate is basing its position on the erroneous assumption that any “further and other” discretionaryrelief granted by this Court would amount to a remedial order, as opposed to declaratory relief. Bacanora posits that if the Estate’sposition is accepted, every claim for declaratory relief that also includes a general prayer for relief would necessarily amount to a requestfor a remedial order, thus essentially defeating any claim for declaratory relief. [54] The Estate takes the position that Bacanora’s argument is overbroad.

Rather, it submits that not every plea for declaratoryrelief will invoke a court’s discretionary ability to additionally consider the appropriateness of a remedial order as described above.However, the Estate argues that given the specific remedy sought at bar – rescission of the GOR – Bacanora has placed itself in aposition in which the form of declaration incorporates an alternative plea for damages.

That is, because the remedy in instances where acontract is entered into due to a misrepresentation may be rescission or, in lieu of rescission, an award of damages, the ‘basket’ pleaincluded in Bacanora’s prayer for relief necessarily incorporates a request for a remedial order. This would exist whether or notparagraph 57(

c) was included in the amended amended statement of claim. [55] Again, I find the fact that an alternate claim for damages may exist, given the court’s discretion as acknowledged by thewording of this ‘basket’ prayer for relief, is not fully dispositive of the issue. Rather, a determination may be made by considering thenature of the primary remedy being sought, and whether it carries with it a coercive effect. It should be further noted that while Bacanorarequested rescission as an alternate form of relief, its primary request is for a declaration that the GOR is “null and void andunenforceable” pursuant to paragraph 57(

a) of the amended amended statement of claim.

Is the relief sought in rem? [56] As noted above, the Estate asserts that the relief sought by Bacanora is disguised in rem relief. It argues that it does not matterwhether there is an interest in land or a property interest of some kind in order for a right to be in rem.

In so arguing it relied on theauthorities discussed below. [57] In both Daniels v Mitchell, 2005 ABCA 271 and the companion case Blair v Desharnais, 2005 ABCA 272 our Court ofAppeal concluded that an order nisi in mortgage proceedings declaring the amount underlying pursuant to the mortgage, is a remedialorder. [58] The Court in both instances rejected the argument that the order sought simply declared the existing rights and duties asbetween the parties.

The Court in Daniels found that the mortgagor’s failure to comply with his duty to repay the loan triggered anumber of resultant remedies, whether in rem or otherwise: para 40. It concluded that “the fact that an order nisi does not order themortgagor to pay but describes what will happen if he fails to pay does not make the order something other than a “remedial order”. Hisduty is implied on the order that grants a remedy to the mortgagee”: para 42 [emphasis in original].

In concluding that an in remmortgage remedy is a remedial order, the Court held, at paras 50-51 that: First, there is nothing in the history or language of the New [Limitations] Act to suggest that the Legislature intended that in remmortgage remedies be subject to no limitation period. Second, the purpose of a declaration is to clarify and define the existence andextent of an applicant's legal rights.

A declaration is unlike most judicial rulings in that it "merely declares and goes no further inproviding relief to the applicant": Lazar Sarna, The Law of Declaratory Judgments, 2d ed. (Toronto: Carswell, 1988) at 1. A primeexample is Calder v. British Columbia (Attorney General), (SCC), [1973] S.C.R. 313 (S.C.C.), where the appellantssought a declaration that aboriginal title had not been extinguished, without further remedy. An order nisi does much more than define or declare the mortgagee's legal rights. It sets in motion a chain of events that, ultimately,permits the mortgagee to realize on his security.

Its essence is remedial, not declaratory. [59] In Blair v Desharnais, 2003 ABQB 657 (aff’d 2005 ABCA 272), this Court dismissed an application, inter alia, for adeclaration as to the amount owing under a mortgage. In so doing, Watson J, as he then was, summarized the parties positions as follows,at paras 26-27: …Counsel for the defendant says the effect of an order nisi is to include stipulations that amount to a finding of an obligation or a debtbecause there is at the very least contained in the standard order nisi a redemption period calculation structure.

The argument thereforefor the Defendant is that that amounts to a judgment in whole because it declares certain things relative to the disposition of the propertybut also makes certain declaratory statements which have the effect of carrying with them a statement of an amount owing in relation tothe underlying mortgage that is the basis of the original order nisi claim.

As I said before though, [Plaintiff’s counsel] contends that the concept of the "remedial order" is not such as to address what he wouldcall an in rem claim exclusively as against the land itself. [60] In concluding that the limitations period was applicable to the plaintiff’s claim, Watson J found as follows, at paras 33 - 34: …it seems to me that unfortunately for the plaintiff what she is seeking by way of an order nisi is not strictly a security in rem type ofclaim.

It is carrying baggage with it which is based upon the Statement of Claim based upon the mortgage and based upon the very purpose of amortgage being a collateral for another form of obligation.

With that in mind and noting the very strict view that appears to have beentaken by the other authorities…it seems to me that the operation of Section 2(2) of the Limitations Act in this instance is what it says. [61] Along the same lines, the Estate relies on BDO Canada Limited v 1125629 Alberta Ltd, 2018 ABQB 402 wherein theessential character of the relief concerned the return of property and was therefore remedial in nature. In BDO, the bankrupt, Mr. Dorais,granted an option to a fellow shareholder, Mr. Deardoff, giving him the ability to purchase Mr. Dorais’ shares upon his death.

Mr.Deardoff exercised the option, unaware of a supposed revocation of the purchase option. Following the expiration of the limitationperiod, the trustee in bankruptcy brought an application against Mr. Deardoff for a declaration that bankrupt's revocation of option wasvalid, and for an order requiring the shareholder to transfer the purchased shares to the trustee.

The Court concluded that the actualdeclaration concerning the revocation was of little import to the trustee, with the chief relief being the request for an order to transfer theshares back to the bankrupt’s estate on the basis that they had been wrongly converted by Mr. Deardoff: para 10. The Court thusconcluded that “calling this an application for a declaration is a thinly disguised attempt to circumvent limitations legislation” (para 11). [62] The Estate takes the position that similar to Daniels, what the plaintiff in BDO was seeking was, in essence, a return ofproperty.

It asserts that the shares transferred in BDO are similar to the royalty interest granted to Mr. Orr-Ewing pursuant to the GOR.That is, shares are property, albeit an incorporeal asset, similar in nature to a royalty interest which is also an intangible interest, this timein land.

Specifically, the Estate asserts that the GOR is a special form of contract in that the Royalty Agreement granted “an interest inland, a profit-a prendre, an in rem right.” The Estate submits that according to the above cases, an in rem remedy is inherently remedial. [63] Bacanora replies that the above authorities can be distinguished, in part, because they are “multiple-step” cases, whereas atbar, the declaration sought is a stand-alone step. It relies amongst other cases, on McLean v Alberta (Justice Minister), 2009 ABQB102, in drawing this distinction to the Court’s attention.

In McLean, the plaintiff sought a declaration that upon his retirement he wouldbe entitled to have certain years of service in a different government position included in his total years of pensionable service with theFederal Government. The parties agreed that if the Court found he was entitled to such a declaration, it should award damages. TheCourt found that the mere fact that the parties had agreed to an award of damages in the event that a declaration was found to beappropriate was not determinative of the question as to whether the relief claimed was remedial or declaratory.

Rather, it focused onwhether the remedy was self-executing.

[64] In particular, the Court interpreted the test in Yellowbird to mean that if further recourse to the judicial process is unavoidablethen the relief sought is remedial in nature. That is, the mere fact that a declaration “might” result in some future recourse to the courtshould the defendant choose not to comply does not necessarily mean that the remedy is actually remedial. Conversely, the Court opinedthat if declarative relief is simply the first step of a process which “will” result in an ultimate remedial order, the relief is not declaratory:paras 54-56.

As such, the Court classified the plaintiff’s form of relief as declaratory in nature, given that it defined the rights and dutiesof the parties regarding the entitlement to a future benefit. Specifically, the Court described the distinction in the test, at paras 55-56, asfollows: If the declaratory relief is only the first step of other(

s) to follow which "will" result in an ultimate remedial order, such as an order nisiin a foreclosure action, Daniels v. Mitchell (2005), 2005 ABCA 271 , 371 A.R. 298 (Alta. C.A.) at para. 51), then the relief isnot declaratory but remedial. The fact that a declaratory relief "might" result in a future judicial process does not mean the relief is actually remedial. The relief isdeclaratory because any future judicial process will only occur if the parties choose not to comply with their duties as set out in thedeclaration.

In such a case, an independent cause of action would arise. [65] Bacanora asserts that as per Yellowbird, and as restated at para 54 of McLean: If the declaratory relief is a stand alone step, not taken as a necessary step or link to a required next step, then the relief is declaratoryand not remedial. [66] In reliance on the above, Bacanora asserts that the only step required at bar is a declaration of invalidity, following which theinterests of the parties to the lithium transaction will be recognized and established.

Unlike the case in BDO, where the declaration thatthe revocation was invalid was secondary to the Order to return the shares, Bacanora stresses that the declaration sought is the relief.More will be said about this proposition below. [67] In addition to its “stand alone” versus “multiple-step” argument, Bacanora takes the position that the Royalty Agreement isnot an interest in land, and that therefore the authorities relied upon by the Estate are distinguishable, as, if there is no in rem right undera royalty agreement, the consequential relief is not necessarily remedial in nature. [68] I turn first to address Bacanora’s argument that the GOR does not create any interest in land and is contractual only. [69] Bacanora asserts, and I agree, that whether or not a royalty agreement creates an interest in land is determined by the intentionof the parties as evidenced though the agreement: Bank of Montreal v Dynamex Petroleum Ltd, 2002 SCC 7 at para 82.

There, theCourt addressed whether an overriding royalty could create an interest in land for the purpose of determining claims priorities in abankruptcy situation. In Dynamex, our Supreme Court addressed whether an overriding royalty issued from a working interest (anincorporeal hereditament) could be an interest in land. The Court referenced with approval certain comments of Laskin J (dissenting inSaskatchewan Minerals v Keyes, (SCC), [1972] SCR 703) in which he was critical of the common law rule againstcreating interests in land out of incorporeal interests.

Laskin J commented that “the language of “corporeal” and “incorporeal” does notpoint to the distinction between the legal interest and its subject-matter…”. In discussing Laskin J’s analysis, the Court concluded atpara 12: … It is significant that he did not find all overriding royalty interests to be interests in land.

He held that the intentions of the partiesjudged by the language creating the royalty would determine whether the parties intended to create an interest in land or to createcontractual rights only. [70] In reviewing the existing state of the law, Major J for the Court, referenced the following, at paras 15-16: That royalties can be interests in land finds support in W. H. Ellis' "Property Status of Royalties in Canadian Oil and Gas Law" (1984),22 Alta. L. Rev. 1 at p. 10: Royalties, as used in the oil and gas industry, make sense only if they are property interests in unproduced minerals.

Owners of mineralrights should be able to create them as such if they make clear their intent to do so. In Oil and Gas Agreements Update (1989), J. F. Newman in his

article "Can a Gross Overriding Royalty Be an Interest in Land?"concludes that most parties to an overriding royalty interest intend for such interest to be an interest in land.

Evidence of this is thecommon practice of registering caveats in the Land Titles Office of Alberta seeking to protect that interest. [71] Bacanora further relies on Vandergrift v Coseka Resources Ltd (1989), (AB KB), 95 AR 372 (ABQB)where this Court held that an overriding royalty interest can be an interest in the land if the parties use language sufficient to demonstratethat intent as opposed to an intent to create a contractual right to receive a portion of the minerals recovered by the land. Additionally, theinterest out of which the royalty is carved must itself be an interest in land: para 32.

There, the impugned agreement created a royaltywith respect to petroleum substances “recovered” from the land, as opposed to one respecting substances within, upon or under the land:para 40. Other references in the royalty agreement mentioned “share production”, “petroleum substances sold”, and “petroleumsubstances produced”. The Court found that this language conveyed an intent to create a contractual right as opposed to an interest inland: paras 49-50.

Of note, Vandergrift did not involve a limitations issue, and the grantor itself did not hold an interest in land. [72] In summarizing the various agreements referred to earlier in this decision, “Assets” as defined in the LOI refers to “lithiumclaim titles” over four specific concessions of land, as well as a pending claim. Paragraph 5 of the LOI acknowledges that the impugnedroyalty is payable “on all production of lithium from the Assets”. Pursuant to paragraph 2 of the General Conveyance, Mr.

Torres agreedto sell the “entire right, title, estate and interest in and to the Assets” to Sonora (as Bacanora’s wholly-owned subsidiary). Again, theGOR defines “Assets” as “those mining claims and pending claims described in [Schedule A to the LOI]”. The royalty interest isspecifically granted on the Products to be obtained from the Assets, “Products” again being the ore – be it raw or processed - from the

surface or subsurface of the claimed property. Finally, the terms of the royalty “constitutes a covenant running with the Assets” and is aregisterable interest. [73] When questioned about whether Mr. Orr-Ewing had taken any steps to register the GOR, any other form of caution or otherdocument against title to the Property (as defined) with the Public Registry of Mining of Mexico or any other offices of public record inMexico, as contemplated in

section 15.1 of the GOR, counsel advised that to the best of his knowledge this had not occurred. In anyevent, the existence of

section 15.1 of the GOR is not determinative of whether an interest in land has been created. It may be that underthe Mexican mining system, interests securing something other than an interest in land may be registered. [74] In my view, the intent of the parties based upon the documentary evidence before me suggests that the interest grantedpursuant to the GOR does not constitute an interest in the minerals themselves in situ. While no evidence as to the claims procedure inMexico was before me, a mining claim, generally, provides for a right to develop and extract a mineral deposit.

A royalty interest can bean interest in land if the parties use language sufficiently precise to show this intent as opposed to an intent to create a contractual right,and if the interest out of which the royalty is carved is an interest in land: Vandergrift at paras 31-37. [75] Here, under the General Conveyance, the language of the Conveyance itself is based in terms of the Assets, defined as a claiminterest, rather than an interest in land.

Further, the GOR provides for an interest in the Assets and a covenant running with the Assets(being the claims) as opposed to an interest in land running with the land. [76] In Vandergrift, the dispute involved a 3% gross overriding royalty “on all petroleum substances recovered from the lands”.The Court concluded that the choice of words "recovered from" the land used in the royalty agreement, as opposed to wording indicatingpetroleum substances "within, upon or under" the land, conveyed a contractual right to the payment of a share of the petroleum after ithad been removed, rather than an interest in land.

Specifically, it held, at para 40: In reading the agreement one is struck by the fact that the first reference to the nature of the interest to be conveyed used the expression"royalty on all petroleum substances recovered from the lands", not petroleum within, upon and under the lands, but, those substances"recovered" from the lands. The next reference, in para. 2, is to a royalty on "petroleum substances found". Again, the reference is not topetroleum substances within, upon or under the lands, but to substances "found" within, upon or under the lands.

The other references inagreement are to royalty in terms of "a share of production", "petroleum substances sold", "petroleum substances produced".

Taken as awhole, I am of the view that the agreement conveys a contractual right to the payment of a royalty on petroleum substances producedfrom the lands, that is, a share of the petroleum after it has been removed, rather than on interest in land. [77] Similarly, in Vanguard Petroleums Ltd v Vermont Oil & Gas Ltd (1977), (AB KB), 72 DLR (3d) 734 (AbSup Ct Jus), Moore J, as he then was, examined the nature of a royalty under which 7% of the proceeds of sale of the substancesproduced out of the said lands was payable.

In finding that no interest in the land was created, Moore J stated, at para 28: … This is an obligation to pay Vanguard a sum of money out of the proceeds of sale of the petroleum substances after they have beenremoved from the land. The wording in the royalty agreement herein cannot be construed as an interest in situ. In my view, the royaltyherein is on the proceeds of the sale of the petroleum substances after removal from the land.

In other words, the owner and the granteeagreed to share in the proceeds of the sale of mineral substances after removal. [emphasis in original] [78] At bar, the grantor has agreed to pay the royalty holder a GOR on “the Products to be obtained from the Assets…equal to 3%(the “Royalty Percentage of the Revenues”)”.

Again, “Revenues” is defined as “the amounts payable to the Grantor from the sale of RawProducts and Processed Products, determined as follows…”. [79] In my view, the wording of the GOR is similar to the agreements discussed in Vandergrift and Vanguard in that the royalty isbased upon minerals “obtained” (ie: “recovered” or “found”, as per Vandergrift) and, similar to Vanguard, is based upon their valuefollowing their removal from the land (as per the definition of “Products” being “produced from” and the definition of “Revenue”).

Assuch, the wording of the GOR and related agreements is not precise enough to create an interest in land. Rather, it provides Mr. Orr-Ewing with a right to payment calculated on production of ore (lithium) from the Assets, as defined. It does not appear to grant a propertyinterest in the produced minerals, nor any profit-a-prendre for the grantee.

It is a contractual right to the payment of a 3% royalty. [80] Thus, I conclude that the GOR did not provide or create any interest in the land itself. [81] However, despite the parties thorough submissions on this point, I do not think that whether the underlying interest is in theland itself or is otherwise in rem is determinative of the issue. I do not read the authorities as stating that the nature of the remedy isdependent upon the object of the action.

Rather, I have determined this issue should it be deemed relevant upon appeal. [82] Indeed, the Court in Daniels concluded that there was nothing in the Limitations Act to suggest that in rem remedies not besubject to limitation periods: para 50. In BDO, the Court did not rely solely upon whether the object of the action was in rem, but ratherfocused on whether the impugned declaration went further and provided a form of relief to an applicant: paras 9-10.

I do not read theauthorities as stating that the courts are precluded from providing a declaration in instances where the object of the action is intangible orthe interest is in personum. Is partial rescission possible? [83] The Estate makes a further argument that Bacanora cannot seek a declaration that the GOR is null and void (or must berescinded) because partial rescission of a contract is not a remedy known in law. The parties agree that partial rescission is not anavailable remedy.

However, Bacanora stresses that this only applies in instances where a claimant is seeking to rescind only part of asingle agreement, as opposed to rescission of the entire agreement in a series of individual agreements. [84] There is no question that in interpreting a contract, courts are to examine the terms of the contract, considered in light of theunderlying factual matrix: Creston Moly Corp v Sattva Capital Corp, 2014 SCC 53. The Estate takes the position that the Royalty

Agreement is only one piece of the entire agreement governing the acquisition of the lithium claims, and that it cannot be cast aside in isolation. Specifically, it argues that in doing so, Bacanora would be ignoring its contractual obligations in relation to the rest of the transactions – most notably, its stated acknowledgment under paragraph 5 of the LOI which expressly recognizes the 3% royalty on all production of lithium from the Assets.

As noted above, the General Conveyance recognizes a similar existing acknowledgment, given that the rights are conveyed subject to the terms and conditions contained in the LOI. [ 85 ] In IFP Technologies (Canada) Inc v EnCana Midstream and Marketing , 2017 ABCA 157 (leave to appeal to SCC refused [2017] SCCA No 303) our Court of Appeal made a number of pronouncements concerning contractual

interpretation in instances where multiple agreements are in play. In so doing it commented specifically on the reality of agreements pertaining to the development of natural resources, which often require numerous companies to enter into contracts in order to provide for multi-party cooperation and investment.

Of particular note are its comments in paras 81, 84: Therefore, while the factual matrix cannot be used to craft a new agreement, a trial judge must consider it to ensure the written words of the contract are not looked at in isolation or divorced from the background context against which the words were chosen. The goal is to deepen the trial judge's understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. […] Of particular relevance on this appeal are the genesis and purpose of the Contract and the relevant background, including the MOU.

An antecedent agreement like the MOU, which has been agreed to in writing by both PCR and IFP, falls within the category of objective evidence of background facts. [ 86 ] In my view, a review of the factual matrix establishes that Bacanora and Torres were both operating upon an understanding that a royalty was to be carved out of the deal and granted to Mr. Orr-Ewing based upon the belief that a thus unaccounted for consideration (in the form of financing) had been provided in furtherance of the acquisition of the lithium claim. This view is reflected in the LOI and forms the genesis of the GOR.

If the genesis for the GOR is based upon a misunderstanding (being a lack of consideration or fraudulent misrepresentation) I see no reason why the acknowledgment of the right to a royalty in the LOI at a time when its validity was not in question would prohibit the subsequent invalidation under the GOR. [ 87 ] Again, my finding that the requested relief is not a form of partial rescission is not determinative.

Conclusion on the nature of the relief sought pursuant to the requested declaration [ 88 ] As per the above, the matrix in which the GOR was created does not, in this instance, determine whether the remedy sought by Bacanora is remedial or declaratory. Rather, I agree with Bacanora that the request itself is the relief. A determination as to the true nature of the relief sought is largely factual. The case before me is, in my view, particularly difficult to classify given its unique fact pattern.

By this I mean that much appears to turn on where – along the spectrum from staking the claims to production of the ore – the progression of the development of the mining claim sits, and what that translates into contractually. [ 89 ] The GOR and surrounding agreements make it clear that Mr. Orr-Ewing’s interests do not “crystalize” until the ore has been produced and revenue received. It is from that revenue that his 3% becomes payable. As no revenue has yet been realized from the claim, no royalty is payable.

In this way, the remedy sought by Bacanora does fall under the “stand alone” category of remedy, as discussed in McLean . [ 90 ] However, one must query as to what would have happened had the claim been developed prior to Bacanora’s request for declaratory relief. That is, if Bacanora had not become aware of the alleged fraudulent acts on the part of Mr. Orr-Ewing until after the claim had been developed and royalty payments began. On such facts, it is clear that Bacanora could not be made whole with a bare declaration alone.

Rather, it would need to seek further assistance of the court in order to recover any monies paid. Such a scenario would clearly bring the case at bar in line with Daniels , Desharnais , and BDO in that the declaration sought would “set in motion” a chain of events which would allow Bacanora to realize on and recover monies wrongfully paid under an invalid royalty. It is clear that steps taken in furtherance of such recovery would be remedial in nature. [ 91 ] Let us assume that revenue is made on the lithium claim on day three of working the claim and that 3% of this revenue is then given to Mr.

Orr-Ewing on day four. According to Bacanora’s position, should it wish to assert its claim to 100% of the revenue made from the lithium products on day two of this scenario it may do so by declaration alone. Yet, should it wish to assert its claim to 100% of the revenue produced from the mining operations on day five, it would require both a finding that the GOR is invalid, as well as an order requiring Mr. Orr-Ewing to disgorge the royalty profits. [ 92 ] In my view, this is not the type of “creative use” of declaratory relief discussed by the Institute in formulating the Limitations Act .

Rather, to use the words of Little J., in BDO , Bacanora’s application for a declaration is “a thinly disguised attempt to circumvent limitations legislation”: para 11. [ 93 ] Indeed, I find this case to be analogous to BDO . There, this Court found that the declaration revoking the share option was of little import to the claimant. Rather, what the trustee was really after was the Order requiring the purchased shares to be transferred back to the estate for distribution.

Similarly, Bacanora’s interests do not lie with the declaration per se, but with its ability to realize on the 3% royalty and secure 100% of the lithium revenues. I see no reason to differentiate between an action to recover physical share certificates and one to ‘recover’ an intangible right currently held by Mr. Orr-Ewing. [ 94 ] Categorizing the nature of relief sought based upon the timing of production of the lithium would, in my view, pave the way for mischief by claimants facing limitations issues.

This is especially so as it is Bacanora, and not the Estate, who will have input into when and how revenue will be produced from the mining efforts. As such, I find the request sought by Bacanora to be declaratory only in form. I agree with the Estate that Bacanora is attempting to characterize actual remedial relief as declaratory relief.

[95] In essence, Bacanora is seeking an affirmation that it is entitled to something currently held by another (whether viewed ascorporeal or incorporeal). While Bacanora wishes to portray this acquisition as simply occurring organically upon a declaration ofnullification, it is principally seeking an entitlement to the 3% interest conveyed to Mr. Orr-Ewing. That is, the declaration has a“creative effect”. When distilled down, the core of the relief requested by Bacanora is a declaration of fact for the ultimate purpose ofobtaining coercive relief in that it ‘forces’ the Estate to ‘return’ its 3% interest.

In pith and substance, the relief claimed is remedial asopposed to declaratory. [96] The relief sought by Bacanora is more than just a pronouncement on the validity of the GOR. It has the effect of transferringsomething of value into the hands of the claimant.

The consequence of such a declaration is remedial in nature. [97] In so finding, I am cognizant of the words of L Sarna in The Law of Declaratory Judgments, at 52-53, warning againstattempts to avoid limitation periods through the use of declarations: …no declaratory proceeding should be entertained if it results in an abuse of process, and unwarranted side-stepping of delays and costsattached to other recourses, or a procedural or evidentiary prejudice against other parties to the action.

Such elements as burden of proof,determination of urgency and limitations of actions may differ substantially in favour of the litigant who chooses the declaration overother routes to relief… [98] Again, what Bacanora truly seeks is 100% of the interest in the mining revenues. A portion of this interest is currently held bysomeone else and Bacanora seeks this Court’s assistance in recovering that portion. It is attempting, in my view, to side-step anylimitations argument in proceeding in this fashion. The request for costs [99] Finally, I turn to the question of costs.

While this issue is somewhat moot following my above findings, I address itnonetheless in the event of an appeal. As noted above, Bacanora removed its claim for indemnification costs as a part of removing itspunitive damages claim from its amended amended statement of claim. However, it continues to seek costs on a “solicitor and ownclient” basis. Bacanora did not clarify the basis for a such a costs award in its argument. [100] The Estate takes the position that a claim for costs is a remedial order, as an award for costs results in an enforceable order topay money.

I agree with Bacanora’s submissions that a request for costs following a successful application for declaratory relief doesnot, in and of itself, transform the nature of the relief sought from declaratory to remedial. I note that in W(

N) v Canada (AttorneyGeneral), 2004 SKQB 434 the Court awarded solicitor-client costs following a successful application for a declaratory orderreformulating the common law definition of marriage. In determining that costs on this basis were appropriate, the Court noted that theSolicitor General was well aware of the jurisprudence in a number of other provinces approving an amendment to the civil definition ofmarriage to allow for the union of same-sex couples. In not simply granting the application, the Solicitor General’s actions necessitatedthe requirement of judicial proceedings, with the associated costs.

The Court concluded that it was the failure of the Solicitor General totake immediate action which necessitated an application – which was of significant public interest and which could have been avoided –that justified the costs award notwithstanding the fact that the relief was purely declaratory. [101] The law is clear that generally, an award of solicitor and his own client costs, is based upon misconduct which occurs during thecourse of the litigation, while a party’s misconduct preceding the litigation process is addressed through an award of damages.

However,this is not an invariable principle: FIC Real Estate Fund Ltd v Phoenix Land Ventures Ltd, 2016 ABCA 303 at para 4. Historically,courts have acknowledged that in rare or exceptional cases it may be possible to base a costs award on the conduct of a party as opposedto the conduct of an action.

This particular situation was addressed in Jackson v Trimac Industries Ltd (1993) 138 AR ABQB (aff’d1994 ABCA 199) wherein this Court provided a list of examples in which a deviation from party and party costs might be warranted.Notably, the list included instances in which a party was found to have acted fraudulently and in breach of trust: Davis v Davis (1981), (MB KB), 9 Man R (2d) 236 (MBQB).

Davis is of note in that while the Court did not award the requested generaland punitive damages based on the defendants’ fraudulent behavior, it did award costs on a solicitor and client basis based upon thisconduct: paras 122-138.

See also Rutherford v Swanson, 1999 ABQB 217, where indemnity costs were awarded based upon pre-litigation conduct found to be reprehensible: paras 21-22. [102] In College of Physicians & Surgeons (Alberta) v H(J), 2009 ABQB 48, this Court cited Colborne Capital Corp v 542775Alberta Ltd, 1999 ABCA 14 in finding that “…solicitor-client costs might suffice to satisfy the objectives of deterrence and punishmentthat would otherwise be served by a punitive damage award: para 17. [103] The continued ability to argue for increased or indemnity costs in relation to pre-litigation conduct alone has been called intoserious question following our Court of Appeal’s recent decision in Pillar Resource Services Inc v PrimeWest Energy Inc, 2017 ABCA19.

That said, the likelihood of success of Bacanora’s costs claim is not at issue here. [104] Again, there was no evidence before me as to whether Bacanora’s costs claim was based upon conduct which occurred duringthe litigation or upon the alleged fraudulent conduct of Mr. Orr-Ewing (assuming the latter argument is available to Bacanora followingthe Court of Appeal’s finding in Pillar).

In my view, an award of costs based upon the conduct of an action may be availablenotwithstanding the fact that relief claimed is declaratory as per W(N), while an award of costs based upon the conduct of a party wouldessentially achieve an objective similar to that of a punitive damages award, and as such, would be remedial in nature and thereforesubject to the Limitations Act.

Absent additional evidence as to the basis for Bacanora’s claim (outside of its earlier pleadings allegingentitlement to punitive or exemplary damages as well as full indemnity costs based upon what it alleged to be high-handed behavior onthe part of Mr. Orr-Ewing) I would be inclined to view its request for costs as falling under the latter category, and as such, beingremedial in nature. iii) Conclusion on whether the Limitations Act applies [105] As the relief sought by Bacanora is, in fact, remedial in nature,

section 3 of the Limitations Act is applicable.

b) Is Bacanora’s claim statute-barred by operation of the Limitations Act ? [ 106 ] Having found that the Limitations Act applies, I turn next to address whether Bacanora’s claim is, in fact, statute-barred. Bacanora takes the position that even if the remedy it seeks is remedial in nature, its claim was not discoverable until after November 17, 2015.

Bacanora argues that as it filed its original statement of claim on November 17, 2017, its claim was brought within the time period prescribed by the Act . [ 107 ] Conversely, the Estate takes the position that the claim was discoverable prior to November of 2015 and that Bacanora brought its action outside of the prescribed period. Under section 3(1)(

a) of the Limitations Act , if a claimant fails to bring a claim within two years in which the claimant knew, or in the circumstances ought to have known, that: (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, A defendan t, on pleading the Act as a defence, is entitled to immunity from liability in respect of the claim. [ 108 ] The requirements spelled out in s.3 are conjunctive, with the limitation period beginning to run upon the satisfaction of all three conditions: Boyd v Cook , 2012 ABQB 284 (Master), at para 27 .

The question before me is therefore whether Bacanora knew, or ought to have known, of the injury and that it warranted commencing proceedings prior to November 17, 2015. In order to determine this issue, a detailed review of the timeline following the execution of the Royalty Agreement and GOR is required, as summarized below:

a) August 2010 – the Royalty Agreement and GOR are executed;

b) January 2011 – Mr. Orr-Ewing becomes a director of Bacanora;

c) May 31, 2013 – Mr. Torres becomes a director of Bacanora; d) 2014 (date unknown) – Mr. Derek Batorowski, director and Chief Financial Officer of Bacanora, alleges that he engages in a conversation with Mr. Torres and forms an understanding that Mr. Orr-Ewing was not involved, financially or otherwise, in the exploration, staking or acquisition of the lithium claims;

e) June 20, 2014 – Mr. Paul Conroy, officer and director of Bacanora, retires;

f) October 22, 2014 - Mr. G Edwards, a major shareholder of Bacanora, raises the legality of the Royalty Agreement with Mr. Orr- Ewing. There is a discussion about the possibility of Mr. Edwards purchasing the royalty at this time;

g) December 2, 2014 - Mr. Guy Walker (director) circulates a memorandum to the Bacanora Board of Directors (the “Board”) regarding certain “red flags” surrounding the Royalty Agreement. Specifically, Mr. Walker queried whether the agreement was connected to a share transfer from Mr. Orr-Ewing to Mr. Conroy. The memorandum enclosed a legal opinion from Cassels Brock & Blackwell LLP dated November 30, 2014, and independently solicited by Mr. Walker, recommending that independent directors investigate the Royalty Agreement;

h) December 3, 2014 – there is a discussion concerning the potential investigation into the Royalty Agreement during a Board meeting. During this meeting, Mr. Orr-Ewing denied that he had been involved in any wrongdoing;

i) Early 2015 – the Board discusses proceeding with an internal investigation into the circumstances surrounding the Royalty Agreement and GOR provision;

j) February 20, 2015 – Mr. Paul Bolger, who acted as external corporate counsel for Bacanora during the acquisition of the lithium assets, circulates a memorandum to the board, summarizing the background facts and circumstances of the granting of the lithium royalty under the terms of the August 2010 agreement, and the transfer of approximately 3.5 million shares of Bacanora from Mr. Orr-Ewing to Mr. Conroy on June 20, 2014. In his memorandum, Mr. Bolger states that he understood that the 2010 royalty had been granted based on a pre-existing 3% royalty payable by Mr. Torres to Mr. Orr-Ewing. Mr.

Bolger states that no inquiry was made into the arrangement between Mr. Orr-Ewing and Mr. Torres because this arrangement preceded the acquisition of the lithium claims. Mr. Bolger understood that the Royalty Agreement was the first time this previous arrangement had been reduced into writing;

k) February 25, 2015 – The Bolger memorandum is discussed by those Directors who were not involved in the lithium transaction. They agree that the law firm of Gowlings WLG will be engaged to provide independent legal advice on the question of whether Bacanora should establish an independent committee to investigate the circumstances of the Royalty Agreement and GOR provision (the “Committee”);

l) May 28, 2015 – Mr. Walker advises the Board that Gowlings has recommended that the Committee be formed;

m) June 3, 2015 - Mr. Walker circulates an email following the Gowlings’ opinion that the Board should establish the Committee to investigate the Royalty Agreement;

n) June 19, 2015 – Mr. Walker resigns from the Board after receiving a majority of no votes at the AGM;

o) June 26, 2015 – the Board passes a resolution striking up the Committee. The directors appointed as members of the Committee included Mr. James Leahy, Mr. Shane Shircliff, Mr. Kiran Morzaria and Mr. David Lenigas;

p) September 2015 – according to the Estate, the Committee reports back to the Board at this time. For the reasons discussed below, I find the Estate to be in error on this point;

q) October 6, 2015 – an email is sent by Mr. Morzaria to the other members of the Committee to remind them that the investigation into the granting of the royalty needs to be progressed.

r) November 17, 2015 – two years before the date on which Bacanora’s original statement of claim was filed;

s) April 2016 – the Board resolves to obtain a fairness opinion regarding Bacanora’s potential acquisition of the Lithium Royalty from Mr. Orr-Ewing;

t) June 2016 – Mr. Morzaria, as Committee member, solicits information from Messers. Conroy, Torres, Bolger and Orr-Ewing concerning the Royalty Agreement;

u) June 14, 2016 – Mr. Torres responds to this request via email stating his assumption that the GOR to Mr. Orr-Ewing had been negotiated and agreed to amongst Bacanora’s Directors, and that he was unsure of who instructed legal counsel to include the royalty in the transaction documents;

v) June 17, 2016 – Mr. Orr-Ewing retains a third-party (Medea Natural Resources) to negotiate the sale of all or some of the Lithium Royalty;

w) June 30, 2016 – the Committee disbands. Bacanora takes the position that Committee’s investigation has not concluded until this time;

x) July 19, 2016 – Mr. Edwards is provided with a copy of the Committee’s investigation and findings (the “2016 Edwards Letter”). In sum, the Committee concluded that: We have reviewed with legal counsel your suggestion that the Share Transfer was an indirect payment made by Colin Orr-Ewing to Paul Conroy in exchange for Paul Conroy approving the grant of a 3% royalty over minerals produced from the lithium properties. For a number of reasons we have concluded that this

interpretation is unlikely…;

y) August 3, 2016 – Mr. Orr-Ewing passes away;

z) September 23, 2016 – the Board receives a letter from Fasken Martineau DuMoulin LLP (counsel to Mr. Walker, who is no longer on the Board at this point in time) opining that the Lithium Royalty is invalid. Bacanora submits that the Fasken opinion was largely set aside given the findings of the Committee; aa) Late 2016 - Bacanora takes the position that the Board finally becomes “independent of Orr-Ewing’s interests” around this date, according to the Rifaat affidavit; bb) April 2017 – Bacanora submits that the September 23, 2016 Fasken letter is reviewed at this time.

The Board decides to seek independent legal advice to look into the issues raised in this letter. Bacanora takes the position that this time around, it began looking into the ‘arm’s length’ nature of the transaction, as opposed to the underlying validity of the royalty. Bacanora states that upon review of the September 23, 2016 Fasken letter, it ceased all negotiations with Mr. Orr-Ewing’s estate regarding the possible purchase of the Lithium Royalty; cc) June 30, 2017 – Mr.

Torres provides a signed statement affirming that there was no pre-existing royalty over the lithium claims, nor did he grant any such royalty to Mr. Orr-Ewing; dd) July 24, 2017 – letter from Bacanora’s legal counsel to the Estate, opining that the Royalty Agreement is invalid and unenforceable.

The letter asserts that there was no conveyance of a pre-existing royalty, and that no consideration was provided in exchange for the granting of the Lithium Royalty; ee) September 20, 2017 – the Estate files a claim against Bacanora in the English Commercial Court seeking a “declaration that the Lithium Royalty is valid and enforceable”. This claim has been stayed; ff) November 17, 2017 – Bacanora files its statement of claim.

i) The position of the parties [ 109 ] While the parties largely do not dispute the occurrence of the above events, they disagree as to their significance as it pertains to the question of discoverability. Specifically, Bacanora takes the position that it did not have: (

i) actual (subjective) knowledge of its claim until June of 2017; and that (ii) the claim was not discoverable (objective knowledge) until, at the earliest, June of 2016. As such, Bacanora submits that its action was brought within the limitation period. Conversely, the Estate submits that Bacanora possessed the requisite level of knowledge well before November of 2015. [ 110 ] Bacanora argues that prior to the December 2014 Board meeting, it had no reason to question the validity of the Royalty Agreement. Up until this point, it was understood that the Lithium Royalty was pre-existing and had been granted by Mr.

Torres. Bacanora asserts that any information to the contrary was withheld by Mr. Orr-Ewing and/or Mr. Conroy as a part of their ongoing misrepresentation to the Board. Moreover, Bacanora takes the position that at this point in time, the only concern being raised was Mr. Walker’s personal suspicion that Mr. Orr-Ewing may have obtained the Lithium Royalty in exchange for a share transfer to Mr. Conroy. [ 111 ] Bacanora asserts that following the initial assertions by Mr. Walker, it took reasonable steps in order to clarify the genesis of the Lithium Royalty. Bacanora emphasizes that following the receipt of Mr.

Bolger’s February 2015 memorandum, the remaining directors

(excluding any potentially conflicted parties) voted on whether to strike up an independent committee. However, given that the vote was evenly split, they went on to obtain a legal opinion as to whether an independent committee should be struck. [ 112 ] As noted above, Gowlings was retained for this purpose, and the Board was provided with its report at the end of May of 2015, recommending the formation of an independent committee. The Committee was struck approximately four weeks after the Board received this report.

The Committee’s mandate was particularized in a director’s resolution, dated June 22, 2015 and is broadly worded, calling for an independent committee to: …conduct an informed and impartial investigation, review, and assessment of certain matters that the Independent Committee may conclude should be considered (such matters being referred to collectively as the “Matters under Investigation”). [ 113 ] Despite this general wording, I accept that it was universally acknowledged that the Committee was struck in order to provide for an investigation into the grant of the Lithium Royalty as well as certain share transfers between Mr.

Orr-Ewing and Mr. Conroy, and the overall impact of these activities on Bacanora. This is borne out by the description of the Committee’s purpose in the 2016 Edwards Letter, where the Board expressly advises that the purpose of the Committee is to review historical transactions including the acquisition of the lithium properties, the associated execution of the GOR, and the ensuing share transfer from Mr. Orr-Ewing to Mr. Conroy. [ 114 ] As noted above, there is some dispute as to when the findings of the Committee were relayed to the Board.

The Estate takes the position that the Committee’s conclusions were relayed to the Board in September of 2015, whereas Bacanora asserts that the report was not received until July 21, 2016. [ 115 ] I find that the evidence supports Bacanora’s position. The Estate’s evidence as to the timing of the report is based solely on Mr. Bolger’s recollection of events at the time. A review of his evidence on this point demonstrates that he is not entirely clear as to whi

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