Tenacity Gold Mining Company ltd. Appellant And: Her Majesty in Right of Newfoundland v. Labrador, 2021 NLSC 43

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Tenacity Gold Mining Company Ltd. v. Newfoundland and Labrador (Finance) , 2021 NLSC 43 Date : March 24, 2021 Docket : 201801G6428 Between: Tenacity Gold Mining Company ltd. Appellant And: Her Majesty in Right of Newfoundland and Labrador as represented by THE HONOURABLE THE MINISTER OF FINANCE Respondent Before: Justice Garrett A. Handrigan On Appeal From: A Decision of the Honorable the Minister of Finance of the Government of Newfoundland and Labrador pursuant to 14(1) of the Revenue Administration Act , S.N.L. 2009, c.

R-15.01 , dated the 16 th day of July, 2018. Place of Hearing: Grand Bank, Newfoundland and Labrador Virtual Appearance Date of Hearing: February 23, 2021

Summary: The Department of Finance of the Government of Newfoundland and Labrador assessed Tenacity Gold Mine both a mineral rights tax and a mining tax on royalties it earned from a mine owned and operated by Anaconda Mining Inc. Tenacity appealed the assessments by filing notices of objection with the Department of Finance. The Department rejected the appeal and Tenacity applied to this Court to review the Department’s decision. It claimed that expenses it incurred working on its own properties were “exploration expenditures,”

which it could offset against the royalties from Anaconda. The Court dismissed Tenacity’s appeal. It reviewed the Department’s decision on the standard of “palpable and overriding error” andfound that the Department had ample evidence on which it made its decision and did not err. It made no order as to costs. Appearances: Joseph J. Thorne Appearing on behalf of the Appellant Mark P. Sheppard Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: Canada (Minister of Citizenship and Immigration) v.

Vavilov, 2019 SCC 65; Wabush Mines, Re (1996), (NL CA), 144 Nfld. & P.E.I.R. 244, 451 A.P.R. 244 (Nfld. C.A.); Wabush Mines v. Newfoundland (Minister of Finance)(1993), (NL SC), 106 Nfld. & P.E.I.R. 61, 334 A.P.R. 61 (Nfld. S.C.(T.D.)) STATUTES CONSIDERED: Revenue Administration Act, S.N.L. 2009, c. R-15.01; Mineral Act, R.S.N.L. 1990, c. M-12;Environmental Protection Act, S.N.L. 2002, c. E-14.2; Gasoline Tax Regulations, 1980, Nfld.

Reg. 67/80 TEXT CONSIDERED: Peter Darling, ed., SME Mining Engineering Handbook, 3rd ed. (Englewood: Society for Mining, Metallurgy,and Exploration, 2011) REASONS FOR JUDGMENT Handrigan, J.: INTRODUCTION [1] Tenacity Gold Mining Company Ltd. (“Tenacity”) is a mineral exploration company. It is incorporated under the laws of thisProvince and has its registered head office here. Tenacity owned two mineral properties near Baie Verte, NL, one called “Stog’er Tight”and the other “Deer Cove.” From 2009 to 2011, Tenacity worked on both properties and incurred expenses of approximately$3,394,000.

Tenacity shut its work down when it became apparent that the properties were not commercially viable. [2] From 2009 to 2015, Tenacity also owned and received royalty payments from Anaconda Mining Inc. for a mine called “PineCone” that Anaconda owned and operated.

Tenacity incurred mineral rights taxes (“MRT”) of approximately $600,000 on the royaltiesit received from Anaconda, which Anaconda remitted directly to the provincial treasury. [3] In 2012, Tenacity applied to the provincial Department of Finance (I will refer to this as the “DOF”) to reduce the MRT that itowed on the Anaconda royalty by offsetting against it “exploration expenditures” from its work on the Stog’er Tight and Deer Coveproperties before it shut them down.

The DOF applied a portion of Tenacity’s claimed expenditures to reduce its MRT but generallydenied Tenacity’s application. [4] The DOF issued a “Notice of Assessment” on November 12, 2015, for the years 2009 to 2011 in which it said that most of theexpenditures Tenacity claimed were “pre-production,” not “exploration” expenditures and not available to Tenacity to reduce its MRT.

Tenacity filed a “Notice of Objection” on April 12, 2015, to the province’s Notice of Assessment for the years 2009 to 2011. [5] In the meantime, the province issued two other Notices of Assessment on May 13, 2015, for the years 2012 to 2013. Thesenotices related to additional MRT, but also to a “mining tax” (“MT”) for those years. On August 10, 2016, Tenacity filed a secondNotice of Objection to the two new Notices of Assessment.

[ 6 ] The DOF replied to both of Tenacity’s Notices of Objection on July 18, 2018, nearly two years after Tenacity filed its second Notice of Objection, and not before Tenacity obtained a mandamus order from this Court directing the DOF to respond. The province re-classified some of Tenacity’s expenditures as “exploration expenditures” because of its second Notice of Objection but rejected most by calling them “pre-production expenditures,” appropriate to a mining operation and not to exploration work. [ 7 ] Tenacity filed its Notice of Appeal of the province’s decision in this Court on September 24, 2018.

It relies on section 14(1) of the Revenue Administration Act , S.N.L. 2009, c. R-15.01 (the “ RAA ”) for its authority to appeal. I heard Tenacity’s appeal on February 23, 2021, and reserved my judgment until now. issues [ 8 ] The parties agree that Tenacity’s appeal raises three issues: 1. What is the standard of review of the DOF’s decision? 2. Are Tenacity’s “bulk sampling expenses,” “exploration expenditures” under the RAA ? 3. May Tenacity have the DOF reconsider Tenacity’s Notices of Objection? the law Standard of Review – Case Law [ 9 ] In Canada ( Minister of Citizenship and Immigration) v.

Vavilov , 2019 SCC 65 , the Supreme Court of Canada declared that it was seizing “…the opportunity to re-examine its approach to judicial review of administrative decisions” (paragraph 1).

To that end, it “…adopted a revised framework for determining the standard of review where a court reviews the merits of an administrative decision.” The Supreme Court started with “…the presumption that reasonableness is the applicable standard in all cases,” from which “… [r]eviewing courts should only derogate … where required by a clear indication of legislative intent or by rule of law” (paragraph 10). [ 10 ] The Court said, at paragraph 17: The presumption of reasonableness review can be rebutted in two types of situations.

The first is where the legislature has indicated that it intends a different standard or set of standards to apply. This will be the case where the legislature explicitly prescribes the applicable standard of review. It will also be the case where the legislature has provided a statutory appeal mechanism from an administrative decision to a court, thereby signalling the legislature's intent that appellate standards apply when a court reviews the decision.

The second situation in which the presumption of reasonableness review will be rebutted is where the rule of law requires that the standard of correctness be applied.

This will be the case for certain categories of questions, namely constitutional questions, general questions of law of central importance to the legal system as a whole and questions related to the jurisdictional boundaries between two or more administrative bodies.. … [ 11 ] The Supreme Court then elaborated on the relevance of its comment in Vavilov, “… where the legislature has provided a statutory appeal mechanism from an administrative decision to a court, thereby signaling the legislature's intent that appellate standards apply when a court reviews the decision.” [ 12 ] Of which the Supreme Court said, at paragraph 37 of Vavilov : It should therefore be recognized that, where the legislature has provided for an appeal from an administrative decision to a court, a court hearing such an appeal is to apply appellate standards of review to the decision.

This means that the applicable standard is to be determined with reference to the nature of the question and to this Court's jurisprudence on appellate standards of review. Where, for example, a court is hearing an appeal from an administrative decision, it would, in considering questions of law, including questions of statutory

interpretation and those concerning the scope of a decision maker's authority, apply the standard of correctness in accordance with Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235 (S.C.C.) , at para. 8 . Where the scope of the statutory appeal includes questions of fact, the appellate standard of review for those questions is palpable and overriding error (as it is for questions of mixed fact and law where the legal principle is not readily extricable): see Housen , at paras. 10, 19 and 26-37 .

Of course, should a legislature intend that a different standard of review apply in a statutory appeal, it is always free to make that intention known by prescribing the applicable standard through statute. [ 13 ] Section 14(1) of the RAA provides that “[p]art or all of a reply from the minister in response to a notice of objection may be appealed to the Trial Division by commencing a proceeding in the Trial Division within 60 days of receiving the minister’s reply.” [ 14 ] Drawing on the Supreme Court’s comments as quoted from paragraph 37 of Vavilov, and because the Newfoundland and Labrador legislature provided in section 14(1) of the RAA for a statutory appeal of the DOF’s decisions to this Court, I find the applicable standards of review in this matter are the appellate standards of review, or more particularly: 1.

For questions of law, correctness. 2. For questions of fact, "palpable and overriding error"; and 3. For questions of mixed fact and law and inferences of fact, generally "palpable and overriding error," but this may vary, depending on the inferences or the mixture of fact and law. [ 15 ] These are the standards I will apply when reviewing the DOF’s decision. I note here that the parties also agree these are the appropriate standards of review. “Pre-Production Expenses” vs. “Exploration Expenditures”

Statute – Revenue Administration Act [ 16 ] Under section 85(1)(

a) of the RAA , “[a] person who receives from an operator …, consideration including a … royalty or other income, which is contingent upon production of a mine, or computed by reference to the amount or value of production from a mining operation, for the grant or assignment of any right issued under the Mineral Act , including an exploration license, a mining lease and any claim, permit or right held under them … is liable for and shall pay to the Crown, in the manner and at the time set out in the regulations, an annual tax of 20% of the net revenue received for the consideration during that year.” [ 17 ] Section 85(4) (

b) of the RAA defines “net revenue” as the “… the total value of consideration received under paragraph 85(1)(

a) less … (

b) exploration expenditures incurred by the person.” [ 18 ]

Section 2 (

x) of the RAA defines “exploration expenditure” as “an expenditure relating to prospecting, sampling, mapping, diamond drilling, and other work involved in searching for ore in the province under a license to explore for minerals issued under the Mineral Act …” [ 19 ] This is the formula to calculate the MRT that Tenacity must pay under section 85(1) (

a) of the RAA , as it appears in Tenacity’s brief on this appeal. I like its simplicity: MRT = 20% of “net revenue” = Royalties – “exploration expenditures ” [Emphasis original]. I note for completeness that there are other expenses that may be deducted from “net revenue” under section 85(4) , such as “legal expenses incurred by the person in the collection of the consideration,” but I have included only “exploration expenditures” here because none of the others are relevant to Tenacity’s appeal. [ 20 ] Now I will follow a similar exercise to show how a mining tax (“MT”) is calculated. [ 21 ] Under

section 80 the RAA , “[a]n operator is liable for and shall pay to the minister … an annual tax of (a) 15% of the taxable income determined under subsection 83(1) , less the credit determined under

section 84 , plus (b) 20% of the amount taxable as determined under subsection 83(2) .” [ 22 ] The RAA provides for the calculation of “taxable income.” It reads: 83. Taxable income 83(1) For the purpose of paragraph 80(a), the taxable income shall be net income less the greater of (a) 20% of the net income, if positive, or (

b) amounts paid to a person referred to in paragraph 85(1)(a). 83(2) For the purpose of paragraph 80(b), the amount taxable shall be (a) 20% of the net income, if positive, minus (

b) amounts paid to a person referred to in paragraph 85(1)(a). [ 23 ]

Section 82 of the RAA defines “net income.” It relies on “gross revenue” for its calculation, and “gross revenue” is defined in section 81(1) of the RAA , as is relevant here: “81(1) Gross revenue is the revenue derived by an operator from the sale of minerals as a result of mining operations in a year…”. [ 24 ]

Section 2 (rr) of the RAA then defines “mining operations: … the extraction or production, within the province, of minerals up to and including primary crushing, and includes the transportation, handling, storing, distribution and sale of those minerals, mine rehabilitation and decommissioning, but does not include processing…”. [ 25 ] “Net income,” the amount on which the MT is calculated, is obtained by deducting amounts allowed in sections 82(1) and (2) of the RAA .

The amounts that may be deducted include five categories from section 82(1) and amounts from section 82(2) , that are “… exploration expenditures exclusively incurred by the taxpayer anywhere in the province before the commencement of commercial production, but only to the extent that these expenditures have not been deducted in a previous year”. [ 26 ] Once again, I adopt unabashedly, for its simplicity, the formula that Tenacity set out in its brief to calculate the MT it must pay under

section 80 of the RAA : MT = 15% of “taxable income” – 20% of “net income” = 15% of “taxable income” – 20% of (“gross revenue” – “exploration expenditures ”) [Emphasis original]. [ 27 ] Let me stop here briefly, to put the preceding discussion of the RAA in context. Tenacity received a royalty from Anaconda, and the DOF taxed Tenacity on the royalty. Tenacity appeals the DOF’s refusal to accept the costs it submitted to reduce both the MRT and MT payable on that royalty.

In effect, the DOF rejected its claim that the expenses it submitted were “exploration expenditures.” [ 28 ] “Exploration expenditures” are deductible from both the MRT and MT. This discussion of both forms of taxation is simply to

show that the RAA allows mining companies to deduct “exploration expenditures” when calculating those taxes. Fortunately, if I findthat Tenacity may deduct its expenses, as “exploration expenditures,” I need not calculate how much of the royalty will be returned to it. Both parties agree that I should remit the matter, in that case, to the DOF with guidance about whether or not the expenses may bededucted. Statute – “Exploration Expenditure” [29]

Section 2(

x) of the RAA defines “exploration expenditure” as “an expenditure relating to prospecting, sampling, mapping,diamond drilling and other work involved in searching for ore in the province under a license to explore for minerals issued under theMineral Act.” Case Law – “Exploration Expenditure” [30] Despite extensive research, I found no case law to help me understand the meaning of the phrase “exploration expenditure” inthe RAA. Statute – “Pre-Production Expenditure” [31]

Section 2(fff) of the RAA defines “pre-production expenditure” as “costs, other than capital costs, incurred in order to bring amine into commercial production, less revenue earned before the mine comes into commercial production”. Case Law – “Pre-Production Expenditure” [32] Once again, despite extensive research I found no case law to help me understand the meaning that I attach to the phrase “pre-production expenditure” in the RAA.

However, I did find one decision that discussed in some detail the meaning of the phrase “pre-production development,” which may be tangentially relevant to this matter. [33] In Wabush Mines, Re (1996), (NL CA), 144 Nfld. & P.E.I.R. 244, 451 A.P.R. 244 (Nfld. C.A.), our Courtof Appeal considered the meaning of “pre-production development of any mineral,” as the phrase was used in

section 13(c)(

i) of theGasoline Tax Regulations, 1980, Nfld. Reg. 67/80: 13. Gasoline consumed or used in the following circumstances shall be tax exempt: (

c) Gasoline consumed or used (

i) in motorized equipment used on the site for the exploration or pre-production development of any mineral, including the removal ofoverburden in open pit mining. [34] Wabush Mines and the Iron Ore Company of Canada (“IOCC”) were engaged in open-pit mining for iron ore in the vicinity ofLabrador City, NL. The companies exposed deposits of iron ore by removing the material overlying it, otherwise, and obviously knownas the “overburden.” Marshall, J.A. described the mining process as “sequential,” by which he meant that “… [t]he removal of all of theoverlying material is not and cannot be performed at one stage.

Often there is not adequate information available to define the life of themine.

Thus, while ore is being extracted, exploration activities may occur within a short proximity to determine the sufficiency ofdeposits to justify expansion of the very pit already open” (paragraph 4). [35] The Provincial Government declared that “… gasoline consumed or used at a mine site, which had advanced beyond theexploration and the pre-production stage to that of production in commercial quantities could not be claimed as tax exempt under theforegoing regulation.” Wabush Mines and IOCC appealed the Government’s decision to this Court. Wells, J. dismissed its appeal inWabush Mines v.

Newfoundland (Minister of Finance) (1993), (NL SC), 106 Nfld. & P.E.I.R. 61, 334 A.P.R. 61(Nfld. S.C.(T.D.)). [36] The Government appealed. It argued that Wabush Mines and IOCC were not entitled to the exemption because their mineswere in production and no longer engaged in pre-production development. The Court of Appeal dismissed the Government’s appeal. The point that may be relevant to this matter is succinctly stated in the headnote to it: “Section 13(c)(

i) referred to pre-productiondevelopment of ‘any mineral,’ not of ‘any mine.’ Therefore, the trial judge was correct in concluding that the exemption was not limitedto the pre-production stage of the mine.” [37] In effect, the Court of Appeal found that the continuous removal of the overburden to expose the iron ore deposits was “pre-production development” because it was directed towards the “mineral” and not the “mine” per se, as the regulations contemplated.

So,while the mine was already producing iron ore, the search for new deposits continued unabated. [38] I note with interest that the regulation on which the Court focused in Wabush Mines, Re actually used the phrase “for theexploration or pre-production development of any mineral” [Emphasis mine]. Yet, the Court gave no consideration to “exploration” indeciding whether the mining companies could still avail of the gasoline tax exemption.

Quaere, whether the Court omitted to do sobecause it accepted that the companies were no longer “exploring” for mineral? [39] This is the law I will apply to the issues I stated earlier in these reasons. I turn now to analyze those issues starting with thebackground to them. Analysis

Background [ 40 ] Charles Dearin is a professional geologist. He is a registered member of the Professional Engineers and Geoscientists of Newfoundland and Labrador, and also the President and Principal Officer of Tenacity. He provided an affidavit dated April 7, 2016, to support the Notice of Objection that Tenacity filed to the DOF’s Notices of Assessment. [ 41 ] Mr.

Dearin attached as Exhibit “B” to his affidavit a copy of a letter he submitted to the NL Department of Natural Resources on November 26, 2012, when he filed what he referred to as “Tenacity’s Stog’er Tight Property Mineral Act exploration expenditures.” He noted that “Tenacity’s Final Report on Exploration, Drilling, Geology, Mining, Milling & Rehabilitation-Closure of a Bulk Sample Mined from the Stog’er Tight Gold Deposit, Ming’s Bight, Baie Verte, Newfoundland,” was also attached to his affidavit as Exhibit “B” (See paragraph 20, Affidavit of Charles Dearin, in Support of Notice of Objection, Page 6, under Tab 4 of Volume 1 of the Record, filed by Tenacity on this Appeal). [ 42 ] Mr.

Dearin set out a detailed history of the development of the Stog’er Tight Property in his Final Report. It is unnecessary to repeat all of that history, but I will review it briefly to the extent that it is relevant to this matter. [ 43 ] The property consists of 56 mineral claims (1400 hectares) and is located to the east of Baie Verte, NL. It is nearer the town of Ming’s Bight than Baie Verte and is sometimes referred to as the Ming’s Bight Stog’er Tight Gold Project.

Noranda Exploration discovered the gold deposit in 1987 and by its exploratory work identified a 672,000-tonne gold deposit, grading at 7.3 g Au/t., or 7.3 grams of gold per tonne. [ 44 ] Ming Minerals acquired the property in 1996 and did additional work on the deposit, redefining its dimensions to 229,200 tonnes, grading at 6.1 g Au/t., or 6.1 grams of gold a tonne. Ming Minerals mined and milled 30,700 tonnes of ore, but the grade was significantly lower than expected and yielded low recoveries of gold.

Ming Minerals lost the Stog’er Tight property because of financial problems and the NL government leased it to Tenacity in 2006. Tenacity acquired the property under Mining Lease ML193A and Mineral Exploration License 15808M. [ 45 ] In his 2012 Final Report, Mr.

Dearin detailed the work that Tenacity did in 2010 “in preparation for the bulk sample mining and milling”: • Engaged…independent mining consultants to complete a mining reserve and resource calculation and economic evaluation on the main Stog’er Tight gold deposit. • Completed 77 diamond drill holes, totaling 1,772 m, along and with the Main Stog’er Tight deposit for grade confirmation and grade control purposes. • Negotiated a formal milling agreement with Rambler Metals & Mines for the custom milling of the Stog’er Deposit at their Nugget Pond mill. • Negotiated a mining contract with Barkers Construction Ltd. to mine and stockpile Stog’er Tight ore and haul it to the Nugget Pond mill. (See page 47 under Tab 4 of Volume 1 of the Record) [ 46 ] From this work, Tenacity established that the Stog’er Tight gold deposit main zone had a revised mineral reserve of 85,200 tonnes, grading at 4.96 g Au/t., or 4.96 grams of gold per tonne.

Tenacity believed that areas outside the main zone might yield higher gold output but “(t)hese resources would require significant additional drilling and would only be recovered by underground mining methods due to extreme stripping ratios” (See page 47 under Tab 4 of Volume 1 of the Record). [ 47 ] Mr. Dearin noted that “[t]he Stog’er Pit gold deposit bulk sample was mined by open pit within the existing pit development.

All mining was done by a local surface mining contractor.” Then, he listed these “key issues” “with the mining of the bulk sample…”: • A total of 29,695 tonnes of ‘ore’ was mined and trucked to the Nugget Pond mill for processing; 27.057 tonnes were blasted and mucked, and 2,638 tonnes of low grade (1.3 g Au/t.) was recovered from existing (1996) stockpiles around the pit. • Estimated reserved grade was expected to average 4.8 g Au/t. The visual estimate of blasted ore was expected to average ~ 5.5 g Au/t.

The actual millhead grade was 1.92 g Au/t. and the recalculated grade (from final gold bullion poured) was 2.26 g Au/t. • Final reconciled blasted ore grade was ~ 2.35 g Au/t. diluted and pre-milling. • The mill processed 28927 wet tonnes at a production rate of 467 tonnes/day. • Average mill recovery was 95.2%. • Final gold production from Johnson Matthey Refining was 2,099 ounces of gold and 167 ounces of silver. • Serious issues with ‘geological dilution’ yielded a 61% decrease in the reserved gold grades from the expected grade of 4.8 g Au/t. down to 1.92 g Au/t. (average millheads). • This average millhead grade was below the engineering analysis cutoff gold grade and this dictated that mining could not continue after this initial 30,000 tonne bulk sample.

• Independent engineering (P & E Mining Cons.) analysis production rates vs. actual production achieved: Estimated Rate Actual Rate % Achieved Tonnes/day 3,570 1,315 37% Gold oz/day 88 34 38% • On this basis the Stog’er Tight operation never achieved ‘commercial production’ and the operation is classed as a bulk sample exploration operation. [ 48 ] Tenacity recorded the cost of “mining-milling” at $81.30 a ton (by 29,695 tonnes = $2,414,203.50), with 2,099 ounces of gold bullion recovered (at $1,120 an ounce = $2,350,880) for a net loss from this part of the operations of $63,323.50. (I extracted all of the preceding bulleted information from page 47 under Tab 4 of Volume 1 of the Record).

Overall, Tenacity claims that it incurred costs totaling $3,199,696 on the Stog’er Tight property. [ 49 ] Meanwhile, Tenacity also proposed to mine, as an underground operation, a portion of a gold-quartz vein in the Deer Cove area. The deposit is about six kilometers north of Stog’er Tight and thirteen kilometers north of Baie Verte. Noranda first explored the Deer Cove area between 1986 and 1990. It discovered high-grade gold in a quartz vein outcrop in May 1986, leading to a major exploration program in the area. [ 50 ] Noranda abandoned the property in 2001 and Tenacity staked it.

Tenacity acquired the property under Mining Lease ML203 and Mineral Exploration License 8014M. It undertook surface and underground geological mapping and after sampling the quartz vein in 2008 and 2009, it was confident that the vein could be mined economically over a six to eight-week period. [ 51 ] Tenacity planned to operate in the fall of 2010 and anticipated that it would provide short-term, but lucrative work for up to 19 people in the Baie Verte area. It intended to mill the ore, as with its ore from Stog’er Tight, at the Nugget Pond mill.

Tenacity incurred costs of $196,894 before it stopped working on the Deer Cove property. Ultimately, it produced no ore from this property. [ 52 ] Meanwhile, Tenacity held a royalty from Anaconda Mining Inc. for a mine called “Pine Cone” that Anaconda owned and operated. During 2009 to 2011 Tenacity received $3,000,000 in royalties from the Pine Cone mine. The royalty amount was subject to a 20% royalty tax payable by all recipients of mining royalties under section 85(1) (

a) of the RAA . So, Tenacity incurred a MRT of approximately $600,000 on the royalties it received from Anaconda, which Anaconda remitted directly to the provincial treasury as required by

section 86 of the RAA . Anaconda paid the amount in full to the province by February 2015. [ 53 ] Anaconda’s remittances on Tenacity’s account set in motion a flood of correspondence, reports, and representations, verbal and written, between Tenacity and the DOF.

For its part, Tenacity tried to persuade the DOF to accept the costs it incurred on the Stog’er Tight and Deer properties in 2010 as “exploration expenditures.” If the DOF accepted its position, which it did not, the expenditures would offset the royalties and reduce the MRT and MT that Tenacity would pay. [ 54 ] The paper flow that Tenacity’s claim generated is too copious to list exhaustively. As well, some of it is not especially relevant to the issues I have to decide.

However, I offer details of what I consider relevant in the following table: No Party Issuing Document Date 1 Tenacity Request for refund of MRT 2012 2 DOF Letter refusing MRT refund September 19, 2012 3 Tenacity’s Counsel Reply to letter refusing refund November 2, 2012 4 DOF’s Counsel Reply to letter of November 2, 2012, maintaining refusal of refund July 30, 2015 5 DOF Letter confirming refusal to allow refund October 9, 2015 6 DOF Notice of Assessment November 12, 2015 7 Tenacity’s Counsel Reply to Notice of Assessment December 7, 2015 8 DOF Reply to letter of December 7, 2015 January 14, 2016 9 DOF Re-Issued Notice of Assessment January 14, 2016 10 Tenacity’s Counsel Notice of Objection April 12, 2016 11 DOF Two New Notices of Assessment May 13, 2016 12 Tenacity’s Counsel Notice of Objection August 10, 2016 13 DOF Response to Notices of Objection July 16, 2018 14 Tenacity’s Counsel Notice of Appeal filed in Court September 24, 2018 [ 55 ] DOF responded to Tenacity’s Notices of Objection on July 16, 2018, and it rejected Tenacity’s assertion that “… the various costs [claimed by Tenacity] should have been classified as exploration expenditures as defined pursuant to subparagraph 2 (

x) of the Revenue Administration Act (Letter from the Deputy Minister of Finance, dated July 16, 2018, under Tab 1 of Volume 1 of the Record).

DOF elaborated on its position: “It is the opinion of the Department that, while certain of the information you provided does indicate that the Stog’er Tight Mine was at a pre-feasibility or feasibility stage when the bulk sample extraction was taken, the information did not demonstrate that the activities related to the bulk sampling extraction should also be considered as that of searching for ore, as is required by the definition of ‘Exploration Expenditures’”(Letter from the Deputy Minister, dated July 16, 2018). [ 56 ] DOF then listed seven factors that it believed showed that “… Tenacity was at the time involved in mining operations as opposed to exploration activities”: The size of the sample, at 30% of the total mineral reserve, was excessively large to be considered as a bulk sample.

Officials with the Department of Natural Resources advise that Tenacity did not apply for approval to extract a bulk sample but rather had sought approval to mine for the entire mineral reserve. Officials with the Department of Natural Resources also advise that if Tenacity had in fact sought approval to extract a bulk sample of 30% of the mineral reserve, the request would have been denied due to the negative impact this amount of extraction would have had on the company’s ability to mine the remainder of the reserve in an economical manner.

The milling contract required a minimum of 63,000 tonnes of ore to be supplied – much larger than the bulk sample size. This indicates that Tenacity intended to mine the entire Stog’er Tight reserve rather than extract a bulk sample. The environmental approval registration of March 2010 stated that 107,000 tonnes of ore was planned to be mined at Stog’er Tight Mine in 2010 with full reclamation planned to be completed by the fall of 2010. The amount of ore removed for what you deem to be exploration purposes would appear inconsistent with the strategy referenced in the environmental registration documentation.

On July 7, 2010, Tenacity received conditional approval from the Minister of Natural Resources under the Mining Act , , to mine 65,201 tonnes of ore starting in July 2010 for a period of 17 weeks. Your letter of November 1, 2010, to the Department of Natural Resources stated, in fact, that Tenacity had planned to mine all of the Stog’er Tight reserve but had only stopped the mining activity because the gold grade was less than the company had expected. With respect to general prospecting costs, such costs are incurred before an exploration license is obtained. Subparagraph 2(

x) of the Act specifically requires that exploration expenditures be incurred under a license to explore. General prospecting costs, which are incurred before the issuance of an exploration license, would therefore not qualify as exploration expenditures. (Letter from the Deputy Minister, dated July 16, 2018) [ 57 ] Tenacity responded to the July 16, 2018 letter from the Deputy Minister by filing a notice of appeal in this Court on September 24, 2018. This is the background to Tenacity’s appeal. I turn now to discuss the issues I stated earlier, starting with the standard of review. Discussion 1.

Standard of Review [ 58 ] Tenacity says the DOF should accept the costs it incurred from 2009 to 2011 for the work it did at its Stog’er Tight and Deer Cove properties as “exploration expenditures.” That is so, says Tenacity, because it focused on extracting a “bulk sample” as it tried to identify the gold reserves at both locations, but at Stog’er Tight in particular.

If DOF accepts that Tenacity extracted a bulk sample, then Tenacity says it follows necessarily that the cost of extracting the bulk sample is an “exploration expenditure,” which Tenacity may offset against the MRT and MT it must pay on the royalties it received from Anaconda. [ 59 ] The DOF refuses to accept that Tenacity was extracting a bulk sample. It says that Tenacity was mining the ore, not exploring for it. At best for Tenacity, the DOF says that it may have been engaged at a pre-feasibility or feasibility stage when it extracted the bulk sample.

Thus, resolving the substantive issue between Tenacity and the DOF turns on the meaning of “exploration expenditures” in

section 2(

x) of the RAA and whether the DOF interpreted and applied that meaning correctly to Tenacity. [ 60 ] This is not simply an exercise of statutory

interpretation, to which the standard of correctness would apply. Rather it involves inquiring into whether the phrase “exploration expenditures” actually applies to the costs Tenacity incurred when it worked on its Stog’er Tight and Deer Cove properties. It also involves an understanding of the relevant factual matrix to the issue and applying those facts to the statutory definition to see if it fits suitably. [ 61 ] The appropriate standard of review for this exercise is palpable and overriding error because it involves a mixture of fact and law.

That is the standard of review I will apply to the DOF’s decision as I examine the main issue in this matter. To which I turn now. 2. Bulk Sample Expenses vs. Exploration Expenses [ 62 ] There are three parts to this discussion: I. What are Bulk Sample Expenses? II. Did Tenacity incur Bulk Sample Expenses? III. Are Tenacity’s Bulk Sample Expenses, also Exploration Expenditures? I. What Are Bulk Sample Expenses? [ 63 ] Tenacity’s counsel set out his client’s position on bulk sampling in a letter he addressed to the DOF on November 2, 2012.

Counsel’s letter is Exhibit “H” to Charles Dearin’s Affidavit of April 7, 2016, which Mr. Dearin filed to support Tenacity’s Notice of Objection dated April 12, 2016. In his correspondence, counsel stated: Properly viewed in this context, Tenacity’s work on the Stog’er Tight property constituted advanced mineral exploration work, and more particularly bulk sample work directed to sampling, testing and searching for ore at the property.

It is of particular relevance that Tenacity’s operations cannot be characterized to have been pre-production work because the property was never brought in ‘commercial production’ within the definition quoted above.

Section 2 (fff) of the Revenue Administration Act contemplates that pre-production work must relate to a mine brought into commercial production. Bulk sampling is recognized to be a conventional late-stage mineral exploration activity directed towards the assessment of a mineral

discovery for production. Typically, large volumes of material must be removed and sampled.

Bulk sampling activities may range from simple trench working to the sampling of an entire train load of ore shipments. [ 64 ] Counsel cites several mining texts to support the claims he makes in the second paragraph of this quotation about what constitutes bulk sampling. [ 65 ] The DOF rejected counsel’s claims saying, amongst other things that the quantity of ore that Tenacity extracted was too big for a bulk sample, both of itself, but especially when compared to the total reserve that Tenacity estimated for the Stog’er Tight mine. [ 66 ] Tenacity engaged RPA Inc. to provide an expert report addressing some of the issues in its dispute with the DOF.

Graham G. Clow is an engineer, with degrees in Mining Engineering (1974) and Geological Engineering (1972) as well as being a licensed professional and consulting engineer. When he submitted the report on behalf of RPA to Tenacity on April 7, 2016, Mr. Clow was also the Principal Mining Engineer and Chairman of the Board of RPA Inc. [ 67 ] Tenacity asked Mr. Clow to address several questions, including “[w]hat is the meaning of ‘bulk sampling’ in the Canadian mining industry?” Mr. Clow responded to Tenacity’s question in paragraph 46.1 of his report.

This may be found at Tab 8 of Volume 4 of the Record, which Tenacity submitted on this appeal: ‘Bulk Sample’ and ‘Bulk Sampling’ are common terms, widely used and well understood in the mining industry worldwide. The terms generally refer to the extraction of a large amount of material (measured in dry tonnes) that is expected to be representative of the mineral deposit.

Although a bulk sample can be taken at any stage in the development of a project, it is normally extracted at the time of a Pre- Feasibility or Feasibility Study (see Paragraph 24) when mineral reserves are first established . [Emphasis mine] [ 68 ] Mr.

Clow noted the “purpose” of bulk sampling in paragraph 46.2 of his report: The purpose of a bulk sample is to test the key physical assumptions in a mineral reserve estimate and economic study, including grade of the material, continuity of mineralization, metallurgical characteristics for process design, mining/geotechnical considerations including ground conditions and dilution, and environmental factors such as potential for acid rock drainage. [ 69 ] Mr.

Clow quotes from the Peter Darling, ed., SME Mining Engineering Handbook , 3rd ed. (Englewood: Society for Mining, Metallurgy, and Exploration, 2011) in paragraph 46.3 of his report: The SME Mining Engineering Handbook describes bulk sampling as ‘ Bulk sampling in the latter stages of exploration or during preproduction development can be critical factor in determining the feasibility of production from a mineral deposit.

With few exceptions, the prime purpose of any bulk sampling program is to confirm grade indicated by prior sample data from drill holes or workings. [Italics original; Underlining mine] [ 70 ] I will return to these quotations below and comment on the portions I have underlined as they relate to the other issues I stated above. [ 71 ] In the meantime, Mr. Clow referred to “a Pre-Feasibility or Feasibility Study” in the first of these two quotations and mentioned paragraph 24 of his report. In paragraph 24, Mr.

Clow, referring to both studies, says: These studies determine mineral reserves, which are the key asset of a mining project, being the amount of extractable metal or other commodity hosted in the deposit. At this stage, field work, including more detailed metallurgical and geotechnical testing, will likely be carried out, as would more diamond drilling and environmental work. Test mining, test stoping, and further bulk sampling may be completed at this stage. Work would have commenced on an environmental impact study and project permitting will be underway.

Socio-economic engagement with local communities would likely be well underway. [ 72 ] From the preceding, I find that “bulk sampling” is the extraction of a large amount of material, taken from an area of the mine site that represents the mineral deposit. It is usually done at the later stages of exploration or during pre-production development to determine the feasibility of a mineral deposit. It follows, of course, that “bulk sample expenses” are the costs that an operator incurs when extracting bulk samples. II.

Did Tenacity incur Bulk Sample Expenses? [ 73 ] Tenacity steadfastly maintains that it was engaged in bulk sampling, not mining during 2009 to 2011, but mainly in 2010 when it worked its Stog’er Tight and Deer Cove properties. Tenacity also asked Mr. Clow to express an opinion on whether it was engaged in bulk sampling. In paragraph 48.1 of this report, he stated with some obvious reservation, that “[i]n my opinion, the 2009 to 2012 work carried out at the Stog’er Tight property can be fairly described as bulk sampling and should not be considered as production from the property.” [Emphasis mine] [ 74 ] Mr.

Clow supported his opinion by reviewing the history of the development of the property. He noted, for example, that South Coast Ventures Limited, a prior owner of the Stog’er Tight property and a related company to Tenacity, from whom it acquired the property, had developed a four-stage proposal in 2006 for assessing the viability of the mine. South Coast did not get beyond the second stage of the proposal, so it fell to Tenacity to complete it and Mr. Clow claims that Tenacity was doing so between 2009 and 2011. [ 75 ] Mr.

Clow also addressed the DOF’s concern with the size of the bulk sample that Tenacity said it was extracting, compared to the overall deposit. Of this, Mr. Clow said in paragraph 48.5 of his report: In my experience, the size of the bulk sample is not directly related to the size of the deposit. The ultimate determining factor will be the

need to have enough material to test the assumptions listed in Paragraph 46.2 (I quoted that paragraph earlier in these reasons). In the case of Stog’er Tight, previous bulk sampling by Ming Minerals (Paragraph 33) totalling 30,000 dry tonnes showed problems with both grade continuity and metallurgical properties. Based on this experience, in my opinion, a prudent operator would ensure that a large sample was taken to allow adequate testing to be carried out during the processing of the sample. [ 76 ] Mr. Clow’s report is unconvincing. [ 77 ] Throughout it, Mr.

Clow speaks hypothetically about what Tenacity was doing on its mining properties between 2009 and 2011. He covers the history of the mines, and he explains the need for Tenacity to perform its due diligence; but he never comments on what Tenacity was actually doing onsite. His opinion that Stog’er Tight was doing bulk sampling is vague and it is overborn by his reservation that the “… work carried out … can be fairly described as bulk sampling,” which is at best, a tepid endorsement of what Tenacity says it was doing on site [Emphasis mine]. And it does not conform with what Tenacity was actually doing on site.

Let me explain. [ 78 ] In paragraph 62 of the affidavit that Charles Dearin provided in support of the Notice of Objection Tenacity filed on April 12, 2016, he described the “advanced exploration work” that Tenacity carried out on its two properties between June and November 2010.

He noted that the “… work consisted of detailed geological mapping and sampling, diamond drilling of 77 drill holes, trenching, pitting, assays, bulk sampling, milling and beneficiation work” (Under Tab 5 of Volume 2 of the Record). [ 79 ] During this time, he says Tenacity extracted a total of 29,695 wet tonnes of ore, which it trucked to the Nugget Pond mill. The ore yielded approximately 1.9 g Au/t., a disappointing 38% of the expected yield of 4.9 g Au/t. In the same affidavit, Mr.

Dearin noted in paragraph 77 that “… Tenacity’s bulk sample proved that the Stog’er Tight gold deposit was not economical to mine, and ‘commercial production’ was not achieved.” [ 80 ] I accept that Tenacity realized after it mined and milled approximately 30,000 tonnes of ore at Stog’er Tight that the mine would not be commercially viable.

However, I find that Tenacity’s claim that it extracted a bulk sample from the Stog’er Tight deposit to see if it could support commercial production is simply ex post facto reasoning, that is not consistent with the plans it had for the mine before it came to that realization. [ 81 ] I note, for example, that Tenacity held mining leases for both the Stog’er Tight and Deer Cove properties and, as the DOF noted, Tenacity did not apply for approval to extract a bulk sample but rather sought approval to mine the entire mineral reserve.

As well, and again as the DOF noted, if Tenacity had sought approval to extract a bulk sample of 30% of the mineral reserve, the request would have been denied due to the negative impact this amount of extraction would have had on the company’s ability to economically mine the remainder of the reserve. [ 82 ] Tenacity went into the Stog’er Tight property in 2010 intending to mine the deposit.

It had the benefit of historical information about Stog’er Tight going back to 1987, from both Noranda and Ming Minerals, as well as current reports from P & E Mining Consultants and Fortis Geoservices Ltd., both indicating grading close to 5 g Au/t. In fact, Tenacity was confident enough about the gold that it would recover from the deposit, that it entered into gold purchase arrangements with Coordinates Capital Corporation in 2010. [ 83 ] In paragraph 73 of his affidavit, Mr.

Dearin claimed these arrangements were “… for purposes of funding Tenacity’s bulk sampling work,” yet in paragraph 78 of the same affidavit he says it was “[i]n consequence of the failure to achieve commercial production, [that] the gold purchase arrangements with Coordinates Capital Corporation were unable to be completed” (Under Tab 5 of Volume 2 of the Record).

He implies, of course, that if the mine had reached commercial production the gold purchase arrangements would have been completed. [ 84 ] Tenacity also entered into a gold purchase agreement with 1512513 Alberta Ltd. on July 14, 2010, for the gold it produced from its Stog’er Tight and Deer Cove properties. A copy of the agreement is attached to Mr. Dearin’s affidavit of August 5, 2016, provided to support the Notice of Objection that Tenacity filed on August 12, 2016.

It is Exhibit “I” to the affidavit and appears as part of the Notice of Objection under Tab 7 of Volume 3 of the Record in this matter. [ 85 ] In paragraph 11(

j) of the agreement, Tenacity covenants to “… use and expend the Purchase Price … exclusively …f or the purpose of mining, quarrying or otherwise extracting Properties Ore…” from both sites. I also note, for its efforts in 2010, that Tenacity, recovered 2,099 ounces of gold bullion from Stog’er Tight, as well as 167 ounces of silver.

It recorded the cost of “mining-milling” at $81.30 a ton (by 29,695 tonnes = $2,414,203.50), while the 2,099 ounces of gold bullion were worth (at $1,120 an ounce = $2,350,880) for a net loss on the mining-milling operation of $63,323.50. [ 86 ] It is also helpful to examine the language that Mr. Dearin used to describe the work that Tenacity had done or would be doing on its two properties in 2010. Mr. Dearin wrote to the Department of Natural Resources on November 1, 2010, to provide “… a

summary of our mining work to date at the Stog’er Tight gold mining project near Baie Verte.” [Emphasis mine] His letter is replete with references to “mining” but does not mention “bulk sampling.” I offer one other example for further emphasis: From August 13 to October 22 a total of 29,695 tonnes were mined and trucked to the Nugget Pond mill. Up to October 24 a total of 25,593 t (wet) were milled ; average mill head grade is 1.89 g Au/t. with an average mill recovery of 95.4%.

The Nugget Pond mill is still toll-milling at an average rate of 474 tonnes per day and I estimate that all milling will be complete by November 3, 2010 (Underlining mine). (Under Tab 9 of Volume 4 of the Record) [ 87 ] When Tenacity registered its Stog’er Tight and Deer Cove properties under the Environmental Protection Act , S.N.L. 2002, c.

E-14.2 , on March 9, 2010, it declared that it “… proposes to mine a portion of the Stog’er Tight gold deposit … [or a portion of the Deer Cove gold quartz vein…].” For the Stog’er Tight property it referred to the “new geological work and reinterpretation” it had conducted and was confident “… that this portion of the Stog’er Tight gold deposit can be economically mined by open-pit mining over a four to five-month period” [Emphasis mine] (Under Tab 21 of Volume 4 of the Record). [ 88 ] Mr. Dearin was “bullish” on the prospects for Tenacity’s two mines when he gave an interview to the Daily Business Buzz on

March 16, 2010. It appears under this banner “NL: Gold mines planned for Baie Verte Peninsula.” The

article quotes him as saying, “If we get these up and going, they’ll probably be amongst the smallest gold mines Newfoundland has ever seen.” Elsewhere in the same article, when referring to their Stog’er Tight property, Mr. Dearin is quoted, as saying, “It is economical … We’re very, very confident that this can be mined .” [Emphasis mine] (Under Tab 20 of Volume 4 of the Record) [ 89 ] In late 2012 it was becoming evident that Tenacity would try to offset the costs it incurred mainly in 2010 on the Stog’er Tight and Deer Cove properties against the royalties it received from Anaconda on the Pine Cove mine.

By then, as well, the relevance of “bulk sampling costs” to Tenacity’s position on the royalties was starting to emerge. Yet, even then Mr. Dearin referred to the operations as “mines,” as this demonstrates. [ 90 ] He submitted Tenacity’s Final Report on the Stog’er Tight mine to the Department of Natural Resources on November 26, 2012. In the

summary to the report, he noted: “The Stog’er Tight gold deposit bulk sample was mined by open pit within the existing pit development. All mining was done by a local surface- mining contractor.

Key issues with the mining of the bulk sample were…” [Emphasis mine] (Exhibit “B” to Charles Dearin’s affidavit dated April 7, 2016, under Tab 4 of Volume 1 of the Record). [ 91 ] Simply put, and by all accounts, including Tenacity’s own rendering of it, Tenacity was involved in “mining” and “milling” gold in 2010 on its Stog’er Tight and Deer Cove properties, not exploring for it, as it now claims. [ 92 ] The DOF did not accept that Tenacity was exploring for gold but believed that it was conducting a mining and milling operation. I share that view as is evident from the preceding discussion.

However, it is not my view of the operation that matters, so much as it is the view that DOF held. My role is to review DOF’s decision to reject Tenacity’s appeal to the department of its assessments for the MRT and MT. The standard of review that applies is “palpable and overriding error.” [ 93 ] The department had available to it the Record that Tenacity filed in this matter, just as it is available to me.

In the DOF’s letter of July 16, 2018, dismissing Tenacity’s appeal, the Deputy Minister canvassed many of the points that I have already discussed before rejecting Tenacity’s claim that it was engaged in extracting a bulk sample. [ 94 ] The Deputy Minister had ample evidence available to her to make that decision and I find that she acted appropriately and did not err when she did so. There is no reason for me to interfere in her decision and I defer to it.

In the result, I accept the DOF’s finding that Tenacity was involved in mining and not in extracting a bulk sample. [ 95 ] I turn now to consider whether costs Tenacity incurred are “exploration expenditures,” within the meaning of

section 2 (

x) of the RAA . III. Are Tenacity’s Bulk Sample Expenses, also Exploration Expenditures? [ 96 ] Tenacity claims it incurred “bulk sampling expenses.” If allowed, Tenacity says the DOF should accept them as “exploration expenditures.” The DOF rejected that submission and called them “pre-production expenditures.” [ 97 ]

Section 2 (

x) of the RAA defines “pre-production expenditures” as “costs, other than capital costs, incurred in order to bring a mine into commercial production, less revenue earned before the mine comes into commercial production.” The DOF does not accept that Tenacity incurred its costs to bring the Stog’er Tight and Deer Cove properties into commercial production.

In fact, the DOF says, to the extent that is relevant, that both properties were in 2010 at the point of commercial production or had already launched into it. [ 98 ] While the RAA does not define “bulk sampling expenses,” it defines “exploration expenditure” to mean “an expenditure relating to prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore in the province under a license to explore for minerals issued under the Mineral Act . ” [ 99 ] Tenacity failed to demonstrate that it incurred expenses from 2009 to 2011 that fit within any part of the definition of “exploration expenditure,” whether “prospecting,” “sampling,” “diamond drilling,” or “other work.” It is also worth noting, as the DOF did, that “exploration expenditures” are only permitted if they are incurred “… in searching for ore in the province under a license to explore for minerals under the Mineral Act . ” Tenacity operated under a mining lease, not a license to explore. [ 100 ] The DOF rejected Tenacity’s claim that it incurred “exploration expenditures” on its Stog’er Tight and Deer Cove properties for these reasons: 1.

Tenacity was mining ore on these properties, not exploring for it. 2. Tenacity did not incur bulk sampling expenses. 3. Even if Tenacity had incurred bulk sampling expenses, they would not be “exploration expenditures” here. 4. The RAA does not allow bulk sampling expenses to be offset against the MRT and the MT. [ 101 ] The DOF did not accept that Tenacity incurred exploration expenditures. I share that view as is evident from the preceding discussion. However, as with the DOF’s refusal to accept that Tenacity was exploring for gold, it is not my view that matters, so much as it is the view that DOF held.

My role is to review DOF’s decision to reject Tenacity’s appeal to the department of its assessments for the MRT and MT. The standard of review that applies is “palpable and overriding error.” [ 102 ] The department had available to it the Record that Tenacity filed in this matter, just as it is available to me. The Deputy Minister had ample evidence available to her to make that decision and I find that she acted appropriately and did not err when she did so. There is no reason for me to interfere in her decision and I defer to it.

In the result, I accept the DOF’s finding that Tenacity did not incur exploration expenditures or any other expenditures that it may offset against the MRT and the MT.

3. May Tenacity have the DOF reconsider Tenacity’s Notices of Objection? [ 103 ] There is no reason to require the DOF to reconsider Tenacity’s Notice of Objection. Costs [ 104 ] Both parties sought their costs. I make no order for costs. Ordinarily, costs follow the cause but not here. In that behalf, I note that the Department delayed its decision on Tenacity’s appeal until July 16, 2018; almost two years after Tenacity filed its Notices of Objection on April 12, and August 10, 2016, respectively. And then, it appears Tenacity had to apply for an order of this Court directing the Department to act.

Summary and Disposition [ 105 ] The Department of Finance of the Government of Newfoundland and Labrador assessed Tenacity Gold Mine both a mineral rights tax and a mining tax on royalties it earned from a mine owned and operated by Anaconda Mining Inc. Tenacity appealed the assessments by filing notices of objection with the Department of Finance. The Department rejected the appeal and Tenacity applied to this Court to review the Department’s decision.

It claimed that expenses it incurred working on its own properties were “exploration expenditures,” which it could offset against the royalties from Anaconda. [ 106 ] The Court dismissed Tenacity’s appeal. It reviewed the Department’s decision on the standard of “palpable and overriding error” and found that the Department had ample evidence on which it made its decision and did not err. It made no order as to costs. Order [ 107 ] In the result, 1. I dismiss Tenacity’s appeal. 2. I make no order as to costs. _____________________________ Garrett A. Handrigan Justice