2024 ONSC 239, 2024 ONSC 239

CITATION : Iamgold C orporation v . T reelawn Capital Corp., 2024 ONSC 239 DIVISIONAL COURT FILE NO.: 697/22 DATE: 20240117 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT Stewart, Lococo and O’Brien JJ. B E T W E E N: ) ) Iamgold CorpORATION Applicant (Respondent for the Liability Phase) Appellant - and - Treelawn Capital Corp. and Wood Family Wealth Corporation Respondents (Applicants for the Liability Phase) Respondents ) ) ) ) ) ) ) ) ) ) ) ) ) Kimberly Potter , Vaso Maric and Harry Skinner , for the Applicant (Respondent for the Liability Phase) Appellant Ian P. Katchin , Martin R. Kaplan , Ronald D.

Davis and Breanna C. Pierce , for the Respondents (Applicants for the Liability Phase) Respondents ) ) ) HEARD: June 14, 2023 stewart J. reasons for DECISION Nature of the Proceeding [ 1 ] The Appellant, Iamgold Corporation (“IGC”), has brought an appeal from the decision of the Ontario Land Tribunal, dated November 15, 2022, which rescinded a previous order of the Tribunal dated March 29, 2021.

The decision appealed from holds that the Respondents, Treelawn Capital Corp. (“TCC”) and Wood Family Wealth Corporation (“WFWC”), are not required to contribute to any expenses incurred for mining development work undertaken on certain properties in northern Ontario in which the parties have an interest. [ 2 ] IGC asks that the decision of the Tribunal be set aside and the previous order of the Tribunal requiring contribution by TCC toward development expenses incurred on those properties be reinstated.

IGC submits that the Tribunal incorrectly ignored admissions made by TCC, and that it made errors in its findings of fact that are of such a degree and significance that the decision should be set aside. [ 3 ] TCC and WFWC submit that the appeal should be dismissed. [ 4 ] At the conclusion of the hearing of this appeal, we advised counsel for the parties that the appeal was to be dismissed, with

reasons to follow. These are the reasons for dismissing this appeal. Background Facts [ 5 ] IGC is a developer and operator of mines in Canada and elsewhere. The subject matter of this dispute related to IGC’s mining lease interests in three contiguous properties in the area of Sudbury, Ontario. These three properties are referred to by the parties collectively as the “Chester Properties”, and individually as “Chester 1”, “Chester 2” and “Chester 3”.

They form part of the Coté Gold Project, an open-pit gold mine. [ 6 ] TCC and WFWC are Ontario corporations that hold interests in the Chester Properties but are not operationally involved in the mining industry.

Jeff Wood is the President and Director of each corporation. [ 7 ] On May 23, 2006, six years before the acquisition by IGC of its interests in the Chester Properties, TCC had acquired interests in the Chester Properties pursuant to the terms of a Vesting Order made by the Superior Court of Justice following the default by the previous owners of those interests on the repayment of loans made to them by TCC. [ 8 ] In 2009, Jeff Wood (“Wood”) was the principal of Treelawn Investment Corp. and Treelawn Group Inc., predecessor corporations to TCC.

At that same time, Gregory Gibson (“Gibson”) was the President of Trelawney Mining and Exploration Inc. (“Trelawney”), a predecessor corporation to IGC. [ 9 ] In 2009, Wood and Gibson agreed on behalf of their corporations that, if option agreements in relation to Chester 3 were successfully negotiated, neither Treelawn Investment Corp. nor Treelawn Group Inc. would have any obligation to contribute toward any costs or expenses in relation to any mining activities on the Chester Properties (such as exploration, development, operations, management and transportation).

This agreement would result in the making of TCC’s interest in the Chester Properties a “free carried, perpetual, non-contributing” one. [ 10 ] On June 21, 2012, IGC obtained its interests in the Chester Properties as a result of its acquisition of Trelawney by way of a share purchase and amalgamation. This acquisition resulted in the assumption by IGC of all rights and obligations attached to Trelawney. [ 11 ] In 2012, following this acquisition, IGC demanded contribution from TCC of its alleged share of development expenditures Chester 2.

TCC refused, citing its prior agreement with the predecessor corporation of IGC that TCC would not be required to make any such contributions. [ 12 ] On August 7, 2018, IGC brought an application for an order under s.181(2) of the Mining Act , R.S.O. 1990, c. M.14 , claiming that TCC had neglected or refused to reimburse it for a proportionate share of the expenditures made in connection with the development of the Chester 2 Properties. [ 13 ] Section 181(2) of the Mining Act states that co-owners of a property are to pay their share of expenditures relating to the development of land and mining claims.

As the first step of a two-step process, a co-owner may apply for an order from the Tribunal to enforce a claim against another co-owner for payment of rents or expenditures incurred. This provision is intended to be a streamlined and expeditious procedure for the recovery of unpaid rents or expenditures. [ 14 ] As the second step in the process, a co-owner against whom a s. 181(2) order for payment is made may bring an application before the Tribunal under s. 181(4) of the Mining Act to dispute its liability to pay for development expenditures.

The Tribunal may affirm, amend or rescind the order made under s. 181(2) , or make any other order it considers just. [ 15 ] At the time of the commencement of the proceedings before the Tribunal, the percentage ownership interests in the Chester Properties were as follows: (

a) Chester 1: TCC (30%), IGC (49%) and SMM Gold Coté Inc. (21%); (

b) Chester 2: TCC (7.5%), IGC (64.75%), SMM Gold Coté Inc. (27.75%); and (

c) Chester 3: TCC (7.5%), Various Other Owners (92.5%). [ 16 ] IGC’s application pursuant to s. 181(2) proceeded as of right and with no hearing. On March 29, 2021, the Tribunal issued an order requiring TCC to pay to IGC the amount of $2,065,492 for its share of development expenses for Chester 2 incurred between June 2012 and May 2018. [ 17 ] TCC then brought an application under s. 181(4) for an order rescinding the s. 181(2) order requiring it to contribute to development expenses.

Among other things, TCC alleged that it had entered into a prior oral agreement with Trelawney that served to relieve it of any obligation to contribute to any development expenses incurred by IGC. [ 18 ] At the 12-day hearing before the Tribunal, evidence and arguments were advanced by the parties on several issues relating to the question of TCC’s liability for the payment ordered, including the impact of the Vesting Order that established TCC’s interest in the Chester Properties as well as the legal effect of the termination of a letter agreement entered into by the previous owners of the interests acquired by TCC as a result of that Vesting Order.

However, it was the existence of the alleged oral agreement between Wood and Gibson and its enforceability that were the central issues identified. In particular, IGC denied the existence of any such oral agreement while TCC relied heavily upon it to justify its argument that it need not contribute to development expenses. [ 19 ] Following the hearing before the Tribunal, on November 15, 2022 the Tribunal decided as follows (at paras. 125-129): [125] Upon the whole of the evidence, it is the Tribunal's view that ultimately the finding that the 7.5% interest effectively became a

non-contributing carried interest when Young-Shannon Ltd. terminated the JV Letter Agreement, and/or by virtue of the Vesting Order is of lesser significance than the existence of the Oral Agreement as identified by the Applicant and considered by the Tribunal (hereafter referred to as the “Oral Agreement”). [126] The Tribunal was compelled to first determine the Applicant's very comprehensive submissions relating to the status of the 7.5% interest as it was acquired by the Applicant, as opposed by the Respondent.

However, upon the overview of the operation of sections 181(2) and 181(4) above, the central question is really whether, as between the two co- owners, the Applicant and Trelawney entered into a binding agreement that the Applicant's interest was a free carried interest and non-contributing. [127] If within the context of the development of a mining project, parties enter into contractual terms which determine their respective obligations to contribute to expenditures for its further development, which are relevant to the question of liability for contributions under s. 181(4) , that is the primary focus of the Tribunal's assessment of the evidence and determination of liability. [128] For the reasons that follow, the Tribunal has determined on the balance of probabilities, that there was an Oral Agreement binding upon Trelawney and the Respondent. [129] That Oral Agreement within the context and framework of the concurrent transactions for Chester 1 and 3, that resulted in the Applicant and Trelawney becoming co-owners, ultimately established that the 7.5% interest in Chester 2 was a perpetual free carried interest in all respects as was established and clarified to be in place for Chester 3, and Chester 1.

That free carried interest provided that the Applicant was not required to perform any duties or contribute or pay any monies to Trelawney whatsoever in respect of Chester 2 including costs related to exploration, development, mining, operations or production. It was clarified to be a Net Profits Interest upon the

definitions provided for in the Restated Amending Agreement dated March 26, 2012. [ 20 ] As a result of these findings, the Tribunal determined that TCC and WFWC were not required to pay any contribution to the development expenses claimed by IGC as described in the previous order of the Tribunal. [ 21 ] IGC brought an appeal of this decision as is provided for in the Mining Act . Jurisdiction [ 22 ] This Court has jurisdiction to hear this appeal pursuant to ss. 133 and 134 of the Mining Act . Standard of Review [ 23 ] As this is a statutory appeal, appellate standards apply.

Any issue of law is to be determined on a standard of correctness. In order to succeed on an appeal challenging findings of fact, a palpable and overriding error must be demonstrated unless an extricable error of law is identified (see: Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 SCR 235).

Issues and Discussion Issue A: Did the Tribunal err in law by making findings contrary to TCC’s admissions? [ 24 ] IGC submits the Tribunal erred in law by finding TCC’s interest became free carried prior to the formation of the alleged oral agreement, either through the termination of the joint venture agreement between the predecessor co-owners in 2004 or through the Vesting Order in 2006. IGC argues that these findings are contrary to admissions made by TCC in an undertaking given during examinations for discovery which were later confirmed by Gibson on cross-examination at the hearing.

IGC argues that these admissions confirmed that TCC’s interest became free carried only when the oral agreement was finalized and that therefore a document referred to as the “2007 Report” that described that interest as “non-contributing” was inaccurate. [ 25 ] TCC does not dispute that its position throughout was that its interest in Chester 2 became free carried and non-contributing when the oral agreement was finalized in 2009.

Although the Tribunal found that this interest was actually non-contributing as of 2007 or before, any possible discrepancy in this regard does not displace the Tribunal’s primary conclusion that there was an oral agreement between TCC and Trelawney that produced that same result. [ 26 ] I agree with the position advanced by TCC that these findings had no bearing on the outcome of the hearing, as the Tribunal clearly viewed them to be of less significance than the existence of the oral agreement between TCC and Trelawney. [ 27 ] Further, the findings of the Tribunal both as to the effects of the Vesting Order and the termination of the joint venture are legal conclusions that the Tribunal was entitled to make.

These are not affected by or displaced by any admissions or opinions advanced by any party during the proceedings. Ultimately, they had no impact on the final determination arrived at by the Tribunal. [ 28 ] I therefore would not give effect to this ground of appeal.

Issue B: Did the Tribunal make any palpable and overriding error in its decision? [ 29 ] IGC advances several alleged findings of fact made by the Tribunal that it claims amount to palpable and overriding errors. [ 30 ] IGC submits that the Tribunal’s finding that it did not lead any evidence to contradict the testimony of TCC’s witnesses is a palpable and overriding error. IGC highlights some of the documents it adduced to contradict the existence of the oral agreement.

For instance, IGC argues that the Tribunal’s finding that the earlier option agreements form an “interconnected” contractual framework with the oral agreement is contradicted by the express words of the option agreements, specifically the “entire agreement” clauses.

[ 31 ] Further, in documents associated with IGC’s acquisition of Trelawney, IGC argues that Trelawney represented that there are no “material contracts’ affecting Chester 2 other than those disclosed to IGC, including the joint venture agreement between the predecessor co-owners. TCC admitted that there was an obligation to contribute proportionately under that joint venture agreement.

Since the alleged oral agreement would have removed this obligation, IGC submits that a representation that there were no other “material contracts” should have been treated as evidence contradicting the existence of the alleged oral agreement.

In addition, IGC argues that the Tribunal ignored important context about the “Norregaard Memo” that described an obligation to contribute in terms of its timing against the backdrop of the arrangement between IGC and Trelawney. [ 32 ] IGC also submits the Tribunal erred in finding there was an oral agreement because a reasonable person could not conclude the parties reached a mutual understanding on the essential terms of the alleged contract given the inconsistencies between the witnesses’ evidence about the various aspects of the oral agreement.

For instance, IGC argues Wood’s answer on cross-examination that TCC’s interest became free carried when the oral agreement was finalized conflicts with Gibson’s testimony that TCC’s interest was already a free carried interest at the time they were negotiating. As the parties to the agreement, Wood and Gibson’s inconsistent views on the timing of when TCC’s interest became free carried shows that there was no meeting of the minds.

Their acknowledgement that the Chester 3 option agreement was therefore necessary “to put a framework” around the meaning of a “free carried interest” with respect to that property is evidence of the lack of specificity and clarity around the meaning of that term in the oral agreement, which ought to have convinced the Tribunal that no enforceable oral agreement was made. [ 33 ] TCC takes the position that the Tribunal merely noted that IGC simply called no evidence on important issues.

The Tribunal’s finding that the oral agreement and option agreements are “interconnected” is not contradicted by the express wording of the option agreements, as Chester 2 does not form the subject matter of the option agreements within the meaning of the “entire agreement” clauses. With respect to the representations in the other documents, TCC submits that the oral agreement cannot be treated as a “material contract” to the joint venture agreement as that agreement had been terminated three years earlier. Wood did not know of the joint venture agreement until after formation of the oral agreement.

Lastly, the Tribunal did not err in its treatment of the Norregaard Memo. [ 34 ] Further, TCC submits the Tribunal made no errors in finding that Wood and Gibson’s evidence was congruent on all the material facts to support the existence of a binding oral agreement. Any inconsistencies were noted as being minor, and secondary to the Tribunal’s primary factual determinations about the terms of the oral agreement. The Tribunal properly rejected IGC’s argument that the term “free carried interest” needed a contractual framework around it in order to be sufficiently certain.

It accepted TCC’s evidence that, whatever term may have been used in describing the oral agreement, the parties understood at all times that TCC would have no obligation to contribute to development expenditures. [ 35 ] Before arriving at a determination of the issue of the existence of an oral agreement, the Tribunal concluded that there may have been no obligation to make proportionate contributions for the disputed 7.5% interest in Chester 2 as early as February 23, 2004. On that date, a co-owner of Chester 2 at the time terminated its joint venture agreement with the other co-owner, Northville Gold Corp.

Northville Gold Corp. was the subsidiary of the corporation with which TCC had entered into a loan agreement and was the predecessor in interest to TCC in the Chester 2 Properties. [ 36 ] The Tribunal found there was no evidence that the other co-owner had ever demanded contribution from Northville after the date of termination of the joint venture agreement. This was consistent with indirect evidence from a corporate requisition report from 2007 identifying the 7.5% interest in Chester 2 as “non-contributing”.

The Tribunal therefore found that Northville Gold Corp.’s interest became a non-contributing interest upon termination of the joint venture agreement. This was the nature of the interest in Chester 2 when it passed to TCC pursuant to the Vesting Order. [ 37 ] Indeed, the Tribunal considered that TCC’s interest would have become non-contributing in 2006 when the Vesting Order vested interests in TCC “free and clear of and from any claims”. The Tribunal found that any obligation to contribute was a contractual claim and not one that “ran with the land”.

Therefore, it would be expunged as a result of the Vesting Order. [ 38 ] The Tribunal found that IGC failed to produce adequate evidence to refute the existence of the oral agreement alleged by TCC. TCC adduced the viva voce evidence of three witnesses to the relevant events to prove the existence and terms of the oral agreement.

IGC called no witnesses but relied only upon selective references to the documentation and argument. [ 39 ] The Tribunal accepted as sensible and credible the evidence of Gibson, Wood and Lisa McCormack (former Corporate Secretary of Trelawney) to prove the existence of, and the terms contained, in the oral agreement. [ 40 ] The Tribunal determined on the basis of all of the evidence that an oral agreement was formed between Gibson and Wood in 2009.

In exchange for a free carried non-contributing interest in the Chester Properties for TCC, including its 7.5% interest in Chester 2, TCC would enter negotiations with Trelawney over option agreements for Chester 1 and Chester 3. As the undisputed successor co- owner, IGC was found to have assumed all of Trelawney’s duties, rights obligations and liability in respect of the Chester Properties, including those imposed by the terms of its oral agreement with TCC. [ 41 ] The Tribunal found that the existence of the oral agreement needed to be assessed alongside the written option agreements and amended agreements.

It described these as an “interconnected” contractual framework that allowed the parties to establish a co- ownership arrangement whereby Trelawney agreed to take on all development expenditures up to the point of production. It found that these supported a conclusion that there was a requisite meeting of the minds to result in an enforceable contract.

It noted that, at the time, Gibson was anxious to acquire the Chester Properties to develop a gold mine while, simultaneously, Wood was looking for a co-owner with a business plan to carry all development costs up to the point of production. [ 42 ] The Tribunal also found that there were many documents produced noting TCC’s 7.5% free carried interest that were either publicly available or produced to IGC during the conduct of its due diligence for the acquisition of Trelawney. This understanding was confirmed by McCormack, who was involved with retrieving and making public filings during the acquisition.

The one possible exception to this characterization is the memorandum (the “Norregaard Memorandum”) written by Trelawney’s Chief Operating Officer, Steve Norregaard, which set out his understanding that the 7.5% interest was a contributing interest, would likely have been corrected in

subsequent communications. [ 43 ] Further, the Tribunal noted that internal documents from IGC also contained admissions adverse in interest to its position on the application. While the admissions in these documents were not specific to the existence of an oral agreement, they all describe TCC’s 7.5% interest as “free carried”.

This is consistent with the evidence of both Gibson and Wood as to the terms and effect of the oral agreement they entered into on behalf of their respective corporations. [ 44 ] In the result, the Tribunal granted TCC’s application and rescinded the Payment Order. [ 45 ] I consider that the decision of the Tribunal reflects a thorough and careful assessment of all of the evidence adduced by the parties in light of the issues raised by them. The record before the Tribunal amply supports the findings of fact made by it upon which the ultimate conclusion arrived at relies.

In particular, the evidence of the existence of a valid and enforceable oral agreement is not only present, it is strong. No palpable and overriding error has been demonstrated. [ 46 ] Accordingly, I would not give effect to this ground of appeal. Conclusion [ 47 ] For these reasons, the appeal is dismissed. Costs [ 48 ] In accordance with the agreement of the parties, costs of this appeal fixed in the all-inclusive amount of $50,000 shall be paid to the Respondents by the Appellant. _______________________________ Stewart J. I agree _______________________________ Lococo J.

I agree _______________________________ O’Brien J. Released: January 17, 2024 CITATION : Iamgold C orporation v . T reelawn Capital Corp., 2024 ONSC 239 DIVISIONAL COURT FILE NO.: 697/22 DATE: 20240117

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT Stewart, Lococo and O’Brien JJ. B E T W E E N: Iamgold CorpORATION Applicant (Respondent for the Liability Phase) Appellant - and - Treelawn Capital Corp. and Wood Family Wealth Corporation Respondents (Applicants for the Liability Phase) Respondents REASONS FOR DECISION Stewart J. Released: January 17, 2024