The central issue in this case was the nature of the business
relationship between Mr. Buchan, a prospector and owner of Hidden
Rock Drilling Ltd. (Hidden Rock), and Mr. Klassen, a securities
lawyer, in relation to an aggregate gravel quarry operation in
northern British Columbia.
Hidden Rock claimed that it beneficially owned 100% of the
gravel tenures and that Mr. Klassen had defrauded it out of a 50%
interest in them. Mr. Klassen had performed solicitor's work
for Hidden Rock and related companies, but he claimed to have been
engaged with Mr. Buchan in a joint venture as equal partners.
At trial, the main question for the Court was whether the
parties were in fact engaged in a joint venture, or, whether they
were merely engaged in an owner-solicitor relationship. Although
the terms of the relationship had not been reduced to writing, the
trial judge found that the relationship contained all the
characteristics of a joint venture. She held that Mr. Klassen was
entitled to his 50% beneficial interest in the gravel tenures and
that he had not breached any fiduciary duty or committed any fraud
on Hidden Rock or Mr. Buchan. She found that Mr. Klassen had acted
as corporate solicitor for the joint venture, not Mr. Buchan or
Hidden Rock, and that Mr. Klassen had not used his status as Hidden
Rock's former solicitor to take advantage of Mr. Buchan. A key
issue at trial was credibility: the Court had found that Mr.
Buchan's evidence left his credibility "wanting" in
several respects, while Mr. Klassen's evidence was found to be
Hidden Rock appealed the trial decision. It did not challenge
the trial judge's findings as to the nature of the relationship
as a joint venture or the findings as to credibility. Rather,
Hidden Rock argued that the trial judge had erred in finding that
there was not a solicitor-client relationship with "Mr. Buchan
and/or Hidden Rock" when the joint venture was formed and that
the trial judge had erred in finding that Mr. Klassen had not
breached his fiduciary duties in his capacity as a former solicitor
for "Mr. Buchan and/or Hidden Rock" in connection with
the formation of the joint venture. This represented a change from
Hidden Rock's focus at trial. At trial, Hidden Rock had claimed
a breach of fiduciary duty not in connection with forming the joint
venture, but in connection with Mr. Klassen's alleged wrongful
appropriation of an interest in the gravel tenures.
The Court of Appeal did not find it necessary to decide whether
to allow Hidden Rock's new focus on the pleadings and the
evidentiary record. Rather, the Court found that Hidden Rock's
success was fully precluded by two findings of fact made by the
First, the trial judge found that the joint venture was between
Mr. Klassen and Mr. Buchan, not Hidden Rock. Mr. Buchan was not a
plaintiff in the action and Hidden Rock could not seek redress on
Mr. Buchan's behalf.
The second critical finding of the trial judge was that before
the gravel license had been issued it had been agreed that the
beneficial owner of the license would be Granby International or a
newly incorporated subsidiary of Granby International. Hidden Rock
acted as Granby International's agent and never, in fact,
became the beneficial owner of the tenures. As such, Hidden Rock
had no interest in the tenures and no cause of action against Mr.
Klassen for any alleged wrongdoing that resulted in him becoming an
indirect owner of 50% of the tenures.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).