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 amply corroborated.
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 trial judge.
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.
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