Canada: Registration Of Securities On Mining Claims In Quebec: Have We Been Getting It Wrong?

It is common practice amongst mining law practitioners in Quebec to consider that the registration of a hypothec against a mining claim at the Register of Real and Immovable Mining Rights (known as "Gestim" and hereinafter referred to as the "Mining Registry") is sufficient to render such hypothec opposable against third parties. As set forth below, this practice may need to be reconsidered.

Section 8 of the Mining Act provides that mining claims and other mining rights are immovable real rights. As such, it is possible to register these mining rights at the Register of real rights of State resource development ("the Resource Register") which is part of Quebec's land registry system. Section 10 of the Mining Act goes on to say however that mining claims (and certain other mining rights) are exempt from registration at the [land] registry office. It should be noted that, as provided by Section 14 of the Mining Act, a registration at the Mining Registry is only opposable against the State. It is principally due to the exemption set forth in Section 10 of the Mining Act that many practitioners only register hypothecs at the Mining Registry, the logic being that since a mining claim does not need to be registered at the Resource Register, there is no obligation to do so in regards to any security affecting such mining claims.

Our discussions with representatives of the Mining Registry indicate that the exemption to register set forth in Section 10 of the Mining Act likely stems from the lack of longevity of these rights (for example, a mining claim is only valid for two years and a significant number of claims are not renewed after two years in part due to the unfeasibility of successfully mining the minerals relating to the claim). Consequently, due in large part to the relative short duration of the right, it would be inefficient to require registration at the Resource Register for all mining claims. This "temporary duration" reasoning to justify why mining claims are exempt from registration at the land register is also supported by Denys-Claude Lamontagne and Jean Brisset des Nos in Le Droit Minier, 2e éd, Éditions Thémis, 2005 at p 70.

The exemption granted to mining claims appears to be evolving however as evidenced by Bill 14, An Act respecting the development of mineral resources in keeping with the principles of sustainable development, which Bill, despite not being adopted by the National Assembly, was going to do away with such exemption. It is expected that the new Quebec government will submit its own bill to modify the Mining Act before June 2013 and although the new legislation may be different from Bill 14, it is expected that it will still provide for the removal of the exemption of registration. While this change should not necessarily be interpreted as a confirmation that hypothecs against mining claims not registered at the registry office are not opposable to third parties, it nonetheless must be viewed as to how the legislature wishes to resolve the debate of what must be done to render mining claims (as well as any security registered against mining claims) opposable against third parties.

In addition to the foregoing, when one reads Article 2663 Civil Code of Quebec ("C.c.Q.") (providing that, in short, hypothecary rights may only be set up against third persons when the hypothec is published in accordance with the relevant sections of the C.c.Q), Article 2695 C.c.Q. (which states that hypothecs are published in the land register) and Article 3040 C.c.Q. (which provides that that a real right of state resource development is enforceable against third parties only from the time the relevant correspondences are entered in the land register), it seems clear that a hypothec on an immovable right must be registered at the appropriate land registry office in order to render it opposable to third parties. Consequently, the justification for not registering a hypothec on a mining claim at the Resource Register, due to the fact that the registration of the mining claim itself at the Resource Register is not required, may be overreaching since it presumes that one exemption should automatically lead to another exemption.

While it is hoped that the proposed amendments to the Mining Act will clarify matters, it may be prudent in the interim to open land files for mining claims which are to be hypothecated and register such hypothecs at the Resource Register in order to avoid any debates regarding the enforceability of such hypothecs against third parties (other than the State).

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