This decision of the Saskatchewan Court of Appeal (SKCA)
clarifies that a court will only intervene to overturn a
determination by the Ministry of Energy and Resources (Ministry)
with respect to royalty calculations under The Crown Minerals
Act, S.S. 1984-85-86, c C-50.2 (Act) where such a
determination is unreasonable.
Areva Resources Canada Inc. (Areva) mined uranium in
Saskatchewan. Under the Act, Areva was required to pay annual
royalties to the Crown, calculated as a percentage of the fair
market value of Areva's gross uranium sales in that year. For
arm's-length transactions, the fair market value was the actual
sale price. For non-arm's-length transactions, the fair market
value was deemed to be the average sale price of all
arm's-length sales in that year.
The issue in this case was the manner in which the Ministry had
calculated the average sale price of the arm's-length
transactions, which Areva sought to have judicially reviewed. The
judge in the court below provided an example of the difference
between the Ministry's calculation methodology and that
proposed by Areva:
...The parties' approaches can be illustrated using an
example in which a producer, in a given year, has arm's-length
sales of uranium under three contracts as follows:
- Contract 1 is for the sale of 1,000
pounds of uranium at $50 per pound.
- Contract 2 is for the sale of 2,000 pounds of uranium at $40
- Contract 3 is for the sale of 3,000 pounds of uranium at $60
Areva calculates the average sale price by adding $50, $40 and
$60 and dividing by 3 ($150/3 = $50). Areva says that the result,
$50 per pound, is the average sale price of all arm's-length
sales - the average of the three contract sale prices.
The Ministry calculates the average sale price by first
determining the total revenue for the uranium sold ($50,000 +
$80,000 + $180,000 = $310,000). The Ministry then divides that
total by the number of pounds sold ($310,000/6,000 = $53.33). The
Ministry says that the result, $53.33 per pound, is the average
sale price of all arm's-length sales.1
The SKCA first reviewed the decision of the Supreme Court of
Canada in Dunsmuir v. New Brunswick,2 to
determine whether a "correctness" or
"reasonableness" standard of review applied. Of
particular significance to a majority of the SKCA in selecting a
standard of reasonableness was the fact that the Act explicitly
denied a right of appeal from the Ministry's determination.
The SKCA went on to find that the Ministry's calculation
methodology was a reasonable interpretation of the complex royalty
scheme that fell within the acceptable range of possibilities.
In this case, the Québec Court of Appeal considered the
nature of a net smelter return (NSR) royalty granted by the holder
of mining claims to a lender and the legal publicity regime
applicable to such a royalty. It provides a reminder of the
complexity of creating enforceable NSR royalties in Québec
and underscores that particular attention that needs to be paid in
drafting NSR royalties relating to Québec properties if the
parties intend the royalty to constitute an ownership or property
right. For more discussion, see "Recent Developments in
Québec Mining Royalties" on page 47.
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...
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