Canada: Case Summary: Yukon Zinc Corporation (Re), 2015 BCSC 836

Last Updated: July 15 2015
Article by Dionysios Rossi and Jessica Duhn

Most Read Contributor in Canada, September 2016

The recent British Columbia Supreme Court decision in Yukon Zinc Corporation (Re), 2015 BCSC 836, provides some rare insight into the operation of provincial "miners lien" legislation in an insolvency context.


The case arose out of the insolvency of Vancouver-based Yukon Zinc Corporation ("Yukon Zinc"). The dispute involved competing claims between Transamine Trading S.A. ("Transamine") and Procon Mining and Tunnelling Ltd. ("Procon") to approximately 14,126 MT of zinc concentrate owned by Yukon Zinc, worth an estimated US $8 million. The concentrate was situated in various locations: the mine located in Yukon Territory, in a bulk terminal in Stewart, British Columbia ("B.C."), and in trucks that were in transit between the mine and the terminal.

Procon's claim arose from a lien it filed under the Yukon Miners Lien Act, R.S.Y. 2002, c. 51 (the "MLA") in respect of underground mining and production work for which it remained unpaid.  Procon contended its lien took priority over the claim of Transamine, a consignee. Procon also submitted that matter would be more appropriately heard by the Yukon Territory Supreme Court, rather than by the British Columbia Supreme Court. In response, Transamine claimed that title to the concentrate had already passed to it at the time Procon filed its lien (meaning that it was no longer the property of the debtor, Yukon Zinc).

The Decision

On the threshold question of jurisdiction, the court declined to cede jurisdiction to the Yukon courts, due to a number of factors: the urgency of the matter; the fact that the contracts between Yukon Zinc and Procon had a forum selection clause pointing to B.C.; that the majority of the zinc concentrate was already in B.C.; that insolvency proceedings benefit from all issues being decided in single forum; and that it was not possible to bifurcate the issues.

With respect to the priority of claims, the court concluded that a bona fide purchaser for value who takes title prior to the registration of the lien takes priority. Procon argued that all of the contested zinc concentrate was subject to the lien because it remained "in the hands of the owner." The court, however, noted that by the time Procon had perfected the formalities of its lien, the majority of the concentrate was already in B.C. On this point, the court concluded that the phrase "in the hands of the owner" could only be applicable to severed minerals remaining within the Yukon at the time of perfection. Regarding the MLA, the court noted that "there is no intention – express or inferred – that the enforcement provisions have extraterritorial effect."

Procon further argued that title to the concentrate had not passed to Transamine, and that Transamine was therefore only a holder of a security interest. In dismissing this argument, the court agreed with Transamine's submissions that it was a bona fide purchaser for value. The court noted that Transamine and Yukon Zinc's contracts contained express provisions stating when the transfer of title would occur.

Nor was Transamine's claim defeated by an inability to ascertain the goods in question. In addition to the measures taken by Yukon Zinc to demarcate the concentrate to be sold to Transamine, by the time the lien was registered, all of the concentrate Yukon Zinc was producing and processing from the mine was solely for Transamine. In this regard, the court held that any element of control exercised by Yukon Zinc in the act of storage or shipping of the concentrate was required by its contracts with Transamine and was not indicative of Yukon Zinc maintaining title to the concentrate.

The court further expressed its reluctance to interpret statutes in a manner that would nullify the interests of innocent third parties (such as Transamine), absent express wording to this effect. In this regard, the court noted that the current version of the MLA had repealed a previous provision stating that a "lien shall attach and take effect against persons purchasing... material in respect of which the lien is claimed." The also court confirmed the longstanding rule that statutes should not be construed too broadly if the interpretation would result in commercial uncertainty. Both of these factors militated in favour of Transamine's claim.

Finally, the court took notice of an earlier agreement between all parties in which Procon, among other things, surrendered all of its interest in the present and after-acquired zinc concentrates for valuable consideration. Specifically, the court noted the existence of a "no-interest letter" in which Procon agreed to the transfer of concentrates between Yukon and Transamine free and clear of Procon's interest. This agreement arose because Transamine took active steps with Yukon Zinc and Procon to ensure it would receive title to the zinc concentrate free of Procon's previously existing liens.

In rejecting Procon's argument that these agreements did not prevent it from registering subsequent liens, the court concluded: "Procon has now cast an interpretation of those arrangements [in a manner] which defies commercial logic."


The decision is instructive, insofar as it provides a rare glimpse into the operation of provincial miners lien legislation in the context of an insolvency proceeding. Specifically, it confirms that where title to goods has already been transferred, a bona fide purchaser for value will take priority over a lien unless the latter has already been perfected. Given this, parties intending to file a claim of lien should do expeditiously. Conversely, contracts of purchase and sale should expressly define when title to severed minerals passes from a shipper to a consignee.

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