Canada: To Vest, Or Not To Vest? Royalties And The Court's Power To Extinguish Third-Party Interests In Land Through A Vesting Order

The Ontario Court of Appeal released its second decision in the Dianor Resources Inc. (Dianor) receivership. In its first decision, Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2018 ONCA 253, pronounced on March 15, 2018, the Court determined that certain gross overriding royalties (GORs) were ‘interests in land.’ In this second decision, the Court of Appeal addresses when a court can grant a vesting order to transfer property free and clear of an interest in land.

This decision will be of particular interest to lenders, royalty holders, and restructuring professionals as they determine how best to structure transactions.


On August 20, 2015, a receiver was appointed over the assets and properties of Dianor on the application of Dianor’s secured creditor, Third Eye Capital Corporation (Third Eye) pursuant to section 243 of the Bankruptcy and Insolvency Act (Canada) (the BIA) and section 101 of the Courts of Justice Act (Ontario) (the CJA). Dianor’s main asset was a group of mining claims that were subject to the GORs. The GORs were registered against the mining claims and were described in their terms as interests in land.

Following a bidding process for Dianor’s assets conducted by the receiver, two offers were received, both of which required that title to the mining claims be transferred free and clear of the GORs. The accepted offer was a partial credit bid by Third Eye, which used expert evidence to determine the present value of the GORs and provided for payment of that amount to the GOR holders on closing. The transaction was scheduled to close two days after the granting of an approval and vesting order, and within the appeal period under both the CJA and the BIA, provided that there was not an extant appeal.

The motion judge held that the court had jurisdiction under section 243 of the BIA and section 100 of the CJA to order that property be vested in a purchaser free and clear of any encumbrance, including the GORs. The motion judge held that the GORs were not interests in land, but regardless of their nature, the court had jurisdiction to vest the property in the purchaser free and clear of the GORs.

In its first decision, the Ontario Court of Appeal overturned the motion judge’s determination that the GORs were not interests in land. In doing so, the Court relied on the test set out by the Supreme Court of Canada in Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, which confirmed that a royalty constitutes an interest in land if: (i) the language used in describing the interest is sufficiently precise to show that the parties intended the royalty to be a grant of an interest in land, rather than a contractual right to a portion of the resource recovered from the land (in that case, oil and gas), and (ii) the interest out of which the royalty is carved, is itself an interest in land.

The Ontario Court of Appeal requested additional submissions to address whether, as an interest in land, the GORs could be extinguished and whether a Superior Court judge has jurisdiction to extinguish a third-party interest in land pursuant to a vesting order.

Issues Considered by the Court

[1] Can a third-party interest in land, such as the GORs, be extinguished by a vesting order granted in a receivership proceeding?

[2] Does a Superior Court judge have jurisdiction to extinguish a third-party interest in land through a vesting order under section 243 of the BIA and section 100 of the CJA?

Key Takeaways

  • The Court held that the BIA is remedial legislation that should be given a liberal interpretation to achieve its objectives, which frequently includes the liquidation of assets. Therefore, a Superior Court judge has jurisdiction under the BIA to grant a vesting order which provides for the conveyance of title free and clear of all encumbrances (including, where appropriate, interests in land).
  • When granting a vesting order that will extinguish the rights of a third-party to an interest in land, the court should assess, (i) the nature and strength of the interest to be extinguished and (ii) whether the parties have consented to the vesting of their interest. A key inquiry is whether the interest in land is more similar to a monetary interest (i.e., similar to a mortgage or tax lien) that is attached to the real or personal property or whether the interest is more similar to a fee simple that is in substance an ownership interest. An ownership interest is generally tied to an inherent feature of property, rather than a fixed monetary obligation where the interest is extinguished once the obligation is paid in full. In other words, an ownership interest is of a continuing nature that cannot be extinguished without the consent of the owner.
  • The priority of the interests represented in negotiated agreements must be considered when determining whether an interest in land may be vested off title. This includes considering whether the third-party has contractually or otherwise subordinated its interest to a secured creditor. The court must consider the intention of the parties where they have negotiated and agreed to the priority of their interests.
  • If the priority of the interests under the agreements is unclear, the court may consider the equities to determine if a vesting order is appropriate in the circumstances. The court may assess whether (i) any prejudice exists to the third-party interest holder, (ii) the third-party may be adequately compensated for its interest from the proceeds of the disposition or sale, (iii) based on evidence of value, there is any equity in the property, and (iv) whether the parties are acting in good faith. The court may also identify other factors that may be relevant to this analysis.
  • In determining whether the appeal period under the CJA or BIA applies in Ontario, the court is required to determine the source of the power to grant the subject order. Where the power is derived under the BIA, the BIA appeal period of 10 days applies. Where the power is derived under the CJA, and normal Ontario rules apply, the standard 30-day appeal period applies. If there is an operational or purposive inconsistency between the federal bankruptcy rules and provincial rules with respect to the timing of an appeal, the doctrine of federal paramountcy would cause the federal bankruptcy rules to prevail. In this case, the Court held that the vesting order was granted solely under the jurisdiction of the BIA, and therefore the BIA appeal period applied. In this case, the appellant missed the appeal deadline, and the Court held that it was not appropriate to grant an extension.
  • The Court also noted that, absent urgency that is highlighted to the court when the request for the vesting order is made, the Receiver should not close a sale within the appeal period.

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

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions