Supreme Court

5C C\V IH 00\

IN THE SUPREME COURT OF THE NOP.THV/EST TERRITORIES BETWEEN: CADILLAC EXPLOPvATIONS LTD. Plaintiff

- and -PENARROYA CANADA LIMITEE, Defê idant REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE W. G. MORROW The present matter came before me in Chambers as a result of Notices of Motion filed on behalf of each party seek­ing directions end relief in respect to the production of documents and certain questions asked on the examination for discovery of the respective officers of th-:' parties. At the opening of the hearing before me both counsel agreed tliat as a result of undertakings mada by each to the other as well as because of certain agreements made the applications were to be adjourned sitie die except as to certain ones argued at the time. Accordingly the two notices of motion stand ad­journed sine die except as to those points either settled or those points nov; to be considered in this judgment. In brief it is to be observed that the Amended State­ment of Claim shows that the plaintiff relying en an agreement I entered into between the two parties on February 11, 1970, ar '-!- »^-?«f^-'t;-5,:^r?FC'^;-'^''-S°"'^?T*?^ "̂ '5r'-'̂

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- 2 ­alleges that the defendant undertook to carry out an exploration program in accordance with good mining explorstion practices on certain Mining Claims owned by the plaintiff in the Nahanni Mining District of the Northwest Territories. The defendant is alleged to have gone into possession and control. An option to acquire an undivided 50 per cent interest in the claim was open to the defendant upon the happening of certain events. Certain results were to floî / from the exercise of the option. The defendant is alleged to have exercised the option but to have failed to proceed with the construction and equipping of mining facilities although requested to so do, all of which is alleged to be in breach of the agreement. Damages in the sum of $5,000,000.00 are claimed as a consequence of the default. In the alternative the plaintiff alleges that the agreement hf;s been discharged and terminated by the failure of the defendant, rescission is sought, and resulting from x-Jhat is termed a con­dition subsequent permitting the interest to be determined, the plaintiff claims damages for loss of market, cost of development, and so on, in the sum of $25,000,000.00. In the further alternative it is alleged that the option was not properly exercised for reasons as set forth in detail in the claim and that by continuing in possession the defendant has caused damage to the plaintiff. The above recital is not intended to be a full review of the various claims or positions taken by the plaintiff but is set forth as a short resume only.

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J - 3 -In its defence the defendant alleges the option was exercised and tiiat there has been no defaii.lt. Aiiong ctlier defences raised iS estoppel, that conditions did not permit the defendant to as yet commence the equipping and developing as sought, and generally that the defendant is excused from acts alleged to be required of it by reason of events and factors as detailed in the defence. The defendant by counterclaim asks for a grant and conveyance of its interest in the Mining Claims to be ordered. An Amended Reply and Defence to the Counterclaim closes the pleadings. Specific reference will be made to certain paragraphs of the pleadings as necessary in considering the points still to be settled on these motions. The plaintiff asks for a ruling in respect to objections made to questions asked of Jean Yves Eichenberger. President of the defendant company who was being examined in Paris, France, as the selected officer of the defendant. The first question found at page 70 of the transcript IS: 'Q. Was any budget submitted by Penarroya Canada to Penarroya France for approval apart froia ... for approval? »'^: ^•'~:m'-W^i?7^^-^'' ?1K:.

ILJ>' . 4 .. I •>fr. R o l l s What re Icvancc does that have to the law suit, as you know you hav t: abaiidonod your claiins against Penarroya France? There i 3 no mention of Penarroya France in the statement of claims ain.endcd On what basis is any dealing , v.'ith respect to budget a t least , between Penarroya Canada and Penarroya France, any 1 oni ',<?r relevant in this action? The second questions found at page 80 are: "Q. In February, 19 70 did Penarroya Ca:o.ada Li'irited contem])late tliat the sum of tnree million dollars would be required for the purpose of carryin.g out tiie exploration program then considered by it?

Q. Well, did Penarroya Canada Limited estiji.ate that the su,".; of tarse I million dollars would be required to carry out tixe exploration pro­gram then proposed by it? On ;riy examination of the pleadings I am unable to see any basis for requiring an answer to the question on page 70. Voth respect to tb.e two questions Oi:i p3̂;;:e SO it seems to me that if such an estimate was or was not inade such fact might be material to so.uc of t.he allegations made by the defendant that the required program was carried out. The defendant officer will be required to ĉ nswer the latter two questions but cannot be required to go into detfils of the manner in v.-hich the budget was to be realized. i

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-^ - 5 -The final qiiestion sought of this officer is found at page 372 et seq.: Q. There is a reference on tl̂ e document to "Blocking out", I thin:<, sonettiing. j/oes that portion not relate to che Nahanni Project?

Mr. Rolls: It does not relate to Nahanni, or in any event it is not relevant."

Counsel for the plaintiff relied on the reasoning of Ewing, J. as found in Corlett v. Canadian Fire Insurance Co. et al 1939 2 W.'W.R. 527 and in particular to a quotation in the judgment at page 529 taken from Wedin v. Robertson (1907) 7 W.L.R. 72 as follows : "As to conversations between him and others, not parties to the action, I doubt whether na should be asked as to statements made by such others during tnose convcrsatioiis, but he should be compelled to testify as to the statements made by iiim during any such conversation."

After a careful examination of the pleadings in the present action I am satisfied that questions can be asked as to whether there were discussions with Conwest or anyone else xv'ith respect to the efforts made, if in fact any efforts v;ere so made, for disposal of the particular property, but tlie questioning must •lot go any further. There i>.'ill be en Order for the officer of the Defendant, namely, Jean Yves Eichenberger to attend in the sam.e manner as

^^^ has been provided for by this Honourable Coart to answer the questions referred to. The defendant asks for a ruling in respect to ob­jections made to questions asked of Lawrence Cyril .Morrisroe, President of the plaintiff company, v,'ho vvas sii?.ila,cly being examined as the selected officer of the plaintiff. This examination was at Calgary, Alberta. Questions 146 and 155 are the first to be considered, '146 0, I \'ould like you to find out for me, please, v;hat use and witli v;iiat result was iUadc of the electro-magnetic survey to v/Iiich I have just referred and v;hich is numnered 3 of your productions. 155 Q Did .̂5r. Christie ].ial:e use of it?"

The main objection here is to the effect that the defendant is attempting to find out what use experts made of it, Counsel in objecting relied on two Alberta decisions v.'hich dis­cuss Rule 240 (now 200) of tiie Alberta RuJcs of Court v.diich are applicable here, namely: Marine Pipeliyie S Dredging Ltd. v. Canadian Fina Oil Ltd. (1964) 48 W.W.R. 462; and Canadian % Utilities Ltd. v. Mannix Ltd. et al (195S) 27 W.W.R. 508. These cases arc concerned v.ath, among other things, the relationsiiip of client and professional man. To the extent that the above question.s reacii into -.Jiut area tliere will :->o no

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- 7 ­requirement to answer, that is th3 plaintiff's officer is not required to seek out his experts and ascertain v,-Iiat use tliey may nave .made of the survey. I do tiiink however that the officer is required to answer to tiie extent that lie iiiiaself has knowledge ana further to ascertain from iiis coiupany em­ployees or officers the use made of tJxe report. If ae can find out from them v;ithout inquiring further, what use Mr. Christie made of it he must so do and answer accordingly. I agree that the practice that has grovm and developed under our Rule 200 is as expressed by Riley, J. at page 521 of the Canadian Utilities case v;here he says: "I am of the opinion that the v.'ords 'touching the r.iatters in question' and 'relating to' quoted ... (our Rule 20 4) ... permit more latitude on discovery than is permitted by the rules of adiiiissibili ty at trial."

i i Counsel for the defendant was satisfied to accept the i ajiswers found from. Questioiis 1343 to 1546 as tiic ausv.'cr to Question 1095 if Counsel for the plaintiff agreed. Accordin.,ly unless tnis agreei.ient is not made I have no need to discuss this question any further. The next questions 1400, 1402, 1416 - 1419 raise quite different issues. The officer Morrisroe had apparently produced a copy of a letter addressed to the plaintiff company from its solicitors. This ]rrcvluction took place on tlie occasion of one

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gVWtftTftWWUB of his meetings with the Paris solicitor of the defendant company. Counsel for tiio plaijitiff oijjects to tho qucstio.js on the luisis that tlie letter was bet.^een solicitor ana client. Counife] for the defendant argues the pi-ivilege was waived as soon as it was shown to tlie other side. The letter has been marked as Exhibit 31. An;-ong other thini'S it makes a statement as to an understandi7ig tliat the defendant compaiiy haa completed all of the exploration program it inten.ded to carry out and also expresses an opi)\ion in respect to what construction could be placed 031 certain clauses of the agreemeixt, On tixe jaatorial before rie it ajjpears to be clear that Mr. Morrisroe. in an effort to persuade the solicitor to en­courage liis client to take a different course, gave a copy of the letter to hi:;i. This in my opinion constituted a clear and unequivocal v;aivor of whatever privilege the plaintiff may have liad: Phipson on Evidence^ 11th Ed,, com.-î>, page 596 Carey v. Cuthbe2->t, (1S72) I.R. 6 Eq. 599; Caldbeek v. Boon 7 I.C.L.R. 32. Accordingly the plaintiff's officer v/ill I)e ordered to answer questions 1400, 1492, 1416, Ĵ il7, i'U8 and 1419. Defendant company liad made a pre-feasibi lity report and in Questions 1833 to 1S:S5 defendant's counsel seeks to have the officer of tiic plaintiff company disclose any facts by which the propriety of the report could be challenged. flounscl here relies on the reasoning set forth in Ohl et ol v. Cannito (1972) 26 U.L,R. (.id) 556. I agree with the reasonin;; of 0.s.i.er, J,

r - 9 ­in this case but cannot see that tiie present situation is the same. By ir,erely providing for a pre-feasibility report v/liich way be based on or refer to certain factiial situations or assumptions, where the report itself or its findings is iiot directly in issue in the pleadings, surely cannot place the officer being examined in the position v/ixere he can be required to challenge factual statements therein. The examining solicitor himself can by direct questioning arrive at tiie same position. I thin.k I would be going far too far here if I were to give tlie direction sougiit. The plaintiff's officer v.n'. 11 not be required to answer here. By Questions 2057 to 2059 the officer of tiie plaintiff is asked as to the com.pany's kno'.i,'ledge or information as to the value of Millhead grades of metals whether tiiis knowledge or information was obtained before or after the commencement of the action. It is clearly in issue in the pleadings. I direct that tlie questions be ansv/ered as to tĥ . facts known only. There will bo no requirement to expand any ansv.-ers in respect to what conclusions the company may have reached from such facts. By Question 2031 defendant's counsel seeks information as to whether there have been any complaints or enquiries from shareholders of the plaintiff company respecting the defendant's obligations. I cannot see the relevancy of this line of inquiry. '̂iie officer need not arisv/er or ;iaxe further enquiry r.ere.

- 10 -Question 2363 seeks to find out from the plaintiff i.'aat the defendant failed to do cr v/hat it uici contrary to good mining practice. In my opinion this question is required to be aj.sv;ered as the pleadings have clearly r.iado good mining practice a basis of the action. The questions and ansi^ers iiore are restricted to things or matters factual aiul opinions cannot bo sougiit out or required. By Question 2179 counsel for defendant states: "I want to know what it is in the reports vniich specifically deals v;itli these allegations and on which the plaintiff relies." The al­legations are contained in paragraph 16(i)(a) of the Amended Stateriont of Claim and are as follows: "(i) At the time of the purported exercise, Penarroya v.̂as in default under the Agreement, as follov/s:

(a) it had failed to carry out a program of prospecting, exploration and other mining work on the Mining Claims in accordance v;itii good inining exploration practices and, in particular, had not explored and evaluated, or not fully explored and evaluated, tiie lands to determine the extent of feasible commercial production;"

I think counsel is entitled to answers as to the facts forming the basis of the allegations made in the same manner as in respect to Question 2163 above but I do not agree that the of­ficer can bo required to analvze reports or be examined on such reports. There u'ill be an order accordingly.

- 11 -In its Reply to the Amended Statement of Defence, the plaintiff states •'the va.lue of payable mota'ls within sucn meaning of clauses 6(a) (i) as may be attributed to it, exceeds U.S. ,,-53 per ton after deducting taxes and royalties in the productioji tiiereof." Its officer was asked on v/hat fact tiie company relied on in support of this allegation. The answer was objected to as it would require reliance o]i expert opinion. In my opinion the party here has made a firm allegation. If in arriving at its factual basis tne party required tiie assistance of experts that surely does not avoid tiio responsibility to answer. Tiie officer will be required to answer as to the fact or facts hut may not be required to give the }ia;nes of any experts he has had to call on for iiis ansv.'er or any opiriions tiiey iiiay have expressed, See Ruhinoff v. 'Jewton 1967 i U.R. 402 and British Coliirrihia Forest Products Ltd. v. Yarrows Ltd. (1963) 52 l.'.W.R. 430. There will be an order for the officer of the Plaintiff; namely Lawrence C. Morrisroe, to atten.d in the sai.ie i.nanner as previously ordered to ansv/er as directed above. Either counsel may apply to this Court shoulci there be any further difficulties experienced in completing tlie respective examinations or obtaining attendance of the respective officers. Costs vi/ill be in the cause.

•' W. G,' Morrc-v Y e l l cv/ w n i i: o , ,'i. .V'. T. J a n u a r y 1 1 , 19 74 .

•• 11 I C o u n s e l : C. D. O ' B r i e n , E s q . , f o r P J a i n t i f f R. J. Rolls, Esq. , Q.C. , for Defendant.

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