Frobisher Ltd. v. Canadian Pipelines & Petroleums Ltd. et al.

Frobisher Ltd. v. Canadian Pipelines & Petroleums Ltd. et al.
Collection
Supreme Court Judgments
Date
1959-12-14
Report
[1960] SCR 126
Judges
Locke, Charles Holland; Cartwright, John Robert; Abbott, Douglas Charles; Martland, Ronald; Judson, Wilfred
On appeal from
Saskatchewan
Subjects
Property law
Decision Content
Supreme Court of Canada
Frobisher Ltd. v. Canadian Pipelines & Petroleums Ltd. et al., [1960] S.C.R. 126
Date: 1959-12-14
Frobisher Limited (Plaintiff) Appellant;
and
Canadian Pipelines & Petroleums Limited, Lawrence C. Morrisroe, E. George Meschi, A. Oak, A. Amren, S. Daigle, Jock Mackinnon and D. J. Sheridan (Defendants) Respondents.
1959: February 2, 3, 4, 5; 1959: December 14.
Present: Locke, Cartwright, Abbott, Martland and Judson JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN.
Real property—Mines and Minerals—Option to purchase mineral claims— Second option given to different company—Specific performance of first option sought—Whether option created equitable interest in land— Failure of optionee to comply with statutory requirement to hold licence—Pleadings—Amendments at trial—Regulations 8(1), 9(1), 124 of the Mineral Resources Act, R.S.S. 1953, c. 47.
On June 25, 1955, the plaintiff, through its agent H, took an option to purchase certain mining claims from four prospectors. The option provided that it should remain open to June 30, and set out the terms of purchase involving the transfer of the claims on or as close as possible to June 30 whereupon a certain sum would be paid; a further sum to be paid in stated instalments and the formation of a new company in which the vendors would receive 10 per cent, of the authorized stock. On June 29, the prospectors gave an option to purchase the same claims to the defendant P Co., which not only took with notice of the first option but actively induced the breach of it. The plaintiff sued P Co. and the four prospectors for specific performance and an injunction against any dealings with the claims by the defendants.
Towards the end of the trial, the defendants moved to amend by pleading regulations 8 and 9 of the Regulations made under the Mineral Resources Act, providing that no mining company shall be granted a licence unless it is registered under the Companies Act and that no person or company, not a holder of a licence, shall prospect for minerals, stake out or record any location or "acquire by transfer, assignment, or otherwise howsoever, any mineral claim or any right or interest therein". The trial judge refused leave to amend and gave judgment for the plaintiff. The majority in the Court of Appeal ruled that the amendment should have been allowed and ordered a new trial restricted to the issue raised by the amendment. In all other respects the appeal was dismissed.
The plaintiff appealed to this Court and two of the prospectors cross-appealed. The plaintiff admitted before this Court that its agent H had no licence until July 27, 1955; that the plaintiff did not register under the Companies Act until March 9, 1956, and that it acquired its Miner's licence on March 12, 1956. Counsel all agreed that this admission should be regarded as evidence given before this Court under s. 67 of the Supreme Court Act.
Held (Locke and Martland JJ. dissenting): The appeal and the cross-appeals should be dismissed. The action must also be dismissed.
Per Curiam: The Court of Appeal exercised its discretion rightly in permitting the defendants to amend their defence so as to plead regulations 8(1) and 9(1).
Per Locke, Abbott, Martland and Judson JJ.: There was no necessity to decide as to the validity of regulation 124, providing compensation for the wrongful registration of a caveat, since it was clearly shown that no damage arose from the registration of the caveat and that the filing of it was completely justified under the circumstances.
Per Cartwright, Abbott and Judson JJ.: No valid distinction could be drawn between the position of the plaintiff during the period from June 25 to June 30 and what would have been its position if the first payment had been made. The option created an equitable interest in the claims and was rendered void because it was given and taken against the express prohibition contained in regulation 9(1). London and South Western Railway v. Gomm, 20 Ch. D. 562, followed.
The plaintiff's case was not assisted by the fact that the claims were to be transferred not the plaintiff but to a company to be incorporated. Its legal position was the same whether the transfer was made direct to the new company or to the plaintiff and from the latter to the new company.
The analogy which the plaintiff sought to draw with the cases dealing with the rule against perpetuities did not lead to the suggested result that the contract could still be enforced as a personal obligation. The case at bar was not concerned with that rule. Whether or not the contract, on the true construction of regulation 9, was forbidden, depended upon the rights which it conferred. By the contract, specific performance of which the plaintiff was seeking as construed by the trial judge, the plaintiff, during the currency of the option, acquired the exclusive right to enter upon, drill and explore the claims and the right to compel the conveyance of the claims upon completion of the option payments. The plaintiff, therefore, acquired a right or interest in the claims.
Per Abbott and Judson JJ.: The position of the optionee under the agreement was the same throughout all its stages; the plaintiff obtained an irrevocable offer for certain stipulated periods on payment of certain stipulated sums. The payments, if completed, constituted the purchase price and all that then would remain to be done was to form the new company, transfer the claims and allot to the prospectors 10 per cent, of the stock. An option to purchase land creates an equitable interest because it is specifically enforceable. There is a right to have the option held open and this is similar to the right that arises when a purchaser under a firm contract may call for a conveyance. In both cases there is an equitable interest but in the case of the option it is a contingent one, the contingency being the election to exercise the option. Judicial reexamination from time to time since the case of London and South Western Railway v. Gomm, supra, has resulted only in an affirmation of the rule that an option holder has an equitable interest.
An interest in these claims having been acquired, the agreement was void and of no effect because it was given and taken against the express prohibition contained in regulation 9.
Regulation 124, if valid, has no application when there is a bona fide dispute; registration of a caveat "wrongfully and without reasonable cause" means something in the nature of an officious intermeddling without any colour of right.
Per Locke J., dissenting: Assuming that on the authority of the Gomm case an option to purchase land vests in the optionee an equitable interest in the land in respect of which the option is granted when the land is to be transferred to the optionee, the case at bar was distinguishable in that the claims here were to be transferred not to the optionee but to a company to be incorporated. Consequently, the optionee in this case acquired no equitable interest in the claims. Its right was a personal right enforceable in a Court of equity by a decree of specific performance, and as such, was not affected by regulation 9.
Per Martland J., dissenting: The Gomm case was not to be considered as laying down, as a general proposition of law, that any option relating to land of necessity vests in the optionee, forthwith upon the granting of it, an interest in land. The word "option" was not a term of art; its meaning depended upon the context. Here, the option did not confer upon its exercise a right to the optionee to call for a conveyance of the title to the claims. Therefore, even on the reasoning of the Gomm case, the optionee did not acquire an equitable property interest in the claims.
An option for the purchase of land creates contractual rights and, accepting the reasoning in the Gomm case, its effect may be to create also a contingent limitation of land which may take effect in the future. If that limitation was rendered void by regulation 9, the contractual right remained. Consequently, the option in the case at bar was not rendered void by the regulation, and specific performance could be granted even though no interest in land was created.
APPEAL from a judgment of the Court of Appeal for Saskatchewan1, granting leave to amend the defence, ordering a new trial restricted to the issue raised by the amendment and otherwise affirming the judgment at trial. Appeal dismissed and action dismissed on admitted facts, Locke and Martland JJ. dissenting.
C. F. H. Carson, Q.C., A. Findlay, Q.C., and J. R. Houston, for the plaintiff, appellant. J. J. Robinette, Q.C, and W. M. Elliott, for the defendants, respondents, Pipelines & Petroleums Ltd., Morrisroe and Meschi.
D. J. Murphy, for the defendants, respondents, Oak and Amren.
Locke J. (dissenting):—This is an action for specific performance and the plaintiff is the appellant.
The agreement sought to be enforced was signed at Uranium City, Saskatchewan, and reads as follows:
Date—25th day of June, 1955.
We, the undersigned, the sole owners of mineral claims—EO—1 to 16 incl.
Missing Link 1 to 9 incl.
IO—1 to 12 incl.
In all 37 claims contiguous, Located on or near Stewart Island, Lake, Athabasca, Province of Saskatchewan, Canada—do hereby grant to James A. Harquail, Mining Engineer—Suite 2810, 25 King St. West, Toronto, Ontario—in consideration of the sum of $1.00 (one dollar), receipt of which is hereby acknowledged, an option effective to 12 noon— June 30, 1955—to purchase said mineral claims from the undersigned under the terms of the following deal:
On receiving transfers to above claims in good order—on, or as close as possible to June 30, 1955—said transfers to be turned over to Uranium City Bank of Commerce branch at which time sum of $25,000.00 (twenty-five thousand dollars) will be issued to MacKinnon and partners. (Vendors).
New company to be formed in which vendors will receive 10% (ten per cent) of authorized stock.
$25,000. Firm cash.
Option Payments
1st option—Nov. 1, 1955 ................................................. $ 25,000.00
2nd option—March 1, 1956 ............................................. 50,000.00
3rd option—Nov. 1, 1956 ................................................. 50,000.00
4th option—July 1, 1957 .................................................. 50,000.00
$8200,000.00
The above agreement shall be binding on the executors, heirs, etc. of the people signing.
"A. Oak"
"Albin Amren"
"S. Daigle"
"Jock MacKinnon"
"A. D. Wilmot"
Witness to above four signatures.
Signed in the Settlement of Uranium City, Saskatchewan. On or prior to June 30, Harquail deposited the sum of $25,000 with the bank, to be paid to Oak, Amren, Daigle and MacKinnon (hereinafter referred to as the prospectors) upon their depositing transfers of the mineral claims as pro-, vided. They, however, did not comply with the option, having decided to repudiate any liability under it and having granted another option to the respondent company under the circumstances to be hereinafter mentioned.
Mineral claims in the Province of Saskatchewan are subject to the provisions of The Mineral Resources Act of that province, R.S.S. 1953, c. 47, and to the regulations made thereunder by the Lieutenant Governor in Council as authorized by s. 9. Under these regulations persons desiring to prospect and make entries on mineral claims must obtain a licence in the form prescribed. A licensee desiring to acquire a mineral claim situate in unsurveyed lands such as the area in question must stake the claim in the manner prescribed by the regulations, and within a stated period apply to have such location recorded as a mineral claim with the Mining Recorder of the district. Upon compliance with these requirements the Recorder may issue a certificate of record of the claim in Form B prescribed by the regulations, which simply certifies that the claim has been recorded in the name of the applicant and describes generally its location. A claim thus recorded may be transferred to another licensee. The entry is effective for one year and from year to year thereafter for a maximum period of ten years, provided that work to a prescribed value is done in each year. Upon the required work being done the licensee may obtain a certificate of improvements from the Recorder and, obtaining this, is entitled to a lease of the claim for 21 years, with a provision for renewals of such term at a rent prescribed.
The prospectors and Evelyn Oak, the wife of Alvar Oak, had staked the claims referred to in the option as EO-1-16 inclusive and recorded them with the Mining Recorder at Uranium City. Whether certificates of record in Form B had been issued in respect of these and the other claims is not clear from the evidence, but it is apparently undoubted that the parties who had staked the claims were entitled to such certificates. It is also common ground that Oak had been authorized by his wife to sign the option upon the claims recorded in her name.
On June 28, 1955, the respondents Morrisroe and Meschi, both of whom were officers of the respondent company and were aware of the option granted by the prospectors to Harquail, entered into negotiations with the prospectors to obtain an option in favour of the respondent company. As a result, Oak and MacKinnon left Uranium City and proceeded with Morrisroe to Regina. MacKinnon had been given a power of attorney by the other prospectors to deal with the claims other than those of Mrs. Oak. On arrival at Regina on June 29 they were taken to the office of the solicitors for the respondent and there signed an option prepared by one of these solicitors upon the claims mentioned in the option to Harquail. Morrisroe appears to have concealed from his solicitor the fact that the prospectors had already given an option upon the properties to Harquail, Mr. Ehmann, the solicitor who dealt with the matter, contenting himself with asking Oak and MacKinnon if they and their associates owned the claims, a question which they answered in the affirmative. He thereupon prepared an option agreement dated June 29, 1955, between Oak and MacKinnon as optionors and the respondent company as optionee.
This document recited that the optionors were the owners and recorded holders of the mineral claims referred to (though in the case of the EO group of claims this was inaccurate) and that they had agreed to grant "the sole and exclusive option to purchase the said mining claims to the respondent company" in consideration of a cash payment of $25,000 and a further sum of $175,000 to be paid in stated instalments on November 1, 1955, March 1, 1956, November 1, 1956, and July 1, 1957. As a further consideration for the granting of the option it was provided that the optionee would "at such time as it may deem advisable" incorporate a public company for the development of the claims with a minimum authorised capital of four million shares. Of these shares the optionors were to receive 10 per cent, and of this percentage 10 per cent, were to be free shares and 90 held in escrow and released pro rata "as stock is released from escrow." It was provided that the optionors should forthwith execute transfers of the mining claims in blank and deposit such transfers with the Bank of Commerce in Uranium City, with any other title papers which they might have in their possession, including a copy of the option agreement, to be held by the bank in escrow to be delivered to the optionee or his nominee upon the prescribed payments being made and "in the event of this option not being exercised the said bank is to hold the said documents to the order of the optionors." During the currency of the option the optionee was given the right to enter upon the mining claims and to develop and work them in such manner as it might deem advisable. The optionee covenanted to do the required assessment work upon the claims and to record such work with the Mining Recorder until such time as the company had been formed, at which time such work should be performed by it. Upon default in payment of any of the amounts stipulated to be paid the option agreement was to terminate and any payments made thereunder be forfeited.
While, by the terms of the option agreement, transfers of the claims in blank were to be placed in escrow with the bank at Uranium City, for some reason which I am unable to understand, the solicitor, who said that in preparing the document he was acting on behalf of MacKinnon and Oak as well as the respondent company, obtained from Oak transfers of 18 claims which included the 12 claims being part of 10 group 1 described in the option. It is not clear from the evidence in whose name these entries had been recorded or by whom the transfers were executed, and the transfers were not produced at the trial. According to Mr. Ehmann, he caused these transfers to be filed with the Mining Recorder, transferring these 18 claims to the respondent company on June 29. On the same date he prepared an agreement which was signed by Morrisroe on behalf of the respondent company, which recited that Alvar Oak "has entered into an agreement for sale to sell a certain group of claims known, as the 10 group" and that the respondent company undertook to transfer back to Oak Claims 14, 15, 16, 17 and 18. There had been in fact no agreement of sale entered into by Oak and it was not contemplated by the option that the claims should be transferred to the respondent company then or apparently thereafter. Clearly, the parties intended that the claims would be transferred to the new company if the option payments were made, since otherwise the shares to be received by the prospectors would be worthless.
While the Mining Recorder at Regina was called and gave evidence of interviews which he had with Mr. Ehmann and Morrisroe on June 29 and 30, he made no mention of the recording of this transfer, the documents were not produced and there is no other evidence of the transfer of the claims than that given by the solicitor. The fact that such transfer was made was accepted by the learned trial judge and the matter dealt with in the manner hereinafter stated. On the morning of June 30 the respondent company filed a caveat with the Mining Recorder at Regina claiming to be interested in the mining claims under the option agreement referred to. On the same date Harquail filed a caveat based upon the option granted to him with the Mining Recorder at Uranium City. In view of the findings of fact made by the learned trial judge, the actual times at which these respective caveats were filed are not important. Transfers in blank of the entries made by Mrs. Oak and by Alvar Oak and MacKinnon were obtained by the respondent company and remained in their possession at the time of the trial. They were not deposited in escrow, as contemplated by the option, due apparently to the institution of this action.
Davis J. by whom the action was tried, found that the option agreement made between Harquail and the prospectors was a binding contract and directed that it should be specifically performed and carried into effect. It was directed that the respondent company cause the 12 mineral claims transferred to it to be recorded in the names of the prospectors jointly and, failing this being done, that the Mining Recorder do cancel the "title of the defendant Canadian Pipelines and Petroleums Limited to the said mineral claims" and record the same in the names of the prospectors and issue certificates of record in their names. The prospectors were directed to execute transfers of the said entries in blank and deposit the same in escrow in the Canadian Bank of Commerce at Uranium City in accordance with the terms of the agreement. A further term of the judgment continued an injunction made by Dorion J. on July 20, 1955, and continued by Graham J., the terms of which enjoined the respondents from disposing of or drilling or developing the said mineral claims.
A further term of the judgment read as follows:
AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the date of the first option payment of $25,000.00 under the said Agreement be fixed at four months after the said certificates of Record and Transfers in blank of all the said mineral claims are deposited in escrow at the said Bank, as aforesaid, that the date of the second option payment of $50,000.00 be fixed at four months thereafter, or so long as is necessary to assure to the Plaintiff the privilege of drilling on the ice during the months of January and February, that the date of the third option payment of $50,000.00 be fixed at eight months thereafter, and that the date of the fourth and final option payment of $50,000.00 be fixed at eight months thereafter.
As to this it is to be noted that the option to Harquail did not contain any provision entitling him to enter upon the claims or do any work on them and, in the absence of such a term in the agreement, the optionee had no such right, in my opinion. The claim advanced in the statement of claim is upon the option agreement of June 25, 1955, as it reads: it is not alleged that there was a contemporaneous oral agreement that the optionee might enter and work the claims during the currency of the option and that by a mutual mistake such a term was omitted from the writing, nor is there any claim made to rectify the agreement on this or any other ground. The respondent company had expressly stipulated for such a privilege in the option of June 29, 1955.
The main grounds of defence to the action were that the agreement had been signed on a Sunday and so was unenforceable under the provisions of the Lord's Day Act, R.S.C. 1952, c. 171, and that the agreement was uncertain and, accordingly, an action for specific performance did not lie. The learned trial judge found as a fact that the respondents Morrisroe, Meschi and the company, which had obtained an option agreement for the same claims from the prospectors following July 25, 1955, had done so with full knowledge of the fact that they had entered into the agreement above quoted. Towards the end of the trial the defendant company, Morrisroe and Meschi had applied for leave to amend their defence so as to plead regulations 8(1) and 9(1) above quoted, but this motion was refused.
After the hearing of the evidence had been completed in the matter, counsel for the plaintiff asked leave to amend the statement of claim by claiming damages under regulation 124 of the Quartz Mining Regulations, which provides that any person registering a caveat wrongfully and without reasonable cause against a mineral claim shall make compensation to any person who has sustained damage thereby, but this application was refused.
The defendants Daigle and MacKinnon had counter-claimed in the action against the defendant company for an order declaring that the option agreement entered into by them with that company on June 29, 1955, became void and was terminated on November 1, 1955, and the judgment at the trial declared such agreement to have been terminated.
The plaintiff, the defendant company and the prospectors appealed to the Court of Appeal2. The judgment of that Court dismissed the appeal of the defendant company, Morrisroe and Meschi as to the merits, but allowed it to the extent that the said defendants were permitted to amend their statement of defence to plead regulations 8(1) and 9(1) upon terms upon compliance with which a new trial restricted to the issue raised by the said amendment was directed. The appeal taken by the same defendants against the judgment in favour of Daigle and MacKinnon declaring the agreement of June 29, 1955, to have been terminated was allowed. The appeals taken by the present appellant and by Oak and Amren were dismissed.
On this appeal the defence that the agreement dated June 25, 1955, had been made on a Sunday was abandoned and the finding that the respondent company and its officers Morrisroe and Meschi were aware that the prospectors had entered into the agreement of June 25, 1955, when they obtained the option of June 29, 1955, was not questioned. In so far as the present appeal seeks to set aside the judgment appealed from on the ground that the amendment to plead the Mining Regulations should not have been permitted, it should fail, in my opinion. I consider that no sound reason has been advanced which would justify our interfering with the exercise of the discretion vested in the Court of Appeal.
In order that the issues in the action might be properly dealt with in this Court and the cost of a new trial avoided, counsel for the appellant admitted before us that Harquail did not acquire a miner's licence until July 27, 1955, that the appellant company was not registered under the provisions of the Companies Act of Saskatchewan until May 9, 1956, and that it did not acquire a miner's licence until March 12, 1956. Counsel for all parties agreed that these admissions should be treated as evidence given before this Court under s. 67 of the Supreme Court Act.
The defence which raises what is in my opinion the only question of difficulty in the present appeal is based upon a contention that the agreement sought to be enforced gave to Harquail and his principal, the appellant, an equitable interest or estate in the mineral claims, that the acquisition of any such rights by an individual or a company not holding a miner's licence is prohibited by Regulation 9(1) and that the agreement is accordingly invalid.
This contention is based upon the decision of the Court of Appeal in London and South Western Ry. Co. v. Gomm.3 It is necessary to consider with some care the facts of that case to determine just what was decided.
By an indenture dated August 10, 1865, made between the London and South Western Railway Company and one Powell, the company conveyed to the latter a parcel of land no longer required for its purposes. Powell, on his part, covenanted with the company that he, his heirs and assigns, owner and owners for the time being-of the hereditaments intended to be thereby conveyed and all other persons who might be interested therein, would at any time thereafter whenever requested by the company, its successors or assigns, by a six calendar months' previous notice in writing, reconvey the said lands to the company, its successors or assigns, for a consideration of 100 pounds. Powell sold the lands to Gomm in 1865 and the latter was in possession in 1880 when the company gave notice of its desire to repurchase the property. It was shown that Gomm had full notice of the provisions of the deed of 1865 when purchasing the property.
Kay J., who tried the action, rejected the argument of the defendant that the covenant created an estate or interest in land in the railway company and was, therefore, unenforceable as being contrary to the rules against perpetuities. He held that Gomm was bound by the covenant in the deed on the authority of Tulk v. Moxhay.4
The appeal to the Court of Appeal was heard by a Court consisting of Sir George Jessel, M.R., Sir James Hannen and Lindley L. J. The passage from the judgment of the Master of the Rolls which is relied upon for the proposition that an option to purchase land creates an equitable interest or estate in the optionee reads:
If then the rule as to remoteness applies to a covenant of this nature this covenant clearly is bad as extending beyond the period allowed by the rule. Whether the rule applies or not depends upon this as it appears to me, does or does not the covenant give an interest in the land? If it is a bare or mere personal contract it is of course not obnoxious to the rule, but in that case it is impossible to see how the present Appellant can be bound. He did not enter into the contract, but is only a purchaser from Powell who did. If it is a mere personal contract it cannot be enforced against the assignee. Therefore the company must admit that it somehow binds the land. But if it binds the land it creates an equitable interest in the land. The right to call for a conveyance of the land is an equitable interest or equitable estate. In the ordinary case of a contract for purchase there is no doubt about this, and an option for repurchase is not different in its nature. A person exercising the option has to do two things, he has to give notice of his intention to purchase, and to pay the purchase-money; but as far as the man who is liable to convey is concerned, his estate or interest is taken away from him without his consent, and the right to take it away being vested in another, the covenant giving the option must give that other an interest in the land.
In that case the option gave to the railway company the right to require a conveyance to itself and its assigns upon the terms stated, and this was held to give to it an equitable interest in the land. The present agreement, as it reads and as it was understood by the prospectors as shown by their evidence, contemplated that the mineral claims should be conveyed not to Harquail or his principal but to a new company to be formed in which they would hold ten per cent, of the stock. Harquail, as is stated in his evidence, understood that the transfers of the mineral claims which were to be deposited in the bank would be in blank, the reason for this being, no doubt, that the new company was not then in existence and its name had not been determined. The name of the transferee would be inserted if the terms of the proposed option were complied with by the optionee and the completed transfers delivered to the new company. The judgment at the trial which directed the deposit of the transfers in blank so interpreted the agreement between the parties and that, in this respect, it properly construed the document is not questioned by anyone. The agreement did not provide and none of the parties to it contemplated that, upon making the payments specified in the option, Harquail or his principal would acquire any interest or estate in the claims. What they were to acquire was the majority share interest in the company which would be the owner of the claims. It was not, in my opinion, an option to purchase at all but an option upon the acceptance of which, by compliance with its terms, the optionee would become entitled to require delivery of the transfers to the new company. The fact that the agreement drawn by Harquail, a layman, reads "an option to purchase" does not relieve us of the duty of determining the true nature of the document.
In Gomm's case the covenant which was held not to bind the defendant required him to reconvey the land to the railway company on its demand, and this appears to have been the basis for the finding that it gave to the optionee an equitable estate or interest in it. The phrase reading "The right to call for a conveyance of the land is an equitable interest or equitable estate" in the judgment of Sir George Jessel must be construed in the light of the facts of the case, and thus as meaning a right to call for a conveyance of the legal title to the optionee. Sir James Hannen said in part (p. 586):
it appears to me to be a Startling proposition that the power to require a conveyance of land at a future time does not create any interest in that land.
and this, I consider, is to be construed in the like manner. Here there is no such covenant.
It is altogether too easy a generality to say that an option vests in the optionee an equitable interest in the land in respect of which the option is granted. If it be assumed that Gomm's case was rightly decided, its application depends, of necessity, upon the nature of the right given to the optionee and that he may acquire upon its exercise.
I must confess my inability to understand how an option agreement which, when exercised, would not entitle the optionee to any estate, legal or equitable, in the mineral claims can be said to vest any equitable interest or estate in him prior to the exercise.
The argument based upon Gomm's case proceeds upon the assumption that the optionee, as of the time of the execution of the option, acquired, in the language of Regulation 9(1), "some right or interest" in the mineral claims. Since neither Harquail or the appellant had at that time a prospector's, developer's or miner's licence, the contention is that the transaction was prohibited by the regulation which, by virtue of the statute, has the force of law.
The interests of the prospectors in the claims upon which they had made entries which had been recorded are chattel interests, as declared by Regulation 38. Such a chattel interest is assignable at common law and Regulation 9(1), to the extent that it prohibits a transfer to a person not a licensee, is in derogation of common law rights. It is thus to be construed strictly (Maxwell, 10th ed., 292).
As I have pointed out, however, the option in question does not provide that the optionors will transfer the claims or any interest in them to the optionee, but rather, upon the exercise of the option, to a company to be formed. It is not to be assumed that that company would not obtain the required licence to enable it to accept a conveyance when the necessity arose. The regulation does not say that a person who has made and recorded an entry in a mineral claim may not lawfully agree with anyone to transfer such claim at some future date to a third person other than the optionee or to a company to be thereafter formed. We are asked to read into this regulation a prohibition which it does not contain, a course for which there is no warrant. In my opinion, the regulation as it reads does not affect the rights of the appellant under this agreement.
Unless regulation 9(1) is to be construed as rendering unenforceable a covenant to convey a mineral claim at some future time to a company to be thereafter incorporated, the decision in Gomm's case has no bearing on the matter to be decided. Whether that case should be followed in this country has not been considered by this Court. Apart from the fact that it was referred to with approval in Davidson v. Norstrant5, in a dissenting judgment of Duff J. (as he then was), the case does not appear to have been mentioned in this Court. In that case, however, the option entitled the optionee to a conveyance to himself or his nominee of a half interest in the land, his rights in that respect being similar to those of the London and South Eastern Railway Company. The case was not referred to by the other members of the Court.
Apart from the difference in the nature of the rights given by the option, the facts in the present case differ from those in Gomm's case in another material particular. Here the ownership of the mineral claims has at all "times remained in the prospectors. The 12 claims transferred by mistake to the respondent company have at all times been held by it as bare trustee for the prospectors. The respondent company was a necessary party to the action only for the purpose of obtaining a direction for a reconveyance of these claims to the prospectors, a declaration that the company had no interest in the claims, and to recover any damages caused by its interference with the appellant's contractual rights.
The facts of the present case are in this respect similar to those considered by the Court of Appeal in South Eastern Railway v. Associated Portland Cement Manufacturers6.
In that case the railway company had obtained a conveyance of a strip of land from a landowner which reserved to himself, his heirs and assigns the right to make a tunnel at his or their expense under the property conveyed. The defendants were the assignees of the landowner and, when they commenced the excavation of a tunnel, the railway company brought an action for an injunction, contending that as the time within which the tunnel might be constructed was unlimited the covenant offended against the rule against perpetuities. The railway company relied upon the judgment in Gomm's case and it was held by Swinfen Eady J. at the trial and by the unanimous judgment of the Court of Appeal that the case had no application. The defendants had succeeded to the rights of the landowner and, as expressed in the head note, it was held that as against the original covenantors, the railway company, the provision in the agreement as to the tunnel was a personal contract and was not obnoxious to the rule against perpetuities.
Swinfen Eady J., referring to Gomm's case, said in part (p. 25):
Jessel M.R. … said that if it was a mere personal contract it would not be obnoxious to the rule against perpetuities, but, as Gomm had not himself entered into the covenant, it was essential for the plaintiff to prove that it ran with the land in order to succeed against the assignee.
The same difference in the facts was pointed out in the judgments of Cozens-Hardy M.R. and by Fletcher-Moulton L.J. Farwell L.J. referred to the judgment of the House of Lords in Witham v. Vane, the only report of which appears to be in Challis's Real Property, 3rd ed., p. 440, and said (p. 33):
But the fact that there is some connection with or reference to land does not make a personal contract by A. less a personal contract binding on him, with all the remedies arising thereout, unless the Court can by construction turn it from a personal contract into a limitation of land, and a limitation of land only. As regards the original covenantor it may be both; he may have attempted both to limit the estate, which may be bad for perpetuity, and he may have entered into a personal covenant which is binding on him because the rule against perpetuities has no application to such a covenant.
In my opinion, the right of the optionee in the present case, as above stated, is a personal right enforceable in a Court of equity by a decree of specific performance. The covenant related to land, as did the covenant in Witham v. Vane and the Associated Portland Cement case, and was enforceable as between the contracting parties. I would add that if Gomm's case applied in the present circumstances it would be necessary to consider the decision of the Court of Appeal in the case of Manchester Ship Canal Co. v. Manchester Race Course Co.7, which is in direct conflict with it. The right of first refusal upon which the action was based in that case does not appear to differ from the right of an optionee who has the right to purchase, and the Court there held that such right was not an interest in land and rejected the argumet based upon Gomm's case. The latter case has, it is true, been followed in a number of cases by single judges in England who, apparently, considered themselves bound by it, but I think this does not add to its weight.
As to the defendant company, as found by the learned trial judge, the option agreement obtained by it was entered into with full knowledge of the option theretofore granted to Harquail, and the principle followed in Lumley v. Wagner8, applies.
The fact that the appellants obtained an interim injunction restraining the respondents from entering upon and working the claims and that the formal judgment at the trial, as above pointed out, read in part:
so long as is necessary to assure to the plaintiff the privilege of drilling on the ice during the months of January and February
cannot conceivably, in my opinion, affect our decision in this matter. The option required the prospectors to transfer the claims as they were at the date of the option to the company to be formed if the option was exercised and, clearly, during the currency of the option the optionee would be entitled in