Core Gold DMMIF

Latest post from TAD...

[merlin991]

Our esteemed learned Gentleman over on siliconinvestor has posted his latest missive. It's the BC judgement. (I don't see it posted yet but obviously he has his sources). No wonder those hooligans have had him blocked. 

 https://www.siliconinvestor.com/readmsg.aspx?msgid=32256504

B.C. Supreme Court written transcript of the ruling denying the Titan Minerals / Core Gold Plan 
of Arrangement.


It's pretty clear cut that Keith Piggott was in the right, and the other four directors and all others 
(in particular CFO Sam Wong) who were trying to ram this "deal" down Core Gold shareholders 
throats were not representing the best interests of the company and its shareholders.

The plan of arrangement was not fair and reasonable.

.

---------------------------------------------------------------------------------------------------------------

IN THE SUPREME COURT OF BRITISH COLUMBIA 

Date: 20190704 
Docket: S195415 
Registry: Vancouver

In the Matter of Section 288 of the British Columbia Business Corporations 
Act, S.B.C. 2002, c. 57, as Amended 

And 

In the Matter of a Proposed Arrangement Involving Core Gold Inc. 

Petitioner 

Before: The Honourable Mr. Justice Groves 

Oral Ruling Re a Petition in the Matter of a Proposed Arrangement 


In Chambers 

Counsel for the Petitioner: D. Brown A. Crimeni 

Counsel for Keith Piggott: T.M. Tomchak E. Miller E. Coffin (A.S.) 

Counsel for Titan Minerals Ltd.: B.J. Greenberg 

Place and Date of Hearing: Vancouver, B.C. June 24 & 25, 2019 

Place and Date of Ruling: Vancouver, B.C. July 4, 2019 

Core Gold Inc. (Re) Page 2 



[1] THE COURT: On the 24th and 25th of June, 2019, the petition “In the Matter of the Proposed Arrangement Involving Core Gold Inc. ("Core")” was heard in chambers in Vancouver. This matter is apparently time sensitive. Counsel for Core commented to me during the course of the second day that sometimes commercial reality and judicial reality collide. That is what has happened here. The parties apparently need an answer, and they need an answer quickly. 

[2] As I will discuss later, part of the proposed arrangement, which is the basis of this petition, involves Titan Minerals Ltd. ("Titan") raising approximately $18 million Canadian to complete the arrangement. I was advised on June 25th, the second day of the petition hearing, that in fact the deadline for approval of the arrangement with respect to that funding was June 21, 2019, the Friday before, meaning that those who had committed money to the project then are now in a position to withdraw that commitment. Obviously the sooner the answer happens, the less likely that withdrawal is to be, or so I perceive. 

[3] As for the petition itself and the applicable legal test for the court to apply in deciding whether or not to approve an arrangement, the case of BCE Inc. v. 1976 Debentureholders, [2008] 3 SCR 560, 2008 SCC 69, appears to set the following test:

- First, has the statutory procedure in place been complied with? 
- Secondly, has the application been put forward in good faith? 
- Thirdly, is the arrangement fair and reasonable? 

[4] With respect to the third requirement of it being fair and reasonable, the court is directed in the BCE case to consider two aspects related to fairness. The first is, does the arrangement have a valid business purpose? The second is, are the legal rights of those being arranged resolved in a fair and balanced way? The onus is on the proponent of the arrangement to satisfy the court that this test has been met on a balance of probabilities.


Core Gold Inc. (Re) Page 3 



[5] In addition to the BCE case, a case that is key to my consideration is the decision of InterOil Corporation v. Mulacek, 2016 YKCA 14, a decision essentially of the British Columbia Court of Appeal sitting as they do as the Yukon Court of Appeal, which is of course therefore binding authority on me. The InterOil case cites extensively from the BCE decision, and of particular note to me in terms of its conclusions and the conclusions I have reached, paragraph 29 of InterOil talks about reviewing judge's responsibility to go beyond whether a reasonable person would approve a plan, but he or she must also consider the positive value to the corporation offsetting the fact that rights may be altered. Additionally as noted in InterOil, the court must be satisfied that the burden imposed upon the arrangement on security holders is justified by the interests of the corporation as an ongoing concern. 

[6] Again, recognizing that time is pressing and that an answer is required, I am not in these reasons going to repeat the details of the contentious history between the parties. The parties are, of course, Core, the acquiring party Titan and Keith Piggott ("Piggott"). Piggott was and is a director of Core. He was CEO of that company for a number of years. At the time the board of directors, by a four to one vote, approved the proposed arrangement and began the progress leading to this corporation, Piggott was the “one” in the four-to-one vote. Piggott expressed his negative concern about the transaction. Although the details of this are in dispute, I am satisfied on a balance of probability that his refusal to go along with the proposed arrangement was the underlying reason for his dismissal as CEO of Core, at considerable financial loss to him in terms of options and the like.


[7] The stated reason for his dismissal as CEO is “for cause”. There are allegations that he misappropriated about $50,000 of Core funds while he was working in South America for Core, but his explanation is that these funds were legitimately used to cover his expenses for that considerable time. The truth of that issue and the legitimacy of his termination is not before me. I am, however, satisfied that he was dismissed as CEO was likely a result of his actions in opposing the 

Core Gold Inc. (Re) Page 4 

proposed arrangement because, in fact, it was clear that these alleged allegations of misappropriation of funds were well known to the other directors months previously. 

[8] I am generally satisfied that in terms of the test set out in BCE that the statutory provisions have been complied with. It is worth noting, however, in these Reasons that when the initial application was made for directions, as is the practice before a master, in this case Master Cameron, the learned master specifically asked then counsel for Core if there was anything else he should have been informed of before what is making essentially a standard order on what appears to be a two-or-three-minute application. Counsel appearing before Master Cameron indicated that there was nothing. That, as it turns out, is somewhat disingenuous in light of the known facts at the time that the matter was going to be highly contentious and that all parties would be using considerable resources available to them to either promote or oppose the proposed arrangement. 

[9] In terms of this and having over the course of close to 20 years that I have been a presider in this court, I have seen a number of this type of arrangements being presented in one fashion or another before the court. I am struck at the level of opposition and the complexity of the claims advocated by all parties against those who oppose their position. Piggott and Core appear to have used considerable financial resources to assist them in their essentially political campaign with shareholders to promote or defeat the proposed arrangement. This includes, amongst other things, both parties hiring a number of business-related professionals to assist them in advocating for or against the arrangements. 

[10] Though I do not purport to understand the details of the services provided by these professionals, they including public relations assistance, assistance with preparation, marketing and distribution of challenges to, or advocations for, the proposed arrangement and contacting various shareholders on a regular basis to attempt to sway them to their respective points of view. Additionally this service included soliciting media coverage for negative allegations against the other side’s position. 

Core Gold Inc. (Re) Page 5 

[11] Piggott appears to have been significantly successful in this regard in that the Canadian Broadcasting Corporation did a sympathetic cover piece advancing Piggott's concerns about the legitimacy of Titan, their past history in mining operations in South America, their potential civil and regulatory wrongdoing and criminal conduct in the mining sector, and their somewhat shaky history as a mining operation centre in Australia. Core was equally aggressive in waging a political war of spin, for lack of a better term, with the shareholders and other voters on this contested arrangement. The materials before me show potentially defamatory allegations being advanced about the past conduct of Piggott, his level of morality and his true intent in opposing the proposed arrangement. 

[12] Back to being satisfied about the first aspect of the test. The initial order of Master Cameron appears to have been complied with. The vote was held, and there was a narrow passage by those who chose to vote on the proposed arrangement. In the materials all counsel have attempted to slice and dice how one could view the vote, but no matter how it is sliced or diced, the required majorities have all voted in favour of the proposal. 

[13] There was a challenge as to what was said in advance of the vote, particularly as it relates to a circular described by or on behalf of Core which appears to indicate that approximately 30 percent of the shareholders were planning on voting in favour of the arrangements. It was argued that this has created in the minds of many the expectations of inevitability about the vote. That does not, however, affect the legitimacy of the vote, nor the legitimacy of the process, in my view. It may, however, have some effect on the final factor for consideration, which I will deal with later. Generally speaking, I am satisfied the first aspect of the BCE test has been met. 

[14] As to the second aspect of the test, was the application put forward in good faith? In one sense this test has been met in that there appears to be a legitimate reason for Core to need the additional assistance in maintaining its operation. It is argued that it needed a cash influx to survive, and that the Titan proposed 

Core Gold Inc. (Re) Page 6 

arrangement was its only option. This too is disputed, both as to fact and implication, by the representations of Piggott. 

[15] It is not disputed, however, that Core had been losing significant money from its mining operations for a period of time. Its mining operations in South America being insufficient to meet its on going financial commitment, which eventually would have required additional contributions to be made by various shareholders, or so I understand. I am satisfied that the second aspect of the test has been met. The application has been put forward in good faith. There was a need for money, and this was an option. 

[16] It is in my view the third aspect of the BCE test which is of greatest concern. That, of course, is the question of whether or not the arrangement is fair and reasonable. Before I get into my analysis of this, let me start by expressing a significant concern about process. I mentioned to counsel on the second day of the hearing that I would imagine that an answer would be required sooner than later. It was then that counsel for Core advised me as to the June 21, 2019 date for approval of the arrangement as it relates to funders in Australia, secured as part of the arrangement by Titan. 

[17] I made a flippant comment at the time about how an adequate judicial determination was possible with the 3 feet of materials have been provided. As it turns out, that was an exaggeration. However, it is not a significant exaggeration. What the court was presented with, obviously expected to review in some detail, was six binders and numerous loose affidavits closer to 2 feet in height than 3. Over the course of two days counsel did their best to direct the court through their written submissions. 

[18] Core's submissions were 66 pages, 230 paragraphs and 12 authorities being cited. That took most of the first day. Titan's submissions were modest, being 14 pages, 85 paragraphs, with 9 authorities. The respondent's submissions were of considerable additional length, 87 pages long, 365 paragraphs and 16 authorities in their case book. I can see that the number of these authorities were duplicated 

Core Gold Inc. (Re) Page 7 

vis-a-vis all of the case books, but I do note that in terms of consideration of the arguments, counsel for Piggott, speaking last, realized, to use her words, that the clock was ticking and was only able to touch on approximately half of her written submission. The expectation obviously being that the court in weighing the matter would consider the balance. 

[19] How a detailed analysis of what was presented is to be considered and analyzed by the court on a short fuse, in fact a non-existent fuse as the date had passed, is simply beyond my ability to comprehend. Criticism for this timeline must fall at the feet of the proponents of the arrangement in that they knew or ought to have known that because of the contested nature of the matter and the contested nature of the arrangement, the timeline should have been set up in such a way so as to allow for a legitimate hearing in the court of everyone's concern. A hearing with this volume of materials should have been set for a week as opposed to two days, with a sufficient period of time for a chambers judge to consider the detailed materials and authorities provided. 

[20] How does that whining of this judge, myself, something I concede, effect a reasonable determination of the issue on its merits? If this was any other matter attempting to be done by way of chambers application in two days with the volume of materials, argument and authorities provided, virtually all chambers judges in British Columbia would note the considerable factual dispute in the affidavits with deep concern. Virtually all chambers judges would be concerned about the contrary legal opinions as to a key point, a key point related to value, the potential civil, regulatory and possible criminal exposure of Titan, the successor company, which will be issuing shares to the former shareholders of Core if this arrangement is approved.


[21] On that point it is important to note that these allegations raised by Piggott about Titan, I am satisfied on a balance of probabilities, except as to the complaint regarding the use of the firearms, has been conceded for the most part as at least partially true by the proponents of the arrangement. 

Core Gold Inc. (Re) Page 8 

[22] Again, if this was any other matter attempting to be done by way of chambers application, I do not doubt that because of the factual dispute, the disputes as to foreign law, the essential admission of past civil and regulatory wrongdoings by persons not then necessarily employed by Titan but now front and centre in the South American operations, a judge would refer the matter to the trial list. 

[23] Again, on the issue of reasonableness of the proposal, the conflicting affidavits simply do not allow for a proper determination of the question of the reasonableness of the proposal. Virtually all chambers judges when faced with this circumstance would refuse to hear the petition and set the matter for trial, something of course that cannot be done here. 

[24] An answer is required. An answer will be given. The answer is this: I am not satisfied on the balance of probabilities that the arrangement is fair and reasonable. I am not satisfied that the legal rights of the shareholders and others are being arranged in a fair and balanced way. 


[25] I have had the opportunity to review the submissions and materials since court. There is much reasonable suspicion about Titan. One cannot help by conclude that Titan and/or its key staff have in the past operated in its South America mining operations in a questionable if not unlawful way. It is simply not good enough to say on one hand most of that bad conduct happened before we took over and on the other hand note as a positive the considerable expertise and experience of your newly acquired staff, the same operators who operated outside, I am satisfied, the regulatory law in place. 

[26] Titan has as much admitted the unlawful conduct but has attempted to downplay the details, as I read the materials. There is a level of uncertainty, better put a level of uncertainty that has not been dispelled that caused the court to consider the value of Titan, its shares, the key item that Core shareholders are receiving in this arrangement, to be of limited worth. This is further confirmed by the apparent lack of liquidity associated with Titan's shares in the not too distant past. 

Core Gold Inc. (Re) Page 9 

[27] Additionally, and of most important note, and in this regard I reference the authority of the Yukon Court of Appeal in InterOil, there is no independent fairness opinion. If anything is a commercial reality, in my view, since the InterOil decision, then it is the necessity of an independent fairness opinion in a highly contentious arrangement. What the court has is two opinions: one offered by the proponents of the arrangement, which sets a value of the Titan shares; and one offered by those opposing the arrangement, Piggott writing a very different estimate of value of the Titan shares. By highly contentious, I note that this arrangement was approved but only by a narrow margin. I again reference the original materials noting around 30 percent committed to a positive vote. I note crucially that the non-independent fairness opinion offered by the proponents, values Titan's shares, what the shareholders of Core will be getting, as having assets worth $33,333,330 by my math. The contrary non-independent fairness opinion values those assets at less than half of that, $16,546,617. 

[28] It is only an independent fairness opinion that could resolve this dispute. Core and Titan knew from the start that this was a highly contested matter. Rather than provide the resources to fund an independent fairness opinion, they funded their own advisors to counter the Piggott spin with their own. No rational explanation, in light of the resources spent by the party on this fight, is advanced as to why an independent fairness opinion was not provided. One can only guess that it is an oversight, which in light of the InterOil decision is odd at best, or that perhaps the results of the independent assessment were thought to be too risky or potentially self-defeating. 

[29] A final aspect of the lack of fairness, the lack of reasonableness of this proposal, is the somewhat shallow response of Titan and Core to the concerns raised by Piggott about the dissenting shareholders' rights. Both vehemently oppose security for this obligation. Though there is some merit to the argument that dissenting shareholders are not as a matter of right entitled to guarantees, the recent past lack of liquidity of Titan, the arguable overvaluing of its assets in the non-arm's length fairness opinion, and in that regard I am referring to the PI presentation, a 

Core Gold Inc. (Re) Page 10 

report in which success of the arrangement is the partial basis for PI's remuneration, combined with the arguments against security in my mind raise the substantial possibility that the dissenting shareholders here may, in fact, not get the benefits set out in the arrangement. 

[30] The onus is on the proponents of the arrangement to satisfy the Court on a balance of probabilities that the arrangement is fair and reasonable. I am not satisfied. 

[31] For these reasons, rushed as they are due to restriction of time this matter has presented the court, I conclude this arrangement is not fair and reasonable, and as such the petition is dismissed. Thank you. 

“Groves J.”