UNREAL!!!!!!!!!!!!!!
COURT OF APPEAL FOR BRITISH COLUMBIA Citation: American Creek Resources Ltd. v. Teuton Resources Corp., 2015 BCCA 170 Date: 20150427 Docket: CA041797 Between: American Creek Resources Ltd. Respondent (Plaintiff) And Teuton Resources Corp. Appellant (Defendant) Corrected Judgment: The text of the judgment was corrected at paragraph 50 on May 1, 2015. Before: The Honourable Mr. Justice Donald The Honourable Madam Justice Saunders The Honourable Madam Justice Garson On appeal from: Orders of the Supreme Court of British Columbia, dated April 14, 2014 and November 26, 2014 (American Creek Resources Ltd. v. Teuton Resources Corp., 2014 BCSC 636 and 2014 BCSC 2214, Vancouver S107895). Appearing in person as an officer of Teuton Resources Corp.: D. Cremonese Counsel for the Respondent: T. A. Kowalchuk and M. A. Mitchell Place and Date of Hearing: Vancouver, British Columbia March 9, 10 and 11, 2015 Place and Date of Judgment: Vancouver, British Columbia April 27, 2015 Written Reasons by: The Honourable Mr. Justice Donald Concurred in by: The Honourable Madam Justice Saunders The Honourable Madam Justice Garson Summary: The appellant appeals from an order of specific performance granted to the respondent regarding an option to transfer a mining interest, as well as an order for special costs. The appellant contracted to transfer a 51 per cent interest in a mining property to the respondent upon completion of certain conditions, including the expenditure of at least $5 million by the respondent on exploration of the mining property. The respondent spent over $6 million on various exploration expenditures. The appellant claimed that less than $5 million of those expenditures were reasonable, and refused to complete the contract on the basis that the contract implicitly required all expenditures to be reasonable. The trial judge interpreted the contract as not requiring any reasonableness standard for the expenditures, and found that the expenditures claimed by the respondent were all valid exploration expenditures. The trial judge also ordered special costs directed at the appellants conduct in giving false answers in examination for discovery, as well as posting inflammatory statements online in an attempt to discourage litigation. Held: Appeal dismissed. The trial judge applied the correct legal principles pertaining to contractual interpretation. The trial judges interpretation of the contract was a finding of mixed fact and law, assessed on a standard of palpable and overriding error. The appellant cannot show any palpable and overriding error in the trial judges interpretation of the contract. The judge correctly found reprehensible conduct in ordering special costs, and the discretionary decision to do so should not be overturned. Reasons for Judgment of the Honourable Mr. Justice Donald: Introduction [1] The appellant, Teuton Resources Corp., appeals from an order of specific performance granted to the respondent, American Creek Resources Ltd., for an option of an interest in mining claims held by the appellant; and from an order of special costs for part of the trial. [2] At the heart of the specific performance action is the question of contract interpretation: what is the meaning of the phrase exploration expenditures in an agreement that provided that if the respondent spent $5 million in exploration expenditures over three years on the appellants claims in the Treaty Creek area near Stewart in northwestern British Columbia, it would obtain a 51% interest in the claims? The respondent spent over $6 million on various expenditures related to exploration of the mining claim, but the appellant refused to transfer title because, properly interpreted, the agreement required the expenditures to be reasonable, and less than $5 million of the expenditures met that requirement. [3] The trial judge construed the key phrase in light of, amongst other considerations, the scheme under the Mineral Tenure Act, R.S.B.C. 1996, c. 292, which requires the filing of assessment reports with the Mineral Titles Branch of the Ministry of Energy and Mines. The reports set out what has been spent on exploration of the claims and if accepted to maintain ownership of the claims and to add to the Provinces geoscientific database. His interpretation is as follows (2014 BCSC 636): [92] In these circumstances, I find that the term exploration expenditures in the context of this agreement was intended to mean expenses incurred by American Creek in good faith in relation to the exploration of mineralization at Treaty Creek, which expenses relate to exploration and development work within the meaning of the Mineral Tenure Act Regulation and are accepted by the Mineral Titles Branch as the basis for the value to be credited for such exploration and development work. [93] To go beyond this interpretation by implying the sort of additional qualifying terms proposed by Teuton would, in my view, produce an agreement for which neither party had bargained. [4] This interpretation destroyed the basis of the underlying theory of the appellants case. As such, there was little cogency or relevance in much of the evidence adduced to show that there was excessive waste and incompetency when the appellants expenditures were measured against a standard of reasonableness. [5] In my opinion, the trial judges decision on the contract interpretation question was free of legal error and entitled to the deference owed to findings of mixed fact and law as recently described by Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53. Likewise, there was no palpable or overriding error in his application of the interpretation of the contract to the facts as he found them. [6] The appeal also challenges the judges award of special costs. After the trial proper, the judge conducted a four-day hearing into the respondents claim for special costs on a number of grounds, including the posting of pornographic, threatening and demeaning messages on the Internet by Mr. Cremonese, the principal of the appellant, and Amanda Mullin, an employee, whom the judge found had done so on behalf of the appellant; and on the ground that Mr. Cremonese lied about his involvement in the postings on his examination for discovery. The judge refused special costs on all but these two grounds, and, as part of a lengthy detailed costs disposition, on 26 November 2014, he ordered as follows: 6. The Defendant Teuton Resources Corp. shall pay the Plaintiff American Creek Resources Ltd. special costs, plus tax, to be assessed with reference to the following portions of this proceeding: (a) Four days of trial, together with applicable preparation time; (b) Three days of this costs hearing, together with applicable preparation time; (c) The cross-examination of Ross Guffei on his Affidavit, including applicable preparation time; and (d) Two days for the examination for discovery of Mr. Cremonese, including applicable preparation time; provided that the scale C value of any party and party units included in the agreed total of 1100 that are attributable to any of these steps shall be deducted from the special costs. 7. These special costs awarded to the Plaintiff American Creek Resources Ltd. shall be assessed by the Registrar. [7] The appellant contests the order, primarily on the basis that the persons targeted in the postings are pursuing a defamation action in Alberta on the same subject matter, and hence the claim for special costs was duplicative and ought not to have been entertained. [8] The judge found the appellants conduct was reprehensible and connected to the action. I find no reversible error in his award of special costs, nor can I see any merit in the appellants other grounds of appeal on special costs, which I will briefly discuss later. [9] In the result, I would dismiss the appeal. Background [10] Teuton Resources Corp. is a mineral prospect generator company. It acquires mineral claims and then enters into earn-in or option agreements with junior exploration companies. In 1984, Teuton acquired the Treaty Creek mineral claims near Stewart, British Columbia. [11] American Creek Resources Ltd. is a junior exploration company. On 4 April 2007, American Creek entered into an agreement with Teuton relating to the Treaty Creek mineral claims. The parties agreement provided that American Creek would earn a 51% undivided interest in the Treaty Creek property upon issuing a total of 100,000 common shares to Teuton and making exploration expenditures on the property totalling $5,000,000 from 2007 to 2009. In a supplemental agreement dated 11 September 2007, the parties agreed that upon completion of that earn-in, Teuton would convey the entire property to American Creek, which would then hold legal title to the property in trust as to Teutons 49% interest. [12] The text of the agreement in question was framed by Mr. Cremonese. The parties did not involve lawyers in the transaction. It was dated 4 April 2007 and reads as follows: Teuton Resources Corp. 207, 675 West Hastings Street Vancouver, B.C. V6B1N2 Attention: Dino Cremonese Dear Dino: Re: Treaty Creek Property This confirms the agreement between Teuton Resources Corp. (Teuton) and American Creek Resources Ltd. (American Creek), as foIIows: 1. American Creek will earn a 51% undivided interest in the mineral claims known as the Treaty Creek Property (as more particularly set out in the attached Schedule A) (the Property) upon American Creek issuing a total of 100,000 common shares in its capital stock to Teuton and making exploration expenditures on the Property aggregating $5,000,000 as follows: Shares a) 25,000 shares to be issued within 10 days of receiving regulatory approval from the TSX Venture Exchange: b) 25,000 shares to be issued on or before March 31, 2008; and c) 50,000 shares to be issued on or before March 31, 2009. Exploration Expenditures d) $1,000,000 on or before March 31, 2008 (the First Year Program); e) $2,500,000 in aggregate on or before March 31, 2009; and f) $5,000,000 in aggregate on or before March 31, 2010. (the First Earn-In). 2. The requirement to make exploration expenditures on the dates set out in sub-paragraphs 1(d), (e) and (f) is contingent upon the receipt prior to July 1, 2007 of an approval of a Notice of Work (NOW) as filed with the office of the Inspector of Mines in Smithers, B.C. If the approval of the NOW for the First Year Program is not obtained prior to July 1, 2007, then the completion dates set out in paragraph 1 shall each be extended by one year. Teuton shall be responsible to file the NOW, and Teuton hereby agrees that the details of the NOW shall conform to the exploration program as determined by American Creek, the Operator. 3. Notwithstanding anything else in this Agreement, in the event that American Creek makes expenditures of less than $500,000 on the First Year Program within the agreed time period, American Creek shall forthwith pay to Teuton a sum equal to the difference between what was expended and $500,000. 4. American Creek may accelerate any or all of the share issuances and exploration expenditures in its sole discretion. American Creek shall have completed the First Earn-In immediately upon the issuance of an aggregate of 100,000 common shares and expending $5,000,000. 5. Subject to American Creek duly completing its First Earn-In, Teuton hereby irrevocably grants to American Creek the right to earn an additional 9% undivided interest in the Property (such that its aggregate interest is 60%) by performing and paying for such additional exploration work, engineering studies and reports as may be necessary in order to provide Teuton with a positive feasibility study (Feasibility Study) (the Second Earn-In). 6. No later than 60 days following the completion of the First Earn-In, American Creek shall notify Teuton of its election to proceed with the Second Earn-In, failing which its right to earn the additional 9% shall terminate. 7. If American Creek completes the First Earn-In, but fails to deliver the Feasibility Study within four years of its election under the preceding paragraph, or if at any time American Creek notifies Teuton of its election to abandon its rights under the Second Earn-In, then American Creek [shall] no longer be entitled to the Second Earn-In and American Creek and Teuton shall be deemed to have formed a joint venture with the initial interests of American Creek being equal to 51% and that of Teuton being equal to 49%. If American Creek completes the Second Earn-In, then American Creek and Teuton shall be deemed to have formed a joint venture with the initial interests of American Creek being equal to 60% and that of Teuton being equal to 40%. 8. Pursuant to the preceding paragraph, American Creek and Teuton shall enter into a Joint Venture agreement, the terms of which shall be in conformity with industry standards, including dilution clauses such that a party holding an interest of 10% or less shall be deemed to have a net proceeds interest only. 9. American Creek acknowledges that all interests in the 24 mineral claims more particularly described in Group II of the attached Schedule A are subject to a 2% Net Smelter Return Royalty (aNSRfl) in favour of St. Andrew Goldfields Ltd. A buy-back of one-half (1%) of the NSR for $1,000,000 is exercisable at any time until six months has passed from the commencement of commercial production. The Property is not subject to any other third-party interest or obligation. 10. American Creek or its designate will be the Operator beginning with the 2007 exploration program. 11. During the term of this Agreement, Teuton shall be entitled to appoint a representative to monitor exploration activities on the Property. The representative shall be entitled to access all data associated with the exploration activities at the same time they are furnished to American Creek, including, without limiting the generality of the foregoing, access to diamond drill core and logs, all assay, geophysical survey, and geochemical survey results, geological mapping data, maps, etc. 12. American Creek shall be responsible for all assessments and to file all assessment credits during the term of the option. 13. This Agreement constitutes the whole of the agreement between the parties. 14. It is contemplated that the parties hereto shall enter into a formal option agreement (Option Agreement), the terms and conditions of which shall conform with the terms and conditions of this Agreement and shall contain such other terms and conditions as are typically contained in an industry-standard option agreement. The terms and conditions of this Agreement shall be subsumed by the terms and conditions of the Option Agreement. 15. This is a legally binding agreement, and shall enure to the benefit of and be binding upon the parties and their respective successors and assigns. This Agreement and the Option Agreement shall be assignable by American Creek or its successors and assigns, subject to Teutons prior written consent, which shall not be unreasonably withheld. 16. This Agreement shall be governed by and construed in accordance with the laws of Alberta. 17. This Agreement is subject to the approval of the TSX Venture Exchange. It is our understanding that we will have our legal counsel prepare an agreement to formalize the foregoing and that a draft document will be provided to you as soon as possible. In the meantime, we ask that you kindly confirm the above by endorsing this letter below and faxing a copy back to our office. We thank you for your attention to this matter, and look forward to working with you. Yours truly, [Signed] ALLAN G. BURTON President & CEO ___________________________________________________________ Teuton Resources Corp. hereby acknowledges its agreement to the terms and conditions set out above. Dated this 4th day of April, 2007. TEUTON RESOURCES CORP. Per: _[Signed]_____________________ DINO CREMONESE. President [13] The parties entered into a supplemental agreement on 11 September 2007: September 11, 2007 Teuton Resources Corp. 207, 675 West Hastings Street Vancouver, BC V6B 1N2 Attention: Dino Cremonese Dear Dino: Re: Treaty Creek Property This letter confirms that the agreement between Teuton Resources Corp. (Teuton) and American Creek Resources Ltd. (ACR) set forth in the letter dated April 4, 2007 (the Agreement) is amended and supplemented as follows: 1. With effect from July 29, 2007, the definition of Property shall include the mineral claims set forth in Schedule A annexed, which are in addition to the mineral claims set forth In Schedule A annexed to the Agreement. 2. Teuton represents and warrants to ACR that Teuton is the legal, beneficial and registered owner of a 100% interest in the Property, unencumbered by any interests or claims except pursuant to the Agreement and the NSR in favour of St. Andrew Goldfields Ltd. in respect of the mineral claims described in Group II of Schedule A annexed to the Agreement. 3. Teuton covenants and agrees to hold the Property in trust for ACR in respect of any interest ACR may have or acquire pursuant to the Agreement and shall forthwith transfer legal title in and to the Property to ACR upon completion of the First Earn-In. ACR covenants and agrees that upon such transfer, it will hold legal title to the Property in trust for the interest of Teuton. 4. Teuton further covenants and agrees that while ACR is earning an interest in the Property, Teuton will not transfer, sell, grant, assign, pledge, charge, encumber or otherwise commit or dispose of all or any part of the Property, nor will it cause to be created any right, interest or claim (collectively and individually, a claim) in or against all or any part of the Property unless it has received the prior written consent of ACR and any such permitted Claim must expressly provide that it is subordinate to the interest of ACR. 5. Except for the obligation to make payments when due in accordance with the Agreement, the obligations of ACR shall be suspended to the extent and for the period that performance is prevented by any cause, whether foreseeable or unforeseeable, beyond ACRs reasonable control, including without limitation, labour disputes (however arising and whether or not employee demands are reasonable or within the power of ACR to grant); acts of God, laws, regulations, orders, proclamations, instructions or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonable acceptable terms any public or private license, permit or other authorization; curtail and or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of federal, provincial or a local environmental standards; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; interference by environmentalists, aboriginals or aboriginal right groups or other activists; fire, explosion, earthquake, mudslide, storm, flood, avalanche, sinkholes, volcanic eruption, drought or other adverse weather conditions; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors or subcontractor; shortage of, or inability to obtain, labour, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or facilities; or any other cars whether similar or dissimilar to the foregoing. ACR shall promptly give notice to Teuton of the suspension of performance, stating there in the nature of the suspension, the reasons therefor, and the expected duration thereof. The affected party shall resume performance as soon as reasonably possible. [Strikethrough of clause 5 initialled.] 6. The Agreement, as amended and supplemented by this letter, shall constitute the entire agreement between the parties. Please sign and return a copy of this letter to evidence your acceptance of the agreement set forth herein. Upon your execution of this letter or a counterpart hereof, this letter will constitute a legally binding and enforceable agreement between ACR and Teuton. Yours truly, [Signed] ALLAN G. BURTON President & CEO March, 2008 The foregoing is agreed and accepted this 20 day of September, 2007. TEUTON RESOURCES CORP. per: ______[Signed]________________ Dino Cremonese, President [14] The exploration work over the years 2007, 2008 and 2009 involved two major expenditures: diamond drilling and helicopter transportation. They became the focus of the appellants complaints during the trial and appeal. [15] The expenditures in the assessment reports filed with and accepted by the Mineral Titles Branch were as follows: 2007: $3,762,961.02 2008: $451,127.09 2009: $2,197,258.91 [16] These expenditures exceeded the $5 million expenditure condition within the option agreement, and the respondent subsequently sought to trigger its option to take a 51% interest in the property. The appellant refused to complete the transfer on the basis that some of the expenditures were unreasonable, and therefore the conditions of the agreement had not been satisfied. The respondent sued the appellant for specific performance. Proceedings at Trial [17] The appellant ran its defence on the theory that either exploration expenditures must be interpreted as importing a particular reasonableness requirement, or a reasonableness requirement must be an implied term in the agreement. The appellant maintained that the respondent was required to prove that its expenditures met certain reasonable standards in order to succeed in its claim for specific performance. The amended response to civil claim spells it out: 6. In response to paragraph 10 of the notice of civil claim, the plaintiffs obligation pursuant to the Agreement is to make exploration expenditures on the Property aggregating $5,000,000 in accordance with the stated schedule. The defendant has not made $5,000,000 in exploration expenditures on the Property as that phrase is intended to mean, and is meant, in the Agreement. 7. The phrase exploration expenditures as used in the Agreement is intended to mean, and does mean, actual money spent to physically explore the Properties. This refers to money spent in relation to lines/grids, local trails/road creation, improvement or work, topography, trenches, open cuts, underground cuts, drilling, reclamation, construction of on-claim helicopter pads, boundary survey and related expenses of airborne exploration surveys, remote sensing, grant exploration surveys, ground geophysics, and geochemical surveys, all such expenditures having to be reasonable taking into account the nature and extent of the Property and indications of potential mineralization as noted from time to time (the Reasonable Expenditure Requirement). 8. In the alternative, the plain and ordinary meaning of the phrase exploration expenditures could additionally include transportation costs in British Columbia and the cost of accommodation and food for field personnel, communications devices and equipment to undertake the physical work on the Property, all such expenditures having to be reasonable taking into account the nature and extent of the Property and the indications of potential mineralization as noted from time to time (the Alternate Reasonable Expenditure Requirement). 9. Implied terms of the Agreement included: (a) only reasonable expenditures for work designed and carried out to reliably add to the geoscientific database associated with the Property and carried out in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) published Exploration Best Practices Guidelines (the CIM Guidelines) could qualify as exploration expenditures; (b) exploration work on the Property would be carried out in a minerlike and competent fashion under the supervision of a Qualified Person as that term is defined in National Instrument 43-101 of the Canadian Securities Administrators, an association of Provincial and Territorial securities regulators in Canada including the British Columbia Securities Commission; (c) additional supervision and management of exploration work on the Property would be conducted by qualified and competent management personnel; (d) drill work would be carried out in a fashion designed to maximize the value of the data obtained by the drilling program by ensuring that the drilling program was carried out to minerlike standards and in accordance with mining exploration industry standards including the CIM Guidelines so that geoscientific data obtained would be reliable and the value of the exploration work would bear a reasonable relation to the amount spent on the exploration work; (e) drill work would be carried out as part of a drilling program designed and supervised by a competent Qualified Person; (f) exploration work ancillary to drill work would be carried out in a competent and workmanlike fashion and would be necessary to the carrying out of the drill work; (g) the plaintiff would engage only qualified and competent employees to carry out the exploration work and only in numbers and for time periods reasonably required to conduct exploration work on the Property; (h) employees of the plaintiff carrying out exploration work would be paid at a level consistent with industry standards; (i) contractors hired by the plaintiff would be qualified and competent; (j) contractors hired by the plaintiff would be engaged on industry standard terms; (k) exploration expenditures would not include general overhead expenses of the plaintiff, depreciation, amortization, taxes or the like (the Excluded Expenditures); and (l) the plaintiff would utilize proper accounting systems to segregate exploration expenditures on the Property from expenditures made by the plaintiff on the Plaintiffs Properties. (collectively the Implied Terms) (The Implied Terms together with the Reasonable Expenditure Requirement and the Alternate Reasonable Expenditure Requirement are referred to as the Implied Terms of Reasonableness, Competence and Value). 10. Expenditures by the plaintiff that did not satisfy the Implied Terms of Reasonableness, Competence and Value do not qualify as exploration expenditures under the Agreement. [Amendments underlined in original.] [18] The appellant concentrated on the 2007 expenditures, which were much higher than those for 2009 and said to produce results of lower quality. The appellant attributes this to the lack of expertise and general incompetence of the persons in charge of the drilling program. The judge summarized this position in his reasons: [132] The starting point is the fact that the 2007 exploration program, when compared to the 2009 exploration program, cost almost three times as much per metre drilled. Teuton says that if the 2007 program had been carried out at the same rate as the 2009 program, the aggregate expenditures would be reduced to approximately $4,238,000, comfortably below the $5,000,000 threshold the agreement required. [133] According to Teuton, this discrepancy was due to a number of factors that disentitle American Creek from claiming the full amount as 2007 exploration expenditures under the agreement. Further, submits Teuton, this discrepancy of itself provides evidence of significant imperfection in the Plaintiffs performance under the Option Agreement. [134] The first alleged deficiency is that the 2007 program was incompetently designed and carried out due to the lack of experience and competence on the part of the field manager, Brent Ambrose, and the head geologist, Mac Millard. Teuton contrasts this to the 2009 program, which was designed and supervised by a person it acknowledges to be a competent geologist, Raul Sanabria, who replaced Mr. Millard after the 2007 season. [135] The second is that American Creeks contractual relationship with Sean Pownall and his company, More Core Drilling, was impenetrable and, as I understand the submission, wanting in good faith. [136] The third is that the 2007 drilling program was designed and carried out for promotional purposes rather than exploration purposes based on scientific considerations; that is, to produce results that would look good in press releases, rather than results that would advance exploration for gold and silver. [137] The fourth is that the evidence produced by American Creek yields numerous examples of reckless overspending or inappropriate allocation indicating demonstrably imperfect performance by the plaintiff under the agreement. [19] The trial judge rejected the appellants argument that exploration expenditures must be interpreted as including a reasonableness standard or there was an implied term importing such a standard. The trial judge found that the contract intended exploration expenditures to mean expenditures approved by the Mineral Titles Branch. The judge accepted the respondents evidence that the expenditures in 2007, 2008 and 2009 satisfied these requirements of the agreement. As I will explain below, the trial judge made no legal error in this analysis and his interpretation of the contract deserves deference from this Court. [20] Mr. Cremonese appeared in-person as an officer of the appellant in this appeal, and his presentation of the appellants position went into considerable detail on the theme that the 2007 expenditures were wasteful and unproductive. I will not recite the many criticisms of the respondents 2007 performance because the trial judges interpretation of the agreement makes these criticisms largely irrelevant. Regardless, they were all put before the trial judge, and he dealt with them by finding that either the criticisms were unjustified in fact, or were based on standards not found in the agreement. Indeed, he found that the appellant failed to prove any industry standards against which to compare the respondents performance. [21] The question of the discrepancy in drilling costs between 2007 and 2009 was explained to the judges satisfaction by the respondents witnesses, which led him to observe: [154] In coming to this conclusion, I rely particularly upon the evidence of two witnesses whom I found to be candid, reliable and credible: Mr. Pownall of More Core Drilling, and Mr. Blaney of American Creek. Each provided testimony that I found compelling and which was untouched in cross-examination. As well, I was much impressed by the evidence of Mr. Ambrose. He was straight forward and made no attempt to skirt around uncomfortable issues. His evidence was consistent with documents produced at the time of the events in question, and I prefer it to the evidence of the witnesses called by Teuton where there is a conflict. [22] The judge similarly accepted the respondents explanation for the difference in helicopter costs between the two years, and found that in respect of the appellants myriad other complaints a long list they either related to a non-existent standard in the agreement or an unproven standard in the industry. [23] I will next explain why the judge committed no reversible error in construing the agreement. Contract Interpretation [24] In my opinion, the judges method in his approach to interpreting the agreement manifests no legal error. [25] The trial judge adverted to the correct relevant principles set out in Jardine v. General Hydrogen Corporation, 2007 BCSC 119, 68 B.C.L.R. (4th) 162 at para. 23, and to the compendious discussion of the basic rules of construction in Water Street Pictures Ltd. v. Forefront Releasing Inc., 2006 BCCA 459, 57 B.C.L.R. (4th) 212 at paras. 23-26. In short, his method was to discover the intention of the parties by examining the agreement as a whole within the factual matrix surrounding the making of the instrument. In the result, he found that the nature of the agreement was a unilateral option, with the obligation on the optionee to prove strict compliance with the terms a finding not in issue on appeal and that the expression exploration expenses was not intended to be modified by words connoting reasonableness or some variant of the concept as pleaded. [26] In arriving at the latter conclusion, the judge considered the following: (1) There was no expert evidence to establish any industry standard, such as reasonableness, as to the meaning of exploration expenditures. (2) Of the many option agreements the appellant made in the past, some had used qualifying terms such as reasonable in varying contexts, making their absence in this case particularly striking: at para. 78. (3) There was no ambiguity in the contested language; however, interpreting reasonableness into the agreement would create uncertainty. The judge reasoned as follows: [85] In this regard, I note that qualifying terms such as reasonable and productive of geoscientifically useful and reliable data import their own uncertainties. Reasonable from whose perspective? When? Useful to whom? For what? Reasonable in retrospect with the benefit of hindsight, or from the point of view of a reasonable person in the position of the party who incurred the expense given all of the circumstances at the time of the expenditure? Not only is there no evidence that such concepts were part of the parties agreement, there is no real possibility of attempting to discern what standard of reasonableness or degree of usefulness they might have contemplated, even though their agreement sets out conditions precedent. [86] This problem is amplified by the moving target created by the different positions Teuton has taken concerning the proper meaning of the term exploration expenditures as used in the earn-in agreement. It began with a lengthy definition set out in paragraph 7 of Teutons Response to Civil Claim, called the Reasonable Expenditure Requirement, supplemented by additional proposed meanings set out in paragraph 8, called the Alternate Reasonable Expenditure Requirement. To these were later added by amendment, in paragraph 9, 12 subparagraphs setting out alleged implied terms to the agreement, which, together with the Reasonable Expenditure Requirement and the Alternate Reasonable Expenditure Requirement were said to constitute the Implied Terms of Reasonableness, Competence and Value. By the end of the trial, these were pared down to paragraph 17 of the defendants closing argument: 17. The Defendant says that to qualify as exploration expenditures, funds spent by the plaintiff must have been spent with respect to the Treaty Creek Property, have been reasonable, and have been for services conducted or goods utilized in a fashion to produce reliable geoscientific data respecting the Treaty Creek Property. This, in turn, was supplemented by a paragraph 23 of the defendants closing argument: 23. The thrust of these terms is that exploration expenditures must relate to physical exploration of the Treaty Creek property, carried out reasonably, and taking into account the nature and extent of the property and indications of potential mineralization done in a competent fashion to produce reliable results. [27] The trial judge acknowledged that it was reasonable to presume the contract must have contemplated some limit on what constituted exploration expenditures, saying it would be commercially untenable for the respondent to [pay] a driller to drill repeated useless holes in an area where no mineralization has been found or is expected, simply to run up costs in order to reach the specified threshold: at para. 72. However, the trial judge also stressed that it would also be commercially unreasonable to expect the respondent to incur enormous expense without knowing its rights until it had undergone a retrospective forensic investigation of the sort undertaken in this case in order to prove the reasonableness of all expenses: at para. 73. [28] The judge went on to examine what, from the text and the factual matrix, he considered to be three clues as to what the parties intended. The first was in recognition of the appellants position that the parties must have contemplated some control on expenditures and, in that regard, the judge referred to clause 11 of the agreement, which gave the appellant the right to monitor the respondents exploration activities and to access all data associated with those activities. Second, as mentioned, the appellant did not stipulate the terms for which it later advocated. Third, in reference to clause 12 of the agreement, the respondent is responsible for all assessments with the Mineral Titles Branch, which led the judge to find: [90] This, considered in the context of the factual matrix existing when the agreement was made, makes it clear that both parties intended that the expenses incurred and the work performed by American Creek in its exploration activities would be detailed in assessment reports submitted to the chief gold commissioner pursuant to section 33 of the Act for the purpose of generating assessment credits to extend the rights to the mineral claims. [29] In conclusion, the judge found that exploration expenditures were expenses that (a) were actually incurred; (b) in good faith; (c) in connection with Treaty Creek; (d) in relation to exploration and development work within the meaning of the Mineral Tenure Act Regulation; and (e) were accepted as such by the Mineral Titles Branch and credited accordingly: at para. 117. [30] The judges analysis brought him to the point where he was satisfied that his interpretation reflected the objectives of the agreement as contemplated by the parties: (1) to extend the life of the appellants claims through filings of expenditures with the Mineral Titles Branch; (2) to protect the respondents value in its option; (3) to establish a level of scrutiny of the expenditures; and (4) to provide clear guidance to the respondent as to what it was expected to accomplish in order to complete the earn-in option. [31] I have gone on at some length in describing the path followed in the judges reasoning to demonstrate that the process was rational and in accordance with legal principles. In line with the Sattva decision, I would pay deference to the judges appreciation of the factual matrix and the meaning of the language in the agreement. The trial judge found that there was no prior custom or usage as to the phrase exploration expenditure, and he found that his interpretation provided the necessary baseline of business efficacy for the agreement: at para. 104. The trial judge therefore correctly declined to imply any additional terms into the agreement that were not expressly included: see M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 at para. 27; Moulton Contracting Ltd. v. British Columbia, 2015 BCCA 89 at para. 55. [32] And so, where it is submitted by the appellant that the judge ought not to have placed so much weight on the assessment reports because they are not audited, or that he wrongly disregarded National Instrument 43-101 [see 9(b) of the pleading at para. 17 of these reasons], or that he failed to appreciate the commercial necessity of importing a reasonableness standard, the arguments did not meet the test of showing palpable and overriding error. Consequently, the case must be adjudicated in accordance with the judges interpretation of the agreement. [33] Having found that the respondent had made out the prima facie case of compliance with the agreement, the judge turned to whether the appellant answered the case. [34] This leads to that part of the appeal which raises evidentiary errors enumerated in the appellants factum as follows: a) Excluding evidence from Teuton as to experience, industry practices, customs, and standards; b) Excluding admissible lay opinion; c) Misapplying the rule in Browne v. Dunn; d) Confusing admissibility with reliability of evidence of filings made with the Ministry of Mines and AMKs business records; e) Failing to identify and exclude opinion, as opposed to fact contained in the filings made with the Ministry of Mines and AMKs business records; and f) Excluding material, admissible parts of the expert report and evidence of Mr. Whitehead; [35] There is some overlap between evidence going to the meaning of the agreement and evidence going to the merits of the appellants position that the respondent failed to discharge the burden of proof of strict compliance with the condition that $5 million be spent on exploration expenditures. The judge found that the appellant failed to prove industry standards, either in relation to the meaning of exploration expenses or to any failure of the respondent to meet such standards in its exploration activities. [36] In my opinion, the trial judge made no reversible error, and I will quickly dispose of these grounds of appeal. [37] Issues (a) and (b) should be considered together as they both relate primarily to the testimony of Mr. Cremonese. In the course of his evidence, he wished to offer his opinion on a number of pertinent subjects, calling upon his many years of experience with mining exploration projects in the Stewart area. He was not qualified as an expert, and he filed no expert report as required by the Rules. The respondent objected to this aspect of his evidence. [38] In a separate ruling, the judge upheld the objection, but allowed Mr. Cremonese to proceed to cover the same ground in defence of the claim of punitive damages so that he could explain why the appellant could not transfer title when the respondent completed the earn-in. It was not received as expert opinion, given that it consisted of inferences going to the principal issues in the case. The following excerpts from the ruling (2013 BCSC 1042) explain the judges line of reasoning: [18] The evidence that [Mr. Cremoneses] counsel seeks to adduce does not consist of everyday inferences from observed facts which he, as the observer, was in a better position to make than I am because he was there. Rather, his evidence will concern matters of specialised, technical expertise upon which he proposes to comment on the basis of his review of documentation and reports, taking into account his own experience. Examples would include such important issues as the reasonableness of the cost of drilling carried out by the plaintiff, and whether certain drilling techniques were standard, or useful for the purpose of exploration. The experience that would equip him to make such comments is not common experience. Such evidence must come from a qualified expert if it is to be admissible as an opinion that can be relied upon by the trier of fact as evidence of the correct inference to be drawn. [19] Circumstances may arise in this case where it becomes relevant to know that Mr. Cremonese formed an opinion, and what that opinion was. This is particularly so given that punitive damages are claimed. I analogise from the hearsay rule. In most circumstances, hearsay evidence is not admissible to prove the truth of the hearsay assertion. It is invariably admissible, however, to prove that the hearsay statement was made, to the extent that it is relevant. Similarly, if it becomes relevant to know whether Mr. Cremonese formed an opinion at a particular time, and if so, what that opinion was, then he can give that testimony. But such evidence is under no circumstances admissible to prove the correctness of his opinion, including whether, in his experience, it constituted industry standards. Once again, that can only be accomplished through an independent expert. * * * [27] Mr. Cremonese may certainly tell me about his training and experience in the mining exploration and industry. He may not provide me with his views of what constituted industry norms and standards practices. The proper source for that evidence was Mr. Whitehead. Mr. Cremonese may tell me his observations and concerns regarding the plaintiffs programs, and he may tell me what conclusion he came to, but only to the extent of indicating what that conclusion was. It is not evidence of the inference that should be properly drawn by me from the same facts. [39] I agree with this reasoning. The appellant was not entitled to bypass the expert opinion rule, and the judge was right in holding the appellant to it. [40] Issue (c), regarding the rule in Browne v. Dunn (1893) 6 R. 67 (H.L.), was not pressed in argument before us, and was given little elaboration in the appellants factum. In short, I see no error by the trial judge in regards to this rule. [41] Issue (d) asserts that the judge confused admissibility with reliability of evidence of filings made with the Ministry of Energy and Mines and the respondents business records. [42] The assessment reports were admitted under s. 40 of the Evidence Act, R.S.B.C. 1996, c. 124, which reads as follows: For the purpose of a record kept by or a document filed with the chief gold commissioner or a gold commissioner under the Mineral Tenure Act, copies of or extracts from the record or document, certified as true copies or extracts by the chief gold commissioner or gold commissioner, must be received in a court in British Columbia as evidence of the matters contained in them. [43] The appellants argument, as I understand it, is that given that the expenditures are not subject to close scrutiny by the Mineral Titles Branch, along with the evidence of alleged incompetency and mismanagement by the respondents field personnel (especially in 2007), the contents of the assessment reports ought to have been attested to by witnesses as proper and reasonable. [44] The judge gave full effect to the provision of s. 40 and noted that the expenditures were also validated by the respondents business records proved in the ordinary course by appropriate witnesses: [113] This evidence was supported by the testimony of a number of witnesses, being Mr. Ambrose, Mr. Pownall, American Creeks president, Mr. Burton, its COO, Mr. Blaney, its CFO, Mr. Edwards, its bookkeeper, Ms. Trotman, and an expert in investigative forensic accounting, Mr. McEwen. [45] I can see no merit in the appellants argument concerning the reliability of the assessment reports. They were accepted as proof of their contents subject to challenge by the appellant, which did not succeed. [46] Similarly, I am unpersuaded that the trial judge made any error in considering the contents of the business records or filings argued in issue (e). [47] Finally, I will address issue (f), referring to the evidence of the expert, Mr. Whitehead, whom the judge described in a separate ruling on the admissibility of his report, as follows (2013 BCSC 2202): [5] Mr. Whitehead is a professional geologist and president of a drilling company that provided diamond drilling services in various parts of Canada between May 2005 and August 2007. He has nine years of experience in mineral exploration and has acted as a senior project geologist since 2004. The defendant notes his unique dual qualification as both a geologist and diamond driller, and further points out that Mr. Whitehead has not reviewed the documents in this case, which number in the tens of thousands, but is giving his opinion generally on applicable standards rather than commenting on what was actually done. Accordingly, the defendant seeks to tender this evidence for the purpose of providing a framework so that I will have some kind of benchmark against which to measure the plaintiffs performance. [48] The gist of the ruling was that the expert opined, not on industry standards, but on what he would have done in designing and operating an exploration program. Some aspects of his report and testimony were allowed; others were rejected on the basis that the views were beyond his expertise or could be covered factually through the testimony of witnesses who actually worked on the project. I have not been persuaded that the judge erred in dealing with Mr. Whiteheads evidence. [49] In summary, the appellant was not wrongly prevented from establishing industry standards and practices by the evidentiary rulings challenged on this appeal. Summary and Conclusion on Specific Performance [50] The trial judge applied the correct principles of contractual interpretation and came to the conclusion that the phrase exploration expenditures did not include any reasonableness standard, as alleged by the appellant, but was instead defined as expenditures made in good faith and approved by the Mineral Titles Branch. No further terms needed to be implied for purposes of business efficacy or custom. The trial judge then found that the respondent had met the evidentiary standard for showing compliance with the conditions of the agreement. [51] Substantial time was spent in this appeal reviewing the same evidence and arguments made at trial. In many ways, the appellant asked this Court to retry the case. It is not for this Court to conduct a second trial and compare our interpretations with those of the trial judge. The standard of palpable and overriding error is such that an error must be so obvious that it can be plainly seen; it does not require de novo review: Housen v. Nikolaisen, 2002 SCC 33 at paras. 5 and 6. The thorough analysis I have conducted in this case has led to the same inexorable result a summary review would have brought me to: there was no palpable and overriding error in the trial judges interpretation of the contract. [52] I would therefore dismiss the appeal on this ground. [53] I will now turn to a consideration of the appellants appeal on special costs. Special Costs [54] As mentioned previously, the judge found that certain online postings and Mr. Cremoneses false testimony on discovery were reprehensible conduct connected to the action, deserving of an award of special costs. Referring to the postings, which depicted the president and chief operating officer of the respondent and their wives, the judge wrote this in his reasons on costs: [74] But there are a number of features that, in my view, take the postings in question outside of [the area of business criticism]. They became very personal. They included photographs of the executives, far more threatening than mere words. They demeaned their wives. They included images of violence, both graphic and verbal. They played upon the sensibilities of the Mormon community in Alberta of which Mr. Burton and Mr. Blaney were members (one of Mr. Cremoneses bullboard aliases being Brigham_Old). [75] It is also important to note that although there was no evidence before me of what effect these postings had on Mr. Burton and Mr. Blaney, or on American Creek in general, there can be no doubt of the potential for such conduct to have a chilling effect on its victims, possibly discouraging their pursuit of their claim through the justice system. Moreover, Mr. Cremonese well knew that such postings could have a negative impact on American Creeks ability to raise capital. [76] When I add to this mix Mr. Cremoneses attempt on discovery to cover up his participation and that of Ms. Mullin in this conduct, I am satisfied that we have reached the level of reprehensibility that requires intervention to denounce the conduct through an award of at least partial special costs. [Emphasis added.] [55] The appellant alleges four errors in the judgment as to special costs. They are set out in the appellants supplementary factum as follows: POST-TRIAL AMENDMENTS The Judge erred in allowing AMK to amend, after the trial had been completed and evidence closed, its pleadings relating to punitive damages and special costs. The amendments included an application for special costs or other costs orders based thereon, including out of court expression alleged to be attributable to Teuton. [ii] DUPLICATION OF PROCEEDINGS The Judge erred in entertaining and subsequently granting a punitive award against Teuton in the form of special costs when the same conduct Teuton is being punished for is the subject of an ongoing, separate action in Alberta. [iii] FREEDOM OF SPEECH The judge erred in finding that the conduct in question was not protected under the Charter, and by failing to encompass and reflect Charter values in his assessment of the conduct in question. [iv] UNRELATED TO LITIGATION The judge erred in allowing AMK to bring the impugned postings into the action appealed from and in finding that the postings were sufficiently related to the proceeding, in as much as posing a risk to the integrity of his court. [56] The appellant also seeks to adduce fresh evidence on its appeal as to special costs. This is in the form of an affidavit sworn by Mr. Cremonese, which alleges that officers of the respondent engaged in improper dealings with the shares in the company, the same officers who were targeted by the postings. It also contained remarks attributed to Brent Ambrose, which cast aspersions at those officers. The relevance is said to affect the judges finding of reprehensibility. Mr. Cremonese puts the point this way in the appellants supplementary factum: 24. The trial judge may have changed his findings of reprehensibility had he had a chance to assess this fresh evidence, under the trite premise that one is allowed greater latitude in criticizing a rogue than an innocent. [57] It is an offensive and dangerous tactic to add to the insult that gave rise to the special costs in the first place. As established in Palmer v. The Queen, [1980] 1 S.C.R. 759 at 775, fresh evidence must be both relevant and timely in order to be adduced on appeal. This application fails the test of relevancy as it does not relate to the attempt to intimidate which lies at the basis of the costs order. Even if this fresh evidence were relevant, it is untimely as it could have been presented during the lengthy costs hearing. I would therefore reject the application for fresh evidence. [58] Regarding the appeal of the special costs order itself, this Court should only set aside a costs award if the trial judge made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para. 27. [59] I will now deal with each of the four grounds of appeal the appellant raises on the matter of special costs in turn. Post-trial Amendments [60] The appellant submits that it was prejudiced by the amendments to the notice of claim after the close of evidence to include special costs on the basis of the postings. The argument is that the appellant was caught by surprise and was thereby denied the opportunity to call responsive evidence. [61] The respondents answer, which I accept, is that because the subject matter came up on discovery and was raised again during trial, the appellant had to know that the respondent was making an issue of the postings and the appellant had ample opportunity to adduce whatever evidence it thought necessary to defend itself. In any event, the appellant was given the opportunity to call evidence during the costs hearing and did so. [62] I do not consider the appellant to have been prejudiced by the amendment process in this case, and I would not find this to be a ground for reversing the trial judges discretionary decision as to special costs. [ii] Duplication of Proceedings [63] The appellant objects to the possibility of being punished twice for the same wrong: in special costs in the present action and in damages for defamation in the Alberta action. [64] I would also reject this ground of appeal. There is no duplication. Special costs were ordered to punish reprehensible conduct in the course of an action for the purpose of upholding the integrity of the legal process. The damages, if any, awarded in the Alberta action would compensate for a private injury. Moreover, the quantum of the award in each action is calculated in entirely different ways. For example, the costs award was for a part only of the entire proceeding on a 44-day trial into a contract dispute, and was based on factors which would have nothing to do with defamation damages. The Alberta court would not have jurisdiction to make an award to punish an abuse of proceedings in British Columbia. [iii] Freedom of Speech [65] This is an unsupported attempt to invoke Charter values in defence of the postings. It was appropriately given no credence by the judge and it was not pressed by Mr. Cremonese in his oral presentation of the appeal. I would not accede to this ground. [iv] Unrelated to Litigation [66] Against the clear finding of the judge that the postings were an attempt to intimidate the respondents management into abandoning the litigation, the appellant argues that the attempt clearly failed, and so this is not the kind of case which warrants a sanction for egregious conduct. I reject this argument. As the respondent submitted, reprehensible conduct warranting special costs is rarely successful in affecting the outcome of litigation. Indeed that must be so, because if the intimidation had been successful, litigation would never move to a point where special costs could be awarded. The integrity of the litigation process must be protected against any overt attempt at subverting it. Conclusion on Special Costs [67] The judge correctly found reprehensible conduct related to the proceedings in ordering special costs, as is the standard laid out in Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740 (B.C.C.A). I would not accede to any of the appellants grounds for finding the award of special costs was in any way inappropriate. I would therefore dismiss the appeal on this ground. Special Costs on the Appeal [68] Finally, the respondent asks for special or increased costs on this appeal because of the conduct of the appellant in its appeal against costs by reason of the exacerbation of the harm caused by trying to show the respondents officers to be rogues. I would agree that the application to adduce fresh evidence in pursuit of this tactic was wrongheaded, but the application was rejected. While it was a waste of time, when measured against the totality of this long and complicated matter, it was only a minor addition to the case. I would not grant the respondent special or increased costs in this appeal. Summary of Conclusions [69] I would dismiss the appeal of the order for specific performance, and I would dismiss the appeal of the order for special costs. The Honourable Mr. Justice Donald I agree: The Honourable Madam Justice Saunders I agree: The Honourable Madam Justice Garson