We know Men of Straw
won't stand and fight for the rights of their shareholders.
Good Management teams do not give up. Courts do dispense justice.
https://www.courts.gov.bc.ca/jdb-txt/sc/90/04/s90-0423.htm
Mikado Resources Ltd
Symbol MKO
Shares Issued 7,733,192
Close 1991-11-25 $ 0.07
Recent Sedar Documents
Mikado reaches settlement with Dragoon
1991-12-02 16:51 ET - News Release
Also News Release (C-DGN) Dragoon Resources Ltd
Mr Richard J. Watson reports
A settlement with Dragoon Resources Ltd was reached with respect to litigation over the Ainsworth milling facility.
For 500,000 shares of Mikado Resources Ltd, Dragoon has transferred its 50% undivided interest in the Ainsworth mill facility to Mikado Resources Ltd. The companies have executed mutual releases of outstanding claims and all actions have been discontinued.
BTW Adobe: If it wasn't for the TSX interference in Golden Arch's and Silver Peak's affairs Mikado, now Silver Peak (in Bankruptcy)would still own this mill. As it stands, both Golden Arch and Silver Peak are out in the cold.
Furthermore, you can bet Golden Arch's problems are far from over. They are still insolvent, they are also facing a huge potential shareholder oppression claim. They are still faced with raising the 5-6,000,000 dollars that Bolero would have had to spend to earn 1/2 of Mildred Peak.
NO. A883196 VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
Re: Partition of Property Act,
R.S.B.C. 1979, c. 311 and the
Partition of Nelson Assessment Authority,
Lot 1, District Lots 214 and 603,
Kootenay District, Plan 5773
BETWEEN:
MIKADO RESOURCES LTD.
PETITIONER)
AND:
DRAGOON RESOURCES LIMITED
RESPONDENT)
REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE MACZKO
Counsel for the Petitioner: Stuart B. Hankinson, Esq.
Benedict S. Parkin, Esq.
Counsel for the Respondent: Irwin G. Nathanson, Esq., Q.C.
Date and Place of Hearing: February 27 & 28, 1990
Vancouver, British Columbia
This is an application for partition and sale of property
registered in the name of Mikado Resources Ltd. ("Mikado") and
Dragoon Resources Limited ("Dragoon") as tenants in common.
Dragoon defends on the basis that Mikado is not in fact the joint owner of the property and is wrongly on title, because the agreement to purchase the property is not enforceable as it amounts to an agreement to make a contract and no contract was ever made.
BACKGROUND
The property in question was owned by a company known as David minerals Ltd. which had gone into receivership. On November 3rd, 1986 the court ordered a sale of the property and a number of bids were received. Inspiration Management Ltd. ("Inspiration") was the successful bidder. Inspiration and Dragoon are controlled by the
same person, Mr. McGowan. Dragoon and Mikado are both mining companies and were interested in the property because it had on it
a mill, which was close to their mining properties. Canadian roundwood was a logging company that was interested in the timber rights on the property. Before completion of the sale to Inspiration one of the bidders, Canadian Roundwood, launched an appeal. Before the appeal could be heard the parties reached a settlement on the following terms:
1. The appeal would be abandoned.
2. Canadian Roundwood would obtain the timber rights to the subject property.
3. Mikado and Dragoon would each become one-half owners in tenants-in-common of the property and the mill.
Mikado, Inspiration and Dragoon entered into a written agreement dated November 15, 1986 which provided for Mikado to become a registered one-half owner of the property. As a result of this agreement the court order was changed to provide that a one-half interest would vest directly in the name of Mikado. On December 31st, 1986 title was obtained in the names of Dragoon and Mikado as tenants in common.
Mikado seeks partition of the property, however, Dragoon argues that Mikado is not a joint owner of the property because it's interest was subject to the written agreement, which is not enforceable because it contains a clause which provides for the parties to reach agreement on the operation of the mill and since agreement was not reached no part of the agreement was enforceable.
It argues that the purchase of the property is inextricably bound up with the other terms in the contract and because the parties could not agree on such matters as a buy and sell clause, the cost of milling and other terms, there was no enforceable contract, and
therefore the petitioner never became a one-half owner of the
property. Mikado argues that there were two agreements; one for
the purchase of the property and the mill, and the other for the
operation of the mill. The relevant clauses in the agreement
provide as follows:
Clause 2.1 provides,
"The vendor's covenant and agree that the vesting order obtained by the vendors from the Supreme Court of British Columbia in order to
facilitate the completion of the offer shall specify Mikado as being a party acquiring the Mikado interest."
The Mikado interest is defined as follows:
Clause C provides,
"The vendors have agreed to sell to Mikado an undivided one-half interest in and to the Ainsworth Mill in accordance with the terms and conditions hereinafter contained (which undivided one-half interest is hereinafter called the "Mikado" interest)."
"TRANSACTIONS TO BE COMPLETED AFTER CLOSING"
5.1 After the Closing Date but before the 28th day of November, 1986, the Vendors and Mikado covenant and agree as follows:
a) Mikado and Dragoon shall enter into a Co-owners Agreement that shall set out their respective rights and obligations with respect to the Ainsworth Mill which Co-owners Agreement shall contain a mutual efault option, a buy-sell option and a right of first refusal which said options and rights shall be on terms mutually acceptable to the parties. The said mutual default option, buy-sell option and right of first refusal shall be registered in the appropriate Land Title Office against the Lands forming part of the Ainsworth Mill;
(b) The Vendors and Mikado shall cause to be incorporated a new company (hereinafter referred to as "Newco") and Newco shall issue 50 common voting shares without par value to Robert J. McGowan, or his nominee, and 50 common voting shares to Richard Watson, or his nominee;
(c) Robert J. McGowan and Richard Watson shall be appointed as the sole directors of Newco and McGowan shall be elected as Chairman of the Board of Newco; and
(d) Dragoon, Mikado and Newco shall enter into an operating agreement which operating agreement shall provide that Newco shall manage and operate the Ainsworth Mill.
The parties never reached agreement on the matters set out in Clause 5. Counsel for Dragoon argues that recital Clause C makes Mikado's interest subject to the agreement, and because Clause 5 is in substance an agreement to agree, Mikado could not acquire an
interest in the property unless agreement was reached on the matter
set out in Clause 5.
The two questions raised by these facts are first, whether the conveyance of the property to Mikado was subject to agreement being reached on the matters set out in Clause 5 or whether Clause 5 is severable from the conveyance. Secondly, whether the petitioner is entitled to partition and sale.
In my view Clause 5 is severable from the agreement to convey the property.
In May & Butcher v. R. [1934] 2 K.B. 17n (H.L.) Lord Buckmaster said at page 20:
"It has long been a well recognized principle
of contract law that an agreement between two
parties to enter into an agreement in which
some critical part of the contract matter is
left undetermined is no contract at all. It
is of course perfectly possible for two people
to contract that they will sign a document
which contains all the relevant terms, but it
is not open to them to agree that they will in
the future agree upon a matter which is vital
to the arrangement between them and has not
yet been determined. "
The question therefore to be determined is whether the matters to be agreed upon in the future in Clause 5 were vital to the arrangement between these parties.
Both counsel admitted that they could not find a case directly on point. The petitioner relied heavily on Calvan Consolidated Oil
and Gas Co. Ltd. v. Manning (1959) 17 D.L.R. (2d) 1. In that case
the plaintiff and defendant each owned gas permits. They agreed
to exchange 20% of each other's permit and also agreed that there
would be an operating agreement to be mutually agreed upon at some
subsequent time, and if the parties could not agree then terms of
that agreement would be arbitrated. The Court held that "failure
of a term such as this would not invalidate the transfer of
property interest and the rest of the agreement, the terms of which
had been completely settled."
The Respondent referred me to the decision of our Court of Appeal in Boult Enterprises Ltd. v. Bissett [1986] 1 W.W.R. 385. In that case the parties entered into a contract where the defendant agreed to sell a piece of property to the plaintiff which property the plaintiff was to subdivide and then sell a lot back to the defendant for a fixed price and build the defendant a house upon the lot at a price to be determined. The plaintiff paid part of the money, subdivided the land and attempted to complete the deal. The defendant refused to transfer the property upon the balance of the price being tendered on the ground that the contract was unenforceable. The Court held that the agreement to agree on the price for the defendant's new house although it was a defect in the contract, it was not a matter vital to the arrangement between the parties.
Each of these cases demonstrates that although an agreement to agree is not a binding contract, where that part of the agreement is not essential to the completion of the balance of the contract it may be severed from the contract.
In my view in the present case, Clause 5 is severable from the agreement to convey the property and the written agreement reflects
that intention of the parties. The facts which lead me to that conclusion are as follows:
1. The agreement is drafted in a manner which leads me to
conclude that the parties intended the ownership of the
property and the mill to be separate and apart from the
operation of the mill. The title to Clause 5
"Transactions to be Completed on Closing" implies
that the property would be conveyed first and then the
parties would negotiate the terms of the operation of the
mill. The clause itself refers to co-owners and those
matters that the co-owners would negotiate.
2. Clause 3.1 refers to closing documents and defines them.
3.1 The Closing Documents shall consist of,
inter alia, a Form 23 Transfer Form pursuant
to the Land Title Act of British Columbia
transferring the Lands comprising the Ainsworth
Mill, namely Lot 1, Plan 5773, of District Lots
603 and 214, to Mikado, as to an undivided one-
half interest, and to Dragoon, as to an
undivided one-half interest, as tenants in
common, together with a Bill of Sale Absolute
transferring the Equipment and Chattels
described in Schedule "2" to Mikado, as to an
undivided one-half interest, and to Dragoon,
as to an undivided one-half interest. The
aforesaid Form 23 Transfer Form and Bill of
Sale Absolute shall specify that Mikado and
Dragoon shall take their respective interests
as Tenants in Common.
No mention is made of any documents which might arise from Clause 5.
3. Clause 3.2 provides for Mikado's solicitors to prepare
the form 23 Transfer and Bill of Sale Absolute, and again
no mention is made of the matters in Clause 5.
4. Clause 4.1 further reflects the view that the transfer
of property was separate and apart from Clause 5.
"4.1 Sales Tax
Mikado covenants and agrees to pay
on the Closing Date one-half of all sales tax
applicable to the transfer of the Ainsworth
Mill to Dragoon and/or to Dragoon and Mikado,
as the case may be, pursuant to the Vesting
Order and this Agreement, and Dragoon covenants
and agrees to pay one-half of all sales tax so
applicable. "
5. Mr. Bronk, the solicitor for Mikado at the time the
transaction was negotiated, gave evidence and stated that
he had Clause 2.2 inserted specifically to protect the
interests of Mikado because he had concluded that
Inspiration Management had nothing to sell. Mr. Bronk
realized that Inspiration did not have sufficient funds
to complete the transaction and required Mikado's money
to complete. In an effort to protect Mikado's interests
Mr. Bronk ensured that a one-half interest in the
property vested directly in the name of Mikado. The
parties were in a hurry to complete the transaction
because there was fear that other bidders would jump in
and the property would be lost. It was therefore agreed
that the property part of the transaction would be
completed and there was a separate agreement to agree on
the matters contained in Clause 5. The property in fact
vested directly in the name of Mikado which paid
$143,875.00 as half the purchase price directly to the
trustee.
6. After the transaction Mr. McGowan, the operator of
Dragoon, behaved as though he thought Mikado was a one-
half owner of the property. Part of the agreement was
that Mikado would pay one-half the cost of rehabilitation
of the mill and that the costs would be properly
documented. Mikado paid $60,000.00 towards the
rehabilitation which was originally estimated to be a
total of $25,000.00 and would take about 6 months. In
fact, Mikado was billed for $566,000.00 and the project
took 16 months. The parties got into a dispute over the
cost of rehabilitating the mill and negotiations broke
down. It was clear that Dragoon was charging Mikado for
costs which were not attributable to the rehabilitation
of the mill.
7. In his discovery Mr. McGowan agreed that the mill
would be owned one-half by Mikado and one-half by
Dragoon, and that he would be the operator of the mill.
He also stated "They would go on the vesting order."
They - referring to Mikado.
On balance a reasonable interpretation of the agreement is
that the parties contemplated joint ownership of the property and
the mill, with the operation to be agreed upon later. The Petitioner therefore became an owner of an undivided one-half interest in the property as a Tenant in Common.
The second question is whether the petitioner is entitled to
partition and sale of the property. Pursuant to Section 2 of the
Partition of Property Act, R.S.B.C. 1979 c. 311, "All joint
tenants, tenants in common ... may be compelled to make or suffer
partition or sale of the land..." In Vista Homes Limited v. Taplow
Financial Limited and McGregor (1985) 64 B.C.L.R. 291 Madam Justice
McLachlin, as she then was, said:
"The law establishes that a co-tenant has a
prima facie right to have the joint tenancy
severed and the property sold regardless of
the wishes of the other co-tenant, subject to
the overriding discretion of the court to
refuse to permit the sale where justice so
requires."
In coming to my finding that the petitioner is entitled to partition and sale I have considered all of the relevant
circumstances including the evidence of the value of the asset to
the respondent as far as its asset base and the current operating
status of the mill.
It is clear from the agreement and the facts of this case that
the parties were running a risk in that if agreement were not
reached they would end up in a partition action. It was reasonable
for them to run that risk considering the speed with which the
transaction had to be completed.
I can find no prejudice to the respondent which would justify
my denying the petitioner's application.
I therefore order partition of the property.
Costs follow the event.
F. Maczko, J.
Vancouver, British Columbia
April 10, 1990