arkerville sues Callaghan over confidential data
2017-10-19 20:31 ET - Street Wire
by Mike Caswell
Barkerville Gold Mines Ltd. has filed a lawsuit in the Supreme Court of British Columbia against its former president, Frank Callaghan. The suit claims that he and an associate used confidential information to stake a piece of ground located near the company's property. He then offered to sell that ground to Barkerville, the suit states.
The accusations from Barkerville come over two years after Mr. Callaghan left the company amidst an investigation by the B.C. Securities Commission. The regulator cited him for a massive overstatement of Barkerville's resources. To settle the case, Mr. Callaghan agreed to pay $30,000 and to serve a one-year officer and director ban.
Details of the lawsuit are contained in a notice of claim that Barkerville filed at the Vancouver courthouse on Oct. 16, 2017. The defendants include Mr. Callaghan and a former Barkerville contractor named Angelique Justason. Also named is Mr. Callaghan's private company, Standard Drilling & Engineering Services Ltd.
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| BARKERVILLE GOLD MINES |
| Frank Callaghan |
The lawsuit centres on events that occurred after Mr. Callaghan left Barkerville. According to the suit, around that time the company had a contract with a private entity controlled by Ms. Justason. She had been preparing a technical report, but failed to deliver that report, the suit states. Barkerville claims that as a result it terminated Ms. Justason's contract, and asked her to return the company's confidential data. Despite multiple requests, she refused to do so, the suit states.
Instead of returning the data, Ms. Justason began working with Mr. Callaghan, the company contends. (The lawsuit also states that the two had a business and personal relationship, without elaborating.) The two sought to identify and acquire mining claims that were "within the scope" of Barkerville's property, according to the suit. Barkerville says that the confidential information in Ms. Justason's possession showed that the company had an interest in a particular piece of ground. Mr. Callaghan was also aware of the ground from his time as CEO, Barkerville contends. According to the suit, Ms. Justason staked a claim on that ground.
"The potential acquisition of the Mineral Tenure was viewed as a lucrative and important business opportunity for BGM. Justason and Callaghan were aware of the value of this opportunity for BGM, and of BGM's interest in the Mineral Tenure," the suit states. They also knew that the information they possessed was confidential, Barkerville claims.
According to the suit, Barkerville learned that Ms. Justason had staked the ground in June, 2017. The company says that its lawyer sent her a letter demanding that she relinquish the claim and that she return the company's confidential information. Instead of complying, Ms. Justason transferred the claim to Mr. Callaghan's company, Standard Drilling, the suit states.
Barkerville claims that Mr. Callaghan offered to sell the ground to the company. He did so while he had a fiduciary duty to Barkerville, the suit states. "Callaghan failed to meet the general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest that was required of him as a fiduciary to BGM," the company says.
The suit seeks a court order that would effectively transfer the disputed claim to Barkerville. The company is also seeking the court-ordered return of its confidential information. Alternatively, Barkerville is asking for damages totalling $2.75-million. Vancouver lawyer Allan Wu of Bennett Jones LLP filed the suit on behalf of Barkerville.
Mr. Callaghan and Ms. Justason have not yet filed a response. For Mr. Callaghan, the lawsuit comes after he spent 23 years running Barkerville and its predecessor companies. His tenure with the company ended after a controversial June 28, 2012, news release.
That release reported that the company had a massive 10.6 million ounces of gold indicated, plus the potential for as many as 65 million to 90 million ounces in the same trend. If the figures had been correct, the discovery would have been one of the largest gold finds in mining history. The news sent the stock to $1.60. It had been trading between 45 and 80 cents in the weeks prior.
Unfortunately for shareholders, the BCSC quickly became interested. The regulator issued a cease trade order against Barkerville and required the company to restate the resource. On June 18, 2013, Barkerville published revised figures, in the process substantially reducing the size of the resource. The company said that its indicated resource was 1.04 million ounces, about one-10th of the original estimate. It also cut the potential size of exploration targets in the area to between nine million and 27 million ounces.
The controversy led to Mr. Callaghan's resignation from Barkerville, and the eventual sanctions from the BCSC. Mr. Callaghan no longer appears to be an officer or director of any TSX Venture Exchange company, but he is a shareholder in Blind Creek Resources Ltd., owning 41.54 per cent of that company's 22.5 million shares.
Barkerville remains active on the TSX-V, closing at 74 cents Thursday.
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