COURT OF APPEAL FOR ONTARIO

CITATION: Third Eye Capital Corporation v. Ressources Dianor
    Inc./

Dianor Resources Inc., 2018 ONCA 253

DATE: 20180315

DOCKET: C62925 (M47498)

Pepall, Lauwers and Huscroft JJ.A.

Application under section 243 of the
Bankruptcy
    and Insolvency Act
, R.S.C. 1985, c. B-3,

and section 101 of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43.

BETWEEN

Third Eye Capital
    Corporation

Applicant

(
Respondent
)

and

Ressources Dianor Inc./Dianor Resources Inc.

Respondent

(Respondent)

Daniel J. Matson and Roderick W. Johansen, for the
    appellant, 2350614 Ontario Inc.

Shara N. Roy, for the respondent Third Eye Capital
    Corporation

Dylan Chochla, for the receiver of Dianor Resources
    Inc., Richter Advisory Group Inc.

Delna Contractor, for the monitor of Essar Steel Algoma
    Inc., Ernst & Young Inc.

Heard: May 23, 2017

On appeal from the order of Justice Frank J.C. Newbould of
    the Superior Court of Justice, dated October 5, 2016, with reasons reported at
    2016 ONSC 6086.

Lauwers J.A.:

A.

THE CONTEXT OF THE APPEAL

[1]

Dianor Resources Inc. was insolvent. At the request of the respondent,
    Third Eye Capital Corporation as a lender, the court appointed a receiver under
    s. 243 of the
Bankruptcy and Insolvency Act
, R.S.C. 1985, c. B-3 (
BIA
),
and s. 101 of the
Courts of
    Justice Act
, R.S.O. 1990 c. C.43 (
CJA
), over the assets,
    undertakings, and property of the debtor, Dianor
[1]
.

[2]

Dianors main asset was a group of mining claims. The claims with which
    this appeal is concerned were subject to, among other things, a Gross
    Overriding Royalty (GOR) in favour of a company from which the appellant,
    2350614 Ontario Inc. (235Co), had acquired the royalty rights. Notices of the
    agreements granting the GORs were registered on title to the surface rights and
    the mining rights.

[3]

The supervising judge made an order approving a bid process for the sale
    of Dianors mining claims. It generated two bids, both containing a condition
    that the GORs be terminated or significantly reduced. Third Eye was the
    successful bidder.

[4]

At the request of the receiver, the motion judge approved the sale of
    the mining claims to Third Eye and granted a vesting order that purported to
    extinguish the GORs.  235 did not oppose the sale but asked that the property
    vested in Third Eye be subject to the GORs.

[5]

The motion judge rejected the appellants argument that the claims would
    continue to be subject to the GORs after their transfer to Third Eye. He held,
    at para. 30: that the GORs do not run with the land or grant the holder
    of the GORs an interest in the lands over which Dianor holds the mineral
    rights. The motion judge also held, at para. 38, that ss. 11(2), 100, and 101
    of the
CJA
, gave him the jurisdiction to grant a vesting order of the
    assets to be sold to Third Eye on such terms as are just including the
    authority to dispense with the royalty rights. He found the experts valuation
    of the royalty rights to be fair and added, at para. 39:

In my view, it is appropriate and just that a vesting order in
    the usual terms be granted to Third Eye on the condition that $250,000 be paid
    to 235Co. or whatever entity Mr. Leadbetter directs the payment to be made.
    That is higher than the mid-point of the range of values determined by Dr.
    Roscoe.

[6]

The receiver paid this amount to 235Co. The funds are being held in
    trust pending the outcome of this appeal.

[7]

235Co also brought a cross-motion claiming payment for a debt owing
    under the
Repair and Storage Liens Act
, R.S.O. 1990, c. R.25. The
    motion judge dismissed the cross-motion.

[8]

In this appeal, 235Co seeks to set aside the order of the motion judge and
    to obtain an order that 235Cos GORs constitute a interests in land, along with
    consequential relief. Third Eye moved for an order quashing 235Cos Notice of
    Appeal on the basis that the appeal is moot because 235Co did not seek a stay
    of the vesting order, which operated to extinguish the GORs when it was
    registered on title.  Furthermore, the variation 235Co seeks to the vesting
    order is unavailable as the subject transaction was predicated on the
    elimination of the GORs.

[9]

For the reasons that follow, it would be premature to quash the appeal.
    I would hold that 235Cos GORs constitute an interest in land, but I would
    require additional submissions on whether the motion judge had jurisdiction to
    vest out 235Cos GORs in the sale to Third Eye, and if not, whether 235Co is
    entitled to a remedy. I would dismiss 235Cos appeal with respect to the lien
    claim.

B.

Overview of these Reasons

[10]

The
    preliminary issue raised by Third Eye is whether registration of the vesting
    order on title had the legal effect of rendering the appeal moot.

[11]

The
    central issue in this case is whether the GORs constitute interests in land
    within the meaning of the law outlined by the Supreme Court in
Bank of
    Montreal v. Dynex Petroleum Ltd.
, 2002 SCC 7, [2002] 1 S.C.R. 146. I
    conclude that the GORs are interests in land, contrary to the holding of the
    motion judge.

[12]

This
    gives rise to the related issue: if the claims are subject to the GORs, did the
    motion judge have jurisdiction to vest out the GORs?

[13]

If
    the motion judge had jurisdiction to vest out the GORs, then 235Co is not entitled
    to a remedy. But if he lacked this jurisdiction, then 235Co might be entitled
    to a remedy, including a possible remedy under the
Land Titles Act
, R.S.O.
    1990, c. L.5 (
LTA
). Because neither the issue of jurisdiction nor of
    remedy was adequately argued by the parties in their factums or in oral
    argument, I would require additional submissions on the issues specified below,
    especially since they are of considerable importance to the insolvency
    practice.

[14]

Finally,
    I conclude that 235Co, as the purported owner of the surface rights, is not
    entitled to a storers lien in respect of Dianors surface works. I would
    dismiss the appeal on the lien claim for the reasons given by the motion judge
    and will not address it further.

[15]

I
    address, first, Third Eyes motion to quash the appeal and then address the
    remaining issues in sequence.

C.

The First Issue: Is The Appeal Moot?

[16]

The
    appellant did not seek a stay of the vesting order pending appeal before the
    vesting order was registered on title, although it could have done so on a
    timely basis. Generally, a vesting order cannot be attacked on appeal unless a
    stay order has been obtained: Lloyd W. Houlden, Geoffrey B. Morawetz &
    Janis P. Sarra,
Bankruptcy and Insolvency Law of Canada
, 4th ed.
    (Toronto: Carswell, 2009), at Part XI, L§21.

[17]

Third
    Eye submits that the appeal is moot because the vesting order was spent when
    it was registered, relying in part on
Regal Constellation Hotel Ltd., Re
(2004), 71 O.R. (3d) 355 (C.A.). In that case, a hotel was placed into
    receivership. The receiver found a purchaser. The court approved the sale and
    granted a vesting order in favour of the purchaser. A few days later, the sole
    shareholder of the company that operated the hotel discovered information about
    the identity of the group behind the purchaser. This was relevant because the
    group had previously entered into agreements to purchase the hotel for more
    money, but the transactions had failed to close. The sole shareholder sought to
    set aside the vesting order on the basis that the receiver had failed to
    disclose the identity of the group behind the purchaser.

[18]

This
    court quashed the appeal in
Regal Constellation
as moot. The
    conditions attached to the vesting order had been met and the vesting order
    (and the banks mortgage) had been registered on title. Justice Blair stated,
    at para. 39:

Once a vesting order that has not been stayed is registered on
    title , it is effective as a registered instrument and its characteristics as
    an order are, in my view, overtaken by its characteristics as a registered
    conveyance on title. In a way somewhat analogous to the merger of an agreement
    of purchase and sale into the deed on the closing of a real estate transaction,
    the character of a vesting order as an "order" is merged into the
    instrument of conveyance it becomes on registration. It cannot be attacked
    except by means that apply to any other instrument transferring absolute title
    and registered under the land titles system. Those means no longer include an
    attempt to impeach the vesting order by way of appeal from the order granting
    it because, as an order, its effect is spent. Any such appeal would accordingly
    be moot.

[19]

Where
    no stay is obtained and the order has been registered, innocent third parties
    are entitled to rely upon that change [in title], as Blair J.A. noted, at
    para. 45 of
Regal Constellation
. Accordingly, the respondent argues
    that this appeal is moot.

[20]

It
    cannot be said that the appeal is moot in the particular circumstances of this
    case. The order is spent, but the remedy for rectification under the
LTA
,
    left open by Blair J.A. in
Regal Constellation
, may be available to
    the appellant, provided that several conditions are met: (1) the motion judge
    had no jurisdiction to vest out the GORs; (2) no innocent third party has relied
    on the title to its detriment; and (3) the appellant is otherwise entitled to
    the remedy.

[21]

Additional
    submissions are required. In particular, because I conclude the GORs are
    interests in land, does the fact that Third Eye had notice of 235Cos claim
    affect the application of
Regal Constellation
? Third Eye was aware
    that 235Co was considering an appeal on the day of (but prior to) the closing
    of the transaction.

[22]

Blair
    J.A.s observation in
Regal Constellation
, at para. 49 was: These
    matters ought not to be determined on the basis that the race is to the
    swiftest. Was it appropriate for the court-appointed receiver to close the
    transaction before the expiry of the appeal period, having been advised that an
    appeal could be launched, and how does this affect the availability of a
    remedy?

[23]

As
    Blair J.A. recognized, vesting orders have a dual character as both a court
    order and a conveyance. Once an order is registered on title, it is effective
    as a registered instrument and has lost its character as an order. However, in
    my view, this does not mean that 235Co is necessarily without a remedy, if the
    GORs constitute interests in land. As Blair J.A. noted in
Regal
    Constellation
, the vesting order cannot be attacked except by means that
    apply to any other instrument transferring absolute title and registered under
    the land titles system: at para. 39. If the GORs are interests in land, then
    the appellants remedy is to be found under the
LTA.
In these
    circumstances, it would be premature to quash the appeal. It is to the issue of
    the nature of the interest that I now turn.

D.

The SECOND ISSUE: Are the GORs interests in land?

[24]

As
    noted, I conclude that the GORs are interests in land, contrary to the holding
    of the motion judge. In this section of the reasons, I first set out the facts
    relevant to the issue, then discuss the governing legal principles, the motion
    judges reasons, and finally, the proper application of the governing
    principles.

(1)

The Facts Relevant to
    the GORs

[25]

The
    facts relevant to this issue are set out in the motion judges decision at
    paras. 4, 5, and 17-22, which I paraphrase. Dianor's assets consisted mainly of
    certain mining claims in Ontario and Quebec, both patented and unpatented. The
    asset sale to Third Eye covered only the Ontario assets.

[26]

Dianor
    obtained the mining rights under a Crown Land Agreement and a Patented Land
    Agreement made with 3814793 Ontario Inc., a company controlled by Mr.
    Leadbetter and his wife Paulette A. Mousseau-Leadbetter. The terms of the Crown
    Land Agreement and the Patented Land Agreement, both dated August 25, 2008,
    govern. The relevant terms in each are virtually identical:

Once the Optionee [Dianor] becomes the owner of a one hundred
    percent (100%) undivided interest in the Mining Claims, the Optionors [now
    235Co] shall retain a twenty percent (20%) Gross Overriding Royalty ('GOR') for
    diamonds and a one and a half percent (1.5%) gross overriding royalty (GOR) for
    all other metals and minerals as calculated in accordance with Schedule 'A'.
    The Optionee shall have the right of first refusal to purchase the Optionors'
    GOR.

[27]

The
    Crown Land Agreement and the Patented Land Agreement state that the parties
    intend the GORs to create an interest in and to run with the land:

4.1. It is the intent of the parties hereto that the GOR shall
    constitute a covenant and an interest in land running with the Property and the
    Mining Claims and all successions thereof or leases or other tenures which may
    replace them, whether created privately or through governmental action, and
    including, without limitation, any leasehold interest.

[28]

Notices
    of the GORs were registered on title to the patented lands under s. 71 of
    the
LTA
and on the unpatented mining claims under the
Mining Act
,
    R.S.O. 1990, c. M.14. The parties did not treat the fact that 235Co came to
    hold the GORs as a live issue.

[29]

I
    turn now to the governing legal principles.

(2)

The Governing
    Principles

[30]

The
    ruling precedent is the decision of the Supreme Court of Canada in
Dynex
,
    which changed the common law to permit a GOR to achieve status as an interest
    in land. I begin with a review of the common law before
Dynex
and the
    challenges it posed to mining in Canada, then consider how the court responded
    to the commercial realities of the mining industry in
Dynex
.

(a)

The common law before
Dynex

[31]

At
    common law, rights in relation to land are divided into corporeal and
    incorporeal hereditaments: Bruce H. Ziff,
Principles of Property Law
, 6th
    ed. (Toronto: Carswell, 2014), at p. 76. A corporeal hereditament is an
    interest in land that is capable of being held in possession, such as a fee
    simple. An incorporeal hereditament is an interest in land that is non-possessory
    such as easements,
profits à prendre
, and rent charges. Under each
    type of incorporeal hereditament, the holder has an interest in land.

[32]

Mining
    rights derived from the owner of the mineral estate are generally treated by
    the common law as
profits à prendre
,
depending on the words of grant. A
profit à prendre
is a real
    property interest entitling the holder to acquire some natural resource on land
    belonging to another:
Ziff
, at
    p. 321. More specifically, it is a right to take something from the land of
    another. And it must be literally from the land. The right must be to take  part
    of the land itself, e.g., minerals: Andrew Burrows, ed.,
English Private
    Law
, 3rd ed. (Oxford: Oxford University Press, 2013), at s. 4.96.

[33]

To
    constitute a
profit à prendre
, a party must be granted the right to
    enter the lands of another and to exploit a natural resource:
Ziff
, at p. 399. See also, Alicia
    K. Quesnel,
Modernizing the Property Laws that Bind Us: Challenging
    Traditional Property Law Concepts Unsuited to the Realities of the Oil and Gas
    Industry
 (2003) 41 Alta. L. Rev. 159, at pp. 172-173.

[34]

The
    Supreme Court stated in
Dynex
, at para. 21: A royalty which is an
    interest in land may be created from an incorporeal hereditament such as a
    working interest or a
profit à prendre
. A working interest is a
profit
    à prendre
and is a right given by the fee owner (often the Crown) to a
    miner to enter the owners land and extract minerals or resources from the
    property. The Court of Appeal of Alberta has stated:

[T]he law is clear that a "working interest" in
    relation to mineral substances
in situ
is a particular kind
    of property right or interest in land. When the owner of minerals
in
    situ
(the Crown in this case) leases the right to extract these
    minerals , the right to extract is known as a "working interest" .
    This particular kind of interest in land is also commonly called a "
profit
    à prendre
", which allows a party to enter land and take a resource
    for profit.

IFP
    Technologies (Canada) Inc. v. EnCana Midstream and Marketing
, 2017
    ABCA 157, 53 Alta. L.R. (6th) 96, at para. 98, leave to appeal filed, [2017]
    S.C.C.A. No. 303.

[35]

At
    common law prior to
Dynex
, if a party did not have the right to enter
    and to extract a resource from the land, then it did not have a
profit à
    prendre
and did not have an interest in land  regardless of the parties
    intentions. Moreover, as the Supreme Court noted in
Dynex
, at para. 8:
    At common law, an interest in land could issue from a corporeal hereditament
    but not from an incorporeal hereditament. On this logic, the right to a
    payment or to profits was not itself a
profit à prendre
, and a royalty
    right contractually carved out of a working interest could not confer an
    interest in land. Further, as Quesnel observed, once the subject-matter of the
    grant [e.g., minerals] is extracted from the ground and in possession, it
    becomes personal property. The right  does not run with the subject-matter
    of the grant after it has been [extracted] and reduced to possession: at p.
    173.

[36]

To
    sum up the common law, the right to take resources from another persons land
    is a
profit à prendre
and is recognized as an interest in land.
    However, the right to a payment or to profits alone is not a
profit à
    prendre
and was not historically recognized as an interest in land.

[37]

Because
    an interest in land could not be granted out of an incorporeal hereditament,
    the common law posed commercial challenges to holders of working interests who
    needed to secure financing sources to allow for the exploitation of mining
    rights:
Quesnel
, at pp. 173-175.

(b)

The practice in mining before
Dynex

[38]

Working
    interests are common in the mining, oil, and gas industries of Canada and play
    an important role in the Canadian economy. Resource extraction is a risky
    business; ventures in resource extraction require huge amounts of capital but
    only a small fraction are successful, as the Court of Appeal of Alberta observed
    in
Bank of Montreal v. Dynex Petroleum Ltd.
, 1999 ABCA 363, [2000] 2
    W.W.R. 693, at para. 35.

[39]

Royalty
    agreements are one method used in the industry to provide incentives to key
    participants such as geological surveyors or drilling companies, or to those
    selling the claims, as in this case. In granting a GOR, the working interest
    holder grants royalty rights to a third party. These royalty rights are
    generally granted out of the lessees working interest. The royalty amount is
    not tied to the profitability of the mine. Third parties who obtain royalty
    rights do not own the working interest or
profit à prendre
and have no
    independent ownership interest in the land.

[40]

As
    the Court of Appeal of Alberta noted in
Dynex
, it became industry
    practice to draft contracts with the intention of granting royalty holders an
    interest in land because it was commercially and practically expedient to do so.
    Key participants often prefer an interest in land rather than a contractual
    right against the lessee because this allows investments in a particular piece
    of property, not in a particular operator or company. ... The investment return
    on a royalty results from the success of the property regardless of who owns or
    is working the property, as the Court of Appeal of Alberta explained in
Dynex
,
    (at para. 36).

[41]

Interests
    in land provide incentives to key participants, mitigate financial risks, and
    provide better financing terms. As the Alberta Court of Appeal observed in
Dynex
,
    interests in land provide key participants with exposure to a potentially
    significant upside if the venture is successful. Granting such an interest as a
    form of compensation reduces the amount of initial capital necessary to fund a
    new venture. This allows the working interest holder to reduce its own exposure
    to loss and thereby spreads risk among key participants. Providing lenders with
    real property interests protects them in the event of an insolvency and leads
    to better financing terms for borrowers. The Court, endorsing an industry
    commentators view, explained at para. 43:

[T]he law should provide a framework within which unnecessary
    risks for those who invest or participate in oil and gas operations are
    removed. The oil and gas industry has created new devices to meet the high
    risks of the enterprise. Included among the new devices are non-operating
    interests which are used to make the sharing of the benefits of mineral
    ownership definite and certain, minimize taxes, make clear delegation of
    operating rights and make proper allocation of the risks and rewards of an
    operation without invoking many objectionable features associated with creating
    a conventional business association. Non-operating interests include royalty
    interests, overriding royalty interests, production payments, net profit
    interests and carried interests.

[42]

Consequently,
    for practical and commercial reasons, even before
Dynex
, parties often
    drafted royalty agreements with the intention of granting the royalty holder an
    interest in land rather than a contractual right against the lessee. See Nigel
    Bankes
,
Private Royalty Issues: A
    Canadian Viewpoint
,
Private Oil & Gas Royalties, Rocky
    Mountain Mineral Law Foundation, February 2003, at p. 21.
[2]

[43]

In
Dynex
, the Supreme Court quite deliberately changed the common law in
    response to these commercial realities.

(c)

Dynex
and changes to the common law

[44]

In
    a nutshell, as I will explain more fully below, the Supreme Court in
Dynex
changed the common law of Canada for express policy reasons in order to permit
    a royalty interest, including a GOR, to become an interest in land, consistent
    with the industry practice. In this section of the reasons, I set out the facts
    in
Dynex
, and then review the reasons of the Court of Appeal of Alberta
    and the Supreme Court.

(i)

The facts in
Dynex

[45]

Dynex
    Petroleum had granted an overriding royalty on the net profit interests from
    its oil and gas properties to Enchant Resources Ltd. and an individual. The royalty
    interests were recorded on the title to the oil and gas properties by means of
    caveat. The Bank of Montreal was a secured creditor and wanted to sell the oil
    and gas properties free of the royalty interests of Enchant Resources and the
    individual. The motion judge ruled that the Bank could sell the properties free
    of the royalty interests.

(ii)

The Ruling of the Court of Appeal of Alberta in
Dynex

[46]

The
    Court of Appeal of Alberta decided that the royalty interest could be an
    interest in land despite the common law rule that an incorporeal hereditament
    could not give rise to an interest in land.
[3]
The Court adopted the dissenting reasons of Laskin J. (as he then was) in
Saskatchewan
    Minerals v. Keyes
, [1972] S.C.R. 703, at p. 725, who held that a royalty
    interest could be an interest in land if the parties so intended. The parties
    intent could be inferred from a number of factors, which the Court addressed at
    paras. 84 and 85.

[47]

I
    make two observations. First, the Court of Appeal of Alberta took a practical
    view, approving the approach taken in two lower court decisions:
Canco Oil
    & Gas Ltd. v. Saskatchewan
(1991), 89 Sask. R. 37 (Q.B.); and
Scurry-Rainbow
    Oil Ltd. v. Galloway Estate
, [1993] 4 W.W.R. 454 (Alta. Q.B.); affd 1994
    ABCA 313, [1995] 1 W.W.R. 316; leave to appeal refused, [1994] S.C.C.A. No.
    475. The Court noted, at para. 73:

The approach of both Matheson J. in
Canco
and Hunt J.
    in
Scurry-Rainbow
was to
examine the parties'
    intentions from the agreement as a whole, along with the surrounding
    circumstances, as opposed to searching for some magic words
. Matheson J.
    stated at p. 47:

. . . The fact that Farmers Mutual did not utilize all of
    the wording, or type of wording considered by some persons as perhaps
    essential, can surely not detract from an otherwise clearly manifested
    intention to create an interest in the lands.

And according to Hunt J. in
Scurry-Rainbow
, at p. 474:

There is in my view an unreality about placing too heavy an
    emphasis upon fine distinctions as the selection of words such as
    "in" rather than "on". Notwithstanding the significance
    that the courts have sometimes attached to these word choices, I doubt that
    parties who signed leases . . . should be taken to have intended to create an
    interest in land as opposed to a contractual right, as a result of such
    minuscule differences in language. . . .
Rather, it is more appropriate to
    consider the substance of the transaction (namely, what were the parties
    actually trying to achieve?) and to regard the words they have used from that
    perspective
. [Emphasis added.]

[48]

Second,
    the Court of Appeal rooted its reasons in the practices and the exigencies of
    the oil and gas industry, as outlined above. At para. 29, the Court
    specifically endorsed the view of Hunt J. (as she then was), in
Scurry-Rainbow
that: too rigid a reliance on common law principles that have developed in
    vastly different circumstances can lead to results that are out of touch with
    the realities of the industry and that deviate from the sorts of solutions
    needed by the affected parties.

(iii)

The Supreme Courts Ruling in
Dynex

[49]

The
    Supreme Court recognized it was required to resolve a controversy that pitted
    an ancient common law rule against a common practice in the oil and gas
    industry, in the words of Major J., at para. 4.

[50]

Justice
    Major summarized the Courts decision, at para. 21:

In this appeal, to clarify the status of overriding royalties,
    the prohibition of the creation of an interest in land from an incorporeal
    hereditament is inapplicable. A royalty which is an interest in land may be
    created from an incorporeal hereditament such as a working interest or a
profit
    à prendre
, if that is the intention of the parties.

[51]

He
    adopted the view, at para. 22, that Canadian common law should recognize that a
    "royalty interest" or an "overriding royalty interest" can
    be an interest in land if:

1) the language used in describing the interest is sufficiently
    precise to show that the parties intended the royalty to be a grant of an
    interest in land, rather than a contractual right to a portion of the oil and
    gas substances recovered from the land; and

2) the interest, out of which the royalty is carved, is itself
    an interest in land.

[52]

The
    Supreme Court knew that its ruling changed the common law and cited, at para.
    20, the principles for doing so, expressed in
Friedmann Equity Developments
    Inc. v. Final Note Ltd.
, 2000 SCC 34, [2000] 1 S.C.R. 842, at
    para. 42: to keep the common law in step with the evolution of society, to
    clarify a legal principle, or to resolve an inconsistency.

[53]

Consistent
    with these principles, Major J. stated, at para. 18: Given the custom in the
    oil and gas industry and the support found in case law, it is proper and
    reasonable that the law should acknowledge that an overriding royalty interest
    can, subject to the intention of the parties, be an interest in land. He noted
    that the appellant could not offer any convincing policy reasons for
    maintaining the common law prohibition on the creation of an interest in land
    from an incorporeal hereditament other than fidelity to common law principles.

[54]

Several
    points in the decision are of continuing importance. Justice Major noted, at
    para. 6: For substantially the same reasons as the Court of Appeal, I conclude
    that overriding royalty interests can be interests in land. He added, at para.
    19, that he much preferred that Courts compelling insight into the evolution
    of the law. In my view, this language gives continuing relevance to the
    approach and the ruling of the Court of Appeal of Alberta, especially its
    statement, at para. 73, that a court must examine the parties' intentions from
    the agreement as a whole, along with the surrounding circumstances, as opposed
    to searching for some magic words.

[55]

I
    also note that Major J. approved the holding of Laskin J. in dissent in
Saskatchewan
    Minerals
. He noted, at para. 11, that: The effect of Laskin J.'s reasons
    was to render inapplicable, at least insofar as overriding royalties, the
    common law rule against creating interests in land out of incorporeal
    interests. He described Laskin J.s holding, at para. 12: [T]he intentions of
    the parties judged by the language creating the royalty would determine whether
    the parties intended to create an interest in land or to create contractual
    rights only. This was the Supreme Courts ultimate holding in
Dynex
.

(3)

The Motion Judges
    Reasons

[56]

The
    motion judge stated, at para. 30: I conclude and find that the GORs do not run
    with the land or grant the holder of the GORs an interest in the lands over which
    Dianor holds the mineral rights. He determined that neither the expression of the
    parties intent to do so, expressed in s. 4.1 of the Crown Land Agreement and
    the Patented Land Agreement that the GORs would run with the land, nor the
    registration of the GORs, was sufficient to convey any interest in land.

The motion judge stated, at para.
    26:

In my view, the situation with 235Co. is exactly described by
    Roberts J. [in
St. Andrew Goldfields Ltd. v. Newmont Canada Ltd
., [2009]
    O.J. No. 3266, affd 2011 ONCA 377, 282 O.A.C. 106.] 235Co. has no right to
    enter the property to explore and extract diamonds or other minerals. That
    right belongs to Dianor. The only right 235Co.  obtained under the agreements
    was to share in revenues produced from diamonds or other minerals extracted
    from the lands. It is clear from the agreements that the royalties were to be a
    percentage of the value of the diamonds or other metals and minerals. The
    interest, out of which the royalty is carved, is not [an] interest in land.

[57]

The
    motion judge also referred, at para. 24, to the decision of the Court of Appeal
    of Quebec in
Anglo Pacific Group PLC c. Ernst & Young Inc.
, 2013
    QCCA 1323, [2013] R.J.Q. 1264.

(4)

The Principles
    Applied

[58]

In
    this section of the reasons, I apply the
Dynex
test and then consider
    the errors made by the motion judge in his reasoning. It is important to note
    that the legal documents on which the appellant relies were prepared after
Dynex
.

(a)     The
Dynex
test

[59]

I
    repeat for convenience the test prescribed in
Dynex
, at para. 22, for
    determining whether a royalty right is an interest in land:

1) the language used in describing the interest is sufficiently
    precise to show that the parties intended the royalty to be a grant of an interest
    in land, rather than a contractual right to a portion of the oil and gas
    substances recovered from the land; and

2) the interest, out of which the royalty is carved, is itself
    an interest in land.

[60]

Dianors
    interests in the claims were working interests or
profits à prendre
,
    which the common law unquestionably recognizes as interests in land. The GORs were
    carved out of Dianors interests. The second element in the
Dynex
test
    is plainly met in this case.

[61]

In
    my view, the first element is also met. The Crown Land Agreement and the
    Patented Land Agreement expressly state that the parties intend the GOR to
    create an interest in and to run with the land. To repeat for convenience,
    s. 4.1 of each of the Agreements states:

4.1. It is the intent of the parties hereto that the GOR shall
    constitute a covenant and an interest in land running with the Property and the
    Mining Claims and all successions thereof or leases or other tenures which may
    replace them, whether created privately or through governmental action, and
    including, without limitation, any leasehold interest.

[62]

Apart
    from the plain language of the Agreements, in considering the surrounding
    context, the original GOR-holder took steps to register its royalty rights:
    notices of the GORs were registered on title to the patented lands under
    s. 71 of the
LTA
and on the unpatented mining claims under the
Mining
    Act
.

[63]

I
    agree with the Court of Appeal of Alberta in
Dynex
, at para. 73, that
    the court must examine the parties' intentions from the agreement as a whole,
    along with the surrounding circumstances. Doing so in this instance makes
    plain their mutual intention to constitute the GORs as interests in land. It is
    express in the Agreements (based on the general principles of contractual
    interpretation), and the royalty rights-holder took care to register the
    interests on title.

[64]

I
    observe that the same result was reached with less supporting evidence in
Blue
    Note Mining Inc. v. Fern Trust (Trustee of)
, 2008 NBQB 310, 337 N.B.R.
    (2d) 116, affd 2009 NBCA 17, 342 N.B.R. (2d) 151. One issue was whether a net
    profit interest constituted a continuing interest in land that bound the
    purchaser. The motion judge determined that the agreement creating the interest
    did not contain the typical words found in a conveyance of an interest in
    land: at para. 34. The only relevant words were grant and in the mine.
    However, the motion judge held (and the Court of Appeal affirmed) that this was
    sufficient to grant an interest in land.

[65]

The
    contractual terms are not necessarily determinative of whether an interest in
    land was intended; the language does not require magic words to demonstrate the
    parties intention. However, these words were present in the Agreements. In my
    view, the appellants GORs constitute interests in land that run with the land
    and are capable of binding the claims in the hands of a purchaser.

(b)     The motion judges errors

[66]

The
    motion judge made three legal errors in his analysis. The first error was that
    he did not examine the parties' intentions from the royalty agreements as a
    whole, along with the surrounding circumstances; this was the burden of the
    previous section of these reasons.

[67]

The
    motion judges second error was in holding that in order to qualify as an
    interest in land, the royalty agreements had to give the appellant the right
    to enter the property to explore and extract diamonds or other minerals: at
    para. 26. The third error is in holding that: The interest, out of which
    the royalty is carved, is not [an] interest in land because it is expressed in
    the Agreements as only a right to share in revenues produced from diamonds or
    other minerals extracted from the lands. The latter two errors come from a
    misapprehension of the
Dynex
test. I will address them in turn.

(i)
Dynex
does not require a royalty rights-holder to have the right to enter the
    property to explore and extract resources in order to qualify as an interest in
    land

[68]

In
    my view, a serious misapprehension has arisen in the application of
Dynex
in some cases, including some of those relied on by the motion judge.

[69]

In
Dynex
, Major J. used some precise language from the trial decision of
    Virtue J. in
Vandergrift v. Coseka Resources Ltd.
(1989), 67 Alta.
    L.R. (2d) 17 (Q.B.), at p. 26, to specify the test as to when a royalty
    interest can be an interest in land. However, the Supreme Court did not adopt
    the reasoning in
Vandergrift
. There is good reason for this, because
Vandergrift
is inconsistent with
Dynex
in a critical way.

[70]

In
Vandergrift
, the court did not conclude that the royalty right ran
    with the land but instead concluded that it was a purely contractual right,
    taking precisely the approach to the analysis that both the Court of Appeal of Alberta
    and the Supreme Court expressly disavowed in
Dynex
. Justice Virtue
    stated, at p. 28:

One of the incidents of an interest in land one would expect to
    find in a royalty agreement intended to create an interest in land would be the
    right to the royalty holder to enter upon the lands to explore for and extract
    the minerals. A mere entitlement to an overriding royalty, without more, does
    not, in my view, carry with it the right to explore for oil and gas.

[71]

The
    purpose of the Supreme Court and the Court of Appeal of Alberta in
Dynex
was to step away from the requirement that a royalty right had to have the
    incidents of a working interest or a
profit à prendre
in order to
    constitute an interest in land, so that royalty rights could play their useful
    role in financing the industry and spreading risk.

[72]

Moreover,
    royalty rights-holders have no interest in working the land, nor do holders of
    the working interest or the
profit à prendre
want their operations to
    be subject to the working rights of a royalty rights-holder. This is precisely
    why the Alberta Court noted, at para. 43, that the royalty right was to be
    non-operating, adding: Non-operating interests include royalty interests,
    overriding royalty interests, production payments, net profit interests and
    carried interests.

[73]

I
    agree with Professor Bankes, who observed, at p. 23 of his article: I do not
    think that the Court should be taken to have endorsed either the particular
    approach taken by Justice Virtue or the actual result that he arrived at in
    that case. This built on his earlier comment criticizing
Vandergrift
,
    at p. 18, on the basis that it seems to want to turn the royalty owners
    passive interest into a working interest.

[74]

I
    turn now to the motion judges second error respecting the application of
Dynex
.

(ii)     The language
    in which the calculation of the royalty right is expressed does not affect its
    characterization as an interest in land

[75]

As
    noted, the motion judge held, at para. 26, that: The interest, out of which
    the royalty is carved, is not [an] interest in land because it is expressed in
    the Agreements as only a right to share in revenues produced from diamonds or
    other minerals extracted from the lands. This takes the mistaken approach of
    the court in
Vandergrift
, which
    was rejected in
Dynex
.

[76]

In
    my view, the motion judges approach does not give due weight to the Supreme
    Courts approval, in
Dynex
, of the reasoning in the dissent of Laskin
    J. in
Saskatchewan Minerals
. Justice Laskin was a long-time property
    law professor before his judicial career. It is worth attending to his
    reasoning in
Saskatchewan Minerals
, where he made these observations,
    at pp. 724-725:

In principle, a mining lessee whose holding is an interest in
    land in respect of which he has a royalty obligation should be able to grant or
    submit to an overriding royalty in respect of that interest to take effect as
    itself an interest in the lessee's holding.

This is not to say that every reservation or grant of a royalty
    creates an interest in land. The words in which it is couched may show that
    only a contractual right to money or other benefit is prescribed. However, if
    the analogy is to rent, then
the fact that the royalty is
    fixed and calculable as a money payment based on production or as a share of
    production, or of production and sale, cannot alone be enough to establish it
    as merely a contractual interest
. [Emphasis added.]

[77]

In
    my view, the fact that the GORs are calculated on production does not defeat
    the clear intention of the parties that the GORs constitute interests in land.

The cases referred to by the motion judge

[78]

I
    now turn to consider the cases on which the motion judge relied.

St. Andrew Goldfields

[79]

The
    first is
St. Andrew Goldfields
. Barrick Gold Corp. sold a mine to
    Newmont Canada Ltd. Part of the consideration was a net smelter return royalty
    agreement in Barricks favour. Newmont was also required to obtain Barricks
    consent to transfer any interest in the mine, failing which it would continue
    to be responsible for the royalty. Newmont later sold the mine to St. Andrew
    Goldfields Ltd. without first seeking Barricks consent.

[80]

The
    situation was explained by Rouleau J.A., at para. 4:

As found by the trial judge, Newmont Canada had misread the
    provisions in the Barrick royalty agreement, erroneously believing that the
    royalty was an insignificant flat rate of 0.013% NSR. In fact, it was a sliding
    scale royalty obligation that increased substantially as the price of gold
    increased. Believing that the low 0.013% NSR was an error on Barrick's part,
    Newmont Canada did not question Barrick on the provision nor did it seek to
    modify or change the clause.

[81]

The
    agreement between Newmont and St. Andrew Goldfields reflected the flat royalty
    rate but did not contain the multiplier.

[82]

Because
    Newmont did not get Barricks approval for the transfer to St. Andrew
    Goldfields, it continued to remain liable to Barrick under the original
    agreement. It appeared that Newmont had made a unilateral error in its
    interpretation of the royalty provision in its agreement with Barrick and
    omitted the escalator in its agreement with St. Andrew Goldfields. The issue
    was whether St. Andrew Goldfields was nonetheless required to pay the higher
    royalty rate because the royalty interest ran with the land.

[83]

The
    trial judges ruling was set out at para. 11:

I hold that the Barrick royalty agreement is clear and
    unambiguous, that Newmont alone is responsible under the Barrick royalty
    agreement for payment of the royalties on net smelter returns for gold, silver
    and other minerals to [Barricks assignee of the royalty rights] Royal Gold,
    and that St. Andrew is required to indemnify Newmont up to the flat rate of
    .013% of the net smelter returns for gold, silver and other minerals.

[84]

Newmont
    argued that St. Andrew Goldfields was obliged to pay the higher royalty rate
    because the royalty agreement constituted an interest in land. The trial judge
    followed the
Vandergrift
approach. She observed, at para. 104, that
    under the Barrick royalty agreement: [T]he royalty holder retains no interest
    in or control over the kind of operations or activities that the owner of the
    property may carry out.

[85]

Further,
    although there was a provision that notice of the agreement could be
    registered, she held, at para. 105, that this was not sufficient by itself to
    demonstrate that the parties intended to create an interest in land. Although
    the royalty agreement permitted Barrick to register the agreement on title, it
    had not done so.

[86]

However,
    the case did not turn on whether the royalty agreement created an interest in
    land that bound St. Andrew Goldfields, nor was that holding appealed. The
    appeal turned on the legal interpretation of the transactional documents and
    the effect of Newmonts failure to secure Barricks consent to the sale of the mine.
    In this court, Rouleau J.A. noted, at para. 31:

Faced with two contractual interpretations, the trial judge
    carefully considered the facts and the agreements and concluded that, correctly
    interpreted, the agreements provided that St. Andrew agreed to an indemnity of
    a royalty obligation stated to be 0.013% NSR [the lower royalty rate]. This is
    consistent with the many references in both the Newmont Canada-Holloway and
    Newmont Canada-Holloway-St. Andrew agreements to the amount of the Barrick
    royalty obligation being 0.013% NSR.

[87]

In
    the result, St. Andrew Goldfields was obliged to indemnify Newmont for the
    lower net smelter return, while Newmont was obliged to pay the net smelter
    return at the higher rate to Royal Gold, Barricks assignee of the royalty rights.
    In my view, the decision in
St. Andrew Goldfields
has no application
    to this appeal.

Anglo Pacific

[88]

Nor
    does the Court of Appeal of Quebecs decision in
Anglo Pacific
assist
    the respondent. In
Anglo Pacific
, the Court looked at the royalty
    agreement to determine whether it assigned the attributes of ownership to the
    royalty holder. The agreement did not assign the attributes of ownership but
    only the right of the royalty holder to receive payment. The Court held that,
    because the royalty agreement did not give the royalty holder the right to
    enter, enjoy, or dispose of the property, the holder did not have a real right
    in land: at paras. 63, 77-81.

[89]

Although
    the facts in
Anglo Pacific
are similar to this case, the Court did not
    apply the common law framework from
Dynex
but relied exclusively on
    the civil law of Quebec. A description of the civil law concepts applied by the
    Court shows they have no application in common law jurisdictions.

[90]

The
    Quebec Court held that to have a real right in land pursuant to the
Civil
    Code of Quebec
, one must have ownership: at paras. 53, 60. Ownership
    includes corporeal or incorporeal property: at para. 53. Thus, the owner of a
    mining claim is the owner of a real right in land: at paras. 70-71. However,
    in order to have ownership, one must have the attributes of ownership: at para.
    53. The attributes of ownership under civil law include: the right of use (
usus
),
    of enjoyment (
fructus
), of free disposition (
abusus
), and the
    ability to make ones own that which the property generates and that which is
    attached to it (
accessio
 for example, buildings on the land or
    deposits in the land): at paras. 43, 53-54.

[91]

The
    owner of land can dismember his or her ownership by dividing the attributes
    of ownership with one or more third parties, who then acquire an interest in
    land: at paras. 54-55. For example, the holder may have the right to
    temporarily use and enjoy the property that belongs to another (
usufruct
).
    This transmits to the holder of the dismemberment the right of use (
usus
)
    and enjoyment (
fructus
) for a certain time, and the true owner retains
    the right to dispose of the land (
abusus
) and the
accessio
:
    at para. 55.

[92]

The
    party to whom a dismemberment is granted will have a real right in land if he
    or she has the right to share in one of the above-noted attributes of
    ownership. Without such a right, the party has no direct right on property:
    at para. 60. For example, the state dismembers its ownership rights in favour
    of a party when it assigns a mining claim to that party: at para. 70. The
    holder of a mining claim is the holder of a dismemberment and has a real right
    in land.

[93]

Although
    there are similarities between the civil law concepts and the
profit à
    prendre
under the common law, there are differences. Most importantly, the
    Court of Appeal of Quebec did not apply the common law framework from
Dynex

but relied exclusively on the civil law.
Dynex

is the
    governing law in Ontario; the decision of the Court of Appeal of Quebec in
Anglo
    Pacific
has no bearing on this case.

Conclusion on the issue of whether the GORs constitute
    interests in land

[94]

I
    began my analysis by noting that the central issue in this case is whether the
    GORs constitute interests in land within the meaning of the law outlined by the
    Supreme Court in
Dynex
. For the reasons set out above, I conclude that
    the GORs are interests in land, contrary to the holding of the motion judge.
In my view the deferential approach called
    for by the Supreme Court in

Sattva Capital Corp. v. Creston Moly Corp.
,

2014 SCC 53
,
[2014] 2 S.C.R. 633
has n
o application to this
    case in view of the motion judges legal errors.

[95]

While
    the motion judge did purport to adjudicate the appellants GOR claims, his
    erroneous determination that it was not an interest in land raises potential
    issues respecting the vesting order.

E.

The THIRD Issue: Did The Motion Judge have jursidiction to issue a vesting
    order that extinguished the GORs?

[96]

In
    this section of the reasons, I consider, first, the motion judges reasons in
    order to set the context and then describe the positions of the parties
    regarding his jurisdiction to vest out the GORs. I next turn to the governing
    principles and then to their application.

[97]

The
    context for this issue is set by the conclusions I reached on the earlier issue
    of mootness. Because the GORs are interests in land, the appeal is not
    necessarily moot, particularly if the Superior Court did not have jurisdiction
    to issue the vesting order in these circumstances. The determination of this
    issue in 235Cos favour could entitle it to a remedy.

(1)     The Motion Judges
    Decision

[98]

The
    motion judge held, at para. 37, that:

In this case, the BIA and the
Courts of Justice Act
give the Court that jurisdiction to order the property to be sold and on what
    terms. Under the receivership in this case, Third Eye is entitled to be the
    purchaser of the assets pursuant to the bid process authorized by the Court.

[99]

He
    added, at para. 38: I conclude that I do have the jurisdiction to grant a
    vesting order of the assets to be sold to Third Eye on such terms as are just.
    Pursuant to the order, the receiver allocated $400,000 in cash as compensation
    for the extinguishment of Ontario royalties in favour of the appellant and
    Essar Steel Algoma Inc. The appellant was paid $250,000 for its GORs, and the
    Court-appointed monitor of Essar was paid $150,000 for its royalty. The motion
    judge made the payment to 235Co a term of the order, explaining at para. 39:

In my view, it is appropriate and just that a vesting order in
    the usual terms be granted to Third Eye on the condition that $250,000 be paid
    to 235Co. or whatever entity Mr. Leadbetter directs the payment to be made.
    That is higher than the mid-point of the range of values determined by Dr.
    Roscoe.

[100]

The motion judge
    expressed his opinion, at para. 40, that the Court would have been authorized
    to make the vesting order disposing of the royalty rights of 235Co whether the
    royalty rights were or were not an interest in land.

(2)     The Positions of the
    Parties

[101]

The appellant
    argued that if the royalty rights run with the land, then the motion judge had
    no authority under s. 243 of the
BIA
or s. 100 of the
CJA
to
    vest the mining claims in Third Eye pursuant to the sale process without
    leaving the royalty rights in place.

[102]

The respondent
    supported the motion judges view that he had authority to make the vesting
    order, free of the royalty rights.

(3)     The Issue

[103]

The issue is
    whether the motion judge, in the circumstances of this case  acting under s.
    100 of the
CJA
and s. 243 of the
BIA
, its inherent
    jurisdiction, or the wording of the vesting order  had jurisdiction to approve
    a sale that vested out 235Cos proprietary interest.

(a)

The Context

[104]

The motion judge
    noted that the sale of the mining claims was carried out in accordance with a
    court-approved bid process under ss. 100 and 101 of the
CJA
and s. 243
    of the
BIA
, working together. It is important to reiterate that the motion
    judge was not acting under s. 65.13(7) of the
BIA
; s. 36(6) of the
CCAA
;
    ss. 66(1.1) and 84.1 of the
BIA
; or s. 11.3 of the
CCAA
.
Neither the provisions of the
CCAA
nor the proposal provisions of the
BIA
apply
    to this case.

[105]

Sections 100 and
    101 of the
CJA
provide:

100 A court may by order vest in any person an interest in real
    or personal property that the court has authority to order be disposed of,
    encumbered or conveyed.

101 (1)
In
    the Superior Court of Justice, an interlocutory injunction or mandatory order
    may be granted or a receiver or receiver and manager may be appointed by an
    interlocutory order, where it appears to a judge of the court to be just or
    convenient to do so.

(2)
An order under subsection (1) may include such terms as are considered just.

[106]

Section 243(1)
    of the
BIA
provides:

243 (1) Subject to subsection (1.1), on application by a
    secured creditor, a court may appoint a receiver to do any or all of the
    following if it considers it to be just or convenient to do so:

(a) take possession of all or
    substantially all of the inventory, accounts receivable or other property of an
    insolvent person or bankrupt that was acquired for or used in relation to a business
    carried on by the insolvent person or bankrupt;

(b) exercise any control that the
    court considers advisable over that property and over the insolvent persons or
    bankrupts business; or

(c) take any other action that the
    court considers advisable.

[107]

These provisions do not expressly authorize a court to take real
    property out of the hands of a third party.

(b)

Does the Superior Courts inherent jurisdiction give jurisdiction to
    grant a vesting order in these circumstances?

[108]

The Superior
    Court of Justice has all of the jurisdiction, power, and authority historically
    exercised by courts of common law and equity in England and Ontario, as
    provided in s. 11(2) of the
CJA
. This power includes making vesting orders:
CJA
, at s. 100. However, this Court has interpreted these provisions
    as conferring no greater authority on the Superior Court than was previously
    recognized at equity.

[109]

The leading text
     Houlden,
Bankruptcy and Insolvency Law of Canada
, at Part XI, L§21
    notes:

A vesting order should only be granted if the facts are not in
    dispute and there is no other available or reasonably convenient remedy; or in
    exceptional circumstances where compliance with the regular and recognized
    procedure for sale of real estate would result in an injustice. In a
    receivership, the sale of the real estate should first be approved by the
    court. The application for approval should be served upon the registered owner
    and all interested parties. If the sale is approved, the receiver may subsequently
    apply for a vesting order, but a vesting order should not be made until the
    rights of all interested parties have either been relinquished or been
    extinguished by due process. [Citations omitted.]

[110]

The leading
    judicial authority in Ontario is
Trick
    v. Trick

(2006), 81 O.R. (3d) 241 (C.A.), leave to appeal
    refused, [2006] S.C.C.A. No. 388. In that case, Lang J.A. stated, at
    para. 19, that s. 100 of the
CJA
:

[P]rovides a court with jurisdiction to vest property in a
    person but only if the court also possesses the "authority to order [that
    the property] be disposed of, encumbered or conveyed". Thus, s. 100 only
    provides a mechanism to give the applicant the ownership or possession of
    property to which he or she is
otherwise entitled
;
    it does
not provide a free standing right to property
    simply because the court considers that result equitable
. [Footnote
    omitted. Emphasis added.]

[111]

At equity and
    common law, a party must have a valid and independent entitlement to possession
    or ownership in order for a court to issue a vesting order that extinguishes a
    third partys real property interest. Several cases have held that the inherent
    jurisdiction of the Superior Courts does not confer the power to take real property
    from third parties simply because the court considers it equitable to other
    stakeholders. Rather, it gives courts authority to bring about a transfer of
    title to a party who is otherwise or independently entitled to it. See also
2022177
    Ontario Inc. v. Toronto Hanna Properties Ltd.
,
203 O.A.C. 220, at para 49. See also
Clarkson Co. v.
    Credit foncier franco canadien
(1985), 57 C.B.R. (N.S.)
    283 (Sask. C.A.), at p. 284.

[112]

Although this
    court has referred obliquely to this issue in several cases, we have never
    faced it squarely.

(c)

The Policy Context

[113]

The policy
    context is well set out by Wilton-Siegel J. in
1565397
    Ontario Inc., Re
, [2009] O.J. No. 2596, 54 C.B.R. (5th) 262 (S.C.). In
    that case, a numbered company delivered an undertaking at closing to later
    transfer part of the real property to two parties. The company became insolvent,
    and a receiver was appointed. Although the undertakings were not registered on
    title until after the appointment of the receiver, the relevant parties had
    actual notice of them. The receiver attempted to sell the property free of the
    undertakings. The Court refused to permit the sale. Justice Wilton-Siegel
    stated, at para. 60:

I know of no law that permits a court to authorize a receiver
    to terminate a proprietary interest in land in such manner. The effect of any
    such extinguishment  amounts to expropriation of the respondents assets in
    favour of subordinate or unsecured creditors.

[114]

He added, at
    para. 67: I do not think the Court has the authority to order a sale of the
    third partys proprietary interests on the basis proposed by the receiver.
    Among the reasons he gave for refusing a vesting order, at para 68, was that
    the third partys interest was not subject to the receivership:

Such interests in the Property reside in the respondents whose
    property is not subject to the receivership.  [The receiver] cannot have taken
    possession of, or otherwise have any interest in, the respondents' interests in
    the Property, regardless of the terms of the Receivership Order because the
    Order extends only to the assets of [the debtor]. As such, the [receiver] has
    no authority under the Receivership Order to sell the interests of the
    respondents. Nor does the Court have the authority to grant such an order in
    the absence of the appointment of a receiver over the respondents' property and
    assets.

[115]

See also
Blue
    Note Caribou Mines Inc., Re
, 2010 NBQB 91, 356 N.B.R. (2d) 236, leave
    to appeal to N.B.C.A. refused, [2010] N.B.J. No. 267.

(4)

The Context for
    Further Submissions

[116]

There are several
    situations in which courts have considered vesting orders that vest out a third
    partys proprietary interest. I address several, and there may be others.

(a)

The narrow circumstances exception

[117]

Several cases
    have held that in some narrow circumstances, courts may issue a vesting order
    that extinguishes third party interests. Such circumstances appear to include
    situations where doing so would provide added certainty, and there is no
    evidence of competing proprietary interests:
BTR Global Opportunity Trading
    Ltd. v. RBC Dexia Investor Services Trust
, 2012 ONSC 1868, at paras. 5,
    18, 20-21.

[118]

What are the
    narrow circumstances in which a Superior Court judge may issue a vesting order
    under s. 100 of the
CJA
that vests out a third partys proprietary
    interest, when s. 65.13(7) of the
BIA
; s. 36(6) of the
CCAA
;
    ss. 66(1.1) and 84.1 of the
BIA
; or s. 11.3 of the
CCAA
do
    not apply?

(b)

The equities

[119]

Courts have also
    considered the equities in determining whether to issue a vesting order.
    Although the term, equities, is an ambiguous word, the vesting order cases
    have tended to use it to describe their work in establishing priorities among
    interests. See, for example,
Meridian Credit Union v. 984 Bay Street Inc.
,
    [2005] O.J. No. 3707 (S.C.), revd [2006] O.J. No. 1726 (C.A.), and [2006] O.J.
    No. 3169 (S.C.). See also
Romspen Investment Corp. v. Woods Property
    Development Inc
., 2011 ONSC 3648, 75 C.B.R. (5th) 109, revd 2011 ONCA 817,
    286 O.A.C. 189; and
Firm Capital Mortgage Fund Inc. v. 2012241 Ontario Ltd.
,
    2012 ONSC 4816, 99 C.B.R. (5th) 120.

(c)

Have commercial practices expanded the courts jurisdiction?

[120]

Finally, under
    the rubric of equitable considerations, s.100 of the
CJA
, and the
    Superior Courts inherent jurisdiction, has the permissible reach of the
    vesting order grown to permit a court to vest out virtually any interests in an
    asset? See, for example, David Bish and Lee Cassey, Vesting Orders Part 1: The
    Origin and Development (2015) 32(4) Nat. Insol. Rev. 41; and Vesting Orders
    Part 2: The Scope of Vesting Orders (2015) 32(5) Nat. Insol. Rev. 53.

(5)

The Question
    Requiring Additional Argument

[121]

To summarize the
    discussion, the question to be addressed in additional argument before this
    panel is: Whether and under what circumstances and limitations (including the
    ones enumerated above) a Superior Court judge has jurisdiction to extinguish a
    third partys interest in land using a vesting order, under s. 100 of the
CJA
and s. 243 of the
BIA
, where s. 65.13(7) of the
BIA
; s. 36(6)
    of the
CCAA
; ss. 66(1.1) and 84.1 of the
BIA
; or s. 11.3 of
    the
CCAA
do not apply?

[122]

I turn now to
    the issue of remedy.

F.

The Fourth Issue: REMEDY

[123]

Regrettably, the
    parties did not fully address what this court should do by way of remedy if it were
    to allow the appeal.

[124]

The appellant
    effectively seeks rectification of the register to reflect the GORs. I note
    that in
Sheard v. Peacock
, 2012 ONSC 4237, the motion judge treated
    the application to set aside the vesting order as an application for
    rectification.

[125]

As noted
    earlier, even though registration of the vesting order has effected a
    conveyance of the mining claims, the appellant is not necessarily without a
    remedy. As Blair J.A. observed in
Regal Constellation
, an aggrieved
    party like the appellant may seek a remedy under the regime established by the
LTA
.

[126]

Because this court
    has found that 235Co has an interest in land, it could be entitled to rectification
    of the register under ss. 159 and 160 of the
LTA
, which provide:

159. Subject to any estates or rights acquired by registration under
    this Act, where a court of competent jurisdiction has decided that a person is
    entitled to an estate, right or interest in or to registered land or a charge
    and as a consequence of the decision the court is of [the] opinion that a
    rectification of the register is required, the court may make an order
    directing the register to be rectified in such manner as is considered just.

160. Subject to any estates or rights acquired by registration
    under this Act, if a person is aggrieved by an entry made, or by the omission
    of an entry from the register, or if default is made or unnecessary delay takes
    place in making an entry in the register, the person aggrieved by the entry,
    omission, default or delay may apply to the court for an order that the register
    be rectified, and the court may either refuse the application with or without
    costs to be paid by the applicant or may, if satisfied of the justice of the
    case, make an order for the rectification of the register.

[127]

However, providing
    a remedy gives rise to several difficulties. First, there is no information
    before the court on whether an innocent third party acquired an interest from
    Third Eye after the vesting order was registered, which would debar a remedy.

[128]

Second, in its
    Notice of Appeal, the appellant requested this court to vary the vesting order
    to remove the appellants interest from the schedule of claims to be discharged
    from title of the property and to add its interests to the schedule of
    permitted encumbrances. The respondent submitted that this is not possible
    because its accepted Offer to Purchase was predicated on the elimination of
    the GORs. The respondent argued that [i]t was not open to the Motions Judge
    to impose additional terms on the Transaction that were not agreed to by the
    parties, and 235Co cannot ask for those terms to be imposed on appeal. I do
    not know whether the respondent would want to press this position in an
    argument about the appropriate remedy.

[129]

In the
    circumstances, it would not be prudent to exercise authority under s.134 of the
CJA
and ss. 159 and 160 of the
LTA
to rectify title without hearing
    argument from the parties on whether additional evidence is necessary, how it
    should be received, and on any other remedial issues arising from this decision.

G.

Disposition

[130]

The next phase
    of the appeal, assuming the parties choose to pursue it, requires case
    management to coordinate written submissions on the issues raised in these
    reasons and to consider the necessity of oral submissions, and I would refer
    the parties to the Registrar to make the necessary arrangements.

Released:

MAR 15 2018                                   P.
    Lauwers J.A.

SP                                                   I
    agree S.E. Pepall J.A.

I
    agree Grant Huscroft J.A.

[1]
The motion judge was not acting under s. 65.13(7) of the
BIA
; s. 36(6)
    of the
Companies Creditors Arrangement Act
, R.S.C. 1985, c. C-36 (
CCAA
);
    ss. 66(1.1) and 84.1 of the
BIA
; or s. 11.3 of the
CCAA
.

[2]
Online: <http://law.ucalgary.ca/files/law/rmli-royalty-paper-feb-2003-final.pdf>.

[3]

The Court of Appeal of Alberta did not decide the factual
    issue but sent it to trial, an outcome affirmed by the Supreme Court. The trial
    judge held that the documents in
Dynex
did not
    grant any interest in the land: 2003 ABQB 243, 1 C.B.R (5th) 188.


COURT OF APPEAL FOR ONTARIO

CITATION: V. Melfi Holding Ltd. v. Dourada Investment Inc.,
    2018 ONCA 290

DATE: 20180322

DOCKET: C64380

Sharpe, Juriansz and Miller JJ.A.

BETWEEN

V. Melfi Holding Ltd.

Appellant

(Defendant)

and

Dourada Investment Inc
.

Respondent

(Plaintiff)

Dominic Saverino, for the appellant

Varoujan Arman and Megan Hodges, for the respondent

Heard and released orally: March 15, 2018

On appeal from the judgment of Justice Chris de Sa of the
    Superior Court of Justice, dated September 11, 2017.

REASONS FOR DECISION

[1]

We do not agree that the motion judge made a palpable and overriding
    error in finding that the appellants failure to comply with the term of the
    agreement of purchase and sale requiring it to remove its goods from the
    premises amounted to an abandonment of those goods. The respondent insisted
    throughout that the appellant remove the goods and gave the appellant several opportunities
    to do so.

[2]

The motion judge found that the appellant failed to avail itself of
    those opportunities insisting that it would only remove its goods on its own
    terms. The evidence on this summary judgment motion provided a basis for the
    motion judge to find that the appellant had in effect abandoned its goods.

[3]

We do not accept the appellants submission that the motion judge erred
    in his calculation of the rent or damages payable by the appellant. The
    appellant was locked out of the premises on April 14, 2014 and rent is payable
    up to that date. Thereafter, the appellant was in breach of its contractual
    obligation to remove its goods from the premises. The appellants failure to do
    so made it impossible for the respondent to use or rent the premises and the
    motion judge properly calculated damages for breach of that contractual
    obligation on the basis of the rent that would otherwise have been payable.

[4]

We do not agree that the respondent failed to mitigate its damages prior
    to May 15, 2015 given the position taken by the appellant extending the lease
    from month-to-month and given the attempts being made by the parties to
    negotiate a settlement.

[5]

The appellant breached the term of the agreement of purchase and sale
    requiring it to remove its goods and the motion judge was entitled to find that
    that breach entitled the respondent to forfeit the $100,000 holdback.

[6]

The appellant conceded in oral argument that the provisions of the
Commercial
    Tenancies Act
regarding distress for nonpayment of rent are not
    applicable. He argues however, that while the letter of the Act does not apply,
    the procedure it lays down should have been followed by analogy.

[7]

We do not accept the argument but note the motion judge found that the
    respondent sold the goods after giving the appellant the opportunity to remove
    them and behaved in a commercially responsible manner. It obtained appraisals
    and sold the goods at a public auction. The motion judge found that there is no
    merit in the assertion that the sale was improvident.

[8]

Finally, while the amount awarded minimally exceeded the amount claimed
    in the statement of claim we see no prejudice to the appellant that requires
    this court to intervene.

[9]

For these reasons, the appeal is dismissed.

[10]

Costs
    to the respondent fixed at $7,283.88, inclusive of disbursements and applicable
    taxes.

Robert J. Sharpe
    J.A.

R.G. Juriansz
    J.A.

B.W. Miller J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Universal Health Group Inc. v. Limmex AG, 2018 ONCA
    289

DATE: 20180321

DOCKET: C64537

MacFarland, Huscroft and Nordheimer JJ.A.

BETWEEN

Universal Health Group Inc.

Plaintiff (Appellant)

and

Limmex AG, Thomas Sieber and Herbert Bachler

Defendants (Respondents)

Patricia Virc, for the appellant

Matthew Latella and Glen Gibson for the respondents

Heard: March 20, 2018

On appeal from the order of Justice Jasmine T. Akbarali
    of the Superior Court of Justice, dated October 20, 2017.

APPEAL BOOK ENDORSEMENT

[1]

We are in substantial agreement with the reasons of the motion judge and
    we see no error. The appeal is dismissed. Costs to the respondent in the sum of
    $15,000 on a partial indemnity basis inclusive of disbursements and HST.


COURT OF APPEAL FOR ONTARIO

CITATION: Weenen v. Biadi, 2018 ONCA 288

DATE: 20180321

DOCKET: M48284 (C61429)

Epstein, Hourigan and Paciocco JJ.A.

BETWEEN

Matthew Weenen

Plaintiff

(Respondent/Responding Party)

and

Graziano Biadi

Defendant

(Appellant/Non-Party)

Sarah Turney and Anastasia Reklitis, for the moving
    party, Fasken Martineau DuMoulin LLP

Yan David Payne, for the responding party, Matthew Weenen

Heard: In writing

REASONS FOR DECISION

overview

[1]

Fasken Martin DuMoulin LLP (the Law Firm) successfully represented
    Matthew Weenen (the Client) in an action against his neighbour, Graziano
    Biadi. The Client had sought damages against Biadi, for causing flooding on the
    Clients property. After an 18-day trial, Mr. Biadi was ordered to pay the
    Client $390,000 in damages and $550,000 in costs. In June, 2017 this court
    dismissed Mr. Biadis appeal of the damages award and ordered him to pay the
    Client his costs of the appeal in the amount of $50,000.

[2]

After the appeal was dismissed, the Law Firm brought a motion to this
    court for a charge or lien in the amount of $360,836.88 on the funds Mr. Biadi
    has been ordered to pay the Client. The law firm seeks this remedy as either a
    charging order under s. 34(1) of the
Solicitors Act
, R.S.O. 1990, c.
    S.15, or a lien under the courts inherent jurisdiction. The sum of $360,836.88
    is the remaining balance the Law Firm says it is owed out of the approximately
    $820,000 in fees and disbursements it charged the Client for representing him
    in these proceedings.

[3]

The Client contests the amount owed to the Law Firm. He initiated an
    assessment process before the Law Firm brought this motion.

[4]

When it initially brought its motion, the Law Firm sought only a
    charging order under s. 34 of the
Solicitors Act
. Section 34 provides
    as follows:

34. (1) Where a solicitor has been employed to prosecute or
    defend a proceeding in the Superior Court of Justice, the court may, on motion,
    declare the solicitor to be entitled to a charge on the property recovered or
    preserved through the instrumentality of the solicitor for the solicitors
    fees, costs, charges and disbursements in the proceeding.

[5]

The motion was first heard by Brown J.A., sitting alone. However, Brown
    J.A. questioned this courts jurisdiction to grant a s. 34 charging order to
    secure solicitors fees over the damages and costs awarded by the Superior
    Court. In the light of his concern, the matter was referred to the panel that
    heard the appeal.

[6]

The Law Firm then sought to amend its notice of motion to add an
    alternative claim for a lien for its fees and disbursements based on the
    courts inherent jurisdiction. This request was allowed and the parties provided
    further submissions  on both the jurisdictional issue identified by Brown J.A.
    and the merits.

[7]

For the reasons that follow, we are of the view that while this court
    has the jurisdiction to make either order, the Law Firms motion for a charging
    order or a lien should nonetheless be dismissed.

analysis

(1)

The legal framework

[8]

Solicitors have special rights both under statute and at common law to
    facilitate payment of their client accounts: Edwin G. Upenieks & Robert J.
    van Kessel,
Enforcing Judgments and Orders
, 2d ed. (Toronto:
    LexisNexis Canada Inc., 2016), at s. 8.1. These include both charging orders,
    under s. 34 of the
Solicitors Act
, and solicitors liens on funds,
    derived from the courts inherent jurisdiction: see
Halton Standard
    Condominium Corp. No. 627 v. Grandview Living Inc.
, 2017 ONSC 1761, at
    paras. 29-30;
Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc.
,
    2012 ONSC 2182, 349 D.L.R. (4th) 431, at paras. 84-89.

[9]

This takes us to the question of jurisdiction raised by Brown J.A.

[10]

A
    courts inherent jurisdiction to declare a lien on the proceeds of its
own
judgments is well-established:
Thomas Gold Pettinghill LLP
, at para.
    89;

Re Tots and Teens Sault Ste. Marie
    Ltd.
(1976), 11 O.R. (2d) 103 (S.C.), at p. 108;

Welsh v. Hole
(1779), 99 E.R. 155 (K.B.), at pp. 155‑56. It follows that this court has
    the inherent jurisdiction to grant, when warranted, a solicitors lien over the
    $50,000 in costs awarded in favour of the Client on the appeal.

[11]

In
    the light of this conclusion, the question remains as to whether this court has
    jurisdiction to issue a charging order under the
Solicitors Act
or a
    solicitors lien over the damages and costs awarded by the Superior Court.

[12]

In
    our view, it does. A judge of the Court of Appeal is, by virtue of his or her
    office, a judge of the Superior Court with all of the jurisdiction, power and
    authority of a judge of that court under s. 13(2) of the
Courts of Justice
    Act
, R.S.O. 1990, c. C.43, and under s. 134(1) of that Act may make any
    order or decision that could have been made by the court appealed from. There
    is no dispute that a judge of the Superior Court has the jurisdiction, both
    pursuant to s. 34 of the
Solicitors Act
and, as previously indicated, under
    the courts inherent jurisdiction, to grant a charging order or lien on the
    damages and costs awarded in that court: e.g.,
Dalcor Inc. v. Unimac Group
    Ltd.
, 2017 ONSC 945, 136 O.R. (3d) 585, at para. 14;
Thomas Gold
    Pettinghill LLP
, at para. 89. To the extent a Superior Court judge could order
    a charge or a lien, a Court of Appeal judge is accordingly empowered to do so
    the same.

[13]

It
    follows that this Court has jurisdiction to issue a charging order over the
    amounts the trial judge ordered Mr. Biadi to pay the Client under s. 34(1) of
    the
Solicitors Act
or a lien under the courts inherent jurisdiction. What
    remains to be determined is whether this relief should be granted.

[14]

In
    order to obtain a charging order or a lien on the monies in issue, the onus is
    on the solicitor to demonstrate that a charging order or lien is warranted. The
    decision is discretionary:
Taylor v. Taylor

(2002), 60 O.R.
    (3d) 138 (C.A.), at para. 34;
Foley v. Davis
(1996), 49 C.P.C. (3d)
    201 (Ont. C.A.), at p. 202. In deciding whether or not to exercise that
    discretion, courts must balance the circumstances and equities of each case
    and client:
Taylor
, at para. 34.

[15]

The
    test for a charging order under s. 34 is clear. To obtain a s. 34 charging
    order a solicitor must demonstrate that:

i.

the fund or property is in existence at the time the order is granted:
Langston
    v. Landen
, [2008] O. J. No 4936 (Ont. S.C.J.), at paras. 28-29;

ii.

the property was recovered or preserved through the instrumentality
    of the solicitor;
Kushnir v. Lowry
, [2003] O.J. No. 4093 (C.A.), at
    para. 2;

iii.

there must be some evidence that the client cannot or will not pay the
    lawyers fees;
Kushnir
,
at para. 2; see also
Guergis v. Hamilton
, 2016 ONSC 4428, at para. 6;
Thomas
    Gold Pettinghill LLP
, at para. 88;
Foley,
at p. 202.

[16]

Charging
    orders exist alongside, and in addition to, a courts inherent jurisdiction to
    grant a solicitors lien. Although distinct, they are two sides of the same
    coin, and overlap significantly in purpose and effect. As this court observed
    in
Taylor
, at para. 28, s. 34 of the
Solicitors Act

is
    a codification of a courts inherent jurisdiction in equity to declare a lien
    on the proceeds of a judgment where there appears to be good reason to believe
    that the solicitor would otherwise be deprived of his or her costs.

[17]

In
    our view, the conceptual differences between the two orders, such as how and
    when they are acquired, do not justify the application of different tests. The
    two types of charges cover the same circumstances and have identical
    objectives. Regardless of which of the two remedies is sought, it is our view
    that the three elements outlined above must be established.

(2)

The application of the framework

[18]

Here,
    the first element is satisfied. The judgments in favour of the Client exist. As
    a
chose in action

or judgment debt, those judgments are a
    property right against which the charge or lien may attach:
Fancy
    Barristers P.C. v. Morse Shannon LLP
, 2017 ONCA 82, at para. 9;
Pino
    v. Vanroon
(1998), 28 C.P.C. (4th) 274 (Ont. Gen. Div.), at para. 10;
Mpampas
    v. Steamatic Toronto
, 2009 CanLII 61417 (Ont. S.C.), affirmed 2010 ONCA
    373.

[19]

The
    second element is also satisfied. There is no dispute that the Law Firm was
    instrumental in recovering the monies owed under the judgments.

[20]

The
    only branch of this test that is seriously contested is the third element
    whether the evidence supports a finding that it is likely that the Law Firm
    will not be paid what is ultimately found owing by the Client:
Taylor
,
at para. 34.

[21]

The
    Client has paid more than $460,000 in legal fees to the Law Firm. This includes
    payments of $55,000 since January 5, 2016, including a payment of $10,000 on
    June 7, 2017, only a few weeks before the appeal was dismissed and the Client
    initiated assessment proceedings.

[22]

The
    Law Firm submits that the Client has had financial difficulties in the past
    that have prevented him from being able to pay his outstanding accounts. The
    Law Firm has rendered 51 accounts to the Client throughout these protracted
    proceedings. Twelve remain unpaid. The Law Firm contends that it has demanded
    payment of the outstanding amounts owed from the Client, but to no avail. It
    points to the fact that the Client had to refinance his home in order to pay an
    earlier account, arguing that it has every reason to believe that the Client
    cannot or will not pay what it owes the Law Firm.

[23]

The
    Client says that the evidence does not support either proposition. The Client
    attests to the fact that he has sufficient liquid assets to pay the Law Firm
    the amount the Assessment Officer determines should be paid  even if it is the
    full amount the Law Firm says is owing, as set out above. The Client says his
    willingness to pay can be demonstrated by the regular flow of payments he has
    made during the time when the Law Firm represented him in this matter.

[24]

In
    our view, the Law Firm has not discharged its burden of establishing that it
    will likely not be paid without a charging order or lien: see
Taylor
,
at para. 34.

[25]

The
    correspondence between the parties demonstrates that the Law Firm has asked the
    Client for instalment payments toward the outstanding accounts on at least four
    occasions over the past several years. Tellingly, the Client has made payments
    on three of those four occasions. The Law Firm does not appear to have
    requested the full amount due on the outstanding accounts or a corresponding
    refusal or inability to pay. There is, of course, the pending assessment but,
    in our view, the fact that the Client contests the amount he owes the Law Firm
    is not evidence of his inability or unwillingness to pay.

[26]

The
    evidence supports a finding that the Client owes money to the Law Firm for
    unpaid accounts. However, this in and of itself does not justify a charging
    order or lien.

[27]

On
    this record, we are of the view that the Law Firm has not satisfied us that we
    should exercise our discretion to grant the requested charging order or lien. The
    motion is therefore dismissed.

[28]

Finally,
    we note that originally, the Law Firm also sought an order pursuant to rule
    72.05(1) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, that
    the $50,000 in costs of the appeal currently being held by the Accountant of
    the Superior Court as security not be dealt with except on notice to the Law
    Firm. We have been advised that this money has already been paid out. The
    motion for an order pursuant to rule 72.05(1) is therefore also dismissed, as
    moot.

[29]

If
    the parties cannot agree on costs, they may provide the court with brief
    written submissions not exceeding three pages within 14 days of the release of
    these reasons.

Gloria Epstein
    J.A.

C.W. Hourigan
    J.A.

David M.
    Paciocco J.A.