THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2006 SKCA 58 Date: 20060518 Between: Docket: 1287 De Beers Canada Inc. (Plaintiff Applicant) Appellant and Shore Gold Inc., Cameco Corporation, UEM Inc. and Kensington Resources Ltd. (Defendants Respondents) Respondents Coram: Cameron, Gerwing Sherstobitoff JJ.A. Counsel: Robert S. Harrison and R.G. Kennedy, Q.C. for the Appellant Lenard M. Sali, Q.C. for the Respondent Shore Gold Kensington W.F. Hood and M. Deobald for the Respondents, Cameco and UEM Inc. Appeal: From: 2006 SKQB 154 (CanLII) Heard: May 18, 2006 Disposition: Dismissed (orally) Written Reasons: May 24, 2006 By: The Honourable Mr. Justice Sherstobitoff In Concurrence: The Honourable Mr. Justice Cameron The Honourable Madam Justice Gerwing SHERSTOBITOFF J.A. [1] The facts of this case, and the relevant provisions of the agreements in issue may be found in the reasons for judgment of the chambers judge, [2006 SKQB 154; [2006] S.J. No. 211] [2] All parties agree that this case turns on the interpretation of article XIV, subsection 14.01 of the joint venture agreement, which provides as follows: ARTICLE XIV TRANSFERS Section 14.01 RIGHT OF REFUSAL ON TRANSFERS If Party (denoted in this Article XIV as the "Vendor") shall wish to sell, assign, transfer, convey or otherwise dispose of all or part of its Participating Interest in the Program Lands or Project Area (herein called the "Offered Interest") (the Parties being absolutely prohibited from selling, assigning, transferring, conveying or otherwise disposing of any interest other than all or part of its Participating Interest) at any time during the currency of this Agreement, the other Parties hereto then having Participating Interest in the Program Lands or Project Area affected (hereafter in this Section 14.01 called the "Purchasers") shall be entitled to right of refusal in respect thereof as follows: (a) the Vendor shall first obtain from third party or third parties, which may include another Party to this Agreement, (herein collectively called the “Third Party”) an irrevocable offer to purchase the Offered Interest for cash, subject to the rights of the Purchasers pursuant to this Article (herein called the “Third Party Offer”); (b) the Vendor shall give written notice (hereafter called the "Offering Notice") to the Purchasers of the Vendor's desire to sell. The Offering Notice shall describe the Offered Interest that is offered for sale, and shall also state the cash consideration and other terms on which the sale and purchase is desired to be made by the Vendor to the Third Party. The Offering Notice shall have attached to it copy of the Third Party Offer; They also agree that the subsection is right of first refusal clause. It is clear that the subject matter of the clause is “Participating Interest in the Program Lands or Project Area.” [3] The appellant relies on the words in parenthesis “the Parties being absolutely prohibited from selling, assigning, transferring, conveying or otherwise disposing of any interest other than all or part of its Participating Interest” to establish its case that the voting agreement contravenes the terms of the joint venture agreement. [4] However, subsection 14.01, with the words in parenthesis deleted, creates complete right of first refusal. In our view, the words in parenthesis, rather than being intended to create substantial new contractual obligations, were intended, as is buttressed by the parenthetical structure, merely to recall to the parties their dedication of assets to the joint venture, and their inability to dispose of them qua separate assets. Thus, the phrase in parenthesis is mere surplusage in that it does not add or subtract substantively to subsection 14.01 or the joint venture agreement as a whole. Accordingly, the voting agreement is not caught by subsection 14.01. [5] In the alternative, if the parenthetical phrase is substantive provision creating new obligations and prohibitions, we would be required to consider the meaning of the term “interest” in it. The appellant urged upon us definition of the broadest possible nature, which would include any interest in or arising from the contract, and which, it argued, would include the right to vote attendant upon the ownership of Participating Interest. In our judgment, even if this broad definition were accepted, the voting agreement does not constitute disposition of the voting rights so as to constitute breach. [6] By way of background, there had been two alternate proposals for exploration and development, one by the appellant and one by the respondent Kensington, the latter being more expansive, proceeding more rapidly, and proceeding in different direction. The respondents Cameco and UEM preferred the Kensington plan and were prepared to commit themselves to it. They took the position that they had exercised their right to vote by entering into the voting agreement, rather than having sold their vote by so doing. The voting agreement secured the follow up steps under the original commitment by Kensington which would be implemented over lengthy period. We conclude that the voting agreement does not constitute sale of voting rights as contended by the appellant. It follows that we agree with the result reached by the chambers judge. [7] The appeal is dismissed with costs to be taxed.
All parties agree that this case turns on the interpretation of article XIV, subsection 14.01 of the joint venture agreement. They also agree that the subsection is a right of first refusal clause. It is clear that the subject matter of the clause is a 'Participating Interest in the Program Land or a Project Area'. HELD: Appeal dismissed orally. The appellant relies on the words in parenthesis 'the Parties being absolutely prohibited from selling, assigning, transferring, conveying or otherwise disposing of any interest other than all of part of its Participating Interest' to establish its case that the voting agreement contravenes the terms of the joint venture agreement. However, subsection 14.01, with the words in parenthesis deleted, creates a complete right of first refusal. In our view, the words in parenthesis, rather than being intended to create substantial new contractual obligations, were intended, as is buttressed by the parenthetical structure, merely to recall to the parties their dedication of assets to the joint venture, and their inability to dispose of them qua separate assets. Thus, the phrase in parenthesis is mere surplusage in that it does not add or subtract substantively to subsection 14.01 or the joint venture agreement as a whole. Accordingly, the voting agreement is not caught by subsection 14.01.