The Yukon Supreme Court has made a very significant decision (January 3, 2007) that grants the Canadian government leave to pursue the “oppression remedy” to “pierce the corporate veil” in order to hold perpetrators of bad mining practices responsible for their actions, even if they are operating under different corporate names.
BYG Resources owned and operated the Mt. Nansen Mine and the Ketza Mine (Ketza was held by related company YGC Resources) in the Yukon in the 1990s. When the mines were closed down in 1999, the federal government was left holding the bag for tens of millions of dollars in clean up costs. It is now attempting to recover some of that money in bankruptcy proceedings and are having to fight “secured creditors” (Ellake Services and Cosman) that are in fact companies controlled by former principals of BYG: Robert Chafee and Graham Dickson and their families.
In 1999, Mr. Justice Lillies convicted BYG of three charges related to the abuse of a water licence and stated in his judgement that “the above examples demonstrate an attitude consistent with “raping and pillaging” the resources of the Yukon…There is little evidence of any diligence.” He went on to describe BYG as “inept, bumbling, amateurish and possibly negligent”.
Chafee has recently brought YGC back to life and is exploring around the Ketza site, with support from the Kaska First Nation. YGC shares are doing well on the stock exchange. The receiver for BYG wants to sell some of these shares to recoup the federal costs.
At the core of the case is the federal application for an “Oppression Remedy” which would enable the court to pierce the corporate veil between YGC, BYG, and their creditors – Ellake and Cosman – in order to come to a fair determination of who pays for the clean-up at the Mt. Nansen and Ketza Mines. It is clear that Chafee and Dickson have personally profited from the disasters at those two mines, and are now seeking to make money from the mining claims that were retained under the name of YGC.
The “oppression remedy” is in fact very far reaching and should allow a discussion of Chafee and Dickson’s interests in this matter. It was brought in 1975, and gives complainants the right to bring an action against a corporation under Section 241(2)(c) of the Canadian Business Corporations Act. Many provinces, like Ontario, also have an Oppression Remedy. The Court can grant a remedy if the powers of the Directors of a corporation or its affiliates have been exercised in a manner that is oppressive or unfairly prejudicial, or disregards the interests of any security holder, creditor, director or officer of the company. It has great scope in remedies including cash damages, appointing a receiver, dissolving the corporation, or amending the charter documents of the corporation. It allows the court to look at personal relationships between companies as well as legal entities, including “self-dealing”.
Mr. Justice Veale enumerated many of the shocking relationships and egregious behaviours of the various actors on the Board of BYG, and found that the Oppression Remedy would give the Court the power to deal fairly with Chafee and Dickson’s behaviour. He also said that the manner in which the creditors from the bankruptcy were paid out would be determined in the usual priorizing of creditors by the receiver.
This is a very significant decision by the Court in terms of getting polluters to pay for the mess they leave behind. It is an important precedent.
The decision can be found at http://www.yukoncourts.ca/judgements/supreme/2006/yukon_and__canada_v_byg_natural_resources_2007yksc02.pdf.