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B LAW402 (43)

Lac Minerals.doc

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University of Alberta
Business Law
B LAW402
Elaine Geddes

Lac Minerals Ltd. v. International Corona Resources Ltd. 1989 Supreme Court of Canada International Corona Resources Ltd., a junior mining company, carried out an extensive exploration program and made arrangements to attempt to acquire the Williams property. Representatives from a senior mining company, Lac Minerals, read of the test results in a public newsletter and arranged to visit the Corona property. Corona showed the Lac representatives confidential geological findings and disclosed the geological theory of the site and the importance of the Williams property. Detailed private information was left with Lac officials during further discussions about development and financing options. Corona was advised by Lac to aggressively pursue the Williams property. The matter of confidentiality was not raised. The Lac representatives, after their visit to Corona's site, instructed their personnel to gather information on the area in question and to stake favorable claims east of the Corona property. Lac acquired the Williams property but never informed Corona at any time of its intention of acquiring that property. Later negotiations between Lac and Corona for the Williams property to be turned over to Corona failed. Three main issues were raised in this appeal: (1) did a fiduciary relationship exist between Corona and Lac which was breached by Lac's acquisition of the Williams property? (2) did Lac misuse confidential information obtained by it from Corona and thereby deprive Corona of the Williams property? and, (3) if either question were answered affirmatively, what was the appropriate remedy? Per La Forest J.: Lac breached a duty of confidence owed to Corona. The test for whether there has been a breach of confidence involves establishing three elements: (1) that the information conveyed was confidential; (2) that it was communicated in confidence; and (3) that it was misused by the party to whom it was communicated. Corona had communicated private, unpublished information and, although the matter of confidence had not been raised, there was a mutual understanding between the parties that they were working towards a joint venture and that valuable information was communicated to Lac under circumstances giving rise to an obligation of confidence. The information provided by Corona was the springboard that led to Lac's acquisition of the Williams property. This use had not been authorized by Corona. The receipt of confidential information in circumstances of confidence establishes a duty not to use that information for any purpose other than that for which it was conveyed. The relevant question to be asked is what is the confidee entitled to do with the information, not what is the confidee prohibited from doing with it, and the onus falls on the confidee to show that the use of the confidential information was not prohibited. If the information is used for such a prohibited purpose, the confider is entitled to a remedy to the extent of the detriment suffered. Lac acted to Corona's detriment when it used the confidential information to acquire the Williams property which Corona would have otherwise acquired. Lac was uniquely disabled from pursuing property in the area for a period of time; this was not an unacceptable result. It could have either negotiated a relationship with Corona based on the disclosure of confidential information or it could have pursued property in the area for itself on the basis of publicly available information. Lac could not have the best of both worlds. A constructive trust was the only just remedy here, regardless of whether this remedy was based on breach of confidence or breach of a fiduciary relationship. The remedies available under one head are those available to the other. Given a breach of a duty of confidence, the finding of a fiduciary relationship was not strictly necessary. The law of confidence and the law relating to fiduciary obligations are not coextensive and yet are not completely distinct. A claim for breach of confidence will only be made out, however, when it is shown that the confidee has misused the information to the detriment of the confider. Fiduciary law, however, is concerned with the duty of loyalty and does not require that harm result. Duties of confidence, unlike fiduciary obligations, can arise outside a direct relationship. Another difference is that breach of confidence also has a jurisdictional base at law, and accordingly can draw on remedies available in both law and equity, whereas fiduciary obligations arise only in equity and can only draw upon equitable remedies. The following common features provide a rough and ready guide to whether or not a fiduciary obligation should be imposed on a new relationship: (1) the fiduciary has scope for the exercise of some discretion or power; (2) the fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests; and (3) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. A fiduciary obligation can arise out of the specific circumstances of a relati
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