First Majestic Silver Corp. et al. v. Davila et al., 2013 BCCA 458

• Judge: Chiasson, J.A.
• Court: Court of Appeal (British Columbia)
• Case Date: Wednesday October 09, 2013
• Jurisdiction: British Columbia
• Citations: 2013 BCCA 458;(2013), 344 B.C.A.C. 262 (CA)

First Majestic Silver Corp. v. Davila (2013), 344 B.C.A.C. 262 (CA);

    587 W.A.C. 262

MLB headnote and full text

Temp. Cite: [2013] B.C.A.C. TBEd. OC.055

First Majestic Silver Corp., First Silver Reserve Inc., and Minera El Pilon, S.A. De C.V. (respondents/plaintiffs) v. Hector Davila Santos and Minerales Y Minas Mexicanas, S.A. De C.V. (appellants/defendants)

(CA040924; 2013 BCCA 458)

Indexed As: First Majestic Silver Corp. et al. v. Davila et al.

British Columbia Court of Appeal

Chiasson, J.A.

October 23, 2013.

Summary:

Davila was a director and the president and majority shareholder of the plaintiff First Silver, which operated a silver mine in Mexico. In April 2006, he entered into an agreement to sell his 63% holding in First Silver to the plaintiff First Majestic for $53 million. Thereafter, he ceased to be a director and an officer of First Silver. The plaintiffs sued Davila and a company controlled by him, alleging fraud and breach of fiduciary duty in relation to Davila's personal acquisition of a property that First Silver had had an option on.

The British Columbia Supreme Court, in a decision reported at [2013] B.C.T.C. Uned. 717, concluded that Davila had breached his fiduciary duty to First Silver by engaging in misrepresentation, misconduct and wrongful acts in order to advance his own self-interest. The court awarded the plaintiffs equitable damages (equitable compensation) for the loss of opportunity (loss of profits) from the operation of the mine since 2008. The court assessed damages at approximately $93.84 million U.S. The defendants appealed, seeking to overturn the court's finding of liability or, alternatively, the award of damages. The plaintiffs cross-appealed respecting a prejudgment ruling in which the court required them to elect between the remedies of equitable damages and disgorgement of the defendants' gain/benefit. The plaintiffs applied under s. 10(2)(b) of the Court of Appeal Act to have the defendants post security for the trial judgment and, if granted, for a further order that, in the absence of the security being posted, they be granted leave to apply to have the appeal dismissed as abandoned.

The British Columbia Court of Appeal, per D. Smith, J.A., in a decision reported at 340 B.C.A.C. 117; 579 W.A.C. 117, ordered the defendants to post $79 million U.S. as security for the trial judgment or, alternatively, a letter of credit in that amount within 90 days, with liberty to apply for further directions on the form of the security, if necessary. In the event that the defendants failed to comply with the order, the plaintiffs were granted leave to apply for an order dismissing the appeal as abandoned. The defendants appealed. First Majestic applied for a post-judgment worldwide Mareva injunction prohibiting the defendants from disposing of, pledging, mortgaging, transferring, diminishing or assigning the value of the mine. They obtained an interim order to that effect.

The British Columbia Supreme Court, in a June 24, 2013 decision reported at [2013] B.C.T.C. Uned. 1209, issued the injunction as requested. First Majestic applied to vary the injunction and for additional terms.

The British Columbia Supreme Court, in a decision reported at [2013] B.C.T.C. Uned. 1704, varied the injunction to provide for extraction of up to 500 tons of ore per day. The plaintiffs unsuccessfully applied to have the proviso deleted (see [2013] B.C.T.C. Uned. 1212). The defendants did not post the security. The plaintiffs applied to dismiss the appeal. The defendants applied for further directions on the form of security required pursuant to the security order to the effect that the June 24 injunction order, as varied, was sufficient security under the order. The defendants relied on the injunction, as varied, and the fact that, subject to settling the trial judge's order, the appeal was ready to be set for hearing to establish changed circumstances. The defendants also sought to introduce fresh evidence respecting the difficulties that they faced financially.

The British Columbia Court of Appeal, per Chiasson, J.A., refused to admit the fresh evidence where most of it was available at the time of the hearing before D. Smith, J.A., and there was no explanation for its absence. The court held that it lacked authority to vary the security order as there had been no change in circumstances. Alternatively, it was not in the interest of justice to vary the order. There had been avenues of recourse open to the defendants, but disregarding an order of the court and applying after the last minute to vary that order was not one of them. The court dismissed the appeal for the failure to comply with the security order.

Editor's note: There are several other prior cases involving these parties which have been assigned the Indexed As of either First Majestic Silver Corp. et al. v. Santos et al. or First Majestic Silver Corp. et al. v. Davila et al.

Courts - Topic 2110

Jurisdiction - Appellate jurisdiction - Single appellate judge - See paragraphs 14 to 36.

Practice - Topic 6076

Judgments and orders - Payment of judgments - Security for payment pending appeal - See paragraphs 14 to 36.

Practice - Topic 6101

Judgments and orders - Amendments, rescission and variation of judgments and orders - Jurisdiction - See paragraphs 14 to 36.

Practice - Topic 6107

Judgments and orders - Amendments, rescission and variation of judgments and orders - Amendment or variation - Circumstances permitting - See paragraphs 14 to 36.

Practice - Topic 8862

Appeals - Quashing or dismissal of appeals - Grounds for - See paragraphs 14 to 36.

Practice - Topic 9031

Appeals - Evidence on appeal - Admission of "new evidence" or "fresh evidence" - See paragraphs 24 to 26.

Cases Noticed:

Shieh v. Certified General Accountants Association (B.C.), [2008] B.C.A.C. Uned. 4; 2008 BCCA 24, refd to. [para. 9].

Glase v. Glase (2009), 274 B.C.A.C. 1; 463 W.A.C. 1; 2009 BCCA 321, refd to. [para. 16].

Larkin v. Glase - see Glase v. Glase.

Farmers Insurance Co. of Oregon v. Brown (2005), 218 B.C.A.C. 285; 359 W.A.C. 285; 2005 BCCA 577, refd to. [para. 19].

Hughes v. Khalighi (2008), 262 B.C.A.C. 121; 441 W.A.C. 121; 2008 BCCA 469, refd to. [para. 20].

International Hi-Tech Industries Inc. v. FANUC Robotics Canada Ltd. et al. (2007), 250 B.C.A.C. 43; 416 W.A.C. 43; 2007 BCCA 639, refd to. [para. 20].

Majormaki Holdings LLP v. Wong et al. (2008), 261 B.C.A.C. 212; 440 W.A.C. 212; 2008 BCCA 422, not appld. [para. 20].

Golder Associates Ltd. v. North Coast Wind Energy Corp. (2010), 288 B.C.A.C. 130; 488 W.A.C. 130; 2010 BCCA 263, refd to. [para. 25].

Counsel:

D.P. Church, Q.C., and M.W. Bühler, for the appellants;

H. Shapray, Q.C., and B. Cramer, for the respondents.

These applications were heard in Chambers at Vancouver, British Columbia on October 9, 2013, by Chiasson, J.A., of the British Columbia Court of Appeal, who delivered the following reasons for judgment on October 23, 2013.