First Majestic Silver Corp. et al. v. Davila et al., 2014 BCCA 115

• Judge: Newbury, Frankel and Garson, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: Tuesday December 10, 2013
• Jurisdiction: British Columbia
• Citations: 2014 BCCA 115;(2014), 353 B.C.A.C. 116 (CA)

First Majestic Silver Corp. v. Davila (2014), 353 B.C.A.C. 116 (CA);

    603 W.A.C. 116

MLB headnote and full text

Temp. Cite: [2014] B.C.A.C. TBEd. MR.036

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; 2014 BCCA 115)

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

British Columbia Court of Appeal

Newbury, Frankel and Garson, JJ.A.

March 27, 2014.

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., in a decision reported at 344 B.C.A.C. 262; 587 W.A.C. 262, 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 at 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. The defendants applied to discharge Chiasson, J.A.'s order on the ground that a single justice lacked jurisdiction in the circumstances to dismiss an appeal. The plaintiffs moved for leave to adduce new evidence to establish that the defendants continued to violate court orders. The plaintiffs asserted that the new evidence directly belied the defendants' assertion that the injunction should be considered adequate security.

The British Columbia Court of Appeal allowed the application to discharge Chiasson, J.A.'s order. A justice in chambers had statutory jurisdiction to dismiss an appeal for failure to comply with the Court of Appeal Act, the Court of Appeal Rules or an order extending or shortening time, but not for a failure to comply with another order. Therefore Chiasson, J.A., lacked the authority to dismiss the appeal for the defendant's non-compliance with the order to post security for the trial judgment. The court affirmed that Chiasson, J.A., lacked the authority to vary D. Smith, J.A.'s order and he would have lacked jurisdiction even if the circumstances had changed such that varying the order might be justified. The court dismissed the motion to introduce fresh evidence.

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 2015

Jurisdiction - General principles - Controlling abuse of its process - See paragraphs 32 and 33.

Courts - Topic 2083

Jurisdiction - Extent of - Statutory courts - See paragraph 29.

Courts - Topic 2110

Jurisdiction - Appellate jurisdiction - Single appellate judge - See paragraphs 16 to 38.

Courts - Topic 2221

Jurisdiction - Consent - General - See paragraphs 34 to 36.

Practice - Topic 6076

Judgments and orders - Payment of judgments - Security for payment pending appeal - See paragraphs 16 to 36.

Practice - Topic 6101

Judgments and orders - Amendments, rescission and variation of judgments and orders - Jurisdiction - See paragraphs 37 and 38.

Practice - Topic 6107

Judgments and orders - Amendments, rescission and variation of judgments and orders - Amendment or variation - Circumstances permitting - See paragraphs 37 and 38.

Practice - Topic 8862

Appeals - Quashing or dismissal of appeals - Grounds for - See paragraphs 16 to 36.

Practice - Topic 8863

Appeals - Quashing or dismissal of appeals - Jurisdiction - See paragraphs 16 to 36.

Practice - Topic 8865

Appeals - Quashing or dismissal of appeals - Abuse of process - See paragraphs 32 to 33.

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previously raised - See paragraphs 34 to 36.

Statutes - Topic 1554

Interpretation - Construction where meaning is not plain - Implied meaning - Stating one thing implies exclusion of another (expressio unius est exclusio alterius) - See paragraph 30.

Statutes - Topic 2265

Interpretation - Presumptions and rules in aid - Against change in terminological usage (consistent expression) - See paragraph 26.

Statutes - Topic 2280

Interpretation - Presumptions and rules in aid - Against surplusage - See paragraphs 27 and 28.

Cases Noticed:

Haldorson et al. v. Coquitlam (City) (2000), 149 B.C.A.C. 197; 244 W.A.C. 197; 2000 BCCA 672, refd to. [para. 13].

Shieh v. Certified General Accountants Association (B.C.), [2008] B.C.A.C. Uned. 4; 2008 BCCA 24, refd to. [para. 19].

Stromotich v. Stromotich et al. (2005), 214 B.C.A.C. 97; 353 W.A.C. 97; 2005 BCCA 82, refd to. [para. 21].

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. 21].

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. 21].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 25].

R. v. Proulx (J.K.D.), [2000] 1 S.C.R. 61; 249 N.R. 201; 142 Man.R.(2d) 161; 212 W.A.C. 161; 2000 SCC 5, refd to. [para. 27].

Cunningham v. Lilles et al., [2010] 1 S.C.R. 331; 399 N.R. 326; 283 B.C.A.C. 280; 480 W.A.C. 280; 2010 SCC 10, refd to. [para. 29].

R. v. Cunningham - see Cunningham v. Lilles et al.

ATCO Gas and Pipelines Ltd. v. Energy and Utilities Board (Alta.), [2006] 1 S.C.R. 140; 344 N.R. 293; 380 A.R. 1; 363 W.A.C. 1; 2006 SCC 4, refd to. [para. 29].

Glase v. Glase (2009), 274 B.C.A.C. 1; 463 W.A.C. 1; 2009 BCCA 321, refd to. [para. 32].

Larkin v. Glase - see Glase v. Glase.

Besic v. Kerenyi (2012), 321 B.C.A.C. 247; 547 W.A.C. 247; 2012 BCCA 187, refd to. [para. 32].

Pratt, Re (1884), 12 Q.B. Div. 334, refd to. [para. 34].

Baker v. Dumaresq, [1934] S.C.R. 665, appld. [para. 34].

MacLeod v. Harrington (1995), 69 B.C.A.C. 1; 113 W.A.C. 1; 14 B.C.L.R.(3d) 201; 131 D.L.R.(4th) 15 (C.A.), refd to. [para. 35].

Aylmer, Re (1887), 20 Q.B.D. 258 (C.A.), refd to. [para. 35].

Ottawa & New York Railway v. Cornwall (Township) (1916), 30 D.L.R. 664 (S.C.C.), refd to. [para. 35].

Toch v. Grove (2010), 297 B.C.A.C. 16; 504 W.A.C. 16; 2010 BCCA 428, refd to. [para. 41].

Statutes Noticed:

Court of Appeal Act, R.S.B.C. 1996, c. 77, sect. 10, sect. 28 [para. 17].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (2nd Ed.), p. 87 [para. 25].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), pp. 210 [para. 27]; 214 [para. 26].

Counsel:

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

B. Cramer and F. Lamer, for the respondents.

This application was heard at Vancouver, British Columbia, on December 10, 2013, by Newbury, Frankel and Garson, JJ.A., of the British Columbia Court of Appeal. The judgment of the court was delivered on March 27, 2014, with the following reasons:

Garson, J.A. (Frankel, J.A., concurring) - see paragraphs 1 to 40;

Newbury, J.A. - see paragraph 41.