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Real Property - Interest in Land

. Prism Resources Inc. v. Detour Gold Corporation

In Prism Resources Inc. v. Detour Gold Corporation (Ont CA, 2022) the Court of Appeal considered when mining royalties are an 'interest in land':
[2] The motion judge granted summary judgment, concluding that Prism’s royalty interest was an interest in land under the principles of law set by the Supreme Court in Bank of Montreal v. Dynex Petroleum Ltd., 2002 SCC 7, [2002] 1 S.C.R. 146, as explained by this court in Third Eye Capital Corp. v. Dianor Resources Inc., 2018 ONCA 253, 141 O.R. (3d) 192.


[10] It is common ground that Dynex changed property law in Canada, and that Prism and Conquest were both aware of that change when they negotiated the 2004 Letter Agreement.

[11] At para. 22 of Dynex, Major J. noted that Canadian common law should recognize that a “royalty interest” or an “overriding royalty interest” can be an interest in land under two conditions: first, if “the language used in describing the interest is sufficiently precise to show that the parties intended the royalty to be a grant of an interest in land, rather than a contractual right to a portion of the oil and gas substances recovered from the land”; and, second, if “the interest, out of which the royalty is carved, is itself an interest in land”.

[12] The motion judge was well-aware of the reasoning in Dynex, noting, at para. 18: “The ruling in Dynex specifically changed the law to bring it in line with industry practice, to permit a royalty that consists of a right to payment of profits to be an interest in land”. After specifying the two-part test in Dynex, the motion judge said, at para. 19: “There is no issue in this case that the second part of the test set out in Dynex is satisfied in that the property interest claimed by Prism has been carved out of Conquest’s property interest”. This finding was not appealed, and is incontestable in any event because Prism’s interest in the lands owned by Boliden was registrable although never registered. The 1999 Agreement provided that: “A party will be entitled to register this Agreement or notice thereof against the Property, subject in the case of the Leases to the consent of the Ministry, and each party will cooperate in effecting the registration of any such notice and execute any documentation required in connection therewith”.

[13] Writing for this court in Third Eye, in glossing Dynex, I made several statements that are pertinent to this appeal. I noted that the Supreme Court had upheld the approach of the Court of Appeal of Alberta in Dynex, which was that “[t]he parties’ intent could be inferred”: at para. 46. About the application of Dynex, I noted, at paras. 54-55:
Several points in the decision are of continuing importance. Justice Major noted, at para. 6: “For substantially the same reasons as the Court of Appeal, I conclude that overriding royalty interests can be interests in land.” He added, at para. 19, that he much preferred that court’s “compelling insight into the evolution of the law”. In my view, this language gives continuing relevance to the approach and the ruling of the Court of Appeal of Alberta, especially its statement, at para. 73, that a court must “examine the parties’ intentions from the agreement as a whole, along with the surrounding circumstances, as opposed to searching for some magic words.”

I also note that Major J. approved the holding of Laskin J. in dissent in Saskatchewan Minerals. He noted, at para. 11, that: “[t]he effect of Laskin J.’s reasons was to render inapplicable, at least insofar as overriding royalties, the common law rule against creating interests in land out of incorporeal interests.” He described Laskin J.’s holding, at para. 12: “[T]he intentions of the parties judged by the language creating the royalty would determine whether the parties intended to create an interest in land or to create contractual rights only.” This was the Supreme Court’s ultimate holding in Dynex.
[14] This analysis led me to conclude, at para. 65 of Third Eye, that “contractual terms are not necessarily determinative of whether an interest in land was intended; the language does not require magic words to demonstrate the parties’ intention”. The New Brunswick courts took a similar approach in Blue Note Mining Inc. v. Fern Trust (Trustee of), 2008 NBQB 310, 337 N.B.R. (2d) 116, aff’d 2009 NBCA 17, 342 N.B.R. (2d) 151.


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