Strateco Resources | Legal Proceedings

 

Motion to institute proceedings

On December 11, 2014, Strateco claimed CA $189,987,663 from the Quebec Government in a motion to institute proceedings filed with the Superior Court of Quebec. Strateco is seeking damages for, among other things, the loss of its investment in the Matoush project arising from the wrongful actions of the Minister of Sustainable Development, Environment and the Fight against Climate Change and the Quebec Government.

Related documents:

Motion to institute proceedings (unofficial translation)

Press release – December 11, 2014

 

On May 14, 2015, Strateco has agreed with the Attorney General of Quebec on the modalities of the procedure concerning the Strateco’s pursuit of CAN $ 189,987,663. The agreement was ratified at the Quebec Superior Court on May 21, 2015. Strateco and the Attorney General of Quebec have also agreed to an agreement as to the conduct of the proceedings.

Related document:

- Agreement between Strateco and the Attorney General of Quebec - SCHEDULE (unofficial translation)

 

On June 25, 2015, the Associate Chief Justice appointed the Honourable Justice Denis Jacques of the Quebec Superior Court as the coordinating judge of the proceedings. This appointment is aimed at ensuring that the proceedings are handled efficiently.

 

On June 26, 2015, as provided for in the agreement between Strateco and the Attorney General of Quebec, the latter filed the Quebec government’s defense.

Related document:

- Press release - July 9, 2015

 

Strateco interrogated Quebec government representatives in September 2015, and Strateco’s President and CEO, Guy Hebert, was in turn interrogated by the Crees’ prosecutors in late October. Strateco also signed an agreement with the Crees and the Attorney General of Quebec regarding the terms of Cree participation in the claim proceedings, to the satisfaction of all parties. In accordance with that agreement, Strateco and the Attorney General interrogated Isaac Voyageur, a Cree representative, on November 30, 2015.

 

In November 2015, the government (the defendant) and Mr. Hébert (the plaintiff) submitted the undertakings they made at their respective interrogations.


On January 13, 2016, a case management session was held in Québec City before the Honourable Denis Jacques, J.C.S. It was agreed that as one of the next steps,the application for registration for instruction and trial should be filed on or before March 16, 2016, and the joint declaration that the file is complete should be produced by all the parties on or before April 8, 2016.

 

The Matoush litigation is also expected to proceed to a hearing (trial) expected to last approximately 35 days during January, February and March 2017.

 

On February 24, 2016, Strateco announced that it had amended its motion to instituting proceedings in the Superior Court of Quebec on February 23, 2016, to claim $10 million in punitive damages from the Attorney General of Quebec. This amount is in addition to the $189,987,663 claimed by Strateco from the Government of Quebec on December 11, 2014, for the loss of its investment in the Matoush project.

Related document:

- Press release - February 24, 2016

- Amended motion to institute proceedings (in French only)

 

On May 5, 2016, the Honourable Justice Denis Jacques confirmed he would be the judge for the trial concerning the pursuit of Strateco against the Quebec government. The trial will begin on January 9, 2017 and will end during the week of February 20, 2017; it will be a 25 days trial.

 

Initial order under the Companies’ Creditors Arrangement Act

On June 9, 2015, an initial order regarding Strateco was issued under the Companies' Creditors Arrangement Act by the Superior Court of Quebec (Commercial Division). The Court has granted a stay of proceedings until July 9th, 2015, renewable thereafter.

Related documents:

- Press release

- Petition for the issuance of an initial order

- Initial Order

 

The initial order issued under the CCAA and the relevant legal proceedings can be accessed directly from Ernst & Young's website.

 

The coordinating judge of the Superior Court of Quebec (Commercial Division) has appointed the Honourable Justice Danielle Turcotte to oversee the CCAA proceedings instituted by Strateco. On July 8, 2015, at Strateco’s request, the Superior Court of Quebec (Commercial Division) approved an extension of the protection provided by the initial order until September 3, 2015, to enable Strateco to finalize its efforts to finance the $190 million lawsuit against the Quebec government. 

 

Justice Turcotte also rendered her decision, on July 8, 2015, regarding the request for the creation of two super-priority charges to protect the professionals and the directors, which was opposed by Toro Energy Limited (« Toro »). As requested by Strateco, the judge ordered an administrative charge of $2 million to protect the professionals and another charge of $2.5 million to protect the directors. These charges have priority over charges of Toro and other secured creditors.

Related documents:

- Judgment « Amended and Restated Initial Order » - July 8, 2015

- Transcription révisée des motifs du jugement rendu le 8 juillet 2015 (only in French)

- Press release - July 9, 2015

 

On October 23, 2015, the Honourable Justice Danielle Turcotte, S.C.J. issued a judgement:

a) Authorizing Strateco to close on the $4 million interim financing from Third Eye and creating a super-priority charge over Strateco's assets to secure the obligations owing under the financing;

b) Authorizing Strateco to enter into a contingency fee arrangement with Irving Mitchell Kalichman, which is representing Strateco in the Litigation; and

c) Extending the protection granted by the initial order until January 29, 2016.

 

The Third Eye financing closed on October 29, 2015.

 

On January 26, 2016, at Strateco’s request and in light of the imminent expiry of the suspension period on January 29, 2016, Judge Turcotte approved an extension of the protection afforded by the original order until January 27, 2017.

 

Legal Proceedings History

For over two years, from August 2011, Strateco has been awaiting the Sustainable Development, Environment and the Fight against Climate Change ("MDDELCC") minister’s decision on whether or not to grant the certificate of authorization for the Matoush underground exploration project since. The Minister’s decision was the only one still required for the project to go ahead. Strateco has received all the other required permits, including those from the federal review panel, the federal Minister of the Environment and the Canadian Nuclear Safety Commission, as well as a positive recommendation from the provincial review committee (“COMEX”). Furthermore, since the beginning of the Matoush project permitting process, Strateco has been granted more than 20 certificates, permits and leases at the provincial level alone.

Related documents:

- COMEX Report – July 2011 (in French only)

- Press release – August 2, 2011

- Press release – February 3, 2012

- Press release – October 17, 2012

 

Due to the passage of time and the MDDELCC minister’s failure to make a decision, Strateco sent the Minister a letter on November 13, 2012, asking him to render a decision on the authorization required for the Matoush project by November 28, 2012.

 

After waiting more than 18 months, with still no decision, Strateco filed a motion for mandamus and declaratory judgment with the Quebec Superior Court (the “Court”) on January 17, 2013, aimed, among other things, at obtaining a decision from the MDDELCC minister.

 

Strateco’s motion sought a decision on the issuance of a certificate of authorization by the MDDELCC minister pursuant to Section 164 of the Environmental Quality Act. In addition, in the motion for declaratory judgement, Strateco asked the Court to declare null and void one of the conditions in the COMEX report that, in effect, delegates a provincial jurisdiction to a third party by requiring ratification of a written agreement on social acceptability.

Related documents:

- Motion for mandamus and declaratory judgment (in French only)

- Press release – January 17, 2013

 

In the context of the motion for mandamus and declaratory judgment, Strateco then filed a motion for special case management on February 7, 2013, asking the Associate Chief Justice of the Court to appoint a judge to oversee the proper conduct of the proceedings. The motion was favourably received and the Honourable Justice Danielle Blondin of the Quebec Superior Court was appointed for that purpose.

Related documents:

- Press release – February 8, 2013

- Press release – February 19, 2013

 

At the initial case management session on its motion for mandamus and declaratory judgment held in Quebec City on March 20, 2013, Strateco informed the Court that it had decided to amend its petition to limit it to the motion for mandamus. This decision was made in the interest of accelerating the judicial process.

Related document:

- Press release – March 21, 2013

 

On March 28, 2013, the MDDELCC minister announced studies on the uranium industry ahead of a mandate to be given to the BAPE. The mandate, expected for the fall 2014, focused on environmental and social impacts of uranium exploration and mining in Quebec. The Minister also declared that no certificate of authorization would be issued for uranium exploration and mining projects in Quebec until the BAPE tabled its report.

 

Strateco was deeply shocked by this announcement, especially as the Minister notified Management less than two hours before the public announcement. Following the imposition of the moratorium by the Minister, Strateco amended its motion for mandamus; on April 22, 2013, Strateco filed new motions with the Court and sent a formal notice for damages to the Government of Quebec.

Related document :

- Press release – March 28, 2013

 

As a first step, Strateco served the MDDELCC with a notice for damages set at an initial amount of $16,000,000, representing the loss in Strateco’s market capitalization from the time of the MDDELCC minister’s announcement up until April 1, 2013.

 

Through its legal counsel, Strateco informed the MDDELCC minister that it held him liable for damages caused by his misconduct up until that time, and that it had given instructions for legal proceedings to be instituted to obtain compensatory and punitive damages.

 

Strateco also amended its motion for mandamus, which originally asked the Court to order the Minister to render a decision on the certification of authorization. Strateco was then asking the Court to order the Minister to issue the certificate of authorization.

 

In addition, Strateco asked the Court to issue a safeguard order. Strateco believed that, with the position taken in its press release dated March 28, 2013, and in subsequent public statements, the government had upset the balance between the parties. The impact was such that, without a rapid safeguard and recovery order, Strateco was unlikely to be able to maintain its Matoush facilities or cover the costs essential to the viability of this project pending the Court ruling. Given the circumstances, Strateco took the measures required to minimize its expenses and attempt to preserve the viability of the Matoush project pending the final ruling.

 

Considering the urgency of the situation, the balance of convenience, the fact that Strateco will suffer serious and irreparable harm and the apparent illegality of the government's position, Strateco has asked the Court to order the government to pay a sum of $420,000 to $800,000 on the last day of each month starting on May 31, 2013, until at least September 30. These amounts corresponded to the shortfall between the funds available to Strateco and the amounts needed to pay the expenditures essential to the viability of the Matoush project. The hearings for the safeguard order took place on June 13 and 14 at Quebec Superior Court.

Related documents:

Press release – April 22, 2013

Press release – May 15, 2013

 

Following the hearings, the MDDELCC minister notified Strateco on June 21, 2013, that he planed to “refuse to issue the permit for the Matoush underground exploration project” due to “a lack of sufficient social acceptability”. The notification also gave Strateco 60 days to present its "observations" to the Minister regarding his intended refusal to issue the requested permit. The facts as presented by the Minister in his notification entirely disregard his earlier decision.

Related document:

- Press release June 25, 2013

 

On July 5, 2013, the Minister presented a motion asking the Court to dismiss the mandamus proceedings.

 

On July 31, 2013, the Court issued a ruling rejecting the motion from Strateco for a safeguard measure. One reason for the ruling was that the Court could not, at this stage in the proceedings, assume what the final ruling would be on the main application for mandamus. In addition, the Court stated that a quantifiable prejudice can be compensated by damages and does not, in principle, cause the irreparable prejudice required for a safeguard order to be issued. The Court added, citing a Supreme Court of Canada ruling, that financial prejudice may be irreparable in nature only in a case where a court ruling has the effect of causing the loss of part of a business or where one party may suffer permanent commercial loss. 

Related document:

- Press release – August 1, 2013

 

On August 15, 2013, at the request of the MDDELCC, the Company agreed to stay the legal proceedings underway. In exchange, the MDDELCC granted the Company a 30-day extension to submit its observations on the Minister’s notice, and provided some of the documents and information requested by the Company. Under the stay of proceedings agreement reached in court between the Company and the MDDELCC, the Minister had 30 days following the filing of the Company’s observations to make its decision on the granting of a certificate of authorization, otherwise the stay of legal proceedings could end.

 

On September 20, 2013, the Company sent the MDDELCC minister its observations within the required timeframe. These observations were aimed at demonstrating the lack of justification for the MDDELCC minister’s intended refusal to issue the certificate of authorisation for the Matoush project due to “a lack of sufficient social acceptability”. The Company considered that the Minister had all the elements needed to make a favourable decision regarding the Matoush project.

 

In its observations, without acknowledging the "adequacy of social acceptability" as a suitable reason for the Minister’s decision, the Company pointed to the lack of legislation, directives, policies, guidelines or any other document that might provide a clear understanding of what constitutes social acceptability in Quebec. The Company also indicated to the Minister that a project’s social acceptability cannot be limited to a single stakeholder, in this case the Crees. Furthermore, the Minister cannot abdicate his authority and give the Crees a veto on Category III lands, thereby creating a historical precedent in the development of Quebec’s natural resources.

 

In its observations, the Company also stressed that the certificate of authorisation required for the Matoush project to proceed is an exploration permit, not a mining permit. The advanced exploration phase is needed to obtain additional technical data, which will provide the data required to properly assess the environmental impact and feasibility of a future operating phase and provide more accurate answers to the concerns raised by the communities.

Related documents:

Strateco’s observations sent to the Minister

Press release – September 23, 2013

 

Despite the filing of the Company’s observations on September 20, 2013, and the expiry of the agreed stay period, the Minister had still not rendered a decision on the granting of the certificate of authorization. The Company announced on October 29, 2013, that it was picking up where it left off with its legal action against the Minister.

Related document:

Press release – October 29, 2013

 

On November 7, 2013, the Minister notified the Company that his decision was to refuse to deliver the certificate of authorization for the Matoush underground exploration phase.

Related document:

- Press release – November 11, 2013

 

On December 5, 2013, the Company filed a motion to invalidate the decision rendered by the Minister, on November 7, 2013. In addition to seeking the invalidation of the decision, the Company was asking the Superior Court to force the Minister to issue the certificate of authorization needed for the advanced exploration phase. The way the Company was treated throughout the licensing process showd that the Minister no longer has the impartiality required to assess the Company’s application for authorization on the basis of its merits.

Related documents:

- Motion to invalidate (in French only)

- Press release – December 5, 2013

 

The first hearing on the motion filed by the Company was held on January 24, 2014. The matters to be discussed at the hearing were postponed to a later date due to the motion filed on January 10, 2014, by Quebec’s Attorney General for special case management of the motion to invalidate. This second motion, heard by the Associate Chief Justice on February 5, 2014, was aimed at ensuring that the proceedings were handled efficiently and facilitating the resolution of the case by appointing a judge responsible for the proper handling of the case. The Company did not oppose it. The Associate Chief Justice appointed the honourable Justice Danielle Blondin of Quebec Superior Court, who was in charge of the legal proceedings in 2013, including the Company’s motion for mandamus, to hear the motion to invalidate.

Related documents:

- Press release – January 29, 2014

- Press relase – February 10, 2014

 

On December 24, 2013, the Crees filed a request to intervene in the Company’s motion to invalidate. On February 20, 2014, a hearing was held on the type and scope of the Cree intervention. The honourable judge Danielle Blondin took the question of the Cree participation under deliberation and rendered her judgement in July 2014. The ruling authorized the Crees to participate in relation to all issues and at all stages of the proceedings.

 

In addition, with respect to the Company’s motion to invalidate, the Company received, on October 28, 2014, the defense of the Attorney General of Quebec.

 

The Company’s board of directors subsequently decided to withdraw the motion to invalidate and replace it with the motion to institute proceedings.

 

The Company will continue with its legal actions and intends to keep pursuing a vigorous defence of the interests of its shareholders.