Editorial Fiduciary incantation

It is highly unlikely that anyone involved in the Canadian mineral exploration business during the past few years has not heard of fiduciary duties. The term was made famous during the LAC-Corona lawsuit concerning ownership of the Williams gold mine at Hemlo, Ont. in the 1980s. Since then it has taken on the aura of a magic incantation that will protect junior companies against the evil intentions of their senior counterparts. The latest example comes from northwestern Quebec where Golden Rule Resources and Northern Abitibi Resources say a group comprised of Inco Ltd., Societe d’Exploration Miniere Vior and Cambior Inc. violated its fiduciary duty when negotiating an option agreement.

Readers probably have their own concept of what a fiduciary duty is. Whether that coincides with how the courts interpret a fiduciary duty is another thing.

From here, the whole argument seems somewhat arcane. The final decision on the Hemlo lawsuit was not based on fiduciary duties and fiduciary obligations do not offer any more protection for junior companies today than they did before the suit.

Those companies that feel they’ve been unfairly treated look to the LAC-Corona decision as their salvation, and they invoke the fiduciary incantation for their protection. But fiduciary obligations didn’t enter into the final decision that saw Corona win ownership of the mine. The judges merely applied a well-established principle: because negotiations for a possible business deal had been initiated, Corona was entitled to assume that private business information it revealed would be held in confidence and not used to its detriment.

So next time you hear “fiduciary duty,” don’t think of Corona winning ownership of Canada’s largest gold mine, think of lawyers having to break new legal ground by determining what a fiduciary duty is, establishing that it did exist and proving that it was violated.