THE DIAMOND PAGE — Equity Investments suing Fipke,

The Lac de Gras diamond play in the Northwest Territories has taken another litigious turn.

In a lawsuit filed in the Supreme Court of British Columbia, Equity Investments (ME) alleges it was “improperly induced” to sell its interest in Dia Met Minerals (TSE) to certain associates of Dia Met, without proper disclosure of the results of their exploration activities.

Specifically, Equity alleges it was not informed about material results from Dia Met’s 1988 and 1989 exploration program in the Territories, “including any significant geological or geochemical results and any opinions they were in possession of with respect to those results.” Equity further alleges it was not informed Dia Met had acquired about 1,554 sq. km of claims in the region.

The case is the second lawsuit to be initiated against individuals and companies involved in the original diamond exploration venture in the Territories.

Earlier this year, Pioneer Metals (TSE) launched a suit against Stewart Blusson, one of its former directors and officers. Blusson was involved in exploring for diamonds in the Territories with Dia Met Chairman Charles Fipke and others and currently has a 10% interest in the joint venture being advanced by BHP Minerals Canada and Dia Met.

Pioneer alleges, among other things, that Blusson offered Pioneer the right to participate in the project in August, 1989, but did not provide “full information and advice” about the play. Pioneer further claims that, not having this “full information and advice,” it made an “uninformed decision” to the effect that it was not interested in acquiring an interest. Blusson, who is defending the action, claims Pioneer declined several invitations to participate in the project. He also says Pioneer directors retained the right to conduct their own independent business activities. Blusson’s involvement with the diamond venture pre-dates his involvement with Pioneer (a fact not disputed by Pioneer), and he claims it was “well-understood” that he owed duties of confidentiality to persons other than representatives of Pioneer.

The Equity lawsuit is focused on an agreement, reached on Jan. 10, 1989, whereby the Equity group agreed to sell and option up to 1.5 million shares of Dia Met to a company acting on behalf of Fipke. (Dia Met was never a party to the sale and option agreement.) The prices ranged from 25 cents to 32 cents per share.

From 1986 through 1988, Dia Met received flow-through financing from a series of limited partnerships managed by the Equity group. In return, the group received the Dia Met shares.

Equity is seeking to rescind the sale and option agreement to obtain the return of 825,000 Dia Met shares conveyed under that agreement. Fipke, along with other companies and individuals associated with him, are named as defendants in the action.

Both Fipke and Dia Met President James Eccott say the Equity action will be “vigorously defended to the fullest extent.” The company also intends to investigate the matter immediately “and take appropriate redress if it believes the action was commenced to affect the market price of the shares of Equity and/or Dia Met”.

Dia Met’s legal counsel says there is “no merit” to the Equity action, particularly as the first discovery of a potential kimberlite target (Point Lake) was not made until April, 1990. The company will also likely point out that Equity was selling its Dia Met shares on the open market well before the January, 1990, agreement.

Meanwhile, Equity, has been advised by counsel that its likelihood of success in asserting its claims and the level of recovery (if successful) “are both difficult to quantify until the litigation process is further advanced.”