Lac Minerals Ltd v International Corona Resources Ltd

International Corona was a junior mining company that was investigating the mineral potential of a property at Hemlo in Northern Ontario. Lac Minerals, a senior mining company, heard of Corona's activity and arranged to visit the site. Corona showed Lac's representatives detailed information about their geological findings, together with their underlying theory about its mineral potential and importance. In further discussions about development and financing options, detailed private information was disclosed. Corona was advised by Lac to aggressively pursue the Williams property. The matter of confidentiality was not raised.

Lac proceeded to stake their own claims east of Corona's property, and acquired the adjacent Williams property on which Corona had been negotiating, without the latter having been advised of Lac's intentions. Subsequent attempts by Corona to negotiate the transfer of Lac's interest in the Williams property failed.

Corona formed a joint venture with Teck Corporation to develop a mine on the Corona property, and proceeded to sue Lac for the return of the property.

The trial judge held that there was no binding contract, but Lac was still liable for breach of confidence and breach of fiduciary duty. He ordered the return of the property to Corona, but allowed Lac's claim in part for a lien for the cost of improvements and other payments.

The Ontario Court of Appeal affirmed the trial judge's ruling, also noting that a constructive trust was an appropriate remedy for both the breach of confidence and fiduciary duty.

There were three questions before the Supreme Court of Canada:

• Did a fiduciary relationship exist between Corona and Lac which was breached by Lac's acquisition of the property?
• Did Lac misuse confidential information obtained by it from Corona and thereby deprive Corona of the property?
• If either question were answered affirmatively, what was the appropriate remedy?

The court ruled unanimously that there had been a breach of confidence, and by 3-2 it was held that no fiduciary duty existed in this case, and by 3-2 that the imposition of a constructive trust on Lac in favour of Corona was the appropriate remedy.

  = majority

  = dissent

The noteworthy aspect is that the Court is reluctant to impose fiduciary duties on arm's-length commercial parties, and that such duties should not supplant or amplify other more appropriate causes for action.

The consequences attendant on a finding of a fiduciary relationship and its breach have resulted in judicial reluctance to do so except where the application of this "blunt tool of equity" is really necessary. It is rare that it is required in the context of an arm's length commercial transaction. ...the fact that confidential information is obtained and misused cannot itself create a fiduciary obligation. No doubt one of the possible incidents of a fiduciary relationship is the exchange of confidential information and restrictions on its use. Where, however, the essence of the complaint is misuse of confidential information, the appropriate cause of action in favour of the party aggrieved is breach of confidence and not breach of fiduciary duty.[2]

The decision has also served to consolidate the law in Canada on the nature and use of confidential information,[3] as well as to clarify the nature of fiduciary relationships and duties in Canadian law.[4][5]

Lac Minerals further confirms the divergence of Canadian common-law jurisprudence on constructive trusts to that of English law, which began to arise in Pettkus v. Becker. While English law is based on the concept of institutional constructive trusts (as it was later described by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council), Canadian courts have broadened it to include remedial constructive trusts. Australian and New Zealand jurisprudence can be characterized as falling in between the other two.[6]