Canada: First Majestic Silver Corp. v Davila, 2013 BCSC 1212 And 2013 BCSC 1704

First Majestic Silver Corp. v. Davila, 2013 BCSC 1212 And 2013 BCSC 1704

These decisions reviewed the appropriate terms for a post-judgment, worldwide Mareva injunction following a successful suit by First Majestic Silver Corp. (First Silver) against a former corporate director (director)¹ for breach of fiduciary duty in connection with a lost corporate opportunity to acquire a mining property in Mexico known as "Bolaños." The director indirectly acquired the Bolaños property when he purchased shares in Minerales y Minas Mexicana, S.A. de C.V. (MMM), the Mexican company that owned the property. Damages were awarded against the director and MMM (Defendants), jointly and severally, in the amount of US$93.84 million. After trial, First Silver applied for a Mareva injunction to freeze the assets of the Defendants within and outside British Columbia in order to secure payment of the judgment. Prior to delivering reasons, the Court issued a status quo order, which imposed a Mareva injunction for 10 days and prohibited the Defendants from diminishing the value of the mine "save and except in the ordinary course of business" (the caveat) unless $79 million was first deposited into trust. On the tenth day of the status quo order being in effect, the Court granted the Mareva injunction "in substantially the same terms" as the status quo order.

The parties returned to court when they could not agree on the injunction terms. First Silver argued that the caveat should be deleted to prevent the Defendants from reducing the mine to a mere shell. In First Silver's submission, the Defendants could to come to court as necessary, explain what they wished to do, and seek to have the order varied accordingly. The Court disagreed, ruling that if the Defendants operated the mine so as to diminish its value beyond the de minimis level, First Silver could apply to vary the terms of the injunction (2013 BCSC 1212).

Three months later, First Silver sought to have the caveat removed again, this time presenting evidence suggesting that the Defendants were extracting up to 800 tons per day of ore, which could deplete two of the mine's key veins in two years. The Court refused to remove the caveat, but ordered the Defendants to produce monthly reports about the mine's operations and to limit mining to 500 tons per day (2013 BCSC 1704). First Silver and the Defendants were each denied leave to appeal. See 2014 BCCA 11.

Footnote

1. Mr. Davila was a director of, inter alia, a subsidiary of First Majestic which assigned the claims to First Majestic.

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