Canada: Dianor Resolved – Jurisdiction To Vest Off Interests In Land In Receivership Upheld, But GORs Hard To Impair

Last Updated: July 18 2019
Article by Stuart Brotman and Dylan A. Chochla


In a number of recent cases, Canadian courts have demonstrated a willingness to vest mining claims free of royalty rights notwithstanding that those rights might constitute interests in land. One such case before the courts in Ontario is Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc.


On June 19, 2019 the Court of Appeal released its decision in Dianor upholding the jurisdiction of the courts to grant vesting orders impairing third party rights, and setting out a test for when assets can be vested free and clear of interests in land. This highly anticipated decision has provided much needed guidance on this issue.


Dianor was an early stage exploration company that owned a number of mining claims in Ontario and Quebec. On the application of its secured lender, Third Eye Capital Corporation, the Ontario Superior Court of Justice granted an order appointing a receiver over Dianor's assets. Fasken acted as counsel to the receiver.

The receivership proceeding involved a contested sale by the receiver of Dianor's Ontario mining claims free of gross overriding royalty ("GOR") rights held by certain third parties. One of the royalty holders opposed court approval of the sale on the basis that the court has no jurisdiction to vest mining claims free of existing royalty rights (effectively terminating the royalty). The primary position of the opposing royalty holder was that its GOR was an interest in land that could not, or should not, be extinguished by a vesting order.

Prior Decisions

The receivership court found that the GORs did not constitute an interest in land and granted the order approving the sale free and clear of the GORs. In its reasons for decision, the receivership court stated as follows:

"I need not consider the claim of Third Eye that even if the royalty rights were an interest in land, a vesting order could be made vesting clear title in the assets being sold on the proviso that fair value be paid to the holder of the royalty rights. I see no reason in logic, however, why the jurisdiction would not be the same whether the royalty rights were or were not an interest in land.1"

The opposing royalty holder appealed the receivership court's decision to the Court of Appeal. The Court of Appeal released a preliminary decision in March 2018 holding that the GORs did constitute an interest in land and requesting further submissions from the parties relating to the implications of that holding, and in particular whether and under what circumstances a court has jurisdiction to extinguish a third party's interest in land by issuance of a vesting order.2 Those further submissions were made in September 2018, and on June 19, 2019, the Court of Appeal released its highly anticipated decision.

The Second Court of Appeal Decision

The Court of Appeal found that receivership courts have jurisdiction under section 243(1) of the Bankruptcy and Insolvency Act3 to authorize a receiver to enter into an agreement to sell property and, in furtherance of that power, to grant an order vesting the property in the purchaser free and clear of encumbrances.4 In reaching this conclusion, the Court of Appeal undertook a lengthy review of the history of vesting orders, and of the interim and national receivership provisions in the BIA.

The Court of Appeal went on to consider whether such jurisdiction extends to the extinguishment of third party rights, including interests in land. With respect to interests in land, the Court of Appeal stated that the key inquiry is whether the interest in land is more akin to a fixed monetary interest that is attached to real or personal property subject to the sale, or whether the interest is more akin to a fee simple that is in substance an ownership interest.5 The Court of Appeal set out the following test when considering whether to extinguish an interest in land:

"[109] Thus, in considering whether an interest in land should be extinguished, a court should consider: (1) the nature of the interest in land; and (2) whether the interest holder has consented to the vesting out of their interest either in the insolvency process itself or in agreements reached prior to the insolvency.

[110] If these factors prove to be ambiguous or inconclusive, the court may then engage in a consideration of the equities to determine if a vesting order is appropriate in the particular circumstances of the case. This would include: consideration of the prejudice, if any, to the third party interest holder; whether the third party may be adequately compensated for its interest from the proceeds of the disposition or sale; whether, based on evidence of value, there is any equity in the property; and whether the parties are acting in good faith. This is not an exhaustive list and there may be other factors that are relevant to the analysis.6"

The Court of Appeal found that, in this case, the GORs in question were less than a fee simple interest, but more than a fixed monetary interest that attached to the property. The GORs were in substance an interest in a continuing and inherent feature of the property itself.7 On the facts of this case, the Court of Appeal found that, given the nature of the opposing royalty holder's interest and the absence of any agreement that subordinated the priority of that interest, the receivership court erred in granting a vesting order extinguishing the GORs.8

The Court of Appeal ultimately held, however, that the applicable appeal period was 10 days from the date of the receivership court's decision (as prescribed by rule 31 of the BIA) and that the opposing royalty holder's appeal was out of time.9 The Court of Appeal therefore dismissed the appeal.

In addition to the important holdings regarding vesting orders and interests in land, the Court of Appeal also made findings regarding the appropriateness of a receiver closing a sale transaction in the face of a threatened (but not commenced) appeal of an approval and vesting order. Having regard to the history of dealings between the parties, the Court of Appeal held that the receiver had not acted improperly in closing the transaction in the face of a threatened appeal from the royalty holder (which was only made after the expiry of the appeal period).10 As a practice point, the Court of Appeal did state that, absent some emergency that is highlighted to the court in a receiver's report, a receiver should wait until the expiry of the 10-day appeal period before closing a sale transaction to which a vesting order relates.11 The Court of Appeal also refused to grant the royalty holder an extension of the time to appeal nunc pro tunc.12

Concluding Remarks

In its reasons for decision, the Court of Appeal recognized that there has been no consistently applied framework of analysis in the case law to determine whether a vesting order extinguishing interests should be granted.13 This decision provides courts in Ontario and elsewhere with meaningful guidance on how to approach the analysis.


[1] Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2016 ONSC 4472 at para 40.

[2] Third Eye Capital Corporation v. Ressources Dianor Inc., 2018 ONCA 253 at para 121.

[3] Bankruptcy and Insolvency Act, RSC 1985, c. B-3 ("BIA").

[4] Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508 at para 85.

[5] Ibid, at para 105.

[6] Ibid, at paras 109-110.

[7] Ibid, at para 111.

[8] Ibid, at para 115.

[9] Ibid, at para 131.

[10] Ibid, at para 140.

[11] Ibid, at para 139.

[12] Ibid, at paras 144-145.

[13] Ibid, at para 101.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions