Our side of the story
Gerle Gold Ltd GGL
Shares issued 22,411,858 Feb 2 close $0.65
Mon 2 Feb 98 Street Wire
Also SouthernEra Resources Limited (SUF) THE CASE AGAINST INUKSHUK
by Stockwatch Business Reporter
Details of a legal action brought by Gerle Gold and SouthernEra Resources
in the Federal Court of Canada indicate the two companies have more than a
few questions for Boyd Warner, the Yellowknife-based contract staker at the
centre of a diamond-property dispute south of Mountain Province's AK block
in the Slave Craton.
In particular, they may want to know why the supervising mining recorder
for the Northwest Territories, Annette McRobert, would mark in her notebook
in April 1996 a comment from Mr Warner indicating he staked the property on
behalf of Tyler Resources. The comment, made allegedly in a telephone
conversation, was revealed in Ms McRobert's decision of May 10, 1996, which
ruled the disputed claims belonged to Gerle and SouthernEra. At the same
time, Ms McRobert rejected an application for transfer of the claims by Mr
Warner to John Dupuis' Inukshuk Capital on behalf of Golden Rule Resources.
The following month, Mr Warner denied making the comment and stated in a
statutory declaration that "at no time did I have any reason to state that
the MK-RIM mineral claims had been staked by on or behalf of Tyler." Mr
Warner also produced receipts indicating his company, Bathurst Inlet
Development (1984) Ltd, was paid by Tyler's associate, Golden Rule, for the
staking work, along with expenses.
These and other documents are contained in an originating notice of motion
filed with the Calgary Federal Court in December and secured by Stockwatch.
Gerle and SouthernEra have applied for a judicial review of the November 20
decision made by the Minister of Indian Affairs and Northern Development
which reversed the supervising mining recorder's decision of May 1996 in
favour of Gerle, to being in favour of Inukshuk and Golden Rule.
The point of whether Tyler was involved is crucial in the case because
federal mining law states that lapsed claims cannot be restaked by the
previous owner or associated companies or agents for a period of one year.
Golden Rule shares management -- Glen Harper is president of both companies
-- and owns a significant shareholding in Tyler (which ranges from eight
percent to 11 percent, depending on the source).
In the latest court documents, Gerle and SouthernEra say the outcome of the
minister's November 20 decision should be "reviewed and set aside" or sent
back to the minister with instructions to permit the two companies to
cross-examine Mr Warner on his June 1996 statutory declaration, and allow
the plaintiffs to submit evidence in response. In addition, the plaintiffs
want the minister to "review all of the evidence submitted by both the
applicants and the respondents in arriving at his decision."
The documents also reveal that Gerle's Ray Hrkac, in February 1995 - soon
after it became clear the properties would be in dispute - offered to
strike a deal with Tyler to jointly develop the claims, but that this was
rejected by Tyler-Golden Rule president Harper.
Gerle and SouthernEra allege the deputy minister, who conducted the
ministerial review, "failed to observe rules of natural justice" by
refusing to allow the plaintiffs an opportunity to cross-examine Mr Warner
on his statutory declaration, and that he "breached the principles of
natural justice" when he failed to provide reasons for the decision
"sufficient to meet the requirements" of Section 84 of the Canada Mining
Regulations.
The disputed land claim numbers about 100,000 acres and contains 12,500
acres known to Gerle Gold as the LA 26-30 claims located immediately south
of Mountain Province's 5034 kimberlite discovery.
According to a chronology of events contained in an affidavit by Gerle
president Ray Hrkac, Golden Rule was the recorded holder of mineral claims
KIM 1-48 and MIR 1-24 immediately prior to March 8, 1993. At that time, the
claims were transferred to Tyler, which subsequently failed to work the
claims. "Accordingly, on September 26, 1994, the KIM and MIR claims lapsed
pursuant to Section 45 of the regulations," Mr Hrkac states.
On October 14 and 15, mineral claims known as MK 1-15 and RIM 1-24 were
located by a J.W. Essery for Mr Warner and recorded in Mr Warner's name at
the mining recorder's office on October 24, 1994. The disputed claims were
located on part of the same ground occupied by the KIM and MIR claims. Mr
Hrkac adds that he agrees with others in the dispute that Mr Warner has no
beneficial interest in the disputed claims.
On January 4-5, April 4, and May 8, 1995, Gerle located mineral claims LA
26-30, Easy 1-3, and Kailash 1-2 over an area occupied by some of the
disputed claims. Gerle applied to the mining recorder to record the Gerle
claims on March 3 and May 25, 1995, but its application was refused. As a
result, Gerle on June 21, 1995 filed a notice of protest alleging that the
disputed claims had been previously located on behalf of Tyler in
contravention of Section 49.
On March 31 and April 6, 1995, Southern Era located mineral claims KIDME
1-34 which, like Gerle's claims, overlapped the disputed land. On May 25,
1995, SouthernEra applied to the record these claims, but its application
was refused. Likewise, SouthernEra filed a notice of protest on June 21,
1995.
As the supervising mining recorder, Ms McRobert conducted a hearing into
the complaints and on May 10, 1996 ruled in favour of Gerle and
SouthernEra. In her decision, Ms McRobert ruled that: Tyler continued to
have an interest in the disupted claims; alternatively, Tyler controlled
the disputed claims through Golden Rule.
Of the disputed telephone call, Ms McRobert states: "Boyd Warner contacted
me by telephone on April 9, 1996 and advised me that he would not be
providing a written submission to me on the matter as he had no interest in
the mineral claims since he was contracted to stake this ground for Tyler."
Significantly, Ms McRobert adds that she did not place any weight on the
Tyler comment because "this was not provided to me in writing, and the
other parties were not provided an opportunity to respond." Now, however,
the comment is taking on greater meaning because others will be able to
respond in the judicial review.
On May 28, 1996, Golden Rule and Inukshuk applied for a ministerial review
of Ms McRobert's decision. The following month, Mr Warner swore a statutory
declaration claiming, in part: "At no time did I state either in that
telephone conversation or otherwise to Ms McRobert that the MK-RIM mineral
claims had been staked on behalf of Tyler. I have had no contact with Tyler
at any time respecting the location or recording of the MK-RIM mineral
claims."
Further, he adds, "I am not aware of any reason why Ms McRobert would
record a statement from me to the effect that I had located and recorded
the MK-RIM mineral claims for Tyler."
Mr Hrkac also states the assistant deputy minister, James Moore, may have
already reached a decision by August 1997 - without having completed the
quasi-judicial hearing. In a letter dated August 13, Mr Moore states the
attached briefing note contains information he "relied upon to make (his)
determination."
In his response dated September 12, Mr Hrkac instructed his lawyers to
explicitly state to Mr Moore that Gerle and SouthernEra want an opportunity
to respond to Mr Warner's June 1996 statutory declaration. "If the minister
determines that the statutory declaration is to be admitted and considered,
we submit that the rules of natural justice require that Gerle Gold and
SouthernEra have an opportunity to, at a minimum, cross-examine Boyd Warner
on this evidence," the letter contends.
In addition, the letter from Mr Hrkac's lawyers also requested Mr Moore
state that the minister's decision has, in fact, not yet been reached. No
response from the minister or his subordinates was made to either request;
however, in his November 20 decision, Mr Moore states that comments made by
Mr Warner to Ms McRobert by phone were "inadmissible in this review because
no other parties were present during the call, nor were given the
opportunity to rebut the statements."
According to the affidavit, Mr Moore also stated: "Tyler did not relocate
the disputed claims in contravention of the regulations, nor were they
relocated in Tyler's name; neither Boyd Warner nor JW Essery relocated the
disputed claims on behalf of Tyler; the disputed claims were staked at the
request and on behalf of Golden Rule; and Golden Rule is not controlled by
Tyler."
Further, Mr Hrkac believes Mr Moore failed to address many of the points
raised in his statutory declaration of October 25, 1995. These include a
letter from Tyler-Golden Rule president Harper in response to Mr Hrkac's
proposal that Gerle and Tyler co-own the disputed claims and develop them
in a 50-50 joint venture. In March 1995, he says, Mr Harper responded on
letterhead marked "GR CAPITAL CORPORATION The Golden Rule Group of
Companies".
Mr Hrkac states Mr Moore failed to address the matter of Tyler's 1994
annual report that discloses "material facts" relating to Tyler properties
and operations during the period August to October 1994. "Tyler and its
auditors were legally obliged to disclose as a subsequent event that the
MIR and KIM claims were going to lapse on September 26, 1994 but chose not
to do so."
In addition, unaudited financial statements of October 31, 1994 refer to
the MIR and KIM claims as being Tyler properties - as does the January 31,
1995 unaudited Tyler financials.
Mr Hrkac states Mr Moore failed to address the question of the 1995-96
Canadian Mines Handbook, which relies on individual companies to supply
factual information. Tyler's entry indicates the Calgary company has a
100-percent interest in the MIR and KIM claims.
Gerle's president also claims Mr Moore failed to comment on an April 4,
1995 Tyler news release, which states: "Tyler's holdings include property
adjoining the recent 5034 diamond discovery made by Mountain Province
Mining Inc."
Further, says Mr Hrkac, the assistant deputy minister failed to address
several points raised by Ms McRobert, including her statements that Golden
Rule and Tyler had taken steps, she says, "in an effort to conceal the true
state of affairs"; that "the sworn declarations filed by Gerle and
SouthernEra are compelling and persuasive," and that the responses received
byTyler and Golden Rule "are not sworn, are uninformative and have little
in the way of supporting documentation."
Also left unaddressed, Mr Hrkac says, was a statement by Golden Rule-Tyler
president Harper and submitted on April 2, 1996, that "Gerle and
SouthernEra . . . were told many times that Tyler did not own the MK-RIM
but that we had control of them via Golden Rule."
Lastly, Mr Hrkac states Mr Moore declined to address the Gerle-SouthernEra
contention that Mr Harper continued to negotiate Tyler's interest in the
disputed claims subsequent to their staking by Mr Warner, "thereby
indicating that Tyler continued to have an interest in the claims."
Mr Hrkac concludes by hinting Mr Moore may have been derelict in his duties
by not considering all of the available evidence, and that he may have been
prejudiced against Gerle-SouthernEra or prejudiced in favour of Golden
Rule-Inukshuk.
Says Mr Hrkac: "The assertion by the assistant deputy minister that the
briefing note (attached to his August 13, 1997 letter) is 'information I
have relied upon to make my determination', together with the adoption of
substantial portions of the briefing note in reaching the decision issued
November 20, 1997, leads me to conclude that the decision of (Mr Moore) was
in fact made on the basis of the briefing note and prior to (Mr Moore)
having received our submission in rebuttal thereto. As a result, I have
concluded that (Mr Moore) did not bring an unbiased mind to the task of
making the decision in the case."
Inukshuk's Mr Dupuis declined to comment on the Gerle-SouthernEra appeal to
Federal Court, stating only that the issue is with the government and not
Inukshuk Capital. "I can't speak for the mining recorder," he says, while
commenting airly that he "believes" his lawyers have received notice of the
Federal Court action. "Come to think of it, that's a good question," he
adds.
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