Brian,
I've been traveling and just got back from the Oil Sands Projects @ Ft. McMurray. Incredible that Alberta hosts enough Oil to last Canada for 400 years.
More to the point. For those that think the CDNX has been squeaky clean in it's effort to protect the shareholders your badly mistake. Outright fraud committed by Robert Holland of the CDNX. Please carefully the below as you may need the evidence.
i.e. "Added to this are the notes of meetings held between representatives of Birch Mountain and Mr. Craven of AMCL, (the company retained to conduct an independent, technical audit of Birch Mountain) which are referred to in Mr. Blackie's report. On November 15, 2000 Mr. Craven reported that Mr. Holland didn't believe there were precious metals in the Athabasca area where Birch’s operations were located. On January 2, 2001, Mr. Craven commented that any revisions to the draft AMCL report were subject to the agreement and approval of Mr. Holland."
IN THE MATTER OF THE CANADIAN VENTURE EXCHANGE INC. (CDNX)
- and -
BIRCH MOUNTAIN RESOURCES LTD.
(Applicant)
DECISION OF THE LISTED COMPANY REVIEW PANEL
Birch Mountain Resources Ltd. (Birch Mountain) has applied to the Listed Company Review Panel for a review of the March 5, 2001 decision of the Canadian Venture Exchange Inc. (CDNX or the Exchange) which suspended the trading of shares of Birch Mountain.
In its Notice of Application, Birch Mountain requested, inter alia, that the Listed Company Review Panel's hearing should proceed de novo. The CDNX opposed that request. The Panel directed that that issue would be argued at a pre-hearing conference and directed the parties to provide written submissions prior to the pre-hearing conference.
The pre-hearing conference was held on January 4, 2002, at the conclusion of which the Panel granted Birch Mountain's application, giving brief reasons therefore, and expressly reserving the right to edit, clarify and explain its reasons in the written decision which would follow. This is that written decision.
The Rules of the CDNX require that a hearing before the Listed Company Review Panel shall be in the form of an appeal on the record from the Exchange’s decision, unless the Panel orders otherwise. (E.2.19[C](1)) When a Panel is of the opinion that the record is incomplete, the Panel may permit persons having evidence relating to the decision to testify before it. (E.2.19[C](2)) Reference is also made to the Rule which directs Panels to generally confirm the decision of the Exchange "unless new and compelling evidence" is presented to the Panel which was not presented to the Exchange and the Panel is to then either "make a decision on the merits of the case or refer the matter back to the Exchange". (E.2.19[C](10)(d))
It was alleged by Birch Mountain and conceded by the CDNX that subsequent to the March 5, 2001 trading suspension decision, there came into existence "a significant amount of new scientific evidence that was not presented to the CDNX" (see paragraphs 2,3,15 of CDNX’s written submissions). Furthermore, Mr. McDonald, Q.C. candidly conceded that, if presented to the Panel, all of this evidence would meet the requirements of "new and compelling evidence" as referred to in Rule E.2.19[c](10)(d) - see also paragraph 25 of CDNX's written submissions. The Panel accepted the concession and so did not have to hear the new evidence in order to formally comply with this Rule.
Thus the Panel had to decide to either "make a decision on the merits of the case or refer the matter back to the Exchange".
The CDNX argued that the matter should be referred back to itself. Birch Mountain was adamantly opposed and wanted the Panel to make "a decision on the merits" (which all parties, including the Panel, described as a "de novo" hearing and of which more will be said later).
Birch Mountain's resistance to the CDNX re-hearing the matter was primarily based on the assertions that the CDNX is understaffed, that no timely decision could be expected (a hearing before the Panel had already been tentatively set to commence at the end of this month) and that, based upon prior events, it had no confidence it would receive a fair hearing by the CDNX in the future.
The last of these assertions gave the Panel great concern.
Birch Mountain alleged the existence of a reasonable apprehension of bias by the Exchange against the Company which therefore brought into question the validity of the Exchange's decision to suspend trade in the shares of Birch Mountain.
To support their complaint, Birch Mountain enumerated or identified a number of discrete events and allegations in their written submissions. These involve, inter alia, a number of memoranda of conversations, copies of communiques, and a lengthy opinion from a Mr. Blackie, dated September 26, 2001.
In their written submissions, the Exchange's response was to (a) state that it disputed these allegations (paragraph 41) and (b) state that the allegations are unproven and really only amount to argument (paragraph 56). This was repeated in oral argument.
In the materials submitted by Birch Mountain, a June 22, 2000 letter from Mr. Holland confirmed a comment he was previously recorded to have expressed (in a meeting in late 1999) that the Exchange was concerned that press releases issued by Birch Mountain described operations which he described as being similar to "well known mining scams". While one could suggest that such comments, made in isolation, were offered as honest and fair expressions of concern after comparing the language of Birch press release(s) to the circumstances of some other, particular cases, these comments "bookended" a memo prepared by Ms. Loov, counsel for Birch Mountain, of a telephone conversation she held with Mr. Holland on June 16, 2000 wherein he described a draft report prepared by CANMET and filed by Birch Mountain with the Exchange as a "forgery" because it was unsigned.
Before us, Mr. McDonald, Q.C. did not offer any argument or memo from Mr. Holland seeking to explain or challenge Ms. Loov's memo of the remarks of Mr. Holland nor was an adjournment sought to do so.
It may be debatable in law whether or not an unsigned document amounts to a forgery and/or whether filing such a document with the Exchange could therefore amount to the offence of uttering a forged document. But what is not left to debate is that such an allegation of the commission of the indictable criminal offence of forgery made by a responsible officer of the Exchange to counsel for Birch Mountain, when the integrity of the Company and the status of that Company's privilege to have its stock traded on the Exchange is already under scrutiny by the Exchange, is of great concern to the Panel.
This would leave a reasonable observer with a sense that Mr. Holland had more than simple concerns or misgivings. There is an air about all this that he was, at least, predisposed to believe that Birch Mountain's processes/activities were without merit and, worse, that Birch Mountain was actively trying to deceive him and the Exchange by using a forged document.
Added to this are the notes of meetings held between representatives of Birch Mountain and Mr. Craven of AMCL, (the company retained to conduct an independent, technical audit of Birch Mountain) which are referred to in Mr. Blackie's report. On November 15, 2000 Mr. Craven reported that Mr. Holland didn't believe there were precious metals in the Athabasca area where Birch’s operations were located. On January 2, 2001, Mr. Craven commented that any revisions to the draft AMCL report were subject to the agreement and approval of Mr. Holland.
With respect, it is difficult to understand how Mr. Holland could or should possess this "vetting" authority on a report ultimately prepared over the signature of the experts at AMCL - particularly strange is the fact that in its written submissions to the Panel, the Exchange highlighted the ability of the Exchange to seek out the assistance of outside experts when it lacked the necessary expertise "in house". If this explained why AMCL was ultimately retained, why would an officer of the Exchange yet think it appropriate to hold some sort of "vetting power".
It is not necessary to proceed further in the discussion of the claim of an apprehension of bias. We repeat that we have received nothing from the Exchange that attempted to undercut, clarify or interpret these various reported events and conversations. In the end, therefore, we conclude that Birch Mountain has satisfied us of the existence of an apprehension of bias and we are not satisfied that it could be comfortably and fairly remedied, as Mr. McDonald, Q.C. suggests with a referral of the matter back to the Exchange and the direction that Mr. Holland not be involved in the process.
Given these circumstances, the CDNX does not persuade us that the referral back to the Exchange is the appropriate course. Thus the Rules require that the Panel hold a hearing and "make a decision on the merits".
That then leaves the questions - how is the matter to proceed before this Panel and what is the scope of our decision-making ability?
Notwithstanding that in the written and oral submissions of the parties the words "de novo hearing" were used and, indeed, were repeated in the questions and oral ruling from the Panel, it is important there is no misunderstanding about the review hearing process.
While we are not bound by the legal or technical rules of evidence, the Rules of the Exchange (E.2.19[C](1), (2) and (10)(d)) do not use the words "de novo" nor "hearing de novo". Nor does the language of these provisions meet the usual definition of "hearing de novo" - see the written submissions of the CDNX.
While the Panel is to "make a decision on the merits" the Rules go further and describe what that decision must be - "to confirm, vary or set aside a decision which is the subject of the application for a review" (Rule E.2.21 [C]).
This language implies that the Panel must know the decision and the basis upon which it was constructed (e.g. the facts, qualified expert opinion, etc.) - for how could we be expected, for example, to be able to confirm a decision if we weren't informed how that decision came about? The wording of this Rule also indicates that we apparently do not possess the authority as a review panel to act as if we had the full scope of authority of the initial decision maker. In this regard, compare the language of the Rule with the following examples:
Alberta Rules of Court, Rule 657(1) - in an appeal from the decision of a taxing officer, the Court’s authority is to be exercised "as fully as if the taxation were made by the court in the first instance";
In an appeal from the decision of a disciplinary committee struck pursuant to the provisions of the Pharmaceutical Profession Act of Alberta, the governing body of that profession hearing the appeal, is given the authority to make a decision "that in its opinion ought to have been made" by the disciplinary committee.
We conclude therefore that the Rules which govern this Panel do not grant as wide a decision making ability as could have otherwise been provided.
In total, these restrictions support the conclusion that a review hearing before the Panel is not a true "de novo hearing", (again, see the definition in the written submissions of the CDNX).
But, as previously noted, the hearing cannot proceed solely upon the record because, as the CDNX concedes, there is more information available to us that was not available to the Exchange. The additional information that Birch Mountain seeks to present is documentary (with an undertaking to present the authors for cross examination if requested by the CDNX) plus three witnesses to give viva voce testimony. The Panel understands that this "new and compelling evidence" will therefore augment the record which was before the Exchange and, in total, Birch Mountain believes it will satisfy the Panel that the Exchange’s decision to suspend the trading of Birch Mountain shares was wrong and that the Panel should therefore "set aside" the impugned Exchange decision.
The Panel presumes that the CDNX will seek to have its previous decision "confirmed" and, to that end, may rely on the record and may challenge Birch Mountain's case through cross examination and by the presentation of its own evidence.
Given all the foregoing and before the Panel gets to the new, additional or augmenting evidence at the Hearing, the Panel expects to also have the "record" that was before the Exchange when it made its suspension decision last March.
There may be some disagreement in what will form the "record".
It would seem that it must include, at least, the various news releases or reports from or on behalf of Birch Mountain which contain the various claims which caused concern for the Exchange, the AMCL audit report, the February 27, 2001 letter to Birch Mountain Board of Directors from Mr. Gil Gauthier, Manager, Surveillance for the CDNX and the February 28, 2001 letter to Mr. Gauthier from Mr. Doug Rowe, President and CEO of Birch Mountain.
This is not meant to be an exhaustive list.
But as this material was in existence and apparently known to the parties at the time of the suspension decision and has apparent relevance to the suspension decision being reviewed, it would make no legal, let alone practical sense to ignore it and will offer a good starting point for the hearing.
What should not be made part of the record are any notes, memoranda, etc. of any employee of the CDNX which may show bias, real or apprehended, or predisposition against Birch Mountain. The Panel has already responded to these concerns by directing that we will hold a hearing and not refer the matter back to the CDNX. The Panel's concerns will be directed at whether the suspension decision can be shown by Birch Mountain to have not been properly founded by pointing out errors in the facts, errors in the AMCL report etc. and establishing the integrity/validity of the Birch Mountain processes and activities.
Clearly, it is the Applicant, Birch Mountain, who seeks a setting aside of the suspension decision. Accordingly, it carries the burden to persuade the Panel to its point of view. Birch Mountain will have to persuade us on all of the "facts" that the Exchange decision cannot be the appropriate result here. Whether Birch Mountain is successful or unsuccessful in this regard, the presence or absence of any bias or prejudgment within the Exchange, while perhaps interesting to others, will be irrelevant to our decision.
The further pursuit of claims of bias or prejudgment should not occupy the time of this Panel. This entire matter has been extant for almost one year. An appeal had been commenced, then adjourned and then abandoned. Now there is this review. There have been a series of very unfortunate misunderstandings on both sides which have arisen since the suspension decision was made and which have contributed to the delay. Both parties now seem intent on achieving a resolution. The Panel is prepared to proceed "on the merits" this month and wishes to avoid being distracted by issues not strictly relevant to our mandate.
Lastly, on January 4, the Panel advised it would have to decide whether or not the "affected parties" could properly participate in this review hearing. We note that there is nothing in the Rules which would clearly permit anyone other than the Company and the Exchange to be formally involved as a "litigant". We also note that Mr. McDonald, Q.C. has not expressed any reservation/objection. However, the Panel wishes to ensure that the affected parties have a right to participate at this hearing. We therefore look forward to receiving written submissions from their counsel in the week preceding the hearing.
DATED the 14th day of January, 2002.
"original signed by E.C. Wilson,Q.C."
EARL C. WILSON, Q.C.
Chairman, Listed Company Review Panel
- PAGE 6 -
IN THE MATTER OF THE CANADIAN VENTURE EXCHANGE INC. (CDNX)
- and -
BIRCH MOUNTAIN RESOURCES LTD.
(Applicant)
DECISION OF THE LISTED COMPANY REVIEW PANEL
Birch Mountain Resources Ltd. (Birch Mountain) has applied to the Listed Company Review Panel for a review of the March 5, 2001 decision of the Canadian Venture Exchange Inc. (CDNX or the Exchange) which suspended the trading of shares of Birch Mountain.
In its Notice of Application, Birch Mountain requested, inter alia, that the Listed Company Review Panel's hearing should proceed de novo. The CDNX opposed that request. The Panel directed that that issue would be argued at a pre-hearing conference and directed the parties to provide written submissions prior to the pre-hearing conference.
The pre-hearing conference was held on January 4, 2002, at the conclusion of which the Panel granted Birch Mountain's application, giving brief reasons therefore, and expressly reserving the right to edit, clarify and explain its reasons in the written decision which would follow. This is that written decision.
The Rules of the CDNX require that a hearing before the Listed Company Review Panel shall be in the form of an appeal on the record from the Exchange’s decision, unless the Panel orders otherwise. (E.2.19[C](1)) When a Panel is of the opinion that the record is incomplete, the Panel may permit persons having evidence relating to the decision to testify before it. (E.2.19[C](2)) Reference is also made to the Rule which directs Panels to generally confirm the decision of the Exchange "unless new and compelling evidence" is presented to the Panel which was not presented to the Exchange and the Panel is to then either "make a decision on the merits of the case or refer the matter back to the Exchange". (E.2.19[C](10)(d))
It was alleged by Birch Mountain and conceded by the CDNX that subsequent to the March 5, 2001 trading suspension decision, there came into existence "a significant amount of new scientific evidence that was not presented to the CDNX" (see paragraphs 2,3,15 of CDNX’s written submissions). Furthermore, Mr. McDonald, Q.C. candidly conceded that, if presented to the Panel, all of this evidence would meet the requirements of "new and compelling evidence" as referred to in Rule E.2.19[c](10)(d) - see also paragraph 25 of CDNX's written submissions. The Panel accepted the concession and so did not have to hear the new evidence in order to formally comply with this Rule.
Thus the Panel had to decide to either "make a decision on the merits of the case or refer the matter back to the Exchange".
The CDNX argued that the matter should be referred back to itself. Birch Mountain was adamantly opposed and wanted the Panel to make "a decision on the merits" (which all parties, including the Panel, described as a "de novo" hearing and of which more will be said later).
Birch Mountain's resistance to the CDNX re-hearing the matter was primarily based on the assertions that the CDNX is understaffed, that no timely decision could be expected (a hearing before the Panel had already been tentatively set to commence at the end of this month) and that, based upon prior events, it had no confidence it would receive a fair hearing by the CDNX in the future.
The last of these assertions gave the Panel great concern.
Birch Mountain alleged the existence of a reasonable apprehension of bias by the Exchange against the Company which therefore brought into question the validity of the Exchange's decision to suspend trade in the shares of Birch Mountain.
To support their complaint, Birch Mountain enumerated or identified a number of discrete events and allegations in their written submissions. These involve, inter alia, a number of memoranda of conversations, copies of communiques, and a lengthy opinion from a Mr. Blackie, dated September 26, 2001.
In their written submissions, the Exchange's response was to (a) state that it disputed these allegations (paragraph 41) and (b) state that the allegations are unproven and really only amount to argument (paragraph 56). This was repeated in oral argument.
In the materials submitted by Birch Mountain, a June 22, 2000 letter from Mr. Holland confirmed a comment he was previously recorded to have expressed (in a meeting in late 1999) that the Exchange was concerned that press releases issued by Birch Mountain described operations which he described as being similar to "well known mining scams". While one could suggest that such comments, made in isolation, were offered as honest and fair expressions of concern after comparing the language of Birch press release(s) to the circumstances of some other, particular cases, these comments "bookended" a memo prepared by Ms. Loov, counsel for Birch Mountain, of a telephone conversation she held with Mr. Holland on June 16, 2000 wherein he described a draft report prepared by CANMET and filed by Birch Mountain with the Exchange as a "forgery" because it was unsigned.
Before us, Mr. McDonald, Q.C. did not offer any argument or memo from Mr. Holland seeking to explain or challenge Ms. Loov's memo of the remarks of Mr. Holland nor was an adjournment sought to do so.
It may be debatable in law whether or not an unsigned document amounts to a forgery and/or whether filing such a document with the Exchange could therefore amount to the offence of uttering a forged document. But what is not left to debate is that such an allegation of the commission of the indictable criminal offence of forgery made by a responsible officer of the Exchange to counsel for Birch Mountain, when the integrity of the Company and the status of that Company's privilege to have its stock traded on the Exchange is already under scrutiny by the Exchange, is of great concern to the Panel.
This would leave a reasonable observer with a sense that Mr. Holland had more than simple concerns or misgivings. There is an air about all this that he was, at least, predisposed to believe that Birch Mountain's processes/activities were without merit and, worse, that Birch Mountain was actively trying to deceive him and the Exchange by using a forged document.
Added to this are the notes of meetings held between representatives of Birch Mountain and Mr. Craven of AMCL, (the company retained to conduct an independent, technical audit of Birch Mountain) which are referred to in Mr. Blackie's report. On November 15, 2000 Mr. Craven reported that Mr. Holland didn't believe there were precious metals in the Athabasca area where Birch’s operations were located. On January 2, 2001, Mr. Craven commented that any revisions to the draft AMCL report were subject to the agreement and approval of Mr. Holland.
With respect, it is difficult to understand how Mr. Holland could or should possess this "vetting" authority on a report ultimately prepared over the signature of the experts at AMCL - particularly strange is the fact that in its written submissions to the Panel, the Exchange highlighted the ability of the Exchange to seek out the assistance of outside experts when it lacked the necessary expertise "in house". If this explained why AMCL was ultimately retained, why would an officer of the Exchange yet think it appropriate to hold some sort of "vetting power".
It is not necessary to proceed further in the discussion of the claim of an apprehension of bias. We repeat that we have received nothing from the Exchange that attempted to undercut, clarify or interpret these various reported events and conversations. In the end, therefore, we conclude that Birch Mountain has satisfied us of the existence of an apprehension of bias and we are not satisfied that it could be comfortably and fairly remedied, as Mr. McDonald, Q.C. suggests with a referral of the matter back to the Exchange and the direction that Mr. Holland not be involved in the process.
Given these circumstances, the CDNX does not persuade us that the referral back to the Exchange is the appropriate course. Thus the Rules require that the Panel hold a hearing and "make a decision on the merits".
That then leaves the questions - how is the matter to proceed before this Panel and what is the scope of our decision-making ability?
Notwithstanding that in the written and oral submissions of the parties the words "de novo hearing" were used and, indeed, were repeated in the questions and oral ruling from the Panel, it is important there is no misunderstanding about the review hearing process.
While we are not bound by the legal or technical rules of evidence, the Rules of the Exchange (E.2.19[C](1), (2) and (10)(d)) do not use the words "de novo" nor "hearing de novo". Nor does the language of these provisions meet the usual definition of "hearing de novo" - see the written submissions of the CDNX.
While the Panel is to "make a decision on the merits" the Rules go further and describe what that decision must be - "to confirm, vary or set aside a decision which is the subject of the application for a review" (Rule E.2.21 [C]).
This language implies that the Panel must know the decision and the basis upon which it was constructed (e.g. the facts, qualified expert opinion, etc.) - for how could we be expected, for example, to be able to confirm a decision if we weren't informed how that decision came about? The wording of this Rule also indicates that we apparently do not possess the authority as a review panel to act as if we had the full scope of authority of the initial decision maker. In this regard, compare the language of the Rule with the following examples:
Alberta Rules of Court, Rule 657(1) - in an appeal from the decision of a taxing officer, the Court’s authority is to be exercised "as fully as if the taxation were made by the court in the first instance";
In an appeal from the decision of a disciplinary committee struck pursuant to the provisions of the Pharmaceutical Profession Act of Alberta, the governing body of that profession hearing the appeal, is given the authority to make a decision "that in its opinion ought to have been made" by the disciplinary committee.
We conclude therefore that the Rules which govern this Panel do not grant as wide a decision making ability as could have otherwise been provided.
In total, these restrictions support the conclusion that a review hearing before the Panel is not a true "de novo hearing", (again, see the definition in the written submissions of the CDNX).
But, as previously noted, the hearing cannot proceed solely upon the record because, as the CDNX concedes, there is more information available to us that was not available to the Exchange. The additional information that Birch Mountain seeks to present is documentary (with an undertaking to present the authors for cross examination if requested by the CDNX) plus three witnesses to give viva voce testimony. The Panel understands that this "new and compelling evidence" will therefore augment the record which was before the Exchange and, in total, Birch Mountain believes it will satisfy the Panel that the Exchange’s decision to suspend the trading of Birch Mountain shares was wrong and that the Panel should therefore "set aside" the impugned Exchange decision.
The Panel presumes that the CDNX will seek to have its previous decision "confirmed" and, to that end, may rely on the record and may challenge Birch Mountain's case through cross examination and by the presentation of its own evidence.
Given all the foregoing and before the Panel gets to the new, additional or augmenting evidence at the Hearing, the Panel expects to also have the "record" that was before the Exchange when it made its suspension decision last March.
There may be some disagreement in what will form the "record".
It would seem that it must include, at least, the various news releases or reports from or on behalf of Birch Mountain which contain the various claims which caused concern for the Exchange, the AMCL audit report, the February 27, 2001 letter to Birch Mountain Board of Directors from Mr. Gil Gauthier, Manager, Surveillance for the CDNX and the February 28, 2001 letter to Mr. Gauthier from Mr. Doug Rowe, President and CEO of Birch Mountain.
This is not meant to be an exhaustive list.
But as this material was in existence and apparently known to the parties at the time of the suspension decision and has apparent relevance to the suspension decision being reviewed, it would make no legal, let alone practical sense to ignore it and will offer a good starting point for the hearing.
What should not be made part of the record are any notes, memoranda, etc. of any employee of the CDNX which may show bias, real or apprehended, or predisposition against Birch Mountain. The Panel has already responded to these concerns by directing that we will hold a hearing and not refer the matter back to the CDNX. The Panel's concerns will be directed at whether the suspension decision can be shown by Birch Mountain to have not been properly founded by pointing out errors in the facts, errors in the AMCL report etc. and establishing the integrity/validity of the Birch Mountain processes and activities.
Clearly, it is the Applicant, Birch Mountain, who seeks a setting aside of the suspension decision. Accordingly, it carries the burden to persuade the Panel to its point of view. Birch Mountain will have to persuade us on all of the "facts" that the Exchange decision cannot be the appropriate result here. Whether Birch Mountain is successful or unsuccessful in this regard, the presence or absence of any bias or prejudgment within the Exchange, while perhaps interesting to others, will be irrelevant to our decision.
The further pursuit of claims of bias or prejudgment should not occupy the time of this Panel. This entire matter has been extant for almost one year. An appeal had been commenced, then adjourned and then abandoned. Now there is this review. There have been a series of very unfortunate misunderstandings on both sides which have arisen since the suspension decision was made and which have contributed to the delay. Both parties now seem intent on achieving a resolution. The Panel is prepared to proceed "on the merits" this month and wishes to avoid being distracted by issues not strictly relevant to our mandate.
Lastly, on January 4, the Panel advised it would have to decide whether or not the "affected parties" could properly participate in this review hearing. We note that there is nothing in the Rules which would clearly permit anyone other than the Company and the Exchange to be formally involved as a "litigant". We also note that Mr. McDonald, Q.C. has not expressed any reservation/objection. However, the Panel wishes to ensure that the affected parties have a right to participate at this hearing. We therefore look forward to receiving written submissions from their counsel in the week preceding the hearing.
DATED the 14th day of January, 2002.
"original signed by E.C. Wilson,Q.C."
EARL C. WILSON, Q.C.
Chairman, Listed Company Review Panel
- PAGE 6 - |
