Crabtree Law successfully defended Sona Resources Inc. in a trial regarding the enforceability of two mineral option agreements (the “Agreements”). In written reasons, Madam Justice Gray dismissed the plaintiffs’ claim in their entirety and awarded costs to Sona.

The plaintiffs owned certain mineral claims in northwestern BC and optioned those claims to Sona. Over the course of several years, Sona invested approximately $6 million into the properties with a view to starting commercial mining production.

Without any prior notice, the plaintiffs purported to terminate the Agreements in the fall of 2014 on the basis that Sona had allegedly failed to comply with certain terms, including a requirement to obtain a bankable feasibility study. In addition, the plaintiffs argued that the failure to make a small annual royalty payment (approximately $10,000 for both Agreements) by May 2014 amounted to a breach of the Agreements. The plaintiffs sought a court declaration confirming they were entitled to terminate the Agreements.

Sona defended the case on the basis that it had complied with the terms of the Agreements and that in the absence of a termination provision, a reasonable period of notice was required before the plaintiffs had a right to terminate in order to allow it time to complete the requirements of the Agreements. Sona paid the annual royalty payments in December 2014 in compliance with the terms of the Agreements.

The evidence demonstrated that Sona had undertaken a significant amount of work on the properties, all with the view to advancing the properties towards commercial production or, alternatively, to obtaining an assessment of the feasibility of commercial production.

The court agreed with Sona's arguments and held that the Agreements were still valid and in force. Sona did not breach any terms of the Agreements and it was entitled to a reasonable period of time to complete a bankable feasibility study and/or put the properties into commercial production.

In the alternative, Judge Gray agreed with Sona that if it had breached any terms of the Agreements, it was entitled to relief from forfeiture as the magnitude of any breach (approximately $10,000 in payments) was far exceeded by the amount Sona had invested into the properties (approximately $6 million).