Yukon Zinc has sued its main contractor at the Wolverine mine over a $18 million lien, alleging defamation, conspiracy and possible racism.
The Chinese-owned company filed the claims against Procon Mining and Tunnelling and its lawyers in the Supreme Court of British Columbia in October, and the documents have been posted online by CBC News.
According to Yukon Zinc’s version of the facts, Procon filed a lien against the company on Sept. 8, 2014, in the amount of $17,869,168.
The next day Procon sent Yukon Zinc a letter demanding immediate payment of $2,940,669 “plus further amounts for ongoing work or materials ... interest and legal or other costs.”
Procon’s response to the lawsuit alleges that Yukon Zinc agreed later that month to pay $2,958,341 in exchange for dropping the lien, although it’s unclear from the documents if that settlement is in dispute, or if actions were taken by either company as a result.
Yukon Zinc asserts in its claim that Procon was only owed $56,698 at that time.
“The amounts allegedly owed and set out in the lien and demand letter were intentionally and egregiously inflated,” the court documents state.
“The registration of the lien was malicious and intentional, and was calculated to cause the plaintiff embarrassment and financial harm, and to extract concessions from the plaintiff that the plaintiff would not have otherwise made.”
The notice of claim alleges that Procon conspired with its lawyers at Dentons Canada LLP to defame Yukon Zinc through the lien, which threatened its business relationship with other companies.
“The purpose of this conspiracy was to gain financial benefits to which the defendants are otherwise not entitled and unlikely to gain. The motives behind the conspiracy may also include the hostility to the racial background of the plaintiff’s executives and its corporate solicitor.”
Yukon Zinc claims it is owed aggravated and punitive damages, as well as a written apology.
The defendants denied Yukon Zinc’s version of events in a response filed with the court on Nov.21, 2014.
“The claim against this defendant is brought maliciously and for improper purposes and is frivolous, unnecessary, scandalous and vexatious,” according to legal firm’s response.
“The true purpose of the claims against this defendant is to seek to impair the ability of the defendants to pursue legitimate claims and remedies against the plaintiff and the bringing of this claim is an abuse of process.”
Procon’s response asserts that it acted appropriately in its dealing with Yukon Zinc.
“The plaintiff has repeated defaulted in its obligation to pay amounts due and owing to Procon Ltd. and, from time to time, Procon Ltd. has had to file miners liens to protect its interests.”
Near the end of September, the companies agreed that Yukon Zinc would pay Procon $2,958,341 and Procon would drop the lien, according to the document.
Yukon Zinc did not suffer loss or damage as a result of the lien, the defendants allege.
Yukon Zinc announced a temporary shut-down of the Wolverine mine last month, citing poor mineral prices.
The company has had difficulty securing funding from shareholders to pay down its debts, according to a letter sent by CEO Jingyou Lu to its suppliers on Jan. 23.
The mine has also been out of compliance with its mining licence since October, when it failed to make a $350,000 payment towards its closure and reclamation security.
Yukon Zinc owes the Yukon government nearly $3 million in security payments.
Contact Jacqueline Ronson at