Merchant banker faces Utah court

The managing director of British merchant banker Samuel Montagu & Co. is being cross-examined this week in the Utah Federal Court in Salt Lake City by lawyers representing Utah exploration company Gold Standard (NASDAQ). John Van Der Westhuizen is accused of breaching Montagu’s fiduciary duty to Gold Standard by sharing allegedly confidential information that enabled American Barrick Resources (TSE) to purchase the Mercur gold mine from Texaco Inc. in 1985.

While no details are available on the trial, which began Aug. 3, the jury was expected to hear evidence over a 2-week period before rendering a decision.

As the lawsuit against Montagu is the first step in Gold Standard’s bid to reclaim its previously held 25% interest in Mercur, the Montagu trial is being closely watched by the mining industry. It will be followed by a second trial relating to lawsuits launched by Gold Standard and Barrick against each other.

In its $3.4-million lawsuit against Montagu, Gold Standard is claiming disgorgement of all the money Montagu is alleged to have earned through fees and retainers from its relationship with Barrick. According to Vancouver lawyer David Clarke, Gold Standard provided Van Der Westhuizen and Montagu with information regarding Mercur in 1984 when it was attempting to obtain financing to purchase the mine. By later sharing that information with Barrick, Montagu was in breach of its fiduciary duty to Gold Standard, Clarke says. Montagu denies the allegations.

The result of the trial is of particular interest to Yorkton Continental Securities Vice-president Ray Saadien. The Vancouver stock broker is president of a private company that holds approximately two million Gold Standard shares.