Coldwater Indian Band v. Canada (Indian and Northern Affairs)

Coldwater Indian Band v. Canada (Indian and Northern Affairs)
Court (s) Database
Federal Court of Appeal Decisions
Date
2017-09-26
Neutral citation
2017 FCA 199
File numbers
A-214-16
Notes
A correction was made on December 14, 2017
Digest
Decision Content
Date: 20170926
Docket: A-214-16
Citation: 2017 FCA 199
CORAM:
DAWSON J.A.
WEBB J.A.
RENNIE J.A.
BETWEEN:
COLDWATER INDIAN BAND and CHIEF LEE SPAHAN in his capacity as Chief of the Coldwater Band on behalf of all members of the Coldwater Band
Appellants
and
THE MINISTER OF INDIAN AFFAIRS AND NORTHERN DEVELOPMENT and KINDER MORGAN CANADA INC.
Respondents
Heard at Vancouver, British Columbia, on June 20, 2017.
Judgment delivered at Ottawa, Ontario, on September 26, 2017.
REASONS FOR JUDGMENT BY:
DAWSON J.A.
CONCURRED IN BY:
RENNIE J.A.
DISSENTING REASONS BY:
WEBB J.A.
Date: 20170926
Docket: A-214-16
Citation: 2017 FCA 199
CORAM:
DAWSON J.A.
WEBB J.A.
RENNIE J.A.
BETWEEN:
COLDWATER INDIAN BAND and CHIEF LEE SPAHAN in his capacity as Chief of the Coldwater Band on behalf of all members of the Coldwater Band
Appellants
and
THE MINISTER OF INDIAN AFFAIRS AND NORTHERN DEVELOPMENT and KINDER MORGAN CANADA INC.
Respondents
REASONS FOR JUDGMENT
DAWSON J.A.
[1] A pipeline right-of-way easement was granted for the Trans Mountain Pipeline in 1955. The easement indenture allowed the Trans Mountain Oil Pipe Line Company to construct, operate and maintain a pipeline through portions of ten Indian reserves located in British Columbia, including the Coldwater Indian Reserve No. 1.
[2] Of relevance to this appeal is clause 2 of the easement indenture, which prevents Trans Mountain from assigning the rights granted to it under the easement without the written consent of the responsible Minister.
[3] On December 19, 2014, the Minister of Indian Affairs and Northern Development (Minister) consented to the assignment of the easement indenture from one affiliate of Kinder Morgan Canada Inc. to another affiliate. The Minister granted his consent notwithstanding that the Coldwater Band Council had previously advised him that it had “determined that it is not in the interests” of the Coldwater Indian Band (Coldwater) for the Minister to consent to the assignment of the easement indenture (underlining in original).
[4] Coldwater’s application for judicial review of the Minister’s decision to consent to the assignment of the easement indenture was dismissed by the Federal Court (2016 FC 595).
[5] On this appeal from the judgment of the Federal Court, Coldwater argues that the Federal Court erred in determining the appropriate standard of review to be applied to the Minister’s decision and further erred by concluding that the Minister acted in accordance with the fiduciary duty he owed to Coldwater when the Minister consented to the assignment of the easement indenture.
[6] Before considering the asserted errors, I will briefly review the relevant facts and the material aspects of the decision of the Federal Court.
I. Facts [7] The appellant Coldwater is an Indian Band as defined in the Indian Act, R.S.C. 1985, c. I-5 (Act). The respondent Minister is the minister responsible for the administration of the Act. At the time the consent at issue was granted, the Minister was the Honourable Bernard Valcourt.
[8] Kinder Morgan operates a number of pipeline systems and terminal facilities in Canada, including the Trans Mountain Pipeline. The Trans Mountain Pipeline carries oil from Sherwood Park, Alberta to Burnaby, British Columbia. The pipeline currently traverses 14 Indian reserves held for the benefit of 18 First Nations.
[9] Trans Mountain was incorporated in 1951 by a Special Act of Parliament in order to construct an oil pipeline running from Alberta through parts of British Columbia. In January of 1952, a request was made on behalf of Trans Mountain for 60-foot right-of-way easements across a number of Indian reserves. This request was approved by the Minister then responsible for the administration of the Indian Act, R.S.C. 1952, c. 149 (1952 Act).
[10] Trans Mountain offered compensation to Coldwater and the other Bands whose reserves were traversed by the pipeline in the amount of one dollar per lineal rod of land crossed by the right-of-way. One dollar per lineal rod of right-of-way was the amount paid along the entire length of the right-of-way for easements on lands located both inside and outside of Indian reserves.
[11] The Coldwater Band Council agreed to both the proposed right-of-way and the proposed compensation, as evidenced by a Band Council Resolution dated April 22, 1952.
[12] Thereafter, the Governor in Council authorized the granting of the right-of-way easement on March 19, 1953, by way of an order in council. The order in council authorized the right-of-way pursuant to section 35 of the 1952 Act for “pipe line purposes for so long as the same are required for that purpose, upon such terms, conditions, and provisions” as the responsible Minister might deem necessary and advisable.
[13] On May 4, 1955, the Minister granted the right-of-way through the affected reserves by way of the indenture.
[14] As consideration for the easement over its lands, Coldwater received the sum of $1,292.00 ($1.00 for each lineal rod) plus compensation for its damages and loss of timber in the amount of $1,125.09.
[15] Between 2002 and 2007, Trans Mountain underwent a series of corporate mergers and acquisitions. These changes left the Trans Mountain Pipeline under the management and control of Kinder Morgan. Both the National Energy Board and the Governor in Council approved the transfer of the pipeline assets, including the indenture, and the required certificates of public convenience and necessity were issued to allow Kinder Morgan to operate the pipeline.
[16] Notwithstanding the requirement that the Minister approve any assignment of the indenture, it was not until June 12, 2012, that Kinder Morgan wrote seeking ministerial consent. The appellants were informed of this request on July 16, 2012.
[17] Subsequently, the appellants corresponded with the Minister on a number of occasions about the requested consent. In a letter sent to Coldwater and all of the other affected First Nations, a representative of the Department of Indian Affairs and Northern Development (Department) advised that the Minister would “consider facts and information from the time frame of 2007 through to the present” relating to “the legal capacity of the companies making the assignment and, in respect of the companies receiving the assignments, the legal capacity, corporate track record, operational track record, financial capacity and the overall capability to fulfill the terms of the easement”.
[18] Thereafter, in 2013, Kinder Morgan applied to the National Energy Board for a certificate of public convenience and necessity in order to enlarge the pipeline so as to roughly triple its capacity. The proposed expansion contemplates twinning the pipeline; the existing line would carry refined petroleum products, synthetic crude oils and light crude oils, while the proposed new line would carry heavier oils.
[19] The appellants expressed their concern to the Minister about the proposed expansion of the pipeline. They also expressed their desire that the Minister take the opportunity afforded by the request for consent to the assignment to modernize the terms of the indenture so as to include more generous compensation for the Band, and modernize the indenture’s terms on such things as current environmental practices and enhanced rights for the Band.
[20] On February 20, 2013, Coldwater wrote to the Department advising that the Band had determined that it was not in the interests of the Band for the Minister to consent to the assignment. This conclusion was said to be based on a number of factors, including the proposed pipeline expansion and the safety and integrity of oil transmission through the Reserve. The letter concluded by instructing the Minister to refuse his consent to the assignment of the indenture.
[21] In December 2013, the Department and the Tk’emlúps te Secwépemc First Nation invited all of the Bands with reserve lands located along the pipeline to participate in an indenture modernization process. Participation was voluntary. In the working group discussions held early in the process it was agreed that work would be based on the principle that no new rights would be created and no existing rights would be diminished in the modernization process. A steering committee was created to help move the process along. It was also agreed that a technical working group would draft an “umbrella” indenture agreement that could later be modified to accommodate First Nations’ specific interests.
[22] Coldwater initially participated in the indenture modernization process, but withdrew in May 2014, because it felt that the Minister refused to modernize the indenture by including most of the provisions that it proposed. In fact, however, it appears it was the steering committee, not the Minister alone, that determined the content of the proposed modernized indenture.
[23] By letter dated July 15, 2014, signed jointly by a representative of the Department and the Chief of the Tk’emlúps te Secwépemc First Nation, Coldwater was advised that the steering and technical committees had completed their work, and that on June 11, 2014, the steering committee had approved a “modification template”, a copy of which was attached.
[24] The modification template contained a number of new terms, including terms requiring the indenture holder to do such things as patrol and inspect the right-of-way, maintain the pipeline, prepare a spill response plan, comply with environmental protection measures and take all necessary mitigative and remedial action in the event of any spill, release or migration of a contaminant.
[25] The July 15, 2014 letter went on to state that:
The modifications contained in the template document will enhance the existing easement instruments by better delineating the roles and responsibilities of the parties under the easement indentures. In addition, specific provisions about environmental matters and heritage resources are incorporated. Implementation of the modifications to easement indentures within a First Nation’s reserve will be an option for each First Nation. If a First Nation does not wish to implement the modification on their reserves the existing easement indenture will remain in full force and effect and will be unmodified.
[26] The letter concluded by advising that “the use and implementation of the modification template is a separate issue from the Minister’s decision regarding Trans Mountain’s request for consent to assignment of the easement indentures. The Minister’s decision on this matter may be made prior to modifying the current easement indentures.” As will be explained later, it is alleged that the failure of the Minister to consider issues arising from the modernization process was one element of the breach of fiduciary duty.
[27] On October 1, 2014, direct negotiations between the appellants and Kinder Morgan resulted in a Protocol and Capacity Agreement to establish a process, including capacity funding, for addressing legacy and operational issues and to set out the engagement process for the proposed expansion of the pipeline. The respondent Minister was not involved in these negotiations, nor was he aware of them.
[28] On December 19, 2014, the Minister consented to the assignment by way of an assignment consent agreement, registered in the Indian Land Registry. No conditions were attached to the Minister’s consent. The terms of the easement indenture were unchanged.
[29] Coldwater was informed of this decision by letter dated December 29, 2014. This letter advised Coldwater that the Minister had considered “the grantee credit record, grantee environmental record, grantee contract record, grantee eligibility, valid grantor, adequate description, appropriate circumstances and proper documentation for the assignment of the Trans Mountain Pipeline.” The letter went on to advise that Kinder Morgan “was able to demonstrate to the Minister they have the legal capacity, corporate track record, operational track record, financial capacity and the overall capability to fulfill the terms of the easement.”
[30] As of March 2015, one First Nation had agreed with the Minister and Kinder Morgan on a final form of a modified indenture based on the indenture modification template. However, the changes had not been implemented at the time the appellants filed their application in the Federal Court.
[31] Clause 1 of the existing easement indenture obliges the easement grantee to pay all charges, taxes, rates and assessments charged on lands encumbered by the easement. The Coldwater Band Council levies and collects an annual property tax on Kinder Morgan’s 60-foot right-of-way (considered to be land) and on the pipeline itself (considered to be a building). Since 2010, Kinder Morgan has paid the following property taxes to Coldwater:
$77,958.88 in 2010
$83,748.73 in 2011
$87,427.64 in 2012
$107,843.86 in 2013
$124,911.51 in 2014
II. Decision of the Federal Court [32] The Federal Court began its analysis by considering the standard of review to be applied to the Minister’s decision. The Federal Court concluded that the “existence and content of a fiduciary duty are questions of law, reviewable on the standard of correctness” while the “discharge of such duty by the Crown is reviewable on the standard of reasonableness” (reasons, paragraphs 177, 178).
[33] Before the Federal Court all of the parties acknowledged, and the Court agreed, that the Minister owed a fiduciary duty to the appellants when deciding whether to consent to the assignment of the easement indenture (reasons, paragraphs 181, 183). What was at issue was the scope of the duty and its proper discharge.
[34] In Osoyoos Indian Band v. Oliver (Town), 2001 SCC 85, [2001] 3 S.C.R. 746, the Supreme Court articulated a two-step process to be applied when a taking or use of reserve lands or an interest in reserve lands is contemplated under section 35 of the Act. At the first step of the process the question to be answered is whether it is in the public interest that the taking or use be authorized. If that question is answered in the affirmative, the next step requires the Crown to ensure that the taking or use minimally impairs a Band’s right to use and enjoy its reserve lands. The Federal Court accepted the respondents’ submission that the approach used in an expropriation under section 35 of the Act should also apply to consideration of the assignment of an interest that arose from such an expropriation (reasons, paragraph 191).
[35] With respect to the application of the two-step process, the Federal Court found no evidence in the record that any challenge was made in respect of the original taking. In the absence of evidence to the contrary, the Court found that the initial taking of the easement for the pipeline right-of-way was in the public interest. Insofar as the assignment of the easement indenture was for the purpose of facilitating the operation of the pipeline, the Court was satisfied that the consent to the assignment was a continuation of the initial recognition of the public interest (reasons, paragraphs 199, 203). Therefore, the first part of the two-step process was met.
[36] Turning to the second step, the Federal Court found that the Minister’s consent to the assignment minimally impaired Coldwater’s use and enjoyment of its land (reasons, paragraph 206). The Court also found that the Minister discharged the fiduciary duty he owed to the appellants. The assignment of the indenture did not increase the impairment of Coldwater’s use of their land, the Minister reasonably concluded that Kinder Morgan was able to fulfil the terms of the original indenture, and the Minister engaged with Coldwater on many occasions during the process that followed from the original request for the consent to the assignment and the indenture modernization process so as to be aware of Coldwater’s concerns before making his decision (reasons, paragraphs 207-209).
[37] The Federal Court rejected Coldwater’s submission that the Minister was obliged to renegotiate the terms of the indenture, including the term that related to compensation (reasons, paragraph 216). Rather, the Minister’s fiduciary duty required him to ensure minimal impairment of Coldwater’s interest in its reserve. The discharge of that duty did not require the Minister to reopen the indenture to alter its terms for the purpose of increasing the compensation paid to Coldwater. Thus, the Minister’s decision to consent to the assignment without imposing conditions on Kinder Morgan was reasonable.
[38] Finally, the Federal Court rejected the submission that the Minister should have considered the proposed pipeline expansion when making his decision. The proposed pipeline expansion is the subject of other administrative proceedings, and Kinder Morgan has advised that the proposed expansion will not take place on Coldwater’s lands without its consent (reasons, paragraphs 218-221).
[39] It followed that the application for judicial review should be dismissed.
III. The Issues [40] In my view, the issues to be decided on this appeal are:
1. What is the standard of review to be applied to the decision of the Federal Court?
2. What is the standard of review to be applied to the Minister’s decision?
3. What is the content of the fiduciary duty owed by the Minister when considering whether to consent to the assignment?
4. Did the Minister reasonably discharge his fiduciary obligation?
IV. Consideration of the Issues 1. The standard of review to be applied to the decision of the Federal Court [41] The parties agree that on an appeal from an application for judicial review in the Federal Court, this Court’s role is to determine whether the Federal Court selected the correct standard of review and applied it correctly. In practice, this requires the reviewing court to step into the shoes of the lower court; the focus of this Court is on the administrative decision (Agraira v. Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, [2013] 2 S.C.R. 559, at paragraphs 45 and 46).
2. The standard of review to be applied to the Minister’s decision [42] As explained above, the Federal Court found that: (i) the existence of a fiduciary duty and the content of the duty are questions of law, reviewable on the standard of correctness; and, (ii) the discharge of the fiduciary duty by the Minister is reviewable on the standard of reasonableness (reasons, paragraphs 177, 178).
[43] The appellants agree that the scope of the duty owed is a question of law reviewable on the standard of correctness. However, they argue that the discharge of the fiduciary duty is reviewable on the standard of correctness because the question “is one of the jurisdiction of the Minister to act how he did in consenting to the assignment”. They submit that the Federal Court erred by importing the standard of review from the duty to consult context. This is said to be in error because the exercise of the fiduciary duty is distinct from the duty to consult, “with the fiduciary obligation being the more onerous of the two” duties.
[44] In my view, the Federal Court did not err by concluding that the discharge of the fiduciary duty was to be reviewed on the standard of reasonableness. Assuming, without deciding, that true questions of jurisdiction exist, no question of jurisdiction is raised in the present case. This is so because, without doubt, the Minister had jurisdiction to consent or withhold his consent to the assignment.
[45] The more deferential reasonableness standard is usually applied when an administrative decision-maker is interpreting its home statute, or a statute closely connected to its function, unless the question falls into the category of questions to which the correctness standard continues to apply (Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654, at paragraph 34; Edmonton (City) v. Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47, [2016] 2 S.C.R. 293, at paragraphs 22-24).
[46] In the present case, the Minister was required to exercise his discretion to decide whether to consent to the assignment of a right originally granted under section 35 of the Act. The exercise of discretion was in largest measure fact dependent. The exercise of discretion did not raise a constitutional question, a question of the jurisdictional boundaries between competing specialized tribunals, a question of importance to the legal system as a whole, or a true question of jurisdiction. It was, therefore, a question to be reviewed on the reasonableness standard.
[47] Before leaving the issue of the standard of review, it is important to observe that Coldwater, as a beneficiary of a fiduciary duty, cannot be deprived of that benefit because the fiduciary is a decision-maker whose decisions are to be reviewed under the principles articulated in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190. Thus, the fiduciary obligations imposed on the Minister serve to constrain the Minister’s discretion, narrowing the range of reasonable outcomes.
3. The content of the fiduciary duty owed by the Minister when considering whether to consent to the assignment [48] In the Federal Court, and in this Court, both the Minister and Kinder Morgan acknowledge that the Minister owed a fiduciary duty to the appellants when considering whether to consent to the assignment of the indenture.
[49] I acknowledge that not all obligations that exist between the parties to a fiduciary relationship are themselves fiduciary in nature. In every case it is necessary to focus on the relevant Crown obligation and determine whether the Crown assumed discretionary control over that obligation sufficient to ground a fiduciary obligation (Wewaykum Indian Band v. Canada, 2002 SCC 79, [2002] 4 S.C.R. 245, at paragraph 83). In the present case, Coldwater had a cognizable interest in its reserve lands. By requiring that the Minister consent to any assignment of the easement right, the Crown undertook discretionary control over any assignment in a way that invoked a fiduciary obligation on its part.
[50] The next task is to ascertain the content or scope of the fiduciary duty owed in respect of the assignment of the easement right. For the Federal Court, this question was answered by the Supreme Court in Osoyoos, which was to be applied by way of analogy because the ministerial action under review was not an expropriation, but rather a consent to an assignment of a right created as a result of the original taking of the easement right under section 35 of the Act (reasons, paragraph 192). The Federal Court then went on to find that the consent “was a continuation of the initial recognition of the public interest” (reasons, paragraph 203) and that the consent minimally impaired Coldwater’s use and enjoyment of its land (reasons, paragraph 206).
[51] In the present case, because the assignment was an assignment of an existing right – there was no new taking or use to ground application of the principles articulated in Osoyoos – I prefer to begin my analysis from the fundamental principle that the content of the Crown’s fiduciary duty towards Aboriginal people varies with the nature and importance of the interest at issue (Wewaykum, paragraph 86). Here, what was at issue was Coldwater’s use and enjoyment of its land. This is an issue of central importance.
[52] Unlike the situation in Wewaykum, the Crown was interposed between Coldwater and Kinder Morgan with respect to the Band’s interest in the use and enjoyment of its land. The Crown’s mandate was the exercise of its discretion to consent, or not, to an assignment of the existing easement right. In this circumstance, particularly in light of the importance of Coldwater’s interest in its reserve lands, the Crown was under a continuing duty to preserve and protect the Band’s interest in the reserve land from an exploitive or improvident bargain (Wewaykum, paragraphs 98-100).
[53] This said, the Crown is no ordinary fiduciary. As the Supreme Court explained in Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, [2004] 3 S.C.R. 511, at paragraph 18, the content of the fiduciary duty may vary to take into account the Crown’s other, broader obligations. At the same time, the fiduciary duty still required the Crown to act with reference to Coldwater’s best interest when deciding whether to consent to the assignment of the easement indenture.
[54] In the present case this required the Minister to have regard to both Coldwater’s current and ongoing best interest as well as the interests of all affected parties in the continued operation of the pipeline. As counsel for the appellants acknowledged during oral argument, the Minister’s exercise of discretion had to be exercised in a manner so as not to defeat the public interest in the continued operation of the pipeline.
[55] I find support for the view that the Minister was required to consider Coldwater’s current and ongoing best interest in the decision of this Court in Semiahmoo Indian Band v. Canada, [1998] 1 F.C.R. 3, 148 D.L.R. (4th) 523 where the Court, in the context of a surrender of Indian land, found an ongoing obligation to provide relief when, after the fact of a surrender, the Crown ascertained that an excessive surrender had been granted.
[56] More particularly, in 1951 the Crown had negotiated an absolute surrender of part of an Indian reserve for the purpose of improving a customs facility adjacent to the reserve. By 1969, the land had not been used and the Federal Court found that the Crown knew, or ought to have known, that:
i. Public Works did not have any definite plans for development of the land in the foreseeable future, but was retaining the land for the sake of convenience;
ii. The Band wanted the land back for economic development; and,
iii. Private interests had approached Public Works to buy or lease a portion or portions of the surrendered land.
[57] This Court held that the Crown had a post-surrender fiduciary duty to advance, to the extent possible having regard to the terms of the surrender agreement, the best interest of the Band. Particularly, the Crown had a post-surrender fiduciary duty of reasonable diligence to correct any error in the original surrender agreement.
[58] Before I turn to the application of these principles to the present case, I reject the submission that jurisprudence decided in the context of section 37 of the Act, the surrender jurisprudence, has no relevance to section 35 of the Act. In the cases of both a taking by a local authority under section 35 of the Act and a surrender under section 37 of the Act, there is a loss or diminution of a Band’s interest in its land. I see no reason in principle why the continuing obligation to act in a Band’s best interest found to exist when land is surrendered would not apply equally where a Band’s land is taken or used by a local authority.
[59] In the present context, application of the principles articulated in Semiahmoo would require the Minister to consider whether consenting to the assignment of the original easement on its original terms would be in Coldwater’s continuing best interest, or whether it would continue what is now alleged to be an improvident arrangement or an excessive intrusion on the right of Coldwater to enjoy and use its reserve lands.
[60] As a fiduciary, the Minister is required to exercise his discretion in a manner consistent with his obligations of loyalty and good faith and to act in what he reasonably and with diligence regards as Coldwater’s best interest while, at the same time, being mindful of the public interest in the pipeline’s continued operation. Put another way, the Minister must act as a person of ordinary prudence managing his own affairs while not defeating the public interest in the pipeline’s continued operation by imposing conditions on his consent that are so onerous that they defeat the public purpose.
[61] While I have approached the issue of determining the content of the fiduciary duty from the first principles articulated by the Supreme Court in Wewaykum, the requirement that the Crown have regard to the public interest in the continued operation of the pipeline results in largely the same outcome as that reached when applying the second step of the process articulated in Osoyoos. The Minister must act so as to minimally impair a Band’s right to use and enjoy its land.
[62] In the present context, minimal impairment must be understood as follows. The extent of the impairment of Coldwater’s current and ongoing interest in its land must be assessed at the time the Minister exercises his discretion to grant, or withhold, consent. The extent of the impairment must be assessed with regard to the current and ongoing impact of the continuation of the original terms of the easement on Coldwater’s right to use and enjoy its reserve lands.
4. The discharge of the fiduciary obligation [63] Before I turn to consider the arguments Coldwater advances in this Court, it is appropriate, for completeness, to deal with two arguments that I understand Coldwater does not pursue, or no longer pursues, in this Court.
[64] First, Coldwater initially argued that the Minister was obliged to accept its direction that the Minister not consent to the assignment. I agree with the Federal Court that the Minister was not obliged to accept this direction (reasons, paragraph 196). This argument is inconsistent with the appellants’ acknowledgement in this Court that the Minister was required to have regard to the interests of all affected parties in the continued operation of the pipeline. Thus, the Minister could not impose conditions on the granting of his consent that would be inconsistent with the public interest in the continued operation of the pipeline.
[65] Second, Coldwater originally argued that the Minister erred by failing to consider the impact of the proposed pipeline expansion. I agree with the Federal Court that this was an issue the Minister was not required to consider. As the Federal Court correctly noted, Kinder Morgan has advised Coldwater that the proposed expansion will not take place on its reserve without Coldwater’s consent (reasons, paragraphs 218, 221). In this Court, counsel for the appellants agreed that it is simply speculative to suggest that the expansion would prolong the life of the pipeline.
[66] In this Court, Coldwater’s argument is premised on its assertion that the terms of the easement indenture “are outdated, improvident, and ill-suited to current and future use of Coldwater’s lands for oil transmission pipeline purposes for the indefinite future.” It argues that the “Minister had the discretion and, it is submitted, duty to exercise a power in relation to that easement by requiring negotiations towards a renewed easement agreement as a condition of any consent to the assignment sought by Kinder Morgan. This is what any person of ordinary prudence would have done if they had that power in relation to their own land.”
[67] The shortcomings said to exist in the existing indenture are the inadequacy of the small, one-time payment made as consideration for the easement, and the inadequacies of the remaining indenture terms as identified by Coldwater in the Indenture Modernization Process.
[68] In response, the respondents argue that the Minister engaged with the appellants in order to understand their interests, and that the assignment of the easement did not increase the impairment of Coldwater’s interest in the use and enjoyment of its land.
[69] In oral argument, counsel for the Minister and Kinder Morgan argued that, properly construed, clause 2 of the indenture simply required the Minister to satisfy himself that the proposed assignee had the capacity to comply with its obligations under the indenture and that the Minister’s fiduciary duty was coextensive with this requirement. To this, counsel for the Minister added that the fiduciary duty owed by the Minister was “in a way analogous” to this requirement. The fiduciary duty required the Minister to engage with Coldwater in order to understand its interests and concerns. Only when armed with that knowledge could the Minister be satisfied that consenting to the assignment would minimally impair Coldwater’s interest in its lands. In the context of an expropriation, the requirement to act in the best interests of a Band means to minimally impair a Band’s interest in its land.
[70] Counsel for the respondents also submitted, apparently in the alternative, that because the Minister knew that the adequacy of the consideration was of significant concern to Coldwater, we ought to infer from the outcome that the Minister directed his mind to the issue of compensation and decided that it was unnecessary or inappropriate to seek additional compensation.
[71] In my view, these submissions lend themselves to the following analysis:
i. Did the Minister direct his attention to the adequacy of the consideration Coldwater received?
ii. Did clause 2 of the indenture limit the relevant factors to be considered to the capacity of the proposed assignee to comply with the indenture?
iii. Did the Minister reasonably conclude that consenting to the assignment would minimally impair Coldwater’s interest in its reserve lands?
[72] Each item will be considered in turn.
(1) Did the Minister direct his attention to the adequacy of the consideration Coldwater received? [73] As explained above, during oral argument counsel for the respondents submitted that the Minister had considered Coldwater’s desire for increased compensation. We were asked to infer that the Minister decided it was unnecessary or inappropriate to seek additional compensation.
[74] In order to properly consider this submission it is necessary to consider the nature of an inference. Drawing an inference is a matter of logic. As stated by the Newfoundland Supreme Court (Court of Appeal) in Osmond v. Newfoundland (Workers’ Compensation Commission), 2001 NFCA 21, 200 Nfld. & P.E.I.R. 202, at paragraph 134:
[…] Drawing an inference amounts to a process of reasoning by which a factual conclusion is deduced as a logical consequence from other facts established by the evidence. Speculation on the other hand is merely a guess or conjecture; there is a gap in the reasoning process that is necessary, as a matter of logic, to get from one fact to the conclusion sought to be established. Speculation, unlike an inference, requires a leap of faith.
[75] The House of Lords in Caswell v. Powell Duffryn Associated Collieries, Limited, [1940] A.C. 152 described the difference between conjecture and an inference in these terms at pages 169-70:
Inference must be carefully distinguished from conjecture or speculation. There can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish. In some cases the other facts can be inferred with as much practical certainty as if they had been actually observed. In other cases the inference does not go beyond a reasonable probability. But if there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation or conjecture.
[Emphasis added]
Thus, an inference cannot be drawn where the evidence is equivocal in the sense that it is equally consistent with other inferences or conclusions.
[76] In the present case, counsel acknowledged that there is nothing in the record that expressly demonstrates that the Minister considered the adequacy of the compensation paid to Coldwater. It is therefore necessary to examine the evidentiary record to see what inference, if any, it can support.
[77] I consider the following information from the record to be relevant.
[78] First, by letter dated November 14, 2012, from the Department, Coldwater was advised that the Department was gathering facts and information to assist the Minister in making his decision. The letter advised:
The Minister will consider facts and information from the time frame of 2007 through to the present. The facts and information under consideration include the legal capacity of the companies making the assignment and, in respect of the companies receiving the assignments, the legal capacity, corporate track record, operational track record, financial capacity and the overall capability to fulfill the terms of the easement.
[79] Missing is any reference to the Minister considering facts and information about the amount of compensation and the appropriateness of the other terms of the indenture.
[80] Second, the recommendation from Departmental staff to the decision-maker recommending that the assignment be consented to advised that the request for consent to the assignment “was assessed to ensure Kinder Morgan Canada Inc. met reasonable business requirements, including fulfilling the indentures’ obligations.” By way of background, the recommendation went on to note that while the Department had no specific policy for indenture assignments under section 35 of the Act “it was determined further to internal consultation that certain criteria should be considered, including grantee credit, grantee environmental record, grantee contract record and grantee eligibility, valid grantor, adequate description, appropriate circumstances, and proper documentation.”
[81] In setting out the considerations that led to the Department’s favourable recommendation, the Department noted that it had determined internally that there was no duty to consult with First Nations prior to a decision regarding the assignments; however, in order to uphold the honour of the Crown, the Department sought information from First Nations on whose lands the pipeline was located. After setting out that Kinder Morgan held a Certificate of Public Convenience and Necessity, it was noted that “Kinder Morgan Canada Inc. has the financial means and the expertise to operate the Trans Mountain Pipeline and continues to fulfill the obligations of the Indentures.”
[82] Missing in the document forwarded to the decision-maker is any acknowledgement or advice about Coldwater’s concerns about the adequacy of the consideration it received and the adequacy of the terms of the easement indenture.
[83] Finally, the December 29, 2014, letter that advised Coldwater of the Minister’s decision stated that the Minister had consented to the assignment after considering the facts and information researched by the Department and provided by the First Nations, Kinder Morgan and the National Energy Board. The letter specified that the facts and information considered “pertained to the grantee credit record, grantee environmental record, grantee contract record, grantee eligibility, valid grantor, adequate description, appropriate circumstances and proper documentation for the assignment of the Trans Mountain Pipeline.” The letter concluded that Kinder Morgan “was able to demonstrate to the Minister they have the legal capacity, corporate track record, operational track record, financial capacity and the overall capability to fulfill the terms of the easement.”
[84] This letter expressly negates the suggestion that the Minister considered the adequacy of the compensation and the other terms of the easement indenture.
[85] The record before the Court does not support, on a balance of probabilities, the submission that the Minister considered Coldwater’s concerns about compensation and the terms of the indenture agreement when deciding to consent to the assignment. In my view, the record before the Court demonstrates on a b