Coldwater First Nation v. Canada (Indian Affairs and Northern Development)

Coldwater First Nation v. Canada (Indian Affairs and Northern Development)
Court (s) Database
Federal Court Decisions
Date
2016-05-30
Neutral citation
2016 FC 595
File numbers
T-133-15
Decision Content
Date: 20160530
Docket: T-133-15
Citation: 2016 FC 595
Ottawa, Ontario, May 30, 2016
PRESENT: The Honourable Madam Justice Heneghan
BETWEEN:
COLDWATER INDIAN BAND AND CHIEF LEE SPAHAN IN HIS CAPACITY AS CHIEF ON BEHALF OF ALL MEMBERS OF THE COLDWATER BAND
Applicants
and
MINISTER OF INDIAN AFFAIRS AND NORTHERN DEVELOPMENT AND KINDER MORGAN CANADA INC.
Respondents
PUBLIC JUDGMENT AND REASONS
(Confidential Judgment and Reasons issued on May 20, 2016)
I. INTRODUCTION [1] The Coldwater Indian Band (“Coldwater”) and Chief Lee Spahan (collectively, the “Applicants”) seek judicial review pursuant to section 18.1 of the Federal Courts Act, R.S.C. 1985, c. F-7 (the “Federal Courts Act”) of a decision of the Minister of Indian Affairs and Northern Development (the “Minister”). In that decision, dated December 19, 2014, the Minister consented to the assignment to Kinder Morgan Canada Inc. (“Kinder Morgan”) of an Indenture dated May 4, 1955 (the “1955 Indenture”) by which a pipeline right-of-way through Coldwater Indian Reserve No. 1 (the “Reserve”) was granted to Trans Mountain Oil Pipe Line Company (“Trans Mountain”). The Reserve is located approximately 13 km south of Merritt, British Columbia.
[2] The Minister’s consent to the assignment of the 1955 Indenture was executed through an Assignment Consent Agreement, which was registered in the Indian Land Registry under the No. 6083518.
[3] On August 3, 1958 another Indenture, granting a pipeline right-of-way through the Reserve (the “1958 Indenture”), was issued to Trans Mountain. That Indenture, registered in the Indian Land Registry under the No. R10906, is not at issue in this proceeding.
II. THE PARTIES [4] Coldwater is a Band as defined by the Indian Act, R.S.C. 1985, c. I-5 (the “Act”). Chief Lee Spahan is the elected chief of Coldwater.
[5] The Minister is a Minister of the Crown responsible for the administration of the Act; see section 4(1).
[6] The Minister who made the December 2014 decision was the Honourable Mr. Bernard Valcourt. The Honourable Dr. Carolyn Bennett is currently the Minister.
[7] Kinder Morgan is a body corporate incorporated under the laws of Alberta. Kinder Morgan, through related companies, owns and operates a pipeline between Sherwood Park, Alberta and Burnaby, British Columbia (the “Pipeline”). The Pipeline crosses the Reserve.
III. PROCEDURAL HISTORY [8] Coldwater and former Chief Harold Aljam filed a judicial review application in March 2013 in cause number T-491-13, seeking declaratory relief, prohibition and an injunction. More specifically, the relief sought in cause T-491-13 was an order prohibiting the Minister from consenting to the assignment of the 1955 Indenture and the 1958 Indenture (collectively, the “Indentures”), together with a declaration that the Minister was legally bound to follow Coldwater’s instructions about the assignment of the Indentures.
[9] The 2013 application for judicial review was initially granted, in part, by a judgment recorded as Coldwater Indian Band v. Canada (Indian Affairs and Northern Development) (2013), 442 F.T.R. 136. However, upon appeal the application was dismissed by the Federal Court of Appeal on the basis that that the application was premature; see the decision in Coldwater Indian Band v. Canada (Indian Affairs and Northern Development) (2014), 466 N.R. 145.
[10] Since the Federal Court of Appeal set aside the decision of the Federal Court in cause T-491-13, and in light of the different facts and arguments presented in the present proceeding, I have not taken into account the Federal Court's disposition in T-491-13.
[11] The Applicants commenced the present proceeding on January 27, 2015.
[12] Prothonotary Lafrenière issued an Order dated April 28, 2015, that the Robert Love Affidavit, sworn March 27, 2015 be treated as confidential and filed on a confidential basis. By Order dated June 1, 2015, Prothonotary Lafrenière ordered that the transcript of the cross-examination on the affidavit of Chief Spahan also be treated as confidential.
[13] On November 4, 2015, Prothonotary Lafrenière granted Kinder Morgan leave to file a motion pursuant to Rules 81 and 369 of the Federal Courts Rules, SOR/98-106 (the “Rules”) to strike out certain paragraphs of the affidavits of Chief Spahan and Mr. Harold Aljam filed on behalf of the Applicants. This motion was heard during the hearing of the proceeding.
IV. EVIDENCE [14] In support of this application, the Applicants filed the affidavit of Chief Spahan, sworn February 25, 2015; the affidavit of Mr. Harold Aljam, sworn February 26, 2015, former Chief of Coldwater; and the affidavit of Chelsea Craighead, sworn March 26, 2015, paralegal for the Applicants’ Counsel.
[15] Chief Spahan’s affidavit provided background information about Coldwater, the Reserve and the history of the right-of-ways and Indentures. His affidavit also described Kinder Morgan’s proposed expansion for the Pipeline and his concerns over the failure of the Minister to require Kinder Morgan to modernize the Indentures.
[16] Mr. Aljam’s affidavit detailed consultation which took place between himself and representatives of the Minister and Kinder Morgan. These discussions were related both to an attempt to modernize the Indentures and the request to consent to the assignment of the Indentures.
[17] Ms. Craighead’s affidavit was filed for the purpose of attaching as an exhibit correspondence dated July 16, 2015 between Mr. Kuldip Gill and Counsel for Kinder Morgan.
[18] In response, the Minister filed the affidavit of Mr. Kuldip Gill, sworn March 27, 2015, Lands Management and Leasing Officer for the Department of Indian Affairs and Northern Development (“IAND”). He also filed the transcript of the cross-examination of Chief Spahan on his affidavit conducted on April 14, 2015 and the transcript of the cross-examination of Mr. Aljam on his affidavit conducted on April 16, 2015.
[19] Mr. Gill addressed the history of the creation of the Indentures, the communications between IAND and Coldwater, and the Indenture Modernization Process. He also gave evidence about the prior litigation in the Federal Court.
[20] Kinder Morgan filed the affidavit of Mr. Robert Love, sworn March 27, 2015, Manager, Land and Rights-of-way for Kinder Morgan; the confidential affidavit of Mr. Love, also sworn March 27, 2015; and the confidential transcript of the cross-examination of Chief Spahan conducted on April 14, 2015.
[21] In his affidavit, Mr. Love provided a detailed account of the creation of the Indentures, the restructurings of Trans Mountain between 1958 and 2007, the Indenture Modernization Process, and Kinder Morgan’s engagement efforts with Coldwater. Exhibits to Mr. Love’s confidential affidavit include the Asset Transfer Agreement between Terasen Inc. and Trans Mountain Pipeline ULC, and the Protocol and Capacity Agreement between Kinder Morgan, Trans Mountain Pipeline L.P. and Coldwater.
V. FACTS [22] The following facts are taken from the evidence. That evidence consists of the affidavits, including the exhibits, filed by the parties, the transcripts of the cross-examinations, as well as the Tribunal Record.
[23] Trans Mountain began to construct the Pipeline in 1952.
[24] In April 1952, Canadian Bechtel Ltd. applied on behalf of Trans Mountain to the Department of Indian Affairs for a 60 foot wide right-of-way through the Reserve. Trans Mountain offered compensation of $1.00 per lineal rod of the right-of-way and promised payment at the time “easements granting said right of way are executed.”
[25] By Band Council Resolution dated April 22, 1952, Coldwater resolved that the right-of-way be granted to Trans Mountain on the terms set out in the application.
[26] By Order-in-Council dated March 19, 1953, the Governor-in-Council authorized the granting of an easement on the Reserve pursuant to section 35 of the Indian Act, R.S.C. 1952, c. 149, (the “1952 Act”) for “pipe line purposes for so long as same are required for that purpose upon such terms, conditions, and provisions as the Minister of Citizenship and Immigration may deem necessary and advisable.” The Minister of Citizenship and Immigration was the minister responsible for the Department of Indian Affairs at the time.
[27] In the fall of 1953 Trans Mountain paid the Department of Indian Affairs $1292.00 for the acquisition of the right-of-way through the Reserve, and $1125.09 as compensation for Coldwater’s damages and loss of timber.
[28] By the 1955 Indenture Her Majesty the Queen in Right of Canada granted a right-of-way in the Reserve to Trans Mountain. The offer of $1.00 per lineal rod was accepted, and additional compensation was paid for removal of timber and impacts on residents. The 1955 Indenture was registered in the Indian Lands Registry under No. R10848.
[29] Clause 2 of the 1955 Indenture is relevant to this proceeding and provides as follows:
2. That the Grantee shall not assign the right hereby granted without written consent of the Minister.
[30] In May 1958, Trans Mountain made a second application for a right-of-way through the Reserve to allow a looping line.
[31] By Order in Council P.C. 1958-611, the Governor General in Council consented to the grant of a second easement in May 1958. This easement was formalized by the 1958 Indenture on the same terms as the 1955 Indenture.
[32] The parties amended the 1955 Indenture in 1970 by deleting an area and relocating the right-of-way. A second amendment was made in 1975 by further deletion of part of the right-of-way and the addition of an area of 0.17 acre to the right-of-way. Both these amendments affected portions of the right-of-way on the Reserve.
A. Corporate History [33] Between 1955 and 2007, Trans Mountain underwent a series of name changes, amalgamations, and continuations. The Minister’s consent was not sought in relation to any of these changes.
[34] On November 11, 1994, the shares of Trans Mountain Pipe Line Company Ltd., a successor of Trans Mountain, were purchased by BC Gas Inc. On December 31, 2002, Trans Mountain Pipe Line Company Ltd. changed its name to Terasen Pipelines (Trans Mountain) Inc.
[35] In April 2003, BC Gas Inc. changed its name to Terasen Inc. On December 1, 2005, Terasen Inc, parent company of Terasen Pipelines (Trans Mountain) Inc., was acquired by Kinder Morgan Inc. through its Canadian subsidiary, 0731297 B.C. Ltd.
[36] As of January 2007, Terasen Pipelines (Trans Mountain) Inc. owned the Pipeline. Terasen Pipelines (Trans Mountain) Inc. was a subsidiary of Terasen Inc., which in turn was owned by the US-based Kinder Morgan and its Canadian subsidiary, 0731297 B.C. Ltd.
[37] On February 15, 2007, 0731297 B.C. Ltd. was continued as 4371330 Canada Inc. The following day, Terasen Pipelines (Trans Mountain) Inc. amalgamated with 4371330 Canada Inc. and Terasen Inc., both of which were subsidiaries of Kinder Morgan, and continued under the name Terasen Inc. Terasen Inc. became the owner and operator of the Pipeline.
[38] On April 30, 2007, the Pipeline was transferred to Trans Mountain Pipeline ULC, a subsidiary of Terasen Inc., through an Asset Transfer Agreement. The same day, the Pipeline was transferred to Trans Mountain Pipeline L.P. through a partnership contribution agreement. Trans Mountain Pipeline L.P. was a subsidiary of Trans Mountain Pipeline ULC.
[39] On May 1, 2007 Trans Mountain Pipeline ULC amalgamated with KMEP Canada ULC and continued under the name KMEP Canada ULC. KMEP Canada ULC is a Canadian subsidiary of Kinder Morgan Energy Partners. These transactions were part of a larger transaction by which Fortis Inc. purchased Terasen Inc.’s natural gas assets, excluding the Pipeline, through an acquisition agreement.
[40] Both the National Energy Board (“N.E.B.”) and the Governor-in-Council approved the 2007 corporate transactions. Those approvals were acknowledged by the transfers of Certificates of Public Convenience and Necessity, as required by sections 21(2), 21.1(1) and 30 of the National Energy Board Act, R.S.C. 1985, c. N-7.
B. Request and Consultation [41] By letter dated April 25, 2012, Coldwater wrote to the Minister expressing its concerns that Kinder Morgan would be seeking his consent to an assignment of the Indentures. Mr. Gill met with Mr. Aljam and Counsel for Coldwater on May 17, 2012. However, Mr. Aljam and Mr. Gill decided that the meeting was premature as no formal request for consent to the assignment of the Indentures had been made.
[42] On June 12, 2012, the Minister received a request by letter from Kinder Morgan, Fortis and FortisBC seeking his consent to the assignment of the Indentures.
[43] On July 16, 2012, a representative of IAND informed the Applicants of the request. IAND also provided the Applicants with the opportunity to present information relating to Kinder Morgan’s legal capacity, corporate record, operational record, financial capacity and overall capacity to fulfill the terms of the Indentures.
[44] Between November 14, 2012 and December 3, 2014, IAND and Coldwater exchanged correspondence. IAND invited Coldwater to provide submissions and information about the June 2012 request.
[45] By letter dated February 20, 2013, Coldwater informed IAND that it had determined the assignment was not in its best interests and “instructed” the Minister to withhold his consent.
[46] Beginning in January 2014, IAND, Kinder Morgan and representatives of several First Nations, including the Applicants, discussed an Indenture Modernization Process. The purpose of the process was to improve the terms of the Indentures to better “delineate the roles and responsibilities of the parties under the Indentures”. However, new legal rights would not be created nor existing rights diminished through the modernization process.
[47] The Applicants withdrew from the Indenture Modernization Process citing Canada’s failure to consider its recommendations about this process, as the reason. One of Coldwater’s recommendations, set out in a letter dated May 30, 2014, was that the process provide for new consideration because “the consideration received by each First Nation for the lands in the 1950s was wholly inadequate…”. The remaining First Nations approved an Indenture Modernization Agreement in June 2014.
[48] Kinder Morgan consulted with Coldwater beginning in July 2010 to address its concerns regarding the Pipeline. The Applicants expressed concerns about the safety of the Pipeline, specifically, drinking water contamination, risks of spills, and irrigation problems. Kinder Morgan asserts that all these issues have been adequately addressed.
[49] In 2013, Kinder Morgan applied to the N.E.B. for a Certificate of Public Convenience and Necessity as well as related approvals to build and operate the proposed expansion of the Pipeline. The proposed expansion would increase the Pipeline’s capacity approximately threefold. The N.E.B. regulatory process is distinct from the Minister’s decision to approve the assignment of the 1955 Indenture. However, concerns over the proposed Pipeline expansion were central to Coldwater’s opposition to the Minister’s consent to the assignment of the 1955 Indenture.
[50] During the course of consultations, Coldwater stated Kinder Morgan was trespassing on Band lands, and demanded a fee for a “unauthorized use of reserve lands”. The Applicants threatened to deny Kinder Morgan entry to the Reserve if the fee was not paid. Coldwater also stated it would take all actions necessary to stop unauthorized operation of the Pipeline.
[51] Due to the threats against the operation of the Pipeline, the RCMP was dispatched to the Reserve at the request of Kinder Morgan. This event is referenced in a letter dated August 1, 2012 from Coldwater to Kinder Morgan, where Coldwater wrote “We authorized our lawyer to invite you to meet with us to consider an interim permit upon payment of $20,000. Instead, you sent the RCMP onto our Reserve.”
[52] Efforts to address concerns about the existence and operation of the Pipeline culminated in a Protocol and Capacity Agreement (the “Protocol Agreement”) dated October 1, 2014 executed by Kinder Morgan and Coldwater. The Protocol Agreement established a process, including funding, to address Legacy Issues and Operational Issues. Kinder Morgan says that it made substantial payments to Coldwater to resolve the Legacy Issues. The payment amounts were redacted from the Protocol Agreement attached as an exhibit to the Confidential Love affidavit.
[53] The Protocol Agreement defined Legacy Issues as,
all issues relating to the legal entitlement of the Trans Mountain Pipeline System to be located on the Reserve, including in respect of KMC’s rights under the Indenture, the Indenture generally, and any inconvenience, costs and damages related to settling all issues related thereto.
[54] The Protocol Agreement defined Operational Issues as “any issues relating to the current operations of the Trans Mountain Pipeline System on, under or upon the Reserve, including access roads on the Reserve.”
[55] Kinder Morgan also agreed to provide funding to conduct a Traditional Land Use and Traditional Knowledge Study for on and off reserve territory, and compensation for Past Use.
[56] As part of the Protocol Agreement, Coldwater agreed to refrain from taking any action to challenge the Indentures for the term of the Agreement. The Protocol Agreement was not disclosed to the Minister until cross-examination of the Applicants’ affiants on their affidavits.
[57] Coldwater Band Council, by Resolution dated August 3, 2015, directed Kinder Morgan to remove the Pipeline as soon as practicable and fixed a fee of $30,000 per month for unauthorized use.
[58] The Coldwater Band Council receives annual property tax from Kinder Morgan, in excess of $100,000 a year.
C. Decision Under Review [59] On December 19, 2014, the Minister consented to the assignment of the 1955 Indenture without conditions. He deferred his decision on the 1958 Indenture, pending further information to be provided by Kinder Morgan. The Minister, by his delegate, executed the Assignment Consent Agreement on December 19, 2014.
[60] Coldwater was informed of the Minister’s decision by letter dated December 29, 2014. According to that letter, the consent was given on the basis that Kinder Morgan had demonstrated the “legal capacity, corporate track record, operational track record, financial capacity and overall capacity to fulfill the terms of the easement”.
VI. ISSUES [61] This application for judicial review raises a number of issues, beginning with the motion filed by Kinder Morgan pursuant to Rules 81 and 369 of the Rules to strike out certain paragraphs of the affidavits of Chief Spahan and Mr. Aljam.
[62] The next issue is the applicable standard of review.
[63] The third issue is the content of the fiduciary duty owed by the Minister when consenting to an assignment of the 1955 Indenture and whether he discharged that duty.
[64] The fourth issue is whether the Minister breached procedural fairness by failing to provide Coldwater with all the material before him in making his decision.
[65] The fifth issue concerns the effect of the failure of Kinder Morgan to obtain the Minister’s consent in 2007 upon the continued legality of the 1955 Indenture.
[66] Finally, if the application for judicial review is granted, should the relief sought by the Applicants should be granted.
VII. PRELIMINARY MATTER A. Kinder Morgan’s Motion to Strike (1) Kinder Morgan’s Submissions [67] Kinder Morgan seeks an order pursuant to Rules 81 and 369 of the Rules striking out paragraphs 9, 15, 16, 27, 32 to 42 and 44 to 46 of the affidavit of Chief Spahan and paragraphs 12 to 15 of the affidavit of Mr. Aljam. In the alternative, Kinder Morgan asks that the paragraphs be given no weight.
[68] Kinder Morgan submits paragraphs 9, 37, 44, and 46 of the Spahan affidavit contain legal argument about the legality of its ownership of the Pipeline and the Minister’s obligations as a fiduciary.
[69] Kinder Morgan argues that paragraph 15 of the Spahan affidavit contains speculation and information beyond the personal knowledge of the affiant.
[70] Kinder Morgan submits that paragraph 16 of the Spahan affidavit contains improper evidence that is irrelevant and speculative. Similarly, it argues that paragraphs 32 to 36, 41, and 44 to 45 are irrelevant as they concern the proposed expansion of the Pipeline which is not at issue in this proceeding.
[71] Kinder Morgan argues paragraphs 38 to 42 are hearsay evidence. It submits that these paragraphs are contradicted by other evidence. These paragraphs address harm caused to the Reserve by the Pipeline in the past.
[72] With respect to the Aljam affidavit, Kinder Morgan submits that the impugned paragraphs ought to be struck as they contain legal argument and opinion evidence.
(2) The Applicants’ Submissions [73] The Applicants submit that the Court should cautiously exercise its discretion to strike parts of an affidavit in judicial review proceedings; see the decisions in Z.(Y.) v. Canada (Minister of Citizenship and Immigration) (2015), 387 D.L.R. (4th) 676 (F.C.) at para. 91 and Armstrong v. Canada (Attorney General), 2005 FC 1013 at para 40.
[74] The Applicants argue that paragraphs 9, 15, 37 and 45 to 46 of Chief Spahan’s affidavit contain relevant facts within the affiant’s knowledge. They also submit that Kinder Morgan has not identified any prejudice it would suffer if these paragraphs are considered.
[75] The Applicants further argue that paragraphs 9, 15, 37, and 45 to 47 of the Spahan affidavit contain facts, not legal argument, as asserted by Kinder Morgan. They submit paragraphs 32 to 36, 41, and 44 to 45, which address the proposed expansion of the Pipeline, are relevant to the determination of whether the Minister discharged his fiduciary duty.
[76] The Applicants argue that paragraphs 38 to 42 of the Spahan Affidavit describe concerns with the Pipeline and were within the affiant’s knowledge. To the extent that Kinder Morgan argues these facts are contradicted by other evidence, the Applicants say that argument goes to the weight to be placed on the evidence, not its admissibility.
[77] In response to the objections about Mr. Aljam’s affidavit, the Applicants submit that paragraphs 12 to 15 contain a summary of correspondence between them and the Department of Justice, and do not constitute impermissible legal argument.
[78] In response to the motion as a whole, the Applicants argue that Kinder Morgan had the opportunity to cross-examine Chief Spahan on these issues but elected not to do so.
(3) The Minister’s Submissions [79] The Minister neither consented to nor opposed the motion.
VIII. SUBMISSIONS A. The Applicants’ Submissions (1) The Applicable Standard of Review [80] The Applicants submit that in consenting to the assignment contrary to his fiduciary obligations, the Minister was acting unlawfully and ultra vires. They argue, accordingly, that the standard of review is not in issue, relying on the decisions in Tzeachten First Nation v. Canada (Attorney General) (2007), 281 D.L.R. (4th) 752 (B.C.C.A.), and Inuit Tapirisat of Canada et al. v. Canada (Attorney General), [1980] 2 S.C.R. 735.
[81] In oral submissions, the Applicants relied upon the decision in White Bear First Nations v. Canada (Minister of Indian Affairs and Northern Development)et al. (2012), 434 N.R. 185 (F.C.A.) at para. 16, to submit that the extent of the Minister’s obligations as a fiduciary is a question of law reviewable on the standard of correctness.
(2) What is the content of the fiduciary duty owed by the Minister in administering the terms of a section 35 grant? [82] The Applicants submit that a fiduciary duty arises where the Crown has discretionary control over a specific band interest. The extent of the Minister’s fiduciary duty is informed by the importance of the interest in Reserve land to Coldwater.
[83] The Applicants argue that in consenting to the assignment the Minister was not exercising “ordinary government powers” but powers arising out of the 1955 Indenture. As such the power must be exercised in accordance with his fiduciary duty to Coldwater; see the decision in Wewaykum Indian Band v. Canada, [2002] 4 S.C.R. 245 at paras. 98-104.
[84] According to the Applicants, the Minister is under a continuing obligation to act in Coldwater’s best interests regarding transactions under the 1955 Indenture. This obligation endures for the life of the 1955 Indenture. The Applicants here rely upon the decisions in Osoyoos Indian Band v. Oliver (Town), [2001] 3 S.C.R. 746 and Semiahmoo Indian Band v. Canada (1998), 148 D.L.R. (4th) 523 (F.C.A.).
[85] The Applicants submit that Osoyoos, supra provides guidance as to how reconcile the Crown’s use of band land in the public interest and the Crown’s fiduciary duty in the context of an expropriation under section 35 of the Act. The process requires first, that the Crown determine whether use of the land is in the public interest, and if it is, then the Minister has a fiduciary duty to ensure a minimal impairment of the use and enjoyment of Indian land.
[86] The Applicants argue that the Minister’s fiduciary duty obliged him to refuse to consent to the assignment unless he was satisfied the assignment was in the best interests of Coldwater, including ongoing compensation for Coldwater.
[87] In the alternative, the Applicants submit that the Minister was required to abide by the informed direction of Coldwater. They argue fiduciaries are generally required to adhere to beneficiaries’ instructions.
[88] The Applicants refer to the First Nations Land Management Act, S.C. 1999, c. 24 (“FNLMA”), a statute that allows First Nations to exert control over reserve lands through the adoption of a Land Code.
[89] Coldwater has not adopted a Land Code. However, two other First Nations, which are subject to the Indentures, did adopt a Land Code. According to the Applicants, in those cases, the bands have the authority to consent to an assignment of the 1955 Indenture.
[90] The Applicants submit that this power to consent shows that the purpose of the requirement in the 1955 Indenture, for ministerial consent to an assignment of that Indenture, is for the benefit of First Nations.
(3) Did the Minister Discharge His Fiduciary Duty? [91] The Applicants submit the Minister breached his fiduciary duty in consenting to the assignment. They argue the terms of the 1955 Indenture are highly unfavourable to Coldwater because the 1955 Indenture does not provide adequate protections or compensation. They submit that the compensation given to Coldwater in 1952 is plainly inadequate.
[92] The Applicants submit that the Minister’s fiduciary duty obliged him to take the opportunity to renegotiate the terms of the 1955 Indenture in Coldwater’s best interests, specifically the compensation paid to Coldwater; see the decision in Semiahmoo, supra at page 543. In that case, the Federal Court of Appeal held that the Crown was required to correct an error which had resulted in an unconditional surrender of band land.
[93] The Applicants repeatedly characterized the 1955 Indenture as a contract and argue that transactions involving indentures are subject to ordinary principles of contract law.
[94] In response to the Minister’s submissions that he is bound to negotiate in good faith, they argue that requiring fresh consideration before an assignment is “perfectly acceptable” in the commercial world.
[95] The Applicants contend that renegotiation of the 1955 Indenture would not breach the contractual duty of good faith owed by the Minister to Kinder Morgan.
[96] They further submit that Kinder Morgan is a stranger to the contract, that is the 1955 Indenture. In these circumstances, it was reasonable for the Minister to require Kinder Morgan to negotiate new terms with Coldwater as a pre-condition for consent to the assignment of the 1955 Indenture.
[97] According to the Applicants, Coldwater’s interests could only be met by modernization of the 1955 Indenture. The Applicants argue that the Minister should have withheld his consent until better terms were agreed to. By failing to renegotiate the 1955 Indenture, the Minister failed to meet his fiduciary duty.
[98] The Applicants argue that the fact that a project may be necessary for the public interest does not diminish the Minister’s obligations as a fiduciary; see the decision in Wewaykum, supra at para. 104 and Osoyoos, supra at paras. 52-55. They also argue that requiring a modernized indenture would not diminish the public interest in the Pipeline.
[99] The Applicants submit that the Minister was not bound by the Indenture Modernization Process. He had the discretion to require updated terms that would minimally impair Coldwater’s interest.
[100] In the alternative, the Applicants submit the Minister’s fiduciary obligations required him to abide by Coldwater’s informed direction. Fiduciaries are generally required to fully disclose all material facts and adhere to the beneficiaries’ instructions. The Applicants argue that in failing to follow Coldwater’s instructions, the Minister breached his fiduciary duty.
[101] The Applicants argue that the purpose of the consent requirement was to prevent exploitation; see the decision in Blueberry River Indian Band v. Canada (Department of Indian Affairs and Northern Development), [1995] 4 S.C.R. 344 at para 35. In that case, the Supreme Court found that the Crown’s use of the consent clause was limited to refusing consent where surrender would amount to an exploitative bargain. The Applicants submit that the requirement in that case is analogous to the requirement in the 1955 Indenture for ministerial consent to an assignment of that Indenture.
(4) Did the Minister breach procedural fairness by failing to provide Coldwater with all the materials before him? [102] The Applicants submit that the Minister’s failure to disclose an internal memorandum from IAND staff, recommending that he consent to the assignment of the 1955 Indenture, amounted to a breach of procedural fairness.
[103] The principle of audi alteram partem requires that decision makers provide adequate opportunities to know and respond to the case to be met. Furthermore, a fiduciary is required to disclose all material facts to his beneficiary.
[104] The Applicants argue that they are entitled to a high degree of procedural fairness since the decision affected property interests, that is the easement; the property interest at stake is in reserve land; the decision engaged the honour of the Crown; and Coldwater had a legitimate expectation of a continuing high degree of participation; see the decision in Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817.
[105] The Applicants argue the Minister should have provided all the materials on which his decision was based, thereby allowing Coldwater to comment on them before the decision was made.
(5) Is the 1955 Indenture void because Kinder Morgan failed to obtain the Minister’s consent in 2007 and the easement is not needed for pipeline purposes? [106] Contrary to the express terms of the 1955 Indenture, the Minister’s consent was not sought until June 2012. The Applicants submit that, as a result, the 2007 assignment was legally ineffective.
[107] The Applicants submit that, since April 30, 2007, Terasen Inc., the owner of the 1955 Indenture, has not operated the Pipeline. Accordingly, they contend that the easement is not needed for “pipeline purposes” and as such, the easement is void.
[108] In oral submissions, the Applicants said they are not challenging the validity of the 1955 Indenture. They submit that, while Kinder Morgan did not have legal entitlement to the easement, the 1955 Indenture itself is valid.
(6) If this Application is granted, what is the appropriate remedy? [109] The Applicants seek a declaration that the Minister has an obligation to act in Coldwater’s best interests in exercising his authority to grant or refuse to consent to the assignment of the 1955 Indenture; a declaration that the Minister had a legal obligation, which he failed to fulfill, to consult and accommodate Coldwater’s interest in respect of the assignment of the 1955 Indenture; and a declaration that the Minister’s consent to the assignment of the 1955 Indenture is unlawful.
[110] In the alternative, the Applicants seek a declaration that the Minister had an obligation to seek and follow Coldwater’s instructions and that the Minister’s consent to the assignment of the 1955 Indenture is unlawful as it is contrary to his obligation to act in accordance with Coldwater’s instructions. They also seek a declaration that the Minister had a legal obligation to share with Coldwater all the information available for his consideration in respect of the assignment of the 1955 Indenture and that the Minister failed to fulfill that obligation.
[111] In their Memorandum of Fact and Law, the Applicants also requested an order quashing or setting aside the Minister’s decision to consent to the assignment of the 1955 Indenture.
B. Kinder Morgan’s Submissions (1) The Applicable Standard of Review [112] Kinder Morgan submits that the question of whether a fiduciary duty exists at law is reviewable on a correctness standard; see the decision in Nunavut Tunngavik Incorporated v. Canada (Attorney General), [2014] 3 C.N.L.R. 193 at paras. 24-26 (N.U.C.A.). The question of whether the fiduciary duty was discharged in these circumstances is heavily informed by the facts. This issue should be reviewed on a standard of reasonableness; see the decision in Brokenhead Ojibway Nation et al. v. Canada (Attorney General) et al. (2009), 345 F.T.R. 119 (F.C.) at para. 17.
[113] Kinder Morgan argues that the standard of review for breach of procedural fairness is correctness; see Tobique Indian Band v. Canada (2010), 361 F.T.R. 202 (F.C.) at para. 66.
(2) What is the content of the fiduciary duty owed by the Minister in administering the terms of a section 35 grant? [114] Kinder Morgan concedes that the Minister owes Coldwater a fiduciary duty. However, it submits that in exercising that duty the Minister must balance the Crown’s obligations to the public purpose of the initial expropriation and her fiduciary duty to ensure minimal impairment of the enjoyment and use of the Reserve.
[115] Kinder Morgan argues that the Applicants have fundamentally mischaracterised the fiduciary duty owed in the present circumstances through reliance upon jurisprudence dealing with section 37 of the Act, the surrender provision.
[116] Under section 35 of the 1952 Act, expropriation was effected through a combination of the 1952 Act and other statutes which ordinarily authorize the taking of land, in this case section 28 of the Pipe Lines Act, R.S.C. 1952, c. 211 (the “Pipe Lines Act”).
[117] Section 35 of the 1952 Act provided as follows:
35 (1) Where by an Act of Parliament or a provincial legislature Her Majesty in right of a province, a municipal or local authority or a corporation is empowered to take or to use lands or any interest therein without the consent of the owner, the power may, with the consent of the Governor in Council and subject to any terms that may be prescribed by the Governor in Council, be exercised in relation to lands in a reserve or any interest therein.
35 (1) Lorsque, par une loi fédérale ou provinciale, Sa Majesté du chef d’une province, une autorité municipale ou locale, ou une personne morale, a le pouvoir de prendre ou d’utiliser des terres ou tout droit sur celles-ci sans le consentement du propriétaire, ce pouvoir peut, avec le consentement du gouverneur en conseil et aux conditions qu’il peut prescrire, être exercé relativement aux terres dans une réserve ou à tout droit sur celles-ci.
(2) Unless the Governor in Council otherwise directs, all matters relating to compulsory taking or using of lands in a reserve under subsection (1) are governed by the statute by which the powers are conferred.
(2) À moins que le gouverneur en conseil n’en ordonne autrement, toutes les questions concernant la prise ou l’utilisation obligatoire de terres dans une réserve, aux termes du paragraphe (1), doivent être régies par la loi qui confère les pouvoirs.
(3) Whenever the Governor in Council has consented to the exercise by a province, authority or a corporation of the powers referred to in subsection (1), the Governor in Council may, in lieu of the province, authority or corporation taking or using the lands without the consent of the owner, authorize a transfer or grant of the lands to the province, authority or corporation, subject to any terms that may be prescribed by the Governor in Council.
(3) Lorsque le gouverneur en conseil a consenti à l’exercice des pouvoirs mentionnés au paragraphe (1) par une province, une autorité ou une personne morale, il peut, au lieu que la province, l’autorité ou la personne morale prenne ou utilise les terres sans le consentement du propriétaire, permettre un transfert ou octroi de ces terres à la province, autorité ou personne morale, sous réserve des conditions qu’il fixe.
(4) Any amount that is agreed on or awarded in respect of the compulsory taking or using of land under this section or that is paid for a transfer or grant of land pursuant to this section shall be paid to the Receiver General for the use and benefit of the band or for the use and benefit of any Indian who is entitled to compensation or payment as a result of the exercise of the powers referred to in subsection (1).
(4) Tout montant dont il est convenu ou qui est accordé à l’égard de la prise ou de l’utilisation obligatoire de terrains sous le régime du présent article ou qui est payé pour un transfert ou octroi de terre selon le présent article, doit être versé au receveur général à l’usage et au profit de la bande ou à l’usage et au profit de tout Indien qui a droit à l’indemnité ou au paiement du fait de l’exercice des pouvoirs mentionnés au paragraphe (1).
[118] Kinder Morgan submits the approach used in a section 35 expropriation should apply to an assignment of an interest arising from a section 35 expropriation. It argues that Supreme Court has set out a two-step process for the fiduciary duty arising out of a section 35 expropriation. The Crown must determine the expropriation is in the public interest, having found so, the Crown then must expropriate only the minimum interest required to fulfill that public interest; see Osoyoos, supra at paras. 52-53.
[119] Kinder Morgan argues that Coldwater is presently seeking a higher duty than was owed to it in respect of the original expropriations. It submits that the content of the duty owed to the Applicants is determined on a sliding scale, by reference to the facts.
[120] According to Kinder Morgan, the consent requirement exists to allow the Minister to ensure that the prospective assignee can continue to serve the public purpose for which the 1955 Indenture was granted.
[121] Kinder Morgan argues that the assignment of the 1955 Indenture does not affect Coldwater’s use and enjoyment of the Reserve. It submits that because there is no impairment to protect against there is no substance to the duty owed to Coldwater.
[122] Kinder Morgan also submits that the content of the duty owed is reduced by the fact that Coldwater has negotiated its own deal with Kinder Morgan. Vulnerability is the hallmark of the fiduciary relationship, but Coldwater has demonstrated it is not vulnerable through the negotiation of the Protocol Agreement.
[123] Finally, Kinder Morgan submits the Applicants’ reliance on FNLMA is misplaced. That statute does not apply to Coldwater. Furthermore, the FNLMA sets out