In a recent Ontario decision, Mr. Justice Lederer dismissed an action brought by an exploration company against the Crown for failing to discharge its constitutional duty to consult a First Nation. The Company sought millions of dollars in damages it said it suffered by being unable to continue exploration activities on its mining claims.

Background

Commencing in 2005, Northern Superior staked mining claims in northwest Ontario. The land on which the mining claims were staked is Crown land but subject to Treaty 9 rights. The mining claims were located within the claimed traditional territory of at least the Sachigo Lake First Nation. The claims were adjacent to lands which had been withdrawn from staking by the Ministry of Northern Development and Mines (“MNDM”) because of the treaty land entitlement claim of Kitchenuhmaykoosib Inninuwug, another First Nation in the area. The exploration company asserted that the issuance of such withdrawal area constituted a breach of the Crown’s duty to consult.

The Company undertook short-term exploration, including drilling, in 2005, 2008 and 2011 pursuant to an agreement with the Sachigo Lake First Nation. In 2012, as the Company prepared for its next drill program, its relationship with the Sachigo Lake First Nation soured. It appears that the principal contentious issues related to financial demands of Sachigo Lake First Nation namely a fee calculated as a percentage of the total project costs and the mandatory use and standby fees of a Beaver aircraft owned by the community.

Decision

The Court held that, as the duty to consult is an obligation of the Crown to First Nations, such constitutional protection does not provide a legally enforceable benefit to a third party such as the plaintiff exploration company.

The Court then analyzed the Company’s claim by applying the Anns v. Merton London Borough Council test finding that the Crown owed no private law duty of care to Northern Superior in the circumstances. In so ruling, the Court examined section 50(1) of the Ontario Mining Act which precludes any private law duty where the governmental act was “done in good faith in the execution or intended execution of the person’s duty”. The Court concluded that the legislative scheme did not impose a duty of care and there was no evidence of bad faith by MNDM.

Beyond a regulatory regime, direct interactions between a governmental authority and a plaintiff could give rise to a duty of care. On the facts of this case, however, there was little interaction between MNDM and Northern Superior. For several years, Northern Superior engaged with Sachigo Lake First Nation on its own. Even when problems arose in its relationship with the First Nation, Northern Superior’s direct interaction with MNDM related largely to the issue of compensation for the Company’s alleged losses.

The Court considered, but rejected, the argument that the Crown had improperly delegated its duty to consult to the proponent. Relying upon Haida Nation v. British Columbia and the leave to appeal decision in Wahgoshig First Nation v. Ontario, the Court found that there was no Crown delegation. In Wahgoshig First Nation, the First Nation obtained an injunction. Mr. Justice Wilton-Siegel granted leave to appeal since, among other things, the motion judge had wrongly based the decision on Solid Gold (the exploration company) being subject to a delegated duty to consult.

The Court also was highly critical of the approach taken by Northern Superior finding, in essence, that it was the author of its own misfortune. The Company did not request the assistance of MNDM to facilitate a resolution when the Company faced obstacles with the First Nation. It also ignored MNDM’s attempts to, among other things, provide a dispute resolution mechanism. Mr. Justice Lederer criticized the company as follows:

To put it simply, Northern Superior cannot reasonably expect to be compensated by the Crown which was never directly involved in its relationship with Sachigo Lake First Nation and who it contacted only for the purpose of seeking compensation. When, in response to the Crown’s offer to facilitate meetings with Sachigo Lake First Nation or to employ the as yet unproclaimed amendments to the Mining Act, Northern Superior walked away, it gave up any possibility of succeeding in an action before the court regardless of the cause of action.…There is nothing in this situation that could call for compensation to be paid by the Crown when it had not been involved until after the decision to sue had been taken and, then, had its offers to at least try to resolve the dispute rejected. Both parties must take a reasonable and fair approach in their dealings. (emphasis added)

It is not clear from the reasons why Kitchenuhmaykoosib Inninuwug featured so prominently in the case. The political and practical implications of multiple and overlapping traditional territories or claims of First Nations is a significant and growing issue in Ontario. The dynamic of what is effectively “tripartite” (Crown, First Nation and industry) consultation in the exploration context can be complicated.

What specific aboriginal or treaty rights of the Sachigo Lake First Nation were potentially adversely impacted by the Company’s exploration also is not discussed. Financial aspects of agreements between proponents and First Nations, particularly at an early exploration stage, often do not relate directly to aboriginal or treaty rights and, thus, fall outside the Crown’s duty to consult.

The underlying facts were not ideal for litigating the important legal issues raised in this case. Nevertheless, the decision underscores the practical and strategic importance of on-going dialogue with the Crown, and involving the Crown when fundamental relationship issues arise.

Northern Superior has appealed the decision.