Date: 20070212
Docket: A-150-06
Citation: 2007 FCA 39
CORAM: NOËL
J.A.
SHARLOW
J.A.
RYER
J.A.
BETWEEN:
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
and ALL
Appellant
and
CHIEF JOHN EAR acting on his own behalf
and on behalf of
the other members of the Bearspaw Band of
the Stoney Band and Tribe
and on behalf of the Stoney Tribe and all
its members
and
CHIEF KEN SOLDIER acting on his own
behalf and on behalf of
the other members of the Chiniki Band of
the Stoney Band and Tribe
and on behalf of the Stoney Tribe and all
its members
and
CHIEF ERNEST WESLEY acting on his own
behalf and on behalf of
the other members of the Wesley Band of
the Stoney Band and Tribe
and on behalf of the Stoney Tribe and all
its members
and
THE STONEY BAND AND TRIBE
Respondents
REASONS FOR JUDGMENT
SHARLOW J.A.
[1]
This is an
appeal and cross appeal of a judgment of the Federal Court dismissing the
motion of the respondents for summary judgment and granting the respondents
“leave to re-apply on the materials before the Court supplemented by such
further and better evidence as the parties deem appropriate” (2006 FC 435). The
Crown is appealing the portion of the judgment that grants the respondents
leave to re-apply for summary judgment based on further evidence. The respondents
are cross-appealing the dismissal of their motion for summary judgment.
BACKGROUND
[2]
The
respondents are the Chiefs and members of the Bearspaw Band, the Chiniki Band
and the Wesley Band of the Stoney First Nation. For convenience, I will refer
to the respondents collectively as “the Stoney Nation”.
[3]
The members
of the Stoney Nation have a number of reserves in the Province of Alberta. Over the years, the Stoney
Nation has surrendered to the Crown certain oil and gas rights relating to
portions of those reserves to facilitate the commercial exploitation of those
rights. The Crown, as the holder of legal title pursuant to those surrenders,
has entered into leases with PanCanadian Petroleum Limited, Chevron Canada
Resources Ltd., Imperial Oil Resources Canada Limited, and Shell Canada Limited
(collectively, the “producers”) pursuant to which the producers have taken and
sold natural gas from wells they have developed on the surrendered reserve land.
[4]
At all
material times, the right of the producers to take the natural gas from the
surrendered reserve land was subject to the their obligation to pay a royalty
pursuant to subsection 4(1) of the Indian Oil and Gas Act, R.S.C. 1985,
c. I-7, which reads as follows (emphasis added):
|
4. (1) Notwithstanding any term or condition in any grant, lease,
permit, licence or other disposition or any provision in any regulation
respecting oil or gas or both oil and gas or the terms and conditions of any
agreement respecting royalties in relation to oil or gas or both oil and gas,
whether granted, issued, made or entered into before or after December 20,
1974, but subject to subsection (2), all oil and gas obtained from Indian
lands after April 22, 1977 is subject to the payment to Her Majesty in right
of Canada, in trust for the Indian bands concerned, of the
royalties prescribed from time to time by the regulations.
|
4. (1) Nonobstant les modalités d’une concession, d’un bail, d’un
permis, d’une licence ou d’un autre acte d’aliénation, les dispositions d’un
règlement sur le pétrole ou sur le gaz ou les modalités d’un accord sur les
redevances applicables au pétrole ou au gaz, qu’ils soient ou non survenus
avant le 20 décembre 1974, mais sous réserve du paragraphe (2), le pétrole et
le gaz tirés des terres indiennes après le 22 avril 1977 sont assujettis au
paiement à Sa Majesté du chef du Canada, en fiducie pour les
bandes indiennes concernées, des redevances réglementaires.
|
[5]
The
regulations referred to in subsection 4(1) of the Indian Oil and Gas Act
are the Indian Oil and Gas Regulations, C.R.C. 1978, c. 963 (revoked by
the Indian Oil and Gas Regulations, 1995, SOR/94-753, effective January
1, 1995). For the purposes of this appeal, the key provisions of the Indian
Oil and Gas Regulations are subsection 21(1) and subsection 2(2) of Schedule
I, which read as follows (emphasis added):
|
21. (1) Except as otherwise provided in a special
agreement under subsection 5(2) of the Act, the royalty on oil and gas
obtained from or attributable to a contract area shall be the royalty
computed in accordance with Schedule I, as amended from time to time, and shall
be paid to Her Majesty in right of Canada in trust for the Indian band
concerned.
SCHEDULE I
2.
(2) The royalty to be computed, levied and collected on gas obtained
from or attributable to a contract area shall comprise the basic royalty of
25 per cent of the gas obtained from or attributable to the contract area
plus the applicable supplementary royalty determined in accordance with
subsection (3), all quantities to be calculated at the time and place of
production free and clear of any deduction whatsoever except as provided
under subsection (4).
|
21. (1) Sauf
indication contraire dans un accord spécial visé au paragraphe 5(2) de la
Loi, la redevance sur le pétrole et le gaz obtenu d’une zone sous bail ou attribuable
à cette zone est celle calculée selon l’annexe 1, telle que modifiée au
besoin, et est payable à Sa Majesté du chef du Canada, en fiducie, à
l’intention de la bande d’Indiens concernée.
ANNEXE I
2. (2) La
redevance calculée, imposée et perçue pour le gaz produit dans une zone
sous contrat ou attribuable à cette zone comprend la redevance de base de 25
pour cent de la production de gaz dans une zone sous contrat ou attribuable à
cette zone et la redevance supplémentaire appliquable déterminée selon le
paragraphe (3); toutes les quantités sont calculées à la date et au lieu
de la production, sans aucune déduction, sauf pour ce qui figure au
paragraphe (4).
|
[6]
In this
case there is no “special agreement under subsection 5(2)” of the Indian Oil
and Gas Act, as referred to in subsection 21(1) of the Indian Oil and
Gas Regulations, and subsection 2(4) of Schedule I is not applicable.
Therefore, the producers of all natural gas taken from the surrendered reserve
land in issue in this case must pay royalties to the Crown in trust for the
band that surrendered the reserve land, and the royalties must be determined on
the basis of the rate stipulated in subsection 2(2) of Schedule I.
[7]
The
Minister of Indian Affairs and Northern Development is responsible for the
administration of the Indian Oil and Gas Act and the Indian Oil and
Gas Regulations. Certain specific responsibilities under the Indian Oil
and Gas Regulations are assigned to an official of that Department called
the Manager of Indian Minerals. In my view, nothing in this case turns on
whether any specific aspect of the administration of the Indian Oil and Gas
Regulations is the responsibility of the Minister or the Manager of Indian
Minerals. As between the Crown and the Stoney Nation, all of those
responsibilities are those of the Crown.
A. The TOPGAS and OMAC Deductions
[8]
From
January 1, 1982 and for many years after that, the producers applied the statutory
royalty rate to the sale price of the natural gas after deducting amounts
referred to as “TOPGAS” (a financing charge). From November 1, 1986, the
producers also deducted amounts referred to as “OMAC” (operating, marketing and
administration charges). The Crown obtained details of the TOPGAS and OMAC
deductions as the result of an audit completed in 1988.
[9]
The complex
history of the TOPGAS and OMAC charges need not be explained here. It is enough
to say that until the disposition of the Alberta litigation described below,
there was a dispute between the producers on the one hand, and the Crown and
the Stoney Nation on the other, as to whether or not the producers were entitled
as a matter of law to deduct those charges in computing the sale price of
natural gas for the purposes of quantifying the royalty payable under the Indian
Oil and Gas Act.
[10]
The Crown sent
the producers letters in 1991 asserting the position of the Crown that the
deductions were not permitted, and demanding payment of the unpaid portion of
the royalties. The producers maintained that the deductions were permitted. The
letters led to meetings and negotiations, but did not result in any payment.
[11]
In and after
1991, there were discussions and meetings between the Crown and the Stoney
Nation, culminating in a decision by the Crown, apparently made in 1993, not to
attempt to collect the underpayment by litigation. The Stoney Nation was
informed of that decision in 1993. At the same time, the Crown also informed the
Stoney Nation that they could commence such an action themselves, and if they
did so, the Crown would provide support and assistance.
B. The Alberta Actions
[12]
On May 3,
1993, the Stoney Nation commenced an action in the Alberta Court of Queen’s
Bench against PanCanadian for recovery of the unpaid amounts. In 1997, the
Stoney Nation commenced similar actions against Shell, Chevron and Imperial.
[13]
The Crown
participated in the 1993 action against PanCanadian as an intervener. The only
contribution the Crown made to the proceedings (apart from providing the
evidence upon which the Stoney Nation largely relied), was to inform the
Alberta Court of Queen’s Bench that any order made for the payment of royalties
should direct that the payment be made to the Crown in trust, as required by
the Indian Oil and Gas Act.
[14]
The action
was heard by McIntyre J., whose decision is reported as Bearspaw, Chiniki
and Wesley Bands v. PanCanadian Petroleum Ltd., 1998 ABQB 286. I summarize
his conclusions as follows. The Stoney Nation, as the beneficiary of the trust
in which the leases and royalty interests were held, had standing to pursue a
claim against PanCanadian because the Crown, the trustee, had not done so. The statutory
scheme does not permit TOPGAS and OMAC charges to be deducted in determining
the sale price of natural gas for the purposes of computing royalties payable.
It follows that substantial royalties remained unpaid by PanCanadian. The claim
of the Stoney Nation against PanCanadian was a proceeding to recover an
interest in land, and thus was subject to the 10 year limitation period in
section 18(a) of the Limitation of Actions Act, R.S.A. 1980, c. L-15.
Therefore, the Stoney Nation is entitled to receive the underpayment for the
period commencing 10 years prior to the filing of its claim, i.e., from May 3,
1983.
[15]
The
decision of McIntyre J. was appealed to the Alberta Court of Appeal. The appeal
was allowed in part (2000 ABCA 209). The Alberta Court of Appeal agreed that
the royalties had been underpaid, for the reasons given by McIntyre J., but
held that the action was subject to a six year limitation period because the
action was a claim for breach of contract, not to recover an interest in land.
On that basis, the judgment was amended to limit the Stoney Nation to a claim
for royalties for the period commencing May 3, 1987, six years prior to the
commencing of the action. There was no application for leave to appeal that
decision to the Supreme Court of Canada.
[16]
The status
of the actions commenced by the Stoney Nation in 1997 against the other
producers is not clear from the record in this case. However, it appears that the
producers have now paid all of their royalty obligations in relation to natural
gas produced from the Stoney Nation’s surrendered lands, or have offered to do
so, based on the PanCanadian decision.
[17]
In 1999,
the Crown commenced an action in the Alberta Court of Queen’s Bench against
PanCanadian, Chevron, Shell and Imperial for the underpaid royalties in respect
of natural gas taken from the Stoney Nation’s surrendered lands. That action
has been dismissed or discontinued against Chevron. Otherwise, the status of
that action is not clear from the record.
C. Federal Court Proceedings
[18]
On
September 30, 1993, the Stoney Nation commenced an action against the Crown in
the Federal Court, claiming damages for breach of the Crown’s trust or
fiduciary obligations to the Stoney Nation in respect of the administration,
management and supervision of the natural gas resources of the Stoney reserves,
particularly in allowing improper deductions to be made in the determination of
the royalties, in failing to collect the outstanding royalties, and in failing
to properly apply the Indian Oil and Gas Act and the Indian Oil and
Gas Regulations.
[19]
That is
the action in which the Stoney Nation made the summary judgment motion that
resulted in the order now under appeal. In essence, the Stoney Nation is
seeking to collect from the Crown the royalties they cannot collect from the
producers because of the six year statutory limitation period.
[20]
The Crown
denies that it had a legal obligation to commence litigation to collect the
unpaid royalties, and also asserts a six year limitations defence, arguing that
in any event it is not liable for any lost royalties that were payable before
September 30, 1987.
[21]
In
response to the limitations defence, the Stoney Nation argues that the Crown
did not inform them until 1991 of the particulars of the unpaid royalties. They
argue that they could not have known the relevant facts before they learned
them from the Crown. They say that even the Crown required an audit to learn
the relevant facts, which may be attributable in part to the absence of detail
in the periodic royalty reports the producers were required to file (a form
established by the Crown). The Stoney Nation argues that even if they are fixed
with the same knowledge as the Crown (which would be a stretch because the
Crown was obliged by subsection 43(1) of the Indian Oil and Gas Regulations
to keep the royalty information confidential), the Stoney Nation cannot have
had knowledge of the relevant facts earlier than the Crown did, in 1988.
D. The Summary Judgment Motion
[22]
The
summary judgment motion was filed by the Stoney Nation on October 12, 2005,
twelve years after the statement of claim was filed and five years after the
decision of the Alberta Court of Appeal in the Stoney Nation litigation against
PanCanadian. When the summary judgment motion was filed, documentary
discoveries had been completed (or were well advanced), but oral discoveries
had not yet taken place. The record does not disclose the reason for the slow
progress of the litigation. The Crown contests the summary judgment motion on
the basis that there are triable issues with respect to its liability, and with
respect to its limitations defence.
[23]
The
summary judgment motion relates to the unpaid royalties owed by all of the
producers, including PanCanadian, as a result of the TOPGAS and OMAC deductions,
to the extent they have been rendered uncollectible because of the six year
limitation period. The Stoney Nation alleges that the statute barred portion of
the unpaid royalties owed by PanCanadian is approximately $2 million, and that
the unpaid royalties owed by the other producers amounts to approximately $8
million.
[24]
I
summarize as follows the factual and legal basis of the Stoney Nation’s motion
for summary judgment:
a)
At all
relevant times, the Crown was in control of the leases entered into on the
reserve land surrendered by the Stoney Nation, the share of the natural gas
production reserved to the Stoney Nation, and the royalty payments relating to
that production.
b)
The Crown
held those leases and related royalty interests in trust for the Stoney Nation.
c)
The Crown
at all times had a legal obligation to collect all royalties payable by the
producers pursuant to those leases.
d)
In
computing the royalties payable, the producers deducted the TOPGAS charges from
January 1, 1982 until October 31, 1994, and the OMAC charges from November 1,
1986.
e)
Those
deductions were not permitted under the Indian Oil and Gas Regulations,
with the result that the royalties have been underpaid since January 1, 1982.
f)
The Crown
discovered the underpayments in 1988 and informed the Stoney Nation of them in 1991.
g)
In 1991
the Crown sent letters to the producers demanding payment of the full
royalties, and subsequently entered into discussions with the producers.
h)
Substantial
royalties remain uncollected, namely the amounts barred by the six year
limitation period.
i)
The Crown
took no legal action against the producers in time to stop the producers from
claiming the benefit of the applicable limitation period.
j)
An action
commenced in 1993 by the Stoney Nation against the producers resulted in the
recovery of substantial royalties, except those barred by the limitation
period.
k)
The unpaid
and now unrecoverable royalties amount to approximately $2 million payable by
PanCanadian, and approximately $8 million payable by the other producers.
l)
The Crown
is liable to the Stoney Nation for damages equal to the unrecoverable
royalties.
[25]
Perhaps
the most cogent argument of the Stoney Nation in support of its motion for
summary judgment is that the Crown could have stopped the application of any
limitation period relating to its claim against the producers simply by
commencing litigation to collect the unpaid royalties at any time before the
end of 1988 (as the improper deductions were first taken in 1982). The fact
that the deductibility of the TOPGAS and OMAC charges and the applicability of
provincial limitation laws were matters of dispute until the PanCanadian action
was concluded are not matters that should reasonably have deterred the Crown
from taking the relatively simple measure of filing a protective statement of
claim.
[26]
The
summary judgment motion was supported by the affidavit of Ian Getty sworn
January 21, 2004, to which were appended 114 exhibits. Some of the exhibits are
historical documents, of limited relevance to the issues in dispute in the
summary judgment motion. Of the remaining documents, the key ones are from the
Crown’s own files. The Stoney Nation was of the view that the factual elements
of its claims against the Crown were established in large part by the Crown’s
own documents. Mr. Getty obviously had no first hand knowledge of those facts.
His affidavit, to the extent that it asserts facts derived from the Crown’s
documents, states the relevant facts as being based on information and belief.
[27]
Mr.
Getty’s affidavit also asserts certain other facts on information and belief
that relate to matters that are within the knowledge of the Stoney Nation or
its leaders. The most important statement of that kind, which is particularly
relevant to the Crown’s limitation defence, appears in paragraph 30 of his
affidavit. Paragraph 30 reads as follows:
30. It is my
information and belief that the Plaintiffs were first notified of and became
aware of the improper deductions from their royalty interest, including the
approximate value and magnitude of these improper and unauthorized deductions,
when advised of the same by their trustee or fiduciary, Her Majesty, in or
about February 1991.
[28]
Mr. Getty
was cross-examined on his affidavit, and in fulfilling undertakings arising
from that cross-examination, he confirmed that he conferred with certain
leaders of the Stoney Nation to confirm this statement.
[29]
There is
an unexplained absence of affidavit evidence from any of the Stoney Nation
leaders attesting to the truth of the allegation that they did not know and
could not reasonably have known the relevant facts until the Crown informed
them in February of 1991. That evidence is relevant to the Crown’s limitation
defence.
[30]
The Crown,
in opposing the Stoney Nation’s summary judgment motion, submitted the
affidavit of James R. Eickmeier sworn March 18, 2004. Mr. Eickmeier was the
executive director of Indian Oil and Gas Canada (IOGC) from 1987 to 1991. IOGC
is the agency of the Department of Indian Affairs and Northern Development that
was specifically responsible for the administration of oil and gas leases on
surrendered reserve lands. Mr. Eickmeier was cross examined, but he had no
personal knowledge of anything that occurred after 1991. His affidavit does not
explain why the Crown did not at least file a protective statement of claim after
the audit disclosed the extent of the TOPGAS and OMAC charges or after the
producers refused to pay.
[31]
Despite
these unanswered questions, it seems to me that most of the facts relied upon
by the Stoney Band are undisputed. The Crown argues the contrary, but with one
exception that I have been able to identify, proof of the relevant facts is in
the hands of the Crown. The one exception is the evidence relating to the date
upon which the relevant facts were or should have been known to the Stoney Nation.
[32]
The Crown
takes issue with the accuracy of the quantification of the unpaid royalties.
However, the motions judge concluded, and I agree, that the issues as to the
accuracy of the computation appear to be of a relatively minor nature and could
be resolved on a reference. The Crown does not argue that there are
quantification issues that, by themselves, would or should preclude summary
judgment.
[33]
The Crown
takes issue with characterization of the Crown as a trustee of the leases and
royalties, and argues that there is uncertainty about the nature of the legal
obligations of the Crown with respect to the collection of the royalties. These
are questions of law, not fact. The question of whether the Crown is a trustee
of the leases and royalties was resolved against the Crown by the decision of
Teitelbaum J. in Samson Indian Nation and Band v. Canada, 2005 FC 1622,
affirmed 2006 FCA 415. The specific duties of the Crown in its capacity as
trustee, including the question of whether the Crown had a legal obligation to
take steps to collect the unpaid royalties, are matters to be addressed by
legal argument.
[34]
The Crown
also says that that there are unresolved issues relating to the correct interpretation
of the Indian Oil and Gas Regulations (and in particular the meaning of
the word “collection”), and that evidence is required to resolve issues of
statutory interpretation arising from the Indian Oil and Gas Regulations.
I can conceive of no interpretation that would absolve the Crown of the legal
obligation to collect the royalties, and the Crown has not suggested how it
might be absolved from that obligation, or who has the collection obligation if
the Crown does not.
[35]
The Crown
argues that further facts may yet be discovered relating to the sophistication
and knowledge of the Stoney Nation or its leaders. I am not persuaded that any
degree of sophistication and knowledge of the Stoney Nation could result in the
Crown being relieved of its legal obligation to collect the royalties. However,
those issues might well be relevant to the Crown’s limitation defence, if the
Stoney Nation continues to assert the issue of discoverability.
E. The Summary Judment
Decision
[36]
The
summary judgment motion was heard in February 2006. The hearing lasted for
eight days. The motions judge rendered reasons and an order on April 6, 2006.
The key portion of the order reads as follows:
The application is
dismissed with leave to re-apply on the materials before the Court,
supplemented by such further and better evidence as the parties deem appropriate.
[37]
The
motions judge reached this conclusion because, although he was satisfied that
there is no genuine issue for trial except with respect to quantum (which he
noted could be settled by agreement or on a reference), neither the Stoney
Nation nor the Crown had put their best foot forward, with the result that
there were many unanswered questions. He was clearly right in reaching that
conclusion. Although he did not identify the unanswered questions, they would
include at least the discoverability issue, and the reason for the Crown’s
decision not to litigate.
[38]
It is
worth repeating that the evidence for the Stoney Nation, the party seeking
summary judgment, was a single affidavit consisting almost entirely of
statements on information and belief. That in itself is not fatal to the
summary judgment motion, at least in so far as the affidavit contains evidence which
the Crown is in a better position to adduce. However, the affidavit also
contains evidence on information and belief in relation to facts solely within
the knowledge of officials of the Stoney Nation who could have provided an
affidavit. In my view, the motions judge was correct when he said that he could
have inferred from the absence of direct evidence that the Stoney Nation might
have learned the relevant facts before the claimed date of 1991.
[39]
The
evidence for the Crown, which was attempting to establish the existence of at
least one triable issue, was also based on a single affidavit based in part on
the first hand knowledge of the affiant, but also based on statements on
information and belief with respect to some important events, including facts
that would explain the Crown’s decision not to pursue the producers for
payment. Again, it seems to me that the motions judge would have been entitled
to infer, from the absence of direct evidence, that the Crown’s decision not to
litigate was flawed.
[40]
Depending
upon which adverse inference the motions judge might have chosen, he could have
dismissed the summary judgment motion on the basis of the failure of the Stoney
Nation to establish that the requisite knowledge did not exist until 1991. Or,
he could have granted the summary judgment motion on the basis that the Crown
has no limitations defence and no other justification for its failure to collect
the royalties. He did neither of those things. Instead, he dismissed the motion
with leave to re-apply on the terms stated above.
ISSUES ON APPEAL AND
CROSS-APPEAL
[41]
The Crown
appeals the order in so far as it gives the Stoney Nation leave to re-apply for
summary judgment on the materials before the Court, supplemented by such
further and better evidence as the parties deem appropriate. The Stoney Nation
appeals the dismissal of its summary judgment motion.
[42]
There is
merit in the Crown’s appeal. The powers of the Federal Court on the disposition
of a summary judgment motion are to grant the motion or dismiss it, in whole or
in part. If the motion is dismissed in its entirety, the motions judge may
order the action to proceed to trial. If the motion is dismissed in part, the
motions judge may order a trial of the issues not disposed of on the summary
judgment motion, and the motions judge may also make certain ancillary orders
for payment into court, security for costs, or for the limitation of
examinations for discovery. All of these powers are stipulated in Rule 216(4)
and 218 of the Federal Courts Rules. The order made does not fit within
any of these powers.
[43]
However,
it would have been open to the motions judge to adjourn the summary judgment
motion in order to give the parties an opportunity to supplement their
evidence. In oral argument, both parties recognized that possibility. In my
view, that is the course the motions judge should have taken once he concluded that
this case presents a number of discrete legal and factual issues that are
amenable to summary disposition and that, given an appropriate evidentiary
foundation, it might well be possible to dispose summarily of many of the major
issues in this case.
[44]
Therefore,
it seems to me that the most appropriate disposition of the Crown’s appeal is
to allow the appeal, set aside the order under appeal and, exercising the
authority of this Court to make the order that should have been made, order the
adjournment of the motion with a direction to the parties to submit further and
better evidence.
[45]
Given that
disposition of the appeal, it is unnecessary to deal with the cross-appeal on
its merits because the summary judgment motion remains alive. However, it seems
to me that there are at least three inescapable conclusions. First, the motions
judge is bound by the Samson case (cited above) to conclude that the
Crown is a trustee of the leases and the royalties. Second, there can be no
doubt that the Crown has a legal obligation to collect the royalties. Third, despite
the fact that the Stoney Nation is entitled to succeed on those points of law, it
would have been open to the motions judge to dismiss the summary judgment motion
in whole or in part on the basis that there was a triable issue on the discoverability
of the relevant facts, an issue upon which the Stoney Nation’s evidence was
deficient.
[46]
The
parties should bear their own costs of this appeal.
“K. Sharlow”
“I
agree
Marc
Noël J.A.”
“I
concur
C. Michael Ryer J.A.”
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