Docket: A-214-16
Citation:
2017 FCA 199
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CORAM:
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DAWSON J.A.
WEBB J.A.
RENNIE J.A.
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BETWEEN:
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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
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Appellants
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and
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THE MINISTER OF
INDIAN AFFAIRS AND NORTHERN DEVELOPMENT and KINDER MORGAN CANADA INC.
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Respondents
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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 balance of probabilities that these factors
were not considered by the Minister. He confined his consideration to the
corporate capacity of the assignee to carry out the terms of the original
easement indenture.
(2)
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?
[86]
I agree that the capacity of a proposed assignee
to comply with the obligations imposed by the indenture is a relevant factor to
be considered when determining whether to consent to the assignment. The question
raised is whether this is the only relevant factor.
[87]
The respondents did not support their submission
that, properly construed, clause 2 of the indenture only required the Minister
to satisfy himself that the proposed assignee had the capacity to comply with
its obligations under the indenture by reference to the text, context or
purpose of the easement indenture. I see nothing in the text, context or
purpose of the indenture to support the submission.
[88]
Significantly, the indenture contains no
provision to the effect that the Minister’s consent to the assignment is not to
be unreasonably withheld. As counsel for Kinder Morgan agreed in oral argument,
absent such an express limitation a broad discretion exists in the Minister as
to whether to give, or to withhold, consent to the assignment (Tredegar v.
Harwood, [1928] All E.R. Rep. 11 (H.L.); P. & G. Cleaners Ltd.
v. Johnson, [1995] 9 W.W.R. 487, 105 Man. R. (2d) 175 (Q.B.)).
[89]
Further, construing the scope of the Minister’s
discretion as narrowly as the respondents propose is inconsistent with the
scope of the fiduciary duty I have found to be imposed upon the Minister. The
Minister is obliged to look to the best interest of Coldwater and to see that
the use and enjoyment of its land are minimally impaired. This requires
consideration of factors beyond the corporate capacity of the proposed assignee.
(3)
Did the Minister reasonably conclude that
consenting to the assignment would minimally impair Coldwater’s interest in its
reserve lands?
[90]
As explained above, a beneficiary of a fiduciary
duty cannot be deprived of that benefit because the fiduciary’s decision is
reviewed on the reasonableness standard. Rather, the fiduciary obligation serves
to constrain the fiduciary’s discretion, narrowing the range of reasonable
outcomes.
[91]
Also as explained above, the Minister was
required to act as a person of ordinary prudence managing his own affairs,
while not defeating the public interest in the pipeline’s continued operation.
In the present context, this required the Minister to ensure that consenting to
the assignment would impair only minimally Coldwater’s interest in the use and
enjoyment of its land. In assessing the extent of the impairment the Minister
was obliged to have regard to the current and ongoing impact of the
continuation of the terms of the easement on Coldwater’s right to use and enjoy
its reserve lands.
[92]
Thus, while there is no suggestion that the
compensation initially received by Coldwater was improvident, the Minister was
required to consider if his consent to the assignment would continue what is
said to have become an improvident arrangement. This could entail consideration
by the Minister of such things as the fact that by operation of clause 1 of the
indenture, Coldwater now receives substantial income each year by virtue of
levying and collecting tax on Kinder Morgan.
[93]
Similarly, as a result of the Indenture
Modernization Process, the Minister knew, or ought to have known, that the
terms of the indenture were no longer responsive to current concerns, and that
while Coldwater could choose to adopt the proposed modernized template, such
template imposed no new obligations on Kinder Morgan. The Minister was therefore
required to consider whether the protection available to Coldwater under the
modernized template was adequate in order to protect the land, and thus
minimally impair Coldwater’s interest in the land.
[94]
The record demonstrates that the Minister did
not do this – he confined his consideration to the corporate capacity of the
assignee to carry out the terms of the original easement indenture.
[95]
The Minister’s failure to assess the current and
ongoing impact of the continuation of the easement on Coldwater’s right to use
and enjoy its lands rendered his decision unreasonable. The Federal Court erred
in its application of the reasonableness standard when it concluded otherwise.
[96]
It follows that I would set aside the Minister’s
decision and return the matter to the Minister for redetermination in
accordance with these reasons.
V.
Conclusion
[97]
For these reasons, I would allow the appeal with
costs here and in the Federal Court payable by each respondent to the
appellants. Pronouncing the judgment that the Federal Court ought to have
pronounced, I would set aside the decision of the Minister of Indian Affairs
and Northern Development made on December 19, 2014 consenting to the assignment
of the 1955 indenture granting an oil pipeline easement through Coldwater
Indian Reserve No. 1. I would return the matter to the responsible Minister for
redetermination in accordance with these reasons.
“Eleanor R. Dawson”
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“I agree.
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Donald J.
Rennie J.A.”
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WEBB J.A.
(Dissenting Reasons)
[98]
I agree that the Crown owed a fiduciary duty to
Coldwater in relation to the issue of whether consent to the assignment of the
easement should have been granted. I also agree that the impact that granting
consent to the assignment of the easement would have on Coldwater’s right to
use and enjoy the lands is a relevant factor. However, in my view, it is
important to focus on the particular impact that refusing consent or granting
consent in this case would have on the right of Coldwater to use and enjoy its
lands.
[99]
The Minister, in this case, was not asked
whether the pipeline should remain on the property in question. Rather the only
question for the Minister was whether the rights of one corporate member of the
Kinder Morgan group of companies in the easement should be assigned to another
corporation in the same corporate group. In my view, the impact that refusing
or consenting to this assignment would have on the use and enjoyment of the
lands by Coldwater can be determined from the record.
[100] The pipeline that runs through the Coldwater Reserve is part of the
pipeline that transports oil from Sherwood Park, Alberta to Burnaby, British
Columbia, a distance of approximately 1,150 kilometres. The length of the
pipeline running through the reserve is 1,292 lineal rods and, based on a rod
being approximately 16.5 feet, this would mean that the length of the pipeline
running through the reserve is approximately 6.5 kilometres or less than 1% of
the total length of the pipeline.
[101] The easement in question is contained in an indenture dated May 4,
1955 between the Crown and Trans-Mountain Oil Pipe Line Company (the Grantee).
Clause 2 of the indenture provides that:
2. …the Grantee shall not assign the
right hereby granted without the written consent of the Minister.
[102] This clause does not require the consent of the Minister unless the
Grantee is assigning the right granted under the indenture. As a result not all
corporate transactions would require consent. For example, a sale of shares of
the Grantee would not, in and of itself, result in the Grantee assigning the
right granted under the indenture and, therefore, would not require the consent
of the Minister.
[103] As a result of various corporate transactions the holder of the
easement in 2005 was Terasen Pipelines (Trans Mountain) Inc. On December 1,
2005 the shares of Terasen Pipelines (Trans Mountain) Inc. were acquired by a
company within the Kinder Morgan group of companies. Therefore, Kinder Morgan
had control of the company that held the easement and there was no allegation
that the consent of the Minister was required in relation to any of these
transactions.
[104] In 2007, Kinder Morgan agreed to sell the shares of Terasen Inc.
(the parent company of Terasen Pipelines (Trans Mountain) Inc.) to an arm’s length
purchaser. However, the pipeline was to remain with the Kinder Morgan group of
companies. To achieve this result, the pipeline assets (including the easement)
were, prior to the closing of the sale of shares of Terasen Inc., conveyed
first to one company and then to another company within the Kinder Morgan group
of companies. Consequently, the easement, which had already been acquired by a
company within the Kinder Morgan group of companies, would remain within the
Kinder Morgan group of companies if the assignment of the easement is approved.
[105] The indenture in question provides that:
NOW THEREFORE, this Indenture witnesseth
that in consideration of the sum of three thousand, five hundred and fifty-four
dollars, ($3,554.00) paid to the Minister by the Grantee, the receipt whereof
is hereby acknowledged, the Minister grants, conveys, releases, assigns and
confirms to the Grantee, its successors and assigns, the right to lay down,
construct, operate, and maintain a pipe line on, over, under and/or through the
said lands, being portions of the several Indian Reserves in the Province of
British Columbia named in the said SCHEDULE.
TO HAVE AND TO HOLD unto the Grantee, its
successors and assigns, for such period as the said lands are required for
the purpose of a pipe line right of way;
(emphasis added)
[106] The easement was not granted to the Grantee for so long as the
Grantee required the lands for use as a pipeline, but rather “for such period as the said lands are required for the purpose
of a pipe line right of way”. There is no dispute that oil continues to
flow through this pipeline. Therefore, when the Minister was requested to
consent to the assignment of the easement, the lands located within the
boundaries of the Coldwater Reserve were still required for the purpose of a
pipeline right of way. In my view, there is no basis to conclude that the
easement would cease to exist if the Minister were to refuse to consent to the
assignment. As a result, regardless of whether the Minister would have
consented to the requested assignment of the interest of Terasen Pipelines
(Trans Mountain) Inc. to another company within the Kinder Morgan group of
companies, the easement would remain in place. Counsel for Coldwater, during
oral argument, also acknowledged that the easement would remain in place even
if the Minister would have refused to consent to the assignment.
[107] In my view, this would also mean that the use of the land in
question (as a right of way for a pipeline) would not change whether consent
was granted or refused. In either case, the land would continue to be used as a
right of way for the pipeline as the land for this 6.5 km stretch of the 1,150
km was (and still is) “required for the purpose of a
pipe line right of way”. Therefore, consenting to the assignment of the
easement would not change the use of this land. Coldwater’s right to use and
enjoy this land would be the same regardless of whether the consent was granted
or refused.
[108] Even though the easement would remain in place, the next question
would be whether refusing or consenting to the assignment would affect the
right of Trans Mountain Pipeline ULC, as general partner of Trans Mountain L.P.
to operate the pipeline. For any pipeline, the operator of that pipeline must
hold a certificate of public convenience and necessity issued under the National
Energy Board Act, R.S.C. 1985, c. N-7.
[109] Subsection 30(1) of the National Energy Board Act provides that:
|
30 (1) No company shall operate a pipeline unless
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30 (1) La compagnie ne peut exploiter un pipeline que si les
conditions suivantes sont réunies :
|
|
(a) there is a certificate in force with respect to that
pipeline; and
|
a) il
existe un certificat en vigueur relativement à ce pipeline;
|
|
(b) leave has been given under this Part to the company to
open the pipeline.
|
b) elle
a été autorisée à mettre le pipeline en service aux termes de la présente
partie.
|
[110] The company that is required to obtain the necessary certificates of
public convenience and necessity is the company that is operating the pipeline.
In 2007, by Orders of the National Energy Board (which were approved by an
Order in Council), the certificates of public convenience and necessity issued
in relation to the operation of the pipeline (OC-2 and OC-49) were changed to
amend the name of the holder of these certificates to Trans Mountain Pipeline
Inc., as general partner of Trans Mountain L.P. (for ease of convenience Trans
Mountain Pipeline Inc. as general partner of Trans Mountain L.P. will be
hereinafter referred to as the assignee). Trans Mountain Pipeline Inc. later
changed its name to Trans Mountain Pipeline ULC.
[111] The Certificate of Public Convenience and Necessity OC-2 was issued
for the entire pipeline not just the part that traversed the Coldwater reserve.
The amendment to the certificates to change the name to the assignee is not
before us nor is there any indication that anyone challenged the decision to
make this amendment.
[112] There is nothing to suggest that if the consent to the transfer of
the easement would have been refused that the assignee would no longer hold the
certificates of public convenience and necessity for the operation of the 1,150
km pipeline, including the 6.5 km part that traverses the Coldwater reserve. In
my view, if the consent would have been refused it would simply mean that the owner
of the easement would be a different person than the operator of the pipeline
but the operator of the entire pipeline would continue to be the assignee.
[113] It is not clear whether the assignee, as the operator of the
pipeline, would need to access the lands on a regular basis in relation to the
operation of the pipeline or only if a problem arose. At the time of the
transfer of the pipeline assets in 2007, both the transferor and the assignee
were part of the Kinder Morgan group of companies. Therefore, presumably the
assignee had the permission of Terasen Pipelines (Trans Mountain) Inc. to use
the easement to operate the pipeline. The transactions related to the sale of
the shares of Terasen Inc. also included a declaration of trust that the
easement would be held in trust for the benefit of the assignee. Therefore,
following the sale of the shares of Terasen Inc., the assignee would also have
the permission of the legal owner to use the easement to operate the pipeline.
[114] The issue of whether the permission of the legal owner of the
easement would allow the assignee to access the lands in relation to the
operation of the pipeline is, however, not before us. The only issue that is
before us is whether the approval of the assignment of the easement to the assignee
was reasonable. In analyzing the reasonableness of the Minister’s decision,
there are two possible answers to the question of whether the permission of the
legal owner of the easement would allow the assignee to access the lands in
relation to the operation of the pipeline. Either such permission would allow
the assignee to access such lands or it would not.
[115] If the permission of the legal owner of the easement would permit
the assignee to access the lands in relation to the operation of the pipeline, then
the assignee would continue to operate the pipeline with permitted access to
the lands. The decision of the Minister to approve the assignment of the legal
interest in the easement (or to not approve this assignment) would not impact
this access to the lands.
[116] If the permission of the legal owner of the easement would not allow
the assignee to access the lands in relation to the operation of the pipeline,
then the assignee would not be able to access the lands to fix any problem that
might arise or to perform any maintenance that may be required. The assignee
had received the approval to operate the pipeline in 2007 and that approval was
not before the Minister. The Minister, in deciding whether to approve the
assignment of the easement to the assignee, had to base such decision on the
fact that the assignee was the operator of the pipeline. Assuming that the
permission of the legal owner of the easement would not allow the assignee to
access the lands in relation to the operation of the pipeline, then the
decision of the Minister to approve the assignment would be reasonable as the
assignee may well need access to the lands in relation to the operation of the
pipeline. If there was a problem with the pipeline that required access to the
lands to fix, the assignee should have access to the lands to fix the problem.
It would be in the best interests of Coldwater if any problem with the pipeline
could be fixed.
[117] Since the easement would remain in place and the assignee would
continue as the operator of the pipeline regardless of whether the Minister
consented to the assignment of the easement, it is difficult to determine, in
this situation, how the use and enjoyment by Coldwater of this particular
parcel of land would be different if consent was refused or granted. In my
view, the issue was only related to the legal ownership of the easement, not
the use of the lands in question. Refusing to consent to the assignment would
mean that the easement would not be owned by the operator of the pipeline. It
would not mean that the lands were no longer required for the purpose of a
pipeline right of way. If refusing to consent to the assignment would mean that
the assignee could not enter the lands to fix a problem with the pipeline, then
this would support a finding that the decision of the Minister to approve the
assignment of the easement was reasonable.
[118] The Minister in this case was not asked to approve the acquisition
of the easement by the Kinder Morgan group of companies. This had occurred in
2005 and this acquisition is not part of the transactions that are under
review. The Minister was only asked to consent to the assignment of the
easement from one member of the Kinder Morgan group of companies to another
member of the same corporate group. Under the terms of the indenture, the
easement would remain in place as long as the lands were required for the
pipeline and therefore it would remain in place regardless of whether consent
was granted. The operator of the pipeline through the Coldwater reserve would
also not change as the decision to approve the assignee as the operator of the
pipeline was made in 2007 and was not before the Minister. Prior to granting
consent to the assignment of the easement, the Minister considered the factors
as set out in the letter dated December 29, 2014 which included the credit
record, environmental record and contract record of the proposed assignee.
[119]
As a result, in my view, the decision of the
Minister to approve the assignment of the easement, in the circumstances of
this case, was reasonable and I would dismiss the appeal.
“Wyman W. Webb”
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