Court confirms no duty of care owed to affected project proponents under Constitution

The Ontario Superior Court of Justice recently dismissed Northern Superior Resources Inc.’s claim against the Ontario Crown for business losses stemming from lost access to mining claims in the traditional territory of the Sachigo Lake First Nation (the First Nation), allegedly resulting from the Crown’s breach of its duty of care around the duty to consult. Northern Superior comes less than a year after the British Columbia Court of Appeal’s decision in Moulton Contracting Ltd. v British Columbia, where a project proponent unsuccessfully sought damages in both contract and tort for business losses flowing from the erection of a blockade by indigenous individuals dissatisfied with the level of consultation relating to the project.

Northern Superior partnered with the First Nation to explore a possible gold mining opportunity on the First Nation’s traditional territory. It was a seven-year partnership that degraded in the final two years, ultimately terminating at the request of the First Nation who decided the relationship was no longer in its interest.

In response to the termination of the partnership, Northern Superior brought an action against the Crown alleging Ontario owed it a duty, the failure of Northern Superior’s relationship with the First Nation was the result of a breach of that duty, and Northern Superior should be compensated accordingly.
 

Constitutional argument

Northern Superior grounded its argument, in part, in section 35 of the Constitution, claiming that the Crown failed in its constitutional responsibilities and that those responsibilities benefit not just First Nations but also third parties whose interests may be impacted by that failure. The evidence before the court was that other than letters to Northern Superior emphasizing the importance of consultation, the Crown was uninvolved in the relationship between Northern Superior and the First Nation until after the relationship terminated.

The court was quick to reject Northern Superior’s argument, stating that duties created by section 35 are owed to the First Nation, and a corresponding duty to Northern Superior would be incompatible with the Crown’s obligations to indigenous peoples:

It cannot be that the Crown would, at the same time, owe an independent duty to a mining company to work to protect its exploration rights in the face of a legitimate constitutional concern of a First Nation. The Crown would be in the untenable position of being required to serve two opposing masters, each insisting it can rely on one of two contradictory responsibilities. In such circumstances, it would not be a matter for tort law. The constitutional rights and concerns of the First Nation would govern. (para. 51)

The court held that even though there is a need for balance between indigenous interests and other societal interests, this balancing does not amount to a legal right and the province did not have a fiduciary responsibility to any company that holds mining rights that challenge the treaty or aboriginal rights of a First Nation. Ultimately, the court found that the duty to consult is not owed to third parties and does not provide third parties with any legally enforceable benefit.
 

Other arguments rejected

Northern Superior also alleged Ontario breached its duty of good faith, duty of fairness and implied statutory duty of care under the Mining Act. The court determined that Section 4(3) of the Mining Act limited the Crown’s liability in tort for misconduct to those circumstances where it is demonstrated that the alleged neglect or default was executed in bad faith. As that was not alleged here, there was no basis to impose liability on the Crown under the statute.

With regard to liability arising from the Crown’s breach of its duty of care, the court found that given the lack of involvement of the Crown by the parties until after the breakdown of the parties’ relationship, there was not sufficient proximity between the Crown and Northern Superior to satisfy the first branch of the Anns test.

This case was distinguished from Behn v Moulton Contracting Ltd.,1 where the duty to consult was held to be triggered by real or constructive knowledge on the Crown’s part of the potential existence of an aboriginal right or title and contemplates conduct that might adversely affect it. In this case, the court found that the Crown was not aware of the difficulties between Northern Superior and the First Nation, or any potential adverse effect of Northern Superior’s activities on aboriginal rights or title, until after the relationship had broken down, by which time Northern Superior was unwilling to contemplate a resolution other than litigation.
The court also concluded that, by rejecting the Crown’s offer to facilitate a resolution between Northern Superior and the First Nation, Northern Superior “gave up any possibility of succeeding in an action before the court regardless of the cause of action,” noting “[b]oth parties must take a reasonable and fair approach in their dealings” (para 96).
 

Implications

While the court was quick to reject Northern Superior’s submission that it was owed any duties pursuant to section 35 of the Constitution, the decision did not close the door on the Crown being held liable to a project proponent for negligence where the Crown played a more active role in the relationship between the project proponent and the First Nation.
This decision highlights the important role the Crown can play in assisting project proponents with consultation and the extent to which courts may expect proponents to avail themselves of such assistance before seeking legal redress.
 

Footnote

1 [2013] 2 SCJ 227 (SCC).


Practice area:

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...