• Northern Superior Resources Inc. v. Ontario, 2016 ONSC 3161, Ontario Superior Court of Justice (Lederer J.), 25 May 2016
  • April 25, 2017 | Author: Scott Kerwin
  • Law Firm: Borden Ladner Gervais LLP - Vancouver Office
  • The Ontario Superior Court of Justice dismissed a claim against the Province of Ontario brought by a mining company that was based upon an alleged duty of the Crown to protect the rights of third parties when consulting with Aboriginal groups. The exploration activities of the plaintiff in northwestern Ontario had been halted, in part, due to a breakdown of its relationship with Treaty 9 communities. The plaintiff alleged that Ontario had a duty to protect its interests during the consultation process, and that Ontario's failure to comply with this duty resulted in the plaintiff suffering losses. The Court rejected that such a duty to third parties existed, either under constitutional principles or the law of negligence, and dismissed the plaintiff's claim.

    The plaintiff Northern Superior Resources Inc. is a junior mining company that is in the business of resource exploration. It held certain mining claims in the Red Lake Mining Division of Ontario, approximately 740 kilometers northwest of Thunder Bay. Preliminary exploration for diamonds in this area took place between 2002 and 2005. Northern Superior then began staking claims near Thorne Lake in order to explore gold resources in the area. Further claims were staked in 2006 and 2007. Although the results of surveying were good, the plaintiff required an investment partner to continue. An option agreement with International Nickel Ventures Corporation was signed in 2009.

    Throughout this time, Northern Superior had been in contact with the Sachigo Lake First Nation (SLFN). It had hired an elder from the SLFN to assist in its work, and entered into a "Letter of Agreement" in 2005 regarding a short term drilling program. Northern Superior made commitments towards hiring SLFN members and buying goods from the local communities. Another agreement was reached in 2008 with more sophisticated terms.

    In 2009, the Ontario Ministry of Northern Development and Mines initiated a "transitional approach" to consultation with First Nations, in anticipation of amendments to the provincial Mining Act. On each occasion that the plaintiff recorded a mining claim, it received a letter from the Ministry advising that First Nations should be consulted. The plaintiff subsequently contacted the SLFN, but not other Aboriginal groups. Northern Superior "received and accepted the assurances of Sachigo Lake First Nation that it would discuss any issues that arose concerning overlapping claims in the area". Northern Superior had been approached by the Kitchenuhmaykoosib Inninuwug First Nation ("KI First Nation") about their concerns relating to staking east of Thorne Lake. It understood that the KI First Nation was content with its activities. The Court noted : "It was on this basis that Northern Superior entered into the option agreement with International Nickel Ventures Corporation".

    The Mining Act was amended in 2011. Later that year, the plaintiff and International Nickel terminated their option agreement upon payment of $500,000 to International Nickel and the issuance of common shares in Northern Superior. The plaintiff then decided upon an aggressive exploration plan to rekindle market awareness and interest. It entered into a further Letter of Agreement with the SLFN. In January 2012, Northern Superior issued a press release announcing the positive results of its 2011 staking program and the findings near Rapson Bay.

    In 2012, the relationship between Northern Superior and the SLFN broke down, and no further work was done by the plaintiff. The Court found that the solid and constructive relationship between Northern Superior and the SLFN "became frayed at the edges, deteriorated, and fell apart". The plaintiff had concerns about the SLFN's invoicing practices. In November 2011, the SLFN sent a letter stating its concerns that Northern Superior had not complied with the previous Letter of Agreement. A second letter from the SLFN to Northern Superior alleged that staking work and geophysical work had been conducted in its traditional territory without its knowledge, and that "a lack of respect" had been shown. In a response letter, Northern Superior disputed the allegation that the SLFN could have been unaware of the activities given the meetings with Band Council and the involvement of elders and SLFN members at the site.

    Following a meeting between the parties in Toronto in March 2012, the SLFN supported an exploration program proposed for 2012. The relationship fell apart again in the spring of 2012 during negotiations over a new Letter Agreement. The SLFN wanted a new administration fee valued at 24% of the costs to Northern Superior, and required the plaintiff to use a Beaver aircraft owned by the SLFN. These terms were not acceptable to Northern Superior.

    In July 2012, Northern Superior obtained an "exclusion of time" order under the Mining Act so that its recorded claims could remain despite no investment being made.

    In September 2012, Northern Superior wrote to the Acting Assistant Deputy Minister demanding compensation from Ontario for "all losses suffered or to be suffered as a result of the frustration of its legal right to access, explore and exploit the mineral claims in our Rapson Bay, Meston Lake, and Thorne Lake properties..."

    In response to the September 2012 letter, the Assistant Deputy Minister met with Northern Superior and, later, with representatives of the SLFN. Northern Superior rejected offers of assistance by the Ministry to resolve its problems with the SLFN on the basis that they would be "pointless", and stating that efforts "are certain to prove futile". The Ministry made another attempt in late December 2012 to repair the relationship between Northern Superior and the SLFN. Northern Superior again rejected such assistance, stating that the SLFN's approach had "shifted from negotiation to extortion".

    At that point, Northern Superior had decided to sue Ontario. Northern Superior claimed that it was owed a duty by Ontario to protect its interests in the consultation process, and had suffered loss as a result of Ontario breaching that duty. The plaintiff argued that the Crown's constitutional responsibilities benefit not just First Nations, but also third parties whose interests may be impacted by the Crown's failure to comply with its duty. Northern Superior sought compensation for the loss resulting from the Crown's breach of duty.

    The Court rejected the argument that the Crown, as part of its obligation to consult First Nations, had a duty to third parties like Northern Superior.

    The amendments to the Mining Act codified the obligation to consult with interested First Nations, The Court reviewed the principles relating to the duty to consult arising from cases like Haida. Lederer J. summarized:

    This requires the Crown to act in the best interest of the First Nation when exercising discretionary control over specific First Nation interests. In this case, the land in question is subject to Treaty 9. In exchange for Aboriginal title and Aboriginal rights, the First Nations received reserves and certain harvesting rights. There are rights in respect of cultural sites, such as burial grounds, that have not been set down in treaty. To the extent that there are rights to be protected arising from the treaty (harvesting rights) or outside the treaty (respecting sites of cultural significance), the Crown acts as a fiduciary of the First Nation. The problem is that, in the absence of the First Nation, it is not possible to know what rights they perceive as being threatened, whether they are correct in the assertion of such rights or to appreciate the strength and substance on which the claim to those rights is based.

    In the event that the interest at issue is one that attracts constitutional protection that is accompanied by fiduciary responsibilities, there can be no duty owed by the Crown to Northern Superior. In such circumstances, the loyalty of the Crown is to the First Nation. 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.

    The Court noted the claims of the KI First Nation to the area, and its unilaterally-imposed "community moratorium" over a large area of land. Such claims "could cause the honour of the Crown and an accompanying fiduciary duty to drive and define the role and responsibilities of Ontario in the dispute". Ontario would then have been under a duty to act for the benefit of the KI First Nation. Section 35 of the Mining Act allows the Minister to withdraw lands that are the property of the Crown from prospecting and staking. The Court noted that such an order had been made in response to the claims of the KI First Nation, and resulted in Ontario paying $3.5 million to another company (God's Lake Resources) that had existing claims in the area covered by the withdrawal order. In regards to that event, the Court noted:

    The result may have been satisfactory to both sides, but the law does not impose a duty to find such a solution. Ontario's fiduciary responsibilities of trust and loyalty to the First Nation do not allow for a corresponding duty to any company that holds mining rights which challenge the treaty or aboriginal rights of a First Nation. The underlying result was the preservation of whatever claim Kitchenuhmaykoosib Inninuwug First Nation had to rights in respect of the lands affected by the mining leases and claims of God's Lake Resources.

    Even if a fiduciary duty to a First Nation did not arise, the honour of the Crown would only benefit First Nations in their relationship with the Crown. This duty "does nothing for third parties" such as the plaintiff. Lederer J. further stated:

    The upshot of the constitutional protection of the interests of First Nations, founded in the honour of the Crown, with or without an accompanying fiduciary duty, is that the duty to consult, which is an expression of the protection, is a responsibility owed to First Nations. It is not owed to third parties and provides no legally enforceable benefit to them.

    The constitutional responsibilities of the Crown relating to the duty to consult First Nations cannot be extended to the plaintiff. There was also no contractual relationship between the plaintiff and Ontario that could give rise to a claim.

    The Court then considered whether a duty of care arose due to the relationship between Northern Superior and Ontario, and applied the test from Anns v. Merton London Borough Council. No such duty of care arose by statute or the common law of negligence. The first requirement of the Anns test, relating to "proximity", was not established. It was noted that Ontario and the plaintiff had no direct contact until July 2012. The letter sent by Northern Superior to Ontario in September 2012 was not a request for assistance, or anything to suggest the “proximity” required to demonstrate a duty of care, but was a demand for compensation. Lederer J. stated:

    There is nothing in any of this to demonstrate the direct and close interaction on which the presence of any duty of care could be founded. Northern Superior received the notification letters. Each of them accepted that the Crown had the ultimate responsibility for ensuring appropriate consultation, but advised that third-party proponents had an important role to play. Two of these letters pointed out that the third-party was in the best position to describe their plans and develop measures to prevent or diminish potential adverse effects and the other two noted that building a positive relationship with Aboriginal communities made good business sense and could help a proponent to address any potential issues at the outset. Northern Superior worked with Sachigo Lake First Nation and, for a period, achieved the balance to which the courts have referred without the participation or the assistance of the Crown. This was laudable and to the advantage of both parties. The fact that the association deteriorated does not allow Northern Superior to fall back and claim a duty of care was owed to it by the province. Up until the breakdown of the relationship, Ontario did not take part.

    Northern Superior also alleged that the Crown's lack of interaction, and the nature of the notification letters, represented an improper delegation of the Crown's duty to consult. The Court rejected this argument. There was no delegation, as Ontario accepted that the duty to consult was its responsibility. There was no suggestion in the notification letters that Northern Superior was legally obligated to consult.

    The Court also considered the second arm of the Anns test, concerning whether there is some policy or broader reason to limit or extinguish a duty of care. Lederer J. stated:

    In the context of modern-day Canada, with the constitutional recognition of the rights of First Nations and our, generally, understood desire for reconciliation, there could be no more powerful policy recognition calling for the setting aside of any duty of care owed by the Crown to third parties than our expressed desire to come to terms with our history and our relations with those who were here first.

    The Court concluded that Northern Superior cannot reasonably expect to be compensated by the Crown which was never directly involved in the relationship with the SLFN. The Crown was only contacted for the purpose of seeking compensation. It was also noted that Northern Superior rejected Ontario's offer to facilitate meetings with the SLFN or otherwise assist in resolving the dispute. Lederer J. stated:

    To come full circle, I return to the question of a duty to consult and join it to the concerns surrounding the actions of Northern Superior. In Behn v. Moulton Contracting Ltd., the Court observed that the "duty to consult is triggered 'when the Crown has knowledge, real or constructive, of the potential existence of the Aboriginal right or title and contemplates conduct that might adversely affect it.'" In this case, the Crown was unaware of any difficulties between Northern Superior and Sachigo Lake First Nation until July 5, 2012 and did not understand the relationship to be in peril until the letter of September 6, 2012. Until then, it had no idea that there was any concern that the activities of Northern Superior were seen as adversely affecting any Aboriginal title or rights. By then, Northern Superior was unprepared to do anything other than sue. The Crown had no knowledge of the problem until its efforts at redress were refused. Its efforts to consult and look for a resolution were summarily turned down by Northern Superior.

    The Court therefore dismissed Northern Superior's action.