Ross River Dena Council v. Government of Yukon: “Open Entry” Mining Claims and the Duty to Consult
March 30, 2013
In Ross River Dena Council v. Government of Yukon, 2012 YKCA 14, the Yukon Court of Appeal unanimously held that the Government of Yukon has a duty to consult with First Nations before recording mineral claims staked in areas claimed by First Nations, and that merely providing notice of mining claims will not be sufficient to meet that duty.
The “duty to consult” is a duty on the part of Canada’s governments (the “Crown”) to engage in a process of consultation with First Nations where proposed Crown conduct may adversely affect Aboriginal claims or rights.
The decision may have implications for similar mining claim regimes in British Columbia and other Canadian jurisdictions.
On February 25, 2013, the Government of Yukon filed an application seeking leave to appeal the decision to the Supreme Court of Canada.
Background
The plaintiff, the Ross River Dena Council (the “Council”), claimed Aboriginal title and rights to a portion of traditional territory known as the “Ross River Area”. The claim covered approximately 13% of the Yukon.
The dispute focused on the mining claim system established by the Quartz Mining Act, S.Y. 2003, c. 14 (the “Act”), which provides that an individual may acquire mineral rights simply by physically staking a claim and then recording it with a designated regulatory authority.
Once a mining claim is recorded, the Act provides that a claimant is entitled to the minerals within the claim and may conduct certain exploration activities on the land without further authorization and without notice to the Government of Yukon. Such a system is typically referred to as an “open entry” or “free entry” mineral claim system.
The regulatory authority’s role in registering a mineral claim is purely ministerial in nature. That is, the authority does not possess any discretion to refuse to record a claim that complies with the requirements of the Act.
The Council argued that this system permits exploration activities potentially adverse to its asserted Aboriginal title and rights, and that the Government has a duty to consult before recording mining claims within the claimed territory.
The chambers judge held that the Government’s practices in respect of new mineral claims under the Act did not measure up to the consultation requirements required by the law, but held that those requirements would be satisfied by a scheme under which the Government provided notice to the Council of newly-recorded quartz mining claims within its traditional territory.
The Council appealed, arguing that consultation must take place before the recording of mineral claims, and that consultation requires more than mere notice of new claims.
Law
The law provides that the Crown has a duty to consult with First Nations with respect to contemplated Crown activities when:
- The Crown has knowledge, actual or constructive, of the potential existence of a First Nations claim or right;
- The Crown contemplates conduct or a decision; and
- The conduct or decision may adversely affect the First Nations claim or right.
The duty to consult is grounded in the honour of the Crown. While the treaty claims process is ongoing, there is an implied duty to consult with First Nations claimants on matters that may adversely affect their treaty and Aboriginal rights, and, where appropriate, to accommodate those interests in the spirit of reconciliation.
It is not necessary for a First Nation to definitely establish a claim or right for the duty to consult to arise. The depth of the required consultation in connection with an unproven claim increases with:
- The strength of the prima facie First Nations claim; and
- The seriousness of the impact on the underlying claim or treaty right.
As a result, a dubious or peripheral claim may attract a mere duty of notice, while a stronger claim may attract more stringent duties.
The remedy for a breach of the duty to consult varies with the situation. The Crown’s failure to consult can lead to a number of remedies ranging from injunctive relief against the conduct, to damages, to an order to carry out the consultation prior to proceeding further with the proposed Crown conduct.
Decision
The question on appeal was whether the three elements of the duty to consult were present where the Government sought to record a mineral claim within territory subject to Aboriginal rights and title claims.
There was no dispute that the first element of the duty to consult was satisfied, since the Government had knowledge of the Council’s asserted Aboriginal rights.
There was also no doubt that the third element of the duty to consult was met. The regulatory regime could allow mineral claims to be granted without regard to asserted Aboriginal title, and could also allow exploratory work that might adversely affect claimed Aboriginal rights to be carried out without consultation.
Accordingly, the key issue in dispute was whether the second element of the duty to consult was met. That is, the question was whether the recording of a mineral claim under the Act qualified as “contemplated Crown conduct” despite the fact that the regulatory authority had no discretion in respect of the granting of the mineral claim provided that the requirements of the Act were met.
Mr. Justice Groberman, writing for the Yukon Court of Appeal, rejected the notion that “the absence of statutory discretion in relation to the recording of claims under the … Act absolve[d] the Crown of its duty to consult.” In the Court’s view, the duty to consult “exists to ensure that the Crown does not manage its resources in a manner that ignores Aboriginal claims”, and that “[s]tatutory regimes that do not allow for consultation and fail to provide any other equally effective means to acknowledge and accommodate Aboriginal claims are defective and cannot be allowed to subsist.”
The Court also held that the duty to consult required more than the mere provision of notice of mining claims. Although the Court acknowledged that “the open entry system … under the … Act has considerable value in maintaining a viable mining industry and encouraging prospecting” and “that the system is important both historically and economically”, the Court held that the system had to be modified “in order for the Crown to act in accordance with its constitutional duties.”
However, the Court did not specify precisely how the regime could be brought into conformity with the requirements of the duty to consult. In the Court’s view, “[w]hat is required is that consultations be meaningful, and that the system allow for accommodation to take place, where required, before claimed Aboriginal title or rights are adversely affected.”
In particular, where “exploration activities are expected to have serious or long-lasting adverse effects on claimed Aboriginal rights, … [t]he affected First Nation must be provided with notice of the proposed activities and, where appropriate, an opportunity to consult prior to the activity taking place.” In doing so, “the Crown must ensure that it maintains the ability to prevent or regulate activities where it is appropriate to do so.”
In the result, the Court declared that the Government had a duty to consult “in determining whether mineral rights … within [the claimed lands] are to be made available to third parties under the provisions of the … Act.” The Court also declared that the Government “has a duty to notify and, where appropriate, consult with and accommodate the plaintiff before allowing any mining exploration activities to take place within the [claimed territory], to the extent that those activities may prejudicially affect Aboriginal rights claimed”.
The Court suspended these declarations for one year in order to permit the Government time, if it wished, to make statutory and regulatory changes in order to provide for appropriate consultation.
The decision may have implications for similar “open entry” mining claim regimes in British Columbia and other Canadian jurisdictions. Although the decision is binding precedent only in the Yukon, the judges of the Yukon Court of Appeal are comprised of the judges of the British Columbia Court of Appeal. Accordingly, the decision is likely to be highly influential in British Columbia.
On February 25, 2013, the Government of Yukon filed an application seeking leave to appeal the decision to the Supreme Court of Canada.
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In Antrium Truck Centre Ltd. v. Ontario (Minister of Transportation), 2013 SCC 13, the Supreme Court of Canada reviewed the law of injurious affection, which occurs when a defendant’s activities interfere with the claimant’s use or enjoyment of land. The decision provides important guidance with respect to the circumstances in which a landowner will be entitled to compensation when their business or property is negatively affected by the construction of public works but no expropriation has occurred.
The key issue on appeal was how to determine whether an interference with the private use and enjoyment of land is unreasonable when it results from construction which serves an important public purpose.
The Court held that the reasonableness of an interference must be determined by balancing the competing interests, as in all other cases of private nuisance. That balance will be appropriately struck by answering the question of whether, in all of the circumstances, the individual claimant has shouldered a greater share of the burden of construction than it would be reasonable to expect individuals to bear without compensation.
Background
Antrim Truck Centre Ltd. (“Antrim”) owned and operated a truck stop on Highway 17 near Ottawa. For more than 25 years, the business benefited from the patronage of motorists travelling along the highway.
In 2004, the Province of Ontario constructed a new highway that significantly and permanently altered Highway 17 in a manner that restricted motorists’ access to the truck stop, decreasing the market value of the land and effectively putting the truck stop out of business.
Antrim sought compensation for injurious affection before the Ontario Municipal Board, which awarded damages of approximately $400,000 for business loss and for loss in the market value of the property.
The award was upheld by the Divisional Court of the Ontario Superior Court of Justice, but set aside by the Ontario Court of Appeal on the basis that the interference was not unreasonable given the important public purposes served by the highway’s construction.
Decision
The key issue on appeal was how to determine whether an interference with the private use and enjoyment of land is unreasonable when it results from construction which serves an important public purpose.
In order to establish a claim for injurious affection, Antrim had to establish three elements under the Ontario Expropriations Act:
- The damage must result from action taken under statutory authority;
- The action would give rise to liability but for that statutory authority; and
- The damages must result from the construction and not the use of the works.
If Antrim could establish those three elements, it would be compensated for the amount by which the affected land’s market value was reduced because of the interference, and for personal and business damages.
On appeal, there was no dispute that the first and third requirements of injurious affection were met. The unresolved question was whether the second requirement was met. That is, if the highway construction had not been done under statutory authority, could Antrim have successfully sued for damages caused by the construction under the law of private nuisance?
Mr. Justice Cromwell, writing for the Court, began by observing that in order to establish a claim in private nuisance a claimant must establish that the interference with their use or enjoyment of land is both substantial and unreasonable.
To conclude that an interference is substantial, it must be shown to be “non-trivial” and “amount[ing] to more than a slight annoyance or trifling interference.” This requirement “underlines the important point that not every interference, no matter how minor or transitory, is an actionable nuisance; some interferences must be accepted as part of the normal give and take of life.”
Once the substantial interference threshold is met, the inquiry proceeds to the unreasonable interference analysis, which is concerned with whether the substantial interference was also unreasonable in all of the circumstances.
The question of whether an interference is unreasonable where that interference arises from an activity that furthers the public good “must be determined by balancing the competing interests”. In the Court’s view, that balance is “appropriately struck by answering the question whether, in all of the circumstances, the individual claimant has shouldered a greater share of the burden of construction than it would be reasonable to expect individuals to bear without compensation.”
In the traditional law of private nuisance, courts assess whether an interference is unreasonable by balancing the gravity of the harm against the utility of the defendant’s conduct. However, because the acts of a public authority will generally be of significant utility, public interests will generally outweigh the private interests affected by even very significant interferences. Accordingly, a simple balancing of private interests against public utility may well undermine the purpose of legislation that provides compensation for injurious affection.
In order to avoid that result, the Court held that “the question is not simply whether the broader public good outweighs the individual interference when the two are assigned equal weight”. Rather, “the question is whether the interference is greater than the individual should be expected to bear in the public interest without compensation”. The rationale is that “everyone must put up with a certain amount of temporary disruption caused by essential construction.”
The Court thus drew a distinction between interferences that constitute the “give and take” expected of all members of the public and “interferences that impose a disproportionate burden on individuals.” The Court observed that “the reasonableness analysis should favour the public authority where the harm to property interests, considered in light of its severity, the nature of the neighbourhood, its duration, the sensitivity of the plaintiff and other relevant factors, is such that the harm cannot reasonably be viewed as more than the claimant’s fair share of the costs associated with providing a public benefit.” Another relevant factor is whether the public authority “has made all reasonable efforts to reduce the impact of its works on neighbouring properties.”
The Court ultimately allowed the appeal on the basis that it was reasonable for the Board to conclude that, in all of the circumstances, Antrim should not be expected to endure “permanent interference with the use of its land that caused a significant diminution of its market value in order to serve the greater public good.”
It is important to recognize that Antrim was decided on the basis of Ontario’s statutory regime. Although s. 41 of the British Columbia Expropriation Act also permits claims for compensation on the basis of injurious affection, it remains unclear how Antrim will impact compensation claims in British Columbia.
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Tang v. Zhang: Forfeited Deposits and Proof of Damages
February 18, 2013
In Tang v. Zhang, 2013 BCCA 52, the British Columbia Court of Appeal considered the interpretation of “deposit” clauses in standard form contracts for the purchase and sale of real estate. The key issue was this: where a buyer fails to complete a real estate purchase, and has paid a deposit that the contract states is to be forfeited to the seller “on account of damages”, must damages be proven in order for the seller to retain the deposit?
The Court held that a deposit will generally be forfeited without proof of damages, subject to a clear expression of contrary intention in the contract. This decision clarifies the law in British Columbia and resolves a conflict between prior inconsistent decisions.
Background
The sellers entered into a standard form contract to sell a residential property for approximately $2,000,000. The buyer paid a deposit of $100,000. The contract provided that if the buyer did not complete the sale, “the Seller [could], at the Seller’s option, terminate [the] Contract, and, in such event, the amount paid by the Buyer [would] be absolutely forfeited to the Seller … on account of damages, without prejudice to the Seller’s other remedies.”
The buyer paid the deposit, but failed to complete the transaction. The sellers subsequently went to court seeking a declaration that the deposit was absolutely forfeited to them. In the meantime, the sellers managed to sell the property to another buyer at a higher price. As a result, the seller did not suffer any damages as a result of the buyer’s failure to complete the sale.
The trial judge observed that the contract provided that the sellers “were only entitled to the deposit ‘on account of damages’” in the event that the buyer did not complete the sale. The trial judge interpreted this to mean that the sellers did not have an unconditional right to the full deposit; instead, they only had a right to claim proven damages out of the deposit funds. Because the sellers had suffered no damages, the buyer was entitled to the return of the deposit.
Decision
The sole issue on appeal was whether the deposit was absolutely forfeited without proof of damages.
The Court began by reviewing the legal principles that govern deposits. The Court observed that the common law supports the notion that, in general, a deposit is lost by the party who fails to perform a contract, even in the absence of damages, on the basis that a deposit is “not merely a part payment”, but also a practical mechanism to “creat[e] by the fear of its forfeiture a motive in the payer to perform the rest of the contract.”
The Court held that although the question of whether a deposit is forfeited is a matter of contractual interpretation, a deposit is generally forfeited without proof of damages. This is consistent with the purpose of deposits, which is to motivate contracting parties to carry through with their bargains.
However, the Court noted that the mere act of labeling a payment as a “deposit” in a contract will not permit the parties to “immunize [the payment] from judicial scrutiny.” A court is not precluded from considering whether a “deposit” is in fact a penalty (in which case relief from forfeiture is available at common law), or unconscionable (in which case relief is available in equity). The Court observed that a deposit of up to 10% of the purchase price has generally been regarded as reasonable, and noted that there was an instance in which a deposit of 20% was regarded as reasonable.
The Court expressly rejected the argument that the phrase “on account of damages” should be interpreted to limit the forfeiture of a deposit to proven damages. In the Court’s view, the phrase was intended to mean that “in any action by a vendor to recover damages against a defaulting purchaser for breach of contract, the amount of the deposit would be counted toward (or “on account of”) such damages.” Seen in this manner, “[t]he phrase forecloses double recovery if damages are proven”, which is “not inconsistent with the nature of the deposit as a ‘guarantee’ of performance which encourages contracting parties to complete their contracts in accordance with their terms.”
Tang does not preclude parties to a contract from providing that a deposit will not be forfeited unless damages are proven. However, in light of the Court’s reasoning, doing so would appear to require the use of language that clearly and unambiguously expresses the parties’ intentions to negate the general rule and the policy rationale underlying it.
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TELUS Corporation v. Mason Capital Management: Shareholder Meeting Requisitions and “Empty Voting”
October 24, 2012
In TELUS Corporation v. Mason Capital Management LLC, 2012 BCCA 403, the British Columbia Court of Appeal considered the validity of a shareholder’s requisition for a general meeting of shareholders. The Court clarified that a requisition made under s. 167 of the British Columbia Business Corporations Act need not identify the beneficial owner of the shares used to call the meeting in order to be valid. In addition, the Court held that it had no authority under the Act to restrain a shareholder from requisitioning a meeting on the basis of its “net investment” or that its interests are not aligned with the economic well-being of the company.
Read the full article here: Matthew Nied and Taylor Little, “Mason Capital Succeeds: Appeal Court Confirms CDS’s Ability to Requisition Meeting By ‘Empty Voter’” (2012) 7:4 Corporate Governance Report 41.
Also published on the Canadian Securities Law Blog (Stikeman Elliott)
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Southcott Estates v. Toronto Catholic District School Board: Mitigation and Specific Performance
October 21, 2012
In Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, the Supreme Court of Canada considered whether a plaintiff in a case involving a failed real estate transaction was excused from mitigating its losses on the basis that it had made a claim for specific performance.
Although the Court recognized that a plaintiff’s refusal to mitigate may be reasonable if the plaintiff had a “substantial justification” or a “substantial and legitimate interest” in specific performance, the Court held that the plaintiff had no such interest because the property was intended as an investment and had no peculiar or special value to the plaintiff.
Background
The plaintiff, Southcott Estates Inc. (“Southcott”) was a single-purpose company incorporated solely for the purpose of a specific land purchase. It had no assets other than money advanced to it by its parent company for the deposit relating to the land purchase.
Southcott entered into an agreement of purchase and sale for a specific property with the defendant, the Toronto Catholic District School Board (the “Board”). When the Board failed to satisfy a condition and refused to extend the closing date, Southcott brought a claim for specific performance of the contract, and argued that it was not required to mitigate its losses by purchasing a different property.
The trial judge refused to award Southcott specific performance and, instead, awarded damages to Southcott. On appeal, the Court of Appeal concluded that the Board had breached its contractual obligations, but that Southcott had failed to take available steps to mitigate its losses. As a result, the Court of Appeal reduced Southcott’s damage award to a nominal sum.
Decision
The key issue on appeal was whether a plaintiff must mitigate its losses where the plaintiff has made a claim for specific performance.
The majority reasons, penned by Madam Justice Karakatsanis, recognized that “there may be situations in which a plaintiff’s inaction is justifiable notwithstanding its failure to obtain an order for specific performance.” In particular, “[i]f the plaintiff has a ‘substantial justification’ or a ‘substantial and legitimate interest’ in specific performance, its refusal to purchase other property may be reasonable, depending upon the circumstances of the case”.
In the Court’s view, this was not a case where the plaintiff could reasonably refuse to mitigate. The Court began by observing that “[a] plaintiff deprived of an investment property does not have a “fair, real, and substantial justification” or a “substantial and legitimate” interest in specific performance unless he can show that money is not a complete remedy because the land has “a peculiar and special value” to him. In this case, Southcott had no “substantial and legitimate” interest in specific performance because the land had no peculiar or special value to it. Rather, Southcott had simply “engaged in a commercial transaction for the purpose of making a profit”, such that “[t]he property’s particular qualities were only of value due to their ability to further profitability.”
As a result, the Court held that Southcott owed a duty to mitigate its damages by purchasing an alternative property, notwithstanding its specific performance claim.
In light of the decision, a plaintiff with a claim of specific performance must carefully evaluate the strengths and weakness of its claim. If a plaintiff chooses to pursue its claim of specific performance and declines to mitigate its losses in the interim by buying an alternative property, the plaintiff must be prepared to suffer a reduction in its damage award in the event that a court rejects its claim of specific performance and finds that the plaintiff unreasonably failed to mitigate its losses.
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Edward Jones v. Voldeng: Investment Advisors, Non-Solicitation Covenants, and Injunctions
July 9, 2012
In Edward Jones v. Voldeng, 2012 BCCA 295 (“Voldeng”), the British Columbia Court of Appeal considered the test for granting an interlocutory injunction in the context of a restrictive covenant prohibiting solicitation contained in the employment contract of an investment advisor. The Court made several notable remarks regarding the irreparable harm and balance of convenience elements of the test for granting an interlocutory injunction.
Background
Randy Voldeng, an investment advisor, worked at Edward Jones, a national brokerage firm. The employment agreement contained a restrictive covenant that prevented Mr. Voldeng from soliciting sales from any client of Edward Jones after his employment relationship with Edward Jones ended.
Ultimately, Mr. Voldeng left his employment with Edward Jones and commenced employment with a competing brokerage firm. Shortly after leaving Edward Jones, Mr. Voldeng contacted a number of Edward Jones’ clients and allegedly encouraged them to transfer their accounts to the competing brokerage firm.
Edward Jones commenced an action and sought an interlocutory injunction restraining Mr. Voldeng from making further solicitations.
In order to obtain an interlocutory injunction, an applicant must establish that:
- there is a serious question to be tried;
- the applicant will suffer irreparable harm if the injunction is not granted; and
- the balance of convenience favours granting the injunction.
The lower court held that Edward Jones had established these three elements. Accordingly, the lower court granted an interlocutory injunction.
Decision
The key issues on appeal were whether there was evidence of irreparable harm and whether the balance of convenience favoured granting the injunction. There was no dispute that there was a serious question to be tried.
Mr. Justice Chiasson, writing for the Court, began by describing two types of irreparable harm:
- harm that cannot be quantified in monetary terms, such as permanent market loss or irrevocable damage to business reputation; and
- harm that cannot be compensated because, for example, an award of damages will not be collectible.
The lower court accepted that the facts gave rise to the first type of irreparable harm. It held that damages were not an adequate remedy for the alleged breach of the non-solicitation covenant because it would be extremely difficult to separate damages for loss of business caused by the breach from those resulting in fair competition.
The Court disagreed. In its view, “the damages that flow from a violation of a non-solicitation covenant in the employment contract of an investment advisor generally are calculable”. This is because the industry is regulated in a manner such that the “value of the portfolio of a departing client is known, as is the return to the brokerage firm of managing the portfolio.”
In the case at bar, the evidence was clear that Mr. Voldeng had received instructions to transfer client accounts with an approximate total value of $20.2 million. Accordingly, the potential damages arising out of the alleged solicitation, being calculable, did not constitute irreparable harm.
Turning to the assessment of whether the balance of convenience favoured the granting of an injunction, the Court held that “in the context of a non-solicitation covenant, the interests of an individual investment advisor and his or her clients often tips the balance of convenience in favour of the investment advisor.”
In particular, the Court recognized that the interests of the clients of an investment advisor are a legitimate public policy factor to consider in the balance of convenience analysis. On this point, the Court cited previous decisions which emphasized that “clients should be free to receive information from all competitive sources and to have the ability to decide if they wish to follow a person with whom they have developed an individual trust and confidence regarding investment advice.”
The Court also noted that while the “interests of the clients of investment advisors are a legitimate factor to take into account, [they] should not be considered as unique to that relationship.” Accordingly, “[t]here are many other relationships in which similar interests may be relevant.”
In the course of assessing the balance of convenience, the Court also observed that granting the interlocutory injunction could have caused irreparable harm to Mr. Voldeng “because, if his conduct were found to be proper, it would not be possible to determine which of his clients would have shifted to [the competing brokerage firm] if he had been able to inform them of his contact particulars.”
Based on these factors, the Court concluded that the balance of convenience did not favour the granting of an injunction.
In the result, having determined that the irreparable harm and balance of convenience elements were not met, the Court overturned the lower court’s decision to grant an interlocutory injunction.
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