Canada: When Consultation Goes Wrong

In October 2013, Northern Superior Resources Inc ("NSR") filed a $110M law suit against Ontario based upon Ontario's alleged failures to adequately undertake s. 35 consultation with affected Aboriginal groups.  The NSR litigation raises the interesting question: who bears the cost when consultation goes wrong?

The allegations in the statement of claim are not proven.  Yet, the story told by NSR's statement of claim is fascinating.  NSR is a junior mineral exploration company.  It looks for gold.  Since 2005, NSR had been working a number of unpatented mining claims in Northwest Ontario (generally near the Manitoba-Ontario border).  NSR says that it dealt with one First Nation, the Sachigo Lake First Nation ("SLFN"), respecting its gold exploration project and spent $15M in working the project, including costs associated with engaging SLFN and other Aboriginal groups.

NSR alleges that things started to go wrong in 2011.  It says SLFN started to make unrealistic demands, such as submitting invoices to NSR that NSR denies were ever due.  This led to a confrontation.  NSR says that SLFN physically detained two NSR employees and some equipment in an effort to obtain payment from NSR for invoices that NSR denies were ever due.  NSR says it felt compelled to pay these invoices and says it lost about $40,000 in out of pocket losses (i.e. the time lost in not doing the exploration work that time). 

NSR says that things continued to deteriorate in 2012.  SLFN made a demand that NSR pay an "administrative fee" of 24% of total project expenditures and that NSR use an aircraft (that NSR deemed unsafe) as part of NSR's operations.  If NSR did not agree, it is alleged, NSR was no longer welcome in SLFN traditional territory.  NSR did not agree.  As a result, NSR got a letter from the First Nation indicating that NSR no longer could access the project area and that SLFN would not negotiate with NSR any further. 

In the face of this 'eviction order,' NSR says, "in the interest of safety and the rule of law, NSR accordingly halted all exploration work on the Claims." 

From the statement of claim, it is clear that NSR was having difficulties with SLFN and felt that shutting down the project was better than continuing to work the project and risk further confrontation.  In such a situation, one could expect a resource developer to seek an injunction against a third party, be it First Nation or otherwise, to prevent interference with their operations.  This apparently was not done.  Instead, NSR sued Ontario for Ontario's failure to consult with the affected First Nations. 

NSR says that Ontario owed it a duty of care to discharge Ontario's s. 35 consultation duty to First Nations properly and that Ontario failed in this regard.  NSR says, amongst other things, that Ontario's failures "encouraged unreasonably held views of the nature of the duty of consult" on the part of First Nations and "created the conditions for the assertion by the said First Nations of all manner of demands" including the actions noted above.  In essence, Ontario's legal failures created a climate in which SLFN could do what it did.  NSR goes on to say that Ontario had a duty to protect it from the actions of First Nations that purported to exclude NSR from its project area, which Ontario failed to do.   

NSR's claim against Ontario is unique.  It could be said that NSR is attempting to rely upon an alleged legal wrong done to a third party (i.e., Ontario's alleged failure to do s. 35 consultation with Aboriginal groups) to justify its claim.  To phrase the claim this way would be to make success very difficult. 

However, the question can be phrased differently based upon a Supreme Court case known as Fullowka. This case arises from the Giant Mine strike in Yellowknife.  During the strike, one person detonated a bomb in a mine killing a number of replacement workers.  The families of the deceased workers sued, amongst others, the government.  On its face, the logical wrongdoer was the person who detonated the bomb and no one else. However, the Supreme Court dug deeper and rephrased the question.  Cromwell J. wrote, "The question is not, therefore, whether these defendants are responsible for the tort of another, but whether they, in relation to another's tort, failed to meet the standard of care imposed on them and thereby caused the ultimate harm." 

In this case, the Court said that government owed the deceased workers a duty of care to prevent the explosion, in part, because there was a statutory duty to do safety inspections of the mine and government knew the mine owner was not taking reasonable steps to ensure safety.  Ultimately, the claim of the deceased workers failed because, while a duty of care was owed, government took reasonable steps to meet the duty, including by relying on legal advice not to close the mine prior to the explosion.

This case could assist NSR's claim.  The actions of SLFN in detaining employees is not so much the issue as is Ontario's alleged failure to consult, which NSR says created a climate in which such actions could occur.  Fullowka could help in getting the ball rolling.  It can help NSR set the legal duty of care.  However, NSR will have to show that Ontario did not meet the duty.  This will be very fact specific.  It may well be that Ontario was doing some level of consultation and NSR was not aware of the fact.  It may well be that Ontario did nothing.  It all remains to be seen. 

The NSR litigation could have the effect of making government pay resource developers for failed consultation.  In the end, it is far too early to say what will happen, but it is a case worth monitoring if and when it makes it to court.  

This article originally appeared in MidCanada Forestry & Mining Magazine and is reprinted with permission

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