Canada: Stoney First Nation Unable To Sue The Lessee For The Recovery Of Royalty Payments

Last Updated: September 9 2014
Article by Michael G. Massicotte and Sandi Shannon

Most Read Contributor in Canada, September 2016

In Stoney First Nation v. Imperial Oil Resources Limited, 2014 ABQB 408 [found here], the Alberta Court of Queen's Bench (per Mahoney J.) dismissed an appeal by the Stoney Tribal Council (the "Stoney") from the decision of Master J. B. Hanebury [found here], in which summary judgment was granted in favour of the defendant/respondent, Imperial Oil Resources Limited ("Imperial"). The case concerned reserve lands that the Stoney had surrendered to Canada "in trust to lease" and which Canada had subsequently entered into a mineral lease with Imperial.  In the decision appealed from, the Master summarily dismissed the Stoney's claim against Imperial for the recovery of royalty payments (the "Stoney-Imperial Action"). The Court agreed with the Master's finding that the common law of trusts was applicable where Canada acted as trustee over reserve lands.  As no evidence was produced that would give rise to one of the common law exceptions allowing a beneficiary to sue a debtor of a trust fund directly and in accordance with the recently revised test for summary judgment (genuine issue requiring trial, instead of genuine issue for trial), which was out in the Supreme Court of Canada's decision in Hryniak v Mauldin, 2014 SCC 7 [found here] and subsequently applied by the Alberta Court of Appeal in Windsor v Canadian Pacific Railway, 2014 ABCA 108 [found here], it was held that a fair and just disposition on the merits of the summary judgment motion could be made on the record, and that there was no genuine issue requiring trial.

In November 1997, the Stoney commenced the Stoney-Imperial Action against Imperial, seeking an accounting for all royalty monies owing by Imperial in respect of certain reserve lands which had been surrendered between 1926 and 1992 to Her Majesty in right of Canada ("Canada") "in trust to lease".  In 1984, Canada had entered into a mineral lease with Imperial, pursuant to which Imperial was to make royalty payments directly to Canada as trustee for the Stoney.

Prior to commencing the Stoney-Imperial Action, in September 1993, the Stoney had commenced an action against Canada in the Federal Court of Canada (the "Stoney-Canada Action"). In it, the Stoney alleged that Canada had breached its trust and fiduciary obligations by having failed to ensure that the Stoney received all of the royalties owing by Imperial. That action was subsequently settled upon payment of $28,500,000.00 by Canada to the Stoney.

In February 1999, a third related action was commenced, this one by Canada, on behalf of and as trustee for the Stoney, against Imperial and others (the "Canada-Imperial Action"), wherein Canada sought an accounting and judgment for improper deductions of royalty payments. That action was also settled, upon payment of $149,956.19 by Imperial to Canada.

The Stoney argued that Imperial did not prove that it paid all royalties due and owing to Canada on behalf of the Stoney, and that it had standing to proceed with the Stoney-Imperial Action since, among other things, Canada had reduced the payment by Imperial to $149,956.10 without its consent. Imperial's position on its application was that the Stoney had no standing and that given the two related royalty claim settlements, "there was no action left to bring".

In dismissing the Stoney's appeal, Mahoney J. held that no evidence had been led by the Stoney of anything arising from the history of aboriginals in Canada that would suggest that the common law of trusts would be inapplicable to the facts in this case. Applying the common law of trusts the Court held that the Stoney failed to establish that the facts of the case gave rise to any of the established exceptions that would allow a beneficiary to sue a debtor of a trust fund directly, as opposed to suing the trustee. Accordingly, it was held that the Stoney had failed to raise any principle at law that gave them standing to sue Imperial directly. The Court held that any claim to be made by the Stoney, must be made against Canada for breach of trust, which it had done and settled in the Stoney-Canada Action.

In its application of the revised test for summary judgment, the following was stated:

[69] Although I agree with the Stoney's argument that the culture shift recognized by the Court in Hryniak and Windsor emphasizes a fair process that results in a just adjudication of disputes, I disagree with their conclusion that this principle results in a finding in their favour. I find quite the opposite: a fair process that results in a just adjudication of disputes militates in favour of granting summary judgment. Granting summary judgment in this case is the fair and just result based on all of the evidence.

Of significance to the industry is that unless one of the exceptions applies, lessees will be shielded from actions by First Nations, but not by Her Majesty in right of Canada, for the recovery of royalty payments allegedly due and owing. This case also continues the growing trend of the courts in Alberta and elsewhere to grant summary judgment and avoid the expense and time of full trials where the record permits a fair and just adjudication, which is often the case when resolution of the dispute turns primarily on issues of law.

We understand that to date, this decision has not been appealed, although the time for doing so will not expire until on about September 15, 2014.

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