Canada: Federal Court Of Appeal Requires Minister To Discharge Fiduciary Duty In Consent To Assignment Of First Nations Pipeline Easement

Overview

This decision concerns the 2014 consent by the federal Minister of Aboriginal Affairs and Northern Development (the "Minister") to the assignment of a pipeline easement as part of a corporate reorganization undertaken by Kinder Morgan.  The easement forms part of the Trans Mountain pipeline, and crosses the Coldwater Indian Reserve (the "Reserve"), and accordingly ministerial consent to the assignment between Kinder Morgan subsidiaries was required.

The Crown owed the Coldwater Indian Band ("Coldwater") a fiduciary duty when considering whether or not to consent to the assignment. The Federal Court of Appeal found that, while the Minister considered the ability of the proposed assignee to discharge the obligations under the easement, he was also required to consider whether a consent to the assignment of the easement on its original terms would be in Coldwater's best interest, while also being mindful of the public interest in the pipeline's ongoing operation. The Minister did not undertake this consideration, and the consent was returned to the Minister for reconsideration having regard to its obligations.

To read the full summary, click here.

Facts

Trans Mountain Pipeline was incorporated in 1951. Trans Mountain required multiple easements to be built, including one from Coldwater. The easement ("Easement") was agreed to by Coldwater Band Council in 1955, and was granted over approximately 6.5 km of the Reserve. Coldwater received $1,292.00 for the Easement, calculated at the standard rate of the time, and has since that time also been charging Kinder Morgan property tax for the easement.

The Easement contained a restriction on assignment, in that it could not be assigned without consent of the responsible minister. Between 2002 and 2007, Trans Mountain underwent a series of corporate mergers, with the result that Trans Mountain was ultimately owned by Kinder Morgan, but was owned by a different subsidiary of Kinder Morgan.  Therefore, in order to assign the Easement successfully to the subsidiary that owned the pipeline, ministerial consent was required.  

In July 2012, Kinder Morgan sought the consent of the Minister for the assignment of the Easement. Shortly thereafter, Coldwater was given notice of the request, and began communicating with the Minister about the terms of the consent. In 2013, Kinder Morgan applied to the National Energy Board for a certificate of public convenience and necessity in order to enlarge the pipeline so as to approximately triple its capacity.  Coldwater expressed its concern about the expansion, and also expressed its desire to the Minister to modernize the Easement, including terms such as environmental practices and enhanced rights for the Band.

Coldwater subsequently advised the Minister that it was not in the interest of Coldwater to consent to the assignment of the Easement and that the Minister should refuse consent to the assignment. Shortly thereafter, the Minister and the Tk'emlúps te Secwépemc First Nation initiated an optional process for the purposes of modernizing pipeline easements over multiple reserves. Coldwater was invited to partake in the process, with a focus on updating the Easement, and did so for a time, but later removed itself from the modernization process because many of the provisions it had proposed were not included in in the modernized easement.  

The Minister provided his consent to the assignment on December 19, 2014. In a letter informing Coldwater of the decision, the Minister said he considered "the grantee credit record, grantee environmental record, grantee contract record, grantee eligibility, valid grantor, adequate description, appropriate circumstances and proper documentation for the assignment of the Trans Mountain Pipeline." However, the decision did not include consideration of whether the assignment would minimally impair Coldwater's interest in the use and enjoyment of the land, and also did not include consideration of the impact of the continuation of the terms of the Easement on Coldwater's right to use and enjoy the reserve lands. 

Decision

In a majority decision of the court, the Minister's decision to consent to the assignment was set aside and returned to the Minister for redetermination, taking into account the Crown's fiduciary duty to Coldwater in consenting to the assignment, not just assessing the ability of the assignee to perform the obligations under the Easement. In short, the Court did not tell the Minister what to decide, only the matters to be considered in arriving at the decision.

The fiduciary duty requires the Minister "to exercise his discretion in a manner consistent with his obligations of loyalty and good faith and to act in what he reasonably and with diligence regards as Coldwater's best interest while, at the same time, being mindful of the public interest in the pipeline's continued operation" (para. 60). The Court could find no evidence on the record that the duty was discharged. Further, as a result of the modernization process initiated by the Minister, he ought to have known that the terms of the Easement were no longer responsive to current concerns. The Minister was "therefore required to consider whether the protection available to Coldwater under the modernized template was adequate in order to protect the land, and thus minimally impair Coldwater's interest in the land" (para. 93).

The Court also noted that the Minister was not required to consider the expansion of the Trans Mountain pipeline in discharging its duty – Kinder Morgan has advised Coldwater that the proposed expansion will not take place without Coldwater's consent.

The dissenting judgement from Webb JA focused on the fact that the assignment was from one subsidiary of Kinder Morgan to another subsidiary, and therefore it was impossible to see how Coldwater's use or enjoyment of the land would be any different as a result of the assignment. Further, it would be possible that the interest of the proposed assignee would be held in trust, regardless of the minister's consent. Therefore, irrespective of whether the fiduciary duty had been discharged, the result of consent or non-consent would be the same.

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