The Federal Court of Appeal dismissed an appeal by the Coldwater Indian Band, and allowed a cross-appeal by Kinder Morgan, in relation to a dispute over the assignment of pipeline easements. The Court held that the judicial review application was premature, as the Minister had not yet made a decision whether to consent to the assignment, and the administrative process should have first run its course.

The Coldwater Indian Band possesses reserves near Merritt, British Columbia. In 1952, Trans Mountain Oil Pipeline Company sought a 60-foot right of way through one of the Band’s reserves for the purpose of building an oil pipeline. The Band Council passed a resolution approving the ROW, and an Order-in-Council was passed in March 1953 approving the ROW. In 1955, Trans Mountain entered into an agreement with the Crown relating to the easement. One of the terms stated that Trans Mountain shall not assign the ROW without the written consent of the Minister. The pipeline was subsequently built, and carries approximately 300,000 barrels of oil per day from Alberta.

In 1957, Trans Mountain made a request for a second easement through Indian reserves, including the Coldwater Indian Band’s reserve. The Band Council made a resolution approving the ROW. In 1958, Trans Mountain and the Crown entered into an agreement with the same terms as the 1955 agreement. However, a second pipeline has not been built.

Through a complex series of corporate transactions, Trans Mountain sold its pipeline assets in 2007 to interests controlled by Kinder Morgan. In June 2012, Kinder Morgan made a request to the Minister to consent to the assignment of the assets. At the time of this litigation, the Minister had not yet made a decision in regards to the assignment.

The Coldwater Indian Band became aware of the request made by Kinder Morgan and took the position that the original indenture was void due to the failure in 2007 to obtain a consent to the assignment, and that a new process needed to be started. The Band applied to the Court for an order declaring that the Minister is obligated to follow its instructions, and deny retroactive consent to the assignment of the ROW.

At the Federal Court hearing in 2013, the parties agreed that the Minister owed a fiduciary duty to the Band in relation to the assignment. Justice Hughes held that the main issue concerned the nature and extent of that duty. The relevant legislation was section 35 of the Indian Act which concerns lands being taken from Indian reserves for public purposes.

In November 2013, the Federal Court ruled that the respondent Minister does not have an obligation to follow the instructions of the Coldwater Indian Band to refuse consent to the assignment of pipeline easements from Trans Mountain Pipeline to Kinder Morgan. The Court held that the Minister is required to listen in good faith to the concerns of the Band, balance those concerns with the public interest, and negotiate with Kinder Morgan to obtain more favourable terms for the Band. Justice Hughes commented that there seems little basis for refusing to consent to the assignment of the easement for the existing pipeline. However, there is a reasonable argument that the other easement created in the 1950s has expired for non-use, and the Minister could re-negotiate with Kinder Morgan to obtain more favourable terms for the Band.

The November 2013 decision of Mr. Justice Hughes (2013 FC 1138) was summarized in our e-Newsletter of 13 February 2014. The Coldwater Indian Band filed an appeal of this decision, and Kinder Morgan filed a cross-appeal.

The Federal Court of Appeal, in oral reasons, dismissed the Band’s appeal but allowed the cross-appeal brought by Kinder Morgan. The Court of Appeal concluded that the judicial review proceeding was premature.

At the appeal, the Band sought an order declaring that the Minister must follow its direction to withhold consent, and also sought an order of prohibition preventing the Minister from consenting to the assignment of the easements. Kinder Morgan sought an order that the judicial review application be dismissed in its entirety, and argued that the application was premature in that the judge exceeded his jurisdiction in ordering declaratory relief. The Minister agreed with the submission that the judicial review application was premature.

The Court of Appeal held:

We are of the view that the judicial review application is premature and that there is no basis for the Federal Court or for this court to interfere with the administrative process which requires the Minister to decide whether he should consent to the two assignments sought by Kinder Morgan.

The Court is not to interfere with an ongoing administrative process until all adequate remedial recourses in the administrative process had been exhausted, unless there are “exceptional circumstances”. No such exceptional circumstances exist in this case. Concerns about procedural fairness or bias, the presence of an important legal or constitutional issue, or the fact that all parties have consented to early recourse to the courts are not exceptional circumstances allowing parties to bypass an administrative process, as long as that process allows the issues to be raised and an effective remedy to be granted.

Counsel for the Band conceded at the hearing that his client was seeking a remedy akin to a directed verdict in a jury trial, on the basis that the Minister could not, in law, decide the consent issue other than in the way proposed by the Band. Nadon J.A. stated:

In our view, the circumstances put forward by Coldwater to justify its pre-emptive strike are not exceptional circumstances. Further we cannot see any irreparable harm or prejudice arising from having the Minister decide the question which is before him. To this we would add that we are satisfied that the Minister can provide the remedy sought by Coldwater, i.e. that the indentures not be assigned to Kinder Morgan.

The Court further commented that the premature recourse to the Courts in this case has resulted in the types of negative consequences – in the form of costs and delays – that the rule seeks to avoid. If the Minister ultimately makes the decision advocated by the Band, these proceedings would in all probability become moot. If the Minister consents to the assignments, a judicial review application would likely be commenced.

The Court of Appeal held that the chambers judge ought to have refused to entertain this judicial review application and should have allowed the administrative process to take its course. The Band’s appeal was dismissed with costs, and Kinder Morgan’s cross-appeal was allowed with costs.

http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/99838/index.do

Author

Scott Kerwin 
SKerwin@blg.com
604.640.4029

Expertise

Aboriginal Law