Coldwater First Nation v Canada

Background

Kinder Morgan owns and operates a pipeline that crosses the Coldwater Reserve. In 1952 Trans Mountain, a previous corporate owner and operator of that pipeline, applied to the Department of Indian Affairs for a 60 foot wide right-of-way through the Coldwater Reserve and promised compensation, which was approved by a band council resolution and later sanctioned by the Governor-in-Council pursuant to section 35 of the Indian Act. The right-of-way was granted by the 1955 indenture and contained within it a clause that stated that the grantee cannot assign the right granted within the indenture without written consent of the Minister.

Trans Mountain went through a number of amalgamations and name changes over the past six decades. In 2012 the Minister received a request for consent to the assignment of the 1955 indenture to Kinder Morgan. Coldwater was notified of the request and was allowed to submit information relating to the indenture. In 2013 the applicants informed the Minister of their view that the assignment was not in their best interests. In 2014 Kinder Morgan began holding discussions to improve and modernize the terms of indentures for the pipeline and to better define the responsibilities of the parties with many First Nations, including Coldwater. The discussions did not, however, promise any new legal rights to be created or for existing rights to be diminished. The applicants withdrew from the talks and recommended that new appropriate consideration be given to the First Nations as the consideration received in the 1950s was insufficient, while the remaining First Nations approved a modernization process. In 2014 a Protocol and Capacity Agreement was signed between Kinder Morgan and the applicants that established a process to deal with legacy and operational issues of the pipeline and that included funding. Under the agreement Coldwater agreed to refrain from taking any action to challenge the indentures for the term of the agreement. In 2015, however, Coldwater’s band council issued a resolution demanding that Kinder Morgan remove the pipeline and setting a $30,000 per month fee for unauthorized use of their reserve land. By this time the Minister had already approved the assignment of the 1955 indenture to Kinder Morgan.

In 2013 Kinder Morgan applied to the National Energy Board for a Certificate of Public Convenience and Necessity to triple the capacity of the pipeline project. Although this process is separate from the indenture, the applicants have concerns with the future developments of the pipeline and the Court found these concerns to be central to Coldwater’s opposition to the Minister’s consent to the indenture.

Decision

Although there were a number of issues presented, the Court focused its analysis on the Minister’s fiduciary obligations to Coldwater regarding the assignment of the indenture under section 35 of the Indian Act. All parties in this case acknowledged that the Minister owed Coldwater a fiduciary duty in deciding whether to consent to the assignment of the indenture. However, the Minister argued that his fiduciary duty must be varied to take into account the Crown’s contractual obligations to deal with Kinder Morgan in good faith. While the Court recognized the tension between these obligations, it held that the Crown’s contractual obligations to Kinder subordinate to the Crown’s fiduciary duty to Coldwater.  

The Court followed the two-step process for determining the scope of the Minister’s fiduciary duty when expropriating reserve land that was set out by the Supreme Court of Canada in Osoyoos Indian Band v Oliver (Town). The Minister first needed to determine whether the assignment of the indenture was in the public interest and this step could be completed without considering the impact of the assignment on Coldwater. Having determined that the assignment was in the public interest, the Minister then needed to consult with Coldwater to determine its interest in the reserve and determine how that interest could be minimally impaired by the assignment.

The applicants’ argued that the Minister was required to follow Coldwater’s informed direction as fiduciaries are generally required to adhere to beneficiaries’ instructions. However, the Court rejected this submission. While the Court acknowledged that this might have been the case for a decision to surrender reserve land under section 37 of the Indian Act, the Court distinguished the Minister’s decision to consent to the assignment on the basis that there was no requirement for consent under the Act. Sections 35 and 37 of the Indian Act each have their own unique principles.

The Court went on to determine whether the Minister’s fiduciary duty had been fulfilled. As the expropriation of the reserve land was not directly being challenged the Court focused on the assignment of the indenture. The Court accepted that the expropriation of Coldwater’s reserve land in 1953 was in the public interest and held that the Minister’s consent to the assignment of the indenture in 2014 was a continuation of the initial recognition of the public interest in the pipeline. The Court also found that the Minister’s consent to the assignment of the indenture resulted in only minimal impairment of Coldwater’s use and enjoyment of the reserve lands impacted by the right-of-way. The Court held that the 2014 assignment to Kinder Morgan did not increase the impairment of Coldwater’s use of its reserve land since it was a continuation of an already agreed upon and compensated impairment from 1955. The Court found that the Minister was aware that Coldwater was seeing more compensation in addition to what was paid in 1953 but rejected Coldwater’s argument that the Minister was obliged under fiduciary duty to negotiate fresh consideration for the right-of-way. The Court held that the indenture was not defective and the Minister was therefore not obliged to renegotiate its terms for compensation.

The Court also rejected Coldwater’s argument that the Minister should have considered Kinder Morgan’s desire to triple the pipeline’s capacity in consenting to the assignment.