Government sued over duty to consult

Confusion over the duty to consult with First Nations groups may leave the provincial government vulnerable to more lawsuits after a junior mining company announced its intention to sue, according to a Toronto lawyer with aboriginal expertise.

Solid Gold Resources Corp. plans to sue the province after it had to suspend exploratory drilling operations on Crown land considered traditional territory by the northern Ontario Wahgoshig First Nation.

Ontario Superior Court Justice Carole Brown’s Jan. 3 decision enjoined Solid Gold from drilling for 120 days after she found the company had failed to consult with the First Nation before starting its operations.

Solid Gold claims that since the Crown bears the ultimate responsibility for any duty to consult, the government is liable for the company’s losses as a result of the suspension. It estimates the losses at more than $100 million.

Ralph Cuervo-Lorens, a partner with Blaney McMurtry LLP who regularly advises clients on aboriginal consultation, says the lawsuit has some foundation.

In its 2004 decision in Haida Nation v. British Columbia (Minister of Forests), the Supreme Court of Canada said the Crown bears legal responsibility for consultation but that it may delegate procedural aspects of the duty to third parties.

“If the duty belongs to the Crown, then there’s a case for saying that they’re responsible if things don’t go well,” says Cuervo-Lorens.

“The company can say these damages — and I have no doubt they have suffered significant damages — are the consequences of the lack of consultation and that the province should compensate them for that. That has merit, I think, and as far as I know hasn’t been dealt with before by the courts.”

The problem in this case, he says, comes in the company’s attitude to the consultation process. Solid Gold staked mining claims in the area as early as 2007.

The province then warned it in 2009 that it should contact the Wahgoshig to consult. The province also offered to facilitate the process.

But no consultation occurred before the company began drilling in the spring of 2011. Shortly after, members of the Wahgoshig discovered a drilling crew and attempted to initiate consultation themselves, according to Brown’s decision. In November 2011, the province again wrote to Solid Gold to insist that consultation occur.

“Not only did Solid Gold, as delegatee of the operational, on-the-ground aspects of the duty to consult regarding its mining exploration activities, fail to consult with WFN; the evidence indicates that it made a concerted, willful effort not to consult, at least until after its flow-through share monies for 2011 had been exhausted,” wrote Brown.

Solid Gold claimed Ontario’s so-called free-entry system under the Mining Act guaranteed its right to exploratory drilling without even engaging the duty to consult despite the province’s view that it had met the threshold.

“In most cases when there’s a dispute about consultation and accommodation, it’s because the company tried and the aboriginal group says it was not enough, which raises the question of what is sufficient consultation,” says Cuervo-Lorens. “That is a hard one to answer.

“But in this case, Solid Gold didn’t even bother to do any. It’s hard logically for them to say that lack of consultation caused all these problems when they didn’t even try. If they had given it even a little bit of a try, then I think they’d be in a much better position.”

Neal Smitheman, the Fasken Martineau DuMoulin LLP partner who represents Solid Gold, says the injunction decision effectively confers a duty to consult on junior exploration companies, an outcome he says “flies in the face” of the case law.

In Haida, the Supreme Court concluded its decision by stating that the Crown’s duty to consult didn’t extend to Weyerhaeuser Co. Ltd., the company involved in the case.

“So if they didn’t have a duty, why does Solid Gold?” Smitheman asks. “Delegation of procedural aspects of the Crown’s duty to consult doesn’t mean that the duty can be simply downloaded to the company.”

Where the duty to consult comes into play, Smitheman sees the process as an exchange of information, overseen by the Crown, between an exploration company that explains its planned sites of operation and a First Nation that outlines its specific concerns.

In the Solid Gold case, Smitheman claims the company has attempted unsuccessfully to engage with the Wahgoshig. He says the First Nation had failed to provide evidence of sacred, burial or culturally sensitive sites.

If the government agreed that studies are necessary to determine whether they exist as part of the consultation and accommodation process, then the province, not the company, should pay for it, says Smitheman.

“We find ourselves in this situation in the position of having to try to prove a negative. It seems like the ramifications of this might be that the junior exploration companies, who don’t have funding available, have an obligation to prove there are no significant sites,” he says.

“This case represents the reality that there’s still confusion out there as to whose duty it is to consult, and what exactly the Crown can delegate,” says Sandra Gogal, a partner at Miller Thomson LLP.

“Delegation is happening across Canada, and there’s no case I’m familiar with where the court says these are appropriate procedural aspects to delegate and these are not.”

Richard King, a partner at Norton Rose Canada LLP, says many of his clients prefer to err on the side of caution when it comes to consultation with First Nations. He notes the issue is always among the most difficult they deal with on development projects.

“It’s not just because it’s new but because it’s so imprecise and undefined,” he says. “It’s not like all the other approvals and permits they’ve got lined up.

You can’t just check a box. The only way you truly know if the aboriginal group is satisfied with consultation is if they say so and agree in some way with you by way of a letter of support or some formal agreement.”

John Vanthof, the NDP MPP who represents the area covered by the Solid Gold dispute at the provincial legislature, says the government’s hands-off approach to the duty to consult has encouraged confusion over the extent to which the Crown can delegate it and increased the chances of disagreements.

“It seems like they would rather just back away, let the combatants fight among themselves, and hope it goes away rather than saying, ‘Here are the rules.’ They’ve never really looked at the big picture and said these are the guidelines that everyone must work within.”

According to Vanthof, the provincial government should have taken a more proactive role when it became clear that Solid Gold was ignoring its requests to consult with the Wahgoshig.

“If I got a letter from the ministry telling me to stop doing something, I would stop. And If I didn’t stop, I’m assuming there would be some type of consequence.

They should have stepped in and stopped them from drilling. The problem cases like this cause is that over the broader picture, they slow development down and risk killing it completely because nobody can trust the system.”

According to Gogal, draft amendments to the Mining Act currently under public consultation could help fill in some of the gaps between the free-entry system and the duty to consult.

Proposed amendments would require permits for drilling in certain cases and force companies to file plans with aboriginal groups as well as the government before the start of any work.

“It’s going to help in bringing more clarity around the roles of the Crown and the proponent, which is really needed,” she says.

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