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Aboriginal (First Nations) Law and Real Estate Development

By the Commercial Real Estate Group at Clark Wilson LLP        March 6, 2003 

The British Columbia Court of Appeal has recently issued two important decisions concerning Aboriginal (First Nations) law which may impact real estate development in the province. The two related decisions involving the Haida Nation, the B.C. government and Weyerhaeuser Company Limited have created new duties of consultation and accommodation on the part of industry generally (known as Haida No. 1 and Haida No. 2). The duties may now have to be discharged by industry whose lines of business or projects may adversely impact Aboriginal rights. Failure to properly address these duties may ultimately endanger the viability of such lines of business or projects.

What the Law of Consultation was before the Haida No. 1 Case

Where a constitutionally protected Aboriginal right exists or has a reasonable probability of existing (e.g., the right to fish, hunt or trap), that right may be infringed by business activities conducted pursuant to various government approvals such as leases, licenses or permits. If so, the government has the responsibility of justifying the infringement to ensure that its approvals are legally valid.

Fulfilling the "Sparrow test" of justification, formulated by the Supreme Court of Canada (where a federal law unjustifiably infringed Aboriginal fishing rights), involves a suite of factors. A key factor is whether or not the government conducted adequate consultation with Aboriginal peoples whose Aboriginal rights are negatively affected by an activity authorized by a regulation, statute or other form of government approval. If the government conducted adequate consultation, then the justification test was satisfied and activities taking place pursuant to government approvals, while infringing, were legal (subject to satisfying other components of the justification test).

Until early 2002, industry was a passive bystander who, while encouraging the government to fulfill its consultation duties, did not have any similar duty.

The Haida No. 1 Case

Haida No. 1 involved the disputed transfer of a timber forest license, pursuant to the Forest Act, from MacMillan Bloedel to Weyerhaeuser. The Haida Nation argued that prior to such a transfer, the B.C. government had a duty to consult with the Haida people. In February 2002, the Court of Appeal ruled that the government did not discharge its duty to consult. More importantly, however, the Court of Appeal also imparted the duty to consult on Weyerhaeuser. Thus the Crown and Weyerhaeuser were both liable for damages and potentially the loss of the timber license for inadequate consultation.

Weyerhaeuser, to put it mildly, must have been surprised at the decision. The principle of placing constitutionally enshrined government duties onto the shoulders of industry was never raised in the legal proceedings and, in fact, such duties had not previously been recognized by any other Canadian court. Weyerhaeuser and the B.C. government followed what seemed to be the sensible strategy at the time; they requested, and received, another hearing with the Court of Appeal for a reconsideration of the decision. The Court of Appeal reaffirmed its finding in Haida No. 2 in August 2002 with reasons that further entrenched Weyerhaeuser’s duty to consult Aboriginal peoples.

The Haida No. 2 Case

In Haida No. 2 each of the three appeal judges provided written reasons for judgment (2 to 1 in favour of the Haida Nation). The two reasons for judgment in favour are difficult to reconcile as the legal underpinnings used to base the duty of consultation bear no resemblance to one another.

One judge stated that Weyerhaeuser either had an obligation under the Forest Act, or separately under the law of "fiduciaries", a duty to consult the Haida people. In effect, Weyerhaeuser’s fiduciary duty was premised on the fact that where the Crown had inadequately consulted the Haida people, Weyerhaeuser knew or ought to have known of the government’s lack of consultation and, as such, any approval issued by the Crown (in this case the Ministry of Forests) was "clogged", to use legal real estate parlance. Weyerhaeuser was in "knowing receipt" of a timber forest license that was illegally issued to it by the government. It was, in relation to the Haida people, a constructive trustee.

The second judge simply stated that Weyerhaeuser’s duty to consult with Aboriginal peoples arose due to the "particular" circumstances of the case and that Weyerhaeuser’s timber license suffered from a "fundamental legal defect" due to the government’s breach of its duty to consult.

Duty of Accommodation on Industry

While there has been much discussion on the duty of consultation with Aboriginal peoples arising from the Haida cases, industry’s duty to accommodate Aboriginal peoples has received little attention. Again, where the government fails to fulfill its fiduciary obligations, then industry, in effect, steps into the shoes of the government and may be held liable for breach of the duty to accommodate. If industry does not adequately conduct consultation and "endeavour to seek workable accommodations" with Aboriginal peoples, its activities may infringe Aboriginal rights and may be subject to one or more remedies by the courts, including the award of damages (including punitive and aggravated damages).

Legally discharging the duty to accommodate occurs before an infringement of an Aboriginal right (whether or not such right is proven). But just what exactly does accommodation encompass? There are no legal guideposts to assist in such a determination. The only guidance the courts have articulated is that the "strength of the obligation to seek an accommodation will be proportional to the potential soundness of the claim" for Aboriginal rights. Thus, in this judicial vacuum uncertainty exists for industry whose activities require the discharge of the duty of accommodation with Aboriginal peoples.

B.C. Real Estate Development

The duties of consultation imposed on Weyerhaeuser by the Court of Appeal in the Haida No. 1 and Haida No. 2 decisions are directly applicable to all B.C. industries whose activities interfere with or infringe Aboriginal rights. Where activities may result in some form of interference with or infringement of Aboriginal rights, particularly where industry knew or ought to have known that government duties of consultation and accommodation were inadequately discharged, the potential for the scuttling or delaying of development is ever present.

Energy projects involving mineral, coal, oil & natural gas exploration and development as well as "green" energy projects such as micro-hydro, wind and tidal energy developments are all impacted by the two Haida cases. Real estate development involving B.C. Crown land may be similarly affected. Where Crown land is transferred or where leases, licenses, permits or other interests in land are granted by the government, developers should conduct due diligence regarding the requirement of the government to consult and accommodate Aboriginal peoples. Lenders, investors and purchasers may require some form of assurance, or a legal opinion that the duty to consult on a given project has been discharged.

What to Do? Start with a Consultation Checklist

Clark Wilson LLP has posted on its website a consultation checklist for use by natural resources project proponents that is directly applicable to the real estate development community. The checklist reflects the current state of the law and provides practical suggestions to ensure industry meets the requirements of the duty to consult with Aboriginal peoples. The Haida No. 2 decision will likely be heard to the Supreme Court of Canada. If so, a decision from Canada’s highest court would not expected until early or mid 2004. Thus, companies operating in B.C. should establish a strategy to ensure they have considered, and where appropriate, fulfilled the legal duties of consultation and accommodation with Aboriginal peoples.

 

BCRELinks.com is a reference service developed by the Commercial Real Estate group at Clark Wilson LLP. The information and links posted to this website should not be treated by readers as legal advice and ought not be relied upon without further, detailed legal counsel being sought.



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