Costs denied in duty to consult case

Costs denied in duty to consult case
Paul Seaman of Gowling Lafleur Henderson LLP
A Divisional Court in Ontario has declined to award substantial costs to a hydroelectric dam operator and Ontario Power Authority after a protracted review in a duty-to-consult case ended in settlement with a First Nations group.

In 2011, the Grand Council Treaty 3 commenced a judicial review in which it alleged the Ontario Crown had failed to consult and accommodate the Anishinaabe Nation in relation to the issuing of a ministerial directive ordering the OPA to implement a program called the Hydroelectric Contract Initiative.

The Grand Council’s position was that the minister’s directive and other decisions made by the Crown, including the awarding of a contract and consent to a change in control by the OPA in relation to five existing hydroelectric facilities in Treaty 3, triggered the duty to consult. The five facilities in question were operated by H2O Power Limited Partnership and previously owned by Resolute FP Canada Inc. H2O and Resolute applied to become parties to the proceeding, but they were added as interveners instead. The usual rule is that an intervener neither receives nor pays costs.

The matter was scheduled to be heard by a panel of the Divisional Court over a five-day period starting June 8, 2015. On June 5, the Grand Council and the minister reached a negotiated settlement. The terms of settlement provided that the judicial review was to be abandoned by the Grand Council on a without-costs basis, with no admission of liability or wrongdoing by either party.

H2O and OPA — who were not parties to the settlement — sought partial indemnity costs of $335,000 and $450,399.17, respectively, against the Grand Council in respect of the abandoned proceeding. The Grand Council and the minister opposed the awarding of costs to either and, on Dec. 9, 2015, the Divisional Court denied both claims for costs. The court referred to the cost request made on behalf of H2O as “excessive.”

“It suggests third parties who elect to participate are not necessary parties to name in this type of litigation,” says Paul Seaman of Gowling Lafleur Henderson LLP, who was one of three lawyers representing the Grand Council in the case.

Where they elect to participate as interested parties, the decision demonstrates parties may be on the hook for the costs.

“The court is saying they are inclined to apply cost rules in a manner that encourages settlement,” says Seaman. “For many years, the Supreme Court of Canada has commented that these types of issues should be negotiated, not fought about in court. For an aboriginal government to have to pay those types of costs subsequent to successfully settling something would send a very negative message that would disincline parties from settling these types of issues.”

In fact, the court wrote in its decision: “… the award of costs sought by OPA is of a crippling nature against an Aboriginal community of limited means. It would only serve to deter other Aboriginal communities from raising such important constitutional issues and ultimately from settling their disputes with the Crown through negotiations. A costs award would defeat the Supreme Court’s statement that it is through negotiated settlements such as the one reached in this case, that the reconciliation of the pre-existence of aboriginal societies with the sovereignty of the Crown is achieved.”

Seaman says the case was “not a standard judicial review” and had a somewhat “tortured history” going back several years.

The dam owner who was the beneficiary of the contract at issue wasn’t named as a party in the first instance of the review. The two parties named included the minister of Energy and the Ontario Power Authority being the party that carried it out. The dam owner applied to be added as third-party intervener.

In July 2012, H2O was added as intervener but not on the same footing as OPA and the ministry. Once the settlement happened between the Grand Council and the minister, a notice of abandonment was filed.

“The rules provide that when you do that, a respondent — not interveners — are entitled to costs,” says Seaman.

The OPA was named as a respondent and is typically entitled to costs, while H2O was not named but had a substantial direct impact.

David Bursey, partner at Bennett Jones LLP in Vancouver, acted on a similar case in 2009 — Rio Tinto Inc. v. Carrier Sekani — that went to the Supreme Court of Canada. It involved a contract to sell power entered into by B.C. Hydro and Rio Tinto from their facility in B.C. — a smelter and a hydropower facility that supplies the smelter.

“The same kind of argument was made there — because B.C. Hydro is a Crown agent, it should have consulted in the sale of power, and the sale of power extended this and wasn’t accepted by the court,” says Bursey.

Bursey says the case in Ontario is another indication of how the courts prefer to have parties work out the issues in settlement and not litigate.

“The other implication here is for the private interest caught in the middle of the disputes where the Crown authorized OPA and H2O to extend the contracts and approved the arrangements,” he says. “It’s another example of where private industry often has to absorb the costs associated with the duty to consult and accommodate even though it’s a Crown’s obligation to consult. The practical effect is you’re caught in the middle.

“Although the dispute is between ‘nation to nation,’ the impact on the ground is felt by the private interest and quite often the costs of accommodation and consultation are downloaded on to the private interest to try and work it out. In this case, it’s the court downloading the costs,” says Bursey.

Bursey notes it is also interesting that the OPA, which is a Crown agent, sought its costs and was opposed by its own principal.

“OPA on the face of it should have been entitled to costs,” he says. “The amount claimed was considerable, but the court didn’t consider the option of ordering even part of it because it wanted to serve the primary principle of trying to encourage settlement.”

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