Good corporate governance must take into account Aboriginal rights

Monday, October 21, 2024

The Supreme Court recently refused to hear the appeal in Thomas v Rio Tinto Alcan Inc, 2024 BCCA 62 [Saik’uz]. In Saik’uz, the British Columbia Court of Appeal found that Aboriginal fishing rights were capable of grounding a claim in nuisance against a private entity, but that Rio Tinto Alcan Inc. (“Rio Tinto”) had a complete defence because its actions were authorized by statute.

The Supreme Court’s refusal to hear this appeal was a missed opportunity to advance reconciliation. The Court could have done so by abolishing the statutory authorization defence for infringements of Aboriginal rights and title, thereby allocating a greater share of the risk of liability onto private entities. If the Supreme Court had taken this bold step, it would have increased the likelihood of these claims being settled, either by the private entities themselves or by the Crown under pressure from the private sector. In other words, the Supreme Court missed a valuable opportunity to allocate the risks of liability more efficiently in a way that could have generated more settlements.

Nevertheless, the Supreme Court left open the ability for section 35 rightsholders to sue private parties in tort (and not just the Crown) for breaches of their Aboriginal rights. This creates additional risk for third parties seeking to advance projects that may interfere with the common law rights of section 35 rightsholders. Companies should take this risk into account when they operate in territories where there are Aboriginal rights in play.

Factual Background

Rio Tinto built the Kenney Dam, which had significant adverse impacts on Saik’uz First Nation and Stellat’en First Nation’s (collectively, the “Nechako Nations”) Aboriginal fishing rights and title lands. The Nechako Nations sued Rio Tinto in nuisance for those adverse impacts. Rio Tinto argued that it was not liable because its construction and operation of the dam was authorized by statute. This is the “statutory authorization” defence. The trial judge found the claim to nuisance was made out, but the statutory authority defence was successful at trial. The trial judge made a declaration that the Nechako Nations have an Aboriginal right to fish in the Nechako River and that the provincial and federal governments have an obligation to protect that right.

While the appeal dealt with many issues, it centered around the question of whether Aboriginal rights can ground a claim in nuisance, and whether the statutory authority defence had been made out here and could apply where the authority in question allowed a breach of Aboriginal rights.

Aboriginal rights Can ground private law claims Against Private Entities

The Court of Appeal started its analysis by noting that courts have applied nuisance law to a variety of circumstances before and the novelty of the claim here was not a barrier to the Nechako Nations. It concluded that interests in land short of ownership, including Aboriginal rights, can sustain a claim in nuisance, and that nuisance was made out here.

Statutory Authority Defence

A Narrow Defence

The Court of Appeal agreed with Rio Tinto that, based on the specific facts before it, the statutory authority defence applied. However, the Court of Appeal’s discussion on this point demonstrates that this is a narrow defence.

The statutory authority defence is a two-step defence that requires that: (1) the activity in question is authorized by statute and (2) the nuisance is the inevitable result of exercising that authority. A defendant cannot avoid liability where they can carry out the work in a different way that would not cause the nuisance. While this involves a consideration of the state of the science, “common sense”, and financial realities, it is not enough to show that the selected alternative is less expensive.[1]

Authorization may be Subject to Judicial Intervention Even Where Statutory Authority Defence is Made Out

On appeal, the parties did not challenge the trial judge’s finding that Rio Tinto met the first step of the statutory authority defence. At issue was whether the nuisance was the inevitable result of the operation of the Kenney Dam. The Court of Appeal found that it was.

Nevertheless, the Court of Appeal modified the declaration provided by the trial judge to explicitly recognize that the federal and provincial governments have a fiduciary duty to protect the Nechako Nations’ right to fish by:

• Consulting them when managing the annual water allocation and flow for the Nechako River raises the potential for a novel adverse impact on that right; and
• Ensuring that the Crown’s participation in managing the annual water allocation and flow is consistent with the requirements of section 35 of the Constitution Act, 1982.

This declaration will presumably impact the ongoing operation of the dam.

Supreme Court Leaves Open Availability of Claims AGainst Private Entities, But Misses the Chance to Advance Reconciliation

Saik’uz is a novel decision that finds that section 35 rights are capable of grounding nuisance claims and opens up liability against private entities. Although the Court of Appeal in this instance found the statutory authority defence applied here, this may not always be the case. Where statutory authorizations are not as prescriptive as what was before the Court of Appeal here, section 35 rightsholders may be successful in bringing nuisance claims against private entities for infringements of their  Aboriginal rights. This opens the door to tort claims against non-Crown entities, an important development for enforcing Aboriginal rights.

Private entities engaged in large scale natural resource development projects need to be alert to the implications of this decision. These include:

• Aboriginal rights or title only need to be asserted, and not proven, to ground a claim in nuisance and disclose a reasonable cause of action and survive a motion for summary judgement or motion to strike.[2]
• Tort law is an ever-expanding area of the law and the Court of Appeal in Saik’uz signaled a willingness to apply the principles of tort law to novel situations. Courts have also already recognized that section 35 rights may ground other property torts, including trespass.[3]
• The Court of Appeal explicitly left open the possibility that section 35 rights alone may ground private law claims (i.e. they may not need to be connected to land), which may expand the scope of the kinds of rights that may ground private law claims.
• Even where the statutory authority defence is made out, the statutory authorization at issue may be subject to judicial intervention as was the case in Saik’uz where the Court of Appeal issued a declaration that will presumably impact the operation of the Kenney Dam.

Nonetheless, by leaving open even a narrow version of the statutory authorization defence, the Supreme Court missed the opportunity to fully allocate the risk of tort claims for breaches of Aboriginal rights and title to private entities. As it stands, Saik’uz leaves open the possibility of liability for private entities. However, those risks are tempered by the availability of the statutory authorization defence. The Supreme Court could have taken this as an opportunity to fully abolish the statutory authorization defence for claims in tort for breaches of Aboriginal rights and title, given that those statutory authorizations are breaching constitutionally protected rights. 

This approach would have substantially advanced reconciliation by increasing the likelihood that Aboriginal rights and title claims would be settled. For example, developers, knowing they would bear those risks, would have greater incentives to settle the claims themselves before proceeding with their projects. Alternatively, they would have incentives to push the Crown to settle. In either case, settlement of claims outside of court, something the Supreme Court of Canada has been advocating for over decades, would have become more likely. However, by leaving the statutory authorization defence in place, even in its narrow form, the Court passed up this opportunity to boldly advance reconciliation.

In any event, as a matter of good corporate governance, companies operating in areas where Aboriginal rights or title are asserted ought to take steps to ensure their actions are not interfering with those rights. Otherwise, companies could open themselves up to liability by way of private tort action, depending on the circumstances.

[1] Saik’uz at para 169.

[2] The Court of Appeal in Saik’uz First Nation and Stellat’en First Nation v Rio Tinto Alcan Inc., 2015 BCCA 154 specifically rejected the motion judge’s finding that a nuisance based on asserted but unproven section 35 rights had no reasonable prospect of succeeding on a motion for summary judgement.

[3] For example, in Tolko Industries Ltd v Okanagan Indian Band, 2010 BCSC 24, the court noted that the right to harvest timber  may ground a trespass claim.