CITATION: 2274659 Ontario Inc. v. Canada Chrome Corporation, 2014 ONSC 4446
DIVISIONAL COURT FILE NO.: 445/13
DATE: 20140730
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
aston, dambrot and swinton JJ.
B E T W E E N:
2274659 Ontario Inc.
Applicant (Appellant)
- and -
CANADA CHROME CORPORATION
Respondent (Respondent in Appeal)
- and -
MINISTER OF NORTHERN DEVELOPMENT AND MINES
Intervenor
Paul Schabas, Robin D. Linley and Iris Antonios, for the Applicant (Appellant)
Neal Smitheman and Kimberly Potter, for the Respondent (Respondent in Appeal)
John Kelly and Michael Burke, for the Intervenor, Minister of Northern Development and Mines
HEARD at Toronto: June 16 and 17, 2014
Swinton J.:
Overview
[1] 2274659 Ontario Inc. appeals the order of the Mining and Lands Commissioner ("MLC") dated September 10, 2013, dismissing its request for an order pursuant to s. 51 of the Mining Act, R.S.O. 1990, c. M.14 that would have dispensed with the consent of the respondent, Canada Chrome Corporation ("CCC"), to the grant of a 100 meter-wide easement over certain Crown lands subject to unpatented mining claims held by CCC. The appellant seeks the easement in order to allow it to build a road in northern Ontario to service a proposed mine in the Ring of Fire area. CCC wants to build a railway in the same transportation corridor in order to develop its own mineral deposits in that area.
[2] This case raises important issues respecting the interpretation of ss. 50 and 51 of the Mining Act and the extent to which mining claim holders may assert rights over the surface of their claims. It also raises issues with respect to the proper test under s. 51(5) when the MLC decides whether to dispense with the consent of an unpatented mining claim holder to the disposition of surface rights on its mining claims.
[3] For the reasons that follow, I would allow the appeal and set aside the decision of the MLC on the basis that the MLC gave the pertinent sections of the Mining Act an unreasonable interpretation and reached an unreasonable decision in refusing to dispense with CCC's consent in the present case, given the governing law and the evidence before it.
Background
[4] Both parties to this appeal have ownership interests in chromite deposits in the Ring of Fire area of northern Ontario. Chromite ore can be smelted to produce ferrochrome, a critical ingredient in the production of stainless steel. Both parties wish to build a transportation link to these mineral deposits which, at present, are not accessible by road or rail.
[5] The appellant, 2274659 Ontario Inc., is a subsidiary of Cliffs Natural Resources Inc., an international mining and natural resources company. The appellant, Cliffs Natural Resources Inc. and Cliffs' subsidiaries are collectively referred to as "Cliffs" in these reasons.
[6] CCC is a subsidiary of KWG Resources Inc. ("KWG"), a mining exploration company. KWG, in a joint venture with Spider Resources Inc., discovered the Black Daddy chromite deposit in 2008 in the Ring of Fire area. In 2009, KWG approached Cliffs to become a shareholder of KWG for purposes of assisting with the development of the Big Daddy deposit. Pursuant to a shareholder agreement between KWG and Cliffs, the latter acquired a 19.9% interest in KWG, and one of Cliffs' vice-presidents was appointed a director of KWG. Through various corporate transactions, the ownership of the Big Daddy deposit has changed. At present, CCC holds a 30% interest in it, while Cliffs holds the other 70%.
[7] In 2009, CCC staked more than 200 unpatented mining claims along a series of linear sand ridges or eskers from Exton, Ontario, near the CN rail line, and running approximately 340 kilometers north to an area close to the Big Daddy deposit. The claims are not all contiguous, and they do not touch the Big Daddy deposit. The location of the claims was selected because they follow the high ground through an area that mainly consists of swamp or muskeg.
[8] A mining claim is a square or rectangular area of Crown land or Crown mineral rights, usually with an area of 256 hectares, that a licensed prospector marks out through ground staking or map staking (Claim Staking and Recording, O. Reg. 43/11, s. 15(1)(b)). Here, the majority of the CCC claims are 1,600 meters by 1,600 meters.
[9] CCC would like to build a railway along this corridor so that it can develop the Big Daddy deposit. This objective is set out in a letter dated September 23, 2011, in which Frank Smeenk, President and CEO of KWG, stated that KWG had acquired the corridor of mining claims and conducted assessment work on them for the purpose of constructing a railway to exploit the Big Daddy deposit. He also stated, in an affidavit dated May 30, 2012, that the CCC claims are a valuable asset and "a key component of KWG's development of the Big Daddy deposit" (at para. 6). At para. 39 of the affidavit, he stated, "The CCC Claims also provide significant strategic value for KWG/CCC, as a basis for transportation infrastructure to and from the remote Ring of Fire location."
[10] In late 2009 and early 2010, CCC retained consultants to determine the route for its proposed railroad and to undertake geotechnical field investigation to determine the feasibility of a railroad corridor on the claims. The firm of Krech Ojard & Associates, railway engineers, was retained to advise on a route, while Golder Associates drilled almost 800 boreholes along the proposed corridor route to provide geotechnical information. The purpose of the boreholes, which are each about 7 and one half inches in diameter, was described in an affidavit filed by CCC:
(a) to provide geotechnical related data to support the engineering design and construction of embankments, bridges, and related structures; (b) to identify and characterize potential material site prospects; and (c) to generate a pre-feasibility level engineering document, which will enable informed consultations with affected First Nations and all other local and regulatory constituencies, on the feasibility of constructing a railroad.
[11] Over $15 million worth of work has been carried out on the CCC claims. Of that, CCC has filed $8 million worth of work with the Mining Recorder as assessment work under the Mining Act.
[12] Around 2010, Cliffs acquired ownership of the Black Thor chromite deposit, which is nearby the Big Daddy deposit. In order to construct and operate a mine and ore processing facility at Black Thor, Cliffs now wants to build an all season gravel road from its proposed mine site to the CN rail line near the southernmost mining claim of CCC. The road would be approximately 340 kilometers in length and is estimated to cost about $600 million. CCC has estimated the cost of the railway as $2 billion, according to the Agreed Statement of Facts.
[13] Both the proposed road and CCC's proposed railway would follow a pattern of high ground along a series of eskers. Cliffs anticipates 50 to 100 truckloads will travel south each day to transport concentrate along the road.
[14] In 2012 CCC retained an engineering firm, Tetra Tech, to identify critical material resource sites for aggregate and granular fill within the claims – that is, aggregate material that could be used to construct a railway bed. Tetra Tech's report showed that none of the claims affected by the proposed easement had bedrock that could be used as subgrade material for the proposed railway.
[15] Cliffs at one point sought to buy out KWG's interest in the Big Daddy deposit. When that effort failed, Cliffs made an application to the Ministry of Natural Resources pursuant to s. 21 of the Public Lands Act, R.S.O. 1990, c. P.43 for disposition of surface rights over portions of the CCC claims. It sought an easement over Crown lands that would permit it to build a road to the Black Thor deposit with access that will not be exclusive to Cliffs. While the size and location of the easement have changed over time, the current request is for a 100 meter-wide easement over Crown lands, which would accommodate a 10 meter-wide road and an amount on each side for shoulder, slope, drainage, snow removal, sight lines and maintenance facility structures.
[16] The requested easement passes over 108 of the unpatented mining claims staked by CCC. Accordingly, as required by s. 51 of the Mining Act, Cliffs sought the consent of CCC, an unpatented mining claim holder, for the grant of the easement. CCC refused, leading the Minister of Natural Resources to refer Cliffs' application to the MLC, pursuant to s. 51(4) of the Mining Act, for an order dispensing with consent. Pursuant to s. 51(5), the MLC may make an order "based on the merits of the application."
The Issues Raised on this Appeal
[17] The appellant raised four issues in this appeal:
Did the MLC give an unreasonable interpretation to ss. 50 and 51 of the Mining Act in holding that the limitation on a claim holder's surface rights in s. 50(2) does not apply to public lands?
Did the MLC err in law in not requiring the respondent in a s. 51(4) hearing to provide positive evidence of interference with its surface rights?
Did the MLC err in law in requiring the applicant in a s. 51(4) hearing to lead evidence of the "public interest" in its proposed use?
Did the MLC base its decisions on irrelevant considerations, including its perception and characterization of the parties' relationship?
[18] To these issues, I would add the following:
Was the decision to refuse dispensation of consent reasonable, based on the evidence before the MLC?
If the decision reached is unreasonable, what is the appropriate remedy?
The Standard of Review
[19] The MLC is a specialized body that deals with mining issues. In the present case, it was interpreting the Mining Act, a statute with which it has particular familiarity. As well, it was making determinations of mixed fact and law in order to decide whether to dispense with CCC's consent to the application for an easement. The standard of review with respect to such questions is the standard of reasonableness (Ontario (Minister of Transportation) v. 1520658 Ontario Inc., 2011 ONCA 373 at paras. 16-35).
[20] The reasonableness standard requires the reviewing court to consider the reasons of the tribunal for the purpose of determining whether there has been justification, transparency and intelligibility in the decision-making process and whether the decision falls within a range of possible, acceptable outcomes which are defensible, given the facts and applicable law (Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 47).
Did the MLC give an unreasonable interpretation to [ss. 50](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m14/latest/rso-1990-c-m14.html) and[ 51](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m14/latest/rso-1990-c-m14.html) of the [Mining Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m14/latest/rso-1990-c-m14.html) in holding that the limitation on a claim holder's surface rights in [s. 50(2)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m14/latest/rso-1990-c-m14.html) does not apply to public lands?
The Legislative Scheme
[21] The purpose of the Mining Act, as set out in s. 2, is "to encourage prospecting, staking and exploration for the development of mineral resources" in a manner consistent with Aboriginal and treaty rights and to minimize the impact of these activities on public health and safety and the environment.
[22] Ontario operates under a "free entry system", whereby licensed prospectors can obtain mineral rights on a first-come basis by staking claims. Section 27 expressly permits the holder of a prospector's licence to prospect for minerals and stake a claim on Crown lands and on lands where the Crown has reserved the mineral rights.
[23] Sections 50 and 51 of the Mining Act are the key provisions for purposes of this appeal. They are found under the heading "rights of licensee". While those provisions were amended in 2009, the amendments were not in force at the time of the hearing before the MLC, and so the present application was decided on the basis of the law prior to the 2009 amendments.
[24] Subsections 50(1) and (2) set out the rights that come with the staking or the filing of an application for or the recording of a mining claim. A "mining claim" is defined in s. 1 as "a parcel of land, including land under water, that has been staked and recorded in accordance with this Act and the regulations."
[25] Pursuant to s. 50(1), the staking of a claim does not confer any right, title, or interest in the mining claim other than the right to proceed, in accordance with the Act, to perform the assessment work prescribed by the legislation or to obtain a lease from the Crown. Staking confers no right to take or remove any minerals found in the claim.
[26] Subsection 50(2) deals with the extent of the mining claim holder's right to use the surface. Notably, it permits the right to enter and use the part or parts of the surface of land that are "necessary" for the purpose of prospecting and development of the mines, minerals and mining rights "therein." It states:
The holder of a mining claim does not have any right, title or claim to the surface rights of the claim other than the right, subject to the requirements of this Act, to enter upon, use and occupy such part or parts thereof as are necessary for the purpose of prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights therein.
"Surface rights" are defined in s. 1 as "every right in land other than the mining rights."
[27] Subsection 51(1) deals with the priority of the holder of an "unpatented mining claim" to use the surface rights for prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights. An "unpatented claim" is defined in s. 1 as land where there is no patent or lease or other form of Crown grant in effect. Subsection 51(1) reads:
Except as in this Act is otherwise provided, the holder of an unpatented mining claim has the right prior to any subsequent right to the user of the surface rights, except the right to sand, peat and gravel, for prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights.
[28] The rest of s. 51 deals with the process to be used when there is a request for disposition of surface rights under the Public Lands Act. If the holder of an unpatented mining claim does not consent to such a disposition, s. 51(4) provides a mechanism for dispensing with the consent of the unpatented mining claim holder after a reference to and hearing by the MLC.
The MLC's Interpretation of ss. 50 and 51
[29] The MLC held that s. 50(2) of the Mining Act did not apply in the present application, as it addresses different circumstances from s. 51. Subsection 50(2) was said to apply only to mining claims staked on land where the surface rights are privately held. The MLC concluded that s. 50(2) "does not establish purposes for which the surface of unpatented mining claims may be used." Subsection 51(1), in contrast, applies to surface rights on Crown land, where the surface rights remain in the Crown (Reasons, pp. 29-32).
[30] The MLC noted that the surface rights in s. 50(2) were limited, in that the use of the surface rights must be necessary for the purpose of prospecting and development of minerals found "therein." In contrast, s. 51(1) does not contain the word "therein", and this was found to be a deliberate legislative choice. In the MLC's view (Reasons at p. 32):
Where there is no private owner of the surface to contend with, the Act establishes a priority in favour of the unpatented mining claim holder in respect of the use of the surface. Section 51 gives a prior right to surface use to the claim holder with respect to all activities covered by the Act – from the point of prospecting to development and operation of a mine.
[31] The MLC also stated that "s. 50(2) does not say what use can be made of the surface of an unpatented mining claim", nor does it form part of the test to determine whether there is a conflict between the unpatented mining claim holder and another proposed user of the surface rights (Reasons, pp. 32, 34).
[32] The MLC emphasized that s. 51 is the applicable section in the present case. The MLC accepted that CCC's primary objective with respect to its claims was to develop the Big Daddy deposit in the Ring of Fire, and that it staked the claims for two purposes: to secure its right to use the surface for a transportation route and to develop any resource below the surface (Reasons, p. 33).
[33] The MLC rejected Cliffs' argument that the use of the surface for a railway to another deposit was not a permitted use of the surface rights, because the activity was not related to exploration or development of the minerals on the claim. The MLC stated a number of times that the restriction in s. 50(2) did not create or impose a limitation on the use of the surface of an unpatented mining claim and concluded, "The tribunal also does not accept Cliffs' interpretation of the legislation insofar as Cliffs' counsel stated that a railway would not be an acceptable use to which the surface could be put" (Reasons, p. 34).
Analysis
[34] Cliffs, with the support of the intervenor, the Minister of Northern Development and Mines of Ontario, submits that the MLC adopted an unreasonable interpretation of ss. 50 and 51 of the Mining Act, because the limitation on a mining claim holder's use of surface rights found in s. 50(2) applies to claims on both public and private lands and applies to unpatented mining claim holders.
[35] CCC conceded that part of the MLC analysis was flawed, as unpatented mining claims are a subset of mining claims. Nevertheless, CCC argued that the interpretation of s. 51(1) was reasonable, and, in any event, the ultimate decision to reject Cliffs' application was reasonable, given the evidence before the MLC.
[36] In this section of my reasons, I will deal with the issue of statutory interpretation and later turn to the overall reasonableness of the MLC's decision. I start with the observation that the MLC did not adopt the conventional approach to statutory interpretation - that is, the MLC did not look, in a systematic way, at the ordinary grammatical meaning of the words of the statute, the sense of the words in the context of the entire Act, the object of the Act and the intention of the Legislature (see Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27 at p.41).
[37] The MLC concluded that s. 50(2) applies only to mining claims where the surface rights are privately held, and the provision does not address the use that can be made of the surface of an unpatented mining claim. In other words, the MLC made a public/private distinction with respect to the surface rights of mining claim holders, dependent upon the status of the surface rights of the land that is staked as a mining claim. If the surface rights are privately held, s. 50(2) applies. If the surface rights are held by the Crown, s. 51(1) applies.
[38] In my view, the MLC's interpretation is inconsistent with the language of s. 50(2), particularly when read in context with other provisions in the Act dealing with mining claims, as well as the purpose of s. 51(1). I note that counsel for CCC did not advocate the interpretation of ss. 50(2) and 51(1) adopted by the MLC in its written submissions to the MLC.
[39] The words of s. 50(2) do not limit the application of the subsection to privately owned surface rights. Section 50 is found under the heading "rights of licensee", with the term "licensee" defined in s. 1 as a person holding a prospector's licence under the Act. The section sets out the rights that a person has on staking a claim or filing an application for or recording a mining claim, including the limited right to use the surface. Had the Legislature meant to limit s. 50(2) to mining claims where surface rights are privately held, one would have expected express words to that effect.
[40] A "mining claim" is an "unpatented mining claim" until the claim holder fulfills the requirements of the Act, including the performance of sufficient units of assessment work, and receives a "patent" of the mining claim. Currently, the applicable form of patent is usually a lease, whether of mining rights alone or of mining and surface rights.
[41] When s. 50 is read as a whole, the language suggests that the section applies to all mining claims. This would include unpatented mining claims, which are a subset of mining claims. For example, s. 50(3) expressly states that the holder of an unpatented mining claim is not liable for assessment or taxation for municipal or school purposes in respect to that claim.
[42] An examination of the broader context of the Mining Act confirms that when the term "mining claim" is used elsewhere in the Act, unpatented claims are a subset of mining claims. Otherwise, as the appellant and the Minister of Northern Development and Mines have shown, the other provisions would not make sense. For example, s. 18 states that a licence is required to stake out and record mining claims. Sections 27 and 28 prescribe where a prospector may stake a mining claim, while s. 38 sets out how a mining claim is to be staked. "Mining claim" must include an unpatented mining claim in those sections, just as the term in s. 50(2) includes an unpatented claim.
[43] What then is the role of s. 51? Section 51 appears to have two functions. First, s. 51(1) grants a limited priority to the unpatented mining claim holder to use the surface (except the right to sand, peat and gravel) over other subsequent rights of others to use the surface. That priority is for the purpose of prospecting and exploring and developing mines, minerals and mining rights. Second, the following subsections provide a dispute resolution mechanism if there are competing claims to the use of the surface rights on Crown lands.
[44] By its language, s. 51(1) does not confer additional surface rights, beyond what was conferred in s. 50(2) of the Act, on those who hold unpatented mining claims on Crown lands. Indeed, an unpatented mining claim may exist on land where the surface rights are privately held.
[45] Rather, s. 51(1) is dealing with priority rights with respect to the surface based on the status of the claim holder – that is, for certain purposes, an unpatented mining claim holder obtains a priority over subsequent users of the surface. Once the mining claim is patented, the surface rights will be determined by the patent itself, not by s. 51 (see ss. 81(4) and 89(1) of the Mining Act). However, s. 51(1) confers priority to the unpatented mining claim holder only to use those limited surface rights that were accorded by s. 50(2).
[46] The differing purposes of ss. 50(2) and 51(1) explain the lack of reference to "therein" in s. 51(1), an omission that was very important for the MLC in its decision. The extent of the surface rights of a mining claim holder (including an unpatented mining claim holder) is found in s. 50(2), which includes the limitation on those surface rights.
[47] Indeed, the MLC's conclusion that s. 50(2) is limited to surface rights in privately held lands is inconsistent with its own jurisprudence. For example, in Roy v. McCombe, File No. MA014-00, the MLC stated (at p. 22):
In the case of Crown lands, it does not necessarily follow that surface rights uses cannot co-exist with mining rights; the holder has no right title or claim to the surface of the claim other than those enumerated in subsection 50(2).
[48] This statement from Roy is inconsistent with the following statement at pp. 31-32 of the present reasons: "s. 50(2) contemplates those situations where 'the holder of a mining claim' has to assert a right to access materials in the ground and has to cross a privately owned surface in order to do so."
[49] In interpreting legislation, a court should also look to the objective of the Act and the intention of the Legislature. In the present case, all parties relied on the Report of the Public Lands Investigation Committee, 1959 (dated 1961) to show the purpose behind the present s. 51. The report described the situation prior to 1957, when a mining claim holder could obtain both mining rights and surface rights by simply staking a mining claim and performing the prescribed assessment work, and there was concern that this could lead to public land being alienated from the Crown forever. In 1957, s. 100a (later s. 104) of the Mining Act was amended to allow the Crown to reserve, in a patent or lease, all surface rights considered necessary for any purpose other than the mineral industry which were not essential to the development of the mines, minerals and mining rights (Report, pp. 1-2). At the same time, s. 66(1a), the predecessor to the current s. 50(2), was added to the Act (see Mining Amendment Act, 1957, S.O. 1957, c. 71, ss. 5, 9). Its underlying purpose was to encourage multiple use of surface rights on mining lands (Report, p. 4).
[50] Because of concerns of the mining industry about the difficulty of determining what portion of surface rights would be required for mining purposes, the Public Lands Investigation Committee was established to consider how to deal with multiple claims to use Crown lands. The Committee stated its commitment to the multiple use principle (Report at p. 5):
… it is the opinion of the Committee that some policy covering surface rights on potentially valuable mining lands should be established that would protect the public interest and at the same time protect the claim holder until he has had full opportunity to explore his ground thoroughly, and thereby avoid further hazards to his efforts in bringing in new mineral deposits.
[51] The Committee stated its objective in the following words (Report, pp. 6-7):
It has been the constant objective of the Committee to devise some means of granting mining lands which will not hinder the industry and at the same time prevent large areas of the Province from being alienated with no development or exploration other than the performance of sufficient work to enable the claim holder to obtain patent.
[52] Consequently, the Committee recommended the recognition of "the prior right of a mining claim holder or the lessee or owner of the mining rights to use the surface rights for mining purposes" and recommended a mechanism for resolving disputes among competing uses of the surface rights. These recommendations were enacted in an amendment to the Mining Act (S.O. 1962-63, c. 84, s. 17) which added then s. 68a. The substance of that provision, as amended, is now found in s. 51(1) of the Act.
[53] Thus, the purpose of s. 51(1) was to give priority to mining claim holders to use the surface of a claim, but, as well, to provide a mechanism to protect the principle of multiple use. The mining use to be protected was the exploration and development of the staked claim, so that the claim holder could "explore his ground thoroughly, and thereby avoid further hazards to his efforts in bringing in new mineral deposits", to use the words of the Committee quoted above. However, the effect of the MLC's interpretation of ss. 50 and 51 is to grant surface rights to unpatented mining claim holders on Crown land that can be exercised for any purpose that can be tied to mines, minerals or mining rights anywhere. According to this interpretation, the uses need not be restricted to the exploration or development of the particular claim at issue.
[54] The MLC's interpretation of ss. 50 and 51 is not consistent with the words of the Act, the scheme of the legislation or the intention of the Legislature, and, indeed it seriously undermines the multiple use principle. Sections 50 and 51 must be read together in order to give full effect to the Legislature's intention to promote the multiple uses of Crown land, as well as to give effect to the opening words of s. 51(1): "[e]xcept as in this Act is otherwise provided, the holder of an unpatented mining claim has the right prior to any subsequent right to the user of the surface rights..." (emphasis added). That opening phrase ought to be read as including the limitations on the surface rights of a mining claim holder, including an unpatented mining claim holder, found in s. 50(2) of the Act.
[55] Thus, there is no restriction in s. 51(1) to mineral prospecting and exploration "therein", meaning the claims themselves, because the source of the mining claim holder's rights to use the surface is found in s. 50(2). Subsection 51(1) is dealing with priorities. It gives priority to an unpatented mining claim holder to use the surface rights recognized in s. 50(2) in relation to subsequent users. That priority is to allow exploration and development of the particular mining claim that the unpatented claim holder seeks to develop.
[56] In conclusion, the MLC adopted an unreasonable interpretation of s. 50(2) when it held that the restrictions on surface rights found in s. 50(2) did not apply to unpatented mining claims on Crown land. Consequently, its interpretation of s. 51(1), as conferring broader surface rights to unpatented mining claim holders on Crown lands, was also unreasonable and unjustified by the language of the Act.
Did the MLC err in law in not requiring the respondent in a s. 51(4) hearing to provide positive evidence of interference with its surface rights?
[57] Cliffs argues that the MLC erred in law by not imposing a burden of proof on CCC, as the respondent in the s. 51(4) hearing, to provide positive evidence that the easement for a road would interfere with its surface rights. Cliffs argues that there is a presumption in favour of multiple use of Crown lands, and CCC as the respondent has the burden of proving that the multiple use principle should not be applied.
[58] CCC argues that there is no such presumption of multiple use. Rather, there is an evidentiary burden on both applicant and respondent to produce evidence, and it is the role of the MLC to balance the competing interests and decide whether both uses can co-exist.
[59] The Minister did not submit that there was a presumption of multiple use. However, the Minister submitted that the inherent public interest in the multiple use principle, promoting shared uses of public lands, is not served unless the respondent in s. 51(4) applications is required to demonstrate actual or probable impacts to interests under the Mining Act that are material or beyond the de minimis range, and which cannot be reasonably addressed through the MLC's order. The Minister argued that the decision adopts a test that is incompatible with the purpose of s. 51 and inconsistent with past decisions of the MLC.
The MLC Decision
[60] The MLC phrased the question before it as whether the surface rights should be "shared" with Cliffs. It was alive to the fact there is a public interest in recognizing multiple uses, describing the application of the "so-called multiple use principle" as a "balancing act" (Reasons, p. 35). The MLC held that there was an onus on both Cliffs and CCC "to clearly indicate what their interests in the surface are and how sharing or not sharing surface rights would affect those interests" (p. 36).
[61] However, the MLC does not clearly articulate the test it was applying in the present case. At p. 36 of its reasons, it stated, "The multiple use principle involves a balancing of interests if such can be accommodated without affecting the claim holder's rights under the Act" (emphasis added). It continued, relying on past decisions, "it is clear that application of the multiple use principle should not result in the claim holder's interest in the surface being negatively affected, diminished, or cancelled out entirely" (emphasis added). The MLC concluded that the granting of an easement for a road "will have a negative impact on the development of the mining claims" (emphasis added) (p. 37).
Analysis
[62] I see no legal error on the part of the MLC in holding that each party – the applicant and the unpatented mining claim holder – has an evidentiary onus in an application under s. 51(4). Cliffs, as applicant, had an onus to show the nature of its proposed use, location and possible impact on the lands that were subject to the claims, as the MLC stated. Similarly, CCC had an evidentiary onus to show an interference with its use of the surface rights accorded to it by the Act – that is, it had to show interference with its efforts to explore and develop the minerals and mineral rights on the mining claims. There is no "presumption" of the principle of multiple use, as Cliffs argued.
[63] That said, it is unclear what test the MLC applied in this case and what evidence it relied on to find an interference with CCC's surface rights that could not be accommodated.
[64] Past cases decided by the MLC have looked for evidence of interference with the actual or proposed use of the mining claims for the purposes permitted under the Act – that is, exploration and development of a particular mining claim. The cases have also considered the extent of the interference, looking for something beyond a de minimis impact. As well, the MLC has considered whether accommodation of the two uses is possible. This is illustrated by the following quotation from Ontario Hydro v. Nahanni Mines Limited, Appeal No. MA 026-92 at p. 9:
To defend an application for release of surface rights, the respondent must show that the granting of the release would interfere with its exploration or extraction of minerals or other activity on the Mining Claims.
[65] Leaving aside the treatment of evidence respecting exploration and development activity on the claims, which I will address later in these reasons, it is evident that the MLC based its decision, in part, on the proposed road's interference with the CCC railway project. In other words, the MLC took into account interference with CCC's proposed use of the mining claims for the purpose of building a railway to service the deposits at Big Daddy, a mineral deposit that is not on these claims nor contiguous to them. For example, the MLC voiced concern about placing an easement (and a road) over the borehole lines. This would "interfere with development of the claims under the Mining Act as it is clear to the tribunal that the line depicts the best place to locate either a road or a railroad." Later the MLC stated, "Regardless of whether it is right or wrong for CCC to build a railway over the claims, the tribunal finds that CCC's ability to access the feature would be negatively affected" (p. 42). The MLC also stated that there had been little useful evidence to allow it to conclude that both a railway and road could be built on the sand ridge in issue.
[66] Subsection 51(1) gives priority to the claim holder to use the surface rights to explore and exploit minerals on the claims. The proposed railway is not planned in order to develop the subject mining claims, but rather to provide a transportation route to allow possible development of a deposit far to the north and not included in these claims. Therefore, it was unreasonable for the MLC to have considered whether Cliffs' proposed easement to build a road would interfere with CCC's plan to build a railway for development in the Ring of Fire. CCC could not claim priority for that project under s. 51(1).
[67] There was some suggestion in argument that the definition of a "mine" in s. 1of the Act includes "(b) all ways, works, machinery, plant, buildings and premises below or above the ground relating to or used in connection with the activity referred to in clause (a)," and these words can include a railway. However, clause (a) describes "any opening or excavation in, or working of, the ground for the purpose of winning any mineral or mineral bearing substance". The proposed railway here is not to be used in connection with extracting any minerals from the claims themselves and is not a use for which CCC can claim priority under s. 51(1).
Did the MLC err in law in requiring the applicant in a s. 51(4) hearing to lead evidence of the "public interest" in its proposed use?
[68] The MLC held that there was no public interest to Cliffs' application, since Cliffs was acting to advance its own corporate goals. The MLC cited an earlier decision, The Improvement District of Gauthier v. Egg (1987), 7 M.C.C. 281, for the proposition that the public interest is an "essential aspect of the multiple use concept" (Reasons, p. 41).
[69] In its reasons, the MLC lamented the fact that no provincial representative appeared before it to testify as to the provincial or public interest in Cliffs' road project. Ultimately, the MLC concluded (at p. 42),
This is not a case where there is a public interest element for the tribunal to consider. What is before this tribunal is no more than a simple corporate fight and, as between the two corporations, the law is clear; the application must fail.
[70] Cliffs and the Minister of Northern Development and Mines submit that the MLC erred in law in requiring proof of a public interest in the particular development. It is noteworthy that CCC did not try to defend this aspect of the MLC's decision, conceding that multiple use of Crown land is in the public interest.
[71] Indeed, earlier in its reasons, the MLC had made reference to the public interest in recognizing multiple uses, as set out in the Public Lands Investigation Committee's 1961 report (see p. 35 of the Reasons).
[72] The MLC erred when it stated that its earlier decisions, Egg (above) and Kamiscotia Ski Resorts Limited v. Lost Treasure Resources Ltd. (1984), 6 M.C.C. 460, required a public interest in the applicant's use. Indeed, the quote from Egg in the MLC's reasons stops too short. What the Egg decision said (at p. 286) is the following:
The public interest in the use and management of a municipal park is an essential aspect of the multiple use concept and in the view of this tribunal should be given priority where there is a dearth of evidence to establish any future expectation of need of exclusive use of the surface rights of the part of the mining claim in issue.
[73] Nor does the decision in Kamiscotia turn on the public interest nature of the proposed use. Rather the case turned on the failure of the mining claim holder to lead any evidence as to "the nature of the mineral potential of the mining claim or the methods of exploration or the compatibility or otherwise of the proposed use of the surface rights" (at p. 462). Given the lack of evidence, the MLC concluded there would be "no serious interference with the exploration program" of the mining claim holder.
[74] Moreover, in the present case, the MLC ignored other decisions where the applicant sought the use of surface rights for a private corporate use – for example, the construction of a septic waste disposal site in Roy (above) and transmission lines in Northland Powers v. Labine, MA 011-95 and Ontario Hydro (above). In these cases, the MLC asked whether the release of the surface rights sought would interfere with the exploration or extraction of minerals or other activity on the mining claims. The focus was on the conflicting uses, not the public interest nature of the proposed use.
[75] The Minister also raises a concern about the MLC's criticism of the failure of provincial officials to testify. The legislation does not require the Ministry to provide evidence of the public interest. Moreover, in a case like the present, where the application for an easement is still to be determined under the Public Lands Act, officials from the Ministry would be placed in a precarious position if they participated in a s. 51(4) hearing. Were they to enter into a discussion of the benefits of the road versus the railroad, they might well give the appearance of having pre-judged the application for an easement, where public interest will be the central issue.
[76] The MLC's task was to determine whether, given the public interest in multiple use of Crown lands, the road easement proposed by Cliffs would interfere with CCC's ability to explore and develop the minerals on the mining claims it had staked. It unreasonably concluded that there had to be a public interest in the proposed use beyond the public interest in multiple uses of Crown land.
Was the decision to refuse dispensation of consent reasonable, based on the evidence before the MLC?
The parties' positions
[77] This brings me to the question whether the decision of the MLC was reasonable, based on the evidence. CCC argues that even if the MLC made errors in law in its interpretation of ss. 50(2) and 51(1) of the Mining Act and in its appreciation of the meaning of public interest in a s. 51(4) hearing, the decision was, nevertheless, reasonable, given the evidence of interference with CCC's interests. CCC argues that the MLC found that Cliffs' proposed road would interfere with CCC's use of the surface of the claims for mining activities within the claims themselves – that is, there was interference with the more limited surface rights set out in s. 50(2) sufficient to warrant refusing the application.
[78] The Minister took no position on the merits of the decision, in particular the treatment of the evidence before the MLC.
[79] Cliffs argues that the decision was unreasonable, as there was no evidence of interference with mining activities on the claims or, if there was any interference, no suggestion that the interests of CCC could not be accommodated.
The MLC findings
[80] The MLC made a number of findings:
Placing the easement along the borehole lines which have been drilled would lead to interference with any work to be done by CCC under the Mining Act.
There was no evidence that further assessment work would not be done in the future.
"Placing an easement (and the resulting road) over [the borehole] line would interfere with the development of the claims under the Mining Act as it is clear to the tribunal that the line depicts the best place to locate either a road or a railroad. It follows that the line likely also depicts the best place to move exploration or other mining equipment to assist in the development of the claims themselves."
There was not "enough or, indeed any evidence" that the road and railroad could co-exist.
Attempts by CCC to work its claims along the esker will be hampered or curtailed by the existence of a road.
[81] As noted, CCC had filed $8 million worth of qualifying assessment work on its claims, exclusive of work exploring the possible railway. However, the MLC did not engage in a detailed examination of the past and proposed mining exploration and development activities of CCC, as in the earlier cases decided by the MLC and cited earlier in my reasons. Nor did it ever consider whether the easement and such mining activity on the claims could be accommodated in some way.
Analysis
[82] In determining whether the MLC's decision is reasonable, it is necessary to consider the evidence with respect to interference with the exploration for minerals and mining activity on the claims. As I have said, the fact that there might be interference with CCC's proposed railway to develop the Big Daddy project north of the corridor of mining claims is not a relevant consideration in the s. 51(4) hearing. CCC has a priority, against subsequent users, to use the surface rights for exploration and development of the minerals in the particular mining claim, not to use the claims for a railway to a mineral deposit that is hundreds of kilometers from some of these claims. To the extent that the MLC considered the incompatibility of a road and a railway, it was unreasonable for it to do so, for that was not its task. Moreover, it was not the argument made by CCC before it. CCC's written submissions make it clear that it rested its case for dismissal of the Cliffs' application on the extent of interference with CCC's mining of consolidated aggregate and its exploration for diamonds and other minerals on the claims.
[83] With respect to consolidated aggregate, CCC argued before the MLC and before this Court that it will continue to explore for the presence of consolidated aggregate (bedrock) on the claims, with the plan to use that aggregate in the building of the proposed railway.
[84] The evidence is clear that Cliffs is seeking permits under the Aggregate Resources Act, R.S.O. 1990, c. A.8 to allow it to explore and ultimately use sand and gravel on the claims in building a road. CCC as a surface rights holder has no priority to sand and gravel, which are specifically excluded from the priority for surface rights found in s. 51(1) of the Mining Act.
[85] With respect to consolidated aggregate, Cliffs' witnesses testified that they would not be seeking to use bedrock found on the claims to build the road. In any event, an easement would not allow it the right to take minerals, such as bedrock, from the ground.
[86] With respect to CCC's argument that there will be interference with its use of the consolidated aggregate, the evidence does not reasonably support a finding of interference, and no clear finding of such interference was made by the MLC. First, there is no evidence that CCC has current plans to extract the aggregate, including bedrock. The railroad project can only be described as speculative (although the MLC did not address this point). CCC does not have the funds for the railway construction, estimated at $1.6 billion or more. Moreover, if CCC seeks to build the railway in order to exploit the Big Daddy deposit, it has no present hope of developing that deposit, as Cliffs is a majority owner of the deposit, and Cliffs prefers to develop the Black Thor deposit. Therefore, CCC's plan to build a railroad is unrealistic, and accordingly, the likelihood of CCC exploiting the bedrock is speculative at best.
[87] As well, CCC's own evidence shows that there is no available bedrock in the CCC claims that the road would cross. CCC retained an engineering firm, Tetra Tech, in 2012 to "identify critical material resource sites for aggregate and granular fill" within the claims. The report produced shows that none of the claims crossed by the proposed road had rock that could be used as subgrade material for the proposed railway (see the Hartmann evidence in the record). Despite finding interference with the mining activities, the MLC never addressed the evidence with respect to consolidated aggregate on the claims.
[88] CCC asserted that the road would cover CCC's boreholes, and this would "sterilize" the development of the aggregate in the claim. The MLC concluded that "any attempt to develop the claims would have to make use of the borehole line", and this would be the best place to move equipment to assist in the development of the claims. There is no evidence that supports the conclusion that development of the mining claims depends on use of the borehole lines, which, in any event, take up a very small part of the surface of the claim. They have been drilled and the samples have been available for sampling.
[89] Moreover, the MLC does not explain why it concluded that the road, if built, would hamper, rather than assist in access to the mining claims. One would expect the presence of a road to facilitate access to these claims for the purpose of moving equipment and people.
[90] With respect to future testing for other minerals, the evidence is that the CCC claims are not yet known to contain a commercially proven deposit of minerals or diamonds. CCC and Debut Diamonds (a formerly owned subsidiary of KWG that is now publicly traded) have been exploring the CCC claims, looking for kimberlite indicator minerals and other base metals. There is no evidence that any mineral deposits have been discovered on the claims. Rather, the evidence shows that the analysis of material from the claims may show the likelihood of mineral deposits "up ice" - that is, in the lower James Bay lowlands outside CCC's claims. Accordingly, there was no basis in the evidence for the MLC to conclude that there would be interference with mining exploration or development of minerals such as these on the claims themselves.
The reasonableness of the decision
[91] Earlier in these reasons, I made reference to the passage in Dunsmuir stating that a reviewing court looks for justification, transparency and intelligibility in the decision-making process. In the present case, the MLC's reasons do not satisfactorily explain and justify its decision, both with respect to the applicable legal principles and the treatment of the evidence.
[92] First, the MLC gave an unreasonable interpretation to ss. 50(2) and 51(1) of the Mining Act, with the consequence that it failed to keep in mind the restrictive nature of the rights of unpatented mining claim holders to use the surface of the mining claims. This erroneous interpretation affected its decision-making process, leading it to inappropriately consider whether the proposed road would interfere with activities of CCC that included building a railway to service a mineral deposit outside the claims and not even contiguous to them.
[93] Second, the MLC erred in its application of s. 51(4) of the Mining Act when it found that an applicant seeking to dispense with the consent of the unpatented mining claim holder to the use of surface rights must prove its proposed use is in the public interest. This unreasonable interpretation appears to have affected the decision.
[94] Third, the MLC never articulated the test it was applying under s. 51(4) of the Mining Act. One does not know if any impact, no matter how minor, is adjudged to be sufficient to dismiss the application. Certainly, the words used by the MLC sometimes suggest that the impact need only be minimal. Such an interpretation would be unreasonable, as it would undermine the multiple use principle intended by the Legislature. The multiple use principle requires an assessment of the degree of actual or probable interference with exploration and development activity respecting minerals on the claims. Past decisions of the MLC indicate that the interference must be more than minimal. As well, the multiple use principle requires a consideration of the possibility of accommodation of both uses. However, the MLC never discusses the possibility of accommodation of the two uses on any or all of the CCC claims or Cliffs' offer to accommodate permitted exploration and development activity, if possible.
[95] Fourth, the MLC inappropriately accepted that CCC's desire to build a railway was a legitimate use of the surface rights on the claims for purpose of determining priority in s. 51(1). For example, it found that it was "unreasonable to expect CCC to accommodate the placement of an easement on the basis that there is enough room for both parties to build their own separate infrastructures" (Reasons, p. 42). This interpretation ignores the restriction on the surface rights of a claim holder in s. 50(2) of the Act. The priority of surface rights that CCC acquired does not grant a priority of surface rights at large just because it wishes to build a railway to service a mine elsewhere.
[96] Fifth, the focus of the MLC's analysis should have been the proposed exploration and mining activity on the CCC claims. It should have considered the evidence of actual and proposed activity - whether for consolidated aggregate or diamonds and base metals - and assessed the actual or probable impact of the proposed road on those activities in the claims. It did not engage with the evidence and make the necessary findings of fact respecting interference and the magnitude of the interference.
[97] Given the unreasonable interpretations of the legislative provisions and the failure to engage with the evidence - or lack of evidence - of interference with actual or proposed mining activity to exploit the minerals in the claims, the MLC decision is not reasonable. Accordingly, the appeal must be allowed, and the decision to dismiss Cliffs' application must be set aside.
What is the appropriate remedy?
[98] Were the appeal to be allowed, Cliffs asked that this Court substitute its decision for that of the MLC. Section 133 of the Mining Act does not restrict the orders that may be made on an appeal, and therefore, ss. 134(1)(a) and 134(4)(a) of the Courts of Justice Act, R.S.O. 1990, c. C.43 permit this Court to may make an order or decision that the MLC could have made and that the Court considers just.
[99] When a court overturns the decision of an administrative tribunal, the usual remedy is to remit the matter for reconsideration by the tribunal, perhaps differently constituted. However, in exceptional circumstances the court may substitute its decision for that of the tribunal. The Court of Appeal gave examples of exceptional circumstances in Stetler v. Ontario Flue-Cured Tobacco Growers' Marketing Board, 2009 ONCA 234 at para. 42: "where remitting the case would be 'pointless', where the tribunal is no longer 'fit to act', and cases where, 'in light of the circumstances and the evidence in the record, only one interpretation or solution is possible'."
[100] In the present case, there is some difficulty in remitting the matter to the MLC, given the composition of the MLC and comments made by the tribunal in its decision. The MLC has three members, two of whom participated in this matter: the Mining and Lands Commissioner and the Deputy Mining and Lands Commissioner. In the course of the reasons, the MLC expressed frustration with Cliffs on a number of occasions. For example, the MLC disapproved of Cliffs' conduct in supporting CCC's staking of the claims in order to preserve a transportation corridor and then arguing this was not a permitted use of the mining claims. It also commented on Cliffs' decision to change tactics and proceed with the road and the impact of that change of plans on CCC. Given the comments, fairness requires that the matter proceed before a differently constituted tribunal, although it appears that only one commissioner may be able to hear it.
[101] However, Cliffs argues that there is no reason to send the matter back because the evidence and law, properly considered, can lead to only one outcome.
[102] Exercising the discretion to decide the issue of whether to dispose with CCC's consent to Cliffs' easement application, rather than remitting the issue to the MLC, engages the Court in a more extensive examination of the evidence than is usual on appeal. It also bypasses the expertise of the MLC.
[103] Though these considerations militate against our deciding the ultimate issue, I accept Cliffs' submission that a more narrow focus on the relevant evidence allows us to undertake this approach, particularly given the other difficulties in remitting the matter to the MLC already noted. I would add that the issue being decided under s. 51(4) of the Mining Act does not deprive CCC of its ability at the next stage to oppose Cliffs' easement application or to ask for conditions that would protect its legitimate interests in its mining claims.
[104] The focus of the MLC inquiry should have been the evidence of interference with actual or potential mining activities by CCC on its claims. If there was some interference of significance, the MLC should have considered whether there could be accommodation, so as to permit multiple use of Crown lands.
[105] As outlined earlier, CCC argues that its ability to use the consolidated aggregate from the claims will be interfered with if Cliffs builds a road. However, there is no evidence that Cliffs will seek to use consolidated aggregate from the CCC claims to build the road.
[106] CCC asserts that it will be seeking to use the consolidated aggregate for purposes of building the railway. There are two problems with its argument that the road easement will cause interference with its plans. First, there is no basis in the evidence to conclude that the railway is likely to be built. KWG, the parent of CCC, has no funds to do it. To the extent that KWG seeks to develop the railway to exploit the Big Daddy deposit, it has no ability to require the development of that deposit, given its minority ownership position. Thus, the plan to build a railway is highly speculative, with the result that the plan to use the consolidated aggregate on the claims for its construction is also highly speculative. Second, the evidence of Tetra Tech, outlined above, is that there is very little bedrock on the claims in any event.
[107] With respect to exploration and development of base metals and diamonds on the claims, there is no evidence of any serious interference with actual or proposed exploration and development. Maurice Lavigne, KWG's Vice President of Exploration and Development, gave evidence that the samples from the boreholes are to be analyzed to find possible sources of minerals "up ice" - that is, elsewhere in the region. There is no evidence at the present time of any mineral deposits on the claims themselves, nor is there any follow-up exploration yet designed (Transcript, February 7, 2013, pp. 55-57).
[108] The MLC concluded that placing an easement over the borehole lines would interfere with development of the claims because that line is the best place to locate a road or railroad. As I have already said, this consideration was irrelevant, given the railway was not to be used to develop minerals on the claims. However, the MLC was also concerned that the line depicted the best place to move mining equipment for the development of the claims. That may be true, but the MLC never then considered why the road, if built by Cliffs, could not be used as well for that purpose.
[109] The task of the MLC was to determine whether the proposed easement would interfere with mining activities on the claims to such a degree that multiple uses of the Crown lands were not possible. Past cases of the MLC turned on evidence of the degree of interference of the proposed use with actual mining activity or proposed mining activity on the claim in issue. CCC has not provided evidence to show that interference, despite its evidentiary onus to do so.
[110] It is clear that CCC's main goal, in staking these claims, was to gain control of a transportation corridor where it wants to build a railway. Its priority to the use of the surface rights of the claims does not allow it to control the surface for the purpose of someday, perhaps, building a railway. Whether or not it is in the public interest to grant an easement for a road is a matter for the Minister of Natural Resources to determine, after an environmental assessment and consultation with First Nations and other affected interests. It is for the Minister to determine whether the easement should be granted in the public interest and on what terms. CCC will be able to participate in that process.
[111] Given the evidence and the applicable law, the only reasonable decision was to dispense with the consent of CCC under s. 51(5) of the Mining Act.
Conclusion
[112] Accordingly, the appeal is allowed, the decision of the MLC is set aside, and the application to dispense with the consent of CCC is granted.
[113] The Minister does not seek costs and none are awarded to it. Costs of $40,000 all inclusive are awarded to Cliffs, an amount agreed to by Cliffs and CCC, payable by CCC.
Swinton J.
Aston J.
Dambrot J.
Released:
DIVISIONAL COURT FILE NO.: 445/13
DATE: 20140730
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
aston, dambrot and swinton jj.
B E T W E E N:
2274659 Ontario Inc.
Applicant (Appellant)
- and -
CANADA CHROME CORPORATION
Respondent (Respondent in Appeal)
- and -
MINISTER OF NORTHERN DEVELOPMENT AND MINES
Intervenor
REASONS FOR JUDGMENT
Swinton J.
Released: July 30, 2014