Court File and Parties
COURT FILE NOS.: CV-19-227 and CV-19-246 DATE: 2022-05-31 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: Hiawatha First Nation Applicant
- and -
Laural Lee Shearer, also known as Laurel Lee Shearer Respondent
AND BETWEEN: Gregory Cowie, Georgina Rogers and Laurel Shearer Applicants
- and –
Hiawatha First Nation Respondent
Counsel: David Golden, Ceyda Turan and Christoph Pike, for Hiawatha First Nation Martin Henderson and Hansen Wong, for Gregory Cowie, Georgina Rogers and Laurel Shearer
Heard: July 9 and September 8, 2021, by video conference
Before: S.T. Bale J.
Reasons for Judgment
Overview
[1] Hiawatha First Nation (“HFN”) applies for a permanent injunction restraining Gregory Cowie, Georgina Rogers and Laurel Shearer (the “proponents”) from continuing with the construction of a gas station (the “project”) on the HFN reserve. The proponents are all members of HFN.
[2] In a counter application, the proponents apply for declarations that the by-law and resolution relied upon by HFN are of no force and effect, a declaration that they are entitled to develop and construct the gas station, and for damages.
Background facts
[3] HFN is a band under the Indian Act, R.S.C. 1985, c. I-5. It is a small community on the north shore of Rice Lake, approximately 20 kilometres southeast of Peterborough. It has approximately 670 registered members, with about 200 residing on the reserve. A provincial road known as the Hiawatha Line passes through the reserve from its northern-most boundary and runs south to Rice Lake. It is the primary access road for those entering or leaving the reserve.
[4] Georgina Rogers is a businesswoman and operates a local smoke shop on the reserve known as the "Discount Smoke Shop". The Discount Smoke Shop is located on the Hiawatha Line and caters to both HFN members and off-reserve visitors. Rogers has a Certificate of Possession (“CP”) for the parcel of land on which the shop operates.
[5] Laurel Shearer has a CP for a parcel of land abutting Rogers' parcel. Together, Rogers' and Shearers' lands will be referred to as the "CP Lands".
[6] On August 2, 2019, HFN Council became aware that fuel storage tanks were being delivered to Shearer’s land. Chief Carr immediately took the position that the construction was unlawful and asked Ms. Shearer to immediately cease all construction activities and to contact band council to discuss her plans before continuing. However, the work continued, the land was excavated, and the fuel tanks were buried.
[7] On October 1, 2019, C.M. Smith J. granted an interlocutory injunction enjoying further construction which has remained in force pending determination of these applications.
[8] For the reasons that follow, HFN’s application will be allowed in part and the counter application will be dismissed.
Positions of the parties
[9] HFN’s position is that the injunction should be continued until such time as the proponents agree to be bound by all relevant federal laws and by HFN by-laws and resolutions. In support of their position, they make the following submissions:
- that because the project is controlled by non-HFN citizens, the proponents were required to, but did not, apply for a permit under s. 28(2) of the Indian Act or for a lease under s. 58(3) of the Act.
- that the proponents have failed to comply with HFN By-Law 11 which prohibits construction of new buildings or additions without a permit from the band administrator;
- that the proponents have failed to comply with HFN Resolution 21/19 which provides for a moratorium on the creation of all new businesses, pending the completion of HFN’s land code, and associated by-laws and policies;
- that the proponents failed to comply with the Canadian Environmental Assessment Act (CEAA) which was in force when the project commenced, by proceeding with the development without first conducting an environmental review; and
- that in the absence of any evidence that the proponents are prepared to obtain necessary approvals, a permanent injunction is justified, including an order that the site be restored to its original condition.
[10] The proponents argue that HFN has no enforceable by-law or any means to lawfully regulate the project, and that in making its submissions, HFN is “throwing a multitude of allegations against the [proponents] and hoping one will stick.”
Analysis
Permit or lease under ss. 28(2) or 58(3) of the Indian Act
[11] Under the Indian Act, non-Indians cannot hold "lawful possession" of reserve lands - they can only occupy, use, reside in or otherwise exercise rights on a reserve by obtaining a permit or lease under the Act. Section 28(2) of the Act provides that the Minister “may by permit in writing authorize any person for a period not exceeding one year, or with the consent of the council of the band for any longer period, to occupy or use a reserve or to reside or otherwise exercise rights on a reserve.” Section 58(3) of the Act provides that the Minister “may lease for the benefit of any Indian, on application of that Indian for that purpose, the land of which the Indian is lawfully in possession without the land being designated.” Section 28(1) of the Act provides that subject to s. 28(2), “any deed, lease, contract, instrument, document or agreement of any kind, whether written or oral, by which a band or a member of a band purports to permit a person other than a member of that band to occupy or use a reserve or to reside or otherwise exercise any rights on a reserve is void.
[12] In this case, the business plan produced by the proponents discloses that they entered into a limited partnership agreement for the purpose of operating the proposed gas station, “including the financing and re-financing, development, construction, operation and management of facilities and infrastructure required to operate such business and all other activities incidental to the foregoing …” The limited partners included Mr. Cowie, Ms. Shearer and Burke Peters (all members of HFN) and 2693472 Ontario Inc. The general partner was Hiawatha Gas Ltd.
[13] The partnership agreement contains the following provisions:
[T]he General Partner has full power and exclusive authority for and on behalf of the Partnership to manage, conduct, control, administer and operate the business and affairs of the Partnership …
No Limited Partner shall (a) take part in the control or management of the Business or transact any business for the Partnership; (b) execute any document or take any action pursuant to which it purports to bind the Partnership, the General Partner or any other Limited Partner as such; (d) have any authority to undertake any obligation or responsibility on behalf of the Partnership.
[14] Based upon the structure of the limited partnership, HFN argues that the development offends the Indian Act because the general partner is a non-Indian and the partnership has not obtained or applied for a permit or license under section 28(2) of the Act or a lease under s. 58(3) of the Act. The proponents concede that if the development of the gas station were to proceed pursuant to the limited partnership agreement, it would require a lease under s. 58(3). However, they now say that their business plan has changed.
[15] In his affidavit sworn December 19, 2019, Gregory Cowie says that the proponents have now decided to forgo a limited partnership structure, and instead proceed with a sole proprietorship and joint venture structure for operating the business. He says that each of the three proponents will operate sole proprietorships and operate the business pursuant to a joint venture agreement. There will be no non-HFN member ownership. Original Traders Energy (“OTE”) will remain the fuel supplier pursuant to a renewable term contract. It will finance the project and be repaid by a per litre charge on fuel sold.
[16] In his affidavit sworn December 19, 2019, the president of OTE, Glenn Page, confirms that OTE will not take any ownership, leasehold or other property interest in the gas station and that neither OTE nor any lender engaged by OTE for HFN will receive any security interest over the gas station assets or the land upon which it is situate.
[17] HFN argues that this evidence is not good enough. The proponents have been asked to provide documentary evidence by way of the actual documents pursuant to which the gas station will be developed and operated. They have not done so. As a result, HFN argues that I must judge the legality of the project based upon the limited partnership agreement in place at the time the project was commenced. The proponents respond by arguing that it is not reasonable to expect them to have mapped out all the operational contracts without knowing the results of these applications.
[18] I would have preferred that the proponents had come to the hearing with the operational contracts in place in order that I could confirm that they do not offend the Indian Act. On the other hand, I do not agree with HFN that I should grant a permanent injunction based upon the limited partnership agreement when the evidence before the court is that the project will proceed based upon new agreements which will not grant non-HFN members an interest in, or control of, the project. I will leave it that if the project is otherwise able to proceed, I will review the new agreements for compliance with the Act, in the event that the parties are unable to agree on that issue.
HFN By-law 11
[19] HFN By-Law 11 was passed in 1978 pursuant to s. 81 of the Indian Act, R.S.C. 1970, c. I-6 which provided that the council of a band could make certain by-laws, including by-laws for the regulation of the construction, repair and use of buildings. Section 81 of the current act contains the same provision. The current act also provides in s. 81(3) that where any by-law of a band is contravened, “in addition to any other remedy and to any penalty imposed by the by-law, such contravention may be restrained by court action at the instance of the band council.”
[20] By-Law 11 provides that "no construction of any new buildings, or no new additions to existing buildings, may be made on the Reserve, without first receiving a permit from the Administrator of our Band.” Violating the by-law is an offence. HFN’s position is that the proponents were required to obtain a permit before proceeding with the project.
[21] Under s. 81(g) of the Indian Act, the council of a band may make by-laws for the purpose of “the dividing of the reserve or a portion thereof into zones and the prohibition of the construction or maintenance of any class of buildings or the carrying on of any class of business, trade or calling in any zone.” HFN has not done so.
[22] The proponents argue that the work that they have done to date did not require a permit under By-law 11 because it involved the installation of a fuel storage and handling system and not the construction of a building. Federally, the installation and operation of fuel storage tanks and fuel handling systems is regulated by the Canadian Environmental Protection Act through the Storage Tank Systems for Petroleum Products and Allied Petroleum Products Regulations (SOR/2008-197). In the provincial context, Liquid Fuels, O. Reg. 217/01 enabled by the Technical Standards and Safety Act, 2000 governs the installation and operation of fuel storage tanks and fuel handling systems. It is not disputed that the proponents complied with those laws.
[23] In support of its argument that the proponents require a building permit, HFN points to the fact that the construction contract provides for a canopy to be built over the gas pumps and for the construction of a kiosk. However, the proponents argue that if there was no injunction and they completed the installation of the fuel handling system, they would be able to operate the gas station without a canopy and using the existing building on the site, or could then apply for permission to construct a new building or to extend the existing building.
[24] I agree with the proponents that By-Law 11 does not apply to the installation and operation of fuel tanks and fuel handling systems and that in the absence of a zoning by-law, no permit was required. In the event that this project proceeds and the proponents wish to construct a canopy or kiosk, they will have to comply with applicable building regulations at that time.
[25] In the alternative, the proponents argue that even if By-Law 11 applied to the project, it is unenforceable because it is unclear and ambiguous. Because I have decided that the by-law does not apply to the installation and operation of fuel storage tanks and fuel handling systems, it is not necessary for me to deal with that argument.
HFN Resolution 21/19
[26] HFN Resolution 21/19 was passed on July 17, 2019. It provides as follows:
WHEREAS, Hiawatha First Nation has been approached by some of its Citizens about potential new businesses or expansion of existing businesses on the Hiawatha First Nation Reserve and territory;
AND WHEREAS, Hiawatha First Nation is presently in the process of developing its Land Code as per the 'Framework Agreement on First Nation Land Management' ratified and implemented in the First Nations Land Management Act ("FINLMA") assented to June 17, 1998;
AND WHEREAS, the FNLMA and subsequent Land Code is a sectoral self-government initiative which recognizes Hiawatha First Nation's inherent right to govern and protect its lands by opting out of the 44 land-related sections of the Indian Act,
AND WHEREAS, Hiawatha First Nation is a signatory to the Framework Agreement on First Nation Land Management which requires each signatory First Nation to seek ratification of their Land Code and transfer agreement from Canada by its Citizens;
AND WHEREAS, Hiawatha First Nation is presently in the process of developing, in consultation with its Citizens and community stakeholders, a Comprehensive Community Plan ("CCP");
AND WHEREAS, the purpose of the CCP is to help Council and the Citizens develop community priorities aimed at promoting the health, well-being and growth, including environmental protection, economic development and land use strategies, for Hiawatha First Nation as whole, on a short and long-term basis;
AND WHEREAS, the CCP and Land Code projects are being carried out to help Hiawatha First Nation develop and implement an economic development strategy which will guide the best uses of our lands and resources for the present and future, for both community initiatives and Citizen-led businesses and initiatives;
NOW THEREFORE BE IT RESOLVED THAT, the Chief and Council of Hiawatha First Nation hereby declare a community-wide moratorium on the creation of all new businesses and/or for-profit enterprises, or the expansion of any existing businesses or for-profit businesses, on any lands including lands held by Certificate of Possession within the Hiawatha First Nation Reserve and territory, subject to direct Council approval in extraordinary circumstances only, so as to afford the community the opportunity to complete its Land Code, Comprehensive Community Plan and any associated laws, by-laws, policies or strategies with respect to community priorities, including but not limited to environmental protection, economic development and land use planning. Any and all violations of this moratorium will be prosecuted by Hiawatha Policing Services or other authorities as designated by Chief and Council. This moratorium is in effect as of the date of this Resolution and shall only be lifted by a quorum of elected Council at a duty convened Council meeting of Hiawatha First Nation.
[27] The proponents argue that HFN’s zoning authority under s. 81(1)(g) of the Indian Act may only be exercised by the passing of a by-law, and not by the passing of a resolution. They argue that Resolution 21/19 is a resolution and not a by-law and is therefore unenforceable. I disagree, for the following reasons.
[28] The proponents argue that the resolution was not intended to be a by-law but rather was intended to be “an expression of council’s will.” They argue that the purpose of a resolution is to evidence the exercise of power of the band – to create evidence of the exercise of that power. However, if that is the case, then what was the power exercised, if it was not the power to regulate zoning provided for in s. 81(1)(g)? Band council clearly did intend to create a moratorium, they expressed the reasons for the moratorium in the recitals, and they provided for enforcement.
[29] In effect what the proponents are arguing is that if the moratorium had been expressed in a document entitled “by-law” and a resolution had then been passed to bring the by-law into effect, the by-law could have been enforced under ss. 81(2) and 81(3) of the Act; but that because the substance of the moratorium is contained in the document entitled “resolution” and the word “by-law” nowhere appears, the resolution is unenforceable. In my view, this is too rigid a distinction to make in the circumstances of this case.
[30] Section 2(3)(b) of the Indian Act provides that “a power conferred on the council of a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the councillors of the band present at a meeting of the council duly convened.”
[31] HFN council had the power under s. 81(1)(g) to regulate the carrying on of businesses on the reserve. Resolution 21/19 was passed by a majority of the councillors present at a duly convened meeting. It provides for a moratorium on the creation of all new businesses without council’s approval (to be given in extraordinary circumstances only), to allow HFN to complete its Land Code and Comprehensive Community Plan. As of the date of the resolution, HFN’s land code had been in the works for a period of approximately five years.[^1] In the circumstances of this case, the resolution will be considered to be a by-law enforceable under s. 81(3). To hold otherwise, would be to allow form to triumph over substance.
Canadian Environmental Assessment Act
[32] HFN argues that the proponents failed to comply with the Canadian Environmental Assessment Act (CEAA) which was in force at the material time, by proceeding with the development without first obtaining an environmental assessment. I disagree.
[33] In support of its argument, HFN relies on s. 67 of the CEAA which provided as follows:
67 An authority must not carry out a project on federal lands, or exercise any power or perform any duty or function conferred on it under any Act of Parliament other than this Act that could permit a project to be carried out, in whole or in part, on federal lands, unless (a) the authority determines that the carrying out of the project is not likely to cause significant adverse environmental effects; or (b) the authority determines that the carrying out of the project is likely to cause significant adverse environmental effects and the Governor in Council decides that those effects are justified in the circumstances under subsection 69(3).
[34] There are two parts to HFN’s argument.
[35] First, HFN again relies on ss. 28(2) and 58(3) of the Indian Act. Counsel argues that if the proponents had applied for a permit or lease to allow non-HFN entities to develop and operate the gas station, the Minister, before considering the application, would have had to consider the environmental impact of the project and would have required an environmental assessment. However, it is unclear why a proposed lease to a non-HFN entity would have triggered such an assessment – the fact of being non-HFN would not appear to be relevant to environmental impact. In addition, as I said earlier in these reasons, the business structure which the proponents now intend does not fall within ss. 28(2) or 58(3) of the Act.
[36] Second, HFN relies on s. 93 of the Indian Act which provides that a person who, without the written permission of the Minister, removes or permits anyone to remove minerals, stone, sand, gravel, clay or soil from a reserve is guilty of an offence. Counsel argues that the proponents have removed soil from Ms. Shearer’s land without permission and that if they had applied for permission, the Minister, before considering the application, would have had to consider the environmental impact of the project and would have required an environmental assessment.
[37] The proponents concede that soil has been removed but say that the removal is temporary, that the soil is being stored off site, and that their intention is to return the soil and use it in the final landscaping of the site. In these circumstances, I am not persuaded that had the proponents requested permission to do so, the Minister would have required an environmental assessment.
[38] The proponents have not failed to comply with the CEAA. The Act did not require them to obtain an environmental assessment. No authority has exercised any power with respect to the CP lands which would have required an environmental review under s. 67 of the Act. The proponents have not been charged with removal of the soil and even if they had been, such a prosecution would not have triggered an environmental assessment under s. 67.
Remedy
[39] In support of their positions with respect to appropriate remedy, both sides rely upon Nalcor Energy v. NunatuKavut Community Council Inc., 2014 NLCA 46.
[40] HFN argues that it is entitled to a permanent injunction because by their conduct (including the positions taken on these applications), the proponents have demonstrated that if not restrained by court order, they will continue with the project without the necessary approvals.
[41] In Nalcor Energy, at para. 65, the Newfoundland Court of Appeal, in considering the appropriateness of a permanent injunction, held that “[c]hief among the discretionary considerations is whether there is an effective alternative remedy available.” The proponents argue that even if HFN has the legal right to regulate the project, a permanent injunction would not be the appropriate remedy. Rather, if they have failed to abide by any applicable processes, the appropriate remedy would be to require them to follow those processes.
[42] The only basis upon which I have found that the proponents were not entitled to proceed with the project is the moratorium provided for in Resolution 21/19. The purpose of that resolution was primarily to put a temporary freeze on development pending finalization of the HFN Land Code and Comprehensive Community Plan. As the Land Code has since been finalized and is now in effect, the proponents should be entitled to proceed with their project, provided that they comply with the Code and relevant by-laws. The question of whether they are capable of doing so is not within the scope of these applications.
[43] However, there remains the issue of the work which was carried out in the face of the moratorium. HFN asks that the proponents be required to remove the tanks and the added fill and restore the property to its original condition. If the proponents are unable to complete the project, I agree that the land should be restored. However, they should be given a reasonable opportunity to establish their entitlement to proceed. If the parties are unable to agree on the time within which the proponents must establish their entitlement, I will consider submissions on that issue.
[44] In the result, there will be an order that Gregory Cowie, Georgina Rogers and Laurel Shearer be restrained from continuing with the development of a gas station on the CP lands for so long as the moratorium imposed by Resolution 21/19 remains in effect, and thereafter until the proponents comply with all applicable law. There will be a further order that if they are unable to obtain approval for continuation of the project by a date to be determined, they will restore the CP lands as close as possible to their condition prior to the start of the project.
[45] In their cross application, the proponents originally sought a number of orders including declarations that By-Law 11 and Resolution 21/19 are of no force or effect. However, commencing with their factum, the relief sought was narrowed to a request for “a declaration that they are permitted to construct the Project and operate a gas station on the CP Lands” and an order dismissing HFN’s application.[^2] The cross application will be dismissed.
[46] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered no later than June 30, 2022, to my judicial assistant at monica.mayer@ontario.ca.
“S.T. Bale J.”
Released: May 31, 2022
[^1]: Counsel have advised that HFN’s land code was certified on July 14, 2021 and came into force on August 1, 2021. I have not reviewed or considered the provisions of the land code in deciding these applications.
[^2]: If the proponents had continued with their requests for declarations that the by-law and resolution were of no force or effect, I would have had to consider this court’s jurisdiction to make such declarations. See s. 18(1) of the Federal Courts Act and Horseman v. Horse Lake First Nation, 2013 FCA 159, at para. 6.