Canada: Suing The Provincial Crown In The Federal Court: The Federal Court Of Appeal Upholds Attornment Clause In First Nations Settlement Agreement Against Saskatchewan

In an important decision regarding the jurisdiction of the Federal Court in aboriginal claims, the Federal Court of Appeal has affirmed the right of the Pasqua First Nation to sue the Government of Saskatchewan in the Federal Court for breach of a settlement agreement on the basis of an attornment clause. In Canada v Peigan, 2016 FCA 133,¹ Saskatchewan argued that notwithstanding the attornment clause, which directed that any disputes arising under the settlement agreement be determined by the Federal Court, it was immune from suit in the Federal Court and, alternatively, that the suit did not fall within the Court's subject matter jurisdiction. The Federal Court of Appeal rejected both arguments, finding that the Federal Court possesses exclusive jurisdiction over the portions of the claim alleging a breach of Saskatchewan's obligations under the settlement agreement.

Background

In 1993, Canada, Saskatchewan, and a number of First Nations signatories to Treaties 4, 6 and 10 signed the Saskatchewan Treaty Land Entitlement Framework Agreement among her Majesty the Queen in Right of Canada and the Minister of Indian Affairs and Northern Development and the Entitlement Bands and her Majesty in Right of Saskatchewan (the "Framework Agreement"), which sets out a framework for the fulfillment of the Crown's outstanding obligations under the three numbered treaties. The Framework Agreement also provides for the conclusion of similar agreements with other First Nations groups who did not sign on to the Framework Agreement. The Pasqua First Nation concluded such an agreement with Canada and Saskatchewan in 2008 (the "PFN Settlement Agreement").

Both the Framework Agreement and the PFN Settlement Agreement provide that disputes arising under them shall be within the exclusive jurisdiction of the Federal Court. The relevant provisions provide, in relevant part:

In 2014, the Pasqua First Nation commenced an action in the Federal Court against Canada and Saskatchewan alleging that they had breached their obligations under the PFN Settlement Agreement. In addition, the claim alleged that Canada and Saskatchewan had failed to discharge their obligations to consult with the Pasqua First Nation regarding the grant of a subsurface mineral lease to a third party in connection with a mining project.

Saskatchewan brought a motion to strike the claim as against it, on the basis that the Federal Court does not have jurisdiction over Saskatchewan nor over the subject matter of the claim.

Decision Below

In a brief "speaking order", Justice Boswell of the Federal Court dismissed Saskatchewan's motion. He held that the attornment clause provided the Federal Court with exclusive jurisdiction over the entire claim by virtue of section 17(3)(b) of the Federal Courts Act, which provides:

Decision of the Federal Court of Appeal

On appeal, the Federal Court of Appeal upheld Justice Boswell's ruling that the Federal Court has exclusive jurisdiction over the portions of the claim alleging that Saskatchewan had breached its obligations under the PFN Settlement Agreement. However, the Court disagreed that its jurisdiction extends to the second portion of the claim, alleging a breach of the duty to consult. In the result, it struck this portion of the claim but granted the Pasqua First Nation leave to amend the claim in accordance with its reasons.

In reaching these conclusions, the Court rejected both arguments advanced by Saskatchewan: namely, that it was immune from suit before the Federal Court and that the Federal Court lacked subject matter jurisdiction.

Crown Immunity

As a starting point, the Court noted that the common law rule that the Crown is immune from suit before any court has been abrogated by statute in Canada. Provincial legislation enables the Crown in right of each province to be sued in the courts of that province. Likewise, the Federal Courts Act and the Crown Liability and Proceedings Act provide that the Crown in right of Canada may be sued before either the Federal Court or the superior court of the province where the cause of action arose, except where the Federal Court possesses exclusive jurisdiction over the claim. However, as the Court also recognized, none of these statutes makes the Crown in right of a province amenable to suit before the Federal Court.

In its submissions, Saskatchewan relied on numerous decisions of the Federal Court holding that, in light of this omission, a provincial Crown could not be sued in the Federal Court. Consistent with this case law, it urged a different interpretation of the attornment clause in the PFN Settlement Agreement as meaning that only claims to enforce the agreement as against Canada could be brought before the Federal Court, and that Saskatchewan could only be brought before the Federal Court if Canada commences a third-party claim and joins Saskatchewan. Saskatchewan argued that the Pasqua First Nation, who were represented by counsel during the negotiation of the PFN Settlement Agreement, knew or ought to have known that Saskatchewan could not be sued in the Federal Court.

The Federal Court of Appeal rejected Saskatchewan's interpretation of the clause, finding that the "only way" to interpret the clause "is to find that it means what it unambiguously says, namely, that all claims for interpretation and enforcement of the PFN Settlement Agreement are to be brought before the Federal Court."³ It went on to distinguish the present case from the line of jurisprudence cited by Saskatchewan on the basis of the Province's unambiguous agreement to attorn to the jurisdiction of the Federal Court. In this regard, the Court adopted the reasoning in Bank of Montreal v. Attorney General (Quebec),⁴ in which the Supreme Court of Canada held that the rights and prerogatives of the Crown cannot be invoked to limit or alter the terms of a contract to which the Crown had bound itself.

Subject Matter Jurisdiction

In order for a claim to proceed in Federal Court, the Federal Court must possess jurisdiction not only over the parties but also over the subject matter of the dispute.

The test for whether the Federal Court has jurisdiction over a particular matter was laid down by the Supreme Court of Canada in ITO-International Terminal Operators Ltd. v. Miida Electronics:

1. There must be a statutory grant of jurisdiction to the Federal Court by the federal Parliament;
2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes a statutory grant of jurisdiction; and
3. The law in which the case is based must be "a law of Canada" as the phrase is used in section 101 of the Constitution Act. ⁵

The focus of Saskatchewan's challenge was on the first part of this test, which requires there to be a federal statute that confers jurisdiction on the Federal Court over the subject matter of the litigation.

The Federal Court of Appeal agreed with the motions judge that the requisite grant of statutory jurisdiction is found in section 17(3)(b) of the Federal Courts Act, cited above. In reaching this conclusion, it chose not to adopt reasoning contained in an earlier decision of the Federal Court, Thomas v. Peace Hills Trust Co.,⁶ which interpreted this provision, not as a means to expand the jurisdiction of the Federal Court, but as merely a means to oust the concurrent jurisdiction of the provincial Superior Courts in certain matters. Taking into consideration the provision's legislative history, the Federal Court of Appeal held that it could accomplish both:

Saskatchewan argued against this interpretation on the basis of the well-established principle that parties cannot confer jurisdiction on a court by agreement. The Federal Court of Appeal's answer was that its jurisdiction is grounded in the statutory provision giving effect to the parties' agreement, not the agreement itself.

Implications of the Decision

This decision brings clarity to section 17(3)(b) of the Federal Courts Act, which to date has received little judicial consideration. What it leaves unanswered, however, is what effect it will have on similar claims involving the same or substantially similar attornment clauses which have already been decided by or are currently before the Court of Queen's Bench in Saskatchewan, given the Federal Court of Appeal's conclusion that the latter lacks jurisdiction to hear them. While noting that it may be open to the parties in those cases to treat the pleadings as an agreement to amend the attornment clause (which would permit those claims to proceed in Saskatchewan), the Federal Court of Appeal declined to rule on this question, leaving it to be determined by the Saskatchewan courts.

Case Information

Canada v. Peigan, 2016 FCA 133

Court File: A-11-15

Date of Decision: April 29, 2016

Footnotes

1 Canada v. Peigan, 2016 FCA 133.

2 Ibid. at para. 4.

3 Ibid. at para. 58.

4 Bank of Montreal v. Attorney General (Quebec), [1979] 1 SCR 565.

5 ITO-International Terminal Operators Ltd. v. Miida Electronics, [1986] 1 S.C.R. 752 at 766.

6 Thomas v. Peace Hills Trust Co., 2001 FCT 443.

7 Supra note 1 at para. 81.

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