Stoney Tribal Council v. Imperial Oil Resources Limited, 2012 ABQB 557

Court of Queen ’ s Bench of Alberta Citation: Stoney Tribal Council v. Imperial Oil Resources Limited, 2012 ABQB 557 Date: 20120907 Docket: 9701 16074 Registry: Calgary Between: Stoney Tribal Council, Representing the Chiefs, Councils and Members of the Bearspaw, Chiniki and Wesley Bands Plaintiff - and - Imperial Oil Resources Limited Defendant _______________________________________________________ Memorandum of Decision of J.B.

Hanebury, Master in Chambers _______________________________________________________ [ 1 ] This application raises the question of whether an Indian band can continue a claim against a third party for royalty payments when two related claims for the royalty payments have previously been settled. The first related claim was brought by the Crown in right of Canada on behalf of the band against the third party and it was settled; and, the second claim was brought by the band against the Crown in right of Canada for failing to collect the royalties from the third party and others.

It was also settled. [ 2 ] The third party seeks to dismiss this action against it claiming that the band has no standing to bring this action and in any

event, there is no action left to bring. It cannot be sued multiple times for the same alleged debt. FACTS [ 3 ] The plaintiffs (the Stoney) received rights to certain lands pursuant to Treaty No. 7, with the underlying legal title to the lands vesting in Her Majesty in right of Canada (Canada or the Crown). Between 1926 and 1962 the petroleum and natural gas mining rights in these lands were surrendered by the Stoney to Canada “in trust to lease”. Canada leased certain lands to Imperial Oil Resources Limited (Imperial).

The Stoney were not a party to the lease. [ 4 ] Pursuant to the regulatory scheme found under the Indian Oil and Gas Act , RSC 1985, c. I-7, and the Indian Oil and Gas Regulations, CRC 1978, c. 963, royalty payments under the lease were to be paid to Canada as trustee for the Stoney and not to the Stoney directly.

As a result, royalties were paid by Imperial to Canada. [ 5 ] It came to the attention of the Stoney that certain charges may have been improperly deducted from the royalties by various resource companies, including Imperial, and this resulted in a number of legal actions being commenced. [ 6 ] In an action against a different resource company, Stoney Tribal Council v.

PanCanadian Petroleum Ltd. , 2000 ABCA 209 , the Alberta Court of Appeal held that there had been improper deductions by PanCanadian and the Stoney were entitled to a recalculation of the royalties, but the claim was subject to a six year limitation period [1] . No question was raised by PanCanadian as to the standing of the Stoney to bring that action against the defendants. [ 7 ] In relation to the royalties owed by Imperial, several claims relating to the alleged unpaid royalties were filed.

It is helpful to consider them chronologically. [ 8 ] In 1993 the Stoney sued Canada (Stoney-Canada action) for a declaration that the Crown had breached its trust, fiduciary, treaty, constitutional or statutory obligations and duties to the band in its negotiation of the oil and gas leases and in their management and the receipt of funds.

They alleged that Canada failed to ensure that the Stoney received all of the royalties to which they were entitled. [ 9 ] In 1997 the Stoney commenced this action (the Stoney-Imperial action) and sued Imperial seeking an accounting of the unpaid royalties. [ 10 ] In 1999 Canada sued Imperial and certain other resource companies (Canada-Imperial action) seeking a declaration that improper deductions had been made from royalty payments, and for an accounting. [ 11 ] On Nov. 14, 2001, Imperial sent Canada $171,766.50 in satisfaction of both the Stoney-Imperial and Canada-Imperial actions.

It was returned to Imperial by Canada, apparently with the advice that Canada could not deal with the Stoney-Imperial action. [ 12 ] In 2002 the Stoney commenced another action against a number of resource companies including Imperial, for a declaration that improper deductions were made from the royalty payments and for damages or judgment. That action was dismissed under the “drop dead” rule: Stoney Tribal Council v. Petro-Canada , 2009 ABQB 430 (Master), aff’d. April 14, 2010 (unreported).

That action will be considered no further in these reasons. [ 13 ] In February, 2005, Imperial paid Canada $149,956.19 in consideration of a release by Canada of all allegations made against Imperial in the Canada-Imperial action. The release refers to all claims contained in the statement of claim, which sets out no time frame for the claimed underpayments. Attached to the release is a page not referred to in the release that indicates that the amount received relates to payments for the period 1991-1995. The Stoney were not a party to, nor privy to, the release. The release states that “the

Releasees do not admit that the Attorney General of Canada has the status to bring the Action or recover monies for the allegedunderpayment of royalties.” [14] In February, 2008, the Stoney entered into a settlement agreement with Canada in the Stoney-Canada action and releasedCanada from liability for its breach of trust or fiduciary duties resulting from its failure to collect certain specified royalties. The Stoneywere paid $28,500,00.00 under the settlement for the underpayment of royalties for a number of wells, including those leased byImperial. [15] The settlement agreement provides in s. 6(2)(

a) that the Stoney releases Canada from all “actions...claims...obligations andliabilities whatsoever arising from or in relation to...the loss of royalties, as specified in

Schedule ‘J’, claimed to be caused by thededuction of ....[improper] charges between December 1977 and December, 1994.” [16] Clause 6.3 of the release states that the Stoney “agree not to assert any action, cause of action, suit, claim, demand, interest,costs expenses, promises, undertakings, obligations, and liabilities whatsoever in any proceeding against Canada...by reason of or in anyway relating directly or indirectly to any of the items released pursuant to

Article 6.2.” Exhibit J to the settlement agreement lists theStoney wells and their locations, and indicates a calculation of funds owed under the Imperial leases for the period 1977 to 1991. [17] As a part of the settlement agreement the Stoney filed a partial discontinuance against Canada for the specified loss ofroyalties. The discontinuance states that the Stoney “discontinue all claims relating to (

a) the loss of royalties in the amount of$11,850,820.00 which they claim were caused by the deduction of ....charges between December 1977 and December 1994 from theselling price of natural gas produced from Reserve Numbers 142, 143, 144, 142B, 144A, and 216 of Stoney Nakoda First Nations, and(

b) interest on such royalties.” [18] The reserve numbers and the dates referenced in clause 6.2 and the discontinuance include the underpayment of royalties to the end of 1994[2] for all of the Imperial wells on Stoney lands. [19] Imperial applies to have the remaining action, the Stoney-Imperial action, struck. [20] The Stoney say that Imperial “has refused to verify the values of the specified royalties” attributed to it. While Imperial hasapparently never provided this calculation to the Stoney, Canada has provided an estimate of $3,530,328.80, plus interest for the period1977 to 1994.

The Stoney say that an accounting could show that funds are still owing, and this action is to collect those funds. ISSUES [21] Imperial argues that the claim against it should be struck either on the basis that it is frivolous, vexatious or an abuse ofprocess, or, by way of

summary dismissal. It argues first that the Stoney do not have standing to pursue the action, as they are thebeneficiaries of a trust and an action can only be brought by Canada, the trustee. Alternately, they argue that even if the Stoney havestanding, there are no genuine issues for trial. In essence the claims have been litigated, settled, and there is no remaining cause ofaction.

To allow this action to proceed, Imperial states, would subject it to multiple causes of action for the same debt. [22] The Stoney respond that the relationship between it and the Crown is a fiduciary relationship that is trust-like in nature:Ermineskin Indian Band & Nation v. Canada, 2009 SCC 9 , [2009] 1 S.C.R. 222 para 74. However, the relationship is suigeneris, ie. in a class of its own, and as a result they do have standing.

However, even if the relationship is subject to the law of trusts,they argue that when a trustee fails to make a claim against a third party, the beneficiary has the right to bring a cause of action:Greenwood Shopping Plaza Ltd. v. Neil J. Buchanan Ltd., (SCC), [1980] 2 S.C.R. 228, para 14.

Relying on this andcertain other exceptions to the general rule that an action cannot be brought by a beneficiary, the Stoney say that there is a genuine issuefor trial as to whether they have standing to pursue their claim. [23] As to whether there is a claim remaining to be pursued, the Stoney argue that the Canada-Imperial settlement is invalid as it

should only have been entered into with the consent of the Stoney pursuant to s. 4(2) of the Indian Oil and Gas Act , and s. 21of the Regulations. Without the Stoney’s consent, they say, there was no ability on Canada’s part to settle the action. Furthermore, the settlement with Canada of the Stoney-Canada action was not for the payment of royalties; it was for the payment of damages as the money was not received pursuant to the royalty regime [3] . Even if it were for the payment of outstanding royalties, the settlement was only for the amount received.

As there has never been an accounting by Imperial, the Stoney say that they have, at a minimum, a claim for any excess amount owing. [ 24 ] This Court must determine if there is a genuine issue for trial in relation to any of the issues between the parties: 1. Does the law of trusts apply to the arrangement existing between Canada and the Stoney for the collection of royalties? 2. If the law of trusts applies, do the Stoney have standing to pursue their claim against Imperial? 3. If the Stoney have standing, do they have a claim in light of the settlement agreements?

ANALYSIS [ 25 ] A claim may be struck for being frivolous, an abuse of process, or disclosing no cause of action under rule 3.68. It may also be dismissed summarily under rule 7.3. In either case the standard is high as a court will not lightly deprive a litigant of his or her right to bring a cause of action. [ 26 ] A claim will be struck under rule 3.68 if it is plain and obvious or beyond doubt that the action cannot succeed: Martin v. General Teamsters, Local 362 , 2011 ABQB 412 , para. 5-6 .

However, if it can be shown that “there is a chance” that the action will be successful, the claim should not be foreclosed: Alberta Adolescent Recovery Centre v. Canadian Broadcasting Corporation , 2012 ABQB 48 , para. 29 . [ 27 ] Similarly, in an application to dismiss a claim summarily under rule 7.3, the application should not be granted if there is a genuine issue for trial. The law was summarized by Master Mason in BA Capital Inc. v. Stream Oil & Gas Ltd. , 2011 ABQB 91 , para. 4 : The bar on a motion for

summary judgment is high. A party bringing a motion for

summary judgment bears the legal onus of showing no genuine issue for trial.

Summary judgment should not be granted if opposing affidavits clash on relevant facts. A Justice or Master in chambers should not assess the quality and weight of the evidence, as this is a function reserved for a trial judge. [citations omitted]. [ 28 ] In Tottrup v. Clearwater (Municipal District No. 99) , 2006 ABCA 380 , para. 11 , the Court of Appeal considered the appropriateness of a

summary judgment application in various situations: ...In some cases the facts are clear and undisputed. The ultimate outcome of the case may depend on the

interpretation of some statute or document, or on some other issue of law that arises from undisputed facts. In such cases the test for

summary judgment is not whether the issue of law is “beyond doubt”, but whether the issue of law can be fairly decided on the record before the court. If the legal issue is unsettled or complex or intertwined with the facts, it is sometimes necessary to have a full trial to provide a proper foundation for the decision. In other cases it is possible to decide the question of law summarily... [ 29 ] As is clear from Tottrup , when the facts are not in dispute, as in this case, the real question to be determined by the Court is whether the issue can be fairly decided on the filed record.

[30] With that overview of the principles underlying this application I turn to the issues in dispute. Does the law of trusts apply to the arrangement existing between Canada and the Stoney for the collection of royalties? [31] Imperial entered into a contract with Canada to pay royalties. When a contract has been breached, privity of contract allowsone contracting party to sue the other contracting party.

It is acknowledged that there is no privity of contract between the Stoney andImperial. [32] An action in contract against a third party debtor of the trust is usually brought by the trustee, who is the contracting party.However, in certain limited circumstances, the law of trusts permits the beneficiary under the trust to sue the third party, joining the trustee as a defendant [4]: Ermineskin Indian Band & Nation v. Canada, 2009 SCC 9; Greenwood Shopping Plaza Ltd. v. Beattie, (SCC), [1980] 2 S.C.R. 228; Roberts v. Gill & Co. [2010] UKSC 22 (H.L.).

The first question in this case is whether the lawof trusts applies. [33] It is acknowledged by the parties that the relationship between the Stoney and Canada is a fiduciary relationship and like atrust in its nature. However, the Stoney argue that the law of trusts is not applicable in this case, while Imperial takes the contrary view. [34] The Stoney state that a sui generis relationship exists between them and Canada and common law trust principles should beapplied with caution.

Implicitly, they are saying that there is a genuine issue for trial as to the applicability of common law trustprinciples to their relationship with Canada vis-a-vis the surrender of their resource rights and the royalty regime under the Indian Oil andGas Act. [35] To consider the Stoney’s argument a brief overview of the law of trusts and fiduciaries is helpful, followed by a review of twocases considering the applicability of that law to the relationship between the Crown and aboriginal people. [36] Historically, the concept of a trust relationship was developed to deal with property.

Fiduciary law then developed from theintervention by equity in the relationship between the trustees and the beneficiaries of the trust. Over time other relationships, includingthose that did not involve property, came to be seen as fiduciary in nature, such as those based on the position of the parties, for example, solicitors and their clients and partners and co-partners.[5] [37] The result of these developments in the law is that while a trust relationship results in fiduciary duties owed by the trustee, afiduciary is not necessarily a trustee.

While the parties to a fiduciary relationship are governed by similar principles to those regulating a trust relationship, there is no need for an interest in property to create or sustain a fiduciary relationship.[6] [38] In Guerin v. The Queen (SCC), [1984] 2 SCR 335, at p. 384, Dickson J. noted that fiduciary law focuses onrelationships where one party has a discretionary power to affect the vital, practical or legal interests of another party. Once a party is afiduciary, equity will then oversee the relationship and hold the fiduciary to a strict standard of conduct.

In that case the Court held thatthe Crown, who had the control of surrendered aboriginal land, had a fiduciary obligation to hold it for the use and benefit of thesurrendering band. When the Crown leased the land for use as a golf course for a sum less than it should have, it was liable in damages. [39] The obligations of the Crown in relation to aboriginal people were described first by academics and then by the Courts as sui generis, ie. unique or of their own kind or class[7].

That term has been used to describe aboriginal rights, the law relating to treaties, and the relationship between the Crown and First Nations[8]: Ermineskin (supra). [40] In relation to aboriginal rights, this concept recognizes that they are different than rights founded on the English common law.They do not take their meaning from the philosophies that underpin common law rights, but rather come from a different source that reflects the history of aboriginal people in North America[9].

[ 41 ] The challenge is the utilization of this concept, i.e. ensuring the proper preservation and consideration of the traditions, customs, practices and laws underpinning the claimed aboriginal right by courts that operate from a different legal foundation. This challenge has resulted in a significant body of case law, much of it at the appellate and Supreme Court of Canada level. [ 42 ] The question of the characterization of the obligations of the Crown in relation to oil and gas royalties from surrendered lands has been considered by the Courts: Samson Indian Nation & Band v.

Canada , 2005 FC 1622 (F.C.) , aff’d 2006 FCA 415 (F.C.A.) That decision was subsequently appealed to the Supreme Court of Canada: Ermineskin (supra), and is pertinent to the question in this case. [ 43 ] Under consideration in Ermineskin was Treaty No. 6 and at issue was the alleged failure of the Crown to invest the royalties it received for the leasing of oil and gas rights on reserve lands.

Rather than investing that money, the Crown had been simply paying interest under a formula established for the payment of interest on “Indian moneys”. [ 44 ] The primary issue before the Court was whether the Crown was obligated, as a fiduciary, to invest the oil and gas royalties that it was holding on behalf of the bands. Essentially the bands argued that when collecting royalties for oil and gas on lands surrendered to the Crown, the Crown had the same duties as a trustee at common law, which included the duty to invest the funds received.

It relied on the treaty, the 1946 surrenders, the Indian Oil and Gas Act and the Indian Act , R.S.C., 1985, c. I-5. [ 45 ] The Court first considered the obligations imposed by the treaty. It held that Treaty No. 6, on its face, did not impose the duties of a common law trustee on the Crown. Its language supported no such intention. Instead, the treaty relinquished all rights in the land to the Crown and in return the Crown agreed to set aside certain lands for the use of the aboriginals signing the treaty.

The language and circumstances, said the Court were more conducive to a conditional transfer of land than a common law trust. [ 46 ] The Supreme Court of Canada then considered whether the 1946 surrenders imposed on the Crown the obligation of a common law trustee to invest the royalties received. Relying on Guerin v.

The Queen , (supra) the Court held that the surrenders imposed a fiduciary duty on the Crown in relation both to its ability to grant to others the right to exploit the mineral resources of the bands, and to the way in which the royalties were dealt with after their receipt. [ 47 ] The Court then went on to discuss the duties of the Crown as a fiduciary at paragraphs 73-74: If a situation is such that a fiduciary is in a position similar to that of a trustee, even though the situation cannot necessarily be categorized as a “common law trust”, I do not see why the common law duties of a trustee cannot be applied to that fiduciary if that is what the particular situation warrants.

In this case the bands have placed particular emphasis on a trustee’s duty to invest their royalties - the trust corpus. In my opinion, if the situation is such that the Crown is in the position of a fiduciary, although not strictly speaking a trustee at common law, and holds funds on behalf of the bands, it is not improper to ascribe to the Crown a duty to invest those funds in the manner of a common law trustee, subject to any legislation limiting its ability to do so. In my view, therefore, the relationship between the Crown and the bands is a fiduciary relationship that is trust-like in nature.

The Crown possesses a discretionary power to act in the best interests of the bands, and the bands are vulnerable to the Crown’s exercise of that discretion.

The Crown may only grant rights over the minerals upon terms that are most conducive to the welfare of the bands, and will hold the proceeds of the granting of those rights on behalf of the bands. [ 48 ] The Court found that when the fiduciary is the Crown, Parliament may legislate in ways that constrain or eliminate the Crown’s fiduciary duties, and therefore it examined the Indian Oil and Gas Act . [ 49 ] The Indian Oil and Gas Act, s.4 (1), provides that “...all oil and gas obtained from Indian lands after April 22, 1977 is subject to the payment to Her Majesty in right of Canada, in trust for the Indian bands concerned, of the royalties prescribed from time to time by the regulations.” [10]

[ 50 ] The Court held that this legislation does not affect the Crown’s obligations, which arise from the Surrenders. The Act merely confirms that royalties are to be paid to the Crown in trust for the bands. As it does not set out any terms of the trust or duties of the Crown, it does not limit the Crown’s fiduciary duties to the bands.

Ultimately the Court determined that any obligation of the Crown to invest the funds in the manner of a common law trustee was circumscribed by other legislation. [ 51 ] Ermineskin establishes that the Crown acts as a fiduciary rather than a trustee in relation to the collection of royalties under the Indian Oil and Gas Act .

The Court’s finding that, where the situation warrants it, the common law duties ascribed to a trustee can be applied to the Crown as a fiduciary indicates that the common law of trusts could be found to be applicable to the relationship between the Crown and the band in this case. [ 52 ] The Stoney argue that the law in relation to trusts should only be applied with caution.

If by that, the Stoney mean that it must be done thoughtfully, and not blindly, that view is in line with the reasoning found in Ermineskin . [ 53 ] Having taken that position, two reasons are given by the Stoney for not applying the common law of trusts in this case to the relationship between the Stoney and Canada in relation to the collection of royalties.

The first is that if the law of trusts is applied and the Stoney are limited to suing the Crown for failing to fulfill its duties in the collection of the royalties, then the taxpayers of Canada will be paying a debt that should be paid by Imperial. [ 54 ] That argument puts the cart before the horse. Who will pay for the outstanding royalties is a result of a determination of the applicability of the law, not a factor underpinning that determination. [ 55 ] The second argument for not applying the law of trusts is the alleged inconsistent position of Imperial.

The Stoney state that Imperial is trying to argue it both ways.

They point to the letter accompanying Imperial’s first tender of payment to Canada for the unpaid royalties where the company stated that it was not acknowledging that either Canada or the Stoney had the status to bring actions to recover those monies. [ 56 ] The Stoney also point to the release in the Canada-Imperial action which stated that Imperial does “not admit that the Attorney General of Canada has the status to bring the Action or recover monies for the alleged underpayment of royalties.” Now, the Stoney say, Imperial argues that as a result of the applicability of the law of trusts, only Canada and not the Stoney has a right to bring an action against Imperial for the payment of royalties. [ 57 ] If the prior position of a party were a determining factor in deciding if the common law of trusts should be applied in this situation, then the Stoney have a similar issue in relation to their prior inconsistent position. [ 58 ] In the Stoney’s action against PanCanadian Petroleum Ltd. it asserted standing as the beneficiary of a trust: PanCanadian , (supra) para. 52.

In its brief filed May 11, 2012, in Calgary Court of Queen’s Bench action no. 0901-16813, it said at para. 26: While Canada is the Lessor of the Leases in relation to the SNN [Stoney] Reserve Lands, Canada is acting in its capacity as trustee for the SNN.

Canada is under a legal duty to collect royalties, in trust for the SNN. [ 59 ] The allegedly inconsistent positions of both parties are not of assistance in this case. [ 60 ] These two arguments of the Stoney raise no genuine issue for trial as to the applicability of trust law to the facts in this case. [ 61 ] However, there remains the question of whether the record in this case is sufficient for the Court to make a determination of the applicability of trust law at this stage of the proceeding: Tottrup (supra), para. 11.

[62] Ermineskin (supra) indicates that principles of trust law can be applied to the relationship between the Crown and the Stoneythat exists for the collection of royalties by the Crown and that the applicability of these principles to that fiduciary relationship rests onthe particular situation before the Courts. [63] In this case there has been no evidence led by the Stoney of anything arising from the history of aboriginals in Canada thatwould suggest it is inappropriate to apply the relevant common law of trusts to the facts in this case.

Nor have they raised any otherprinciple of law that could enable them to sue Imperial directly, despite their lack of privity of contract.

If they do not base their argumenton the common law of trusts, they have provided no other basis, either in law of because of unique facts, upon which to assert a right tosue Imperial. [64] Without any evidence or argument that could suggest to this Court a need for further fact finding or analysis, and therefore apossible genuine issue for trial, I am of the view that the matter can be determined on the record before this Court. [65] The law of fiduciaries and the law of trusts have developed as overlapping circles.

The Supreme Court of Canada has appliedthe law of trusts to the fiduciary relationship between the Crown and aboriginal peoples, and in particular to the obligation of the Crownto collect royalties from surrendered lands. I have come to the conclusion that in this particular situation, the common law of trusts canand should be applied. If the law of trusts applies, do the Stoney have standing to pursue their claim against Imperial? [66] The general rule in relation to a beneficiary suing a third party debtor was noted by the Alberta Court of Appeal in Remmersv.

Lipinski, 2001 ABCA 188, para. 57: [g]enerally, while beneficiaries have an in personam action against trustees for breach of trust, they cannot sue the debtor of a trust fund. [67] Exceptions to this general rule require that the beneficiary first meet certain prerequisites and that there be specialcircumstances: Kwinter v.

Metrowest Development Ltd., 2007 ABQB 713, para. 36. [68] Imperial argues that it is plain and obvious these prerequisites have not been met nor are there the requisite specialcircumstances, with the result that there is no genuine issue for trial. [69] There are three prerequisites to a beneficiary’s action against a third party owing money to a trustee that could be animpediment to the Stoney bringing this action: the beneficiary must first ask the trustee to bring the action and be refused; thebeneficiary must name the trustee as a defendant if it sues the third party; and, the beneficiary must exhaust its remedy against thetrustee, in this case the Crown.

Did the Stoney ask the Crown to sue Imperial? [70] Case law has established that the beneficiary must first ask the trustee to sue and it is only if the trustee is unwilling or unable to act that a beneficiary may itself sue: Waters (3rd ed.), at 1204, 1266; Nelson House Indian Band v. Young, [1999] Man. R. (2d) 134(Man. C.A.) at para. 13, citing Sharpe v. San Paulo Railway

(173) L.R. 8 Ch. 597 (C.A.) and Norfolk (Municipality) v. Roberts,(1913), (ON CA), 28 O.L.R. 593 (Ont. C.A.), aff’d. (1914), (SCC), 50 S.C.R. 283 (S.C.C.); Hayim v. Citibank, (1987) 3 W.L.R. 83 (P.C), at p. 92; Mayer v. Osborne Contracting Ltd., 2012 BCCA 77, paragraphs 240 -241[11]. [71] Therefore the Stoney were obliged, prior to launching their action against Imperial, to ask Canada to bring the action astrustee. However, as Canada ultimately launched an action against Imperial, the failure of the Stoney to ask the trustee to bring the actionappears moot and will not be considered further.

Did the Stoney name the Crown as a defendant in their action against Imperial? [ 72 ] A lengthy historical review of hundreds of years of relevant case law was recently undertaken by the United Kingdom Supreme Court in Roberts v. Gill & Co. , [2010] UKSC 22 (UKSC).

After considering English, Scottish and American law, the Court concludes, at para. 62: [I]t has been the consistent practice...for almost 300 years that, where a beneficiary brings an action in his own name to recover trust property, the trustees should be joined as defendants...The purpose of joinder has been said to ensure that they are bound by any judgement and to avoid the risk of a multiplicity of actions...But joinder also has a substantive basis, since the beneficiary has no personal right to sue, and is suing on behalf of the estate, or more accurately, the trustee. [ 73 ] This view, that the trustee must be joined as a defendant, has been upheld in Canada: Greenview Shopping Plaza Ltd. (supra), para. 14.

The Stoney were obliged under the common law of trusts to name Canada as a defendant in their action against Imperial. They did not do so. Their failure to fulfill this prerequisite appears to deprive them of standing to continue their action. However, as they could seek to cure this deficiency by applying to add Canada to their action [12] the last criteria will be considered. Have the Stoney exhausted their remedy against the Crown? [ 74 ] The beneficiary’s principle right is to require the trustees who have caused the loss to the trust to indemnify the trust from their own funds [13] .

It is then up to the trustees to recover, if they can, from the third party: Waters (3 rd ed.), 1204, Bronson v. Hewitt , 2011 BCSC 1115 , para. 38 . [ 75 ] If the trustee successfully pleads one of the defences to an action by the beneficiary or is insolvent, the beneficiary can then bring an action against the third party: Bronson , para. 38 , citing Waters (3 rd 3d.) at 1266. [ 76 ] The Stoney sued Canada and the parties entered into a settlement. There is no evidence of a successful defence nor that Canada did not or could not pay the agreed-to funds.

The Stoney simply argue that funds remain to be collected over and above that settlement sum and that is the basis of their claim against Imperial. [ 77 ] There are four aspects to the sum the Stoney claim remains outstanding. [ 78 ] First, they claim that the Canada-Imperial action may have been settled for a payment that did not represent the entire amount of outstanding royalties for 1991-1995, as they have not seen documentation supporting the correctness of that amount and it is less than the original offer made in 2001 to settle both the Stoney-Imperial and Crown-Imperial claims.

As a result, they argue, all of the money owing may not have been collected. [ 79 ] Second, they say that Canada’s settlement with Imperial was only for the years 1991-1995 and no payment was made for the prior period commencing in 1977 [14] . [ 80 ] Third, they say that the settlement funds they received from the settlement of the Stoney-Canada action for the period 1977 to 1994 [15] may not be all of the funds owing as they do not have access to an accounting by Imperial.

They point to the wording of the release, which they argue only releases their claim in relation to a specific amount, and the wording of the partial discontinuance of action, to argue that the option of pursuing a claim for any further amount remaining outstanding is open to them.

[ 81 ] Finally, they argue that the funds received from the settlement of the Stoney-Canada action were damages resulting from the failure of Canada to collect royalties for the Stoney, and should not be credited against any amount owing for those royalties. In support of this argument they point to the fact that the funds were paid directly to them, rather than to the Consolidated Revenue Fund as occurs with royalties.

The funds, they say, did not increase the “corpus” of the trust estate. [ 82 ] Regardless of the ultimate success of these arguments, the Stoney’s first claim is and continues to be against Canada for its alleged failure to properly collect the entire amount owing for royalties from Imperial.

They have shown no reason why the trustee could not or cannot be held responsible for any monies owing. [ 83 ] Assuming, without deciding, that the Stoney are correct and their settlement with the Crown was not a complete settlement, the Stoney are free to continue and complete their action against Canada for the balance outstanding.

If, on the other hand, the settlement was a final settlement of their claims against Canada, then they have pursued their remedy and have no further claim. [ 84 ] In either event, they have no claim against Imperial as they have shown no reason why they could not or did not exhaust their remedy against the Crown. Conclusion [ 85 ] An action by a beneficiary of a trust against a third party is only allowed in certain circumstances and if certain prerequisites are met. One prerequisite is that the beneficiary is unable to obtain redress from the trustee.

There is no genuine issue for trial on the ability of the Crown to provide redress to the Stoney for the lost royalty income owed by Imperial. The Stoney argued that their settlement with the Crown was not final as it left open the possibility that further funds were owing. If that is the case, they are free to continue their action against the Crown. If that is not the case, that action is at an end. The net result, in either case, is that they have no standing to continue their claim against Imperial. Heard on the 11 th day of June, 2012. Dated at the City of Calgary, Alberta this 7 th day of September, 2012.

J.B. Hanebury M.C.C.Q.B.A. Appearances: Heather L. Treacy, Q.C. Fraser Milner Casgrain LLP

for the Defendant W. Tibor Osvath Rae and Company LLP for the Plaintiff [1]The constitutional applicability of provincial limitation legislation to lands reserved for Indians was raised by the Stoney but ultimatelynot argued so was not addressed in that decision. [2] The discontinuance discontinues the action in relation to a longer royalty payment period then that set out in

Schedule J but matchesthe period included in the release. The payments in issue ended when Imperial transferred its interests to another company in 1995. [3] In support of this argument they point to the fact that the money did not go into the government’s coffers, as legislatively required forroyalty payments, but was transferred to the Stoney directly. [4] As noted earlier in the facts, the Stoney sued Imperial and did not name Canada as a defendant. Two years later Canada sued Imperialfor all of the years outstanding, and settled the claim for the period 1991 to 1995.

The payment was likely only for this limited period inlight of the limitation period established in the PanCanadian decision. [5] Paul B. Miller, “A Theory of Fiduciary Liability”, (2011) 56:2 McGill LJ 235-288, para. 14. [6] Leonard. I. Rotman, “Fiduciary Doctine: A Concept in Need of Understanding”, (1996) 34 Alta. L.Rev. 821 at A: Property Theory. [7] John Borrows and Leonard I. Rotman, The Sui Generis Nature of Aboriginal Rights: Does it Make a Difference?”, (1997) 36 Alta.

L.Rev. 9, para. 1. [8] See also, ibid, note 7, Borrows and Rotman, fn. 66 and cases cited therein. [9] Ibid, n. 7, Borrows and Rotman, para. 2. [10] Similarly, s. 21(1) of the Indian Oil and Gas Regulations provides that royalties “shall be paid to Her Majesty in right of Canada intrust for the Indian band concerned.” [11] Additionally, if the trustee is insolvent, the beneficiary may be in a position to act itself: Waters (3rd ed.), at 1267. That is notrelevant in relation to the facts in this case.

The underlying consideration is that the beneficiary not be left without a remedy when thetrustee has failed to fulfill its obligations. [12] Though limitations issues might make this difficult as the claim was filed in 1997. [13] As well, in certain instances, although not specifically argued in this case, the right of a beneficiary is not a derivative right when trustproperty is in a third party’s hands due to “knowing receipt”: Citadel General Assurance Co. v. Lloyds Bank Canada, (SCC), [1997] 3 S.C.R. 805 (SCC); Condominium Corp. No. 0321365 v. 970365 Alberta Ltd., 2012 ABCA 26.

However, even with such a claim, the beneficiary’s first remedy is against the trustee: Waters (3rd ed.) at 1204. [14] As earlier noted the parties to the settlement may well have relied on the decision in PanCanadian, which limited the years forwhich the Stoney could claim unpaid royalties pursuant to the provincial limitations legislation. The constitutional applicability of thatlegislation to the Stoney’s claim was apparently initially raised as an issue by the Stoney, but not ultimately argued before the Court.

[15] As previously noted,

Article 6.2 of the Settlement Agreement and the Partial Discontinuance of Action refer to 1994. Exhibit J to the Settlement Agreement refers to 1991.