2024 NUCJ 2, 2024 NUCJ 2

Nunavunmi Maligaliuqtiit NUNAVUT COURT OF JUSTICE Cour de justice du Nunavut Citation: Kitikmeot Inuit Association and Paul Emingak v. Dyno Nobel (Nunavut) Inc., Dyno Nobel Canada Inc. and The Attorney General of Canada, Shear Diamonds Ltd., Shear Diamonds (Nunavut) Corp., 2024 NUCJ 02 Date: 20240111 Docket: 23-20-291-CVC Registry: Iqaluit Plaintiff(s): Kitikmeot Inuit Association and Paul Emingak -and- Defendant(s): Third Parties: Dyno Nobel (Nunavut) Inc., Dyno Nobel Canada Inc. -and- The Attorney General of Canada, Shear Diamonds Ltd., Shear Diamonds (Nunavut) Corp.

Before: The Honourable Madam Justice Cooper Counsel (Plaintiffs): Counsel (Defendants): Counsel (Third Parties): Did not appear. S. Hansen; C. McLeod J.P. Murdoch-Flowers Location Heard: Date Heard: Iqaluit, Nunavut October 17, 2023 Matters: Application to set aside a Third Party Notice pursuant to Rule 144 of the Rules of the Court REASONS FOR DECISION I. TERMINOLOGY [ 1 ] The following acronyms will be used throughout this decision: Canada: The Attorney General of Canada

Dyno: Dyno Nobel (Nunavut) Inc. and Dyno Nobel Canada Inc. KIA: Kitikmeot Inuit Association & Paul Emingak Shear: Shear Diamonds Ltd. and Shear Diamonds (Nunavut) Corp. Tahera: Tahera Diamond Corporation II. INTRODUCTION [ 2 ] This is an application by the Third Party, Canada, to set aside a Third Party Notice brought against it by the Defendant, Dyno, pursuant to Rule 144 of the Rules of Court. III. PRELIMINARY MATTERS [ 3 ] Prior to proceeding to the merits of the application there are some preliminary matters to be addressed. A. Service On Shear [ 4 ] Shear is also named as a Third Party in the action.

Canada sought direction from the Court regarding service on Shear, as Shear seems to have ceased operations. Direction was given that Shear be served at its registered offices in Alberta and Nunavut, respectively, in accordance with Rule 30(3) of the Rules of Court . [ 5 ] Canada filed proof of service on Shear of the materials in relation to this application, in accordance with the direction given. No one appeared at the hearing on behalf of Shear. [ 6 ] There is no proof of service by Dyno on Shear of the Third Party Notice.

Presumably Shear has notice of the Third Party Notice through service of the materials to set aside the Third Party Notice, however, this does not relieve Dyno of its service obligations. Accordingly, this decision only applies to Canada. Dyno will not be able to proceed against Shear without proof of service. B. Participation of the Plaintiff [ 7 ] Counsel for the Plaintiff, KIA, were present in the gallery of the courtroom during the hearing of the application to set aside the Third Party Notice and confirmed that they took no position on the application. IV.

BACKGROUND [ 8 ] In 2006 the Jericho Diamond Mine (Jericho), operated by Tahera, opened in the Kitikmeot region of Nunavut, approximately 250 km southeast of Kugluktuk. The mine is situated on a parcel of land that is partially Crown land and partly Inuit Owned Land (IOL). The

KIA is the Designated Inuit Organization (DIO) that has ownership of the surface rights of the IOL portion of the mine site. [ 9 ] The mining operation required explosives, which were provided by the Defendant, Dyno. An explosives plant at the mine site was used to mix explosives and was maintained and operated by Dyno. The explosives plant is located on IOL. Whether Dyno owned or continues to own the explosives plant is an issue in the litigation. [ 10 ] A few years into the mining project, Tahera encountered financial difficulties and sought protection from creditors.

Subsequently, Shear purchased the Jericho mine, taking on its property, assets, undertakings, and liabilities. This transaction was confirmed by way of an Order of the Ontario Superior Court. [ 11 ] In 2012 Shear also experienced financial difficulties and suspended the Jericho operations. [ 12 ] In 2014 Canada declared the Jericho mine site abandoned. The Nunavut Court of Justice subsequently vested ownership in Canada of all real and personal property held by Shear. [ 13 ] Security for restoration [1] of the Jericho site was taken at various stages throughout the life of the mine.

At this time, those securities are held by Canada. [ 14 ] The regulatory approval process for a mine site involves several institutions of public government. However, security for site restoration is held and managed by Canada, regardless of which institution requires the security. The process is further complicated if the project is wholly or partially on IOL, as the DIO and the project proponent may enter into agreements for compensation and restoration. [ 15 ] Canada has undertaken restoration on the Crown land portion of the Jericho mine site.

It has not undertaken any restoration of the mine site on IOL. [ 16 ] The issue in the litigation is whether Canada has an obligation to use the securities to restore all of the Jericho mine site, both Crown land and IOL. Dyno’s position is that Canada does have such an obligation. That is the basis of the Third Party Notice. V. THE LAW SUIT A. Statement of Claim [ 17 ] The KIA has brought an action against Dyno for its failure to remove the explosives plant and restore the property. The KIA alleges: i.

Negligence [ 18 ] The KIA alleges Dyno owes a duty of care to the KIA and must remove the explosives plant infrastructure and restore the site. They say that Dyno’s failure to do so constitutes negligence. ii. Trespass & Breach of Nunavut Land Claims Agreement (NLCA)

[ 19 ] The KIA alleges that the continued presence of the explosives plant on IOL, without the consent of the KIA, constitutes a trespass and a breach of the NLCA and that the KIA is entitled to compensation. iii. Statutory Liability [ 20 ] The KIA alleges that Dyno is in contravention of legislative provisions as follows:

a) Nunavut Waters and Nunavut Surface Rights Tribunal Act , SC 2002, c 10 ( NWSRTA ) [ 21 ] The KIA alleges that the explosives plant constitutes the deposit of waste by Dyno and as such, affects the right of Inuit to water on IOL that is substantially unaffected in quality and quantity. Further, it is alleged that Dyno failed to report the deposit of waste as required, thereby breaching the Act .

b) Environmental Protection Act , RSNWT (Nu) 1988, c E-7 , ( EPA ) [ 22 ] The KIA alleges that the explosives plant site is unsightly and therefore in contravention of the Act .

c) Environmental Rights Act , RSNWT (Nu) 1988, c 83 (Supp ), ( ERA ) [ 23 ] The KIA, and particularly the Plaintiff Mr. Emingak, relies upon s. 6 of the Act which provides each citizen with the right to bring an action for the release of contaminants into the environment. B. Statement of Defence [ 24 ] Dyno has filed a Defence to the Statement of Claim. [ 25 ] In its’ Statement of Defence Dyno alleges that securities for restoration were required by the Nunavut Water Board (NWB), the KIA, and Canada.

They allege that Canada holds all the securities and is responsible for restoration of the entire Jericho site. [ 26 ] Dyno further alleges that restoration and compensation requirements were addressed in a lease between the KIA and Tahera and in an Inuit Impact Benefits Agreement (IIBA) between the KIA and Tahera. [ 27 ] Alternatively, they argue that Shear, as the most recent occupier of the land, is responsible for removal of the explosives plant and restoration of the site. [ 28 ] Dyno also alleges that the 2014 vesting order of the Nunavut Court of Justice had the effect of transferring ownership of the explosives plant to Canada and that, as owner, Canada has responsibility for its removal. [ 29 ] Dyno alleges that Canada has made restoration efforts on only that part of the Jericho site that is on Crown land, ignoring the parcel that is on IOL.

It is Dyno’s position that Canada has a responsibility to restore the entire mine site, including that portion on IOL. [ 30 ] It is on these bases that Dyno issued a Third Party Notice to Canada and Shear. VI. THIRD PARTY NOTICE AND POSITION OF THE

PARTIES A. Dyno [ 31 ] Dyno advances the following bases for liability on the part of Canada; • tort liability for trespass, as owner of the explosives plant; • statutory liability for trespass, as owner of the explosives plant; • negligence for mismanagement of the restoration securities; and • breach of trust with respect to the restoration securities. [ 32 ] The first two bases for liability turn on Dyno being successful in their arguments that Canada is owner of the explosives plant.

If successful in their argument that Canada is the owner of the explosives plant pursuant to the 2014 vesting Order, Dyno argues that it would follow that Canada is the trespasser and as such, has both tort and statutory liability. [ 33 ] Dyno asserts that Canada has acted negligently in its management of the restoration project and the security funds over which it has control. [ 34 ] Dyno also asserts that the restoration securities are held by Canada in a constructive trust.

A constructive trust arises by operation of law and is founded on the concept of unjust enrichment; one party unjustly benefitting to the detriment of another party. Dyno argues that by directing the funds to restoration on only those lands which Canada owns, Canada has benefitted, and has done so at the expense of the KIA and those who may be responsible for restoration of the IOL. B. Canada [ 35 ] Canada asserts essentially two propositions in support of its motion to set said the Third Party Notice:

i) There is a “central contradiction” in the position of Dyno in that they say they are not owners of the explosive plant. Accepting this to be true, Dyno has a complete defence to the claim by the KIA and therefore, no claim over against Canada; and ii) The essential requirements for a trust do not exist. VII. ANALYSIS [ 36 ] The Rules of the Nunavut Court of Justice provide for Third Party Notices as follows: 142.

(1) A defendant may serve a third party notice on any person, whether or not the person is already a party to the action, where the defendant claims against that person that

a) he or she is entitled to contribution or indemnity;

b) he or she is entitled to any relief or remedy that is related to or connected with the original subject matter of the action and that issubstantially the same as some relief or remedy claimed by the plaintiff; or

c) any question or issue relating to or connected with the original subject matter is substantially the same as some question or issuearising between the plaintiff and the defendant and should properly be determined, not only as between the plaintiff and the defendant,but also as between the plaintiff and the defendant and the third party, or between any of them. (Rule 142) [37] A Defendant filing a Third Party Notice stands in the place of a plaintiff vis a vis the third party.

The Defendant may be able tobring a separate claim against the third party for contribution or indemnification or may assert a different cause action as between thedefendant and the third party than the cause of action between the plaintiff and the defendant, as long as the issues are related and arisefrom the same transaction. [38] Bringing such proceedings as a third party claim reduces multiplicity of proceedings, provides for a more efficient use of resources,and avoids inconsistent judgments. [39] As stated in McNaughton v Baker [1988] CanLii 3036 BCCA: [14] Third party pleadings function as a special type of statement of claim.

Indeed, the claim they embody could be brought byseparate action. But to avoid a multiplicity of proceedings, the rules permit the claim to be made in the action which has beencommenced against the defendant.

The object of permitting third party proceedings to be tried with the main action is to provide a singleprocedure for the resolution of related questions, issues or remedies, in order to avoid multiple actions and inconsistent findings, toprovide a mechanism for the third party to defend the plaintiff's claim, and to ensure the third party claim is decided before a defendantis called upon to pay the full amount of any judgment.

The avoidance of a multiplicity of proceedings is fundamental to our rules of civilprocedure. [40] A third party may apply to set aside a Third Party Notice pursuant to Rule 144 of the Rules of Court: A third party, at any time before he or she defends, or the plaintiff, at any time after service of a third party notice, may move to set thethird party notice aside. [41] The bases upon which pleadings may be set aside are provided for in Rule 129: The Court may, at any stage of a proceeding, order that

a) any pleading in the action be struck out or amended, on the ground that i)it discloses no cause of action or defence, as the case may be… [42] The well-established test to be applied in determining whether the pleadings disclose a cause of action is as follows: … assuming that the facts as stated in the pleadings can be proved, is it “plain and obvious” that the pleadings disclose no reasonablecause of action (Hunt v Carey Canada Inc., SCC). [43] The test is not an easy one for the third party to succeed upon. In Odhavji Estate v.

Woodhouse, 2003 SCC 69, [2003] 3 SCR 263at 277 the Supreme Court of Canada stated as follows in regards to striking a third party pleading: The test is a stringent one. The facts are to be taken as pleaded. When so taken, the question that must then be determined is whether …itis “plain and obvious” that the action must fail. It is only if the statement of claim is certain to fail because it contains a “radical defect”that the plaintiff should be driven from the judgment. See also Attorney General of Canada v. Inuit Tapirisat of Canada,

(SCC), [1980] 2 S.C.R. 735. [44] I will first address the “central contradiction”, as it underpins Canada’s position throughout. [45] In my view, there are two frailties with this argument. [46] First, Dyno does not put forward as a fact, which must be accepted as true for the purpose of this application, that it is not theowner of the explosives plant.

While Dyno will argue at trial that it is not the owner of the explosives plant, it remains to be seenwhether such a defence will be successful. [47] The structure of the pleadings supports the conclusion that the assertion of ownership of the explosives plant lies with Canada andnot Dyno is presented as a defence and not as an assertion of fact. [48] In the Third Party Notice, Dyno sets out a Statement of Facts at paragraphs 4 to 19.

While the Statement of Facts (Facts) allegesthat Canada has assumed responsibility for restoration of the mine site, the Facts do not specifically address the issue of ownership of theexplosives plant. [49] The issue of ownership of the explosives plant is addressed in the

section of the Third Party Notice where the legal basis for theThird Party Notice is set out. This

section essentially sets out the defences which Dyno will rely upon, and includes arguments in thealternative, as is common. [50] The second concern with the “central contradiction” argued by Canada, is that, focusing as it does on the question of ownership, itfails to address the issue of restoration of the site. Even if it were established that Dyno is the current owner of the explosives plant, is italso clear and obvious that they are solely liable for restoration of the site, given that some of the contamination may have come fromand may continue to come from adjacent land?

In my view, it is not. [51] This difficulty with Canada’s position addresses the viability of the Third Party Notice as it relates to the claim over for trespass. Itdoes not however address the Third Party Notice as it relates to Canada’s use and management of the restoration security funds. [52] Dyno asserts that Canada has acted negligently in its management of the restoration project and the security funds over which ithas control. [53] To establish negligence, it must first be established that a duty of care exists.

In determining whether there is a duty of care, thecourt must consider the foreseeability of harm and the proximity of the relationship between the parties. If satisfied that there isreasonable foreseeability of harm and that the relationship is sufficiently proximate, the court must consider if there are public policyreasons for not recognizing a duty of care (Cooper v. Hobart 2001, SCC 79). [54] The fact that the nature of the alleged tort is not one yet recognized in law is not determinative of the issue as the categories of tortsis not closed (Hill v.

Hamilton-Wentworth Regional Police Services Board 2007 SCC 41 , [2007] S.C.J. No. 41). [55] The analysis which must be applied is (Cooper v. Hobart, 2001 SCC 79, [2001] SCR 537, paragraph 30): 1. Do the circumstances disclose reasonable foreseeability of harm and proximity sufficient to establish a prima facie duty of care; and 2. If the answer to #1 is yes, are there reasons, notwithstanding the proximity, that liability should be denied?

A. Reasonable Foreseeability of Harm [ 56 ] If there was a failure to manage the restoration project in such a way that the entire mine site was restored, it was foreseeable that the users and owners of the non-restored land would be harmed. [ 57 ] If it is found that the securities which are currently held by Canada were taken as security for remediation of the entire mine site, and not just the Crown owned land, failure to use for the securities for that broader purpose had the potential to harm former users, including Dyno, who might also be responsible for restoration efforts. B.

Proximity of Relationship [ 58 ] If there are analogous categories in which sufficient proximity has been previously identified to establish a duty of care, then proximity of relationship will be established. If there are no analogous categories, then the court must consider the nature of the relationship between the parties. C. Nature of Relationship [ 59 ] Dyno has had, and may continue to have, responsibilities in relation to the Jericho mine site. As holder of the restoration securities, Canada has responsibilities with respect to the site.

They have a shared interest in the same physical property. [ 60 ] The restoration work undertaken by Canada is being done using the funds secured specifically for the Jericho mine project. The work is being done following the closure and abandonment of the mine, without any intervening uses or users. There is proximity in time. [ 61 ] This mutual obligation regarding the same property and arising from the same use of the property may be found to create a relationship that is both close and direct and, thus, a duty of care. D.

Public Policy [ 62 ] Assuming that a duty of care can be established, it is not apparent that public policy arguments such as the availability of an alternate remedy or the creation of an unlimited class of plaintiffs, come into play to disallow recognition of the duty of care. Further, public policy reasons for not recognizing a duty of care have not been advanced by Canada. [ 63 ] At this stage of the proceedings, it is not necessary for me to determine whether there is a duty of care and reasonable foreseeability of harm, and therefore, potential liability for negligence.

The question which must be asked is whether it is plain and obvious that a duty of care cannot be established. I am unable to make such a conclusion. E. Breach of Trust [ 64 ] Dyno also asserts that the restoration securities are held by Canada in a constructive trust. A constructive trust arises by operation of law and is founded on the concept of unjust enrichment; one party unjustly benefitting to the detriment of another party.

Dyno argues that by directing the funds to restoration on only those lands which Canada owns, Canada has benefited, and has done so at the expense of the KIA and those who may be responsible for restoration of the IOL.

[65] This position is somewhat complicated by representations made both by Canada and by the KIA at the NWB hearings. A review oftheir positions regarding restoration security suggests that each of them were concerned only with those waters and lands which theyowned, with the KIA representing to the NWB that it held sufficient security pursuant to its lease agreement with Shear to provide for thereclamation of IOL. [66] However, a fragmented approach was not the approach taken by the NWB.

In its decision, the NWB made it clear that its approachto restoration is a holistic one and that its concern is with ensuring that there is sufficient security, through all means, when takentogether, to ensure that overall restoration of the site has been addressed. [67] The area of environmental law and in particular, legal principles relating to responsibility for abandoned mines is an evolving areaof the law. While the concept of a constructive trust in relation to restoration securities may not be well developed, I am unable toconclude that it is plain and obvious that the action cannot succeed. VIII.

CONCLUSION [68] The fact that the action involves novel areas of the law and legal arguments which may be difficult to establish and which mayultimately be unsuccessful, is not a basis for striking the pleadings(Guinan v Northwestel Inc. (NWT SC), [1997]NWTR 149).. [69] The law must be permitted to develop and respond to evolving social conditions and expectations. The common law developsincrementally and starts at the trial level. [70] For pleadings to be struck, it must be clear that there is no cause of action and that the action will not be successful. As stated inGroves v.

Yukon (Ministry of the Environment) 2022 YKCA 8, paragraph 14, “when a matter calls for fact specific adjudication, requiresan analysis of unsettled law, and involves complex and competing positions even at the interlocutory stage, the unmeritorious nature ofthe claim is anything but plain and obvious”. [71] Further, in keeping with the objectives of the Third Party Notice rule, it is preferable that issues that are substantially the same andarise from the same transaction should be determined in one proceeding. Clearly there are related issues as between the KIA, Dyno, andCanada.

There is no question that Canada has responsibility or has taken on responsibility for some aspects of the mine site restoration.The issue is the extent and scope of that responsibility. It is preferable that the obligations of all the parties in relation to the mine site bedetermined in one proceeding. This promotes the goal of both efficiency and timeliness and avoids conflicting judgments. [72] The test for striking pleadings is not met. The application to set aside the Third Party Notice is dismissed. [73] The defendant, Dyno, is entitled to its costs on this application.

Dated at the City of Iqaluit this 11th day of January, 2024. ___________________ Justice S. Cooper Nunavut Court of Justice