The Québec Superior Court has found Hydro-Québec demonstrated institutional bad faith in its interactions with the Innu First Nation of Uashat and Mani-Utenam, neglecting to honour an agreement in principle made with the community during the development of the La Romaine hydroelectric complex more than a decade ago.
In a fact-heavy judgment, the Court tells the story of the relationship between a Crown corporation, the defendant Hydro-Québec (HQ), and the plaintiffs, the Innu of Uashat and Mani-Utenam, the Takuaika Uashat Mak Mani-Utenam Innu Band and Chief Mike McKenzie (collectively the Innu of UMM or ITUM), as well as the role of the defendants, the Attorney General of Québec and the Attorney General of Canada, in the consultations with the UMM Innu leading to the development of the La Romaine hydroelectric project (the Project).
Factual background
In 2004, HQ began planning a hydroelectric project on the Romaine River. In 2009, the UMM Innu began their proceedings, in which they contested certain aspects of the Project, including the issues related to the transmission lines that would pass through lands they consider to be part of their traditional territory (the La Romaine file).
In early 2014, an Agreement in Principle (AIP) was signed by ITUM and HQ, which aimed to establish a harmonious long-term relationship between the parties and thus put an end to several disputes. HQ required the AIP to be put to a popular vote by referendum within the community. If accepted in a referendum, the AIP was then to be submitted to HQ’s board of directors, and a final agreement drawn up thereafter. The agreement provided for payments totaling $75,101,717 between 2014 and 2073.
HQ did not submit the AIP to its board of directors, despite its acceptance by the community members in a referendum. HQ considered that the dissent of certain families in the community posed an unacceptable level of risk to the Project, and that an agreement resolving all or at least most of the disputes launched by the dissenting families was required to move forward with the AIP.
Nevertheless, the parties attempted to find a solution, one step of which was the settlement of the La Romaine file, involving a payment of $6,630,000 to the UMM Innu in connection with transmission lines for the Project. HQ and the UMM Innu continued to try to finalize the AIP thereafter but, in December 2019, the plaintiffs instituted the proceedings, claiming that HQ is liable for damages as a result of its conduct and institutional bad faith. The UMM Innu also requested that the parties be restored to their former condition prior to signing the AIP.
The Court’s decision
Liability of HQ in private and public law
Given the provisions of the Act that created HQ, the Court concluded that the corporation must respect the principles of the honour of the Crown in the context of the development and operation of a hydroelectric project, where HQ represents the interests of the Québec government in the pursuit of its legislative mission. The Court recognized that, being subject to the obligation to act in accordance with the honour of the Crown, HQ is also subject to the obligation to respect the principles of reconciliation in its relationship with the UMM Innu.
More precisely, this decision confirmed that agents of the Crown such as HQ in this present case may be held liable at two levels:
- The defendant can be found liable under the private law regime and be required to compensate for the prejudice caused to the UMM Innu by the failure to respect the duty of good faith.
- The defendant also may be liable for damages under the public law regime if it is subject to the principles of the honour of the Crown, and if the nature of its relationship with the Innu of UMM engages these principles. The Court here considers that the AIP, given its nature, engages the principle of the honour of the Crown.
Ultimately, according to the Court, HQ’s refusal to compromise in the negotiation of the final agreement constituted not only a breach of the requirements of good faith in private law, but also a breach of the obligation to act in accordance with the honour of the Crown in public law. The honour of the Crown is a principle of public law that is based on a higher standard than the private law obligation of good faith.
Annulment of the settlement
ITUM sought the annulment of the settlement of the La Romaine file for cause of erro, on the grounds of lack of consent, since the conclusion of a final agreement following the AIP was an essential condition of its consent.
Although the Court agreed with HQ that the conclusion of a final agreement, as such, was a future event, it remains that the conclusion of a final agreement was a condition imposed by ITUM for its participation in the overall settlement process, of which the settlement agreement was a part. This condition was present and implicitly accepted by HQ.
Knowing this, the Court determined that it would be unrealistic to consider that the plaintiffs believed that HQ could settle the dispute for a payment of $6,630,000, after having acknowledged in the settlement itself that the sum of $75,101,717 was an appropriate compensation to them for the Project, as stipulated in the AIP.
Moreover, in the context of a negotiation between a developer and an Indigenous community, a transaction that allows the developer, supported by Québec and Canada, to bypass the payment of a sum that all parties recognize as fair compensation for the coveted project, appears to be abusive. Therefore, accepting HQ’s, the Attorney General of Quebec’s, and the Attorney General of Canada’s interpretation that the settlement put an end to any possible claim by the UMM Innu in relation to the Project, would contradict the text of the settlement and counter the foundational principles of Crown-Indigenous relations.
The role of Québec and Canada
In this case, the Court decided that the evidence did not support a finding that Québec, as a government, breached its fiduciary obligations to the UMM Innu between the signing of the AIP and the present proceedings.
In its analysis of Canada’s implications, the Court noted that, during the period relevant to the dispute, Canada did not participate in the negotiations, nor did the UMM Innu or HQ ask it to do so. There is also no evidence that, in the context of this case, Canada attempted to diminish the importance of the UMM Innu land claim. In short, it cannot be said that Canada had a duty to play an active role in the impasse between HQ and the UMM Innu.
Conclusion and damages
According to the Court, HQ’s actions undermined community governance. HQ’s refusal to respect the will of the community not only disregarded Innu culture but, more importantly, empowered certain families in a manner which was unknown to that culture.
HQ is held liable for a total sum of $5 million, which represents the amount that the UMM Innu should have received between the date of signature of the AIP and the initiation of proceedings ($2.5 million), and an additional sum of $2.5 million, awarded in view of HQ’s institutional bad faith and its breach of its duties arising from the honour of the Crown. Despite the annulment of the settlement, the UMM Innu was not ordered to return the proceeds of that settlement to HQ.
Key takeaways
In Innus de Uashat et de Mani-Utenam v. Hydro-Québec, the Superior Court of Québec addressed important legal principles regarding the Crown’s obligations and the behaviour of agents representing the Crown in relations with Indigenous communities.
Firstly, this case is a clear application of the Supreme Court of Canada’s recent teachings in Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan with respect to the dual liability which arises when an agent of the Crown’s actions constitute a breach of the duty to act in good faith under private law and violates the obligation to act in accordance with the honour of the Crown under public law. This dual accountability ensures public authorities or agents of the Crown uphold their duties not only to the general public, but also specifically in their dealings with Indigenous communities, respecting all applicable frameworks.
HQ was found to have engaged in conduct that breached both its duty to act in good faith and its obligation to act in accordance with the honour of the Crown. HQ breached its obligations by refusing to compromise during negotiations for a final agreement with the community. According to the Court, such conduct amounted to a failure to act in good faith in private law and a failure to act honourably in public law, as it demonstrated a disregard for the respect and consideration required in the Crown’s relations with Indigenous people.
Lastly, the Court emphasized the importance of respecting community governance, particularly in the context of the decision-making process. In this case, HQ’s refusal to respect the results of a referendum it had insisted upon violated the community’s self-governance. The Court ruled that HQ should have respected the referendum result, therefore acknowledging that Indigenous communities have the right to determine their own processes and priorities. This failure undermined the principle of reconciliation, reinforcing the need for greater respect and sensitivity in negotiations and relationships between agents of the Crown and Indigenous communities.
