Mining Regulator May Owe Duty to Mine Owners

Last summer, the Supreme Court of British Columbia held that a
mining regulator may, in limited circumstances, owe a duty to pay a mine
owner for its losses suffered as a result of a breach of a duty owed. This
spring, the same court applied the same test to find liability on a regulatory
authority.

In Imperial Metals Corporation v Knight Piesold Ltd. et al,[1] two engineering firms brought a third party proceeding against the BC Ministry of Energy, Mines and Petroleum Resources (“MEM”).  They alleged that MEM owed a duty of care to the mine owner, Imperial Metals, to provide the technical advice and directions it supplied as a part of the approval process for the mine permit, with reasonable care.  MEM was also alleged to owe a duty to take all reasonable steps within its regulatory authority to reduce or eliminate known risks of imminent danger at the mine.

The Province applied to strike the claims on the basis that
they had no merit, alleging the Government did not owe a duty to the mine owner.
 

Justice Branch determined that the claim alleged against the
regulator had enough merit to proceed to trial.[2]
Specifically, he decided that the Province:

1. had a duty to perform its responsibilities
   outlined by statute as mandatory; and
2. may have created an independent duty to the mine
   owner if the Province or its agents performed acts taking it beyond its
   responsibilities imposed by statute, such as actively participating in the
   design or construction of the tailings storage facility of the mine.

Justice Branch further set out a list of “Accepted
Exceptions” of particular conduct which could attract liability to an otherwise
immune regulator:

1. where the regulator steps outside the role of
   the regulator and assumes the role of the designer, developer or advisor to the
   regulated party;
2. where the regulator acquires knowledge of
   serious and specific risks to the person or property of a clearly defined group
   of the class that the statutory scheme was intended to protect;
3. where the regulator makes a specific
   misrepresentation to the regulated party – apart from a regulatory statement –
   that invites reliance, and the regulated party relies on the misrepresentation
   for the purpose for which is was made; or
4. where interactions between the regulator and the
   regulated party give rise to a clear set of expectations that the regulator
   will consider the interests of the regulated party, and the statute does not
   expressly or implicitly exclude consideration of those interests.

The significance of this decision to the mining industry is evident
from the facts of the case from which it arose. The litigation related to the
2014 breach of the tailings storage facility at the Mount Polley mine near
Likely, BC.

In Wu v Vancouver
(City),[3]
a case decided after Imperial Metals,
the BC Court of Appeal made it clear that statutory duties do not in and of
themselves give rise to private duties, especially where interactions with the
public are inherent in the statute. More is required. A private duty of care
will only arise where the public authority and claimant have a relationship of
proximity over and above the regulatory relationship, either by the nature of
specific interactions or from the context of the statute.

In Waterway Houseboats
Ltd. v British Columbia,[4] the
court found a duty of care was owed by the regulator by applying the test from Imperial Metals. At issue was the Province’s
approval of a permit for a privately owned bridge, the improper construction of
which caused flooding to adjacent property. The Court found the Province
breached a private law duty of care to the property owners created when the
Province’s engineer:

1. stepped outside the role of regulator by
   providing advice regarding the construction of the bridge and channel beneath
   it, including its required height;
2. acquired knowledge of serious and specific
   risks of flooding to the adjacent property; and
3. made specific representations to the owners
   about the required bridge height.

The potential for mine owners to claim against regulators is
particularly noteworthy in an industry where limitation of liability clauses
often limit the mine owner’s ability to recover from other parties to a fraction
of the mine owner’s loss. Mine owners may continue to look at their
interactions with their regulator to assess whether there is another party who
may have responsibility to help allay their financial losses.

^{[1] 2018 BCSC 1191.
[2] The nature of the decision in an application to strike the claim necessarily meant that Justice Branch’s did not make a final determination on whether a duty of care was in fact owed or whether the Province breached their duty of care. Rather, the question was whether the claim had a chance of success at trial, if it were to proceed.
[3] 2019 BCCA 23.
[4] 2019 BCSC 581.}