The Manitoba government was within its rights to cancel a $67.5-million payment to the Manitoba Metis Federation connected to future hydroelectric development, the Court of Queen's Bench has ruled.

Chief Justice Glenn Joyal ruled against the MMF in a judgment released on Tuesday.

The Manitoba Metis Federation argued in a two-day hearing in September that the Progressive Conservative government didn't have the right to quash a settlement agreed to by the federation and Manitoba Hydro in 2017.

It said the government's actions were unconstitutional and violated both the contract and Indigenous rights.

The province trashed the agreement in March 2018, with Premier Brian Pallister calling it "persuasion money" and arguing the province shouldn't pay Métis people in exchange for their silence.

He said the agreement was for discussion purposes and wasn't legally binding.

'Lawful and reasonable' exercise

Joyal wrote in his decision that the decision to cancel the deal was a "lawful and reasonable exercise" of cabinet's power to enforce its stewardship role over Hydro.

"I am of the view that using a standard of correctness, the directive falls squarely within cabinet's authority to issue binding legal directives (in this case to Hydro) respecting important matters of policy," Joyal wrote in his decision.

Those matters can include issues of fiscal prudence, he wrote.

The Manitoba Metis Federation was set to receive $67.5 million for its support of hydroelectric projects such as a new transmission line to Minnesota. (John Woods/The Canadian Press)

The Manitoba Metis Federation has had a strained relationship with the province for years.

The province also cancelled an earlier 2014 contract between itself, the Métis federation and Manitoba Hydro. That $20-million deal, dubbed the Turning the Page agreement, was in exchange for the federation's support for several Hydro activities, including the Bipole III transmission line and the Keeyask generation project.