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Indigenous - Surrender. Kahkewistahaw First Nation v. Canada (Crown-Indigenous Relations)
In Kahkewistahaw First Nation v. Canada (Crown-Indigenous Relations) (Fed CA, 2023) the Federal Court of Appeal considered a JR of decisions of the Specific Claims Tribunal, here addressing surrender of land emanating from 1944 and related Crown fiduciary duties.
In these quotes the court canvasses Specific Claims Tribunal (SCT) doctrine on fiduciary duties in the context of land surrender:(2) Precedents from the Tribunal
[78] I turn next to briefly review relevant precedents from the Tribunal, itself.
[79] The Tribunal has recognized many times that the obligations imposed on the Crown when reserve land is surrendered go beyond preventing exploitative bargains and accepting a surrender that the First Nation has consented to sign. These additional obligations include, among other things, the need for full disclosure to the First Nation by the Crown of all relevant facts that the Crown has knowledge of prior to taking the surrender: see e.g. Metlakatla Indian Band v. His Majesty the King in Right of Canada, 2022 SCTC 6 at paras. 186-189, 194 [Metlakatla]; Makwa Sahgaiehcan First Nation v. Her Majesty the Queen in Right of Canada, 2019 SCTC 5 at para. 144 [Makwa Sahgaiehcan]; Lac La Ronge Band and Montreal Lake Cree Nation v. Her Majesty the Queen in Right of Canada, 2014 SCTC 8, aff’d 2015 FCA 154 at para. 164.
[80] In all of the foregoing cases, the Tribunal found the Crown breached the fiduciary duty it owed to Indigenous Peoples, in part because it failed to disclose or consult on facts the Crown had knowledge of that were relevant to the decision to surrender. As the Tribunal noted in Metlakatla, “the failure by Canada to offer disclosure of material facts to [a] Band” is “a failure to act with loyalty and good faith towards [that] Band”: see para. 340.
[81] Where there is a failure to disclose relevant facts, any consent given to the surrender is not an informed one, and therefore cannot be valid. This is because “where actions are a matter of choice, the exercise of an actor’s autonomous will depend on the actor’s knowledge of the available choices”: Makwa Sahgaiehcan, at para. 149.
[82] Where appropriate disclosure has not been made, the Tribunal has held that the burden falls on the Crown to establish that the First Nation would have suffered the same loss regardless of the breach. In in Doig River First Nation and Blueberry River First Nations v. Her Majesty the Queen in Right of Canada 2018, SCTC 5, the Tribunal outlined the applicable principles as follows:[161] ... .Where the breach of duty includes a failure to inform the beneficiary about important aspects of the impugned transaction, the principle in Brickenden, as interpreted in Hodgkinson, applies. The Court in Brickenden at page 469 said:When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constitutent’s [sic] action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosure facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant. [162] In Hodgkinson, the Supreme Court of Canada framed the principle in Brickenden as a reverse onus: “…the onus is on the defendant to prove that the innocent victim would have suffered the same loss regardless of the breach…”; the defendant must provide “concrete evidence”; and, “mere ‘speculation’” is inadequate (Hodgkinson at para 76). The focus of the inquiry then is whether the ill-informed “constituent” would have continued with the deal if properly informed. [83] The Tribunal has also found that where there is a change in circumstances relevant to a decision to surrender or to the sale of resources harvested from reserve lands, the Crown must consult with the First Nation before proceeding: see especially Doig River First Nation and Blueberry River First Nations v. Her Majesty the Queen in Right of Canada, 2015 SCTC 6 at paras. 155, 168 [Doig River 2015]; Huu-Ay-Aht First Nations v. Her Majesty the Queen in Right of Canada, 2014 SCTC 7 at paras. 72, 86-87, 104 [Huu-Ay-Aht].
[84] As will soon become apparent, it is my view that the Tribunal’s failure to recognize the foregoing principles drawn from the relevant court and Tribunal cases renders its decision in the case at bar unreasonable. . Kahkewistahaw First Nation v. Canada (Crown-Indigenous Relations)
In Kahkewistahaw First Nation v. Canada (Crown-Indigenous Relations) (Fed CA, 2023) the Federal Court of Appeal considered a JR of decisions of the Specific Claims Tribunal, here addressing surrender of land emanating from 1944 and related Crown fiduciary duties.
In these quotes the court canvasses fiduciary duty court case law in the important indigenous context:(1) Precedents from the Courts
[60] In Williams Lake 2018 SCC, the Supreme Court of Canada explained that there are two different ways in which a fiduciary obligation may arise between the Crown and Indigenous peoples. Writing for the majority, Chief Justice Wagner stated as follows at paragraph 44:A fiduciary obligation may arise from the relationship between the Crown and Indigenous peoples in two ways. First, it may arise from the Crown’s discretionary control over a specific or cognizable Aboriginal interest: Manitoba Metis Federation, at paras. 49 and 51; Wewaykum, at paras. 79-83; Haida Nation, at para. 18; T.R., at para. 180-81. Because this obligation is specific to the relationship between the Crown and Indigenous peoples, it has been characterized as a “sui generis” fiduciary obligation: Wewaykum, at para. 78; Guerin, at p. 385; Sparrow, at p. 1108. Second, a fiduciary obligation may arise where the general conditions for a private law ad hoc fiduciary relationship are satisfied — that is, where the Crown has undertaken to exercise its discretionary control over a legal or substantial practical interest in the best interests of the alleged beneficiary: Manitoba Metis Federation, at para. 50; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261, at para. 36; T.R., at paras. 182 and 217. [61] As noted in Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, [2013] 1 S.C.R. 623 at paragraph 50 and Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261 [Elder Advocates], at paragraph 36, a private law ad hoc fiduciary relationship requires that the following conditions be met:(1) an undertaking by the alleged fiduciary to act in the best interests of the alleged beneficiary or beneficiaries; (2) a defined person or class of persons vulnerable to a fiduciary’s control (the beneficiary or beneficiaries); and (3) a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary’s exercise of discretion or control. [62] The duties cast upon an ad hoc fiduciary are those of utmost loyalty and good faith, requiring the fiduciary to act in the best interests of the beneficiary and no other: see Elder Advocates at para. 43, citing Timothy G. Youdan, ed., Equity, Fiduciaries and Trusts (Royal Society of Canada, 1989) at p. 27; Williams Lake 2018 SCC at para. 165 (Brown J.’s dissenting reasons). Given their multifaceted obligations and responsibilities, as was noted at para. 37 of Elder Advocates, governments will not owe private law duties of an ad hoc fiduciary in many circumstances.
[63] The sui generis fiduciary duty owed to Indigenous people, on the other hand, has been held to exist whenever the Crown has discretionary control over a cognizable Aboriginal interest, and particularly with respect to the surrender and expropriation of reserve lands.
[64] The sui generis fiduciary duty owed to Indigenous peoples in respect of surrendered reserve lands was first recognized by the Supreme Court of Canada in Guerin v. The Queen, 1984 CanLII 25 (SCC), [1984] 2 S.C.R. 335; Jack Woodward, Aboriginal Law in Canada (Proview) at § 3:57 at paras. 3.1300, 3.1310; Leonard I. Rotman “Conceptualizing Crown-Aboriginal Fiduciary Relations,” in Law Commission of Canada, In Whom We Trust: A Forum on Fiduciary Relationships (Toronto: Irwin, 2002) at 26. There, the Court found that the Crown breached its fiduciary duty to the Band when it leased surrendered reserve lands on less favourable terms than were discussed with the Band and failed to disclose its inability to have the lessee agree to the terms discussed with the Band. Rather than proceeding to sign the lease, the Supreme Court held that the Crown ought to have instead disclosed to the Band its inability to obtain the terms discussed with the Band and should have sought new instructions before signing a lease. Even though the terms in issue were only discussed orally and were not incorporated into the terms of the surrender, the Court held that the Crown could not rely on the written terms contained in the formal surrender document. Writing for the majority in Guerin, Dickson J. (as he then was) stated at pp. 388-389:Nonetheless, the Crown, in my view, was not empowered by the surrender document to ignore the oral terms which the Band understood would be embodied in the lease. The oral representations form the backdrop against which the Crown's conduct in discharging its fiduciary obligation must be measured. They inform and confine the field of discretion within which the Crown was free to act. After the Crown's agents had induced the Band to surrender its land on the understanding that the land would be leased on certain terms, it would be unconscionable to permit the Crown simply to ignore those terms. When the promised lease proved impossible to obtain, the Crown, instead of proceeding to lease the land on different, unfavourable terms, should have returned to the Band to explain what had occurred and seek the Band's counsel on how to proceed. The existence of such unconscionability is the key to a conclusion that the Crown breached its fiduciary duty. Equity will not countenance unconscionable behaviour in a fiduciary, whose duty is that of utmost loyalty to his principal. [65] In Blueberry River, the Band surrendered its mineral rights and reserve lands to the Crown to use the funds obtained to purchase alternate lands closer to its hunting grounds. The terms of the surrender for the mineral rights were for them to be leased and the terms of the surrender of the lands were for lease or sale. The Court found no breach of fiduciary duty in respect of the surrender because its terms were fully discussed and understood by the Band. Importantly, the option of leasing was shown to have been fully discussed with the Band. However, the Court went on to find a breach of fiduciary duty in respect of the Crown’s failure to reserve the mineral rights in the eventual sale in circumstances where the Crown’s usual practice was to reserve the mineral rights in all sales of Crown lands.
[66] On the issue of the surrender, in her oft-cited concurring reasons, McLachlin J. (as she then was) noted that, while the Band had trusted the Crown to provide it with information as to its options and their foreseeable consequences, the Band had not abdicated its decision making power in respect of the surrender. In the circumstances, the Court found that the scope of the fiduciary duty owed by the Crown in respect of the surrender was limited to preventing an exploitative bargain as opposed to preventing the sale. The Band had argued that the Crown had an obligation to prevent the surrender in circumstances where, with the decline of hunting and trapping and the subsequent discovery of oil and gas on the former reserve, hindsight showed the decision to surrender to have been unfortunate. The Court rejected this contention. McLachlin J. noted at paragraph 35:My view is that the Indian Act's provisions for surrender of band reserves strikes a balance between the two extremes of autonomy and protection. The band's consent was required to surrender its reserve. Without that consent the reserve could not be sold. But the Crown, through the Governor in Council, was also required to consent to the surrender. The purpose of the requirement of Crown consent was not to substitute the Crown's decision for that of the band, but to prevent exploitation. As Dickson J. characterized it in Guerin (at p. 383):
The purpose of this surrender requirement is clearly to interpose the Crown between the Indians and prospective purchasers or lessees of their land, so as to prevent the Indians from being exploited.
It follows that under the Indian Act, the Band had the right to decide whether to surrender the reserve, and its decision was to be respected. At the same time, if the Band's decision was foolish or improvident -- a decision that constituted exploitation -- the Crown could refuse to consent. In short, the Crown's obligation was limited to preventing exploitative bargains. [67] Gonthier J., who penned the majority reasons, noted that he would have been “reluctant to give effect” to the surrender if he thought that the “Band’s understanding of its terms had been inadequate, or if the conduct of the Crown had somehow tainted the dealings in a manner which made it unsafe to rely on the Band’s understanding and intention” (at para. 14).
[68] The failure to reserve the mineral rights, on the other hand, was found to be a breach of fiduciary duty because the Crown failed to exercise ordinary prudence when, through mistake, it neglected to follow its usual practice of reserving the mineral rights from the sale. In the words of McLachlin J. at paragraph 104:The matter comes down to this. The duty on the Crown as fiduciary was "that of a man of ordinary prudence in managing his own affairs": Fales v. The Crown Permanent Trust Co., 1976 CanLII 14 (SCC), [1977] 2 S.C.R. 302, at p. 315. A reasonable person does not inadvertently give away a potentially valuable asset which has already demonstrated earning potential. Nor does a reasonable person give away for no consideration what it will cost him nothing to keep and which may one day possess value, however remote the possibility. The Crown managing its own affairs reserved out its minerals. It should have done the same for the Band. [69] Wewaykum also concerned reserve lands. There, the Supreme Court of Canada clarified that a fiduciary duty does not cover all aspects of the relationship between the Crown and Indigenous peoples and does not necessarily arise before reserve creation: see para. 81. The Court held that, depending on the circumstances, a fiduciary relationship can arise prior to reserve creation, where its scope is limited to the obligations of good faith, providing full disclosure with respect to the subject matter, and acting with ordinary prudence. However, after a reserve is created, the scope of the Crown’s obligations are expanded to include protection of Indigenous interests in reserve land from exploitative bargains: see paras. 98-99.
[70] In Williams Lake 2018 SCC, Chief Justice Wagner, writing for a majority of the Supreme Court, described the scope of the sui generis fiduciary duty owed to Indigenous peoples, as developed through the case law, in the following terms at paragraph 46:A fiduciary obligation requires that the Crown’s discretionary control be exercised in accordance with the standard of conduct to which equity holds a fiduciary (Guerin, at p. 384; Wewaykum, at para. 80). This is embodied, for example, in the fiduciary duties of loyalty, good faith and full disclosure. The standard of care to which a fiduciary is held in its pursuit of the beneficiary’s interests is “that of a man of ordinary prudence in managing his own affairs”: Blueberry River Indian Band v. Canada (Department of Indian Affairs and Northern Development), 1995 CanLII 50 (SCC), [1995] 4 S.C.R. 344, at para. 104 (McLachlin J., as she then was), citing Fales v. Canada Permanent Trust Co., 1976 CanLII 14 (SCC), [1977] 2 S.C.R. 302, at p. 315; Wewaykum, at para. 94. [71] In Southwind, the most recent decision of the Supreme Court concerning fiduciary duties owed to Indigenous peoples, Karakatsanis J., writing for the majority, described the nature of the ad hoc fiduciary duty owed by the Crown to Indigenous peoples with respect to reserve lands as follows at paragraphs 63-64:In a case involving reserve land, the sui generis nature of the interest in reserve land informs the fiduciary duty. Reserve land is not a fungible commodity. Instead, reserve land reflects the essential relationship between Indigenous Peoples and the land. In Osoyoos, Iacobucci J. wrote that Aboriginal interests in land has an “important cultural component that reflects the relationship between an aboriginal community and the land and the inherent and unique value in the land itself which is enjoyed by the community” (para. 46). The importance of the interest in reserve land is heightened by the fact that, in many cases such as this one, the reserve land was set aside as part of an obligation that arose out of treaties between the Crown and Indigenous Peoples.
The fiduciary duty imposes the following obligations on the Crown: loyalty, good faith, full disclosure, and, where reserve land is involved, the protection and preservation of the First Nation’s quasi-proprietary interest from exploitation (Williams Lake, at para. 46; Wewaykum, at para. 86). The standard of care is that of a person of ordinary prudence in managing their own affairs (Williams Lake, at para. 46). In the context of a surrender of reserve land, this Court has recognized that the duty also requires that the Crown protect against improvident bargains, manage the process to advance the best interests of the First Nation, and ensure that it consents to the surrender (Blueberry River Indian Band v. Canada (Department of Indian Affairs and Northern Development), 1995 CanLII 50 (SCC), [1995] 4 S.C.R. 344, at paras. 35 and 96). In an expropriation, the obligation to ensure consent is replaced by an obligation to minimally impair the protected interest (Osoyoos, at para. 54).
[Emphasis added.] [72] In Southwind, the Supreme Court also underscored that a breaching fiduciary who fails to disclose material facts is prevented by what has been called the “Brickenden rule” from arguing that the outcome would have been the same regardless of whether the facts were disclosed, citing to Brickenden v. London Loan & Savings Co. [1934] 3 D.L.R. 465 (P.C.), 1934 CanLII 280 (UK JCPC) (at para. 82).
[73] One other court decision merits mention, namely, the decision of our Court in Semiahmoo Indian Band v. Canada (C.A.), 148 D.L.R. (4th) 523, 1997 CanLII 6347 (FCA) [Semiahmoo]. There, this Court found a breach of fiduciary duty when the Crown requested the surrender of land to expand a customs facility without any definite plans to construct the facility. This Court upheld the trial judge’s finding that the initial surrender as well as a failure to re-convey the land when the Band requested a re-conveyance were both breaches of fiduciary duty by the Crown. Importantly for our purposes, this Court confirmed that the Crown’s post-surrender fiduciary obligations required it to consider and adjust to changed circumstances, which in that case, involved a request by the Band that the land be re-conveyed back to Band when it was no longer needed for the purposes it was surrendered.
[74] From the foregoing cases, the following principles emerge of relevance to the instant case.
[75] First, the nature of the sui generis fiduciary duty owed by the Crown to Indigenous peoples in the context of a surrender of reserve land is multifaceted. The obligations imposed on the Crown in such circumstances include duties of loyalty, good faith, full disclosure, protection of the First Nation’s interest in the reserve lands from exploitative or improvident bargains, managing the process in the best interests of the First Nation, and ensuring that the First Nation consents to the surrender. These duties require decision makers tasked with assessing a claim of breach of fiduciary duty to consider factors that go well beyond the existence of consent by the First Nation and whether the bargain was improvident, the only two factors assessed by the Tribunal in the present case.
[76] Second, the terms of the formal written surrender document are not determinative of the scope of the Crown’s fiduciary obligations. Rather, the nature of those obligations will fall to be determined based on all the relevant surrounding circumstances. Sometimes those circumstances may require the Crown, in the discharge of its fiduciary obligations, to go beyond the terms contained in the surrender document and to explore other options.
[77] Third, the Crown’s post-surrender fiduciary obligations may require it to consider and adjust to changed circumstances relevant to the surrender where the surrendered land has not yet been sold. Depending on the facts, the Crown’s fiduciary duties may require it to consult with the First Nation or re-convey to the First Nation lands that have been surrendered and not yet sold.
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