Date: 20100121
Docket: T-1497-07
Citation: 2010 FC 67
Ottawa, Ontario, January 21,
2010
PRESENT: The Honourable Mr. Justice Beaudry
BETWEEN:
TOBIQUE
INDIAN BAND
Applicant
and
HER
MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This
is an application for judicial review of the decision of C. Dougal MacDonald,
A/Regional Director General, Department of Indian and Northern Development
(DIAND) to implement third party management of the Tobique Indian Band (the
Applicant). This decision was communicated to the Applicant on August 9, 2007.
Factual Background
[2]
The
Applicant is a First Nation community in New Brunswick which has
received approximately 14 million dollars annually in funding pursuant to an
agreement with DIAND. In 2007, at the time of the impugned decision, the
Applicant and DIAND were parties to a First Nations Funding Agreement for the
term of April 1, 2005 to March 31, 2008 (the Agreement). It is pursuant to that
Agreement that DIAND took the decision to appoint a third party manager.
[3]
The
financial history leading up to the appointment of the third party management
is long and I will summarize only the relevant facts. Essentially, the
Applicant has been in remedial intervention, a lower level of intervention, for
over 18 years due to defaults in the funding agreements. This remedial
intervention was self-administered and required the Band to develop, implement
and comply with a remedial management plan. During these years, the Applicant’s
cumulative deficit ratio increased. Finally, in December 2005, DIAND required
the Applicant to enter into co-management and the firm of Teed Saunders Doyle
& Co. was hired accordingly.
[4]
Although
a remedial management plan was put in place in January 2006, DIAND requested a
revised plan to address certain concerns about the Applicant’s deficits for
over a year but one was never received. The Applicant did not provide DIAND
with a revised budget or fulfill its reporting requirements for those same
periods.
[5]
Eventually,
in June 2007, the firm of Arbuthnot, MacNeil, Douglas, Dorey and Associates
Ltd. (AMDD) replaced Teed Saunders Doyle & Co. as co-managers with the Applicant.
A new remedial management plan was to be completed by the co-managers by August
31, 2007.
[6]
During
this time, the Applicant was trying to garner support for a financial
restructuring proposal and obtained a proposal from Merchant Capital LLC to
consolidate its debts and obtain additional financial resources for certain
anticipated projects. It seems that at a meeting held on July 12, 2007,
Mr. Ian Gray (then Acting Associate Regional Director of DIAND) expressed his
qualified support for the Merchant Capital proposal.
[7]
A
report entitled “Tobique Co-Management Assessment”, dated July 13, 2007, was communicated
to the parties shortly after that date. This report indicates that the
Applicant’s deficit ratio was 67.2%. It also notes that the current multi-year
funding agreement is set to expire and the Applicant does not meet the criteria
for a further agreement. The report mentions Tobique Economic Development Corp.
Operations (TEDCO) and its 2.1 million dollar liability to the Canada
Revenue Agency along with other debts and losses. It also notes that the
accounting for this corporation is incomplete. Additionally, there are TEDCO
liabilities which have been linked into Band operations and impact on the Band
finances with no notice of these until after the fact. The report also contains
a summary of the Applicant’s cash flow which shows a shortfall of more than six
million dollars and notes that it does not include its obligations to the
Canada Revenue Agency and other obligations such as insurance and health and
safety. It indicates that certain progress has been made by reducing staff and
implementing financial controls and the history of not meeting reporting
requirements needs to be addressed. It also details several observations by
community members and that success is not possible without a collective effort.
[8]
A
representative of DIAND provided affidavit evidence saying that DIAND began to
consider the appointment of a third party manager on or about August 3, 2007
after a series of meetings with AMDD during which it was advised that the
Applicant’s financial situation was more severe than originally thought and
there was a serious likelihood that many lenders would call in their loans.
Furthermore, the Applicant would likely have a serious cash flow problem which
would shortly affect its ability to provide services such as education. The Merchant
Capital proposal was also an area of concern. The Applicant was made aware of
these concerns by AMDD.
[9]
On
August 7, 2007, at a meeting where AMDD was also in attendance, DIAND advised
the Applicant that it intended to implement third party management. It was
following that meeting that DIAND sent the letter of August 9, 2007, via fax,
confirming the decision and setting out the reasons for it.
[10]
This
application for judicial review was filed on August 14, 2007 and concerns the
third party management decision.
Impugned Decision
[11]
The
letter of August 9, 2007 indicates that it is a follow-up to the council
meeting of August 7, 2007, where DIAND advised that it had decided to
implement third party management in order to maintain the provision of essential
services. This was further to the determination that the Applicant was in
default of section 8 of the Agreement. The letter also shows that concern regarding
the financial situation had been communicated for some time as outlined in the
attached correspondence and that the Applicant had been advised numerous times
to take remedial steps. It also mentions that the co-managers have recently
confirmed that any funding is now subject to garnishment from various
creditors. Due to these reasons and the Applicant’s inability to remedy the
defaults, the highest level of intervention is required in order to secure
funding and maintain the provision of programs and services.
[12]
Consequently,
a third party manager is being appointed to administer funding otherwise payable
to the Applicant. The letter also details the process that will be required in
developing a new comprehensive funding arrangement and confirms that the
reporting requirements are continuing.
Questions at issue
[13]
The
parties have raised six questions, two of which are preliminary matters:
a. Should
certain paragraphs of Chief Bear’s affidavit be struck as they contain
irrelevant, new evidence not before the decision maker?
b. Should the
letter written by AMDD’s counsel to correct a statement made during the cross-examination
on affidavits be considered as part of the judicial record?
c. Was the
decision to implement third party management reasonable?
d. Was DIAND in
breach of procedural fairness by failing to give adequate notice to the
Applicant regarding the third party management decision?
e. Did DIAND
have a fiduciary duty towards the Applicant which was breached when it
implemented third party management?
f.
Are
the remedies sought by the Applicant practical and/or available in law?
[14]
The
application for judicial review shall be dismissed for the following reasons.
Relevant Provisions of
the Agreement
[15]
DIAND/Tobique
Funding Agreement for 2005/2006-2007/2008 (March 16, 2005).
8.0 DEFAULT
8.1 The Council will be in default
of this Agreement in the event:
(a) the Council
defaults in any of its obligations set out in this Agreement;
[…]
(c) the Audit indicates
that the Council has incurred a cumulative deficit equivalent to eight (8) % or
more of the Council’s total annual revenues; or
(d) the Minister has a
reasonable belief, based on material evidence, that the health, safety or
welfare of the Members or Recipients is being compromised.
9.0
REMEDIES
ON DEFAULT
9.1 In the event the
Council is in default, the parties will meet to review the situation.
9.2 Notwithstanding
section 9.1, in the event the Council is in default under this Agreement, the
Minister may take one or more of the following actions as may reasonably be
necessary, having regard to the nature and extent of the default:
(a) require the Council
to develop and implement a Remedial Management Plan within thirty (30) days, or
at such other time as the parties may agree upon and set out in writing, but
not to exceed sixty (60) days;
(b) require the Council
to enter into a Co-Management Agreement;
(c) appoint, upon
providing notice to the Council, a Third Party Manager;
(d) withhold any funds
otherwise payable under this Agreement;
(e) required the
Council to take any reasonable action necessary to remedy the default;
(f) take such other
reasonable action as the Minister deems necessary to remedy the default; or
(g) terminate this
Agreement.
Applicant’s
position
Reasonableness
of the decision
[16]
The
Applicant submits that the Minister’s decision to implement third party
management must be held to a standard of reasonableness. It relies on the
Court’s decision in Pikangikum First Nation v. Canada (Minister of Indian
and Northern Affairs), 2002 FCT 1246, 224 F.T.R. 215, where it was held
that the decision to make funding contingent on the Band entering co-management
would be reviewed on a standard of patent unreasonableness. It adds that since
then, the Supreme Court has recast the standard as that of
reasonableness in Dunsmuir v. New Brunswick, 2008 SCC 9,
[2008] 1 S.C.R. 190.
[17]
The
Applicant alleges that the decision was unreasonable for a number of reasons.
Firstly, it argues that it was unreasonable to reject the Merchant
Capital proposal on the basis of unsubstantiated information provided by the
co-manager AMDD. It further contends that the Respondent knew that such
information was being provided without the authority of the Applicant’s Chief
and Council and did not take into account the fact that there was a resolution
by the Applicant allowing for further steps in pursuing the Merchant Capital
proposal (pages 67 and 68, Applicant's record). It also claims that information
about community concerns on the Merchant Capital proposal was received from a
dissident Band councillor and DIAND acted unreasonably by relying on the AMDD
report which was based on this information.
[18]
Secondly,
the Applicant contends that is was unreasonable for DIAND to rely on the
ground that the Applicant’s funds were subject to seizure and garnishment as
this ignores the protection against such actions where the funds are held on a
reserve. The Applicant submits that the funds at issue were located in a
financial institution on the reserve and were exempted from garnishment and
seizure by virtue of section 89 of the Indian Act, R.S.C. 1985, c. I-5
as they would meet the physical situate test as applied in MacDiarmid Lumber
Ltd. v. God’s Lake First Nation, 2006 SCC 58, [2006] 2 S.C.R. 846.
[19]
Thirdly,
the Applicant alleges that it was unreasonable to rely on the AMDD’s
information because it did not reflect any knowledge or consideration of
the good relationship enjoyed by the Applicant and its financial institution
(Peace Hills Trust).
[20]
Fourthly,
it was unreasonable to rely on the AMDD report because the report expressly
included debts of corporate owned entities with the Band’s direct debts. It was
also unreasonable to rely on the AMDD report because it gave no consideration
to the defences that the Applicant had against various creditors or to the
Applicant’s outstanding claim against the province of New
Brunswick.
[21]
Finally,
the Applicant asserts that it was unreasonable for the Respondent to refuse to
accept decisions made by the Applicant; the Respondent could have
challenged those decisions under section 18 of the Indian Act. It points
particularly to the decision to continue the co-management agreement with Teed
Saunders.
Procedural
fairness
[22]
The
Applicant asserts that there is a duty of fairness owed here and that
there was a breach of that duty when, on August 7, 2007, DIAND communicated the
decision to implement third party management shortly after the meeting of July
12, 2007, where the possibility was mentioned but no notice of intent to do so
was given.
[23]
The
Applicant relies on the findings of this Court in Pikangikum First Nation
at paragraphs 93, 101 and 102, where it was held that a duty of fairness was
owed and did require a notice of the alleged defaults before co-management was
imposed. Furthermore, it was held that announcements and statements of
generalities are not sufficient.
Breach of fiduciary duty
[24]
The
Applicant submits that there is a fiduciary duty to help preserve and promote
the self-government of Indian Bands. Although it acknowledges that there is a
lack of judicial precedent for such a finding, the Applicant claims that it was
owed a fiduciary duty of care in the making of the decision to implement third
party management.
Respondent’s Position
Affidavit evidence of
Chief Bear
[25]
The
Respondent urges that paragraphs 7, 8, 9, 10, 11 & 11 of the affidavit of
Chief Bear, dated January 21, 2008, should be struck as they contain new
evidence not before the decision-maker. These paragraphs relate to the
termination of the co-management agreement with AMDD and allegations are made
of underfunding to the Applicant. It submits that this information does not fit
the permitted exceptions and is irrelevant to the decision at bar.
Letter from counsel for
AMDD
[26]
On
March 5, 2008, counsel for AMDD wrote to correct evidence pertaining to the statements
given by Mr. Arbuthnot (from AMDD) on cross examination. It appears that there
were two versions of the co-management assessment prepared by AMDD and that Mr.
Arbuthnot confused the two versions (D-1, pages 54 to 57 and D-2, pages 58 to
62, Applicant's record). The letter indicates that he later realized his
mistake and that the version included in Chief Bear’s affidavit as Exhibit D-1
was the one submitted to DIAND and not Exhibit D-2 he had identified. The
Respondent points out that this is confirmed by Exhibit C to the affidavit of
Dougal MacDonald which contains the report received by DIAND. The Respondent
argues that this would be appropriate and must be accepted in order for the
Court to have the most relevant and accurate information (Pharmacia Inc. v.
Canada (Minister of National Health and Welfare) (1996), 111 F.T.R. 140 at
paragraphs 5-8 (F.C.T.D.) (QL)).
Reasonableness
of the decision
[27]
The
Respondent advances that the applicable standard of review on this
question is reasonableness and notes that the Applicant seems to agree. The
Respondent points to the Court’s decision in Pikangikum First Nation and
to the more recent decision Ermineskin Tribe v. Canada (Minister of Indian
Affairs and Northern Development), 2008 FC 741, 334 F.T.R. 126 where it was
found that DIAND’s decision to apply default provisions under a funding
agreement was reviewable according to the standard of reasonableness.
[28]
As
to the decision itself, the Respondent contends that the decision to invoke
third party management is a discretionary decision of DIAND under section 9 of
the Agreement. Furthermore, it urges that the facts demonstrate the
reasonableness of the decision. Particularly, the fact that the Applicant had
been in default for numerous years for having an unacceptable cumulative
deficit and that even Chief Bear agreed on cross-examination that there were
further defaults to the current Agreement. Also, the Applicant was already in
co-management since 2005 and the co-managers advised that funds were at
risk of seizure. Furthermore, in July 2007, DIAND was informed that the
Applicant’s financial situation was at its worst and DIAND had no way of fully
knowing the financial situation as the Applicant continually failed to provide
necessary information. Finally, despite advances of funds, essential services
were deemed to be at risk.
[29]
The
Respondent also submits that DIAND was entitled to consider and rely on AMDD’s
representations respecting the financial situation as it is the co-manager’s
role to work in conjunction with a Band to fulfill its obligations. The
Respondent points out that the co-managers did not take direction from DIAND,
nor was DIAND a party to the co-management agreement between the Applicant and
AMDD.
[30]
As
for the possible seizure of funds by creditors, the Respondent acknowledges
that this was a specifically articulated concern in the decision letter. It
also acknowledges that generally speaking section 89 of the Indian Act
will exempt such funds from seizure. However, the Respondent argues that case
law has held that Bands can waive this condition (see Tribal Wi-Chi-Way-Win Capital
Corp. v. Stevenson, 2009 MBCA 72, 240 Man.R.
(2d) 122) and that DIAND was informed that funds may be seized pursuant to
terms and condition of a security agreement. Whereas, funds in the hand of
a third party manager are not subject to seizure and thus was a relevant factor
within the discretion of the decision maker in concluding that intervention
should be escalated.
[31]
According
to the Respondent, DIAND knew of the Merchant Capital proposal and the
expressed provisional support by Mr. Gray. Citing affidavit evidence of Dougal
MacDonald, the Respondent claims that discussions were ongoing and the same
decision would have been made regardless of the comments that community members
were fearful of any deals. Furthermore, MacDonald came to his own conclusion
and, notwithstanding the Merchant Capital proposal, it was determined that the
best course of action was the implementation of third party management because
of the high risk to the funding.
[32]
As
for the Applicant’s claims that it was unreasonable to rely on the AMDD report,
the Respondent counters that it was reasonable to rely on the co-managers’ opinion and
its other experiences in dealing with similar situations. Also, it could not
take into account any legal defences towards various creditors and the
outstanding claim against the province until the issues were settled, the
latter could not be considered as receivable and the claims from different
creditors had to be considered as debts. Finally, the Respondent reiterates
that the Applicant failed to provide financial information and it was not
unreasonable for DIAND to proceed without that information despite the
Applicant’s current allegations.
[33]
With
regard to the argument that DIAND acted unreasonably by refusing to accept
decisions without challenging them under the Indian Act, the Respondent
submits that the relevance of this ground has not been established by any
evidence.
Procedural fairness
[34]
The
Respondent holds that the duty of fairness is eminently variable and that its
content is to be decided in the specific context of each case (Knight v. Indian Head School
Division No. 19, [1990] 1 S.C.R. 653 at paragraph 46). Furthermore, having
considered the five factors set out in Baker v. Canada (Minister of
Citizenship and Immigration), [1999] 2 S.C.R. 817 at paragraphs 23 to 27,
the Respondent proposes that there is a minimal procedural fairness requirement
in this context and that any such duty does not require advance notice to the
Applicant.
[35]
The
Respondent argues that when it comes to the nature of the decision, the
decision at bar is more akin to a purely ministerial decision and as such,
should be afforded minimal protection. It is also a policy driven decision
involving considerable discretion and consideration of multiple factors and the
duty of fairness should be relaxed accordingly. Finally, it proposes that to
burden DIAND with an onerous duty of procedural fairness in this context would
limit the Minister’s capacity to ensure that funds are spent for their intended
purpose.
[36]
As
for the nature of the statutory scheme, the Respondent emphasizes that there
are no statutory provisions that dictate how decisions are to be made regarding
funding First Nations. This discretion would suggest minimal procedural
fairness.
[37]
On
the issue of the importance of the decision to the individuals affected, the
Respondent submits that one must consider the interests of all Band members who
benefits from the funds being used for services and programs that will serve
them. DIAND must be able to hold the Band accountable with respect to the use
of public funds for these purposes, again suggesting a low level of procedural
fairness.
[38]
The
Respondent contends that no evidence has been adduced of any contravention as
to procedures or substantive promises that would accord significant procedural
rights as per Baker. Accordingly, the factor of legitimate
expectations would suggest minimal notice is required.
[39]
With
regard to the choices of procedure made by the decision maker, the Respondent proposes
that the terms of the Agreement are relevant to determine the Applicant’s
entitlement to procedural protections. The Respondent claims that the Agreement
does not require advance notice of a decision to implement third party
management, nor does it provide the Applicant with a right to respond to the
reasons or to remedy its defaults.
[40]
No
notice is required under section 9.2(c) (volume 1, page 65, Respondent’s
record) to appoint a third party manager. The Respondent argues that this is in
order to allow for an orderly transfer of funds.
[41]
The
Respondent adds that these factors are not exhaustive and that in this case,
the pressing time constraints should be considered as the situation was
significant and the fear of seizure was urgent. This factor, in conjunction
with the others in Baker, creates a situation where a low level of
procedural fairness is owed.
[42]
Even
if it is found that advance notice is required, the Respondent submits that it
was provided here. Drawing upon the law surrounding employment contracts, the Respondent
holds that any advance notice required by procedural fairness would be
satisfied if it can be demonstrated that the Applicant knew of the risks and
grounds (Knight v. Indian Head School Division No. 19; Pelletier v.
Canada (Attorney General), 2007 FCA, [2007] 4 F.C.R. 81).
[43]
The
Respondent emphasizes that the Applicant continually failed to comply with its
obligations and was aware that intervention measures could escalate pursuant to
the Agreement. Furthermore, the tribunal record shows that numerous meetings
were held with the Applicant where it could have made its position known and it
was advised that third party management was a possibility.
[44]
The
Applicant was under co-management and third party management was the next level
of possible intervention. The Applicant was also aware of the concerns
expressed in the AMDD report and that DIAND had been advised accordingly.
Finally, the Respondent adds that there was an opportunity leading up to the
August 7, 2007 meeting to address the contents of the report and the issues
raised. Consequently, DIAND’s actions were proper and the Applicant was aware
of the risks and grounds upon which the decision is based thus satisfying any
requirement of advance notice.
[45]
The
Respondent distinguishes the case at bar from that in Pinkangikum First
Nation on the ground that the policy in that case required that it be
determined whether the recipient is willing, but lacks the capacity to address
its defaults. Here the policy requires a consideration of the recipient’s willingness
to address the defaults and the evidence shows that the Applicant was given
many opportunities to remedy its defaults and failed to do so. This was
considered in the decision to implement third party management. Also, in the
cited decision, the parties were not subject to an agreement. Consequently,
Justice O’Keefe’s conclusion that the recipient must first know what the
difficulty or default is thus requiring an advance notice does not apply in
this case.
[46]
Based
on all of the above, the Respondent submits that there is a low degree of
procedural fairness owed and that it did not require advance notice.
Alternatively, any such duty was not breached.
Fiduciary
duty
[47]
The
Respondent states that courts have traditionally recognized fiduciary duties
where there is management of Aboriginal lands, where the fiduciary duty
requires the Crown to justify the infringement of a section 35 rights and more
recently where there is a specific Indian interest over which the Crown takes
discretionary control (Guerin v. Canada, [1984] 2 S.C.R. 335; R v.
Sparrow, [1990] 1 S.C.R. 1075; Wewaykum Indian Band v. Canada,
[2002] 4 S.C.R. 245). It submits that none of these situations apply and the
Applicant has not asserted a cognizable Indian interest over which DIAND assumed
discretionary control.
[48]
The
Respondent argues that the Court has already held that there is no link between
the appointment of a third party manager and self-government (Elders Council
of Mitchikanibikok Inik v. Canada (Minister of Indian
Affairs and Northern Development), 2009 FC 374, 343 F.T.R. 298 at paragraph
40). Thus the Applicant’s argument that makes reference to self-government
cannot succeed.
[49]
The
Respondent further alleges that the arguments made by the Applicant on this
issue are the same as those made under other grounds and would be more
appropriately addressed as administrative law issues. Thus, the Court should
follow the more traditional route of applying administrative law in this
context (Tsartlip Indian Band v. Canada (Minister of
Indian Affairs and Northern Development), [2000] 2 F.C. 314 (C.A.)).
Remedies
[50]
The
Respondent submits that the Court should decline to exercise its discretion
with respect to many of the remedies sought by the Applicant in the notice of
application. The Respondents contends that quashing the decision would have
unknown ramifications as it has been over two years since the decision was made
and the evidence shows that, even today, the Applicant is in financial
disarray. As for the declaration sought by the Applicant, it would similarly
serve little purpose as it would leave the parties unclear as to what conduct
they should adopt in light of the unknown changed circumstances.
[51]
The
Respondent further submits that by asking the Court to order co-management, the
Applicant is essentially asking for mandamus but has failed to meet
several parts of the test. Nor would a directed verdict be appropriate because
the current situation is unknown.
[52]
Moreover,
any breach of procedural fairness by failing to give notice was an
inconsequential breach of natural justice and thus, setting aside of the
decision is not required.
[53]
Finally
regarding the claim for damages, the Respondent submits that it is trite law
that such cannot be obtained on judicial review (Al-Mhamad v. Canada (Canadian
Radio-Television and Telecommunications Commission), 2003 FCA 45, [2003]
F.C.J. No. 145 at paragraph 3 (QL)).
Analysis
Should
certain paragraphs of Chief Bear’s affidavit be struck as they contain
irrelevant, new evidence not before the decision maker?
[54]
It
is well established that judicial review of a decision should be conducted
using only the material that that was before the decision maker during the
decision making process unless there is a question of jurisdiction or a breach
of procedural fairness. There is an allegation of a breach of procedural
fairness in the case at bar but paragraphs 7, 8, 9, 10, 11 and 11 do not deal
with that issue. Furthermore, they are irrelevant to the application as a whole
and deal with events that arose after the impugned decision was made and will
therefore be struck out.
Should the letter
written by AMDD’s counsel to correct a statement made during the
cross-examination on affidavits be considered as part of the judicial record?
[55]
The
Respondent has asked the Court to add a letter from AMDD’s counsel in order to
correct a statement made during cross-examination as to which version of a
report was submitted to DIAND. This will not be granted as it will not add to
the record or complete it. The tribunal record provided by DIAND contains a
copy of the report and thus it can easily be ascertained which copy was
received and there is no need to add to the record. This case is not like that
of Pharmacia Inc. on which the Respondent relies. In that case, it was a
question of expert evidence based on speculation and the corrected evidence
provided more certain and specific information. There is no dispute expressed
by the parties as to which version DIAND relied on and I am satisfied that the
record is adequate and complete.
Was the decision to
implement third party management reasonable?
[56]
Both
parties submit that the decision to implement third party management is held to
a standard of reasonableness. I agree with those submissions. In Pikangikum
First Nation, it was held that the appropriate standard of review was
patent unreasonableness. In Dunsmuir, the Supreme Court stated that existing
jurisprudence can offer guidance in establishing the standard of review (at
paragraphs 57 and 62). Also, in Ermineskin Tribe, Justice Dawson
considered the factors set out in Dunsmuir and arrived at the conclusion
that reasonableness is the appropriate standard (at paragraphs 42 and 43). The
impugned decision in Ermineskin Tribe was that a Band had defaulted
under the funding agreement and I find that those same factors would also apply
here and point to reasonableness. Accordingly, the Court will consider if the
impugned decision here "falls within a range of possible, acceptable
outcomes which are defensible in respect of the facts and law" (Dunsmuir
at paragraph 47).
[57]
The
Applicant argues that the decision made by DIAND was unreasonable for a number
of reasons including that it was unreasonable to rely on the information
provided by the co-managers. However, I disagree with this and find that it was
reasonable and necessary to rely on the report by AMDD. First of all, it is
undisputed that the Applicant had been in default of the Agreement for numerous
years for having an unacceptable cumulative deficit and had not fulfilled many
of its reporting requirements.
[58]
Furthermore,
DIAND had no way of fully knowing the financial situation as the Applicant
continually failed to provide necessary information. DIAND had no way to verify
the financial information provided by AMDD. It seems incongruous that the
Applicant would not provide the require financial information to DIAND but now
faults DIAND for relying on the financial picture put together by AMDD. It was
also reasonable not to have considered any defences to various claims or amounts
owing to the Applicant as these were not certainties. Moreover, the co-managers’
role was to work in conjunction with the Band to fulfill its obligations - it
did not have any interest in the information provided, nor was it taking orders
from DIAND.
[59]
Turning
now to the issues relating to the good relationship between the Applicant and
the Peace Hills Trust and the possibility of seizure of funds. On the first, I
note that the tribunal record actually shows that Peace Hills Trust had refused
to advance further funds to the Applicant at one point and had demanded payment
of debts owed. The Applicant has not adduced evidence on this relationship or
shown how it would render the decision unreasonable.
[60]
As
to the possible seizure of funds, I do accept that generally, funds held on a reserve
are exempt from seizure pursuant to the Indian Act and there is no
evidence of the loans agreements on the record that would allow me to ascertain
whether or not that right had been waived. However, the record does contain an
e-mail from AMDD to DIAND indicating that the Applicant’s funds were subject to
garnishment or seizure as well as an e-mail indicating that Peace Hills Trust
had demanded payment of certain debts owed by the Applicant and intended to
debit accounts accordingly.
[61]
In
making this decision, DIAND had to consider not only the interest of the
members of the Applicant but also the importance of public funds in light of
the sudden revelation of the state of the Applicant’s finances and the urgency
of the situation. Based on this and the overall state of the Applicant’s
finances, I find that it was realistic to fear that some type of seizure or
garnishment proceedings could start at anytime and that the consideration of
protection of public funds and trying to insure the future availability of
services was a reasonable ground in reaching the decision to implement third
party management in order to protect the funds.
[62]
With
regard to the argument that DIAND acted unreasonably by refusing to accept
decisions without challenging them under the Indian Act, this ground has
not been established by any evidence.
[63]
As
for the effect on the Merchant Capital proposal, this was not a concrete
possibility and required further investigation and action by the Applicant. It
could have been a long term solution but that alone does not make it a
determinant factor for DIAND in arriving at its decision. The Court notes that
there was no firm commitment by Merchant Capital (Volume 2, Tab “TT”, page 468).
[64]
Overall,
DIAND had to consider a variety of factors in reaching its decision – those
include the interests of the Band members who were on the verge of no longer
having essential services due to the depletion of funds. Furthermore, the
co-managers were hired in order to help the Applicant meet its requirements
under the Agreement and this includes providing adequate financial information
and other reporting so that DIAND could verify if the Applicant was in default
of the Agreement. Accordingly, it was completely reasonable to rely on the
information provided by the co-manager who had a specialized knowledge of such
matters and was fulfilling its duty.
[65]
Finally,
the Applicant was unquestionably in default of the Agreement and had been for a
number of years and had done very little to remedy its difficulties. On the
face of these facts and the evidence on the record, I find that DIAND’s
decision to implement third party management was reasonable and falls within
the acceptable range of outcomes in view of the facts and the law in this case.
Was DIAND in breach of
procedural fairness by failing to give adequate notice to the Applicant
regarding the third party management decision?
[66]
Although,
neither party has made submissions on the standard of review on this issue, I
wish to note that this aspect of the decision must be held to a standard of
correctness. The Applicant alleges that the Respondent breached procedural
fairness by failing to give advance notice of the decision. This Court has
repeatedly found that the standard or review for breaches of procedural
fairness is correctness and that will be the standard applicable to this
issue (Nunavut Wildlife
Management Board v. Canada (Minister of Fisheries
and Oceans), 2009 FC 16, [2009] 1 C.N.L.R. 256 at paragraph 61).
[67]
The
Applicant has submitted that there is a duty of advance notice in this case
where the DIAND decided to appoint a third party manager to the Tobique First
Nation. In making that claim, the Applicant relied entirely on the decision of
this Court in Pikangikum First Nation. However, I note that the decision
in that case was factually different – it was actually a decision by DIAND
requiring the First Nation to enter into a co-management agreement failing
which funding would be withheld and programs would be delivered through an
agent.
[68]
Also,
the parties had previously been governed by an agreement but were not at the
time of the decision. Furthermore, the policy in that case was not the same as
the one before me and a reading of Justice O’Keefe’s reasons shows that the
policy played an important role in his determination. Therefore, I cannot
accept the submission that the duty owed has already been determined in Pikangikum
First Nation and will consider the relevant factors identified in Baker
in order to determine what type of procedural fairness the Applicant is entitled
to in the present case.
Nature of the decision
being made
[69]
Decisions
made by DIAND regarding funding and the administration of that funding are
highly discretionary. DIAND is at liberty to choose how it will dispense the
funding that flows to a First Nation and can enter into agreements setting out the
parties’ obligations. The decision to intervene pursuant to an agreement is
also highly discretionary. DIAND will not necessary take action the minute a party
is in default of the agreement but will weigh multiple factors in coming to a decision.
This particular case is a good example of that discretion – the Applicant had
numerous defaults under the Agreement, stretching over a long period of time,
but still DIAND met with the Applicant in order to find ways to provide
services and meet the needs of the community members. This discretion is
indicative of minimal procedural fairness.
Nature of the statutory
scheme
[70]
There
is no legislated duty of procedural fairness in this case.
The importance of the
decision to the individuals affected
[71]
The
decision is clearly of great importance as it essentially removes the
Applicant’s rights to govern its own financial affairs. The decision will also
affect the interests of the community members who risk not having access to
programs and services if funds are not administered properly. Furthermore,
there is a public interest in maintaining accountability with respect to the
use of public funds.
Legitimate expectations
[72]
The
Applicant has not brought any evidence of its past dealings with DIAND when
such decisions were made and the procedures that were used, nor is there any
evidence of a promise being made. Thus, this factor is neutral.
Choice of procedure by
DIAND
[73]
There
are two documents that govern DIAND’s decision in this case – the Agreement and
the Policy. Starting first with the Agreement, it does not require advance
notice of a decision to implement third party management, nor does it provide
the Applicant with a right to respond to the reasons or to remedy its defaults.
There is no notice for the appointment of the third manager (s.9.2(c)).
[74]
Turning
now to the Policy, the Respondent has argued that because there was an
agreement in place and the policy was implemented after its signing, its
requirements cannot supersede the terms of the Agreement. However, I must disagree
with this proposition as the Policy itself specifies the scope as follows:
2.1 This policy applies to
Canada/First Nation Funding Agreements (CFNFA), Comprehensive Funding
Arrangements (CFA) and all other Funding Arrangements signed by Indian and
Northern Affairs Canada (INAC). It may also be applicable in a situation where
no Funding Arrangement has been executed by Council.
Also, the Policy was in place at the time
the decision was made. The Policy states that it is designed to support timely
intervention and consistency in regional operations (at s. 1.3). Accordingly,
there was clearly an intention that the Policy be followed in all cases in order
to ensure consistent interventions.
[75]
The
Policy provides for certain steps in the intervention process. If a recipient
is in default of their funding arrangement, DIAND is required to meet with the
recipient to review the situation and assess the reasons for the difficulties
that give rise to the default (s. 8.1.1). The Policy also sets out the steps for
deciding what level of intervention will be required. DIAND must provide
written notification of the relevant default clauses on which the intervention
is based; the kind of intervention and the reasons for that intervention; the
immediate steps to be taken to address the default giving rise to the default
and the relevant information or policies that would assist the First Nation in
meeting the requirements (ss. 8.1.6 to 8.1.6.4).
[76]
The
Policy also contains specific information that must be given in the written
notification depending on the level of intervention which includes stating that
the Minister will appoint a third party manager and offering to meet with the
community to explain the decision. Section 8.4 specifies that in instances
where the level of intervention is being escalated, the Minister shall provide
notice indicating the default in the performance of obligations under s. 17.0.
[77]
In
my view, the Policy does not contemplate a requirement to give advance notice
of the decision but rather notification that the decision has been made. I
arrive at this conclusion based on the elements that are to be contained in the
written notification which are essentially the factors motivating the decision
and the immediate steps that will follow. The written notification leaves no room
for response from the recipient.
[78]
The
Respondent submits there is an additional factor in play in such matters – that
of urgency. I do note that the decision to implement third party management is
meant to be a short term one in order to ensure the provision of services and
the protection of funds. It must be acted upon quickly to ensure that this goal
is met. The urgent circumstances giving rise to the decision to implement third
party management also indicate a low threshold of procedural fairness.
[79]
Having
considered all of these factors, I am of the view that no advanced notice of
the decision to implement third party management was required in this case.
[80]
DIAND
had met its requirement under section 8.1.1 of the Policy and met with the
Applicant and its co-managers many times in order to discuss various defaults
under the Agreement and the steps that were required to remedy them. The
tribunal record contains ample correspondence between the parties on the
defaults and necessary steps to remedy them. Also, the trip reports in the
tribunal record and the minutes from some of these meeting show that there was
mention, on more than one occasion, that DIAND was contemplating increasing the
level of intervention and implementing third party management. This was
mentioned at the July 12, 2007 meeting (volume 2, Tab “TT”, page 468, Respondent's
record) shortly before the decision was made and communicated to the Applicant.
Thus, even if I am wrong on the issue of a requirement for an advance notice, I
am satisfied that it has been met in this case. All the parties involved were
fully aware of the precarious situation and the urgency for the highest level
of intervention by DIAND.
[81]
Therefore,
the Court is of the opinion that there was no breach of procedural fairness on
this ground.
Did DIAND have a
fiduciary duty towards the Applicant which was breached when it implemented
third party management?
[82]
The
Applicant acknowledges that there is no authority to support the proposition
that a fiduciary duty exists in a case such as this one where a decision has
been made to implement third party management. Therefore this argument cannot succeed.
Are the
remedies sought by the Applicant practical and/or available in law?
[83]
In
light of my analysis above, it is not necessary to answer that question.
JUDGMENT
THIS COURT
ORDERS that the application for
judicial review be dismissed. The Applicant shall pay costs to the Respondent
by way of a lump sum in the amount of $2,500 plus GST.
“Michel
Beaudry”
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