Polchies v. Canada, 2007 FC 493

 

 

Date:  20070504

 

                                                                                                                              Docket:  T-715-03

 

Citation:  2007FC493

 

 

Ottawa, Ontario, Friday, this 4^th day of May 2007

 

 

PRESENT:     MADAM PROTHONOTARY MIREILLE TABIB

 

 

BETWEEN:

 

CHRISTOPHER K.J. POLCHIES,

CALISTA POLCHIES and

CRYSTAL POLCHIES

                                                                                                                                             Plaintiffs

                                                                         - and -

 

HER MAJESTY THE QUEEN

Defendant

- and -

 

CYNTHIA POLCHIES,

EMMANUEL POLCHIES and the

OROMOCTO INDIAN BAND

 

Third Parties

 

 

 

 

REASONS FOR JUDGMENT

 

TABIB P.

 

[1]               In the late spring and summer of 1983, the Oromocto Indian Band settled a dispute with the Federal Crown, and resolved to distribute most of the proceeds of this settlement to all the members of the Band on a per capita basis.  Christopher, Calesta and Crystal Polchies were minors at the time.  The Band paid out their share of the distribution to their mother, Cynthia Polchies, who deposited the funds in her and her husband’s joint bank account.

 

[2]               It is not clear whether the monies were spent, and if so, how much and for what purposes.  At any rate, the Polchies children claim to never have received their share of the distribution from their parents. They are therefore bringing the present action, claiming that the Crown is liable to them for the payment of these monies, as well as interest thereon and punitive damages, on the basis of breach of trust, breach of fiduciary duty, breach of statutory duty and breach of the duty or principles of “honour of the Crown”.

 

[3]               The Crown denies any liability to the Plaintiffs, and to the extent it were to be held liable, seeks contribution and indemnity from Cynthia and Emmanuel Polchies, the Plaintiffs’ parents, and from the Band, whom they contend had the primary responsibility to the Plaintiffs to ensure that monies belonging to the children were paid or kept in trust.

 

The Facts

[4]               The circumstances giving rise to this action are set out below.  The facts as recited appear mostly from the agreed statement of facts prepared by the parties, although I have supplemented them with details and explanations found in documents admitted at trial.

[5]               The Plaintiffs are siblings.  Christopher Polchies was born on May 30, 1974, Crystal Polchies was born on April 18, 1977, and Calesta Polchies was born on March 14, 1983.  The Third Party Defendants, Cynthia and Emmanuel Polchies, are the parents of the Plaintiffs and were their legal guardians until they reached the age of majority, which under the law of New Brunswick was 19 years of age.  The Plaintiffs and their parents are “Indians” as defined in the Indian Act, R.S.C. 1985, c. I-5.

 

[6]               The Third Party Defendant, Oromocto Indian Band (the “Band”) is a band as defined in the Indian Act.

 

[7]               The Plaintiffs and their parents are members of the Band and reside on the reserve.  Christopher Polchies lived with his parents at 25 Woolamooktook Street until he reached the age of majority.  Both Calesta and Crystal Polchies moved out when they reached 18 years of age, having otherwise always lived with their parents at that same address.

 

[8]               In 1952-1953, the Government of Canada (hereinafter “the Crown”) established what is now known as Canadian Forces Base Gagetown.  For that purpose, the Crown acquired, mainly by expropriation, a large area of land in New Brunswick.  Part of the reserve of the Band was in that area and on May 15, 1953, the Band surrendered the affected area.  The Band later alleged that there were irregularities in the 1953 surrender and claimed compensation from the Crown.  During the period 1982-1983, the Band and the Crown entered into negotiations to resolve this dispute.

 

[9]               The Band Council at the time included Emmanuel Polchies, who was Chief and lead negotiator for the Band.

 

[10]           A meeting was held in March 1983 between representatives of the Crown and of the Band and their respective legal counsel, at which an agreement was reached to settle the Band’s claim, whereby the Band would receive $2,550,000.00 as compensation for the 1953 surrender.  The agreement provided that the funds be allotted as follows:  $1,000,000.00 would go to the Band’s Capital account, $1,507,000.00 would go to the Band’s Revenue account, both held in the consolidated revenue fund by the Crown, and $43,000.00 would be returned to the Crown as repayment of a loan advanced during negotiations.

 

[11]           On March 24, 1983, the Band Council passed a Band Council Resolution (“BCR”) 424, which requested that the Minister of Indian Affairs (the “Minister”) hold a referendum on May 25, 1983 to determine if a majority of the electors of the Band approved the agreement.  The agreement was overwhelmingly approved in that referendum.

[12]           On April 5, 1983, pending the referendum, the Band held a meeting to determine what to do with the settlement funds.  The outcome of the meeting was that all Band members in attendance were in favour of distributing the settlement monies amongst each Band member.

 

[13]           Pursuant to sub-section 64(1) of the Indian Act, monies held by the Crown for Bands as “Capital” monies can only be disbursed upon the Band’s consent and the authorization of the Minister, and of these funds, only fifty percent may be authorized to be distributed to the Band’s members.  “Revenue” monies are not subject to such restrictions.  Furthermore, by Order-In-Council dated May 14, 1974, the Band had obtained control over its Revenue monies, such that transfer of these monies to it for the purpose of distribution was not subject to discretionary approval by the Minister.

 

[14]           To give effect to the Band members’ wish for per capita distribution of all settlement monies available for that purpose, the Band Council passed BCR 433 on July 13, 1983.  That resolution requested the Department of Indian Affairs to transfer from the Band’s Revenue account to a bank account set up by the Band for that purpose (the Band’s “Land Claim Account”), the sum of $1,507,000.00, and from the Band’s Capital account to the Band’s Land Claim Account the sum of $500,000.00 (representing fifty percent of the $1,000,000.00 portion of the settlement designated as Capital monies).

 

[15]           Shortly beforehand, members of another band had commenced an action in the New Brunswick Court of Queen’s Bench asserting entitlement to a share of the Oromocto Band’s settlement, and on July 4, 1983, the Court had ordered the Crown to withhold fifteen percent of the settlement funds pending resolution of that action.

 

[16]           Giving effect to both BCR 433 and the July 4, 1983 Order of the Court, the Crown transferred to the Band’s Land Claim Account the sum of $450,000.00 from Capital monies and $1,274,500.00 from Revenue monies, being the amounts requested by the Band less the Court-imposed holdback.  The Band thus had the total amount of $1,699,500.00 in its Land Claim Account for distribution.

 

[17]           On or around July 22, 1983, the Band issued from that account cheques to cover per capita distributions of $10,056.21 for each of the Band’s 169 members, including minors.  On a pro-rated basis, $2,514.79 of the distribution came from Capital monies and $7,541.42 from Revenue.

 

[18]           The distribution shares of Cynthia, Emmanuel, Christopher, Calesta and Crystal Polchies were paid by a single cheque in the amount of $50,281.05 payable to Cynthia Polchies.

 

[19]           On July 20, 1983, the Band Council adopted a resolution whereby it requested the Crown to authorize disbursement of a further $300,800.00 from the Capital monies, to pay $55,800.00 in lawyers’ and consultants’ fees for the settlement negotiations, $15,000.00 for certain land improvements, and payments in the amount of $150,000.00 to Chief Emmanuel Polchies and $40,000.00 to each of the two Band councillors “as compensation for their efforts in concluding the land claim”.

 

[20]           The Minister, pursuant to his authority under section 64 of the Indian Act, approved only the disbursements for consultants’ and lawyers’ fees and for land improvements, specifically denying the requested disbursement for compensation to the Band Council members.

 

[21]           Nevertheless, on July 25, 1983, Chief Polchies and one of the councillors issued cheques to themselves and the other councillor on the Band’s Land Claim Account, for those same amounts.

 

[22]           Obviously, these last cheques brought the total amount of the cheques drawn from the Land Claim Account to $230,000.00 more than had been deposited in it, leaving over 20 Band members who had delayed in cashing their cheques unable to obtain payment.  By the end of August 1983, the Chief’s and councillors’ actions were brought to light.

[23]           By October 1983, bank accounts held by Chief Polchies had been attached in proceedings related to allegations of misappropriation by Chief Polchies.  Chief Polchies was convicted of theft for his part in these events in May 1984.  Execution ensued against the bank accounts in the summer of 1985; $81,688.42 was recovered from the $150,000.00 taken by Chief Polchies.  The two other councillors, for their part, repaid all but $15,680.45 of the amounts they received.

 

[24]           In 1989, the New Brunswick Court of Queen’s Bench finally removed all restrictions arising from the Order of July 4, 1983, making the fifteen percent holdback available for distribution.

 

[25]           At a public meeting held in July 1989, the Band members expressed support for the holdback to be likewise distributed amongst Band members.  BCR 601, dated August 25, 1989, and authorized by the Crown, gave effect to that desire, authorizing $402,622.95 to be disbursed to the Band for the purpose of per capita distribution.  The distribution affected 165 members, for individual distributions of $2,440.13 for each Band member.

 

[26]           Again, the shares of the distribution belonging to minors were paid out by the Band to the parents of the children, in this case, Cynthia Polchies, for the three Plaintiffs.

 

The issues

[27]           The issues raised in this action can be summarized as follows:

            -           Are the claims of any or all of the Plaintiffs barred by limitation or laches?

-           Did the Crown, the Band or the Plaintiffs’ parents have a duty to the Plaintiffs, under statute or at law, with respect to the payment and management of monies payable to them as minors?  If so, what is the nature and extent of that duty, and was it breached?

-           What, if any, are the damages suffered by the Plaintiffs as a result of any breach of duty established?

 

The evidence and findings of fact

[28]           In addition to the uncontested facts set out above, the evidence adduced at trial revealed the following:

 

[29]           The Plaintiffs admit that their mother did receive all amounts to which they were entitled pursuant to the distribution of the settlement monies.  There is, however, no evidence at all as to what exactly happened with that money after the cheque was deposited in the family’s bank account in 1983.  Both Christopher Polchies and Mark Sabattis, their neighbour, testified that shortly after the Plaintiffs’ mother received the proceeds of the distribution, in the summer of 1983, the family made several improvements to its lifestyle:  The house was renovated and a snowmobile, a “three-wheeler”, a new car and a new truck were purchased.  The costs of all this is unknown, nor is it known whether it was paid for with the distribution cheque, the monies misappropriated by Emmanuel Polchies, or other assets of the family.

 

[30]           No evidence was led as to the family’s standard of living, both before or after the distribution, as to the parents’ assets or bank accounts, or their sources of income, if any.  All the Plaintiffs however admitted to having always been properly clothed, fed and housed, and that their recreational and medical requirements were met.

 

[31]           All three Plaintiffs deposed in affidavits received at the trial that, had they known they were to receive some $11,000.00 on reaching majority, they would have had more interest in school and higher education, and would have pursued higher education.  However, Christopher Polchies testified at trial that he did finish his secondary education, and that he understood post-secondary education would be funded by the Band or the Crown; he did apply to university a few years after high school, but was not admitted due to his grades.  He later benefited from training funded by the Band to obtain a certification as Addiction Counsellor offered through the University of Moncton.  Both Calesta and Crystal Polchies left school without completing their twelfth grade.  Both had their first child before they reached twenty years of age, Crystal Polchies admitting that she did not have the time after the birth of her first child to continue her schooling.

 

[32]           All three Plaintiffs were aware, growing-up, that their father, having once been Chief, was charged with a criminal offence.  Christopher Polchies, who was nine years old at the time of the settlement, was also aware of the fact of the settlement and of the distribution.  He claims to have learned the details of the payment in respect of the minors’ shares only in 2000, from his father.  Crystal and Calesta Polchies became aware of the settlement in their teens (which I take it refers to the period between 13 and 17 years of age), but only learned of the details of the payment of the minors’ shares when told of them by their father and/or brother in 2002.

 

[33]           I find that the settlement of the land claim and the distribution of per capita shares amongst the Band members, including the fact that the children’s shares were paid out to the parents as legal guardians, were matters of immediate public knowledge amongst the residents of the reserve throughout the period from 1983 to at least 1989.  Knowledge would have remained in the memories of the residents of the reserve well after that.  The Band had a small membership (approximately 170 including minors and off-reserve members).  All Band members living on reserve and with the right to vote, numbering only 53, were consulted in a referendum as to the acceptance of the settlement in 1983.  Each time a distribution was made or anticipated, and this happened at least three times in that period, at least one public meeting was convened to discuss the manner of distribution.  Finally, of course, knowledge was imparted from the very fact of the distribution, as all adult members received their cheque and that all parents received, as guardians, the shares of some 72 children, both in 1983 and in 1989.  Some of these parents set up trusts to hold their children’s monies.  Accordingly, in the period between 1983 and 2002, in addition to the two general distributions, at least some young Band members would have received the benefits of these trusts upon turning eighteen or nineteen.  It is further worthy of note that the Plaintiffs’ parents were themselves, not only aware of the distribution, but of the possibility that the Crown could have taken steps to force the children’s shares into trusts.  Chief Polchies himself alluded to the possibility of parents suing the Crown on behalf of their children for the Crown’s failure to institute trusts for them, at a public meeting held on November 9, 1987, at which Cynthia Polchies was also in attendance.

 

[34]           Thus, and even though I accept that the Plaintiffs might not have realized that their mother had received their share of the distribution on their behalf in 1983 and 1989, I conclude from the evidence as a whole that they did know, as they were growing up, that the proceeds of the settlement with the Crown had been distributed amongst all Band members.  From that knowledge, they should have known or realized that as Band members, they were entitled to their share; had they simply enquired to their parents or to the Band’s Council, they would have easily discovered the details as to the dates, amounts, and manner of payment of their own shares.

 

[35]           The evidence at trial reveals that as early as March 23, 1983, the Band’s membership favoured the distribution per capita of as much of the settlement proceeds as was available.  Ms. Audrey Stewart, an official from the Department of Indian and Northern Development, attended at a March 23, 1983 meeting, with the Band’s Council and other Band members, and provided information to the Band as to what portions of the settlement could be distributed, and how portions payable to children could be paid.  It appears that Ms. Stewart explained her current understanding of the general policies of the Crown with respect to distribution of Capital monies to minors, to the effect that Capital monies paid to minor children would be held by the Crown in a trust fund, earning interest until the child is 21.  Ms. Stewart however advised that this information was subject to verification, as she was not an expert on the matter.  Ms. Stewart’s recollection was to the effect that the members present were opposed to the minors’ monies being held in trust by the Crown; it was felt that Indian parents could be trusted with money for their children and that the establishment of trusts would be disrespectful to them.  Mark Sabattis and John Sacobie, Band councillors, had similar recollections, and confirmed that the consensus was the same at the public meeting held on April 5, 1983, where the majority of Band members, including Cynthia and Emmanuel Polchies, attended.

 

[36]           Shortly before these discussions took place, the Crown had issued Circular H-12, containing internal guidelines as to the processes and procedures applicable to authorization of disbursements from Bands’ Capital accounts.  Ms. Stewart transmitted a copy of that Circular to the Band Council in the spring of 1983.  Section 6 of that document applies particularly to per capita distributions, and provides, in its general principles, that per capita distributions in respect of minors are to be held in trust by the Crown until the minor reaches the age of majority, but that payments of up to $3,000.00 per year could be made to a parent or guardian having custody of the child upon written request (paragraph 6(2)(e))[1].  In addition, the Circular contemplates that the Crown could permit a Band to administer the distribution itself, in accordance with any procedure agreed between them (paragraph 6(2)(j))[2].

 

[37]           It seems clear to me that this is precisely what happened in this case.  The Band, as a whole, objected to any suggestion that minors’ shares be administered or put in trust by the Crown, as would have happened had the Crown itself administered the distribution from the Capital monies.  To avoid this, the Band’s resolution BCR 433 specifically requested that the monies for distribution, from both the Revenue account and from the Capital account, be transferred to the Band for distribution by the Band.  To this, the Crown clearly agreed, asking only that the Band provide it with a list of recipients and amounts paid to each.  If the Band or any parent wished that trust funds be maintained by the Crown, a request merely had to be made.  None was ever made.

 

[38]           This is to be contrasted with the procedure adopted by the Crown when, in 1985, the Band sought the release of further funds from the Band’s Capital account to pay for the outstanding distribution cheques of some 25 Band members that could not be honoured by reason of the misappropriation of the Land Claim Account’s funds.  On that occasion – and it seems that the Crown had let the Band know that it would not otherwise approve the disbursement – the Band’s BCR 471 requested the distribution be made directly by the Crown to the affected Band members.  The Crown then followed Circular H-12 and constituted trusts to hold all minors’ monies, subject to the right of custodial parents/guardians to request a maximum of $3,000.00 per child each fiscal year.

 

[39]           When it came to the final distribution of the portion of the settlement held back by Court Order, in July 1989, the Band Council held a meeting, at which 44 voting members attended.  It was confirmed at that meeting that BCR 433, calling for the transfer of all available Revenue and Capital monies for the purpose of per capita distribution by the Band, was still valid to authorize transfer by the Crown to the Band for distribution.  As a result, BCR 601 was adopted, requesting transfer of monies now available to the Band for per capita distribution by the Band.  By letter dated September 1, 1989, the Minister approved the resolution, confirming that the transfer to the Band would be made pursuant to BCR 433.

 

[40]           Finally, I should note here that neither Cynthia nor Emmanuel Polchies gave evidence at trial, either on their own behalf or as called by another party.  They were not represented, did not file a defence to the counterclaim and so far as I am aware, did not attend at the trial.

 

Analysis

Limitation and Laches

[41]           All parties are ad idem that, through the application of section 39 of the Federal Courts Act, it is New Brunswick’s Limitation of Actions Act, R.S.B. 1973, c. L-8 that governs the limitation period for the Plaintiffs’ action herein.  Sections 7 and 18 of the Limitation of Actions Act read as follows:

 

[42]           Likewise, all parties are in agreement that the cause of action, as pleaded, arose out of the release of the Plaintiffs’ distribution shares to their mother.

 

[43]           As Calesta Polchies reached the age of majority on March 14, 2002 and instituted this action on August 12, 2003, her action is clearly timely, whatever the date of the accrual of the cause of action or of the “discovery” might be.  It is in respect of Christopher and Crystal Polchies that the issue of limitation arises.  The Plaintiffs submit that the cause of action was only discovered by them when each of them were told of the details of the payments, being 2000 for Christopher and 2002 for Crystal Polchies, such that their action was instituted well before the 6 year limitation.  The Crown, however, fixes the discovery of the cause of action in relation to, at best, the knowledge of the Plaintiffs’ legal guardians, or at worst, to the time at which the children “ought to have discovered” the material facts with the exercise of reasonable diligence. According to the Crown, this latter was the time at which they became aware of the distribution itself, or at the very least, the time at which they reached the age of majority and would have been entitled to seek closure of any minor trust account that could have been set up to receive their share.  Both Christopher and Crystal Polchies reached majority more than 6 years prior to the issuance of the statement of claim:  Christopher, in 1993, and Crystal in 1996.

 

[44]           The applicable provision in this matter is section 18 of the Limitation of Actions Act, to the exclusion of section 7.  Although it is true that this is an action grounded on equitable grounds of relief, the provisions of section 18 apply specifically to cases where the cause of action accrues to a minor or other legally incompetent person, without distinction as to the relief claimed or the nature of the cause of action. Under the maxim generalia specialibus non derogant, the specific provisions of section 18 displace and override the general provisions of section 7 when the cause of action accrues to a minor (see also Guignard v. Paulin, [1992] N.B.J. No. 23). 

 

[45]           The distinction may seem academic, since the starting point of the six-year period is in both cases based on the principles of discoverability:  In the case of section 7, the common-law principle is explicitly recognized by the wording of the section, which fixes the beginning of the limitation period to the time of “the discovery of the cause of action”; in the case of section 18, the principles of discoverability also govern, but as an interpretative principle, to determine the time at which the cause of action is deemed to accrue. Still, the distinction is in my view important, as it confirms the direct application in this case of the discoverability principles, as they have been set out in established case law, without need to question whether a different or more subjective construction should be given to the word “discovery,” as used in section 7, when it is applied to minors.

 

[46]            The Supreme Court has recently reaffirmed that the discoverability rule “is generally applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action (Ryan v. Moore, [2005] S.C.J. No. 38, 2005 SCC 38, at par. [24]).  Section 18 of the Limitation of Actions Act expressly relates the commencement of one of the possible limitation periods to the accrual of the cause of action.  In Ryan v. Moore, the Supreme Court also again repeated the well known formulation of the rule:

 

“[22]    The discoverability principle provides that a cause of action arises for the purpose of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the Plaintiff by the exercise of reasonable diligence.”

 

(emphasis mine)

 

 

 

[47]           As I have found, both Christopher and Crystal Polchies knew of the material fact of the per capita distribution of settlement monies well before they reached the age of majority.  The details of how the funds owed to them were paid, and to whom, would have been discovered by them by the exercise of reasonable diligence: they merely had to ask their parents or the Band council.  Knowing of the distribution, they ought, in any event, to have requested the status or closure of any trusts in their name when they reached the age of majority; had they done so, they would have found out whether such trusts existed and if they didn’t, have been put to enquiry as to the details of the payments.

 

[48]           Thus, while it is arguable that Christopher and Crystal Polchies’ cause of action accrued much earlier, I find that the very latest time at which this cause of action must have accrued was when they reached the age of majority, in 1993 and 1996 respectively, and that their action is accordingly time-barred.

 

[49]           Of course, if I am wrong, the analysis and conclusions reached below with respect to Calesta Polchies’ claim would equally have applied to Christopher and Crystal Polchies’ claim.  I have, for greater certainty, proceeded to analyse the claims as if none of the Plaintiffs’ claims were prescribed.

 

Duties regarding minors’ property

[50]           Pursuant to section 88 of the Indian Act, the laws of general application in a province apply to Indians in that province, unless otherwise provided for by federal legislation or treaties.  With the exception of section 52 of the Indian Act, which will be further considered below, there appears to be no federal legislation, regulation or treaty providing for guardianship of minors or the administration of their property; at any rate, the parties have not drawn my attention to any such legislative instrument, whether emanating from Parliament or from the Band Council.

 

[51]           Before considering whether the Indian Act or the status of the Plaintiffs as Indians modifies or creates specific duties regarding the administration of their property, it is appropriate to consider the laws generally applicable to minors’ property in New Brunswick.

[52]           The relevant and applicable sections of the Guardianship of Children Act, R.S.N.B. 1973, c. G-8 read as follows:

 

 

[53]           Thus, under the general laws of New Brunswick, the Plaintiffs’ parents were their legal guardians and had the obligation to care for and manage monies they received on behalf of their children.  The effect of these provisions is that the payment of the children’s distribution shares to their mother as one of their legal guardians was lawful and constituted due payment of the monies to the children. This is to be contrasted with the situation that currently exists in several other provinces or territories, where parents are not automatically deemed in law to be the guardians of their children’s property, and where certain statutes even specifically provide that payment of debts owed to children, over certain amounts, may not lawfully be made to their parents as discharge of the obligation[3].

 

[54]           The Plaintiffs rely on the case of Williams v. Squamish Band, [2003] F.C.J. No. 65, 2003 FCT 50, as establishing the existence of a fiduciary duty on the part of the debtor of a monetary obligation to a child to consider the child’s best interest in deciding how to disburse monies belonging to him.  In Williams, payments were made by the band to the plaintiff’s grandmother, who, although his primary caregiver, was not his legal guardian.  The payments made by the band in that case could therefore not stand as payments to the child; they were payments of monies belonging to a child, made to a third party.  In the apparent absence of a legal guardian authorized to receive the funds on the child’s behalf, and considering that the custodial arrangements for the child appeared to have been sanctioned by the band council, it is hardly surprising that the band would have been impressed with trust and fiduciary responsibilities with regards to the disbursement of these funds. The case does not in my view illustrate or establish the existence of a duty owed by the debtor of a monetary obligation due to a child to make any provision as to the future care or management of the funds during the child’s minority, either as part of lawful payment or after it is made.

 

[55]           Indeed, there is an important distinction to be made between the duties that arise in the course of the distribution and payment process and those that attach to the administration of the monies once they become the minors’ property, either as an entitlement or as monies paid and received.

 

[56]           Whenever a distribution of monies among a group of persons is undertaken by another person, whether it be by the Crown, the Band or any other entity or person, a trust is created whereby that person is required to ensure that the monies set aside for distribution are properly kept, and distributed fairly, to the appropriate recipients.  For example, in Barry et al. v. Garden River Band of Ojibways, 33 O.R. (3d) 782; [1997] O.J. No. 2109, circumstances were very similar to the ones at bar, but the basis of the plaintiffs’ claim was that they had not been included in the distribution list; the Ontario Court of Appeal in that case described the creation of the trust as follows:

 

“It would appear from the above that the sum of $1 million being part of the $1,339,150 paid under the settlement agreement, is not strictly a trust fund because it was to be paid into the revenue account of the Band where it could be used for the purposes of the Band generally, subject only to the regulations which set out accountability requirements.  There was no requirement in the settlement agreement that the fund was to be distributed to the members of the Band and certainly there was no requirement that it be distributed by a certain date.  At some later time, the Band decided on December 17 and 18, 1987 as the dates for the per capita distribution.  There was no clear evidence presented at trial explaining why these dates were selected.  Accordingly, while the funds were not the subject-matter of a trust when they were delivered to the Band Council, when the Band Council resolved to make a per capita distribution, and to set aside $1 million for that purpose, in our view a trust was created.  The Band Council was under a duty to ensure that the distribution was carried out in accordance with trust principles.”

(emphasis mine)

 

 

 

[57]           However, the trust or fiduciary obligations created as a result of the decision to make or approve a per capita distribution and the administration thereof are limited to the process of the distribution itself: preserving the funds pending completion of the process, identifying all intended recipients and preserving the rights of potential claimants, ensuring that payment is effected to the intended recipient, obtaining receipts, maintaining records and audit trails, etc.  Where the distribution includes minor children, the duty of ensuring that payment is effected to the intended recipient encompasses the duty to ensure that the payment to the child is lawful and made in accordance with applicable legislation so as to effectively discharge the payment obligation. The “duty” if any, of providing for the care and administration of the funds once the child’s entitlement is established or the money is paid out is an altogether different duty, which goes beyond the mechanics of ensuring lawful payment of the funds to the child. In order to rely on the existence of such a duty, the Plaintiffs need to establish another, more immediate fiduciary relationship, or point to a specific duty created by law.  Insofar as concerns any duty or responsibility that the Crown or the Band may have had to the Plaintiffs as a result of their authorization or administration of the distribution, I am satisfied that that duty was discharged when the appropriate amounts were received by the Plaintiffs’ legal guardian.

 

[58]           As I have determined that the duties owed to the Plaintiffs arising from the decision and administration of the distribution were discharged, it is not necessary for me to determine how these responsibilities fell to be allocated as between the Crown and the Band.  However, to the extent it is useful to do so, I would conclude that, with respect to funds from the Band’s Revenue account, responsibilities rested entirely with the Band Council.  With respect to Capital monies, the ultimate authority to approve the use of the monies for the purposes of per capita distribution having rested with the Crown pursuant to section 64 of the Indian Act, the Crown also had a duty to take steps to ensure that the distribution would be made to those entitled to it.  In the circumstances, the Crown chose to delegate the administration of the distribution to the Band Council.  In seeking and accepting the responsibilities of administering the distribution of the Capital monies, the Band Council became the trustee for the Band members entitled to the distribution and also owed these duties to them.  Whether the Crown acted reasonably in delegating its responsibilities to the Band is not an issue that arises here, as I have found that the Band did properly discharge its obligation to pay to the Plaintiffs their share of the distribution.

 

Section 52 of the Indian Act

[59]           The Plaintiffs construe section 52 of the Indian Act as giving rise to both a statutory and a fiduciary duty on the part of the Minister to ensure that property of minor Indians is properly administered, and in the circumstances of this case, to exercise its discretion by creating a trust in which to hold these monies.

 

[60]           Section 52 reads as follows:

 

 

[61]           The use of the word “may” in section 52 necessarily implies the existence of discretion and the Courts will not interpret “may” as requiring the exercise of power in all circumstances.  The permissive character of the word “may” is confirmed by section 11 of the Interpretation Act, R.S.C. c. I-21, which provides that “the expression “shall” is to be construed as imperative and the expression “may” as permissive”.

 

[62]           Of course, notwithstanding the Interpretation Act, there remain instances where a power conferred with the expression “may” will be interpreted as imparting an imperative or mandatory exercise of that power (see discussion and cases cited in Coté, Pierre André, The Interpretation of Legislation in Canada (3^rd ed.), Carswell, at pp. 234-235).  However, none of these circumstances are present here: section 52 does not assign a judicial or quasi-judicial jurisdiction to the Minister, there is no right conferred by section 52 to Indian children to have their property administered upon the satisfaction of certain conditions, and neither the context, legislative history, or purpose of the statute or possible negative consequence intended to be avoided would justify construing the discretion conferred by section 52 as imposing a duty to act on the Minister.  On the contrary, since the discretion conferred on the Minister by section 52 can be triggered by the simple existence of two conditions (the existence of property to which infant children of Indians are entitled and the fact that they reside on a reserve), it would create an absurd result to say that the Minister must administer or provide for the administration of all property of all Indian children residing on reserves.

[63]           It further bears reiterating that in the province of New Brunswick, as in several other Canadian provinces[4], the law establishes the parents of minor children as guardians for both custody purposes and for the purposes of the care and management of their property.  All provinces further have established legislation governing the appointment of guardians or trustees to children’s property, so that even without the exercise of the Minister’s discretion pursuant to section 52 of the Indian Act, property of Indian infants is not left without any means of protection.

 

[64]           I therefore conclude that the Minister had no duty to exercise the powers conferred upon him by section 52 of the Indian Act to direct the manner in which the Plaintiffs’ distribution shares were to be administered or to administer same himself.

 

[65]           Of course, had the Minister exercised its discretion to administer or provide for the administration of the Plaintiffs’ monies, it is likely that a fiduciary relationship would have been created in respect of such acts as might have been taken by the Minister.  However, in the absence of any exercise of the Minister’s power under section 52 and in light of my conclusion that the Minister had no duty to act under section 52, I cannot see how a fiduciary relationship could be said to arise merely as a result of the Minister’s potential ability to act.

 

 

Other basis for the creation of a fiduciary duty

[66]           It seems that the Plaintiffs are invoking a variety of circumstances, other than merely section 52 of the Indian Act, to assert that a fiduciary relationship did arise between the Crown and the Plaintiffs whereby the Crown would have been bound to exercise its powers pursuant to section 52 to institute trusts for their benefit.  The Plaintiffs’ arguments in that respect are not clearly articulated, but rely variously on the Plaintiffs’ status as “Indians in general and minors in particular”, on the fact that the distribution monies arose out of the settlement of a land or surrender of land claim, and on facts which, the Plaintiffs contend, were known by the Crown as making it virtually certain that their share of the distribution would be stolen or would not be spent in their best interest.

 

[67]           I will turn to this last element first.  The Plaintiffs have argued that judicial notice can be taken of the fact that “many in the native community have never earned a reputation for financial rectitude”, and that the Crown was “cognizant of the casual attitude towards money adopted by some in the native community”, in effect, suggesting that Indian parents in general or at least the parents of the Oromocto Band, cannot be expected to properly discharge the legal duties they owe to their children when it comes to the care and management of their children’s property.  Not only is the suggestion inherently offensive, but no evidence has been led to support it.  It is certainly not a notion of which the Court can or will take judicial notice.  In fact, the only evidence led in this trial as to what any parent in the Band actually did with its child’s share was the evidence of Mark Sabattis, who testified that he and “some of the parents” put their children’s share of the distribution in trusts.  There is strictly no evidence as to what any of the other parents did with the money, including, as will be further discussed below, the Plaintiffs’ own parents.

 

[68]           There is of course evidence on record that many band members, including Chief Polchies and the other councillors, appeared to renege on the financial commitments the Band had made with its advisors, and of course, there is the Chief and councillors’ misappropriation of monies.  Yet, sharp business dealings or even misappropriation of monies cannot be a predicator of any person’s ability or good faith intention to carry-out or to meet his obligations to his own children.  Indeed, the Plaintiffs did not appear to consider their father’s actions in the summer of 1983 to have been blameworthy, as they all considered the criminal charges brought against him to have been unfair.

 

[69]           The Plaintiffs have therefore not proven that there existed any circumstances, or that the Crown knew of any circumstances, from which a reasonable person would conclude that it was likely that the Plaintiffs’ parents – or any parent on the Oromocto reserve – would be incapable or unwilling to properly care for and manage their children’s property.

 

[70]           I next turn to the Plaintiffs’ argument that a fiduciary duty would arise as a result of their status as Indians in general and minors in particular.  As was held by the Supreme Court of Canada in Wewaykum Indian Band v. Canada, 2002 SCC 79, a fiduciary duty cannot exist in a factual vacuum.  It must be identifiable and arise from a specific set of facts “in relation to specific Indian interests”.  Liability can only exist upon identification of a “cognizable Indian interest, and the Crown’s undertaking of discretionary control in relation thereto in a way that evokes responsibility “in the nature of a private law duty”” (Wewaykum, supra, at par. 81 and 85).  There is no specific or cognizable Indian interest arising solely as a result of a person’s status as a minor of Indian ancestry or status, or from such a person’s rights regarding personal property.  Aboriginal status alone does not create a fiduciary relationship, as recognized by the Supreme Court in Gladstone v. Canada, [2005] 1 S.C.R. 325, [2005] S.C.J. No. 20; 2005 SC 21, at par. [23]:

 

“Although the Crown in many instances does owe a fiduciary duty to aboriginal people, it is the nature of the relationship, not the specific category of actor involved, that gives rise to a fiduciary duty. Not every situation involving aboriginal people and the Crown gives rise to a fiduciary relationship. See Haida Nation v. British Columbia (Minister of Forests), [2004] 3 S.C.R. 511, 2004 SCC 73, at para. 18, per McLachlin C.J. The provisions of the Fisheries Act dealing with the return of things seized are of general application. I agree with the trial judge and the Court of Appeal that the respondents' aboriginal ancestry alone is insufficient to create the duty in these circumstances.”

 

[71]           Finally, the Plaintiffs’ argument to the effect that a fiduciary relationship arises here by virtue of the distribution funds’ origin as Capital monies or as the proceeds of the settlement of a land claim also fails.  There may well be a fiduciary duty on the part of the Crown in the management of Indian monies – and I need not determine here the circumstances in which it might arise or its extent – but that is not the point.  The Plaintiffs here are not suing the Crown on behalf of a band or group of Indians on the basis of mismanagement of Indian monies; they are suing as individuals for the Crown’s alleged failure to take measures to take control and protect monies they personally became entitled to pursuant to a distribution.  To the extent some of these monies originally were designated as “Capital” monies or monies representing the Band’s interest in reserve lands, the Crown may have had a duty, pursuant to section 64 of the Indian Act or even a common law fiduciary duty, to ensure that these monies were properly administered, and used or disbursed in the Band’s interest.  That duty, as mentioned above, may also have extended to ensuring that when a per capita distribution was authorized, the distribution would go to those entitled thereto.  But once the distribution was properly authorized and effected, the monies ceased to be Capital monies of the Band and became personal property of the persons entitled thereto.  The Plaintiffs provided no support for the proposition that Capital monies are somehow impressed with a special status that would follow them beyond their legitimate disbursement and into the hands of their recipients, entitling the funds to special protection under the law.

 

[72]           I will finally note here that the Plaintiffs at the trial have made much of the Band’s and the Crown’s agreement to designate a large proportion of the settlement amount as Revenue monies, which the Plaintiffs contend was contrary to section 62 of the Indian Act.  (Under section 62, all monies derived from the sale of surrendered lands or capital assets are deemed to be Capital funds).  Leaving aside the lack of evidence from which any determination of this issue could be made, it remains that the allocation and the designation of the funds were approved by referendum and by ministerial decision.  The lawfulness of that decision was not challenged by judicial review.  Pursuant to the principles set out in Canada v. Grenier, [2006] 2 F.C.R. 287; [2005] F.C.J. No. 1778, the validity and lawfulness of the ministerial decision can simply not be attacked or put in issue in the context of an action.

 

[73]           Thus, I find that the Plaintiffs have not established the existence of a fiduciary duty on the part of the Crown, either in statute or by operation of law, to intervene to protect the Plaintiffs’ interest in the distribution funds paid to their legal guardian on their behalf.

 

Honour of the Crown

[74]           In the memorandum of fact and law submitted to the Court by the Plaintiffs at the opening of the trial, the Plaintiffs discourse at length on the principle of the honour of the Crown and how it has been broadened in recent decisions from its early uses as a tool for treaty interpretation.  Yet the Plaintiffs articulate no cogent argument as to what, in the circumstances of this case, gives rise to special duties on the part of the Crown in order for the honour of the Crown to be upheld, and how the breach of these duties might establish or help establish a cause of action.  In none of the cases cited by the parties has a breach of the principles of honour of the Crown been held to constitute an independent cause of action.  The Plaintiffs do not explain how this concept, which was originally and remains mostly used as an aid to the interpretation of treaties and legislative provisions protecting treaty and aboriginal rights, informs the rights of individuals to the protection of their personal property.

 

[75]           The Plaintiffs do reach back to the origins of the distributed funds as a settlement of a land dispute to somehow trigger the application of the honour of the Crown principles, but for the same reasons as stated above in respect of the creation of a fiduciary duty, it is of no assistance to them.

 

[76]           Also, the Plaintiffs cite the Crown’s actions in recovering the funds misappropriated by Chief Polchies from funds allegedly co-mingled with the Plaintiffs’ money as high handed and unfair, sullying the honour of the Crown.

 

[77]           I fail to see how the Crown’s actions to recover these funds, which actions were taken at the behest of the Band Council and for the express purpose of protecting the interests of the Band as a group, can be said to be contrary to the honour of the Crown.  Furthermore, having found that the Crown was not a trustee of the Plaintiffs’ money and had no fiduciary or statutory duty to take steps to protect same, I cannot see how the possibility of any prejudice to the Plaintiffs from these lawful proceedings could give rise to liability on the part of the Crown.  Finally, I note that the funds recovered by the Crown were seized in legal proceedings as being Chief Polchies’ own property.  To the extent any of the Plaintiffs’ money had been co-mingled with the funds in the accounts seized, a fact which has not been established, the Plaintiffs’ parents, as their legal guardians, had the right and duty to assert the Plaintiffs’ ownership of the funds at the time of the seizure and execution; the Crown had neither the right nor the duty to assert the Plaintiffs’ rights for them.

 

[78]           I therefore find that the principles of honour of the Crown are not engaged in the circumstances of this matter, and even had they been engaged, that the Crown did not act in a manner that was other than fair.

 

Damages

[79]           Even had there been any basis upon which to find that the Crown, or the Band as third party defendant, had any duties to the Plaintiffs and had breached same, no relief could be granted to the Plaintiffs on the evidence adduced at trial.

 

[80]           The Plaintiffs are not requesting the payment of the distribution monies as an unpaid debt to them.  They admit that the monies were paid to their mother, as their legal guardian.  Their claim is for damages arising from alleged breaches of duty on the part of the Crown.  As such, they had to establish that, as a result of the Crown’s alleged breaches, they suffered damage.  They claim that they suffered damage because they did not receive their share of the distribution, or more precisely, that they did not receive the benefit of their share of the distribution.

 

[81]           I have already held that, at law, payment of the Plaintiffs’ share to their mother was payment to them and that their parents owed them a direct statutory duty to properly care for and manage their funds.  Accordingly, in order to recover anything from the Defendant, the Plaintiffs also had to establish that they did not receive the benefit of these funds and that this was caused by their parents’ mismanagement of the funds and failure to use them in the Plaintiffs’ best interests.  That evidentiary burden rested squarely on the Plaintiffs.  However, there is simply no evidence as to what happened with the Plaintiffs’ money after it was deposited in their parents’ joint bank account.  For all the evidence shows, the money could have been used to purchase valuable securities, it could have been invested, it could have been used to keep a roof over the heads of the Plaintiffs, clothes on their bodies and food in their bellies throughout their formative years, or it could still be in the Polchies’ joint bank account.

 

[82]           The Plaintiffs’ case is build on the assumption that their share of the distribution was sitting, co-mingled with their parents’ monies, in their parents’ joint bank account in October 1983, that this joint bank account was then seized by the Crown, and that their money was taken in repayment of their father’s theft.  Yet, there is no evidence to support that assumption.  The bank records of their parents’ joint account were not produced; Cynthia and Emmanuel Polchies were not called to testify; there is therefore no evidence that the monies remained in the joint account.  The identification number of the joint account is nowhere in evidence; there is evidence that two bank accounts in the name of Emmanuel Polchies, bearing specified numbers, were seized, but there is no evidence to the effect that the joint account was one of the two named accounts seized.  There is evidence that the Polchies made major purchases in the summer of 1983; but there is no evidence of the costs of these purchases, and they occurred at a time where Emmanuel Polchies had possession of an additional $150,000 to the $50,000 paid to Cynthia Polchies.  Only $80,000 were recovered from Emmanuel Polchies’ bank accounts; what became of the other $120,000 the family received in July?  Was it spent in that summer of 1983?  Was it spared the seizure for being in a different account?  Was it invested?  There is no evidence either way.

 

[83]           The Plaintiffs’ memorandum of fact and law states that “Their parents had the means to feed, cloth and house the Plaintiffs without recourse to their share of the distribution”, yet there is no evidence of this: no evidence of their assets, source of income or occupation; no evidence of their spending other than in the summer of 1983.

 

[84]           Finally, the Plaintiffs did not even testify or bring any evidence to the effect that they have asked their parents to remit to them – or even account for – their share of the distribution, and that they have been refused.

[85]           The Plaintiffs have failed to prove that they did not receive their share of the distribution or the benefit thereof, or that they have suffered any loss from the remittance of these funds to their mother.

 

Conclusion

[86]           For the reasons above, I find that the actions of Christopher and Crystal Polchies are barred by limitation, that the Band and the Crown fulfilled their duty to the Plaintiffs when they paid their shares to their mother, that neither the Band nor the Crown owed a duty to the Plaintiffs to ensure that these monies, once paid, were properly cared for and managed, and that the Plaintiffs, in any event, have failed to establish that they have suffered any damage as a result of the Crown’s or the Band’s conduct.

 

[87]           The Plaintiffs’ action therefore fails, and it is not necessary to deal with the substance of the Band’s positive grounds of defence to the Crown’s third party claim.

 

 

 

 

 

 

 

“Mireille Tabib”

End notes: