HER MAJESTY THE QUEEN IN RIGHT OF CANADA, THE MINISTER OF INDIAN
AFFAIRS AND NORTHERN DEVELOPMENT AND THE MINISTER OF FINANCE
Respondents
- and -
THE ATTORNEY GENERAL OF THE PROVINCE OF ALBERTA
Intervener
- and -
THE ATTORNEY GENERAL FOR THE PROVINCE OF SASKATCHEWAN
Intervener
REASONS FOR JUDGMENT
RICHARD C.J. AND SHARLOW J.A.
[1]
These two
appeals, heard together, are from judgments of the Federal Court rendered on
November 30, 2005 after a very long trial of two actions that were heard
together. The appeal in A-618-05 (the “Ermineskin appeal”) is from Ermineskin
Indian Band and Nations v. Canada, 2005 FC 1623 (Federal Court File
T-1254-92). The appeal in A-629-05 (the “Samson appeal”) is from Samson
Indian Nation and Band v. Canada, 2005 FC 1622 (Federal Court File
T-2022-89).
[2]
We have
concluded that these appeals must be dismissed. Our reasons are set out below
under the following headings:
Paragraph
I. The
parties...................................................................................................................... 3
II. Preliminary
matters.......................................................................................................... 6
(a) The
severance of the actions into phases................................................................. 6
(b) Scope
of the judgments under appeal..................................................................... 10
(c) Grounds
of appeal relating to evidentiary rulings...................................................... 12
(d) Transfer
of Samson trust funds to the control of the Samson Nation........................ 13
III. Reasonable
apprehension of bias..................................................................................... 21
IV. General
and Historical Phase........................................................................................... 25
(a) Introduction........................................................................................................... 25
(b) Evidence
in the General and Historical Phase.......................................................... 28
(c) The
reliance of the oral history evidence................................................................. 34
(d) Judge’s
determinations relating to evidence in the General and Historical Phase....... 38
(e) Discussion............................................................................................................. 45
V. The
facts relevant to the Money Management Phase........................................................ 51
(a) Preliminary
Point.................................................................................................... 51
(b) Treaty
6................................................................................................................ 52
(c) The
Indian Act – provisions relating to reserves..................................................... 54
(d) The
surrender to the Crown of the oil and gas resources on the reserves................. 56
(e) The Crown’s
admission – beneficial title to the oil and gas resources
on the
reserves...................................................................................................... 61
(f) The
Indian Oil and Gas Act................................................................................. 62
(g) The
management of the royalties received by the Crown......................................... 63
(1) Financial
Administration Act..................................................................... 65
(2) Money
management provisions of the Indian Act.......................................... 71
(h) Statutory
provisions relating to the investment of the capital money
of Indian
bands...................................................................................................... 79
(i) Interest
on Indian money in the Consolidated Revenue Fund................................... 90
(j) Discussions
and negotiations relating to the handling of Indian money....................... 99
IV. Analysis.......................................................................................................................... 108
(a) Whether
the Crown is a trustee of the royalties....................................................... 109
(b) Whether the royalties
are “public money” as defined in the
Financial
Administration Act.............................................................................. 112
(c) Whether
the Crown improperly made use of the capital money............................... 117
(d) Whether
the royalties could and should have been invested..................................... 122
(1) The
Indian Act........................................................................................... 124
(2) Section
15 of the Charter............................................................................. 129
(3) The
Financial Administration Act............................................................. 135
(4) Whether
the statutory scheme breaches or results in a breach of Treaty 6...... 143
(e) Whether
the Crown was obliged to propose an investment plan.............................. 146
(f) Unjust
enrichment.................................................................................................. 150
(g) Rate
of return........................................................................................................ 160
(h) Summary............................................................................................................... 171
VII. Conclusion..................................................................................................................... 174
I. The parties
[3]
The
appellants in the Ermineskin appeal (collectively, “Ermineskin”) are Chief John
Ermineskin and the Councillors of the Ermineskin Indian Band and Nations (the
“Ermineskin Nation”), acting on their own behalf and on behalf of all of the
other members of the Ermineskin Nations. The appellants in the Samson appeal
(collectively, “Samson”) are the Samson Indian Nation and Band (the “Samson
Nation”), and Chief Victor Buffalo of the Samson Nation, acting on his own
behalf and on behalf of all of the other members of the Samson Nation.
[4]
The
Ermineskin Nation and the Samson Nation are “bands” within the meaning of the Indian
Act, R.S.C. 1985, c. I-5. They are also “bands” that are entitled to the
benefit of Treaty 6, entered into in 1876 between the Crown and the Plain and
Wood Cree and other Indians then living in the area covered by Treaty 6.
[5]
The
respondents are the Crown in right of Canada,
the Minister of Indian Affairs and Northern Development, and the Minister of
Finance. For ease of reference, we use the expression “the Crown” to refer to
the respondents. The Minister of Indian Affairs and Northern Development, who
is responsible for the administration of the Indian Act, will be
referred to as the “Minister”.
II.
Preliminary matters
(a) The severance of the
actions into phases
[6]
Both
actions involve a large number of claims, and both have been divided into
phases. In the trials that led to the judgments under appeal, evidence was
adduced in respect of only the first two phases, referred to as the “General
and Historical Phase” and the “Money Management Phase”.
[7]
The
evidence presented as part of the General and Historical Phase apparently was
intended to provide historical and other background evidence relating to the specific
claims in all phases of the actions, including the Money Management Phase.
Evidence adduced in relation to the first two phases of the action will be
treated as part of the record of the trial in the remaining phases to the
extent it is relevant.
[8]
The claims
made in relation to the Money Management Phase are based on allegations that
the Crown has breached one or more of its legal obligations in respect of certain
funds held in trust for Ermineskin and Samson.
[9]
The trust
funds are comprised mainly of accumulated royalties derived from the
exploitation of oil and gas resources found beneath the surface of the Samson
Reserve (which belongs to the Samson Nation), and the Pigeon Lake Reserve
(which is shared by the members of four bands, often referred to as the “Four
Bands”: the Ermineskin Nation, the Samson Nation, and two other bands that are
not parties to these appeals). The Ermineskin Nation also has its own reserve
(the Ermineskin Reserve), but that reserve has not yet produced any royalties.
The events that led to the Crown’s receipt of the royalties are described later
in these reasons.
(b) Scope of the judgments
under appeal
[10]
The
judgments under appeal state that the actions are dismissed. All parties agree
that those judgments must be understood as dismissing only the claims of
Ermineskin and Samson in relation to the Money Management Phase, except the
claims of Samson that became moot as the result of the transfer of the Samson
trust funds pursuant to a series of orders made by the Judge in 2005 (described
below).
[11]
The claims
in the remaining phases of the actions have yet to be heard. All parties agree,
as they must, that the judgments under appeal do not dispose of any claims that
have not been heard.
(c) Grounds of appeal relating
to evidentiary rulings
[12]
In the
course of the trial, numerous objections were made in relation to the
admissibility of evidence, and the Judge made rulings on those objections.
Samson and Ermineskin raised several grounds of appeal in relation to evidentiary
rulings against them. The Crown responded to those arguments, and also made a
number of arguments of its own relating to evidentiary rulings against the
Crown. As a result, each memorandum of fact and law contains a detailed review
of the many alleged errors of the Judge in relation to those evidentiary
rulings, and significant time was spent on oral argument on those issues. However,
on the view we have taken of the substantive issues in this case, we have not
considered it necessary to express an opinion on the evidentiary issues.
(d) Transfer of Samson trust
funds to the control of the Samson Nation
[13]
One of the
remedies requested in the Samson pleadings at trial is an order requiring the
Crown to transfer all of Samson’s capital money to the control of the Samson
Nation. During the submissions at the close of the trial, the Crown indicated
its willingness to make such a transfer, subject to certain conditions.
Accordingly, the Judge made an order on January 27, 2005 setting out the steps
to be taken to effect the transfer, and the conditions to be met before the
transfer could occur (see Samson Indian Nation and Band v. Canada, 2005
FC 136).
[14]
The
conditions were that (1) the Samson Nation execute a trust agreement with
certain provisions, subject to the approval of the Court, (2) the Crown be
released from any future liability in relation to the Samson capital money, (3)
the approval of Samson be obtained by means of a referendum meeting certain
conditions, (4) the Council of the Samson Nation submit to the Minister a band
council resolution containing certain information, and (5) any capital money
received by the Crown for Samson in future was to be transferred to Samson on
terms to be agreed between Samson and the Crown, or failing that, as determined
by the Court. In the same order, the Judge declared that the transfer would be
for the benefit of the Samson Nation, and that it was authorized by paragraph
64(1)(k) of the Indian Act.
[15]
Paragraph
64(1)(k) of the Indian Act is discussed later in these reasons. At this
point it is convenient to mention parenthetically a minor legal argument about
its scope. Section 64 of the Indian Act sets out the conditions that
must be met for the “expenditure” of the capital money of a band. Paragraphs
64(1)(a) to (k) list the permitted expenditures. Paragraph 64(1)(k), the most
general item of that list, includes as a condition that the Minister be of the
opinion that the expenditure is for the benefit of the band. There was some
debate in these appeals as to whether the word “expenditure” is broad enough to
cover the transfer of capital money to a trust fund as contemplated by the
January 27, 2005 order referred to above, or the use of the capital money to
purchase an income earning investment. In our view, it is. The word “expenditure”
connotes “spending”, and is broad enough to include any use of money to acquire
something. Thus, a transfer of the capital money of a band to a trustee or
trustees for the purpose of acquiring income earning investments for the band
is an “expenditure” within the meaning of section 64. Such a transaction is permitted
by paragraph 64(1)(k), if the statutory conditions are met.
[16]
On October
17, 2005, the Judge made an order approving the terms of a trust deed dated
July 21, 2005 (the Kisoniyaminaw Heritage Trust Deed) under which it was
proposed to transfer the Samson capital money to a trust fund (the
Kisoniyaminaw Heritage Trust Fund), and the holding of a referendum to approve
the transfer. On October 31, 2005, the Judge made (a) an order approving an
amendment to the Kisoniyaminaw Heritage Trust Deed, (b) an order approving the
terms of Samson’s release of the Crown, to take effect upon the transfer of the
money, and (c) an order confirming the appointment of trustees for the
Kisoniyaminaw Heritage Trust Fund and the referendum regulations and procedure.
[17]
On
December 22, 2005, the Judge declared that the conditions for the transfer of
Samson’s capital money to the Kisoniyaminaw Heritage Trust Fund had been met,
and he approved the transfer, subject to a small holdback and other relatively
minor conditions. The transfer was implemented on February 1, 2006.
[18]
It was one
of the claims of Samson at trial that it has an aboriginal right to manage its
own money. Counsel for Samson properly conceded that this claim was rendered
moot by the transfer of Samson’s capital money to the Kisoniyaminaw Heritage
Trust Fund. The remaining claims of Samson in the Money Management Phase deal
only with the acts and omissions of the Crown during the period ending on
February 1, 2006.
[19]
No appeal
was taken from any of the orders of the Judge relating to the establishment of
the Kisoniyaminaw Heritage Trust Fund and the transfer of Samson’s capital
money to that trust fund.
[20]
Ermineskin
did not seek an order requiring the transfer of its capital money to its
control or to a trust fund, and has not claimed that it has an aboriginal right
to manage its capital money. Ermineskin was aware of the orders and
transactions involving the Kisoniyaminaw Heritage Trust Fund, but as of the date
of the hearing of these appeals, Ermineskin had not chosen to undertake a
similar arrangement.
III. Reasonable apprehension of bias
[21]
Samson
alleges a reasonable apprehension of bias on the part of the Judge. Ermineskin
makes no such allegation.
[22]
The
arguments of Samson on the issue of reasonable apprehension of bias are
addressed in detail in the memoranda of fact and law submitted by Samson and by
the Crown. By way of summary, Samson alleges that the Judge engaged in improper
cross-examination of the Samson witnesses, interfered improperly with the
cross-examinations conducted by counsel for Samson, made statements indicating
that he had prejudged whether certain treaty issues were justiciable,
improperly exhorted the parties to settle certain issues raised in the Money
Management Phase, prejudged the credibility of Samson witnesses, permitted the
Crown to submit late expert reports without regard to the possible prejudice
caused to Samson, arbitrarily adjourned the trial at one point, improperly
admonished counsel for Samson, awarded costs against Samson on a motion without
hearing from counsel for Samson, decided issues against Samson for which Samson
did not seek relief and failed to decide issues for which Samson sought relief,
found a large number of Samson’s witnesses not to be credible, and failed to
criticize or reject the evidence of certain expert witnesses for the Crown.
[23]
At the
hearing of the appeal, counsel for Samson addressed each of these grounds, with
extensive references to the transcript and other relevant documents. We
concluded that Samson had not made out an arguable case for the existence of a
reasonable apprehension of bias. We did not require counsel for the Crown to
make oral submissions on this point.
[24]
Many of
the factual allegations made by Samson in support of the argument that there
was a reasonable apprehension of bias also relate to other grounds of appeal
raised by Samson. The rejection of Samson’s argument that there was a
reasonable apprehension of bias did not preclude Samson from referring to those
factual allegations in the context of those other grounds of appeal.
IV.
General and Historical Phase
(a) Introduction
[25]
Before dealing with the issues in the Money
Management Phase, it is convenient to dispose of a number of issues arising
from the argument of Samson and Ermineskin that the Judge erred in law in
determining a number of issues that are not relevant to the claims made in the
Money Management Phase. Those determinations relate primarily to the claim, asserted by Samson only,
that the “cede, release and surrender” clause in Treaty 6 does not mean to the
Cree people what it means to the Crown.
[26]
Ermineskin and Samson were and are part of the
Plains Cree, and are parties to Treaty 6 which was signed in 1876. The
geographical area covered by Treaty 6 includes much of what is now Alberta and Saskatchewan, including the area that is
the source of the royalties referred to above. The portions of Treaty 6 that
are relevant specifically to the Money Management Phase are discussed later in
these reasons.
[27]
The “cede,
release and surrender” clause of Treaty 6 reads as follows:
|
The
Plain and Wood Cree Tribes of Indians, and all [the other] Indians inhabiting
the district hereinafter described and defined, do hereby cede, release,
surrender and yield up to the Government of the Dominion of Canada, for Her
Majesty the Queen and Her successors forever, all their rights, titles and
privileges, whatsoever, to the lands included within the following limits
[…].
|
(b) Evidence in the General
and Historical Phase
[28]
In support
of what Samson claims to be the Cree understanding of the “cede, release and
surrender” clause in Treaty 6, Samson adduced a large body of oral history
evidence of many Cree elders and other Cree people, and also a large body of expert
evidence, including a report by Professor H. C. Wolfart.
[29]
The report
of Professor Wolfart contains a lengthy analysis of many aspects of the Cree
language, including an analysis of a Cree language text containing what is said
to be the story of the making of Treaty 6. The Cree text, with an English
translation, is found in an appendix to Professor Wolfart’s report.
[30]
The
English translation of the Cree text seems to suggest that the Cree leaders
understood that the Crown was “buying” the Cree homeland for a perpetual stream
of payments, but only the surface of the land. According to the English
translation, the Crown representatives told the Cree: “No, I do not buy from
you what is deep beneath this land, only one foot deep whence the White-Man
makes his living, that is what I buy from you. Indeed, from here on, any monies
drawn from beneath the ground, let people understand that this is one benefit
which the Crees will continue to be paid from their homeland”. Some of the oral
history evidence supports that view of Treaty 6.
[31]
The Crown
objected to the admission of all evidence on this point. The Judge admitted the
evidence and reserved his decision on the objection. In the end, it was
admitted.
[32]
The Supreme Court of Canada has given
substantial guidance and direction concerning the admissibility and weight of
oral history evidence in aboriginal rights claims. The relevant issues are
discussed most recently in Mitchell v. Canada (Minister of National Revenue
– M.N.R.), [2001] 1 S.C.R. 911, per Chief Justice McLachlin, building on
the teaching of R. v. Van der Peet, [1996] 2 S.C.R. 507 and Delgamuukw v. British Columbia,
[1997] 3 S.C.R. 1010. All of these cases are referred to in the Judge’s reasons
in Samson at paragraphs 38 to 43.
[33]
In our view, the Judge demonstrated in
his reasons that he was aware of the principles stated in Mitchell at
paragraphs 29 to 39, which we summarize as follows. In determining a claim to
an aboriginal right or title, rules of evidence must be
applied flexibly, in a manner commensurate with the inherent difficulties posed
by such claims and the promise of reconciliation embodied in subsection 35(1)
of the Constitution Act, 1982. Evidentiary principles must be
sensitively applied to aboriginal claims but they cannot be strained beyond reason.
Oral history is admissible if it is both useful and reasonably reliable,
subject always to the exclusionary discretion of the trial judge. Oral history
evidence may meet the test of usefulness if it offers evidence of ancestral
practices and their significance that would not otherwise be available, given
the absence of contemporaneous written records, or if it provides the
aboriginal perspective on the right claimed. In considering the reliability of
oral evidence, a trial judge may inquire as to the witness’s ability to know
and to testify as to aboriginal traditions and history that have been orally
transmitted. Such inquiries may be appropriate on the question of the
admissibility of the evidence, and the weight to be assigned to the evidence if
admitted.
(c) The relevance of the oral history
evidence
[34]
Samson
asserted what it claims to be the Cree understanding of Treaty 6 to support one
of the legal theories underlying its claims, which is that the Plains Cree
(including Samson) have and have always had aboriginal title to the oil and gas
resources underlying the land to which Treaty 6 relates. That would include the
land that later came to comprise the Pigeon Lake Reserve and the Samson
Reserve. It is implicit in the position of Samson that the Cree aboriginal
title to those resources was not surrendered under Treaty 6.
[35]
If the
argument of Samson on this point is valid, then it is also arguable that
Samson’s aboriginal title to the oil and gas resources survived the subsequent
creation of the Pigeon Lake Reserve and the Samson Reserve, and perhaps
subsists to this day except to the extent it has been validly extinguished. It
is also arguable, based on Samson’s theory, that its aboriginal title to the
oil and gas resources underlying the Pigeon
Lake and Samson reserves obtained
the status of a constitutional right upon the coming into force of section 35 of the Constitution
Act, 1982.
[36]
Another
potential consequence of the Samson theory is that the Samson and other Cree
people could assert aboriginal title to all of the oil and gas reserves within
the area covered by Treaty 6 that comprises any part of the historic Cree
homeland, subject to any valid extinguishment of that aboriginal title. That
potential consequence (sometimes referred to as the “off reserve surrender
question”) prompted the Government of Alberta and the Government of
Saskatchewan to intervene in this case in support of the position of the Crown.
[37]
It
was because of the claim of aboriginal title that the Judge admitted, over the Crown’s
objection, the oral history evidence and the expert evidence relating to the
meaning of the “cede, release and surrender” clause in Treaty 6. As a claim of
aboriginal title may require certain evidence relating to pre-contact history,
territory and practices, evidence on those points was also permitted.
(d)
Judge’s determinations relating to evidence in the General and Historical Phase
[38]
In
Samson’s closing argument at trial, counsel for Samson conceded that the
meaning of the “cede, release and surrender” clause of Treaty 6 (and by
extension, the evidence relating to pre-contact history, territory and
practices) was not relevant to Samson’s claims in the Money Management Phase.
For that reason, Samson argued that the Judge should not reach any conclusions
in the Samson action with respect to the evidence adduced on that point.
[39]
In
Ermineskin’s closing argument at trial, counsel for Ermineskin argued that, for
two reasons, the Judge should not reach any conclusions in the Ermineskin
action with respect to the meaning of the “cede, release and surrender” clause
of Treaty 6. First, Ermineskin’s pleadings do not put the meaning of that
clause in issue. Second, although Ermineskin adopted minor portions of the
evidence adduced by Samson on that point, none of that evidence is relevant to
the claims of Ermineskin in the Money Management Phase.
[40]
In the
Crown’s closing argument at trial, counsel for the Crown agreed that this
evidence was not relevant to any of the claims of Samson or Ermineskin in the
Money Management Phase, but he argued that the Judge should nevertheless make
provisional findings on these points because the evidence might be relevant in
a subsequent phase, and the Judge who heard the evidence was in the best
position to assess it.
[41]
The Judge
indicated that he would make findings on these points, and he did so. His
summary of the evidence and his analysis is lengthy, and results in a number of
conclusions. All of his conclusions appear in his reasons in the Samson case,
and some appear also in his reasons in the Ermineskin case. We summarize as
follows the most important conclusions reached by the Judge :
|
1.
|
In assessing the oral
history evidence, the approach advocated by Dr. von Gernet (an expert witness
for the Crown) is preferable to the approach advocated by Dr. Wheeler (an
expert witness for Samson) (Judge’s reasons in Samson, paragraph 453).
|
|
2.
|
The oral history evidence of
the Samson elders should be discounted because the story probably was not
transmitted to them as they recalled it, and alternatively because it is
implausible that the Crown representatives who negotiated Treaty 6 would have
agreed to accept a surrender of the land only to a certain depth (Judge’s
reasons in Samson, paragraphs 458 to 494).
|
|
3.
|
The evidence represented by
the Cree language text attached to the expert report of Professor Wolfart
bears little weight because there is little evidence as to the provenance of
the story it contains (Judge’s reasons in Samson, paragraph 495).
|
|
4.
|
The evidence of Professor
Wolfart that the Cree leaders who signed Treaty 6 could not have understood
the “cede, surrender and release” clause bears little weight because his
evidence does not explain how he reached that conclusion (Judge’s reasons in
Samson, paragraph 503, and in Ermineskin, paragraph 195).
|
|
5.
|
The contemporaneous accounts
of the signing of Treaty 6 that were written by Alexander Morris, A. G.
Jackes, Peter Erasmus and John McDougall are reliable (Judge’s reasons in
Samson, paragraphs 504 to 508, and in Ermineskin, paragraphs 196 to 200).
|
|
6.
|
The Cree leaders were aware
that, for the Crown, the purpose of Treaty 6 was to secure the surrender of
aboriginal title to a vast tract of land so as to open it up for settlement
and development, and that the land surrender clause was absolutely non-negotiable,
unlike certain other clauses such as those relating to money, agricultural
implements and livestock (Judge’s reasons in Samson, paragraph 509, and in
Ermineskin, paragraph 201).
|
|
7.
|
Alexander Morris, who
represented the Crown at the negotiation of Treaty 6, assured the Cree that
they could continue to hunt and fish as before except on land taken up for
settlement, that reserves would be set aside for the Cree, that no one could
take their homes from them, that if they wanted to sell all or part of their
reserves, this could be done only by the Crown with their consent, and that
the proceeds would be kept by the Crown and “put away to increase” (Judge’s
reasons in Samson, paragraph 510, and in Ermineskin, paragraph 202).
|
|
8.
|
The evidence does not justify
interpreting the “cede, release and surrender” clause as being limited to the
land only to a certain depth (Judge’s reasons in Samson, paragraph 512).
|
|
9.
|
It is likely that the theory
relating to such a limitation has emerged within the past few decades as a
motif within the Cree oral traditions, and may represent a present day
reconstruction of what current generations wished had happened, or thought
should have happened, in 1876 (Judge’s reasons in Samson, paragraph 513).
|
|
10.
|
The “cede, release and
surrender” clause in Treaty 6 was explained to the Cree leaders in 1876, and
they understood that clause when they signed Treaty 6 (Judge’s reasons in
Samson, paragraph 532).
|
|
11.
|
For the purposes of the test
in R. v. Van der Peet (cited above), the date of contact between the
Cree and the European settlers is 1670 (Judge’s reasons in Samson, paragraph
550).
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|
12.
|
Before European contact, the
Cree people occupied what is now Manitoba and Saskatchewan, but they are not indigenous to
central Alberta and were not present there
until sometime after European contact (Judge’s reasons in Samson, paragraph
576).
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|
13.
|
The evidence does not
establish pre-contact trade by the Cree in any particular item. Specifically,
there is no evidence of any trade by the Cree in minerals, including salt,
oil, gas, or anything analogous (Judge’s reasons in Samson, paragraph 588).
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[42]
The
arguments of the parties in these appeals are similar to their closing
arguments at trial. Ermineskin argues that the Judge erred in law in considering
and determining the meaning of the “cede, release and surrender clause” in
Treaty 6 in relation to the Ermineskin action, because that issue was not
raised in the Ermineskin pleadings. Ermineskin emphasizes the importance of
these issues, and also emphasizes the unfairness of an adverse finding that,
for practical purposes, might be considered binding on Ermineskin although it
was not an issue raised in the pleadings in its case.
[43]
Samson
argues that the Judge erred in law in the Samson case in stating the conclusions
summarized above because, although they relate to issues raised in the
pleadings in the Samson case, they are not relevant to any of the claims made
by Samson in the Money Management Phase. Samson also argues that in any event
the conclusions are incorrect because of a number of errors of law and in the
assessment of the credibility and reliability of significant portions of the
evidence.
[44]
The Crown
argues that although it is true that these conclusions are not relevant to any
of the claims made by Ermineskin or Samson in the Money Management Phase, the
Judge made no error in reaching or stating these conclusions because they may
be relevant in future phases and because, as the Judge heard all of the
evidence, he is in the best position to assess it. The interveners generally
support the position of the Crown, and emphasize that the findings are
potentially of critical importance to Alberta and Saskatchewan.
(e) Discussion
[45]
We have
considerable sympathy for the difficult position in which the Judge found
himself at the close of the trial. Early in the trial he had acceded to
Samson’s request to hear an enormous body of controversial evidence, the admissibility
of which was the subject of lengthy and intense debate. According to the Samson
memorandum of fact and law, the evidence relating to the General and Historical
Phase (including the evidence relating to the meaning of the “cede, release and
surrender” clause) took 174 hearing days out of a total of 370 hearing days (of
which 19 days consisted of oral submissions at the conclusion of the trial).
[46]
And yet,
at the conclusion of the trial, the Judge was faced with arguments that were
the opposite of the arguments made at the outset. Counsel for Samson had been
responsible for the evidence being presented, but he argued that it should be
disregarded because it was irrelevant. Counsel for the Crown maintained his
argument that the evidence was irrelevant to the Money Management Phase but,
despite his earlier objection to the evidence being admitted, urged the Judge
nevertheless to assess the evidence and reach conclusions about it.
[47]
Given
those circumstances, and the amount of time and resources invested in the
General and Historical Phase evidence, it is not difficult to understand why
the Judge considered himself obliged to undertake the difficult task of
assessing that evidence.
[48]
Nevertheless,
all parties agreed at the close of the trial, and still agree, that the
conclusions summarized above are not relevant to any of the claims made in the
Money Management Phase. We agree also. For that reason we express no opinion as
to whether those conclusions are correct. As a matter of legal analysis, they
are obiter dicta. It follows that the “off reserve
surrender question” remains
unresolved.
[49]
It appears
to be common ground that some or all of the evidence presented during the
General and Historical Phase, including the evidence relating to the meaning of
the “cede, release and surrender” clause of Treaty 6, may be relevant to one or
more of the claims of the subsequent phases of the Samson and Ermineskin
actions (although we did not obtain from counsel a clear picture of exactly how
it might be relevant).
[50]
However,
none of the conclusions summarized above are binding on any judge who hears the
subsequent phases. If, during the trial of the subsequent phases, a party
wishes to refer to any of the evidence from the General and Historical Phase,
the relevance of that evidence to those phases will have to be determined anew,
and fresh consideration will have to be given to its credibility, reliability
and weight.
V.
The facts relevant to the Money Management Phase
(a)
Preliminary point
[51]
This
section contains a factual summary. It includes references to statutes and
legal principles, and also descriptions of the position taken by the Crown on
certain legal issues, where those references are necessary to appreciate the
factual context of these appeals. That is because the acts and omissions of the
Crown of which Samson and Ermineskin complain were premised on the Crown’s belief
that it was acting throughout in a manner that was mandated by law. In
reviewing these facts, it must be borne in mind that Samson and Ermineskin take
issue with many of the Crown’s legal conclusions. Nothing in this factual
summary is intended to be read as an expression of the opinion of this Court on
any of the disputed legal issues. Our analysis of the legal debate is set out
later in these reasons.
(b)
Treaty 6
[52]
In 1889,
the Samson Reserve was established pursuant to Treaty 6 for the Samson Nation.
In 1896, the Pigeon Lake Reserve was established pursuant to Treaty 6 for the
Four Bands (including, as stated above, the Samson Nation, the Ermineskin
Nation, and two other bands).
[53]
The
portion of Treaty 6 that is most relevant to the claims in the Money Management
Phase reads as follows (our emphasis):
|
And Her Majesty the Queen
hereby agrees and undertakes to lay aside reserves for farming lands, due
respect being had to lands at present cultivated by the said Indians, and
other reserves for the benefit of the said Indians, to be administered and
dealt with for them by Her Majesty's Government of the Dominion of Canada,
provided all such reserves shall not exceed in all one square mile for each
family of five, or in that proportion for larger or smaller families, in
manner following, that is to say : that the Chief Superintendent of Indian
Affairs shall depute and send a suitable person to determine and set apart
the reserves for each band, after consulting with the Indians thereof as to
the locality which may be found to be most suitable for them;
|
|
Provided, however, that Her
Majesty reserves the right to deal with any settlers within the bounds of any
lands reserved for any Band as She shall deem fit, and also that the
aforesaid reserves of land, or any interest therein, may be sold or otherwise
disposed of by Her Majesty's Government for the use and benefit of the said
Indians entitled thereto, with their consent first had and obtained; and
with a view to show the satisfaction of Her Majesty with the behavior and
good conduct of her Indians, She hereby, through Her Commissioners, makes
them a present of twelve dollars for each man, woman and child belonging to
the Bands here represented, in extinguishment of all claims heretofore
preferred.
|
(c) The Indian Act –
provisions relating to reserves
[54]
The Indian
Act contains a number of provisions relating to reserves which, in relation
to the Pigeon Lake Reserve and the Samson Reserve, must be understood to be
subject to the provisions of Treaty 6. The following provisions of the Indian
Act relating to reserves appear to be generally relevant to the claims in
the Money Management Phase:
|
2. (1) In
this Act,
|
2. (1) Les
définitions qui suivent s’appliquent à la présente loi.
|
|
[…]
|
[…]
|
|
“reserve” […] means a tract of land, the legal title
to which is vested in Her Majesty, that has been set apart by Her Majesty for
the use and benefit of a band […]
|
« réserve »
Parcelle de terrain dont Sa Majesté est propriétaire et qu’elle a mise de
côté à l’usage et au profit d’une bande […].
|
|
[…]
|
[…]
|
|
“surrendered
lands” means a reserve or part of a reserve or any interest therein, the
legal title to which remains vested in Her Majesty, that has been released or
surrendered by the band for whose use and benefit it was set apart;
|
« terres
cédées » Réserve ou partie d’une réserve, ou tout droit sur celle-ci,
propriété de Sa Majesté et que la bande à l’usage et au profit de laquelle il
avait été mis de côté a abandonné ou cédé.
|
|
[…]
|
[…]
|
|
18. (1) Subject to this Act, reserves are held by Her Majesty for
the use and benefit of the respective bands for which they were set apart,
and subject to this Act and to the terms of any treaty or surrender, the
Governor in Council may determine whether any purpose for which lands in a
reserve are used or are to be used is for the use and benefit of the band.
|
18. (1) Sous
réserve des autres dispositions de la présente loi, Sa Majesté détient des
réserves à l’usage et au profit des bandes respectives pour lesquelles elles
furent mises de côté; sous réserve des autres dispositions de la présente loi
et des stipulations de tout traité ou cession, le gouverneur en conseil peut
décider si tout objet, pour lequel des terres dans une réserve sont ou
doivent être utilisées, se trouve à l’usage et au profit de la bande.
|
|
[…]
|
[…]
|
|
37. (1) Lands in a reserve shall not be sold nor title to them
conveyed until they have been absolutely surrendered to Her Majesty pursuant
to subsection 38(1) by the band for whose use and benefit in common the
reserve was set apart.
|
37. (1) Les
terres dans une réserve ne peuvent être vendues ou aliénées que si elles sont
cédées à titre absolu conformément au paragraphe 38(1) à Sa Majesté par la
bande à l’usage et au profit communs de laquelle la réserve a été mise de
côté.
|
|
(2) Except where this Act
otherwise provides, lands in a reserve shall not be leased nor an interest in
them granted until they have been surrendered to Her Majesty pursuant to
subsection 38(2) by the band for whose use and benefit in common the reserve
was set apart.
|
(2) Sauf
disposition contraire de la présente loi, les terres dans une réserve ne
peuvent être données à bail ou faire l’objet d’un démembrement que si elles
sont cédées conformément au paragraphe 38(2) à Sa Majesté par la bande à
l’usage et au profit communs de laquelle la réserve a été mise de côté.
|
|
[…]
|
[…]
|
|
38. (1) A band may absolutely surrender to Her Majesty,
conditionally or unconditionally, all of the rights and interests of the band
and its members in all or part of a reserve.
|
38. (1) Une
bande peut céder à titre absolu à Sa Majesté, avec ou sans conditions, tous
ses droits, et ceux de ses membres, portant sur tout ou partie d’une réserve.
|
|
(2) A band may,
conditionally or unconditionally, designate, by way of a surrender to Her
Majesty that is not absolute, any right or interest of the band and its
members in all or part of a reserve, for the purpose of its being leased or a
right or interest therein being granted.
|
(2)
Aux fins de les donner à bail ou de les démembrer, une bande peut désigner
par voie de cession à Sa Majesté, avec ou sans conditions, autre qu’à titre
absolu, tous droits de la bande, et ceux de ses membres, sur tout ou partie
d’une réserve.
|
|
39. (1) An absolute surrender or a designation is void unless
(a) it is made to Her
Majesty;
(b) it is assented to by a
majority of the electors of the band
(i) at a general meeting of the
band called by the council of the band,
(ii) at a special meeting of the
band called by the Minister for the purpose of considering a proposed
absolute surrender or designation, or
(iii) by a referendum as provided
in the regulations; and
|
39. (1) Une
cession à titre absolu ou une désignation n’est valide que si les conditions
suivantes sont réunies :
a)
elle est faite à Sa Majesté;
b)
elle est sanctionnée par une majorité des électeurs de la bande :
(i) soit à
une assemblée générale de la bande convoquée par son conseil,
(ii) soit
à une assemblée spéciale de la bande convoquée par le ministre en vue
d’examiner une proposition de cession à titre absolu ou de désignation,
(iii) soit
au moyen d’un référendum comme le prévoient les règlements;
c)
elle est acceptée par le gouverneur en conseil.
|
|
[…]
|
[…]
|
|
53. (1) The Minister or a person appointed by the Minister for the
purpose may, in accordance with this Act and the terms of the absolute
surrender or designation, as the case may be,
(a) manage or sell
absolutely surrendered lands; or
(b)
manage, lease or carry out any other transaction affecting designated lands.
|
53. (1) Le ministre
ou son délégué peut, conformément à la présente loi et aux conditions de la
cession à titre absolu ou de la désignation :
a)
administrer ou vendre les terres cédées à titre absolu;
b)
effectuer toute opération à l’égard des terres désignées et notamment les
administrer et les donner à bail.
|
[55]
The Crown
interprets the quoted provisions of the Indian Act, in so far as they
relate to reserves established under Treaty 6, as providing a statutory
mechanism by which the Crown can ensure that the reserve lands are not dealt
with in any manner that is not consistent with Treaty 6. Specifically, the
Crown considers these provisions to be consistent with the Crown’s promise in
Treaty 6 that an interest in a reserve cannot be alienated except by the Crown,
and then only for the benefit and with the consent of the members of the band
or bands for which the reserve was established. The Crown also considers the
statutory scheme to be consistent with the Crown’s fiduciary obligations in
relation to the Samson Reserve and the Pigeon Lake Reserve.
(d)
The surrender to the Crown of the oil and gas resources on the reserves
[56]
Evidence
of oil and gas was discovered under the surface of the Samson Reserve and the
Pigeon Lake Reserve. In 1946, it was deemed advantageous to find a way to
permit the oil and gas resources to be exploited in a manner that would produce
a financial return for the bands for which those reserves were established.
[57]
Under the
terms of Treaty 6 and the statutory scheme in the Indian Act, it was
necessary for the oil and gas resources to be surrendered to the Crown, with
the consent of the respective bands, on terms that would permit the Crown to
enter into the necessary arrangements with third parties to conduct
exploration, development and extraction activities on the surrendered reserve
lands.
[58]
To that
end, the Four Bands and Samson, respectively, executed instruments of surrender
in 1946. The terms of the surrenders are identical and read in relevant part as
follows:
|
… WE, the undersigned Chief and Principal men of the
[Band] …, for and acting on behalf of the whole people of our said Band in
Council assembled, Do hereby release, remise, surrender, quit claim and yield
up unto our Sovereign Lord the King, His Heirs and Successors forever, ALL
the land deemed to contain salt, petroleum, natural gas, coal, gold, silver,
copper, iron and other minerals, underlying the surface of the area within
the boundaries of the [Reserve] …, and such timber contained within the
boundaries of any mineral claim staked or leased in accordance with the
Regulations, as may be necessary for the development and proper working of
such mineral deposits ….
TO HAVE AND TO HOLD the same unto his said Majesty the
King, his Heirs and Successors, forever, in trust to grant in respect of such
land the right to prospect for, mine, recover and take away any or all
minerals contained therein, to such person or persons, and upon such terms
and conditions as the Government of the Dominion of Canada may deem most
conducive to our welfare and that of our people ;
and upon further conditions that money received from the
permit proceeds of 10¢ per acre be paid immediately on a per capita
distribution.
AND WE, the said Chief and Principal men of the said
[Band] … do on behalf of our people and for ourselves, hereby ratify and
confirm, and promise to ratify and confirm, whatever the said Government may
do, or cause to be lawfully done in connection with the management and
operation of the said lands and the disposal and sale of the minerals
contained therein.
|
[59]
The Crown
used a standard printed form for the surrender documents. The phrase relating
to the per capital distribution of 10¢ per acre was added to the form. One
portion of the standard form was crossed out. The crossed out words read as
follows:
|
…and
upon the further condition that all moneys received and to which we are entitled
by law and pursuant to the Surrender, shall be placed to our credit and
interest thereon paid to us in the usual manner.
|
The record discloses no
explanation for the deletion of these words, but it is not suggested that the
deletion of these words from the surrender form is relevant to any of the
issues in these appeals.
[60]
The
surrenders were accepted by the Crown. Within a few years, commercial
quantities of oil and gas were discovered on the Pigeon Lake Reserve and the
Samson Reserve. Beginning in 1952, the Crown prepared and executed leases with
oil and gas companies that would yield royalties for Samson and Ermineskin.
(e)
The Crown’s admission – beneficial title to the oil and gas resources on the
reserves
[61]
The Crown
admitted during the trial of the Money Management Phase that at all relevant
times, the oil and gas resources under the Pigeon Lake Reserve and the Samson
Reserve were and are beneficially owned by Samson and Ermineskin (in the case
of the Pigeon Lake Reserve, to the extent of their respective shares). At the
hearing of the appeals there was some debate about the timing of that
admission, but at this stage the timing is not relevant.
(f)
The Indian Oil and Gas Act
[62]
The
statutory scheme relating to the administration of Indian oil and gas resources
includes the Indian Oil and Gas Act, R.S.C. 1985, c. I-7, enacted in
1974. It appears to be common ground that the amount of royalties derived from
the Samson and Ermineskin oil and gas resources prior to 1974 was relatively
minor, and that the Indian Oil and Gas Act is relevant to substantially
all of the accumulated royalties that are the subject of the Money Management
Phase. The part of the Indian Oil and Gas Act that is most relevant to
claims in the Money Management Phase reads as follows (our emphasis):
|
4.(1)
Notwithstanding any term or condition in any grant, lease, permit, licence or
other disposition or any provision in any regulation respecting oil or gas or
both oil and gas or the terms and conditions of any agreement respecting
royalties in relation to oil or gas or both oil and gas, whether granted,
issued, made or entered into before or after December 20, 1974, but subject
to subsection (2), all oil and gas obtained from Indian lands after April
22, 1977 is subject to the payment to Her Majesty in right of Canada, in
trust for the Indian bands concerned, of the royalties prescribed from time
to time by the regulations.
|
4. (1)
Nonobstant les modalités d’une concession, d’un bail, d’un permis, d’une
licence ou d’un autre acte d’aliénation, les dispositions d’un règlement sur
le pétrole ou sur le gaz ou les modalités d’un accord sur les redevances
applicables au pétrole ou au gaz, qu’ils soient ou non survenus avant le 20
décembre 1974, mais sous réserve du paragraphe (2), le pétrole et le gaz
tirés des terres indiennes après le 22 avril 1977 sont assujettis au paiement
à Sa Majesté du chef du Canada, en fiducie pour les bandes indiennes
concernées, des redevances réglementaires.
|
(g) The
management of the royalties received by the Crown
[63]
During the
period relevant to these appeals, the Crown dealt with the royalties derived
from the Pigeon Lake Reserve and the Samson Reserve in a manner that the Crown
considered to be mandated by the statutory scheme that includes section 4 of
the Indian Oil and Gas Act (which states that the royalty payments are
received by the Crown in trust for the bands), certain provisions of the Indian
Act, and certain provisions of the Financial Administration Act,
R.S.C. 1985, c. F-11.
[64]
The Crown
has always taken the position, and still takes the position, that as a matter
of law the statutory scheme is consistent with Treaty 6, and that the Crown is
obliged to adhere to that statutory scheme and cannot deal with the royalties
in any manner that is not contemplated by that statutory scheme. Samson and
Ermineskin do not contend that the Crown is entitled to disregard the statutory
scheme but they argue that the Crown’s narrow interpretation of the scheme is
not correct (or alternatively, if the Crown’s view of the statutory scheme is
correct as a matter of statutory interpretation, the statutory scheme breaches
the rights of Samson and Ermineskin, or necessarily results in a breach of
their rights).
(1)
Financial Administration Act
[65]
The
operation of the statutory scheme, as understood by the Crown, is based on the
premise that the royalties fall within the definition of “public money” in
section 2 of the Financial Administration Act. The definition reads as
follows (our emphasis):
|
2. In this
Act, …
|
2. Les
définitions qui suivent s’appliquent à la présente loi.
|
|
“public
money” means all money belonging to Canada received
or collected by the Receiver General or any other public officer in his official
capacity or any person authorized to receive or collect such money, and
includes
(a) duties and revenues of Canada,
(b) money
borrowed by Canada or received through the issue or sale of securities,
(c)
money received or collected for or on behalf of Canada, and
(d)
all money that is paid to or received or collected by a public officer
under or pursuant to any Act, trust, treaty, undertaking or contract, and is
to be disbursed for a purpose specified in or pursuant to that Act, trust,
treaty, undertaking or contract;
|
«
fonds publics » Fonds appartenant au Canada, perçus ou reçus par le
receveur général ou un autre fonctionnaire public agissant en sa qualité
officielle ou toute autre personne autorisée à en percevoir ou recevoir. La
présente définition vise notamment :
a)
les recettes de l’État;
b)
les emprunts effectués par le Canada ou les produits de l’émission ou de la
vente de titres;
c)
les fonds perçus ou reçus pour le compte du Canada ou en son nom;
d)
les fonds perçus ou reçus par un fonctionnaire public sous le régime d’un
traité, d’une loi, d’une fiducie, d’un contrat ou d’un engagement et affectés
à une fin particulière précisée dans l’acte en question ou conformément à
celui-ci.
|
[66]
Because
the Crown considered the royalties to be “public money”, they were deposited as
received by the Crown in the Consolidated Revenue Fund pursuant to subsection
17(1) of the Financial Administration Act, which reads as follows:
|
17. (1) Subject to this Part,
all public money shall be deposited to the credit of the Receiver General.
|
17. (1) Sous réserve des autres dispositions de la
présente partie, les fonds publics sont déposés au crédit du receveur
général.
|
[67]
The
authority of the Crown to pay money out of the Consolidated Revenue Fund is
subject to section 26 of the Financial Administration Act, which reads
as follows:
|
26. Subject to the Constitution Acts, 1867 to 1982,
no payments shall be made out of the Consolidated Revenue Fund without the
authority of Parliament.
|
26. Sous
réserve des Lois constitutionnelles de 1867 à 1982, tout paiement sur
le Trésor est subordonné à l’autorisation du Parlement.
|
[68]
Generally,
the authority of Parliament to make a payment out of the Consolidated Revenue
Fund must be found in the Financial Administration Act or another
statute, or in an appropriation or a special warrant (see sections 27 to 41 of
the Financial Administration Act).
[69]
In the
case of money received on behalf of a band and held in the Consolidated Revenue
Fund, the requisite authority for expenditures is found in the combined
operation of subsection 21(1) of the Financial Administration Act and
sections 61 to 69 of the Indian Act (those provisions are discussed in
more detail in the next section of these reasons).
[70]
Subsection
21(1) of the Financial Administration Act reads as follows:
|
21.
(1) Money referred to in paragraph (d) of the definition “public
money” in section 2 that is received by or on behalf of Her Majesty for a
special purpose and paid into the Consolidated Revenue Fund may be paid out
of the Consolidated Revenue Fund for that purpose, subject to any statute
applicable thereto.
|
21. (1) Les
fonds visés à l’alinéa d) de la définition de « fonds
publics » à l’article 2 et qui sont reçus par Sa Majesté, ou en son nom,
à des fins particulières et versés au Trésor peuvent être prélevés à ces fins
sur le Trésor sous réserve des lois applicables.
|
(2) Money
management provisions of the Indian Act
[71]
It is
common ground that the royalties that are the subject of the claims of Samson
and Ermineskin in the Money Management Phase come within the definition of
“Indian moneys” in section 2 of the Indian Act. That definition reads as
follows:
|
2. (1) In
this Act, …
|
2. (1) Les
définitions qui suivent s’appliquent à la présente loi.
|
|
“Indian
moneys” means all moneys collected, received or held by Her Majesty for the
use and benefit of Indians or bands;
|
« argent
des Indiens » Les sommes d’argent perçues, reçues ou détenues par Sa
Majesté à l’usage et au profit des Indiens ou des bandes.
|
[72]
Sections
61 to 69 of the Indian Act deal with the management of Indian money. The
relevant portions of sections 61 to 69 of the Indian Act read as
follows:
|
61. (1) Indian moneys shall be expended only for the benefit of the
Indians or bands for whose use and benefit in common the moneys are received
or held, and subject to this Act and to the terms of any treaty or surrender,
the Governor in Council may determine whether any purpose for which Indian
moneys are used or are to be used is for the use and benefit of the band.
|
61. (1)
L’argent des Indiens ne peut être dépensé qu’au bénéfice des Indiens ou des
bandes à l’usage et au profit communs desquels il est reçu ou détenu, et,
sous réserve des autres dispositions de la présente loi et des clauses de
tout traité ou cession, le gouverneur en conseil peut décider si les fins
auxquelles l’argent des Indiens est employé ou doit l’être, est à l’usage et
au profit de la bande.
|
|
(2) Interest on Indian
moneys held in the Consolidated Revenue Fund shall be allowed at a rate to be
fixed from time to time by the Governor in Council.
|
(2)
Les intérêts sur l’argent des Indiens détenu au Trésor sont alloués au taux
que fixe le gouverneur en conseil.
|
|
62. All Indian moneys
derived from the sale of surrendered lands or the sale of capital assets of a
band shall be deemed to be capital moneys of the band and all Indian moneys
other than capital moneys shall be deemed to be revenue moneys of the band.
|
62. L’argent des Indiens
qui provient de la vente de terres cédées ou de biens de capital d’une bande
est réputé appartenir au compte en capital de la bande; les autres sommes
d’argent des Indiens sont réputées appartenir au compte de revenu de la
bande.
|
|
[…]
|
[…]
|
|
64. (1) With
the consent of the council of a band, the Minister may authorize and direct
the expenditure of capital moneys of the band
|
64. (1) Avec
le consentement du conseil d’une bande, le ministre peut autoriser et
prescrire la dépense de sommes d’argent au compte en capital de la bande :
|
|
(a) to distribute per
capita to the members of the band an amount not exceeding fifty per cent of
the capital moneys of the band derived from the sale of surrendered lands;
|
a)
pour distribuer per capita aux membres de la bande un montant maximal
de cinquante pour cent des sommes d’argent au compte en capital de la bande,
provenant de la vente de terres cédées;
|
|
(b) to construct and
maintain roads, bridges, ditches and watercourses on reserves or on
surrendered lands;
|
b)
pour construire et entretenir des routes, ponts, fossés et cours d’eau dans
des réserves ou sur des terres cédées;
|
|
(c) to construct and
maintain outer boundary fences on reserves;
|
c)
pour construire et entretenir des clôtures de délimitation extérieure sur les
réserves;
|
|
(d) to purchase land for
use by the band as a reserve or as an addition to a reserve;
|
d)
pour acheter des terrains que la bande emploiera comme réserve ou comme
addition à une réserve;
|
|
(e) to purchase for the
band the interest of a member of the band in lands on a reserve;
|
e)
pour acheter pour la bande les droits d’un membre de la bande sur des terrains
sur une réserve;
|
|
(f) to purchase livestock
and farm implements, farm equipment or machinery for the band;
|
f)
pour acheter des animaux, des instruments ou de l’outillage de ferme ou des
machines pour la bande;
|
|
(g) to construct and
maintain on or in connection with a reserve such permanent improvements or
works as in the opinion of the Minister will be of permanent value to the
band or will constitute a capital investment;
|
g)
pour établir et entretenir dans une réserve ou à l’égard d’une réserve les
améliorations ou ouvrages permanents qui, de l’avis du ministre, seront d’une
valeur permanente pour la bande ou constitueront un placement en capital;
|
|
(h)
to make to members of the band, for the purpose of promoting the welfare of
the band, loans not exceeding one-half of the total value of
(i) the chattels owned by
the borrower, and
(ii) the land with respect
to which he holds or is eligible to receive a Certificate of Possession,
and may charge interest and take
security therefor;
|
h)
pour consentir aux membres de la bande, en vue de favoriser son bien-être,
des prêts n’excédant pas la moitié de la valeur globale des éléments suivants
:
(i) les
biens meubles appartenant à l’emprunteur,
(ii) la
terre concernant laquelle il détient ou a le droit de recevoir un certificat
de possession,
et percevoir des intérêts
et recevoir des gages à cet égard;
|
|
(i) to meet expenses
necessarily incidental to the management of lands on a reserve, surrendered
lands and any band property;
|
i)
pour subvenir aux frais nécessairement accessoires à la gestion de terres
situées sur une réserve, de terres cédées et de tout bien appartenant à la
bande;
|
|
(j) to construct houses for
members of the band, to make loans to members of the band for building
purposes with or without security and to provide for the guarantee of loans
made to members of the band for building purposes; and
|
j)
pour construire des maisons destinées aux membres de la bande, pour consentir
des prêts aux membres de la bande aux fins de construction, avec ou sans
garantie, et pour prévoir la garantie des prêts consentis aux membres de la
bande en vue de la construction;
|
|
(k) for any other purpose
that in the opinion of the Minister is for the benefit of the band.
|
k)
pour toute autre fin qui, d’après le ministre, est à l’avantage de la bande.
|
|
(2) The Minister may make
expenditures out of the capital moneys of a band in accordance with by-laws
made pursuant to paragraph 81(1)(p.3) for the purpose of making
payments to any person whose name was deleted from the Band List of the band
in an amount not exceeding one per capita share of the capital moneys.
|
(2) Le
ministre peut effectuer des dépenses sur les sommes d’argent au compte de
capital d’une bande conformément aux règlements administratifs pris en vertu
de l’alinéa 81(1)p.3) en vue de faire des paiements à toute personne
dont le nom a été retranché de la liste de la bande pour un montant ne
dépassant pas une part per capita de ces sommes.
|
|
[…]
|
[…]
|
|
69. (1) The Governor in Council may by order permit a band to
control, manage and expend in whole or in part its revenue moneys and may
amend or revoke any such order.
|
|
|
(2) The
Governor in Council may make regulations to give effect to subsection (1) and
may declare therein the extent to which this Act and the Financial
Administration Act shall not apply to a band to which an order made under
subsection (1) applies.
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(2) Le
gouverneur en conseil peut prendre des règlements pour donner effet au
paragraphe (1) et y déclarer dans quelle mesure la présente loi et la Loi
sur la gestion des finances publiques ne s’appliquent pas à une bande
visée par un décret pris sous le régime du paragraphe (1).
|
[73]
Subsection 61(1) states three general principles relating to the
management of Indian money. Those principles may be summarized as follows:
|
1.
|
Indian money is to be expended
only for the benefit of the Indians or bands for whose use and benefit in
common the money is received or held.
|
|
2.
|
The
Governor in Council may determine whether any purpose for which Indian money
is used or is to be used is for the use and benefit of the band.
|
|
3.
|
The determination of the
Governor in Council is subject to the Indian Act and to the terms of
any treaty or surrender.
|
[74]
One feature of the money
management provisions of the Indian Act is that all Indian money is categorized
as either “revenue money” or “capital money” (see section 62). The two
categories of money are managed differently, and so they must be accounted for
separately. The
Crown maintains separate capital accounts and revenue accounts for Indian money
held in the Consolidated Revenue Fund. There is a capital account and a revenue
account for the Pigeon Lake Reserve, which is held for the Four Bands and
periodically allocated among them according to their respective populations.
There are also capital accounts and revenue accounts for each of the Four
Bands, including the Ermineskin Nation and the Samson Nation.
[75]
A band may
manage its own revenue money if an order to that effect is made by the Governor
in Council under subsection
69(1). In 1964, Orders in Council were made under subsection 69(1) for the
Samson Nation and the Ermineskin Nation. They have managed their own revenue money since that time.
There is a routine procedure by which revenue money received by the Crown for
the Samson Nation or the Ermineskin Nation is handed over to the respective
band councils, subject to certain requirements such as the presentation of an
appropriate budget which, among other things, permits the Crown to determine
that the revenue money is intended to be expended in
compliance with section 62 (quoted above). Neither Samson nor Ermineskin has made
any claim in the Money Management Phase in relation to their revenue money.
[76]
Section 64
of the Indian Act deals with the management of capital money of the
bands. Royalties derived from the Pigeon Lake Reserve and the Samson Reserve
come within the category of capital money. For that reason, royalties received
by the Crown in relation to those reserves are credited to the appropriate
capital account. Royalties in the Pigeon
Lake capital account are allocated
periodically to the capital accounts of the Four Bands in accordance with their
respective populations.
[77]
Capital
money remains credited to the capital accounts of the respective bands until it
is expended pursuant to section 64 of the Indian Act. A section 64
expenditure requires the consent of the band council and, in the case of an
expenditure under paragraph 64(1)(k), the opinion of the Minister that
the expenditure is being made for a purpose that is for
the benefit of the band. In the case of Samson and Ermineskin, a
proposal for an expenditure of capital money typically is initiated by the band council, which
submits a band council resolution to the Minister containing particulars of the
proposal. The request is considered and, if it is approved by the Minister, the
money is released to the band or as the band directs.
[78]
There is
no dispute between the parties as to the amount of royalties derived from the
Pigeon Lake Reserve or the Samson Reserve. With respect to the royalties
derived from the Pigeon Lake Reserve, there is no dispute about the correctness
of the allocation of the royalties among the Four Bands. From 1969 to 2003, the
total royalties were approximately $993 million for Samson and $505 million for
Ermineskin.
(h)
Statutory provisions relating to the investment of the capital money of Indian bands
[79]
Before Confederation (1867) and for some time
after Confederation, the Crown exercised direct control of the management of
all Indian money, which was held in trust and could be invested in commercial
securities and municipal debentures. Early versions of the Indian Act
specifically gave the Governor in Council complete control over the use of what
later would be categorized as the capital money of a band. For example, section
70 of the Indian Act (1880), 43 V., c. 28, reads as follows:
|
70. The Governor in
Council may, subject to the provisions of this Act, direct how, and in what
manner, and by whom the moneys arising from sales of Indian lands, and from
the property held or to be held in trust for the Indians, or from any timber
on Indian lands or reserves, or from any other source for the benefit of
Indians (with the exception of any small sum not exceeding ten per cent. of
the proceeds of any lands, timber or property, which may be agreed at the time
of the surrender to be paid to the members of the band interested therein),
shall be invested from time to time […].
|
70. Le Gouverneur en
conseil pourra, sauf les dispositions du présent acte, déterminer comment et
par qui seront, de temps à autre, placés au profit des sauvages les deniers
provenant des ventes de terres des sauvages les propriétés possédées
actuellement ou à l’avenir en fidéicommis pour eux (in trust), ou des
bois de leurs terres ou réserves, et les deniers provenant de toute autre
source, à l’exception de toute somme, n’excédant pas dix pour cent du
produits des terres, bois ou propriétés, qu’il sera convenu de payer, lors de
l’abandon de ces terres, aux membres de la bande intéressée […].
|
[80]
In 1906, section 70 was amended to limit the investment
authority of the Governor in Council, so that it could not be applied to up to
50% of the proceeds of Indian lands or 10% of the proceeds of any timber or
other property “as is agreed at the time of the surrender to be paid to the
members of the band interested therein” (6 E. VII, c. 20, s. 1). The 10% limit
applicable to the proceeds of timber was increased in 1919 to 50% (S.C. 1919,
c. 56, s. 2).
[81]
It appears that the investment power was not
actually used after 1859, for reasons that are explained in the following
submission to the Executive Council, signed by John A. Macdonald on August 25,
1859:
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On the reference of the Report of
the Superintendent General of Indian Affairs, and Documents connected
therewith, the Minister of Finance respectfully reports that the subject of
the Management of the Indian Trust and Funds must necessarily soon be brought
under the notice of the Provincial Legislature. And it may ultimately be
considered advisable for the Province to assume the Fund, and to grant
Annuities charged on the Consolidated Revenue, rather than to continue the
present system of investment which involves a possible loss to the Trust, as
has already occurred in the case of the Grand River Navigation Stock.
In dealing with the Indians of whom
the Government has constituted itself the Guardian, it would appear desirable
so to secure the funds as to prevent the possibility of any failure in the
payment of the Annual Sums required for the Indians, as such failure would
certainly be attributed to a breach of faith on the part of the Government
and [could not] be explained to the satisfaction of the Tribes. By
maintaining the present system of investment, it might also result that one
Tribe would find its Annual interest regularly paid, while others would meet
with disappointment. Should such an event arise, Parliament would probably
find it necessary to make good the losses of the Trust, and it would
therefore be more advisable to carry the funds at the credit of the Trust to
the Consolidated Fund, and to charge the annual interest upon that Fund at
such scale as might appear equitable to the Legislature.
Further receipts on account of the
Indians might be kept at their Credit in account with the Receiver General –
allowing the Trust six per cent interest thereon pending the decision of
Parliament on the general subject.
With reference to the present
investments held by the Indian Trust, that portion consisting of Provincial
and Consolidated Municipal loan Fund Debentures might now, under the
Authority of Parliament, be assumed by the Province. But until arrangements
are made for the general redemption of these securities, it is suggested that
they might remain in their present form, unless His Excellency could effect
such arrangements as would ensure the immediate realization of the price at
which they stand in the Indian Fund – in which case the money might remain at
interest in the hands of the Receiver General.
With
reference to the other Funds, it is recommended that steps be taken for the
collection of the Sums due to the Indian Fund, and for the realization of the
Securities, as it would appear desirable that when the question of the future
management of the Indian Trust comes before Parliament, the funds should be
available at once in cash.
|
[82]
The express reference to investment that once
appeared in section 70 of the Indian Act (1880) disappeared when the Indian
Act was substantially revised in 1951 (S.C. 1951, c. 29). Since 1951, the Indian
Act has been silent on that point.
[83]
The Indian Act has gradually been changed
to permit the bands to become more involved in decisions relating to the
expenditure of their capital money. The first step in that direction was made
in 1894 when the Indian Act was amended by 57-58 V., c. 32, s. 11, to
add section 139, the predecessor to what is now paragraph 64(1)(k) of the Indian
Act. Section 139 of the Indian Act (1894) permitted the Governor in
Council to authorize and direct the expenditure of any capital money standing
to the credit of a band, with the consent of the band, which in the opinion of
the Governor in Council would be of permanent value to the band or would, when
completed, properly represent capital. When the Indian Act was
consolidated in 1906 (R.S.C. 1906, c. 81), section 139 became section 90.
[84]
In 1918, section
90 was amended to permit the Governor in Council to direct the expenditure of
capital money of a band for a “reasonable and proper” purpose, without the
band’s consent, if the band refused to consent and the Governor in Council
considered the refusal detrimental to the progress or welfare of the band. That
overriding authority has since been considerably reduced. Under the current Indian
Act, only section 65 provides expressly for the expenditure of the capital
money of a band without the band’s consent. It permits the Minister to use a
band’s capital money to compensate an Indian for land compulsorily taken from
him for band purposes, or to pay expenses incurred to prevent or suppress grass
or forest fires or to protect the property of Indians in cases of emergency.
[85]
Section 90
of the Indian Act (1906) became section 93 in the 1927 consolidation: Indian
Act, R.S.C. 1927, c. 98. A series of amendments gradually expanded the list
of uses to which the capital money of a band could be put with the band’s consent.
By the time the Indian Act was extensively revised in 1951, section 93
had become section 64, which read nearly as it does now except for an amendment
in 1956 to add paragraph 64(1)(j), to permit the use of the capital money of a
band for housing, and housing loans and guarantees.
[86]
For most
of the period relevant to these appeals, the Crown took the position that it
had no statutory authority, even under paragraph 64(1)(k) of the Indian Act,
to use the capital money standing to the credit of bands in the Consolidated
Revenue Fund to make income earning investments, or to transfer it
unconditionally to a trustee or to the bands themselves or at their direction
for investment purposes.
[87]
In 1982,
Mr. Paul Ollivier, Q.C., the Associate Deputy Minister of the Department of
Justice, formed the view that paragraph 64(1)(k) of the Indian Act had
to that point been interpreted too narrowly, and that it could be interpreted
to permit the expenditure of capital money of a band to make income earning
investments, with the band’s consent. His opinion is set out in a letter dated
August 30, 1982 to Mr. R. J. Fournier, Senior Assistant Deputy Minister of
Finance and Management with the Department of Indian and Northern Affairs.
[88]
Mr.
Ollivier’s opinion was prompted by concerns as to the propriety of the
Minister’s decision to authorize a particular expenditure under paragraph
64(1)(k). The expenditure in question was the use of approximately $35 million
of Samson’s capital money to capitalize its own trust company and its own
management company, the Peace Hills Trust Company and the New-West Investment
Company. The substantive portion of Mr. Ollivier’s opinion reads as follows
(emphasis in original):
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The moneys we are concerned with are Indian moneys which
are defined in section 2 of the [Indian Act] as moneys collected,
received or held by Her Majesty for the use and benefit of Indians or bands.
The moneys belong to the Crown and are derived for the most part, I believe,
from the sale, lease or other disposition of Crown lands or of an interest
therein. Though lawyers for the Samson Band take a different position, I have
no doubt that these moneys are public moneys as defined in the Financial
Administration Act, i.e. moneys belonging to Canada and received for a
special purpose, namely for the use and benefit of the Indians. Under section
15 of the Financial Administration Act, moneys received for a special
purpose may be paid out of the Consolidated Revenue Funds for that purpose
subject to any statute applicable thereto.
The control and management of Indians moneys is the
responsibility of the Crown. Under section 61, the moneys must be expended
for the use and benefit of the Indians but subject to the Act and to the
terms of any treaty or surrender, the Governor in Council may determine
whether any purpose for which Indian moneys are used or are to be used is for
the use and benefit of a band. Under section 69(1) the Governor in Council
may permit a band to control, manage and expend in whole or in part its revenue
moneys. It follows that with regard to the capital moneys of the Band,
the control and management of these moneys must in the final analysis remain
the responsibility of the Crown and cannot be delegated either to the Band or
to any other body.
The actual management of the capital moneys of the band is
the responsibility of the Minister of Indian Affairs. Section 64 sets out the
purposes for which moneys may be expended and section 64(k) provides that the
Minister may authorize and direct the expenditure of the capital moneys of
the band “for any other purpose that in the opinion of the Minister is
for the benefit of the Band”. I am aware that the Department has
until now been operating on the basis of a restricted interpretation of this
provision. While such an interpretation is understandable given the very
narrow scope of the preceding subsections, nevertheless I find no common
genus in these other provisions that necessarily limits the generality of the
language used in sub-section (k).
In my opinion, the Minister may authorize, without risk of
liability, an expenditure for any purpose that he honestly and in good faith
believes is for the use and benefit of a band. Of course, the purpose of the
expenditure that he is asked to approve should be sufficiently defined so as
to allow the Minister to determine whether it is in the interest of the Band.
In my opinion a vaguely worded purpose such as “for economic development”
does not meet this test. In addition, while the Act may not require anything
more than that the Minister act in good faith, I have no doubt that the
spirit of the Act contemplates that he will exercise his powers with prudence
so as to enhance and not impair the bands’ capital.
A critical question is whether the Minister must
personally approve every single expenditure of a band’s capital moneys.
First of all, I see no reason why the Minister cannot
approve a class of expenditure – or an investment plan – as being for the
benefit of the band. Such a plan could include the type of proposed
expenditures (corporate securities, real estate, government bonds, etc.), the
proportion of moneys to be expended on each type, and other financial
guidelines.
Secondly, I see no reason why the Minister should not
delegate the day to day management of these expenditures, within the overall
framework of the approved plan, to an agent under his supervision or control.
While there might well have been a time when the Minister could be expected
to personally authorize every expenditure, I think it is unreasonable to expect
him to do so today given the vast sums involved. I am sure that he neither
has the time nor, I would think, the expertise required to make every
decision with regard to these moneys.
While our view, as you know, is that the Minister is not a
trustee in the private law sense, I note that even under the modern law of
trusts, the trustee may employ an agent to perform some of the duties of the
trust. In Waters, Law of Trusts in Canada,
the powers that can be delegated are dealt with as follows: [quotation omitted].
While the “approved plan” may envisage a role for a
financial intermediary such as the Peace Hills Trust Company, the role would
have to be commensurate with the skill and experience of the financial
intermediary selected. The Minister would have to satisfy himself on a case
by case basis that his “agents” were equal to the tasks proposed to be
assigned to them.
Thirdly, consistently with the view expressed above that
the control and management of capital moneys in the final analysis
remains the responsibility of the Crown, the Minister would be obliged on a
periodic basis to review the way in which his approved expenditure plan was
being implemented, and to make any adjustments in the plan or in its
implementation which appeared to him to be for the benefit of the band.
In the case of the expenditure of $35 million of the
capital funds of the Samson Band referred to above, consideration should be
given to preparation of an “expenditure plan” which when approved by
the Minister, with appropriate guidelines and controls, could serve to
regularize that situation. Because of the somewhat unorthodox way in which
those moneys were originally handed over to the Band, consideration might
also be given, in the case of that particular payment, to preparation of an
Order in Council under section 61 of the Indian Act to confirm that
this expenditure was, in the view of the Governor in Council, for the use and
benefit of the Band.
Any further payments out of band capital would be made by
the Minister, using the procedure suggested above, without the necessity of
obtaining confirmation by Order in Council.
Undoubtedly the interpretation of section 64(k) expressed
in this letter, while it goes well beyond the strict interpretation
previously adhered to, will continue to involve a closer degree of government
supervision of the expenditure of capital moneys than Indian bands may feel
is appropriate. Consideration may therefore have to be given to appropriate
statutory amendments, either to the Oil and Gas Act or to the Indian
Act itself.
Bands such as the Samson Band must accept the fact that
under the present Act the Minister must retain ultimate control over the
management of the band’s capital moneys. However, subject to the Minister’s
overriding control, it is surely in the best interest of the bands that they
participate as fully as the present Act allows in the administration of the
moneys being held for their use and benefit.
Finally, I would suggest that any scheme involving a
substantial part of a band’s capital assets be approved by the Band
membership as well as by the Band Council.
If
there is any serious challenge to the scheme on legal grounds, consideration
could be given to referring the matter to the Federal Court under section 17
of the Federal Court Act.
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[89]
Mr.
Ollivier’s opinion has been endorsed in certain respects by the orders of the
Judge that led to the transfer of the Samson trust funds to the Kisoniyaminaw
Heritage Trust Fund in February of 2006 (described above). As we understand Mr.
Ollivier’s opinion, he concluded that in circumstances like those in the Samson
case, and subject to certain conditions such as the existence of an appropriate
trust agreement, paragraph 64(1)(k) of the Indian Act may permit the
transfer of capital money of a band to a trustee for the purpose of making
income earning investments for the benefit of the band. One element of the
arrangements relating to the Kisoniyaminaw Heritage Trust Fund that was not
contemplated by the opinion of Mr. Ollivier is that the Crown has no further
involvement in the management of the transferred funds, and has been released
from any risk of future liability in that regard.
(i)
Interest on Indian money in the Consolidated Revenue Fund
[90]
Interest is credited on all Indian money in the
Consolidated Revenue Fund in accordance with an Order in Council made under
subsection 61(2) of the Indian Act (quoted above). That applies to both
capital money and revenue money. Interest is treated as revenue money, whether
it is credited to a capital account or revenue account.
[91]
From 1859, the rate of interest on Indian money
was fixed at 6%. In 1861, an Order in Council retained the 6% rate for Indian
money then held in trust, but fixed a rate of 5% for funds newly received. From
1861 until 1969, the rate of interest was changed periodically, although it
appears that the 6% rate was retained for the funds on which that rate was paid
in 1861. For the remaining funds, the rate was 5% until December 31, 1882, 4%
from January 1, 1883 to June 30, 1892, 3½% from July 1, 1892 to December 31,
1897, 3% from January 1, 1898 to March 31, 1917, and 5% from April 1, 1917 to
March 31, 1969. By 1969, approximately $600,000 of Indian money was still
bearing the rate of 6%, based on the policy established in 1861.
[92]
In 1969, the Minister submitted to the Governor
in Council a proposal to tie the rate of interest on Indian money held in the
Consolidated Revenue Fund to the market yield of government bonds having a term
of 10 years or more. It was also proposed to discontinue the practice of
guaranteeing a 6% rate of interest on the pre-1861 funds. Those proposals were
adopted. They are reflected in Order in Council P.C. 1969-1934, which
stipulates an interest rate for Indian money in the Consolidated Revenue Fund
based on the following formula, starting April 1, 1969:
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Interest to be paid on Indian Band funds held in the
Consolidated Revenue Fund which represent capitalized annuities at the time
of Confederation and proceeds from the sale of Indian assets since that time,
pursuant to subsection (2) of Section 61 of the Indian Act, at a rate equal
to the monthly average of those market yields of Government of Canada bond
issues as published each Wednesday by the Bank of Canada as part of its
weekly financial statistics which have terms to maturity of 10 years or over,
the appropriate rate for calculating and crediting interest on the opening
balance as of April 1 in each year in accordance with Treasury Board Minute
No. 678135 of March 29, 1968 to be the monthly average of the preceding month
together with an adjustment to correct for the amount by which rates during
the course of the previous year will have varied from the rate established at
the commencement of that year.
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[93]
When the 1969 Order in Council was passed, it
resulted in an effective rate of interest of 7.24% on all Indian money then
held in trust. The rate varied with changes in the market yield of long term
government bonds.
[94]
The method of calculating interest after 1969
varied from time to time. From April 1, 1969 to March 31, 1974, interest was
calculated and credited on the basis of the opening balance in the accounts as
of April 1 of each year. From April 1, 1974 to March 31, 1980, interest was
credited in advance at the beginning of each fiscal year and adjusted at the
end of each fiscal year to reflect the result of the statutory formula.
[95]
The rate
of interest paid on Indian money was the subject of discussions in the late
1970s and the early 1980s between officials of the Crown and leaders of various
bands, including the Four Bands. Those discussions were motivated in part by a
situation referred to as an “inversion” which, for a relatively short period of
time, resulted in the market yield on short terms investments being greater
than the market rate of interest on long term investments. The inversion soon
corrected itself, but nevertheless in 1981, Order in
Council P.C. 1981-3/255 was
enacted to replace the 1969 Order in Council.
[96]
The 1981
Order in Council retained the comparison to market
yields on government bonds with a term of 10 years or more, but provided for
interest to be calculated on quarterly rather than monthly averages. The 1981
Order in Council reads as follows:
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HIS EXCELLENCY THE GOVERNOR GENERAL IN COUNCIL, on the
recommendation of the Minister of Indian Affairs and Northern Development and
the Treasury Board, pursuant to subsection 61(2) of the Indian Act, is
pleased hereby to revoke Order in Council P.C. 1969-1934 of the 8th of
October, 1969 and to fix the rate of interest to be allowed, commencing the
1st day of April, 1980, on Indian Bands' Revenue and Capital moneys held in
the Consolidated Revenue Fund at the quarterly average of those market yields
of the Government of Canada bond issues as published each Wednesday by the
Bank of Canada as part of its weekly financial statistics, which have terms
to maturity of 10 years or over.
|
[97]
In
addition, the discussions led to the adoption by the Crown of a policy by which
interest was credited to the Indian money accounts semi-annually, rather than
annually. From April 1, 1980 to the present, interest
paid on Indian money has been paid semi-annually at the rate fixed by the 1981
Order in Council.
[98]
The rates
of interest paid on Indian money from 1970 to 2004 were as follows:
|
1969 Order in Council
|
|
1981 Order in Council
|
|
|
|
|
|
|
|
|
1981
|
12.90%
|
|
1993
|
8.80%
|
|
1970
|
7.24%
|
|
1982
|
16.14%
|
|
1994
|
7.74%
|
|
1971
|
8.60%
|
|
1983
|
13.93%
|
|
1995
|
9.23%
|
|
1972
|
6.34%
|
|
1984
|
12.22%
|
|
1996
|
8.16%
|
|
1973
|
7.24%
|
|
1985
|
13.03%
|
|
1997
|
7.49%
|
|
1974
|
7.53%
|
|
1986
|
10.96%
|
|
1998
|
6.25%
|
|
1975
|
8.32%
|
|
1987
|
9.50%
|
|
1999
|
5.43%
|
|
1976
|
8.25%
|
|
1988
|
10.39%
|
|
2001
|
6.01%
|
|
1977
|
9.47%
|
|
1989
|
10.63%
|
|
2002
|
5.88%
|
|
1978
|
8.76%
|
|
1990
|
10.15%
|
|
2003
|
5.90%
|
|
1979
|
9.15%
|
|
1991
|
11.02%
|
|
2004
|
5.66%
|
|
1980
|
9.91%
|
|
1992
|
9.78%
|
|
|
|
(j) Discussions and
negotiations relating to the handling of Indian money
[99]
As
mentioned above, the 1981 Order in Council was the result of discussions during
the 1970s and early 1980s between the Crown and certain bands, including the
Four Bands. The record indicates that the Crown has been open to discussion
with respect to the applicable interest rate on Indian money held in the
Consolidated Revenue Fund.
[100]
There have
also been discussions relating to the investment of Indian money. As explained
above, the only provision of the Indian Act that referred expressly to
the investment of Indian money by the Crown alone was repealed in 1951 when the
Indian Act was substantially revised. That revision followed extensive
discussions, including a clause by clause review with aboriginal
representatives, including Samson and Ermineskin. There is no evidence that the
investment clause was discussed or referred to in any way during those
discussions. However, there is evidence that the Indian Association of Alberta
recommended that the interest rate on Indian money in the Consolidated Revenue
Fund remain at its current rate, which then was 5%.
[101]
From the
1960s and continuing into recent years, there have been numerous occasions for
discussion and negotiation with respect to the treatment of Indian money,
generally in the context of a consideration of broader issues. One theme of
those discussions was the desirability of encouraging aboriginal self
determination and self government, and greater participation by aboriginal
peoples in decisions relating to their affairs. Another theme was the need to
amend the Indian Act.
[102]
The
Crown’s stated policy, at least from the 1960s, has been to respect band
decision making and to encourage the bands in their aspirations of greater
control, as far as possible under the applicable legislation. An important
aspect of the Crown’s policy was not to amend the Indian Act without
first consulting with and obtaining the support of those affected; see for
example (1) Canada, House of Commons, Special Committee on Indian
Self-Government, “Report of the Special Committee on Indian Self-Government”
(Ottawa: Queen’s Printer, 1983) (Chairman: Keith Penner), (2) Indian and
Northern Affairs Canada, “Project F2 Trust Fund Management Volume 1, Final
Report (Ottawa, 1983), and (3) the annual reports of the Department of Indian
Affairs and Northern Development through the 1990s.
[103]
The issue
of the investment of the capital money of bands was included in the discussions
between the Crown and aboriginal representatives over many years. Some of the
wealthier bands, including the Samson Nation and the Ermineskin Nation, made
proposals of various kinds that would have given them greater control over
their capital money.
[104]
The Crown
was not unsympathetic to the objective of those demands but believed that it
was precluded by law from acquiring income earning investments with the capital
money of the bands and was also precluded by law from simply transferring to
the bands the power of disposition of the capital money.
[105]
From time
to time the Crown invited proposals for an investment plan that could be
assessed by the Minister in accordance with the requirements of section 61 and
paragraph 64(1)(k), but no such proposal was made by Ermineskin or by Samson
(until the proposal of Samson in 2005 relating to the Kisoniyaminaw Heritage
Trust Fund). Nor was any consensus ever reached with respect to the amendment
of the Indian Act. Therefore, the Crown considered itself compelled to
maintain its practice of retaining the capital money of bands in special
accounts in the Consolidated Revenue Funds, and paying interest in accordance
with the applicable Orders in Council.
[106]
At some
point (it is not clear exactly when), Samson and Ermineskin began to advocate
the position they now take, which in broad terms is this: the Crown, as trustee
of the capital money of Samson and Ermineskin, has and has always had a duty at
common law to invest the capital money prudently, that the Crown’s refusal to
even consider doing so was a breach of trust, and that Samson and Ermineskin
have the right to sue for damages if the income that should have been earned by
the prudent investment of their capital money would have exceeded the interest
they received under the 1969 and 1981 Orders in Council.
[107]
The
judgments now under appeal were the result of actions commenced by Samson in
1989, and by Ermineskin in 1992. Samson and Ermineskin claim damages or
equitable disgorgement, based on what they say is the mismanagement of hundreds
of millions of dollars derived from their royalties.
VI. Analysis
[108]
In this
analysis we discuss the legal conclusions reached by the Crown as described
above that are disputed by Samson and Ermineskin, and the additional legal
issues raised in the appeals in relation to the Money Management Phase. The most critical issues in this appeal are matters of statutory
interpretation. Our approach to statutory interpretation must be guided by the
jurisprudence of the Supreme Court of Canada, as most recently summarised in Canada
Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, at paragraph 10:
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[10] It has been long
established as a matter of statutory interpretation that “the words of an Act
are to be read in their entire context and in their grammatical and ordinary
sense harmoniously with the scheme of the Act, the object of the Act, and the
intention of Parliament”: see 65302 British Columbia Ltd. v. Canada,
[1999] 3 S.C.R. 804, at para. 50. The interpretation of a statutory
provision must be made according to a textual, contextual and purposive
analysis to find a meaning that is harmonious with the Act as a whole.
When the words of a provision are precise and unequivocal, the ordinary
meaning of the words play a dominant role in the interpretive process.
On the other hand, where the words can support more than one reasonable
meaning, the ordinary meaning of the words plays a lesser role. The relative
effects of ordinary meaning, context and purpose on the interpretive process
may vary, but in all cases the court must seek to read the provisions of an
Act as a harmonious whole.
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(a) Whether the Crown is a
trustee of the royalties
[109]
We agree
with the Judge that the Crown is a trustee of the royalties held in the
Consolidated Revenue Fund (Judge’s reasons in Samson, paragraph 653, and in
Ermineskin, paragraph 261). Section 4 of the Indian Oil and Gas Act says
so, and there is no reason to conclude that section 4 is not intended to mean
what it says. If there had been any doubt about the existence of a trust, that
doubt could not have survived the enactment of the Indian Oil and Gas Act.
[110]
Indeed, even
if the Indian Oil and Gas Act had never been enacted, the Crown would
have been a trustee of any royalties derived from the exploitation of the oil
and gas reserves in relation to the surrendered interests in the Samson Reserve
and the Pigeon Lake Reserve. That conclusion is compelled by the promises of
Treaty 6, as well as the provisions of the Indian Act relating to
reserves and the management of Indian money. The Crown clearly has fiduciary
obligations to Ermineskin and Samson with respect to the use and exploitation
of their respective shares of the oil and gas resources on the Pigeon Lake
Reserve and the Samson Reserve, and also with respect to their respective
shares of the royalties derived from the exploitation of those resources: see Guerin
v. Canada, [1984] 2 S.C.R. 335, per Wilson J. at pages 349 to 350 and per
Dickson J. at page 382.
[111]
The
conclusion that the Crown is a trustee of the royalties is consistent with the
Crown’s admission at trial that the oil and gas resources under the Pigeon Lake
Reserve and the Samson Reserve were and are beneficially owned by Samson and
Ermineskin (in the case of the Pigeon Lake Reserve, to the extent of their
respective shares). It is also consistent with the Crown’s understanding of its
obligations with respect to the handling of Indian money. The record
establishes that even before Confederation, the Crown acknowledged that it
holds all Indian money in trust. The record is replete with similar
acknowledgements, some predating Confederation.
(b) Whether the royalties are
“public money” as defined in the Financial Administration Act
[112]
The Crown
argues that even if it is a trustee of the royalties, it is not required or
permitted to deal with the royalties as a trustee would at common law, but must
deposit the royalties into the Consolidated Revenue Fund to the credit of the
capital accounts of Samson and Ermineskin, as described above.
[113]
The
Crown’s argument is based on the premise that the royalties fall within
paragraph (d) of the definition of “public money” in section 2 of the Financial
Administration Act (quoted above), reproduced here for ease of reference:
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2. In this
Act, …
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2. Les
définitions qui suivent s’appliquent à la présente loi.
|
|
“public
money” means all money belonging to Canada received
or collected by the Receiver General or any other public officer in his
official capacity or any person authorized to receive or collect such money, and
includes
(a) duties and revenues of Canada,
(b) money
borrowed by Canada or received through the issue or sale of securities,
(c)
money received or collected for or on behalf of Canada, and
(d)
all money that is paid to or received or collected by a public officer
under or pursuant to any Act, trust, treaty, undertaking or contract, and is
to be disbursed for a purpose specified in or pursuant to that Act, trust,
treaty, undertaking or contract;
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«
fonds publics » Fonds appartenant au Canada, perçus ou reçus par le
receveur général ou un autre fonctionnaire public agissant en sa qualité
officielle ou toute autre personne autorisée à en percevoir ou recevoir. La
présente définition vise notamment :
a)
les recettes de l’État;
b)
les emprunts effectués par le Canada ou les produits de l’émission ou de la
vente de titres;
c)
les fonds perçus ou reçus pour le compte du Canada ou en son nom;
d)
les fonds perçus ou reçus par un fonctionnaire public sous le régime d’un
traité, d’une loi, d’une fiducie, d’un contrat ou d’un engagement et affectés
à une fin particulière précisée dans l’acte en question ou conformément à
celui-ci.
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[114]
Samson and
Ermineskin challenged that premise at trial and in this appeal. They argue that
the royalties do not “belong to Canada”
as required by the opening words of the definition, and therefore they cannot
possibly fall within paragraph (d) of the definition.
[115]
The Judge
agreed with the Crown on this point, and we do as well. Although the royalties
do not “belong to Canada” in the ordinary sense of
those words, we interpret the statutory definition of “public money” as
applying to the royalties nevertheless. That is because the phrase immediately
preceding the list in paragraphs (a) through (d) of the definition of “public
money” is “and includes”, indicating that paragraphs (a) through (d) are
intended to expand the more general opening words.
[116]
As well,
the royalties fall literally within the language of paragraph (d) of the
definition. They are paid to the Crown for the benefit of a band, in accordance
with one or more of the Indian Oil and Gas Act, the lease agreements,
the Indian Act, and Treaty 6, and if they are to be disbursed, they must
be disbursed for the benefit of the band, in accordance with Treaty 6 and the Indian
Act.
(c) Whether the Crown
improperly made use of the capital money
[117]
The fact
that the royalties are “public money” as defined in the Financial
Administration Act leaves the Crown with no choice but to pay the royalties
into to the Consolidated Revenue Fund when they are received. At the same time,
the Crown must recognize that Samson and Ermineskin are beneficially entitled
to the royalties. The Crown does that by maintaining separate accounts for each
band, and crediting those accounts with the royalties as received or, in the
case of the royalties from the Pigeon Lake Reserve, as allocated from time to
time.
[118]
Samson and
Ermineskin argue in various ways that regardless of the Crown’s accounting
methods, the consequence of paying the royalties into the Consolidated Revenue
Fund is that the capital money of Samson and Ermineskin is used by the Crown
for its own purposes until it is paid out to the bands under section 64 of the Indian
Act. Samson and Ermineskin characterize that as a “forced borrowing” by the
Crown of the capital money of Samson and Ermineskin, which is improper or
unlawful without their consent, either because it is a breach of the common law
trust principles, or a breach of the Crown’s overriding obligation to deal with
Indians and their money honourably and in a manner that is consistent with the
promises of Treaty 6.
[119]
We take it
as given that when the Crown receives the royalties of Samson and Ermineskin,
it cannot simply retain the money in the form of cash and store it in boxes
until it is needed for expenditure by Samson or Ermineskin. Rather, as
explained above, the Crown must deposit the royalties to the credit of the
Samson and Ermineskin capital accounts in the Consolidated Revenue Fund. That
automatically creates a liability on the part of the Crown to pay those amounts
to Samson and Ermineskin upon compliance with the conditions in section 64 of
the Indian Act. By operation of law, that liability is a debt that bears
interest, as the Crown has always acknowledged in its public accounts.
[120]
As a
factual matter, this treatment of the capital money of Samson and Ermineskin
results in the Crown making use of the money for its own purposes as long as
the Crown’s liability to Samson and Ermineskin subsists, or in other words
until the money is expended in accordance with section 64. If that is aptly
described in practical terms as a “forced borrowing”, it is an inevitable
consequence of the combined operation of the Indian Act and the Financial
Administration Act, and is therefore lawful.
[121]
Our
rejection of the “forced borrowing” argument of Samson and Ermineskin leaves
open several questions: (1) whether the Crown could and should have put the
money to some other use once it was deposited into the Consolidated Revenue
Fund (such as acquiring income earning investments or establishing a separately
managed trust fund), (2) whether the Crown properly compensated Samson and
Ermineskin for the use of their money, and (3) whether the Crown was unjustly
enriched by the use of that money. Those issues are discussed below.
(d) Whether the royalties
could and should have been invested
[122]
Samson and
Ermineskin argue that because the Crown is a trustee of the capital money that
is held in the Consolidated Revenue Fund, it follows that the Crown is obliged
by the common law of trusts to invest that money, and in so doing, to meet the
standard of care described as follows in Fales v. Wohlleben Estate,
[1977] 2 S.C.R. 302 at page 315:
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Traditionally, the standard of care and diligence
required of a trustee in administering a trust is that of a man of ordinary
prudence in managing his own affairs (Learoyd v. Whiteley [(1887), 12
App. Cas. 727], at p. 733; Underhill's Law of Trusts and Trustees,
12th ed., art. 49; Restatement of the Law on Trusts, 2nd ed., para.
174) and traditionally the standard has been applied equally to professional
and non-professional trustees. […]
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[123]
The Crown
does not deny that it is a trustee of the royalties of Samson and Ermineskin
when it receives them, and for as long as it holds that capital money in the
Consolidated Revenue Fund, but argues that its obligations as trustee are not
determined by common law principles, but by the Indian Act.
(1) The Indian Act
[124]
The Crown
argues that it does not have a duty to invest the capital money of Samson and
Ermineskin as though it were a common law trustee, because Parliament has
enacted statutory provisions that are not consistent with that common law duty.
Specifically, the Crown argues that any exercise of the right of disposal of
the capital money of a band, including any use of that money to acquire income
earning investments, is subject to the requirements of the Financial
Administration Act and the Indian Act. Section 64 of the Indian
Act precludes the Crown from making any use of the capital money of a band
without the consent of the band council. Samson and Ermineskin concede that
their respective band councils have not provided the requisite consent.
Therefore, the Crown could not have used the capital money of Samson or
Ermineskin to make investments for their benefit.
[125]
We agree with the Crown that, because of section
64 of the Indian Act, the Crown cannot act unilaterally to use the
capital money of a band to make income earning investments for the benefit of
the bands, as a common law trustee would. That conclusion is reinforced by a
consideration of the legislative history.
[126]
As explained above,
there was at one time a provision in the Indian Act that permitted the
Crown to use a specified portion of the capital money of a band held by the
Crown in trust to acquire income earning investments: see, for example, section
70 of the Indian Act (1880). That provision was the functional
equivalent of the statutory investment authority found in the modern trust
legislation of the provinces and territories: see, for example, the Trustee Act,
R.S.A. 2000, c. T-8 (section 3), the Trustee Act,
R.S.O. 1990, c. T-23 (section 27), the Trustee Act, R.S.B.C. 1996, c.
464 (section 15.1), the Civil Code of Québec, R.S.Q. 1991, c. 64 (articles
1278, 1339 and 1343), the Trustee Act, R.S.S. 1978, c. T-23 (section 3),
the Trustee Act, C.C.S.M. c. T160 (section 68), the Trustees Act,
R.S.N.B. 1973, c. T-15 (section 2), the Trustee Act, R.S.N.S. 1989, c.
479 (section 3), the Trustee Act, R.S.P.E.I. 1988, c. T-8 (section 2),
the Trustee Act, R.S.N.L. 1990, c. T-10 (section 3), the Trustee Act,
R.S.Y. 2002, c. 223 (section 2), the Trustee Act, R.S.N.W.T. 1988, c.
T-8 (section 2).
[127]
Section 70
of the Indian Act (1880) was repealed in 1951. The inescapable inference
is that in 1951, Parliament withdrew from the Crown the authority to invest the
capital money of a band held by the Crown in trust. There is no federal
legislation of general application that deals with the rights and obligations
of the trustee of a trust established or governed by federal law, and no
federal legislation replacing the provision that was repealed in 1951. We find no
legal basis upon which this Court can find that the Crown has the legal
authority to invest Indian money, in the face of an Act of Parliament in 1951
that intentionally took that authority away from the Crown.
[128]
If
Parliament had intended the Minister to have a duty to invest Indian money held
in trust in the Consolidated Revenue Fund, appropriate legislation could have
been enacted, but that has not been done. Certainly Parliament knows how to
enact such legislation. There are federal statutory schemes that contemplate
the investment of funds under the management of a federal authority. The two
most prominent examples are the Canada Pension Plan Investment Board Act,
S.C. 1997, c. 40 (see section 5), and the Public Sector Investment Board Act,
S.C. 1999, c. 34 (see section 4).
(2) Section 15 of the Charter
[129]
At trial
and in this appeal, Samson and Ermineskin have challenged the
constitutional validity or operability of sections 61 to 68 of the Indian
Act as contrary to section 15 of the Canadian Charter of Rights and
Freedoms. They argue that if this Court finds that those provisions
preclude them from asserting a claim for damages for a breach by the Crown of
the common law duties of a trustee, the result is discrimination that
contravenes subsection 15(1) of the Charter. They argue that, because they are
Indians, they have been deprived by the Indian Act of the rights that
are available to non-Indian individuals whose property is held in trust.
[130]
Subsection 15(1) reads as follows:
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15.
(1) Every individual is equal before and under the law and has the right to
the equal protection and equal benefit of the law without discrimination and,
in particular, without discrimination based on race, national or ethnic
origin, colour, religion, sex, age or mental or physical disability.
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15. (1) La loi ne fait acception de personne et s'applique
également à tous, et tous ont droit à la même protection et au même bénéfice
de la loi, indépendamment de toute discrimination, notamment des
discriminations fondées sur la race, l'origine nationale ou ethnique, la
couleur, la religion, le sexe, l'âge ou les déficiences mentales ou
physiques.
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[131]
The Judge rejected the Charter challenge because he concluded
that the bands (that is, the Samson Nation and the Ermineskin Nation) have no
standing to assert it (Judge’s reasons in Samson at paragraphs 778 to 780 and
in Ermineskin at paragraphs 319 to 321; see also Nechako Lakes School
District No. 91 v. Patrick, 2002 BCSC 19, at paragraphs 103 to 111).
[132]
Samson and Ermineskin do not challenge the conclusion that the
bands, as such, do not have standing to make a Charter challenge based on
subsection 15(1). They rely on the fact that these are representative actions.
The representatives are the Chief of the Samson Nation and the Chief and
Council of the Ermineskin Nation, but the real claimants are the individuals
who are members of the Samson Nation and the Ermineskin Nation. Samson and
Ermineskin argue that those individuals have standing to challenge the
provisions of the Indian Act based on subsection 15(1) of the Charter,
because they are asserting a claim in respect of their interest in the property
of the band of which they are members.
[133]
Even
if the individual band members had standing, they would have no interest to
enforce under the relevant provisions of the Indian Act. There can be a
remedy under subsection 15(1) of the Charter only where a personal right has
been infringed. The claim in this case is not a claim in relation to a personal
right, but a claim relating to the management of property of the band. The
right of a member of an Indian band in relation to band property is a communal
right, not a personal right. That is explained by Justice Rothstein, writing
for this Court in Blueberry River Indian Band v. Canada
(Department of Indian Affairs and Northern Development) (C.A.), [2001]
4 F.C. 451, at paragraph 16:
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[…]
it does not follow that because an Indian band is not a legal entity, rights
accruing to the band are the rights of its members or their descendants in
their individual capacities. The definition of “band” uses the term “in
common” in relation to the interest that the members of the band have in the
reserve. The term “in common” connotes a communal, as opposed to a private,
interest, in the reserve, by the members of the band. In other words, an
individual member of a band has an interest in association with, but not
independent of the interest of the other members of the band. […]
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[134]
The interests at issue in these cases are the rights of the bands
in relation to their royalties, which comprise most if not all of the capital
money of the bands. That money is the property of the bands (see section 62 and
subsection 64(1) of the Indian Act). The individuals who are members of
the bands have, together, a communal interest in the property of the band
(including the capital money), but none of them has a personal right to that
property, or to a share of that property. In our view, the fact that the claims
in each of these cases have been asserted by band members through
representatives does not convert what is essentially a claim relating to band property
into a claim relating to the personal rights of the members of the bands. We
conclude that subsection 15(1) of the Charter is of no assistance to Samson or
Ermineskin in advancing any claims made in the Money Management Phase of their
actions.
(3) The Financial
Administration Act
[135]
Samson and
Ermineskin argue, in slightly different ways, that even if the Crown is
required by the Financial Administration Act to pay the royalties into
the Consolidated Revenue Fund, and even if the Indian Act contains no
investment authority, there are provisions of the Financial Administration
Act that would authorize the Crown to use the money to make income earning
investments for the benefit of the bands. That argument is supported by two
alternative lines of reasoning, one based on subsection 21(1) of the Financial
Administration Act (submitted by Samson and Ermineskin), the other based on
section 18 of the Financial Administration Act (submitted only by
Samson).
[136]
Subsection
21(1) of the Financial Administration Act reads as follows:
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21.
(1) Money referred to in paragraph (d) of the definition “public
money” in section 2 that is received by or on behalf of Her Majesty for a
special purpose and paid into the Consolidated Revenue Fund may be paid out
of the Consolidated Revenue Fund for that purpose, subject to any statute
applicable thereto.
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21. (1) Les
fonds visés à l’alinéa d) de la définition de « fonds
publics » à l’article 2 et qui sont reçus par Sa Majesté, ou en son nom,
à des fins particulières et versés au Trésor peuvent être prélevés à ces fins
sur le Trésor sous réserve des lois applicables.
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[137]
We
summarize as follows the argument based on subsection 21(1) of the Financial
Administration Act. Even if the royalties had to be paid into the
Consolidated Revenue Fund, they did not have to stay there. If they fall within
paragraph (d) of the definition of “public money” in section 2 of the Financial
Administration Act, it must be because they were paid to the Crown for a
particular purpose (to be held in trust for Samson and Ermineskin). If that is
so, then it must also be the case that, according to subsection 21(1) of the Financial
Administration Act, the royalties may be paid out of the Consolidated
Revenue Fund for that same purpose, namely, to fulfil the purpose of the trust,
or to benefit Samson or Ermineskin, as the case may be.
[138]
The
difficulty with this argument is that it ignores the proviso at the end of
subsection 21(1), “subject to any statute applicable thereto”. The Indian
Act applies to the royalties. It characterizes them as capital money and
permits them to be expended, but only in accordance with section 64 of the Indian
Act. There is nothing in section 64 that can possibly be interpreted to
authorize capital money of a band to be invested by the Crown in the manner in
which a trustee would invest it, that is, by acquiring income earning property
that the Crown in its sole discretion considers appropriate. On the contrary,
the capital money of Samson and Ermineskin cannot be used for any purpose
unless the statutory conditions in section 64 are met. One of those conditions
is band council consent. It is conceded by Samson and Ermineskin that their
respective band councils have not given the requisite consent.
[139]
Section 18
of the Financial Administration Act reads as follows (until its repeal
in 1999, S.C. 1999, c. 26, s. 20):
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18. (1) In this
section, “securities” means securities of or guaranteed by Canada and
includes any other securities described in the definition “securities” in
section 2.
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18. (1) Au présent
article, « valeurs » s’entend des titres
émis ou garantis par le Canada, ainsi que de ceux qui sont mentionnés dans la
définition de « valeurs » ou « titres » à l’article 2.
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|
(2) The Minister may,
when he or she deems it advisable for the sound and efficient management of
public money or the public debt, purchase or acquire securities, including
securities on their issuance, pay for the securities out of the Consolidated
Revenue Fund and hold the securities.
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(2) Le
ministre peut, lorsqu’il le juge opportun pour la bonne gestion des fonds
publics ou de la dette publique, acheter ou acquérir des valeurs, y compris
lors de leur émission, les payer sur le Trésor et les détenir.
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|
(3) The Minister may
sell or lend any securities purchased, acquired or held pursuant to
subsection (2), and the proceeds of the sales or lending shall be deposited
to the credit of the Receiver General.
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(3) Le
ministre peut vendre ou prêter les valeurs ainsi achetées, acquises ou
détenues; le produit de la vente ou du prêt est déposé au crédit du receveur
général.
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|
(4) Any net profit
resulting in any fiscal year from the purchase, holding, sale or lending of
securities pursuant to this section shall be credited to the revenues of that
fiscal year, and any net loss resulting in any fiscal year from that
purchase, holding, sale or lending shall be charged to an appropriation
provided by Parliament for the purpose.
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(4) Au
cours d’un exercice, les bénéfices nets qui résultent de l’achat, de la
détention, de la vente ou du prêt de valeurs sous le régime du présent
article sont ajoutés aux recettes de cet exercice, et les pertes nettes qui
résultent des mêmes opérations sont imputées à un crédit voté par le
Parlement à cette fin.
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|
(5) For the purposes
of subsection (4), the net profit or loss in any fiscal year shall be
determined by taking into account realized profits and losses on securities
sold or loaned, the amortization applicable to the fiscal year of premiums
and discounts on securities, and interest applicable to the fiscal year.
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(5) Pour
l’application du paragraphe (4), il est tenu compte, dans le calcul des
bénéfices ou pertes résultant de la vente ou du prêt de valeurs, ainsi que de
l’amortissement concernant les primes et escomptes sur les valeurs et de
l’intérêt applicables à l’exercice.
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[140]
We
summarize as follows the argument of Samson based on subsection 18(2) of the Financial
Administration Act. If the royalties are public money, then every provision
of the Financial Administration Act that refers to public money must
apply to it. Since subsection 18(2) authorizes the Minister of Finance to
invest public money, the Minister of Finance is authorized to invest the
royalties.
[141]
We are
unable to accept this argument. In our view, section 18 of the Financial
Administration Act is not intended to function as statutory authority for
the investment of Indian money for the benefit of the bands. Rather, section 18
contemplates the investment of the Crown’s own money for the account of the
Crown. It is the Crown that is entitled to the profits from any investments
made under section 18, and that bears any investment losses (see subsection
18(4)). If Parliament had intended subsection 18(2) to be interpreted to permit
the investment of Indian money as a trustee would invest it, section 18 would
have provided that any profits and losses from the investments would be for the
account of the bands, not the Crown.
[142]
Section 18
of the Financial Administration Act was replaced in 1999 by what is now section
46 (S.C. 1999, c. 26, sections 20 and 22). Samson made no submissions relating
to the current provision.
(4) Whether the statutory
scheme breaches or results in a breach of Treaty 6
[143]
Samson and
Ermineskin argue, in slightly different ways, that their rights in relation to
their capital money are treaty rights, and thus must be recognized as
constitutional rights pursuant to section 35 of the Constitution Act, 1982,
and cannot be abrogated by statute. It follows, they argue, that if the
statutory scheme precludes the Crown from investing Indian money as a trustee
is obliged to do, then either the statutory scheme cannot stand, or it must be
read down.
[144]
We are
prepared to assume, without deciding, that Treaty 6 might have been understood
by the Indian signatories as establishing a promise on the part of the Crown to
hold Indian money in trust, at least in so far as the Indian money was derived
from the disposition of reserve land or an interest in reserve land. In 1876,
when Treaty 6 was signed, the Indian Act gave the Governor in Council
complete control over Indian money held in trust, and permitted the money to be
invested without band consent.
[145]
However,
the record contains nothing from which we can infer that the Crown promised
that the statutory investment power in the Indian Act would remain
forever unchanged. In fact, that investment power was repealed in 1951, after
consultation, with no evidence of any objection by Samson or Ermineskin, or any
other band. In our view, the repeal of the statutory investment power does not
infringe or deprive Samson and Ermineskin of any of their rights under Treaty
6.
(e) Whether the Crown was obliged
to propose an investment plan
[146]
The
constraints represented by the Indian Act and the Financial
Administration Act do not preclude all investment of the capital money of Samson
and Ermineskin. That was finally demonstrated by the transfer of the Samson
capital money to the Kisoniyaminaw Heritage Trust Fund. Samson and Ermineskin
argue that the Crown should have recognized long ago that its interpretation of
the scope of paragraph 64(1)(k) of the Indian Act was too narrow, and
should have devised an appropriate investment proposal that would conform to
the requirements of paragraph 64(1)(k), and put the proposal to Samson and
Ermineskin to seek their consent. They also argue that the Crown, in arguing
that it was not required to take this initiative, is improperly trying to shift
its legal obligation as trustee to the beneficiaries of the trust.
[147]
We do not
agree with Samson and Ermineskin that the Crown had a legal obligation to take
the initiative to propose a plan of investment for the capital money of Samson
and Ermineskin. Section 64 of the Indian Act empowers the
Minister to “authorize and direct” the expenditure of capital money of the band
with the consent of the band council. That presupposes that a proposal for the expenditure
of capital money is to be made by the band council, and that the Minister would
consider whether to authorize it, with or without directions. We are unable to
read into the expression “authorize and direct” an obligation on the part of
the Crown to make a proposal for expenditure.
[148]
In our view, this interpretation of paragraph 64(1)(k) accords
with the intention of Parliament to give the bands the initiative with respect
to the use of their capital money. It also accords with common sense. Generally,
it is to be expected that Samson and Ermineskin are in a better position than
the Minister to determine what expenditures are required. If a request is made
for the expenditure of the capital money of a band for the purpose of
investment, then it is reasonable for the Minister to require a plan of
investment to satisfy itself that the expenditure is for the benefit of the
band as required by paragraph 64(1)(k).
[149]
This
conclusion is also consistent with the long standing practice of the
Minister in relation to the expenditure of the capital money of Samson and
Ermineskin. Typically, the band council determines a need for an expenditure of
capital money and prepares a band council resolution, which is then submitted
to the Minister for authorization. With respect to the Peace Hills Trust, for
example, the Samson band council prepared a resolution for the expenditure of
capital money for economic development purposes and the establishment of Peace
Hills Trust. Those band council resolutions were approved by the Minister, $35
million was released and the Peace Hills Trust was established.
(f) Unjust
enrichment
[150]
The claims
of Samson and Ermineskin for breach of trust are framed in a number of
different ways, most relating in some way to the argument that the Crown has a
duty to invest the royalties as a trustee would do. We have rejected that
argument for the reasons explained above. An alternative basis for the breach
of trust argument is that, by making use of the capital money of Samson and
Ermineskin and paying the rate of interest that it did, the Crown was unjustly
enriched.
[151]
In our
view, if the elements of unjust enrichment are established on the facts of
these cases, Samson and Ermineskin would be entitled to a remedy. It seems to
us axiomatic that the Crown should not be permitted to enrich itself to the
detriment of Samson and Ermineskin. That would be a breach of the Crown’s
fiduciary obligations to Samson and Ermineskin, and more fundamentally it would
not be consistent with the honour of the Crown.
[152]
The question of unjust enrichment arises
inevitably from the statutory scheme, which requires the Crown to retain the
capital money of Samson and Ermineskin in the Consolidated Revenue Fund, and
thus to use the money. If the Crown fails to compensate Samson and Ermineskin
appropriately for that use, there would be unjust enrichment
[153]
In Garland v. Consumers' Gas Co., [2004]
1 S.C.R. 629, Justice Iacobucci stated the test for unjust enrichment (at
paragraph 30):
|
As a general
matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an
enrichment of the defendant; (2) a corresponding deprivation of the
plaintiff; and (3) an absence of juristic reason for the enrichment (Pettkus
v. Becker, [1980] 2 S.C.R. 834, at p. 848; Peel (Regional
Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 784). […]
|
[154]
The Judge
reasoned that there was no deprivation because the Crown paid Samson and
Ermineskin the interest required by law (that is, the Orders in Council), but
even if there was a deprivation those Orders in Council provided the necessary
juristic reason (Judge’s reasons in Samson at paragraph 710, and in Ermineskin
at paragraph 291).
[155]
The Judge
also concluded that the Crown was not enriched. Samson
and Ermineskin argued at trial, and in these appeals, that because their
capital money was on deposit in the Consolidated Revenue Fund for long periods
of time and the Crown did not lock in high interest rates when they prevailed
for long term federal government debt (especially during the early 1980s), the
Crown was enriched because it paid less for the use of Indian money than it did
for other long term debt.
[156]
The factual premise of the enrichment argument is
that if the Crown had not had access to Indian money in the Consolidated
Revenue Fund, it would necessarily have borrowed more money from others by
issuing more long term government debt, which bore a higher rate of interest
than the rate established by the Orders in Council.
[157]
In order to assess the validity of that factual
premise, the Judge examined and analyzed a considerable body of conflicting
expert evidence. In the end, he preferred on this point the expert evidence of
Mr. King, a Crown witness, who was an economist with specific expertise in
government debt management. Mr. King’s opinion, based on the Crown’s debt
strategy during the relevant period, was that if the Crown had not had access
to Indian money (that is, if the Indian money had never existed), the Crown
would have issued more treasury bills or a mix of treasury bills and whatever
long term bonds the Crown had targeted for the relevant period. Either choice
would have resulted in a lower cost to the Crown than the interest actually
paid on the Indian money from 1971 to 2000. It follows that the Crown was not
enriched by having paid interest on Indian money at the rates established by
the Orders in Council. In fact, the Crown could and would have obtained the
same funding less expensively if the Indian money had not existed.
[158]
In our opinion, the Judge approached the
enrichment issue correctly when he asked himself what the Crown would have done
had it not had access to the Indian money, and a careful review of the relevant
evidence discloses no error in his assessment of the evidence on that point.
For that reason, we have no basis for interfering with his conclusion that the
Crown was not enriched by its use of the capital money of Samson and Ermineskin
while it was held in the Consolidated Revenue Fund. As that element of the
unjust enrichment test was not met, there was no unjust enrichment.
[159]
Samson and Ermineskin criticize the Judge’s
unjust enrichment analysis because it seems to imply that the Crown can always
avoid an unjust enrichment claim by requiring the interest rate on Indian money
to be established by Order in Council, thereby establishing in every case a
juristic reason for a particular rate of interest for the use of Indian money.
In our view, that criticism is not sound. To illustrate by an absurd example,
assume that during a certain period all market debt instruments bear interest
at 12% per year or more, and that for the same period there is an Order in
Council fixing the rate of interest on Indian money at 1% per year. In that
situation it would be obvious that the Crown would be enriched and the bands
correspondingly deprived. We doubt that on those facts, the existence of an Order
in Council fixing a 1% interest rate would be accepted as a juristic reason for
the enrichment.
(g) Rate
of return
[160]
Although the Crown did not have a duty to invest Indian money or
to present a plan of investment, it did have an obligation to pay a rate of
return on Indian money held in the Consolidated Revenue Fund in accordance with
subsection 61(2) of the Indian Act. It is clear that at all relevant
times there was an Order in Council stipulating the rate of interest to be
paid, and that interest was in fact paid accordingly. The only question is
whether any rights of Samson and Ermineskin were breached by the choice of interest
rate or interest rate methodology established by those Orders in Council.
[161]
There is a
dispute between the parties as to whether the Governor in Council, in
exercising its authority under subsection 61(2) of the Indian Act to set
the rate of interest to be paid on Indian money, is bound by the fiduciary
obligations that the Crown owes to all bands and all Indians. In our view, the
answer to that question must be yes.
[162]
The statutory
scheme for the administration of Indian money requires the money to be held in
trust in the Consolidated Revenue Fund. For that reason, Indian money is used
by the Crown. However, the statutory scheme also requires for the payment of
interest, fixed unilaterally by the Crown, as compensation for the use of that
money. This places the Crown inevitably in a position where it has conflicting duties.
Its duty to the Indian people is to pay interest on their money at a rate that
it must fix, but its duty to all Canadians is not to expend excessive amounts
on financing government operations. The existence of that conflict is
acknowledged by the Crown when it says that, in addressing the Governor in
Council in relation to the interest payable on Indian money, the Minister of
Indian Affairs and Northern Development must advocate for higher interest for
Indian people, while the Minister of Finance must advocate against excessive
financing costs. However, despite that internal government conflict, Samson and
Ermineskin are entitled to expect the Crown, as an indivisible whole, to fulfil
its fiduciary obligations.
[163]
In our
view, when the Governor in Council passes an Order in Council to fix the rate
of interest on Indian money and the interest rate methodology pursuant to
subsection 61(2) of the Indian Act, it is functioning as the Crown with
respect to the bands who are beneficially entitled to that money. The choices
made by the Governor in Council in that regard must fulfil the Crown’s
fiduciary obligations to those bands.
[164]
Samson and Ermineskin argue that, because the Indian money is
held in trust, the rate of interest should be at least the equivalent of what
would have been achieved if the Crown had been required and permitted to invest
the Indian money as a trustee would have done. They presented considerable
evidence in an attempt to establish that the rates of interest set out in the
Orders in Council do not meet that standard. Based on that evidence, a trier of
fact could reasonably find that, until 2002, the Orders in Council yielded a
return on the Indian money that was less than might have been achieved if that money
had been invested on the basis of an investment strategy of the kind that might
have been followed by a trustee governed by the common law of trusts.
[165]
The Crown submits that the obligation of the Governor in Council,
in setting the rate of interest payable on Indian money, is to ensure that the
rate of return on Indian money is reasonable in all the circumstances, and that
the Governor in Council has met that obligation. That argument rests principally
on three points:
|
1.
|
It is not
rational to require the Crown to pay interest at a rate that might have been
achieved with the most advantageous possible investment strategy, because the
money was not and could not have been invested in that manner without the
consent of the band councils, and the band councils did not consent.
|
|
2.
|
If any
comparison is to be made with investment returns that might have been
achieved with an actual investment, the comparison must take into account
that there is no risk of capital loss in relation to money held in the Consolidated
Revenue Fund, and that there was complete liquidity in the sense that the
money was always available on short notice if expenditures were required.
None of the comparisons proposed by Samson or Ermineskin involved the management
of large funds in similar circumstances.
|
|
3.
|
There is evidence that over the
relevant period, the Orders in Council resulted in a positive real rate of
return on Indian money (that is, after accounting for inflation) that was in
excess of 4% (as much as 5.7% according to one expert), and there is also
evidence that a real rate of return in excess of 4% falls within the range of
even current expectations for large private funds, and significantly above
the 3% long-term real rate of return expectation which was typically set by
private funds in the 1970s.
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[166]
Samson and Ermineskin adduced a large body of evidence that was
aimed at establishing that the rate of interest was not reasonable, because it
did not result in a rate of return that was commensurate with one of a number
of investment strategies that would have been appropriate for a trustee making
investments of a large fund. Samson and Ermineskin also point to evidence from
the Crown’s own witnesses that the Crown did not consider itself obliged to
match an investment rate of return, and its senior officials did not even put
their minds to that question.
[167]
We agree with the Crown that the decision
of the Governor in Council as to the choice of the rate of interest and the interest
rate methodology should be assessed against a standard of reasonableness. Those
choices fundamentally are an exercise of discretion, albeit a discretion that
is exercised in circumstances in which the Crown has a fiduciary obligation,
and in which the honour of the Crown is engaged. Generally, a discretionary
decision must be permitted to stand if it is based on rational factors and not
on irrelevant considerations, and is within the margin of manoeuvre
contemplated by the legislation that grants the discretionary authority.
[168]
The Judge
concluded that the rates of interest chosen by the Governor in Council for the
relevant period were reasonable. Samson and Ermineskin criticize that
conclusion because the Judge did not set out an analysis of the massive body of
evidence that was relevant to that issue. It is true that the Judge’s reasons
on this point are short. However, we have reviewed carefully the portions of
the record to which we were referred in argument. That review included evidence
in support of the Crown’s arguments as summarized above, and the conflicting
evidence of Samson and Ermineskin explaining why a higher rate of interest is justified
by comparisons to any number of investment strategies. We find that there is a
sufficient evidentiary foundation to support the Judge’s conclusion that the
rates of interest paid were reasonable.We are unable to find any basis
for intervening in the conclusion of the Judge that the rate of return
generated by the Orders in Council was a reasonable one.
[169]
We are also satisfied that the Crown properly managed the rate of
return pursuant to subsection 61(2), which provides for a rate to be fixed from
“time to time”, and that the Crown consulted with the bands appropriately in
that regard whenever the bands requested such consultations. The Governor in
Council changed the rate and the methodology in 1969 on the initiative of the
Minister and did so again in 1981 after representations by the bands. The issue
did not require more frequent attention because, from 1969 forward, the rate of
interest was linked to the market yield on long term Canada bonds, with the
result that the rate adjusted automatically to reflect current market rates.
[170]
Samson and Ermineskin also criticize the Crown for treating all
Indian band accounts in the same manner in that they were all subject to the
same interest rate methodology, regardless of their balances. However, the real
issue in this case is whether Samson and Ermineskin received a reasonable rate
of return. Having found that they did, Samson and Ermineskin cannot complain
that the benefit they received was also given to other bands. They have no right
to receive a rate of interest that was necessarily higher than that received by
other bands.
(h)
Summary
[171]
The Crown’s obligations as trustee of the royalties received for the
benefit of Samson and Ermineskin are substantially different from the
obligations of a common law trustee, because of the combined operation of the Financial
Administration Act and the Indian Act. Those obligations fall on the
Minister in relation to the management of Indian money, and on the Governor in
Council in establishing how much interest is to be paid on Indian money.
[172]
The Minister’s obligations are to deposit the royalties into the
appropriate reserve or band capital account in the Consolidated Revenue Fund,
to pay interest at the rate stipulated by the applicable Order in Council, to
maintain accurate accounts, to provide periodic reports to Samson and
Ermineskin, and to consider any requests by Samson or Ermineskin to authorize
and direct expenditure of the capital money as proposed by a band council
resolution. The Governor in Council, for its part, must establish a rate of
interest that is reasonable in the circumstances.
[173]
We agree
with the Judge that the Crown has met all of its obligations as trustee of the
royalties of Samson and Ermineskin. We conclude that the Judge was correct to
dismiss the claims of Samson and Ermineskin in the Money Management Phase.
VII. Conclusion
[174]
For the
reasons stated above, we would dismiss this appeal with costs, but without
prejudice to the right of the parties to seek directions on costs pursuant to
Rule 403 of the Federal Courts Rules.
“J. Richard”
“K.
Sharlow”
SEXTON J.A. (Dissenting Reasons)
Table of Contents
Page
INTRODUCTION.. 2
FACTS. 2
WHAT ARE THE DUTIES OF THE CROWN AS A
TRUSTEE.. 2
I. Introduction. 2
II. Standard of Review.. 2
III. Duties of the Crown in the
Present Case. 2
a. The Crown is a Trustee. 2
b. Duties of a Common Law
Trustee. 2
c. The Crown’s Power and
Duty to Invest 2
i. The common law duties
have not been displaced by legislation. 2
ii. Does the Crown have the power to invest or was it lost by the repeal
of the investment section? 2
iii. Does the Crown have the
power to invest without the consent of the Band?. 2
iv. What is the scope of the
Crown’s duty to invest 2
IV. Did the Crown Breach Its
Duties?. 2
a. The Nature and Size of
the Funds. 2
b. The Crown’s Approach
to Handling Indian Moneys. 2
c. The Crown Breached Its
Duty to Invest 2
d. Alternative Defences
of the Crown. 2
i. The government policy of promoting self-government for the Bands and
their attempts to implement it did not excuse the Crown. 2
ii. The spending habits of the Bands and the volatility of oil revenues
did not preclude the Crown from investing. 2
iii. It is far from clear that
the rate of return was reasonable. 2
V. Section 15 of the Charter. 2
VI. Conclusions. 2
DUTY TO ACCOUNT.. 2
CONFLICT OF INTEREST AND UNJUST
ENRICHMENT.. 2
LIMITATION OF ACTIONS AND LACHES. 2
I. Statutory Limitation of
Actions. 2
a. Which Statute of
Limitations Applies?. 2
b. Does section 14 of the Judicature
Act of Alberta prevent the Crown from relying on the Alberta Limitations
of Actions Act?. 2
c. Discoverability. 2
II. Laches and Acquiescence. 2
DAMAGES. 2
DISPOSITION.. 2
SEXTON J.A. (Dissenting Reasons)
INTRODUCTION
[175]
Oil is an
essential resource in our society. Consequently, those who have oil resources
have earned large sums of money when they permit others to exploit those
resources. Such large sums of money may be placed with trustees who have
expertise in investing and those trustees are expected to manage the moneys by
prudently investing them. The main issue in this case is whether the appellant
Aboriginal Bands who were entitled to the benefits from oil resources beneath
their reserves, and obliged by law to surrender their oil resources to the
Crown as trustee, can be deprived of the same right to have their moneys
invested by the Crown when it is acting as their trustee. In the present case
the Crown has taken the position that legislation which it has passed has
precluded its officials from investing the oil moneys of Samson and Ermineskin
(collectively referred to in these Reasons as “the Bands”) and instead has
deposited those moneys into its own account, used the moneys itself, and paid
interest to the Bands. The Bands say they could have earned many millions of
dollars more if the moneys had been prudently invested.
FACTS
[176]
I adopt
the facts set forth in the reasons of Richard C.J. and Sharlow J.A., and their
conclusions with respect to the General and Historical Phase, the issue of
reasonable apprehension of bias, and the objections to the admissibility of
evidence. The reasons which follow include additional facts from the record
below, at points in the analysis where they are pertinent, in order to provide
a complete factual understanding of the Money Management Phase.
WHAT ARE THE DUTIES OF THE CROWN AS A TRUSTEE
I. Introduction
[177]
In the
Money Management Phase of these actions, the appellants claim damages, or
alternatively, equitable disgorgement for the Crown’s alleged mismanagement of
hundreds of millions of dollars of royalty moneys derived from the oil and gas deposits
underlying the Pigeon Lake and Samson Reserves. These moneys, say
the appellants, are held by the Crown in trust and the Crown is therefore
subject to all of the duties imposed upon a common law trustee in handling
them. Most importantly, the appellants allege that, by failing to invest their
funds as would a prudent private trustee, the Crown failed to ensure that Samson
and Ermineskin received an adequate return on their moneys.
[178]
To
establish their claims, the appellants called twelve expert witnesses in the
Money Management Phase, at least eight of which gave evidence as to the
investment practices that would be expected of managers of large sums of money.
These experts testified that the Crown should have obtained expertise in the
management of large sums of money, assessed the risk tolerance of the funds and
the needs of the beneficiaries, set performance targets for the funds, invested
the funds in a diversified portfolio and continually monitored the performance
of the investments to ensure that the maximum return consistent with sound
investment practices was being obtained. Upon reviewing the Crown’s conduct,
the experts concluded that the Crown’s handling of the Bands’ funds fell short
of prevailing and acceptable industry practices expected of trustees.
[179]
The
appellants compare the Crown’s conduct to other money managers to illustrate
the drastic difference between the services the Bands received and the
standards prevailing in the private sector. Crown witnesses admitted that the
Crown does not actively manage the funds entrusted to it by First Nations and
that no one with investment expertise was hired or consulted in relation to the
Bands’ moneys. In contrast, the appellants point, for example, to the Ontario
Teachers’ Pension Plan which they say has a staff of over 150 persons qualified
as Chartered Financial Analysts continuously managing the pension moneys for
which it is responsible. Crown witness Robert Bertram, Executive Vice-President
of the Ontario Teachers’ Pension Plan, agreed in his testimony that the Crown’s
failure to actively manage the Indian moneys would be unheard of for someone in
his position.
[180]
As a
result of these alleged failures, the appellants claim to have suffered
significant damages over the period in which royalty moneys have been held by
the Crown. In Samson’s case, they claim damages of at least $650 million for
the Crown’s mismanagement of their capital moneys. In Ermineskin’s case, up to
$217 million in damages have been claimed. The appellants’ claims are supported
by voluminous expert evidence which was not taken into account by the Trial
Judge.
[181]
The
respondents admit the Crown holds the royalty moneys in trust for the
appellants, but they claim the Crown’s duties with respect to those funds are entirely
defined by legislation. They assert the legislation gives the Crown no power or
duty to invest the moneys but rather obliges it to hold the moneys in the
Consolidated Revenue Fund (CRF) and pay the rate of interest set by
Order-in-Council. Even if the legislation does authorize investment in private
markets, the respondents submit the Crown’s policy of not investing Indian
moneys was a reasonable one in light of its overall policy of encouraging
Aboriginal self-government. In any event, the respondents claim that they could
not invest the Indian moneys because of the expenditure patterns of the Bands and
the risk associated with the volatile nature of the revenue funds from the oil.
[182]
As will be
elaborated more fully below, I think the Crown was bound to invest the trust
moneys, provided it first obtained the consent of the Bands. Because it failed
to even attempt to obtain the Bands’ consent to invest, it is liable for any
damage this failure has caused. I am not persuaded that any of the defences
proposed by the respondents exonerate the Crown.
II. Standard
of Review
[183]
In Housen
v. Nikolaisen, [2002] 2 S.C.R. 235 (Housen), the Supreme Court of
Canada set out the standards of review to be used by appellate courts when
reviewing trial judgments. In appellate review, the nature of the questions at
issue determines the applicable standard. Questions of law are reviewable on a
standard of correctness (Housen at paragraph 8). The Trial Judge’s
findings of fact will be set aside only if he has committed a palpable and
overriding error (Housen at paragraph 10). For questions of mixed fact
and law, the standard of palpable and overriding error applies unless the Trial
Judge wrongly characterized the correct legal standard or failed to apply the
correct standard, in which case a standard of correctness applies (Housen
at paragraph 37).
[184]
Central to
this appeal is the question of whether the Crown satisfied the duties expected
of it as trustee of the appellants’ royalty moneys. In order to answer this
question, it is necessary to first identify what duties were applicable to the
Crown and secondly, to assess whether the Crown’s conduct was sufficient to
comply with those duties. The former is purely a question of law. It involves
interpreting the applicable legislation and canvassing the case law to identify
the duties of a trustee at common law. Consequently, the Trial Judge’s
assessment of these duties is reviewable on a standard of correctness. The
latter question is one of mixed fact and law. It involves measuring the Crown’s
conduct against that expected of it at law to determine whether there was a
breach of trust. Accordingly, unless there is an extricable error of law, this
Court would normally only be permitted to interfere with the Trial Judge’s
conclusions on this question if he made a palpable and overriding error.
[185]
The
following excerpt outlines the Trial Judge’s conclusions on the issue of breach
of trust in Samson Indian Nation and Band v. Canada, 2005 FC 1622 (Samson). Although there
are some minor differences in the wording of the corresponding passages in the
trial judgment in Ermineskin Indian Band and Nations v. Canada, 2005 FC
1623 (Ermineskin), the effect is the same:
[691] I am satisfied
that the legislation informs the Crown's duties as trustee for Indian moneys.
There is no doubt that the royalty moneys are to be held in trust. That
language appears in the 1946 Surrender and later in section 4 of the Indian
Oil and Gas Act. Although that piece of legislation was enacted in 1974 and
royalties had been collected by the Crown long before that date, the Indian
Oil and Gas Act found its genesis in the world oil crisis of 1973. Section
4 and the words "in trust" merely confirm what was an already
existing situation and in no way altered the manner in which the funds were to
be held and administered.
[692] While section 4 of
the Indian Oil and Gas Act confirms the trust, the characterization of
Indian moneys as public money within the meaning of section 2 of the Financial
Administration Act means that they must be deposited into the CRF, pursuant
to section 17. Section 61(2) of the Indian Act mandates that they be
paid interest at a rate to be determined by the Governor in Council. There is
no choice in whether or not to pay interest: the Crown must. However, the Crown
also has discretion in fixing the rate.
[693] I am also
satisfied that no legal authority exists that would permit the Minister to
purchase investments with Indian moneys, instead of paying a rate of interest.
Recall that when the Indian Act was amended in 1951, the power to make
investments, under section 92, was specifically removed.
[694] In paying a rate
of interest to the Indian moneys pursuant to section 61(2) of the Indian Act,
I am satisfied that the Minister has discharged his duty as a trustee to invest
the trust corpus. In fixing a rate of interest -- or investing -- the trustee's
duty is not to maximize profits. If that was the case, then any trustee failing
to earn the maximum possible on property entrusted to her, would be liable for
breach of trust. Rather, the standard that applies to the duty to invest is
that of reasonableness. The trustee must, of course, act prudently. In the case
of the Indian moneys, the rate of interest is tied to long-term Government of
Canada bonds. The money is not committed to remain in the CRF for any specified
period of time and may be withdrawn, subject to the parameters established by
section 64 of the Indian Act. I am satisfied that the rate of interest
meets the reasonableness standard for assessing a trustee's conduct. (Samson
at paragraphs 691-694; see also Ermineskin at paragraphs 280-283)
[186]
As will be
elaborated upon more fully in the subsequent sections, the Trial Judge’s
conclusions in the Money Management Phase are premised on at least two critical
errors of law, both of which are reviewable by this Court on a standard of
correctness. First, the Trial Judge wrongly interpreted the Indian Act,
R.S.C. 1985, c. I-5 as not authorizing the Crown to invest Indian moneys. In
these reasons it will become clear that the Crown’s principal failure was in
neglecting to consider investment of the royalty moneys, to devise and present
to the Band investment plans on an ongoing basis and to seek their consent.
Concluding at the outset that the Crown had no power to invest, therefore,
significantly tainted the Trial Judge’s reasoning. Secondly, the Trial Judge
concluded incorrectly that the legislation “informs and defines the Crown’s
duty as trustee” (Samson at paragraph 696; Ermineskin at
paragraph 285), apparently leading him to determine that the Crown is bound to
hold the Indian moneys in the CRF and pay interest thereon (Samson at
paragraph 692; Ermineskin at paragraph 281). A proper analysis of the
authorities reveals that while the legislation in an important respect modifies
the Crown’s duties, the Crown is primarily bound to perform as would a trustee
at common law. The legislation does not, therefore, define the Crown’s duties
in their entirety. This critical error in identifying the Crown’s duties
likewise taints the Trial Judge’s conclusions.
[187]
The Trial
Judge’s erroneous interpretation of the duties and powers of the Crown as
trustee constitutes an error of law extricable from the question of whether he
appropriately assessed the facts in light of those duties and powers. Because
of the Trial Judge’s legal errors in identifying the Crown’s duties, he could
not have properly assessed whether the Crown met its duties as trustee, and
this Court must, therefore, intervene. In any event, because of the inadequacy
of the Trial Judge’s reasons on this question, intervention of this Court is
warranted.
[188]
The
appellants led evidence from eight experts on the issue of investment,
including Allen Lambert, the former President and CEO of the Toronto Dominion
Bank; Stephen Jarislowsky, a noted investment expert; Donald McDougall,
Director of RBC Global Services’ Benchmark Investment Analysis practice; Alan
Hockin, a Department of Finance employee for over 20 years and a former Vice-President
of the Toronto Dominion Bank; and Alan Marchment, President and CEO of
Guaranteed Trust and advisor to Canadian Deposit Insurance Corporation. The
Trial Judge, however, felt it was unnecessary for him to consider any of this
evidence going to the question of whether the Crown had satisfied its duties as
trustee:
Since I have found that
the Crown may -- and indeed must -- rely on the legislation, as it informs and
defines the Crown's duty as trustee, I need not review or comment on the wealth
of expert evidence presented to me on the industry standards, norms, and
practices of commercial trustees. (Samson at paragraph 696; Ermineskin
at paragraph 285)
Moreover, the trial judgment contains no analysis of
voluminous non-expert evidence critical to establishing that the Crown breached
its duties as trustee. The Trial Judge consequently made no findings of fact
going to the question of whether the Crown breached its duties, nor did he give
any indication of his reasoning in coming to the conclusion that the Crown
satisfied its duties because it acted reasonably.
[189]
In the
face of a failure by the Trial Judge to identify the applicable legal test and
the complete absence of any factual findings in the application of the test to
the facts, this Court must conduct its own review of the evidence before the
Trial Court and assess it in light of the correct characterization of the
Crown’s duties. The words of Rothstein J.A. (as he then was) in Baker
Petrolite v. Canwell Enviro-Industries, [2003] 1 F.C. 49 at paragraph 72
are apposite:
I readily recognize that
there was much evidence in this case and many issues, and that this placed a
heavy burden on the Trial Judge. Nonetheless, the summary way in which the
Trial Judge reached his conclusion respecting anticipation precludes this Court
from understanding his reasoning process. The Trial Judge made no findings of
fact with respect to the expert evidence. He simply quoted two opposing expert
opinions without commenting on them. While he concluded that the expert evidence
was "ambivalent and, in totality ... quite unsatisfactory", he
provided no explanation for this conclusion. Nor does his final conclusion, at
paragraph 93, provide any factual underpinning to give content to his
reasoning.
[190]
An
appellate court must, of course, exercise caution in embarking on an assessment
of the evidence, having not had the benefit of seeing the witnesses and
conducting its own assessment of their credibility (Housen at paragraphs
11-14). However, in the present case, a great deal of evidence is documentary.
In addition, the parties have already invested considerable time in this
matter. Samson filed its Statement of Claim in 1989; Ermineskin in 1992. The
trial lasted nearly four years. The oral hearings in this appeal spanned four
weeks. Critically, the parties are only in the middle of a very long
proceeding, having argued only with respect to two of the phases of the action.
The appropriateness of the appellate court intervening in such circumstances
was approved by the Supreme Court of Canada in Hollis v. Dow Corning Corp.,
[1995] 4 S.C.R. 634 at paragraph 33.
[191]
Perhaps
more importantly, in this case, many of the factual issues on the breach of
trust issue are not in dispute; the only dispute relates to the legal
consequences flowing from these facts.
III. Duties of the Crown in the
Present Case
a. The
Crown is a Trustee
[192]
It is
uncontested in the present case that the Crown holds the royalty moneys in
trust for the Bands. There was a dispute, however, as to whether the source of
the trust is Treaty 6 or the surrender in 1946. I am in agreement with the
reasons of the Trial Judge that the source of the trust is the 1946 surrender:
[663] In the case at
bar, the Crown holds the Indian moneys, pursuant to section 61(1) of the Indian
Act, for the "use and benefit" of Indians or bands; the funds may
only be expended for their "benefit." At the very least, this gives
rise to a fiduciary obligation. However, in my opinion, insofar as Indian
moneys are concerned, a trust corpus, or res, exists. The Indian
moneys, derive from the disposition of an interest in land, in the case at bar,
through the 1946 Surrender. In Guerin, upon the surrender of the land,
the band's right in the land disappeared; nothing more remained that could
constitute the trust corpus. In the instant case, however, the
disposition of the plaintiffs' interest in the land leads to the royalty
moneys, which form the trust corpus.
[664] As for the source
of this trust, I do not agree with the plaintiffs' assertion that the trust
arises from either the historical relationship between the Crown and aboriginal
people, or Treaty 6. In my opinion, the treaty is of no assistance in this
matter. It does not speak to the issue of how Indian moneys are to be held and
administered. The only part of the treaty that may possibly pertain to this
issue -- and it is a most tenuous connection at best -- is the clause dealing
with reserve creation. That part of Treaty 6 reads as follows:
And Her Majesty the
Queen hereby agrees and undertakes to lay aside reserves for farming lands, due
respect being had to lands at present cultivated by the said Indians, and other
reserves for the benefit of the said Indians, to be administered…
…
[666] In my opinion,
both the reserve clause in Treaty 6 and Morris's remarks cannot be relied on as
the source of the trust. At that time, the Indian moneys that are the subject
matter of this action did not exist. They came into being subsequent to the
execution of the 1946 Surrender of Minerals document. The words contained in
that document are sufficient to create a trust: there are certainties of
intent, subject-matter, and object. The agreement explicitly contemplates a
trust; the subject-matter is the royalty moneys; and the object, or
beneficiary, is clearly the plaintiffs. (Samson at paragraphs 663-666)
[193]
In any
event, whatever the source, it cannot be disputed that a trust exists in this
case. The 1946 surrender provides for the holding of the surrendered mineral
rights in trust for the appellants and the Indian Oil and Gas Act,
R.S.C. 1985, c. I-7, which was enacted in 1974, confirms in subsection 4(1) the
royalty moneys derived from these minerals are to be held in trust. In
addition, the Crown has referred to itself as trustee on numerous occasions.
b. Duties
of a Common Law Trustee
[194]
A number
of duties applicable to a trustee at common law have been identified by the
Courts. Although the main issue in the present case is whether the Crown had
the power and the duty to invest, the appellants also allege that the Crown
breached additional duties owed by trustees at common law, particularly the
duty to account and the duty of loyalty, which encompasses the duty to avoid
conflicts of interest and the duty of the trustee not to profit from her
office. I do not feel that these latter issues are critical to this case for
reasons which will be explained below.
[195]
In Fales
v. Canada Permanent Trust Co., [1977] 2 S.C.R. 302 at 315 (Fales),
Dickson J. identified that “the standard of care and diligence required of a
trustee in administering a trust is that of a man of ordinary prudence in
managing his own affairs.” A primary responsibility of the prudent trustee is
the duty to invest. As the Trial Judge recognized, “…a trustee owes a positive
duty to invest the corpus – or, put another way, to make it productive – when
the corpus is a wasting asset, such as money. The trust corpus may not lie fallow.
This is the duty to invest”. Lord Hailsham of St. Marylebone in Halsbury’s
Laws of England characterized the duty to invest as follows:
835. Duty to invest. Pending the
negotiation and preparation of a mortgage, or during any other time in which an
investment is being sought, a trustee may pay trust money into a bank to a
deposit or other account, the interest on it, if any, being treated as income.
Subject to this, or unless a trustee is expressly otherwise authorised or
required under the terms of his trust, he must duly and promptly invest all
capital trust money coming into his hands, and all income which cannot be
immediately applied for the purposes of the trust, and he is liable for any
loss which may result from its being improperly invested or being left
uninvested for an unreasonable length of time, and for interest during the
period of its being so left. (Lord Hailsham of St. Marylebone, Halsbury’s
Laws of England, 4th ed., vol. 48 (London: Butterworths, 1984)
at paragraph 835)
[196]
In Donovan
W.M. Waters, Mark Gillen & Lionel Smith, eds., Waters’ Law of Trusts in
Canada, 3d ed. (Toronto: Thomson Carswell, 2005) at
941 the authors note the importance of acting prudently in carrying out the
duty to invest:
Prudence is the
essential quality expected of trustees; prudence in the selection of good
investments, and prudence in ensuring that those investments are also suitable,
given the particular trust terms and the interests of each of the trust
beneficiaries.
Investment will often be
the most difficult task the trustee has to perform because on the one hand he
is required to invest as wisely as he can, given the state of the market, and
on the other hand he must adjust his investment plans to the needs of the trust
objects.
[197]
That the
duty to invest is imposed upon trustees at common law was not controversial in
this case. The dispute between the parties lay, however, in determining the
extent to which this duty applies to the Crown as trustee of the appellants’
royalty moneys. The Crown’s duties will be explained in the following section.
c. The
Crown’s Power and Duty to Invest
[198]
Whether the Crown had
a duty to invest
is at the heart of this case. The respondents argue that the Crown was
precluded from investing by the legislation in two ways. First, the respondents
allege that the Crown had no duty to invest. By virtue of section 17 of the Financial
Administration Act, R.S.C. 1985, F-11 (FAA) and subsection 61(2) of the Indian
Act, they say the Crown’s only obligations were to hold the moneys in the
CRF and pay interest on them at a rate set by Order-in-Council. Secondly, the
Crown says it has no power to invest in any event, that power having been
removed when what was section 92 in the Indian Act, R.S.C. 1927, c. 98
was removed during the 1951 amendments to that Act. In my view, the Crown is
wrong in both respects. The analysis that follows will explain that the Crown’s
duties as trustee are not exhausted by the legislation. It is primarily bound
to act as would a trustee at common law. Likewise, the removal of section 92 of
the Indian Act in 1951 did not have the effect of removing the power of
the Crown to invest Indian moneys. A proper review of the relevant legislation
reveals that the power to invest continues under paragraph 64(1)(k), but
only with the consent of the Band. Having established both that the Crown
continues to have the duty to invest and the power to invest, I will then explain
how the Crown’s duty to invest operates in view of the consent requirement in
paragraph 64(1)(k).
i. The
common law duties have not been displaced by legislation
[199]
In order
for legislation to circumscribe the common law duties of a trustee, that intention
must be clear (see Authorson v. Canada (Attorney General) (2002), 215
D.L.R. (4th) 496 at paragraph 80 (Ont. C.A.), rev’d on other grounds, [2003] 2
S.C.R. 40). To allow otherwise would be contrary to the principle set out by
the Supreme Court of Canada in Wells v. Newfoundland, [1999] 3 S.C.R.
199 at paragraph 46:
In a nation governed by
the rule of law, we assume that the government will honour its obligations
unless it explicitly exercises its power not to. In the absence of a clear
express intent to abrogate rights and obligations – rights of the highest
importance to the individual – those rights remain in force. To argue the
opposite is to say that the government is bound only by its whim, not its
word. In Canada this is
unacceptable, and does not accord with the nation’s understanding of the
relationship between the state and its citizens.
[200]
Section
17 does not evince the requisite clear intention, nor does it even require, as
the Crown suggests, that the moneys be held in the CRF. It merely requires that
all public money, which includes the royalty moneys, be deposited in the CRF:
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17. (1) Subject to this Part,
all public money shall be deposited to the credit of the Receiver General.
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17. (1) Sous
réserve des autres dispositions de la présente partie, les fonds publics sont
déposés au crédit du receveur général.
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[201]
Likewise, subsection
61(2) of the Indian Act does not mandate that interest be paid on all
Indian moneys. The provision requires only that when such moneys are held in
the CRF, the Crown must pay interest at the rate set by the Governor in Council:
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(2)
Interest on Indian moneys held in the Consolidated Revenue Fund shall be
allowed at a rate to be fixed from
time
to time by the Governor in Council.
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2)
Les intérêts sur l’argent des Indiens détenu au Trésor sont alloués au taux
que fixe le gouverneur en conseil.
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[202]
These
sections do not mandate that the Indian moneys remain indefinitely in the CRF.
They do not prohibit withdrawal. They simply mandate that when moneys are on
deposit in the CRF, interest must be paid by the Crown.
[203]
The common
law duties of a trustee, therefore, have not been replaced by narrower,
legislative obligations, as the Crown suggests. Although nobody argued this, it
is worthwhile to note that there is nothing in provincial legislation that
would derogate from the obligation of the Crown to invest. In the Alberta Trustee Act, R.S.A.
2000, c. T-8, for example, trustees are empowered with the authority to invest
trust funds (section 3) and are liable if they do not exercise reasonable skill
and prudence in making the investments (section 4(1)). Consequently, the
starting point for determining Crown’s duties are those of a trustee at common
law. These will be outlined in the section that follows.
[204]
This
holding is consistent with the landmark decision of the Supreme Court of Canada
in Guerin v. The Queen, [1984] 2 S.C.R. 335 (Guerin).
In that case, Dickson J., for the majority, determined that when reserve lands
were surrendered to the Crown, the arrangement was “trust-like” and the
consequences for breach of the Crown’s fiduciary duties were likewise similar
to those imposed on a common law trustee. In Guerin, Dickson J. could
not find a trust because of the nature of Aboriginal title: when lands bearing
Aboriginal title are surrendered to the Crown, the Aboriginal group no longer
holds an interest in them and therefore there is no legal interest which can
form the corpus of the trust. As the Trial Judge properly identified, no
such difficulty exists with respect to the royalty moneys in the present case
because moneys beneficially owned by the Bands can form the corpus of a
trust. In Blueberry River Indian Band v. Canada (Department of Indian Affairs
and Northern Development),
[1995] 4 S.C.R. 344 at paragraph 13 (Blueberry), the Supreme Court of
Canada underscored the use of trust concepts. While acknowledging that in the
case of a land surrender, for the reasons expressed by Dickson J. in Guerin,
a strict common law trust could not be identified, Gonthier J. nevertheless
held that the surrenders at issue “were framed as trusts, and the parties
therefore intended to create a trust-like relationship. Thus, for lack of a
better label, I think that it is appropriate to refer to these surrenders as
trusts in Indian land.”
ii. Does
the Crown have the power to invest or was it lost by the repeal of the
investment section?
[205]
The respondents
submit that the Crown lost its power to invest when section 92 of the Indian
Act, R.S.C. 1927, c. 98, which authorized the Crown to make investments of
Indian moneys, was repealed in 1951.
[206]
In 1951,
the Indian Act underwent significant amendments. One of such amendments
was the removal of what were then sections 92 and 93. These sections provided
as follows:
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Investment
and management of Indian funds may be regulated by Governor in Council
In
what particulars.
If
capital does not exceed $2,000.
Power
of Governor in Council over expenditure of capital.
Direction
of expenditure of capital of band, without consent.
Lease
of lands in a reserve if band or individual neglects cultivation.
Improvements.
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92.
With the exception of such sum not exceeding fifty per centum of the proceeds
of any land, timber or other property, as is agreed at the time of the
surrender to be paid to the members of the band interested therein, the
Governor in Council may, subject to the provisions of this Part, direct how
and in what manner, and by whom, the moneys arising from the disposal of
Indian lands, or of property held or to be held in trust for Indians, or
timber on Indian lands or reserves, or from any other source for the benefit
of Indians, shall be invested from time to time, and how the payments or assistance
to which the Indians are entitled shall be made or given.
2 . The Governor in
Council may provide for the general management of such moneys, and direct
what percentage or proportion thereof shall be set apart, from time to time,
to cover the cost of and incidental to the management of reserves, lands,
property and moneys under the provisions of this Part, and may authorize and
direct the expenditure of such moneys for surveys, for compensation to
Indians for improvements or any interest they had in lands taken from then,
for the construction or repair of roads, bridges, ditches and watercourses on
such reserves or lands, for the construction and repair of school buildings
and charitable institutions, and by way of contribution to schools attended by
such Indians. Provided that where the capital standing to the credit of a
band does not exceed the sum of two thousand dollars the Governor in Council
may direct and authorize the expenditure of such capital for any purpose
which may be deemed to be for the general welfare of the band.
93.
The Governor in Council may, with the consent of a band, authorize and direct
the expenditure of any capital moneys standing at the credit of such band, in
the purchase of land as a reserve for the band or as an addition to its
reserve, or in the purchase of cattle, implements or machinery for the band,
or in the construction of permanent improvements upon the reserve of the
band, or such works thereon or in connection therewith as, in his opinion,
will be of permanent value to the band, or will, when completed, properly
represent capital or in the making of loans to members of the band to promote
progress, no such loan, however, to exceed in amount one-half of the
appraised value of the interest of the borrower in the lands held by him.
2.
In the event of a band refusing to consent to the expenditure of such
capital moneys as the Superintendent General may consider advisable for any
of the purposes mentioned in subsection one of this section, and it appearing
to the Superintendent General that such refusal is detrimental to the
progress or welfare of the band, the Governor in Council may, without the
consent of the band, authorize and direct the expenditure of such capital for
such of the said purposes as may be considered reasonable and proper.
3.
Whenever any land in a reserve whether held in common or by an individual
Indian is uncultivated and the band or individual is unable or neglects to
cultivate the same, the Superintendent General, notwithstanding anything in
this Act to the contrary, may, without a surrender, grant a lease of such
lands for agricultural or grazing purposes for the benefit of the band or
individual, or may employ such persons as may be considered necessary to
improve or cultivate such lands during the pleasure of the Superintendent
General, and may authorize and direct the expenditure of so much of the
capital funds of the band as may be considered necessary for the improvements
of such land, or for the purchase of such stock, machinery, material or
labour as may be considered necessary for the cultivation or grazing of the
same, and in such case all the proceeds derived from such lands, except a
reasonable rent to be paid for any individual holding, shall be placed to the
credit of the band.
4.
In the event of improvements being made on the lands of an individual the
Superintendent General may deduct the value of such improvements from the
rental payable for such lands.
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92.
A l'exception de la somme, n'excédant pas cinquante pour cent du produit
d'une terre, de bois de construction ou d'autres biens qu'il est convenu,
lors de la rétrocession, de verser aux membres de la bande y intéressée, le
gouverneur en son conseil peut, sous réserve des dispositions de la présente
Partie, prescrire comment, de quelle manière et par qui les deniers provenant
de l'aliénation ou de la vente de terres indiennes, ou de biens tenus ou à
tenir en fiducie pour les Indiens, ou de bois de construction sur les terres
ou dans les réserves indiennes, ou provenant de toute autre source au
bénéfice des Indiens, doivent être placés à toute époque, et il peut
prescrire le monde de versement ou de secours auxquels les Indiens ont droit.
2.
Le gouverneur en son conseil peut assurer l'administration générale de ces
deniers, et fixer la quotité ou la proportion qui doit, de temps à autre, en
être mise à part pour couvrir les frais occasionnés par l'administration des
réserves, terres, biens et deniers sous l'empire de la présente Partie; et il
peut autoriser et ordonner l'emploi de ces deniers pour les arpentages, pour
l'indemnité à payer aux Indiens pour améliorations ou pour tout intérêt
qu'ils avaient dans les terres dont ils sont dépossédés, pour l'établissement
ou la réparation des chemins, ponts, fossés et cours d'eau dans ces réserves
ou sur ces terres, pour la construction et la réparation de maisons d'école
et d'institutions de charité, et à titre de contribution aux écoles
fréquentées par ces Indiens. Mais lorsque le capital porté au crédit d'une
bande ne dépasse pas la somme de deux mille dollars, le gouverneur en son
conseil peut ordonner et autoriser la dépense de ce capital pour toute fin
tendant au bien-être général de la bande
93.
Le gouverneur en son conseil peut, du consentement d'une bande, autoriser et
prescrire l'emploi de capitaux portés au crédit de la bande, à l'achat de
terrains devant servir de réserve à la bande ou augmenter sa réserve, ou à
l'achat de bestiaux, d'instruments aratoires ou de machines pour la bande, ou
à l'exécution d'améliorations permanentes dans la réserve de la bande, ou aux
travaux dans la réserve ou connexes à la réserve, qu'il estime devoir
procurer une valeur permanente, ou qui, après leur achèvement, représenteront
un capital effectif, ou à faire des prêts aux membres de la bande afin de
favoriser le progrès; toutefois, ces prêts ne doivent pas être supérieurs à
la moitié de la valeur estimative de l'intérêt de l'emprunteur dans les
terres qu'il détient.
2.
Advenant qu'une bande refuse de consentir à dépenser les capitaux que le
surintendant général peut juger opportun de dépenser pour l'une des fins
mentionnées au premier paragraphe du présent article, et s'il appert au
surintendant général que ce refus est préjudiciable au progrès ou au
bien-être de la bande, le gouverneur en son conseil peut, sans le
consentement de la bande, autoriser et ordonner la dépense de ces capitaux
pour celles desdites fins qui peuvent être jugées raisonnables et
convenables.
3.
Lorsqu'une terre située dans une réserve, qu'elle soit tenue en commun ou par
un Indien en particulier, est inculte, et que la bande ou l'Indien est
incapable ou néglige de la cultiver, le surintendant général, nonobstant
toute disposition contraire contenue dans la présente loi, peut, sans qu'il y
ait eu rétrocession, accorder un affermage de ce terrain pour des fins
d'agriculture ou de pâturage, au bénéfice de la bande ou de l'individu, ou il
peut employer les personnes qui peuvent être jugées nécessaires afin de
cultiver ou d'améliorer cette terre durant le bon plaisir du surintendant
général, et il peut autoriser et ordonner la partie des capitaux de la bande
qui peut être jugée nécessaire pour améliorer cette terre, ou pour acheter
les animaux, machines, matériaux ou main-d'œuvre qui peuvent être considérés
comme nécessaires pour la culture ou le pâturage de cette terre; et dans ce
cas tout le produit de ce terrain, sauf une redevance raisonnable à payer
pour toute propriété individuelle, sera placé au crédit de la bande.
4.
Si des améliorations sont effectuées sur les terres d'un individu, le
surintendant général peut déduire la valeur de ces améliorations de la
redevance payable pour ces terres.
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Le
gouverneur en son conseil peut régler le placement et l'administration des
fonds des Indiens.
Particularités
Pouvoir
du gouverneur en son conseil relative-dépenses du capital.
Ordre
de dépenser les capitaux de la bande sans consentement.
Affermage
de terres dans une réserve si la bande ou l'individu néglige de cultiver.
Améliorations.
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[207]
The Crown
relies on the removal of section 92 to establish that the Crown no longer has
the power to invest. However, a review of section 64 of the present Indian
Act, which has existed largely unchanged from the form adopted during the
1951 amendments, illustrates that rather than removing the power to invest or
the power to make the other expenditures from Indian capital moneys listed in
sections 92 and 93, the 1951 amendments merely established a new regime for
making such expenditures. Under the new regime, the Minister continues to have
considerable scope to make expenditures, including investments, of Band capital
moneys, but he or she can no longer do so without the Band’s consent. Section
64 provides as follows:
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64. (1) With the consent of the
council of a band, the Minister may authorize and direct the expenditure of
capital moneys of the band
(a) to distribute per capita to the members of the band an amount
not exceeding fifty per cent of the capital moneys of the band derived from
the sale of surrendered lands;
(b) to construct and maintain roads, bridges, ditches and
watercourses on reserves or on surrendered lands;
(c) to construct and
maintain outer boundary fences on reserves;
(d) to purchase land for
use by the band as a reserve or as an addition to a reserve;
(e) to purchase for the
band the interest of a member of the band in lands on a reserve;
(f) to purchase livestock
and farm implements, farm equipment or machinery for the band;
(g) to construct and maintain on or in connection with a
reserve such permanent improvements or works as in the opinion of the
Minister will be of permanent value to the band or will constitute a capital
investment;
(h) to make to members of
the band, for the purpose of promoting the welfare of the band, loans not
exceeding one-half of the total value of
(i) the chattels owned by the borrower, and
(ii) the land with respect to which he holds or is eligible to
receive a Certificate of Possession,
and may charge interest and take
security therefor;
(i) to meet expenses necessarily incidental to the
management of lands on a reserve, surrendered lands and any band property;
(j) to construct houses for members of the band, to make
loans to members of the band for building purposes with or without security
and to provide for the guarantee of loans made to members of the band for
building purposes; and
(k) for any other purpose that in the opinion of the
Minister is for the benefit of the band.
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64. (1) Avec le consentement du
conseil d’une bande, le ministre peut autoriser et prescrire la dépense de
sommes d’argent au compte en capital de la bande
a) pour
distribuer per capita aux membres de la bande un montant maximal de
cinquante pour cent des sommes d’argent au compte en capital de la bande,
provenant de la vente de terres cédées;
b) pour
construire et entretenir des routes, ponts, fossés et cours d’eau dans des
réserves ou sur des terres cédées;
c) pour
construire et entretenir des clôtures de délimitation extérieure sur les
réserves;
d) pour
acheter des terrains que la bande emploiera comme réserve ou comme addition à
une réserve;
e) pour
acheter pour la bande les droits d’un membre de la bande sur des terrains sur
une réserve;
f) pour
acheter des animaux, des instruments ou de l’outillage de ferme ou des
machines pour la bande;
g) pour
établir et entretenir dans une réserve ou à l’égard d’une réserve les
améliorations ou ouvrages permanents qui, de l’avis du ministre, seront d’une
valeur permanente pour la bande ou constitueront un placement en capital;
h) pour
consentir aux membres de la bande, en vue de favoriser son bien-être, des
prêts n’excédant pas la moitié de la valeur globale des éléments suivants :
(i) les biens meubles appartenant
à l’emprunteur,
(ii) la terre concernant laquelle
il détient ou a le droit de recevoir un certificat de possession,
et percevoir des intérêts
et recevoir des gages à cet égard;
i) pour
subvenir aux frais nécessairement accessoires à la gestion de terres situées
sur une réserve, de terres cédées et de tout bien appartenant à la bande;
j) pour
construire des maisons destinées aux membres de la bande, pour consentir des
prêts aux membres de la bande aux fins de construction, avec ou sans
garantie, et pour prévoir la garantie des prêts consentis aux membres de la
bande en vue de la construction;
k) pour
toute autre fin qui, d’après le ministre, est à l’avantage de la bande.
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[208]
There is
no evidence that the investment clause was discussed or referred to in the
discussions leading up to the 1951 amendments. This was confirmed by the Crown
in oral argument. It would seem that if there was an intention to remove such
an important power as the power to invest, that there would have been some
discussion of this intention. Rather, it is evident on the face of these
provisions that the amendments were not an attempt to reduce the type of
expenditures, such as investments, that could be made with Indian moneys, but
rather were intended to remove the Crown’s power to make expenditures and
investments of Indian capital moneys without the need to obtain the consent of
the Band. Under section 92, the Governor in Council had complete authority to
make expenditures for the listed purposes without seeking consent of the Band.
Under section 93, although subsection (1) appears to indicate that the Governor
in Council must seek Band consent before directing expenditures of capital
funds for the listed purposes, subsection (2) in fact permits the Governor in
Council to make expenditures even if the Band refuses to consent, if the
Superintendent General considers the refusal detrimental to the progress or
welfare of the Band. Under section 64 the Minister no longer has any power to
make expenditures of Band capital moneys without first obtaining the consent of
the Band council.
[209]
A comparison
of sections 92 and 93 of the former Indian Act with the present section
64 reveals that the former provisions were consolidated into a single provision
intended to govern all capital expenditures in a unified manner; section 92 was
not simply removed in its entirety. The reference to investment previously
found in section 92 has been replaced by the broader authority in paragraph
64(1)(k) to use capital moneys “for any other purpose that in the
opinion of the Minister is for the benefit of the band.” The permissible
expenditures in the former section 92, including the authority to pay expenses
incidental to the management of reserves, lands and property; the authority to
pay for the construction or repair of roads, bridges, ditches and watercourses
on reserves or surrendered lands; and the authority to make distributions to
Band members of no more than fifty per cent of the value of surrendered
property, have been combined with the permissible expenditures from the former
section 93 into the current section 64.
[210]
The work
of the Special Joint Committee of the Senate and House of Commons appointed to
examine and consider the Indian Act in 1946, 1947, and 1948, and the
Parliamentary debates leading up to the enactment of the consolidated Indian
Act in 1951 also indicate that the thrust of the change to the money
management provisions was not to remove the power of the Crown to invest, but
rather to give Bands greater control over their expenditures. Numerous
Aboriginal groups, including the Indian Association of Alberta, made
submissions to the Special Joint Committee requesting that the power of the
Governor in Council to unilaterally authorize expenditures of capital moneys be
removed from the Act. Likewise, members of Parliament indicated a desire to
give Aboriginal peoples greater control over their own affairs. This respect
for the decisions of Bands themselves is similarly reflected in the approach
taken to amending the Indian Act in 1951, which involved extensive
consultation with Aboriginal groups before the new legislation was enacted and
it is also more in accord with Treaty 6, which contemplates that the consent of
the Bands would be obtained when their assets were being dealt with by the
Crown.
[211]
This
interpretation is also consistent with subsection 21(2) of the Interpretation
Act, R.S.C. 1927, c. 1, in force when the 1951 amendments to the Indian
Act came into force, which stated: “The amendment of any Act shall not be
deemed to be or to involve a declaration that the law under such Act was, or
was considered by Parliament to have been, different from the law as it has
become under such Act as so amended.” By this section, the Court is required to
presume where possible that the meaning of the provisions of the pre-amendment
legislation bear the same meaning as their counterparts after amendment. A
construction of the relevant provisions consistent with this principle, such as
the one I have set out above, must therefore be adopted in favour of a
construction that results in a change in legislative meaning.
[212]
Moreover,
the Trial Judge’s Order on January 27, 2005 allowing the transfer of all of
Samson’s capital moneys to the Band was made under the authority of paragraph
64(1)(k) of the Indian Act. A condition of that transfer was the
preparation and execution of a trust instrument detailing an investment plan
for the funds:
Samson must prepare and
execute a trust agreement with provisions satisfactory to the Court. The
agreement will name an external trustee or board of trustees, independent of
Samson, which will hold the money. It will contain provisions dealing with a
detailed financial plan which, in turn, will set out the fund’s investment and
spending policies. The trust agreement will establish the conditions necessary
for the payout of income and encroachments upon capital. The agreement will
contain provisions concerning the selection and dismissal of investment
managers and trustees. It will establish processes for monitoring and reviewing
the performance of the funds and the investment policy, as well as reporting to
Samson Cree Nation members. (Reasons for Order of Teitelbaum J., January 27,
2005 at paragraph 6)
[213]
Following
the Trial Judge’s January 27, 2005 Order, the Kisoniyaminaw Heritage Trust Deed
(the Deed) was consented to by the Crown and approved by the Trial Judge. The
Deed sets out the objects of the trust as follows:
ARTICLE 3 –
TRUST OBJECTS
3.1 The objects of the
Trust are that the Trustees manage and invest the Trust Fund on behalf of the
Beneficiary. The Trustees shall have the following responsibilities:
(a) They
are to manage and invest as a prudent person would.
(b) They
are to invest to attempt to generate sufficient Net Income annually to assist
the Beneficiary to meet its responsibilities to present and future members.
(c) They
are to attempt to maintain the purchasing power of the Trust Fund by
endeavouring to ensure that over the long term the value of the Net Capital of
the Trust remains at least at the real dollar level of 2005 in respect of sums
transferred to the Trust in 2005, and at least at the real dollar level of the
year in which other sums are transferred to the Trust in respect of any other
amounts transferred to the Trustees for the purposes of the Trust. The real
dollar level is to be determined by reference to the Consumer Price Index as
published by Statistics Canada from time to time.
3.2 In
managing and investing as a prudent person would:
(a) The
Trustees may invest the Trust Funds in any kind of property if the investment
is made in accordance with this Trust Deed.
(b) The
Trustees must invest the Trust Funds with a view to obtaining a reasonable
return while avoiding undue risk, having regard to the circumstances of the
Trust.
(c) The
Trustees must review the Trust investments at reasonable intervals for the
purpose of determining that the investments continue to be appropriate to the
circumstances of the Trust.
(d) The
Trustees who have invested trust funds in property may exercise for the benefit
of the Trust any right or power that a person who was both the legal and
beneficial owner of the Trust’s interest in the property could exercise.
(e) Without
restricting the matters that the Trustees may consider, in planning the
investment of the Trust Funds the Trustees must consider the following matters,
insofar as they are relevant to the circumstances of the Trust:
(i) the
purposes and probable duration of the Trust, the total value of the Trust Fund
and the needs and circumstances of the Beneficiary;
(ii) the
duty to act impartially towards the Beneficiary and between different members
of the Beneficiary;
(iii) the
special relationship or value of an asset to the purpose of the Trust or to the
Beneficiary;
(iv) the
need to maintain the real value of the capital or income of the Trust;
(v) the
need to maintain a balance that is appropriate to the circumstances of the
Trust between
(A) risk,
(B) expected
total return from income and the appreciation of capital,
(C) liquidity,
and
(D) regularity
of income;
(vi) the
importance of diversifying the investments to an extent that is appropriate to
the circumstances of the Trust;
(vii) the
role of different investments or courses of action in the Trust portfolio;
(viii) the
costs, such as commissions and fees, of investment decisions or strategies;
(ix) the
expected tax consequences of investment decisions or strategies.
[214]
The Deed
also specifies a number of administrative matters including:
11.1 The Trustees
shall appoint a qualified auditor for the Trust and shall insure that at all
times a qualified auditor for the Trust is in office. The Trustees may change
auditors as may be necessary.
11.2 The Trustees may
retain staff to carry on any of the administrative duties and responsibilities
of the Trustees.
11.3 The Trustees may
retain by contract or otherwise, any person or persons who they in their
absolute discretion feel can best advise them on matters relating to the
administration of the Trust or the Trust fund including but not limited to
legal, accounting and investment advisors.
11.4 The Trustees
shall also, as a high priority, develop an investment policy and shall retain
professional investment advisors with suitable qualifications to aid them in
developing that policy and investing the Trust Fund. The Trustees shall, at
least once a year, review the policy to determine whether it remains
appropriate and if it is not, to make such changes as may be necessary. The
Trustees shall also continuously monitor and at least annually review the
investment returns of the Trust Fund.
[215]
By virtue
of its approval of the Deed and accompanying investment policy, the Crown
consented to the transfer of Samson’s capital moneys to a trustee to perform
all the investment functions the Crown now says it had no authority to perform
itself. The Crown’s position is completely inconsistent. It is illogical to
interpret paragraph 64(1)(k) on the one hand as permitting the Crown to
agree that all of Samson’s capital moneys be turned over to a trustee to invest
with the Band’s consent, but on the other hand to argue that the same provision
of the Indian Act would not permit the government to itself invest the
moneys under the same investment terms with the Band’s consent.
[216]
In any
event, the Crown did not strongly recommend at an early stage to the Bands that
because their position was that the Crown could not invest, that the Bands
should consent to turning over the moneys to an independent trustee with powers
comparable to those which appeared much later in the Kisoniyaminaw Heritage
Trust Deed. Such a recommendation would have been consistent not only with the
Crown’s duties as a trustee, but also with its general fiduciary duties to
Aboriginal bands.
[217]
A further
inconsistency in the conduct of the Crown is shown by its approval of a number
of investments under paragraph 64(1)(k) including the purchase from
Samson’s capital moneys of $1,000,000.00 worth of shares in General Systems
Research Ltd.
[218]
Finally,
from at least 1982, the Crown had legal advice suggesting a more expansive
interpretation of section 64. In that year, a legal opinion was provided by
Paul Ollivier, Q.C., Associate Deputy Minister of the Department of Justice, to
R.J. Fournier of the Department of Indian and Northern Affairs. The full text
of the opinion was set out in the Reasons of my colleagues. Here I wish to
focus on several important aspects. First, it states that there is “no common
genus” between paragraphs 64(1)(a) to (j) which necessarily
limits the generality of paragraph 64(1)(k). It also says that the
Minister need not under paragraph 64(1)(k) obtain consent for each
expenditure of capital moneys. Rather, the Minister is permitted to approve a
class of expenditures such as an investment plan:
First of all, I see no
reason why the Minister cannot approve a class of expenditure – or an
investment plan – as being for the benefit of the band. Such a plan could
include the type of proposed expenditures (corporate securities, real estate,
government bonds, etc.), the proportion of moneys to be expended on each type,
and other financial guidelines.
[219]
Moreover,
the Ollivier opinion states the Minister is permitted to delegate the day-to-day
management of such a plan to an agent under his supervision, but that the
Minister has the responsibility to review on a periodic basis the way in which
the expenditure plan is being implemented. Lastly, the opinion suggests that if
there is a dispute about the meaning of paragraph 64(1)(k), the matter
should be referred to the Federal Court.
[220]
Paragraph
64(1)(k), then, authorizes the Minister to invest Indian moneys, but
only with the consent of the Bands. The legislative requirement that the Crown
must first seek Band consent before investing trust moneys only shows respect
for the decision-making of Bands in regards to their moneys and gives them an
important level of control over the actions of their trustee which most
beneficiaries are not afforded. It also accords with the submissions of
Aboriginal groups, including the Indian Association of Alberta, to the Special
Joint Committee of the Senate and House of Commons appointed to review the Indian
Act prior to the introduction to the 1951 amendments to the legislation.
[221]
The
concept of requiring a trustee to obtain the consent of a third person in order
to make investments is not an unknown concept at common law. Although such a
requirement can prove cumbersome and is perhaps not advisable, nevertheless it
may exist at common law (Waters at 958-959).
iii. Does
the Crown have the power to invest without the consent of the Band?
[222]
Although
paragraph 64(1)(k) gives the Crown the power to invest the trust moneys,
the appellants claim that the Crown has the power, and indeed the duty, to
invest the trust moneys without first obtaining the Bands’ consent. I disagree.
[223]
The
appellants’ primary position is that the royalty moneys are not “public money”
within the definition in section 2 of the FAA and therefore they are not to be
paid into the CRF in accordance with section 17. It follows, they say, that the
Crown is able to invest the moneys as part of its common law duties as trustee.
[224]
The
appellants’ position is incorrect. The definition of “public money” encompasses
the Bands’ royalty moneys paid to the Crown in trust. The definition provides:
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2. In this Act, …
“public
money” means all money belonging to Canada received
or collected by the Receiver General or any other public officer in his
official capacity or any person authorized to receive or collect such money,
and includes
(a) duties and revenues of Canada,
(b) money
borrowed by Canada or received through the issue or sale of securities,
(c)
money received or collected for or on behalf of Canada, and
(d) all money that is paid to or received or collected by
a public officer under or pursuant to any Act, trust, treaty, undertaking or
contract, and is to be disbursed for a purpose specified in or pursuant to
that Act, trust, treaty, undertaking or contract;
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2.
Les définitions qui suivent s’appliquent à la présente loi.
«
fonds publics » Fonds appartenant au Canada, perçus ou reçus par le receveur
général ou un autre fonctionnaire public agissant en sa qualité officielle ou
toute autre personne autorisée à en percevoir ou recevoir. La présente
définition vise notamment :
a) les
recettes de l’État;
b) les
emprunts effectués par le Canada ou les produits de l’émission ou de la vente
de titres;
c) les fonds
perçus ou reçus pour le compte du Canada ou en son nom;
d) les fonds perçus ou reçus par un
fonctionnaire public sous le régime d’un traité, d’une loi, d’une fiducie,
d’un contrat ou d’un engagement et affectés à une fin particulière précisée
dans l’acte en question ou conformément à celui-ci.
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The Trial Judge was correct to conclude that the phrase “and
includes” expands the definition to not only include money beneficially
belonging to Canada, but also money held by the
Crown in trust.
[225]
The
appellants’ second position is that even if the royalty moneys are “public
money” and must therefore be deposited in the CRF pursuant to section 17 of the
FAA, they may be paid out of the CRF for the purpose of investment in
accordance with subsection 21(1). Subsection 21(1) provides that moneys paid
into the CRF for a special purpose may be paid out of the CRF for that purpose:
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21. (1) Money referred to in paragraph (d)
of the definition “public money” in section 2 that is received by or on
behalf of Her Majesty for a special purpose and paid into the Consolidated
Revenue Fund may be paid out of the Consolidated Revenue Fund for that
purpose, subject to any statute applicable thereto.
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21. (1) Les fonds visés à l’alinéa d) de
la définition de « fonds publics » à l’article 2 et qui sont reçus
par Sa Majesté, ou en son nom, à des fins particulières et versés au Trésor
peuvent être prélevés à ces fins sur le Trésor sous réserve des lois
applicables.
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The appellants maintain that because the moneys are paid
into the CRF in trust for the Bands, they may be paid out of the CRF for the
purpose of fulfilling the Crown’s trust duties, including investment. Thus
there is no requirement, they claim, for the Crown to seek Band consent before
investing.
[226]
Again, I
cannot agree. While the royalty moneys may be the type of “special purpose”
funds to which subsection 21(1) refers, that provision states specifically that
the payment of such funds out of the CRF is to be “subject to any statute
applicable thereto.” The applicable statute is the Indian Act and in
section 64, the Indian Act outlines the two conditions that must be met
before capital moneys are to be paid out of the CRF: 1) the expenditure must
fall within one of the listed categories or otherwise be for the benefit of the
Band; and 2) the consent of the council of the Band must be obtained. Without
Band consent in accordance with subsection 64(1) of the Indian Act, the
Minister is not permitted to remove money from the CRF through subsection 21(1)
of the FAA. The general provision in the FAA, section 21, cannot overrule
section 64 of the Indian Act, which deals specifically with Indian
capital moneys.
[227]
Samson,
but not Ermineskin, argues further that section 18 of the FAA, now repealed,
authorized the Crown to invest the trust moneys. Section 18 read:
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18.(1)
In this section, "securities" means securities of or guaranteed
by Canada and
includes any other securities described in the definition of
"securities" in section 2.
a. The
Minister may, when he deems it advisable for the sound and efficient
management of public money or the public debt, purchase, acquire and hold
securities and pay therefor out of the Consolidated Revenue Fund.
b. The
Minister may sell any securities purchased, acquired or held pursuant to
subsection (2), and the proceeds of the sales shall be deposited to the
credit of the Receiver General.
(4) Any net profit resulting in any fiscal year from the
purchase, holding or sale of securities pursuant to this section shall be
credited to the revenues of that fiscal year, and any net loss resulting in
any fiscal year from that purchase, holding or sale shall be charged to an
appropriation provided by Parliament for the purpose.
(5)
For
the purposes of subsection (4), the net profit or loss in any fiscal year
shall be determined by taking into account realized profits and losses on
securities sold or loaned, the amortization applicable to the fiscal
year
of premiums and discounts on securities, and interest applicable to the
fiscal year.
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18.(1)
Au présent article, «valeurs» s'entend des titres émis ou garantis par le
Canada, ainsi que de ceux qui sont mentionnés dans la définition de «valeurs»
à l'article 2.
(2)
Le ministre peut, lorsqu'il le juge opportun pour la bonne gestion des fonds
publics ou de la dette publique, acheter, acquérir et détenir des valeurs et
les payer sur le Trésor.
(3)
Le ministre peut vendre les valeurs ainsi achetées, acquises ou détenues; le
produit de la vente est déposé au crédit du receveur général.
(4)
Au cours d'un exercice, les bénéfices nets qui résultent de l'achat, de la
détention ou de la vente de valeurs sous le régime du présent article sont
ajoutés aux recettes de cet exercice; les pertes nettes, durant la même
période, qui résultent des mêmes opérations son imputées à un crédit voté par
le Parlement à cette fin.
(5) Pour l’application du paragraphe (4), il est tenu compte,
dans le calcul des bénéfices ou pertes résultant de la vente ou du prêt de
valeurs, ainsi que de l’amortissement concernant les primes et escomptes sur
les valeurs et de l’intérêt applicables à l’exercice.
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[228]
I do not
agree with Samson. It is clear section 18 was not intended to refer to funds
not beneficially belonging to Canada. As the Trial Judge held,
“[e]ven a cursory reading of this section reveals that it simply cannot be
applied to Indian moneys. If Indian moneys were invested pursuant to this
section, then the Crown would gain or lose, not the plaintiffs.” (Samson
at paragraph 689)
iv. What
is the scope of the Crown’s duty to invest
[229]
Having
established that the Crown has retained both the power and duty to invest when
acting as trustee for the royalty moneys, the scope of that duty to invest must
now be explained.
[230]
The
starting point for assessing the scope of the Crown’s duty to invest in the
present case is the standard of prudence for assessing the conduct of a trustee
set out in Fales. In Blueberry, the Supreme Court of Canada
considered whether the Crown had breached its fiduciary duty to an Indian Band
when it failed to reserve the mineral rights, which later became very valuable,
from a transfer of Band lands to the Director, The Veterans’ Land Act.
At paragraph 104, McLachlin J. (as she then was) adopted the common law
standard as set out in the Fales case as setting out the test against
which to measure the Crown’s conduct as a fiduciary:
The matter comes down to
this. The duty on the Crown as fiduciary was "that of a man of ordinary
prudence in managing his own affairs": Fales v. Canada Permanent Trust
Co., [1977] 2 S.C.R. 302, at p. 315. A reasonable person does not
inadvertently give away a potentially valuable asset which has already
demonstrated earning potential. Nor does a reasonable person give away for no
consideration what it will cost him nothing to keep and which may one day
possess value, however remote the possibility. The Crown managing its own
affairs reserved out its minerals. It should have done the same for the Band.
[231]
In Wewaykum
Indian Band v. Canada, [2002] 4 S.C.R. 245, the Supreme Court of Canada was
charged with explaining the extent of the fiduciary duty applicable to the
Crown at the point of reserve creation. Binnie J., at paragraph 94, cited the
paragraph quoted above from McLachlin J.’s reasons in Blueberry as
establishing the appropriate standard.
[232]
In order
to meet this standard of prudence, a trustee is obliged to perform a number of
actions, including assessing the circumstances of the fund and the
beneficiaries to ascertain the appropriate investments, building a diversified
portfolio where appropriate, monitoring the investments periodically, seeking
expert advice before making investments and maintaining an even hand between
successive beneficiaries. Ultimately, the trustee is obliged to obtain the best
return possible consistent with sound investment practices. This concept was
stated in by Megarry V.C. in Cowan v. Scargill, [1984] 2 All E.R. 750 at
760 (Cowan) as follows:
In the case of a power
of investment, as in the present case, the power must be exercised so as to
yield the best return for the beneficiaries, judged in relation to the risks of
the investments in question; and the prospects of the yield of income and
capital appreciation both have to be considered in judging the return from the
investment.
(See also Ontario Law Reform Commission, Report on the
Law of Trusts, 1984; Cheyenne-Arapaho Tribes of Indians of Oklahoma v.
United States, 512 F.2d 1390 (1975) at 1394 (Cheyenne-Arapaho))
[233]
In order
to fully understand the Crown’s obligations, it is necessary to review in
greater detail the sound investment practices that are to be taken by any
trustee with the obligation to invest.
[234]
The
duty to consider the circumstances of the fund when selecting investments. The first practice to be
followed by the prudent trustee seeking to invest the trust assets is to
consider the circumstances of the fund. Experts called by both the appellants
and respondents agreed that the circumstances requiring consideration include the
nature of the funds, time horizon and cash flow patterns; the interests and
needs of the beneficiary; the risk tolerance of the fund; and the expected risk
and returns from various investment policies. As is noted in the Restatement
of the Law, Trusts, 3d ed. (St. Paul: American Law Institute Publishers,
1992) at §227, pages 14-15,
The trustee must give
reasonably careful consideration to both the formulation and the implementation
of an appropriate investment strategy, with investments to be selected and
reviewed in a manner reasonably appropriate to that strategy. Ordinarily this
involves obtaining relevant information about such matters as the circumstances
and requirements of the trust and its beneficiaries, the contents and resources
of the trust estate, and the nature and characteristics of available investment
alternatives.
In order to fulfil this obligation, the trustee must consult
with the beneficiary to understand its risk tolerance, income needs and
expenditure plans.
[235]
The
duty to take appropriate advice where necessary. The standard of prudence requires the
trustee to seek expert advice in making investments. In Cowan at 762,
the Court held that the duty to act prudently “includes the duty to seek advice
on matters which the trustee does not understand, such as the making of
investments, and on receiving such advice to act with the same degree of
prudence.” This important principle was also well-stated in Re Miller Estate
(1987) 26 E.T.R. 188 (Ont.
Surr. Ct.) at
191, where the Court held:
Investment is no longer
a choice between government bonds and blue chip stocks. It requires assessment
of many rapidly changing factors in political, economic and financial areas,
which in turn requires the assimilation of large amounts of detailed
information. The ordinary prudent person in the conduct of his or her own
investment affairs turns now as a matter of course to investment counsellors
and advisors…
[236]
Even the
Crown’s expert witness, Keith Ambachtsheer, recognized the importance of
seeking expert advice in his book, Pension Fund Excellence at 35:
[T]he fiduciary must be
assumed to be knowledgeable. In particular, when advice from an expert is
available, prudent trustees will avail themselves of this advice. In this
sense, there is no excuse for failing to get expert input before decisions are
made. Hence the standard is usually called the “prudent expert” standard.
[237]
The
duty to maintain an even hand between successive beneficiaries. When the trust has
successive beneficiaries, the standard of prudence requires that the
investments generate sufficient income for the income beneficiary and that the
investments do not favour the capital beneficiary by preserving the capital at
the expense of income. (See e.g. Nestle v. National Westminster Bank
Plc (1988), reported (1996), 10 Trust Law International 112, aff’d (1992),
[1993] 1 W.L.R. 1260 (C.A.); Re Carley Estate (1994), 2 E.T.R. (2d) 142;
Myran et al. v. Long Plain Indian Band et al. (2002), 162 Man. R. (2d) 166.)
[238]
The
duty to diversify trust assets where appropriate. In many cases, the prudent approach
will be for the trustee to diversify the portfolio of investments held by the
trust. This principle was endorsed in Re Carley Estate (1994), 2 E.T.R.
(2d) 142 (Ont. Ct. Gen. Div.) at 157, where the Court adopted the following
passage from Waters: “All capital is now at risk, and the task of the trustee
is to keep his portfolio reasonably balanced between investments so as to
maintain and, if possible, expand the capital value of the trust funds.”
[239]
The
duty to periodically monitor the trust portfolio in light of market conditions. Finally, the prudent trustee
must monitor the performance of the investments she has made. This obligation
was described in Cheyenne-Arapaho at 1394, where the Court held that a
corollary duty of the duty to prudently invest trust funds “is the
responsibility to keep informed so that when a previously proper investment
becomes improper, perhaps because of the opportunity for better (and equally
safe) investment elsewhere, funds can be reinvested.” Dickson J. in Fales at
317 likewise identified this duty to monitor: “A trustee must also be alert to
changes in the fortunes of the companies represented in the portfolio of the
trust estate.”
[240]
High-ranking
Crown officials were aware of the Crown’s duty to carry out these sound
investment practices and in doing so, to strive to attain the best return
possible consistent with these practices. For example, in a news release from
November, 1969, then Minister of Indian Affairs, Jean Chrétien, was quoted as
saying, “…my Department is acting as trustee for the Indian people of Canada,
it has a duty to obtain as high a rate of interest as possible consistent with
sound investment practices.” Likewise, at trial, Crown witness and former
Associate Deputy Minister of Indian Affairs, Dennis Wallace, testified that the
Crown took the position that as trustee, it was to obtain a rate of return
consistent with sound investment practices for the Bands. Finally, by letter on
May 16, 1973, P.B. Lesaux, Director of the Indian-Eskimo Economic Development
Branch, wrote, “In many instances, Bands accumulate significant sums of money
in Band accounts. We must surely view it as part of our trust responsibility to
effect optimum return on these funds, while at the same time, minimize the risk
factor.”
[241]
Unlike an
ordinary trustee, however, the Crown has an obligation to seek the consent of
First Nations for whom it holds money in trust before investing. Although
consent may be sought with respect to individual investments, it is unlikely
that the standard of prudence can be met without attempting to implement an
investment plan. When the Crown assesses the circumstances of the fund, obtains
expert advice, determines the appropriate balance between present and future beneficiaries
and considers diversification, these practices will be directed not to the
immediate purchase of investments, but to the creation of an investment plan
that will be put to the Bands for their approval. Such investment plans must be
produced for approval by the Bands on a continuing basis, with plans being
proposed at least once per year, and might resemble the Kisoniyaminaw Heritage
Trust Deed and accompanying Statement of Investment Policies and Procedures
which the Crown approved in the Order of the Trial Judge on October 17, 2005.
Once a plan is implemented, the Crown must then monitor the performance of the
investments and, if any necessary changes are outside the scope of the initial
investment plan, it must seek the consent of the Bands before such changes are
made.
[242]
In
proposing investments to the Bands, the Crown must do more than present an
investment plan. It must explain to the Bands the benefits and risks involved
with investment, and it must describe the financial consequences of a Band’s
decision not to approve the plan. In effect, the Crown must explain its own
reasoning in establishing and recommending the investment plan to the Bands so
that they can make an informed decision about whether or not it is appropriate
for them.
IV. Did the Crown Breach Its
Duties?
[243]
I now come to the important
question of whether the Crown breached these duties when handling the
appellants’ royalty moneys. To answer this question, it will first be necessary
to explain in greater detail the Crown’s approach to managing the royalty
moneys it collected in trust and to then compare the Crown’s conduct to that
expected of a trustee. As the discussion that follows will illustrate, the
Crown’s conduct in this case fell short of satisfying its duties as trustee.
a. The
Nature and Size of the Funds
[244]
Because the
royalty moneys received from the Samson and Pigeon Lake Reserves are derived
from a non-renewable resource, they are treated as capital moneys by the Crown
and accordingly kept in capital accounts. Prior to the transfer of the entirety
of Samson’s trust moneys to it, each Band had a capital account in its name. In
addition, the Crown maintained a separate Pigeon Lake Capital Account and
credited to it royalties received from production from the Pigeon Lake Reserve.
The amounts in that account were distributed annually to the Samson and
Ermineskin Capital Accounts in proportion to each Bands’ entitlement. Interest
paid on the moneys is treated as revenue and accordingly recorded in revenue
accounts. This case concerns only the moneys that have been retained in the
capital accounts.
[245]
When
analyzing the appropriateness of the Crown’s conduct in executing its trust
duties, it is important to bear in mind that the sums held by the Crown on
behalf of Samson and Ermineskin were large and they were held by the Crown on a
long-term basis.
[246]
The
balances in each of Samson and Ermineskin’s capital accounts have grown
substantially since at least 1969. At year-end in 1969, Samson held $1,513,957;
Ermineskin held $1,182,745. By year-end, 1982, Samson held over $100 million in
its account, a milestone achieved by Ermineskin two years later. Both Bands
reached their highest year-end balances in 1997, with Samson holding
$414,412,667 and Ermineskin holding $219,879,147. At all material times, therefore,
the Crown was responsible for considerable sums of money.
[247]
These
statistics also illustrate the long-term nature of these funds, as do
additional calculations provided by the experts. For example, depending upon
whether a First In First Out or a Last In First Out analysis is used, the
balance in Ermineskin’s capital account as of December 31, 1999 had been owing
for either 11.8 or 16.4 years, both of which are considered “long term” by
financial analysts. In Samson’s case, using the Last In First Out method, the
length of time the December 31, 1999 balance had been owing was 17.4 years.
b. The
Crown’s Approach to Handling Indian Moneys
[248]
The
Crown’s approach to handling the royalty moneys it collects on behalf of the
Bands involves paying the funds into the CRF and paying a rate of interest on
them in accordance with the Order-in-Council passed pursuant to subsection
61(2) of the Indian Act (the “Indian moneys methodology”). As has
already been established, the royalty moneys are “public money” within the
definition in section 2 of the FAA and therefore in accordance with section 17
of that Act, they are to be deposited in the CRF upon receipt. The Crown has
authorized a variety of withdrawals from both Bands’ capital accounts for such
purposes as per capita distributions to Band members and the building of
infrastructure on reserve. The money not withdrawn by the Bands has remained in
the CRF and is accounted for in each Band’s capital account.
[249]
From the
time of the surrender until March 31, 1969, the Crown paid a consistent 5%
interest on the Indian moneys held in the CRF. Effective April 1, 1969, a new
method of calculating interest was developed according to a formula contained
in a new Order-in-Council (P.C. 1969-1934). A second Order-in-Council was
issued in 1981 (P.C. 1981-3/255), which followed essentially the same method of
calculating interest as the 1969 Order-in-Council but modified how interest was
credited, changed which balances would be used and used quarterly as opposed to
monthly averages of market yields of Government of Canada bond issues as the
basis for calculation. The formula set out in the 1981 Order-in-Council has not
changed since that time. It effectively provides for a short term rate of
interest because it is subject to change every 90 days. Further, the formula applies
to all Indian moneys, no matter what their size or the length of time they are
to be held in trust by the Crown.
c. The
Crown Breached Its Duty to Invest
[250]
Having
reviewed what approach the Crown took in handling Indian moneys, it is
necessary to assess whether that approach fulfills the Crown’s duties as
trustee. As this Court stressed in Semiahmoo Indian Band v. Canada,
[1998] 1 F.C. 3 at paragraph 45, “[a]s a fiduciary, the Crown must be held to a
strict standard of conduct.” On its face, it would appear that simply paying a
rate of interest according to a formula that has remained unchanged for 26
years could not satisfy the Crown’s duty to invest. As the following discussion
will illustrate, a more thorough review of the evidence confirms that the Crown
did not satisfy this duty.
[251]
The
evidence at trial reveals that the Crown made no attempt to set goals or
objectives for the trust moneys, to seek expert advice about prudent investment
strategies or to establish an investment plan to propose to the Bands.
Moreover, it did not even, at least since 1981, monitor the appropriateness of
the rate of interest paid on the royalty moneys under the Indian moneys
methodology in light of prevailing market conditions.
[252]
Consistent
with the respondents’ primary position in this case, the Crown officials
responsible for handling Indian moneys did not engage in any active management
of the funds. As Gregor MacIntosh, a Crown official responsible for
expenditures of the funds, stated:
We do nothing regarding
the management of the Indian monies when they are in the Consolidated Revenue
Fund. That is the Consolidated Revenue Fund and it’s managed by legislation.
[253]
The Crown
officials responsible for managing the funds in any event did not have the
specialized investment expertise required when managing large sums of money,
nor did they attempt to obtain the relevant expertise by engaging outside
advisors. Gregor MacIntosh confirmed that Department of Indian Affairs
officials did not have the relevant expertise:
Q. But in any event, no
one that you know of in the Government of Canada, presently, or in the past,
has had any special training which would enable that person to hold himself out
or herself out as having expertise in the investment of large sums of money or
the management of large sums of money; is that so?
…
A. Currently, not that I
know of.
Q. What about in the
past, do you know of anybody in the past?
A. Not offhand, no.
[254]
Mr.
MacIntosh likewise confirmed that outside advisors had not been retained with a
view to putting together an investment plan:
Q. MR. O’REILLY: Now,
whether or not it has been possible to make any investments, Mr. MacIntosh, out
of proceeds of oil and gas monies or debiting monies to the credit of the
Samson, Ermineskin, Enoch bands, has the Department of Indian Affairs and
Northern Development, since 1969, ever sought the advice of investment managers
or taken other steps to invest monies for the credit of the Samson, Ermineskin
and Enoch bands in securities?
A. Not to my knowledge,
Mr. O’Reilly.
Q. There haven’t been
any investment plans formulated by the Department of Indian Affairs or the
Department of Finance in respect of possible investments in securities for the
benefit of Samson or Ermineskin or Enoch during the period even from 1951 until
date [sic]?
A. Not to my knowledge.
The only thing I’m thinking about is when we agreed to do the special
legislation for the Ermineskin Band, but I don’t think we had a detained plan
of investments at that time.
Q. But the Government of
Canada, then, hasn’t tried to obtain investment counsel or talked to different
financial people and said well, what could be an alternative plan than simply
paying interest on these Indian monies pursuant to Orders in Council D-39 and
D-41, since 1951?
A. Not to my
recollection, Mr. O’Reilly.
…
Q. MR. O’REILLY: But
as of now, the answer is no, there was no such plan, there were no such
consultations; is that correct?
A. Not in anything I’ve
read, Mr. O’Reilly, or in any research that I’ve been able to do.
[255]
The Crown
likewise did not fulfill the trustee’s obligation to ascertain the
circumstances of the fund. Gregor MacIntosh stated on discovery that the
Department of Indian Affairs had no written goals or objectives relating to the
return on Indian moneys. When asked specifically about Ermineskin, he further
testified that the Crown did not have an understanding of the income
requirements or risk tolerance of the Band, and would not have felt it
appropriate to inquire.
[256]
As would
be expected from the foregoing, the Crown made no attempt to actually invest
the appellants’ moneys by preparing an investment plan for approval by the
Bands. Crown counsel admitted before us that there is no evidence that the
Crown drafted an investment plan to be proposed to the Bands. The Crown’s
approach, he explained, was to wait for the Bands to develop such a plan
themselves.
[257]
The
evidence establishes that even when the Bands requested that the Crown invest
their moneys, the Crown was not prepared to do so. A letter written by Gregor
MacIntosh to Chief John B. Ermineskin in 1992 shows the Crown was not prepared
to hire an outside independent investment advisor for the Band funds. Likewise,
in 1994 and 1996, in response to letters from Ermineskin counsel, the Crown
refused to invest the trust moneys.
[258]
This
approach is, of course, consistent with the Crown’s primary position taken in
this case that it did not have the authority to invest the funds. As I have
already shown, not only was this view incorrect on a proper interpretation of
the evidence, it contradicts the legal opinion provided to the Crown in 1982 by
Mr. Ollivier which concluded the Crown was able to invest the Band funds under
what is now paragraph 64(1)(k) by putting an investment plan to the
Bands. At that point, had the Crown continued to be unsure as to the scope of
its legal authority to invest, it should have referred the question to the
Federal Court, as recommended in the Olliver opinion.
[259]
The
approach taken by the Crown, which exhibits no attempt to even draft a proposed
investment plan for approval by the Bands, could not, of course, satisfy the
Crown’s duty to invest, as modified by paragraph 64(1)(k). The onus is
on the Crown to generate a plan, based on the size of the trust fund, the
spending requirements of the Bands and the need for conservatism in order to
preserve capital for future beneficiaries. Although the Crown must seek consent
of the Band before investing, it does not follow that the Crown, as trustee,
can shift this obligation to create an investment plan to the trust
beneficiary.
[260]
When it
agreed to become trustee of the royalty moneys, the Crown undertook the
obligation to look after the best interests of the Bands. In giving the Crown
the power to manage their moneys, the Bands trusted the Crown to exercise its
authority over their funds with care. As McLachlin J. (as she then was) stated
in Blueberry at paragraph 38:
Generally speaking, a
fiduciary obligation arises where one person possesses unilateral power or
discretion on a matter affecting a second "peculiarly vulnerable"
person: see Frame v. Smith, [1987] 2 S.C.R. 99; Norberg v. Wynrib,
[1992] 2 S.C.R. 226; and Hodgkinson v. Simms, [1994] 3 S.C.R. 377. The
vulnerable party is in the power of the party possessing the power or
discretion, who is in turn obligated to exercise that power or discretion
solely for the benefit of the vulnerable party. A person cedes (or more often
finds himself in the situation where someone else has ceded for him) his power
over a matter to another person. The person who has ceded power trusts the
person to whom power is ceded to exercise the power with loyalty and care.
This is the notion at the heart of the fiduciary obligation.
[261]
To borrow
the words of Justice Rothstein in Fairford First Nation v. Canada (Attorney General), [1999] 2 F.C. 48 (F.C.T.D.)
at paragraph 171, the Bands became “completely reliant” on the Crown and the
Crown “failed to act in a reasonable and prudent manner as if it were looking
after its own interests.”
[262]
Having
been entrusted by the Bands with the authority to manage their moneys, the
Crown could not rely on the Bands to formulate the requisite investment plans.
It is well-established in trust law that it is the trustee who has the responsibility
to develop an investment plan for the trust funds. This principle is
acknowledged in Waters at page 963:
In selecting an
investment, the trustee must consider a range of matters concerning the market
conditions, the quality and probable duration of the proposed investment, the
duration of the trust and the beneficial interests involved, the financial
situation of income beneficiaries, and the impact of taxation and inflation. He
must also consider in the planning of his portfolio of trust investments,
whether and, if so, to what extent and in what manner, he ought to diversify.
(emphasis added)
[263]
The Restatement
of the Law, Trusts, 3d ed. (St. Paul: American Law Institute Publishers,
1992) at §227, page 8 also highlights the obligation of the trustee to outline
an investment strategy:
The trustee is under a
duty to the beneficiaries to invest and manage the funds of the trust as a
prudent investor would, in light of the purposes, terms, distribution
requirements, and other circumstances of the trust.
i.
This
standard requires the exercise of reasonable care, skill, and caution, and is
to be applied to investments not in isolation but in the context of the trust
portfolio and as a part of an overall investment strategy, which should
incorporate risk and return objectives reasonably suitable to the trust.
(emphasis added)
[264]
The
Ollivier opinion likewise identified that the onus is on the Crown to properly
manage the Bands’ capital moneys:
Thirdly, consistently
with the view expressed above that the control and management of capital
moneys in the final analysis remains the responsibility of the Crown, the
Minister would be obliged on a periodic basis to review the way in which his
approved expenditure plan was being implemented, and to make any adjustments in
the plan or in its implementation which appeared to him to be for the benefit
of the band. (emphasis added)
[265]
Therefore,
it is unrealistic to suggest that the Crown is excused from investing because
the Bands did not give consent. The Bands were not presented with any plan of
investment for approval to which they could consent.
[266]
Expert
evidence helps to illuminate what was expected of the Crown by establishing the
standards applicable to professional trustees. In Authorson v. Canada (Attorney General) (2004), 249 D.L.R. (4th)
214 (Ont. Sup. Ct. J.) at paragraph 143,
Brockenshire J. recognized that the appropriate model against which to assess
the Crown’s conduct is against the practice of professional trustees:
…the most appropriate
model, to satisfy the fiduciary obligation to invest and keep invested the
funds under administration, is that used by professional trustees, who face
exactly the same type of obligation, and … have faced it since long before the
Crown first undertook the obligation at issue in this case.
[267]
The expert
evidence adduced at trial highlights the Crown’s obligation to generate an
investment plan for the royalty moneys. For example, Robert Bertram, a Crown
expert, agreed with the statement that “in the management of large sums of
money, say, $50 million or more, an investment strategy is an absolutely
necessary thing to have.”
[268]
Tony
Williams, another expert, stated that in order to comply with the prudent
person standard, the Crown should have “set up appropriate investment policies”
and “documented the policies in a written statement of investment policies and
goals.”
[269]
Likewise,
according to the testimony of Professor Laurence Booth,
…it was the Crown’s
responsibility to do what any financial planner would have done, which is to go
through a financial plan, to look at revenues, to look at expenses, to look at
all of the factors that go into this holistic approach, and design an
investment strategy consistent with those spendings and those other
responsibilities.
[270]
Despite
this onus on the Crown to prepare an investment plan and present it to the
Bands, the evidence shows that the Crown never sought the consent of the Bands
to invest their moneys. The following excerpt from the discovery transcript of
Reinhard Kohls, a Crown employee, was adduced at trial:
Q. And as I understand
it, I’d simply like you to confirm that the Crown has never asked the
Ermineskin Band whether it would approve the government investing monies on its
behalf? Is that right?
A. Not – not to my
knowledge, without the change to legislation and so on.
Q. But it’s never asked
that question –
A. No.
[271]
The expert
evidence as to the duties of a trustee adduced at trial likewise supports the
conclusion that the Crown was required to carry out a variety of sound investment
practices in fulfilling its duty to invest prudently. The experts noted that
the Crown failed to properly manage the Bands’ moneys because:
(a) the Crown should have analyzed
the present and future needs of the Band members (born and unborn);
(b) the Crown should have deployed
either in-house expertise in the management of substantial sums of money or
retained outside expertise in this regard;
(c) the Crown should have set
performance targets for the funds;
(d) the Crown should have
monitored the results of its investment decisions on an ongoing basis;
(e) the Crown should have
diversified the investment of the appellants’ royalty moneys;
(f) the Crown should have
preserved capital funds from diminution due to inflation and increased them for
the benefit of future generations;
(g) the Crown should have taken
account of the fact that the funds received in trust were from a non-renewable
and depleting asset;
(h) the Crown should have
evaluated the nature of the funds, time horizon and cash flow patterns;
(i) the Crown should have assessed
the risk tolerance of the fund; and
(j) the Crown should have
determined the risks and returns from various investment policies.
[272]
The
investment experts confirmed that the Crown’s lack of an investment policy
resulted in poor performance of the funds and that based on a review of
investment returns available during the period through diversification, a wide
margin of incremental gain was forfeited over the last 20 years. In summary, the
experts concluded the Crown’s treatment of the Bands’ funds did not conform to
the prevailing and acceptable industry practices.
d. Alternative
Defences of the Crown
i. The
government policy of promoting self-government for the Bands and their attempts
to implement it did not excuse the Crown
[273]
If the
Court were to find, as I have, that the Crown’s duties as fiduciary are defined
by the common law as modified by legislation, the Crown’s alternative defence
is that its decision not to invest the trust moneys was appropriate in light of
the Crown’s policy of promoting self-government among Aboriginal peoples.
[274]
The Crown
pointed to numerous initiatives specific to Samson and Ermineskin or intended
to be of general application to all First Nations across the country designed
to devolve decision-making authority to First Nations and to transfer to them
all of the moneys the Crown had previously held in trust on their behalf. In
the Crown’s view, it was a reasonable decision to focus its efforts entirely on
building Aboriginal self-government, rather than attempting to prudently manage
the trust moneys of First Nations. At least two reasons prevent the Crown from
relying on its self-government policy as a valid defence.
[275]
First,
while the Crown’s self-government policy may have been laudable, that did not
excuse the Crown from fulfilling its trust duties until such time as
self-government, at least to the extent of having the Bands take control of the
trust funds, could be implemented. Self-government for Canada’s Aboriginal peoples is an important
goal and indeed, a goal expressed by many Aboriginal peoples themselves.
However, self-government is a long-term objective. The paternalism and
dependence characteristic of the relationship between the Crown and Aboriginal
peoples cannot be undone overnight. In the meantime, the Crown must fulfill its
trust responsibilities by properly managing the funds entrusted to it. The
evidence supports this proposition, indicating that while both Bands at times
expressed interest in collapsing the existing trust and taking full control of
their moneys, such initiatives failed. It was not appropriate, therefore, for
the Crown to work solely towards these ultimately unsuccessful initiatives. The
Crown was obliged to continue to fulfill its trust duties by, in particular,
creating investment proposals on a continuing basis for approval by the Bands.
[276]
Secondly,
while senior government officials may have had a policy directed to developing
initiatives to build Aboriginal self-government, there is no evidence that this
policy was communicated to the public servants actually handling the trust
moneys as a reason why the funds could not be invested. Throughout the relevant
period government officials maintained the funds could not be invested not
because of a desire to establish self-government amongst Aboriginal peoples,
but because they were of the view that the Indian Act did not permit
investments, because of a Crown policy against taking risks with Indian moneys,
and because of a desire to avoid earning different returns for different Bands.
[277]
These
reasons against investment were evident from early evidence covering the period
up to the 1970s. The Trial Judge quoted from an 1859 Executive Council
Recommendation signed by John A. MacDonald which disclosed the government’s
concern with making actual investments of Indian moneys:
In dealing with the
Indians of whom the Government has constituted itself the Guardian, it would
appear desirable so to secure the funds as to prevent the possibility of any
failure in the payment of the Annual Sums required for the Indians, as such
failure would certainly be attributed to a breach of faith on the part of the
Government and could more be explained to the satisfaction of the Tribes. By
maintaining the present system of investment, it might also result that one
Tribe would find its Annual interest regularly paid, while others would meet
with disappointment. Should such an event arise, Parliament would probably find
it necessary to make good the losses of the Trust, and it would therefore be
more advisable to carry the funds at the credit of the Trust to the
Consolidated Fund, and to charge the annual interest upon that Fund at such
scale as might appear equitable to the Legislature.
Further receipts on
account of the Indians might be kept at their Credit in account with the
Receiver General -- allowing the Trust six per cent interest thereon pending
the decision of Parliament on the general Subject. (Samson at paragraph
648; Ermineskin at paragraph 256)
[278]
An August
28, 1973 letter by V.M. Gran, Chief, Band Management Division, a Crown official,
confirms the view that the Crown should not invest Indian moneys because of the
risk of criticism from failing to do so appropriately:
…I submit that the
Department should not attempt to become involved deeply in the matter of
investment of surplus Band funds on behalf of Bands. The fact that the Minister
is always subject to criticism regardless of how wisely the money is invested,
or how great the return to the Band is important. The Band is always in a
position to levy criticism against the Minister even with respect to the
possibility that he did not invest their funds and obtain the highest return
possible whether he did or not.
[279]
Likewise,
a December 9, 1974 letter from Jacques Roy, Director, Legal Services, Indian
and Northern Affairs, to Mr. V.M. Gran reveals the Crown’s view about
investment of Indian moneys
This office has on
several occasions studied the questions you have raised and it is our opinion
that the Indian Act does not allow for the investment of Capital Band
Funds nor for the transferring of these capital funds which would permit a band
to manage, control and expend its capital monies.
[280]
The
evidence also reveals that the same reasons for failing to invest were given
into the 1990s. Ermineskin counsel wrote first to Crown counsel and then to
Prime Minister Jean Chrétien in 1994 and 1996, respectively, asking for the
Crown to fulfill its duties as trustee by obtaining the best yield for the
Bands. The responses on behalf of the Crown in both cases indicate that the
legislative and policy concerns against investment present in the 1970s
remained. The response to the first letter, provided by Alan D. Macleod on June
13, 1994, states:
…as long as it has
responsibility for the monies, Her Majesty’s Government is not prepared to turn
them over to third parties to invest those funds; it is not prepared to risk
band capital accounts in the marketplace. The capital and revenue accounts in
the consolidated revenue fund constitute a very safe investment which attracts
a favourable interest rate. Moreover, the bands have demonstrated a requirement
for funds annually, which funds have been derived from the interest earned and
the bands have, from time to time, availed themselves of opportunities to
access the capital accounts through Section 64(1) of the Indian Act.
[281]
Ronald A.
Irwin, P.C., M.P. responded to the second letter on March 26, 1996 by stating,
As you know, the holding
of Band funds in the Consolidated Revenue Fund is mandated by legislation.
Moreover, given that the funds are not at risk, the Crown’s position is that
the interest formula applicable to Band capital and revenue accounts provides a
reasonable rate of return, particularly given the fact that these funds are
accessible under section 64 of the Indian Act.
With respect to the
investment of Band funds, the Government of Canada will not place the funds of
the Ermineskin Band at risk by making investments in which there is a
possibility of a decline in value, even though it might produce a higher rate
of return.
[282]
In sum,
while self-government is an important policy objective to be pursued by the
Crown, it cannot excuse the Crown from performing its duties as trustee until
self-government is in fact implemented, particularly in the circumstances of
this case, where the desire for self-government was never considered by Crown
officials responsible for the trust moneys to be the reason for the Crown’s
refusal to invest.
ii. The
spending habits of the Bands and the volatility of oil revenues did not
preclude the Crown from investing
[283]
The respondents
also argue in defence that in any event, investment could not be made in light
of the fact that the Bands did not have a sufficiently disciplined spending
policy to enable a long-term investment strategy of the type that might have
lead to greater returns for the Bands. Moreover, the respondents reject the
appellants’ submission that even high levels of spending could be tolerated by
the fund because of substantial oil royalty forecasts. According to the Crown,
oil revenues were too volatile to compensate sufficiently for Band spending.
[284]
The Bands
admit that that their spending was high. According to statistics provided by
the Crown, from 1969 to 1999, Samson withdrew and spent or invested $1.74
billion of its $2.2 billion in total revenues – roughly 80%, while Ermineskin
withdrew over 70% of all its royalty and interest revenue. However, despite
these significant withdrawals from the Bands’ capital and revenue accounts, it
is important to bear in mind the substantial balances that remained in the
Bands’ capital accounts in the relevant periods. From at least 1969, the
balance in the Bands’ accounts continued to grow for most years with
substantial balances being maintained. Thus it is clear that despite the
spending habits of the Bands, their capital accounts kept increasing. This
evidence should have persuaded the Crown that there were substantial sums
available for investment. The following excerpt from an exhibit entitled, “Summary
Of Pigeon Lake Royalty Distribution To Samson Cree Nation's And Ermineskin Cree
Nation's Capital Accounts,” illustrates this concept:
|
|
|
|
|
Samson Cree Nation
Year-End Balance (1)
|
|
|
Ermineskin Cree Nation
Year-End Balance (2)
|
|
DATE
mar-69 $1,513,957 $1,182,745
Mar-70 1,778,394
1,349,376
Mar-71 2,102,723
1,209,315
Mar-72 2,545,360
1,108,608
Mar-73 3,407,378
1,611,779
Mar-74 5,728,755
2,621,713
Mar-75 17,241,933
8,022,490
Mar-76 24,680,137 11,995,141
Mar-77 32,270,573 14,478,410
Mar-78 37,177,922 19,324,259
Mar-79 47,239,365 25,315,319
Mar-80 70,811,276 42,233,855
Mar-81 80,889,955 41,198,787
Mar-82 114,395,897 55,908,238
Mar-83 151,612,576 79,467,586
Mar-84 232,983,762
116,547,244
Mar-85 329,311,768
158,058,905
Mar-86 391,298,391
199,546,404
Mar-87 383,983,082
196,683,252
Mar-88 376,674,227
199,045,135
Mar-89 387,898,365
202,915,058
Mar-90 399,875,433
205,822,562
Mar-91 405,868,224
210,599,263
Mar-92 409,587,208
213,934,172
Mar-93 406,149,559
216,930,163
Mar-94 408,573,936
216,746,868
Mar-95 409,935,537
217,464,396
Mar-96 414,082,421
216,874,109
Mar-97 414,412,667
219,879,147
Mar-98 410,808,220
218,372,038
Mar-99 348,604,338
210,824,436
Notes: (1)
Includes Samson's pro-rata share of Pigeon Lake capital balance as of each March 31st.
(2)
Includes Ermineskin's
pro-rata share of Pigeon Lake capital balance as of each March 31st.
Preliminary,
subject to minor revision.
[285]
Furthermore,
the Crown should have made inquiries of the Band on a periodic basis to
determine Band spending requirements. The evidence of the Crown is that they
did not do so, nor even believe that they should. When asked whether the Crown
had “any understanding of what the income requirements and risk tolerance of
the Ermineskin capital accounts were,” Gregor MacIntosh responded “…it’s not
our business to know what the band wants to spend or what the band thinks it
needs to live off of anymore [sic] they’d know what I think I need to
live off of”.
[286]
Moreover,
it is impossible to know how the Bands’ spending habits would have changed had
they been confronted with the possibility of making actual investments and
locking-in their funds on a long-term basis in order to obtain higher returns.
The evidence in fact indicates that at least in Ermineskin’s case, the Band was
capable of curbing excessive spending. After its withdrawals hit a peak of $42
million in 1987, Ermineskin developed a plan to reduce spending and saw its
expenditures decrease to $17 million in 2000 despite the fact that over that
period the Band’s population increased by approximately 53%.
iii. It is
far from clear that the rate of return was reasonable
[287]
The
respondents say that in any event, the interest they paid was reasonable in the
sense that it provided the appellants with a reasonable return on their moneys.
However, the Crown made little attempt to ascertain how the rate being paid
compared to rates of return that could be obtained through investment and
therefore had no way of assessing the “reasonableness” of the rate of interest
being paid. As Mr. MacIntosh stated on discovery:
Q. But no one has been
specifically designated, as I understood your earlier testimony, to be
reviewing the Globe and Mail, the interest rates on long-term Government of
Canada bonds, the stock market, to say that all told, if we had a portfolio of
$100 million, what is the returns of other portfolios, similar portfolios and
comparing that to the returns on Indian monies? No one was charged with that
function?
MR. MACLEOD: Other
than the process we’ve described about getting information on a weekly basis
from the Bank of Canada and doing the actual calculation; I think that’s been
described before. You are talking about somebody taking that information and
assessing its quality, if you like, against the marketplace?
MR. O’REILLY: Yes, on
an ongoing basis.
Q. No one was doing
that, Mr. MacIntosh?
A. No one does that, Mr.
O’Reilly; because Indian monies isn’t set aside for someone to look at the
specific rate of return on a daily basis. The funds from Indian monies, as you
are aware, are part of the government operating cash in the CRF.
From
time to time, people do look at the rate of return that is given to Indian
monies. That’s why it’s been changed over since 1868 a number of times, as
indicated in the listing that I gave you.
But no
one sits down on a daily basis and looks at the specific rate of return on a
portfolio of 400 million, say, for Samson.
[288]
The Crown
likewise made no attempt to hire outside advisors to assess the reasonableness
of the rate of interest being paid:
Q. MR. O’REILLY:
Well, did the department ever consider hiring or did they hire any
professionals in the area of Finance, money markets, security, to do an
analysis or a comparison of the rates of return on the Indian monies in
relation to funds in the private sector?
A. Not that I know of
while I was in this area, other than the people I have mentioned or talked to.
Why would we, Mr. O’Reilly?
MR. MACLEOD: Well,
let’s not get into that.
Q. MR. O’REILLY: Well,
you have testified, though, that you have had, on a number of occasions, Indian
bands including Samson, who have complained that the rates of return were not
high enough. You acknowledge that, you just acknowledged that this morning, I
believe, Mr. MacIntosh?
A. That’s correct.
Q. So, faced with those
complaints, why did you not hire persons before Mr. Mundell, for instance, to
do such a comparison?
A. Because we felt that
the rate of return that we were giving, under the circumstances, was
reasonable; no costs, no risk.
Q. But you hadn’t
checked that out with a report or verified that with a report like Mr.
Mundell’s report?
A. No.
Q. When you said you
felt that the rates were reasonable, it was just based on the general
information from Finance or was it based on your instinct or –
A. My instinct, what I
read, the people I talked to.
[289]
Moreover,
the appellants presented expert evidence showing the additional moneys which
they could have received if their moneys had been managed by a prudent trustee.
For Samson, the estimates for such additional returns ranged from approximately
$239 million to approximately $1.53 billion. For Ermineskin, the estimates
ranged from approximately $156 million to approximately $217 million.
[290]
There was
voluminous expert evidence from many witnesses at the trial over an extended
period of time. Some of this evidence was conflicting. The Trial Judge, without
canvassing this evidence, simply found that the rate of interest which the
Crown paid was reasonable. In my view, it would be unwise for this Court to
attempt to determine whether or not the rate of interest paid was reasonable
without reviewing all of the evidence and giving reasons as to which evidence
should be preferred. This would involve reviewing many exhibits, as well as what
appear to be thousands of pages of transcript and then assessing that evidence
without the benefit of seeing and hearing the evidence of the experts and
without having the benefit of a finding by the Trial Judge on the credibility
of the various experts or indeed any adequate reasons of the Trial Judge as to
why he said the rate of interest was reasonable.
[291]
By way of
example, the evidence of just two of such experts was summarized as follows by
counsel for Samson. It should be noted that several of these calculations are
based on notional investment in bonds, just as the interest in fact paid by the
Crown was based on a notional investment in bonds.
891. The additional
returns that Samson would have received based on different calculation's [sic]
carried out by Mr. Perreault and Mr. Williams are as follows:
i) $239
million – SEI Median Large Plans, after investment management fees (as
at September 30, 2002) – the SEI Large Plans Universe is representative of pension
plans that have in excess of $250 million in assets. These plans invest their
moneys in diversified portfolios of stocks and bonds, which investment strategy
is recommended for moneys with a long-term horizon. [Updated to December 31,
2003 - $322 million.]
ii) $230
million – SEI Median Balanced Funds, after investment management fees
(as at September 30, 2002) – the SEI Balanced Fund Universe is representative
of performances obtained by individual investment counsellors having a balanced
fund mandate. These plans invest their moneys in diversified portfolios of
stocks and bonds, which investment strategy is recommended for moneys with a
long-term horizon. [Updated to December 31, 2003 - $295 million.]
iii) $1.53
billion – S&P 500 Index, after investment management fees (as at September
30, 2002) – the Standard & Poor’s 500 stock composite index is a capitalization-weighted
index of 500 publicly traded stocks issued by U.S. companies.
The index is converted to Canadian dollars. [Updated to December 31, 2003 -
$1.74 billion.]
iv) $845
million – MSCI EAFE Index, after investment management fees (as at September
30, 2002) – the Morgan Stanley Europe, Australia, Far East stock market index
is a capitalization-weighted index representing 20 developed countries outside
of North America. The index is converted to Canadian dollars. [Updated to
December 31, 2003 - $1.04 billion.]
v) $755
million – MSCI World Index, after investment management fees (as at September
30, 2002) – the Morgan Stanley World index is a capitalization weighted index
representing 22 developed countries around the world. The index is converted to
Canadian dollars. [Updated to December 31, 2003 - $894 million.]
vi) $395
million – Long-term Government of Canada Bond Portfolio (as at September
30, 2002) – this calculation represents what the total additional return would
have been had Samson’s moneys been notionally invested in long-term Government
of Canada Bonds with terms to maturity of ten years or more. This calculation
uses the same bonds used by the Crown in applying the Indian moneys
methodology, however the bonds are notionally purchased and held to maturity.
This has the effect of locking in the interest rates for the duration of the
bond, as opposed to the Crown methodology which resulted in a floating rate of
interest. [Updated to December 31, 2003 - $408 million.]
vii) $650
million – formula approximating the return of Long-term Government of Canada
Bond Portfolio (as at September 30, 2002) – this calculation represents the
additional return Samson would have received had a formula been used which
captured the capital gains and losses and coupon interest from the same bonds
used in the Indian moneys methodology. The calculation is based on the Scotia
Capital Markets Long Term (Canada only) Bond Index. When a bond’s maturity
falls below ten years, it is dropped from the calculation. This is the main
difference between this calculation and paragraph vi), above. [Updated to
December 31, 2003 - $706 million.]
viii) $746
million – Scotia Capital Markets Long Term Bond Index (as at September
30, 2002) – this calculation represents the additional return Samson would have
received had a formula been used to replicate the returns on this index. The
index captures the capital gains and losses and coupon interest from the
Government of Canada, provincial and corporate bonds with terms to maturity of
10 years and more which comprise this Index. [Updated to December 31, 2003 -
$836 million.]
ix) $445
million – Scotia Capital Markets Universe Bond Index (as at September
30, 2002) – this calculation represents the additional return Samson would have
received had a formula been used to replicate the returns on this index. The
index captures the capital gains and losses and coupon interest from the
short-term (47%), mid-term (27%) and long-term (26%) bonds which comprise this
Index. [Updated to December 31, 2003 - $477 million.]
x) $327
million – Simulated 15-year Government of Canada Bond portfolio (as at
September 30, 2002) – this calculation represents what the total accumulated
additional dollar return, including the market value of the notional bonds,
would have been if the interest rates actually used for crediting interest to
Samson’s moneys had been locked in for a period of 15 years. [Updated to December
31, 2003 - $343 million.]
xi) $365
million – Simulated 17-year Government of Canada Bond portfolio (as at
September 30, 2002) - this calculation represents what the total accumulated
additional dollar return, including the market value of the notional bonds,
would have been if the interest rates actually used for crediting interest to
Samson’s moneys had been locked in for a period of 17 years. [Updated to December
31, 2003 - $394 million.]
xii) $618
million – PSSA interest rate methodology (as at June 30, 2002) – this calculation
represents the additional return Samson would have received had the PSSA
formula been used to credit interest on Samson’s account. This approximates the
return which would have been achieved had Samson’s moneys been locked in to
20-year bonds.
[292]
The Crown
likewise spent considerable time addressing this issue. In its factum it
utilized at least thirty pages discussing it.
[293]
Perhaps
the clearest way of graphically showing the divergence of views is to show them
by reference to an exhibit, which illustrates how the rates of return obtained
by the Crown for the Bands compared with other rates of return.
ANNUALIZED RATES OF RETURN
FOR PERIODS ENDING DECEMBER 31, 1999
|
|
30 YRS
|
25 YRS
|
20 YRS
|
15 YRS
|
10 YRS
|
8
YRS
|
7
YRS
|
6
YRS
|
5 YRS
|
4 YRS
|
3 YRS
|
2 YRS
|
1 YR
|
|
SAMSON CREE
NATION RATE
|
9.3
|
9.8
|
9.9
|
8.8
|
8.0
|
7.4
|
7.2
|
7.1
|
6.8
|
6.4
|
5.9
|
5.6
|
5.7
|
|
ERMINESKIN CREE
NATION RATE
|
9.4
|
9.8
|
10.0
|
8.8
|
8.1
|
7.5
|
7.2
|
7.1
|
6.8
|
6.4
|
5.9
|
5.7
|
5.8
|
|
MAJOR MARKET
INDICES
|
|
TSE 300
|
11.0
|
13.4
|
11.3
|
11.7
|
10.6
|
14.0
|
16.4
|
13.9
|
17.0
|
17.6
|
14.2
|
13.8
|
31.7
|
|
S&P 500
|
14.8
|
19.0
|
19.1
|
19.6
|
20.8
|
23.1
|
23.7
|
25.4
|
29.3
|
28.2
|
29.8
|
25.3
|
13.9
|
|
EAFE
|
13.5
|
16.7
|
15.5
|
16.7
|
9.5
|
14.2
|
16.9
|
13.7
|
13.6
|
15.0
|
18.0
|
24.3
|
20.0
|
|
WORLD
|
12.9
|
16.7
|
16.3
|
17.2
|
14.0
|
18.1
|
20.2
|
19.0
|
20.6
|
21.4
|
24.0
|
25.5
|
18.0
|
|
SCM UNIVERSE
|
N/A
|
N/A
|
11.6
|
10.8
|
10.1
|
9.0
|
8.9
|
7.4
|
9.9
|
7.4
|
5.8
|
3.9
|
-1.1
|
|
SCM LONG TERM
|
10.9
|
11.7
|
12.6
|
12.4
|
11.6
|
10.9
|
10.8
|
9.0
|
12.6
|
9.4
|
7.9
|
3.0
|
-6.0
|
|
SCM L-T (CANADA ONLY)
|
N/A
|
N/A
|
12.5
|
12.3
|
11.3
|
10.6
|
10.4
|
8.8
|
12.5
|
9.4
|
8.1
|
3.2
|
-6.7
|
|
SCM 91-DAY
T-BILLS
|
8.5
|
9.1
|
9.2
|
7.7
|
6.6
|
5.4
|
5.1
|
5.1
|
5.0
|
4.4
|
4.2
|
4.7
|
4.7
|
|
SEI MEDIAN RETURNS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CANADIAN EQUITIES
|
N/A
|
N/A
|
12.6
|
12.6
|
11.0
|
14.0
|
15.8
|
13.2
|
16.3
|
16.9
|
12.6
|
11.0
|
24.1
|
|
FOREIGN EQUITIES
|
N/A
|
N/A
|
17.7
|
17.0
|
17.5
|
18.8
|
19.2
|
18.9
|
21.0
|
20.8
|
22.1
|
21.0
|
17.0
|
|
FIXED INCOME
|
N/A
|
N/A
|
11.7
|
10.8
|
10.2
|
9.1
|
8.9
|
7.4
|
10.0
|
7.4
|
5.8
|
3.9
|
-1.3
|
|
BALANCED FUNDS
|
N/A
|
N/A
|
12.1
|
12.4
|
11.7
|
12.1
|
13.1
|
11.5
|
14.4
|
13.5
|
11.3
|
9.9
|
11.4
|
|
ENDOWMENTS &
FOUNDATIONS
|
N/A
|
N/A
|
N/A
|
N/A
|
12.3
|
12.5
|
13.1
|
11.9
|
14.8
|
14.0
|
11.8
|
10.1
|
10.4
|
|
LARGE PLANS
|
N/A
|
N/A
|
12.3
|
12.0
|
11.2
|
12.0
|
12.9
|
11.7
|
14.3
|
13.4
|
11.8
|
10.4
|
12.1
|
[294]
Even small
changes in the rates of return achieved are significant and therefore it is
important for the Court to be accurate when assessing whether the rate of
return was reasonable. In his testimony at trial, Donald McDougall, an expert
called by the appellants, stated:
…an investment manager
in a bond mandate would get terminated for underperforming the Scotia universe
index by a half a percent over four or five years. That manager would get fired
on the spot for underperformance, all things being equal.
[295]
Keith
Ambachtsheer, a Crown expert, agreed that a 0.66 percent return increment
represented a highly material difference. It could represent a difference in
the millions of dollars.
Q. And so I take it
that you would agree with respect to a large fund with a long-term horizon, a
difference of less than 1 percent, to be precise, .66 percent basis points, is
a highly material difference; is that correct?
A. Yes it is.
[296]
It is
therefore far from clear that the rate of return on the appellants’ moneys was
reasonable.
V. Section
15 of the Charter
[297]
Because I
have concluded that the Crown breached its duty to invest, it is not strictly
speaking necessary for me to deal with the appellants’ submission that the
legislation relied upon by the Crown violates subsection 15(1) of the Charter.
However, there is a principle that legislation should be interpreted so as to
be in accord with the Charter (See e.g. Ruth Sullivan, Sullivan
and Driedger on the Construction of Statutes, 4th ed. (Markham: Butterworths, 2002) at 367).
McLachlin J. (as she then was), in R. v. Zundel, [1992] 2 S.C.R. 731 at
771, reviewed the case law on this point and concluded as follows:
These authorities
confirm the following basic propositions: that the common law should develop in
accordance with the values of the Charter (Salituro, supra, at p.
675), and that where a legislative provision, on a reasonable interpretation of
its history and on the plain reading of its text, is subject to two equally
persuasive interpretations, the Court should adopt that interpretation which
accords with the Charter and the values to which it gives expression (Hills
and Slaight, supra).
Likewise, in R. v. Sharpe, [2001] 1 S.C.R. 45 at
paragraph 33, McLachlin C.J. stated: “If a legislative provision can be read
both in a way that is constitutional and in a way that is not, the former
reading should be adopted.”
[298]
This
principle supports the interpretation I have placed on the legislation. In my
view, the interpretation adopted by the Trial Judge would result in a breach of
the appellants’ rights under subsection 15(1) of the Charter. Subsection
15(1) provides as follows:
|
15. (1) Every
individual is equal before and under the law and has the right to the equal
protection and equal benefit of the law without discrimination and, in
particular, without discrimination based on race, national or ethnic origin,
colour, religion, sex, age or mental or physical disability.
|
15.
(1) La loi ne fait acception de personne et s'applique également à tous, et
tous ont droit à la même protection et au même bénéfice de la loi,
indépendamment de toute discrimination, notamment des discriminations fondées
sur la race, l'origine nationale ou ethnique, la couleur, la religion, le
sexe, l'âge ou les déficiences mentales ou physiques.
|
[299]
Concluding
that the Crown has no duty or power to invest the Indian moneys would subject
Indians, who must deal with the Crown as their trustee, to inferior treatment
merely because of their Indian status and membership in an Indian Band. This
would appear to constitute discriminatory treatment on the part of the
government in violation of subsection 15(1) of the Charter on the basis
of race, or national or ethnic origin.
[300]
The
respondents argue that the appellants lack standing to bring a section 15(1)
claim. The respondents say that the Trial Judge was correct in holding that
because section 15(1) refers to an “individual” and an Indian Band is not an
individual, the Bands had no standing to bring the subsection 15(1) claim.
Moreover, the Crown submits that because collective rights, not individual
rights, are at issue, no subsection 15(1) argument can me made. The appellants,
on the other hand, stress that the actions in this case are representative
actions on behalf of all individual members of the Samson and Ermineskin
Nations. Accordingly, there is no bar to the applicability of subsection 15(1)
to this action. For the reasons that follow, I agree with the appellants that
because this action was brought on behalf of all individual members of the
Bands, they have standing to maintain a subsection 15(1) claim. Furthermore,
the fact that collective rights are at issue is not a bar to the applicability
of the Charter.
[301]
The Trial
Judge disposed of the appellants’ section 15 claim by relying on the holding of
the British Columbia Supreme Court in Nechako Lakes School District No. 91
v. Patrick, 2002 BCSC 19 wherein Garson J. held that because Indian Bands
are not individuals, section 15 does not apply to them. Not only am I not bound
by the decision in Nechako Lakes, I need not consider the question of
whether Indian Bands can validly bring a subsection 15(1) claim in their own
name, because in the present case, the action is brought on behalf of each
individual Band member. As this Court held in Ardoch Algonquin First Nation
v. Canada (Attorney General), [2004] 2 F.C.R. 108 at
paragraph 23, while section 15 may not apply to collectivities, it certainly
applies to individuals:
…the section 15
guarantee of equality only extends to individuals. As a result, the two
respondent organizations, Ardoch and ACW, would appear to lack standing to
bring a section 15 claim. However, the individual respondents clearly do
have standing to bring such a claim and an appropriate remedy may still be
granted if they successfully establish that their rights have been infringed.
(emphasis added)
[302]
The same
reasoning was applied by Kelen J. in Métis National Council of Women v. Canada (Attorney General), [2005] 4 F.C.R. 272 at
paragraph 50, aff’d 2006 FCA 77. There he was faced with a claim of
discrimination by the Métis National Council of Women (MNCW), an incorporated
non-profit organization. Although the Council itself did not enjoy section 15
rights, Kelen J. held that the MNCW nevertheless had standing to bring a
section 15 claim on behalf of the individual women it represents:
The difficulty with the
applicants' argument is that it is premised solely on the exclusion of the MNCW
which, as a corporation, does not enjoy equality rights under the Charter
nor does it have innate personal characteristics. See Ardoch (F.C.A.),
at paragraph 23. Thus the fact that the MNCW has been excluded does not by
itself demonstrate that there has been differential treatment within the
meaning of subsection 15(1). In my view, to establish differential treatment
the applicants have to demonstrate that the exclusion of the MNCW from
negotiations and bilateral agreements has the effect of treating the individual
applicant or Métis women in general differently on the basis of gender. To
accomplish this, the applicants first have to demonstrate that MNCW represents
the interests of Métis women and second, that the MNC, which purports to
represent all Métis people, does not adequately represent the needs and
interests of Métis women. (emphasis in original)
[303]
In
upholding Kelen J.’s reasons, Sharlow J.A. for this Court further emphasized
that when rights are asserted on behalf of individuals by a representative, as
they are in this case, relief under section 15 is available, provided the
factual elements of discrimination are present:
The Charter rights
that the appellants claim have been breached are rights that can be asserted
only by or on behalf of an individual. However, it is part of the foundation of
the appellants' case that the MNCW, through the various Métis women's
organizations that comprise its membership, represents all or at least a
substantial number of Métis women in Canada. (Métis National
Council of Women v. Canada (Attorney General), 2006 FCA 77
at paragraph 7)
[304]
The
individual Band members clearly have an interest in the moneys owned by the
Band in common for all members. As Rothstein J.A. (as he then was) held in Blueberry
River Indian Band v. Canada (Department of Indian Affairs
and Northern Development),
[2001] 4 F.C. 451 (F.C.A.) at paragraph 16: “an individual member of a band has
an interest in association with, but not independent of, the interest of the
other members of the band.” Therefore, their representatives have standing to
bring a section 15 claim.
[305]
The next
question is whether the fact that collective rights are at issue in any event
bars their access to section 15. The answer to this question lies in a review
of the Supreme Court of Canada’s decision in Lovelace v. Ontario, [2000]
1 S.C.R. 950 (Lovelace). In Lovelace, a number of Aboriginal
communities, none of which constituted bands under the Indian Act
regime, brought an action against the Province of Ontario alleging discrimination under subsection
15(1) of the Charter. The Province had established a fund from which the
profits from Casino Rama would be distributed to First Nations. As in the
present case, therefore, the right at issue was a collective right. However,
only those First Nations registered as bands under the Indian Act
qualified for the distribution, thereby excluding the plaintiff Aboriginal
communities. Although the Supreme Court was ultimately unable to find that
there had been impermissible discrimination, it did not reject the claim
outright on the basis that it was brought by groups of individuals or because
it involved collective rights. In fact, the Supreme Court’s analysis selects
bands as the appropriate comparator group for the claims of the non-band
communities (Lovelace at paragraph 64).
[306]
Once it is
established that individual Band members are entitled to claim discrimination
under section 15 of the Charter in relation to collective rights, the
substance of the section 15 claim must be evaluated. In Law v. Canada (Minister of Employment and
Immigration),
[1999] 1 S.C.R. 497 (Law), the Supreme Court of Canada set out
guidelines for analysis under subsection 15(1). According to the Court, the
purpose of the equality guarantee is to prevent the violation of essential
human dignity:
In general terms, the
purpose of s. 15(1) is to prevent the violation of essential human dignity and
freedom through the imposition of disadvantage, stereotyping, or political or
social prejudice, and to promote a society in which all persons enjoy equal
recognition at law as human beings or as members of Canadian society, equally
capable and equally deserving of concern, respect and consideration. (Law
at paragraph 88)
[307]
Iacobucci
J. went on to describe the type of law that would violate human dignity:
Human dignity is harmed
when individuals and groups are marginalized, ignored, or devalued, and is
enhanced when laws recognize the full place of all individuals and groups
within Canadian society. Human dignity within the meaning of the equality
guarantee does not relate to the status or position of an individual in society
per se, but rather concerns the manner in which a person legitimately
feels when confronted with a particular law. Does the law treat him or her
unfairly, taking into account all of the circumstances regarding the
individuals affected and excluded by the law? (Law at paragraph 53)
[308]
The
conduct to which the appellants have been subjected in the handling of their
trust moneys by the Crown treats them unfairly by imposing upon them inferior
treatments as compared to non-Indian trust beneficiaries. If the laws do
mandate this conduct they constitute a violation of essential human dignity
contrary to subsection 15(1) of the Charter. The appellants, by virtue
of such instruments as the Royal Proclamation, 1763, Treaty 6 and section 37 of
the Indian Act, must surrender their interests in property to the Crown
if they wish to sell them. When those property interests are sold, the Crown
holds the proceeds in trust for the Bands entitled to them (See e.g. Indian
Oil and Gas Act, s. 4(1)). The appellants, therefore, have no ability to
choose their trustee. They must deal with the Crown as trustee and, according
to the reasoning of the Trial Judge, they must accept the inferior trust
services the Crown is willing to provide. Whereas any other trustee would be
required to prudently invest trust funds, the Crown is able to borrow the funds
and select a rate of interest that takes into account the desire of the
government to reduce borrowing costs for the benefit of other Canadians.
[309]
Because of
their race, or national or ethnic origin, the appellants are subjected to a
regime whereby they are not entitled to the full benefits that equity confers
on beneficiaries generally, in order to allow the Crown to promote its own
interests, such as avoiding criticism of Aboriginal beneficiaries who receive
inadequate returns from investment or returns that differ from those obtained
by other Aboriginal beneficiaries, simplifying the administration of trusts by
not having to engage the machinery required to properly invest trust funds, and
ensuring non-Aboriginal Canadians are not burdened by this policy choice of the
government by reducing the rate of interest paid by the Crown on Indian moneys
below that which would have been obtained by prudent investment. This is the
type of conduct section 15 is intended to prevent.
[310]
It is unlikely
that a violation of section 15(1) on these grounds could be justified under
section 1 of the Charter. According to R. v. Oakes, [1986] 1
S.C.R. 103, in order for a violation of Charter rights to be justified
by the government, the law must have a pressing and substantial objective, the
means chosen must be rationally connected to achieving the objective, rights
must be minimally impaired, and the deleterious effects of the law must not be
disproportionately severe.
[311]
The Crown
maintains that the legislative objective behind sections 61-68 of the Indian
Act was the protection of the Indian interest. This may be a valid
objective. The scheme of holding the Indian moneys in the CRF, a very safe
depository, may even be rationally connected to this objective. However, I have
difficulty accepting that this scheme impairs rights as little as possible. The
alternative approach I have outlined in these Reasons would better protect the
appellants’ rights and would be more likely to protect their interests. A system
whereby the Band is consulted to determine its spending needs and risk
tolerances, and an investment plan is developed based on a diversified
portfolio would protect Bands against the risk of investment, it would take
into account the actual interests of each Band, and it would be more likely to
lead to a maximum return. Most importantly, all of this could be achieved in a
way that promotes the dignity and worth of Band members, by providing them with
the same possibilities as non-Aboriginal peoples are provided.
VI. Conclusions
[312]
When the
Crown took surrender of the appellants’ interests in the oil and gas rights
underlying their reserve lands and later converted those rights into proceeds,
it accepted the role of trustee of the appellants’ property. In doing so, it
undertook to perform the duties expected of a trustee at common law. Most
importantly for this case, it undertook the duty to invest trust funds as would
an ordinarily prudent person managing his or her own affairs. This essential
duty could not be abrogated except by clear legislative language, which was
never enacted. To the contrary, by virtue of the enactment of paragraph 64(1)(k),
the Minister has retained the power and duty to invest trust funds, provided
consent of the relevant Band is obtained.
[313]
The Crown
made no attempt to ascertain whether actual investment of the significant sums
held in trust for the appellants would be a more prudent course of action than
simply retaining the money in the CRF and paying the rate of interest mandated
by Order-in-Council, nor did it make any attempt to formulate investment plans
for approval by the Bands. As it has been shown, none of the defences proposed
by the Crown for failing to develop and propose investment plans, such as the
policy of promoting self-government and the spending patterns of the Bands,
excuse the Crown from its duty to prepare investment plans for approval by the
Bands.
[314]
The Crown
was aware throughout that it had a duty to obtain the highest return on the
Indian moneys consistent with sound investment practices, yet it made no
attempt to ensure that its method of handling the trust moneys satisfied this
duty.
[315]
In J.
Mowbray Q.C. et al., Lewin on Trusts, 17th ed. (London: Sweet & Maxwell, 2000)
at 1200-01, §§ 39-24 – 39-26, the authors state the consequences for the
failure of the trustee to prudently invest, or in the case of the Crown, to
attempt to formulate a prudent investment plan:
Failure to invest
A trustee guilty of
unreasonable delay in investing the trust fund, or in transferring it to the
beneficiary, is liable for interest during the period of delay…and costs. It is
not an excuse that the trustee made no personal use of the money, but lodged it
in his bank, even to a separate account, because it was a breach of trust to
retain the money uninvested. Interest will not normally be awarded on lost
income…
[…]
Failure to invest
prudently
Trustees who fail to
exercise their powers of investment in a prudent fashion, for instance by
failing to diversify a fund of government securities into equities when any
prudent trustee would have done so, may be liable to pay compensation if damage
can be proved…
[316]
The Crown,
in my view, is liable to the Bands for any damages they suffered as a result of
the Crown’s breach of the duty to invest. The issue of damages and any
limitations to the appellants’ entitlement to damages will be canvassed at the
end of these Reasons.
DUTY TO ACCOUNT
[317]
It was
briefly argued by the appellants that there was a breach of the duty to
account, because of the seeming difficulty of the Crown in having an audit of
the funds performed on a timely basis, and problems with the timeliness and
quality of reports. It is unnecessary, however, to deal with this question
because the appellants failed to point to any evidence that they suffered
damages as a result of the alleged breach of the duty to account.
CONFLICT OF INTEREST AND UNJUST ENRICHMENT
[318]
Finally, a
matter of considerable dispute in this appeal was whether the Crown was in an
impermissible conflict of interest which created an independent breach of
trust. The appellants argue that by depositing the royalty moneys in the CRF,
the Crown was “borrowing” the Indian moneys, constituting the type of
self-dealing in which trustees are not permitted to engage. In addition, the
appellants submit that in setting the rate of interest payable on Indian
moneys, the Crown should have been guided solely by its duties as trustee and
was not entitled to consider any other interests. As a result of this conflict
of interest, the appellants argue that the Crown was unjustly enriched and they
are therefore entitled to equitable disgorgement of the Crown’s benefit as an
alternative to damages for breach of trust if they so elect.
[319]
The
respondents argue that by virtue of the requirement in section 17 of the FAA
that Indian moneys be paid into the CRF, the Crown’s “borrowing” of Indian
moneys was authorized by legislation, displacing the common law rule against
self-dealing. With respect to the setting of the Indian moneys interest rate, the
Crown argues that it was required to take into account not only its duties to
its First Nations trust beneficiaries, but also the duty owed to other
Canadians not to pay excessive interest rates on borrowed money and its policy
of paying the same rate of interest to all Bands. Moreover, it claims that the
Supreme Court of Canada in Blueberry and this Court in Kruger v. Canada,
[1986] 1 F.C. 3, approved this type of conflict of interest, and that the
Courts in those decisions required only that the Crown act reasonably in
balancing such competing interests.
[320]
It is not
necessary to resolve this dispute because finding a breach of trust on the
basis of a conflict of interest would not result in any higher damages than the
appellants would already be entitled to as a result of the breach of the duty
to invest. The Trial Judge found as a fact that if the Crown had not been
borrowing the royalty moneys and paying interest in accordance with the Indian
moneys methodology, it would have issued more short-term debt and therefore
would have reduced its borrowing costs. That finding is also a complete answer
to the appellants’ suggestion that the Crown was unjustly enriched by putting
itself in a conflict of interest position whereby it “borrowed” the Indian
moneys. It is well established that in order to make out a claim of unjust
enrichment, the claimant must first establish that the respondent benefited or
was enriched by its conduct (see e.g. Peter v. Beblow, [1993] 1 S.C.R.
980 at 987). In the present case, the Crown received no “benefit” or
“enrichment” on which to ground the unjust enrichment claim and the appellants
have not shown any basis on which to conclude that the Trial Judge committed a
palpable and overriding error in making this finding. There is therefore no
basis on which I would be justified in setting it aside.
[321]
If the
Crown had attempted to put prudent investment plans to the Bands on an ongoing
basis but the Bands rejected them, the Crown would have been forced to be in a conflict
position. It would have had to hold the moneys in the CRF, “borrow” the moneys,
and pay interest in exchange for the use of the moneys. The interest rate paid
would have had to have been equal to or greater than the Crown’s alternative
borrowing cost. The Crown would not be required in this situation to pay a
notional rate of interest equal to that which would be earned by a prudent
trustee investing in public markets. In order to earn a higher rate of return,
the Bands must be prepared to approve the making of actual investments with
their moneys. As the Crown expert, Mr. King, testified, the higher returns
accompanying prudent investment are earned only because investors are willing
to commit their funds to be invested on a long-term basis. The Bands cannot
refuse a prudent investment plan proposed by the Crown and still demand that
the Crown pay a rate of interest on the trust moneys equal to that which would
be earned through actual prudent investment of the moneys. In the
circumstances, to ask the Crown to pay more interest than the investment is
returning is to ask more of the Crown than would be asked of a trustee at
common law.
[322]
Finally,
the Crown should have sought to avoid being in a conflict of interest position
in the first place by putting together prudent investment plans on a continuing
basis for approval by the Bands. If the Bands had approved the plans, allowing
the Crown to invest their moneys, the Crown would not have held the moneys in
the CRF, and accordingly would not have “borrowed” the moneys. The Crown would
likewise not have been in a situation of managing competing interests from
various constituents. Moreover, the Trial Judge found as a fact that if the
Crown had not been borrowing the royalty moneys and paying interest in
accordance with the Indian moneys methodology, it would have issued more
short-term debt and therefore would have reduced its borrowing costs. Thus, by
properly performing its duty to invest, the Crown would not only have avoided a
conflict of interest in the first place, it would also have reduced its own
overall borrowing costs, thus benefiting the Canadian public.
LIMITATION OF ACTIONS AND LACHES
I. Statutory
Limitation of Actions
[323]
The
respondents submit that any damages arising from the Crown’s conduct more than
six years prior to the filing of the Statement of Claim in each action are
statute-barred as a result of the application of section 39 of the Federal
Court Act, R.S.C. 1985, c. F-7. The appellants raise a number of defences
to this claim, none of which, in my view, are persuasive.
a. Which
Statute of Limitations Applies?
[324]
Provincial
limitation periods are incorporated by reference in subsection 39(1) of the Federal
Court Act, which states that the laws relating to prescription and
limitation of actions in force in a province will govern with respect to any
cause of action arising in that province. In order to evaluate the Crown’s
limitations defence it is necessary, therefore, to determine which province’s
statute of limitations applies. The statute of limitations to be applied is
that of the province where the cause of action, that is where the breach of
trust, occurred. To determine the location of the cause of action, the province
with the most substantial connection to the trust must be ascertained. Both the
Crown and Ermineskin maintain that Alberta’s
Limitations of Actions Act, R.S.A. 1980, c.L-15 is the applicable
statute. The province of Alberta, they say, has the
closest connection to the administration of the trust in this case because the
appellants reside in Alberta and their oil and gas assets
are located there.
[325]
Samson,
however, alleges that the cause of action occurred in Ontario. It suggests that the proper law
applicable in actions respecting the administration of a trust, including
actions respecting the liability of the trustees for breach of a trust, is the
law of the residence of the trustees. They contend that the situs of the
trustee in this case is in Ottawa, Ontario because that is the situs of the
Government according to the Constitution. Therefore, it is their submission
that Ontario limitations legislation
should apply.
[326]
In my
view, Samson’s contentions do not accurately depict the applicable law. While
the residence or place of business of the trustee can be a significant factor
when determining where the cause of action arose, it is not determinative
(Waters at 1392). Alberta clearly has the most
substantial connection to the breach of trust as all of the key elements of the
cause of action can be found there. Specifically, the beneficiaries of the
trust, the trust corpus, and the trustees with the power of
administration all reside in Alberta. Though the technical situs
of the Crown is in Ottawa, this is not enough to establish that the cause of
action arose in Ontario as Samson alleges. Consequently,
the cause of action can be said to have arisen in Alberta.
b. Does
section 14 of the Judicature Act of Alberta
prevent the Crown from relying on the Alberta Limitations
of Actions Act?
[327]
The
appellants argue that if the breach of trust is found to have occurred in Alberta, no statutory limitation
period is applicable to them by virtue of section 14 of the Judicature Act,
R.S.A. 1980, c. J-1, which states:
No claim of a cestui que
trust against his trustee for any property held on an express trust or in
respect of a breach of the trust shall be held to be barred by a Statute of
Limitations.
[328]
The
respondents submit, however, that section 14 of the Judicature Act has
no application, having been displaced by sections 40 and 41 of the Alberta Limitation of Actions Act,
which provide as follows:
40. Subject to the
other provisions of this Part, no claim of a cestui que trust against his
trustee for any property held on an express trust, or in respect of a breach of
the trust, shall be held to be barred by this Act.
41 (1) In this section,
“trustee” includes an executor, an administrator, and a trustee whose trust
arises by construction or implication of law as well as an express trustee, and
also includes a joint trustee.
(2) In an action against
a trustee or a person claiming through him,
(a) rights and
privileges conferred by this Act shall be enjoyed in the like manner and to the
like extent as they would have been enjoyed in the action if the trustee or
person claiming through him had not been a trustee or person claiming through a
trustee, and
(b) if the action is
brought to recover money or other property and is one to which no limitation
provision of this Act applies, the trustee or person claiming through him is
entitled to the benefit of and is at liberty to plead the lapse of time as a
bar to the action in the like manner and to the same extent as if the claim had
been against him in an action for money had and received,
except when the claim is
founded on a fraud or fraudulent breach of trust to which the trustee was party
or privy, or is to recover trust property or the proceeds thereof still
retained by the trustee, or previously received by the trustee and converted to
his use.
[329]
Reconciling
section 14 of the Judicature Act and sections 40 and 41 of the Limitation
of Actions Act is not an easy task. The case law is conflicting without any
appellate level decisions. However, I find the comments made by Girgulis J. in Nilsson
Livestock Ltd. v. Donald A. MacDonald (1993), 11 Alta L.R. (3d) 155 (Nilsson
Livestock) the most compelling. Justice Girgulis held at paragraphs 61-71,
that there was no conflict between section 14 of the Judicature Act and
Part 7 of Alberta’s Limitation of Actions Act, which deals with actions
by trust beneficiaries and includes sections 40 and 41. Instead, he concluded
that both section 14 of the Judicature Act and paragraph 41(2)(b) of the
Limitation of Actions Act carve out exceptions to the general
applicability of limitations legislation to trustees. Specifically, he held
that section 14 of the Judicature Act, when interpreted properly,
prevents limitations legislation from applying to trustees who still have the
trust property in their possession, whether they obtained it as a result of an
express trust or as a result of a breach of trust. Similarly, Girgulis J. held
that section 41 of the Limitation of Actions Act carves out further
exceptions – namely it prevents limitation periods from applying to claims
based on fraudulent behaviour or to property recovery where the proceeds are
still retained by the trustee or were previously received by the trustee and
converted to their use. Consequently, according to Girgulis J.’s interpretation
of the two sections, both can be read together without one having to give way
to the other.
[330]
The interpretation
proposed in Nilsson Livestock is compelling because it accords with the
presumption of coherence within a body of legislation. As stated in Ruth
Sullivan, Sullivan and Driedger on the Construction of Statutes, 4th
ed. (Markham: Butterworths, 2002) at 263: “[i]t is presumed that the body of
legislation enacted by a legislature does not contain contradictions or
inconsistencies, that each provision is capable without coming into conflict
with any other.” Under Girgulis J’s interpretation of the two statutes, both
pieces of legislation can be applied without any conflict.
[331]
In
addition, Girgulis J.’s interpretation of the legislation is consistent with
the plain wording of section 14 of the Judicature Act, which states that
limitation periods shall not bar a claim of a beneficiary “against his trustee
for any property…” Beneficiaries should always have recourse against a trustee
who is holding their property given that every day that a trustee wrongly holds
the beneficiary’s property is arguably a new breach. Furthermore, this
interpretation of the legislation does not arbitrarily deprive a trustee of all
the normal protections that other defendants receive under the statute of
limitations, but instead restricts the trustee’s use of the legislation only in
situations that the special nature of a trust relationship requires.
[332]
The action
in this case is not for the recovery of property held by the trustee but for
damages and accordingly, section 14 does not operate to bar the Crown from
raising a limitations defence in this case. There has also been no allegation
of fraudulent behaviour on the part of the Crown. For these reasons, the
appellants are likewise unable to rely on either of the exceptions in
subsection 41(2) to the application of the limitation period.
c. Discoverability
[333]
The
principle of discoverability applies to statutory limitation periods unless it
is displaced by clear legislative language. Where the cause of action is not
discoverable, the operation of the limitations period is suspended until the
plaintiff discovers or ought to have discovered through the exercise of
reasonable diligence the material facts upon which the cause of action is
based. The rule was identified by La Forest J. in M.(K.) v. M.(H.),
[1992] 3 S.C.R. 3 at 34, quoting from Central Trust Co. v. Rafuse,
[1986] 2 S.C.R. 147 at 224:
…a cause of action
arises for purposes 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.
[334]
However,
discoverability applies only to the facts of a situation and not to the law.
In Luscar Ltd. v. Pembina Resources Ltd., [1994] A.J. No. 864 (Alta. C.A.), Conrad J.A. found at paragraph 127
that “[d]iscoverability refers to facts, not law. Error or ignorance of the
law, or uncertainty of the law, does not postpone any limitation period.” The
Court also held, with specific reference to the Alberta limitations legislation applicable in
this case, that “‘cause of action’, as that phrase is used in s. 4(1)(e) of the
Limitation of Actions Act, refers to facts and not legal principles.” In
addition, the Court held that subsequent clarification or evolution of the law
will not postpone the discovery of the material facts so as to extend the
limitation period and that the onus of disproving discovery rests on the
appellant when the respondent raises a limitation period.
[335]
The breach
in this case was the failure of the Crown to present the appellants with a plan
of investment. Discoverability or discovery occurred, therefore, not when the appellants
discovered, or ought to have discovered, that the Crown had the legal duty to
present a plan of investment to them, but instead, at the time that the Bands
either realized that the Crown had not presented them with a plan or at the
point when the appellants reasonably ought to have known that the Crown had not
presented them with a plan. In either case, the limitation period would have
started to run almost immediately upon the Crown’s receipt of the funds.
However, the duty to present investment plans was a continuing duty over the
years. Consequently, the Bands are not barred completely from remedy. However,
they are limited to seeking damages to a period six years prior to filing their
Statements of Claim.
[336]
In
conclusion, by the combined operation of subsection 39(1) of the Federal
Court Act and section 4 of the Alberta
Limitation of Actions Act, the appellants are not entitled to damages
for any breaches of the Crown’s duties as trustee more than six years prior to
the filing of the Statements of Claim in each action.
II. Laches
and Acquiescence
[337]
The Crown
also submits that the equitable doctrines of laches and acquiescence apply in
this case to limit the appellants’ entitlement to damages. In light of my
conclusion that the Crown’s statutory limitations defences have succeeded,
however, I need not address the issue of laches and acquiescence.
DAMAGES
[338]
The
voluminous and often conflicting evidence as to whether the interest paid by the
Crown was reasonable perhaps explains why, if liability was found against the
Crown, that Ermineskin requested a reference for an assessment of damages.
Significantly, the Crown agreed, thus implicitly acknowledging the difficulty
for this Court in determining whether the return provided by the Crown was
reasonable. While Samson requested the Court to assess damages up to 1999, it
nevertheless agreed that a reference was required for assessing the period
beyond 1999.
[339]
In my
view, damages can be appropriately assessed only by directing a reference to
the Federal Court covering the entire period. It is recognized that the
assessment of the performance of a fund is more accurate the longer the period
of time over which it is reviewed. When making her or his assessment, the
referee should have regard to the following directions.
[340]
In
assessing damages the referee should consider that the Crown should have
achieved a rate of return comparable to that which a prudent trustee would have
earned, having regard to the following factors:
- The Bands had substantial and
increasing year-end balances in their trust accounts over time.
- The Bands’ spending requirements
were considerable and there was a need for liquidity to ensure the
spending requirements could be satisfied.
- Because it was necessary to preserve
capital for future beneficiaries, the investments that should have been
made should not have been in the high risk category.
- There was a requirement that the
Crown obtain the Bands’ consent before making investments, limiting the
ability of the Crown to make investment decisions.
- The calculation of damages should be
made on the assumption that there would be regular and periodic reviews at
least once per year of the results earned to date and recommendations for
the future.
- The period for assessing damages
should run from six years prior to the filing of the Statement of Claim in
each action to the date of assessment.
[341]
The
referee should also have regard to the following principles of law to aid in
her or his assessment:
- In Canson Enterprises Ltd. v.
Broughton & Co., [1991] 3 S.C.R. 534 at 556, McLachlin J. (as she
then was) held that when assessing a remedy for breach of fiduciary duty,
“the plaintiff’s actual loss as a consequence of the breach is to be
assessed with the full benefit of hindsight.”
- In determining the rate of return
that would have been achieved by a prudent trustee, the Court may rely
upon expert evidence and the performance of other comparable trusts in the
marketplace. As stated in the Restatement of the Law, Trusts, 3d
ed. (St. Paul: American Law Institute Publishers, 1992) at § 211, page 164:
If the trustee has
general authority to invest funds in securities that are proper investments for
the trust and neglects to make any investment, unless the beneficiaries are not
disadvantaged by this inaction, the trustee is chargeable with the amount of
return (that is, taking account of both income and changes in principal value)
that would have accrued from a suitable portfolio of investments for the trust.
An appropriate basis for measuring such liability might be the average
performance of investments of some representative sample of generally
comparable trusts.
[342]
The
evidence already lead in this action can be relied on by the referee and the
parties, and it shall be open to the parties to lead such further evidence
covering the entire period of the assessment as is relevant.
DISPOSITION
[343]
I would
therefore allow the appeals and refer the matter to the Federal Court for
assessment of damages having regard to the principles outlined above. The
decision with respect to costs should be reserved pending the result of the
reference.
“J. Edgar Sexton”
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