June 24, 2021
This is a case summary of Mosquito Grizzly Bear’s Head Lean Man First Nation v Her Majesty the Queen in Right of Canada, 2021 SCTC 1 (the “Reasons”), rendered by the Specific Claims Tribunal (the “Tribunal”) on January 18, 2021.
This Claim involves the unlawful surrender of approximately 14,670 acres of IR 110/111 (the “Claim Lands”) in 1905. The Crown admitted it had breached its pre-surrender fiduciary duty owed to the Claimant in relation to the surrender, thereby rendering the Claim valid and dispensing with the need for a hearing on validity.
At issue was the appropriate method to determine the compensation owed pursuant to paragraphs 20(1)(g) and 20(1)(h) of the Specific Claims Tribunal Act SC 2008, c 22 (“SCTA”).
At the time of the surrender, the Claimant was comprised of three distinct bands: Mosquito, Grizzly Bear’s Head, and Lean Man. On September 25, 1877, Chief Lean Man executed an adhesion to Treaty 4 on behalf of the Lean Man Band. On August 29, 1878, Chief Misketo (Mosquito) executed an adhesion to Treaty 6. Although the Grizzly Bear’s Head Band did not sign an adhesion to Treaty 4, the Department of Indian Affairs created a paylist for annuities under Treaty 4 to a band led by Chief Bear’s Head in 1880. Following the adhesions and creation of paylists, reserves were surveyed for each band and separately numbered.
Although the bands were recognized as three distinct communities, the local Indian Agent, J.P.G. Day, conflated them as one community in much of his correspondence with other government officials. He continued this misrepresentation when he contacted the Department of Indian Affairs (“DIA”) about orchestrating the surrender of over 60% of IR 110/111.
On February 6, 1905, Indian Agent Day wrote to the Indian Commissioner that:
... the band asked him to petition for a surrender of 22 and one/half sections land in reserves 110/111, on the basis that the bands were diminishing, had no need of the land, and that the old people would like to see some benefit from the land while still alive. He suggested that they all lived together as one band, ... [Emphasis added, para 41].
This assertion led to the Department treating the distinct bands as one, resulting in a vote that was inconsistent with the surrender provisions of the Indian Act. In May 1905, 22.5 sections of IR 110/111 were unlawfully surrendered to the Crown to be sold to third parties at auction.
The Tribunal held that equitable compensation applies in the context of a breach of fiduciary duty with respect to a surrender of reserve land. The underlying policies that guide the assessment of equitable compensation are restitution (Guerin and Canson), reconciliation (SCTA, preamble), deterrence (Canson), fairness, and proportionality (Hodgkinson).
Since the Claim was deemed valid by agreement of the Parties, the Claimant was entitled to compensation equal to the current unimproved market value (“CUMV”) of the Claim Lands in question, as well as compensation for the loss of use of the lands (“LOU”) in question, brought forward to the current (or present day) value of the loss, subject to the conditions listed in paragraphs 20(1)(g) and (h) in the SCTA.
Current Unimproved Market Value
The Parties both provided expert evidence assessing the CUMV of the Claim Lands as at September 21, 2017. The Parties agreed that the highest and best use of the Claim Lands is agricultural.
The Claimant’s appraisal estimated a per-acre value of $1,150 and a total value for the Claim Lands of $16,635,000. The Crown’s appraisal estimated a per-acre value of $960 and a total value of $13,843,872. The Tribunal held that both appraisers valued the land appropriately and balanced the appraisals to arrive at $15,500,000 owing to the Claimant for CUMV.
Loss of Use
In addition to determining the CUMV, the Tribunal was required to assess the LOU of the Claim Lands from 1905 to 2020.
The Claimant provided an expert report prepared by DEMA Land Services Inc. (the “DEMA Report”). The DEMA Report set out three alternate models to assess LOU: Leasing, Proxy, and Generic Proxy. Under the Leasing Model, losses were assessed on an annual basis assuming the Claim Lands would have been leased out to third parties, with the First Nation accruing revenue therefrom. The Proxy Model (RNI) estimates annual losses by multiplying estimated unimproved land value by a rate of return that reflects the agricultural sector in Saskatchewan. Lastly, the Generic Proxy Model provides a “generic or static rate of return” (6.3%) for every year over the claim period.
The Crown provided a responsive report that critiqued the methods of valuation provided in the DEMA Report. The Crown’s responsive report also identified contingencies that could be applied in relation to DEMA’s estimates. However, the Crown did not propose an alternative model or alternative LOU values.
The Tribunal held that the Leasing Model was the most appropriate in assessing the LOU in this Claim. Under this model, it was assumed the Claim Lands would be developed by lessees for crops at the same rate as farmland in the Rural Municipalities of Battle River and Buffalo. However, the Tribunal noted that the DEMA Report did not consider negative contingencies, which was deemed a necessary component in the overall calculation. Notwithstanding its concerns, the Tribunal adopted the Leasing Model in assessing the LOU, adjusted to account for contingencies.
Bring Forward to Present Value
After establishing the Leasing Model was the best method to determine the LOU, the Tribunal then had to bring forward the nominal losses from the date of the breach to the date of judgment.
The Claimant argued that the appropriate rate of return on the historical amounts assessed for LOU, compounded annually to the present for each year, should accord with a rate of return expected of a “prudent investor.” This approach represents the most advantageous use of the funds. In this scenario, if money had in fact been received, it would have gone into the Claimant’s trust account. The Claimant submitted that the Crown therefore had a duty to invest the moneys as would a trustee, and that the standard of care required of a trustee is that of a “man of ordinary prudence in managing his own affairs”, citing Fales v Canada Permanent Trust Co. (1976). As an alternative, the Claimant argued for bringing the nominal values forward using Band Trust Account rates over the years. This approach assumes the nominal amounts would have been invested at the Band Trust Account as governed by the Indian Act.
The Crown submitted that the fairest approach is to bring forward the hypothesized leasing revenues using annual multipliers based on the percentage growth in GDP per capita over the period of loss, such that the Claimant would be restored on terms akin to the growth in economic wellbeing enjoyed by the average Canadian.
The Tribunal held the most appropriate method was to adopt the Band Trust Account rate to bring forward the nominal losses. This approach recognized that revenue from leasing would have been deposited in the Band Trust Account and would have earned interest at the rate set annually for such funds, compounded annually.
Shortly after the Tribunal’s decision, the Parties agreed on an upward adjustment of $14,066,028 for a total award, including costs, of $141,000,000. The adjustment was based on the methodology adopted by the Tribunal in determining adjusted values for the historical LOU and CUMV, costs, and equitable compensation principles.
To date, this is the largest amount awarded by the Tribunal, which has a monetary cap of $150,000,000.
View the full decision here.