July 20, 2021
The following is a case summary of Siska Indian Band v Her Majesty the Queen in Right of Canada, 2021 SCTC 2 (the “Reasons”), rendered by the Specific Claims Tribunal (the “Tribunal”) on April 9, 2021, regarding the compensation owed to the Claimant (or “Siska”).
This Claim involves the unlawful administration of the development of the Canadian Pacific Railway (“CPR”) through Siska’s reserves, now known as Nahamanak Indian Reserve No. 7 (“Nahamanak” or “IR 7”) and Zacht Indian Reserve No. 5 (“Zacht” or “IR 5”). The area of disputed land in IR 7 was 89.51 acres and the area of disputed land in IR 5 was 0.08 acres (the “Claim Lands”), comprising in total 89.59 acres. The Respondent (the “Crown”) admitted it had breached its fiduciary duty when it granted a wider width of land for the railway tracks than was permitted under the Consolidated Railways Act. Additionally, the Crown was found to have breached its fiduciary duty to the Claimant when it failed to consult with the Claimant regarding access to the Claimant’s fishing stations within IR 7 on the Fraser River.
Therefore, what remained at issue was the appropriate method to determine the compensation owed pursuant to paragraphs 20(1)(c), (g) and (h) of the Specific Claims Tribunal Act, SC 2008, c 22 (“SCTA”), which provide:
20 (1) The Tribunal, in making a decision on the issue of compensation for a specific claim,
(c) shall, subject to this Act, award compensation for losses in relation to the claim that it considers just, based on the principles of compensation applied by the courts;
(g) shall award compensation equal to the current, unimproved market value of the lands that are the subject of the claim, if the claimant establishes that those lands were never lawfully surrendered, or otherwise taken under legal authority;
(h) shall award compensation equal to the value of the loss of use of a claimant’s lands brought forward to the current value of the loss, in accordance with legal principles applied by the courts, if the claimant establishes the loss of use of the lands referred to in paragraph (g);
The Tribunal determined that several issues required assessment, including the current unimproved market value (“CUMV”), injurious affection, loss of use (“LOU”), and other pecuniary losses, if any, and the method to present value the historical values.
As a preliminary issue, the Tribunal sought to determine: How, if at all, do principles of equitable compensation apply in the determination of compensation under paragraphs 20(1)(c) and (h)?
To address this issue, the Tribunal relied upon Mosquito Grizzly Bear’s Head Lean Man First Nation v Her Majesty the Queen in Right of Canada, 2021 SCTC 1 [Mosquito] in its Reasons. Mosquito states the starting point for fashioning an appropriate remedy is consideration of the particular fiduciary setting of the Claim. In Siska, the Parties agreed that principles of equitable compensation apply to the assessment of remedy in this Claim. Mosquito provides that the underlying policies that guide the assessment of equitable compensation are restitution, reconciliation, deterrence, fairness, and proportionality.
The Parties had different views on the extent to which the claimed losses flowed from the breached duties and illegal dispositions. They presented expert evidence addressing CUMV, injurious affection, LOU (based on rental value of the land), fisheries and livestock losses, and present valuation.
Current Unimproved Market Value
For CUMV, the compensation estimates were based on fee simple market values for land similar to the Claim Lands. The Claimant’s expert concluded that the highest and best use of the land (HBU) for all relevant times was rural/residential and agricultural/grazing. The Respondent’s expert referred to similar overall uses (plus some passive recreation in recent times) but described the different parts of IR 7 and IR 5 more specifically and said that the HBU was constrained to uses consistent with an operating railway.
The two experts had vastly different calculations for CUMV (which ultimately impacted LOU), partly because they used different assumptions about whether a form of right-of-way was a pre-existing encumbrance or not, but also due to the different valuation models used. The Claimant’s expert used the Direct Comparison Approach which involves valuing properties by comparing the cost of acquiring another similar property. This resulted in an estimate of $2,000 per acre.
The Respondent’s expert assessed a partial taking of 74.61 acres from IR 7 and 0.08 acres from IR 5 using the Summation Method while also incorporating injurious affection. This method involved estimating the market value of the parcel before the taking at its HBU using the Direct Comparison Approach, then determining the “before” value of the part taken multiplied by the acreage of the subject land, then determining the injurious affection to the remainder. The “before” value of the acres was combined with the injurious affection, which resulted in the 74.61 acres being valued at $1,300 per acre.
The Tribunal considered both expert approaches and concluded a per acre value of $1,800 for the Claim Lands for a CUMV of $161,118.
The Tribunal was called to consider if compensation was due for injurious affection. To qualify, there would have to have been a reduction in market value of the lands by the construction of the railway.
The Claimant’s expert emphasized the reserve status of the land and noted that without access to the river, the reserve would have virtually no value to the Siska people. The expert considered the contributory value of the land (having access to the river) prior to taking, then subtracted the contributory value of the remainder lands, which he valued as being zero. He accepted the Respondent’s valuation as being $1,055 per acre in 1885, which resulted in the Claimant’s expert estimating injurious affection to be $1,055 per acre.
The Respondent’s expert found that no injurious affection was owed to the Claimant because the HBU of land is determined by the market value, not the use that is most beneficial to only one owner. The Tribunal accepted this analysis and found there to be no injurious affection.
Loss of Use
The LOU of the land was approached by calculating an annual rental value, which was then brought forward to present value. The Respondent’s expert identified three accepted methodologies for calculating LOU: the Direct Comparison Approach, the Rate of Return Method, and the Indexing Method.
Under the Direct Comparison Approach, properties are valued by comparing the cost of acquiring another similar property. Under the Rate of Return Method, market rates of return for nominal rents can be estimated by establishing the mathematical relationship between market rents for leased lands and the market value (if sold) of the leased property. The Indexing Method included measures such as CPI and MLS Real Estate board statistics which reflected broader trends but were not directly applicable because: nearby real estate statistics were weighted to urban, residential sales; CPI was not available for rural communities in BC and pre-1979 was only available Canada-wide except for Vancouver; and CPI included many other goods and services.
The Claimant’s expert estimated the value of LOU from July 14, 1885 to December 15, 2018 using the Direct Comparison Approach. He calculated the nominal historical loss to be $106,341. This figure is not adjusted to present value.
The Respondent’s expert employed the Direct Comparison Model to leased reserve lands for some eras but encountered data limitations. He therefore also employed the Rate of Return Method.
The Tribunal found that the Respondent’s expert offered a more realistic estimate. The Tribunal accepted that expert’s estimate, which was present valued to $710,000.
Bring Forward to Present Value
Relying on Beardy’s & Okemasis Band #96 and #97 v Her Majesty the Queen in Right of Canada, 2016 SCTC 15 (“Beardy’s”) and Mosquito, the Tribunal found that the nominal value of historical losses should be brought forward at the Band trust account (“BTA”) rate and compounded at the same intervals had it been deposited the trust account administered by the Department of Indian Affairs.
The rationale for applying compound interest in this case was not that the lost revenue (or other pecuniary loss) would have been deposited in the Claimant’s trust account as in Mosquito and Beardy’s, however. The rationale derives from the restitutionary aspect of equitable compensation and the need to compensate for losses in a manner that captures the lost utility and delay when restoring the Claimant for its pecuniary losses. Therefore, the Tribunal found the appropriate method in present valuing the historical losses is to bring forward the historical losses at the BTA rate.
Impairment of the Claimant’s Use of Land for Fisheries
The Claimant submitted that the construction and operation of the railway obstructed access to the fishery and damaged trails and fishing sites, resulting in a diminished harvesting ability.
The Tribunal found that salmon were central to the sustenance, culture and economy of the Siska and other communities of the Nlaka’pamux Nation. However, both Parties had difficulty establishing the loss of fishing ability was a direct consequence of the railway. Regardless, the Tribunal stated in the application of principles of equitable compensation, a causal nexus between a breach and a loss may be established by the application of common sense. Therefore, it was found that the impairment of access to the river and fisheries was a direct consequence of the fiduciary breaches and the illegal dispositions. The Parties both produced expert evidence which estimated the loss of income from the fishery.
After consideration of both expert analyses, the Tribunal found that the Claimant’s approach to estimating the loss was preferable. This method included modelling the impact on salmon harvest using an opportunity cost approach, then estimating the reduction in harvest due to wrongfully impaired access and the value of the same food product in the market economy. The Tribunal awarded $2,800,000 at present value due to the impact the railway had on the fishery.
The Tribunal awarded the following to the Claimant:
The total compensation awarded was $4,756,726, with adjustments to be agreed upon.
View the full decision here.