Dorsett, Shaunnagh --- "Apsassin v The Queen in Right of Canada: Re-examining the Source of the Crown's Fiduciary Obligations to Indigenous Peoples" [1996] AboriginalLawB 3; (1996) 3(79) Aboriginal Law Bulletin 7

Apsassin v The Queen in Right of Canada: Re-Examining the Source of the Crown's Fiduciary Obligation to Indigenous Peoples

by Shaunnagh Dorsett

On 14 December 1995, the Supreme Court of Canada handed down its decision in Apsassin v The Queen in right of Canada.[1] This is the first time since Guerin v R,[2] in 1984, that the Supreme Court has had an opportunity to consider the source of the fiduciary duty owed by the Crown to First Nations Peoples. Although some recent decisions of that Court[3] have commented on the Crown's fiduciary duty, these comments have been in the context of the interrelationship between the fiduciary duty and s35(l) of the Constitution Act 1982 (Canada), which protects aboriginal rights.[4] The case is interesting for a number of reasons. First, it appears to confirm that the source of the fiduciary duty is the power and control of the Crown over First Nations' interests. Second, rather than simply relying on the earlier decision in Guerin v R, the majority used a trust analogy to determine the Crown's obligations. Arguably, this adds unnecessarily complicating factors to the present law. Third, and most interesting, the Court held that where the Crown has the power under a statute to act for the benefit of an Indian Band, it is under a positive obligation to do so. Failure to so act will result in a breach of fiduciary obligation.

The facts

The facts of Apsassin are complex. Like the Supreme Court's earlier decision in Guerin v R, Apsassin concerns the surrender of an Indian reserve. In the early part of the century, the Beaver Indian Band received a reserve in British Columbia in return for surrendering their aboriginal title by treaty. In 1940, the Band surrendered the mineral rights on the reserve to the Crown in trust 'to lease' for its benefit. In 1945, the Band surrendered the entire reserve `to sell or lease'. The Director of Indian Affairs (DIA) sold the land to the Director of the Veterans' Land Act (DVLA). In turn, the DVLA sold the reserve as smaller parcels to soldiers returning from the second world war. Subsequently, oil and gas were discovered on the land, the revenue from which went to the veterans who by then owned the land. In 1977, an officer of the Department of Indian Affairs realised that the Band had lost its mineral rights, as these had not been reserved out of the transfer of the reserve to the DVLA. The Band argued that the Crown was under a fiduciary duty to them prior to the surrender of the reserve, and breached that duty by failing to advise the Band against surrendering the lands. It also argued the Crown was under a duty after surrender to lease or sell the land in the Band's best interests, which was breached through the Crown failing to reserve the mineral rights when the reserve land was sold to the Director of the Veterans' Land Act.

The decision in Guerin v R

Guerin v R had concerned the surrender for lease of 162 acres of reserve lands by the Musqueam Band in 1957, `in trust, to lease the same to such person or persons, and upon such terms as the Government of Canada may determine most conducive to our welfare and the welfare of our people'. The Crown entered a 75 year lease in 1958 upon terms and conditions substantially less advantageous than those discussed with the Band. The Band successfully sought a declaration that the Crown had breached its obligations to the Band.

The Supreme Court concluded that the Crown was under a fiduciary obligation to deal with the land for the benefit of the Band. Although the source of this duty was somewhat unclear, Dickson J appeared to base the obligation primarily in the statutory requirement that reserve lands must be surrendered to the Crown prior to sale or lease (which in any case is a feature of native title), coupled with the discretion given to the Crown by s18 of the Indian Act to deal with surrendered land as it considers best. Therefore, according to Dickson J, when an Indian Band surrenders its interest to the Crown, a fiduciary obligation takes hold to regulate the manner in which the Crown exercises its discretion in dealing with the land on the Band's behalf.[5] Notably, Dickson J stated that the nature of Indigenous title alone was not sufficient to source a fiduciary obligation:

`The fiduciary relationship between the Crown and the Indians has its root in the concept of aboriginal, native or Indian title. The fact that Indian Bands have certain interest in lands doe not, however, in itself give rise to a fiduciary relationship between the Indians and the Crown'.[6]

The question which remained after Guerin v R was whether or not a fiduciary obligation could arise prior to surrender. Was it the statutory requirement of surrender which sourced the fiduciary obligation, or does the Crown owe wider duties to First Nations Peoples?

In case law subsequent to the decision in Guerin v R, comments in obiter indicated that the fiduciary obligation is sourced after all in the nature of Indigenous title: namely its inalienability save to the Crown and its vulnerability to Crown actions.[7] Essentially, this is similar to Toohey J's formulation in Mabo [No. 2].[8] According to Toohey J, it is the power of the Crown to adversely affect native title holders, coupled with the inability of native title holders to alienate their title, except to the Crown, and their consequent vulnerability, which gives rise to the fiduciary duty.[9] It was not, however, until Apsassin that the Supreme Court had an opportunity to clarify the source and nature of the fiduciary duty.

Decision of the Federal Court of Appeal

The Federal Court of Appeal[10] found that the relationship between the Crown and First Nations peoples is fiduciary in nature. In other words, like the relationships of solicitors and clients, trustees and beneficiaries, directors and companies, the Crown-First Nations relationship belongs to that category of relationships which will be presumed to be fiduciary. In order to determine this, Stone JA turned to recent decisions of the Supreme Court which deal with the question generally of when a relationship will be deemed fiduciary,[11] and applied the test for determining the existence of fiduciary obligations laid down by Wilson J in Frame v Smith.[12] In that case, Wilson J noted that:

`Relationships in which a fiduciary obligation has been imposed seem to possess three characteristics:

`(1) The fiduciary has scope for the exercise of some discretion or power;

`(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests;

`(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power'.[13]

By applying this test, Stone JA came to the conclusion that a fiduciary relationship existed between the Crown and Indian Band prior to surrender:

`In my view, these cases support the existence of a fiduciary relationship between the Crown and the Indians previous to the 1945 surrender, just as one has been recognised once a surrender has taken place. The Indians' interest in [the reserve] could not be alienated except by surrender to the Crown which had power and responsibility under the Indian Act to manage and control these lands and to protect the Indians in the possession and use thereof`.[14]

According to the Federal Court of Appeal in Apsassin, therefore, there exists a general fiduciary relationship to deal with Indigenous land even prior to surrender. This relationship appears to be primarily grounded in the nature of native title, coupled with the Crown's statutory powers of control over Indigenous lands. Indigenous interests in land cannot be alienated except to the Crown,[15] which has powers of management and control over those lands.[16]

Marceau JA's reasoning was virtually identical. His Honour also determined that the relationship between the Crown and First Nations people was one that should be characterised as fiduciary in nature, and concluded that:

`[Recent Supreme Court decisions on the fiduciary principle], as I understand them, preclude dispute of the appellant's contention that, even prior to surrender of their reserve lands, there was already between them and the Crown, with respect to any Crown act that could affect their well-being, a fiduciary relationship which placed upon the Crown a fiduciary duty, the fulfilment of which must be judged in accordance with a fiduciary's strict standard of conduct, and sanctioned without any regard to any foreseeability principle'. [17]

Unfortunately, the Supreme Court did not wholeheartedly agree.

Decision of the Supreme Court

The Supreme Court decision in Apsassin does not materially aid in clarifying the nature and source of the Crown's fiduciary duty for a number of reasons. First, while the majority's[18] and minority's¹⁹ decisions reach essentially the same conclusion, they do so for different reasons. Second, rather than analysing the Crown's obligations in terms of fiduciary law, the majority analogises them to trust law, finding a `trust of Indian Land'. While the nature of a `trust of Indian Land' is uncertain, it is not equivalent to a general law trust.

McLachlin J's minority decision is the most straightforward one. With respect to the Crown's fiduciary obligations, Her Honour asks two questions: What was the Crown's obligation prior to surrender with respect to that surrender? and Was the Crown under a fiduciary obligation with respect to disposal of the minerals after surrender?

On the first issue, whether the Crown was under a duty prior to surrender, McLachlin J concludes, contrary to the opinion of the Federal Court of Appeal, that there was no obligation on the Crown. Unlike the approach taken by Stone and Marceau JJA, Her Honour did not consider whether the nature of the relationship between the Crown and First Nations Peoples was fiduciary, but rather examined the narrower issue of the nature of the duty owed by the Crown when a Band wishes to make a surrender. Her Honour considered that an obligation could be imposed by the terms of the Indian Act, or as a matter of general fiduciary law.

With regard to the issue of whether the specific terms of the Indian Act impose an obligation on the Crown to refuse a Band's surrender of its reserve if the decision to do so is not in the Band's best interests, McLachlin J concluded that the Crown's obligation was limited to preventing exploitative bargains.[20] The appellants argued that the tone of the Indian Act, and the power of the Crown over reserve lands, leads to the conclusion that the Crown is under an obligation to protect the Indians from themselves. On the contrary, McLachlin J determined that the provisions of the Indian Act are designed to strike a balance between the two extremes of autonomy of action and protection of Indigenous interests. The purpose of the surrender requirement is to protect Indigenous people from exploitation. The Band had a right to decide whether it wished to surrender the reserve, and only if its decision would lead to exploitation was the Crown obliged to refuse the surrender.[21] According to McLachlin J, the measure of control given to the Band under the Indian Act to exercise over surrender negates the contention that any general duty is imposed on the Crown by the Act with respect to the surrender of the reserve.[22] Further, Her Honour considered that, as a matter of general fiduciary law, no obligation arose on the Crown on the particular facts at hand. As did the Court of Appeal, McLachlin J considered the circumstances generally in which a fiduciary obligation will arise. However, Her Honour concluded that in the circumstances, the Band had not entrusted its power of decision making as to whether or not to surrender the reserve to the Crown. Consequently, no fiduciary obligation arose. The evidence showed that the Band understood that in surrendering its reserve, it was giving up forever all rights to that reserve.[23]

On the second issue of whether the Crown was under a fiduciary obligation with respect to the disposal of the minerals surrender, McLachlin J concluded that such an obligation did exist. Her Honour could hardly do otherwise in light of the earlier decision in Guerin v R. On the above two issues, therefore, McLachlin J's decision does not advance the law significantly from the position taken by the Supreme Court in Guerin v R in 1994. According to Her Honour, prior to the surrender the Band retains some control over the decision whether or not to surrender the reserve, and consequently, no fiduciary obligation arises. Post-surrender, however, the Crown has the discretion and control as to the best means by which to implement the terms of the surrender. A fiduciary obligation arises in order to regulate the manner in which the Crown deals with the Band's interests on their behalf. McLachlin J's decision, therefore, confirms that discretion and control vested in the Crown with respect to Indigenous interests is the cornerstone of the fiduciary obligation. She disagrees, however, with the conclusions of the Federal Court of Appeal that there exists a general fiduciary duty to deal with Indigenous land even prior to surrender.

The majority take a quite different approach to the issues at hand. Rather than relying on the fiduciary principle in Guerin v R, Gonthier J prefered to analyse the Crown's obligations in terms of trust law. He held that the surrender in 1940 of the minerals rights to the Crown in trust to lease for the benefit of the Band amounted to a `trust in Indian land'. The 1945 surrender, therefore, constituted a variation of trust.[24] The surrender deed contained all terms of the trust. So what is a `trust in Indian land'? Gonthier J was quick to note that a `trust in Indian land' cannot be equated with a trust as we normally think of one. He declined, however, to comment on the exact nature of such a trust:

`I should add that my reasons should not be interpreted to equate a trust in Indian land with a common law trust. I am well aware that this issue was not resolved in Guerin ... and I do not wish to pronounce on it in this case. However, the court did recognise in Guerin that `trust-like' obligations and principles would be relevant to the analysis of a surrender of Indian lands. In this case, both the 1940 and 1945 surrenders 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'.[25]

Gonthier J's reference in this context to Guerin v R is somewhat misleading. Although Dickson J, speaking for the majority, did consider that some `trust-like' obligations adhere to the Crown's fiduciary obligation, he did not analyse those obligations in terms of trust law. Although Wilson J in the minority in Guerin v R did consider that a trust would arise on surrender,[26] the majority specifically denied that a trust arose on surrender.[27] Dickson J noted that a trust could not arise as all the elements required for a trust - a settlor, a trustee, a beneficiary, and trust property - were not present. Although the Crown would be the trustee, and the Indian Band the beneficiary, there was neither a recognisable settlor, nor, more importantly, was there a trust property. Earlier decisions have held that on surrender, a Band loses its interest in a reserve.[28] If they retain no interest on surrender, then there is no relevant trust property. It is presumably for this reason that Gonthier J was at pains to point out that the `trust in Indian land' is not to be equated with a general law trust.

Gonthier J concluded that as the Crown was a trustee, it had a fiduciary obligation to exercise its discretion to lease or sell the surrendered interests in the best interests of the Band. The transfer of minerals to the Director of the Veterans' Land Act was not in the best interests of the Band, particularly in light of the fact that as regards the transfer of non-Indian lands to the Director, it was a matter of Government policy to reserve out minerals. The Crown's actions thus constituted a breach of trust.[29]

Considering the apparent problems of applying general trust principles to the surrender process, it is unclear why Gonthier J chose to utilise a trust analogy, rather than the more straightforward application of the principle in Guerin v R that was favoured by McLachlin J. It is trite to say that one does not need to be a trustee to be a fiduciary. A straightforward application of the principle in Guerin v R would have reached the same conclusion: the Crown's power, discretion and control over the minerals post-surrender would result in a fiduciary obligation on the Crown with respect to the disposal of those minerals. It is still permissible to examine the surrender document for guidance as to the scope of the Crown's fiduciary duty, without requiring the imposition of a `trust in Indian land'.

Perhaps the most interesting facet of the case relates to the decision of both the majority and the minority that the Crown had an on-going duty to revoke the mistaken transfer of the minerals. By virtue of s64 of the Indian Act, the Crown has the power to revoke a sale or lease made under mistake or error.[30] The Court found that not only was the Director of Indian Affairs able to revoke the grant of minerals made by the Band, but that the Crown had a positive duty to use this power. According to McLachlin J, with whom the majority agreed on this point, an ongoing fiduciary obligation to act in the best interests of Indigenous people can be inferred from the terms of s64. If the section itself was not enough to establish a fiduciary obligation to revoke the mistaken grant of minerals, then general fiduciary law would establish such an obligation.[31] According to McLachlin J, the Crown had an obligation to exercise its power under this section, even against bona fide purchasers. According to the Court, therefore, the Crown must exercise its legislative powers over Indigenous interests affirmatively for First Nations peoples, or be in breach of its fiduciary obligations.

Conclusion

Apsassin is interesting for a number of reasons. Despite the preference of the majority to analyse the Crown's obligations in terms of trust law, it appears that all members of the Court would accept that a fiduciary obligation will arise where the Crown has power and control, and hence discretion, over Indigenous interests. This is not surprising in so far as power over another's property interests, generally speaking, will always lead to fiduciary duties. However, it is clear that the nature of native title, its inalienability, and the consequent power of the Crown with respect to that title are not sufficient to ground the fiduciary obligation. The Supreme Court in Guerin v R, as well as both the Federal Court of Appeal and Supreme Court in Apsassin, also relied on the powers of management and control which the Crown has with respect to Indigenous lands by virtue of the provisions of the Indian Act, both before and on surrender. Notably, the Supreme Court decision in Apsassin did not follow the broad approach taken by the Federal Court of Appeal to the imposition of fiduciary obligations on the Crown. Although McLachlin J did rely on the general test for the imposition of fiduciary obligations, she did so only in a limited factual context. She also relied to a large extent on specific duties imposed on the Crown by legislation.

Notably, in Mabo [No. 2],[32] Toohey J presented a number of possible sources for the Crown's fiduciary obligation to the Meriam Peoples. The first was the power of the Crown over the interests of the Meriam peoples by virtue of the nature of native title. According to Canadian jurisprudence, this would not be sufficient to ground a fiduciary obligation. In the alternative, however, Toohey J suggested that if the nature of native title were not enough, then the powers of control and management of the Crown over the Meriam peoples and their land by virtue of legislation would be sufficient. Such a conclusion, therefore, would appear consistent with North American authority. Further, the decision in Apsassin suggests that not only can the Crown's statutory powers source a fiduciary duty, but that the Crown must affirmatively exercise that power for the benefit of Indigenous peoples.

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[1] Apsassin v The Queen in right of Canada, as yet un reported decision of the Supreme Court of Canada, 14 December, 1995.

[2] Guerin v R (1985) 13 DLR (4th) 321.

[3] For example, Sparrow v R (1990) 70 DLR 94th).

[4] Section 35(1) provides `The existing aboriginal and treaty rights of the aboriginal peoples of Canada are hereby recognised and affirmed.

[5] (1985) 13 DLR (4th) 321 at 341-2.

[6] (1985) 13 DLR (4th) 321 at 334.

[7] See Roberts v Canada (1989) 57 DLR (4th) 197; Mitchell v Peguis Indian Band [1990] 5 WWR 97.

[8] Mabo v Queensland [No. 2] [1992] HCA 23; (1992) 175 CLR 1.

[9] [1992] HCA 23; (1992) 175 CLR 1 at 200-201, 203.

[10] Apsasson v The Queen in right of Canada 91993) 100 DLR (4th) 504.

[11] See LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14; M (K) v M (H) (1992) 96 DLR (4th) 289; Frame v Smith (1987) 42 DLR (4th) 81; Hodgkinson v Simms (1995) 117 DLR (4th) 161.

[12] Frame v Smith (1987) 42 DLR (4th) 81.

[13] (1987) 42 DLR (4th) 81 at 98.

[14] Apsassin v The Queen in right of Canada (1993) 100 DLR (4th) 504 at 567.

[15] Section 37 provides as follows: `Except where this Act otherwise provides, lands in a reserve shall not be sold, leased or otherwise disposed of until they have been surrendered to Her Majesty by the band of whose use and benefit in common the reserve was set aside'.

[16] The Crown's powers of management are contained in ss4 and 18(1) of the Indian Act:

`4. The Minister of the Interior, or the head of any department appointed for that purpose by the Governor in Council, shall have the control and management of the lands and property of the Indians in Canada.'

`18(1). Subject to the provisions of this Act, reserves shall be 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 land.'

[17] Apsassin v The Queen in right of Canada (1993) 100 DLR (4th) 504 at 541.

[18] Gonthier, La Forest, Sopinka and L'Heureux-Dube JJ.

[20] At paragraph 35.

[21] At paragraph 35.

[22] At paragraph 36.

[23] At paragraph 39.

[24] At paragraph 12.

[25] At paragraph 13.

[26] (1985) 13 DLR (4th) 321 ay 361.

[27] (1985) 13 DLR (4th) 321 at 342.

[28] See, for example, Smith v R (1993) 147 DLR (4th) 237. It would seem possible, however, to argue that the proceeds of the sale or lease of the reserve land could constitute the trust property.

[29] At paragraphs 17-18.

[30] Section 64 provides that: `If the Superintendent General is satisfied that any purchaser or lessee of any Indian lands, or any person claiming under or through him, has been guilty of any fraud or imposition, or has violated any of the conditions of the sale or lease, or if any of the sale or lease has been made or issued in error or mistake, he may cancel such sale or lease and resume the land therein mentioned, or dispose of it as if no sale or lease thereof had ever been made.'

[31] At paragraph 115.

[32] [1992] HCA 23; (1992) 175 CLR 1 at 200-201, 203.