On November 27, 2024, the Supreme Court of Canada (“SCC” or “Court”) released a decision regarding on-reserve policing (“the Decision”) that is likely to have important consequences for Indigenous nations negotiating contracts with the Crown across a wide array of service areas, and/or those looking to challenge Crown conduct relating to such agreements in court.
In the Decision, the SCC confirmed that contracts between the Crown and an Indigenous people can give rise both to contractual private law duties of good faith and to public law duties flowing from the honour of the Crown.
Regarding the honour of the Crown, the Decision (1) provides a framework for determining when contracts can attract the honour of the Crown, (2) identifies specific duties the honour of the Crown can give rise to in the context of contractual undertakings and performance, and (3) confirms that “reconciliatory justice” guides determination of an appropriate remedy for breach of such duties.
The Decision clarifies that although the same conduct may give rise to both breach of a private law duty of good faith and breach of a public law duty flowing from the honour of the Crown, the approach to determining the appropriate remedy for each breach is different. The concept of “corrective justice” drives determination of a private law remedy, whereas the concept of “reconciliatory justice” drives determination of breach relating to honour of the Crown. Reconciliatory justice calls for a remedy that promotes reconciliation between the parties into the future. Damages may be appropriate for either type of breach, but the approach to calculating damages differs due to these distinct conceptions of justice.
In this blog post, we provide an overview of the facts and history of the case and summarize key aspects of the majority’s reasons and judgment.[1] We conclude with some thoughts regarding broader implications of the Decision.
SUMMARY
Facts
The Decision concerned a claim by Pekuakamiulnuatsh Takuhikan, a First Nation in Mashteuiatsh, QC, against Canada and Quebec. Specifically, Pekuakamiulnuatsh Takuhikan claimed damages for breach of contractual obligations under Quebec’s civil law regime and breach of duties flowing from the honour of the Crown, both in relation to tripartite agreements for the funding of its own police force, the Sécurité publique de Mashteuiatsh (“SPM”).
Canada entered into these tripartite agreements pursuant to its First Nations Policing Program (“FNPP”), which implements its First Nations Policing Policy (“FNP Policy”), both established/adopted in the early 1990s. The FNPP is intended to provide “a practical means to support the federal policy on the implementation of the inherent right and the negotiation of self‑government,”[2] and to facilitate culturally appropriate Indigenous policing services that are equal in quality to policing services in comparable non-Indigenous communities.
Quebec entered the tripartite agreements pursuant to amendments to Quebec’s Police Act that were made in the mid-1990s to allow for the provincial government to enter agreements with First Nations to establish their own Indigenous-led police force.[3] (Quebec was steadfast in its arguments before the Court that the objectives of the federal FNPP had no bearing on Quebec’s commitments).
Pekuakamiulnuatsh Takuhikan, Canada, and Quebec first entered into a tripartite agreement in 1996. The tripartite agreements were of short duration and included a clause permitting the renewal of the agreements to ensure that the SPM was adequately maintained over time. Under the terms of the tripartite agreements, Canada and Quebec undertook to provide a maximum contribution amount, divided between the parties at 52% and 48% respectively, while Pekuakamiulnuatsh Takuhikan was responsible for the administrative management of the SPM and any deficits incurred.
Between 2013 and 2017, the funding provided by the governments proved to be insufficient for the effective provision of services by the SPM, leading to an accumulated operational deficit of nearly $1.6 million. Despite repeated complaints by Pekuakamiulnuatsh Takuhikan and requests to negotiate a higher maximum contribution from Canada and Quebec, the two governments refused, placing Pekuakamiulnuatsh Takuhikan in a position where they either had to either impoverish their Nation by assuming the deficits themselves or cease to provide an Indigenous-led police force.
Faced with this choice, Pekuakamiulnuatsh Takuhikan chose to continue funding the SPM at their own expense and brought an action against Canada and Quebec seeking reimbursement of the $1.6 million costs that they had incurred.
Judicial History
The Quebec Superior Court dismissed the claim,[4] finding that Canada and Quebec were not in breach of good faith and that the honour of the Crown did not impose any obligation on Canada or Quebec in the context of these agreements.[5]
The Quebec Court of Appeal set aside the trial judgement and ordered Quebec and Canada to reimburse Pekuakamiulnuatsh Takuhikan for the accumulated deficits, finding both that the honour of the Crown was engaged and resulted in liability in the case, and that Crown liability arose through abuse of rights which violated the Crown’s duty of good faith.[6]
Canada accepted the ruling of the Court of Appeal. Quebec did not. Quebec appealed the decision to the SCC, where it argued that it had not undertaken to fund police services at a comparable level to other non-Indigenous communities and had only agreed to provide funding according to the terms of the tripartite agreements. Quebec argued it had committed no breach of its duty of good faith or related civil wrong and that the honour of the Crown was not engaged. It argued in the alternative that it had not breached any duty flowing from the honour of the Crown.
The Supreme Court was therefore tasked with determining (1) whether Quebec’s conduct violated its private law duty of good faith or its public law duties flowing from the honour of the Crown (if any), and (2) if it did, what remedy would be appropriate in response to either violation.
Breach of Private Law Duty of Good Faith
In its reasons on good faith, the Court began by affirming that the tripartite agreements are governed by Quebec’s private law of obligations through the Civil Code of Quebec, which stipulates that the general law of obligations apply to the State.[7] This includes an obligation on contracting parties to “conduct themselves in good faith both at the time the obligation arises and at the time it is performed or extinguished.”[8] With this general principle applying to the parties, the Court specifically highlighted that since the tripartite agreements included a renewal mechanism that was necessary for the SPM to be viable long term, the very nature of the contract required that renewal negotiations be conducted in good faith.[9]
The Court determined that good faith in renewal negotiations did not dictate a specific outcome, require the Crown to subordinate its interests to the benefit of the Indigenous party, or obligate Quebec to pay all expenses incurred by the SPM. Good faith did, however, require that the Indigenous party’s interests be taken into account by the Crown through its conduct during negotiations.[10]
The Court found that Quebec’s conduct failed to meet this standard: “Quebec’s intransigence reflects indifference to Pekuakamiulnuatsh Takuhikan’s interests and constitutes a breach of the obligation to negotiate the clauses relating to its financial contribution in good faith at the time of the renewal contemplated by the agreements. Quebec should have entered into genuine negotiations with its counterparty and should have listened and shown openness,” which it did not do.[11] Further, “In light of the circumstances, including the presence of an extension clause providing for the negotiation of the funding clauses and the existence of a long‑term contractual relationship, Quebec could not simply make non‑negotiable funding offers that took no account of Pekuakamiulnuatsh Takuhikan’s interests.”[12]
Finding a clear violation of the duty of good faith by Quebec, the Court then considered the potential for liability flowing from the honour of the Crown.
Applicability of the Honour of the Crown in Contractual Undertakings
In this case, the Supreme Court was tasked with determining for the first time whether the honour of the Crown applies to a contractual undertaking between the Crown and an Indigenous group,[13] and if it applies, what duties it imposes and what remedies are appropriate for a breach.
The Court considered the common element underlying all contexts in which the Court has already recognized the honour of the Crown as being engaged: “they relate to the reconciliation of specific Indigenous claims, rights or interests with the Crown’s assertion of sovereignty.”[14] It then set set out the following considerations to guide determination of when a contract between the Crown and an Indigenous group engages the honour of the Crown:
- The honour of the Crown will only apply where a contract has been entered into “by reason and on the basis of the group’s Indigenous difference, which reflects its distinctive philosophies, traditions and cultural practices.”[15] If the Crown has taken on an obligation “on the basis of its ‘special relationship’ with the Indigenous group” and there is a “collective dimension” to the contract, the honour of the Crown is engaged.[16]
- Contracts relating to an Indigenous right to self-government, whether established or credibly claimed, will engage the honour of the Crown.[17] The agreement need not recognize or modify the right; it must simply relate to it.[18]
Regarding the second point above, the SCC explicitly left the door open to the potential of a court finding that Indigenous rights or interests beyond self-government could engage the honour of the Crown in the context of a contract.[19] In light of the facts before it—where an assertion that control over policing was an aspect of a credible claim to the right self-government—the Court did not have to settle this question.
The Tripartite Agreements Engaged the Honour of the Crown
Applying these considerations to the contractual tripartite agreements before it, the Court concluded that the honour of the Crown was engaged. Regarding the first consideration, the Court found that since the contracting party is the band council,[20] and since the contract was entered into by Quebec through a provision of the Quebec Police Act which applies exclusively to Indigenous communities, the contract was entered into on the basis of Pekuakamiulnuatsh Takuhikan’s Indigenous difference.[21]
Regarding the second consideration, the Court found that the tripartite agreements “concern the Indigenous right of self‑government claimed by the Pekuakamiulnuatsh First Nation in matters of public safety in the community.”[22] The Court referred to legislative debates showing that Quebec’s amendments to the Police Act that allowed for First Nations police forces were made in response to the claims of First Nations to the right to self-government.[23] The Court also referenced the fact that Pekuakamiulnuatsh Takuhikan, Canada, and Quebec have signed an Agreement in Principle meant to one day lead to a signed treaty recognizing and affirming the First Nation’s right to self-government – and the Agreement in Principle specifically speaks to policing.
Specific Obligations Flowing from the Honour of the Crown
Upon finding that the honour of the Crown was engaged, the Court then turned to considering the specific duties it gave rise to in the context of these tripartite agreements. Drawing inspiration from prior decisions about the honour of the Crown in the treaty context, the Court stated that the “the honour of the Crown imposes a duty on Quebec to perform the tripartite agreements with honour and integrity.”[24] It identified the following specific duties:
1. A duty at the negotiating table to “avoid even the appearance of ‘sharp dealing’”, meaning it must arrive “with an open mind and with the goal of engaging in genuine negotiations with a view to entering into an agreement.”[25] The Crown should not “attempt to coerce or unilaterally impose an outcome” and must not adopt “an intransigent attitude.”[26] It must “engage in genuine negotiations in a manner conducive to maintaining a relationship that can support the ongoing process of reconciliation between the Crown and Indigenous peoples.”[27]
2. A duty, once an agreement has been entered into, to “construe the terms of the agreement generously and comply with them scrupulously.”[28]
3. A duty, in negotiations to change or renew an agreement, to “avoid taking advantage of the imbalance in its relationship with Indigenous peoples by, for example, agreeing to renew its undertakings on terms that are more favourable to it without having genuinely negotiated first.”[29]
The Court emphasized that the honour of the Crown does not turn these agreements into treaties,[30] nor does it permit for rewriting of the agreements.[31] It does, however, “modif[y] how the obligations found therein are performed by requiring the Crown to act in a manner that fosters reconciliation.”[32]
Considering the duties set out above, the Court was quick to find that Quebec failed to uphold the honour of the Crown by refusing to negotiate an increase in funding during renewal negotiations of the tripartite agreement, despite Pekuakamiulnuatsh Takuhikan’s request and despite having full knowledge of the deficits the Pekuakamiulnuatsh Takuhikan was incurring.[33] The Court found that this breach “jeopardized the contractual equilibrium and the very purpose of the tripartite agreements. That conduct is not made less dishonourable by the fact that Quebec subsequently complied with the terms resulting from its refusal to negotiate.”[34]
Remedies Informed by Differing Conceptions of Justice
When considering remedies, the Court emphasized that even though the same conduct may give rise to breach of a private law duty and breach of a public law duty flowing from the honour of the Crown, it is important to distinguish the two breaches when it comes to remedies. This is because the duties and related remedies are rooted in differing conceptions of justice. Breach of the private law duty of good faith is remedied in accordance with “corrective justice”, while breach of duties flowing from the honour of the Crown is remedied in accordance with “reconciliatory justice.” The former aims to restore a wronged party to the position they would have been in but for the breach, while the latter “transcends the corrective justice at the heart of private law to make room for repairing and maintaining the special relationship” between the Crown and Indigenous peoples.[35]
Private Law Remedies
The Court found that the record before it did not allow it to assess the amount of financial loss caused by Quebec’s breach of the private law duty of good faith, which meant it could not identify the appropriate damages amount. If Pekuakamiulnuatsh Takuhikan’s claim had been based solely on private law grounds, the Court would have remanded the matter for a determination of damages to the Superior Court to determine the appropriate amount of damages.[36] Instead of doing so, the Court turned to its analysis regarding honour of the Crown.
Public Law Remedies
In considering what reconciliatory justice required in this case to respond to beach of a duty flowing from the honour of the Crown, the Court acknowledged that declarations will often help further the goal of reconciliation, but dismissed the suggestion that a declaration is “generally” the most appropriate remedy in such cases.[37] Instead, the Court explained that the appropriate remedy “will vary with the circumstances of each case; no type of remedy takes precedence over the others.”[38] When damages are the most appropriate remedy for honour of the Crown-related breaches, determining the amount of damages is a “highly contextual issue.”[39]
The Court had to consider what remedy would have the effect of restoring the honour of the Crown[40] by “impos[ing] a measure that restores balance to the relationship between the parties and thus places them back on the path to reconciliation.”[41] The Court emphasized the importance of taking into account the Indigenous party’s perspective on what type of remedy will achieve this aim.[42] In the context of this case, from day one, Pekuakamilnuatsh Takuhikan had been seeking an award of damages and not a declaration.
The Court considered the financial loss experienced by Pekuakamilnuatsh Takuhikan, as well as the harm it suffered “from the standpoint of the quality of policing and its dignity.”[43] None of these were possible to quantify with any precision – and noting that the difficulty in determining the specifics of the First Nation’s financial loss is a direct result of Quebec’s breach of its duty to (re)negotiate honourably, the Court emphasized that the First Nation should not be penalized for this.[44] The Court found that remanding the question of financial loss to the Superior Court would not be consistent with the guiding principle of proportionality. The Court concluded that the award of damages made by the Court of Appeal—reimbursement of the deficit incurred by the First Nation—was “more conducive than any other measure to restoring the honour of the Crown.”[45] The Court noted the importance of ensuring that “double compensation” does not occur when a Court is remedying both a private law breach and a public law breach.[46]
DISCUSSION
Good Faith
For Indigenous nations outside of Quebec, the Court’s analysis regarding good faith is not directly applicable. Instead, as the Court helpfully confirmed, “the private law analysis of the requirements of good faith in the performance of such a contract would be governed by the relevant common law principles[…].”[47] This is because in Quebec, private law is governed by Quebec’s civil law system, while outside of Quebec, private law is governed by the common law.
Under the common law, there is an “organizing principle of good faith” underlying contractual performance, first explicitly recognized by the SCC in 2014.[48] Duties recognized under this organizing principle include a duty of honesty in contractual performance, requiring that parties not lie or mislead one another,[49] along with the duty to exercise contractual discretion reasonably and according to the purposes that the discretion was granted in the contract, which is incompatible with arbitrariness and capriciousness.[50]
When Quebec’s conduct is viewed in light of these common law duties, there is a strong possibility that its refusal in contract renewal negotiations to even entertain an increase to its maximum amount under the tripartite agreements would have resulted in liability in a common law jurisdiction as well. Such conduct could have amounted to an unreasonable exercise of discretion, violating the duty of good faith.
Honour of the Crown
Regarding the honour of the Crown, the Court has confirmed that it is not the form of Crown conduct that determines whether the honour of the Crown is engaged, but whether that conduct is undertaken to advance the process of reconciliation. Just as treaties or legislation can be used to foster reconciliation, so can contracts – and where this is the case, the honour of the Crown is engaged and imposes duties on the Crown both in negotiating the contracts and in implementing them, including in any renewing or renegotiating of them.
The Crown must enter negotiations with an open mind. Where an agreement has a renewal clause permitting for revisiting funding terms, and/or where there is a long-standing contractual relationship and an agreement is being renegotiated, the Crown is obligated to consider the perspective and interests of the Indigenous nation with whom it is negotiating. The Crown acts dishonourably when it makes arbitrary funding commitments divorced from the purpose of an agreement and the relevant needs and interests of the Indigenous party and imposes this on a take-it or leave-it basis.
The Court declined to make any determination of whether the honour of the Crown in this case also gave rise to a duty to act with diligence in fulfilling any promises made, or to a sui generis fiduciary obligation. The Court determined that its findings regarding a failure to perform the tripartite agreements with honour and integrity was sufficient for purposes of disposing with the appeal, so it did not address these other potential obligations.[51] Now that it is established that contracts can engage the honour of the Crown, it remains to be seen what other duties may be found to exist in the contractual context.
The Honour of the Crown and Other Agreements
The Court’s analysis and conclusions regarding performance (including negotiation) of agreements with honour and integrity should guide the Crown’s conduct in circumstances beyond tripartite policing agreements. There are likely strong arguments to be made that most if not all funding agreements regarding on-reserve services engage the honour of the Crown. Reserves exist because of First Nations’ “Indigenous difference” and agreements for funding of services on reserves reflect an obligation undertaken by the Crown on the basis of its ‘special relationship’ with First Nations. These agreements also arguably relate to self-government, as administration of services is directly tied to governance. Furthermore, the Court left the door open to finding that rights or interests other than self-government could also be the basis of finding that a contract engages the honour of the Crown. Where a contract affects a First Nation’s right to use and benefit from its reserve lands, it seems more likely than not that the honour of the Crown would also be engaged, regardless of the question of self-government.
By way of further example, Indigenous governments who are engaging in coordination agreement negotiations pursuant to the Act respecting First Nations, Inuit, and Metis children, youth and families can also look to the Decision for instruction on what standard of conduct the Crown – whether federal or provincial – should be held to in the negotiation and implementation of such agreements.
Remedies
Finally, the Court’s discussion of remedies means that Indigenous groups who are pursuing claims based on the honour of the Crown in court will want to think through what remedies they are seeking. The courts have many remedies at their disposal. The goal of reconciliation is what drives determinations here: what remedy will best restore balance to the Crown-Indigenous relationship at issue and place the parties on the path to reconciliation? Courts have been instructed to pay particular attention to an Indigenous party’s view on what will best achieve this outcome. Where damages are claimed and found to be appropriate, courts are to steer clear of importing stricter private law approaches to quantifying them: the driving question regarding quantification is what is required to promote reconciliation.
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[1] Justice Kasirer wrote the reasons of the majority, and Justice Côté was the sole dissenting justice.
[4] 2019 QCCS 5699.
[6] 2022 QCCA 1699.
[7] 1376 CCQ.
[8] 1375 CCQ.
[10] Decision at paras 9 & 112.
[47] Decision at para 70. Here, the Court states further, “see, in particular, Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras. 65‑66.”
[48] Bhasin v Hrynew, 2014 SCC 71 at para 63.
[50] Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 at para 63 & 88.