On January 12, 2024, the Federal Court of Appeal (“Federal Court of Appeal”) released Kahkewistahaw First Nation v. Canada (Crown-Indigenous Relations), 2024 FCA 8. This case was a judicial review of a Specific Claims Tribunal (the “Tribunal”) decision wherein the Court overturned part of the Tribunal’s findings for unreasonableness and sent it back to the Tribunal for redetermination. The decision provides additional guidance for the Crown’s fiduciary duty in the context of the surrender of reserve land and is re-affirms that where an administrative decision maker fails to provide clear reasons for departing from precedents it risks having its decision overturned on ground of reasonableness.
Kahkewistahaw First Nation had filed a claim with the Specific Claims Tribunal alleging that Canada had owed and breached its fiduciary duties when Kahkewistahaw First Nation surrendered their reserve, IR 72A, to it and when Canada sold the lands over a decade after the surrender. In Kahkewistahaw First Nation v. Canada, 2013 SCTC 5 the Tribunal found that Canada had breached several of its fiduciary duties, but that it had not breached its pre-surrender fiduciary duty and that Canada did not have a duty to consult with Kahkewistahaw First Nation before the sale of its reserve land; it was these findings that Kahkewistahaw First Nation asked the Court to review and set aside.
Kahkewistahaw First Nation is a First Nation located in Saskatchewan and is a signatory of Treaty 4. In 1889 Canada set aside a fishing station on Crooked Lake as a reserve – IR 72A. In 1944, Canada requested Kahkewistahaw First Nation’s consent to surrender a small portion of IR 72A for a road allowance. Kahkewistahaw First Nation offered to surrender the entire reserve so that it could be sold, and the proceeds used to purchase or lease land for a reserve located near Round Lake, close to the residential school their children attended. At that time, and unbeknownst to it, Kahkewistahaw First Nation had over $200,000 in trust money that it could have used to lease or purchase lands at Round Lake. Kahkewistahaw First Nation formally surrendered IR 72A to Canada in 1944. Canada did not sell the land until 1956 and sold it in three tenders to a single purchaser instead of subdividing it, which would have generated greater profits. Canada did not consult with Kahkewistahaw First Nation about the sale or the circumstances affecting the sale, such as the closure of the residential school at Round Lake and the increasing number of cottage lots sold within that area which would have made subdividing or leasing the land more profitable.
Standard of Review.
The Federal Court of Appeal applied the standard of reasonableness to its assessment of the Tribunal’s decision as articulated by the Supreme Court of Canada in Vavilov v Canada (Minister of Citizenship and Immigration), 2019 SCC 65 and s. 18.1(4)(d) of the Federal Courts Act, RSC 1985 c F-7. A decision is unreasonable if the decision maker demonstrates a failure in rationality or if its decision cannot stand in light of the facts and legal principles that bear on it. The Federal Court of Appeal may find a decision maker has made an unreasonable factual error when it bases it decision on erroneous findings of fact that are willingly contrary to the evidence, are not based on all the critical evidence, or are not rationally supported by the evidence. Finally, if an administrative tribunal does not follow the principles set out in case law or its own cases and fails to provide clear reasons for doing so, a reviewing court may overturn the decision for being unreasonable.
Fiduciary Duty and the Surrender of Reserve Lands
The Crown has a duty to protect and preserve reserve land and to guard against improvident bargains. In its assessment of the Tribunal’s decision the Court reviewed case law and several of the Tribunal’s own decisions to determine the factors the Tribunals ought to have considered when it assessed if Canada had discharged its duty. The following principles emerged from that review:
- The Crown’s fiduciary duty in the context of a surrender is multifaceted. A decision maker assessing a breach of duty must look at factors that go beyond the consent of the First Nation or whether the bargain was improvident. The obligations imposed on the Crown includes the duty to protect reserve lands from exploitation and improvident bargains, and the duties of loyalty, full disclosure, to act in the First Nation’s best interest, and to ensure consent.
- The nature of the Crown’s fiduciary obligations is determined by the relevant circumstances and not the terms of a formal written surrender document. To discharge its duty the Crown must consider factors relevant to the community’s interest in surrendering the land that goes beyond those stated in the terms of the surrender.
- A surrender is not valid where the Crown fails to disclose relevant facts to the First Nation as the First Nation cannot make an informed decision and therefore consent to the surrender without this information. That is to say, a Nation cannot consent to a surrender when the Crown withholds relevant information.
- Where the Crown holds surrendered lands, it may need to consider changing circumstances to discharge its post-surrender fiduciary duties before it sells the land, including consulting with the First Nation.
Pre-Surrender Fiduciary Duties
The Court found that the Tribunal had committed a reviewable error when it did not consider facts relevant to its analysis of Kahkewistahaw First Nation’s understanding of the terms of the surrender. As well the Tribunal’s characterizations of certain facts relevant to the analysis were contrary to the established jurisprudence on the surrender of reserve lands and several of its own decisions. The Tribunal’s failure to provide reasons for this departure was also unreasonable.
The Tribunal’s analysis focused on Kahkewistahaw First Nation’s understanding of the terms of the surrender and whether its decision to surrender the reserve could be characterized as so foolish or improvident that it would amount to exploitation. The Tribunal found that Kahkewistahaw First Nation understood the terms of the surrender as it had sought to surrender the land for sale and the surrender documents, which clearly set out that the surrender was for this purpose, was signed by the chief and five band members. The Tribunal concluded that the terms of the surrender were not foolish or improvident so as to constitute exploitation because Kahkewistahaw First Nation articulated a clear explanation for why the land near Round Lake was more suitable to its members.
The Federal Court of Appeal found that the Tribunal could not assess whether Canada had discharged its duty of full disclosure because its mischaracterization of evidence prevented it from considering facts relevant to the analysis. The Tribunal characterized letters exchanged between two key federal officials responsible for managing and protecting reserve lands as merely opinions. The letters showed that these officials knew that it would be more profitable to lease the surrendered lands rather than putting them up for sale. There was no evidence that these officials discussed the prospect of leasing vs surrendering the lands with Kahkewistahaw First Nation before the surrender. The information in the letters goes right to the adequacy of understanding Kahkewistahaw First Nation had about the surrender and whether the Crown met its duty to disclose all the relevant facts. The Court found that without the disclosure of this information to Kahkewistahaw First Nation it was not possible for the Tribunal to conclude that Kahkewistahaw First Nation had an adequate understanding of the terms of surrender. The characterization of the letters exchanged between the officials by the Tribunal was therefore unreasonable and lead the Tribunal to commit a reviewable error.
Post-surrender breach of fiduciary duty
The Tribunal concluded that Canada did not have a duty to consider leasing IR 72A because the purpose of the surrender was to sell the lands. As well, it found that Canada did not have duty to consult with Kahkewistahaw First Nation before the lands were eventually sold because the delay on its own did not create a duty. The Federal Court of Appeal once again found that the Tribunal’s characterization of the facts supporting these findings was unreasonable and could not support its decision.
As above, the Tribunal departed from the principles set forth by the courts and previous Tribunal decisions when it refused to consider the reasons the band chose to surrender the land and whether the circumstances around those reasons may have changed. To meet its duty, the Crown must go beyond simply acting on the terms of a surrender document to consider and adjust to changed circumstances that are relevant to the surrender. Where, as in this case, Canada holds surrendered lands but has not sold them, its post-surrender fiduciary duty to act with reasonable diligence requires it to disclose and move to correct any facts that could affect the community’s decision to surrender the land. When Kahkewistahaw First Nation asked to surrender IR 72A it did so because it wanted a reserve closer to the Round Lake Residential school, yet by the time the Crown got around to selling the land, the school had closed. As well, there was an increasing demand for cottage lots around Crooked Lake which provided an opportunity for greater profit for the First Nation if the reserve land was subdivided into cottage lots and sold or leased for this purpose. These changes in circumstance, the closing of the school and opportunity for more profit through subdividing the land, were relevant to the surrender. The Tribunal’s characterizations of the years between the surrender and the sale as “the mere passage of time” was therefore unreasonable and amounted to a reviewable error by preventing the Tribunal from considering all the relevant factors in the discharge of Canada’s post-surrender fiduciary duty.