SUPREME COURT OF CANADA
Appeal Heard: December 8, 2020 Judgment Rendered: July 16, 2021 Docket: 38795
Between: Roger Southwind, for himself and on behalf of the members of the Lac Seul Band of Indians and Lac Seul First Nation Appellants and Her Majesty The Queen in Right of Canada Respondent - and - Attorney General of Saskatchewan, Assembly of Manitoba Chiefs, Tseshaht First Nation, Manitoba Keewatinowi Okimakanak Inc., Treaty Land Entitlement Committee of Manitoba Inc., Anishinabek Nation, Wauzhushk Onigum Nation, Big Grassy First Nation, Onigaming First Nation, Naotkamegwanning First Nation, Niisaachewan First Nation, Coalition of the Union of British Columbia Indian Chiefs, Penticton Indian Band, Williams Lake First Nation, Federation of Sovereign Indigenous Nations, Atikameksheng Anishnawbek First Nation, Kwantlen First Nation, Assembly of First Nations, Assembly of First Nations Quebec-Labrador, Grand Council Treaty #3, Mohawk Council of Kahnawà:ke, Elsipogtog First Nation, Chemawawin Cree Nation and West Moberly First Nations Interveners Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.
Reasons for Judgment: (paras. 1 to 147)
Karakatsanis J. (Wagner C.J. and Abella, Moldaver, Brown, Rowe, Martin and Kasirer JJ. concurring)
Dissenting Reasons: (paras. 148 to 194)
Côté J.
Roger Southwind, for himself and on behalf of the members of the Lac Seul Band of Indians and Lac Seul First Nation Appellants
v.
Her Majesty The Queen in Right of Canada Respondent
and
Attorney General of Saskatchewan, Assembly of Manitoba Chiefs, Tseshaht First Nation, Manitoba Keewatinowi Okimakanak Inc., Treaty Land Entitlement Committee of Manitoba Inc., Anishinabek Nation, Wauzhushk Onigum Nation, Big Grassy First Nation, Onigaming First Nation, Naotkamegwanning First Nation, Niisaachewan First Nation, Coalition of the Union of British Columbia Indian Chiefs, Penticton Indian Band, Williams Lake First Nation, Federation of Sovereign Indigenous Nations, Atikameksheng Anishnawbek First Nation, Kwantlen First Nation, Assembly of First Nations, Assembly of First Nations Quebec‑Labrador, Grand Council Treaty #3, Mohawk Council of Kahnawà:ke, Elsipogtog First Nation, Chemawawin Cree Nation and West Moberly First Nations Interveners
Indexed as: Southwind v. Canada
2021 SCC 28
File No.: 38795.
2020: December 8; 2021: July 16.
Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.
on appeal from the federal court of appeal
Aboriginal law — Fiduciary duty — Reserve land — Remedy — Equitable compensation — Part of First Nation's reserve land flooded to power hydroelectricity generation without consent of First Nation, without compensation and without lawful authorization — C laim filed against Canada for breach of fiduciary duty and of obligations under Indian Act and applicable treaty — Trial judge concluding that Canada breached fiduciary duty to First Nation and awarding equitable compensation for loss of flooded land — Whether trial judge erred in assessment of equitable compensation.
The Lac Seul First Nation ("LSFN") is a Treaty 3 First Nation in Northern Ontario. Its reserve is located on the southeastern shore of Lac Seul. In 1929, a dam to power hydroelectricity generation to Winnipeg was completed pursuant to an agreement that Canada, Ontario and Manitoba had entered into. The project involved raising the water level of Lac Seul by 10 feet, or approximately 3 metres, to create a water reservoir. Canada was aware from the outset that flooding Lac Seul would cause considerable damage to the LSFN's reserve. Despite repeated warnings about these impacts, the project advanced without the consent of the LSFN, without any compensation, and without the lawful authorization required. As a result of the project, almost one‑fifth of the best land on the LSFN reserve was permanently flooded. The damage was extensive and included the destruction of homes, wild rice fields, gardens, haylands, and gravesites.
The LSFN submitted a claim for flooding damages in 1985. In 1991, S, for himself and on behalf of the members of the Lac Seul Band of Indians, filed a civil claim against Canada in Federal Court for breach of Canada's fiduciary duty and its obligations under the Indian Act and Treaty 3. The trial judge concluded that Canada failed to meet its fiduciary duty to the LSFN in respect of its reserve land and that the appropriate remedy was equitable compensation. The LSFN proposed various models of compensation at trial, and led evidence regarding agreements with another First Nation in contemporaneous hydroelectric projects ("Kananaskis Falls Projects"), which the trial judge distinguished. The trial judge valued the flooded land as if it had been lawfully expropriated according to general expropriation law. In doing so, he excluded the value of the land for hydroelectricity generation. He also assessed other calculable losses and non‑calculable damages for a total award of $30,000,000. On appeal, the LSFN challenged the trial judge's evaluation of equitable compensation for the loss of the flooded lands. The majority of the Court of Appeal dismissed the appeal. A dissenting judge would have allowed the appeal, agreeing that the value calculated for the flooded land should have taken into account downstream hydroelectricity generation and concluding that the trial judge also made a legal error in distinguishing the Kananaskis Falls Projects.
Held (Côté J. dissenting): The appeal should be allowed. The award for equitable compensation is set aside and returned to the Federal Court for reassessment.
Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Rowe, Martin and Kasirer JJ.: Canada breached its obligation to preserve and protect the LSFN's interest in the reserve, which included an obligation to negotiate compensation for the LSFN on the basis of the value of the land to the hydroelectricity project. The LSFN is entitled to equitable compensation for the lost opportunity to negotiate for an agreement reflecting the value of the land to the hydroelectricity generation project.
The specific nature of the Crown's fiduciary duty to Indigenous Peoples, especially over reserve land, informs how equitable compensation must be assessed. The Crown's fiduciary duty is rooted in the obligation of honourable dealing and in the overarching goal of reconciliation between the Crown and the first inhabitants of Canada. The honour of the Crown — and the sui generis fiduciary duty to which it gives rise — is a vital component of the relationship between the Crown and Indigenous Peoples. The Crown's fiduciary duty structures the role voluntarily undertaken by the Crown as the intermediary between Indigenous interests in land and the interest of settlers.
The fiduciary duty itself is shaped by the context to which it applies, which means that its content varies with the nature and the importance of the right being protected. A strong fiduciary duty arises where the Crown is exercising control over a First Nation's land. In a case involving reserve land, the sui generis nature of the interest in reserve land informs the fiduciary duty. The importance of the interest in reserve land is heightened where it was set aside as part of an obligation that arose out of a treaty. The fiduciary duty imposes the following obligations on the Crown: loyalty, good faith, full disclosure, and, where reserve land is involved, the protection and preservation of the First Nation's quasi‑proprietary interest from exploitation, including exploitation by the Crown itself. In the context of a surrender of reserve land, the Court has recognized that the duty also requires that the Crown protect against improvident bargains, manage the process to advance the best interests of the First Nation, and ensure that it consents to the surrender. In an expropriation, the obligation to ensure consent is replaced by an obligation to minimally impair the protected interest.
When the Crown breaches its fiduciary duty, the remedy will seek to restore the plaintiff to the position the plaintiff would have been in had the Crown not breached its duty. Equitable compensation is the preferred remedy when restoring the plaintiff's assets in specie is not available. It is a discretionary and restitutionary remedy that is assessed rather than precisely calculated. As its purpose is to make up the plaintiff's loss, it aims to restore the actual value of the thing lost through the fiduciary's breach, referred to as the plaintiff's lost opportunity. By restoring the beneficiary's lost opportunity, it deters wrongdoing and enforces the trust at the heart of the fiduciary relationship. While equitable compensation is equity's counterpart to common law damages, analogy with common law damages may not be appropriate given equity's purpose, which differs from the purpose of obligations through tort and contract.
The proper approach to equitable compensation recognizes that the applicable rules will depend both on the nature of the fiduciary relationship and the fiduciary obligations. The trial judge must begin by closely analyzing the nature of the fiduciary relationship so as to ensure that the loss is assessed in relation to the obligations owed by the fiduciary. The loss must be caused in fact by the fiduciary's breach, and the causation analysis is not limited by foreseeability, that is, remoteness. While the fiduciary's breach must have caused, in fact, the plaintiff's lost opportunity, common law limiting factors developed in legal causation will not readily apply. There must be a close relationship between the fiduciary duty and the fiduciary remedy. Because equity assesses the loss at the date of trial and with the benefit of hindsight, it compensates the plaintiff for the lost opportunity, regardless of whether the opportunity could have been foreseen at the time of the breach. The benefit of hindsight means that the most valuable use of the asset between breach and date of trial is not always foreseeable at the time of breach. The assessment of equitable compensation is also guided by presumptions that equity makes against breaching fiduciaries.
In the instant case, the trial judge's reasons are tainted by legal errors reviewable on a correctness standard. The trial judge erred in concluding that a hypothetical expropriation — the minimum statutory obligation — would have fulfilled Canada's fiduciary obligations. This legal error impacted his assessment of equitable compensation because it led him to rely on general principles of expropriation law to value the loss and to conclude that compensation would not be assessed at a higher value than the minimum required under an expropriation. The fundamental error of the trial judge was that he focused on what Canada would likely have done instead of what Canada ought to have done as a fiduciary.
The fiduciary duty required more than compensation based upon expropriation principles in this case for three reasons. First, the presence of legal discretion to take or expropriate the land in the Indian Act did not define the obligations imposed by Canada's fiduciary duty. The fiduciary duty, not just the Indian Act, imposed substantive obligations on how Canada was to exercise its discretion over the reserve land. The provisions in the Indian Act accommodated the exercise of the Crown's fiduciary duty by recognizing the discretion of the Crown to negotiate, or the discretion of the Governor in Council to determine the terms of a taking or expropriation. There was therefore no conflict between the requirements of the Indian Act and the requirements imposed by the fiduciary duty. The equitable presumption of legality or lawfulness, which prevents breaching fiduciaries from reducing compensation by arguing that they would not have complied with the law, is of little assistance in determining either the fiduciary obligations or the assessment of loss. The presumption cannot be inverted and used to limit compensation by suggesting that the fiduciary is expected to do no more than what the law, not equity, requires. Moreover, Canada's legal powers to expropriate cannot be considered as a factor to limit compensation. Canada is not permitted to benefit from the very discretionary power over the LSFN which is the source of its fiduciary duty.
Second, the fiduciary duty required more than compensation based upon expropriation principles because the fact that the land was required for a public work did not negate the obligations imposed by Canada's fiduciary duty. The fiduciary duty continues to apply even if the land is needed for a public work. While the Crown can decide that a public work is in the public interest and should thus proceed, the manner in which it proceeds is subject to the fiduciary duty.
Third, the fiduciary duty required more than compensation based upon expropriation principles because the principles of expropriation law are fundamentally different than those underlying Indigenous interest in land. Expropriation law is not the appropriate legal framework governing historic breaches of the Crown's fiduciary duty to protect a First Nation's interest in reserve land. The fiduciary obligations in this case must reflect the nature of the interest, the impact of the loss on the First Nation, the importance of the relationship, and reconciliation, which is the overarching goal of the fiduciary duty itself, based in the honour of the Crown. In the context of an expropriation or taking, the Crown is required to minimally impair the protected interest. Where the Crown decides that reserve land is necessary for a public work and takes that land without the consent of the First Nation, the fiduciary duty requires the Crown to seriously consider the impact on the First Nation and how best to minimize that impact. As a fiduciary, the Crown has the duty to preserve the First Nation's quasi‑proprietary interest in the land as much as possible and to ensure fair compensation reflecting the sui generis interest.
The duty to preserve the interest to the greatest extent possible is not met if expropriation principles are applied in this case. Even though the expropriation value considers the highest and best use of the land at the time of expropriation, this generally does not include the value of the land to the scheme itself because expropriation law seeks to provide landowners with the compensation necessary to purchase replacement land. Conversely, sui generis Indigenous interests in land are fundamentally different as reserve land is not a fungible commodity and Indigenous interests in land are at the centre of the relationship between the Crown and Indigenous Peoples. Instead, given the LSFN's sui generis interest in the reserve land and the impact on the LSFN, the duty required Canada to capture the full potential value of the land for the land's intended use, notwithstanding its legal power to expropriate. Canada must always keep the First Nation informed, attempt to negotiate a surrender before proceeding to an expropriation, and ensure compensation reflecting the nature of the interest and the impact on the community.
Canada ought to have first attempted to negotiate a surrender. Canada's fiduciary obligations required it to ensure the highest compensation possible, including compensation for the land's anticipated use as land for hydroelectricity generation. If negotiations for a surrender of the land were unsuccessful, Canada could have proceeded through a taking or expropriation, but even in an expropriation, Canada was required to preserve the LSFN's interest in the land to the greatest extent possible and should have secured compensation for the LSFN that reflected the nature of the interest, the impact on the community, and the value of the land to the project.
The lost opportunity in this case is the opportunity to negotiate a surrender reflecting the highest value of the land, which was its use for hydroelectricity generation: the LSFN is entitled to compensation for that lost opportunity. The valuation of the LSFN's lost opportunity must reflect Canada's obligation to negotiate compensation based upon the best price that could have been obtained for the land's use for hydroelectricity generation. In this case, the presumption of highest and best use means that the land should be valued on the basis of its actual use as flooded land for hydroelectricity generation and allows equitable compensation to focus on a successful negotiated surrender because that more clearly aligns with the nature of the breach, which included a failure to keep the LSFN informed and a failure to prevent the project from proceeding until the negotiations for compensation had been resolved. Equity can presume that the LSFN would have consented to a negotiated settlement at the best price the Crown could have realistically obtained at the time. The value of the flooded land must be reassessed.
Per Côté J. (dissenting): There is no basis to interfere with the trial judge's equitable compensation assessment. The trial judge assessed compensation for the value of the flooded lands in 1929 based on a thorough examination of the facts as established in the record. As there is no reviewable error in the trial judge's analysis, the appeal should be dismissed.
S and the LSFN have not established a basis for interfering with the trial judge's valuation. The trial judge's determination that the LSFN should have been compensated through a one‑time payment in 1929 based on an expropriation model is not an extricable error, and thus not reviewable on a correctness standard. The trial judge's findings regarding what would have actually happened in 1929 had Canada not breached its duty to the LSFN are factual determinations, not legal ones. No particular findings of fact by the trial judge have been identified as constituting a palpable and overriding error.
The trial judge made no reviewable errors. The trial judge applied settled principles of equitable compensation, including the special importance of its deterrent effect in furthering the ongoing project of reconciliation between Canada and Indigenous peoples. He looked back to when the breach occurred, and, with the benefit of hindsight and the evidentiary record, assessed what position the LSFN would have been in but for the breach. He determined that, had Canada acted legally, it would have taken the reserve lands in 1929 through expropriation or surrender. Based on the evidence before him, the trial judge assessed the losses presuming the highest and best use and with the benefit of hindsight.
While there is agreement with the majority that equitable compensation in this case should be assessed on the basis of a negotiated surrender, there is disagreement with the majority's view that the lost opportunity equates to a lost opportunity to negotiate a surrender of the lands for hydroelectricity generation. The value of the compensation that Canada should have negotiated for the LSFN cannot be assessed in an evidentiary or factual vacuum and the majority seeks to impose a greater obligation on a trial judge than the law demands. The majority's characterization presupposes that the trial judge had the requisite factual basis to make such a finding, while it is clear from the record that he did not. At trial, no evidence was provided regarding a one‑time payment for the flooded lands for hydroelectric purposes. S and the LSFN must bear the consequences of their trial strategy, even though they have changed tack on appeal. Therefore, the trial judge was correct to find that the argument that Canada could, and should, have paid more than fair market value for the lands was nothing more than optimistic speculation.
The trial judge's determination regarding the comparability of the Kananaskis Falls Projects and the Lac Seul situation is a factual determination. His finding that the Kananaskis Falls Projects were not a relevant proxy was supported by the limited evidence before him. That evidence does not substantiate a finding that he made a palpable and overriding error in refusing to award a sum in excess of the fair market value of the lands. It is simply speculation to conclude that Canada's differing approach for the Kananaskis Falls Projects leads to the conclusion that it breached its duty in this case.
Moreover, the trial judge's inclusion of a robust non‑calculable loss analysis allowed him to meaningfully consider the impact of the flooding on the LSFN. He appropriately acknowledged and incorporated the impact on the community and the LSFN's perspective in his analysis. The total equitable compensation awarded ensures that S and the LSFN are compensated for the value of the lands.
Cases Cited
By Karakatsanis J.
Applied: Guerin v. The Queen, [1984] 2 S.C.R. 335; Osoyoos Indian Band v. Oliver (Town), 2001 SCC 85, [2001] 3 S.C.R. 746; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; distinguished: Wewaykum Indian Band v. Canada, 2002 SCC 79, [2002] 4 S.C.R. 245; considered: Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534; referred to: Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, [2004] 3 S.C.R. 511; R. v. Desautel, 2021 SCC 17, [2021] X S.C.R. XXX; Beckman v. Little Salmon/Carmacks First Nation, 2010 SCC 53, [2010] 3 S.C.R. 103; R. v. Sparrow, [1990] 1 S.C.R. 1075; Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, [2013] 1 S.C.R. 623; R. v. Van der Peet, [1996] 2 S.C.R. 507; Williams Lake Indian Band v. Canada (Aboriginal Affairs and Northern Development), 2018 SCC 4, [2018] 1 S.C.R. 83; Ermineskin Indian Band and Nation v. Canada, 2009 SCC 9, [2009] 1 S.C.R. 222; Blueberry River Indian Band v. Canada (Department of Indian Affairs and Northern Development), [1995] 4 S.C.R. 344; Re Dawson; Union Fidelity Trustee Co. v. Perpetual Trustee Co. (1966), 84 W.N. (Pt. 1) (N.S.W.) 399; Hodgkinson v. Simms, [1994] 3 S.C.R. 377; Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 87 O.R. (3d) 321; Stirrett v. Cheema, 2020 ONCA 288, 150 O.R. (3d) 561; AIB Group (UK) plc v. Mark Redler & Co. Solicitors, [2014] UKSC 58, [2015] A.C. 1503; Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142; Target Holdings Ltd. v. Redferns, [1996] 1 A.C. 421; Brickenden v. London Loan & Savings Co., [1934] 3 D.L.R. 465.
By Côté J. (dissenting)
Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 87 O.R. (3d) 321; Guerin v. The Queen, [1984] 2 S.C.R. 335; Modern Cleaning Concept Inc. v. Comité paritaire de l'entretien d'édifices publics de la région de Québec, 2019 SCC 28, [2019] 2 S.C.R. 406; Nelson (City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Mahjoub v. Canada (Citizenship and Immigration), 2017 FCA 157, [2018] 2 F.C.R. 344; Hodgkinson v. Simms, [1994] 3 S.C.R. 377; National Westminster Bank plc v. Morgan, [1985] 1 All E.R. 821.
Statutes and Regulations Cited
Constitution Act, 1982, s. 35.
Expropriation Act, R.S.C. 1985, c. E‑21.
Expropriations Act, R.S.O. 1990, c. E.26.
Indian Act, R.S.C. 1927, c. 98, ss. 48, 50, 51.
Royal Proclamation, 1763 (G.B.), 3 Geo. 3 [reproduced in R.S.C. 1985, App. II, No. 1].
Unemployment Relief Act, 1930, S.C. 1930, c. 1.
Treaties and Agreements
Treaty No. 3 (1873).
Authors Cited
Bray, Samuel L. "Fiduciary Remedies", in Evan J. Criddle, Paul B. Miller and Robert H. Stikoff, eds., The Oxford Handbook of Fiduciary Law. New York: Oxford University Press, 2019, 449.
Luk, Senwung. "Not So Many Hats: The Crown's Fiduciary Obligations to Aboriginal Communities since Guerin" (2013), 76 Sask. L. Rev. 1.
Mainville, Robert. An Overview of Aboriginal and Treaty Rights and Compensation for Their Breach. Saskatoon: Purich Publishing, 2001.
McCabe, J. Timothy S. The Honour of the Crown and its Fiduciary Duties to Aboriginal Peoples. Markham, Ont.: LexisNexis, 2008.
Oosterhoff on Trusts: Text, Commentary and Materials, 9th ed. by Albert H. Oosterhoff, Robert Chambers and Mitchell McInnes. Toronto: Carswell, 2019.
Rotman, Leonard I. Fiduciary Law. Toronto: Thomson/Carswell, 2005.
Rotman, Leonard I. "Understanding Fiduciary Duties and Relationship Fiduciarity" (2017), 62 McGill L.J. 975.
Slattery, Brian. "The Aboriginal Constitution" (2014), 67 S.C.L.R. (2d) 319.
APPEAL from a judgment of the Federal Court of Appeal (Nadon, Webb and Gleason JJ.A.), 2019 FCA 171, [2020] 1 F.C.R. 745, 89 C.L.R. (4th) 1, 15 L.C.R. (2d) 99, [2019] F.C.J No. 672 (QL), 2019 CarswellNat 2362 (WL Can.), affirming a decision of Zinn J., 2017 FC 906, 74 C.L.R. (4th) 4, [2018] 4 C.N.L.R. 63, 6 L.C.R. (2d) 73, [2017] F.C.J. No. 966 (QL), 2017 CarswellNat 5620 (WL Can.). Appeal allowed, Côté J. dissenting.
Rosanne Kyle and Elin Sigurdson, for the appellants.
Christopher Rupar and Michael Roach, for the respondent.
P. Mitch McAdam, Q.C., for the intervener the Attorney General of Saskatchewan.
Carly Fox, for the intervener the Assembly of Manitoba Chiefs.
Christopher Devlin, for the intervener the Tseshaht First Nation.
Kate Kempton, for the intervener Manitoba Keewatinowi Okimakanak Inc.
Harley Schachter, for the intervener the Treaty Land Entitlement Committee of Manitoba Inc.
Cynthia Westaway, for the intervener the Anishinabek Nation.
David G. Leitch, for the intervener the Wauzhushk Onigum Nation.
Donald R. Colborne, for the interveners the Big Grassy First Nation, the Onigaming First Nation, the Naotkamegwanning First Nation and the Niisaachewan First Nation.
Peter Millerd, for the interveners the Coalition of the Union of British Columbia Indian Chiefs, the Penticton Indian Band and the Williams Lake First Nation.
Ronald S. Maurice, for the intervener the Federation of Sovereign Indigenous Nations.
Steven W. Carey, for the intervener the Atikameksheng Anishnawbek First Nation.
Tim Dickson, for the intervener the Kwantlen First Nation.
Stuart Wuttke, for the intervener the Assembly of First Nations.
Benoît Amyot, for the intervener the Assembly of First Nations Quebec‑Labrador.
Kate Gunn, for the intervener the Grand Council Treaty #3.
Stacey Douglas, for the intervener the Mohawk Council of Kahnawà:ke.
Alisa R. Lombard, for the intervener the Elsipogtog First Nation.
Catherine J. Boies Parker, Q.C., for the intervener the Chemawawin Cree Nation.
Reidar M. Mogerman, Q.C., for the intervener the West Moberly First Nations.
The judgment of Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Rowe, Martin and Kasirer JJ. was delivered by
Karakatsanis J. —
[ 1 ] Karakatsanis J. — At the beginning of the twentieth century, Canada needed more electricity to fuel Winnipeg's economic growth. The governments of Canada, Manitoba, and Ontario decided to create a water reservoir in northern Ontario to power hydroelectricity generation. They settled on Lac Seul, which flows into both Ontario and Manitoba, and determined that if they raised the water level of Lac Seul by 10 feet, or approximately 3 metres, they could generate substantial electricity. Construction of the dam was completed in 1929 and the water steadily rose through the 1930s. The project was a success for the three governments.
[ 2 ] The project was also a tragedy for the Lac Seul First Nation (LSFN). The LSFN's reserve (Reserve) is located on the southeastern shore of Lac Seul. Almost one-fifth of its best land was flooded and its members were "deprived of their livelihood, robbed of their natural resources, and driven out of their home[s]" (2017 FC 906, [2018] 4 C.N.L.R. 63, at para. 156).
[ 3 ] This appeal is about how to compensate the LSFN for Canada's breach of its fiduciary duty in respect of the Reserve. It turns on the role of equity in remedying historic breaches of the Crown's fiduciary duty to Indigenous Peoples over reserve land. To understand how to compensate the LSFN, we must first understand what Canada's fiduciary duty required.
[ 4 ] The LSFN's reserve land was not a fungible commodity. It was set aside for the LSFN under Treaty 3, where Canada undertook to provide reserves that would be "most convenient and advantageous" for the LSFN. It was part of a broader relationship between the Crown and the Indigenous inhabitants of Canada. Critically, it was part of the land on which the LSFN lived. The damage done to the LSFN was not simply the loss of some bushland. It was the flooding of nearly one-fifth of its best land, which the LSFN had lived on and which was central to its existence as a community.
[ 5 ] Since the Royal Proclamation, 1763 (G.B.), 3 Geo. 3 (reproduced in R.S.C. 1985, App. II, No. 1), Indigenous interests in land, including reserve land, cannot be taken or used without legal authorization. The Crown's fiduciary duty structures the relationship between the Crown and Indigenous Peoples and defines the terms under which the Crown may dispose of Indigenous interests in land.
[ 6 ] The trial judge concluded that Canada failed to meet its fiduciary duty to the Lac Seul First Nation in respect of its interest in Reserve land. On appeal, Canada does not dispute this conclusion. The sole question before this Court is what remedy flows from Canada's breach of its fiduciary duty.
[ 7 ] Canada did not keep the LSFN informed about the project; did not consult the LSFN; did not negotiate on the LSFN's behalf to get the best compensation possible; did not use its power to refuse to allow the project to proceed; and did not secure any legal authorization for the taking. Canada allowed the flooding to happen anyway, knowing it would cause catastrophic damage to the LSFN. Canada waited decades before providing any compensation.
[ 8 ] The results of Canada's failures are tragic and well documented. Roughly 17 percent of the Reserve — 11,304 acres or approximately 4,575 hectares — is now permanently flooded. Homes were destroyed; the community was displaced; gardens, hayland, and wild rice fields were ruined; gravesites were desecrated; travel by waterway was impeded; hunting and trapping grounds were damaged. These losses were not only material, but also cultural, spiritual, and communal. Some are ongoing.
[ 9 ] The LSFN challenges the trial judge's evaluation of equitable compensation for the loss of the flooded lands. The issue for this Court is how to assess equitable compensation for the loss caused by Canada's breach.
[ 10 ] The trial judge valued the flooded land based on its value in 1929, with 10 percent valued as waterfront land and 90 percent valued as bushland. He determined that because Canada was authorized to expropriate the land for the Project, Canada's fiduciary duty only required it to pay what it would have had to pay had it lawfully expropriated the land in 1929 — compensation according to general expropriation law. This excluded the value of the land to the hydroelectricity generation. He also valued other calculable and non-calculable damages.
[ 11 ] In my view, this approach to equitable compensation for breach of fiduciary duty is flawed. By looking solely at the amount the LSFN would have received if Canada had complied with the general law of expropriation, the trial judge did not ask whether expropriation principles were consistent with the fiduciary duty. In the context of this case, Canada's specific fiduciary duty to preserve and protect the LSFN's interest in the Reserve required more than expropriation compensation for the flooded land.
[ 12 ] The fiduciary duty imposes heavy obligations on Canada. The duty does not melt away when Canada has competing priorities. Canada was under an obligation to preserve and protect the LSFN's interest in the reserve, including an obligation to negotiate compensation for the LSFN on the basis of the value of the land to the project. Canada did not fulfill that obligation. The LSFN is entitled to equitable compensation for the lost opportunity to negotiate for an agreement reflecting the value of the land to the hydroelectricity generation project.
[ 13 ] I would allow the appeal and remit the case back to the Federal Court for reassessment of the equitable compensation to include the value of the flooded land to the hydroelectricity project.
I. Background
[ 14 ] The LSFN is a Treaty 3 First Nation in Northern Ontario. The members are Anishinaabe people. According to Chief Clifford Bull, they have always been lake dwellers who travelled through the waterways and "made their living" from the land and the lake (Trial Reasons, at para. 3).
[ 15 ] The LSFN's traditional territory extends from the Trout Lake region in northwestern Ontario, southeast through the Lac Seul region, and northeast towards Lake St. Joseph. The LSFN has one Reserve, Reserve No. 28, on the southeastern shore of Lac Seul.
[ 16 ] The Reserve was created under Treaty 3, which required Canada to select and set aside reserves that would be "most convenient and advantageous for each band or bands of Indians". In 1875, the Lac Seul Reserve was formally surveyed and set aside.
[ 17 ] In the early twentieth century, Canada wanted to provide more electricity to Winnipeg. By 1911, Canada identified Lac Seul as a potential reservoir for hydroelectricity generation (Project). Lac Seul was particularly suitable because it was connected to the English River system and the Winnipeg River system.
[ 18 ] In the same year, the Manitoba Hydrographic Survey began preliminary fieldwork. Chief John Akewance of the LSFN first became aware of the potential Project through the fieldwork, and wrote to Indian Affairs to inquire. He was told it was a "routine survey" (Trial Reasons, at para. 126).
[ 19 ] The fieldwork report was released in 1916 and noted that the Project would flood portions of the Reserve. In 1917, Canada recommended to Ontario that it obtain flowage rights over the land that would be flooded and compensate the LSFN. The memorandum read:
If after negotiation the offer is accepted on behalf of the Indians, or amended and so accepted, the amount of compensation agreed upon is deposited with the Minister of Finance for the use of the band.
(Trial Reasons, at para. 132)
Canada wrote to Ontario again in 1921 urging that they reserve the flooding rights. There is no record of a response.
[ 20 ] In 1924, Chief Paul Thomas met with Indian Agent Frank Edwards to express the LSFN's concerns. Agent Edwards told Chief Thomas that Canada would "protect their interests as far as possible" (Trial Reasons, at para. 140).
[ 21 ] In February 1928, Canada, Ontario, and Manitoba entered into the Lac Seul Storage Agreement which governed the construction and ownership of the Project. The agreement apportioned the capital costs and the benefits (hydro-electric energy) to Ontario and Manitoba. Canada's role was to build and maintain the project infrastructure, including the dam.
[ 22 ] In April 1928, Ontario wrote to affected landowners regarding the Project. Ontario also notified the Department of Indian Affairs and indicated that the water levels would be raised by approximately 10 feet. The local Indian Agent wrote a letter to Indian Affairs pleading with it to protect the LSFN:
There are 688 Indians on the reserve, who are helpless to avert this calamity, and who view the future with utter dismay, but I feel that the associated governments concerned, will not permit these Indians to suffer this great loss without adequate compensation and protection.
(Trial Reasons, para. 156)
[ 23 ] On May 17, 1929, the Deputy Superintendent General of Indian Affairs wrote to his superior that "[t]he situation is certainly serious; and hardship and disaster appear to face these poor Indian people. No steps have been taken to compensate them" (Trial Reasons, at para. 158). The dam was completed in 1929.
[ 24 ] Ontario applied for necessary approvals in July 1928. The application noted that "[i]t will be necessary in connection with the proposed work to acquire flowage rights over lands on an Indian Reserve" (Trial Reasons, at para. 162). There was never any legal authorization for flooding the Reserve.
[ 25 ] The flooding of Lac Seul was delayed by disagreements between Canada and Ontario regarding timber clearing. Ontario wanted to harvest its Crown timber prior to flooding. To resolve the impasse, Canada agreed to employ Indigenous workers to cut and clear the timber, initially through Indian Affairs, and then through the Unemployment Relief Act, 1930, S.C. 1930, c. 1.
[ 26 ] In July 1933, Canada's Minister of the Interior signed the agreement for the relief project. A week later, the local Indian Agent and the timber supervisor assured the LSFN that the water would not rise further during the clearing work (Trial Reasons, at para. 181). These assurances were false.
[ 27 ] Despite the assurances given to the LSFN, the waters of Lac Seul began to rise in 1934. The damage was extensive. Agent Edwards estimated that at least 29 houses would need to be rebuilt — in the end, 35 homes were relocated. In a letter to the Secretary of State of Canada, the Director of Indian Affairs wrote:
. . . the Lac Seul Indian Reserve has been flooded to such a serious extent that we have been compelled already to construct many new houses for the Indians at a cost of $25,000 and the flood conditions will be continuing for several years . . .
. . . The Indians of this Reserve have been definitely assured that their interests would be fully protected and they are at present much disturbed and alarmed at the damage already caused. [Emphasis added.]
(Trial Reasons, at para. 192)
[ 28 ] In March 1937, Mr. Bury wrote a memorandum regarding the ongoing failure to provide compensation. He wrote:
I desire to again draw your attention to the serious breach of faith that our Department has made with the Indians of the Lac Seul Reserve, respecting promises made to them regarding flooding compensation . . .
I consider that these Indians have been very shabbily treated. Their Reserve lands, timber, houses, gardens, rice beds, musk-rat swamps have been flooded now for some years, and we still procrastinate.
(Trial Reasons, at para. 194)
[ 29 ] Negotiations between Canada and Ontario continued. In 1940, Ontario determined that $50,000 would be a "fair valuation" of compensation, but Ontario also claimed it was owed compensation for what it claimed was excess acreage taken from it by Canada.
[ 30 ] In 1943, Canada and Ontario finally agreed to a claim amount of $72,539, with deductions of $5,000 to pay a timber claim submitted by a lumber company and $17,276 to pay Ontario for "excess acreage". The net compensation of $50,263 was paid to the LSFN. No compensation was paid for the use of Reserve land as a reservoir for the generation of electricity.
[ 31 ] By contrast, Ontario and Canada negotiated compensation with other non-Indigenous groups whose property fell within the flood plain of the dam project, such as the Anglican Church Missionary Society and the Hudson's Bay Company.
[ 32 ] Canada's conduct towards the LSFN also differs from its conduct in three earlier projects that impacted another First Nation. In the early 1910s, Calgary Power and Transmission sought permission to use reserve land for hydroelectric purposes along the Bow River. Canada negotiated compensation on behalf of the Stoney Indian Band (now Stoney Nakoda Nation) as part of the Kananaskis Falls Projects.
[ 33 ] Here, there was never a negotiated surrender of the land by the LSFN and Canada did not at any point expropriate the land in accordance with the provisions of the Indian Act. Nonetheless, the land was flooded.
[ 34 ] In September 1985, the LSFN submitted a claim for flooding damages to the Specific Claims Branch of the Department of Indian and Northern Affairs Canada. In 1991, Roger Southwind, for himself and on behalf of the members of the Lac Seul Band of Indians, filed a civil claim against Canada in Federal Court for breach of Canada's fiduciary duty and its obligations under the Indian Act and Treaty 3.
A. Trial Decision, 2017 FC 906, [2018] 4 C.N.L.R. 63 (Zinn J.)
[ 35 ] In 1991, Roger Southwind, for himself and on behalf of the members of the Lac Seul Band of Indians, filed a civil claim against Canada in Federal Court for breach of Canada's fiduciary duty and its obligations under the Indian Act and Treaty 3. This trial concluded in 2015. The trial judge, Zinn J., issued reasons in 2017.
[ 36 ] The parties called 24 witnesses, 22 of whom were expert witnesses whose testimony included how to value the loss and bring that loss forward to present value. The plaintiff proposed various models of compensation at trial, including a revenue-sharing agreement (the primary claim), compensation based on the "use" of the flooded land for electricity generation purposes, and compensation based on analogous agreements with other First Nations for similar purposes (Kananaskis Falls Projects).
[ 37 ] The trial judge held that Canada owed the LSFN a fiduciary duty in respect of land reserved for its benefit under Treaty 3. He particularized the following obligations: a duty of loyalty and good faith to the LSFN in the discharge of its mandate as trustee of the Reserve land; a duty to provide full disclosure to, and consultation with, the LSFN; a duty to act with ordinary prudence with a view to the best interests of the LSFN; a duty to protect and preserve the LSFN from improvident bargains; and a duty to protect and preserve the LSFN's quasi-proprietary interest from exploitation. He found that Canada failed to meet those obligations.
[ 38 ] Canada accepted that equitable compensation was the appropriate remedy for breach of fiduciary duty. The trial judge summarized the principles of equitable compensation as follows: (1) the goal is to restore the plaintiff to the position the plaintiff would have been in had the defendant not breached its duty; (2) equitable compensation is not limited by remoteness or foreseeability; (3) the court can consider the most beneficial use of trust property; and (4) equitable compensation is assessed as of the date of the judgment with the benefit of hindsight.
[ 39 ] In applying these principles, the trial judge focused on what would have happened had Canada not breached its duties. He determined that the Project was a public work and it would have been completed regardless because Canada could have expropriated the land under s. 48 of the Indian Act. He then considered whether Canada was under a fiduciary duty to obtain more than the amount required by general expropriation law. He concluded it was not: he viewed Canada's fiduciary duty as requiring only that Canada provide fair compensation based on expropriation law.
[ 40 ] In light of these findings, the trial judge determined that Canada would have likely obtained a negotiated settlement for a flowage easement or expropriated the land for the limited purpose of a flowage easement, applying general expropriation principles. Under the general rules of expropriation, this excluded any value from the use of the LSFN's land to power the downstream hydroelectricity generation. Using this method, the expert relied on by the trial judge, Mr. Bell, assessed the value of the flooded land at $1.29 per acre for a total of $14,596. This was brought forward to present value at $3,272,572.
[ 41 ] The trial judge then assessed other calculable losses. He ordered $13,847,870 in calculable damages. The calculable damages included: $3,272,572 for the hypothetical flowage easement, based on general expropriation principles; $2,219,168 in damages for the loss of the timber on the Reserve; $1,395,000 for damages relating to 35 relocated houses; $1,220,000 for the cost of cleaning the foreshore; $1,000,000 for the loss of the LSFN dock; $1,225,000 for the loss of wild rice crops; $1,500,000 for hay land losses; $450,000 for garden losses; and $1,566,130 for the loss of hunting, trapping, and fishing.
[ 42 ] The trial judge also added $16,152,130 in non-calculable damages for a total award of $30,000,000. The trial judge assessed the non-calculable losses based on factors including the amount of the calculable losses, the impact on the community and the LSFN's perspective, and the importance of the deterrent function of equitable compensation.
B. Appeal Decision, 2019 FCA 171, [2020] 1 F.C.R. 745 (per Nadon and Webb JJ.A., Gleason J.A. Dissenting)
[ 43 ] Roger Southwind, for himself, and on behalf of the members of the Lac Seul Band of Indians and the Lac Seul First Nation (LSFN or Appellant), appealed the assessment of equitable compensation to the Federal Court of Appeal.
[ 44 ] In dissent, Gleason J.A. would have allowed the appeal. While she rejected the primary argument that the breach resulted in the loss of a revenue-sharing agreement, she agreed that the value calculated for the flooded land should have taken into account downstream hydroelectricity generation and concluded that the trial judge also made a legal error in distinguishing the Kananaskis Falls Projects. She would have allowed the appeal to that extent and returned the matter to trial for a recalculation.
[ 45 ] For the majority, Nadon J.A. (Webb J.A. concurring) dismissed the appeal. He disagreed with Gleason J.A. that the trial judge committed any error of law or any palpable and overriding error. Moreover, in his view, a revenue-sharing agreement was not analogous to any known compensation model for expropriation.
C. Applicable Provisions
[ 46 ] The provisions of the Indian Act in force in 1929 provided two ways to remove land from a reserve. Section 48 governed takings for a public purpose:
- No portion of any reserve shall be taken for the purpose of any railway, road, public work, or work designed for any public utility without the consent of the Governor in Council, but any company or individual desiring to appropriate reserve lands for such purposes may, with the consent of the Governor in Council, and upon such terms as the Governor in Council may prescribe, take such lands for such purpose, and shall pay such compensation therefor as may be agreed upon between the Minister and the band or as may be fixed by arbitration in the manner provided for by the Expropriation Act.
[ 47 ] Land could also be surrendered by consent under ss. 50 and 51.
[ 48 ] Treaty 3 states:
And Her Majesty the Queen hereby agrees and undertakes to lay aside reserves for farming lands, due respect being had to lands at present cultivated by the said Indians, and also to lay aside and reserve for the benefit of the said Indians, to be administered and dealt with for them by Her Majesty's Government of the Dominion of Canada, in such a manner as shall seem best, other lots to enable the Indians to earn a livelihood by agriculture.
It is further agreed between Her Majesty and Her said Indians that such sections of the reserves above indicated as may at any time be required for Public Works or buildings of what nature soever may be appropriated for that purpose by Her Majesty's Government of the Dominion of Canada, due compensation being made to the Indians for the value of any improvements thereon, and an equivalent in land if requested or in money at the option of the Government.
II. Parties' Submissions
[ 49 ] The LSFN submits that the courts below erred in their application of the principles of equitable compensation. The central issue is how to compensate the LSFN in a manner that accords with equitable principles of compensation, and in particular whether the fiduciary duty required Canada to compensate the LSFN for the value of the lands as flooded land for hydroelectricity generation.
[ 50 ] Canada submits that the trial judge fairly compensated the LSFN for its losses. On the merits of the appeal, Canada submits that the principles of equitable compensation are settled and were properly applied by the trial judge. Canada accepts that there was a breach of its fiduciary duty and agrees equitable compensation is the appropriate remedy.
[ 51 ] Canada also submits that the LSFN is improperly making a new argument before this Court by asking that the land be valued on the basis of its use for flooding purposes. The pleadings, Canada argues, limited the argument to compensation for a revenue-sharing agreement.
III. Analysis
[ 52 ] The issue in this appeal is whether the trial judge erred in his assessment of equitable compensation, specifically in relation to the value of the flooded land. To determine whether the trial judge erred, and to determine what is the correct assessment of the LSFN's loss, I must first consider the nature of Canada's fiduciary duty to the LSFN in respect of the Reserve land.
[ 53 ] My analysis proceeds in three parts. First, I consider the relevant principles of the Crown's relationship to Indigenous Peoples, and more specifically of the fiduciary duty that may arise. Second, I consider the principles of equitable compensation. Third, I apply these principles to the specific breach of the Crown's fiduciary duty in this case.
A. Canada's Fiduciary Duty to Indigenous Peoples
[ 54 ] The existence of a fiduciary duty is not in dispute in this appeal. Canada does not contest the trial judge's determination that Canada owed a fiduciary duty to the LSFN and breached that duty. The question is how to assess the remedy for that breach. However, the proper approach to remedying the breach depends on the nature of the duty and what the duty required. Understanding the fiduciary duty is thus essential to remedying the breach.
[ 55 ] The Crown's fiduciary duty is rooted in the obligation of honourable dealing and in the overarching goal of reconciliation between the Crown and the first inhabitants of Canada (Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, [2004] 3 S.C.R. 511, at para. 32). The honour of the Crown, and the sui generis fiduciary duty to which it gives rise, is a vital component of the relationship between the Crown and Indigenous Peoples. As this Court held in R. v. Desautel, 2021 SCC 17, [2021] X S.C.R. XXX, the treaty relationship between the Crown and Indigenous Peoples is ongoing and must be interpreted in light of the principle of the honour of the Crown.
[ 56 ] This Court first acknowledged a fiduciary duty in Guerin. In Guerin, Canada argued that it could not be subject to a fiduciary duty and, at best, the Crown's control over Indigenous interests in land represented a political trust. This Court rejected that argument: the Crown holds a true fiduciary duty — an enforceable obligation — to Indigenous Peoples.
[ 57 ] Through the Royal Proclamation, 1763, the Crown undertook discretionary control over these pre-existing Indigenous interests in land. The Proclamation provided: "And We do hereby strictly forbid, on Pain of our Displeasure, all our loving Subjects from making any Purchases or Settlements whatever, or taking Possession of any of the Lands above reserved, without our especial leave and Licence for that Purpose first obtained" (quoted in Guerin, at p. 376). This prohibition confirmed the Crown's control over alienation of Indigenous interests in land.
[ 58 ] In Osoyoos Indian Band v. Oliver (Town), 2001 SCC 85, [2001] 3 S.C.R. 746, Gonthier J., dissenting, but not on that point, clarified that the same fiduciary duty applies even where the reserve land is taken for a public purpose: "the Crown's duty as a fiduciary requires it to give first consideration to the best interests of the Band, including ensuring compensation that reflects the sui generis nature of the Bands' interest" (para. 54).
[ 59 ] Guerin set to rest the idea that the trust-like language of historic treaties, laws, and proclamations constituted a mere "political trust" unenforceable in courts. Instead, an enforceable sui generis fiduciary duty arises from the Crown's assumption of discretionary control over an existing Aboriginal interest (Guerin, at p. 376; Williams Lake Indian Band v. Canada (Aboriginal Affairs and Northern Development), 2018 SCC 4, [2018] 1 S.C.R. 83, at para. 44).
[ 60 ] Rooted in the honour of the Crown, the Crown's fiduciary duty exists to further a socially important relationship. It structures the role voluntarily undertaken by the Crown as the intermediary between Indigenous interests in land and the interest of settlers (Guerin, at pp. 376-78). As this Court has recognized more recently, the Crown's fiduciary duty arises from the Crown's underlying title and the Aboriginal right or title as well as the Crown's control over the process of alienation (Williams Lake, at paras. 43-44).
[ 61 ] However, not all aspects of this relationship are fiduciary in nature (Haida Nation, at para. 18; Wewaykum Indian Band v. Canada, 2002 SCC 79, [2002] 4 S.C.R. 245, at paras. 81 and 83). The strength of the Crown's fiduciary duty depends on the nature of the underlying Aboriginal interest and the Crown's discretionary control.
[ 62 ] The fiduciary duty itself is shaped by the context to which it applies, which means that its content varies with the nature and the importance of the right being protected (Williams Lake, at para. 46). A strong fiduciary duty arises where the Crown is exercising control over a First Nation's land.
[ 63 ] In a case involving reserve land, the sui generis nature of the interest in reserve land informs the fiduciary duty. Reserve land is not a fungible commodity. Instead, reserve land reflects the treaty relationship and the unique legal context of Indigenous interests in land. The importance of the interest in reserve land is heightened where it was set aside as part of an obligation that arose out of a treaty.
[ 64 ] The fiduciary duty imposes the following obligations on the Crown: loyalty, good faith, full disclosure, and, where reserve land is involved, the protection and preservation of the First Nation's quasi-proprietary interest from exploitation (Williams Lake, at para. 46; Wewaykum, at para. 86). The standard of care is that of a person of ordinary prudence in managing their own affairs (Williams Lake, at para. 46). In the context of a surrender of reserve land, this Court has recognized that the duty also requires that the Crown protect against improvident bargains, manage the process to advance the best interests of the First Nation, and ensure that it consents to the surrender (Blueberry River Indian Band v. Canada (Department of Indian Affairs and Northern Development), [1995] 4 S.C.R. 344, at paras. 35 and 96). In an expropriation, the obligation to ensure consent is replaced by an obligation to minimally impair the protected interest (Osoyoos, at para. 54).
B. Principles of Equitable Compensation
[ 65 ] The basic principles of equitable compensation are not in dispute in this appeal. However, the parties disagree about their application to breaches of the Crown's fiduciary duty in relation to land held for the benefit of Indigenous Peoples.
[ 66 ] As I shall explain, equitable compensation is a loss-based remedy that deters wrongdoing and enforces the trust at the heart of the fiduciary relationship. It differs from common law damages because the applicable principles are shaped by the nature of the fiduciary relationship and the content of the fiduciary duty. The nature of the Crown's fiduciary duty to Indigenous Peoples thus informs the assessment of equitable compensation in this case.
[ 67 ] This Court's decision in Guerin explained that, although a fiduciary relationship is different than a traditional trust relationship, breach of the Crown's fiduciary duty gives rise to the same equitable remedies as breach of trust (p. 376; see also Wewaykum, at para. 94). The available equitable remedies include an account of profits and equitable compensation.
[ 68 ] When the Crown breaches its fiduciary duty, the remedy will seek to restore the plaintiff to the position the plaintiff would have been in had the Crown not breached its duty (Guerin, at p. 360, citing Re Dawson; Union Fidelity Trustee Co. v. Perpetual Trustee Co. (1966), 84 W.N. (Pt. 1) (N.S.W.) 399, at p. 404). Equitable compensation is the preferred remedy when restoring the plaintiff's assets in specie is not available (Guerin, at p. 360). Equitable compensation is a discretionary and restitutionary remedy and is assessed rather than precisely calculated.
[ 69 ] Equitable compensation is equity's counterpart to common law damages (see Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 87 O.R. (3d) 321, at para. 48). It is discretionary and restitutionary in nature, aiming to restore the actual value of the thing lost through the fiduciary's breach. As such, its purpose is to make up the plaintiff's loss (Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534, at p. 556, per McLachlin J. (as she then was)). The focus is on restoring the plaintiff's lost opportunity, which is the opportunity for gain that the fiduciary's breach caused the beneficiary to lose. By restoring the beneficiary's lost opportunity, equitable compensation deters wrongdoing and enforces the trust at the heart of the fiduciary relationship.
(1) Causation
[ 70 ] To award equitable compensation, there must be factual causation: the fiduciary's breach must have caused, in fact, the plaintiff's lost opportunity (Canson, at p. 551; see also Stirrett v. Cheema, 2020 ONCA 288, 150 O.R. (3d) 561, at para. 69). This basic principle, that equitable compensation must be caused by the breach, is reflected in this Court's jurisprudence.
[ 71 ] In concurring reasons in Canson, McLachlin J. stressed the differences between equitable remedies and common law damages, explaining that the purpose of equity is to enforce the trust which lies at its heart (p. 543). Analogy with common law damages may not be appropriate given this misalignment of purpose (Canson, at p. 549; Guerin, at p. 360). McLachlin J. explained as follows:
In negligence and contract the parties were taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently, the law sought a balance between enforcing obligations by awarding compensation, and preserving optimum freedom for those involved in the relationship by limiting liability. The rules of tort and contract reflect this balance. They are not designed for the fiduciary relationship, a relationship founded not on the independence of the parties, but on the fiduciary's duty of loyalty and the beneficiary's trust and dependence. Breach of fiduciary duty does not raise concerns about the chilling of commercial activity or of deterring the fiduciary from acting. In a fiduciary relationship, the fiduciary cannot choose to be liberated from the obligation of loyalty.
[ 72 ] Another difference between equitable compensation and common law damages is that equity is especially concerned with deterring wrongful conduct by fiduciaries. As Professor Rotman observed, "[b]eneficiaries are . . . implicitly dependent upon and peculiarly vulnerable to their fiduciaries' use of the entrusted property . . . [and] also implicitly reliant upon the fiduciary's fidelity" (Fiduciary Law (2005), at p. 636; see also Leonard I. Rotman, "Understanding Fiduciary Duties and Relationship Fiduciarity" (2017), 62 McGill L.J. 975, at p. 990).
[ 73 ] Due to these differences, rather than relying on common law principles, McLachlin J. explained that the proper approach to equitable compensation "is to look to the policy behind compensation for breach of fiduciary duty and determine what remedies will best further that policy" (Canson, at p. 548). This involves taking account of the nature of the relationship, the deterrence objectives of equity, and the need to "give full effect to the trust" (p. 548).
[ 74 ] Equity assesses the loss at the date of trial and with the benefit of hindsight (Guerin, at pp. 361-62, per Wilson J.; Canson, at p. 556; Target Holdings Ltd. v. Redferns, [1996] 1 A.C. 421 (H.L.), at pp. 437-39). This means that equity compensates the plaintiff for the lost opportunity, regardless of whether the opportunity could have been foreseen at the time of the breach. McLachlin J. explained this aspect of equitable compensation as follows:
The plaintiff's actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.
(Canson, at p. 556)
[ 75 ] McLachlin J.'s use of the phrase "common sense view of causation" in Canson should not be taken to mean that the causation analysis in equitable compensation cases will always have an "intuitively obvious answer" (AIB, at para. 95). This is not always the case; trial judges are often faced with difficult causal questions. On the issue of causation, Professor Rotman helpfully identified key differences between causation in equity and at common law:
Each starts with the idea of "but for," "cause-in-fact," or "sine qua non," causation. This generally satisfies Equity, but the common law requires more; it demands a finding of materiality or substantial cause to link the impugned activity with the harm to the plaintiff. Further, the common law is reluctant to award compensation where the causal connection between the loss and breach of duty is too remote.
(Fiduciary Law (2005), at p. 634).
See, also, Target Holdings, where Lord Browne-Wilkinson observed that "the common law rules of remoteness of damage and causation do not apply" (p. 434).
[ 76 ] Canada argues that in valuing the loss the benefit of hindsight cannot mean that the beneficiary is put in a better position than it would have been in had the fiduciary observed its duty at the time of breach. This argument was explicitly rejected by this Court in Blueberry River, where McLachlin J. (as she then was), writing for the majority, held that "equity does not shy away from making a breaching fiduciary restore property to the condition it would have been in but for the breach, even if this means taking account of events that were not foreseeable at the time of the breach" (para. 43).
[ 77 ] There are very good reasons why foreseeability does not apply to the Crown's breach of fiduciary duty in this case. In Canson, La Forest J. held that it would not apply where a fiduciary has discretionary control over a beneficiary's property (p. 578). Indigenous interests in land are quasi-proprietary interests subject to the Crown's discretionary control. For these interests, the Crown's fiduciary duty in respect of reserve land is strong.
(2) Equitable Presumptions
[ 78 ] To achieve these purposes of equitable compensation, the assessment is also guided by presumptions that equity makes against breaching fiduciaries.
[ 79 ] Equity presumes that the plaintiff would have made the most favourable use of the trust property (Guerin, at pp. 362-63; Canson, at p. 545; Oosterhoff on Trusts: Text, Commentary and Materials, by A. H. Oosterhoff, R. Chambers and M. McInnes (9th ed. 2019), at p. 1018). In Guerin, for example, Wilson J. explained that the assessment of equitable compensation should account for the "best use" of the land as of the date of the breach, meaning that the Court should presume that the plaintiff would have put the land to its most profitable use (pp. 362-63).
[ 80 ] The focus is always on whether the plaintiff's lost opportunity was caused in fact by the fiduciary's breach. Equity will assess that opportunity under the presumption that the beneficiary would have put the asset to its most favourable use. The most favourable use must be realistic. The common law principle of remoteness will not apply to limit the most favourable use, but the most favourable use must be one that could reasonably have been adopted in light of the facts at the time of breach.
[ 81 ] There are additional equitable presumptions that are applicable in appropriate cases. The presumption of legality, discussed in more detail below, prevents breaching fiduciaries from reducing compensation by arguing they would not have complied with the law.
[ 82 ] Another presumption, the so-called Brickenden rule, applies where the fiduciary breached a duty to disclose material facts. The breaching fiduciary is prevented from arguing that the outcome would be the same regardless of whether the facts were disclosed (Brickenden v. London Loan & Savings Co., [1934] 3 D.L.R. 465). In appropriate cases, the Brickenden rule may operate alongside the presumption of most favourable use to shift the burden to the fiduciary to disprove that the breach caused the claimed loss.
[ 83 ] In summary, equitable compensation deters wrongful conduct by fiduciaries in order to enforce the relationship at the heart of the fiduciary duty. It restores the opportunity that the plaintiff lost as a result of the fiduciary's breach. The trial judge must begin by closely analyzing the nature of the fiduciary relationship so as to ensure that the loss is assessed in relation to the obligations owed by the fiduciary. The assessment of equitable compensation must reflect those obligations.
C. Application
[ 84 ] In light of these principles, I turn now to the question of whether the trial judge erred in his assessment of equitable compensation.
[ 85 ] The standards of review identified in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, apply to awards of equitable compensation. Questions of law are reviewable on a standard of correctness. The application of the relevant equitable principles to the facts is reviewable on a standard of palpable and overriding error. Where there is an extricable error of law, it is reviewable on a standard of correctness. Where legal and factual issues are intertwined, this Court has held that legal errors constitute a reviewable error even if they appear intertwined with factual determinations.
[ 86 ] As noted above, the trial judge concluded that Canada owed a fiduciary duty to the LSFN and breached that duty. He determined that Canada had the following specific obligations: (1) a duty of loyalty and good faith to the LSFN in the discharge of its mandate as trustee of the Reserve land; (2) a duty to provide full disclosure to, and consultation with, the LSFN; (3) a duty to act with ordinary prudence with a view to the best interests of the LSFN; (4) a duty to protect and preserve the LSFN from improvident bargains; and (5) a duty to protect and preserve the LSFN's quasi-proprietary interest from exploitation.
[ 87 ] However, the trial judge also concluded that Canada's duty only required it to obtain the amount provided for under general expropriation law as payment for a hypothetical flowage easement. He reached this conclusion largely based on the following findings: the Project could not be stopped because it was a public work; Canada could have expropriated the land under s. 48 of the Indian Act; and expropriation law applies the principle of highest and best use, which he held captured the value of the land.
[ 88 ] Canada submits that the trial judge correctly considered the "non-breach" world and determined, based upon the evidence, that a flowage easement measured by expropriation values is what would have likely happened had Canada not breached its duties.
[ 89 ] I agree with the Appellant that the trial judge erred in concluding that a hypothetical expropriation — the minimum statutory obligation — would have fulfilled Canada's fiduciary obligations. This legal error impacted his assessment of equitable compensation because it led him to rely on general principles of expropriation law to value the loss and to conclude that compensation would not be assessed at a higher value than the minimum required under an expropriation.
(1) The Appellant Is Not Precluded From Raising These Arguments on Appeal
[ 90 ] First, as a preliminary matter, I would reject Canada's argument that there are procedural obstacles to considering the merits of this appeal. Canada submits that the Appellant's proposal to assess compensation on the basis of "the use of the lands for flooding purposes" is a new issue that is being raised for the first time on appeal to this Court. Canada submits that this issue was not raised at trial or at the Federal Court of Appeal.
[ 91 ] The argument that the Appellant relies on at this Court is the same argument relied on at the Court of Appeal and was subject to full submissions at both the Court of Appeal and this Court. The "use of the lands for flooding purposes" assessment is the approach that was accepted as one of two issues by Gleason J.A. in dissent (C.A. reasons, at paras. 51-60), and contested by the majority of the Federal Court of Appeal.
[ 92 ] More importantly, the argument that the land should be valued on the basis of its use as flooded land for the Project was an issue at trial. The LSFN proposed various models of compensation at trial and the primary model — a revenue-sharing agreement — presumes that the use is as land flooded for hydroelectricity generation. In its submissions at trial, the LSFN argued that the trial judge should value the land as land flooded for hydroelectricity generation.
(2) The Nature of the Fiduciary Obligations
[ 93 ] Following the approach taken by this Court in Guerin, the first step in assessing equitable compensation is to determine what the fiduciary would have been expected to do had it not breached its obligations.
[ 94 ] In applying what Canada's obligations to the LSFN required in this case, the trial judge focused on the fact that Canada could legally expropriate the land under s. 48 of the Indian Act because the Project was a public work. This led the trial judge to improperly conclude that Canada's fiduciary duty was satisfied if it met the minimum requirements of the general law of expropriation.
[ 95 ] Therefore, for reasons that follow, I conclude that even though the land was needed for a public work, the fiduciary duty still required Canada to first attempt to negotiate a surrender with the LSFN. If negotiations failed and Canada expropriated the land under s. 48, it would at least have been under an obligation to secure the best possible compensation for the LSFN, reflecting the nature of the interest and the impact on the LSFN.
(a) The Presence of Legal Discretion in Section 48 of the Indian Act
[ 96 ] The provisions of the Indian Act in force at the time provided two routes to remove land from a reserve: a taking and a surrender. Sections 50 and 51 provided that reserve land could be surrendered to the Crown with the consent of the First Nation. Alternatively, subs. 48(1) provided that land could be taken, without consent, for a public work. A taking under s. 48 required the consent of the Governor in Council and the payment of "such compensation therefor as may be agreed upon between the Minister and the band or as may be fixed by arbitration in the manner provided for by the Expropriation Act". The fiduciary duty, not just the Indian Act, imposed substantive obligations on Canada's exercise of this discretion.
[ 97 ] The provisions in s. 48 must therefore be understood in light of the pre-existing fiduciary duty of the Crown. The fiduciary duty, not just the Indian Act, imposed substantive obligations on how Canada was to exercise its discretion over the reserve land. Dickson J. explained the relationship between the legal power of the Crown and its fiduciary duty in Guerin (at p. 357):
Indians have a legal right to occupy and possess certain lands, the ultimate title to which is in the Crown. While their interest does not, strictly speaking, amount to beneficial ownership, neither is its nature completely exhausted by the concept of a personal right. It is true that the sui generis interest which they bear in the land is personal in the sense that it is inalienable except upon surrender to the Crown. But it is also true, as Judson J. pointed out in Calder v. Attorney-General of British Columbia ([1973] SCR 313), at p. 328, that it is "a legal right" derived from the Indians' historic occupation and possession of their tribal lands. As such, it is entitled to protection by the courts.
[ 98 ] The effect of the trial judge's reliance on the legal powers conferred in the Indian Act also raises a question regarding the role of the presumption of legality in this case. The presumption of legality or lawfulness is an equitable presumption meant to prevent fiduciaries from reducing compensation by arguing they would not have complied with the law. However, it cannot be inverted. In this case, the trial judge in effect inverted the presumption of legality — using it to limit compensation by assuming the fiduciary only did what law (and not equity) required.
[ 99 ] The trial judge's reasons can also be read as relying on the legal powers conferred in s. 48 to improperly focus on the inequality of bargaining power between the LSFN and Canada, its fiduciary, as a factor to limit compensation. It is appropriate in assessing the lost opportunity to consider the options realistically available to the LSFN and what the LSFN would have agreed to in the non-breach world. However, the fiduciary cannot use the power imbalance that gives rise to the fiduciary duty to limit its obligations or to reduce compensation.
[ 100 ] The legal authority of Canada to expropriate the land under s. 48 therefore does not define the fiduciary duty in this case.
(b) The Presence of a Public Work
[ 101 ] Because of Canada's public responsibilities to Canadians generally, it may sometimes need to consider broader public interests in addition to its sui generis fiduciary duty to Indigenous Peoples. While an ordinary fiduciary is not generally permitted to balance its own interests against those of its beneficiary, the Crown must sometimes balance its duty to Indigenous Peoples with its broader public responsibilities (Wewaykum, at para. 96). But that does not mean that Canada can subordinate the LSFN's interests to its own public priorities in determining the fiduciary's obligations or in reducing compensation.
[ 102 ] This Court held in Guerin that Canada could not escape liability in equity by arguing that it was only bound by a public trust. In other words, the Court rejected the idea that the fiduciary duty is comparable to the normal exercise of government powers that balances competing priorities or interests. Rather, the existence of the fiduciary duty means that Canada is under a duty of loyalty to the LSFN in respect of Reserve land that is distinct from its public responsibilities.
[ 103 ] Similarly, this Court's statement in Wewaykum that the Crown is expected to "have regard to the interest of all affected parties, not just the Indian interest", does not support the argument that Canada must simply balance existing Indigenous interests in reserve land against other public interests. The Crown's duty to have regard to all affected parties does not extinguish the duty of loyalty that gives rise to the fiduciary duty in this case.
(c) The Content of the Fiduciary Duty Flows From the Nature of the Indigenous Interest and Is Not Defined by Expropriation Principles
[ 104 ] In the context of an expropriation or taking, our jurisprudence has imposed a duty requiring the Crown to minimally impair the protected interest (Osoyoos, at para. 52). This means that the Crown must preserve the Indigenous interest "to the greatest extent practicable" (para. 53). This requires fair compensation that reflects the sui generis nature of the interest.
[ 105 ] Canada submits that the duty to preserve the interest to the greatest extent possible is met even if expropriation principles are applied in this case. I cannot agree. Under an expropriation of fee simple land, the value of the land to the public work is generally removed from compensation. This is consistent with the general objective of expropriation law, which is to compensate the landowner for the value of what they lost, rather than for any enhanced value they might have received had they been a willing seller to the project.
[ 106 ] If expropriation law does not limit the fiduciary duty in this case, there is no basis to say that Canada's duty to preserve the LSFN's interest to the greatest extent possible must exclude a duty to obtain compensation for the value of the land to the scheme. Instead, given the LSFN's sui generis interest in the reserve land and the impact on the LSFN, the duty required Canada to capture the full potential value of the land for the land's intended use, notwithstanding its legal power to expropriate.
[ 107 ] There is no doubt that the nature of the interest impacted in this case is of fundamental importance to the LSFN and lies at the heart of its relationship with the Crown. It is a quasi-proprietary interest in 11,304 acres of Reserve land that was set aside for the LSFN's communal use in exchange for their cession of their territory. Reserve land reflects the relationship between the Crown and the Indigenous Peoples of Canada at the time of contact. The LSFN's interest in the Reserve land is not only communal but spiritual and cultural as well; it is not a fungible commodity to be compensated only on the basis of market forces.
[ 108 ] Expropriation principles are also inappropriate given the tremendous impact that Canada knew the Project would have on the LSFN. Here, Canada knew early in the development of the Project that the impact would be catastrophic. As the trial judge noted, the local government supervisor observed prior to the flooding that "[t]here are 688 Indians on the reserve, who are helpless to avert this calamity, and who view the future with utter dismay". The damage was indeed catastrophic: 17 percent of the Reserve was flooded, 35 homes were destroyed, gardens and haylands were ruined, gravesites were desecrated, rice fields were destroyed, and communal life was fundamentally disrupted.
[ 109 ] The nature of the interest and the impact on the First Nation will always be relevant to assessing the appropriate compensation for the use of its reserve land. Because a First Nation must consent in a negotiated surrender, its members will clearly consider the interest they are giving up and the impact that will have on the community. Where the impact of the flooding on the LSFN was catastrophic, it would be reasonable to expect that the LSFN's consent would be forthcoming only if substantial compensation were provided.
[ 110 ] While legal expropriation represents the minimum entitlement, this is not to suggest that the value of compensation in equity will always exceed a comparable expropriation of fee simple land. However, Canada is never entitled to proceed in the same manner as an expropriation of fee simple land where it is exercising its fiduciary duty to Indigenous Peoples over reserve land. At a minimum, in exercising its fiduciary duty, Canada must first consider whether a negotiated surrender is possible, keep the First Nation fully informed, and ensure compensation reflecting the nature of the interest and the impact on the community.
(d) Summary of the Fiduciary Obligations
[ 111 ] Therefore, the trial judge's description of the fiduciary obligations in this case was based on his narrow focus on legal discretion in s. 48. Even though 11,304 acres, or 17 percent of the Reserve, would be flooded, the trial judge determined that s. 48 allowed Canada to take the land for its public purpose. He then determined that the minimum required under s. 48 — expropriation compensation — was sufficient to discharge the fiduciary duty.
[ 112 ] Instead, Canada ought to have first attempted to negotiate a surrender. Canada's fiduciary obligations to preserve the LSFN's quasi-proprietary interest, advance its best interests, and protect it from an improvident bargain required it to ensure the highest compensation possible. The LSFN's right to have Canada negotiate on its behalf to get the best value for its Reserve land — value that should have included compensation based upon the intended use of the land for hydroelectricity generation — forms the centrepiece of what Canada's obligations required.
[ 113 ] If negotiations for a surrender of the land by the LSFN under s. 50 of the Indian Act were unsuccessful, Canada could have proceeded through a taking under s. 48. However, given the impact of the flooding on the LSFN, Cabinet would have had to seriously consider how to fulfill Canada's fiduciary duty to the LSFN. Canada had an obligation to secure the best possible compensation for the LSFN reflecting the nature of the interest, the impact on the community, and the value of the land to the Project.
[ 114 ] In sum, the trial judge was correct that Canada's fiduciary obligations to the LSFN included a duty of loyalty and good faith; a duty to provide full disclosure and to consult with the LSFN; a duty to act with ordinary prudence with a view to its best interests; and a duty to protect and preserve the LSFN's interest from exploitation. But the trial judge erred when he concluded that a hypothetical expropriation — the minimum statutory obligation — would have fulfilled Canada's fiduciary obligations.
(3) The Loss
[ 115 ] The value of the loss flows from the nature of the breach and the obligations that the fiduciary should have fulfilled. The valuation of the loss must reflect Canada's obligation to negotiate compensation based upon the best price that could have been obtained for the land's use for hydroelectricity generation.
[ 116 ] Here, the trial judge valued the land as bushland and waterfront land. His assessment of equitable compensation flows from his conclusion that expropriation was permitted under the Indian Act and that Canada would likely have compensated on the basis of expropriation law, excluding the value of the land for hydroelectricity generation. This was a legal error. The proper approach requires asking what Canada should have done — not what it would have done.
[ 117 ] At trial, the Appellant primarily relied on the hypothetical of a revenue-sharing agreement as the best valuation, but its experts also put forward additional models for evaluating the lost opportunity, including contemporaneous agreements reached with another First Nation. Canada's experts rejected the relevance of a revenue-sharing agreement and argued for an expropriation model.
[ 118 ] I have already determined that equitable compensation in this case should have been assessed on the basis that Canada was under an obligation to negotiate in order to obtain the best possible compensation based upon the value of the land to the Project. The question is how to assess this value.
(a) Application of Equitable Compensation Principles
[ 119 ] Before considering how to value the LSFN's lost opportunity, it is necessary to clarify how the principles of equitable compensation apply in this appeal.
[ 120 ] First, in my view, the trial judge was correct in assessing compensation on the basis of what would have happened at the time of breach had Canada fulfilled its fiduciary duty. Unlike Guerin, this is not a case in which the plaintiff is advancing different, more valuable uses of the land than the one for which it was taken: the intended use was always hydroelectricity generation. The evidence concerns what would have been the fair value of the land to the Project had Canada fulfilled its fiduciary duty at the time of breach.
[ 121 ] There were two options available to Canada: a negotiated surrender under s. 51 and a taking under s. 48. Canada concedes that the lost opportunity in this case includes the opportunity to negotiate a surrender. Similarly, the trial judge accepted that Canada should have attempted to negotiate a surrender before proceeding to an expropriation (Trial Reasons, at para. 296). The question is what the negotiations would have been for. In my view, Canada's obligation to negotiate on behalf of the LSFN in order to obtain the best possible compensation required it to negotiate for the value of the land to the Project.
[ 122 ] The presumption of most favourable use and valuable accounting also allows equitable compensation to focus on a successful negotiation in this case. The presumption focuses on choices that would be available to the beneficiary in a non-breach world, thus maintaining the causal connection. For the LSFN, the choice that would have been available to it in the non-breach world is the choice to consent to a negotiated surrender at the best price available, reflecting the value of the land to the Project. Equity presumes that the LSFN would have consented to a negotiated settlement at the best price the Crown could have realistically obtained at the time. The presumption of most favourable use therefore supports valuing the land as flooded land for hydroelectricity generation.
[ 123 ] As the trial judge correctly noted, equitable compensation is a discretionary remedy that is assessed and not precisely calculated (para. 465, citing Whitefish Lake, at para. 90). It is unlikely that the trial judge could recreate with mathematical precision what would have happened nearly 90 years ago. But the goal is to compensate the LSFN for the value of its lost opportunity. The trial judge should take account of the realistic contingencies that would have affected what Canada would have agreed to pay in the non-breach world.
[ 124 ] In my view, the benefit of hindsight also has a narrow application in this case, as noted by Gleason J.A. (C.A. reasons, at para. 60). The benefit of hindsight simply means that equitable compensation is not limited by foreseeability (Canson, at p. 555). As an illustrative example, the benefit of hindsight would allow the trial judge, had it been relevant, to take account of the increase in land values over the period to the date of the judgment. In this case, however, the benefit of hindsight does not result in the LSFN recovering the value of benefits derived from the use of the land since the breach: the use of the land was always intended to be for hydroelectricity generation.
[ 125 ] Finally, the Appellant submits that Canada has an ongoing fiduciary duty in respect of the Reserve land because the land was never lawfully taken and the third party use of the land cannot be undone. For the Appellant, the fact that the land was flooded without legal authorization appears to suggest that because there was no legal taking, the equitable remedy should involve restoration of the reserve to its pre-flooding condition or compensation for the loss of the ongoing use of the land. I disagree with this submission.
[ 126 ] I agree that Canada has an ongoing fiduciary duty in respect of the Reserve land. However, in my view, characterizing the breach as ongoing does not affect the assessment of compensation in the way the Appellant suggests. The ongoing dimension of a breach is accommodated in a number of ways in the assessment of equitable compensation. As Lord Browne-Wilkinson explained in Re Dawson:
The obligation to restore to the estate the assets of which he deprived it necessarily connotes that, where a monetary compensation is to be paid in lieu of restoring assets, that compensation is to be assessed by reference to the value of the assets at the date of restoration and not at the date of deprivation.
[ 127 ] Focusing on the lawfulness of the taking would not modify or aid the analysis of the value of the LSFN's lost opportunity. The central inquiry remains: what is the measure of the plaintiff's lost opportunity in light of the breach? The lost opportunity at issue in this case is the opportunity to negotiate a surrender at the best price available, reflecting the value of the land to the Project.
[ 128 ] This is not to suggest that the lawfulness of the taking should have no impact on the assessment of equitable compensation. Equitable compensation must fulfill the deterrent objectives of equity. Deterrence, in this context, aims at the fundamental goal of reconciliation and upholds the honour of the Crown. As such, it is proper for the trial judge, in fashioning the award of equitable compensation, to consider the ongoing impact of the flooding on the LSFN. Where the flooding has resulted in both ongoing and yet-to-be-quantified harms, the trial judge should have regard for those harms in the assessment of equitable compensation.
[ 129 ] In conclusion, the LSFN is entitled to compensation for the lost opportunity to negotiate a surrender of the flooded land based on its value to hydroelectricity generation. This requires the trial judge to presume that the Project would have moved forward and that Canada would have fulfilled its fiduciary duty to negotiate a surrender that captured the value of the land to the Project.
(b) Valuing the Lost Opportunity
[ 130 ] The issue remains how to assess compensation based on the lost opportunity to negotiate a surrender reflecting the value of the land to the Project. In valuing the lost opportunity, the trial judge must assume that Canada fulfilled the fiduciary obligations required in a negotiated surrender.
[ 131 ] The Appellant submits that, because we know the use the land was put to, it was inappropriate for the trial judge to consider a hypothetical surrender or expropriation to assess the value of that use. I cannot agree. While there is only one proposed use of the land, the trial judge still has to assess what would have been the fair price for that use in a negotiated surrender. The trial judge should assess that value using all of the evidence available, including any relevant comparable evidence.
[ 132 ] The trial judge should account for any uncertainty or realistic contingencies in assessing the evidence regarding the value of the land in a negotiated surrender. The idea of realistic contingencies, which was accepted by this Court in Guerin, simply reinforces the principle that the loss must have been caused in fact by the fiduciary's breach.
[ 133 ] At trial, the Appellant led evidence from the Kananaskis Falls Projects that showed that negotiations in comparable projects led to substantial compensation based upon the lands' "usefulness in connection with the development of power". The trial judge rejected this evidence and did not assess it as evidence of the value of the land to the Project.
[ 134 ] In my view, the evidence from the Kananaskis Falls Projects was relevant to the assessment of loss in this case. The trial judge distinguished this evidence based on one factor: Calgary Power could not expropriate the land for the Kananaskis Falls Projects, but Canada could expropriate the lands under s. 48 of the Indian Act. However, as I have explained, the ability to expropriate does not define the fiduciary duty. The trial judge's reliance on that factor to distinguish the Kananaskis Falls Projects is a legal error.
[ 135 ] Canada submits that the Court should defer to the trial judge's findings on the Kananaskis Falls Projects. However, but for the legal determination that Canada was under no legal duty to compensate for more than an expropriation, the trial judge's factual findings support the view that the Kananaskis Falls Projects are relevant to the assessment of loss.
[ 136 ] The Appellant led evidence at trial regarding the compensation that Canada negotiated on behalf of the Stoney Indian Band for the Kananaskis Falls Projects:
- Horseshoe Falls 1909: Calgary Power purchased 1,000 acres at $10 per acre plus a perpetual lease for $1,500 per year;
- Kananaskis Falls 1914: The pre-project value of the land was $5 to $7 per acre, but Canada requested payment of either $320 to $360 per acre, as a one-time payment, or an annual rent plus $60 to $90 per acre as a one-time payment to reflect the value of the land to the project. This is a very substantial premium above the undeveloped value of the land; and
- Ghost River 1929: Calgary Power agreed to pay $21,200 for 1,324.3 acres of land ($16.00 per acre) plus 50 percent of the water power in rental fees.
[ 137 ] The trial judge made three relevant findings based on these projects: (1) hydroelectric benefits to the First Nation were allocated on the basis of the dam location, not on the basis of the lands flooded to create the water reservoir; (2) flooded lands were compensated at a fixed one-time price per acre; and (3) the Kananaskis Falls Projects were distinguishable because Calgary Power could not expropriate the land, unlike the situation in this case (Trial Reasons, at paras. 393-98). I have already addressed the third factor.
[ 138 ] Obviously, these agreements provide relevant historical evidence of how much of a premium on the undeveloped value of the land may be warranted in this case. This is not to suggest that there is no basis upon which to distinguish the various agreements reached in the Kananaskis Falls Projects from what the fair price of the land in this case would have been. It is up to the trial judge to assess how the differences in the location of the dam, or the amount of land involved, or the nature of the impact on the First Nation, would impact the value of the land for flooding purposes.
[ 139 ] The trial judge had other proxies for measuring the value of the land to the Project. For example, the LSFN led evidence regarding the value of a land lease. In that model, the LSFN's expert, Arthur J. Hosios, valued the lost opportunity if the flooded land had been rented for comparable Treaty 3 reserve land rentals, or a rate derived from the land's water potential. This evidence should also be assessed by the trial judge on remand.
[ 140 ] The trial judge should also give appropriate weight to the evidence regarding the impact on the community and the LSFN's perspective. A relevant factor to a negotiated surrender is clearly the impact on the First Nation and the importance of the land to the First Nation. Negotiations are not conducted in a vacuum. The impact on the First Nation matters; it is one of the factors that a First Nation's representatives would consider in determining whether to consent to a surrender and at what price. Evidence regarding that impact should be given appropriate weight.
[ 141 ] Canada submits that even if it had been under an obligation to negotiate for the value of the land to the Project, it would be improper to compensate the LSFN on this basis because there is no evidence that Ontario or Manitoba would have been willing to pay more than the expropriation value. On this view, any compensation in excess of expropriation principles is not caused by the breach and does not represent an opportunity the LSFN lost.
[ 142 ] I cannot agree. The LSFN cannot provide evidence showing definitively what level of compensation Ontario, Manitoba, or Canada would have agreed to in 1929 had Canada made it clear that the Project would be delayed until the issue of compensation was resolved. The LSFN cannot prove what compensation could have been negotiated precisely because Canada failed to fulfill its fiduciary duty. Additional useful evidence that could inform the level of compensation that Ontario or Manitoba would have accepted could include the Kananaskis Falls Projects, the economic fundamentals of the Project, and the anticipated benefit that the provinces stood to receive from the Project. The LSFN did advance evidence at trial showing how cost-effective the Project was and the incredible economic advantages that it conferred on Ontario and Manitoba. The evidence shows that the parties were very motivated to finish this Project and realize its economic benefits. For example, in the 1930s, Canada spent over $850,000 on a failed timber clearing project to advance the Project and resolve an impasse with Ontario.
[ 143 ] Thus, equitable compensation must reflect Canada's obligation to ensure the LSFN was compensated for the value of the land to the Project given the nature of the interest and the impact on the LSFN. The trial judge should have considered the Kananaskis Falls Projects and other evidence available at trial as relevant proxies for what the LSFN would have been able to negotiate had Canada fulfilled its fiduciary duty, even if that evidence might support distinguishing the Kananaskis Falls Projects from the situation in this case.
[ 144 ] After assessing the lost opportunity, the trial judge must determine whether the new total compensation award is sufficient to fulfill the deterrent function of equity (Hodgkinson, at p. 453). Deterrence has special importance in this case because deterring the Crown from breaching its fiduciary duty is linked to the broader goal of reconciliation. The trial judge should determine whether the non-calculable losses, as assessed on remand in light of the new total compensation figure, remain adequate.
[ 145 ] In conclusion, the assessment of the lost opportunity was flawed because it was based on an incorrect view of what the fiduciary duty required. By valuing the loss as the amount required under expropriation law, the trial judge failed to account for a fiduciary obligation to negotiate for compensation that captured the full value of the land to the Project. As a result, the equitable compensation assessment is tainted by a legal error and must be returned for reassessment.
IV. Conclusion
[ 146 ] A hypothetical flowage easement at $1.29 an acre is not an appropriate measure of compensation in this case because it does not reflect the value of the land to the Project. The sole basis for this valuation is the conclusion that because the Project was a public work, and Canada could have legally expropriated the land, Canada's fiduciary duty would have been satisfied by compensation based on the general principles of expropriation law. This is an error of law.
[ 147 ] The award for equitable compensation must be returned for reassessment in accordance with these reasons. I would allow the appeal with costs to the Appellant throughout. I would set aside the judgment of the Court of Appeal and the trial judge's award of equitable damages and return that question to the Federal Court for reconsideration in accordance with these reasons.
The following are the reasons delivered by
Côté J. (dissenting) —
[ 148 ] Côté J. (dissenting) — Canada breached its fiduciary duty to Lac Seul First Nation ("LSFN") when it unlawfully allowed the flooding of over 11,000 acres (or approximately 4575 hectares) of LSFN reserve lands for a hydroelectric project that was completed in 1929 ("Project"). The flooding had devastating, wide-ranging, and long-lasting consequences for the LSFN community, its members, and its way of life.
[ 149 ] No party to this appeal questions this reality. Canada acknowledges its breach of fiduciary duty and its "inexplicable" historical treatment of the appellants, and rightly so. The question, then, is how to compensate for the harms caused by Canada's breach in a manner that accords with settled principles of equitable compensation, as applied to a fiduciary relationship that is sui generis in nature.
[ 150 ] Both the majority judges and the dissenting judge at the Federal Court of Appeal were in complete agreement on two issues (2019 FCA 171, [2020] 1 F.C.R. 745). First, the Court of Appeal unanimously found that the trial judge correctly held that there was no basis to award compensation for a revenue-sharing agreement as the trial judge found such an arrangement to be unprecedented. Second, the Court of Appeal unanimously found that a palpable and overriding error review was the correct standard for the flooded land valuation.
[ 151 ] However, my colleagues in the majority go further than the Court of Appeal, seemingly undertaking a fresh equitable compensation analysis. The majority does not agree with the trial judge's assessment of equitable compensation, not because of any palpable and overriding error that he committed in respect of the facts, but rather because they believe he failed to correctly apply the legal principles governing equitable compensation. Respectfully, I disagree with my colleagues' legal analysis and their consequential holding on the standard of review.
[ 152 ] The value of the compensation that Canada should have negotiated for LSFN cannot be determined in an evidentiary or factual vacuum, and it is improper to fault a trier of fact regarding possible alternative findings based on a newly raised theory of the case. That is not the proper standard of appellate review.
I. Standard of Review
[ 153 ] While the majority largely refrains from discussing the applicable standard of review, the parties took opposing positions concerning the proper standard for questions related to the trial judge's compensation assessment. Therefore, clear guidance on this point ought to be provided.
[ 154 ] Appellate review of an award of damages is to be conducted in accordance with the standards of review articulated in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. The appellants submit that the errors in this case relate to the failure of the courts below to correctly apply the law of equitable compensation, and are therefore errors of law reviewable on a correctness standard. Canada submits that the errors alleged are factual determinations entitled to deference on a palpable and overriding error standard.
[ 155 ] Both parties rely on the same passage from Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 87 O.R. (3d) 321, at para. 28, although the respondent emphasizes the first sentence and the appellants focus on the second:
A trial judge's damages or compensation assessment is entitled to considerable deference on appeal. An appellate court should interfere with that assessment only if it is tainted by an error in principle, or is unreasonably high or low.
[ 156 ] A similar pronouncement was made by Justice Wilson in Guerin v. The Queen, [1984] 2 S.C.R. 335, at p. 363: ". . . I do not think it is the function of this Court to interfere with the quantum of damages awarded by the trial judge if no error in principle in determining or applying the correct principles of assessment has been made."
[ 157 ] Thus, the question to be decided is whether the assessment is tainted by a reviewable error. The appellants attempt to get around this exacting standard by asserting that the courts below erred in "apprehending how the assessment of equitable compensation should be carried out", which they submit is a question of law reviewable on a correctness standard.
[ 158 ] Under the standard of review for questions of mixed fact and law, "an appellate court's role is not to reconsider the evidence globally and reach its own conclusions, but simply to ensure that the trial judge's conclusions — including the trial judge's legal inferences — are supported by the evidence" (Housen, at para. 23, citing Schwartz v. Canada, [1996] 1 SCR 254, at para. 32).
[ 159 ] Even if an appellate court might have come to a different conclusion, it cannot overturn the trial judge's discretionary decision unless a reviewable error has been made. As noted by Stratas J.A. in Mahjoub v. Canada (Citizenship and Immigration), 2017 FCA 157, [2018] 2 F.C.R. 344:
Palpable and overriding error is often best defined by describing what it is not. If an appellate court had a free hand, it might weigh the evidence differently and come to a different result. It might be inclined to draw different inferences or see different factual implications from the evidence. But that is not appellate review under Housen v. Nikolaisen; that is an appellate court substituting its view for the trial court's view.
[ 160 ] In my view, the trial judge made no reviewable errors. The majority of the Federal Court of Appeal properly applied the deferential standard of review, holding that there was no basis to interfere with the trial judge's factual findings. The alleged errors raised before this Court relate to factual determinations that are entitled to deference and not to extricable errors of law.
II. The Trial Judge's Equitable Compensation Assessment
[ 161 ] The principles of equitable compensation, including the special importance of its deterrent effect in furthering the ongoing project of reconciliation between Canada and Indigenous peoples, are settled and not at issue in this appeal. It is the application of those principles that is at issue.
[ 162 ] The trial judge applied these settled principles, specifically looking back to when the breach occurred in 1929, and, with the benefit of hindsight and the evidentiary record, assessed what position the appellants would have been in but for the breach. Based on the evidence, the trial judge concluded that it was not proven that Canada could have realistically obtained compensation greater than the expropriation value for the flooded lands.
[ 163 ] The trial judge noted the public importance of the Project and held that "[t]here is no reasonable likelihood that the project would have been shelved had the LSFN or Indian Affairs refused to have the land flooded" (paras. 292 and 327; see also C.A. Reasons, at paras. 23 and 50, per Gleason J.A., dissenting). This is a factual conclusion based on the evidence and is entitled to deference.
[ 164 ] The evidence proffered at trial focused broadly on two concepts: a revenue- or benefit-sharing agreement and one-time compensation for the loss of the flooded lands. The trial judge rejected the revenue-sharing agreement as unprecedented and inconsistent with the historical approach taken in the region and at the time. These are factual findings entitled to deference.
[ 165 ] Therefore, the trial judge concluded that Canada would have compensated the appellants through a one-time payment for the flooded lands and would not have secured an indefinite revenue-sharing agreement. In order to assess the quantum of the one-time compensation for the loss of the flooded lands, the trial judge reviewed the valuation evidence from the parties' experts. The trial judge ultimately preferred the evidence of Canada's expert, Mr. Bell, over the evidence of the appellants' expert, Mr. Wilson.
[ 166 ] In his appraisal report, Mr. Bell stated that prior to 1934, the highest and best use of the Lac Seul reserve lands would have been for continued traditional uses by LSFN, and it would be expected that the majority of the flooded lands would have remained vacant and unimproved. Mr. Bell stated that the cost approach was not useful in this case since there were no improvements to the flooded land, and he also rejected a discounted cash flow approach because there was no income generated from the lands.
[ 167 ] Mr. Wilson criticized Mr. Bell on three points: (1) a failure to correctly apply the principle of highest and best use; (2) the decision to apply the direct comparison approach; and (3) a failure to make findings and assumptions consistent with the historical record. Mr. Wilson found that when applying the highest and best use principle:
. . . in his view, the flooded Reserve land formed part of a storage project that facilitated a hydroelectric system down the English and Winnipeg Rivers. He testified that the hydroelectric project at Ear Falls would affect the value of the land around the foreshore of Lac Seul, because the highest and best use of the flooded land was as part of this storage project.
However, both in his report and his testimony, Mr. Wilson did not propose an alternative valuation.
[ 168 ] The trial judge found that Mr. Bell's method of valuation was "appropriate and proper in the circumstances" and adopted his conclusions (para. 380). He noted that "[t]his manner of proceeding may seem contrary to that advanced by Indian Affairs in the Kananaskis Falls development where, it was found, the Stoney Indian Band received significant compensation for the use of its land for hydroelectric purposes" (para. 380). However, the trial judge distinguished those projects on the basis that a private company could not expropriate reserve land, unlike the situation with respect to the federal government (para. 381).
[ 169 ] In determining the price per acre, the trial judge rejected Canada's submission that $1.00 per acre would be a more appropriate basis to calculate the amount payable. He held that "[w]hile $1.29 is slightly more than may have been in the contemplation of [Manitoba and Ontario, the provinces that built and operated the dam], it is a fairer value of the expropriation rights that the Crown would have had to acquire from the LSFN" (para. 398).
III. The Appellants Were Fairly and Appropriately Compensated for Their Losses
[ 170 ] The appellants submit that the lower courts improperly applied the principles of equitable compensation and failed to compensate LSFN for what it actually lost. According to them, "[r]ather than compensating for those losses in light of the use to which the Lands have been put, the Courts relied on a fictional expropriation scenario that excludes the value generated by that use." I respectfully disagree.
A. Defining and Valuing the Lost Opportunity
[ 171 ] I am in agreement with the majority that equitable compensation in this case should be assessed on the basis of a negotiated surrender (paras. 118 and 121). This is not controversial. Canada agrees that the lost opportunity in this case includes the opportunity to negotiate a surrender. The trial judge accepted that Canada should have attempted to negotiate a surrender before proceeding to an expropriation. The key question is: what would the compensation in such a negotiated surrender have been?
[ 172 ] As a fiduciary, Canada was arguably required to pursue a negotiated surrender before proceeding to expropriation, as the former more closely aligns with the nature of the breach and probably would have been less detrimental to LSFN. However, it does not necessarily follow that the lost opportunity equates to a lost opportunity to negotiate a surrender of the lands specifically for the purposes of hydroelectric benefits.
[ 173 ] For the appellants to recover the value of a lost opportunity to negotiate a surrender for hydroelectric benefits specifically, they would have had to establish their entitlement through specific facts and evidence, including expert evidence, led at trial. They did not do so. As noted by the Federal Court of Appeal, the appellants' "loss of use" valuation expert, Mr. Wilson, was found not to be credible in his evidence (C.A. Reasons, at paras. 34-35). The evidence regarding a possible alternative to the one adopted by the trial judge — namely, compensation beyond the expropriation value for the use of the flooded lands for hydroelectric purposes — is lacking.
[ 174 ] The value of the compensation that Canada should have negotiated for LSFN cannot be assessed in an evidentiary or factual vacuum. As I explain below, the trial judge determined the compensation for the flooded lands in 1929 based on a "meticulous examination of the facts" (Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at p. 453), taking into account the evidence and the historical context.
B. The Trial Judge's Findings Are Not Tainted by Error
[ 175 ] The trial judge's findings regarding what would have actually happened in 1929 had Canada not breached its duty to the appellants are factual determinations, not legal ones. They were based entirely on the evidence before him, including a lengthy historical record and numerous expert reports and testimony. The trial judge did not make a palpable and overriding error in his factual findings.
(1) Kananaskis Project Example
[ 176 ] The majority takes issue with the trial judge's assessment and ultimate rejection of the evidence from the Kananaskis Project agreements. In the majority's view, that evidence was relevant to the assessment of loss in this case, and the factor used by the trial judge to distinguish this example — Calgary Power's inability to expropriate — was not a proper basis for distinguishing it. With respect, I disagree.
[ 177 ] First, it is important to identify what evidence was actually proffered on this point. There was minimal discussion of this example in the record. The extent of our knowledge is from the expert report addendum and testimony of Gwynneth C. D. Jones and a brief response to Ms. Jones' addendum by Canada's expert, John R. Taylor. Neither party put forward fulsome expert evidence on this point.
[ 178 ] In her testimony, Ms. Jones summarized the differences between what happened at Lac Seul and what happened at Kananaskis Falls as follows:
Well the most salient difference of course is the extent to which the Indian people were consulted. And not just consulted, but were asked to give formal consent to the arrangements, to give consent to the taking of their reserve lands for the power sites, but also for the land to be flooded by the development of these power sites. Of course, the issue of heavy annual payments which would be made, as well as this upfront payment. In other words, that the Stoney people were to be offered a toll or dues on the power that was generated by the private company as a result of their being — the private companies being able to flood Indian Reserve lands.
(A.R. Supp., vol. V, at pp. 69‑70)
[ 179 ] Additionally, Ms. Jones noted that in the Kananaskis Project, there was an agreement between the Department of the Interior and Calgary Power that the "company will have the power to acquire and take [lands] for the purposes of its undertaking, essentially, powers the same as those conferred on a railway company under the Expropriation Act" (A.R. Supp., vol. V, at p. 73). Ms. Jones further confirmed in cross-examination that this agreement was confined to dry lands along the banks of the river.
[ 180 ] While noting that there may be a basis upon which to distinguish this evidence as it relates to the valuation of the loss, the majority finds that "[t]he trial judge should have considered the Kananaskis Falls Projects and other evidence available at trial as relevant proxies for what [the] LSFN would have been able to negotiate had Canada fulfilled its fiduciary duty" (para. 143). With the greatest of respect, I cannot agree.
[ 181 ] With respect, the majority's analysis of this evidence seems to stray from the settled standards of appellate review and instead focuses on how the trial judge ought to have undertaken an assessment of the evidence. That is not this Court's role. We must not reconsider the evidence globally and reach our own conclusions: our role is to ensure that the trial judge's conclusions are supported by the evidence.
[ 182 ] I am in agreement with the majority of the Court of Appeal that the limited evidence proffered at trial concerning the Kananaskis Project does not substantiate a finding that the trial judge made a palpable and overriding error in refusing to grant the appellants a sum in excess of the fair market value of the lands.
[ 183 ] The record before us provides no evidence as to why Canada was not in a position to utilize its expropriation powers for the Kananaskis Project, and thus it is simply speculation to conclude that Canada's differing approach in that matter leads, per se, to the conclusion that it breached its duty in this case.
[ 184 ] While my colleagues in the majority acknowledge that "[i]t is up to the trial judge to assess how the differences in the location of the dam, or the amount of land involved, or the nature of the impact on the First Nation, would impact the value of the land for flooding purposes" (para. 138), they effectively require the trial judge — on remand — to do what the parties themselves failed to do at trial: namely, provide the evidence to support this approach.
(2) Impact on the Community and LSFN's Perspective
[ 185 ] The majority further critiques the trial judge's reasoning by noting that he ought to have given "appropriate weight to the evidence regarding the impact on the community and . . . LSFN's perspective" (para. 140). These two points relate to profound losses not susceptible of mathematical calculation.
[ 186 ] It is important to note that the trial judge's valuation at $1.29 per acre is not the total valuation of the lands. It is simply the value of the lands as agricultural lands, based on the accepted expert evidence. The trial judge subsequently valued other calculable and non-calculable losses. In assessing the non-calculable losses, the trial judge specifically identified the following factors:
- The amount of the calculable losses;
- That many of the non-quantifiable losses created in 1929 persisted over decades, and some are still continuing;
- The failure to remove the timber from the foreshore created an eyesore and impacted the natural beauty of the Reserve land;
- The failure to remove timber from the foreshore also created a very long-term water hazard effecting travel and fishing for members of the LSFN;
- The flooding negatively affected hunting and trapping requiring members to travel further to engage in these pursuits and the number of animals were reduced for some period as a result of the flooding;
- Although Canada supplied the materials to build the replacement houses, the LSFN members supplied their own labour;
- The LSFN docks and other outbuildings were not replaced;
- LSFN hay land, gardens and rice fields were destroyed;
- The hunting and trapping grounds on the Reserve were negatively impacted;
- Two LSFN communities were separated by water and one became an island, impacting the ease of movement of the people who lived there;
- Canada failed to keep the LSFN informed and never consulted with the band on any of the flood related matters that affected it, creating uncertainty and, doubtless, some anxiety for the band; and
- Canada failed to act in a prompt and effective manner to deal with compensation with the LSFN prior to the flooding and did not do so for many years after the flooding, despite being aware of the negative impact on the band members. [para. 512]
It is the total equitable compensation, not simply the $1.29 per acre figure, which ensures that the appellants are compensated for the value of the lands given the nature of their interest and the impact on LSFN.
[ 187 ] When the compensation analysis is viewed in this way, it is clear that the trial judge's inclusion of a robust non-calculable loss analysis allowed him to meaningfully consider the impact of the flooding on LSFN, such as the negative impact on hunting and trapping, hayland, gardens, and rice beds — all of which the majority itself identifies as important aspects of the LSFN's relationship with the Reserve. The trial judge was alive to these impacts, and he compensated for them.
C. Concluding Remarks
[ 188 ] As outlined above, I have found that the trial judge's equitable compensation analysis does not contain any reviewable errors and that neither of the points raised by the majority provides any basis for interfering with his judgment. Nonetheless, some concluding remarks are in order.
[ 189 ] While I agree with the majority that the appellants' strategic decision to change their theory of compensation during this litigation is not a bar to addressing the merits of this appeal, a reconsideration of the merits must take place within the appropriate scope of appellate review and must be grounded in the evidentiary record adduced at trial.
[ 190 ] Despite the appellants' focus on their revenue-sharing claims and the fact that their "loss of use" valuation expert was found not to be credible, the trial judge nevertheless undertook a thorough review of all of the evidence adduced by the parties, rejected Canada's submission that the value of the flooded lands was $1.00 per acre, and compensated the appellants at $1.29 per acre. He also assessed other calculable and non-calculable losses that in total yielded a $30,000,000 equitable compensation award.
[ 191 ] I find that the majority's reasons seek to impose a greater obligation on a trial judge than the law demands. The trial judge had a daunting task. This trial lasted 56 days, and all but 2 of the 24 witnesses called were expert witnesses. He had to resolve a myriad of difficult factual questions, including the value of the flooded lands in 1929 and the evidence on comparable projects. He did so meticulously, based on the evidence before him.
[ 192 ] The appellants must bear the consequences of their tactical choice to advance a predominant theory of the case based on revenue-sharing claims. In retrospect, it may have been a more appropriate trial strategy for the appellants to present, alongside their revenue-sharing claims, fulsome expert evidence supporting the alternate theory of compensation that they now advance. They did not do so, and neither Mr. Wilson's credibility-challenged evidence nor the limited Kananaskis Falls Projects evidence fills this evidentiary void.
[ 193 ] Returning the award of equitable compensation for reassessment, which will inevitably require additional discovery and historical and valuation expert evidence, would permit the appellants to repair the deficiencies in their case and forward their new theory of the case de novo. Absent any reviewable error by the trial judge, there is no basis for this Court to interfere with his award.
IV. Conclusion
[ 194 ] The trial judge reviewed, analyzed, and weighed the evidence before him. Based on the record, he was entitled to find that the argument that Canada could, and should, have paid more than fair market value for the reserve lands was "nothing more than optimistic speculation". As the trial judge acknowledged, his equitable compensation assessment may not be perfect. But it is a reasonable and defensible assessment based on the evidence before him. The majority should not have interfered with that assessment.
Appeal allowed with costs throughout, Côté J. dissenting.
Solicitors for the appellants: Mandell Pinder, Vancouver.
Solicitor for the respondent: Attorney General of Canada, Ottawa.
Solicitor for the intervener the Attorney General of Saskatchewan: Attorney General of Saskatchewan, Regina.
Solicitors for the intervener the Assembly of Manitoba Chiefs: Fox Fraser, Calgary.
Solicitors for the intervener the Tseshaht First Nation: DGW Law Corporation, Victoria.
Solicitors for the intervener Manitoba Keewatinowi Okimakanak Inc.: Olthuis, Kleer, Townshend, Toronto.
Solicitors for the intervener the Treaty Land Entitlement Committee of Manitoba Inc.: Duboff Edwards Haight & Schachter Law Corporation, Winnipeg.
Solicitors for the intervener the Anishinabek Nation: Westaway Law Group, Ottawa.
Solicitors for the intervener the Wauzhushk Onigum Nation: David Garth Leitch Professional Corporation, Toronto.
Solicitors for the interveners the Big Grassy First Nation, the Onigaming First Nation, the Naotkamegwanning First Nation and the Niisaachewan First Nation: Donald R. Colborne Barrister & Solicitor, Victoria.
Solicitors for the interveners the Coalition of the Union of British Columbia Indian Chiefs, the Penticton Indian Band and the Williams Lake First Nation: Mandell Pinder, Vancouver.
Solicitors for the intervener the Federation of Sovereign Indigenous Nations: Maurice Law, Calgary.
Solicitors for the intervener the Atikameksheng Anishnawbek First Nation: Maurice Law, Calgary.
Solicitors for the intervener the Kwantlen First Nation: JFK Law Corporation, Vancouver.
Solicitor for the intervener the Assembly of First Nations: Assembly of First Nations, Ottawa.
Solicitors for the intervener the Assembly of First Nations Quebec‑Labrador: Cain Lamarre, Roberval, Que.
Solicitors for the intervener the Grand Council Treaty #3: First Peoples Law Corporation, Vancouver.
Solicitor for the intervener the Mohawk Council of Kahnawà:ke: Mohawk Council of Kahnawà:ke Legal Services, Mohawk Territory of Kahnawà:ke, Que.
Solicitors for the intervener the Elsipogtog First Nation: Semaganis Worme Lombard, Saskatoon.
Solicitors for the intervener the Chemawawin Cree Nation: Arvay Finlay, Victoria.
Solicitors for the intervener the West Moberly First Nations: Camp Fiorante Matthews Mogerman, Vancouver.