Compensation & Reconciliation

Compensation & Reconciliation

January 31, 2021

By Brad Smith

We await with interest the upcoming Supreme Court of Canada decision in Southwind v. Canada, an appeal from the Federal Court of Appeal argued in December 2020.  Getting this right could be a strong step towards reconciliation.

As described on the Supreme Court website:

In an action initiated in 1991, the Lac Seul First Nation (“LSFN”) claimed damages from Her Majesty the Queen in right of Canada (“Canada”) for losses caused to it and its members as a result of the flooding of a part of its reserve following the construction of a dam where Lac Seul drains into the English River. The dam was completed in 1929, after Canada, Ontario and Manitoba had signed the Lac Seul Storage Agreement. As a result of the construction of the dam and the resulting flooding, nearly one-fifth of the Lac Seul reserve was rendered unusable – the water covers approximately 17 percent of the reserve. Timber was lost, graves were desecrated, homes and fields were destroyed, and portions of the reserve were severed from one another. Canada did not seek LSFN’s consent to surrender the land, nor did it take (or expropriate) the land. The Federal Court awarded the appellants $30 million in equitable compensation for breach of fiduciary duty committed by Canada. LSFN appealed, contending that the Federal Court erred in the assessment of the equitable compensation awarded, namely in the value it attributed to the flooded land. The majority dismissed the appeal. A dissenting judge would have allowed the appeal and remitted the assessment of equitable compensation for redetermination.

Lac Seul First Nation is located northwest of Thunder Bay, so any developments affecting that community and the individual claimants are of interest to us.

However, being lawyers, we have a broader interest in seeing what the Supreme Courts does with the application of the doctrine of equitable compensation to Indigenous rights claims.

The Federal government’s duty to Indigenous peoples has been held to be fiduciary in nature. The Supreme Court has not considered the nature of the remedy for a breach of the duty in depth. The Specific Claims Tribunal, several provincial Courts of Appeal and the Federal Court of Appeal have applied the doctrine of equitable compensation.

Equitable compensation, like other remedies, is intended to put the injured parties back into the same situation as they would be if the breach had not occurred.

Damages are awarded for breaches under the common law of contract, property and negligence. Equitable compensation is awarded for breach of an equitable duty such as a breach of trust, breach of fiduciary duty, or breach of confidence. Since equitable compensation arises from the court’s powers in equity, it is more flexible than common law damages.

The compensation may be payment of money, but may be a declaration of trust, an accounting, or other relief. Even if the compensation is payment of money, that may involve a disgorgement of profits (or gains) measured by the defendant’s gains, rather than the plaintiff’s losses. Because the gains by the government are also difficult to measure, no consistent approach has been used by the various courts.

The leading Supreme Court cases to date dealing with equitable compensation involve rights other than those of Indigenous people.

Many of the nature of breaches of government obligations to Indigenous peoples occurred long ago. There are additional issues surrounding what evidence is admissible, and how different sorts of evidence will be weighed. The Indigenous oral storytelling tradition has begun to gain credibility in the courts, but it is far from consistently treated when balanced with the types of evidence courts historically consider (first hand witnesses and documents, mainly).

The communal nature of many Indigenous rights is also unique, and makes it difficult for courts to know how to assess the losses.

The need for recognition of traditional Indigenous laws and values is a further difficulty that courts struggle with. Damages are typically described as “distributive justice” – the transfer of wealth. Restorative justice, focused on relationships and healing, is an important part of traditional Indigenous law.

As pointed out by Alison Aho in her article Equitable Compensation as a Tool for Reconciliation: Remedying Breach of Fiduciary Duty for Indigenous Peoples, there is an opportunity here for restorative justice to be applied.  She calls for a model that seeks to not only to pay compensation, but also to to heal the relationship.

Aho calls for a shift from distributive justice to substantively recognizing Indigenous rights and law.

Because equity is inherently more flexible than common law, equitable compensation may present better opportunities for reconciliation. It is worth noting that Aho thinks otherwise. She calls for greater self-governance. While it is easy to agree with that idea, she stops short, in our view, of proposing a model of self-governance that also includes solutions for the historical injuries that still must be resolved through remedies which include compensation, but not through compensation alone.

Southwind presents the Supreme Court an opportunity to address many of these concerns, to give us a road map going forward, and to take a significant step towards reconciliation. We hope that they achieve these goals.