A-564-81
The Queen (Appellant) (Defendant)
v.
Delbert Guerin, Joseph Becker, Eddie Campbell,
Mary Charles, Gertrude Guerin and Gail Sparrow
suing on their own behalf and on behalf of all other
members of the Musqueam Indian Band
(Respondents) (Plaintiffs)
Court of Appeal, Heald, Le Dain JJ. and Culliton
D.J.-Vancouver, June 10, 11, 14, 15, 16, 17, 18;
Ottawa, December 10, 1982.
Crown - Trusts - Appeal from Trial Division's finding
that Crown breached trust - Undeveloped reserve lands in
Vancouver surrendered by Indian Band to Crown for lease to
golf club - Trial Judge finding surrender created express
trust, obligating Crown as trustee to lease on specific oral
conditions - Crown leasing on terms quite unlike those
discussed with Band before surrender, without Indians'
authorization of changes - Crown may act as trustee but
must deliberately choose to do so - Crown unlikely to be
constructive trustee - Implying oral terms improper, since no
compliance with formalities prescribed by Act as public policy
- Lesser authority cannot discharge Governor in Council's
statutory responsibilities - Respondents alternatively arguing
trust created by Act and by terms of surrender - Distinction
in Kinloch between true (lower sense) trust and governmental
obligation (trust in higher sense) where Crown performing
governmental functions - Only true trust being equitable
obligation enforceable by courts - S. 18 and surrender creat
ing governmental obligation and not supporting breach of trust
action - In public law context neither "in trust" nor require
ment that property be dealt with for benefit of others conclu
sively establishing intention to create true trust - "Use and
benefit" in s. 18 referring to purpose of executive act reserving
lands for Indians - S. 18 discretion as to use of lands
implying decision rests with Government and incompatible
with court-enforceable obligation to deal with land in particu
lar manner - Authority given by surrender to lease for
Indians' welfare qualifying Government's powers under Act
Qualification within statutory scheme and not imposing obli
gation to lease since would entail fundamental change in
Crown's responsibility - "In trust" in surrender meaning
surrender and subsequent dealings to be for benefit of Indians,
because also found in provisions giving Crown legal title,
wherein no intent to make Crown trustee, especially since
discretion conferred - Appeal allowed, action dismissed -
Indian Act, R.S.C. 1952, c. 149, ss. 2, 4(2), 18(1),(2), 19, 36,
37, 38, 39 (as am. by S.C. 1956, c. 40, s. 11), 40, 41, 53(1), 57,
58, 60(1), 61(1), 73(1), 81 - Indian Act, R.S.C. 1970, c. 1-6,
ss. 18(1), 37, 38, 39, 40, 41, 61(1) - Order of Her Majesty in
Council Admitting British Columbia into the Union, R.S.C.
1970, Appendix II, No. 10, Sch., s. 13 - Indian Affairs
Settlement Act, S.B.C. 1919, c. 32, s. 2 - Land Act, R.S.B.C.
1936, c. 144, s. 93(1) - Federal Court Rules, C.R.C., c. 663,
R. 409.
Indians — Reserve lands in Vancouver — Golf club wishing
to lease — Indian Affairs arranging appraisal — Club making
lease proposal disadvantageous to Band — Government misin
forming appraiser as to proposal — Appraiser giving opinion
offer satisfactory — Band not fully informed of proposal or
appraiser's report — Band not having independent legal advice
— Band voting for surrender — Government granting club
lease with terms unlike those discussed at surrender meeting
— Band suing Crown for breach of trust — Whether Crown
obliged to lease on specific conditions — Statutory surrender
formalities, necessary for conditions to be valid, not observed
— Indians having what amounts to beneficial interest in nature
of property right — May be subject of trust — S. 18 giving
Governor in Council a discretion incompatible with imposition
of equitable obligation enforceable by court — Appeal allowed
— Action dismissed — Indian Act, R.S.C. 1952, c. 149, s.
18(1).
The Musqueam Indian Reserve No. 2, located within the
City of Vancouver, consisted in large part of undeveloped, land.
A golf club expressed an interest in leasing some of this land,
for development and use as a golf course and clubhouse site. In
October, 1956, the Indian Affairs Branch arranged for an
appraisal of the reserve lands to be made by one Howell, a
qualified appraiser but not a land-use expert. His report cha
racterized as a first-class residential area a tract that included
the lands in which the club was interested. It also specified a
per-acre value ($5,500) and a fair rate of return (6%) for that
tract. The Branch gave Band members only limited information
regarding the contents of the Howell report, although the
report's conclusions were communicated to the club. In April,
1957, the club sent to Anfield, the Branch's District Superin
tendent, a detailed proposal for a lease. It envisioned an initial
term of 15 years, with provision for renewals totalling a further
60 years. Several aspects of the proposal were either decidedly
or arguably disadvantageous to the Band. Among these were an
initial annual rental lower than that implied by the figures in
the Howell report. Anfield asked Howell for his opinion as to
whether the proposed rental, and the rate of return which it
would entail, were satisfactory. Howell replied in the affirma
tive; however, Anfield had failed to inform him of certain
critical aspects of the proposal, and at trial, Howell indicated
that his view of the matter would have been very different if he
had had the additional data. Nonetheless, the opinion which he
provided led to a decision by the government officials to accept
the club's offer. The Band were not fully informed of the
proposal. Nor did they receive a copy of Howell's letter. They
did object to certain features of the proposal, but relented, after
some pressure from Anfield. On October 6, 1957, a meeting of
the Band was held to vote on the surrender of reserve lands to
the Crown, to permit a lease to the club. The Band did not
obtain independent legal or expert advice prior to this meeting,
having been told that they were not allowed to do so. Further
objections to the proposal were raised, but when it came time to
vote, Band members still had not been informed of certain
terms adverse to their interests, and were under a mistaken
impression that certain points had been or would be amended in
their favour. Following a reading of the surrender, that docu
ment was approved. It was subsequently accepted by the Gover
nor in Council. Additional discussions and negotiations
occurred, involving Branch officials and club representatives.
The Branch did not consult with the Band or its Council again,
and did not supply them with any further information, until
January, 1958. A change in the draft lease insisted upon by the
Council was never made, nor were other unfavourable terms
removed. On January 22, 1958, the Branch and the club
entered into a lease the terms of which bore little resemblance
to those discussed at the surrender meeting. The Indians did
not receive a copy of the lease until 1970. In 1975, the chief
and councillors of the Band commenced this action, alleging
that the Crown had committed a breach of trust "in agreeing to
and executing the lease". The Trial Judge found that the
surrender had created a trust, whereunder the Crown, as
trustee, was obliged to lease to the club on specific conditions,
even though those terms were not mentioned in the surrender
itself. It was further held that the Crown had failed to obtain
the Band's authorization for the substantial deviations from
those terms which were incorporated into the lease. The Trial
Judge declared that the Crown had committed a breach of
trust, and awarded the respondents $10 million in damages.
The Crown appealed.
Held, the appeal should be allowed and the action dismissed.
In principle, there is nothing to prevent the Crown from
acting as a trustee; however, the Crown must deliberately
choose to do so. It was doubtful that the Crown could be made
subject to a constructive trust. The Trial Judge did not, in any
event, hold that a trust of that sort existed. Instead, he found
that the surrender created an express trust, comprising the oral
terms which he set forth.
Such terms, though, may not properly be implied, and so do
not afford a basis for a finding of liability. Sections 37 through
41 of the Act (R.S.C. 1952, c. 149) establish certain formali
ties, which must be complied with in order for conditions
attaching to a surrender to be valid. These have been prescribed
as a matter of public policy, with a view to ensuring the
protection of the particular band, and the proper discharge of
the Government's responsibility for the Indians. They are also
an important means of ensuring certainty as to the effect of the
surrender, and the validity of any subsequent disposition of the
land. In so far as the oral terms found by the Trial Judge are
concerned, the formalities were not observed: the Band did not
approve the terms, nor did the Governor in Council accept
them. The cases indicate that the responsibilities of the Gover
nor under the Act, being of great importance, cannot be
discharged by a departmental official, but even if the situation
were otherwise, the evidence does not indicate—and the Trial
Judge did not find—that the oral conditions were accepted by
any official.
Furthermore, in allowing for a conditional surrender, the Act
contemplates that any conditions approved by a band will be
incorporated into the document of surrender, either by an
actual statement of them, or by reference. No such inclusion
was made in the instant case.
As an alternative to relying on the supposed oral terms, the
respondents contend that a trust was created by the terms of
the surrender document, and that the Crown breached this
trust by failing to exercise ordinary skill and prudence in the
leasing of the land. They also argue that a trust was imposed on
the Crown by the provisions of the Act—notably subsections
18(1) and 61(1).
There can, however, be no trust at all unless some form of
property is present and acts as the subject-matter of the trust.
In this regard, the appellant argues that the interest held by the
Indians in the reserve lands did not in fact constitute property,
and therefore could not have been the subject of a trust.
The nature and content of this kind of interest have been
much commented upon, both with reference to the Act and
otherwise, but they have yet to be authoritatively determined.
The interest is not the legal title, for that belongs to the Crown.
While not strictly a beneficial interest in land, it amounts to the
same thing. It displaces the Crown's beneficial interest. Hence
it is a qualification of the Crown's title of such content and
substance as to be in the nature of a property right. Conse
quently, it may be the subject of a trust.
This does not decide the issue of whether the Act or the
surrender made the Crown a trustee. A number of decisions, in
particular that of the House of Lords in Kinloch, have estab
lished that where the Crown is involved in the performance of
governmental functions, a distinction must be drawn between a
"true trust", (or trust in the "lower" or private law sense) and a
"governmental obligation" (or trust "in they higher sense").
Only the true trust is an equitable obligation enforceable by the
courts.
Section 18, however, creates a governmental obligation.
While the section does include the expression "in trust", in a
public-law context neither the use of those words nor the fact
that the property is to be held or dealt with for the benefit of
others is conclusive evidence of an intention to create a true
trust. As for the words "use and benefit", they are found not
only in section 18, but also in several other provisions of the
Act, and refer to the purpose of the executive act by which
lands are reserved for the Indians. On the other hand, section
18 confers on the Governor in Council a discretion to determine
"whether any purpose for which lands in a reserve ... are to be
used is for the use and benefit of the band". This indicates that
it is for the Government to make this determination, not the
courts. The section is indeed incompatible with an intention to
impose on the Crown an equitable obligation, enforceable in the
courts, to deal with reserve land in any particular manner.
Other indications that the responsibility for a reserve is govern-
mental in character may be found in the Act. Section 18
affords no basis for an action for breach of trust in relation to
the management or disposition of reserve lands.
The same conclusion applies in respect of the surrender. The
authority to lease the surrendered lands in the interest of the
Indians' welfare—an authority which, by its terms, the surren
der bestows upon the Government—amounts to a qualification
upon the powers of control and management given to the
Government by the Act. The qualification, however, is itself
within the statutory scheme. Accordingly, it does not impose
any obligation to lease, for, as a part of the statutory scheme, a
conditional surrender cannot have been intended to work as
fundamental a change in the nature of the Crown's responsibili
ty as such an obligation would entail. Again, the words "in
trust" do appear in the surrender, but they are also found in the
key provisions of the Orders in Council and provincial statute
under which the federal Government obtained legal title to the
reserve land. In those provisions, the aim of using the expres
sion "in trust" cannot have been to make the federal Crown a
true trustee—especially since, by the terms of the grant to it,
the federal Government was expressly given a discretion to
determine what use of the land would benefit the Indians.
Given this context of statute and intergovernmental agreement,
the words "in trust", as employed in the surrender, must be
understood simply to signify that the surrender was, and any
subsequent dealings with the surrendered lands were to be, for
the benefit of the Indians.
It is unnecessary in this case to decide whether there is a
court-enforceable obligation with respect to the application of
revenue from a lease of reserve lands. Nor is it necessary to
decide what the nature and extent of such an obligation might
be. Those are issues which involve considerations different from
the ones that apply here. They would turn upon section 61 and
the provisions which follow it, and upon the pertinent terms of
the surrender.
CASES JUDICIALLY CONSIDERED
APPLIED:
Rustomjee v. The Queen (1876), Q.B.D. 69 (C.A.);
Civilian War Claimants Association, Limited v. The
King, [1932] A.C. 14 (H.L.); Kinloch v. The Secretary of
State for India in Council (1882), 7 App. Cas. 619
(H.L.); The Hereford Railway Co. v. The Queen (1894),
24 S.C.R. 1; Tito and others v. Waddell and others (No
2), [1977] 3 All ER 129 (Ch.D.); Town Investments Ltd.
and Others v. Department of the Environment, [1978]
A.C. 359 (H.L.); Amodu Tijani v. The Secretary, South
ern Nigeria, [1921] 2 A.C. 399 (P.C.).
DISTINGUISHED:
Regina v. Taylor et al. (1981), 62 C.C.C. (2d) 227 (Ont.
C.A.).
CONSIDERED:
St. Ann's Island Shooting and Fishing Club Limited v.
The King, [1950] S.C.R. 211, affirming [1950] Ex.C.R.
185; Ontario Mining Company, Limited v. Seybold and
Others, [1903] A.C. 73 (P.C.); St. Catherine's Milling
and Lumber Company v. The Queen (1888), 14 App.
Cas. 46 (P.C.); Attorney-General for the Province of
Quebec and Others v. Attorney-General for the Domin
ion of Canada and Another, [1921] 1 A.C. 401 (P.C.);
Calder, et al. v. Attorney-General of British Columbia,
[1973] S.C.R. 313; Tee-Hit-Ton Indians v. United
States, 348 U.S. 272 (1955); United States v. Sioux
Nation of Indians et al., 448 U.S. 371; 65 LEd2d 844
(1980); The Queen v. Devereux, [1965] S.C.R. 567,
reversing [1965] 1 Ex.C.R. 602; Joe et al. v. Findlay
(1981), 122 D.L.R. (3d) 377 (B.C.C.A.), affirming
(1978), 87 D.L.R. (3d) 239 (B.C.S.C. Chambers); Brick
Cartage Limited v. The Queen, [1965] 1 Ex.C.R. 102;
Miller v. The King, [1950] S.C.R. 168.
REFERRED TO:
Reference re Stony Plain Indian Reserve No. 135 (1981),
130 D.L.R. (3d) 636 (Alta. C.A.); Attorney-General for
the Dominion of Canada v. Attorney-General for
Ontario, [1897] A.C. 199 (P.C.); Shoshone Tribe of
Indians v. United States, 299 U.S. 476 (1937).
COUNSEL:
W. I. C. Binnie, Q.C., G. O. Eggertson and M.
Taylor for appellant (defendant).
M. R. V. Storrow, S. R. Schachter, J. I.
Reynolds and L. F. Harvey for respondents
(plaintiffs).
SOLICITORS:
Deputy Attorney General of Canada for
appellant (defendant).
Davis & Company, Vancouver, for respond
ents (plaintiffs).
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an appeal from a judgment
of the Trial Division [[1982] 2 F.C. 385] declaring
the Crown to be in breach of trust in respect of the
leasing by it on January 22, 1958 of some 162
acres of surrendered land in the Musqueam Indian
Reserve No. 2 in Vancouver to the Shaughnessy
Heights Golf Club and awarding the respondents
$10 million in damages. The respondents cross-
appeal, seeking an increase in the amount of dam
ages, and a reversal of the Trial Division's refusal
to award pre-judgment interest, an increase in the
post-judgment rate of interest, and costs on a fixed
or lump sum basis.
The respondent Delbert Guerin is described in
the statement of claim as the Chief of the Mus-
queam Indian Band and the respondents Joseph
Becker, Eddie Campbell, Mary Charles, Gertrude
Guerin and Gail Sparrow as councillors of the
Band. The respondents sue on their own behalf
and on behalf of all past, present and future
members of the Band.
The Musqueam Indian Band is a "band" within
the meaning of the Indian Act, R.S.C. 1970, c. I-6,
and the Musqueam Indian Reserve No. 2 is a
"reserve" within the meaning of the Act.
Article 13 of the Terms of Union upon which
British Columbia was admitted into Canada by
imperial Order in Council of May 16, 1871
([Order of Her Majesty in Council Admitting
British Columbia into the Union] R.S.C. 1970,
Appendix II, No. 10, at pages 284-285) made the
following provisions concerning responsibility for
the Indians in British Columbia:
13. The charge of the Indians, and the trusteeship and
management of the lands reserved for their use and benefit,
shall be assumed by the Dominion Government, and a policy as
liberal as that hitherto pursued by the British Columbia Gov
ernment shall be continued by the Dominion Government after
the Union.
To carry out such policy, tracts of land of such extent as it
has hitherto been the practice of the British Columbia Govern
ment to appropriate for that purpose, shall from time to time be
conveyed by the Local Government to the Dominion Govern
ment in trust for the use and benefit of the Indians on applica
tion of the Dominion Government; and in case of disagreement
between the two Governments respecting the quantity of such
tracts of land to be so granted, the matter shall be referred for
the decision of the Secretary of State for the Colonies.
The land for the Musqueam Reserve, consisting
of 416.82 acres, was set aside for the use and
benefit of the Musqueam Band and conveyed by
the Province of British Columbia to the Dominion
of Canada by Order in Council 1036 made July
29, 1938, pursuant to section 2 of the Indian
Affairs Settlement Act, S.B.C. 1919, c. 32, and
section 93 of the Land Act, R.S.B.C. 1936, c. 144,
subsection (1) of which provided:
93. (1.) The Lieutenant-Governor in Council may at any
time, by notice signed by the Minister and published in the
Gazette, reserve any Crown lands not lawfully held by pre
emption, purchase, lease, or Crown grant, or under timber
licence, for the purpose of conveying the same to the Dominion
Government in trust for the use and benefit of the Indians, and
in trust to reconvey the same to the Provincial Government in
case the lands at any time cease to be used by the Indians; and
the Lieutenant-Governor in Council may also similarly reserve
any such lands for railway purposes or for such other purposes
as may be deemed advisable.
The provincial Order in Council provided in part
as follows:
... the lands set out in schedule attached hereto be conveyed to
His Majesty the King in the right of the Dominion of Canada
in trust for the use and benefit of the Indians of the Province of
British Columbia, subject however to the right of the Dominion
Government to deal with the said lands in such manner as they
may deem best suited for the purpose of the Indians including a
right to sell the said lands and fund or use the proceeds for the
benefit of the Indians subject to the condition that in the event
of any Indian tribe or band in British Columbia at some future
time becoming extinct that any lands hereby conveyed for such
tribe or band, and not sold or disposed of as heretofore pro
vided, or any unexpended fund being the proceeds of any such
sale, shall be conveyed or repaid to the grantor ....
In the 1950's officials in the Indian Affairs
Branch of the Department of Citizenship and
Immigration were considering how the land of the
Musqueam Reserve should be developed for the
benefit of the Band. They were concerned about
the extent of individual allotments in the reserve
and their effect on the development of the reserve
for the benefit of the Band as a whole. The two
officials principally concerned were Frank E.
Anfield, District Superintendent (sometimes
referred to as "officer in charge of the Vancouver
agency"), and his superior, William S. Arneil,
Indian Commissioner for British Columbia. Nei
ther Anfield nor Arneil was alive at the time of the
trial so we do not have the benefit of their testimo
ny as to what was discussed in important meetings,
but the role they played is fairly fully disclosed by
the documents. On October 11, 1955 Anfield
wrote to Arneil with reference to a resolution of
the Band Council of May 7, 1952 approving the
allotment of some 396 out of the total of 416 acres
in the Musqueam Reserve to individual members
of the Band. His letter contained the following
passages concerning the problem of individual
allotments and the development of the reserve for
the benefit of the Band:
The future of the valuable Reserve, situated within the
charter area of the City of Vancouver, is of paramount concern
to the Indians as well as others. Applications are on file for the
acquisition by sale and lease of large areas of the unused, as
well as the used portions of this Reserve, but it is practically
impossible to get into any workable negotiations until this
problem of individual land holdings is settled once and for all.
The Department cannot lightly refuse allotment of domestic
land holdings to individual Band members. This is their right.
But to permit individual ownership of large unused areas with
the right to lease on an individual basis can only end in
economic disaster for the Band as a whole. The area is present
ly zoned against industry and for the present is restricted to
agricultural use, but this could easily be changed to such uses
as golf courses, and eventually to residential occupancy: these
uses of course to be operative only on alienation of the reserve
by sale or lease. Long term development of the reserve for the
benefit of the Band should be by the leasing of large areas on
the best possible terms.
It may be necessary in time to move the existing scattered
village to a new site either on or off the present reserve and
consequently individual land holdings should be confined to
actually required areas and every effort made to keep unused
areas solely within control of the whole Musqueam Band.
On November 16, 1955 William C. Bethune,
Acting Superintendent, Reserves and Trusts, in
Ottawa, wrote to Arneil with reference to the
proposed policy concerning individual allotments
in the reserve, and said:
Your remarks with respect to a possible proposal involving
leasing of an area for golf club purposes, of a plan for a model
Indian village and of a proposed park area have been noted
with interest. You refer to satisfactory rentals and it is pre
sumed no one has in mind acquiring any portion of the Reserve
for less than full current value.
In a report to Arneil on September 17, 1956
Anfield recommended that a detailed study be
made of the various requirements for land in the
reserve, that there be an expert appraisal, and that
an expert estate planner be retained to advise on
the best use to be made of the reserve. On the need
for expert advice he said:
It seems to me that the real requirement here is the services of
an expert estate planner with courage and vision and whose
interest and concern would be as much the future of the
Musqueam Indians as the revenue use of the lands unrequired
by these Indians. It is essential that any new village be a model
community. The present or any Agency staff set up could not
possibly manage a project like this, and some very realistic and
immediate plans must be formulated to bring about the stated
wish of these Musqueam people, the fullest possible use and
development for their benefit, of what is undoubtedly the most
potentially valuable 400 acres in metropolitan Vancouver
today.
Anfield also recommended that the unrequired
land in the reserve be "publicly advertised for lease
use", and he spoke of the possibility of another
"British Properties" development.
On October 1, 1956 the Band Council resolved
that a land appraisal of the reserve be made at
Band expense by personnel of the Veterans Land
Administration in order to determine the total
value of the land for leasing purposes.
In a memorandum to Arneil on October 12,
1956, Anfield reported on a meeting with officials
of the City of Vancouver concerning the possibility
of leasing the 184 acres in "the lower land area" of
the reserve to the City for garbage-disposal pur
poses. He also referred to the possibility of a lease
of the "upper level" of 232 acres to the Shaugh-
nessy Golf Club as follows:
It was agreed that any attempt to lease either the upper level
area as a golf course to the Shaughnessy Golf Club, or the
lower area to the City must be made on a joint basis, that is
both discussions must proceed at the same time.
Mr. Oliver advised that in his opinion the City would be
prepared to lease the area at the rental to be agreed upon, the
City then to advance the cash required for the rehabilitation of
the existing home owners to a model village site, the cost of
same to be refunded over a comparatively long term basis. It
would be possible that only minimal rentals would be paid in
cash during the refunding period.
If at the same time 150 acres was leased to the Shaughnessy
Golf Club for a golf course and clubhouse site at a figure say of
$20,000 to $25,000 per year, revenue funds would then be
coming into the Band at the same time that the cost of the
model village was being refunded.
This seemed to have merit to all concerned and it was agreed
that each group would keep each other posted, and that as soon
as the appraisal had been received a closed meeting of the three
groups concerned, the City, Shaughnessy Golf Club and this
Department would be held in an effort to come to positive
terms.
As indicated in Anfield's letter of October 11,
1955, various parties had expressed interest in
purchasing or leasing land in the Musqueam
Reserve. This was confirmed in a letter of October
25, 1956 from Bethune to W. Strojick, Superin
tendent, Property Division, of the Veterans' Land
Act Administration, requesting an appraisal of the
reserve that would distinguish between the "upper
lands", on which the golf course is located, and the
"low lying lands". He said: "The reports we have
received indicate that a number of parties have
approached our Commissioner's office at Vancou-
ver with respect to securing a portion of this
Reserve .. .
The appraisal of the Musqueam Reserve was
made by Alfred Howell, an appraiser with the
Veterans' Land Act Administration. Howell was a
qualified appraiser, but not a land-use expert. His
report dated December 28, 1956 characterized the
upper land, on which the golf club was eventually
located, as a first-class residential area and put a
value on it of $5,500 per acre. The total value of
$1,360,000 placed on the land assumed a rate of
return of 6%.
About the same time as Howell made his
appraisal, the "Turner Report" on the adjacent
University Endowment Lands of the University of
British Columbia was being prepared. This report
recommended long-term leasing of the endowment
lands for residential development and put a value
on the land of $13,000 per acre. The report
acknowledged that the 99-year lease for residential
purposes, which it strongly recommended, was not
yet well understood, but expressed confidence that
it could be made attractive to prospective home
owners. There is an indication in the acknowledg
ments section of the report that personnel in the
Indian Affairs Branch in Vancouver were among
those consulted in the course of its preparation.
The Musqueam Band was not given a copy of
the Howell report. It did not obtain one until after
the action was instituted in December 1975. Mem
bers of the Band were informed by Anfield of
some of its contents at meetings of the Band
Council or the Band. Anfield disclosed the conclu
sions of the Howell report to the golf club.
In 1957 Anfield pursued discussions with R. T.
Jackson, then president of the Shaughnessy Golf
Club, and E. L. Harrison, a director of the club
who succeeded Jackson as president during that
year, concerning the possibility of a lease of the
upper level Musqueam land to the club. It was
during these discussions that the Howell evalua
tion of the land was made known to the club,
although it had not yet been disclosed to the Band.
Anfield was evidently concerned about the club's
reaction to Howell's estimate of a fair rental value
for the land. This is reflected in a draft letter dated
February 13, 1957 from Anfield to Jackson, which
Anfield decided not to send. In it Anfield referred
to the value placed on the land by the Howell
report and concluded:
The investment of this land, even at a minimum of 5%
indicates a possible rental of the 150 acres in the neighbour
hood of $37,500.00.
We felt that we should get this information to you immedi
ately so that you could do some thinking about it with a view to
discussion in the immediate future, as to whether or not you
wish to pursue this matter.
You will realize that we will be bound by an official apprais
al not to invest this land at less than the going rate, and I hope
that the contents of this letter will not come as too great a
shock to you.
Notes made by Anfield on March 13, 1957 with
reference to his discussions with the golf club
contained the statement: "Minimum rental expect
ed for 150 acres would be in the neighbourhood of
$40,000.00 a year."
In a letter to Jackson on April 1, 1957 Anfield
said:
Whilst the appraiser has committed himself to a statement
that there might be a diminution in rental values on the yellow
bordered area, he points out, and insists that we keep very
much in mind the fact that he has arrived at his overall figure
of $5500.00 per acre value for the 220 acres lying above the
125 ft. contour as an average value, and he feels that if we start
cutting down from this average value of $5500.00 per acre we
are going to end up with considerably less than the real value of
the acreage of land. He does not feel that he should commit
himself to a reduction by percentages or dollars, and thinks that
we would be well advised to stand on the basis of $5500.00 per
acre value, capitalized at 6% to determine the rental right
across the line.
I thought I should let you have this information as I am well
aware that the financial angle of this thing is going to be quite
likely the determining factor in your thinking. I trust that this
information may assist you and your committee in further
consideration of any submission that your Shaughnessy Golf
Club may care to make to this Department on behalf of the
Musqueam Indians, to whom eventually, of course, the submis
sion must be presented, and whose decision will be final.
On April 4, 1957 Harrison, who had become the
president of the Shaughnessy Golf Club, wrote to
Anfield setting out as follows the terms which he
was prepared to place before the members of the
club as the basis for a lease of land in the reserve:
1. The area to be leased comprises approximately 160 acres of
the Indian Reserve and is in the location discussed at our
meeting yesterday.
2. We are to have the right to construct on the leased area a
golf course and country club and such other buildings and
facilities as we consider appropriate for our membership.
3. We will require a right-of-way over the part of the Reserve
lying between Marine Drive and the leased area to give such
convenient access as we need.
4. The initial term of the lease will be for the period of fifteen
years commencing May 1st, 1957, and the club will have
options to extend the term for four successive periods of fifteen
years each, giving a maximum term of seventy-five years.
5. The rental for the first "fifteen years" of the term of the
lease will be $25,000.00 per annum to be paid in advance on the
anniversary date each year of the execution of the lease, the
first payment of $25,000.00 to be made as soon as the lease has
been prepared, executed and delivered.
6. The rental for each successive fifteen year period of the term
will be determined by mutual agreement between your Depart
ment and the club and failing agreement, by arbitration pursu
ant to the "Arbitration Act" of the Province of British
Columbia, but the rental for any of the fifteen year renewal
periods shall in no event be increased or decreased over that
payable for the preceding fifteen year period by an amount
more or less [sic] than 15% of the initial rent as set out in 5
above.
7. The amount of rent to be paid for each successive fifteen
year period shall be determined before we are required to
exercise our option to extend for that period.
8. We will pay all taxes assessed against the leased area.
9. We will pay the reasonable cost of relocating on other parts
of the Reserve, any Indian houses presently on the leased area.
10. At any time during the term of this lease, and for a period
of up to six months after termination, we will have the right to
remove any buildings and other structures constructed or
placed by us upon the leased area, and any course improve
ments and facilities.
On April 7, 1957 there was a meeting of the
Band Council at which Anfield for the first time
informed members of the Band of the negotiations
with the golf club. He did not circulate a copy of
the club's proposal nor read it out in full. He
referred to it in general terms stating that it was a
proposal to lease land in the reserve for fifteen
years with an option to renew for additional peri
ods of fifteen years on terms to be agreed upon.
Minutes of the meeting were written by Andrew
Charles Jr., the Band secretary, and by Anfield.
The Charles minutes contain the following state
ment with reference to the proposed lease to the
golf club:
Mr. Anfield also submitted to the council a formal Application
to Lease 160 acres on the Musqueam IR #2 from the Shaugh-
nessy Heights Golf Club. The initial term of the Lease will be
for the period of fifteen years commencing May 1st, 1957, and
the Club will have options to extend the term for four succes
sive periods of fifteen years each, giving a maximum term of
seventy-five years.
The Anfield minutes contain the following refer
ence to the proposed lease:
2. The Superintendent then placed before Council the applica
tion of Shaughnessy Golf Club of Vancouver for a long term
lease of approximately 160 acres of land as outlined generally
on the McGuigan survey plan at a rental for the first lease
period of 15 years of $25,000.00 per year, with options for four
additional 15 year periods on terms to be agreed upon.
The findings of the learned Trial Judge as to the
extent to which the details of the proposed lease
were disclosed to the members at this meeting are
as follows [at page 398]:
The evidence on behalf of the plaintiffs is that not all of the
terms of the Shaughnessy proposal were put before the Band
Council at that meeting. William Guerin said copies of the
proposal were not given to them. He did not recall any mention
of $25,000 per year for rental. He described it as a vague
general presentation with reference to 15-year periods. Chief
Edward Sparrow said he did not recall the golf club proposal
being read out in full.
I accept the evidence of William Guerin and Chief Sparrow
on this point. The minutes by Charles Jr. and Anfield suggest,
to me, only a general indication was given of the proposal by
the golf club to lease approximately 160 acres for an initial
term of 15 years, with options for additional 15-year periods. I
note the Charles Jr. minutes record the exact words of term 4
of the golf club proposal. If the other terms, including rent, had
been read out, I am sure Charles Jr. would have recorded them.
I note the Anfield minutes on this point conclude with the
words "... on terms to be agreed upon".
The Charles and Anfield minutes record that
the following resolution was passed by the Band
Council:
That we do approve the leasing of unrequired lands on our
Musqueam I.R. 2 and that in connection with the application of
the Shaughnessy Golf Club we do approve the submission to
our Musqueam Band of surrender documents for leasing 160
acres approximately as generally outlined on the McGuigan
survey in red pencil: and further that we approve the entry by
the said applicant for survey purposes only pertinent to said
surrender: said surveys to be at the applicants [sic] cost and
risk entirely.
On April 24, 1957 Bethune wrote to Arneil
concerning the proposed lease to the golf club. He
acknowledged receipt of a letter of August [sic]
11, 1957 with enclosures. The letter from Arneil
could not be found, but it is clear from Bethune's
letter that he had received a copy of the golf club's
proposal. Bethune's letter, which expressed con
cern about the adequacy of the proposed rent of
$25,000 per annum for the initial period of fifteen
years, reads as follows:
Re: The Shaughnessy Heights Golf Club
application to lease—Musqueam I.R. #2
I wish to acknowledge receipt of your letter and enclosures of
the 11th of April, 1957, relative to an application received from
the above to lease approximately 160 acres of reserve land at a
consideration of $25,000.00 per annum for the first fifteen
years. The matter of survey has been discussed with the Sur
veyor General's office and instructions are going forward to the
Surveyor Mr. D. J. McGuigan.
The proposition put forward by the Golf Club has its relative
merits but after reviewing the appraisal from the rental stand
point, we have some doubt as to whether the amount offered for
the first term is adequate. The club, as you will note from their
application, intend using 160 acres of the best residential land
which consists of only 220 acres in all. The lease proposes to tie
up this area for a period of 75 years.
The appraisal, as you will note, indicates that the area to be
leased has a net value of $5,500.00 per acre and considering
that we should receive 5 to 6 per cent investment return on the
land the rental value per acre should be somewhere between
$250.00 to $300.00 per annum. The offer made by the club
amount [sic] to $156.00 per acre per year which is considerably
lower than what we should expect.
It may be that the proposal offers long range benefits that we
are not aware of and perhaps it might be advisable for you to
discuss the proposition with the appraiser and obtain his opin
ion on what he feels we should expect to obtain on leasing this
area for a term as contemplated by the Golf Club. In due
course, we would appreciate your comments and recommenda
tions as to what you consider would be a suitable annual rental
for such a lease.
On May 16, 1957 Anfield wrote to the appraiser
Howell. His letter referred to a conversation he
had had with Howell on May 16, 1957 and
enclosed copies of Bethune's letter to Arneil of
April 24, 1957. Anfield's letter to Howell con
tained the following passages:
Having in mind the appraisal made by our service under date
of December 28, 1956, and having in mind the specific ques
tions raised in the Department's letter to Mr. Arneil, and our
discussion referred to herein, it will be very much appreciated if
you would review this matter in detail in the light of the
appraisal and endeavour to submit to us in quadruplicate a
report at your earliest convenience as to whether or not in your
opinion the rental of $25,000.00 per year for the first fifteen
year period of a seventy-five year lease is in fact just and
equitable. We should keep in mind that the original discussion
of the area required was in terms of 150 acres, which area has
now been extended to 160. It is possible that we should in any
case ask the Shaughnessy Golf Club people for a pro-rated
increase in that to satisfy the Department that the offer made
of $156.00 per acre is not unreasonable having in mind the
appraised value running between $250.00 and $300.00 per acre
rental per annum based on your appraised value of $5500.00
per acre.
I do not need, of course, to point out to a man of your
experience that in a long term lease of seventy five years, is it
conceivable that we should not expect a return of more than
five percent on the land, and would be glad of your comments
on this particular point.
The learned Trial Judge found that Howell was
not informed of all the details of the golf club's
proposal. He said [at page 399]:
Howell was not given all the details of the Shaughnessy
proposal. He did not know of term 6 where rent increases or
decreases for the 15-year renewal periods were limited to 15%
of the initial rent of $25,000, or $3,750. Nor was he made
aware the golf club proposed to have the right, at any time
during the term of the lease, or up to 6 months after termina
tion, to remove any buildings or improvements.
The Band was not informed that Anfield had
written to Howell asking him to review his
appraisal and express an opinion as to whether the
proposed rent was adequate.
On May 23, 1957, Howell wrote a letter to
Anfield in which he expressed the opinion that a
return of 3% on the value which he had placed on
the upper land would in all the circumstances be a
fair and equitable one, and he recommended the
acceptance of the proposed lease to the golf club.
Because of the influence which this opinion
appears to have had on the decision to lease the
land to the club it should be quoted in full. It reads
as follows:
On first reading your letter it occurred to me that perhaps I
had put too high a valuation on the high land of the reserve. A
study of values obtaining throughout the City of Vancouver
reassured me on this point, but nevertheless, the true test would
be to offer the area on the market for development and see
what offers result.
However, accepting the appraised value as being correct, it
remains to consider whether the present offer, which gives a 3%
return on the appraised value can be considered fair and
equitable.
The ethics of whether the present band should sell their land,
which is their children's birthright, rather than lease it is not
within the field of this appraisal.
A long term lease, in this case, of seventy-five years, adjust
able in fifteen years, if made with a financially sound concern,
eliminates the risk factor, and a return of anything higher than
the present safe rate (Government Bonds, etc.) of around 3.75%
would not be fair and equitable, nor, for that matter, probable.
In this case we have a piece of raw land, which up to the
present has produced practically nothing. The limited areas at
present under lease are only bringing $35.00 and $40.00 per
acre. The present offer of $156.00 per acre for 160 acres of this
land appears to be a big improvement. Taking the safe rate of
money to be 3.75%, what has the present offer of 3% to give to
compensate for the loss of .75%.
The improvements to the property which will be made by the
lessee must be considered. This has been discussed with the
secretary of the Club, and while reluctant to make any commit
ment, he felt that in the course of the lease, they will spend
close to $1,000,000.00 in buildings and improvements. Clearing
alone will be around $100,000.00, and the club house may cost
over $200,000.00. These improvements will revert to the land at
the end of the lease.
In addition to that, the property is ideally suited for the
project, and while this may not be the highest and best use of
the land, it is one which is in keeping with the whole area, some
part of which must be dedicated for recreational purposes. The
establishment then of the golf course will enhance the value of
all the surrounding property, particularly the remaining high
land on the reserve. Sewers and water mains to supply the club
house will pass and be available to this land.
Another point, which must be considered, is that there is a
limit to the amount the Club can afford to pay, and while their
present offer may not be up to that limit, there are other areas
available, and they may prefer to negotiate for some other
property rather than pay a higher price. However, if their offer
is accepted, the Department will be in a much sounder position
to negotiate an increase in rental in fifteen years' time, when
the Club will have invested a considerable amount of capital in
the property, which they will have to protect.
Taking these things into consideration, I consider the offer to
be a sound one. The prospects of finding a purchaser for 220
acres at $5,500 per acre might involve a considerable length of
time, during which your income is nil. By accepting this lease,
you have an assured income of $25,000 per annum from 160
acres, and you will find it much easier and quicker to dispose of
the remaining 60 acres once the Club commences development.
I am, therefore, of the opinion that it would be the wisest
course to accept the present offer, committing the club to the
development of the property, and then offer the balance of the
high land for sale.
As indicated by the foregoing, Howell based his
revised opinion as to what would be a fair return
for the initial rental period, reducing it from 6% to
3%, on two assumptions concerning the proposed
lease which turned out to be wrong: (a) that the
improvements would revert to the Band at the end
of the lease; and (b) that after the initial term the
Department would be in a strong position to
negotiate an increase in rental. He obviously was
not aware of the condition in the golf club's pro
posal of April 4, 1957 that the club would have the
right to remove the improvements and of the con
dition concerning rental increase, which included
provision for arbitration and a limitation on
increase of 15%. Nor, of course, was he aware of
the condition that ultimately found its way into the
lease that the land would be valued for purposes of
rental increase as unimproved, cleared land which
could be used only for a golf course. This was
confirmed by Howell's testimony at the trial. He
agreed that the 15% limitation on rental increase
was a "shocking" provision. He adhered to his
original opinion that the highest and best use of
the land was for residential purposes, and that this
should be the basis of valuation for calculation of
rental after the initial term.
The Trial Judge's findings with respect to
Howell's testimony are as follows [at page 400]:
Howell gave evidence at trial. He said he approved, in 1957,
the 3% return rate, for the reasons given in his letter: the then
bond rate was 3.75%; the golf club was not a financial risk; the
improvements would revert to the Band. In cross-examination
he said if he had known the improvements would not revert to
the Band, he would have recommended a rate of return of 4 to
6%. He had assumed, in giving his opinion to the local Indian
Affairs officials, renegotiation of the rent would be based on
the improved condition of the land and on the highest and best
use principle. He expressed shock at the ultimate limiting 15%
clause, which found its way into the lease which was signed.
Howell was, in my view, an honest witness. I accept his
evidence as set out in the previous paragraph. I am satisfied he
would not have expressed the opinion he gave in Exhibit 33 if
he had had all the facts before him.
On June 4, 1957 Arneil wrote to the Indian
Affairs Branch in Ottawa recommending accept
ance of the golf club's proposal. He based his
recommendation on Howell's second opinion, as
indicated by his letter, which reads as follows:
I have had an opportunity to discuss the above noted pro
posed leasing arrangements with Mr. Anfield, following which
the matter was taken up with Mr. Howell, V.L.A. Appraiser.
Mr. Howell's report, dated May 23, 1957, indicates accept
ance of the present offer, namely, $25,000.00 annual rental,
and I would recommend that surrender documents for leasing
purposes be prepared for submission to the Band.
On the basis of Arneil's recommendation and
Howell's revised opinion the Director of Indian
Affairs in Ottawa recommended to the Deputy
Minister that the golf club's proposal be accepted.
On June 13, 1957 the Deputy Minister gave his
approval.
On July 3, 1957 Bethune sent the surrender
documents to Arneil. He stated that the terms of
the proposed lease were acceptable with the excep
tion of the 15% limitation on increase of rental
after the initial 15-year period. On this point he
said:
While this may be to our advantage in the event of depressed
conditions at the termination of the term, it could also work to
the adverse if land values increase at the rate they are presently
doing so in the Vancouver area.
If at all possible we would like to have this limitation
removed leaving the rental to be established at terms to be
agreed upon or failing such agreement by arbitration.
On July 16, 1957 Anfield wrote to Chief Spar
row in response to a request by the Chief for
certain figures concerning the valuation of the
reserve. Anfield stated that the total appraised
value of the land was $1,360,000. He then made
the following statements with respect to the pro
posed lease:
The golf club people are applying for 162 acres on the high
land. This at $5500.00 an acre shows a valuation of $891,-
000.00 and the offer of $25,000.00 per year rental for the first
ten year period in which the golf club will have to spend almost
a million dollars of capital funds works out at an investment of
3%, which is considered by the appraiser to be a very high
return for such land use.
For your information the investment value of land on which
large structures are placed goes between 5 and 6% and it is our
appraiser's frank opinion that an investment of 3% for golf club
purposes having in mind that the land in its improved state will
eventually revert to the Band is considered a very satisfactory
return.
The Trial Judge made the following observa
tions on these statements [at page 401]:
The reference to the 10-year period was incorrect. At a Band
Council meeting on July 26, Chief Sparrow pointed out the
Shaughnessy proposal was for 15-year terms. Anfield wrote a
letter correcting the error.
Anfield's advice as to Howell's opinion on rate of return is, in
my view, an overstatement. The Band was never given a copy of
Howell's letter of May 23, 1957. Nor was the Band told, at that
time, the golf club proposed to have the right to remove any
improvements made to the lands.
On July 25, 1957 there was a Band Council
meeting to discuss the proposed surrender and
lease to the golf club. The minutes of the meeting,
written by Anfield, contain the following state
ment:
The Council got back to a discussion of terms for the
proposed lease to Shaughnessy Golf Club. Both Councillors
present were of the opinion that review period should be at ten
year intervals including the initial period rather than fifteen
year periods. They will convey this information to the Directors
when they meet with the Council.
Anfield confirmed by letter to Chief Sparrow on
July 29, 1957 that the members of the Council
considered that the rental periods should be ten
rather than fifteen years.
At this meeting there was also discussion of the
policy to be adopted with respect to those who
claimed to have made improvements in the part of
the reserve to be leased, but who did not hold
certificates of possession for the land occupied by
them.
On September 9, 1957 the Band Council
resolved that the proposed amount of rent for the
initial term of the lease should be reviewed and
renegotiated with the golf club.
On September 13, 1957 Anfield wrote to Harri-
son, president of the golf club, stating that the
Band considered the proposed rent to be too low
and wished to "sit around the table and discuss the
terms and rental with you". The letter concluded
as follows:
It is realized this letter may come as a bit of a shock to you
and your Directors, but the issue may as well be faced now as
later. Council now definitely consider this present rental offer
as low and wish to enter into discussion regarding same.
On September 27, 1957 there was a Band Coun
cil meeting attended by representatives of the golf
club. Chief Sparrow, Gertrude Guerin and Wil-
liam Guerin were the members of the Council
present. Anfield and William Grant, officer in
charge of the Vancouver agency, attended for the
Department. The golf club was represented by
Harrison, Jackson and the secretary, Heina.
Andrew Charles Jr. took notes of the meeting. The
findings of the Trial Judge as to what took place at
that meeting are as follows [at pages 403-404]:
In the presence of the golf club representatives, Chief Spar
row stipulated for 5% income on the value of the 162 acres.
That amounted to approximately $44,000 per annum. The
figure of $44,000 or $44,550 had actually been calculated by
Councillor William Guerin. The golf club people balked at that
figure. Some portions of Mr. Howell's letter of May 23, 1957
were read out. Grant's recollection was that paragraphs 4, 5
and 6 were the only portions read.
At one stage at this meeting, the golf club representatives
were asked to step outside. The Band Council and the Indian
Affairs personnel then had a private discussion. Anfield
expressed the view the demand of $44,550 was unreasonable.
After considerable discussion the Band Council agreed on a
suggested figure of $29,000; they would recommend that
amount to the Band as a whole. The golf club representatives
were then brought back into the meeting. The figure of $29,000
was put to them. They said they would recommend it to their
board of directors.
William Guerin testified the Councillors agreed to $29,000
because it was their understanding the first lease period was 10
years; subsequent rental negotiations would be every 5 years;
the Band Council felt it could negotiate for 5% of the subse
quent values.
Grant's recollection of the meeting is substantially the same
as the version I have recounted. There are some discrepancies
on minor details. It was Grant's recollection the $29,000 figure
came from Anfield. He said Anfield advised the Council to go
ahead with the lease and in 10 years demand a healthy increase
from the golf club. It was Grant's further recollection that
some limitation on maximum rent increases, put forward by the
golf club, was discussed. He said the Band Council objected to
this; Anfield said he would relay that view to the Department
of Indian Affairs. Grant's testimony, which I accept, was that
the Band Council reluctantly accepted the $29,000 figure.
William Guerin testified that at the meeting of
September 27, 1957 Anfield told him that if the
Band was unreasonable in its demands the Depart
ment could lease the land without a surrender and
for any sum it wished.
On October 6, 1957 there was a meeting of the
Band to vote on the surrender of the land for the
purpose of a lease to the golf club. It is convenient
to refer to this meeting as the "surrender meet
ing". Anfield presided. Chief Edward Sparrow and
councillors Gertrude Guerin and William Guerin
were present. Grant was present and took notes.
They were edited somewhat by Anfield and then
typed. Charles Jr. also made notes of the meeting.
The Trial Judge found [at page 404] that "The
notes kept by Charles Jr. and Grant are substan
tially the same."
Before the meeting the Band did not receive any
independent legal advice or independent expert
advice with respect to land appraisal and develop
ment. Andrew Charles Jr. testified that "Mr.
Anfield said we were not in a position or allowed
to engage professional people outside the Depart
ment of Indian Affairs". He further testified that
the Band did not receive any legal advice with
respect to the surrender or the effect of the surren
der before it was signed.
In preparation for the surrender meeting
Anfield prepared some notes, which read in part as
follows:
$25,000.00 a year for the first 15 years period—with rents for
the subsequent periods to be by agreement but subject to
escalators of 15% up or down—the Department do not wish to
put in—and the Council have asked that the periods be ten
years instead of fifteen years.
... Remember that at the end of the lease: Every inch of the
land will then be yours and the fixed assets thereon ... .
... This is the plan we lay before you and we believe it is a
good deal—financially—
(a) your land will always be yours,
(b) the rental values and returns to you will increase steadily
each rental period,
(c) at the end of the lease—your children and grandchildren
will bless you because you will have left them what will be
about the most valuable piece of land in Vancouver.
At the surrender meeting the Band members
objected to the proposed fifteen-year renewal peri
ods. They wanted ten-year renewal periods. They
also objected strongly to the proposed fifteen per
cent limitation on rental increases. The Trial
Judge made the following findings of fact as to the
assumptions or understanding of the Band as a
result of the discussion at the meeting [at pages
405-407]:
The following facts are in my opinion clear, and I make these
findings:
(a) Before the Band members voted, those present assumed
or understood the golf club lease would be, aside from the
first term, for 10-year periods, not 15 years.
(b) Before the Band members voted, those present assumed
or understood there would be no 15% limitation on rental
increases.
There was no information given as to the method of negotiat
ing future rental increases. The original golf club proposal (Ex.
22) merely provided for succeeding rentals to be agreed upon,
or to be determined by arbitration.
I am satisfied that, at the time of the vote, the Indian Affairs
personnel and the Band were against any 15% rental limitation;
the Band voted on the basis there would be no such limitation.
(c) The meeting was not told the golf club proposed it should
have the right, at any time during the lease and for a period
of up to six months after termination, to remove any build-
ings or structures, and any course improvements and
facilities.
Chief Sparrow, William Guerin and Charles Jr., all testified
they understood from Anfield, either at the surrender meeting
or a Council meeting, all improvements would, on the expira
tion of the lease, revert to the Band. Grant testified the
surrender meeting was told that the Band could keep all
improvements made on the golf course land.
There are two other terms of the lease ultimately entered into
on January 22, 1958 (Ex. 78) which were the subject of
considerable testimony.
One was the method of determining future rents. Failing
mutual agreement, the matter was to be submitted to arbitra
tion. The new rent was to be the fair rent as if the land were
still in an uncleared and unimproved condition and used as a
golf club. The other term gave the golf club the right at the end
of each 15-year period to terminate the lease. Six months' prior
notice was all that was required. There was no similar provision
in favour of the Crown.
These two matters were, I find, not before the surrender
meeting. They were not in the original golf club proposal (Ex.
22). They first appeared in the draft leases, after the surrender
meeting. But the two terms were not subsequently brought
before the Band Council, or the Band, for comment or
approval.
Grant gave the following testimony concerning
the Band's understanding as to what it was author
izing by its vote on the surrender:
Q. And at no time did the Band say to Mr. Anfield words to
the effect "well, Mr. Anfield, this is what we're voting on
but you can go away and do anything you want with the
land?"
A. No, oh no, no.
Q. There's absolutely no question that the vote was for a
specific lease to a specific tenant on specific terms?
A. Yes it was.
Q. It was clearly understood by the meeting that no lease
would be signed unless the terms we've just gone through
were in the final lease?
A. What—well, what I recall Mr. Anfield saying was that he
would do his very best to get all of these things that the
people wanted and even more if it was possible.
Q. But in any event, no lease was to be signed except on
these terms that we've just gone through?
A. No, the Band didn't give him authority to change things
around after.
Before the vote was taken the surrender docu
ment was read out to the Band. The manner of
recording the vote was one that was peculiar to
Anfield's mode of conducting a meeting. Band
members would go up to the desk or table at which
Anfield presided, hold the end of Anfield's pencil
and whisper their vote to him, and Anfield would
then record their vote.
The surrender, which was approved by a vote of
41 to 2, reads as follows:
KNOW ALL MEN BY THESE PRESENTS THAT WE,
the undersigned Chief and Councillors of Musqueam Band of
Indians resident on our Reserve Musqueam Indian Reserve
number two in the Province of British Columbia and of
Canada, for and acting on behalf of the whole people of our
said Band in Council assembled, Do hereby surrender unto Her
Majesty the Queen in right of Canada, her Heirs and Succes
sors forever, ALL AND SINGULAR, that certain parcel or tract of
land and premises, situate, lying and being in Musqueam
Indian Reserve number two in the Province of British
Columbia containing by admeasurement 162 acres, be the
same, more or less, and being composed of:
The whole of Parcel "A" containing by admeasurement
162 acres more or less as shown on a plan of survey made by
D.J. McGuigan, D.L.S. and B.C.L.S. dated the 18th day of
May, 1957, or as said parcel may be shown on a final plan of
survey for recording in the Indian Affairs survey records at
Ottawa.
TO HAVE AND TO HOLD the same unto Her said Majesty the
Queen, her Heirs and Successors forever in trust to lease the
same to such person or persons, and upon such terms as the
Government of Canada may deem most conducive to our
Welfare and that of our people.
AND upon the further condition that all moneys received
from the leasing thereof, shall be credited to our revenue trust
account at Ottawa.
AND WE, the said Chief and Councillors of the said Mus-
queam Band of Indians do on behalf of our people and for
ourselves, hereby ratify and confirm, and promise to ratify and
confirm, whatever the said Government may do, or cause to be
lawfully done, in connection with the leasing thereof.
At the surrender meeting the Band also voted 25
to 3 to approve the distribution of 50% of the
rental revenue from the proposed lease to the
holders of individual allotments on the land to be
leased. There were only two votes taken by the
Band at the meeting: one to approve the surrender
and the other to approve the distribution of the
rental income.
After the surrender meeting a draft lease was
prepared by the solicitors for the golf club. On
October 24, 1957 Anfield wrote to the Department
in Ottawa enclosing the draft lease. With refer
ence to the proposed 15-year terms, he said:
There has been discussion with the Indians that this term
should be reduced, possibly to 10 year periods. In this regard it
should be stated that it is going to take 3 years to get this site
into operable condition, in addition to which the Club is going
to have to make a million dollar investment in a Club House
and the cost of constructing and perfecting the golf course. It
would hardly seem fair to expect a review of rentals, presum
ably upward, in as short a space of time as 10 years and we are
inclined to recommend that the 15 year period is fair and
equitable.
With reference to the proposed 15% limitation
on rental increases, he said:
It is noted the draft lease includes an escalator clause limiting
increase and decrease to 15% of the rental in the previous
rental period. The Department, in their letter dated July 3,
1957, are obviously not happy about the inclusion of such a
clause and this matter was discussed at very considerable
length last summer with the Directors of the Shaughnessy Golf
Club. They point out that they are not a commercial firm but a
Club, with a limited membership and it is of the utmost
importance that the total financial encumbrance over the lease
period be reasonably secured. They are very definitely against
the suggestion contained in the Department's letter aforemen
tioned; that review of rentals be subject to agreement and, if
necessary, by arbitration. They feel that any such course could
be fatal in their overall planning. Having this in mind they
submitted to us an opinion by Mr. Douglas W. Reeve, obtained
by the Club, and a copy of this document is attached herewith.
This report purports to present the considered views both of
Mr. Reeve and of the Club Directors; with particular reference
to whether or not this escalator clause, with its limitation of
15%, should be contained in the lease. The Directors point out
to the Department in their request, that this 15% limitation be
retained; that they will be turning back to the Musqueam
Indian Band property of terrific value and with vast improve
ments, and they also stressed the point that a vital factor in this
entire project is the stability of the Club in its overall financial
undertaking of the project.
Concerning the compromise that was reached in
negotiations with the club on the issue of the 15%
limitation on rental increases, the Trial Judge said
[at page 409]:
Mr. McIntosh testified the 15% limitation of rent increase
caused the most difficulty in negotiations with the Indian
Affairs Branch. The Branch did not want any such clause. The
golf club wanted it in all renewals. A compromise was reached
providing a 15% limitation in respect of the first renewal. That
compromise, according to Mr. McIntosh, came as a result of a
meeting with Harrison, Jackson and Arneil.
The Trial Judge found [at page 409] that "Nei-
ther the views expressed in Anfield's letter (Ex.
63), nor a copy of the letter containing them, nor a
copy of the draft lease were given to the Band
Council .... " He further observed [at page 409]:
"Put baldly, the Band members, regardless of the
whole history of dealings and the limited informa-
tion imparted at the surrender meeting, were never
consulted."
On November 25, 1957 Bethune wrote to Arneil
enclosing a draft lease prepared in Ottawa. It
embodied revisions of the draft proposed by the
golf club. Bethune suggested further consideration
of the provision permitting the club to terminate
the lease at the end of any fifteen-year period. He
said:
There is, however, one item that I would like you to seriously
consider, namely, the provision of paragraph three which pro
vides for the cancellation of this lease at the end of any fifteen
year period. This clause has been retained merely for the
purpose of discussion. It seems paradoxical if the club wants a
seventy-five year lease to insert the clause permitting them to
cancel it after only fiften years. On consideration you may
come to the conclusion that the Indians have nothing to lose
even if the lease is cancelled after the first fifteen years.
The Trial Judge made the following findings of
fact concerning the failure to inform the Band of
this letter or any of the other communications
between the parties involved in the negotiation of
the lease [at pages 409-410]:
The evidence indicates that a copy of this letter was given to
Mr. Grant and to Mr. McIntosh, the golf club's solicitor, but
not to the Band.
I make this comment at this stage. The evidence adduced by
the plaintiffs is to the effect Anfield had no discussions with the
Band Council, or the Band, following the surrender meeting.
None of the documents or letters, passing between the golf club
and Indian Affairs were given to the Band Council or the Band.
There were discussions among Anfield, Arneil and golf club
officers, including the solicitors, in respect of the lease terms.
The solicitor assumed all matters discussed were being com
municated to the Band. Neither the chief nor the Band Council
were part of those discussions nor were they advised of them.
I accept that evidence adduced on behalf of the plaintiffs.
On December 6, 1957 the surrender was accept
ed by Order in Council P.C. 1957-1606, which
reads as follows:
His Excellency the Governor General in Council, on the
recommendation of the Acting Minister of Citizenship and
Immigration, pursuant to section 40 of the Indian Act, is
pleased hereby to accept the attached surrender dated the sixth
day of October, 1957, of a certain portion of Musqueam Indian
Reserve Number Two, in the Province of British Columbia,
more particularly described in the surrender, it having been
duly assented to by the electors of the Musqueam Band of
Indians in the said Province, in accordance with the provisions
of the Indian Act, in order that the lands covered thereby may
be leased.
Further negotiations took place concerning the
terms of the proposed lease. On January 9, 1958
there was a Band Council meeting which was
attended by Jack Letcher, who had replaced
Anfield as Indian Superintendent following the
promotion of Anfield to Assistant Indian Commis
sioner of British Columbia. Minutes of the meet
ing were kept by Charles Jr. The Trial Judge made
the following findings with respect to what trans
pired at that meeting [at page 412]:
Letcher read a letter regarding the golf club lease. It indicat
ed the renewal periods were 15 years instead of 10. Chief
Sparrow pointed out the Band had demanded 10-year periods.
William Guerin said the Council members were flabbergasted
to learn about the 15-year terms. William Guerin testified
Letcher said the band was "stuck" with the 15-year terms. I
accept Guerin's evidence. The Band Council then passed a
resolution that it agreed the first term should be 15 years, but
insisted the renewal terms be set out at 10-year periods.
The lease with the golf club was made on Janu-
ary 22, 1958. The term of the lease was seventy-
five years. The rent for the first fifteen years was
to be $29,000 per annum. The provision with
respect to the determination of the rent for each of
the successive fifteen-year periods of the lease is as
follows:
For each of the four succeeding fifteen year periods of the term
of this lease, an annual rent to be determined on or before the
commencement of each such period by mutual agreement or,
failing such agreement, by arbitration pursuant to the laws of
the Province of British Columbia; such rent to be equal to the
fair rent for the demised premises as if the same were still in an
uncleared and unimproved condition as at the date of each
respective determination and considering the restricted use to
which the Lessee may put the demised premises under the
terms of this lease; PROVIDED HOWEVER that the annual rent
for the first succeeding fifteen year period of the term of this
lease shall in no event be increased by more than 15% of the
initial rent of $29,000.00 per annum.
The provision with respect to the right of the
club to terminate the lease at the end of any
fifteen-year period is as follows:
The lessee may terminate this lease at the end of any of the
fifteen year periods of the term hereof by giving written notice
of its intention in that regard to the lessor at least six months
prior to the expiration of the then current fifteen year period of
the term hereof.
The provision with respect to the club's right to
remove any improvements at the end of the lease is
as follows:
At any time during the term of this lease and for a period of
up to six months after the termination, the lessee shall have the
right to remove any buildings and other structures constructed
or placed by it upon the leased area and any course improve
ments and facilities, filling in all excavations and leaving the
premises in a neat and tidy condition.
The Trial Judge agreed [at page 413] with the
testimony of Grant that "the terms of the lease
ultimately entered into bore little resemblance to
what was discussed at the surrender meeting."
A copy of the lease was not given to the Band
Council or the Band. Andrew Charles, on behalf of
the Band, requested a copy of the lease on several
occasions, but was refused. The Band, in spite of
their requests, were unable to obtain a copy of the
lease until March 1970.
The respondents instituted their action on
December 22, 1975.
The respondents' action is for breach of trust. It
seeks "a declaration that the Defendant was in
breach of its trust responsibility to the Plaintiffs in
agreeing to and executing the lease of January
22nd, 1958" and compensation for the damages
caused to the Band by the alleged breach of trust.
The statement of claim alleges several breaches
of trust. There is a general allegation in paragraph
10 and more particular allegations of breach of
trust in paragraph 11. These paragraphs are as
follows:
10. The Defendant, in agreeing to and executing the above
mentioned lease, failed to exercise the degree of care, steward
ship and prudent management required by a trustee in the
administration of the assets of a cestui que trust or a benefici
ary, with a resulting loss of revenue to the Plaintiffs.
11. In particular, and without limiting the generality of
paragraph 8 above, the Defendant failed to exercise the degree
of care, stewardship and prudent management required of a
trustee in the administration of trust assets:
(a) by failing to have sufficient or adequate valuations done
of the land involved in the lease,
(b) by leasing for the purpose of a golf and country club,
(c) by agreeing to an initial rental of $29,000 per year,
(d) by agreeing to fifteen (15) year rent review periods,
(e) by agreeing to a 15% limitation on the rental increase at
the end of the first fifteen (15) year rental period,
(f) by agreeing that the lessee could remove buildings and
improvements at the termination of the lease,
(g) by agreeing to an arbitration mechanism which relied on
provincial arbitration legislation,
(h) by agreeing to valuing the leased land for the purposes of
agreeing upon or arbitrating rental changes (i) as if it were
still an [sic] uncleared and unimproved condition, and (ii)
considering the restricted use permitted by the lease,
(i) by failing to report the details of the lease transaction or
provide a copy of the lease to the Musqueam Indian Band
until after the 15th day of January, 1970,
(j) by failing to include provisions in the lease which were in
accordance with the wishes and instructions of the Mus-
queam Band Council and which were in the best interests of
the Musqueam Indian Band,
(k) by failing to take into account the growth potential and
future potential value of the leased lands and of the areas
adjacent to the leased lands,
(I) by failing to take into account the potential for alternative
development both present, and future of the leased lands,
(m) by failing to take into account the present and future
monetary and potential use of the leased lands,
(n) by fraudulently entering into the lease agreement without
the knowledge of and contrary to the express instructions,
wishes and interest of the Plaintiff,
(o) by fraudulently withholding information concerning the
terms and conditions of the lease from the Plaintiffs until
several years after the execution of the lease.
The Trial Judge concluded [at pages 417-418]
that a trust was created by the surrender of Octo-
ber 6, 1957, with the following terms concerning
the proposed lease:
In my view, the surrender of October 6, 1957, imposed on the
defendant, as trustee, a duty as of that date, to lease to
Shaughnessy Golf Club on these conditions:
(a) A total term of 75 years.
(b) The rental revenue for the first 15 years to be $29,000.
(c) The remaining 60 years of the lease to be divided into six
10-year terms.
(d) Future rental increase to be negotiated for each new
term; no provisions regarding arbitration or the manner in
which the land would be valued.
(e) No 15% limitation on rental increases.
(f) All improvements on the land, on the expiration of the
lease, to revert to the Crown.
The breach of trust found by the Trial Judge
was characterized in the following terms [at page
418]:
The defendant, through the personnel and officials of the
Indian Affairs Branch, breached her duty as a trustee. The 162
acres were not leased to the golf club on the terms and
conditions authorized by the Band. Substantial changes were
made, as can be seen in the final lease document. In respect of
those changes, no instructions or authorization were [sic]
sought by the defendant, as trustee, from the Band, the cestui
que trust. Band approval ought to have been obtained. There
was a duty on the defendant, through her personnel, to do so.
The Trial Judge found that the Band would not
have voted in favour of the surrender had they
known that the lease to the golf club would contain
the terms it did. He said [at page 413]:
Chief Edward Sparrow, William Guerin and Andrew
Charles Jr. were present and voted at the surrender meeting of
October 6, 1957. They testified they would not have voted to
surrender the 162 acres if they had known the ultimate terms of
the lease entered into between the defendant and the golf club.
I accept their evidence. I found them to be honest, credible
witnesses. Their testimony was not seriously affected, in my
view, by hindsight.
I have already set out my findings as to what the members of
the Band knew, and did not know, at the time of the surrender
vote. The balance of probabilities is, to my mind, the majority
of those who voted on October 6, 1957, would not have assented
to a surrender of the 162 acres if they had known all the terms
of the lease of January 22, 1958.
In connection with a defence based on the stat
ute of limitations, a submission that the Crown
should be excused from the alleged breach of trust
on the ground that it had acted honestly and
reasonably, and a claim for exemplary damages,
the Trial Judge made the following findings as to
the character of the conduct of the officials of the
Indian Affairs Branch [at page 425]:
The conduct of the Indian Affairs Branch personnel in this
case amounted, in my opinion, to equitable fraud. There was
not, as argued by the plaintiffs, fraud in the sense of deceit,
dishonesty, or moral turpitude on the part of Anfield, Arneil
and others. But the failure to return to the Band or Council,
after October 6, 1957, for authorization as to the proposed
terms of the lease, was, in view of all that had gone on "... an
unconscionable thing for the one to do towards the other".
There was a concealment amounting to equitable fraud.
[and at page 430]:
Even if this Court had such jurisdiction, I would not, in the
circumstances here, grant relief, in whole or in part, to the
defendant. The Indian Affairs Branch personnel in entering
into the golf club lease acted, in my opinion, honestly. There
was no deliberate or wilful dishonesty towards the Band. But
the personnel, and ultimately the defendant, did not act reason
ably in signing the lease without first going back to the Band. I
cannot see that it would be fair to excuse the defendant.
[and at page 443]:
I cannot classify the actions of Anfield, Arneil, and the
officials in Ottawa, as oppressive, arbitrary, or high-handed. I
have already found against any allegations of dishonesty, moral
fraud, or deliberate, malicious concealment. The Indian Affairs
Branch personnel thought they had the right to negotiate the
final terms of the lease without consultation with the Band. I
have found, in effect, they did not have that right. That finding
does not convert their actions into oppressive or arbitrary
conduct, warranting punishment by way of exemplary
damages.
The Trial Judge suggested [at pages 410-411]
the following explanations for the failure of the
officials of the Indian Affairs Branch to return to
the Band for approval of the terms of the lease
that was entered into with the golf club:
There are, I think, three explanations. None are exonera-
tions. The surrender did not specify that any lease was to be
made with the golf club. Nor did it provide that any ultimate
lease, whomever with, had to be approved by the Band or the
Band Council. The probabilities are the Indian Affairs people
took the view they were, by the terms of the surrender, free to
negotiate for the best possible terms, without the necessity of
consulting the Band.
The second explanation, as to why there was no communica
tion with the Band after the surrender meeting, is probably that
Anfield had, by reason of his promotion, more onerous duties.
His replacement had not yet been appointed. That did not
occur until sometime in December of 1957, when Mr. J. C.
Letcher was appointed.
The third explanation is allied to the first. At that time and
for many years before, according to the evidence, a great
number of Indian Affairs personnel, vis-Ã -vis Indian bands and
Indians, took a paternalistic, albeit well-meaning, attitude: the
Indians were children or wards, father knew best. Grant
described Anfield, from his observation of him, as falling within
that description.
The Trial Judge awarded damages of $10 mil
lion on the premise that the golf club would not
have agreed to a lease on the terms found by the
Trial Judge as the terms of the trust, and it would,
therefore, have been possible at some point to lease
the land on a 99-year residential leasehold basis on
much more favourable terms than the oral terms
found by the Trial Judge. The finding by the Trial
Judge that the golf club would not have agreed to
a lease on these terms is expressed as follows [at
page 431]:
One possibility, not discussed in evidence or argument, was
further negotiation and agreement between the golf club and
the Band, through the Indian Affairs Branch. The defendant
called Mr. McIntosh, Mr. Jackson, Mr. Harrison, Mr. Pipes
and Mr. Gillespie. I shall refer to those gentlemen, collectively,
as the golf club witnesses. I conclude, from their evidence, it
was unlikely the golf club would have agreed to deletion of the
15% limitation on increase of rent in the second 15-year period,
or to any reduction in the rental terms from 15 years to 10. I
also think it unlikely, based on the evidence of McIntosh, the
golf club would have relinquished its proposal to have the right
to remove improvements at any time the lease came to an end.
Nor do I think the golf club would have agreed to negotiations
and arbitration for future rental based on the highest and best
use of the land.
I put aside, therefore, any estimate of damages on the basis
of a suitable or desirable golf club lease from the Band's point
of view, as contrasted with the lease now in force.
In supplementary reasons [[19ô2] 2 F.C. 445],
the Trial Judge rejected claims for pre-judgment
interest, an increase in the rate of post-judgment
interest, and costs on a fixed or lump sum basis.
It is important to keep in mind that this is an
action which is based on breach of trust and only
on breach of trust. It is not an action to set aside a
surrender, and a disposition of surrendered land
pursuant thereto, on the ground of fraud or non-
fulfilment of the conditions of the surrender. It is
not an action for negligence in the exercise of
statutory authority with respect to the disposition
of land in a reserve. It is not an action for rectifi
cation of the terms of a surrender of land in a
reserve. The action must stand or fall on whether
the Crown was a trustee, in the private law sense,
of the land in the reserve that was leased to the
Shaughnessy Heights Golf Club, and whether the
lease which it made of the land to the club was in
breach of trust. The appeal raises squarely and
unavoidably the question whether the legal rela
tionship of the Crown, or the Government, to the
land in a reserve and to reserve land which is
surrendered "in trust" for the purpose of lease, is
that of a trustee in the private law sense, that is,
whether it is an equitable obligation enforceable in
the courts. The Trial Judge cited [at page 413] the
following definition of "trust" in Underhill's Law
of Trusts and Trustees, 12th ed., 1970, page 3: "A
trust is an equitable obligation, binding a person
(who is called a trustee) to deal with property over
which he has control (which is called the trust
property), for the benefit of persons (who are
called the beneficiaries or cestuis que trust), of
whom he may himself be one, and any one of
whom may enforce the obligation. Any act or
neglect on the part of a trustee which is not
authorised or excused by the terms of the trust
instrument, or by law, is called a breach of trust."
The completeness of this definition has been the
subject of commentary (see Waters, Law of Trusts
in Canada, 1974, page 5), but it is not disputed
that it reflects the essence of a trust, which, as I
take it, is an equitable obligation to deal with
property in a certain manner, whether it be for the
benefit of some person or persons or for some other
purpose.
It is necessary to consider the basis on which the
respondents claim that there was a trust in the
private law sense. In response to an order by the
Trial Division for particulars of the trust "upon
which it is alleged that the Musqueam Band sur
rendered the land described in paragraph 5" of the
amended statement of claim, the respondents fur
nished the following particulars:
The trust was created on or about October 6th, 1957, by a
surrender document which surrendered one hundred sixty-two
acres of Musqueam Indian Band reserve lands to Her Majesty
the Queen in the Right of Canada, in trust, for the Musqueam
Indian Band. The terms of the Trust were oral and were to the
effect that the lands were to be surrendered to Her Majesty
The Queen so that these lands could be leased to the
Shaughnessy Heights Golf Club for the purposes of a golf
course on certain lease terms to be incorporated into a Lease
between Her Majesty Queen Elizabeth The Second and the
Shaughnessy Heights Golf Club.
In this Court the respondents argued that in addi
tion to the trust created by the surrender, a trust
was imposed on the Crown by the provisions of the
Indian Act throughout the relevant period with
respect to the management and disposition of the
land in the reserve. It is convenient to refer to this
alleged trust as a "statutory trust", despite the
technical connotation that this expression has in
the law of trusts. It would appear that this statu
tory trust is the necessary foundation for the
alleged breaches of trust that would have occurred
before the surrender. As I understood counsel, the
concept of a statutory trust was not argued in the
Trial Division. In any event the Trial Judge did
not refer to it. But counsel for the appellant object
ed to the respondents' reliance on a statutory trust
chiefly on the ground that it had not been pleaded,
and had indeed been expressly excluded by the
particulars of the alleged trust furnished by the
respondents. I am of the opinion that the pleadings
are broad enough to permit the assertion of a
statutory trust. The respondents were ordered to
furnish particulars of the terms of the trust upon
which it was alleged that the land was surren
dered, and this they did, with reference to the
surrender. That did not in my opinion prevent
them from arguing that there was a statutory trust
with respect to the management of the reserve
throughout the relevant period, particularly in
view of the scope of the alleged breaches of trust in
paragraph 11 of the amended statement of claim.
In view of the general importance of the issue, I
am of the opinion that the Court should entertain
this argument although it was apparently not
advanced in the Trial Division. The appellant is
not caused any prejudice because it is a pure
question of law that does not depend upon any
facts that have not been pleaded or established by
the evidence.
The contention that there was a statutory trust
is based primarily on the terms of subsections
18 (1) and 61(1) of the Indian Act (R.S.C. 1952, c.
149, as amended by S.C. 1952-53, c. 41; S.C.
1956, c. 40; and S.C. 1958, c. 19), as it was during
the relevant period. These provisions, which are in
virtually the same terms as the present subsections
18 (1) and 61(1) of the Act (R.S.C. 1970, c. I-6),
are as follows:
18. (1) Subject to the provisions of this Act, reserves shall be
held by Her Majesty for the use and benefit of the respective
bands for which they were set apart; and subject to this Act and
to the terms of any treaty or surrender, the Governor in
Council may determine whether any purpose for which lands in
a reserve are used or are to be used is for the use and benefit of
the band.
61. (1) Indian moneys shall be expended only for the benefit
of the Indians or bands for whose use and benefit in common
the moneys are received or held, and subject to this Act and to
the terms of any treaty or surrender, the Governor in Council
may determine whether any purpose for which Indian moneys
are used or are to be used is for the use and benefit of the band.
The appellant's first contention on the issue of
liability was that neither the provisions of the
Indian Act nor the surrender created a true trust
in the sense of an equitable obligation enforceable
in the courts, but provided at most for a govern
mental obligation or function which the appellant
characterized as a "political trust". In so far as the
surrender is concerned, the appellant also argued
that the alleged terms of trust were not those
found by the Trial Judge but those contained in
the surrender document, and that the Indian title
or interest in reserve land was not property and
could not, therefore, be the subject of a trust.
It is now well established, and was conceded by
counsel for the appellant, that there is nothing in
principle to prevent the Crown from acting as a
trustee. In Rustomjee v. The Queen (1876), 2
Q.B.D. 69 (C.A.), Lord Coleridge C.J., delivering
the unanimous judgment of the Court of Appeal,
said at page 74: "We do not say that under no
circumstances can the Crown be a trustee .... "
In Civilian War Claimants Association, Limited v.
The King, [1932] A.C. 14 [H.L.] at page 27, Lord
Atkin said: "There is nothing, so far as I know, to
prevent the Crown acting as agent or trustee if it
chooses deliberately to do so." This dictum was
cited as expressing the law in Miller v. The King,
[1950] S.C.R. 168 at page 175, and in Tito and
others v. Waddell and others (No 2), [1977] 3 All
ER 129 [Ch.D.] at page 217.
A distinction has been drawn, where the Crown
or a servant of the Crown is involved in govern
mental functions, between a "true trust", or equi
table obligation enforceable in a court, and a
governmental obligation or function that does not
amount to a true trust. The distinction, although
expressed in somewhat different terms, finds its
most authoritative recognition in the judgment of
the House of Lords in Kinloch v. The Secretary of
State for India in Council (1882), 7 App. Cas.
619. In that case the Crown made a "grant" of
war booty by Royal Warrant to the Secretary of
State for India in Council for the time being "in
trust for" the officers and men of military forces to
be distributed by the Secretary of State, or a
person appointed by him, according to certain
scales and proportions. The Royal Warrant further
provided that in the case of any doubt concerning
the distribution of the booty or the proceeds there
of, or concerning any claim thereon, the issue
should be determined by the Secretary of State, or
a person appointed by him, and such determina
tion should be final and conclusive unless within
three months Her Majesty should otherwise order.
The House of Lords held that the Royal Warrant
had not created a trust enforceable in the courts.
Distinguishing between a trust "in the lower
sense", which has since been referred to as a "true
trust", and a trust "in the higher sense", which has
since been referred to as a "governmental obliga
tion", Lord Selborne L.C. said at pages 625-626:
Now the words "in trust for" are quite consistent with, and
indeed are the proper manner of expressing, every species of
trust—a trust not only as regards those matters which are the
proper subjects for an equitable jurisdiction to administer, but
as respects higher matters, such as might take place between
the Crown and public officers discharging, under the directions
of the Crown, duties or functions belonging to the prerogative
and to the authority of the Crown. In the lower sense they are
matters within the jurisdiction of, and to be administered by,
the ordinary Courts of Equity; in the higher sense they are not.
What their sense is here, is the question to be determined,
looking at the whole instrument and at its nature and effect.
Lord O'Hagan said at page 630:
There is no magic in the word "trust." In various circum
stances, it may represent many things, and the Secretary of
State to whom a delegation was made for special and specified
purposes, might well be described as a "trustee" for the Crown,
as, for the Crown, he was required to take on himself the
distribution of the property in question. But he was not con
stituted a "trustee" for a cestui que trust entitled, according to
the rules of Equity, to ask for the administration of a fund.
The features of the Royal Warrant that were
emphasized by the House of Lords as indicating
that there was not an intention to create a trust in
the private law sense may be summarized as fol
lows: (1) the description of the officer to whom the
"grant" was made as "the Secretary of State for
India in Council for the time being" suggested that
it was not intended to impose a fiduciary duty
upon a particular person; (2) the provision that
questions of doubt were to be settled by the Secre
tary of State, or a person appointed by him, and
that his determination should be final and conclu
sive unless within three months Her Majesty
should otherwise order, indicated an intention to
exclude the jurisdiction of the courts; and (3) there
had not been a transfer of anything to the Secre
tary of State, who was merely an agent of the
Crown for the distribution of the booty, which was
in the possession of the Crown.
The Kinloch case was applied by the Supreme
Court of Canada in The Hereford Railway Co. v.
The Queen (1894), 24 S.C.R. 1. There a majority
of the Court held that under legislation which
conferred a discretionary authority on the Lieuten-
ant-Governor in Council of Quebec to grant a
subsidy for the construction of a railway, what had
been done pursuant to the legislation had not
created a liability enforceable by petition of right
against the Crown. Dealing with the question
whether the legislation had imposed a trust, Strong
C.J. said at page 15:
There remains the ground of trust. Can it be said that the
Crown is by the statute made a trustee or quasi trustee of this
money to hold it until the railway should be completed and then
pay it over to the company? Several cases have been before the
English courts where moneys have come into the hands of the
Crown for the purpose of being distributed amongst a certain
class of persons. Such were the cases of Kinloch v. The Queen,
and Rustomjee v. The Queen, in both of which it was deter
mined that money so held by the Crown could not be con
sidered as subject to a trust enforceable by means of a petition
of right. I see no reason why the principle of these cases should
not apply here. If no enforcible [sic] trust is to be considered as
imposed when money to be applied to a particular designated
purpose is placed in the hands of the Crown under treaty or
otherwise than by act of parliament, why should the conclusion
be different where the money is granted by the legislature and
its application is prescribed in such a way as to confer a
discretion upon the Crown? No reason can be suggested for
such a difference. [Footnotes omitted.]
In Tito v. Waddell, supra, it was contended that
an agreement (referred to as the "1913 agree
ment") and two ordinances of 1928 and 1937
respecting the mining of phosphate on Ocean
Island in the Western Pacific had created a fiduci
ary relationship between the Crown and the Bana-
bans, the former inhabitants of the island, in
respect of the payment of compensation and royal
ty. The action was for breach of the alleged fiduci
ary duty by a conflict of duty and interest in two
transactions referred to as the "1931 transaction"
and the "1947 transaction". It was held in the
Chancery Division by Megarry V-C, with particu
lar reliance on the distinction affirmed in Kinloch,
that the agreement and ordinances did not create a
true trust and did not impose any other fiduciary
duty. He said at pages 216-217:
... I must also consider what is meant by `trust'. The word is in
common use in the English language, and whatever may be the
position in this court, it must be recognised that the word is
often used in a sense different from that of an equitable
obligation enforceable as such by the courts. Many a man may
be in a position of trust without being a trustee in the equitable
sense .... At the same time, it can hardly be disputed that a
trust may be created without using the word `trust'. In every
case one has to look to see whether in the circumstances of the
case, and on the true construction of what was said and written,
a sufficient intention to create a true trust has been manifested.
When it is alleged that the Crown is a trustee, an element
which is of special importance consists of the governmental
powers and obligations of the Crown; for these readily provide
an explanation which is an alternative to a trust. If money or
other property is vested in the Crown and is used for the benefit
of others, one explanation can be that the Crown holds on a
true trust for those others. Another explanation can be that,
without holding the property on a true trust, the Crown is
nevertheless administering that property in the exercise of the
Crown's governmental functions. This latter possible explana
tion, which does not exist in the case of an ordinary individual,
makes it necessary to scrutinise with greater care the words and
circumstances which are alleged to impose a trust.
After a detailed analysis of the decision in Kin-
loch, Megarry V-C made certain observations con
cerning the principles or considerations to be
drawn from it, which I quote in part from pages
220 and 221:
First, the use of a phrase such as 'in trust for', even in a formal
document such as a Royal Warrant, does not necessarily create
a trust enforceable by the courts .... Second, the term `trust' is
one which may properly be used to describe not only relation
ships which are enforceable by the courts in their equitable
jurisdiction, but also other relationships such as the discharge,
under the direction of the Crown, of the duties or functions
belonging to the prerogative and the authority of the Crown
.... The third is that it seems clear that the determination
whether an instrument has created a true trust or a trust in the
higher sense is a matter of construction, looking at the whole of
the instrument in question, its nature and effect, and, I think,
its context. Fourth, a material factor may be the form of the
description given by the instrument to the person alleged to be
the trustee. An impersonal description of him, in the form of a
reference not to an individual but to the holder of a particular
office for the time being, may give some indication that what is
intended is not a true trust, but a trust in the higher sense.
It is difficult to sum up the particular reasons
which led Megarry V-C, in application of the
distinction recognized in Kinloch, to conclude that
the 1913 agreement and the ordinances of 1928
and 1937 did not create a true trust or other
fiduciary relationship between the Crown and the
Banabans. The facts are rather complex and are
dealt with in great detail in the judgment. More
over, as in Kinloch, they are quite different from
the facts of the present case. But I would venture
to suggest that the following appear to be among
the more important considerations which
influenced the conclusion: (1) although the 1913
agreement between the company mining the phos
phate and the Banabans was negotiated by the
Colonial Office, was signed in the presence of the
Resident Commissioner, and provided for pay
ments to be made to the government for the
benefit of the Banabans, the Crown was not a
party to the agreement; (2) because of the lack of
a clear relationship between some of the money
payable and the land involved there would be
difficulty, in the case of a true trust, in ascertain
ing the beneficiaries and the amount of their
beneficial interest in the "Banaban Fund"; (3) the
provision that the moneys payable were to be
devoted to the general benefit of the Banabans was
more expressive of a governmental obligation than
a true trust; (4) the 1928 Ordinance, which pro
vided that the royalty and other compensation was
to be paid to the Resident Commissioner "in trust"
for those entitled to it, contained the proviso, [set
forth at page 176] "subject to such directions as
the Secretary of State for the Colonies may from
time to time give"—words that seemed "out of
place in a true trust"; (5) a colonial ordinance was
not the place where one would expect a trust to be
imposed on the Crown in right of the United
Kingdom; (6) the 1937 Ordinance, which did not
contain the words "in trust", offered even less
reason than the 1913 agreement and the 1928
Ordinance for concluding that it created a true
trust.
In considering the 1913 agreement, Megarry
V-C said at page 226: "I must also remember Lord
Atkin's words in the Civilian War Claimants' case,
and consider whether there is anything to show
that in this case the Crown deliberately chose to
act as a trustee. [Footnote omitted.]" At the same
place he spoke of the lack of evidence of an
"unequivocal intention" that the royalty should be
held on "a true trust, enforceable in the courts,
and not merely under a governmental obligation,
or trust in the higher sense." I conclude from his
reasons, viewed as a whole, that there must be
clear evidence of an intention to make the Crown a
trustee.
This requirement was referred to by the House
of Lords in Town Investments Ltd. and Others v.
Department of the Environment, [1978] A.C. 359
[H.L.], where the issue was whether premises
occupied under leases entered into by a minister of
the Crown were occupied by the Crown or by the
minister in trust for the Crown. It was argued that
former use of the words "in trust" with reference
to conveyances of land for the use of a government
department showed that "whenever an interest in
land to be used for government purposes is con
veyed to an officer of state in his official capacity,
the interest so conveyed becomes subject to all the
incidents of a trust in private law; the legal estate
is vested in the officer of state who executes the
conveyance; only an equitable interest is vested in
the Crown and the relationship between him and
the Crown is subject to the equitable jurisdiction
of the courts" [summary by Lord Diplock at page
382]. Speaking of the use of the words "in trust"
in a public law context and referring to the distinc
tion affirmed in Kinloch, Lord Diplock said at
page 382:
My Lords, I would not exclude the possibility that an officer
of state, even though acting in his official capacity, may in
some circumstances hold property subject to a trust in private
law for the benefit of a subject; but clear words would be
required to do this and, even where the person to be benefited is
a subject, the use of the expression "in trust" to describe the
capacity in which the property is granted to an officer of state
is not conclusive that a trust in private law was intended; for
"trust" is not a term of art in public law and when used in
relation to matters which lie within the field of public law the
words "in trust" may do no more than indicate the existence of
a duty owed to the Crown by the officer of state, as servant of
the Crown, to deal with the property for the benefit of the
subject for whom it is expressed to be held in trust, such duty
being enforceable administratively by disciplinary sanctions
and not otherwise: Kinloch v. Secretary of State for India
(1882) 7 App.Cas. 619, per Lord Selborne L.C., at pp. 625-
626. But even if the legal relationship of trustee and cestui qui
[sic] trust under a trust in private law is capable of existing
between an officer of state in his official capacity and a subject,
the concept of such relationship being capable of existing
between him as trustee and the Crown as cestui qui trust is in
my view wholly irreconcilable with the legal nature in public
law of the relationship between the Crown and its servants or,
in more modern parlance, the government and the ministers
who form part of it.
Lord Simon of Glaisdale said at page 397:
In public law even a phrase like "in trust for" may not betoken
at all the relationship of trustee and cestui que trust, but rather
the imposition of a constitutional duty the sanction for which is
political or administrative not legal (cf. Lord Selborne L.C. in
Kinloch v. Secretary of State for India, 7 App.Cas. 619, 625,
626).
Before considering the application to section 18
of the Indian Act and to the surrender of the
distinction between true trust, or equitable obliga
tion enforceable in a court, and a trust "in the
higher sense", or a governmental obligation, I
propose to deal with two contentions respecting the
trust allegedly created by the surrender which
occupied a good deal of the argument in this Court
and to which I have already referred—first, that
the terms of the trust with respect to the leasing of
the land were not the oral terms found by the Trial
Judge but the written terms contained in the sur
render document; and second, that the Indian title
or interest in the reserve land that was surrendered
was not property and could not, therefore, be the
subject of a trust.
As already indicated, the Trial Judge found, as
alleged by the respondents in their particulars, that
a trust was created by the surrender of October 6,
1957 and that its terms were oral. He said [at page
415], "I have concluded there was, in the case
before me, a legal or 'true trust', created between
the defendant and the Band. The Crown, in my
view, became trustee, effective October 6, 1957, of
the 162 acres. The Band was the beneficiary." I
quote again for convenience the oral terms of trust
respecting the leasing of the land which were
found by the Trial Judge [at pages 417-418] on
the basis of what the members of the Band
assumed or understood at the time of the
surrender:
In my view, the surrender of October 6, 1957, imposed on the
defendant, as trustee, a duty as of that date, to lease to
Shaughnessy Golf Club on these conditions:
(a) A total term of 75 years.
(b) The rental revenue for the first 15 years to be $29,000.
(c) the remaining 60 years of the lease to be divided into six
10-year terms.
(d) Future rental increase to be negotiated for each new
term; no provisions regarding arbitration or the manner in
which the land would be valued.
(e) No 15% limitation on rental increases.
(f) All improvements on the land, on the expiration of the
lease, to revert to the Crown.
The terms of the surrender document with
respect to the leasing of the land are as follows:
... to lease the same to such person or persons, and upon such
terms as the Government of Canada may deem most conducive
to our Welfare and that of our people.
AND WE, the said Chief and Councillors of the said Mus-
queam Band of Indians do on behalf of our people and for
ourselves, hereby ratify and confirm, and promise to ratify and
confirm, whatever the said Government may do, or cause to be
lawfully done, in connection with the leasing thereof.
The reasons of the Trial Judge for concluding
that the terms of the trust respecting the leasing of
the land were not those contained in the surrender
document are reflected in the following passages
from his reasons for judgment [at pages 416-417]
which immediately precede the conclusion quoted
above as to the oral terms of the trust:
The next issue is as to the terms of the trust.
The defence argued, if there were a legally enforceable trust,
its terms were those set out in the surrender document (Ex. 53);
the trust permitted the defendant to lease the 162 acres to
anyone, for any purpose, and upon any terms which the govern
ment deemed most conducive to the welfare of the Band; there
was no obligation to lease to the golf club on the terms
discussed at the surrender meeting; nor was there any duty on
the defendant to obtain the approval of the Band in respect of
the terms of the lease ultimately entered into.
I do not accept that contention.
The defendant, through the persons handling this matter in
the Indian Affairs Branch, knew, early on, the defendant was a
potential trustee in respect of any land which might be leased to
the golf club. At a meeting of April 7, 1957, the Band Council
had passed a resolution (drawn presumably by Mr. Anfield) as
follows:
That we do approve the leasing of unrequired lands on our
Musqueam I.R. 2 and that in connection with the application
of the Shaughnessy Golf Club, we do approve the submission
to our Musqueam Band of surrender documents for leasing
160 acres approximately as generally outlined on the McGui-
gan survey in red pencil: and further that we approve the
entry by the said applicant for survey purposes only pertinent
to said surrender: said surveys to be at the applicant's cost
and risk entirely.
I have said the Crown knew, at that stage, it was a potential
trustee. It knew of the intent of the Band to surrender the
lands. The resolution, set out above, does not refer to an
unqualified surrender for leasing to anyone. The whole implica-
tion of the resolution is that the contemplated surrender was for
purposes of a lease with the golf club on terms.
The Indian Affairs Branch, from then on, did not give, on the
evidence before me, any realistic consideration to leasing the
162 acres to any other interested party. From April 7, 1957 on,
all discussions with the Band Council were confined to the
proposed lease of those particular lands to the golf club.
I conclude from what has been referred to that
the Trial Judge held that an express trust had been
created by the surrender and that, in effect, the
conditions of the surrender with respect to the
leasing of the land were the oral terms found by
him and not the terms of the surrender document.
I do not think, as was suggested by the appellant in
argument, that the Trial Judge's conclusion is to
be viewed as the imposition of a constructive trust
on the appellant. In any event, in view of the
principle that the Crown must deliberately choose
to act as a trustee, I would strongly doubt that the
Crown could be made subject to a constructive
trust, even assuming that the situation in the
present case was one to which a constructive trust
could be applicable.
The appellant made several submissions in sup
port of its contention that the terms of the alleged
trust with respect to the leasing of the land created
by the surrender were not the oral terms found by
the Trial Judge but those contained in the surren
der document. The first was that the terms found
by the Trial Judge were not approved by the Band
and accepted by the Government in the manner
and form prescribed by the Indian Act. The appel
lant based this submission on the provisions of the
Act governing a surrender. They are in sections 37,
38, 39, 40 and 41 of the Act (R.S.C. 1952, c. 149),
as it was during the relevant period [section 39 as
am. by S.C. 1956, c. 40, s. 11]. These sections are
virtually identical to the same numbered sections
in the present version of the Act (R.S.C. 1970, c.
I-6) and are as follows:
37. Except where this Act otherwise provides, lands in a
reserve shall not be sold, alienated, leased or otherwise disposed
of until they have been surrendered to Her Majesty by the band
for whose use and benefit in common the reserve was set apart.
38. (1) A band may surrender to Her Majesty any right or
interest of the band and its members in a reserve.
(2) A surrender may be absolute or qualified, conditional or
unconditional.
39. (1) A surrender is void unless
(a) it is made to Her Majesty,
(b) it is assented to by a majority of the electors of the band
(i) at a general meeting of the band called by the council
of the band,
(ii) at a special meeting of the band called by the Minis
ter for the purpose of considering a proposed surren
der, or
(iii) by a referendum as provided in the regulations, and
(c) it is accepted by the Governor in Council.
(2) Where a majority of the electors of a band did not vote at
a meeting or referendum called pursuant to subsection (1) of
this section or pursuant to section 51 of the Indian Act, chapter
98 of the Revised Statutes of Canada, 1927, the Minister may,
if the proposed surrender was assented to by a majority of the
electors who did vote, call another meeting by giving thirty
days' notice thereof or another referendum as provided in the
regulations.
(3) Where a meeting is called pursuant to subsection (2) and
the proposed surrender is assented to at the meeting or referen
dum by a majority of the electors voting, the surrender shall be
deemed, for the purpose of this section, to have been assented to
by a majority of the electors of the band.
(4) The Minister may, at the request of the council of the
band or whenever he considers it advisable, order that a vote at
any meeting under this section shall be by secret ballot.
(5) Every meeting under this section shall be held in the
presence of the superintendent or some other officer of the
Department designated by the Minister.
40. When a proposed surrender has been assented to by the
band in accordance with section 39, it shall be certified on oath
by the superintendent or other officer who attended the meet
ing and by the chief or a member of the council of the band,
and shall then be submitted to the Governor in Council for
acceptance or refusal.
41. A surrender shall be deemed to confer all rights that are
necessary to enable Her Majesty to carry out the terms of the
surrender.
From these provisions it is argued that the con
ditions of a surrender, in order to be valid, must be
voted on and approved by a majority of the elec
tors of a band, be certified by the superintendent
or other officer who attended the meeting and by
the chief or a member of the Council of the Band,
and be submitted to and approved by the Governor
in Council, all of which presuppose that the condi
tions will be in written form. I agree with these
contentions. These solemn formalities have been
prescribed as a matter of public policy for the
protection of a band and the proper discharge of
the Government's responsibility for the Indians.
They are also important as ensuring certainty as to
the effect of a surrender and the validity of a
subsequent disposition of surrendered land. It is to
be noted that they are the only provisions of the
Act excluded from the power of the Governor in
Council under subsection 4(2) to declare by proc
lamation that particular provisions of the Act shall
not apply in certain cases. The oral terms found by
the Trial Judge were not voted on and approved by
a majority of the Band. They were deduced by the
Trial Judge from the testimony of three members
of the Band and a former official of the Indian
Affairs Branch as to what was said at the meet
ings, and in some cases as to what was not said.
The oral terms of the surrender found by the Trial
Judge were not accepted by the Governor in Coun
cil, as required by the Act. What was accepted by
Order in Council P.C. 1957-1606 of December 6,
1957 was the "attached surrender dated the sixth
day of October, 1957". It was an unqualified
acceptance of the written surrender, with no refer
ence, express or implied, to other terms or
conditions.
It was held by the Supreme Court of Canada in
St. Ann's Island Shooting and Fishing Club Lim
ited v. The King, [1950] S.C.R. 211 [affirming the
decision of the Exchequer Court of Canada] that
the lack of a direction by the Governor in Council,
as required by the Indian Act, was fatal to the
validity of a lease, Rand J. expressing the opinion
that because of the importance of the Govern
ment's responsibility under the Act it could not be
transferred to a departmental official. The Ex
chequer Court, [1950] Ex.C.R. 185 [at page 195],
rejecting an argument based on estoppel, quoted
from Lord Davey in Ontario Mining Company,
Limited v. Seybold and Others, [1903] A.C. 73
[P.C.], at page 84 that "the province cannot be
bound by alleged acts of acquiescence on the part
of various officers of the departments which are
not brought home to or authorized by the proper
executive or administrative organs of the Provin
cial Government, and are not manifested by any
Order in Council or other authentic testimony."
But even if conditions of surrender could be validly
accepted by a departmental official, the Trial
Judge did not make a finding that the oral condi
tions found by him had been accepted by Anfield
or any other official of the Department, and in my
opinion such a finding was not open on the evi
dence. No doubt there was an understanding that
the lease would be with the golf club, for a max
imum of 75 years, and that the rent for the initial
period would be $29,000 per annum. On the ques
tion whether the succeeding periods would be for
fifteen years or ten years, the most that can be
inferred is that the Band insisted on ten years and
the Department favoured ten years and would do
its best to obtain ten years. Similarly, on the
question of the 15% limitation on rental increase,
the most that can be concluded is that the Band
was strongly opposed to it and the Department was
opposed to it and would do its best to have it
removed. The Trial Judge found that the method
of determining the rent for the renewal periods
(the provision for arbitration and the basis on
which the land would be valued) was not discussed
at all. As for the improvements, it must be said
that Anfield gave the Band to understand on more
than one occasion that the improvements would
revert to the Band although the golf club's pro
posal of April 4, 1957 provided otherwise. More
over, he allowed Howell to make his revised esti
mate of a fair return for the initial period of the
proposed lease on this assumption and used
Howell's opinion to persuade the Band to accept
$29,000 per annum as the rent for the initial
period. It may be that he sincerely hoped and
expected that he would be able to change the
provision in the golf club's proposal concerning the
improvements. Since he was not alive to testify we
do not know. Disturbing as I find this aspect of the
case to be, it does not support or justify a general
conclusion that Anfield undertook to make a lease
on the oral conditions found by the Trial Judge. In
so far as it is an implication of the Trial Judge's
finding as to the breach of trust that a further
condition of the surrender was that if the Depart
ment could not make a lease on the oral conditions
found by the Trial Judge it would return to the
Band for further authorization or instructions,
there is the finding of the Trial Judge that the
departmental officials probably did not think that
they had any such duty.
In providing that a surrender may be condition
al, the Act clearly contemplates that the document
of surrender may include by incorporation or ref
erence any conditions that may be voted on and
approved by the Band. The appellant pointed out
in argument that a surrender by the Squamish
Band of Indians on April 15, 1956 with respect to
the Capilano Indian Reserve No. 5 contained the
following condition: "Subject, however, to the fol
lowing conditions: 'That all leases granted under
the authority of this Surrender to be at such rental
and on such terms as our Band Council may from
time to time approve by Resolution'." Another
example of such a condition is to be found in the
surrender which was considered in Reference re
Stony Plain Indian Reserve No. 135 (1981), 130
D.L.R. (3d) 636 [(Alta. C.A.), at page 640]: "No
lease with respect to the surrendered land will be
executed by the Minister without the approval of
the Band Council." Counsel for the appellant sug
gested that the present case might be summed up
as an attempt to persuade the Court to read a
similar condition into the Musqueam surrender.
The respondents referred to the decision of the
Ontario Court of Appeal in Regina v. Taylor et al.
(1981), 62 C.C.C. (2d) 227, in support of their
contention that there can be oral terms or condi
tions of a surrender. That case concerned the
effect of an Indian treaty on fishing and hunting
rights. The written treaty made no provision for
such rights but the Court applied oral terms evi
denced by minutes of a council meeting which the
parties agreed formed part of the treaty. MacKin-
non A.C.J.O., delivering the judgment of the
Court, said at pages 230-231: "Counsel for both
parties to this appeal agreed that the minutes of
this council meeting recorded the oral portion of
the 1818 treaty and are as much a part of that
treaty as the written articles of the provisional
agreement." Thus the admission of the oral terms
was not disputed, as in the present case. The
provisions of the Indian Act governing surrender
were not in issue. What was in issue was the
construction of the oral terms which the parties
had agreed formed part of the treaty. On this issue
MacKinnon A.C.J.O. said at pages 232-233:
Cases on Indian or aboriginal rights can never be determined
in a vacuum. It is of importance to consider the history and oral
traditions of the tribes concerned, and the surrounding circum
stances at the time of the treaty, relied on by both parties, in
determining the treaty's effect. Although it is not possible to
remedy all of what we now perceive as past wrongs in view of
the passage of time, nevertheless it is essential and in keeping
with established and accepted principles that the Courts not
create, by a remote, isolated current view of events, new
grievances.
In the instant appeal, both counsel were in agreement that
we could, and indeed should, look at the history of the period
and place, and at the Papers and Records of the Ontario
Historical Society dealing with this particular treaty and the
persons involved in it. The Crown was of the view that a
historical analysis of the times and conditions supported its
position that the Indians intended to surrender their hunting
and fishing rights. Counsel for the respondents took the con
trary view.
That statement was directed to the construction
of the oral terms, which the parties agreed formed
part of the treaty, in the light of historical evi
dence, which the parties agreed should be con
sidered. It does not assist us, in my respectful
opinion, in the application of the formal require
ments of the Indian Act governing the validity of a
surrender.
In view of the conclusion to which I have come
on this branch of the argument, it is unnecessary
to consider the other submissions of the appellant
concerning the oral terms found by the Trial
Judge, although in my opinion they also have
considerable force: in particular, the submission
that oral evidence of these terms should not be
admitted because they purport to vary or con
tradict the terms of a valid written instrument, and
the submission that the basis on which the Trial
Judge found the oral terms of the alleged trust
does not satisfy the requirement of a valid trust
that there be certainty as to the purpose of the
trust, or the manner in which the property is to be
dealt with. In the result, I am of the opinion that
the oral conditions of surrender found by the Trial
Judge did not afford a basis in law for a finding of
liability and an award of damages.
In the alternative the respondents contend that a
trust was created by the terms of the surrender
document, and that the Crown was in breach of
that trust by its alleged failure to exercise ordinary
skill and prudence in the leasing of the land. I
propose to deal now with the appellant's conten-
tion that the Indian title or interest in reserve land
was not property and could not, therefore, be the
subject of a trust created by the surrender. This
issue was not adverted to by the Trial Judge.
It is clear from the definitions of "trust" (see
Underhill's Law of Trusts and Trustees, 13th ed.,
1979, pages 1, 17; Waters, Law of Trusts in
Canada, 1974, page 5) that the subject-matter of a
trust is property of some kind, and that without
property there cannot be a trust. Certainty as to
the property which is the subject of a trust is one
of the requisites of a valid trust.
There is no question, of course, that the legal
title in reserve land is in the Crown. That is made
plain not only by the cases but by the definition of
a "reserve" in section 2 [paragraph (o)] of the
Indian Act as "a tract of land, the legal title to
which is vested in Her Majesty, that has been set
apart by Her Majesty for the use and benefit of a
band". The precise nature and content of the
Indian title or interest has been the subject of
much judicial commentary, but it remains an elu
sive concept. It has been variously characterized as
a "burden" upon or qualification of the Crown's
title, as "usufructuary" in nature, as "personal" in
the sense that it cannot be alienated except by
surrender to the Crown, as a right of occupation,
and as a right of possession. This probably does
not exhaust the ways in which it has been charac
terized. It has further been held that upon extin-
guishment of the Indian title by surrender or
otherwise, the beneficial interest in the surren
dered land passes to the province in which the land
is located unless the province's interest has been
transferred to Canada. The characterization of
Indian title that has had the most important
impact in Canada is that which was suggested in
several decisions of the Privy Council, in particu
lar, St. Catherine's Milling and Lumber Company
v. The Queen (1888), 14 App. Cas. 46; Attorney-
General for the Dominion of Canada v. Attorney-
General for Ontario (the first Indian Annuities
case), [1897] A.C. 199; Ontario Mining Company,
Limited v. Seybold and Others, [1903] A.C. 73;
and Attorney-General for the Province of Quebec
and Others v. Attorney-General for the Dominion
of Canada and Another (the Star Chrome case),
[1921] 1 A.C. 401. In St. Catherine's Milling the
Indian title in question was that which was recog-
nized by The Royal Proclamation of October 7,
1763 [R.S.C. 1970, Appendix II, No. 1], and the
issue was whether upon the extinguishment of that
title by surrender the beneficial interest in the land
passed to the province or the Dominion. Lord
Watson said at page 54 that "the tenure of the
Indians was a personal and usufructuary right,
dependent upon the good will of the Sovereign."
At page 55 he said that the Judicial Committee
did not intend to express an opinion on "the pre
cise quality of the Indian right", but that it was
sufficient to say that "there has been all along
vested in the Crown a substantial and paramount
estate, underlying the Indian title, which became a
plenum dominium whenever that title was surren
dered or otherwise extinguished." Later he said,
"The Crown has all along had a present proprie
tary estate in the land, upon which the Indian title
was a mere burden" (page 58) and referred to "the
right of the Provinces to a beneficial interest in
these lands, available to them as a source of
revenue whenever the estate of the Crown is disen
cumbered of the Indian title" (page 59). In the
Star Chrome case the characterization of the
Indian title in St. Catherine's Milling was applied
by the Privy Council to the Indian interest in land
set apart as a reserve in Lower Canada by Order
in Council pursuant to an Act of 1851 (14 & 15
Vict., c. 106) of the Legislature of the Province of
Canada and which, it was said, the Dominion was
correct, for purposes of a surrender of the land in
1882, in treating as a "reserve" within the mean
ing of the federal Indian Act. An Act of 1850 (13
& 14 Vict., c. 42) of the Province of Canada
provided that lands set apart for the Indians were
vested in a Commissioner of Indian Lands for
Lower Canada in trust for the Indians. The issue
was whether the title to the land was vested after
the surrender in the Crown in right of the province
or in the Crown in right of the Dominion. The
Dominion contended that the effect of the Act of
1850 was to vest the title, both legal and benefi
cial, in the Commissioner in trust for the Indians,
and that upon the surrender that title was vested in
the Crown in right of the Dominion. Duff J., who
delivered the judgment of the Privy Council, said
at page 408 that the Indian right recognized by the
Act of 1850 was "a usufructuary right only and a
personal right in the sense that it is in its nature
inalienable except by surrender to the Crown." He
said at page 411 that "the effect of the Act of
1850 is not to create an equitable estate in lands
set apart for an Indian tribe of which the Commis
sioner is made the recipient for the benefit of the
Indians, but that the title remains in the Crown
and that the Commissioner is given such an inter
est as will enable him to exercise the powers of
management and administration committed to him
by the statute." In the result, the Act of 1850 did
not affect the principle affirmed in St. Catherine's
Milling, by which, upon the surrender of the
Indian title, the beneficial interest in the land
passed to the province.
In Calder, et al. v. Attorney-General of British
Columbia, [1973] S.C.R. 313, the issue was
whether aboriginal Indian title had been extin
guished, but in the course of the analysis of that
question there was reference to the nature of
aboriginal title. There was a division of opinion in
the Court as to whether the Indian title in that
case was based on The Royal Proclamation of
October 7, 1763, but this would not appear to have
had a bearing on the views that were expressed as
to the nature of Indian title. Judson J., with whom
Martland and Ritchie JJ. concurred, said that any
inquiry into the nature of Indian title must begin
with the St. Catherine's Milling case, but he also
said at page 328 that the words "personal" and
"usufructuary" (which were used by Lord Watson
in that case to characterize the Indian title) were
not helpful in the solution of the problem before
the Court. He considered the decisions of the
Supreme Court of the United States on the nature
of aboriginal title and observed [at page 320] that
the lower courts in St. Catherine's Milling had
been strongly influenced by the judgments of
Chief Justice Marshall in Johnson et al. v. M'In-
tosh, 21 U.S. 240 (1823), and Worcester v. State
of Georgia, 31 U.S. 530 (1832). In those cases
aboriginal title was referred to as a "right of
occupancy" based on aboriginal possession of the
land. Judson J. also considered the cases in which
the question had arisen as to whether aboriginal
title was "property" within the meaning of the
Fifth Amendment of the Constitution of the
United States, which provides that private prop
erty shall not be taken for public use without just
compensation. Referring to the decision of the
Supreme Court of the United States in United
States v. Alcea Band of Tillamooks et al. ("the
second Tillamooks case"), 341 U.S. 48 (1951), as
commented on by the Court in Tee-Hit-Ton Indi-
ans v. United States, 348 U.S. 272 (1955), Judson
J. said at page 343: "The finding of the Court in
the second Tillamooks case was therefore that
aboriginal title did not constitute private property
compensable under the Amendment." He then
quoted [at page 344] the following passage from
[page 279 of] the Tee-Hit-Ton case with refer
ence to the nature of aboriginal title, which is
relied on by the appellant: "This is not a property
right but amounts to a right of occupancy which
the sovereign grants and protects against intrusion
by third parties but which right of occupancy may
be terminated and such lands fully disposed of by
the sovereign itself without any legally enforceable
obligation to compensate the Indians." On the
other hand, as the respondents point out, the
Indian title recognized in treaties which have set
apart reservations "for the absolute and undis
turbed use and occupation" of Indians has been
held by the Supreme Court of the United States to
be "property" within the meaning of the Fifth
Amendment: Shoshone Tribe of Indians v. United
States, 299 U.S. 476 (1937), and United States v.
Sioux Nation of Indians et al., [448 U.S. 371]; 65
LEd2d 844 (1980). In Sioux Nation the Court
held [at page 415 U.S., footnote 29] that this
principle was applicable only to "instances in
which `Congress by treaty or other agreement has
declared that thereafter Indians were to hold the
lands permanently'." In Calder, Hall J. [dissent-
ing], with whom Spence and Laskin JJ. concurred,
said at page 352 that it was unnecessary to define
the exact nature of the Indian title since the issue
was whether it had been extinguished, but in
indicating that he assumed there would be a right
to compensation if there were a taking of it, he
said at page 352: "This is not a claim to title in fee
but is in the nature of an equitable title or interest,
(see Cherokee Nation v. State of Georgia [(1831),
5 Peters 1, 30 U.S. 1.]) a usufructuary right and a
right to occupy the lands and to enjoy the fruits of
the soil, the forest and of the rivers and streams
which does not in any way deny the Crown's
paramount title as it is recognized by the law of
nations." Hall J. also quoted with approval what
was said by Viscount Haldane concerning native
title in Amodu Tijani v. The Secretary, Southern
Nigeria, [1921] 2 A.C. 399 [P.C.], a case particu
larly relied on by the respondents in their conten
tion that Indian title is a proprietary interest.
In Amodu Tijani the issue was whether a chief
of Lagos who held land for his community was
entitled on a taking of the land for public purposes
to be compensated on the basis that he was trans
ferring the land in full ownership. The applicable
ordinance provided that where land required for
public purposes was property of a native commu
nity the chief of the community could transfer the
title of the community. The lower courts held that
the chief was only entitled to be compensated for a
"seigneurial right" of control and management.
The Privy Council held that he was entitled to be
compensated on the basis that he was transferring
the land in full ownership. Viscount Haldane said
[at page 402] that the issue turned on "the real
character of the native title to the land", and at
pages 402 and 403 he made the following state
ment concerning the proper approach to the cha
racterization of native title, in the course of which
he referred to Indian title in Canada:
Their Lordships make the preliminary observation that in
interpreting the native title to land, not only in Southern
Nigeria, but other parts of the British Empire, much caution is
essential. There is a tendency, operating at times unconsciously,
to render that title conceptually in terms which are appropriate
only to systems which have grown up under English law. But
this tendency has to be held in check closely. As a rule, in the
various systems of native jurisprudence throughout the Empire,
there is no such full division between property and possession as
English lawyers are familiar with. A very usual form of native
title is that of a usufructuary right, which is a mere qualifica
tion of or burden on the radical or final title of the Sovereign
where that exists. In such cases the title of the Sovereign is a
pure legal estate, to which beneficial rights may or may not be
attached. But this estate is qualified by a right of beneficial
user which may not assume definite forms analogous to estates,
or may, where it has assumed these, have derived them from
the intrusion of the mere analogy of English jurisprudence.
Their Lordships have elsewhere explained principles of this
kind in connection with the Indian title to reserve lands in
Canada. [See (1888), 14 App. Cas. 46 and [1920] 1 A.C. 401.]
But the Indian title in Canada affords by no means the only
illustration of the necessity for getting rid of the assumption
that the ownership of land naturally breaks itself up into
estates, conceived as creatures of inherent legal principle. Even
where an estate in fee is definitely recognized as the most
comprehensive estate in land which the law recognizes, it does
not follow that outside England it admits of being broken up. In
Scotland a life estate imports no freehold title, but is simply in
contemplation of Scottish law a burden on a right of full
property that cannot be split up. In India much the same
principle applies. The division of the fee into successive and
independent incorporeal rights of property conceived as existing
separately from the possession is unknown.
Viscount Haldane then pointed out that the native
title was that of the community rather than an
individual. He said at pages 403 and 404: "Such a
community may have the possessory title to the
common enjoyment of a usufruct, with customs
under which its individual members are admitted
to enjoyment, and even to a right of transmitting
the individual enjoyment as members by assign
ment inter vivos or by succession" and at pages
409 and 410 he said: "Their Lordships think that
the learned Chief Justice in the judgment thus
summarised, which virtually excludes the legal
reality of the community usufruct, has failed to
recognize the real character of the title to land
occupied by a native community. That title, as
they have pointed out, is prima facie based, not on
such individual ownership as English law has made
familiar, but on a communal usufructuary occupa
tion, which may be so complete as to reduce any
radical right in the Sovereign to one which only
extends to comparatively limited rights of adminis
trative interference."
As we have seen, the characterization in St.
Catherine's Milling of the Indian title recognized
by The Royal Proclamation of 1763 was applied
by the Privy Council in the Star Chrome case to
the interest in a reserve which was set apart for the
Indians by executive act under legislation of the
Province of Canada providing for the creation of
reserves and was surrendered under the terms of
the federal Indian Act in 1882. There is, neverthe
less, a body of judicial opinion holding that what
ever may be said of aboriginal title, whether recog
nized by The Royal Proclamation of 1763 or not,
the Indian title or interest in a reserve under the
Indian Act is a right of possession. This is a
conclusion based on the character which the provi
sions of the Indian Act appear to give to the
interest of a band in reserve land. See The Queen
v. Devereux, [1965] 1 Ex.C.R. 602 at page 609;
Joe et al. v. Findlay (1978), 87 D.L.R. (3d) 239
[B.C.S.C. Chambers] at pages 241-242. The con
clusion is based in part on the provisions of the Act
recognizing that an allotment by the band, with
the approval of the Minister, of land in a reserve to
a member of the band gives the member a right of
possession to that land which may be transferred
to the band or a member of the band. The reason
ing is that if the band may allot a right of posses
sion it must have a right of possession. Devereux
involved the statutory recourse under section 31 of
the Act [R.S.C. 1952, c. 149] for recovery of the
possession of a part of the reserve on behalf of the
band or a member of the band. Joe et al. v.
Findlay involved a common law action for tres
pass. In Devereux, a majority of the Supreme
Court of Canada, [1965] S.C.R. 567, differed
from the Exchequer Court as to whether the
recourse under section 31 could be brought on
behalf of the band when the band had allotted the
land in question to a member, but the majority did
not comment on the characterization of the band's
interest in the reserve as a right of possession.
Cartwright J. (as he then was), dissenting, express
ly agreed with this characterization. In the British
Columbia Court of Appeal in Joe et al. v. Findlay
(1981), 122 D.L.R. (3d) 377, Carrothers J.A.
spoke at page 379 of the Indian title or interest in
a reserve under the Indian Act as follows: "This
statutory right of use and benefit, often referred to
in the cases as a usufruct (not a true equivalent
borrowed from Roman law), is a collective right in
common conferred upon and accruing to the band
members as a body and not to the band members
individually. For a discussion on the nature of this
possessory right see St. Catherine's Milling &
Lumber Co. v. The Queen (1888), 14
App. Cas. 46." And he said at pages 379 and 380
of the right of possession which may be allotted by
the Band to a member: "I emphasize that we are
considering merely the right to possession or occu
pation of a particular part of the reserve lands
which right is given by statute to the entire band in
common but which can, with the consent of the
Crown, be allotted in part as aforesaid to individu
al members thus vesting in the individual member
all the incidents of ownership in the allotted part
with the exception of legal title to the land itself,
which remains with the Crown: Brick Cartage Ltd.
v. The Queen [1965] 1 Ex. C.R. 102." In Brick
Cartage, Cattanach J. referred to the Indian inter
est in reserve land under the Indian Act as a
"possessory right" and said at page 106: "This Act
contains provisions under which a band's posses-
sory right in particular parts of a reserve may be
vested in an individual Indian and thus attain, for
all practical purposes, all the incidents of common
law ownership of land in fee simple."
Professor K. Lysyk (now Mr. Justice Lysyk), in
his article, "The Indian Title Question in Canada:
An Appraisal in the Light of Calder" (1973), 51
Can. Bar Rev. 450 at page 473, expressed the view
that the Indian title amounts to a beneficial inter
est in the land. He drew this conclusion from the
implication, in what was said in St. Catherine's
Milling and subsequent decisions of the Privy
Council, which I have cited, concerning the effect
of the extinguishment of Indian title, that until
such extinguishment the beneficial interest in the
land was not available to the province and only
passed or reverted to the province upon the extin-
guishment of the Indian title. There is in my
opinion much force in this view. For the reasons
suggested by Viscount Haldane in Amodu Tijani,
to which Professor Lysyk also makes reference, if
the Indian title cannot be strictly characterized as
a beneficial interest in the land it amounts to the
same thing. It displaces the beneficial interest of
the Crown. As such, it is a qualification of the title
of the Crown of such content and substance as to
partake, in my opinion, of the nature of a right of
property. I am, therefore, of the opinion that it
could be the subject of a trust.
I turn now to the question whether, in the light
of the distinction affirmed in Kinloch and Tito v.
Waddell, section 18 of the Indian Act and the
surrender created a true trust, as contended by the
respondents, or merely a trust "in the higher
sense" or governmental obligation, as contended
by the appellant. Before considering this issue it is
necessary to deal with the respondents' objection
to the appellant's use of the expression "political
trust" to characterize the responsibility of the
Crown under the Intian Act and the surrender
with respect to reserve land and surrendered land.
The respondents sought to prevent the appellant
from invoking this concept on the ground that it
was a defence that is required by Rule 409 of the
Federal Court Rules [C.R.C., c. 663] to be
specifically pleaded. Having been informed before
trial of the appellant's intention to argue "political
trust", counsel for the respondents gave notice that
he would be objecting on the ground that it had
not been pleaded and he had not had an opportu
nity to examine for discovery with respect to it.
After this objection was made at the trial, the
Trial Judge gave the appellant leave to amend its
defence to plead "political trust", with the
respondents to have a right of discovery. He said:
"It is my direction that if you want this amend
ment, either the Minister of Indian Affairs, if that
is his title, or the. Minister of Justice will appear
for examination on discovery on that point." The
appellant did not amend its defence to plead
"political trust", and the Trial Judge made the
following statement with respect to this issue in his
reasons for judgment [at page 416]:
During argument in this case, counsel for the defendant
sought to argue that if there were any trust at all, it was a
"political trust", and only enforceable in Parliament. I do not
know exactly what is meant by "political trust". Rand J., in St.
Ann's Island Shooting and Fishing Club Limited v. The King
([1950] S.C.R. 211), in referring to the Indian Act, used the
expression "political trust". At page 219, he said:
But I agree that s. 51 requires a direction by the Governor
in Council to a valid lease of Indians lands. The language of
the statute embodies the accepted view that these aborigenes
[sic] are, in effect, wards of the State, whose care and
welfare are a political trust of the highest obligation. For that
reason, every such dealing with their privileges must bear the
imprint of governmental approval, and it would be beyond
the power of the Governor in Council to transfer that respon
sibility to the Superintendent General.
Counsel for the plaintiffs objected to any argument being
made on this point, because of the failure to plead it. I gave the
defendant leave, on terms, to amend the defence to raise the
point: if an amendment were made, then the plaintiffs would
have the right to examine for discovery the appropriate Minis
ter of the Crown as to the facts on which the defendant relied
in support of the plea. The defendant chose not to take advan
tage of the opportunity to amend the defence.
I therefore do not propose to deal further with the defence of
"political trust".
At the hearing of the appeal the respondents
argued that since the appellant had not appealed
the Trial Judge's order giving leave to amend to
plead "political trust", it was effectively prevented
from relying on this concept in its contention that
neither the Indian Act nor the surrender created a
true trust. In my respectful opinion the objection is
without merit. As I see it, the expression "political
trust" is merely another way of referring to the
trust "in the higher sense" that is spoken of in
Kinloch and Tito v. Waddell. It is an argument of
law that is open to the appellant in view of the
denial, in its defence, that the Crown held the land
or any interest therein in trust for the Band. It
does not raise any new issue of fact.
In support of their contention that section 18 of
the Indian Act and the surrender created a true
trust, the respondents placed particular reliance on
the decision of the Supreme Court of Canada in
Miller v. The King, [1950] S.C.R. 168. The nature
of the claims in that case, the issue that was before
the Court, and the varying opinions of the mem
bers of the Court oblige me to deal with the
analysis of the decision at some length. The appel
lant in that case brought a petition of right against
the Crown for breach of trust and breach of
contract in respect of Indian lands and the disposi
tion of Indian moneys. There were three heads of
claim: (a) failure to obtain compensation for the
flooding of surrended land; (b) the free grant of
surrendered land to a navigation company without
compensation to the Indians; and (c) the use of the
proceeds of sale of surrendered land to purchase
shares in the navigation company. The first two
heads of claim were based on breach of trust. The
third was based on the breach of a "contractual
agreement" said to have been made between the
Indians and the Government of Upper Canada
whereby the Government was to sell the surren
dered lands, receive the purchase money, and hold
the same for the support of the Indians. The
judgment of the Supreme Court of Canada was on
a preliminary question of law as to whether,
assuming the truth of the allegations of the peti
tion of right when read with the particulars, a
petition of right would lie against the Crown for
the relief sought. The Court held that a petition of
right would not lie for the first two heads of claim
because any breach of trust, if it occurred, took
place before the Province of Canada was formed
by The Union Act, 1840 [3 & 4 Vict., c. 35
(U.K.); R.S.C. 1970, Appendix II, No. 4], and the
liability, if any, was not liability for which Canada
was responsible under section 111 of The British
North America Act, 1867 [30 & 31 Vict., c. 3
(U.K.); R.S.C. 1970, Appendix II, No. 5]. The
Court held that a petition of right would lie for the
third head of claim since the money for the shares
in the navigation company was paid by the Gov
ernment of the Province of Canada. Kerwin J. (as
he then was), with whom Rand J. concurred, did
not refer to the question of trust. Kellock J., with
whom Taschereau J. (as he then was) concurred,
referred at considerable length to the question
whether the Crown could in principle be a trustee
and to the question whether a petition of right
would lie against the Crown for breach of trust. It
is on his opinion that the respondents particularly
rely. The appellant in Miller v. The King alleged
not only that a trust was created by the surrender,
but that the Department of Indian Affairs was
from the time of its origins in 1784 an express
trustee of the Indian lands and Indian moneys for
the benefit of the Indians. Kellock J. treated these
allegations of trust as pertinent to the third claim,
presumably as a basis additional to the alleged
"contractual agreement". He referred [at page
175] to the dictum of Lord Atkin in Civilian War
Claimants, to statements by Lord Selborne L.C. in
Kinloch, including the distinction between a trust
"in the lower sense" and a trust "in the higher
sense", and to Lewin on Trusts [14th ed., page 25]
as authority for the conclusion, as I read his
reasons, that the Crown may in principle act as a
trustee. He then considered the question whether a
subject may enforce a trust against the Crown, and
he concluded that the Exchequer Court had juris
diction to entertain a petition of right against the
Crown for breach of trust. With respect, I do not
read the reasons of Kellock J. as intended to
express a concluded opinion that on the facts as
alleged a true trust was created either by the
surrender or the legislation governing the Depart-
ment of Indian Affairs. The reference to Kinloch
was apparently in support of the conclusion that
the Crown may in principle be a trustee. In the
course of his reasons he said at page 174, "It is
said that reference to the Crown (presumably in
documents or statutes) as trustee for the Indians
and to the Indians as wards of His Majesty is not a
technical use of such terms but such references are
merely descriptive of the general political relation
ship between His Majesty and the Indians", but he
did not address that contention. That he was
assuming the facts might justify a finding of trust
for purposes of the question whether the Court
could grant the relief sought is suggested by the
following statement at page 177: "I see no more
difficulty in the present instance, should the facts
warrant, in making a declaration that the moneys
in the hands of the Crown are trust moneys and
that the appellant and those upon whose behalf he
sues are cestuis que trust, even although the court
could not direct the Crown to pay." At page 179
he said, "Although the matters present relations of
the nature of a trust, they contain likewise the
ordinary elements of a contract", but at page 180
he said that the precise legal position of the Crown
would have to be determined upon the basis of the
evidence at trial: "When the history of the dealings
from time to time with the Indian moneys subse
quent to their receipt is disclosed from the official
records, the court will be in a position to say what
was and is the position and obligations in law of
the Crown with respect to the moneys in question.
For that purpose the matter must go to trial."
Locke J., the fifth member of the Court, said at
page 182 that the question whether a petition of
right lay against the Crown for any of the relief
sought "has been treated properly, in my opinion,
as raising also the question as to whether the
Petition of Right discloses any cause of action, and
the matter has been disposed of by the learned
trial judge upon this footing." As to the cause of
action in respect of the third head of claim, he
clearly indicated at page 186 that he considered it
to be the alleged breach of the "contractual agree
ment": "It is further in the same paragraph
alleged that the Government of Upper Canada was
to hold the proceeds of the sale of the lands for the
purpose of assuring to the suppliants and their
posterity an annuity for their future support and
that the moneys paid out for the Grand River
Navigation Company stock were so paid without
authority from the Indians in breach of the agree
ment between them and the Crown, and in so far
as this relates to the moneys disbursed by the
Government of the Province of Canada I am of the
opinion that a cause of action against that Prov
ince is disclosed." At page 186 he expressed his
concurrence with what was said by Kellock J. on
the question of jurisdiction as follows: "As to the
second branch of the question, I am of opinion that
a petition of right lies for the above mentioned
part of the relief claimed and that there is jurisdic
tion in the Exchequer Court for the reasons stated
by my brother Kellock."
Thus, in so far as it was necessary for the Court
to find that the Petition of Right disclosed a cause
of action in respect of the third head of claim, the
majority found a sufficient cause of action in the
alleged breach of contract, as distinct from breach
of trust. It should also be noted that the third head
of claim involved an obligation respecting the
application of Indian moneys, so that the observa
tions of Kellock J. on the subject of trust must be
seen in this context. They do not relate to the
question whether section 18 of the Indian Act or a
conditional surrender impose an equitable obliga
tion to deal with reserve or surrendered land in a
certain way.
In the present case the Trial Judge quoted from
Tito v. Waddell with reference to the distinction
relied on by the appellant, but he did not state
why, having regard to that distinction and the
reasoning in Kinloch and Tito v. Waddell, he
arrived at the conclusion that the surrender creat
ed a true trust. He expressed his reasons for that
conclusion as follows [at pages 415-416]:
The surrender documents (Ex. 53), themselves, set out that
the 162 acres were surrendered to the Crown, to be held by it
.. forever in trust to lease ...". The Indian Act contem
plates, as I see it, the defendant becoming a trustee, in the legal
sense, for Indian bands. In the statute, there are references to
land being held by the Crown for the use and benefit of bands,
and moneys being held by the Crown for the use and benefit of
bands. (See paragraphs 2(1)(a), (h), (o).) Section 18, for
example, provides that reserves are held for the use and benefit
of the bands. Similarly, subsection 61(1) provides that "Indian
moneys" are held by the Crown for the use and benefit of
Indians or bands. All of the above, in my opinion, supports the
conclusion of a trust, enforceable in the courts.
Kinloch, Tito v. Waddell and Town Investments
Ltd. indicate that in a public law context neither
the use of the words "in trust" nor the fact that
property is to be held or dealt with in some manner
for the benefit of others is conclusive of an inten
tion to create a true trust. The respondents insisted
that the facts in Kinloch, The Hereford Railway
and Tito v. Waddell are quite different and distin
guishable from the facts in the present case. There
can be no doubt of that, but the distinction that is
affirmed in those cases and the policy consider
ations which underly it are relevant to the issue in
the present case.
The appellant laid particular stress on the dis
cretion conferred on the Government by section 18
of the Indian Act as indicating that it could not
have been intended to create an equitable obliga
tion, enforceable in the courts, to deal with the
reserve land in a particular manner. Section 18
provides, as we have seen, that "subject to this Act
and to the terms of any treaty or surrender, the
Governor in Council may determine whether any
purpose for which lands in a reserve are used or
are to be used is for the use and benefit of the
band." Discretion, it will be recalled, was a signifi
cant factor in Kinloch, The Hereford Railway,
and Tito v. Waddell as indicating, in the opinion
of the courts, an intention to exclude the equitable
jurisdiction of the courts. In Kinloch it was the
authority conferred on the Secretary of State to
determine questions of doubt touching the distri
bution of the booty in a final and conclusive
manner, subject to it being ordered otherwise by
Her Majesty. In The Hereford Railway it was the
discretion as to whether to grant a subsidy for
railway construction. In Tito v. Waddell it was the
proviso in the 1928 mining ordinance that the
obligation or duty of the Resident Commissioner
was "subject to such directions as the Secretary of
State for the Colonies may from time to time
give." In my opinion the discretionary authority
conferred by section 18 on the Governor in Coun
cil, or Government, to determine whether a par
ticular purpose for which land in a reserve is to be
used is one for the use and benefit of the Band
indicates, much as the discretion that was con
ferred on the Secretary of State in Kinloch, that it
is for the Government and not the courts to deter
mine what is for the use and benefit of the Band.
That provision is incompatible, in my opinion, with
an intention to impose an equitable obligation,
enforceable in the courts, to deal with the land in
the reserve in a certain manner, and particularly,
an obligation to develop or exploit the reserve so as
to realize its potential as a source of revenue for
the Band, which is in essence the obligation that is
invoked in the present case.
The respondents, as did the Trial Judge, stressed
the importance of the words "use and benefit" in
subsection 18(1), as it was during the relevant
period: "Subject to the provisions of this Act,
reserves shall be held by Her Majesty for the use
and benefit of the respective bands for which they
were set apart ...". The words "use and benefit"
appear in several definitions and other sections of
the Act. A "reserve" is defined in section 2 as "a
tract of land, the legal title to which is vested in
Her Majesty, that has been set apart by Her
Majesty for the use and benefit of a band". A
"band" means a body of Indians "for whose use
and benefit in common, lands, the legal title to
which is vested in Her Majesty, have been set
apart before, on or after the 4th day of September
1951." "Surrendered lands" means "a reserve or
part of a reserve or any interest therein, the legal
title to which remains vested in Her Majesty, that
has been released or surrendered by the band for
whose use and benefit it was set apart." Section 36
provides: "Where lands have been set apart for the
use and benefit of a band and legal title thereto is
not vested in Her Majesty, this Act applies as
though the lands were a reserve within the mean
ing of this Act." Section 37 provides: "Except
where this Act otherwise provides, lands in a
reserve shall not be sold, alienated, leased or other-
wise disposed of until they have been surrendered
to Her Majesty by the band for whose use and
benefit in common the reserve was set apart." The
words "use and benefit" in these provisions simply
refer to the nature or purpose of the executive act
by which lands are reserved for the Indians—they
are set apart for their use and benefit. This is the
sense, in my opinion, in which these words are used
in subsection 18(1). Although the legal title in the
land is vested in the Crown, and the federal Gov
ernment has a power of control and management
over the reserve by virtue of its constitutional
jurisdiction with respect to lands reserved for the
Indians, the land is to be held by the Crown (that
is, controlled and managed) as a reserve (that is,
for the use and benefit of the Indians). To the
extent that subsection 18(1) implies any obligation
at all it is an obligation to make the reserve
available for the exercise and enjoyment of the
Indian right of occupation or possession, but not
an obligation to deal with the land in the reserve in
any particular manner. There are other indications
in the Act besides the discretionary authority con
ferred on the Governor in Council by section 18
that the responsibility for a reserve is governmen
tal in character. The Act confers on the Minister,
the Governor in Council, and the band council
certain powers of a local government nature for
the management of the reserve. See, for example,
sections 18(2), 19, 57, 58, 73(1) and 81. The
Governor in Council has a discretionary authority
under subsection 60(1) to "grant to the band the
right to exercise such control and management
over lands in the reserve occupied by that band as
the Governor in Council considers desirable." All
of this, it seems to me, clearly excludes an inten
tion to make the Crown a trustee in a private law
sense of the land in a reserve. How the Govern
ment chooses to discharge its political responsibili
ty for the welfare of the Indians is, of course,
another thing. The extent to which the Govern
ment assumes an administrative or management
responsibility for the reserves of some positive
scope is a matter of governmental discretion, not
legal or equitable obligation. I am, therefore, of
the opinion that section 18 of the Indian Act does
not afford a basis for an action for breach of trust
in the management or disposition of reserve lands.
I do not find it necessary to express an opinion
as to whether there is an obligation or duty with
respect to the application of the revenue from a
lease for the benefit of the band, and if so, what is
its nature and extent. That would depend on the
terms of the surrender with reference to this point
and the provisions in sections 61 and following of
the Act respecting the management of Indian
moneys. In my opinion the question whether there
is an obligation or duty to deal with reserve or
surrendered land in a certain manner is not subject
to the same considerations, despite certain paral
lels in the wording of subsections 18(1) and 61(1)
of the Act.
The discretionary authority conferred by the
surrender "to lease the same to such person or
persons, and upon such terms as the Government
of Canada may deem most conducive to our Wel
fare and that of our people" is not a statutory
discretion, strictly speaking, but it may be regard
ed as a statutorily authorized qualification of the
power of control and management under the Act.
A conditional surrender is expressly provided for
by the Act, and the Act makes the statutory
authority of the Government to control and
manage a reserve subject to the terms of any
surrender. A surrender is part of the statutory
scheme and giving effect to a surrender is part of
the governmental functions under the Act. Section
41 of the Act provides: "A surrender shall be
deemed to confer all rights that are necessary to
enable Her Majesty to carry out the terms of the
surrender." Upon a surrender, which is the giving
up of the Indian title or interest in reserve land,
the land becomes "surrendered land", as defined
by the Act, and subject to the continuing control
and management of the federal Government in
accordance with the terms of the Act and the
surrender. Subsection 53(1) of the Act, under the
heading "Management of Reserves and Surren
dered Lands", provides: "The Minister or a person
appointed by him for the purpose may manage,
sell, lease or otherwise dispose of surrendered
lands in accordance with this Act and the terms of
the surrender." This provision confirms in my
opinion that a conditional surrender for the pur
pose of leasing land in a reserve is intended to
confer an authority to lease and not to impose an
obligation or duty to do so. The surrender is made
conditional upon the making of a lease in accord
ance with its terms, but it cannot have been
intended that the Crown should have a trustee's
duty or equitable obligation to make a lease. It
cannot have been intended that a surrender, which
is part of the statutory scheme, should make such
a fundamental change in the nature of the Crown's
responsibility for the management and disposition
of land in a reserve.
The words "in trust" have been used in surren
ders for well over one hundred years. They have
been in general use with reference to the govern
mental responsibility for Indian lands. As we have
seen, they appear in Article 13 of the Terms of
Union upon which British Columbia was admitted
into Canada, in section 93 of the Land Act,
R.S.B.C. 1936, c. 144, pursuant to which the
Musqueam Reserve was conveyed by the Province
to the Dominion, and in the provincial Order in
Council which conveyed the reserve. The words
used in the three provisions are "in trust for the
use and benefit of the Indians". The words "in
trust" add little to the words "for the use and
benefit of' as descriptive of the purpose for which
a reserve is set aside, except possibly to emphasize
the importance of the political or governmental
responsibility for such land. They could not have
been intended to make the Crown in right of the
Dominion a trustee, in the private law sense, of the
land in the reserve. As in section 18 of the Indian
Act, the provincial Order in Council expressly
provides for the discretionary authority of the
Dominion Government to determine what use of
the land is in the interest of the Indians. Within
this context of statute and intergovernmental
agreement it is my opinion that the words "in
trust" in the surrender document were intended to
do no more than indicate that the surrender was
for the benefit of the Indians and conferred an
authority to deal with the land in a certain manner
for their benefit. They were not intended to impose
an equitable obligation or duty to deal with the
land in a certain manner. For these reasons I am
of the opinion that the surrender did not create a
true trust and does not, therefore, afford a basis
for liability based on a breach of trust.
This is sufficient to dispose of the issue of
liability, and it is unnecessary for me to express an
opinion on the appellant's other contentions with
respect to liability, namely, that there was no
breach of trust, that an action will not lie against
the Crown for vicarious liability for breach of trust
by servants of the Crown, that the respondents'
action is barred by the statute of limitations, and
that relief should be refused on the ground of
laches.
For these reasons I would allow the appeal, set
aside the judgment of the Trial Division and dis
miss the respondents' action, the whole with costs
in this Court and in the Trial Division. The cross-
appeal will be dismissed with costs.
HEALD J.: I concur.
CULLITON D.J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.