Author Archives: Benjamin

The B.C. Court of Appeal made a unanimous three-judge panel decision on June 3 in Louie v. Louie in relation to an Indian band council and breach of fiduciary duty. The case involved the Lower Kootenay Indian Band, which is part of the Ktunaxa First Nation.

The appeal court had overturned the earlier decision and agreed that in a fiduciary relationship such as that of a band council to its band members that the band councillors are not permitted to put their personal interests first or to make a profit, without having obtained the prior consent of the membership as directed by section 2(3) of the Indian Act which states:

Unless the context otherwise requires or this Act otherwise provides,

(a) a power conferred on a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the electors of the band; and

(b) a power conferred on the council of a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the councillors of the band present at a meeting of the council duly convened.

Additionally, the B.C. Court of Appeal confirmed that band councils are created under the Indian Act, they are creatures of statute whose powers relate to “administration of Band affairs on their respective reserves”, and that they have “no other source of power”.  It seems some band councils operate under a guise of what is referred to as custom; however, the BCCA pointed out that such custom is different than what would attract s.35 Constitutional protection.  However, some band councils exercising self-government authority beyond the scope of the Indian Act power under the so-called “inherent right” or “inherent jurisdiction” might want to ensure that they have been duly authorized to do so.

While the decision in Louie v. Louie dealt with a band council awarding themselves a one-time honorarium bonus without having obtained the consent of the membership, the implications also involve other areas. In essence, the top court in British Columbia has upheld the Indian Act on the basis of the fiduciary principle.

When considering the notion of free, prior, informed consent (FPIC) as required under the United Nations Declaration on the Rights of Indigenous Peoples, and in examining the Indian Act, including the Aboriginal Affairs and Northern Development Canada (AANDC) Manual for the Administration of Band Moneys, it seems that the notion of FPIC is well embedded in the enactment and manual as it relates to the communal rights of aboriginal peoples. I recently posed the question to a FPIC forum hosted by Carleton University as to who has authority to give free, prior, informed consent; it seems that there are varied opinions. Under the Louie v. Louie BCCA decision, it’s clear that band councils operating under the Indian Act have consent requirements with their membership.

First Nations and Indian bands in undertaking due diligence ought to ensure they have not only obtained the free, prior, and informed consent of their members but that they have the evidence to back this up.  The manual states, “Since section 69 authority [band management of revenue moneys] will ultimately rest with the Bands’ Chief and council. Departmental records must demonstrate that the consent of the membership had been obtained.”

It would seem that, the idea of free, prior, informed consent is a communal right. This communal right seems to have been first identified in the Royal Proclamation of 1763, where it is stated, “if at any Time any of the Said Indians should be inclined to dispose of the said Lands, the same shall be Purchased only for Us, in our Name, at some public Meeting or Assembly of the said Indians, to be held for that Purpose”.  It then appears that the notion of free, prior, and informed consent was embedded in the Proclamation made in 1763 and is now a right or freedom that belongs to the aboriginal peoples’ themselves.

Moreover, section 25 of the Canadian Charter of Rights and Freedoms states:

Section 25 – The guarantee in this Charter of certain rights and freedoms shall not be construed as to abrogate or derogate from any aboriginal, treaty or other rights or freedoms that pertain to the aboriginal peoples of Canada including

(a) any rights or freedoms that have been recognized by the Royal Proclamation of October 7, 1763; and

(b) any rights or freedoms that now exist by way of land claims agreements or may be so acquired.

The notion of consent was also referred to in the landmark Supreme Court of Canada case Tsilhqot’in Nation v. British Columbia, 2014 SCC 44, where aboriginal title was officially recognized. In that case, at paragraph 76, the chief justice stated:

The right to control the land conferred by Aboriginal title means that governments and others seeking to use the land must obtain the consent of the Aboriginal title holders. 

In the Tsilhqot’in case, it was not identified as to how to obtain the consent of an aboriginal group; however, these are communal rights and band councils must be aware of exercising powers as a fiduciary.

Band moneys are for the collective, they come because aboriginal rights and title are held communally; thus, the proper rights holders are the band members.  When a band council negotiates they do so for the benefit of the band; it is the band that must consent as to how its collective rights are to be affected.  This is reflected in the Manual for the Administration of Band Moneys where informed community consent is required in respect of settlement type funds.  Settlement type agreements must be ratified by referendum based on the informed community consent of the membership. Also, the Supreme Court of Canada recognized the communal aspect of aboriginal title and rights in Delgamuukw and Tsilqot’in and others.

In Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010:

115  A further dimension of aboriginal title is the fact that it is held communally. Aboriginal title cannot be held by individual aboriginal persons; it is a collective right to land held by all members of an aboriginal nation. Decisions with respect to that land are also made by that community. This is another feature of aboriginal title which is sui generis and distinguishes it from normal property interests.

In Tsilhqot’in Nation v. British Columbia, 2014 SCC 44, [2014] 2 S.C.R. 256

[86]  First, the Crown’s fiduciary duty means that the government must act in a way that respects the fact that Aboriginal title is a group interest that inheres in present and future generations. The beneficial interest in the land held by the Aboriginal group vests communally in the title-holding group. This means that incursions on Aboriginal title cannot be justified if they would substantially deprive future generations of the benefit of the land.

Getting back to Louie v. Louie, the BCCA summarized their decision by stating:

The removal of $25,000 from Band funds and the payment of $5,000 to each of the defendants was a clear and significant personal benefit to them, and them only. As a one-time payment, it did not benefit future members of Council or of the Band. Rather, it was a detriment to the Band. The conclusion seems to me inescapable that this was a breach of fiduciary duty, even in the context of a relatively informal and custom-based governance structure. In my view, such a structure should not deprive members of the Band of the protection of the fiduciary principle. They were entitled to hold the defendants to the high standard to which other fiduciaries are held in this country.

While Louie v. Louie stands to uphold the fiduciary duties, it also points to the need for having obtained free, prior, and informed consent of the true rights holders by a majority of the band, which in that case, hadn’t been proven.

On a side note in regards to fiduciary, in interpreting indigenous law, creation stories and oral histories can inform about indigenous customs or traditions. In 1918, the anthropologist Franz Boaz published a number of such stories in Kutenai Tales, one of which is the Ktunaxa story called “The Youth Who Killed The Chiefs”.  In that story, there were chiefs that did not share food and the people were hungry. A young warrior killed those chiefs that did not share so that the community would also benefit. The moral of the story is that to be a chief, one must put the people first, and that is what the fiduciary principle is all about.

Troy Hunter is a Ktunaxa lawyer who practices aboriginal law with Sea to Sky Law Corporation in British Columbia. Nothing herein is intended to create a lawyer-client relationship and shall not be construed as legal advice.

Canada’s Forgotten Founders: The Modern Significance of the Haudenosaunee (Iroquois) Application for Membership in the League of Nations

Grace Li Xiu Woo


In the 1920’s the Haudenosaunee Confederacy, also known as the Iroquois Six Nations from Grand River Ontario, applied for membership in the League of Nations. They maintained that they were independent allies, not subjects, of Britain. In their view, Canada’s Department of Indian Affairs was exceeding its jurisdiction under section.91(24) of the British North America Act when it tried to enforce its laws on their territory and the use of the Royal Canadian Mounted Police against them was an invasion. The international response to this incident set a significant precedent whose effects are felt to this day in the complaints of unrepresented peoples at the United Nations and in the constitutional dilemmas confronted by Canada concerning the political status of Aboriginal nations. This paper suggests that the final colonization of the Haudenosaunee was the product of a malfunction during the decolonisation of Canada. Procedural decision-making was shielded from public scrutiny and left in the control of unelected officials, both within the British Empire and at the League. As a consequence, Duncan Campbell Scott, the Deputy-Superintendent of Indian Affairs whose policies were at issue, was able to manipulate elected representatives and avoid public accountability. The Haudenosaunee were never given an opportunity to formally present their case or to respond to Scott’s allegations that were put forward as the official Canadian position. This left Scott free to depose their traditional government without raising the suspicions of a bewildered and misinformed public. The experience of the Six Nations Haudenosaunee impugns the integrity of the historical process through which Canada was defined as a modern state and raises serious questions concerning the need for reform, both internally, and at the international level.

  1. Introduction.

Countries like Canada that are a product of the colonial process, are faced with a paradox. We have been attempting to reorient our laws to accord with modern equality rights without bothering to reevaluate the way our history was constructed during the age of imperial expansion and aggression. This paper seeks to address some of the resulting ambiguity by raising awareness of one pivotal event. Though omitted from most accounts of the 20th century, it deserves a prominent place in our collective memory, not only because of the light it casts on the development of Canada’s national identity, but also because it provides a key to understanding why success eludes our well-meaning attempts to achieve both international peace and a solution for complex Indigenous rights issues.

In 1923 the Haudenosaunee Confederacy applied for membership in the League of Nations[i]. Better known to the English as the ‘Iroquois Six Nations of Grand River’ (now in Ontario), they were driven to take this initiative out of exasperation with the intrusive policies of Canada’s Department of Indian Affairs. The Netherlands, Persia, Panama, Estonia and the Republic of Ireland all supported formal consideration of their application – or at least of the issue of whether or not it was receivable. However, Canadian officials did not want their actions subjected to external review. They were already facing court action for losing over CAD160, 000 of Six Nations trust funds through unauthorized investments[ii] and they had difficulty finding the evidence they needed to defend the legality of their policies, so they played on popular stereotypes to ridicule the Haudenosaunee claims. Through these means, they were able to engage the intervention of Britain, which was also potentially liable for financial mismanagement[iii]. The international dominance enjoyed by the British Empire at that time gave it the power needed to pressure Haudenosaunee supporters and prevent formal presentation of the evidence and legal arguments that favoured their claims. As a result, both the Canadian public and the international community were excluded from the decision-making process and this influential Indigenous confederation was denied the opportunity to participate in world affairs on parity with other nations.

The facts surrounding this incident are difficult to untangle from presumptions that are firmly established in our cultural mythology concerning the foundation of both Canada and the modern international order. Those involved – the coloniser and the colonised – see each other in such radically different terms that we do not even use the same words to describe our past and present selves. Yet, the perspective of the colonised is confirmed by the coloniser’s archival records. In considering the significance of what happened, it is worth remembering that most modern Canadians were born in or immigrated to Canada after the events recounted in this paper took place. We see ourselves as an alternative to the United States and we have few ties to people who can remember that back in the 1920’s, the ‘Dominion’ still held colonial status under English law. In those years, the immigrant majority came predominantly from Britain. As ‘loyal subjects’, they had no desire to leave the protection of the imperial ‘motherland’. Their submissive mind set and hierarchical belief system contrasted sharply with the egalitarian philosophy of the Haudenosaunee, who used archival evidence to substantiate their claim to full independence. As they argued in their petitions, the ‘Six Nations’ had never been conquered and they had never accepted alien sovereignty. Since the time of first contact, they had always insisted that they were allies, not subjects, of Britain.

Now that British imperialism has faded to a distant memory, scholars are taking a second look at the past. The primacy accorded to equality, both in the field of international human rights and in the Canadian constitution, castes a different light on how the modern world took shape and it appears increasingly likely that we have underestimated the depth of the philosophical conflict involved in early Anglo-Indigenous encounters. The League of Nations incident is just one of many points of cultural collision. Yet, with the perspective afforded by time, the broad significance of the actions taken by Canada’s Department of Indian Affairs to depose[iv] the traditional Haudenosaunee government is becoming increasingly apparent. These events occurred at the very moment when the Dominion of Canada was taking its first tentative steps towards establishing a limited autonomy of its own. And so, in this case at least, self-determination for Canada was achieved, not in cooperation with Indigenous peoples (contrary to Canada, 1993 Partners in Confederation), but rather at the expense of their traditional autonomy.

  1. The Introduction of Decolonization in International Law

The primacy now given to the principle of equality is a major component in the reorientation of the concept of legality that emerged during the 20th century. Following World War I, US President Woodrow Wilson captured international opinion by announcing that ‘the day of conquest and aggrandizement is gone’[v]. The League of Nations was soon established ‘for the purpose of affording mutual guarantees of political independence and territorial integrity to great and small states alike’ (Covenant of the League of Nations; Walters, 1960). Instead of dividing the conquered German, Austro-Hungarian and Turkish empires among the victors, their constituent nations were either granted recognition as states, as in the case of Czechoslovakia and Yugoslavia, or placed under mandate with a view to eventual independence. This led to a redefinition of Canada’s identity and the country began to look beyond the protection traditionally derived within the British Empire (Veatch, 1975; Lederman, 1984, p 340). Along with the other British ‘dominions’ (Australia, New Zealand, Newfoundland, South Africa and Ireland, which became a ‘dominion’ by treaty in 1920) Canada was finding it increasingly advantageous to emphasize its state-like qualities (Veatch, 1975). This had serious consequences for the indigenous nations living on the territory identified as ‘Canada’ on British maps.

From the Haudenosaunee perspective, their relationship was with Britain and it had been established under the principle of ‘Guswentah’, the Two Row Wampum. According to an analogy that indigenous sources say was British in origin (Weaver, 1975, p 279), the parties were to conduct themselves like two boats sharing the same river, and it was agreed that neither would attempt to steer the other’s vessel. (Canada, 1996a). With the founding of the League of Nations, international organization shifted its definitional focus from imperial allegiance to territorial control by the resident population. Measures were instituted to help former colonies move towards independence and, though the implications of this reconceptualisation may not have been immediately apparent, Britain’s ‘dominions’ found themselves under increasing pressure to follow suit. Canada had not established formal relations with the Haudenosaunee or any other indigenous nation. The treaties and agreements that had been signed in British North America had always been made on behalf of the British monarch (for example, see Canada, 1871); but in the new world order that began to take shape following World War I, the Dominion presumed authority over all of the territory north of the United States’ boundary. In terms of the Two-Row Wampum concept, which had previously governed Anglo-Haudenosaunee relations, it was as if the occupants of one boat laid claim to the whole river.

The conflict raised by this change in the international paradigm came to a head when the Haudenosaunee Confederacy applied for membership in the League of Nations. The few members of the dominant culture, who know of it; consider this incident an esoteric curiosity. However, specialists in the field have identified it as the origin of the modern international indigenous movement (Anaya, 1996, p 46) and it remains a beacon for indigenous-rights activists (see: Rikard, Sunkmanitu tanka Isnala Najin; Mapuche Documentation Center; Cheshire; Sun Singer). What happened is almost impossible to reconcile with Canada’s its proud humanitarian reputation, derived in part from Raoul Dandurand’s pioneering work on minority rights at the League (Hamelin, 1967; Stacey, 1981). Though Dandurand must have heard something about the incident, the Department of Indian Affairs was able to control the information he and his successors received, so Canadian decision-makers never fully understood the Haudenosaunee plight. In recent years, several accounts of what happened have been published (Veatch, 1975; Titley, 1986; Johnston, 1986; Rostkowski, 1987; Sanders; 1992); however, the implications are ignored. What happened simply does not fit with the cut and paste version of history we inherited from the colonial past. (See R. v. Marshall 1999; Dickinson and Gidney, 1987; Fisher, 1992; Ray 1990) Yet Canada depends on history to found the legality of its governmental structure. (Reference re Secession of Quebec 1998, at 49.) This approach is difficult to reconcile with the reorientation of international law to found human rights on the equality of all peoples, including those indigenous to colonial states. From the modern international perspective, the treatment meted out to the Haudenosaunee in the 1920’s is beginning to make the actual function of Britain’s much vaunted legal system look like a hallucination from Alice in Wonderland (Carroll, 1865).

  1. The Haudenosaunee Relationship with British North America

The particular indigenous people involved in the League of Nations application had a long and complex involvement in North American colonial development. By the 1920s, the seat of government for the Canadian branch of the Haudenosaunee Confederacy was on a territory known as the ‘Six Nations Reserve’, near Brantford Ontario[vi]. The 20th century produced a vast literature struggling with elusive concepts related to the idea of ‘nationality’ (Dallier & Pellet, 1999) and it was not until 1933 that international law established a positive legal definition for a ‘state’ (Dallier & Pellet, 1999, ch 1; Harris, 1991, p102; Castel, 1975, p 47). Following Article 1 of the Montevideo Convention on the Rights and Duties of States, it is now considered that a ‘state’ must have a permanent population, a defined territory, a government and the capacity to enter into relations with other states. As a division of the British Empire, Canada’s international relations were handled by Britain when the League of Nations was founded and it did not meet these criteria. The Haudenosaunee Confederacy did. Their Grand River territory was one of the first parts of Upper Canada to be surveyed. Indeed, the history of the people on this ‘reserve’ is inextricably intertwined with the establishment of British North America. Their ancestors had been making treaties with European monarchies since 1643 (Jennings, 1984, p 55), becoming intensely involved in international relations during the colonial age. England, France and the United States all called the ‘Iroquois’ allies at times and Haudenosaunee ambassadors had visited the English court on several occasions. The eventual union of Britain’s American colonies after they revolted from subject status was suggested by indigenous diplomats long before it was achieved and the United States’ senate has acknowledged that it’s constitution is founded on that of the ‘Iroquois’ confederation of the Kanienkehaka (Mohawk), Oneida, Onondaga, Cayuga and Seneca nations (US 1987).

Haudenosaunee attempts to remain neutral in the European conflicts that were carried to their soil during the colonial era met with limited success and they had a pattern of creating ties with both sides in any dispute (Richter, 1992). Following the American revolution of 1784, the part of the Haudenosaunee Confederacy that had allied with the British moved north with the Empire Loyalists. The League of Nations applicants were descendants of those accompanying the Mohawk war chief Thayendanegea. Known in English as ‘Joseph Brant’, Thayendanegea’s older sister, Konwatsi’tsiaienni or ‘Molly’, was the widow of Sir William Johnson, the first British Superintendent of Indian Affairs. The Haudenosaunee were a matrifocal society in which women could remove public representatives from office and decide whether or not to go to war. In their efforts to keep their ‘Indian allies’ on side, the British continued to seek Konwatsi’tsiaienni’s diplomatic support long after Johnson’s death (Huey & Pulis, 1997; Thomas, 1996; Johnston, 1964). It was not until Europeans had established themselves as the majority in North America and the Anglo-American border was settled that the strategic importance of ‘Indian allies’ began to wane.

The territory occupied by the part of the Haudenosaunee Confederacy that led the application for membership in the League of Nations had been guaranteed to them by General Haldimand. It was seen as a replacement for the traditional homeland along the Mohawk River near Albany, New York that had been lost as a result of their British military alliance during the American Revolution[vii]. Originally designated as being six miles wide on either side of the Grand River from Lake Erie to its head, the ‘Six Nations’ territory cut through the heart of what was to become one of the richest parts of Canada, including the modern cities of Brantford, Waterloo and Kitchener. However, confusion over the legal status of this territory coupled with a laissez faire attitude towards squatters on the part of Upper Canadian officials led to the dissipation of most of the land during the 1800’s under circumstances that can only be described as unjust (Harring, 1998). Despite these difficulties, the Six Nations people managed to maintain a functioning government. They adapted to the colonial environment, modifying their traditional institutions to manage all of the normal concerns of an agricultural community. At Six Nations, the Haudenosaunee Confederacy Council met regularly in their brick council house to look after a full range of community business, including tenders for road and school construction, dispute settlement and the welfare of orphans and the disabled. In the eyes of the Indian Department they were a model reserve under the authority of the Superintendent of Indian Affairs, though from their own perspective they were simply managing their own business independently as had always been their custom.

Despite either ignorance or wilful blindness on the part of Canadian officials, the ‘Six Nations’ had not forgotten the history of their relationship with Britain. As previously mentioned, this had begun during the age when European diplomacy was conceived in terms of monarchies, not states. During the nineteenth century, colonial versions of history were compiled to defend the expansionist aspirations that prevailed in Anglo-American culture (Trigger, 1984; 1986), but modern scholars are beginning to realize that Indigenous diplomacy was geared towards self-preservation rather than imperial expansion (Jennings, 1984; Richter, 1992). Although they were constrained to serve as military allies to one side or another, the Haudenosaunee continued to define themselves on their own terms in the changing political environment created by European colonisation. As far as they were concerned nothing had happened to abrogate the Two Row Wampum Treaty that set out their relationship with Britain. The two polities remained separate in a shared environment and changes in the internal organization of the British Empire such as the revolt of colonists to found the United States or the creation of the Dominion of Canada did nothing to impugn their own political integrity.

Whether the British fully understood and accepted the concepts represented by the Two Row Wampum or not, they traditionally allowed subjects to rule themselves according to their local laws and customs (Pesklevits, 2002)[viii]. Thus, despite repeated attempts by colonial administrators to claim Indigenous peoples as subjects, the two societies managed to co-exist. However, as one generation succeeded the next in colonial Canada, knowledge of founding concepts both in the field of British constitutionalism and of Indigenous diplomacy began to erode. After the American boundary was settled following the War of 1812 the British transferred Indian Affairs from military to civilian control and with the creation of the Dominion of Canada by the British North America Act 1867[ix], responsibility for Indian Affairs passed to Canada’s federal government. After confederation, Canada passed a series of Acts on the advice of the Superintendent of Indian Affairs. These gradually increased his powers. At every step of the way, the Haudenosaunee, like other indigenous nations, objected and as recently as 1909 they had been able to rely on their unusual history to extract the assurance from Frank Oliver, then Minister of the Interior that:

‘It is the policy of the Canadian Government, as I understand it, to recognize its relations with the Six Nations Indians of the Grand River as being on a different footing from those with any of the other Indians of Canada. The Six Nations Indians of the Grand River came to Canada under special treaty as allies of Britain, and the policy of the Canadian government is to deal with them having that fact always in view.

The system of tribal government which prevailed among the Six Nations on their coming to Canada was satisfactory to the Government at that time, and so long as it is satisfactory to the Six Nations themselves so long it will remain satisfactory to the Government of Canada’[x].

  1. The Canadianisation of ‘Indian’ Policy

Despite the imposition of Canadian terms of reference on the situation, the traditional British approach allowed the Haudenosaunee to maintain some measure of autonomy under their own rules. However, the authoritarian nature of Indian Affairs’ administration intensified with the appointment of Duncan Campbell Scott as Deputy Superintendent in 1913 (Titley, 1986). Erosion of respect for Haudenosaunee autonomy accelerated. Canada’s attempt to conscript Six Nations men during World War I was followed by legislation allowing redistribution of Six Nations land under the Soldiers’ Resettlement Act[xi]. Then in 1920, an amendment to the Indian Act[xii] proposed to allow the Superintendent of Indian Affairs to enfranchise ‘Indians’ without their consent. ‘Indians’ did not have the vote in Canada at that time and ‘enfranchisement’, as conceived by the proposed legislation, allowed the removal of the enfranchised person’s share of the land from their reserve, making it subject to Canadian laws. The majority of Indigenous people affected wanted to continue their old traditions and, at Grand River in particular, people did not want the vote because they did not believe that they were part of Canada. Even those who supported co-operation with Indian Affairs were afraid that these new measures would result in the loss of the small amount of territory that was left to them.

  1. The Haudenosaunee Defence

In order to defend their autonomy, the Haudenosaunee council hired London Ontario lawyer AG Chisholm to draft a petition asking for a reference to the Supreme Court of Canada. They claimed that actions taken by the Indian Department under the Indian Act were a violation of the Six Nations right to internal self-government and ultra vires Canada[xiii]. They soon encountered a constitutional malfunction that seems to have been produced by the devolution of power from the monarch to the Dominion. Under the Supreme Court Act the case could not be heard without leave from the Governor in Council who was deemed to act on the advice of Canada’s Prime Minister, the notional representative of the Canadian people. In practice, however, the Prime Minister relied on recommendations from the Indian Department, which was effectively a party in this case. Duncan Campbell Scott was thus able to shield his policies from public scrutiny in court. Based on a judiciously worded memo advising that a Supreme Court reference would be of ‘no advantage’ to the Indian administration, the petition was rejected by an Order in Council orchestrated by Scott and declaring that the Six Nations were British subjects[xiv]. Though this decision was ostensibly made by the Governor in Council on Scott’s advice, there is no evidence to suggest that any elected representative or Canadian official other than Scott turned his mind to the situation.

Following the failure of their petition and several other attempts to negotiate a solution to their problems, the Six Nations dismissed Chisholm and hired George Decker, a lawyer from Rochester, New York who was working on the Cayuga claim (Graymount, 1973)[xv]. They drafted a second petition to the Governor General of Canada reminding him of Britain’s traditional alliance with the Iroquois and asking for the protection of the British Crown from laws ‘manifestly designed to destroy our Government’[xvi]. Petitions to previous Governors General had successfully defended their rights, but this time their pleadings were passed down once again to Duncan Campbell Scott – the author of the actions they were complaining about – without any independent consideration by anyone else. And so it was rejected again.

The Haudenosaunee had not made any agreements with Canada. Their treaties had all been made with Britain and so they decided to appoint representatives to carry their cause directly to the King in England. When Scott read about this in the Montreal Gazette, he asked the department of External Affairs to block their passports[xvii]. The Six Nations circumvented this problem by issuing passports of their own and eventually Levi General, who held the Cayuga royaner (or chief)’s title of Deskaheh, travelled to London in the company of their lawyer, an American, George Decker. The English monarch had received Six Nations representatives, including Joseph Brant, on several occasions in the past, but when Deskaheh arrived in London, King George V was out of town. The petition Deskaheh presented, accompanied by a memo setting out the legal grounds for his peoples’ claims[xviii], was dismissed by the young Winston Churchill, then Secretary of State for the Colonies. Acting in support of the Dominion’s emerging autonomy, he claimed that the matter was ‘within the exclusive competence of the Canadian government’[xix]. Thus, once again, the complaint was referred down the line until it appeared on the desk of the man whose interpretation of the law was being questioned. Though he never held elected office, Duncan Campbell Scott never doubted his capacity to act on behalf of Canada. He did not even bother to write a reply, although he did institute measures aimed at strangling the Haudenosaunee economically so as to deprive them of the funds they needed to hire lawyers.

  1. The Canadian Invasion of Haudenosaunee Territory

Charles Stewart, the new Superintendent of Indian Affairs under the MacKenzie King administration, does not seem to have understood the political complexity of the office he was charged with at first. What happened next illustrates the illusory nature of representative government in Canada at the time, as well as the need for a neutral arbiter when there is a serious power imbalance between the parties. On 4 December 1922, Stewart, accompanied by Scott, travelled to Brantford to negotiate the appointment of a tribunal to settle Canada’s differences with the Six Nations. After meeting all day at the local YMCA the Department of Indian Affairs made an offer to negotiate their differences with the ‘Six Nations’. Haudenosaunee law and custom requires ratification of important decisions by the people and, after discussing what had been offered, the Confederacy council decided to accept[xx]. They also appointed seven constables to co-operate with Ontario police on the question of liquor control, which had been a topic of concern at the Brantford meeting[xxi]. However, before they could send in their letter confirming acceptance of the terms Canada had offered, their Grand River territory was subjected to a three-day raid by the newly created Royal Canadian Mounted Police. The RCMP were accompanied by Inland Revenue Officers and claimed to be looking for illicit alcohol. The home of Deskaheh, who was characterized by Canadian authorities as the main troublemaker, was searched although he was a notorious tea-totaler. All that was found on the whole reserve was one still (which may have been planted)[xxii], a small bottle of moonshine and some mash and, despite rumours inspired by popular stories of Indian wars[xxiii], the only shots that were fired were those of the police[xxiv]. There are no records to show who gave the order for this raid that undermined Stewart’s public efforts; but the RCMP, whose future was in question, were looking for a role for themselves (Kelley, 1973) and they were routinely forwarding reports on the Six Nations to Scott[xxv].

  1. The Haudenosaunee Quest for Intervention by the League of Nations

Though the Haudenosaunee had some awareness of Canada’s internal confusion over who was in control, they did not consider it their business and, as their previous appeals to British authorities had demonstrated, they had no means of addressing it in any event. However, Canada had just been accorded a seat at the League of Nations, having overcome exclusion from the International Labour Organization which had initially proposed that ‘No member, together with its Dominions and Colonies, whether self-governing or not, shall be entitled to nominate more than one member’(Veatch, 1975 p.7). In the wake of World War I, international relations were closely followed by the Canadian public and developments received detailed coverage on the front page of the Brantford Expositor. The Haudenosaunee expected the new institutions to be functional. They responded to Canada’s invasive action by addressing a petition to the Queen of the Netherlands, delivered within days to the Dutch Chargé d’Affaires in Washington DC[xxvi]. They were already familiar with the League’s rules. They knew they needed a sponsor in order to appeal to the League. The Netherlands was the first European power with which they had established diplomatic relations back in the early 1600s. and HA van Karnebeek, the Dutch Minister of Foreign Affairs, had been President of the League Assembly in 1921. Their petition stated that the ‘Six Nations’ were an ‘organized self-governing people’ in need of protection from ‘this aggression of our Canadian neighbours’. Both the Haudenosaunee and the Netherlands appear to have interpreted the wording of the League of Nations’ Covenant literally, expecting the new organization to resolve the issues involved openly and in accord with the principles of international law.

Canada’s reaction was scattered and contradictory in keeping with the ambiguity of its status at the time. As a ‘dominion’ the country’s was still a colony according to British law. Though it had won a seat at the I.L.O. and the League of Nations, it did not have its own diplomatic representation in other states, not even in Washington D.C. and despite the prominent role of Canadian men and resources in World War I , Canada did not have the right to sign the Treaty of Versailles that ended the war. As leader of the Liberal Party, Prime Minister Mackenzie King was attempting to maintain a delicate political balance between Ontario Tories who were proud of their Imperial ties and a general wariness, especially in Quebec, about being dragged into Britain’s over-seas conflicts. At the particular moment when the Haudenosaunee were trying to defend their autonomy, Mackenzie King was involved in his own quest for Canadian self-determination, attempting to wrest permission from Britain to sign the Halibut Treaty[xxvii] with the United States. Though Britain continued to be very much involved in Canadian diplomatic negotiations, a precedent was finally set on 23 March 1923 when this treaty took effect without Britain’s signature.

That very same month Canada, on advice from the department of Indian Affairs, turned the screws a notch tighter on the Haudenosaunee by unilaterally appointing Colonel Andrew C. Thompson as a one-man commission to investigate the complaints that the Haudenosaunee had been making so insistently against Dominion interference with their business. This, after months, years even, spent attempting to establish a neutral and mutually acceptable arbitration panel. As far as the Haudenosaunee application at the League was concerned, MacKenzie King was content to let Britain flex its muscles on Canada’s behalf. Despite his on-going struggle to establish Dominion autonomy, Canada was, after all, still a part of the British Empire. The Foreign Office in London pressured the Netherlands to discourage presentation of the Six Nation’s petition[xxviii]. With Sir Eric Drummond, a British diplomat, serving as the League’s Secretary General, procedural formalities were improvised. Ignoring the right to file a writ, which had long been a long-established part of the British system of justice, Drummond insisted that Canada should have the right to reply before the Haudenosaunee complaint was formally registered. At that time MacKenzie King was attempting to handle international matters on his own and he thought so little of External Affairs that staff inherited from the previous Conservative administration was still in place. The task of drafting Canada’s response fell to Sir Joseph Pope, described as a ‘thorough-going colonial with no use for equality of status and such like nonsense’ (Stacey, 1981, p 6). Needless to say, Pope’s principal adviser was Duncan Campbell Scott. His indignant response created such a diplomatic embarrassment that the Netherlands decided to withdraw from the situation despite its belief in the merits of a formal legal treatment of the issues. The Haudenosaunee were not even given a copy of Canada’s reply. They had to rely on unofficial communications to keep track of the progress of their case.

With the Netherlands removed from the scene, the League’s secretariat hoped that no country would ask to place the ‘Six Nations’ appeal on the agenda. However, Deskaheh and Decker soon arrived in Geneva to file a formal request for League membership. Since the secretariat would not accept their petition, they circulated copies under the title The Redman’s Appeal for Justice to all of the members (Deskaheh, 1924)[xxix]. Many states were annoyed by Canada’s attempt to delete Article 10 from the League’s Covenant requiring members to protect each other from external aggression and this may have inspired the support the Haudenosaunee eventually received (Veatch, 1975, ch 6). On 27 September 1923, delegates representing Estonia, Ireland, Panama and Persia signed a letter asking for communication of the Six Nations’ petition to the League’s assembly[xxx]. When informed that the matter could not be dealt with because the assembly’s session was almost over, the Persian delegate sent a telegram asking for consideration by the League’s council. This time the request was rejected on the grounds that there was no Canadian delegate present and the matter was put over for another year on the basis of arguments put forward, not by the members, but rather by the British dominated administration. Britain used the break to bring diplomatic pressure to bear on the countries that had supported the Six Nations. One by one over the following months their governments devised excuses, suggesting that their representatives at the League had acted without proper instructions.

  1. The Deposition of the Haudenosaunee Government

Back in Canada, the final steps needed to depose the traditional government of the Six Nations Haudenosaunee were quietly and carefully put into place. Duncan Campbell Scott prepared a response to The Redman’s Appeal for Justice even though it had never been formally accepted at the League. In February 1924, the secretariat distributed Scott’s defence of Canada’s policies to the members of the League’s council, despite the fact that filing of the petition it was responding to had never been allowed. Once again a copy was not sent to the Six Nations themselves and they were given no opportunity to reply to the official critique of their unregistered complaints[xxxi].

Back at Grand River, the Haudenosaunee continued with business as usual. There is no indication that they knew the end was near. In August 1924 the report of the ‘Thompson Commission’, which had been boycotted by most of the people on the reserve, was released to the Canadian public with its recommendations in favour of the department of Indian Affairs. A bewildered RCMP. was asked to provide reinforcements to police the Six Nations at this time; but their reports indicate that everything was ‘quiet and orderly’ as usual. Despite the Confederacy’s indignant protests over this unauthorized police presence, they do not seem to have realized what was about to occur. Prime Minister MacKenzie King and Governor-General Lord Byng of Vimy had quietly signed Order in Council dated 17 September 1924 mandating the replacement of the Haudenosaunee Confederacy Council with a band council elected under Canada’s Indian Act. The local Indian Agent kept the order under wraps at first, but when the Haudenosaunee Council learned of it, they cabled Deskaheh in Geneva in alarm. The League received a copy of the telegram, but did nothing. Scott was free to proceed with his plan.

On 21 October 1924, the very same day that ratifications of the Halibut Treaty were exchanged, Canada’s Department of Indian Affairs proceeded to hold elections on the Six Nations reserve. The event was boycotted by the majority of the people on the electoral list. Only 26 ballots were cast. The traditional council had more than 30 regular members and though it continued to meet, it was unable to conduct business as usual because Canada had control of their trust funds. With no access to the money needed to pay for road tenders, school repairs and other community business, management was wrested from their hands and placed under Canada’s control. And though the Six Nations people continue their protest in various ways to this day (Maracle, 1997) their dispute with Canada has never been resolved. The majority of the people continue to boycott both band council and Canadian elections. Traditionalists continue to insist that they are independent. And Canada has never paid compensation for unauthorized investments made with Six Nations trust funds, though even Colonel Thompson acknowledged that there had been injustice on this count[xxxii].

And so it was that the first steps in the decolonisation of Canada were accompanied by the final colonisation  of the Haudenosaunee people. It was not until 1931 with the Statute of Westminster that Canada and the other dominions achieved parity with Britain in the British Empire – a level of independence somewhat inferior to that claimed by the Haudenosaunee in relation to Britain throughout the post-contact centuries. And though the Six Nations had a defined territory, a population, a government and a proven, centuries-old history of diplomatic relations with other nations, it was another decade before the nature of a state was defined in international law. By then the department of Indian Affairs was able to point comfortably at its self-imposed band council to claim that the traditional Haudenosaunee Confederacy council, which still continued to meet, did not represent the Six Nations people.

  1. The Long-Term Consequences

What are we to make of this story of simultaneous colonisation  and decolonisation? Would a hearing at the Supreme Court of Canada or at the League of Nations have made any real difference? Perhaps not. British imperial pride was at a peak in the 1920s when the Empire was still celebrating victory in the first Great War. We have become so accustomed to the uniform coloration of the map north of the American border that the current format of Canada seems incontestable. However, a mere ten years later Britain’s Judicial Committee of the Privy Council reversed the seemingly entrenched orthodoxy saying women were not legal persons[xxxiii]. What would they have said about the Indian Act that said the same of Indigenous peoples? The archival evidence and legal authorities that the Six Nations Haudenosaunee had to offer in support of their arguments were impeccable. If they had been allowed equal access to British imperial courts, perhaps they would have won. And then, who knows? Perhaps the reasoning would have been confined to that particular case, dependent on the unique terms of Haldimand’s declaration. Or perhaps Haudenosaunee from other reserves would have found a way to expand their rights producing a very different type of legal and political order – one in which Indigenous nations had a real say. And this might, in turn, have inspired us all. Perhaps we would have developed a society in which no one was held hostage by the shadowy manoeuvres of unelected officials – in the department of Indian Affairs or elsewhere in the dark recesses of the federal bureaucracy.

On the other hand, if the Six Nations had been allowed to present their case at the League of Nations or in the newly formed international court, perhaps the whole history of the twentieth century would have been different. Perhaps polities would have been defined according to relational rather than territorial criteria. Perhaps the boundaries of territorial resources would have been decided through rational grassroots legal consultation, formed on the basis of agreements reached among all those affected instead of on the basis of colonial precedent backed by the use of brute force. We might have developed institutions designed to assist consensus formation. We might have found the means to address social problems before they degenerate to the point that they elicit responses founded on anger and blind rage. Perhaps the need to define the crime of genocide would never have arisen. We can only wonder as we head into the 21st century with new, and similarly undefined challenges before us. We can only wonder, though surely, if we want to decolonize the future we must first decolonize our understanding of the past.


  • [i] Except when identifying a particular quote, the endnotes are not intended to be definitive or exclusive sources on any particular point. For a more detailed account, and more explicit references, see Woo 2000 (publication pending).
  • [ii] The Grand River navigation scheme to promote river transport through dredging failed because of the advent of rail transport. Contrary to popular opinion, the ‘Indians’ were not supported by taxpayers. The money lost was being held in trust by the Department of Indian Affairs and it came from the proceeds of land sales which reduced the size of their reserve substantially. At time of writing, the claim has never been settled despite several attempts to gain compensation.
  • [iii] Indian Affairs, established in 1755 as a branch of the British military, became a civilian administration in 1832 and was transferred to the Dominion of Canada by the British North America Act 1867.
  • [iv] This word was used by the local Indian Agent to describe his actions at the time.
  • [v] Delivered to the U.S. Congress on 8 January1918. Despite Wilson’s seminal influence, the United States never joined the League.<>
  • [vi] A description of the political organization of the Haudenosaunee Confederacy is too complex to include here. There is a voluminous literature on the subject. It was founded in the pre-contact era as a confederation of the Mohawk. Oneida, Onondaga, Cayuga and Seneca nations centred in what is now New York State but the Turcarora, Delaware and others are now affiliated. The Confederacy council, which split following the American Revolution to deal separately with the Americans and the British, has recently reunited. Haudenosaunee identity includes several reserves on both sides of the Canada-U.S. border. For a start, see e.g. Parker, 1916; Shimoney, 1994; Fenton, 1998).
  • [vii] Like the British Empire, the Haudenosaunee polity was defined in relational, rather than territorial terms. The British Empire was founded on the subject-monarch relationship. (Section 8(2) Halsburys Laws of England, 4th ed, p 26). The Haudenosaunee, by contrast, were founded on kin and quasi kin relations. Their complex internal diplomacy has been the subject of innumerable academic studies which go beyond the scope of this paper.
  • [viii] Note the terms of the Coronation oath which must be sworn before the King of England obtains legal status (see Halsbury’s Laws of England).
  • [ix] Now known as the Constitution Act 1867.
  • [x] Frank Oliver, Minister of the Interior, Canada to Chief J.S. Johnston, Deputy Speaker, Six Nations Council, 5 April 1909 Ex. ‘A Memorandum on the Relation of the dominion government of Canada with the Six Nations of the Grand River’, submitted at London by Chief Deskaheh to the Colonial Office, August, 1921.
  • [xi] An Act to Assist Returned Soldiers in Settling upon the Land and to Increase Agricultural Production SC 1917 c 21. Under this act retired soldiers were granted land in Canada. Many Six Nations men had enlisted voluntarily in the Canadian army and, instead of granting them Canadian land, Canadian officials proposed to allocate land to them that had already been reserved for the Six Nations.
  • [xii] Indian Act 1906 S.C. 15 Geo. VI c.29 subsequently amended by 1-2 Ed. VII, 1910 c 28; 1-2 Geo V, 1911 c 14; 4-6 Geo V, 1914 c 35; 8-9 Geo V, 1918 c 26; 9-10 Geo V, 1919 c 56; 10-11 Geo V, 1920 c.50; 12-13 Geo. V., 1922 c.26.
  • [xiii] To His Excellency the Governor-General in Council signed Joseph Logan Head Chief of the Onodagas; John C Martin, Head Chief of the Mohawks; Peter Claus, Head Chief of the Oneida; Levi General, Head Chief of the Cayuga; Peter Isaac, Head Chief of the Seneca; Sam R. Lickers, Head Chief of the Tuscarora, 12 March, 1920. National Archives of Canada (NA) RG10, vol.2285, file 57,169-1A pt 2.
  • [xiv] PC 2719, 27 Nov. 1920. See also NA, RG10, vol.2285, file 57,169-1A pt 2.
  • [xv] The Cayuga of Grand River were seeking compensation from New York for their traditional land around Cayuga Lake under treaties of 1788, 1790 and 1795 that were being respected only for Cayuga living south of the Canadian border. In 1925 an American-British Arbitration Tribunal was established, though the case was not resolved until Chief Clinton Rickard met personally with President Roosevelt in 1929.
  • [xvi] To His Excellency, The Duke of Devonshire, Governor General in behalf of the Six Nations signed William Smith, Levi General, David Sky, AG Smith, OG Nash, David S Hill, 10 May 1921. National Archives of Canada, RG10, vol 2285, file 57,169-1A pt 2.
  • [xvii] Scott to Pope, 1 June 1921. NA RG10 vol.3227/552285 (Reel C-11344).
  • [xviii] I did not find a copy of this petition in the National Archives. However, there is a copy in the Netherland’s Archives at ARA A-dossiers 1918-1940 inv no 1521.
  • [xix] Churchill to Lord Byng, 23 Sepot. 1921 NA. RG10, vol.2285, file 57,169-1A pt 2.
  • [xx] Six Nations Council Minutes, 4 Dec 1922. NA RG10 v.1745/63-32 pt 16.
  • [xxi] Six Nations Council Minutes, 5 Dec 1922. NA RG10 v.1745/63-32 pt 16.
  • [xxii] Deskaheh to Mackenzie King, 6 Jan 1923.
  • [xxiii] There is no evidence to support the assumption of Titley, 1986 p 119.
  • [xxiv] RCMP Ottawa file Q-400-0-1; NA RG10 vol.2285/57, 1969-1B pt 3
  • [xxv] RCMP Ottawa file Q-400-0-1.
  • [xxvi] League of Nations file 28073/28075.
  • [xxvii]Treaty between Canada and the United States of America for Securing the Preservation of the Halibut Fishery of the North Pacific Ocean, signed Washington, 2 March, 1923, ratifications exchanged at Washington 21 Oct. 1921 (Canada, Department of External Affairs, 1927).
  • [xxviii] Netherlands Archives, ARA A-Dossiers 1918-1940.
  • [xxix] League of Nations file 33687/28075.
  • [xxx] E MacNeil, délégué d’Irlande, Raoul Amador, délégué de Panama, Aefa-ed-Dowleh, délégué de Perse, CR Pusta, délégué d’l’Estonie, 27 Sept. 1923, League of Nations file 31340/28075.
  • [xxxi] Contrary to some reports, based perhaps on contemporary news stories, the Six Nations never spoke at the League of Nations though Deskaheh did speak at well attended public meetings. See eg error in Johnston, 1984 n 91 p 23.
  • [xxxii] Over CAD160,000 was lost due to unauthorized investments in the mid 1800s.
  • [xxxiii] Edwards v AG Canada [1930] AC 124 [1929]; 3 WWR 479 [1930]; 1 DLR. 98 (PC).


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  24. Jennings, F. (1984) The Ambiguous Iroquois Empire (New York: W.W. Norton).
  25. Johnston, Darlene M.(1986) The Quest of the Six Nations Confederacy for Self-Determination,  University of Toronto Faculty of Law Review 44(1), p 1.
  26. Johnston, Jean (nee Morton) (1964) ‘Molly Brant: Mohawk Matron’, Ontario History LVI 2, p 105.
  27. Kelley, Nora & William (1973) The Royal Canadian Mounted Police: A Century of History. (Edmonton, Alberta: Hurtig).
  28. Lederman, William R (1984) ‘Canada’s Constitutional Amending Procedures: 1867 – 1982’, American Journal of Comparative Law 32, p 337.
  29. Maracle, Brian (1997) Back on the Rez, Finding the Way Home (Toronto: Penguin).
  30. Mapuche Documentation Center. ‘Libre determinación de los pueblos en América y alternativas de desarrollo’, 7 December 2002
  31. Parker, A.C. (1916) The Constitution of the Five Nations or the Iroquois Book of the Great Law. Ohsweken Ontario: Iroqrafts, 1991 reprint of No 184 New York State Museum Bulletin, University of the State of New York, Albany.
  32. Pesklevits, Richard (2002) ‘Customary Law, the Crown and the Common Law: Ancient Legal Islands in the Post-Colonial Stream’ LL.M., University of British Columbia.
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Primary research materials

  1. League of Nations, ‘La tribu Indien des Six Nations’, Dossier no. 28075. Doc. No. 28075, 29185, 29540, 30035, 30454, 30626, 31197, 31340,31608, 32700, 33556, 33687, 35296, 40890.
  2. Canada, National Archives of Canada, PC, RG2 v1361, v2816, v1109; RG2-1 v1361/PC1629 990f
  3. Indian Affairs, RG10; v1743/63-32, v1744/62-32; v1745/63-32; v2285; v2286; v2287; v3018/220.155; vol.3227/552,053, /552,253, /552,285; vol.3227/552,285 Reel C-11344 (Passports); vol.3228/561,591; vol.3229/571,571; vol.3231/582,103; v3931/32-32; v6809/470-2-3; v6810 file 20-2-3; v6810/470-2-3; v7154/479/3-10; v7930/32-32; v7931/32-32
  4. RCMP, RG18; v3175/G383-1 (League of Nations); v3175/L516-1; v3180/O1318-8-1924; v3295, file HQ-1034-0-1; v3299, file HQ-1034-0-1; v3306, file HQ-1034-0-1; v3312, file HQ-1034-0-1.
  5. External Affairs, RG25; G-1 v1330.
  6. Mackenzie King Diaries, MG26 J13 fiche 61.
  7. Canada, RCMP ‘O’ Div. Ref.20/12 H.Q. Ottawa file Q-400-0-1
  8. The Netherlands, ARA a-DOSSIERS 1918-1940 INV. NO. 1521.
  9. The United States, U.S. S. Con. Res. 76, 2 Dec. 1987.

Anglo-Canadian Legislation

  1. An Act to Assist Returned Soldiers in Settling upon the Land and to Increase Agricultural Production. SC 1917 c 21.
  2. British North America Act 1867, 30-31 Vict.c.3 (U.K.) (renamed the Constitution Act 1867 by the Constitution Act 1982, Schedule B to the Canada Act 1982 UK, 1982 c 11); Constitution Act, 1867 (UK) RSC 1970 Appendix II, No 5.
  3. Indian Act, 1906 SC 15 Geo VI c 29, subsequently amended by 1-2 Ed VII, 1910 c28; 1-2 Geo V, 1911 c 14; 4-6 Geo V, 1914 c 35; 8-9 Geo V, 1918 c 26; 9-10 Geo V, 1919 c 56; 10-11 Geo V, 1920 c 50; 12-13 Geo V, 1922 c 26.

Anglo-Canadian Judgments

  1. Edwards v AG Canada [1930] AC 124 [1929]; 3 WWR 479 [1930]; 1 DLR 98 (PC).
  2. Reference re Secession of Quebec, [1998] 2 SCR 217 SCC.
  3. R v Marshall [1999] 3 SCR 456.

International Treaties and Agreements

  1. Charter of the United Nations [1945] TS Can No 7.
  2. Covenant of the League of Nations, adopted 28 April, 1919, Treaty of Versailles.
  3. Montevideo Convention on the Rights and Duties of States 165 LNTS 19.
  4. Treaty between Canada and the United States of America for Securing the Preservation of the Halibut Fishery of the North Pacific Ocean, signed Washington, 2 March,1923, ratifications exchanged at Washington 21 Oct. 1921, Department of External Affairs, Treaties and Agreements Affecting Canada in force between His Majesty and the United States of America with subsidiary documents 1814-1925 (Ottawa: FA Acland, King’s Printer, 1927).

The Crown has Neither the Power nor the Duty to Invest Indian Monies: The Use of Legislation to Limit the Duties of a Trustee

This article originally appeared on the University of Calgary Faculty of Law blog, and is reproduced here with permission.

The “money management” part of the long-running case in Ermineskin Indian Band and Nation v Canada, 2009 SCC 9, has now come to a close. A unanimous seven person panel of the Supreme Court of Canada (“SCC”) in a judgment authored by Justice Marshall Rothstein has ruled that the Government of Canada is not liable when it fails to invest First Nation royalty monies and instead deposits those monies to the credit of the Consolidated Revenue Fund (CRF) and pays the First Nations interest on those monies. In fact, the Court has ruled that the Indian Act, RSC 1985, c I-5, makes it illegal for the Crown to invest Indian capital monies. The Court also ruled that the provisions of the Indian Act which require this conclusion do not constitute discrimination within the meaning of s. 15 of the Charter.

The Facts

The case involved the treatment of oil and gas royalties from production on the Pigeon Lake Reserve and Samson Reserves in Alberta. Both the Samson First Nation and the Ermineskin First Nation are Treaty 6 First Nations. The reserve lands in both cases were surrendered under the terms of 1946 surrenders which provided that:

TO HAVE AND TO HOLD the same unto his said Majesty the King, his Heirs and Successors, forever, in trust to grant in respect of such land the right to prospect for, mine, recover and take away any or all minerals contained therein, to such person or persons, and upon such terms and conditions as the Government of the Dominion of Canada may deem most conducive to our welfare and that of our people. [Emphasis added by Justice Rothstein.]

The Crown deposited royalties from oil and gas production on the reserves in the CRF and credited the two First Nations with interest calculated on the basis of long-term government bonds. The First Nations argued that the Crown’s failure to invest these proceeds of production in a more diversified portfolio had deprived them of hundreds of millions of dollars that would otherwise have accrued. It was common ground between the parties that the Crown owed the First Nations fiduciary obligations with respect to the royalties; the debate was as to the basis and content of those obligations (at para 44). In particular, the Crown argued that any powers or duties that a fiduciary or trustee might ordinarily have in relation to trust monies had been modified by statute, principally the Indian Act and the Financial Administration Act, RSC 1985, c F-11 [FAA].

An Outline of the Arguments

The plaintiff First Nations argued that the Crown had a fiduciary duty to invest the royalty receipts based on: (1) the language of Treaty 6, or, (2) the language of the mineral surrenders.

The Crown in turn argued that even if a fiduciary might ordinarily have a duty to invest, such a duty was modified by relevant legislation, in particular the FAA and the Indian Act. The result of the modification was that the Crown: (1) had a duty to deposit those monies into the CRF, (2) had a duty to pay interest on Indian monies held in the CRF, but (3) had no duty to invest those monies in, for example, a balanced investment fund.

In determining an appropriate rate of interest the Crown should be held to the standard of prudence that a person would display in managing their own affairs. The Crown argued that the Crown’s practice of fixing interest rates on the basis of the government’s long term bond rate met this test. The Crown was not unjustly enriched by having these Indian monies available to it in the CRF since, had they not been available, the evidence at trial suggested that the Crown would have borrowed short term money at a lower interest rate than that which it was paying on the Indian monies deposited into the CRF (paras 182-184).

The Crown also argued that it was not a breach of duty for the Crown to refuse to transfer monies to the First Nations so that they could invest them. Before making such a transfer the Crown had to satisfy itself that the transfer would be in the best interests of the band. Absent an appropriate financial plan and a release of continuing responsibility for the management of those monies once transferred it was reasonable for the Crown to refuse to transfer monies for investment purposes.

The Treaty Argument

The First Nations led with the treaty argument on the grounds that: (1) if the treaty itself created a common law trust (para 49) or other form of a fiduciary obligation, and (2) if a trustee had a duty to invest rather than just to earn interest, then (3) any effort by the Crown (whether through legislation or in some other way) to modify such a duty would be (a) of no force or effect (para 47) or (b) a prima facie infringement of a treaty right that the Crown would have to justify [this latter is my interpolation].

The Court held that the argument did not get to first base. Neither the treaty text nor the oral terms supported an interpretation that the treaty had created a trust. The treaty text authorized the Crown to sell or otherwise dispose of reserve lands “for the use and benefit” of the Indians entitled thereto and with their consent. The oral promise was that where reserve lands were sold the proceeds of the sale that were not then required by the First Nation would be “put away to increase for them.” This italicized language (taken from Morris’ Treaties with the Indians) did not import a trust duty to invest. The Court suggested that what the Crown committed to, above all else, was to guarantee that these monies would be available (without loss – para 63) to the First Nation when required. Investment always creates the risk of loss (para 58) and a trustee is not a guarantor (para 57). According to Justice Rothstein:

In my opinion, it is likely that the Indian signatories to Treaty No. 6 interpreted and understood Lieut.-Gov. Morris’ statement as amounting to a guarantee that the proceeds of the sale of any part of a reserve would be kept for them by the Crown and that it would be safe and secure and over time would increase. In effect, the Crown guaranteed that there would be a return of and a return on the bands’ capital funds with no associated risk of loss. (at para 56, my emphasis)

In summary, the Court’s position seems to have been that: (1) the Crown promised to preserve the proceeds of sale protecting them at most against inflation (not that the Court mentions inflation until para 133), (2) since “investment” involves risk of loss of capital, investment is inconsistent with the treaty promise.

The Surrender Argument

The second and alternative argument of the First Nations was that the terms of the 1946 surrenders obliged the Crown as a common law trustee to invest their royalties. The Court accepted at least part of this argument. Apparently still constrained by Justice Dickson’s judgement in Guerin v The Queen, [1984] 2 SCR 335, to the effect that a surrender creates a fiduciary relationship rather than an express trust (and notwithstanding use of the term “trust” in the surrender document), Justice Rothstein was prepared to say that the Crown was a fiduciary but that in some circumstances a fiduciary would have essentially the same responsibilities as a common law trustee. And that was the case here (para 73):

If a situation is such that a fiduciary is in a position similar to that of a trustee, even though the situation cannot necessarily be categorized as a “common law trust”, I do not see why the common law duties of a trustee cannot be applied to that fiduciary if that is what the particular situation warrants. In this case, the bands have placed particular emphasis on a trustee’s duty to invest their royalties — the trust corpus. In my opinion, if the situation is such that the Crown is in the position of a fiduciary, although not strictly speaking a trustee at common law, and holds funds on behalf of the bands, it is not improper to ascribe to the Crown a duty to invest those funds in the manner of a common law trustee, subject to any legislation limiting its ability to do so (my emphasis)

The kicker of course lies in the underlined words since they invite an inquiry as to whether there was any such legislation, the assumption being that, if there was no treaty right to have royalty proceeds invested, then any obligation to invest based upon common law and equitable rules might be modified by legislation. That led the court to examine in turn: (1) the Indian Oil and Gas Act, RSC 1985, c I-7 [IOGA], (2) the FAA, and (3) the Indian Act.

The Indian Oil and Gas Act

The IOGA, assented to in 1974, provides, inter alia, that all oil and gas produced from Indian lands is subject to the payment of a royalty to the Crown as prescribed from time to time by the regulations (s. 4). The same section makes it plain that while the royalty is payable to the Crown, the royalty payment is in fact and in law “in trust for the Indian bands concerned”. The section also makes it clear that the royalty is payable in the manner prescribed notwithstanding the terms of any existing lease, permit etc.

The Court held that the IOGA was “not a legislative restriction that would preclude investment by the Crown of the royalties” (para 83) (i.e. it could not be read as modifying the common law and equitable obligations that the Court had already decided applied to the Crown here). However, the IOGA was also not a complete code (para 84 – this was an argument raised by some interveners) meaning that it was necessary to look beyond the IOGA to see if there were other possible statutory modifications. This point was crucial, for if it was not a complete code then it was necessary to look at the FAA.


The FAA (s.17(1)) requires that all public monies shall be deposited to the credit of the Receiver General and all money so deposited constitute the Consolidated Revenue Fund (s.2(1)). Once in the CRF, monies received “for a special purpose” can only be paid out for that purpose and “subject to any statute applicable thereto” (s.21).

One might have thought that royalties payable in trust were not “public monies” but rather were something else (such as First Nation monies), but s. 2 of the FAA defines “public monies” rather broadly and as including:

(d) all money that is paid to or received or collected by a public officer under or pursuant to any Act, trust, treaty, undertaking or contract, and is to be disbursed for a purpose specified in or pursuant to that Act, trust, treaty, undertaking or contract;

In light of that, the Court readily concluded (para 91) that since the “royalties are money collected by Canada on behalf of the bands pursuant to the IOGA, they are “public money” within this definition and as such must be dealt with in accordance with the provisions of the FAA.

Once that conclusion was reached everything else fell into place. The Court held that the “applicable statute” to authorize payments out of the CRF was the Indian Act (para 94) and, remarkably enough, the Court was not prepared to conclude that the Indian Act permitted the Minister to “expend” capital monies of a First Nation on investments. In particular, the Court held that the First Nations could not rely on the apparently broad language of s.64(1)(k) of the Indian Act:

64. (1) With the consent of the council of a band, the Minister may authorize and direct the expenditure of capital moneys of the band …..

(k) for any other purpose that in the opinion of the Minister is for the benefit of the band.

The Court preferred an eiusdem generis interpretation of the section and noted that the other paragraphs in the sub-section referred to expenditures for assets on the reserve rather than investments, held, controlled and managed by the Crown (paras 107 and 109). Thus, while the Court was of the view that the Act did permit the Crown to transfer monies to a First Nation to allow the First Nation to invest in diversified investment portfolio (on conditions discussed below), the Actdid not permit the Crown itself to invest Indian monies (para 123).

In sum, together, the FAA and the Indian Act modified what might otherwise have been the duty of the Crown as a fiduciary to invest the royalty monies. If the Crown had no power to invest, all that was left to argue about was the question of interest and interest rates.

The Interest Issue

I assume that the CRF is effectively a commingled account. Funds within the CRF may be marked or designated for specific purposes but they are all available to fund the business of government. Special purpose funds are not segregated. Commingling of trust monies, while unusual, is not completely inconsistent with a trust, but even where the terms of an agreement permit commingling trust monies with the trustee’s own monies the trustee/fiduciary still owes a duty not to spend those monies for the trustee’s own account: Brookfield Bridge Lending Fund Inc v Vanquish Oil and Gas Corporation, 2008 ABQB 444, and Bank of Nova Scotia v Société Générale (Canada) et al (1998), 4 WWR 232.

But the terms of the CRF and the FAA go far beyond this since they clearly authorize the Crown to make use of these monies while they are in the CRF subject only to the statutory duties prescribed by the FAA and other relevant statutes. The Court recognized that this, on the face of it, is utterly inconsistent with trust obligations:

[126] At common law, a trustee is not permitted to borrow from the trust, as this would constitute a conflict of interest. The bands argued that the Crown was in a position of conflict of interest and therefore in breach of its fiduciary duty to them because their royalties were held in the CRF for use by the Crown. The bands have characterized the fact that the royalties are held in the CRF for use by the Crown as a “forced borrowing”, and that without their consent it is improper or unlawful.

[127] The Crown is in a unique position as a fiduciary with respect to the royalties and the payment of interest. The Crown is borrowing the bands’ money held in the CRF. However, the borrowing is required by the legislation.….

[128] A fiduciary that acts in accordance with legislation cannot be said to be breaching its fiduciary duty. The situation which the bands characterize as a conflict of interest is an inherent and inevitable consequence of the statutory scheme.

Parliament in s.61(2) of the Indian Act recognized that, in return for this “forced borrowing,” “interest on Indian monies held in the [CFR] shall be allowed at a rate to be fixed from time to time by the Governor in Council.”

How then should the Crown go about setting this interest rate given the Crown’s manifest conflict of interest position, a position in which its loyalty to the First Nations was at odds with its own self-interest?

Following earlier authority (the Court cites Wewaykum Indian Band v Canada, [2002] 4 SCR 245, but not Osoyoos Indian Band v Oliver, [2001] 3 SCR 746, and the idea of minimal impairment), the Court emphasised that the Crown was no ordinary fiduciary since in some situations as here, legislation created a conflict of interest and “A fiduciary that acts in accordance with legislation cannot be said to be breaching its fiduciary duty. The situation which the bands characterize as a conflict of interest is an inherent and inevitable consequence of the statutory scheme” (para 128).

In the result, Justice Rothstein was of the view that this allowed the Crown to set aside the fiduciary’s traditional undivided duty of loyalty and instead engage in a balancing of interests:

The Crown’s position in the setting of the interest rate paid to the bands is also unique. On the one hand, it has fiduciary duties that are owed to the bands, including the duty of loyalty and the obligation to act in the bands’ best interests. On the other hand, the Crown must pay the interest owed to the bands with funds from the public treasury financed by taxpayers. The Crown has responsibilities to all Canadians, and some balancing inevitably must be involved. ….. In the present case, the Crown must consider not only the interests of the bands but also the interests of other Canadians when it sets the interest rate paid to the bands (paras 129-130).

Justice Rothstein accepted that in determining the level of interest (“within its discretion as a fiduciary” (para 132)) the Crown had a number of options: (1) a flat rate of interest that might be adjusted from time to time; (2) interest at the rate of return of short-term treasury bills; (3) interest equivalent to the return on a diversified portfolio; (4) interest at a rate tied to the yield on long-term government bonds but adjusted periodically; or (5) interest at the yield on long-term government bonds guaranteed for the term of the bonds, i.e. a laddered bond portfolio.

The Court seemed to reject option 1 (an adjusted flat rate) (even though the Crown actually used this system from 1859 – 1969) on the grounds that it was insufficiently responsive to changes in the rate of inflation because of the need to procure an Order in Council every time it needed to change the rate of interest. Curiously (and I say curiously because of the complete absence of any discussion of consultation anywhere else in the judgement), Rothstein suggested that this in turn (para 133) could likely “have required consultation with the affected bands.”

It may go too far to suggest that the Court rejected option 1 notwithstanding the criticisms expressed (but see para 147, where the Court notes that “it is apparent that short-term rates would not have been in the best interests of the bands when it was possible for the Crown to pay interest at a higher rate in view of the Crown’s diversified borrowing patterns.”) It is perhaps better to emphasise that the Court decided (para 133) that it was not necessary to consider the option further since “no one has suggested it as an adequate alternative” (emphasis mine).

Similarly, the Court did not further explore option 2 (a short term bill rate) since, while this provides liquidity, short term rates are generally lower and the bands would not need access to all of their royalty monies. The Crown, Rothstein concluded, “does not suggest that interest based on short-term treasury bills was an appropriate alternative” (para 134, emphasis mine).

The Court rejected option 3 (interest equivalent to what would have been paid in a diversified portfolio) for quite different reasons:

[136] A fiduciary is not required to provide the beneficiary, out of the fiduciary’s own resources, what could have been obtained had legislative or contractual limits on its discretion not existed. Requiring the Crown to pay a rate of interest equivalent to what would have been obtained through investment in a diversified portfolio would require the Crown, in its fiduciary capacity, to supplement, out of the public treasury, the return that it was statutorily prevented from obtaining. It was not required to do so.

That left options 4 and 5. Option 4 tied the interest rate to the yield on long term government bonds and provided for a quarterly adjustment. This approach provided both liquidity and (because of the quarterly adjustment) protection against inflation and was actually the option that the Crown had selected. While option 5 would (with hindsight) actually have provided better returns, it was not imprudent and therefore met the Fales test (at para. 140) (Fales v. Canada Permanent Trust Co, [1977] 2 SCR 302):

…. it cannot be said that the floating rate approach adopted by the Crown was not a prudent course of action having regard to the options available. Nor can it be said that it was selected without regard to the best interests of the bands. It provided liquidity and some protection against inflation, without the risks associated with locking in the funds. It cannot be said that a prudent person managing his or her own affairs under the same legislative constraints as the Crown would not have chosen this option.

….. [146] just because in hindsight it is apparent that the returns may have been greater [with a laddered approach] does not mean that the Crown breached its fiduciary duties to the bands by adopting an equally prudent floating long-term rate approach.

In conclusion, both an adjusted long term rate and the laddered bond approach “could have been selected by a prudent person managing his or her own affairs but modified by the constraints applicable to the Crown” (para 148) and therefore the Crown did not breach its fiduciary duty owed to the bands.

The Transfer of Funds to the First Nations

As noted above, the Court ruled that the Indian Act did authorize the Crown to transfer funds to a First Nation so that the First Nation itself could invest those funds. The Crown had transferred some funds to the Samson First Nation in 1980 but it refused to transfer more funds until Justice Teitelbaum so ordered in 2005 as part of this action and subject to certain terms and conditions, including a detailed financial plan and a release exonerating the Crown from liabilities associated with the management of these monies (paras 153-170).

Was the refusal of the Crown to transfer further monies to the two First Nations a breach of (a fiduciary) duty? Justice Rothstein elected to consider this issue even though as he concedes (para 150): “This position was not specifically argued as a breach of trust or fiduciary duty by the Crown. The bands simply argued that the Crown not only refused to invest the royalties, but also refused to allow the bands to invest them.”

In effect, he ruled that the Crown was not in breach (without really considering the source of such a duty) on the grounds that the Crown could not simply transfer the funds. In order to fulfill both its statutory duty under s.64(1)(k) of the Indian Act (quoted above) and its fiduciary obligations “it must be satisfied that any transfer is in the best interests of the bands” (para 152). In this case, and based upon Rothstein’s assessment of the evidence, any further transfer to the Samson First Nation (prior to Teitelbaum’s order) “would have been imprudent” while the Crown’s refusal to transfer monies to Ermineskin was amply justified on the basis that Ermineskin was reluctant to provide a release for any monies so transferred (para 181).

The Constitutional Validity of the Legislative Scheme

In a legal system in which a statute will trump an inconsistent common law or equitable duty, the only avenue left to the plaintiffs was to attack the constitutionality of the legislative scheme that precluded the Crown from investing Indian monies. This lead the First Nations to contend that the provisions of the Indian Act were discriminatory and of no force or effect under s. 15 of the Charter. The lower courts had dealt with this argument by denying the First Nations standing to bring the argument on the basis that the First Nations “were asserting a claim in relation to the management of band property and not a claim relating to personal rights of band members” (para 187). Justice Rothstein however preferred to by-pass this “procedural” (para 187) objection and deal with the substantive merits of the argument.

On the substantive merits Justice Rothstein quickly reached the conclusion that the impugned legislation created a distinction (para 189) (presumably on the basis of race, national or ethnic origin, as argued by counsel for the First Nations) but that this differential treatment did not constitute discrimination because the “money management provisions, which preclude investment of Indian moneys by the Crown, [do not] perpetuate prejudice or stereotyping (para 190).”

My colleagues (Jennifer Koshan and Jonnette Watson Hamilton) plan to say more on this topic (see “The End of Law: A New Framework for Analyzing Section 15(1) Charter Challenges”), so I shall limit myself to a few observations.

Justice Rothstein chose to focus on whether the money management provisions that preclude investment of Indian moneys by the Crown amounted to a disadvantage. But I wonder if this was the most appropriate focus for the analysis, particularly in light of Rothstein’s consideration of the question of whether the Crown was in breach of a duty to transfer capital monies to the band for them to invest.

In this context, the questions might have been the following: (1) under what circumstances may the beneficiaries of a trust require the trustee to transfer the subject matter of the trust to the beneficiaries and are those conditions different from those required of First Nation beneficiaries with respect to the Crown’s trust responsibilities for Indian monies (I assume that this might revolve around the conditions precedent for application of the Rule in Saunders v Vautier and any possible statutory limitation on the application of that rule (see Buschau v Rogers Communication Inc, [2006] 1 SCR 973)), and (2) do these (different) conditions (e.g. satisfaction that the First Nation has a financial management plan) perpetuate prejudice or stereotyping.

If the question were so framed (and with a statement of an appropriate comparator such as that described above), I am not sure that Justice Rothstein would have been able to reach the conclusion that he does (at paras 200 – 201) that the provisions of the Indian Act and the Crown’s practice pursuant to those provisions did not in fact perpetuate prejudice and stereotyping.

Analysis and Comment

I comment on four aspects of the decision: (1) the treaty analysis and the failure to consider the procedural implication of a treaty relationship, (2) the vulnerability of indigenous peoples to the categorizations of the legal system of the settler society, (3) the “balancing” discussion, and (4) the times we live in.

The Treaty Analysis

At first reading I was almost persuaded by Justice Rothstein’s treaty analysis. After all it does seem reasonable to think that the tribes would, above all else, have expected that the Crown would preserve the corpus. The risk of loss as a result of investing in a merchant enterprise would perhaps be too difficult to explain and if it could not be readily explained in 1876 then it could not be a reasonable interpretation of the treaty. But the more I thought about it the more I thought that this is such a fossilized and technical approach and an approach that seems to be premised on the idea that the parties could not talk to each other (or perhaps premised on the stereotype that one party to the treaty was so primitive that it could never understand the pros and cons of investing – whether in 1876 or 2009). The fossilized and technical approach is facilitated by fastening on particular “oral” treaty terms as reproduced in Morris’ account. But why privilege that account and that particular choice of words?

It is not clear to me, for example, why the interpretive question is framed in terms of trust law. Why is the question not framed more generally? If we frame the question more generally it is possible that we will re-state the Crown’s duty in less precise but more evolutive terms. For example, it seems reasonable to think that what the Crown was really committing to was to take care of the proceeds of sale in the best interests of the First Nation. What those interests were might evolve and change over time and the Crown would need to engage in a conversation (perhaps even consultation – see para 133) with the First Nation to assess those interests and needs. For example, does the First Nation need cash now, or is it better to save for the long term and for the benefit of future generations? Such a conversation might include a discussion about risk.

Even if it is reasonable to think that there could be no engagement between the parties on the concept of risk in 1876, why pick an interpretation of the treaty that freezes the interpretation at a particular historical moment? The point about a conversation is important. After all, the Court recognized in Mikisew Cree First Nation v Canada (Minister of Canadian Heritage), [2005] 3 SCR 388 [Mikisew Cree] (not mentioned in the judgement) that the Crown’s power to take up lands triggered a duty to consult because it resulted in moving lands from a category of lands to which First Nations had access for hunting purposes to a category of lands from which they could be denied access. What seems to be missing from this case is any sense of a relationship in which the parties might talk about the best interests of the First Nation and how to protect them. And this ignores reality.

Modern international treaty law is fully committed to the evolutive interpretation of historical treaties (especially but not exclusively in the context of human rights treaties – see the Iron Rhine Arbitration, 2005) and it is not clear why the Supreme Court of Canada seems to prefer a more fossilized approach.

The Vulnerability of Indigenous Peoples to the Categorizations of the Legal System of the Settler Society

The treaty issue was crucial to the outcome here. Once the Court had decided that there was no treaty right to have the royalty monies invested it was then able to conclude that parliament could change the terms of the trust relationship at will. This observation triggers two reactions. The first comment is that this reveals (once again) the vulnerability of indigenous peoples to the legal categories and ineffable power of the settler society. The settler society gets to construct legal categories such as: the Crown in its executive capacity; the Crown in parliament; the sovereignty of parliament; trust; fiduciary; property etc. These categories or concepts, once created, have no fixed meaning or content and in particular their content can be modified by parliament and indeed by the courts of the settler legal system.

The only response to this risk of unilateral re-definition is to seek some form of “autonomy of meaning.” This necessarily carries us from the national legal system to the international legal system where the state is more constrained in its unilateral ability to define and redefine such contested concepts as culture (Article 27 of the International Covenant on Civil and Political Rights) or property (Article 23 of the Inter-American Declaration of the Rights and Duties of Man).

A second reaction is to question whether the treaty offered the only means of constitutionalizing the content of the Crown’s fiduciary duty. I don’t have a complete answer to this question but there is dicta in R v Sparrow, [1990] 1 SCR 1075 (not mentioned in the judgment), which some have read as constitutionalizing the Crown’s fiduciary duty. And in addition, Haida Nation v British Columbia (Minister of Forests), [2004] 3 SCR 511 [Haida] (also not referred to by Rothstein) and Mikisew Cree clearly locate the constitutional duty to consult outside s. 35 of the Constitution Act, 1982 and as a more general constitutional duty based on the honour of the Crown and as a necessary implication of the Crown’s assertion of sovereignty (a common law or unwritten principle of the Constitution).

Furthermore, the Court in Haida suggests that both the duty to consult and accommodate and the Crown’s fiduciary duty share this common legal root (Haida, paras 16-18). Haida tells us that the Crown may put in place a process for structuring consultation and accommodation (paras 60 et seq), but Haida does not suggest that the Crown can unilaterally re-define the nature and meaning of the duty to consult and accommodate. And if the Crown and the legislature do not get to redefine the duty to consult, why do they get to redefine the concepts of trust and fiduciary? One of the silences in this case is that the Court barely even mentions “honour of the Crown” (see paras 33 & 84).

The “Balancing” Discussion

As noted above, Justice Rothstein suggests that the Crown is an unusual fiduciary since the Crown may owe duties not only to the First Nation but to Canadians more generally (para 129). I agree with this: the Crown’s fiduciary duty is trulysui generis. However, we need to be careful about when it is necessary to invoke the need to balance and when it is unnecessary. I think that we also need to discipline any balancing by tests such as the minimal impairment test.

I think that the need to invoke balancing is also tied to the particular duty that we are concerned with. Fiduciaries owe their beneficiaries a range of duties. Some of those duties are more strict than others. In particular, the duty of loyalty is strict whereas the duty to manage the trust assets is something like a negligence based duty (reasonable and prudent investor etc: see Fales).

I can see that balancing may be necessary when the duty we are concerned with is the undivided duty of loyalty since that is a duty to completely avoid the possibility that self-interest and duty will conflict. But it is hard to see why balancing is required when the applicable duty is already negligence-based. And that is what is distinctly odd about the balancing discussion in this judgement; it is located in a part of the judgment where the issue was the prudent investor standard rather than a loyalty standard.

The Times We Live In

One of the obvious virtues of interest-based investments is that they always preserve capital assuming that the interest rate remains above the rate of inflation. They are low risk. I suspect that all readers of this blog and all of the members of the Court have been painfully reminded of this reality over the last year and have seen significant losses in any investment exposed to the equity markets. Thus, while interest-based investments will never match returns on equity funds in a booming market, they will never expose their investors to losses of the magnitude that we have all experienced over the last nine months.

Presumably, therefore, and even without this recent experience (recall the crash of 1929 and the earlier South Sea bubble), there must have been an argument that the Crown as trustee/fiduciary would have been acting reasonably and prudently in selecting interest-bearing investments rather than equity funds or some combination thereof and that such an argument would have been a complete defence for the Crown.

Oddly enough there is virtually no discussion of this point in the Court’s judgment. There is a discussion of the relative merits of different strategies for setting the interest rate that the Crown paid (paras 132-149), but this all proceeds on the assumption that the Crown had a duty under the FAA to hold the monies in the CRF subject to the duty to pay interest established by s. 61(2) of the Indian Act. There is also a short discussion of the comparative merits of equity investment vs interest-based investments oddly enough in the s. 15 Charter discussion (at paras 191-192 and concluding “that it is not readily apparent that precluding investment by the Crown necessarily amounts to a disadvantage”).

In any event, I leave this question to those more learned in trust law than I. My quick perusal of Waters’ Law of Trusts In Canada suggests that most of the case law deals with trustees making speculative investments rather than trustees who take a more cautious route. A trustee who puts the trust monies under the bed is in breach of the prudent investor standard, but is it equally clear that a trustee who eschews the equity markets and puts all the trust monies into a laddered bond portfolio that protects against inflation will breach that standard even if it has the power to invest more aggressively?