Quebec Appeal Court sets precedent over First Nations police underfunding

The Appeal Court decision, buttressed by a 2022 landmark ruling by the same court in a reference case that ruled that Indigenous people possess an existing right of self-government protected by section 35 of the Constitution Act, 1982, gives notice to federal and provincial governments that the notion of the honour of the Crown applies to the application of contribution agreements that fund programs and services on reserve, reaffirms that First Nations are owed deference over how they allocate their financial resources, and explores the notion of fiduciary duty in circumstances involving the Crown’s actions with respect to Indigenous interests other than land interests, according to legal experts.

The Appeal Court, concerned over how to integrate constitutional obligations and Aboriginal law concepts into civil law, also draws on the Civil Code of Quebec and held that when the Crown contracts with an Indigenous person or entity, it must do so in a manner that respects the honour of the Crown. Contractual conduct that does not comply with this constitutional obligation may lead to a finding of civil wrongdoing, added the Appeal Court.

“This is a very encouraging precedent, and there’s a difference in how the Appeal Court approaches these agreements from some of the judgments we have seen in the past,” remarked David Schulze, a Montreal expert in aboriginal law and founding partner of Dionne Schulze LLP. “The Appeal Court took the notion of the honour of the Crown and applies it to the way Canada and the provinces implement contribution agreements that fund programs and services on reserve. That’s really an important precedent because it actually results in financial liability for the federal and provincial governments.”

Benoît Amyot, a Roberval aboriginal law expert with Cain Lamarre LLP who successfully plead the case, asserts that the Appeal Court decision underlines that the duty to act honourably by the Crown is not limited to “fine, grand principles” in constitutional matters dealing only with ancestral or land rights but rather that it can be applied in a “very concrete, down-to-earth” way. “When governments fund First Nations’ programs that deliver services to members, they must act with the principle of the honour of the Crown, and not deal with it on a commercial basis as unfortunately they seem to do too often,” noted Amyot.

The Appeal Court decision is “exciting” because it brings the doctrines of fiduciary duty and honour of the Crown “sort of up to speed and infusing” it with last year’s decision by the same Court over the inherent right to self-government, a decision that is now before the Supreme Court of Canada, said Naiomi Metallic, an Aboriginal law professor. “It’s baffling that up to this point, those doctrines of fiduciary duty and honour of the Crown, which are supposed to be about managing the relationship between Indigenous peoples and the government, has not been effective,” said Metallic, Chancellor’s Chair in Aboriginal Law and Policy at the Schulich School of Law at Dalhousie University. “This decision is exciting because it’s trying to applying these doctrines to more real problems.”

The lawsuit was launched by a Band Council representing the Pekuakamiulnuatsh Innu First Nation, alleging that Ottawa and Quebec breached their obligations to negotiate in good faith, to act honourably and to fulfil their fiduciary obligations with respect to the funding of their police force by by arbitrarily and unilaterally allocating funds they knew did not correspond to the actual costs of its establishment and operations. First Nations police services, unlike non-Indigenous communities where policing operates as an essential service, obtain financial support through the federal First Nations and Inuit Policing Program. Under the program, established in 1991, the federal government is supposed to provide 52 per cent of funding, and the remaining 48 per cent by provinces and territories. A 2022 federal report notes that First Nations police services have faced “significant challenges and financial obstacles” to deliver “adequate and culturally appropriate” policing services “in part due to the limitations” of the program.

In 2019, Quebec Superior Court Justice Robert Dufresne excluded the application of the principles of the honour of the Crown and its fiduciary duty and relied on contract law to dismiss the suit, concluding that the federal and provincial government did not act in bad faith. Justice Dufresne also held that one of the components of the fiduciary relationship is the level of vulnerability of the person who benefits from the fiduciary management, and the Band Council did not prove it was vulnerable. On the contrary, added Justice Dufresne. Its financial statements reveal that it has several million dollars of accumulated budget surpluses thanks to self-generated income.

The  Quebec Appeal Court overturned the decision in Takuhikan c. Procureur général du Québec, 2022 QCCA 1699, issued on Dec 15^th. Justice Jean Bouchard penned reasons, which both Justices Marie-France Bich and Simon Ruel concurred with, that focused on the constitutional issues raised by the case. In her reasons, Justice Bich, centred on the interplay between constitutional and contractual law.

Justice Bouchard, who held that the trial judge should have first analyzed the constitutional principles and then in light of the evidence apply those principles to his analysis, explored whether the fiduciary duty can be applied in the context of the Crown’s actions with respect to Aboriginal interests other than land. But he noted that the Supreme Court, although it does not to be “appear to be closed idea” of recognizing the application of this principle to other types of relationships between the Crown and First Nations, has not yet decided on the matter. Justice Bouchard, heeding guidance from the Supreme Court in Wewaykum Indian Band v. Canada, [2002] 4 S.C.R. 245, 2002 SCC 79, warned however that this openness would only apply to situations where the Crown’s responsibility arises from an obligation that is “in the nature of a private law obligation.” In this case, contributing to funding the police services of a public body does not give rise to a prima facie responsibility in the nature of a private law duty.

“The Appeal Court doesn’t know whether there’s a fiduciary duty on the part of the Crown to provide policing services on the reserve or what kind of policing services,” said Schulze. “The Court is not willing to go that far. What the Court is willing to do, though, is take an existing agreement and read it in light of the honour of the Crown.”

Justice Bouchard held that the honour of the Crown was “clearly at stake here” because the federal government adopted a policy that gave rise to the First Nations and Inuit Policing Program while Quebec agreed to participate and enter an agreement with the First Nation, with both governments making a “solemn commitment” to fund the First Nation’s policing services “at a level comparable to that of surrounding communities with similar conditions.”

“There are several Supreme Court decisions that say that the Crown must always act with honour in all its dealings with First Nations,” noted Amyot. “So in principle whenever there is a relationship between the Crown, the honour of the Crown is at stake. But even more so here. Commitments were made, a program was created and a process was implemented to allow First Nations to have their own police force, which is recognized as an important element in the context of First Nations self-government.”

In what Aboriginal legal pundits assert is yet another important finding, the Appeal Court “builds” on the Supreme Court decision in Anderson v. Alberta, 2022 SCC 6 and reaffirms that deference is owed to a First Nation to set its priorities and identify its needs, and not have those imposed by a federal or provincial government, held Justice Bouchard. In this case, Justice Bouchard held after reviewing “social facts” such as a series of reports, including the Viens Commission, that the funding provided to the First Nation did not allow it to offer to members of its communities services that were consistent with the principles of the First Nations Policing Policy and with the mission of a Native police force as set out in s. 93 of the Police Act.

Justice Bich, while concurring, held that the trial judge “ignored” several articles of the Civil Code as well as the notion of implied obligations. The State that contracts with an aboriginal person or entity “must in all respects” do so in a manner that respects the honour of the Crown, a constitutional principle that is embedded in its contractual obligations, held Justice Bich. The Crown’s duty of honour requires it to act with “particular diligence and loyalty” in fulfilling its promises, which governs its conduct and civil liability at all stages of the contract. By failing to comply with its obligation, Ottawa and Quebec breached a constitutional obligation and concomitantly an abuse of contractual rights.

“This issue of integrating Aboriginal law concepts into the civil law applicable in Quebec was a concern of the judges of the Court of Appeal,” said Amyot. “Normally, if you have a contract, it’s a contractual redress, it’s contractual obligations, and then civil contract law applies. But here, we are dealing with a case where there is a contract signed between a First Nation and the governments. Whereas here, we are dealing with an issue where there is a contract signed between a First Nation and the governments. Yes, this contract is subject to constitutional obligations. But how do these constitutional obligations fit into Quebec civil law? That was a question that concerned the Court.”

According to Metallic, it would be far from surprising if Ottawa and Quebec filed an application for leave to appeal before the nation’s highest court. “It would be an opportunity for the Supreme Court to revise and think about these doctrines in a more modern context,” said Metallic. “They need some updating, in light of the United Nations Declaration on the Rights and of Indigenous Peoples, and I think there are ways that the UN Declaration can help inform what government’s obligations should be.”