McDiarmid Lumber v God's Lake First Nation

"The first alternative is to perpetuate what RCAP calls a national embarrassment. The other alternative is for the public to pay twice. Neither is palatable public policy. In my view, Parliament cannot have intended an interpretation of s.90(1)(b) that creates such a Hobson's choice" (Justice Binnie, dissenting, para 149).

In the recently released decision McDiarmid Lumber v God's Lake First Nation, 2006 SCC 58, the Supreme Court held that money deposited into the Winnipeg bank account of the God's Lake Band was not protected from seizure or garnishment under s. 89 or s. 90(1)(b) of the Indian Act, RSC 1985, c I-5. The monies at issue were deposited under a Comprehensive Funding Agreement (CFA) with the Federal government.

The argument centers on whether to consider the monies as 'notionally' situated on the reserve for the purpose of determining exemption, and whether the CFA constitutes an 'agreement between a band and her Majesty' within the meaning of s. 90(1)(b). That section provides that property given to the Band under a qualifying agreement is deemed to be situated on the reserve. First, the SCC rejected the approach in Williams v Canada, [1992] 1 SCR 877, which is based on an examination of factors connecting monies to a reserve and is the standard for determining whether Indian Act tax exemptions apply. Instead, the SCC adopted a 'concrete common law interpretation' where 'on reserve' is given 'its ordinary and common sense' meaning.

Second, the SCC held that for an agreement to come within s. 90(1)(b) it must be ancillary to or 'flesh out' the treaty obligations of the Crown. The God's Lake Band was not able to demonstrate that the disputed funding was related to treaty obligations, and therefore the funding could not be protected from seizure under the statute.

Chief Justice McLachlin also pointed to the Royal Commission on Aboriginal Peoples (RCAP) which found that the Indian Act limited the ability of Bands to access credit because on-reserve assets could not be used as collateral to secure loans. Therefore, the judgment continued, by restricting the meaning of the word 'agreement' in the statutory provision, the SCC finding is consistent with aspirations of self-sufficiency because credit is "a cornerstone of economic development".

However, it is only in the minority judgment by Justice Binnie that the reader learns that the God's Lake Reserve is 1,037 kilometers northeast of Winnipeg and accessible only by air or winter ice roads. Employment is limited to the Band government, its subsidiaries and small entrepreneurs - there is no bank situated on the reserve. Thus, the prospect of the Band becoming connected to the commercial mainstream in the near future remains quite bleak regardless of whether or not they have access to credit.

Further, the Band receives its entire funding through the CFA with the Canadian government and this funding is already being managed by an outside third party appointed by the Ministry. The Band Council was able to circumvent both the contractual protections of the CFA regulations and the third party monitor to enter into a contract that resulted in the garnishment of the CFA funds. Hence, in this case CFA money that is provided by the public for the provision of services to Band members will be redirected to meet debts based on the priorities of Band Council.

The record shows that the garnishment order has frozen money for on-reserve primary education and the post-secondary education of reserve members. Therefore, though the Band was not able to demonstrate that CFA funds are explicitly tied to treaty obligations, it is clear that CFA funds are distributed to the Band to provide basic and essential services to band members including housing, education, health, welfare and infrastructure. Justice Binnie notes that the provision of these services is consistent with Parliament's responsibilities to Bands under s. 91(24) of the Constitution Act, 1867. I would add that these are also services provided by the federal and provincial levels of government to other Canadians.

The majority judgment neither discusses the conditions at God's Lake nor does it delve into the history of the Treaty signed between the God's Lake Band and the Crown. Instead, the majority buries the impact of their narrow construction of the word "agreement" behind an attractive discourse of economic development, access to credit, and self-sufficiency.

Yet, as Justice Binnie asserts, the impact of the majority judgment is to create inequality between bands dependant on the nature of their historical relationship with the Crown. Whether a band signed a treaty, and the nature and provisions of that treaty, will determine whether money provided by the Crown is exempt from seizure or garnishment under the Indian Act. This will create a patchwork of exemptions where money for specific services, such as education, will be subject to garnishment from some bands but not others - depending on the provisions of their treaty.

On what basis can it be said that the extensive modern treaty benefits should be free of tax and execution (unless the exemptions are negotiated away) whereas CFA benefits even to treaty bands do not enjoy such exemptions unless they can be said to be 'ancillary' to some 19th century Crown negotiator's sense of fairness incorporated in an 1875 document written in a language most of the Indians of God's Lake likely didn't understand? (Justice Binnie, dissenting, para 124)

The end result is that approximately $3 million of the Band's $7,354,404 funding will be garnished to repay debts racked up by Band Council. This will clearly affect the delivery of essential services to the entire Band community unless the public provides more funds to ensure a minimum level of basic services. Maybe the Band can provide services based on credit - a national embarrassment indeed.