CASE BRIEF: Huu-Ay-Aht First Nations v. Canada, 2016 SCT 14

This recent decision of the Specific Claims Tribunal will profoundly increase Canada’s liability for historic specific claims of First Nations.

Huu-Ay-Aht First Nations v. Canada, 2016 SCT 14

This recent decision of the Specific Claims Tribunal will profoundly increase Canada’s liability for historic specific claims of First Nations.

BACKGROUND

In 1938, the Huu-Ay-Aht First Nations (“HFN”) surrendered all merchantable timber on its reserve to Canada for sale. The evidence showed that HFN surrendered the timber out of need for basic necessities.

In 2014, the Specific Claims Tribunal (the “Tribunal”) found that Canada had breached its fiduciary obligations in relation to the way the timber was sold. The Tribunal found that Canada had not acted in HFN’s best interests, had entered into an unlawful arrangement, and that HFN had received far less compensation than it ought to have for its timber. Following the Tribunal’s decision on the validity of HFN’s claim, another hearing was held to assess compensation. This decision is outlined below.

DECISION

Breaches of fiduciary duty should be compensated based on principles of equitable compensation. HFN argued that it was entitled to compensation based on lost opportunities to save, invest and consume. Importantly, the band argued that consumption was capable of valuation and its deprivation was a loss. Canada, on the other hand, argued that consumption has no long term benefit and as result, should be considered a contingency to be deducted from the compensation award. In the alternative, Canada argued that consumption could be compensated using simple interest, rather than compound interest.

The Tribunal held that equitable compensation includes recognition of lost opportunities to consume. Denying compensation for consumption would result in poorer First Nations, who out of necessity were required to consume rather than save, receiving smaller awards than those that are better off and therefore able to spend more on investment and saving. This result would be unfair. Spending on consumption is an investment in people and its deprivation is not just a loss in the financial sense, but the loss of an opportunity for a better life. Consumption should be assessed on the same equitable principles as foregone investing and saving. This requires forgone consumption to be brought forward using compound interest.

However, a claim for equitable compensation must be supported by evidence (i.e. historical records of a First Nation’s spending history). The claim cannot be based on speculation. First Nations preparing specific claims for equitable compensation will need to include sufficient, reasonable evidence of such patterns for these kinds of claims to succeed.

WHY THIS MATTERS

This decision represents an important victory for First Nations. It confirms that consumption, regardless of whether it is spent on food or infrastructure, is deserving of compensation in the context of historical losses suffered by First Nations as a result of a breach of fiduciary duty by Canada. For First Nations with a history of economic hardship, the decision recognizes the real and tangible benefits of feeding the hungry and providing medicine to the sick.

This decision also emphasizes the importance of the historical record respecting a First Nation’s spending pattern over time. Without the supporting evidence, a claim for equitable compensation cannot be established.

The Tribunal has rejected the legal basis for Canada’s “80/20” policy when settling specific claims. Given that Huu-Ay-Aht would significantly increase compensation owed by Canada on historic specific claims, Canada has now filed to seek judicial review of the decision in the Federal Court of Appeal. Until the decision is upheld on judicial review, Canada is likely to maintain its 80/20 negotiation policy at specific claim negotiation tables.

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