Day Star First Nation et al v His Majesty the King in Right of Canada, 2025 SCTC 5 — Case Summary

On July 25, 2025, Justice Ducharme of the Specific Claims Tribunal (the “Tribunal”) issued his decision in Day Star First Nation et al v His Majesty the King in Right of Canada, 2025 SCTC 5. As Canada had previously admitted to the validity of the claim, this decision pertains only to compensation. The decision addresses two central questions: (1) how to quantify nominal losses; and (2) how to bring nominal losses forward to their present-day value. The Tribunal confirms the well-established law as set out in Beardy’s & Okemasis Band #96 and #97 v Her Majesty the Queen in Right of Canada, 2016 SCTC 15 (“Beardy’s”) and Siska Indian Band v Her Majesty the Queen in Right of Canada, 2021 SCTC 2 (“Siska”), that application of the Band Trust Account (“BTA”) interest rate to nominal losses continues to be the standard method to bring losses forward to their present value, including by compounding interest accumulated over time. The Tribunal also ruled on a new issue, which considered whether individual losses were properly compensable under the Specific Claims Tribunal Act (“SCTA”), and found that they were in the context of this case. The Tribunal also commented on the onus on Canada to keep precise records. The claimant First Nations were not faulted for their inability to provide records proving Canada’s wrongdoings because the Crown is responsible for accounting for all uses of First Nations trust property. Ultimately, this case is one that canvasses the well-established law on equitable compensation and reaffirms what is required to fulfil its requirements.

Facts

The case was brought by the Day Star, Fishing Lake, George Gordon, and Muskowekwan First Nations (the “First Nations”). Kawacatoose First Nation, who was formerly a claimant, was an intervenor. The facts of this case take place in Treaty 4 territory which covers most of Saskatchewan and parts of Alberta. The 1906 Indian Act was in force at the relevant time period (1920-1924) and the following applicable sections were at issue in the claim: 87(2), 89, and 90. Section 87(2) prohibited a First Nation or its members from entering contracts without the consent of the Superintendent General, section 89 gave the Governor in Council almost complete control over the funds of First Nations and individual members, and section 90 restricted the ability of the Crown to spend a First Nation’s money to specified purposes.

Beginning in 1920, Indian Agent John Hardinge represented the Crown for the Touchwood Agency (“Touchwood” or “the Agency”) in Saskatchewan. At this time, the Order System was in place through which Indian Agents conducted business on behalf of Indigenous individuals, including by issuing paper certificates to merchants indicating how much credit they could extend to an individual Indigenous person. The Indian Agent would repay merchants using funds owed to the individual, which the Agent expected to recover from future grain or cattle sales. This policy was abolished by October 1921, but Agent Hardinge continued to use a similar practice, albeit incorrectly, by recording sales after the fact. In February 1922, the Department discovered Agent Hardinge was not entering all cash transactions into the Agency’s accounting books, but he was not yet suspected of stealing. During this time, the Department found that most First Nations under the care of the Agency were in significant debt. As a result, in March 1922, the Deputy Superintendent General recommended the use of the significant funds in Fishing Lake First Nation’s accounts to pay off the debts of the Fishing Lake, Day Star, George Gordon, and Muskowekwan First Nations, which Agent Hardinge then did.

An April 1923 investigation revealed additional debts not entered by Agent Hardinge. A second investigation in September found that Agent Hardinge deliberately made false statements and uncovered $30,000 of unrecorded debt. Agent Hardinge resigned in October 1923 and never faced prosecution. A January 1924 report found that Agent Hardinge had a habit of moving money to and from different accounts without the account holders’ knowing, and when that money ran out, he acquired bank loans to make up for it. In September 1924, the Department discovered that the Touchwood Agency was $59,959 in debt, so they sought the money from the First Nations to pay it off, under the authority of section 90 of the Indian Act. The First Nations passed band council resolutions to do so, despite protests from members. Correspondence from the Deputy Superintendent shows that the Department knew this was inappropriate and not justified by section 90. Conditions did not improve when Agent Hardinge left the Agency, and the debts were not cleared until the 1930s. Elder testimony about this period shows deep mistrust of Indian Agents by First Nations members because of this mismanagement.

Issues

(a) What were the nominal losses suffered by the First Nations and the intervenor?

(b) What is the present-day value of the nominal losses suffered by each of the First Nations?

Tribunal’s Decision

(a) Determining the Nominal Losses

The Tribunal first determined the nominal losses suffered by each First Nation, primarily using the expert financial accounting and forensic audit report written by the accounting firm Kroll Lindquist Avey (the “KLA Report”). This report was jointly commissioned by Canada and the First Nations during negotiations in 2000. The KLA Report divided the losses into four categories: identified, probable, potential, and other:

• Identified losses were clearly identified and quantified from available information;
• Probable losses are believed to have probably or possibly occurred, and the amount is reasonably quantifiable from the available information;
• Potential losses are those believed to have probably or possibly occurred, but there were significant limitations in the calculations when quantifying the losses; and
• Other losses are not specifically quantifiable.

The KLA Report listed some of these losses as Band Losses, and some as individual losses. However, the KLA Report cautions that some of the losses included could represent double counting.

(i) Burden of proof to demonstrate losses occurred

The Tribunal used the KLA Report’s quantification of nominal losses, which included the identified, probable, and potential categories, but left out the “other loss” category, as argued by the First Nations. Canada argued that the First Nations had not discharged their burden of proof to establish the breaches occurred, nor that the losses occurred. Canada maintained that reasonable efforts had to be made by the First Nations to show losses even when the burden shifts to Canada to disprove the amount of losses.

The Tribunal disagreed with Canada, finding that the Crown conceded that it breached its fiduciary duty when Agent Hardinge mismanaged the money between 1920-1923, thus establishing the breaches. The Tribunal further found that the KLA Report was sufficient to prove First Nations’ reasonable effort to demonstrate losses. It was the Crown’s duty as a fiduciary to keep careful records and be prepared to account for spending out of the First Nations’ accounts. Since the Crown was unable keep careful records of spending, the KLA Report was sufficient to show the First Nations’ losses. The burden then shifted to Canada to disprove the amount of losses. The Tribunal found Canada had not led sufficient evidence to disprove the losses it disputed, and therefore those losses were proven.

(ii) No discount for consumption or benefits gained

Canada further argued that benefits were received from the spending of funds from the First Nations’ accounts which should lessen the amount of nominal losses calculated. Canada prepared the KPMG Report, an accounting report, which stated that benefits gained should be deducted from losses suffered by the First Nations. However, the Tribunal found that equitable compensation requires full restoration of the lost opportunity, meaning the full value of what was taken. Accordingly, the Tribunal declined to discount the figures identified in the KLA Report.

(iii) Individual losses

Finally, the Tribunal did not accept Canada’s submission that some losses identified in the KLA Report were non-compensable because they were suffered by individuals not First Nations. The Tribunal emphasised the statutory interpretation principles of liberal construction and special construction for legislation applying to Indigenous peoples. To do this, the Tribunal referred to the preamble of the Specific Claims Tribunal Act, highlighting reconciliation, self-sufficiency, justice, and efficiency:

…resolving specific claims will promote reconciliation between First Nations and the Crown and the development and self-sufficiency of First Nations;

There is a need to establish an independent tribunal that can resolve specific claims and is designed to respond to the distinctive task of adjudicating such claims in accordance with law and in a just and timely manner;

Ultimately, the Tribunal found that Individual losses were transformed into collective losses by the Crown’s actions in using the money to pay off debts contrary to the Indian Act, and were part of the losses suffered by the First Nations.

(iv) Tribunal division of losses

The Tribunal determined that the unallocated losses would be split equally among the four First Nations and the intervenor, with the double counted losses removed. The intervenor argued that another report should be commissioned, which could further clarify the entitlements of each First Nation. However, the Tribunal found that since the commissioning of a further report would extend the timeline of the legal proceedings, and was not guaranteed to provide more clarity, it did not outweigh the need for efficiency and justice. Given that over a century had passed since the wrongs occurred, the Tribunal explained that the First Nations deserved justice and finality.

(b) Bringing Forward the Nominal Losses

The Tribunal then moved to determining how to bring forward the nominal losses to the present day. Justice Ducharme considered the principles of equitable compensation, primarily, deterring wrongful conduct and restoring the claimants’ lost opportunity. The First Nations argued the appropriate rate of return was the Band Trust Account Rate until the year 2000, when it ought to switch to the rate of return generated by the Canada Pension Plan (“CPP”) Investment Board. The switch was due, in the First Nations’ expert accountant’s opinion, to long term investment portfolios shifting to being primarily held outside fixed income investments. The First Nations argued that the most favourable use of the money would have been investment in third party securities, and this is a required consideration in the assessment of equitable remedies.

Canada argued that the rate of growth of Gross Domestic Product (“GDP”) per capita should be used as the rate of return. This, Canada argued, reflects the consumption the First Nations would have engaged in, and any other realistic contingency that would have affected the First Nations’ communities. Canada argued against the CPP rate because of the precedent set in Ermineskin Indian Band and Nation v Canada, 2009 SCC 9 (“Ermineskin”), which determined that the Crown does not have a duty to invest a First Nation’s funds into any particular investment, and it is in fact prohibited from doing so due to the Financial Administration Act. Canada argued that, in the alterative, the Tribunal should apply the BTA rate of return.

(i) Tribunal rejects use of GDP and Application of CPP to bring losses forward

Justice Ducharme set out the four steps an adjudicator must take to apply the principles of equitable compensation:

1. The relevant equitable presumptions must be applied including the most favourable use.
   
   The Crown unilaterally took on the significant responsibility of the management of the First Nations’ property, including their funds. This was a significant level of authority and control, mostly exercised by the local Indian Agent.
   
   
2. A causation analysis to ensure the losses have been caused by the breach.
   
   The losses complained of by the First Nations are financial and connected to the breaches the Crown admitted. The Crown admitted to the mismanagement of money by Agent Hardinge, that may have caused loss to First Nations. The Tribunal quantified this loss using the KLA Report.
   
   
3. The relevant equitable presumptions must be applied including the most favourable use.
   
   The Tribunal previously rejected Canada’s GDP method (in Siska) because it failed to account for the accrual of interest. The GDP method also includes consideration of likely consumption, which treats a portion of the loss as non-compensable, therefore lessening the deterrent effect. This does not align with the principles of equitable compensation. The proper question is what would have been the most favourable use of the property that was taken, and not to apply discounts to that rate based on hypothetical expenditures that never occurred. Therefore, the Tribunal concluded the GDP method would fail to apply the most favourable use principle.
   
   The Court in Ermineskin considered and rejected the application of an interest rate from a third-party investment bringing forward nominal losses. The Court in Ermineskin held that the Crown did not have a duty to invest a First Nation’s funds, and to do so would contradict paragraph 90(1)(b) of the Financial Administration Act, which prohibits the acquisition of securities by the Crown without an Act of Parliament. Justice Ducharme in this case held that the CPP method is analogous to the approach in Ermineskin and rejected the First Nations’ argument. The Court in Southwind v Canada, 2021 SCC 28, maintained that the most favourable use consideration must be reasonable, and it is not reasonable to conclude that the money would have been invested contrary to the Financial Administration Act.
   
   In Beardy’s the Tribunal held that applying the rate of compound interest must be consistent with the practice of the Crown in the management of money held for the benefit of the First Nation. Justice Ducharme agreed and applied the BTA rates to the First Nations’ losses in this case.
   
   
4. Total compensation is assessed in light of the special relationship between the Crown and Indigenous Peoples in Canada.
   
   Recognizing the need to deter future misconduct by fiduciaries and enforce the trust at the heart of the fiduciary relationship, Justice Ducharme divided each of the First Nations’ losses equally among the three earliest years of the misconduct: 1921, 1922, and 1923. The Tribunal explained that assigning the losses to the earliest three years of the loss of use period supported deterrence for the Crown because it increased the effect of compound interest by applying larger multiplier factors.
   
   

Comments

This case clarifies and confirms the accepted approaches for bringing forward nominal losses. The GDP rate was rejected because it would discount the losses suffered, contrary to equitable compensation, and the CPP rate was rejected, as the Financial Administration Act prohibits third-party investment of First Nations funds. The Tribunal ultimately applied the BTA rate, which confirmed the precedents in Beardy’s and Siska. However, the Tribunal maximised the compounding interest by dividing the First Nations’ losses among the earliest years of the claim, signalling the Tribunal’s preference to favour the interest of the First Nation. This preference is consistent with the mandate of the Tribunal, which calls for just and efficient resolution of specific claims, promoting reconciliation between Canada and First Nations, and the development of the self-sufficiency of First Nations. These principles also show the Tribunal’s commitment to broad interpretation in favour of Indigenous claimants.

The Tribunal classified individual losses as collective losses through the Crown’s actions, which expands the scope of compensable losses permitted under the SCTA. This clarifies that the Crown is liable for the actions of individual Indian agents and can provide compensation for the acts of these agents. Finally, the Tribunal expanded the scope of Crown liability in certain circumstances where the burden to provide evidence of wrongdoing is placed on Canada to provide records disproving the losses claimed, instead of requiring the claimants to provide records that were likely never in their possession.

This decision confirms best practices in calculating compensation for historical losses by rejecting approaches that are not appropriate or consistent with the principles of equitable compensation, and affirms the mandate of the SCTA to promote reconciliation between First Nations and the Crown and the development and self-sufficiency, and to resolve claims in a just and timely manner.

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