Photo credit: Doane Gregory
Background on this Specific Claim
In the early 20th century, the Grand Trunk Pacific Railway Company (GTP) built a transcontinental railway to the Pacific Ocean in partnership with the federal government. By 1904, GTP was heavily committed to Lima harbour (present-day Prince Rupert harbour) as the western terminus. In 1904, GTP acquired 10,000 acres of land from the Provincial government on Kaien Island and the Tsimshian Peninsula around Lima harbour for $1/acre. This sale was subject to three conditions: (1) GTP would locate the western terminus of the railway on the 10,000 acres; (2) GTP would build a townsite on the 10,000 acres; and, (3) GTP would re-convey 1/4 of any townsite and waterfront lots created by subdivision of the 10,000 acres to the Province. This last condition allowed the Province to benefit from the anticipated increase in land values due to railway and townsite development. This deal was made public in May 1905.Metlakatla’s Reserve was adjacent to the lands GTP had purchased from the Province and included lands on Kaien Island that were particularly desirable for railway purposes. GTP approached the Department of Indian Affairs in May 1904 and April 1905 to ask about acquiring portions of the Reserve, but Metlakatla was not approached until 1906. On January 31, 1906, the Indian Agent called a Band Council meeting between Metlakatla and GTP representative E.G. Russell. Negotiations between Metlakatla and Russell continued for six days, culminating in Metlakatla signing a Band Council Resolution agreeing to surrender three portions of the Reserve to Canada.
On August 17, 1906, Metlakatla formally surrendered: (1) a portion of the Reserve on the Tsimshian Peninsula (the Mainland Parcel); (2) all of the Reserve on Kaien Island; and (3) most of the Reserve on Digby Island. The surrender process followed the provisions of the Indian Act, and the Surrender Document stipulated that Metlakatla would receive $7.50/acre and that Metlakatla was surrendering the lands to Canada to dispose of on terms “most conducive to [Metlakatla’s] welfare.”
The Surrender Document stated that Metlakatla surrendered 13,519 acres to Canada for sale. However, on June 25, 1907, Canada issued Letters Patent which purported to transfer 14,160 acres to the GTP. Canada sold the lands to the GTP at $7.50/acre. Canada paid half the proceeds of the sale to Metlakatla members and held the remainder in trust for the band.
Photo credit: Doane Gregory
The Specific Claim Tribunal’s Decision
Sale of Un-surrendered Lands
While a part of the discrepancy between the 13,519 acres identified in the Surrender Document and the 14,160 acres identified in the Letters Patent was due to inaccurate surveys along the sinuous coastline, much of it came from the inclusion of Reserve lands that Metlakatla had not surrendered.
Specifically, the Tribunal found that the northern boundary of the Mainland Parcel was drawn further north and aligned differently than the boundary Metlakatla agreed to. These differences resulted in the Mainland Parcel being enlarged by 313 acres. The Tribunal also found that Canada had sold eight small islands off the coast of Digby Island that Metlakatla had not surrendered, which islands constituted 20 additional acres. With respect to the Mainland Parcel and the small islands, the Tribunal held that Canada breached its fiduciary obligations to Metlakatla in its administration of Metlakatla’s Reserve and had disposed of these un-surrendered Reserve lands illegally.
Metlakatla further argued that Canada had sold Lakanian and Lakwilgiapsh Islands (19 acres and 9 acres, respectively) to the GTP when it was unclear whether Metlakatla had intended to surrender those islands, and that selling the islands was therefore improper. The Tribunal did not agree, finding that there was enough clarity in the Surrender Document to conclude that Metlakatla had intended to include these islands in the surrender.
Improvident Sale of Surrendered Lands
With respect to the sale of the balance of the lands transferred to GTP in the Letters Patent, the Tribunal found that Canada failed to meet its fiduciary obligations when it sold those lands for $7.50/acre. The Tribunal observed that Canada had taken no steps to ascertain the fair market value of the surrendered lands and had not included provisions to ensure that Metlakatla benefitted from the anticipated increase in the value of the lands due to the railway and townsite development.
The Tribunal found that the “principle of anticipation” was an important aspect in assessing the value of the lands.2 Based in part on this finding, the Tribunal assessed the actual market value of the lands at $31/acre. The Tribunal concluded that Canada had consented to an exploitative bargain for Metlakatla, which was not in keeping with Canada’s undertaking to dispose of the lands on terms “most conducive to [Metlakatla’s] welfare”, or with the honour of the Crown.3
Furthermore, the Tribunal found that Canada had breached its duty of loyalty, good faith, and full disclosure appropriate to the circumstances. Canada did not disclose to Metlakatla that Canada was a partner in the construction of the railway (which created a conflict of interest), or that there was no reasonable prospect of the western terminus being located anywhere other than Lima harbour (which increased Metlakatla’s bargaining power). Canada also did not advise Metlakatla of the terms of the deal the Province had negotiated for itself, which allowed the Province to benefit from the anticipated increase in land values.
Comments on Metlakatla Indian Band v His Majesty the King in Right of Canada
This decision is a significant victory for Metlakatla. The Tribunal found that Metlakatla is owed compensation for the difference between the market value of the lands conveyed in the Letters Patent ($31/acre) and the amount GTP actually paid for them ($7.50/acre), brought forward to present-day values. The Tribunal further found that Metlakatla is owed compensation for the over 300 acres which were sold illegally.
This decision provides helpful developments to the Tribunal’s jurisprudence. Previously, the Tribunal has assumed (without deciding) that the provision of the Specific Claims Tribunal Act regarding the illegal disposition of reserve lands4 only applies to reserves that had been “created” under the Indian Act.5 In most cases concerning reserve lands allotted in what is now BC, this did not occur until 1938.6 It has been unclear whether this provision could also apply to dispositions of lands that the Supreme Court of Canada referred to in the Weywaykum7 case as “provisional reserves” not yet under the administration of the Indian Act.
Metlakatla provides guidance on this issue. The Tribunal suggested that the Crown’s fiduciary duty to deal with surrendered reserve lands in the best interests of the First Nation does not arise from the Indian Act, but rather from the Royal Proclamation of 1763.8 The Tribunal observed that the Indian Act did not create, but rather confirmed “the historic responsibility which the Crown has undertaken, to act on behalf of the Indians so as to protect their interests in transactions with third parties.”9 By holding that the Crown’s sale of the un-surrendered lands in Metlakatla’s reserve prior to 1938 was illegal for the purposes of paragraph 14(1)(d) of the Specific Claims Tribunal Act, the Tribunal has adopted an interpretation of that act that is consistent with the conduct of the Crown governments at the time, which indicated their understanding that the Metlakatla reserve was subject to the Indian Act at the relevant time.
Similarly, the Crown’s fiduciary duty to avoid an improvident bargain when accepting a surrender of reserve lands had previously been assumed to apply to the Crown when dealing with surrendered reserve lands after they came under the administration of the Indian Act. The Tribunal suggested, however, that the duty to avoid an improvident bargain stems from the Royal Proclamation of 1763.10 The Tribunal also highlighted the importance of the principle of anticipation in the assessment of land values. These are helpful clarifications from the Tribunal that should assist in the settlement of many claims regarding questionable transactions relating to provisional reserve lands in BC.
This case summary provides our general comments on the case discussed and should not be relied on as legal advice. If you have any questions about this case or any similar issue, please contact any of our lawyers.
1 Mandell Pinder LLP was legal counsel for Metlakatla in the claim.
2 Metlakatla Indian Band v His Majesty the King in Right of Canada, 2022 SCTC 6 at para 313. [Metlakatla]
3 Metlaktla at paras 192-193.
4 Specific Claims Tribunal Act, SC 2008, c 22, s 14(1)(d).
5 See for e.g. Siska Indian Band v Her Majesty the Queen in Right of Canada, 2018 SCTC 2 at paras 169-171.
6 Wewaykum Indian Band v Canada, 2002 SCC 79 at paras 51, 86-106. [Wewaykum]
7 Wewaykum at para. 89.
8 Metlakatla at paras 109-112.
9 Guerin v The Queen,  2 SCR 335 at pp 383-384, qtd with approval in Metlakatla at paras 95, 197.
10 Metlakatla at paras 195-197.