This case concerns breaches of fiduciary duty by the chief and council of Peters First Nation. The chief, a councillor, and a former councillor were sued by band members for mishandling band finances, including awarding themselves inappropriate compensation. The members alleged this conduct amounted to a breach of fiduciary duty, asserting that the chief and councillors failed to act in the best interests of the band.
Background
Peters First Nation is a band of approximately 70 members located near Chilliwack, BC. The appellants were the chief, a councillor, and a former councillor of the band. The trial judge found that the appellant councillor was primarily responsible for administering band finances but that, in doing so, she relied on an informal process for approving expenses and generally failed to maintain adequate records. The judge held that all three appellants acted in a conflict of interest and in contravention of the band’s financial laws by approving certain reimbursements and expenditures, for example, when disbursing leftover funds from a health care program and approving unlawful compensation for attending meetings. The trial judge held that the appellants breached their fiduciary duty to band members and ordered the chief, councillor, and former councillor to pay punitive damages of $25,000, $50,000, and $10,000 respectively.
Photo credit: Gordon Lyall
Analysis: Elected Officials owe Fiduciary Duties to the Band as a Whole
The appellants argued that they did not owe a fiduciary duty to the band, the band members who sued did not have standing, and the punitive damages awarded by the trial judge were not in accordance with common law standards. The court rejected their arguments and dismissed the appeal.
The court affirmed that members of band councils have fiduciary duties to the band and are expected to abide by a “no conflict rule” and “no profit rule”. The chief and councillors can receive benefits such as compensation but only if allowed by law. In this case, the legal authority was Peters First Nation’s Financial Administration Law, which the appellants did not comply with.
The court affirmed that, as a general principle, governments do not owe a fiduciary duty to specific constituencies. Rather, governments are expected to act in what they perceive to be in the best interest of all citizens. A bona fide government decision regarding the allocation of public funds, as authorized by law, does not give rise to fiduciary duty. However, elected or appointed administrators of band governments may owe fiduciary duty to act in the best interest of the band. Contravention of the “no conflict” and “no profit” rules, unless authorized by law, can be a breach of fiduciary duty to the band.
Photo credit: Doane Gregory
The court rejected the appellants’ argument that individual band members could not sue in this case for two reasons. First, courts require that issues of standing be addressed early in litigation, and this point should have been raised much sooner. Second, even though band council is ordinarily the only entity allowed to sue on behalf of the band, there is a clear problem with that monopoly when the band council is alleged to be at fault. In the court’s view, it is just to allow individual band members to sue on behalf of the band when the band itself will not do so.
The court upheld the punitive damages awarded by the trial judge. The court acknowledged that the appellants had done some good for the community but considered that this did not excuse their misconduct which persisted long after they were made aware of problems. The court viewed the damages as modest in the circumstances and consistent with case law.
Key takeaways
This case reaffirms the importance of financial laws and oversight in band governance. Office holders and administrators must ensure expenditures are consistent with their laws. If there is evidence of financial misconduct, courts will allow band members to sue elected officials of the band government for breaches of fiduciary duty on behalf of the band. However, there must be strong evidence of such misconduct—courts will screen actions to ensure they are not vexatious or abusive fishing expeditions.