Case Brief: Southwind v. Canada, 2021 SCC 28
By Christopher Devlin and Kajia Eidse-Rempel
What this case is about
In 1929 Canada authorized the flooding of the Lac Seul First Nation (“Lac Seul”) reserve in northern Ontario for the purpose of a hydroelectric dam, permanently flooding nearly one-fifth of the best land on the reserve without the consent of Lac Seul, without any compensation and without the lawful authorization that was required under the Indian Act
Lac Seul brought a successful claim against Canada for breach of fiduciary duty. However, in assessing equitable compensation, the trial judge valued the land as if it had been a bare expropriation rather than assessing its value for hydroelectricity generation. Lac Seul appealed to the Federal Court of Appeal and then to the Supreme Court of Canada, challenging the judge’s evaluation of equitable compensation.
The Supreme Court of Canada allowed Lac Seul’s appeal, finding that the fiduciary duty requires more than compensation based on expropriation principles for three reasons: (1) Canada’s legal power to expropriate cannot be used as a factor to limit compensation; (2) the fiduciary duty continues to apply even if land is needed for a public work; and (3) the principles of expropriation law are entirely inappropriate in the context of valuing the underlying Indigenous interest in land.
The judge erred by focussing on what Canada would likely have done rather than what Canada ought to have done as a fiduciary. Canada cannot use its legal power of expropriation to force an unfair settlement on a First Nation. Lac Seul was entitled to equitable compensation for the lost opportunity to negotiate an agreement reflecting the value of the land to the hydro project.
Justice Côté wrote a lone dissenting opinion, finding no error in the trial judge’s application of an expropriation model for compensation.
Why this case is important
Prior to this decision, there was significant uncertainty in the law regarding the applicable method when assessing equitable compensation in the context of Indigenous rights claims.
According to the trial judge’s approach, Indigenous groups would receive the same value for their wrongfully taken lands as any settler would have received through a process of expropriation. This approach fails to take into account the unique relationship that exists between the Crown and Indigenous peoples.
The court affirmed that equity assesses the loss at the date of trial, with the benefit of hindsight and in recognition of the ongoing dimension of the lost opportunity. This is especially important in the context of assessing Indigenous interests in land, which “did not flow from the Crown”, “are at the heart of the Crown-Indigenous relationship and are central to Indigenous identity and culture” (paras. 56 & 77, emphasis in original).
By affirming the application of the principles of the honour of the Crown and the goal of reconciliation to the calculation of equitable compensation, the court signalled that Indigenous groups are entitled to obtain adequate compensation that reflects the impact of the loss on the Indigenous group.
What happens next
The Supreme Court of Canada has sent the decision back to the Federal Court to reassess the equitable compensation owed following the proper principles. In particular, the judge must determine the best price Canada could realistically have obtained for the land based on its value to the hydroelectric project and then apply compound interest to bring that sum forward to its present value.