Judgments

[1996] 1 F.C. 667

T-1928-91

Adrienne Descôteaux, Édith Thibault, Francine Thibault, Pierre-Yvan Thibault and Marjolaine Thibault (Plaintiffs)

v.

Her Majesty the Queen (Defendant)

indexed as: Descôteaux v. Canada (T.D.)

Trial Division, Nadon J.—Montréal, March 8, 24 and October 6, 1995.

Crown — Contracts — Plaintiffs heirs of Thibault who entered into contract with Crown purporting to give him ownership of water supply system on Indian reserve — No surrender, as required by Indian Act, obtained — Thibault not consenting to contract amendment — Band Council refusing to recognize ownership by Thibault’s estate — Heirs suing Crown for declaration owners, replacement cost of system — Validity of clause in contract giving Thibault ownership of replaced mains — Crown could not transfer ownership of system failing compliance with Indian Act, s. 37 — Crown not forced to repurchase system.

Native peoples — Lands — Water supply system on reserve forming part thereof — Immovable by nature within meaning of Civil Code, art. 376 — Contract between Crown, plaintiff purporting to give latter ownership of system — In absence of surrender, as required by Indian Act, s. 37, ownership of system could not be transferred to plaintiffs.

Civil Code — Immovables — Water supply system situated on Indian reserve immovable by nature within Civil Code, s. 376 and forming part thereof.

The plaintiffs are the heirs of the late Julien Thibault. In 1962, Thibault entered into a contract with the Crown with respect to a water supply system, undertaking, inter alia, to provide the Odanak Indian Reserve, which had an internal water supply system, with drinking water from the St-François River by means of his distribution system. Clause 7 of that contract provided that if the Crown replaced the mains of the water supply system during the contract period (and this was in fact done), they would become the property of Thibault and he would be obliged to repair and maintain them at his expense. This he did. In 1973, a government office wrote to Thibault advising that the contractual provision as to ownership was “impossible” in view of section 89 of the Indian Act and that the contract would have to be amended. Thibault would not consent to an amendment.

In view of the Band Council’s categorical refusal to recognize Thibault’s estate’s ownership of the water supply system, the plaintiffs brought an action seeking to be declared the owners of the water supply system situated on the territory of the Odanak Indian Reserve and asking the Court to order the defendant to pay them the sum of $389,000 with interest.

Held, the action should be dismissed.

The only issue was the validity of clause 7 of the contract. First of all, it was indisputable that the water supply system was an immovable by nature within the meaning of article 376 of the Civil Code of Lower Canada. And since the word “reserve” in section 2 of the Indian Act covered not only tracts of land set apart for the use and benefit of an Indian band, but also immovables by nature such as water and gas pipe systems buried under reserve land, section 37 of the Indian Act (which provides that lands in a reserve shall not be alienated until they have been surrendered to Her Majesty) was applicable to the case at bar. This was supported by paragraph 80(l) of the Indian Act, which gives band councils the power to make by-laws dealing with “the construction and regulation of the use of public wells, cisterns, reservoirs and other water supplies”. Also, if paragraph 58(4)(b ) of the Act required the band council’s consent to dispose of sand and gravel, it would be surprising if the Minister could dispose of a water supply system without band consent, or at least the band council’s consent. Finally, given that section 28 of the Act requires the Minister to obtain the consent of the band council in order to authorize any person other than a band member to exercise rights on a reserve, the question was raised as to how the plaintiffs could exercise rights on the reserve without the consent of the Band Council.

The Crown’s failure to obtain a surrender, as required by section 37 of the Act, meant that the Crown could not transfer ownership of the water supply system to Thibault. Accordingly, the plaintiffs could not be declared to own it.

The claim for $389,000 (the replacement value of the water supply system) had to be dismissed. It was not a claim for damages for the defendant’s inability to transfer the ownership of the water supply system. It was, in effect, an attempt to force the Crown to repurchase that system. But even if the plaintiffs had been declared owners of the system, the second claim could not have succeeded since they could not have been declared owners at the same time as the Crown was ordered to repurchase it.

Given the Band’s interest in the reserve, the Court was far from convinced that the Indian Band was not a necessary party, within the meaning of paragraph 1716(2)(b) of the Rules. However, in view of the conclusion that the plaintiffs were not the owners of the system, nothing further needed to be said on this point.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Civil Code of Lower Canada, arts. 376, 414, 415, 416.

Companies Act, R.S.Q. 1964, c. 271.

Federal Court Rules, C.R.C., c. 663, R. 1716(2)(b).

Indian Act, R.S.C. 1952, c. 149, ss. 2 “band”, “Department”, “reserve”, “surrendered lands”, 18, 28(1),(2) (as am. by S.C. 1956, c. 40, s. 10), 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 41, 58(4), 80(l).

CASES JUDICIALLY CONSIDERED

APPLIED:

Montreal L.H. & P. Cons. v. City of Westmount, [1926] S.C.R. 515; [1926] 3 D.L.R. 466; Lower St. Lawrence Power Co. v. L’Immeuble Landry Ltée, [1926] S.C.R. 655; Montreal Light, Heat & Power Consolidated v. City of Outremont, [1932] A.C. 423 (P.C.); Guerin et al. v. The Queen et al., [1984] 2 S.C.R. 335; (1984), 13 D.L.R. (4th) 321; [1984] 6 W.W.R. 481; 59 B.C.L.R. 301; [1985] 1 C.N.L.R. 120; 20 E.T.R. 6; 55 N.R. 161; 36 R.P.R. 1; Wewayakum Indian Band v. Canada, [1995] F.C.J. No. 1202 (T.D.) (QL).

ACTION for a declaration that the plaintiffs are the owners of the water supply system and water pipes situated on the Odanak Indian Reserve and for an order requiring the Crown to pay the plaintiffs $389,000. Action dismissed.

COUNSEL:

Louis Savoie for plaintiffs.

Marie Nichols for defendant.

SOLICITORS:

Jutras et Associés, Drummondville, Quebec, for plaintiffs.

Deputy Attorney General of Canada for defendant.

The following is the English version of the reasons for judgment rendered by

Nadon J.: By their action the plaintiffs are seeking to be declared the owners of the water supply system and water pipes (the water supply system) situated on the territory of the Odanak Indian Reserve (the Reserve). In addition, the plaintiffs are asking this Court to order the defendant to pay them the sum of $389,000 with interest from the date of the summons, the whole with costs.

The Facts

The plaintiffs, whose right to sue is not contested by the defendant, are the heirs of the late Julien Thibault, who died on July 15, 1977. The plaintiff Édith Thibault is Mr. Thibault’s widow while the other plaintiffs are his four children.

On March 29, 1962 a contract with respect to the water supply system was entered into by Julien Thibault, who was operating under the firm name Aqueduc de Pierreville Enr., and the defendant. At that time Julien Thibault was the owner of the water supply system in Pierreville and St-Thomas de Pierreville, which was situated outside the Reserve. As well, there was at the time an internal water supply system serving the Reserve and forming part thereof. This water supply system was not owned by Julien Thibault.

The Reserve, an Indian reserve within the meaning of the Indian Act, R.S.C. 1952, c. 149 (the Act), is situated on the eastern shore of the St-François river near Pierreville in the province of Quebec, about 15 miles east of Sorel. The Reserve has an area of about 1,495 acres and is located to the south of the lands surrendered to the Abenakis at the beginning of the 18th century.

Under the contract entered into on March 29, 1962 Julien Thibault undertook, in consideration of a $25,000 payment, to provide the Reserve with drinking water from the St-François river, by means of his distribution system, for the use and consumption of the Reserve’s residents and for protection against fires.

For the purposes of the case at bar, only clause 7 of the 1962 contract is relevant. It reads as follows:

If the reserve distribution mains are replaced by the Minister within twenty years from the date of this agreement, the said mains shall, at the time of their replacement, vest in and become the property of the Supplier and shall thereafter be repaired and maintained by the Supplier at its expense and for this purpose, the Supplier shall have reasonable access to the reserve.

According to this clause, if the defendant replaced the mains of the water supply system during the contract period, they would become the property of Julien Thibault. In exchange, Julien Thibault would be obliged to repair and maintain them at his expense.

In 1971 and 1972 the Department of Indian Affairs and Northern Development (the Department) spent about $200,000 to replace the mains of the water supply system. The defendant admits that Julien Thibault and his successors, pursuant to clause 7 of the 1962 contract, repaired and maintained the mains of the water supply system following their replacement.

While the replacement work was being carried out and in the following years, the defendant tried unsuccessfully to amend the terms of the 1962 contract to eliminate clause 7. On July 17, 1973 the Department’s Regional Director wrote the following to Julien Thibault:

[translation] I refer to the agreement concluded between yourself and our Department in 1962 and specifically to clause 7, in which it is specified that you will become the owner of any water supply system mains installed by the Department before the end of the period covered by the agreement. Section 89 of the Indian Act makes this impossible and accordingly this section of the agreement must be amended so as to comply with the terms of the Indian Act.

Enclosed is a draft agreement that could serve as a basis for negotiations between yourself and Yves Leclerc of the regional office. The main points of this draft agreement should be respected. However, certain words or expressions may be changed to make its form more appropriate before it is signed.

After receiving this letter and the draft agreement enclosed therewith, Mr. Thibault refused to consent to the amendment proposed by the Department. Despite the impossibility of agreeing, the parties to the 1962 contract fulfilled their respective obligations until March 28, 1982, when the contract period ended.

It should be noted that on January 15, 1965 Julien Thibault sold the Pierreville and St-Thomas de Pierreville water supply system, which he owned, to Aqueduc de Pierreville Inc.[1] (the company), a corporation formed under the Quebec Companies Act [R.S.Q. 1964, c. 271]. Under the contract, the purchaser assumed [translation] “responsibility for all transactions entered into by the vendors on behalf of Aqueduc de Pierreville Enr”.

On September 28, 1982 counsel for the company wrote to the Band Council of the Odanak Abenakis (the Band Council) to propose a new contract regarding the supply of drinking water to the Reserve. In addition, the company gave the Band Council the opportunity to purchase the water supply system situated on the Reserve. It appears that this letter was never answered.

It should further be noted that on November 29, 1983 the company sold the Pierreville and St-Thomas de Pierreville water supply system to 2158-8330 Québec Inc.[2] Clause 11 of the sale contract clearly stated that the water supply system was excluded from the sale.

On March 1, 1984 counsel for the company and for 2158-8330 Québec Inc. wrote to the Band Council to inform it that their clients were prepared to sell the water supply system for $200,000. On June 26, 1984 the Band Council wrote to the said counsel in the following terms:

[translation] We would hereby like to inform you that the Odanak Band feels that the water supply system is on reserve lands and forms an integral part thereof.

The system therefore has Indian reserve status and as such is for the use and benefit of the Odanak Band.

In addition, we recognize that the Odanak Band is responsible for maintaining the water supply system.

On August 28, 1984 the Band Council wrote to Julien Thibault’s estate to inform it that [translation] “only the Odanak Band Council can authorize or make repairs or changes to its water supply system and its accessories, which are an integral part of the Reserve.”

On September 5, 1984 the plaintiffs and the company sold the Pierreville and St-Thomas de Pierreville water supply system to Corporation de développement du Bas St-François. The following declaration appears in the contract:

[translation] The vendors also declare that the ownership of the water supply system situated on the territory of the Odanak Indian reserve is currently in dispute by the said reserve and Aqueduc de Pierreville Inc. and/or the Thibault estate. Aqueduc de Pierreville Inc., as duly represented, and/or the Thibault estate assigns the purchaser in perpetuity a right of way for the water in the water supply system on the Odanak reserve and a right to connect to the said system to serve any subsequent consumers, but only in so far as the above-mentioned dispute is resolved in favour of Aqueduc de Pierreville Inc. and/or the Thibault estate.

On July 3, 1985 the Reserve and the municipal corporations of the village of Pierreville, the parish of Saint-Thomas-de-Pierreville, the parish of Notre-Dame-de-Pierreville, the village of Saint-François-du-Lac and the parish of Saint-François-du-Lac created an intermunicipal board called the Régie intermunicipale d’alimentation en eau potable du Bas Saint-François (Lower Saint-François Intermunicipal Drinking Water Supply Board) (the Board) to accomplish the following objectives:

(a) to operate and administer a filtration plant and intermunicipal water supply system serving the corporations that are parties to the agreement; this system is described in Schedule A, which is a part of this agreement;

(b) to build, operate and administer all the fixed assets needed to draw, treat and carry the water to the local distribution systems of the corporations that are parties to the agreement.

On October 22, 1985 the Band Council, by resolution, requested the Department to issue a permit to the Board under subsection 28(2) [as am. by S.C. 1956, c. 40, s. 10] of the Act for a period of twenty years less a day, starting on November 1, 1985, to allow the Board to connect its water supply system to the water supply system situated on the Reserve. The purpose of this connection was to enable the Board to serve the Reserve but also certain surrounding municipalities.

By a contract entered into on February 28, 1986 the defendant granted the Board the right to use the water supply system for a period of twenty years less a day. The operation and maintenance of the water supply system then became the responsibility of the Band Council.

It is quite clear that, since at least June 26, 1984, the date of its letter to counsel for the plaintiffs, the Band Council has not recognized the ownership right claimed by the plaintiffs in the water supply system. The Band Council resolution dated October 22, 1985 simply confirms this position, which is also confirmed by the agreement entered into on February 28, 1986 by the defendant and the Board.

In view of the categorical refusal to recognize their ownership right, the plaintiffs filed this statement of claim on July 18, 1991.

These are, in brief, the relevant facts of the case at bar.[3]

Legislation

The following sections of the Act are relevant:

2. (1) In this Act,

(a) “band” means a body of Indians

(i) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before or after the coming into force of this Act,

(ii) for whose use and benefit in common, moneys are held by Her Majesty, or

(iii) declared by the Governor in Council to be a band for the purposes of this Act;

…

(d) “Department” means the Department of Citizenship and Immigration;

…

(o) “reserve” means a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band;

…

(q) “surrendered lands” means a reserve or part of a reserve or any interest therein, the legal title to which remains vested in Her Majesty, that has been released or surrendered by the band for whose use and benefit it was set apart.

…

18. (1) Subject to the provisions of this Act, reserves shall be held by Her Majesty for the use and benefit of the respective bands for which they were set apart; and subject to this Act and to the terms of any treaty or surrender, the Governor in Council may determine whether any purpose for which lands in a reserve are used or are to be used is for the use and benefit of the band.

…

28. (1) Subject to subsection (2), a deed, lease, contract, instrument, document or agreement of any kind whether written or oral, by which a band or a member of a band purports to permit a person other than a member of that band to occupy or use a reserve or to reside or otherwise exercise any rights on a reserve is void.

(2) The Minister may by permit in writing authorize any person for a period not exceeding one year to occupy or use a reserve or to reside or otherwise exercise rights on a reserve.[4]

…

37. Except where this Act otherwise provides, lands in a reserve shall not be sold, alienated, leased or otherwise disposed of until they have been surrendered to Her Majesty by the band for whose use and benefit in common the reserve was set apart.

38. (1) A band may surrender to Her Majesty any right or interest of the band and its members in a reserve.

(2) A surrender may be absolute or qualified, conditional or unconditional.

…

41. A surrender shall be deemed to confer all rights that are necessary to enable Her Majesty to carry out the terms of the surrender.

…

58. …

(4) Notwithstanding anything in this Act, the Minister may, without a surrender

(a) dispose of wild grass or dead or fallen timber, and

(b) with the consent of the council of the band, dispose of sand, gravel, clay and other non-metallic substances upon or under lands in a reserve, or, where such consent cannot be obtained without undue difficulty or delay, may issue temporary permits for the taking of sand, gravel, clay and other non-metallic substances upon or under lands in a reserve, renewable only with the consent of the council of the band,

and the proceeds of such transactions shall be credited to band funds or shall be divided between the band and the individual Indians in lawful possession of the lands in such shares as the Minister may determine.

…

80. The council of a band may make by-laws not inconsistent with this Act or with any regulation made by the Governor in Council or the Minister, for any or all of the following purposes, namely:

…

(l) the construction and regulation of the use of public wells, cisterns, reservoirs and other water supplies.

At the hearing the parties informed the Court that they agreed that the civil law of the province of Quebec should govern the case at bar.

Analysis

The only issue is the validity of clause 7 of the 1962 contract.

First of all, it is indisputable that the water supply system is an immovable by nature within the meaning of article 376 of the Civil Code of Lower Canada. There has been no doubt about this point of view since the Supreme Court of Canada’s decisions in Montreal L.H. & P. Cons. v. City of Westmount, [1926] S.C.R. 515, and Lower St. Lawrence Power Co. v. L’Immeuble Landry Ltée, [1926] S.C.R. 655, and the Judicial Committee of the Privy Council’s decision in Montreal Light, Heat & Power Consolidated v. City of Outremont, [1932] A.C. 423 (P.C.).

In the last-mentioned case, the Judicial Committee of the Privy Council had to decide, for municipal taxation purposes, whether underground gas distribution equipment situated in the city of Outremont was immovable or movable property. At pages 436-437 of his judgment, Lord Tomlin stated the following:

What then is an “immoveable” under the Civil Code? A gas main laid in the earth is an “immoveable” in the sense that it is physically a construction fixed in the earth, though the individual pipes of which it is made up were movable before they came to form part of the construction.

Of the four means specified in art. 375 of the Civil Code by reason of which property is to be treated as “immoveable,” three can certainly be excluded. The gas mains are not “immoveable by destination,” because the soil in which they are placed does not belong to the appellants. They are not “immoveable” by reason of the object to which they are attached. Into that category fall only things in themselves movable which are permanently attached to an immovable. The gas mains were never movables, though constructed out of things which were movables. It is not suggested that the gas mains are immovable by determination of law. There, therefore, remains only the category of immovables by their nature. These are in s. 376 defined in the words, “lands and buildings are immoveable by their nature.”

It is said that gas mains are not buildings (“bâtiments”) within the meaning of that term as used in art. 376, and an argument based upon art. 523 of the Code Napoléon, which makes “tuyaux” immovables, was addressed to their Lordships in support of that view. Their Lordships are of opinion that the term buildings (“bâtiments”) covers constructions such as these gas mains, and that these mains must be regarded as immovable by their nature in the territory in which they are physically situate, and are therefore taxable subjects in the City of Outremont.

Rinfret J.’s words in Lower St. Lawrence Power Co. v. L’Immeuble Landry Ltée, supra, are to the same effect. He stated the following at pages 667-668:

[translation] In each of these judgments, it was a matter of interpreting a special statute and deciding whether a water, gas or electricity distribution system could be placed in one of the categories of property that the school or municipal corporation was entitled to tax pursuant to the limited powers conferred by the statute governing it. That is not the issue here.

However, Tait J. gave this very detailed consideration in Sherbrooke Gas and Water Co. v. City of Sherbrooke ((1891) 15 L.N. 22), as did White J. in The Bell Telephone Co. v. The Corporation of Ascot ((1899) Q.R. 16 S.C. 436). Both found that a system of pipes or wires (in those cases for water or telephones), such as that which was sold by Landry to Rouleau, Limitée, had to be considered immovable by nature.

At one time the cases in Quebec seemed to be leaning the other way (The Town of Cookshire v. The Canadian Telephone Co. ((1913) Q.R. 44 C.S. 126); The Bell Telephone Co. v. La cité de Hull ((1922) Q.R. 61 C.S. 222)), but they did not take long to return to their original position and, more recently, the first opinion has prevailed in the closely reasoned judgments in re Cité de Westmount v. Montreal Light, Heat & Power Coy. by de Lorimier J. ((1924) 30 R. de J. 81) and the Court of King’s Bench ((1926 Q.R. 38 K.B. 406) (aside from the meters, as is explained in the Supreme Court’s judgment rendered the same day as the instant judgment) ([1926] S.C.R. 515, at p. 521), to which can be added the equally well-reasoned judgments rendered in the case at bar ((1926) Q.R. 41 K.B. 363).

The two main objections made to the opinion that systems of this kind are immovables—those that prevailed in the judgments decided in the negative and that were raised again during the submissions to this Court—are as follows:

1. These systems (poles, wires, etc.) are not immovables by nature because they are not fixed for a permanency;

2. They are not immovables by destination because they are not incorporated into the land by the owner of that land.

In our opinion, neither of these objections is supported by legal writers or by the French courts, which have had to interpret texts equivalent to those of the Civil Code of the province of Quebec.

The vast majority of commentators state that it not necessary, for a construction to be considered immovable by nature, that it be fixed in the soil for a permanency. It is sufficient if the incorporation is not purely temporary and accidental. It is the fact of attachment to the soil that the law considers. The mandatory condition is that “the construction, whatever it is, be incorporated into the soil”, that it cohere thereto as Pothier says, or adhere as Laurent says. The rule is always quod solo inaedificatur, solo cedit.

It follows, therefore, that any sale, alienation or disposition of reserve lands or a part of those lands necessarily involves the sale, alienation or disposition of the water supply system situated on that reserve (see articles 414 to 416 of the Civil Code of Lower Canada). In my opinion, the word “reserve” as defined in section 2 of the Act covers not only the “tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band”, but also immovables by nature such as water and gas pipe systems that are buried under the reserve land.

Accordingly, in my opinion section 37 of the Act, which provides that lands in a reserve shall not be alienated until they have been surrendered to Her Majesty “by the band for whose use and benefit in common the reserve was set apart”, is applicable to the case at bar since it is, in my view, impossible to separate the water supply system from the lands in the Reserve.

This view is supported by paragraph 80(l) of the Act, which gives band councils the power to make by-laws dealing with “the construction and regulation of the use of public wells, cisterns, reservoirs and other water supplies”.

It is also interesting to note that, under paragraph 58(4)(b) of the Act, the Minister may, “with the consent of the council of the band, dispose of sand, gravel, clay and other non-metallic substances upon or under lands in a reserve.” It would be surprising if the Minister could dispose of a water supply system without the band’s consent, or at least the band council’s consent, given that such consent is required to dispose of sand and gravel.

Clause 7 of the 1962 contract also raises a problem under section 28 of the Act. Under section 28 the Minister must, except for a period not exceeding one year, obtain the consent of the band council in order to authorize any person other than a member of the band to exercise rights on a reserve. It must be asked how, given section 28 of the Act, the plaintiffs could exercise rights on the Reserve without the consent of the Band Council. In other words, even if this Court declared that the plaintiffs owned the water supply system, they could not exercise or enjoy their property right.

The defendant submitted that the consequence of not complying with sections 28 and 37 of the Act is that clause 7 of the 1962 contract is void ab initio. However, the plaintiffs argued that the consequence is only relative nullity and that the time to raise this has long since passed.

To resolve this dispute, which is in my opinion a false one, it is essential to determine the nature of Indian property title in Canada. In Guerin et al. v. The Queen et al., [1984] 2 S.C.R. 335, the Supreme Court of Canada examined this issue in detail. At page 382, Dickson J., as he then was, explained the nature of this interest as follows:

It appears to me that there is no real conflict between the cases which characterize Indian title as a beneficial interest of some sort, and those which characterize it [as] a personal, usufructuary right. Any apparent inconsistency derives from the fact that in describing what constitutes a unique interest in land the courts have almost inevitably found themselves applying a somewhat inappropriate terminology drawn from general property law. There is a core of truth in the way that each of the two lines of authority has described native title, but an appearance of conflict has nonetheless arisen because in neither case is the categorization quite accurate.

Indians have a legal right to occupy and possess certain lands, the ultimate title to which is in the Crown. While their interest does not, strictly speaking, amount to beneficial ownership, neither is its nature completely exhausted by the concept of a personal right. It is true that the sui generis interest which the Indians have in the land is personal in the sense that it cannot be transferred to a grantee, but it is also true, as will presently appear, that the interest gives rise upon surrender to a distinctive fiduciary obligation on the part of the Crown to deal with the land for the benefit of the surrendering Indians. These two aspects of Indian title go together, since the Crown’s original purpose in declaring the Indians’ interest to be inalienable otherwise than to the Crown was to facilitate the Crown’s ability to represent the Indians in dealings with third parties. The nature of the Indians’ interest is therefore best characterized by its general inalienability, coupled with the fact that the Crown is under an obligation to deal with the land on the Indians’ behalf when the interest is surrendered. Any description of Indian title which goes beyond these two features is both unnecessary and potentially misleading.

Therefore, before surrender, the Indians’ interest is characterized by “its general inalienability”. The Act expressly prohibits any alienation or disposition of reserve lands and rights therein except via a surrender in Her Majesty’s favour. What is the impact of an alienation or disposition by the Crown in favour of a third party when no surrender has been obtained as required by section 37 of the Act? More specifically, what is the impact of the defendant’s failure to obtain a surrender from the Odanak Abenaki Band before transferring ownership of the water supply system to Mr. Thibault?

Recently, my colleague Teitelbaum J. in Wewayakum Indian Band v. Canada, [1995] F.C.J. No. 1202 (T.D.) (QL), after a detailed consideration of the relevant cases, summarized the principles applicable to such a situation. At pages 435-437 of his judgment, Teitelbaum J. wrote the following:

As I understand the purpose of obtaining a surrender, where it is proposed to sell or lease reserve land to non-native third parties, the native interest must be released to the Crown. Upon release of the native interest, the Crown could then in turn grant an unencumbered interest to the non-native third party. Dickson J. in Guerin made it clear that the effect of a surrender was to disencumber land of the native interest so as to vest the entire beneficial interest in such land in the Crown. The Crown following the surrender would then be in a position to grant an unencumbered freehold or leasehold interest to a non-native third party. Dickson J. emphasized this point in Guerin when he stated at page 338 (DLR):

When the land in question in St. Catherine’s Milling was subsequently disencumbered of the native title upon its surrender to the federal government by the Indian occupants in 1873, the entire beneficial interest in the land was held to have passed, because of the personal and usufructuary nature of the Indians’ right, to the Province of Ontario under s. 109 rather than to Canada. The same constitutional issue arose recently in this Court in Canada v. Smith … in which the Court held that the Indian right in a reserve, being personal, could not be transferred to a grantee, whether an individual or the Crown. Upon surrender, the right disappeared “in the process of release”.

The surrender process was therefore necessary to merge the Crown’s underlying or ultimate title and the native interest into one title which could then in turn be granted to a non-native third party…. It would also seem to me that to surrender and disencumber the land of its native interests would be counterproductive to the objective of retaining the status of such land as a reserve.

Therefore, according to Teitelbaum J. the Crown may not dispose of or alienate “reserve land” unless there has been a surrender. In other words, without a surrender there can be no alienation of reserve lands or any interest therein. I agree completely with Teitelbaum J.’s comments. In my opinion, the failure to obtain a surrender, as required by section 37 of the Act, meant that the defendant could not transfer ownership of the water supply system to Mr. Thibault. Accordingly, I cannot declare that the plaintiffs own the water supply system.

The plaintiffs’ second conclusion seeks to obtain a $389,000 payment from the defendant. This conclusion is cumulative and not alternative.

In other words, the plaintiffs are seeking to become the owners of the water supply system and to force the defendant to repurchase that system. It seems (no evidence having been adduced) that the sum of $389,000 represents the replacement value of the water supply system.

I would like to point out that the plaintiffs are not claiming any damages from the defendant to compensate them for the defendant’s inability to transfer the ownership of the water supply system to them. At the hearing I informed counsel for the plaintiffs that the second conclusion of his action would be dismissed no matter what the finding on the first conclusion.

Even if I had been prepared to declare that the plaintiffs were the owners of the water supply system, it goes without saying that the second conclusion would have been dismissed. I could not have declared the plaintiffs to be the owners and at the same time ordered the defendant to repurchase the water supply system.

Since I have found that the declaration sought by the plaintiffs cannot be granted and that the plaintiffs are not seeking any damages from the defendant, the second conclusion must necessarily be dismissed.

For these reasons, the plaintiffs’ action is dismissed, the whole with costs in favour of the defendant.

In closing, I would like to mention that it is surprising that the Indian Band was not a party to these proceedings. At the hearing, I asked counsel whether the Indian Band should not be a party. Counsel told me that they considered this unnecessary since the federal Crown was the fiduciary of the Indian Band.

Upon reflection, I am far from convinced that the Indian Band was not a necessary party, within the meaning of paragraph 1716(2)(b) [of the Federal Court Rules, C.R.C., c. 663], to “ensure that all matters in dispute in the action may be effectually and completely determined and adjudicated upon”, since the plaintiffs were seeking a declaration of ownership in respect of a water supply system situated on the Reserve, which was “set apart … for the use and benefit” of the Odanak Abenaki Band. There is no doubt that the Band has a definite interest in the Reserve.

In light of my conclusion that the plaintiffs are not the owners of the water supply system, this is all that will be said on this point.

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