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DAMAGES - For torts - Affecting property - Flood

Thursday, July 11, 2019 @ 8:40 AM  


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Appeal by the Band from a decision awarding them $30 million in equitable compensation for breach of fiduciary duty committed by Canada in connection with flooding of a substantial part of a First Nation reserve. The flooding occurred as a result of a dam built in 1929 outside the appellants’ reserve. Canada did not seek the appellants’ consent to surrender the land nor did it expropriate the land. The appellants argued that the Federal Court erred in the assessment of the value attributed to the flooded land. They argued appropriate compensation should not have been premised on the fair market value of the flooded lands based on their use at the time they were flooded, but ought to have included the value of a revenue-sharing agreement they alleged Canada should have negotiated on the appellant’s behalf. In the alternative, the appellants argued that value of the flooded reserve land should be calculated on a greater amount than that fixed by the Federal Court to take into account the value of the flooded lands in connection with downstream hydroelectric electricity generation. The trial judge concluded that the appellants were only entitled to $1.29 per acre of flooded land. Relying on Canada’s approach with respect to the Kananaskis Project in another case, the appellants argued they were entitled to a premium on the fair market value of the flooded land. They alleged that because Canada required that the land at issue in the Kananaskis Project be compensated in excess of its agricultural value, the same result should have been pursued by Canada regarding the development in this case. The Kananaskis Project resulted from an application by Calgary Power in 1910 to develop a hydroelectric power site on land on a reserve. Most of the lands flooded in that case were outside the reserve. At the time of its application, Calgary Power had expropriation rights.

HELD: Appeal dismissed. There was no basis to award compensation for loss of a revenue-sharing agreement. There was no basis to interfere with the trial judge’s conclusion that Canada would have compensated the appellants in a one-time payment for the flooded land and would not have secured an indefinite revenue-sharing agreement. The trial judge’s determination that had Canada expropriated the flooded land in 1929, it would not have paid more than the fair market value of $1.29 per acre, did not result from either an error of law or from a palpable and overriding error. The trial judge made no palpable and overriding error in concluding that the appellants’ situation was not comparable to the other situations relied on by the appellants and in distinguishing the Kananaskis Falls development project from the appellants’ situation. While the trial judge might have distinguished the Kananaskis Project from the appellants’ situation on an incorrect basis, this error alone did not constitute an overriding error. The trial judge’s conclusion that the two situations were different was sound, and his determination that $1.29 per acre was the proper compensation for the appellants’ flooded land should not be disturbed. It was not possible for the court to determine the legal basis upon which Canada relied to insist on a premium for the land at issue in the Kananaskis Project. The land required for the Kananaskis Project was, however, situated on the reserve and most of the flooded land was outside of the reserve which might have led Indian Affairs to take the view that the Band’s land had a fair market value much greater than its agricultural value. The fact that Canada took a different approach in the present matter did not, per se, lead to the conclusion that Canada breached its duty towards the appellants. The evidence did not support the appellants’ proposition that Canada had a duty in the present matter to insist on a payment over and above the fair market value of the flooded land.

Southwind v. Canada, [2019] F.C.J. No. 672, Federal Court of Appeal, M. Nadon, W.W. Webb and M.J.L. Gleason JJ.A., June 10, 2019. Digest No. TLD-July82019010