Even small Indian Act bands must meet a high standard for managing money on behalf of their communities, the B.C. Court of Appeal has ruled in ordering a group of band councillors to repay bonuses they granted themselves without consulting their membership.
Five members of the Lower Kootenay Band council must return a total of $25,000 to their community after a unanimous judgment written by Madam Justice Mary Newbury.
The June 3 decision underscores the need for elected band councils to ensure transparency and accountability. It has drawn attention in aboriginal law circles – particularly in British Columbia, where the provincial government has made economic-development deals with aboriginal bands a priority, with some communities in line for billion-dollar settlements if liquefied natural gas projects are built on the West Coast.
"This gives individual band members a powerful authority to call their band councils to account for their money. They have a fiduciary duty to manage these communally owned assets," said lawyer Mary Macaulay, who represented band member Wayne Louie in his civil suit challenging the payments.
"The issue is that band councils do not treat these monies when they come in as their own ATM to pay themselves – which is exactly what they did in this case."
The Lower Kootenay Band, with only 220 members, received a one-time payment of $125,000 in 2009 from the local regional district as compensation for a road that cuts through the reserve. Five members of the band council at that time met in camera and agreed that they should each receive a $5,000 "retroactive honorarium" out of that money.
The band had no formal rules governing how the payment from the district should be spent. The five defendants, including current Chief Jason Louie, argued in court that they had followed the customs of previous councils and that they were acting in the best interests of the band.
Justice Newbury dismissed their defence: "The defendants profited personally from their position as councillors without express authority to do so. … The conclusion seems to me inescapable that this was a breach of fiduciary duty, even in the context of a relatively informal and custom-based governance structure."
Wayne Louie said he pursued the case because of concerns of "bad governance" that he said has led to inequity in the community. There are roughly 100 members living on the reserve near Creston. "We have one side of the community living on the high end, and the other side go to food banks," he said.
Under federal law, Indian Act band councils have the authority to manage their communities' incomes, but their actions require the consent of a majority of their constituents. The court found no evidence that the Lower Kootenay Band council obtained such consent.
"While I agree that it is unrealistic to expect a band to comply strictly with all the rules and regulations of a sophisticated corporation or council, I see no basis on which this very fundamental statutory provision could be effectively ignored," Justice Newbury wrote.
In recent years, the B.C. government has sought to achieve reconciliation with First Nations through economic-development deals with Indian Act bands. It has signed hundreds of revenue-sharing deals involving forestry and other forms of resource development. In the past two fiscal years, those payments have exceeded $78-million.
Those deals pale in comparison with the potential for LNG revenue-sharing pacts. One band, the Lax Kw'alaams, last month rejected a $1.2-billion offer to consent to the proposed Pacific NorthWest LNG plant, but other First Nations have signed similar agreements.
Cheryl Casimer of the First Nations Summit said the appeal court decision should spur band councils to make sure they have the proper legal mechanisms in place to conduct business for their communities.
"It's fortunate that it happened because it puts everyone on notice. If there are communities operating in the old realm of making decisions without involving your membership, it's an eye-opener," she said. "Band governments have to ensure they have the proper measures in place."
The Lower Kootenay Band council has 30 days to seek leave to appeal the decision. Officials did not return calls on Monday.
Justine Hunter