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Indigenous - Versus White Land System. Chippewas of Saugeen First Nation v. South Bruce Peninsula (Town)
In Chippewas of Saugeen First Nation v. South Bruce Peninsula (Town) (Ont CA, 2024) the Ontario Court of Appeal considered an indigenous claim seeking damages and a declaration that "excluded coastline (the “Disputed Beach”) forms part of the Reserve, that no third parties have any interest in the Disputed Beach, and that the honour of the Crown and its fiduciary duties were breached by the wrongful demarcation of the Reserve boundaries".
Here the trial court considered the issue of the relationship between treaty land rights and the white private land property systems:[53] The trial judge found that Saugeen’s claim was not barred by any defences. She held that the patents issued along the Disputed Beach could not extinguish Saugeen’s Treaty right to the Reserve land, given they did not demonstrate a plain and clear intention to extinguish the Treaty right, pursuant to the Supreme Court’s direction in R. v. Badger, 1996 CanLII 236 (SCC), [1996] 1 S.C.R. 771, at para. 41. . Chippewas of Saugeen First Nation v. South Bruce Peninsula (Town)
In Chippewas of Saugeen First Nation v. South Bruce Peninsula (Town) (Ont CA, 2024) the Ontario Court of Appeal considered an indigenous claim seeking damages and a declaration that "excluded coastline (the “Disputed Beach”) forms part of the Reserve, that no third parties have any interest in the Disputed Beach, and that the honour of the Crown and its fiduciary duties were breached by the wrongful demarcation of the Reserve boundaries".
The court considered the issue of the relationship between treaty land rights and the white private land property systems, here in the form of the "bona fide purchaser for value defence" (aka 'deferred indefeasibility'). While the court found error with the trial judge's conclusions, it found the order result to be correct:[54] The trial judge similarly found that the bona fide purchaser for value defence did not bar Saugeen’s exclusive right of use and possession of the Disputed Beach. The Town’s reliance on this defence was barred given it had actual notice of Saugeen’s claims at the time it acquired its deeds to land alongside the Disputed Beach. The Families similarly failed in advancing this defence, albeit for a different reason: the trial judge found that, because Ms. Lemon and Ms. Twining had inherited their interest in the property, they were not purchasers for value. Relying on this court’s decision in Benzie v. Hania, 2012 ONCA 766, 112 O.R. (3d) 481, the trial judge held that Ms. Lemon and Ms. Twining were “disentitled from relying on the defence of bona fide purchaser for value without notice” because they had not themselves paid valuable consideration. By contrast, Mr. Dobson – who did not participate in the appeal – was not barred on this basis, given that he paid consideration in the form of a vendor take back mortgage on his property.
[55] The trial judge proceeded to apply the principles set out by this court in Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 CanLII 16991 (ON CA), 51 O.R. (3d) 641 (C.A.), leave to appeal refused, [2001] S.C.C.A. No. 63, and balance Saugeen’s Aboriginal rights in the land with the rights of the innocent landowners. She conducted this balancing exercise in relation to all three Families, even though she had already concluded that Ms. Lemon and Ms. Twining were barred from relying on the bona fide purchaser for value defence.
[56] The trial judge considered the fact that Mr. Dobson had a financial interest in his restaurant and that the Lemon and Twining families had a financial interest in using the vacant beach as a profit-making parking lot. She also acknowledged their sentimental attachments to their properties. She contrasted those interests with Saugeen’s constitutionally-protected Treaty rights and the sacred cultural connection between Saugeen and the lakeshore.
[57] After conducting this balancing exercise, the trial judge concluded that, under the overarching principle of reconciliation, “it would be inequitable to apply the defence of bona fide purchaser without notice to deprive Saugeen of their reserve interest in the Disputed Beach”.
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(a) The trial judge erred by limiting the availability of the bona fide purchaser defence to exclude the Families
[230] We find that the trial judge erred in law when she concluded that the Families were barred from raising the bona fide purchaser defence because Alberta Lemon and Barbara Twining did not purchase their land but rather inherited it. We agree with the Families that the trial judge’s conclusion leads to a “perverse result”, in that it would encourage a claimant to wait for a current bona fide purchaser to pass away before commencing their claim against the beneficiaries of an estate. Put simply, the defence is not lost when property passes from an estate to its beneficiaries without consideration.
[231] As the Supreme Court explained in i Trade, at para. 60 (quoting Lionel Smith, The Law of Tracing (Oxford: Clarendon Press, 1997), at p. 386):The effect of the [bona fide purchaser] defence is to allow the defendant to hold its legal proprietary rights unencumbered by the pre-existing equitable proprietary rights. In other terms, where the defence operates, the pre-existing equitable proprietary rights are stripped away and lost in the transaction by which the defendant acquires its legal proprietary rights. What passes to any heirs is the same as what the good faith purchaser held: the property stripped of pre-existing encumbrances.
[232] We agree with the Families that Benzie does not purport to alter the operation of the bona fide purchaser for value defence as the Supreme Court defined it in i Trade, and as it has existed for centuries. When this court in Benzie held, at para. 37, that “[h]eirs do not fall into the category of a bona fide purchaser for value without notice” because heirs are “volunteers in the sense that they give no consideration for title” to property, it was making the point that beneficiaries are not in the same relationship to testators as bona fide purchasers are to previous owners of whom they were unaware. Bona fide purchasers may stand in a better position than original owners because of the series of transactions that led to their acquisition of the property, and the defence protects that position. Heirs, however, cannot stand in a better position – or even, generally, in a different position – than the estate from which they inherit: Benzie, at para. 37. Equally, however, heirs do not stand in a worse position than the estate.
[233] The trial judge therefore erred in law by misapplying Benzie and by limiting the bona fide purchaser defence in the way that she did. This does not, however, end the matter. As we explain in the next part of these reasons, the trial judge’s application of this court’s decision in Chippewas of Sarnia, and her ultimate conclusion that the Families were not entitled to an equitable remedy even if they were not barred from relying on the defence, do not require appellate intervention.
(b) The trial judge did not err in balancing the interests under the principles of reconciliation to deny applying the bona fide purchaser defence
[234] As noted above, the Families and the intervener take the position that the decision in i Trade and equitable principles demand that the bona fide purchaser defence be absolute. As we will explain, this court in Chippewas of Sarnia held something different.
[235] The Families note that the trial judge’s decision is the first time in Canadian history that a court has dispossessed an innocent third party as a remedy for historical wrongs committed by the Crown alone. In their view, they are unfairly “bear[ing] the brunt” of the Crown’s misdeeds. The intervener points to the English Court of Appeal in the seminal case of Pilcher v. Rawlins (1872), L.R. 7 Ch. App. 259 (Eng. C.A.), where Sir W.M. James, L.J. wrote, at p. 268, that “[t]he plea of purchaser for valuable consideration without notice is an absolute, unqualified, unanswerable defence”. The intervener submits that it is important for the defence to be absolute because it must be capable of consistent, predictable application.
[236] However, in Chippewas of Sarnia, this court held, at para. 309:[W]e accept that … the need to reconcile aboriginal title and treaty claims with the rights of innocent purchasers … should be considered on a case-by-case basis. It may well be that where the denial of the aboriginal right is substantial or egregious, a rigid application of the good faith purchaser for value defence would constitute an unwarranted denial of a fundamental right. [Emphasis added.] [237] It was not necessary in Chippewas of Sarnia to consider the possibility outlined here – that the test should not be applied rigidly where there is a substantial denial of an Aboriginal right – because the court found that the First Nation had accepted the terms of the land surrender in question. But the court made it clear that the bona fide purchaser defence is not absolute, and must yield when fairness demands it.
[238] Therefore, in our view, it was open to the trial judge, who balanced all of the competing interests, to find that “fairness dictates that a rigid application of the doctrine of bona fide purchaser without notice would render an injustice in the circumstances of this case”.
[239] It is not surprising that the parties have been unable to find any reported cases where the defence has not succeeded. This is because according to traditional property law doctrine, a bona fide purchaser’s interest will almost always carry the stronger equity. However, this is not always the case when Indigenous interests in land are in play, especially when the land at issue was set aside as a reserve. Due to the sui generis nature of a First Nation’s interest in reserve land, the doctrinal rules of property law do not necessarily apply without modification. Thus, when an Indigenous land interest is competing against later acquired legal rights, it is incumbent on the court to weigh the equities and specifically to consider the conscionability of upholding the legal rights of the bona fide purchaser in the circumstances.
[240] It is important to emphasize how significantly the competing interests in Chippewas of Sarnia, where the equities clearly favoured the private landowners, differ from those in the present case. Here, the Families’ attachment to their properties is largely rooted in their cottages, which in both cases are across the street from the Disputed Beach. This decision will not alter their rights to those cottages. Both of the Families had primarily a commercial interest in the beach, which they used as a parking lot for tourists. By contrast, as the trial judge held, Saugeen has a “constitutionally protected Treaty right to exclusive possession of its reserve territory – all of it – until otherwise surrendered”. More than that, the Saugeen people have a “cultural connection … [to] the land and water, which is sacred”. As the Supreme Court observed in Southwind, at para. 105, reserve lands are not “fungible commodities that can be easily replaced”. The constitutionally-protected, spiritual connection of Saugeen to its unceded Reserve land outweighs the commercial interests of the Lemons and Twinings.
[241] The bona fide purchaser for value defence is not absolute. It is an equitable tool to achieve fairness: Canadian Imperial Bank of Commerce v. Pena, 2022 ONSC 6941, at para. 13; Urban Metal Contracting Ltd. v. Zurich, 2022 ONCA 589, 163 O.R. (3d) 652, at para. 59. There is no principled reason that a treaty-protected reserve interest of a First Nation should, in every case, give way to the property interest of a private purchaser, even an innocent, good faith purchaser for valuable consideration. Such an approach is inconsistent with this court’s decision in Chippewas of Sarnia, fails to recognize the sui generis nature of Indigenous land interests, and would not move us closer to reconciliation.
[242] We note, as did the trial judge, that the Families are not left without remedies. Pursuant to the Phasing Order, the Families’ claims for compensation will be determined in Phase 2 of the trial.
[243] The trial judge’s balancing of the competing interests, and her ultimate finding that the equities in this case favoured Saugeen, are owed deference. As there is no basis on which to interfere with the trial judge’s exercise of discretion, we would reject this ground of appeal.
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