APPEAL WATCH: Mohawk Council of Kanesatake v. Sylvestre On The Right To Seize Band Property

The Supreme Court of Canada (“SCC”) is set to hear an appeal out of the Quebec Court of Appeal (“QCCA”) on where the prescription period for the creditor’s right to seize band property was interrupted by a notice of execution. The SCC will require the parties in Mohawk Council of Kanesatake v. Sylvestre, 2023 QCCA 1603 [Mohawk Council of Kanesatake], to make submissions addressing the applicability of s. 89 of the Indian Act, (RSC 1985, c I-5) [Indian Act] and whether the moveable property of the band is “situated on a reserve.”

Background

Extinctive prescription is a means of extinguishing an obligation when it remains unused for a certain period of time. Under the Civil Code of Quebec (CQLR c CCQ-1991) [C.C.Q], there is ordinarily a 10 year period to exercise a right which is derived from a judgment [C.C.Q. arts 2921-2922]. Article 2892 C.C.Q. provides that filing a judicial application before the expiry of the prescriptive period will cause a civil interruption of prescription.  Article 2892 specifies that a seizure is considered a judicial application in the context of a civil interruption of prescription. If the application is dismissed, discontinued or perempted, then prescription is not interrupted [Mohawk Council of Kanesatake, paras 20-22]. 

Facts

In 2001, the Mohawk Council of Kanesatake (the “Council”) retained the legal services of various parties, including Mr. Sylvestre (collectively, the “Advisors”), to challenge a Commission de protection du territoire agricole du Québec decision which approved a mining project in Oka [Mohawk Council of Kanesatake, para 2]. 

The Council was unable to afford the mounting legal expenses due to financial difficulty. The Advisors obtained default judgments against the Council in 2004. In January 2005, PricewaterhouseCoopers, acting for the Council, offered to settle for 25% of the amount of the judgments in exchange for a release. The Advisors rejected the settlement offer and attempted several times to seize the assets of the Council from 2005 to 2007 — some seizures were successful and others failed. Although these events interrupted the prescription period, there was no clear time where prescription began to run again. In December 2008, the Council renounced the benefit of the elapsed prescription period in a resolution [Mohawk Council of Kanesatake, paras 3-5].

Later in June 2016, the Advisors conducted post-judgment examinations to confirm that the Council did not own any assets situated off the reserve. The Advisors filed a notice of execution with the court in October 2016  and the bailiff served the notice on the Council in November. The notice authorized the bailiff to seize moveable property in the Council’s possession. However, the bailiff did not attempt to seize any property, the bailiff believed that the Indian Act did not permit the seizure of property situated on the reserve. The bailiff returned in February 2017 and recorded minutes which stated that Grand Chief Simon declared that there were no Council assets outside of the reserve [Mohawk Council of Kanesatake, paras 7, 11-12]. 

The next day, the Council’s lawyer notified the Advisors that it was discovered the Council owned a piece of land in Joliette which was acquired under a stipulation that it was unseizable. The Advisors did not attempt to seize the property but instead registered a legal hypothec on it [Mohawk Council of Kanesatake, paras 13]. 

In March 2017, the Council brought an application for declaratory judgment that the Joliette property did not form part of its patrimony as it was acting as a fiduciary for members of the community of Kanesatake, or in the alternative, that the property was exempt from seizure. The application was stayed pending the result of the subsequent 2020 application for which the Council sought confirmation that the prescription period had expired [Mohawk Council of Kanesatake, paras 14-15].

Judicial History 

At trial, Poulin J.S.C. found that the notice of execution interrupted the prescription period. She deemed the events to be an unsuccessful seizure which is not a dismissed application within the meaning of article 2894 C.C.Q. Poulin J.S.C. also held that the Council accounting for the amount owed to the Advisors within its books and financial statements is not an acknowledgement of rights which would interrupt prescription under article 2898 C.C.Q.

Issues 

The Council appealed the decision to the QCCA, which addressed whether the prescription period was interrupted by the filing and service of the notice of execution. This broad issue raised five sub-issues, two of which are excerpted below and were primarily addressed by the QCCA. [Mohawk Council of Kanesatake, paras 18-19].

1. Did the trial judge err in law in concluding that notice of execution leading to an unsuccessful seizure constitutes a “judicial application” in the meaning of article 2892 of the C.C.Q.?
2. Did the trial judge err in law when concluding that the bailiff did not need to record in minutes that no seizure could be performed?

QCCA Decision

The Council argued that the unsuccessful seizure by the bailiff required that minutes be served on the debtor to record that no seizable assets were found. The Council contended that the bailiff’s failure to prepare and serve minutes denied the Council the opportunity to seek an annulment of the seizure application [Mohawk Council of Kanesatake, para 28].

The QCCA dismissed the Council’s appeal — the QCCA stated that the Code of Civil Procedure, (CQLR c C-25) [C.C.P.] did not create a specific obligation on the bailiff to prepare minutes in the event of an unsuccessful seizure. The QCCA determined that article 707 C.C.P. contemplates for a bailiff to record minutes describing the property seized when placed under judicial control. The seizure can then be challenged pursuant to grounds enumerated within article 735 C.C.P. Although article 707 did not preclude the bailiff from preparing minutes of nulla bona upon the request of the creditors, there is no positive obligation placed on the bailiff [Mohawk Council of Kanesatake, paras 29, 31].

The QCCA further states that the absence of minutes did not harm the Council. The minutes would have solely confirmed that the seizure was unsuccessful because the bailiff concluded that the Indian Act provisions applied. The Council was both aware of the unsuccessful seizure and the reason thereof when the bailiff served the notice of execution and conversed with Grand Chief Simon. Additionally, the Council was unable to oppose the seizure because no property was seized or placed under judicial control — the Council maintained possession of all assets [Mohawk Council of Kanesatake, paras 31-32].

The QCCA concluded that the special circumstances led to an unsuccessful seizure, which interrupted the prescription period as the Advisors expressed a clear intention to collect the funds owed by the Council [Mohawk Council of Kanesatake, para 33].

Analysis – An Opportunity To Clarify Reserve Property

The SCC required both parties to prepare submissions pertaining to whether the property was situated on the reserve, and to the applicability of s. 89 of the Indian Act. This is surprising given that the central issue of the 2020 application, (the subject of the QCCA appeal), was the interruption of the prescription period, leaving the issue of whether the property was situated on the reserve to the stayed 2017 application.

The SCC is likely taking the opportunity to clarify the law surrounding the connecting factors approach set out in Williams v. Canada, 1992 CanLII 98 (SCC) [Williams] which was most recently revisited in Bastien Estate v. Canada, 2011 SCC 38 [Bastien]. Bastien was the last time the SCC grappled with the evolving question of whether property is considered “on a reserve”. In Bastien the court interpreted “on a reserve” to mean within the boundaries of the reserve, applying the factors outlined in Williams to the intangible property at issue [para 4].

The SCC may view the decision in Bastien to be too narrowly applicable given that the present case departs from the tax context of both Williams and Bastien. Since 2011 there has been an explosion of commercial and personal intangible property. The evolving state of e-commerce and digital assets such as cryptocurrency and NFTs do not easily lend themselves to being either within or outside of the boundaries of the reserve. The stagnant Indian Act fails to contemplate the complex reality of e-commerce and although the s. 87 & 89 protections remain — the applicability of such provisions cannot be settled without SCC guidance regarding how to apply the connecting factors approach in light of these technological developments. 

The Williams approach was meant to be flexible such that the courts may apply the provisions on a case-by-case basis. However, the SCC may see Mohawk Council of Kanesatake as an opportunity either to clarify how these factors have developed since last visited, or potentially set out a more comprehensive test. The previous approach in Williams was often narrowly applied on a “Indian qua Indian” basis, leading to the subsequent clarification in Bastien [Bastien, paras 23, 26-27]. A further clarification of the approach would not come as a surprise in the wake of the United Nations Declaration on the Rights of Indigenous Peoples Act, (SC 2021, c 14) [UNDRIP Act] which received assent 10 years after Bastien. 

The SCC can potentially lean on the purpose of s. 87 & 89 of the Indian Act as stated by La Forest J. in Mitchell v. Peguis Indian Band, [1990] 2 SCR 85 [Mitchell]:

These provisions are not intended to confer privileges on Indians in respect of any property they may acquire and possess, wherever situated.  Rather, their purpose is simply to insulate the property interests of Indians in their reserve lands from the intrusions and interference of the larger society so as to ensure that Indians are not dispossessed of their entitlements. [Emphasis added; Mitchell, 133; Bastien, para 21]

Sections 87 and 89 may be interpreted as having an expanded purpose in light of the UNDRIP Act, which states in the preamble:

Whereas the Declaration emphasizes the urgent need to respect and promote the inherent rights of Indigenous peoples of the world which derive from their political, economic and social structures and from their cultures, spiritual traditions, histories, philosophies and legal systems, especially their rights to their lands, territories and resources;

The UNDRIP Act refers to the rights of Indigenous peoples to govern their own economic structures, land, and resources. Further, Article 3 links such rights to the self-determination of Indigenous peoples, reaffirming the freedom to pursue economic development. Article 4 adds that in exercising the right of self-determination, the freedom consists of autonomy in matters of internal and local affairs. Article 5 contemplates a separate right for Indigenous people to maintain distinct institutions, while retaining the right to participate fully in the State.

The UNDRIP Act opens the door to the SCC to carve out a new interpretation to s. 89 and potentially a new addition to the interpretation of s. 90 of the Indian Act. Section 90 deems certain property which is physically located off the reserve to be situated on the reserve. This rule recognizes that certain property should be entitled to s. 89 protection despite being outside the strict language of s. 89.

As La Forest J. stated in Mitchell — the purpose of s. 89 is to insulate the property interests of Indigenous peoples in their reserve lands from the interference of larger society, to ensure that Indigenous peoples are not dispossessed of their entitlements. Although the UNDRIP Act does not expand the meaning of reserve in the strict sense, the affirmation of rights could potentially expand the scope of entitlements enjoyed by Indigenous peoples.

Article 20 crucially expands the language of economic activity from merely traditional (such as in the Indian qua Indian approach) to “other economic activities”. This broad language significantly widens the berth that the State should give Indigenous peoples when read in conjunction with Articles 3, 4, and 5, which recognize the ability to economically organize within institutions and maintain autonomy in both internal and local decisions. Read together, commercial property off the reserve may be seen as connected to the reserve such that the property is situated there for purposes of the Indian Act when it directly and solely benefits Indian peoples who are situated on reserve. Although this would sharply depart from previous jurisprudence, the UNDRIP Act gives the SCC room to expand s. 87 and 89 protections as broadly as possible for the benefit of Indigenous peoples. 

Regardless of how the SCC handles the unique circumstances of Mohawk Council of Kanesatake, the decision will have far reaching implications on the property held by Indigenous Nations across Canada.