Southwind v. Canada

Southwind v. Canada
Court (s) Database
Federal Court Decisions
Date
2017-10-12
Neutral citation
2017 FC 906
File numbers
T-2579-91
Decision Content
Date: 20171012
Docket: T-2579-91
Citation: 2017 FC 906
Ottawa, Ontario, October 12, 2017
PRESENT: The Honourable Mr. Justice Zinn
BETWEEN:
ROGER SOUTHWIND FOR HIMSELF, AND ON BEHALF OF THE MEMBERS OF THE LAC SEUL BAND OF INDIANS
Plaintiffs
and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
Defendant
and
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO
Third Party
and
HER MAJESTY THE QUEEN IN RIGHT OF
MANITOBA
Third Party
JUDGMENT AND REASONS
TABLE OF CONTENTS
Blank / En Blanc
Blank / En Blanc
Para
I.
Introduction
1
II.
The Witnesses
15
Blank / En Blanc
A. The Plaintiffs’ Witnesses
15
Blank / En Blanc
B. Canada’s Witnesses
52
Blank / En Blanc
C. Ontario’s Witnesses
73
III.
Assessment of the Witnesses
77
IV.
Approach
92
V.
Historical Background
104
Blank / En Blanc
The Treaty and the Reserve
104
Blank / En Blanc
The LSFN Way of Life
112
Blank / En Blanc
The Lac Seul Storage Project
116
Blank / En Blanc
The Impact of the Project on the LSFN Reserve and other properties
152
Blank / En Blanc
Clearing Timber from the Foreshore
163
Blank / En Blanc
The Raising Water Level and the Impact on Reserve Housing
187
Blank / En Blanc
Other Impacts on the Reserve as the Water Rose
191
Blank / En Blanc
Negotiating the LSFN Claim
196
Blank / En Blanc
Manitoba Reimburses Canada for Capital Costs
210
Blank / En Blanc
Claims Paid by Canada and the Provinces Under the Agreement
213
Blank / En Blanc
LSFN Claims and Receipts Post-1943
214
VI.
Summary of Relevant Facts from the Historical Record
218
VII.
The Crown’s Duty to the LSFN
219
VIII.
Equitable Compensation
228
Blank / En Blanc
Whitefish Lake Band of Indians
250
Blank / En Blanc
Huu-Ay-Aht First Nations
258
Blank / En Blanc
Beardy’s & Okemasis Band #96 and #97
278
IX.
What Options Were Available in 1929
288
X.
Canada’s Legal Duties to the LSFN Relating to the Lac Seul Storage Project
296
XI.
What Would Have Occurred in 1929
330
Blank / En Blanc
Horseshoe Falls 1911
335
Blank / En Blanc
Kananaskis Falls 1914
339
Blank / En Blanc
Ghost River 1915
343
Blank / En Blanc
The Stoney Indian Band Agreements
345
Blank / En Blanc
Columbia River Treaty
347
Blank / En Blanc
Would Canada Have Negotiated a Benefit Sharing Arrangement?
350
XII.
The Value of the Flooded LSFN Reserve Land
376
XIII.
Timber
396
XIV.
Erosion
415
XV.
Community Infrastructure
431
XVI.
Livelihood Losses
438
XVII.
Summary of Losses
443
XVIII.
Past Compensation Provided to LSFN for Flooding Losses
445
XIX.
Compensation Today for Prior Losses
457
Blank / En Blanc
The Hosios Report
468
Blank / En Blanc
The Booth-Kirzner Report
477
Blank / En Blanc
The Lazar-Prisman Report
480
Blank / En Blanc
How to Put the LSFN in the Position It Would Have Been In But for the Breach?
483
XX.
Punitive Damages
513
XXI.
Declaration
526
XXII.
Laches
530
XXIII.
Third Party Claims
539
XXIV
Costs
553
XXV.
Closing
554
“If it had been a white settlement, no person would have dared to flood the property, without paying compensation before flooding took place.”
- H. J. Bury, Department of Indian Affairs, March 16, 1937
I. INTRODUCTION
[1] The Lac Seul First Nation [LSFN] claims that Canada breached its treaty with the LSFN, the Indian Act, RS 1927, c 84, and its fiduciary duties and obligations. As a consequence, the LSFN claims damages from Canada for losses caused to it and its members as a result of the flooding of a part of Reserve No. 28 [Reserve or LSFN Reserve] following the construction of a dam at Lower Ear Falls [the Ear Falls Storage Dam] where Lac Seul drains into the English River.
[2] In 1929, the Ear Falls Storage Dam was completed. Over the next few years the water level of Lac Seul was raised to a maximum high-water level of 1,172 feet – an increase of some 10 feet above its pre-dam normal level. The lake remains flooded today and is likely to continue to be flooded as the water stored behind the Ear Falls Storage Dam is used to support hydroelectric power generating stations downstream on the English River in Ontario and on the Winnipeg River in Manitoba.
[3] On the English River, in Ontario, four hydroelectric generating stations were developed after the Ear Falls Storage Dam was completed: Ear Falls (1929-30), Manitou Falls (1956), Caribou Falls (1958), and the Lac Seul Generating Station (2009). Currently, there are six hydroelectric generating stations on the Winnipeg River in Manitoba. When the Ear Falls Storage Dam was built at the outlet of Lac Seul, there were three generating stations in operation on the Winnipeg River: Pinawa (1906 – 1951), Pointe du Bois (1911), and Great Falls (1923). Four more generating stations were built in Manitoba after the Ear Falls Storage Dam was completed: Seven Sisters (1931), Slave Falls (1931), Pine Falls (1951), and MacArthur Falls (1954).
[4] The LSFN Reserve borders a part of the north shore of Lac Seul. The LSFN consists of approximately 2,700 members. About one-third of the members live on the Reserve in three communities: Kejick Bay and Whitefish Bay, both of which are located on Lac Seul, and Frenchman’s Head, which is located on Lost Lake.
[5] As a consequence of the flooding, the parties agree that 11,304 acres of the LSFN Reserve land is now under water. With the flooding, the LSFN lost the use and enjoyment of this portion of its Reserve. The flooding had other impacts on the LSFN including lost houses, lost wild rice fields, and the separation by water of two of its communities, Kejick Bay and Whitefish Bay.
[6] Canada took no steps then or subsequently to legally authorize the “taking” through flooding of these Reserve lands. Moreover, no compensation was paid to the LSFN relating to the flooded lands or consequent damages suffered until November 17, 1943. A sum the LSFN says was too little and too late paid.
[7] The LSFN in its Statement of Claim, claims damages from Canada for the loss of Reserve lands, for the loss of use of Reserve lands, for the loss of use of hunting, fishing and harvesting rights in its traditional territory, and for what are described as “avoidable losses” relating, among other things, to the destruction of gardens, hay lands, farm crops, wild rice crops, timber, houses, cabins and other buildings, and for the destruction and desecration of graves.
[8] It is fair to say that the theory of the Plaintiffs’ case has changed during the 25 years of this litigation; indeed, it changed during the course of the trial. The claim as it related to non-Reserve lands and many of the “avoidable losses” claims was not pursued in closing submissions.
[9] The principal claim of the LSFN is summarized in its counsel’s opening statement as follows: “[T]he main issue is whether Canada was obliged as the band’s fiduciary to obtain a royalty or a rental or some other form of return on the investment that Canada forced the band to make in this project by taking its land.”
[10] In closing, LSFN counsel quantified the claims advanced by the LSFN as follows: “[E]quitable compensation for a loss of opportunity for hydroelectric benefits, past present and future in the amount of $506.6 million” and also “avoidable [on Reserve] losses, including erosion, timber, community infrastructure in the amount of $40.0 million.” The LSFN also seeks “a declaration that their legal interests in the flooded lands and the freeboard area has not been encumbered or extinguished.” Lastly, the LSFN seeks an award of punitive damages and its costs.
[11] Canada defended the main action and commenced third party claims against both Ontario and Manitoba for contribution and indemnity, pursuant to the terms of the Lac Seul Conservation Act, 18-19 Geo V, c 32 (Canada) and An Act Respecting Lac Seul Storage, 18 Geo V, c 12 (Ontario). Both Ontario and Manitoba, in addition to defending the third party claims, defended the main action.
[12] The action was tried in Ottawa over many days. All but two of the 24 witnesses called by the parties were expert witnesses. In addition to the oral evidence and facts agreed upon by the parties, 8,347 documents were entered as exhibits at trial. The event giving rise to the litigation happened long ago and therefore it is not surprising that many of these documents are historical archival records. Others are of more recent origin, including hundreds of pages of expert reports.
[13] The parties called historians, foresters, erosion specialists, hydrologists, economists, appraisers, and others to be qualified as expert witnesses. Each was so qualified by the Court, in terms described below. It is not possible, given the extensive factual matrix detailed by the exhibits and witness testimony, to summarize all of the events that took place prior to and following the Ear Falls Storage Dam construction, the evidence tendered relating to the losses suffered, the quantification of those losses, or the extensive expert reports.
[14] I assure the parties that I have read and considered all of the evidence relied on by the parties in support of their submissions in this action. I will not summarize the evidence of each of the witnesses; rather, I will outline the facts as I have found them, and where necessary, will explain the rationale for my findings.
II. THE WITNESSES
A. The Plaintiffs’ Witnesses
Chief Clifford Bull
[15] Chief Bull gave evidence as to the membership of the LSFN, and the geography of the LSFN Reserve. He described a number of flooding effects including tree stumps in the water, boating accidents due to boats hitting stumps in the water, people falling through the ice due to the unpredictability of the water, and the absence of wild rice. He also testified about his trapping and the effects the flooding had on muskrat and beaver populations. He outlined the research that preceded this claim, and its timing. He testified that the LSFN submitted a claim in Canada’s Specific Claims Process on September 24, 1985, regarding the flooding of its Reserve.
[16] He testified about an agreement the LSFN entered into with Ontario Power Generation [OPG] in November 2006, regarding the new generating station, the Lac Seul Generating Station that came on line in 2009, located next to the generating station built in 1929 at the Ear Falls Storage Dam. The description of the OPG facilities in the agreement does not include the Ear Falls Storage Dam which belongs to Ontario. The agreement speaks to $11.6 million in compensation OPG has agreed to pay the LSFN. It also provides that OPG offer LSFN an opportunity to purchase an equity position of 25%. Chief Bull testified that the LSFN borrowed over $4 million to invest in the opportunity. The agreement contains releases but excludes Reserve lands or any impacts caused by the Ear Falls Storage Dam. He testified that the limited partnership agreement between OPG and LSFN was made effective in December 2008, and that since 2009 when the Lac Seul Generating Station went into operation, LSFN has received $3.8 million in revenue.
[17] The Chief also testified about other agreements the LSFN entered into regarding mining and forestry.
David Gordon
[18] David Gordon is a LSFN band member and was its Chief from 2002 to 2006. He is currently the LSFN Housing Manager, and was the project manager for the Whitefish Bay Road and Bridge Project and the Kejick Bay Causeway Project. He explained that Kejick Bay became an island when the flooding occurred but that previously Kejick Bay and Whitefish were connected. He stated that the purpose of the road and the causeway was to connect the communities for the health and safety of the residents.
[19] He testified about the contributions to these projects made by the LSFN and Indigenous and Northern Affairs Canada [INAC]. The parties are agreed that in 2009, the Kejick Causeway between Kejick Bay Island and the Reserve mainland was completed for a total cost of $4,538,000 with INAC paying $3,038,000 and the LSFN paying approximately $1,500,000. They also agree that the Whitefish Bay Road and Bridge were completed in 2009 for a total cost of $2,379,930 with INAC paying $1,043,600, the LSFN paying approximately $250,000, and the remainder coming from other sources.
[20] Mr. Gordon testified that the funding could have been used for other infrastructure projects had the communities not been separated by the flooding.
[21] Mr. Gordon was Chief of the LSFN when negotiations began for the OPG agreement described by Chief Bull and Mr. Gordon spoke to his involvement and his understanding of its purpose.
[22] Like Chief Bull, Mr. Gordon testified about his trapping and the effects the flooding had on muskrat and beaver populations.
Gwynneth C. D. Jones
[23] Gwynneth Jones was qualified as “a historian having expertise with respect to the interpretation of the interaction between the Canadian government and Aboriginal Peoples based on historical records.” She provided a lengthy report and testimony covering the period 1871 to 1943, concerning the construction of the Ear Falls Storage Dam and the flooding of the LSFN Reserve.
[24] She also provided a second report and gave testimony concerning water power development on the Bow River in Alberta. This evidence spanned the period from 1903 to 1947, and focused specifically on the relationship between the power developers and the Stoney Indian Band on Reserves 142, 143, and 144. These projects and the financial arrangements with that First Nation are relied upon by the LSFN as a precedent of what Canada ought to have obtained to protect the interests of the LSFN.
Trevor E. Falk
[25] Mr. Falk was qualified an expert witness, being a hydraulic engineer, both by training and experience, and having experience with the water level control at both Lac Seul and Lake of the Woods. It was further accepted by the Court that he has knowledge and experience of hydroelectric generation generally and, more particularly, with respect to the facility or facilities that use the water coming from Lac Seul.
[26] Mr. Falk gave evidence generally regarding the water level and the control of the water level of Lac Seul and the role played in that by the Lake of the Woods Control Board. The portions of his report describing lakeshore erosion was found by the Court not to be admissible evidence, as he has no expertise in that area.
[27] He testified as to the water levels of Lac Seul in the years between 1929 and 1934, and the natural, ordinary high-water level of the lake prior to and after the construction of the Ear Falls Dam. He explained the effect of wind and waves on the lake on the shoreline and testified that it was his opinion that the affected Reserve lands would include more than the lands up to the high-water level of 1,172 feet; it would also include the five vertical feet above that level referred to as the “freeboard” area.
P.M. (Patt) Larcombe
[28] There was an objection from Ontario, supported by Canada, to the qualification of Ms. Larcombe as an expert witness. After a lengthy voir dire and an adjournment to consider the objection, the Court ruled that she would be accepted as an expert: See Southwind v Canada, 2016 FC 1132.
[29] Ms. Larcombe was qualified as an expert witness in cultural geography with a specialty in: (1) aboriginal traditional livelihood loss of use valuation; and (2) evaluating impacts on First Nations’ livelihood and living conditions resulting from industrial and hydro development projects. She was permitted to provide an expert opinion on loss of use of the LSFN’s traditional economy, in relation to losses it experienced on Reserve lands and traditional territory as a result of the construction of the Ear Falls Storage Dam and flooding of Lac Seul, specifically with respect to: (a) decreased opportunity and success in LSFN’s traditional harvesting practices; (b) lost opportunity to harvest wild rice for human nutritional needs and income; (c) decreased opportunity and success in trapping aquatic furbearer species; (d) lost opportunity to grow vegetable products for human nutritional needs; and (e) lost opportunity to feed cattle that were maintained for human nutritional needs. She was also permitted to provide factual historical evidence relating to interment sites of the LSFN that were lost or damaged by the flooding.
[30] Ms. Larcombe provided her opinion on the losses suffered by the LSFN. Her terms of reference were to first prepare a report examining the loss of opportunity over time for the members of the LSFN to harvest or to earn a livelihood from the component of the traditional territory that was impacted by the impoundment of Lac Seul. Second, she examined avoidable losses. Ms. Larcombe developed nominal dollar value assessments for the loss of use from some point after 1929 to 2012. These values were gross values. Third, Ms. Larcombe was asked to form an opinion on which of the losses would have been experienced on the Reserve versus those experienced off the Reserve.
[31] She examined six loss of use areas: hay for livestock, food from gardens, trapping income, food from wildlife, food and income from manomim (wild rice), and food from fishing. She opined that the sum of annualized nominal dollars for these losses for the period 1929 to 2012 was $9,277,853 on-Reserve, and $15,559,824 off-Reserve. Her loss estimates were subsequently used by other witnesses called by the Plaintiffs to provide evidence on the value today of the losses suffered in the period since 1929.
[32] However, as discussed below, in the end her evidence was largely irrelevant to the claim as in closing argument counsel conceded “that Larcombe is not the appropriate measure of damages in this case.”
Greg W. Scheifele
[33] Mr. Scheifele was qualified as an expert in forestry, ecology, and environmental planning; however, his testimony was restricted to the contents of his expert reports, which were more circumscribed than his areas of expertise.
[34] Mr. Scheifele provided evidence on timber losses caused by the flooding of Lac Seul. Additionally, he provided his opinion on the costs of clearing the timber and brush in the flooded areas as clearing was not done prior to the flooding of Lac Seul. He testified that the nominal value of the loss of timber revenue through dues to the LSFN was $66,081.48. He also testified that the estimated cost of clearing the 8,920 acres of woodland on the shoreline of the LSFN Reserve to the 1,172-foot level would have been $767,800.00 in 1929. He testified that this figure would be somewhat larger in light of the parties’ subsequent agreement on the flooded acreage.
James R. (Northcote) Gilles
[35] Mr. Gilles was qualified as an expert witness “to provide opinion evidence generally on the energy sector with particular expertise in hydroelectric power utilities and economic models related thereto, and specifically on the valuation of hydroelectric economic benefits resulting from the flooding of Lac Seul for hydroelectric development.”
[36] Mr. Gillis was asked by the LSFN to analyze the hydroelectric generation benefits and to apply First Nation precedents to provide to the Court his opinion of what a reasonable sharing in a “modern context” might look like.
[37] Mr. Gillis stated that the storage created by the Ear Falls Storage Dam was a critical piece of infrastructure as it was “massively beneficial” to the hydroelectric potential that hadn’t yet been developed and to the downstream facilities that had been developed. He examined the Bow River Stoney First Nation precedent, the letter of March 11, 1968, from E. B. Easson, Secretary, Ontario Hydro to the Minister of Lands and Forests, Ontario, which provided estimates of the annual value of electricity gained from storage of water in three-foot increments on Lac Seul, and the Columbia River Treaty between Canada and the United States of America, all with a view to opining on shared benefits of power storage.
[38] Mr. Gilles, in addition to his first report dated January 31, 2014, provided a second report dated June 15, 2015. His analysis “yielded an estimate of $408 million as being the best estimate of a minimum, reasonable revenue sharing arrangement with the Lac Seul First Nation commensurate with the benefits that the Lac Seul Conservation Dam provided to downstream facilities.” He described that estimate as “both conservative and reasonable.”
Rob Rabichuk
[39] Mr. Rabichuk is a chartered accountant. He was accepted as “an expert witness to give opinion evidence, generally, on the accounting of Indian trust accounts, and specifically regarding the historic revenue and expenditures in the Lac Seul First Nation trust accounts.”
[40] Mr. Rabichuk examined the Indian Affairs trust records of the LSFN and expenditure coding documents. He grouped the expenditures into community infrastructure; health and welfare; other; status memberships; and distribution to individuals. He stated that these were selected to assist Professor Hosios, an economist called by the LSFN, who uses three categories in his analysis: savings, investment, and consumption. He examined the records for the period from the fiscal year ending 1925 to the fiscal year ending 2011. Although the LSFN has two trust accounts: a capital account, which is like a savings account and includes all the sales of land and proceeds for non-renewable resources, and a revenue/interest account, which is like a chequing account and includes everything else, for the purposes of the report, Mr. Rabichuk grouped all of the spending together.
[41] Mr. Rabichuk concluded that for the period 1925 through 2011, LSFN total revenue was $1,582,645.95 and total expenditures were $1,442,051.80. The expenditures were broken down as Community Infrastructure, $409,295.39 or 25.9%; Health and Welfare, $162,161.35 or 10.2%; Status and Membership, $6,461.52 or 0.4%; Other, $756,739.33 or 47.8%; and Distributions to Individuals, $107,394.21 or 6.8%.
Norris Wilson
[42] Mr. Wilson was qualified as an expert in the valuation of land and improvements, and found qualified to give opinion evidence as to whether the analysis, opinions and conclusions of Duncan Bell (an expert called by Canada and Ontario) are appropriate and reasonable. He was specifically limited to doing so within the standards applicable to technical reviews as provided for in the Canadian Uniform Standards of Professional Appraisal Practice and cautioned that he was not to give opinions of value.
[43] Mr. Wilson testified to three errors he found in the land valuation report of Mr. Bell: (1) he failed to correctly apply the principle of highest and best use, (2) he used the direct comparison approach, and (3) he failed to make findings and assumptions consistent with the historical record. Mr. Wilson offered the opinion that the highest and best use of the flooded Reserve lands at the effective date “is for flooding and storage of water in connection with the hydroelectric project at Lac Seul” and that the failure of Mr. Bell to use this resulted in an “unsupported estimate of value.”
Arthur Hosios
[44] Arthur Hosios is a professor of economics at the University of Toronto. He was qualified as an expert to give opinion evidence on macro and microeconomics, and in particular on applied microeconomics, and with expertise in the calculation of the present value of First Nations’ compensation.
[45] Professor Hosios’ objective in his report [the Hosios Report] was to estimate equitable compensation for the valuation date (2012 or 2016) for losses experienced by the LSFN as a consequence of the flooding of Reserve lands and some traditional territories in 1929. He used a retrospective approach to model equitable compensation. He explained that his report was his attempt to arrive at a value for the equitable compensation from an economic view based on the Ontario Court of Appeal judgment in Whitefish Lake Band of Indians v Canada (Attorney General), 2007 ONCA 744 [Whitefish]. His analysis will be discussed and considered in more detail below.
Marcel Deveau & H. James Hawken
[46] Mr. Deveau and H. James Hawken of exp Services Inc. submitted a joint report entitled “Erosion Repair Costing Study” [the exp Report].
[47] Mr. Deveau was accepted as an “expert to give opinion evidence generally, on coastal geology, shoreline erosion and protection, and specifically, for the appropriate protection measures to mitigate erosion of Lac Seul.” He was not qualified to give evidence with respect to the specific reasons for any soil erosion at Lac Seul.
[48] He testified that they identified some 50 sites constituting approximately 14.5 kilometres of shoreline on the Reserve as requiring erosion protection, and four riprap design solutions were created to protect those sites from erosion. The number of sites was later reduced following receipt of the report from Canada’s erosion expert, Peter Zuzek. A costing was done for this proposed work. Mr. Deveau was responsible for the shoreline protection design concepts.
[49] Mr. Hawken was qualified as an expert to give opinion evidence generally on civil engineering project management relating to water resources and specifically on design and costing of shoreline protection on Lac Seul to mitigate erosion issues.
[50] Mr. Hawken stated that he was tasked with identifying the most significant susceptible shorelines that were eroding, and to make preliminary designs to protect those areas along with the estimated cost to carry out the protective designs.
[51] Mr. Hawken testified that after changes in the initial report, some 11.3 km of shoreline was proposed to be protected at a cost of $28.1 million, including contingencies and a management fee.
B. Canada’s Witnesses
Betsey Baldwin
[52] Dr. Baldwin is a historian and was qualified “as an expert in Canadian Aboriginal history including Treaty 3, and government policy towards Aboriginal peoples.”
[53] She prepared and spoke to her report, the title of which is descriptive of the scope of her evidence: A History of the Lac Seul Storage Project, Flooding on the Lac Seul Indian Reserve No. 28, and Related Compensation to the Lac Seul Indian Band, 1873 to 1943. In addition to her own report, she spoke and responded to the report prepared by James R. Gilles, and the two reports of Gwynneth C. D. Jones.
Gwen Reimer
[54] Dr. Reimer has a Doctorate in Anthropology with particular expertise in the sub-disciplines of cultural anthropology and ethno history, and she has knowledge of the way of life of the Ojibwe. She was qualified as “an expert to review and provide an opinion on the methodological approach used by Patt Larcombe to value losses of the Lac Seul First Nation occasioned by the flooding of Lac Seul, and in particular, to offer an opinion as to the accuracy, reliability, validity, and integrity of the data and analysis in that report.”
[55] Dr. Reimer reviewed and replied to the technical reports by Patt Larcombe. She also went beyond Ms. Larcombe’s technical report to provide a broader anthropological perspective to contextualize the valuation losses in terms of changes, adaptations and dynamics of culture, economy, and environment, particularly in the post-flood period. She also looked at sources that were relevant to the LSFN’s traditional land area. Dr. Reimer emphasized that she did not assess or calculate alternative loss valuations. She only assessed the evidence upon which Ms. Larcombe calculated losses.
[56] There were three main themes that framed Dr. Reimer’s analysis. First, she considered that her review and approach to the documentation was within a context of change. The post-flood period is an 80-year period of time in which she notes that there were economic, environmental, social, and cultural changes. She asserts that losses and cumulative losses were not occurring in a static human or natural environment. Second, she observes that multiple factors are generally behind change over a long period of time and she considered that flooding was not necessarily the sole factor in changes and losses. Third, she assessed valuations according to all the available evidence.
Duncan Bell
[57] Mr. Bell was a witness called jointly by Canada and Ontario. The Court qualified Mr. Bell “as a real estate appraiser with expertise in the appraisal of historical land values generally, and in particular, is qualified to give opinion evidence as to the value of land located on the First Nations Reserve 28 as of April 1, 1929, April 1, 1934, and April 1 1943 and to give opinions of value concerning property improvement located on and near the Reserve as well as on the accuracy of historical valuations completed in and around the effective dates as described in his report.”
[58] Mr. Bell stated that waterfront property was generally of greater value than non-waterfront property and he therefore used two different estimated values per acre to reflect this. It was his opinion that the average effective price per acre of the flooded LSFN land was $1.29 in 1929, $1.06 in 1934, and $1.24 in 1943. He estimated the value of the 93 affected LSFN buildings at $24,648.00
Peter Zuzek
[59] Mr. Zuzek was “qualified as an expert geoscientist and coastal geomorphologist with particular expertise in coastal geology, investigating historical shoreline changes, assessing erosion rates, investigating the effects of water level fluctuations on erosion, evaluating the need for shoreline protection and the effects of shoreline protection, including ecological effects.” He was further “qualified to give specific evidence on the question of shoreline erosion at Lac Seul, before and after the construction and operation of the Ear Falls Dam and any potential remediation requirements.”
[60] It was the opinion of Mr. Zuzek that the pre-dam erosion rate on Lac Seul was similar to the post-dam erosion rate. He reached this conclusion because: (1) the geology is the same, (2) the wave climate is similar, (3) the bench sequence at the pre-dam lake level provided evidence that these sites were also eroding in the pre-dam era, and (4) the COSMOS model was able to simulate the post-dam erosion rate and create a bench on the nearshore and retreat the bank in a horizontal direction to a very close rate to what was measured.
[61] While Mr. Zuzek agreed with the statement in the exp Report that some of the sites identified were eroding, it was his opinion that they were eroding in the pre-dam era at a similar rate. He described erosion as a natural process and stated that the flooding at Lac Seul essentially moved the location of the erosion from the pre-dam water level to a higher location up the slope to the current water level range. He asserted that the flooding has not changed the erosion rate – it has just relocated where that erosion is happening.
Matthew Lacompte
[62] Mr. Lacompte was qualified “as an expert to give opinion evidence generally on the history and management of Indian trust fund accounts, and specifically on the historic expenditures in the Lac Seul First Nation trust fund accounts.”
[63] He analyzed the expenditures and income listed in the LSFN capital and interest accounts separately for the period 1902 to 2012.
[64] His analysis of the capital account showed the following for expenditures by category and percentage of the total: band property, 36.4%; forestry, 27.9%; transfers and enfranchisement, 15.8%; distribution, 8.4%; adjustments, 7.8%; unknown, 2%; roads, bridges, waterworks 1.3%; relief, 0.1%; farming and education 0.0%; and three categories of miscellaneous – miscellaneous professional services 0.1%; miscellaneous damages 0.3%; and miscellaneous casual labour 0.0%.
[65] His analysis of the interest account showed the following for the expenditures from it: band property 29.4%; relief and rations 21.5%; salaries and wages 9%; housing and wells 6.7%; interest distribution 4.5%; car expenses 4.4%; medical 4%; adjustments 2.7%; education 2.7%; unknown 1.9%; loans to members 1.3%; transfers and enfranchisements 0.7%; agriculture 0.5%; roads, bridges, and waterworks 0.4%; refunds 0.0%; miscellaneous expenditures - cultural enrichment 5.2%; hunting and fishing 3.7%; grants 1.4%; and recreation and celebrations 0.2%.
Robert Sandy
[66] Mr. Sandy was called jointly by Canada and Ontario. Mr. Sandy is a Chartered Accountant with experience in the quantification of economic losses, specifically in the forest industry and he was qualified to give specific evidence on the quantification of the LSFN economic losses, if any, from the alleged failure to clear the Reserve’s foreshore.
[67] Mr. Sandy assumed that if the Crown had cleared the shoreline prior to flooding Lac Seul it would have paid the clearing costs to parties other than the LSFN and that there would have been no direct economic benefit to the LSFN as they would not have been paid to do the work.
[68] In reply to Mr. Scheifele, Mr. Sandy offered first that Mr. Scheifele did not identify what the disadvantages were or the quantum of the disadvantages to the LSFN for the Crown’s failure to clear the shoreline. Second, he observed that the Crown’s alleged saving of the estimated clearing costs on the Lac Seul clearing project do not relate to the losses that either were or were not suffered by the LSFN. Third, he disagreed with Mr. Scheifele regarding the clearing costs that would have been incurred by the Crown if the project had gone ahead. In his view, the cost to Canada would have been significantly less than Mr. Scheifele stated.
Cliff Hamal
[69] Mr. Hamal was qualified “as an expert witness to provide opinion evidence generally on the electricity industry including its markets, planning, structure and operations, with particular expertise in the economics of the development, operation, production, pricing, valuation and modelling of electric generation projects in the electricity market including hydroelectric projects.” Moreover, he was qualified “to provide specific evidence on the valuation of any hydroelectric economic benefits resulting from the flooding of Lac Seul or hydroelectric development.”
[70] Mr. Hamal offered evidence on the development and history of hydroelectricity in Ontario. He did a critical examination of the reports prepared by Mr. Gillis and described his conclusions as to the value to the LSFN neither reasonable nor conservative. He also examined the alleged comparators including the Bow River developments with the Stoney Indian Band and the Columbia River Treaty and took the view that none were comparable to the situation of the LSFN in 1929 at Lac Seul.
Laurence Booth and Eric Kirzner
[71] Mr. Booth and Mr. Kirzner prepared a joint report [the Booth-Kirzner Report] that provided an economic interpretation of Whitefish and used that interpretation as a framework for bringing forward monies to estimate the value today of compensation for the breach in the past.
[72] The Court qualified both Mr. Booth and Mr. Kirzner in the same language: “an expert witness to provide opinion evidence with respect to the application of financial and economic theory to the valuation of compensation in the present day for losses incurred in the past, with particular expertise in the calculation of current value of First Nations losses based on the 2007 decision of the Ontario Court of Appeal in Whitefish Lake Band of Indians.”
C. Ontario’s Witnesses
Alan McCullough
[73] Mr. McCullough was accepted “as an expert in Canadian history, including the interactions of the federal and provincial governments and Aboriginal people based on historical records.”
[74] Mr. McCullough prepared and filed a report entitled: Historical Narrative concerning the Lac Seul First Nation Claim with Respect to Flooding on Lac Seul Reserve No. 28 (and Off-Reserve Interests) as a result of the Construction of the Lower Ear Falls Dam. His report and evidence covered the period from the signing of Treaty 3 in 1873 to payment made to the LSFN in 1943.
Fred Lazar and Eliezner Prisman
[75] Mr. Lazar and Mr. Prisman filed a joint report [the Lazar-Prisman Report] entitled Estimating Alleged Economic Losses of the Lac Seul First Nation As a Result of the Construction of the Ear Fall’s Dam in 1929.
[76] Mr. Lazar was qualified as “an expert witness to give opinion evidence on macro and micro economics including labour economics and the application of that expertise to the calculation of First Nations’ compensation.” Mr. Prisman was qualified as “an expert witness to provide opinion evidence with respect to the application of financial and economic theory to the valuation of past losses, and to bring those values forward to the trial date and express them as compensation.”
III. ASSESSMENT OF THE WITNESSES
[77] The parties, as noted, called many expert witnesses. Each was qualified to provide his or her opinion on relevant subject-matter and to offer an assessment of the relevant report prepared by the opposite party’s responding expert.
[78] The Court found that there was little disagreement, if any, among the three historians: Ms. Jones, Dr. Baldwin, and Mr. McCullough. The differences in their reports were based on the focus each took to the many relevant events, rather than the events themselves.
[79] There was substantial disagreement between the erosion experts – Marcel Deveau and James Hawken for the LSFN and Peter Zuzek for Canada. For reasons provided later, the Court preferred but does not necessarily adopt all of the evidence of Mr. Zuzek.
[80] There were also differences in the analysis done of the LSFN trust accounts by Rob Rabichuk and Matthew Lacompte. Mr. Lacompte looked at each of the two accounts separately, unlike Mr. Rabichuk, and carried out a far more nuanced and detailed examination than Mr. Rabichuk. Mr. Rabichuk’s analysis left more than 45% of the accounts with no specific information or analysis, whereas Mr. Lacompte categorized all of the expenditures with precision. For these reasons, had this evidence been useful, the more detailed and thorough analysis done by Mr. Lacompte would have been preferred and given more weight. In the end, given the Court’s view of the assessment of the 1929 loss today, the evidence from the band’s accounts was not necessary or helpful.
[81] The Court had the benefit of three reports from economists: the Hosios Report, the Booth-Kirzner Report, and the Lazar-Prisman Report. Each offered an approach to estimating the losses incurred in 1929 or thereafter to today’s value. Each took as the basis of the report, the decision of the Ontario Court of Appeal in Whitefish. Their evidence, to the extent necessary, will be examined after the Court sets out the approach to assessing equitable damages in this case.
[82] There was a fundamental disagreement in the opinions of the land appraisers: Norris Wilson and Duncan Bell, which rested on their differences in the highest and best use of the acreage of the Reserve to be flooded. For reasons discussed below, I prefer the evidence of Mr. Bell.
[83] I prefer the evidence of Mr. Hamal to that of Mr. Gilles. Like Mr. Hamal, I found that Mr. Gilles’s conclusions as to the value of the LSFN land to the Lac Seul Storage Project were neither reasonable nor conservative. As is discussed below, I do not accept his comparisons of the Lac Seul Storage Project with the Bow River sites development with the Stoney Indian Band and the Columbia River Treaty. Unlike Mr. Gilles, I find none of these circumstances are comparable to the situation of the LSFN in 1929, at Lac Seul.
[84] I accept most of Mr. Sandy’s criticisms of Mr. Scheifele’s estimation of the cost to clear the foreshore of Lac Seul. I also accept that whatever that cost would have been does not assist in determining the loss to the LSFN from the failure to clear the timber. The cost of clearing is not a fair and just basis to assess equitable compensation owed to the LSFN. What is required is an examination of the consequences to the LSFN a