The Supreme Court of British Columbia allowed a claim of $176,000 by Canada, on behalf of locatees of portions of an Indian reserve, against a corporation that had leased the lands for property development. A separate action by the corporation against Canada for breach of contract was dismissed.

The relevant lands are approximately 12 acres in size and are part of Duck Lake Indian Reserve No. 7 set apart for the use and benefit of the Okanagan Indian Band. In 1983, the Band allotted portions of the reserve to two band members pursuant to section 20(1) of the Indian Act and granted a certificate of possession to the locatees. The Band Council, at the request of the locatees, then made a formal request to the Minister, pursuant to a Band Council Resolution, that these lands be leased pursuant to s. 58(3) of the Indian Act.

In 1985, Canada entered into a 20-year lease with a company named Lakeshore Estates Ltd, and the term of the lease was subsequently extended to 45 years. In 1990, the lease was sold to a BC company that later became known as Water’s Edge Resort Ltd. Conditions precedent to the sale included the replacement of the existing lease. The terms of the lease provided for the determination of “fair market rent”, and that disputes would be referred to the Federal Court of Canada.

Beginning in 1991, Water’s Edge constructed houses, condo buildings and cottages on the property. The lands were subleased, mostly to elderly or retired persons. Conflicts began to arise in the 1990s. The locatees of the lands (who were different than the original locatees in the early 1980s) objected to actions of Water’s Edge such as cutting trees and the removal of tobacco bundles without the appropriate ceremony. A larger dispute related to rent. In 1996, the Minister issued a Notice of Rent increase for the term of 1995 to 2000 which raised the annual rent from $14,400 to $31,000.  The Minister directed that negotiations take place between Water’s Edge and the locatees, but those negotiations broke down in 1997.

The shares of Water’s Edge were purchased by Donald Shilton in the late 1990s. He intended to develop the property further, and considered a seniors’ residence and care facility. In April 2001, the Minister advised Water’s Edge that the annual rent for 2000 to 2005 would be $192,000. The receipt of this letter triggered the 60-day limitation period for rent reviews in Federal Court under the lease. Water’s Edge objected to the rent increase but did not initiate proceedings in Federal Court, despite several extensions of time granted by the Minister

Negotiations reached an impasse since the Minister (and the locatees) wanted all rent arrears paid before discussions would begin, whereas Water’s Edge would not pay any arrears until a new lease was negotiated. The Minister issued a Notice of Default of Lease in September 2001 and stated that the rent arrears of $176,000 must be paid by October. No amount was paid, and the Minister issued a Notice of Cancellation in October 2001.

The Court accepted the position of Canada that the substance of Water Edge’s claim was a rent review. Such a claim was now moot due to the cancellation of the lease, and the Federal Court had exclusive jurisdiction due to the terms of the lease. The Court also rejected the claims of Water’s Edge that there were implied terms to the lease, such as fairness, or an obligation of “good faith”. Administrative law principles, such as the doctrine of legitimate expectations, cannot be imported into the resolution of a private commercial matter. The claim for damages was separate from the “rent review” component, but Water’s Edge had not proven a breach of contract or any causal connection between the cancellation of the lease and losses that it suffered.

The Court held that Water’s Edge was liable for $176,000 of unpaid rent, as claimed by Canada.

http://www.courts.gov.bc.ca/jdb-txt/SC/14/08/2014BCSC0873.htm

Author

Scott Kerwin 
SKerwin@blg.com
604.640.4029

Expertise

Aboriginal Law