Ontario – Historic arbitration decision is not probative evidence in interpretation of a Treaty – #556

In Restoule v. Canada (Attorney General), 2021 ONCA 779, the Ontario Court of Appeal discussed the evidentiary value of an arbitration record –  from an arbitration between Canada, Ontario and Quebec over responsibility for annuity payments under a Treaty with First Nations signed forty years before the arbitration –  in the context of present-day litigation between the Treaty beneficiaries and the Province of Ontario over increases in those annuities. Because of the lack of temporal proximity between the historic arbitration and Treaty formation, and the fact that the evidence at that arbitration was entirely given by potential payors under the Treaty, the arbitration record needed to be viewed with caution. It was not helpful post-Treaty evidence in interpreting the intentions of the parties at the time of Treaty formation.

This dispute arose in connection with two Treaties entered into by the Crown and the Anishinaabe on the northern shores of Lake Huron and Lake Superior. The Treaties provided for the cession of a vast territory in northern Ontario in exchange for payment by the Crown of a perpetual annuity. The plaintiffs, who were the Treaty beneficiaries, brought two actions for declaratory and compensatory relief related to the interpretation, implementation and alleged breach of the annuity provisions in the Treaties. This litigation was divided into three stages: Stage One on interpretation of the Treaties; Stage Two on the Crown’s immunity and limitations defences; and Stage Three on the remaining issues including damages.

During the trial of Stage One, Restoule v Canada (Attorney General), 2018 ONSC 7701, one of the primary issues was the interpretation of the “augmentation clause” in the Treaties. This clause called for payment of an annuity and for the Province, “without incurring loss, to increase the annuity […] and in that case the same shall be augmented from time to time […].” The trial judge, Justice Hennessy,  found that this clause obligated the Crown to “increase the annuity” paid to the First Nations “from time to time” where possible “without incurring a loss”. Justice Hennessy thus held that the Crown has a mandatory and reviewable obligation to increase annuities under the Treaties where economic circumstances warrant. The Crown is to engage in a consultative process to determine net resource-based revenues and pay an increased annuity amount, a “fair share”, if sufficient Crown resource-based revenues allow for such without incurring a loss. The honour of the Crown and doctrine of fiduciary duty imposed an obligation on the Crown to diligently implement the purpose of the Treaties’ promise.

Ontario appealed this decision. The Court of Appeal granted the appeal from Stage One in part. The five-member court issued joint reasons, providing the factual background and summarizing the court’s conclusions, along with three sets of additional reasons addressing differing views on whether the trial judge erred in interpreting the augmentation clause, with the majority finding that she did not.

It is this question, on interpretation of the Treaties, that raises issues of arbitration, specifically, the reasons of Justices Lauwers and Pardu and their consideration of post-Treaty evidence in the interpretation of the augmentation clause. While the reasons of Justices Strathy and Brown, and the reasons of Justice Hourigan, discuss Post-Treaty evidence they do not comment on the arbitration. After the treaties were signed in 1850, the amount of the annuity was increased in 1875 – the first and only time the annuity was ever augmented. The Chiefs for the First Nations at that time petitioned the Crown for arrears on the augmented amount from 1850 through 1874, however, payment of arrears did not begin until 1903. This delay was the result of a dispute between the Provinces of Ontario, Quebec and the Government of Canada over who was constitutionally required to pay the arrears as a result of Confederation. That dispute proceeded to arbitration. In 1896 an arbitration panel held that Ontario became responsible for the annuity payments after Confederation. Ontario successfully appealed this decision to the Supreme Court of Canada in Province of Ontario v. The Dominion of Canada and Province of Quebec (1895), 25 SCR 434, and Canada’s further appeal to the Judicial Committee of the Privy Council was dismissed, Attorney-General for the Dominion of Canada v. Attorney-General for Ontario, [1897] A.C. 199 (JCPC). As a result of these appeals, Canada was responsible for payments.

As part of Ontario’s present-day appeal in Restoule, the Province disputed the trial judge’s failure to consider post-Treaty evidence in her interpretation of the Treaties. This evidence included the records of the 1895 arbitration between Canada, Ontario and Quebec. As a result, Ontario claimed the trial judge’s interpretation was inconsistent with that evidence on the Crown’s intentions and understanding, leading to an error that required reversal.

Justices Lauwers and Pardu, relying upon Lac La Ronge Indian Band v. Canada, 2001 SKCA 109 and a dissent in West Moberly First Nations v. British Columbia, 2020 BCCA 138, noted that temporal proximity is not required for post-Treaty evidence to be admissible, however, subsequent conduct must be treated with “extreme caution”. The trial judge recognized this potential assistance and also held that weight attributed to post-Treaty evidence will depend on the nature and context of such evidence. Thus the admissibility of the arbitration record needed to be considered in light of these two issues: first, temporal proximity because all but two of the post-Treaty documents were written after 1873; and second, the context for the creation and nature of the arbitration record. 

On the first issue, as the entirety of that arbitration record dated from the 1890s, Justices Lauwers and Pardu. found these documents were not proximate to the Treaties nor connected to their formation, thus providing little, if any, assistance in understanding the Crown’s intentions.

On the second issue, Justices Lauwers and Pardu held that records not directly aimed at interpreting the augmentation clause at the time of formation must be read with sensitivity to the context of the documents and objectives the writers at the time sought to achieve. The arbitration involved a dispute over which either Canada or the provinces were responsible for paying the Treaty annuities. While the parties discussed the amount of the annuity, and potential increases, there was no discussion of the possibility that the amount stipulated in the Treaties would cap the annuities. The scrutiny given to the augmentation clause was entirely from the paying parties, in the context of advancing their own cases vis-à-vis each other, and the arbitrators were therefore limited to considering the arguments of those parties. No one was focused on Anishinaabe entitlements. The trial judge found the post-Treaty record to be vague, inconsistent, and conflicting and on their review of the evidence, Justices Lauwers and Pardu found the trial judge’s assessment was not in error.

In the result, the trial judge’s treatment of post-Treaty evidence, including the 1895 arbitration proceedings, was not in error. In order to be helpful, this evidence must shed light on the intention or interests of one or more of the parties at the time the Treaty was signed, which the arbitration record did not.

Contributor’s Notes:

For a more comprehensive review of the lower court decision, and the arbitration record at issue, see previous Case Note: Court rejects re-using arbitral awards against non-parties despite litigants’ flexibility – Note #153. As noted by Justices Lauwers and Pardu the evidentiary record was complex, consisting of evidence from 18 witnesses, 11 experts, 4 Elders, and 3 Chiefs along with an agreed joint book of 30,000 pages of primary sources and a further equivalent volume of secondary sources. One of the few evidentiary disputes was the objection raised by Anishinaabe First Nation to the Crown’s attempt to file the arbitration awards as part of its case.

This decision is also unique for its discussion of historical arbitration between the Provinces and Canada. See also previous Case Note: Court of Appeal notes 1890’s provincial undertakings to arbitrate with other provinces as predecessor to current court rule on jurisdiction – Note #075, in which the Federal Court of Appeal also mentions arbitration undertaken by provincial and Federal governments in the 1890s.