Clayton v. Lower Nicola Indian Band, 2013 BCSC 162, Supreme Court of British Columbia (Betton J.), 4 February 2013
The B.C. Supreme Court dismissed an application by the plaintiff in a wrongful dismissal case to enforce a settlement agreement against the Lower Nicola Indian Band. The settlement agreement had been negotiated with the former Chief of the Band, just before his term expired, and was not approved by the Band Council. Following a line of authority originating with Leonard v. Gottfriedson (1980), the Court interpreted s. 2(3) of the Indian Act as requiring that the settlement be approved through a Band Council Resolution. The settlement agreement could not be enforced on the basis of the actual or ostensible authority of the Chief to bind the Band.
The plaintiff Clayton was hired as the Executive Director of the Band in January 2008. At the time, Don Moses was the elected Chief of the Band. During the three-year term of Chief Moses, there was considerable conflict within the Band Council, as two factions emerged. Proceedings were later brought in Federal Court relating to actions of the Chief and Council.
In December 2009, the Band Council voted to terminate the plaintiff’s employment as Executive Director. Chief Moses rescinded the termination, and the plaintiff was placed on paid leave. The Band Council again dismissed the plaintiff in January 2010, and this wrongful dismissal claim was commenced in March 2010.
Chief Moses did not seek re-election in 2010, and his term would expire on October 1, 2010. He believed that the Band did not have cause to terminate the plaintiff’s employment. Beginning in June 2010, he began negotiating a settlement of the wrongful dismissal claim with the plaintiff. His first email in the negotiations began with the words “Subject to the approval of the LNIB Council”. An agreement was subsequently negotiated between the plaintiff and Chief Don Moses on 30 September 2010.
In this summary trial application, the plaintiff sought to enforce the settlement agreement negotiated with Chief Moses.
The Court reviewed the Band’s Chief and Council Policy and Guidelines relating to governance. The Band Council quorum was five. Chief Moses endeavoured to hold meetings in September 2010 to discuss a possible settlement of the plaintiff’s claim. No quorum was obtained, as the opposing faction in Council refused to attend. A vote on September 7 was 4:0 in favour of the settlement, but there was no quorum. At a September 21 council meeting, the settlement was approved by a 3:0 vote. Chief Moses purported to lower the quorum from 5 to 3. He then signed the settlement agreement on October 1.
The plaintiff argued that the October 1 settlement was valid as Chief Moses either had the actual or ostensible authority to enter into the settlement on behalf of the Band. The plaintiff and Chief Moses (a third party to the action) relied upon clause 23(e) of the Guidelines which stated that the Chief has the power to “[m]ake decisions when required on behalf of Council when such decisions are necessary for good government”. The issue in this application involved whether clause 23(e) allowed the Chief to negotiate the settlement with the plaintiff without Band Council approval or, in the alternative, lower the quorum from 5 to 3.
The Court rejected the arguments relating to actual authority. The settlement reached with the plaintiff was not “so obviously favourable” to the Band that it needed to be seized upon without delay. There was no specific time pressure or deadline for acceptance. The only time pressure related to the end of Chief Moses’s term. Such circumstances do not satisfy the wording in clause 23(e) of the Guidelines about “good government”. It was noted that Band Council had gone beyond dysfunctional to “not functioning”, but the Court held:
In my view, in those circumstances, good government would in fact dictate that the matter be left for the new chief and council to deal with. …
Simply because the chief felt strongly that the settlement should occur does not make it necessary for good government. Democratic processes by their nature lead to decisions that are not met with universal approval, and even the chief needed to accept that his was but one view.
In addition to the lack of any deadline for reaching a settlement, the purported use of clause 23(e) in September 2010 could not be justified in light of the fact that Band Council elections would be held within days.
The Court reviewed the attempts to reduce the quorum from 5 to 3. The Court noted a letter written by Mr. Moses in November 2010 in which he admitted that there had been no quorum for votes on the settlement. Mr. Justice Betton held that the Band Council Guidelines required that any amendments to the rules about quorum must be ratified by a quorum. Even if the quorum had been reduced to 3, there was no subsequent Band Council resolution in favour of the settlement.
The Court rejected the argument that Chief Moses was using his “good government” authority to directly enter into a negotiation with the plaintiff. It was clear from the affidavits that he did not negotiate on this basis, but was relying upon the 3:0 vote at council. It is not open to him to “rewrite history”.
The Court also rejected the submissions that the plaintiff could rely upon the ostensible authority of Chief Moses. This argument raises the application of section 2(3) of the Indian Act, which provides:
a power conferred on the council of a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the councillors of the band present at a meeting of the council duly convened.
Mr. Justice Betton noted that there are two lines of authority in Canada in regards to the interpretation of this provision. The B.C. Supreme Court decision in Leonard v. Gottfriedson (1980), 21 B.C.L.R. 326 (S.C.) takes a strict interpretation. Any powers of the Band must be exercised by way of a Band Council Resolution in order to be valid. The Court in Leonard drew an analogy between the powers of a Band and the powers of a municipal corporation.
A competing line of authority can be found in cases like Basque v. Woodstock Indian Band (1996), 175 N.B.R. (2d) 241 (C.A.) and Maloney v. Eskasoni Indian Band, 2009 NSSC 177. In these cases, the Courts have held that powers granted to Indian bands may be exercised by BCR or “pursuant to actual or ostensible authority to act on the band’s behalf”.
A person may have actual authority if: (1) the Band Council expressly mandated that person to act on its behalf; (2) whether a course of conduct indicates that the person has such authority; or (3) subsequent ratification or approval by the Band Council. Ostensible authority would be determined by: (1) a representation or holding out of the agent’s authority by the Band Council; (2) third party reliance on that representation; and (3) an alteration of the third party’s position as a result of that reliance.
Referring to the principles of judicial comity set out in Re Hansard Spruce Mills (1954), Mr. Justice Betton held that he was bound to follow the earlier B.C. Supreme Court decision in Leonard v. Gottfriedson. He noted that there have been some B.C. cases in which the doctrine of ostensible authority has been applied, but the Leonard case had not been considered by the Court in those decisions. Leonard remains the “seminal authority” on section 2(3). Further, Mr. Justice Betton agreed with the Leonard court’s interpretation of section 2(3).
Even if a person can be given actual authority to act on behalf of a band, Chief Moses did not have actual authority in this case. Mr. Justice Betton further held that, even if he followed cases like Maloney and applied the doctrine of ostensible authority, the plaintiff could not succeed. The conditions necessary for the finding of ostensible authority do not exist in this case. There is no evidence that the Band Council made a representation or held out that Chief Moses had authority.
The Court therefore held that the settlement agreement could not be enforced against the Lower Nicola Indian Band.
Scott Kerwin, Partner
Kenneth J. Tyler, Partner