A recent decision from the British Columbia Court of Appeal (BCCA) expands our understanding of the legal capacity of a First Nation – recognized as a band under the Indian Act, R.S.C. 1985, c. I-5 (the Indian Act) – as well as the exemption from taxation available to a band under Section 87 of the Indian Act.
How is a band defined in Canada?
The legal capacity of bands has been the subject of evolving case law and practice for several decades.
The definition of a “band” implies that a band is little more than a collection of its members. Sec .2(1) of the Indian Act defines a band as a body of Indians:
- For whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after September 4, 1951.
- For whose use and benefit in common, moneys are held by Her Majesty.
- Declared by the Governor in Council to be a band for the purposes of this act.
The concept of a band was created by the Indian Act to, in part, provide for a form of legal organization with which the Crown could interact with and govern Indigenous communities. This genesis, the historic marginalization of indigenous communities and the inability of the federal government to find consensus in the past half-century on modernizing the Indian Act, are the roots of the difficulties with which courts have struggled to categorize bands.
In the late twentieth century, some courts compared a band to an “unincorporated association,”1 in contrast to a “natural person” who has full legal capacity to sue and be sued, or otherwise conduct business, in its own name.2 As a result, the accepted practice by the early 2000s for litigating indigenous rights (which the Courts have defined as “collective rights”) was for the chief (and sometimes council) of a First Nation to sue in a representative capacity, on behalf of their members.3
In the corporate context, it was common practice by the 1990s to not have bands hold securities directly in their economic development corporations, but rather have the chief and council do so in trust for the band. In many jurisdictions, this practice continues. Similarly, most provincial land registries will not register an interest in land directly in the name of a band, with little discussion on why this restriction persists.
This doubt about the legal capacity of a band – and practices to address that doubt - leads to a variety of challenges. Having securities held by political leaders in trust for a band adds cost and risk to the creation and maintenance of economic development structures. Most bands that want to acquire “fee simple” land outside of their reserves must do so through corporate entities, often supported by trusts or limited partnerships to preserve certain tax advantages held by bands. In the event of a contested election, or unexpected death, it can be challenging to secure valid shareholder resolutions. It also begs the question: if a band cannot be a shareholder, how could it be a beneficiary? The definition of beneficiary in the Trustee Act of British Columbia and definition of shareholder in the Business Corporations Act of British Columbia, both refer to “persons”, without supplementing the general definition of “person” in the Interpretation Act. Consideration must also be given to the impact that the new trust reporting requirements pursuant to recent amendments to the Income Tax Act (Canada) will have in circumstances where political leaders hold assets in trust for a band.
The New Westminster decision
In British Columbia v. New Westminster Indian Band No. 566, 2022 BCCA 368 (New Westminster), the BCCA ruled that the band was a “person” for the purposes of being liable to pay taxes on insurance premiums pursuant to the Insurance Premium Tax Act, S.B.C. 1957, c.58 (IPTA), but that the nature of the transaction had sufficient “connecting factors” to reserve lands to merit immunity from taxation.
The band had secured financing to pursue claims relating to the unlawful taking of lands set aside for its reserve and the financing was secured by litigation insurance. The band was responsible for paying certain premiums relating to this policy. Under the IPTA, “persons” must pay taxes on premiums, and the province took the view that the band constituted a “person” for the purposes of the IPTA, and so must pay taxes on those premiums. The band paid the $42,941.41 of taxes it was told it owed under the IPTA, then filed a petition appealing the minister’s decision.
The British Columbia Supreme Court ruled that the band was not a person for the purposes of the IPTA. In doing so, the court considered the fact that bands do not pay taxes in other contexts and that bands are not defined as persons in the Indian Act itself. It ordered that the payment made under the IPTA be refunded to the band.
On appeal, the BCCA ruled the band was a “person” for the purposes of the IPTA, but that the transaction was exempt from taxation under Section 87 of the Indian Act. Section 87 provides that the “personal property of an Indian or band situated on a reserve” is exempt from taxation. Over the years, the courts have deemed this exemption to apply to sales of good or services that should be deemed to have occurred on reserve through evaluation of a set of “connecting factors” which connect the property in question to a reserve (see Williams v. The Queen  1 S.C.R. 877).
In this case, the Court found that there were sufficient connecting factors of the band’s property – the insurance premium - to a reserve because it related to efforts by the band to recover reserve land wrongly (according to the band) taken from it. In paragraph 84, the Court concluded:
… At the end of the day, the extension of the phrase “personal property situated on a reserve” to include “personal property strongly connected to a reserve” seems a small step, and an appropriate one.”
This may be a small step, but it is a very important one for Section 87 jurisprudence and likely to trigger intense interest by other parties and courts.
On the issue of whether a band could be a “person” under the ITPA, the BCCA reviewed recent case law and concluded (at paragraph 55-56):
There is no doubt that Bands are subject to various responsibilities and restrictions to which other persons are not and have privileges other persons do not have. … However, I fail to see why such restrictions should mean a Band may not be a “person” under legislation of general application. Corporations are also unique, or almost unique, in many respects, but there is no doubt they are generally regarded as “persons”. It seems to me, in other words, that a Band can be both a unique entity and a “person.”
...the unique nature of a Band as a “body of Indians” that must transact business with and have relationships with other Indians, other Bands and other persons outside the First Nations community, would seem to militate in favour of legal personhood. In this case, for example, the Band has entered into contracts of insurance with an insurer located in London and into loan agreements with the Bank. It seems a small step from this evidence of capacity to legal personhood in the context of the IPTA, which as noted is a law of general application and therefore not to be read as if it were a treaty or the Indian Act in accordance with Nowegijick.
Over the last quarter century, there have been various legislative initiatives to help certain bands become recognized as having the same legal capacity of a natural person.
The recently reformed First Nations Land Management Act, S.C. 1999, c. 24 (FNLMA) provided bands with options to step out of some of the more paternalistic elements of the Indian Act in relation to use and management of reserve lands. It also included a provision intended to remove all doubt about the legal capacity of a “First Nation” who enacts a land code under the FNLMA (Section 18(2)):4
For any purpose related to First Nation land, a First Nation has the legal capacity necessary to exercise its powers and perform its duties and functions and, in particular, may
- acquire and hold property;
- enter into contracts;
- borrow money;
- expend and invest money; and
- be a party to legal proceedings.
Most modern self-government agreements and treaties contain provisions – supported by federal implementation legislation – recognizing the legal capacity of the signatory First Nation to be that of a “natural person”.
There have been various provincial or territorial initiatives in this vein as well. The Government of the Northwest Territories adopted legislation in 2022 that updated the Territory’s Partnership and Business Names Act, RSNWT 1988, c.P-1 to include an explicit reference to a band’s ability to act as a limited partner in a limited partnership 5. In 2004, the Province of British Columbia introduced Part 24 to its Land Title Act to allow for certain reserve lands to be included in the provincial land title regime, but only for bands who were recognized under federal legislation as “a legal entity with the capacity of a natural person.”
While these well-intentioned legislative initiatives clarified the legal capacity for indigenous groups that came within their scope, they ironically reinforced the common belief that any band who did not qualify (which is the case for the vast majority of bands in Canada at present) lacked these legal capacities.
Movement in case law
Over the last quarter century, a number of courts have ruled on specific areas where bands were – or should be – deemed to have legal capacity.
This issue was neatly summarized by Justice Johnston in Willson v. British Columbia (Attorney General), 2007 BCSC 1324 (paragraph 50):
An Indian band has been considered to be legally capable as:
- an employer for the purposes of the Canada Labour Code (see P.S.A.C. v. Francis, 1982 CanLII 195 (SCC),  2 S.C.R. 72);
- a juridical person for the purpose of suing to determine the validity of surrender of reserve lands (see Montana Indian Band v. Canada, 1997 CanLII 6380 (FC),  2 F.C. 3 (T.D.));
- capable of contracting, and suing and being sued in contract (see Clow Darling Ltd. v. Big Trout Indian Band (1989), 1989 CanLII 4321 (ON SC), 70 O.R. (2d) 56 (Ont. Dist. Ct.));
- capable of executing a contract of guarantee (see Telecom Leasing Canada (TLC) Ltd. v. Enoch Indian Band of Stony Plain Indian Reserve No. 135, 1992 CanLII 6177 (AB KB),  1 W.W.R. 373 (Alta. Q.B.));
- competent to sue and defend actions between Indian Bands, to determine which of two Bands is entitled to possession and enjoyment of a reserve (see Wewayakum Indian Band v. Wewayakai Indian Band, 1991 CanLII 13589 (FC),  3 F.C. 420 (T.D.));
- competent to sue for a declaration that certain amendments to the Indian Act, R.S.C. 1985, c. I-5, were unconstitutional (see Sawridge Band v. Canada  3 C.L.N.R. 358 (F.C.T.D.)); and
- the proper parties to an action commenced by a corporation formed by 7 First Nations to claim aboriginal fishing rights, in place of the corporation, so that the First Nations were substituted for their corporate vehicle (see Anishinaabeg of Kabapikotawangag Resource Council Inc. v. Canada (Attorney General), 1998 CanLII 14758 (ON SC),  4 C.N.L.R. 1 (Ont. Ct.J.)).
In paragraph 57 of Willson, the Court ruled that a band, as defined by the Indian Act, “is a juridical person that can sue and be sued in its own name.” The BCCA endorsed this in Kwicksutaineuk/Ah-Kwa-Mish First Nation v. Canada (Attorney General), 2012 BCCA 193. As a result, the litigation practice in B.C. has now evolved to allow bands to sue directly in their own name, without the need for a representative action, in far greater frequency and breadth.
Other recent decisions have expanded the notion of when a band should be considered a “person”, including in:
- R v Big River First Nation, 2019 SKCA 117 the Court found that a First Nation was a “public body” for the purposes of the definition of “person” under the Canadian Environmental Protection Act.
- Cowessess First Nation No. 73 v Phillips Legal Professional Corporation, 2018 SKQB 156, the Court found that a band had “the necessary status to be a “person charged with the bill”” under Saskatchewan’s Legal Professions Act.
In the absence of a comprehensive legislative solution,6 the courts have increasingly proven willing to fill in gaps around the legal nature and capacity of a band, but it is on a piecemeal basis. The New Westminster decision of the BCCA provides one more specific instance in which bands should be recognized as persons with legal capacity, but it does so in broad language that – notwithstanding the court’s caution – will no doubt be extrapolated to other contexts. Similarly, the court’s interpretation of the “connecting factors” test will no doubt be of interest to other bands and courts who need to determine whether a transaction should be exempt from taxation under section 87 of the Indian Act.
Litigation practice has already evolved significantly in the past decade to recognize the broad legal capacity of bands. Solicitors’ practice is still, in our opinion, not nearly as settled. While there are good legal and policy arguments for allowing bands to transact business in simpler, more efficient methods, we are still some ways away from consensus on practice and procedure. First Nations, and parties doing business with First Nations, often need to customize their corporate structures based on the applicable jurisdiction in which business is conducted, and the nature of the business.
BLG’s dedicated national indigenous law group assists clients in navigating complex legal questions in Indigenous law and building relationships with Indigenous peoples, including the creation, structuring, and use of corporations, partnerships, trusts, and joint ventures.
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1 Keewatin Tribal Council Inc. v. Thompson (City), 1989 CanLII 7267 (MB QB).
2 See, for example, Mintuk v. Valley River Band No. 63A  2 W.W.R. 309 (Man. C.A.), Otineka Development Corporation Limited v R. (1994) 94 D.T.C. 1234 at footnote 1, and Lac des Mille Lacs First Nation v Canada  OJ No 1977 (Ont Sup Ct).
3 See, for example, Pasco v. Canadian National Railway Company 1989 Canlii 249 (BCCA) at page 15.
4 The replacement legislation, Framework Agreement on First Nations Land Management Act, which came into force in December 2022, essentially retains this provision, albeit through a different approach to legislative drafting.
5 The new section 57 (2.1) reads: “An Indian band may be a limited partner in a limited partnership formed under this section, and is a person under this Act for that purpose.”
6 Surely clarification of legal capacity is one amendment to the Indian Act that can gain broad and uncontroversial support!