2014 QCCA 920, 2014 QCCA 920

Unofficial English Translation Corporation de négociation Ashuanipi c. Canada (Procureur général) 2014 QCCA 920 COURT OF APPEAL CANADA PROVINCE OF QUÉBEC QUÉBEC REGISTRY No. 200-09-007903-120 (650-17-000587-119) DATE: May 8, 2014 CORAM: THE HONOURABLE FRANÇOIS PELLETIER J.A. BENOÎT MORIN J.A. LORNE GIROUX J.A. CORPORATION DE NÉGOCIATION ASHUANIPI APPELLANT – Defendant v.

ATTORNEY GENERAL OF CANADA RESPONDENT – Plaintiff JUDGMENT [ 1 ] The appellant is appealing from a judgment rendered on October 29, 2012 by the Superior Court of the District of Mingan (the Honourable Serge Francoeur J.S.C.), which allowed the respondent’s claim and condemned the appellant to pay the respondent $232 406 with interest and the additional indemnity. [1] 1- CONTEXT [ 2 ] The appellant brought together the members of two Innu communities; its board of directors is composed of Innu and it was constituted for the purposes of conducting comprehensive land claim negotiations. [ 3 ] The dispute is rooted in the context of the funding assistance provided to the appellant by the Department of Indian Affairs and Northern Development (DIAND) for the purposes of funding the negotiations.

The funding took two main forms. One part of the funding was provided by means of loan agreements, which were advances on payments to be made to the Corporation at the time of a future settlement when negotiations were completed. The loan agreements were used to fund negotiation activities per se.

[ 4 ] The other funding component consisted in comprehensive funding arrangements (CFAs) targeting services and specific activities identified in the arrangement.

The assistance was granted in the form of a “contribution”, defined as follows: [TRANSLATION] A conditional transfer payment for a specified purpose that is subject to being accounted for or audited for the purpose of determining adherence to terms and conditions of payment and for which unexpended balances or non-deductible, ineligible expenditures are to be reimbursed to the Crown. [2] [Cited in full] [ 5 ] The activities funded by means of these arrangements were assistance and preparation activities for negotiations with the governments of Quebec and Canada regarding land claims and self-government. [ 6 ] In exchange for obtaining the funding, the CFAs provided that the beneficiary of the contributions had to use the funds for the intended purposes and in accordance with the conditions of the arrangement, and the beneficiary had to render account by means of activity reports and financial reports, in particular, financial statements to be submitted to the Minister within 120 days of the end of the fiscal year. [3] Any unused part of the funds granted by the Minister or any ineligible expenditures had to be reimbursed to the Minister and constituted a debt owed to him. [4] [ 7 ] The 2007-2008 CFA (P-2) was signed by the parties on July 12, 2007 and was in effect from April 1, 2007 to March 31, 2008.

During that period, DIAND granted a contribution of $900 000 to the appellant.

In reality, an amount of $855 000 was paid out during that fiscal year and DIAND retained a residual amount of $45 000. [ 8 ] In his auditing report, which the Minister received on September 19, 2008, the appellant’s auditor revealed that $377 967 in expenditures were recorded in the 2007-2008 fiscal year, while they were actually incurred after the end of the fiscal year, on March 31, 2008. [5] [ 9 ] On September 26, 2008, DIAND notified the appellant that the total amount of the loan agreement entered into in parallel with the CFAs would be reduced from $1 126 640 to $923 605 for the 2008-2009 fiscal year. [6] [ 10 ] Further to DIAND’s requests for information and supporting documents, [7] the appellant transmitted them on May 25, 2009. [8] They confirmed that the activities that gave rise to the expenditures of $377 967 were held from April to October 2008.

On June 22, 2009, DIAND notified the appellant that it had to recover that amount, which corresponded to a payment surplus for the 2007-2008 fiscal year. [9] [ 11 ] The 2008-2009 CFA was signed by the parties on August 12, 2008 and the arrangement was in effect from April 1, 2008 to March 31, 2009.

DIAND granted the appellant a contribution of $900 000 for the same activities as those provided for in the 2007-2008 CFA. [ 12 ] On October 21, 2008, DIAND informed the appellant that its October 2008 activity report seemed to indicate that activities provided for in the work plan submitted at the time of the application for funding were not held, were postponed or were added, or were not consistent with the frequencies established.

It therefore asked the appellant to send it a revised work plan. [10] According to the evidence, the appellant provided the revised work plan. [ 13 ] On November 13, 2008, following a request by the appellant for more funding for the [TRANSLATION] “negotiation preparation initiative” program, DIAND granted additional support funds of $250 000. [11] That additional contribution, which brought the total grant to $1 150 000, was made by means of a December 16, 2008 amendment to the 2008-2009 CFA. [12]

[ 14 ] Of the amount of $1 150 000 thereby granted, DIAND in fact paid the appellant $739 000 and kept a residual amount of $411 000. [13] [ 15 ] On April 1, 2009, the appellant’s board of directors held a meeting to discuss the reduction in the loan agreement announced by DIAND in September 2008.

For that reason, it decided that the appellant would cease its operations. [ 16 ] On June 30, 2009, DIAND informed the appellant that it could not fund its project entitled [TRANSLATION] “Innu research into the land claimed”, during the 2009-2010 fiscal year as part of the [TRANSLATION] “negotiation preparation initiative” because the project was not a priority for the department. [14] [ 17 ] On October 26, 2009, DIAND received the appellant’s financial statements for the 2008-2009 fiscal year.

The auditor indicated therein a contribution payment surplus of $310 439 for the 2008-2009 fiscal year ended March 31, 2009. The contribution surplus was indicated under the heading [TRANSLATION] “Repayments to DIAND” in a table entitled [TRANSLATION] “Operating fund. Table of income and expenditures by activity and cumulative surplus (deficits)”.

DIAND also learned, in a note to the financial statements, that the appellant [TRANSLATION] “. . . ceased its operations for an indeterminate period on June 30, 2009 because no renewal of DIAND’s loan was anticipated for the 2009-2010 fiscal year”. [15] [ 18 ] In a letter dated November 19, 2010, the regional director of DIAND’s funding service notified the appellant that the department had to recover a total amount of $688 406 in surplus contributions for the 2007-2008 and 2008-2009 fiscal years.

Once the amounts not paid and cancelled by DIAND were deducted, [TRANSLATION] “[t]he balance of $232 406 will be recorded as an account receivable in our public accounts ledger and we will take the required steps for its reimbursement”. [16] [ 19 ] On April 26, 2011, a formal notice by the respondent reminded the appellant that, under the 2007-2008 and 2008-2009 CFAs, a balance $232 406 in recoverable surplus contributions still had to be repaid to DIAND and asked the appellant to pay that amount within 10 days. [17] The claim action was instituted on June 23, 2011. 2- JUDGMENT IN FIRST INSTANCE [ 20 ] In his judgment of October 29, 2012, [18] the trial judge allowed the respondent’s claim in full. [ 21 ] Accepting DIAND’s calculations, and on the basis of the appellant’s auditors’ reports and the

summary table submitted by the department, [19] the judge believed that the respondent’s claim for recovery of the total amount was well founded. [20] [ 22 ] According to the judge, the CFAs were separate contracts that were not ambiguous and indicated the parties’ obligations and duties. [21] The respondent respected all the preliminary conditions for instituting its recourse, duly notified the appellant in writing of the status of the amounts owed and sent the appellant the required formal notices, granting considerable periods of time for reimbursement before the action would be instituted.

The judge believed that DIAND had no obligation to act in any other way, pointing out that the appellant was a corporation, not a band council. [22] [ 23 ] The appellant’s argument that DIAND should have used other measures provided for in the CFAs before instituting the proceedings was rejected. The judge was of the opinion that the interventions were within the Minister’s discretionary power. The Minister acted in good faith and fulfilled his obligations. [23] 3- ANALYSIS [ 24 ] The appellant raised three grounds of appeal.

Firstly, it claimed that the trial judge should have dismissed the respondent’s claim on the basis of the fin de non-recevoir that the appellant invoked. Secondly, it argued that compliance with the deadlines was not an essential condition of the arrangements binding it to DIAND. Thirdly, it contended that, in the context of the negotiations regarding land rights and self-government, the respondent did not act in good faith or with honour or dignity.

[ 25 ] The fate of the second ground should be resolved immediately. The appellant claimed that compliance with the deadlines for holding the activities provided for in the CFAs or for submitting the required financial reports was not an essential consideration of the CFAs, which did not so require.

Therefore, the respondent could not attribute a fault to it in that regard in order to justify terminating its funding and claim reimbursement of the amounts owed. [ 26 ] It is important to distinguish compliance with the 120-day deadline for submitting the financial statements, which is calculated as of March 31, [24] the end of the fiscal year, and the requirement that the activities provided for in the CFAs be held during the fiscal year for which the activities were funded. [ 27 ] In the first case, the appellant was in no way penalized for its delay in submitting either the 2007-2008 financial reports [25] or those of 2008-2009. [26] DIAND never took any corrective action or intervened in a particular way because the appellant did not meet those deadlines. [ 28 ] The claim of DIAND and the respondent has nothing to do with the appellant’s delay in submitting the financial reports, but stems from activities that were not held within the fiscal year for which the funding was granted. [ 29 ]

Section 3.1 of each CFA clearly stipulates that the arrangement is for a duration of one year, from April 1 to the following March 31. The funding for the negotiation assistance programs in the framework of which the CFAs were signed was granted by Parliament on an annual basis. For those reasons, the contribution funds in the framework of the CFAs were granted for only one fiscal year, since DIAND’s budgets were attributed on an annual basis. If the activities provided for in the CFAs were not held during the fiscal year for which funding for them was provided, the funds returned to the consolidated fund.

The activities that were to be held during that fiscal year could be held the following fiscal year, but in that case they had to be funded in the second fiscal year. Those requirements were based on Treasury Board rules. [27] [ 30 ] The requirement that unused funds be returned at the end of the fiscal year was clearly indicated in the CFAs. [28] The validity of the arrangements was not challenged by the appellant, which signed them with full knowledge of the facts.

Furthermore, it was not a simple matter of deadlines, but indeed a basic rule of the CFAs: amounts unused at the end of the fiscal year had to be returned to DIAND and constituted a debt.

Accordingly, that ground must be rejected. [ 31 ] The appellant also reproached the trial judge for failing to broach the [TRANSLATION] “however central” question of the fin de non-recevoir that it claimed could be set up against the respondent’s claim. [29] [ 32 ] The appellant acknowledged, that [TRANSLATION] “from a strict accounting standpoint”, it is indebted toward the respondent for the amount of $232 406 the respondent claims, [30] but it argued that the judge did not apply the proper legal principles when he did not accept the fin de non-recevoir that it set up against the claim. [ 33 ] The appellant invoked both the fin de non-recevoir recognized in civil law by the Supreme Court in National Bank of Canada v.

Soucisse et al. [31] and the doctrine of legitimate expectations in administrative law, since it cited, for its benefit, Baker v.

Canada (Minister of Citizenship and lmmigration) . [32] [ 34 ] In civil law, a fin de non-recevoir allows the Court to dismiss an application that is otherwise founded, inasmuch as highly reprehensive conduct of the plaintiff is at the root of the dispute. [33] Without extinguishing the debt or taking action tantamount to the nullity of the contract, it makes the action instituted ineffective or inadmissible and paralyzes it. [34] It is applied exceptionally and can arise only in cases of serious violation of the requirements of good faith, such as particularly unfair conduct. [35] [ 35 ] In administrative law, the equivalent principle is legitimate expectation or estoppel by representation recognized by the jurisprudence. [36] That principle applies, for example, when the Administration acted or promised to act in a particular way, with full knowledge of the facts, and the person who was the subject of the act or promise acted on the faith of that conduct by the Administration in the person’s regard. [37] [ 36 ] In the case at bar, and although the contractual foundation of the respondent’s action makes the application of civil law more likely, it is not necessary to determine definitively whether the theory applicable in this case is a fin de non-recevoir or estoppel by representation .

The evidence adduced does not support that ground raised by the appellant.

[ 37 ] Firstly, the evidence did not show that DIAND’s conduct in its relations with the appellant was reprehensible to the point that its claim should be dismissed or that it seriously failed to meet the requirements of good faith.

Secondly, it also did not show a commitment, mutual understanding or any conduct that could be set up against DIAND on the basis of which the appellant might have acted. [38] [ 38 ] In support of that ground, the appellant first raised the existence of a situation of conflict of interest, since DIAND acted in the case not only as a funding creditor for activities to prepare for negotiations on land claims and self-government, but also as the adverse party in negotiations on these matters that were vital for the Aboriginal communities represented by the appellant. [ 39 ] In that context, it suggested that, under the pretext of its right to require from the appellant detailed activity reports according to the provisions of the CFAs, DIAND sought to interfere in the appellant’s negotiation strategy, thereby abusing its contractual rights, which justified the dismissal of its claim. [ 40 ] The appellant was referring, in particular, to the requirements that detailed activity reports and progress reports be submitted according to Part E of the CFAs.

It particularly cited the amendment to the 2008-2009 CFA of November 2009 in the framework of the negotiation preparation initiative. Pursuant to that amendment, the appellant undertook to continue the activities related to exploratory discussions on overlapping provided for in the work plan it submitted to the department for 2008-2009. The final activity report had to include, for example, the dates and places of the meetings, the minutes of the meetings and a list of participants at each meeting.

It also had to include, [TRANSLATION] “. . . the preliminary conclusions and the possible solutions identified in the multiparty discussions and, where possible, a description of the level of consensus on those conclusions and possible solutions”. [39] [ 41 ] To be able to assess the scope of those contractual requirements in terms of good faith and the notion of abuse of contractual law, the process leading to the conclusion of an arrangement, as explained in the evidence, must be understood. [ 42 ] Under that process, DIAND made a call every year to negotiating Aboriginal groups.

Aboriginal groups, which, like the appellant, sought funding, submitted a work plan that had to be approved by both parties. The plan was quite complex and detailed, stating the activities that the group wanted to undertake during the year. The funded activities were based on the work plan. Auditing of the activities was based on the work plan provided by the Aboriginal group and approved by DIAND.

If, during the year, DIAND’s funding officers saw that certain activities provided for in the work plan would not be held, they contacted the Aboriginal community in order to change the work plan so as to include other activities so that the amounts granted could be used. If the work plan was not amended, steps were then taken to recover the unused funds. [ 43 ] In its factum, the appellant contended that it could not be blamed for non-compliance with a work plan, given that the CFAs made no mention of work plans and did not indicate their mandatory scope or the penalties for non-compliance.

And according to the uncontradicted evidence, the work plans did not appear in the funding arrangements, but the application for funding assistance was based on the activities in the plans. [ 44 ] The activity reports required under the provisions of Part E of the CFAs were necessary so that DIAND’s officers could ensure that the funded activities were part of the work plan on which the two parties agreed.

Moreover, on February 22, 2008, in order to obtain the release of the contributions provided for in the 2007-2008 CFA, the appellant’s representative assured the department’s representatives that the appellant was following the established work plans and that its representatives would provide the detailed activity reports required under the CFA. [40] [ 45 ] Therefore, since the appellant claimed that the clarifications requested in the activity reports constituted an abuse of law by DIAND, it had to demonstrate that the required reports went beyond the activities that it itself proposed in its work plan and on the basis of which the CFAs were concluded.

But no evidence was adduced concerning the content of the work plans underlying the 2007-2008 and 2008-2009 CFAs. [ 46 ] Furthermore, the evidence also showed that, at DIAND, the funding officers were not at the negotiating table concerning land claims and self-government and that, conversely, the negotiators had no impact on the funding granted to the Aboriginal communities. The information required, particularly the minutes of the meetings provided for in the work plan, enabled the funding officers to know whether the planned activities were indeed held.

Lastly, it should be noted that the funding granted under the CFAs did not concern the negotiations themselves, but the negotiation preparation activities. The appellant therefore cannot justify a fin de non-recevoir by invoking a so-called conflict of interest.

[ 47 ] The appellant also claimed that the fin de non-recevoir it invoked was justified by DIAND’s decision to cut its funding, which it alleged paralyzed it, without a valid reason, in its negotiations at a time when DIAND sought to harden its positions at the negotiating table. [ 48 ] That reproach is also not founded. The decision to recover the unused amounts granted in the CFAs was based on clear agreements freely entered into in the CFAs for the 2007-2008 and 2008-2009 fiscal years.

Apart from those affirmations, the appellant did not demonstrate how the decision not to renew the funding for the 2009-2010 fiscal year could justify refusing to pay the respondent the claim based on prior arrangements. [ 49 ] In addition, the negotiations themselves were funded by loan agreements. Loan agreements were funding arrangements separate from the contributions provided for in the CFAs that are the object of the claim.

The evidence adduced at trial was totally silent regarding the content of those agreements and the regime that applied to them. [ 50 ] Beginning on April 1, 2009, after DIAND’S announcement of a reduction in the loan agreement in September 2008, the appellant decided to cease its activities. On June 30, 2009, after dismissing its employees, it terminated its operations. On July 21, 2009, its financial statements indicated $310 439 to be reimbursed to DIAND out of DIAND’s contributions. The appellant learned from DIAND on November 19, 2010 that the amount to be reimbursed totalled $232 406.

A formal notice was served on it on April 26, 2011 and the respondent’s action was instituted on June 23, 2011.

Throughout that period, the appellant never contested DIAND’s decision to reduce and terminate the funding of the negotiations by means of the loan agreements. [ 51 ] Therefore that ground cannot justify the application of a fin de non-recevoir to the claim for the unused surpluses of the contributions made under the CFAs, since there is no link between DIAND’s decision not to renew the loan agreements for the 2009- 2010 fiscal year and the reimbursement of the surpluses stemming from the contributions paid for the various activities in 2007-2008 and 2008-2009. [ 52 ] In regard to the third justification for invoking a fin de non-recevoir , the appellant reiterated the argument raised in first instance that, instead of claiming before the courts the reimbursement of the unused contribution overpayments, the Minister should have used other measures provided for in sections 2.4.3 and 4.3 of Part B of the CFAs.

The trial judge rightly rejected that argument. [41] DIAND has a discretionary power in the choice of the most appropriate means to ensure respect for the arrangement, according to the circumstances proper to each case, and there is no evidence making it possible to conclude that that discretion was exercised improperly, especially in the case of public funds. [42] [ 53 ] That ground raised by the appellant must therefore be rejected. [ 54 ] In its last ground of appeal, the appellant claimed the Crown’s obligation to act with honour and dignity each time it deals with the Aboriginal peoples. [43] [ 55 ] At the appeal hearing, the appellant’s attorney devoted his pleadings to that argument.

He contended that the trial judge did not give the proper weight to the intensity of DIAND’s obligation in the context of the application of the CFAs.

According to the appellant, the Crown’s obligation to act honourably with the Aboriginal peoples goes beyond the simple exercise of its discretionary powers in the context of administrative law, and assumes a constitutional dimension when it is a question of the application of the CFAs. [ 56 ] For the appellant, the principle of the honour of the Crown obliges it to promote reconciliation of its interests with those of the Aboriginal peoples and, if required, to make accommodations.

In the case at bar, the constitutional principle of the honour of the Crown is said to apply in the context of the recourse that sections 4.2 and 4.3 of Part B of the CFAs gave DIAND when the obligations of the Aboriginal party receiving the contribution were not met.

DIAND’s discretion at that point in the choice of appropriate measures [TRANSLATION] “. . . that it deems reasonably necessary, given the nature and importance of the breach . . .” [44] is said to be based, not on the text of the CFA, but rather on constitutional obligations of the Crown toward the Aboriginal peoples. [ 57 ] The appellant maintained that the CFAs have meaning only in the context of constitutional negotiations regarding Innu land claims and self-government, even though the CFAs were signed with the appellant Corporation, which represented two Aboriginal communities, not with the band councils.

[58] Therefore, before suing the Corporation to recover amounts that were not used, DIAND should have explained to the appellantwhy those amounts were being claimed and try to reach an accommodation. [59] What is more, by abruptly refusing, on June 30, 2009, to support the research project dealing with [TRANSLATION] “Innuresearch into the land claimed”, without prior consultation or meetings,[45] DIAND cut the legs out from under the appellant bywithdrawing the means to advance its negotiations. [60] Thus, the appellant reproached DIAND for failing to meet its constitutional obligation to act with honour and dignity with theAboriginal peoples by claiming the unused amounts from them before the courts without prior consultation or accommodation, evenwhile, on June 30, it cut its funding. [61] The scope of the principle of the honour of the Crown was clarified by the Supreme Court in Manitoba Metis Federation v.Canada (Attorney General).[46] In that ruling, the Court recognized that the principle of the honour of the Crown does not come intoplay in all interactions between the Crown and the Aboriginal peoples.

It applies when it is a matter of reconciling Aboriginal rights andthe sovereignty of the Crown. It also applies in the context of subsection 35(1) of the Constitution Act, 1982 and obliges the Crown toact honourably when defining the Aboriginal rights recognized by that constitutional provision. The honour of the Crown is also incurredthrough an explicit obligation toward an Aboriginal group enshrined by the Constitution.

Lastly, the obligation of the Crown to act withhonour and dignity must be owed to an Aboriginal group.[47] [62] In that ruling, the Supreme Court also targeted the obligations that that principle imposes on the Crown:

(3) What Duties Are Imposed by the Honour of the Crown? [73] The honour of the Crown “is not a mere incantation, but rather a core precept that finds its application in concrete practices” and“gives rise to different duties in different circumstances”: Haida Nation, at paras. 16 and 18. It is not a cause of action itself; rather, itspeaks to how obligations that attract it must be fulfilled. Thus far, the honour of the Crown has been applied in at least four situations:

(1) The honour of the Crown gives rise to a fiduciary duty when the Crown assumes discretionary control over a specific Aboriginalinterest (Wewaykum, at paras. 79 and 81; Haida Nation, at para. 18);

(2) The honour of the Crown informs the purposive

interpretation of s. 35 of the Constitution Act, 1982, and gives rise to a duty toconsult when the Crown contemplates an action that will affect a claimed but as of yet unproven Aboriginal interest (Haida Nation, atpara. 25);

(3) The honour of the Crown governs treaty-making and implementation (Province of Ontario v. Dominion of Canada (1895), 1895CanLII 112 (SCC), 25 S.C.R. 434, at p. 512, per Gwynne J., dissenting; Mikisew Cree First Nation v. Canada (Minister of CanadianHeritage), 2005 SCC 69, [2005] 3 S.C.R. 388, at para. 51), leading to requirements such as honourable negotiation and the avoidance ofthe appearance of sharp dealing (Badger, at para. 41); and

(4) The honour of the Crown requires the Crown to act in a way that accomplishes the intended purposes of treaty and statutory grantsto Aboriginal peoples (R. v. Marshall, (SCC), [1999] 3 S.C.R. 456, at para. 43, referring to The Case of TheChurchwardens of St. Saviour in Southwark (1613), 10 Co. Rep. 66b, 77 E.R. 1025, and Roger Earl of Rutland’s Case (1608), 8 Co.

Rep.55a, 77 E.R. 555; Mikisew Cree First Nation, at para. 51; Badger, at para. 47).[48] [63] The appellant argued that the first and third instances of the honour of the Crown principle, as explained in Manitoba MetisFederation Inc., apply to the case at bar. [64] It unfortunately adduced no evidence that would have made it possible to pinpoint the particular Aboriginal interest that, in thecase at bar, would constitute an issue, for example, land concerned in land claims and in regard to which the Crown could claim to

exercise discretionary power, or the negotiation, conclusion or implementation of a treaty between the band councils and the Crown. [ 65 ] Furthermore, at trial, the dispute in no way dealt with the absence of renewal of the loan agreements for the 2009-2010 fiscal year [49] or with the decision communicated to the Corporation on June 30, 2009 not to grant the subsidy requested for fiscal 2009- 2010. [50] In the latter case, it is useful to point out that, as early as April 1, 2009, at a meeting of its board of directors, the appellant, which had been notified of a reduction in the loan agreement of $280 640 for 2008-2009, [51] decided to cease its activities and dismissed its employees, well before decision D-35 of June 30, 2009. [52] In reality, it was only on October 26, 2009, upon reading the 2008-2009 financial statements, that DIAND learned that the appellant had terminated its operations on June 30, 2009. [53] [ 66 ] The situation in this case does not correspond to one of those described by the Supreme Court as justification for the application of the principle of the honour of the Crown. [ 67 ] What is more, and as the trial judge determined, the evidence showed instead that DIAND acted in good faith toward the appellant.

The elements that the appellant invoked to support the contention that DIAND did not respect the constitutional principle of the honour of the Crown in its application of the CFAs were, in substance, the same as those on which it based its argument regarding the fin de non-recevoir , which have been rejected. [ 68 ] As regards the contribution for the 2007-2008 fiscal year, DIAND realized, as of December 2007, that surpluses seemed to have been created in the appellant’s budget.

DIAND notified the appellant of the situation and was assured that that would not be the case. [54] Further to explanations provided by the appellant at the time, the Minister agreed to release the funds to be contributed. [55] In March 2008, at a meeting between the parties, the appellant again assured DIAND that the amounts provided for in the 2007-2008 CFA would indeed be spent and that there would be no surplus at the end of the fiscal year. [56] It was only on September 19, 2008, upon receipt of the financial statements for the 2007-2008 fiscal year, that the department realized that, despite the appellant’s assurances during the fiscal year, it did not hold the activities in the fiscal year for which the funding had been granted, thereby leaving a contribution surplus of $377 976. [57] [ 69 ] As for the contribution for the 2008-2009 fiscal year, a new CFA was signed by DIAND on August 12, 2008 [58] and, on December 16, 2008, the contribution for that fiscal year was even increased by $250 000. [59] Furthermore, since the contributions provided for in the CFAs were reconsidered annually, DIAND could provide funding for the subsequent fiscal year, despite the appellant’s debt for the preceding fiscal year.

Thus, DIAND accepted, in the 2008-2009 fiscal year, expenditures of $377 967 that had been recorded during [60] the 2007-2008 fiscal year, although they had not been incurred in 2007-2008. [ 70 ] In a letter dated February 17, 2009, [61] DIAND reiterated for the appellant the operating rules for the funding by contributions.

Then, between March 16 and June 22, 2009, the parties exchanged letters regarding the expenditures of $377 967. [62] On June 22, 2009, after analyzing the supporting documents transmitted, DIAND notified the appellant in writing that $377 967 in fact had to be recovered for the 2007-2008 fiscal year, [63] and the appellant’s negotiator knew that that debt was from activities that were not held during the 2007-2008 fiscal year. [64] [ 71 ] As we have seen, DIAND noted in the financial statements transmitted on October 26, 2009 that the appellant had ceased its operations.

As for DIAND’s decision to proceed to recover the balance owed, it was made by the manager responsible for the application of

section 34 of the Financial Administration Act , [65] whose duty was to ensure that the public funds committed in the CFAs were used for the purposes for which they were granted. [66] Thus, on November 19, 2010, the appellant was notified by letter that, after cancellation of the unpaid amounts under the 2008-2009 CFA, a residual amount of $232 406 had to be recorded as an account receivable in the public accounts ledgers of the department and had to be reimbursed. [67] Although a formal notice of reimbursement was served on the appellant on April 26, 2011, [68] it was only on June 23, 2011 that the respondent instituted the action for recovery. [ 72 ] Ultimately, the contributions under the CFA program were paid for activities that the appellant itself described in the work plan it submitted for the purposes of obtaining the funding offered.

The contributions were paid pursuant to agreements freely entered into, the clauses of which were clear and in no way ambiguous. Furthermore, the appellant’s auditors clearly advised it that, if it did not use the contributions for the purposes for which they were granted in the fiscal year targeted by the CFA, it would have to reimburse DIAND for them. As indicated earlier, the appellant cannot escape its reimbursement obligation by blaming the respondent for having reduced or interrupted its funding. The appellant itself acknowledged that it owes the amounts claimed by the respondent.

That last ground is without merit. THEREFORE, THE COURT:

[ 73 ] DISMISSES the appeal, with costs. (

s) FRANÇOIS PELLETIER J.A. (

s) BENOÎT MORIN J.A. (

s) LORNE GIROUX J.A. Mtre. André Gauthier Mtre. Stefan Nasswetter Cain, Lamarre For the appellant Mtre. Nancy Bonsaint Mtre. Josianne Philippe Joyal, Leblanc For the respondent Date of hearing: April 8, 2014