2012 QCCA 7, 2012 QCCA 7

Unofficial English Translation Crevette du Nord Atlantique inc. c. Conseil de la Première Nation malécite de Viger 2012 QCCA 7 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC NO: 200-09-006429-085 (250-17-000343-058) DATE: January 9, 2012 CORAM: THE HONOURABLE FRANCE THIBAULT, J.A. ALLAN R. HILTON, J.A. JACQUES A. LÉGER, J.A. LA CREVETTE DU NORD ATLANTIQUE INC. APPELLANT/INCIDENTAL RESPONDENT – Defendant v.

COUNCIL OF THE MALÉCITES DE VIGER FIRST NATION RESPONDENT/ INCIDENTAL APPELLANT – Plaintiff and JEAN GENEST, ALINE GAGNÉ-JENNISS AND MARCELLE ALBERT RIOUX IMPLEADED PARTIES– Defendants JUDGMENT [ 1 ] The appellant appeals from a judgment of the Superior Court, District of Kamouraska (the Honourable Mr.

Justice Claude Henri Gendreau), rendered on July 18, 2008, which granted, in part, the respondent’s motion to institute proceedings for a claim, an injunction and damages. [ 2 ] The respondent also appeals the judgment in an incidental appeal. [ 3 ] For the reasons of Thibault, J.A., with which Hilton and Léger, JJ.A. agree, THE COURT: [ 4 ] ALLOWS the main appeal in part, without costs, to set aside the following condemnations but only with respect to the appellant: - $420,188.80 representing the accounts payable accumulated under the administration of Mr.

Genest as well as the interest and the additional indemnity and the deduction of $225,000 paid by E.

Gagnon et Fils Ltée (paragraphs 225.1 and 225.4 of the trial judgment); - $150,000 representing damages to reputation, for disruption of business and lost opportunities (paragraph 225.3 of the trial judgment); - $107,410 representing the additional fees for the auditors Raymond Chabot Grant Thornton (paragraph 225.2 of the trial judgment); - the condemnation for the court-appointed sequestrator’s fees (attributed to costs) (paragraph 230 of the trial judgment); - replace the conclusion in paragraph 227 of the trial judgment with the following: [227] CONDEMNS all the parties jointly and severally to pay the sum of $281,000 to Leclerc Juricomptables and ORDERS that between the parties the defendants pay this amount of $281,000 with interest and additional indemnity in the proportion of 25% for La Crevette du Nord Atlantique inc. and 75% for Jean Genest, Aline Gagné-Jenniss and Marcelle Albert Rioux; [ 5 ] ALLOWS the incidental appeal in part, without costs; [ 6 ] CONDEMNS the appellant to pay the respondent $261,719 with interest and the additional indemnity as of the June 14,

2005, demand letter; [ 7 ] DISMISSES the motion to amend, without costs. FRANCE THIBAULT, J.A. ALLAN R. HILTON, J.A. JACQUES A. LÉGER, J.A.

Mtre Pascal Girard Gagnon, Girard For the appellant/incidental respondent Mtre Paul-Yvan Martin and Mtre Marie-Paule Boucher Martin, Camirand For the respondent/incidental appellant Date of hearing: November 14, 2011 REASONS OF THIBAULT, J.A. [ 8 ] The appellant, La Crevette du Nord Atlantique inc., appeals from a Superior Court judgment that granted in part the motion to institute proceedings for a claim, an injunction and damages brought by the respondent, the Band Council of the Malécites de Viger First Nation.

More specifically, the appellant and the impleaded parties were jointly and severally condemned to pay the respondent: [ translation ] [225.1] $420,188.80 for accounts payable accumulated by the Genest administration; [225.2] $107,410 for additional auditors’ fees; [225.3] $150,000 for damages to reputation, disruption of business and lost opportunities; [225.4] The whole with interest and the additional indemnity less the amount of $225,000 paid by E.

Gagnon et Fils ltée assigned to the accumulated accounts payable ($420,188.80) and the general damages ($150,000); [ 9 ] The respondent also appeals from the judgment in an incidental appeal. [ 10 ] The impleaded parties did not appeal the judgment. 1- The facts [ 11 ] The facts are detailed in the trial judgment.

I will briefly describe them now and provide further detail, if necessary, when addressing the issues in dispute. [ 12 ] The Malécites de Viger First Nation (hereinafter “First Nation”) is an Indian band within the meaning of the Indian Act. [1] Its main source of income is derived from crab and shrimp fishing.

The respondent is the body responsible for the administration of the First Nation. [2] It is composed of four chief-councillors and a Grand Chief, all elected by the members of the First Nation. [ 13 ] The appellant is a business specialized in processing seafood, shrimp in particular, it purchases from fishermen. It purchased shrimp fished by the First Nation during the 2001 to 2005 fishing seasons. [ 14 ] Mr. Genest was Grand Chief of the First Nation from December 15, 2004, to September 13, 2006.

The impleaded parties Aline Gagné-Jenniss and Marcelle Albert Rioux were employed by the First Nation under the Genest administration. [ 15 ] The dispute is due to a political crisis within the band. I will provide an overview. By-elections were held after Grand Chief Anne Archambault’s leadership was challenged and she resigned on August 27, 2004. On December 18, 2004, Mr. Genest was elected Grand Chief of the First Nation. From the moment of Mr.

Genest’s election, there was noticeable tension among the First Nation’s staff because of his attitude and his actions. [ 16 ] On February 8, 2005, Jean-Claude Paradis, First Nation’s fishing coordinator, informed the appellant’s representative that he would not be selling him any shrimp for the 2005 fishing season. Mr. Paradis was negotiating with another business at the time. As for the crab, Mr. Paradis was also in discussions with other Indian bands about a project to purchase a crab processing plant in Sept-Îles for (the Crabiers du Nord project).

[ 17 ] On March 8, 2005, Mr. Genest suspended Mr. Paradis from his duties and then dismissed him on March 16. As of that moment, Mr. Genest himself coordinated the various fishing-related activities for the 2005 season, without taking into account the respondent’s views and in violation of all the applicable rules. Relations with the First Nation’s employees worsened. After Mr. Genest changed the locks, the employees and the four chief-councillors no longer had access to the administrative centre and were replaced by some of Mr.

Genest’s collaborators. [ 18 ] On March 29, 2005, the crab and shrimp fishing licences were issued by Fisheries and Oceans Canada. They were signed by Mr. Genest. [ 19 ] April 1, 2005, marked the start of the annual fishing season. Mr. Genest agreed to sell the crab to E. Gagnon et Fils Ltée and the shrimp to the appellant. [ 20 ] On April 4, 2005, the respondent sent the appellant a demand letter indicating that it should pay the First Nation directly for its shrimp and not Mr. Genest.

The respondent specified in its demand letter that the First Nation would be responsible for paying the fishermen. [ 21 ] On April 14, 2005, following the injunction proceedings instituted by the respondent and Mr. Genest before the Federal Court, the Honourable Mr.

Justice Simon Noël issued an interlocutory injunction ordering the parties [ translation ] “to respect the status quo as it existed on February 20, 2005, and, to this end, to re-establish the situation as of that date and to then adopt the appropriate resolutions in the interest of the First Nation”. [3] [ 22 ] On June 14, 2005, the respondent sent a second demand letter to the appellant, reiterating that any payment relating to the shrimp be made to the First Nation. [ 23 ] Despite the demand letters and knowing about the previously cited judgment, the appellant did not pay the First Nation for its resource, but paid the fishermen directly, reimbursed certain suppliers and remitted other sums of money to Mr.

Genest. [ 24 ] On July 7, 2005, the respondent initiated proceedings against the appellant, E. Gagnon et Fils Ltée, and the impleaded parties. It claimed the sums paid by the appellant (for the purchase of shrimp) as well as by E. Gagnon et Fils Ltée (for the purchase of crab) to Mr. Genest, as damages, and asked for an injunction ordering the impleaded parties to cease collecting the amounts due to the First Nation.

Before the trial, the parties were involved in various legal proceedings before the Federal Court as well as the Superior Court and various incidents (seizures before judgment, sequestration, etc.) that are not necessary to list for the purposes of the appeal. [ 25 ] On February 2, 2006, the respondent adopted a resolution signed by the four chief-councillors to remove Mr. Genest’s authority to represent the First Nation. On February 13, 2006, the majority of the First Nation’s regular employees returned to work at the administrative centre. On September 13, 2006, the respondent adopted a resolution to remove Mr.

Genest as Grand Chief. [ 26 ] On January 31, 2007, during a case conference presided over by Claude Henri Gendreau J., the parties agreed to appoint a single forensic accounting expert. The trial was held from February 18 to 22, from February 25 to 29, and from March 3 to 5, 2008, in Rivière-du-Loup. Note that the appellant and the impleaded parties were then represented by the same lawyer even though they presented separate defences. [ 27 ] Some time between the bringing of the proceedings and the trial, on April 11, 2006 to be exact, the respondent and E.

Gagnon et Fils Ltée reached an out-of-court settlement ($225,000). 2- Trial judgment [ 28 ] Before examining the respondent’s claims, the judge ruled on two preliminary motions. The first was the appellant’s motion to dismiss the respondent’s action. The appellant argued that the respondent’s abusive behaviour constituted an obstacle to the action, similar to the common law estoppel. The judge dismissed the motion because he felt the evidence had not established that the respondent had been abusive, or had acted in bad faith or reprehensibly.

He believed the situation resulted from a very deep conflict between two factions within the First Nation. [ 29 ] The appellant also argued that there was no contractual relationship between itself and the respondent because there was no resolution from the First Nation authorizing it to do business with Mr. Genest. The judge concluded there was no valid contract between the respondent and the appellant because the First Nation had not adopted a resolution to this effect. His conclusion was based on the Superior Court judgment in Isolation Sept-Îles inc. v.

Bande des Montagnais de Sept-Îles . [4] In his opinion, it followed that the action had an extracontractual, rather than a contractual, basis.

He felt that the appellant behaved as if the respondent did not exist and preferred to [ translation ] “obey Jean Genest’s instructions, pay the fishermen and certain suppliers, and deposit the balance into the bank accounts of Jean Genest and his associates knowing … that the resource was the property of a third person”, the First Nation. [ 30 ] The judge then examined the various heads of damage in the respondent’s claim. [ 31 ] The first head of damage concerned the accounts payable incurred under the Genest administration.

Three amounts were put forth: $274,548 by the expert forensic accountant, $439,277 by the First Nation, and $699,176 according to the sequestrator. Faced with these differences, the judge asked for an additional expertise. He arbitrated the amount of the accounts payable at $420,188.90 and concluded that the impleaded parties and the appellant should be held liable: [ translation ] [171] As this was not the case, the Court must decide the claim for $420,188.80 according to the evidence adduced without the benefit of the forensic accountants’ comments on this topic.

The auditor also refused to comment on Roger Lafond’s numbers for the same reasons as the forensic accountants, and the sequestrator reiterated on March 3, 2008, that he only listed the accounts payable without attributing them to anyone.

[172] In short, only Jean Genest or someone from his administration could have replied to Roger Lafond’s allegations.

Yet, not only did Jean Genest not contest this amount of $420,188.80, he did not testify on the apportionment of responsibility between his administration and the Band Council for the accounts payable listed by the court-appointed sequestrator. [173] The Court, as previously mentioned, has no reason to set aside the sequestrator’s allegations that he received claims for the period prior to his appointment amounting to $699,716.57, and Roger Lafond’s testimony to the effect that an amount of $420,188.80 must be allocated to the Genest administration.

The defendants neither contradicted, nor commented on, these numbers. The Court must accept them. [174] Responsibility for this amount rests on all the defendants. The claim is directly related to the fishing operations. In spite of the demand letters and the notices received, E. Gagnon et Fils ltée and Crevette du Nord Atlantique inc. preferred to pay the Genest administration rather than the owners of the crab and shrimp resource . They must bear the consequences thereof, subject to the agreement entered into with E.

Gagnon et Fils ltée. [Emphasis added] [ 32 ] The respondent paid $153,755 to compensate Jean-Claude Paradis and the other employees of the First Nation who were deprived of work due to Mr. Genest’s actions.

The judge noted that only the impleaded parties were liable for the damage suffered by the respondent in this regard because [ translation ] “the source of this conflict is not related to the fishing operations … but to the management style of Jean Genest and his associates”. [ 33 ] The respondent claimed $47,938.55 for the fees of the receiver appointed by the Minister of Indian Affairs, and $285,174.46 for the court-appointed sequestrator.

The judge concluded that the impleaded parties and the appellant were liable for these fees: [ translation ] [181] The Honourable Madam Justice Ouellet appointed the sequestrator to protect the assets and income of the MVFN after Jean Genest and his associates took control of the administrative offices and to protect future fishing income. [182] All the defendants including the processors are the cause of this order and they alone are responsible.

The sequestrator’s costs and remuneration will be included in the bill of costs. [ 34 ] The respondent claimed $244,756 for the fees of the auditors hired to prepare the 2005 and 2006 financial statements. After examining the invoices, the judge allocated $107,410 to the impleaded parties and the appellant. [ 35 ] The respondent claimed fees for the forensic accounting expert, an amount of $216,000, to prepare the report and $62,498.65 to draft the report as well as for the experts’ presence in Court. The respondent paid the drafting costs for the report in advance.

The judge ruled as follows: [ translation ] [196] In this file, Leclerc Juricomptables was hired by common agreement. The Court has some discretion when deciding on expert fees. Their work benefited all parties. The Court feels all the parties are jointly and severally liable for paying the forensic accountants’ fees and disbursements, but between them, they are the exclusive and joint responsibility of the defendants, given their extracontractual faults. [ 36 ] The respondent claimed $500,000 for [translation] “damages to reputation, disruption of business and lost opportunities”.

The trial judge exercised his discretion and awarded damages of $150,000 because the crisis undermined the First Nation’s credibility. He held the appellant and the impleaded parties liable for these damages: [ translation ] [214] However, the Court notes that the Band Council, the body recognized by the Indian Act to administer the MVFN, could not manage its resources for nearly one year, the crisis as a whole created tensions but most importantly it undermined the Band’s credibility.

Using judicial discretion and taking into account that this is a dispute between two groups within the same band, in which two protagonists, the chief-councillors and the Grand Chief, were elected by the members, the Court awards a total of $150,000 for damages. [ 37 ] According to the trial judge, the damages as well as those related to the accounts payable accumulated under the Genest administration, were to be reduced by $225,000 to take into account the amount paid by E. Gagnon et Fils Ltée to the respondent under the settlement agreement. [ 38 ] Below is a

summary of the amounts the judge awarded the respondent, for which he held the appellant and the impleaded parties liable: Head of claim Amount Accounts payable accumulated under the Genest administration $420,188.80 Damages to reputation, disruption of business and lost opportunities $150,000 To deduct: settlement agreement with E. Gagnon et Fils Ltée ($225,000) Sub-total: $345,188.80

Additional auditor’s fees Raymond Chabot Grant Thornton $107,410.00 Forensic accountants’ fees $281,000.00 Court-appointed sequestrator’s fees Granted as costs TOTAL (condemned jointly and severally with the impleaded parties): $733,598.80 3- Issues [ 39 ] In their appeal factums, the appellant and the respondent, as incidental appellant, raised the following eleven questions: 1) Did the trial judge err in law in finding that the appellant could not purchase shrimp in the manner in which it did? 2) Did the trial judge err in law in finding the appellant liable for the damages to the respondent’s reputation, for disruption of business and lost opportunities? 3) Did the trial judge err in law in finding the appellant liable for the accounts payable accumulated under the Genest administration? 4) Did the trial judge err in law in condemning the appellant to pay the fees and disbursements for the auditor, the forensic accounting expertise and the court-appointed sequestrator? 5) Did the trial judge fail to render judgment on part of the respondent’s claim? 6) Is the respondent entitled to be paid the sum of $934,165.90, corresponding to the sale price for the shrimp fished under its fishing rights? 7) Is the respondent entitled to be fully compensated for the professional fees incurred to prepare an accounting of Mr.

Genest’s expenditures, to examine that accounting and to prepare and audit the 2005 and 2006 financial statements? 8) Could the trial judge have reduced the amount of the condemnation (for the accumulated accounts payable and damages) to $225,000, representing the amount paid by E.

Gagnon et Fils Ltée under the settlement agreement? 9) Should the appellant be held liable for the $153,755 in compensation the respondent paid to the First Nation’s employees? 10) Is the respondent entitled to be fully reimbursed for the sequestrator’s fees and disbursements, or for those that will be taxed after final judgment? 11) Should the trial judge have ruled on the judgments before seizure? [ 40 ] In addition, at the hearing, the respondent presented a motion to amend seeking to have the seizures before judgment granted at trial declared good and valid and to award a special fee in accordance with

section 15 of the Tariff of judicial fees of advocates . [5] 4- Analysis [ 41 ] For the purposes of the analysis, I will address certain related issues together under the following headings. 4.1 The respondent’s legal interest [ 42 ] The appellant argues for the first time on appeal that the respondent does not have the legal interest to claim compensation for

the sale of shrimp during the 2005 fishing season since it does not own this resource. Only the First Nation, as owner, has such an interest. The trial judge erred in confusing the respondent’s patrimony and that of the First Nation, as if these two entities were the same person. [ 43 ] According to the Supreme Court in Public Service Alliance of Canada v. Francis , [6] neither an Indian band nor a band council have legal personality. On the other hand, a Federal Court judgment [7] recognized that an Indian band or a band council can take legal action despite the absence of legal personality.

This implicit capacity flows from the rights and obligations conferred on the band by the Indian Act . Indeed, in Public Service Alliance of Canada v. Francis , supra , the Supreme Court specified that the band council’s lack of of legal personality did not prevent it from being considered as an employer under the Canada Labour Code , since the Indian Act granted it the power to hire. [ 44 ] The author Macaulay noted that the decision in Public Service Alliance of Canada v.

Francis favoured the development of different modus operandi in relation to an Indian band’s capacity to institute legal proceedings in its own name: Because of the apparent continuing lack of agreement regarding the status of a Band to sue in its own name, some counsel acting for Bands continue to bring representative actions.

Others commence actions in the Band's name, and no question is raised as to the propriety of doing so. [Citations omitted] [8] [ 45 ] For his part, Professor Grammond wrote that the majority of the case law clearly leaned towards recognizing that an Indian band has a certain capacity to take legal action: [ translation ] The position generally adopted by the courts seems to be that Indian bands are sui generis entities with the power to take legal action where that power is ancillary to the powers granted by the Act . [9] [ 46 ] The appellant recognizes that the Band and the band council may take legal action, but argues that in this case, only the First Nation could act since the claims concern its patrimony.

Could the respondent claim the amounts due to the First Nation as well as the damages suffered by the latter? [ 47 ] The Indian Act defines the band council as follows: 2. […] « conseil de la bande »

a) Dans le cas d’une bande à laquelle s’applique l’article 74, le conseil constitué conformément à cet article;

b) dans le cas d’une bande à laquelle l’article 74 n’est pas applicable, le conseil choisi selon la coutume de la bande ou, en l’absence d’un conseil, le chef de la bande choisi selon la coutume de celle-ci. […] 74.

(1) Lorsqu’il le juge utile à la bonne administration d’une bande , le ministre peut déclarer par arrêté qu’à compter d’un jour qu’il désigne le conseil d’une bande, comprenant un chef et des conseillers, sera constitué au moyen d’élections tenues selon la présente loi. 2. […] “council of the band” means (

a) in the case of a band to which

section 74 applies, the council established pursuant to that section, (

b) in the case of a band to which

section 74 does not apply, the council chosen according to the custom of the band, or, where there is no council, the chief of the band chosen according to the custom of the band; … 74 .

(1) Whenever he deems it advisable for the good government of a band , the Minister may declare by order that after a day to be named therein the council of the band, consisting of a chief and councillors, shall be selected by elections to be held in accordance with this Act. [ 48 ] Again pursuant to the Indian Act , the band council has the power to regulate in several areas. [10] According to Professor Grammond, the band council is the body responsible under the Act for administering an Indian band. [11] It is thus through the decisions of the band council that the Band may exercise its rights.

In this respect, the First Nation’s internal by-law provides that the respondent may take legal action on behalf of the band: [ translation ] 3.3 And to carry out its duties, the council has the powers conferred under the Indian Act , c I-5 and its regulations, in particular, to: 3.3.1 Adopt administrative by-laws pursuant to sections 81 and 83 I.A .; 3.3.2 Borrow money in accordance with the Indian Band Council Borrowing Regulations, c 949,

section 2 r; 3.3.3 Administer Band affairs, in particular the power to enter into contracts, to take legal action , to sign contribution agreements, to

adopt internal by-laws. [12] [Emphasis added] [ 49 ] The fishing licence, which authorizes the band to engage in fishing activities, is an asset of the band, not the council, even if the latter has the power to represent the former. [13] The Aboriginal Communal Fishing Licences Regulations , [14] adopted under the Fisheries Act , [15] provides that a communal fishing licence may be issued to any “aboriginal organization” to carry on fishing, [16] that is, an Indian band, an Indian band council, a tribal council and an organization that represents a territorially based aboriginal community. [17] [ 50 ] In order to enable the First Nation to exercise its rights, and since the respondent is considered an “aboriginal organization” within the meaning of the applicable regulation, I believe that, in this case, the respondent has the required implicit legal capacity to take legal action.

Professor Grammond further indicates that due to the difficulties caused by the way that the Indian Act is drafted, the courts overlook this technicality and will allow, in particular, an action for damages against an Indian band or its council. [18] 4.2 The rights-holder under the fishing licence [ 51 ] The appellant argues that it could lawfully negotiate the purchase of shrimp with Mr. Genest because the latter held the relevant fishing licence for the 2005 season. [ 52 ] This argument does not stand up to analysis.

First, it is not consistent with the appellant’s position concerning the legal interest required to sue. I note, in this regard, that the appellant pleaded that the right to sue belonged to the First Nation as the owner of the resource. [ 53 ] Moreover, a review of the fishing licences granted for 2005 indicates that they were held by the First Nation: [ translation ] This licence is issued pursuant to the Fisheries Act and

section 4 of the Aboriginal Communal Fishing Licences Regulations . Authorization to fish pursuant to the present licence is valid as of the date of delivery and expires on DECEMBER 31, 2005. This licence authorizes the Malécites de Viger First Nation to fish in compliance with the conditions hereinafter stated, subject to the Fisheries Act and the regulations related thereto. … Species This licence authorizes the capture of the following species: > Shrimp in the ANTICOSTl, ESTUARY AND SEPT-ILES zones, group B. [19] [ 54 ] It is true Mr.

Genest signed the licences in the place designated for “the signature of the licence holder”, [20] but he obviously signed as the authorized representative of the First Nation and this signature did not confer any right of ownership on him. [ 55 ] Lastly, the fishing agreement with Fisheries and Oceans Canada to determine access to commercial fishing was not entered into with Mr.

Genest, but with the First Nation itself. [21] Indeed, according to the Aboriginal Communal Fishing Licences Regulations , supra , this kind of licence may only be granted to an aboriginal organization. [ 56 ] Consequently, the appellant is out of line when it maintains that it was dealing with the rightful holder of the fishing licences by doing business with Mr. Genest. 4.3 Apparent mandate [ 57 ] The appellant submits that the judge erred in finding that it had not validly contracted with the respondent, or the First Nation, for the purchase of shrimp.

The judge refused to apply the theory of the apparent mandate to a contract involving an Indian band. The appellant alleges that recent case law has repudiated the judge’s formalistic approach. It suggests that a formal resolution from the respondent authorizing a contract to sell shrimp belonging to the First Nation was not mandatory. [ 58 ] Section 2(3) of the Indian Act provides that the acts of the band council must be approved by a majority of the councillors present at a council meeting to be valid:

2. […]

(3) Sauf indication contraire du contexte ou disposition expresse de la présente loi :

a) un pouvoir conféré à une bande est censé ne pas être exercé, à moins de l’être en vertu du consentement donné par une majorité des électeurs de la bande;

b) un pouvoir conféré au conseil d’une bande est censé ne pas être exercé à moins de l’être en vertu du consentement donné par une majorité des conseillers de la bande présents à une réunion du conseil dûment convoquée . 2. …

(3) Unless the context otherwise requires or this Act otherwise provides, (

a) a power conferred on a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the electors of the band; and (

b) 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 . [Emphasis added] [ 59 ] The Superior Court commented on this provision in Isolation Sept-Îles Inc. v. Sept-Îles Montagnais . [22] In that case, an insulation business sued an Indian band for specific performance of a contract entered into with one of the band council members. There was no council resolution.

Drawing a parallel with the apparent mandate theory in municipal law, Tourigny J.A. wrote: [ translation ] Thus, it appears settled that in municipal cases, and in school cases for that matter, the formal procedures prescribed by law are sine qua non conditions of the validity of contracts, and applying the civil law theory of apparent mandate seems out of the question. Can these principles be applied to Indian bands?

The functioning and powers of Indian bands and band councils have in the past frequently been treated like those of municipalities, municipal councils and school boards. … Moreover, courts have unanimously held that non-compliance with formal requirements in municipal and school cases has adverse consequences because they are powers which Parliament has delegated for the benefit and in the interest of citizens, and such delegated powers can only be exercised within the strict framework the law imposes on them. All Indian band councils derive their powers from the same source.

Those powers, and the terms and conditions within which they must be exercised, are delegated by the Indian Act. Subsection 2(3) of the Act clearly requires the consent of a majority of councillors of a band present at a duly convened meeting of the council members, failing which “a power conferred on the council of a band shall be deemed not to be exercised.” In addition, the authorization by the Minister of Indian Affairs and Northern Development, provided for under sections 64 and 66 for the expenditure of moneys is also a required formality.

For all these reasons, the Court finds that the requirements of the Indian Act have not been met, and therefore, neither the Band Council nor the Band are liable for paying the sums they never authorized. [23] [ 60 ] Based on the principles in the above-cited case, the trial judge stated: [ translation ] [71] If the principles in Isolation Sept-Iles Inc. and other similar cases are applied, the Band Council cannot claim the price of the shrimp sold to E.

Gagnon et Fils ltée and Crevette du Nord Atlantique Inc. on the basis of contractual liability because there never was a contract between the plaintiff and the processors. [ 61 ] Has this formalism been tempered? [ 62 ] Certain judgments have introduced nuances. Their more liberal approach is based on the wording of section 2(3) of the Indian Act , which implicitly provides that the absence of a resolution is not always fatal. The wording has indeed tempered the rule by adding the words “unless the context otherwise requires”.

This means that the context may show, for example, that the band council ratified a contract entered into without the prerequisite resolution. [24] 4.4 The applicable liability scheme [ 63 ] In principle, the appellant could buy the shrimp only from the First Nation because it was the First Nation that owned the resource. The respondent had to adopt a specific resolution authorizing the contract for it to be valid. It is undisputed that such a resolution was not adopted. But was the contract between the appellant and Mr.

Genest ratified? [ 64 ] According to the respondent, the appellant knew it was not dealing with the right person. A first demand letter seriously cautioned the appellant and warned it that it risked having to pay for the resource twice if it paid a person other than First Nation: [ translation ] You are hereby given notice that payment for shrimp fished by the Malécites de Viger First Nation must be made by cheque to the order

of the First Nation and sent to the administrative office . In addition, be advised that the Council will pay the fishermen through its internal administration. No payment or bank transfer to any other person, directly or indirectly, will be tolerated, be it to the First Nation’s Grand Chief or other persons. You will be held liable for any damages incurred by the First Nation should you fail to respect the Council’s instructions. [25] [Emphasis added] [ 65 ] There are two demand letters with the same date, April 4, 2005.

One is signed by two chief-councillors and the other one is signed by the four chief-councillors. The evidence showed it was the one with two signatures that was brought to the appellant’s attention. What the appellant knew is not relevant.

What matters is the intent of the four chiefs at that date. [ 66 ] On June 14, 2005, the respondent’s lawyer sent the appellant a second demand letter, claiming, once again, payment for all sums related to the purchase of shrimp: [ translation ] The Council demands that all sums relating to the purchase of shrimp, less sums for the salaries of the captains, fishermen and suppliers, be sent without delay by cheque made out to the band council of the Malécites de Viger First Nation at the administrative centre located at 112 Grève Road, Cacouna.

No payment or bank transfer into any account whatsoever to another person, directly or indirectly, will be tolerated, be it to the First Nation’s Grand Chief or to other persons. The salaries and/or advances paid or to be paid to different persons as requested by Jean Genest and/or any person under his orders must cease immediately. [26] [ 67 ] The Band Council members neither wanted, nor required, the contract with the appellant to be nullified. Nor did they ask the appellant to stop taking delivery of the shrimp.

Rather, they demanded that the latter pay the First Nation for the shrimp, regardless of what it had already paid the impleaded parties for the same resource. [ 68 ] Can we infer from this that the respondent ratified the contract with the appellant? The trial judge did not address this possibility. [ 69 ] In municipal case law, the courts various situations have led the courts to find that a contract concluded with a third party is valid if ratified, despite there being no formal resolution by the municipal council. [27] [ 70 ] Some aboriginal law decisions also address ratification.

In Heron Seismic Services Ltd. v. Muscowpetung Indian Band, [28] the Saskatchewan Court of Appeal affirmed the trial judgment that, based on Isolation Sept-Îles Inc., supra , concluded that even where the band made partial payments for a contract, it was not enough to satisfy the requirements of section 2(3) of the Indian Act, and the contract had to be considered as null. [ 71 ] In Plomberie Octave Roy & Fils Inc. v.

Conseil des Innus de Pessamit, [29] Francoeur, J. of the Superior Court held that a band council demand to a “co-contractor” to provide all outstanding invoices so it could make an offer to settle constituted

an act of ratification. [ 72 ] In Basque v. Woodstock Indian Band , [30] the New Brunswick Court of Appeal felt that the band council had ratified a contract with a builder and was therefore valid even though there was no resolution. The ratification was due to the fact that the band council had applied for a grant from the Department of Indian Affairs to pay the builder’s invoices. I point out that in that case the band council had previously adopted a resolution mandating the band chief to negotiate with the builder in anticipation of entering into the contract. [ 73 ] In McDonough v.

Maliseet First Nation at Tobique , the Court of Queen’s Bench of New Brunswick concluded that the band council had ratified the contract. Garnett, J. listed the factors considered to arrive at that decision:

[17] En l'espèce, j'admets la preuve suivante : 1. Le conseil a autorisé le chef à négocier des contrats avec McDonough. 2. Le conseil était au courant de l'existence des contrats et ne s'y est pas opposé. 3. La bande a payé McDonough jusqu'à la fin août 1996, conformément aux modalités du contrat. (Exhibit J-1, page 20.) 4. La bande n'adoptait pas habituellement de Résolutions du conseil de bande (RCB) dans la conduite de ses affaires, sauf lorsque les contrats se rapportaient à des biens réels ou au financement du fédéral. 5.

La bande a mis fin au contrat pour cause de difficultés financières et non en raison du rendement au travail de McDonough. 17 In this case there is evidence which I accept that: 1. the Council authorized the Chief to negotiate contracts with McDonough; 2. the Council was aware of the existence of the contracts and did not object to them; 3. the Band paid McDonough to the end of August 1996 in accordance with the contractual terms (Exhibit J-1, page 20); 4. the Band did not normally pass Band Council Resolutions (BCR'

s) in conducting its business except when contracts related to land or federal funding; 5. the Band terminated the contract because of financial difficulties not because of McDonough's performance. [31] [ 74 ] In this case, it was difficult, if not impossible, for the respondent to deny the agreement between Mr. Genest and the appellant, given how dependent the First Nation is on the fishing income and the short duration of the fishing season.

This is doubtless the reason why the respondent decided to continue doing business with the appellant for the 2005 season, reminding it, however, that any payments should be made to the First Nation. [ 75 ] The two demand letters here served to ratify the contract with the appellant. Indeed, they expressed the will of the majority of the respondent’s members. Also note that they approved the appellant’s continued purchase of its shrimp supply from the First Nation. The respondent did not ask the appellant to stop its activities, quite the contrary.

The respondent’s recourse against the appellant is therefore contractual. 4.5 The characterization of the appellant’s fault [ 76 ] The respondent alleges that the trial judge failed to state that the appellant’s fault was to have acted in a way that allowed Mr. Genest to take control of the First Nation, thereby preventing the respondent from performing its function. [ 77 ] According to the evidence accepted by the trial judge, the respondent did not establish that the appellant collaborated with Mr. Genest so the latter could take control of the First Nation.

The appellant was doubtless negligent, in particular by not seeking a legal opinion when it received the demand letters and the Federal Court judgments, before deciding on its subsequent conduct. Nevertheless, the trial judge did not consider the appellant’s indifference or lack of thoroughness as actively collaborating with the administration of Mr. Genest so as to enable the latter to take control of First Nation’s activities. The judge concluded that the appellant conducted itself as if the Band Council did not exist.

The respondent did not establish that the judge’s conclusion was based on a palpable or overriding error in weighing the evidence. [ 78 ] The appellant’s fault was to pay the price of the shrimp to Mr. Genest rather than to the owner, the First Nation, despite the respondent’s demand letters. The appellant, therefore, contravened

article 1557 CCQ. The payment did not discharge the appellant, except for the portion that benefited the First Nation: 1557. Le paiement doit être fait au créancier ou à une personne autorisée à le recevoir pour lui. S'il est fait à un tiers, il est valable si le créancier le ratifie; à défaut de ratification, il ne vaut que dans la mesure où le créancier en a profité. [32] 1557. Payment shall be made to the creditor or to the person authorized to receive it for him.

Payment made to a third person is valid if the creditor ratifies it; if it is not ratified, the payment is valid only to the extent that it benefits the creditor. 4.6 The appellant’s liability for damages to reputation, disruption of business and lost opportunities [ 79 ] I note once again that the trial judge condemned the appellant and the impleaded parties to $150,000 under this heading. [ 80 ] The appellant argues that the judge did not explain the reasons for holding it liable, contrary to

article 417 CCP. In addition, it maintains that the evidence did not establish any facts demonstrating it damaged the respondent’s reputation, that it disrupted business, or even that it caused any opportunities to be lost. [ 81 ] The appellant pleads that, not only did it not defame the respondent, but, on the contrary, it contributed to maintaining its reputation by paying several salaries and suppliers on behalf of the First Nation.

[ 82 ] In addition, the appellant argues that the amount decided upon by the judge largely surpasses the range of moral damages generally awarded for injury to a legal person’s reputation, which is between $10,000 and $25,000. [ 83 ] Lastly, the appellant argues that to be condemned for the respondent’s lost opportunities and disruption of business, the loss actually sustained by the respondent must be known. This was not proved at trial. [ 84 ] The appellant’s criticism concerns the causal link between its fault (paying Mr.

Genest for the shrimp instead of paying the First Nation) and the respondent’s damages for injury to reputation, disruption of business and lost opportunities. The judge granted $150,000 for the following reasons: [ translation ] [210] The accounting documents, with respect to the MVFN, for the fiscal year ending March 31, 2006, are therefore neither complete nor compliant because they are not consolidated and the review engagement report for one of the subsidiaries was not prepared.

Neither the DIAND, nor a banker, nor any person examining the financian situation of MVFN could have an overall, complete picture of the situation. [211] The defendants did not investigate any farther on this matter so we do not know why the audit was not fully completed in its entirety, although we do know that the Société de développement Wulustuk Inc. played a certain role during the crisis. But which one?

In this case, we are not dealing with a group of people who took over a third party’s marine resource without authorization, but with a major conflict between two factions in the same Indian band who have been locked in a power struggle for a long time, and it would have been expedient to know the overall financial situation of the MVFN as at March 31, 2006 . [212] For the Crabiers du Nord project, we know that all the legal and corporate documents had to be signed before the fishing season opened on April 1, 2005, but we do not know if the other Aboriginal communities established the business or if it was profitable. [213] The purchase of new boats, the acquisition of new fishing licences, and the recreation and tourist project are only projects and the plaintiff cannot assess its damages.

Pierre Nicolas confirmed that he cannot assess the damages after the recreation and tourist project was prematurely disclosed, but he alleged losses in the millions. More complete evidence was needed because there was nothing to indicate that the project can no longer go ahead. [214] However, the Court notes that the Band Council, the body recognized by the Indian Act to administer the MVFN, could not manage its resources for nearly one year, the crisis as a whole created tensions but most importantly it undermined the Band’s credibility.

Using judicial discretion and taking into account that this is a dispute between two groups within the same band, in which two protagonists, the chief-councillors and the Grand Chief, were elected by the members, the Court awards a total of $150,000 for damages. [215] To sum up, the defendants must pay the plaintiff the following amounts: … 5. $150,000 for damages to reputation, disruption of business and lost opportunities. [Emphasis added] [ 85 ] Reading this passage, one must agree with the appellant that the trial judge did not explain why it was held liable for these damages.

The judge’s general comments as to its fault nevertheless do shed some light: [ translation ] [83] Crevette du Nord conducted itself as if the Band Council did not exist. It could not have been unaware that the plaintiff had decided, at the end of the 2004 season, to take over all management of shrimp fishing.

Yet it preferred to obey Jean Genest’s instructions, to pay the fishermen and certain suppliers and to deposit the balance into the bank accounts of Jean Genest and his associates knowing, it must be recalled, that a third party, the MVFN, owned the resource. [ 86 ] Are the damages awarded directly connected to the appellant’s fault? It is well established by case law that whether there is a causal connection is a question of fact, and the Court may only intervene if there is a palpable and overriding error: 104 In the determination of fault one applies norms of behaviour required by law to a set of facts.

This obviously makes the question one of mixed law and fact. In contrast, in the determination of causation one is inquiring into whether something happened between the fault and the damage suffered so as to link the two. That link must be legally significant in an evidentiary sense, but it is rendered no less a question of fact. [33] [ 87 ] There are rules in the Civil Code of Québec on compensating injury:

1607. Le créancier a droit à des dommages- intérêts en réparation du préjudice, qu'il soit corporel, moral ou matériel, que lui cause le défaut du débiteur et qui en est une suite immédiate et directe . […] 1611. Les dommages-intérêts dus au créancier compensent la perte qu'il subit et le gain dont il est privé. On tient compte, pour les déterminer, du préjudice futur lorsqu'il est certain et qu'il est susceptible d'être évalué. […] 1613.

En matière contractuelle, le débiteur n'est tenu que des dommages-intérêts qui ont été prévus ou qu'on a pu prévoir au moment où l'obligation a été contractée , lorsque ce n'est point par sa faute intentionnelle ou par sa faute lourde qu'elle n'est point exécutée; même alors, les dommages-intérêts ne comprennent que ce qui est une suite immédiate et directe de l'inexécution . [Emphasis added] 1607. The creditor is entitled to damages for bodily, moral or material injury which is an immediate and direct consequence of the debtor's default. … 1611.

The damages due to the creditor compensate for the amount of the loss he has sustained and the profit of which he has been deprived. Future injury which is certain and able to be assessed is taken into account in awarding damages. … 1613.

In contractual matters, the debtor is liable only for damages that were foreseen or foreseeable at the time the obligation was contracted , where the failure to perform the obligation does not proceed from intentional or gross fault on his part; even then, the damages include only what is an immediate and direct consequence of the nonperformance. [ 88 ] The damage, therefore, must be direct, immediate, foreseeable and certain in order to be compensated.

Authors Baudouin and Deslauriers state that when the court rules on this issue, in a way it determines whether there is a causal connection between the fault and the damages . [34] The authors describe the causal connection required to identify the immediate and direct damage as follows: [ translation ] 1-1293 – Analysis –

Article 1607 CCQ provides that the debtor is only liable for damages that are an immediate and direct result of the nonperformance. The legislator merely wished to affirm that there must be a close causal connection between the fault and the damage. By eliminating the “damage by ricochet,” the debtor is not held liable for consequences and effects far removed from his fault.

Therefore, only injury that is a direct result of the nonperformance can be compensated. … [ 89 ] As for the damage being foreseeable, the authors add: [ translation ] 1-1295 – Analysis – The condition that contractual damages must be foreseeable is based on the presumed intent of the parties. They specifically defined the terms of their undertaking when the contract was formed, and may also have determined the scope of the consequences in the event of future nonperformance. It indirectly confirms the principle that liability is based on fault, and not simply risk.

Therefore, foreseeability is assessed as at the day the contract was concluded and by applying an abstract criterion: what damages could a reasonably prudent and diligent contracting party have foreseen in the circumstances? It is normal that compensation may not vary greatly as a result of external factors, meaning events or changes in situation that arise after entering into the undertakings, which the parties could not have anticipated and over which they have no control .… [35] [ 90 ] The fact that the appellant committed a fault in paying Mr.

Genest for the shrimp rather than the respondent does not mean that it is responsible for all the harm engendered by the conflict between the respondent and Mr. Genest.

In the words of the trial judge [ translation ] : “[i]n this case, we are not dealing with a group of people who took over a third party’s marine resource without authorization, but with a major conflict between two factions in the same Indian band who have been locked in a power struggle for a long time…” [36] [ 91 ] The judge nonetheless held the appellant liable since [ translation ] “the crisis as a whole created tensions but most importantly it undermined the Band’s credibility.” [37] In my opinion, and with the greatest respect for the trial judge, he committed a palpable and overriding error in finding that the appellant was liable for the damages to the respondent’s reputation, for the disruption of business and the lost opportunities.

There is no direct link between the respondent’s damages and the appellant’s fault as required by the Civil Code of Québec , the leading authors and the case law. [ 92 ] Indeed, it was Mr. Genest’s mismanagement as well as the conflict between the two factions of teh First Nation that tarnished its reputation, not the fact that the appellant paid the wrong person. In the words of authors Baudouin and Deslauriers, the respondent’s injury is not a logical, direct and immediate consequence of the fault.

This is especially true given that the conflict lasted nearly one year and the fishing season only a couple of months. Without the Genest administration’s deficient management of the First Nation’s business and the conflict between the two groups, the appellant’s fault could not have, on its own, caused the injury. [ 93 ] As stated by Robert, J.A. in Chouinard v. Robbins , there must be a close relationship between the fault and the damage to establish causal connection: [ translation ]

[33] It is clear to me that to find an adequate causal connection (as opposed to an immediate one), it is necessary to separate the real cause from mere circumstances or occasions leading to damage. [38] [ 94 ] The conclusion could have been different had the respondent proved that the impleaded parties had consulted and schemed with the appellant to harm the respondent, whether by tarnishing its reputation or preventing it from concluding new business. In so doing, the appellant would have participated in the impleaded parties’ fault, thereby contributing to Mr.

Genest’s illegally taking control of the First Nation, as the respondent alleged. However, this is not the case.

Moreover, the trial judge insisted in his reasons that the dispute concerned first and foremost two rival factions within the same band. [ 95 ] This ground of appeal must succeed. [ 96 ] The conclusions of the judgment a quo should be amended to remove this condemnation against the appellant. 4.7 The appellant’s responsibility for the accounts accumulated during the Genest administration [ 97 ] As I previously indicated, the trial judge held the appellant liable for the accounts payable accumulated under the Genest administration ($420,189) that the respondent must pay, he said, to maintain the First Nation’s reputation and business relationships. [ 98 ] The appellant’s main argument is that the respondent never sought in its proceedings that the appellant be held liable for paying the accounts payable that may have accumulated during the Genest administration.

In the conclusions of the motion to institute proceedings this head of damages only mentioned Mr. Genest. The appellant’s name only appeared under this head of damage in the table of claims, filed the day prior to the oral submissions, without the respondent having applied for any amendment or the judge having authorized one. [ 99 ] In the alternative, the appellant submits that there is no causal connection between the respondent’s damages and the fault it committed, if any. It cannot be held liable for undertakings contracted by Mr.

Genest over which it had no control and of which it was unaware. [ 100 ] It appears from the respondent’s last amended motion to institute proceedings [39] that the appellant was not mentioned in the head for damages concerning the accounts payable accumulated during the administration of Mr. Genest. Only the latter was. [ 101 ] The judge nevertheless condemned the appellant to pay the respondent the sum of $420,188.80 jointly and severally with the impleaded parties, representing the accounts payable accumulated by the Genest administration.

He explained as follows: [ translation ] [174] The responsibility for this amount rests on all the defendants as this claim is directly linked to the fishing operations. E. Gagnon et Fils ltée and Crevette du Nord Atlantique Inc., despite the demand letters and notices received, preferred to pay the Genest administration rather than the owners of the crab and shrimp resource. They must bear the consequences therefrom, subject to the agreement with E.

Gagnon et Fils ltée. [Emphasis added] [ 102 ] Before the judge commented on this head of damages claimed by the respondent, he indicated that counsel for the respondent had filed a table of claims, which was annexed to the trial judgment. This table was filed on March 3, 2008, the day preceding the oral submissions.

Counsel for the respondent presented it as a consolidated table: [ translation ] Mtre PAUL-YVAN MARTIN Counsel for the plaintiff: And the other thing I would like to submit now, before the recess, is that we had difficulty reconciling the amounts paid by the sequestrator that are being claimed with the amounts indicated in the application, that is in the motion to institute proceedings. The amounts are listed, and the challenge is to ensure there is no duplicate claim. And that is why everyone was shilly-shallying, because we were not sure ... And it shows...

It is quite complicated, because each amount included in the claim stems from a statement and the amounts in the document filed by the sequestrator, in certain cases, are also statements, summations. And we had to be sure that there was no duplicate claim. So, perhaps I can submit the documents in question before the recess. … Yes. Well to begin there is our motion to institute proceedings with the

article numbers and the claim... each amount claimed. [40] [ 103 ] The following day, March 4, 2008, counsel for the respondent added the following comments: [ translation ] Mtre PAUL-YVAN MARTIN: Yes, but there have been some minor corrections because the amount of expenses shared between the two parties, that is to say the Band Council and the Genest administration, has changed a little after the experts reexamined them yesterday, the total claimed had to be changed. And I also, in the table I submitted to you, prepared the total result.

Just to explain, I indicated the subtotals, firstly, the subtotals for each group of defendants. Therefore, it is two million eight hundred thousand... eight hundred two thousand ($2,802,000), in fact, for all the defendants. After that, there is three hundred twenty-eight thousand... three hundred twenty-nine thousand ($329,000) for

the defendants Genest, Jenniss and Rioux, and fifty-five thousand ($55,000) for the defendant Jean Genest. Now, if we add it all up, because they are joint and several, that gives us, it is, therefore, two million eight hundred thousand ($2,800,000) in total. In the case of Mr. Genest, Jenniss and Rioux, for them, it adds up to three million (3 000 000 $), you have to add two million eight hundred thousand ($2,800,000) plus three hundred twenty-eight thousand ($328,000).

And in the case of Jean Genest, you have to add three numbers, that is two million eight hundred thousand ($2,800,000) plus three hundred twenty-eight ($328,000) plus fifty-five thousand ($55,000), that makes three million two hundred thousand ($3,200,000).

So that is, it is the fiduciary obligation, in our opinion... excuse me, the solidary obligation, in our opinion, of each of party. [41] [Emphasis added] [ 104 ] This table assigned the debts under the Genest administration to the appellant and the impleaded parties: [42] Para Description Crevettes du Nord inc., J Genest, A Jenniss, M Rioux Solidarily J Genest, A Jenniss, M Rioux Solidarily Jean Genest 108 (C,D) 60 (M to R) 106 (E) - Undertakings and obligations contracted by the Genest administration, excluding those undertakings it paid (Amounts established by the receiver Michel Landry c.a., in P-72 amended) - These undertakings include the amount for deductions at source taken from salaries for the Genest administration (60 M to R), that the sequestrator had to pay even though the band council did not consent. $420,189 [reproduced in full] [ 105 ] According to the amended motion to institute proceedings of November 15, 2007, the amount claimed was therefore reduced from $483,344, to $420,189.

The respondent had indicated in its November 15, 2007, motion that the amount claimed needed to be completed. The second thing is that the accumulated accounts payable were no longer claimed solely from Mr. Genest, but were also claimed from the appellant and the impleaded parties Jenniss and Rioux solidarily. [ 106 ] This change required an amendment to the motion to institute proceedings. Without an amendment, we must conclude the judge ruled ultra petita . To remedy this deficiency, the respondent alleged the table must be considered as amending its motion to institute proceedings.

It is wrong. [ 107 ] Indeed, as it appears from the hearing transcript of March 3, 2008, [43] and from reading the stenographer’s notes, it is impossible to maintain that this formally amended the respondent’s suit. To the contrary, the table of claims was presented rather as a work tool to help the trial judge draft his decison.

Consequently, it was not intended to amend the motion to institute proceedings and cannot be considered as a formal motion to amend. [ 108 ] Even if the table could have been considered an implicit application for permission to amend, I do not believe the judge could have granted it in this case. A pleading may be amended at any time before judgment “provided the amendment is not useless or contrary to the ends of justice and does not result in an entirely new action or application having no connection with the original one.” [44] In Gestion immobilière André Ledoux Inc. v.

Laplante , the Court noted that: [ translation ] An essential element of the ends of justice is to maintain the balance between the parties’ rights .

In this case, the amendment submitted the very morning of the hearing would make it difficult for the respondents to defend themselves. [45] [Emphasis added] [ 109 ] Recognizing on appeal that there was an implicit amendment at that stage in the proceedings, just before oral submissions, without any mention that the respondent was changing tracks, would upset the balance between the parties since the appellant was unable to defend itself against these allegations. [ 110 ] In the alternative, it is my opinion that the appellant could not have been held liable for the accounts accumulated under the Genest administration, even if the amendment had been sought and granted. [ 111 ] The damages are not direct, immediate and foreseeable as required by the Civil Code of Québec .

The respondent’s damages respecting the accumulated accounts were caused by Mr. Genest’s deficient management. There would have been no damage if the latter had managed the First Nation’s property diligently and with know-how. The damage is not the direct and logical consequence of the appellant’s fault.

[ 112 ] Consequently, this ground of appeal must succeed. [ 113 ] The conclusions of the judgment a quo should be amended to remove this condemnation against the appellant. 4.8 Liability for fees and disbursements of the auditor, the forensic accountant and the court-appointed sequestrator [ 114 ] The appellant argues it cannot be condemned to pay the fees for the auditor, the forensic accountant and the court-appointed sequestrator. [ 115 ] First, it submits the auditor was hired to prepare the accounting of the Genest administration, for which it has no responsibility.

Indeed, the costs for preparing the 2004-2005 financial statements cannot be assigned to it because the fishing season opened on April 1, 2005. [ 116 ] The same applies to the fees for the forensic accountant. The appellant argues they became necessary due to the complexity of reconstituting the accounting of Genest administration and the cash payments made by the latter. The payments the appellant made were known and required little work by the forensic accountant. [ 117 ] The appellant pleads that a court-appointed sequestration is a provisional measure and only benefits the property’s future owners.

Consequently, nothing justifies condemning a third party to pay the costs related to administering property the latter is not claiming. In this context, the judge erred in condemning the appellant to pay the costs related to the court-appointed sequestrator. Even if the Court had concluded that it was liable, the appellant suggests that the level of these fees must be debated when the bill of costs is taxed, not in appeal. [ 118 ] As for the respondent, it argues that the judge erred in not condemning the appellant to pay it the $64,795 disbursed to prepare the accounting of Mr.

Genest’s expenditures. [ 119 ] I will analyze these grounds for appeal under the four following headings. 4.8.1 Auditor’s fees [ 120 ] The judge condemned the appellant and the impleaded parties to pay the additional auditing costs for preparing the First Nation’s 2004-2005 and the 2005-2006 financial statements.

He reduced the amount originally claimed ($244,756) by the average amount of fees paid for the years 2002-2003 and 2003-2004 and condemned them to pay $107,410. [ 121 ] As I have already written, the appellant alleges that there is no causal connection between this damage and its fault since it resulted from Mr. Genest’s mismanagement and inadequate accounting. [ 122 ] On a motion for an interlocutory injunction and to appoint a sequestrator , [46] Ouellet, J. appointed Raymond Chabot Grant Thornton to prepare the First Nation’s 2004-2005 and 2005-2006 financial statements.

In the same judgment, Ouellet, J. noted the appellant’s undertaking to provide Raymond Chabot Grant Thornton with the supporting documents needed for the audit. [ 123 ] To return to the principles discussed above on the direct nature of the damage and the causal connection, damage that is [ translation ] “the logical, direct and immediate consequence of the fault” [47] is compensable. One must therefore ask if the appellant harmed the First Nation by paying Mr.

Genest instead of the former, and if it resulted in additional costs for preparing its 2004-2005 and 2005-2006 financial statements. [ 124 ] In my opinion, the judge could not condemn the appellant to pay the fees for preparing the financial statements covering the period from April 1, 2004, to March 31, 2005, the appellant’s fault being subsequent to this date. [48] The appellant, therefore, cannot be held liable for the absence of an accounting and bookkeeping system for this period. [ 125 ] The additional costs to the respondent of $62,300 [49] for preparing the 2005-2006 financial statements are an indirect damage.

The excess costs are not a logical consequence of the appellant’s fault, but rather are attributable to Mr. Genest’s deficient accounting system.

On this matter, the expert forensic accountant noted in her report several kinds of problematic transactions that she traced in order to determine the receipts and disbursements during the Genest administration: - transactions outside of bank accounts, particularly in cash; - lack of supporting documents for several expenses; - bank transfers between several accounts in the impleaded parties’ names. [ 126 ] As indicated by the authors Baudouin and Deslauriers, a court must [translation] “separate the real cause from mere circumstances or occasions leading to damage.” [50] Here, the appellant’s payment for shrimp to Mr.

Genest was perhaps an occasion for damages, but it is not the cause. [ 127 ] Consequently, I find that the additional costs for preparing and auditing the respondent’s financial statements were not caused by the appellant’s payments but by Mr. Genest’s poor financial and accounting management. On the other hand, had Mr.

Genest not improperly administered the First Nation’s affairs, the appellant’s wrongful payments would have had little impact on the accountants’ fees. 4.8.2 Costs related to the forensic accounting expertise [ 128 ] All the parties consented to appointing a single forensic accounting expert during a case conference before the trial judge. [51] Almost two months later, the parties mutually agreed to choose the firm of Leclerc Juricomptables. In accordance with

article 422 CCP ,

an expert has a solidary remedy against all the parties to the suit to recover his or her fees. [129] The guiding principle on this matter is that the party that loses must pay the expert fees, since they are part of the costs:[52] 477. La

partie qui succombe supporte les dépens,frais du sténographe compris, à moins que, pardécision motivée, le tribunal ne les mitige, ne lescompense ou n'en ordonne autrement. Le tribunal peut également, par décisionmotivée, mitiger les dépens relatifs auxexpertises faites à l'initiative des parties,notamment lorsqu'il estime que l'expertise étaitinutile, que les frais sont déraisonnables ou qu'unseul expert aurait suffi. […][53] 477. The losing party must pay all costs,including the costs of the stenographer, unless bydecision giving reasons the court reduces orcompensates them, or orders otherwise.

As well, the court may, by a decision givingreasons, reduce the costs relating to experts'appraisals requested by the parties, particularlyif, in the opinion of the court, there was no needfor the appraisal, the costs are unreasonable or asingle expert's appraisal would have beensufficient. … [130] As indicated by this provision, it is possible to reduce the expert fees.

This decision is left to the discretion of the trial judge, asstated by this Court on numerous occasions.[54] In a Supreme Court judgment, LeBel, J. affirms that a discretionary decision toadjudicate costs may be reviewed on appeal according to the circumstances: 43 As I observed in R. v. Regan, 2002 SCC 12 , [2002] 1 S.C.R. 297, 2002 SCC 12, however, discretionary decisions are notcompletely insulated from review (para. 118). An appellate court may and should intervene where it finds that the trial judge hasmisdirected himself as to the applicable law or made a palpable error in his assessment of the facts.

As this Court held in Pelech v.Pelech, (SCC), [1987] 1 S.C.R. 801, at p. 814-15, the criteria for the exercise of a judicial discretion are legal criteria,and their definition as well as a failure to apply them or a misapplication of them raise questions of law which are subject to appellatereview.[55] [Emphasis added] [131] The trial judge should have used his discretion to reduce the expert fees, for example, by having each party pay a certainpercentage of the costs related thereto. Given the context in which the services of the forensic accounting expert were used in this file,there is cause to intervene.

A significant part of the expertise was to determine how the First Nation’s property had been managed duringthe Genest administration.

The forensic accounting expert also had to calculate the fishing income as well as the payments made by theappellant on behalf of the First Nation to the fishermen or its suppliers,[56] but this work was relatively simple in relation to what wasrequired to shed light on the Genest administration. [132] I find that the appellant should shoulder 25% of the costs related to the forensic accounting expert, which corresponds to theportion of work caused by its actions. 4.8.3 Court-appointed sequestrator’s fees [133] The fees for the court-appointed sequestrator were granted by the trial judge as costs for the following reasons: [translation] [178] The plaintiff claims $47,938.55 for the DIAND appointed receiver-manager and $285,174.46 to reimburse the court-appointedsequestrator’s fees. [179] The first claim for $47,938.55 is dismissed.

In July of 2006, the DIAND decided to appoint a receiver and retained the servicesof the same person appointed by the Honourable Madam Justice Ouellet in January of 2006. On this subject, Nathalie Caron stated asfollows: [translation] “In July of 2006, the Department of Indian Affairs concluded a contract with Mr. Landry for a second term as receiver, a receiver-manager. I have nothing to do with this. I never saw the invoices or the things they did together. It is a mandate between the receiver and the Department of Indian Affairs.” [180] For the court-appointed sequestrator’s fees,

article 750 CCP provides that “the costs and the remuneration of the sequestratorare taxed by the clerk; they are due jointly and severally by the parties to the contestation, unless the court otherwise orders.” [181] The Honourable Madame Justice Ouellet appointed the sequestrator to protect the assets and income of the MVFN after JeanGenest and his associates took control of the administrative offices and to protect future fishing income. [182] All the defendants including the processors are the cause of this order and they alone are responsible. The sequestrator’s costsand remuneration will be included in the bill of costs.

[ 134 ] The appellant adds that the court-appointed sequestrator was appointed to protect the First Nation’s property during the proceedings. It submits that only those parties that claimed this property can be condemned to pay the related costs. Ouellet, J., ordered the First Nation’s property to be sequestered on January 11, 2006, following the respondent’s motion. [57] [ 135 ] The relevant provisions in the Code of Civil Procedure are the following: 742. Le tribunal peut, d'office ou sur demande, ordonner le séquestre d'un bien, lorsqu'il estime que la conservation des droits des parties l'exige.

Le séquestre peut être ordonné par un juge de première instance lorsque la cause a été portée en appel. […] 750. Les frais et la rémunération du séquestre sont taxés par le greffier; ils sont dus solidairement par les parties à la contestation, à moins que le tribunal n'en ordonne autrement . [Emphasis added] 742. The court may of its own motion, or on application, order the sequestration of property when it considers that the protection of the rights of the parties so requires. Sequestration may be ordered by a trial judge when the case is in appeal. … 750.

The costs and the remuneration of the sequestrator are taxed by the clerk; they are due jointly and severally by the parties to the contestation, unless the court otherwise orders . [ 136 ] The Civil Code of Québec defines this institution as follows: 2305. Le séquestre est le dépôt par lequel des personnes remettent un bien qu'elles se disputent entre les mains d'une autre personne de leur choix qui s'oblige à ne le restituer qu'à celle qui y aura droit, une fois la contestation terminée. [58] 2305.

Sequestration is the deposit by which persons place property over which they are in dispute in the hands of another person chosen by them, who binds himself to restore it, once the issue is decided, to the person who will then be entitled to it. [ 137 ] LeBel, J.A. explained the nature of this provisional measure in Sénécal v. Reid : [ translation ] Sequestration is a temporary and limited means to protect a party’s interests during proceedings. It is often more appropriate during a dispute over property, as in this case, than more drastic measures such as injunction or seizure before judgment.

This is especially so where it involves keeping an active business operating, while protecting the allegedly endangered rights. [59] [ 138 ] Another Court judgment distinguished court-appointed sequestration from seizure before judgment by emphasizing the fact that sequestration is a protection measure, pending a court decision attributing a right of ownership: [ translation ] This is where, in my opinion, court-appointed sequestration is clearly distinguished from seizure before judgment. The latter (art 733 CCP ) allays the fear that debt recovery may be in peril.

Sequestration applies to cases where it is required to protect the parties’ rights (art 742 CCP ). In this regard, I refer you to the Superior Court decision in Entrepôts Frigorifiques Martineau Inc. v. Entrepôts Frigorifiques Laberge Inc ., [1976] SC 1351, and the opinion of the Honourable Paul-Étienne Bernier. Another important distinction between these two recourses is that seizure before judgment is reserved strictly for the plaintiff (art 733 CCP ) whereas sequestration may, in principle, be requested by any person, and even ordered by the Court on its own motion.

In this matter, seizure before judgment could not have been granted to the respondent, who is merely an intervener. Sequestration is also distinguished from seizure in revendication, by which the official owner attempts to regain control of property of which he has been illegally dispossessed and which is wrongfully held by another.

Sequestration is a simple temporary conservation and protection measure used while awaiting a court decision attributing a right of ownership. [60] [Emphasis added] [ 139 ] Professor Ferland also believes that court-appointed sequestration is a useful provisional measure during a dispute over property ownership: [ translation ] This order is granted in the context of a dispute over ownership of property.

Indeed, according to substantive law, sequestration is the deposit by which persons place property over which they are in dispute in the hands of another person who binds himself to restore it, once the issue is decided, to the person who will then be entitled to it (art 2305, 2309 CCQ ). …

To repeat, court-appointed sequestration is a provisional measure that applies during a dispute over ownership of property.

For example, the court will order property to be sequestered where it is proved that a party to the suit has mismanaged the property, or committed irregularities with regard to it . [61] [Emphasis added] [ 140 ] Professor Ferland had the following to say with regard to apportioning the costs of court-appointed sequestration: [ translation ] The costs and the remuneration of the sequestrator are taxed by the clerk; they are due jointly and severally by the parties to the contestation, unless the court otherwise orders (art 750 CCP ).…] According to the courts, the term “parties to the contestation” only covers those who had an interest in the disputed property . [62] [Emphasis added] [ 141 ] However, some Superior Court decisions have indicated that “parties to the contestation” refers to parties with an interest in the property sequestered, for example, secured creditors [63] or a person who possesses sequestered property . [64] [ 142 ] In Poudrier v.

Motel Carrefour de l’Est Inc. , Lesage, J. of the Superior Court indicated that the fact that a party was convened to a motion to appoint a sequestrator does not mean that it must, by this fact alone, be considered as a party to the contestation: [ translation ] The rules governing sequestration [art. 742 to 750 CP ) presuppose that the parties have an interest in the sequestered thing.

Article 667 CP , providing for sequestration of an immovable under seizure, presumes that the debtor in possession of the immovable and the creditor have a common interest. The objector has no title in the immovable and is not a party to the contestation of the immovable within the meaning of

article 750 CP , regardless of whether or not he or she was convened to the motion to appoint a sequestrator. [65] [ 143 ] In this case, Ouellet, J.’s judgment appointing a sequestrator ordered the appellant to make the final payments to the sequestrator. Contrary to Tartaglino above , the appellant had no interest in the sequestered thing and none of its property was sequestered.

In my opinion , the judge himself identified the crux of the contestation in this case: [ translation ] [181] The Honourable Madame Justice Ouellet appointed the sequestrator to protect the assets and income of the MVFN after Jean Genest and his associates took control of the administrative office andto protect future fishing income . [Emphasis added] [ 144 ] He had to determine who could administer the First Nation, the respondent or Mr. Genest.

It was this question that led to the sequestrator being appointed because the ownership or control of property was at issue. [ 145 ] Consequently, the appellant’s argument regarding the costs for the court-appointed sequestrator is well founded. In addition, the amount of fees charged by the sequestrator should be debated when the costs are taxed, the judge having decided to award them as costs, as provided by the rule: 750.

Les frais et la rémunération du séquestre sont taxés par le greffier ; ils sont dus solidairement par les parties à la contestation, à moins que le tribunal n'en ordonne autrement. [66] [Emphasis added] 750. The costs and the remuneration of the sequestrator are taxed by the clerk ; they are due jointly and severally by the parties to the contestation, unless the court otherwise orders. 4.8.4 Fees related to preparing the accounting

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