ROGER SOUTHWIND FOR HIMSELF, v. ON BEHALF OF THE MEMBERS OF THE LAC SEUL BAND OF INDIANS, 2017 FC 906

Date: 20171012 Docket: T-2579-91 Citation: 2017 FC 906 Ottawa, Ontario, October 12, 2017 PRESENT: The Honourable Mr. Justice Zinn BETWEEN: ROGER SOUTHWIND FOR HIMSELF, AND ON BEHALF OF THE MEMBERS OF THE LAC SEUL BAND OF INDIANS Plaintiffs and HER MAJESTY THE QUEEN IN RIGHT OF CANADA Defendant and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO Third Party and HER MAJESTY THE QUEEN IN RIGHT OF MANITOBA Third Party JUDGMENT AND REASONS TABLE OF CONTENTS Blank / En Blanc Blank / En Blanc Para I. Introduction 1 II. The Witnesses 15 Blank / En Blanc A. The Plaintiffs’ Witnesses 15 Blank / En Blanc B.

Canada’s Witnesses 52 Blank / En Blanc C. Ontario’s Witnesses 73 III. Assessment of the Witnesses 77 IV. Approach 92 V.

Historical Background 104 Blank / En Blanc The Treaty and the Reserve 104 Blank / En Blanc The LSFN Way of Life 112 Blank / En Blanc The Lac Seul Storage Project 116 Blank / En Blanc The Impact of the Project on the LSFN Reserve and other properties 152 Blank / En Blanc Clearing Timber from the Foreshore 163 Blank / En Blanc The Raising Water Level and the Impact on Reserve Housing 187 Blank / En Blanc Other Impacts on the Reserve as the Water Rose 191 Blank / En Blanc Negotiating the LSFN Claim 196 Blank / En Blanc Manitoba Reimburses Canada for Capital Costs 210 Blank / En Blanc Claims Paid by Canada and the Provinces Under the Agreement 213 Blank / En Blanc LSFN Claims and Receipts Post-1943 214 VI.

Summary of Relevant Facts from the Historical Record 218 VII. The Crown’s Duty to the LSFN 219 VIII. Equitable Compensation 228 Blank / En Blanc Whitefish Lake Band of Indians 250 Blank / En Blanc Huu-Ay-Aht First Nations 258

Blank / En Blanc Beardy’s & Okemasis Band #96 and #97 278 IX. What Options Were Available in 1929 288 X. Canada’s Legal Duties to the LSFN Relating to the Lac Seul Storage Project 296 XI. What Would Have Occurred in 1929 330 Blank / En Blanc Horseshoe Falls 1911 335 Blank / En Blanc Kananaskis Falls 1914 339 Blank / En Blanc Ghost River 1915 343 Blank / En Blanc The Stoney Indian Band Agreements 345 Blank / En Blanc Columbia River Treaty 347 Blank / En Blanc Would Canada Have Negotiated a Benefit Sharing Arrangement? 350 XII. The Value of the Flooded LSFN Reserve Land 376 XIII. Timber 396 XIV. Erosion 415 XV. Community Infrastructure 431 XVI. Livelihood Losses 438 XVII.

Summary of Losses 443 XVIII. Past Compensation Provided to LSFN for Flooding Losses 445 XIX. Compensation Today for Prior Losses 457 Blank / En Blanc The Hosios Report 468 Blank / En Blanc The Booth-Kirzner Report 477 Blank / En Blanc The Lazar-Prisman Report 480 Blank / En Blanc How to Put the LSFN in the Position It Would Have Been In But for the Breach? 483 XX. Punitive Damages 513 XXI. Declaration 526 XXII. Laches 530 XXIII. Third Party Claims 539 XXIV Costs 553 XXV.

Closing 554 Blank / En Blanc Blank / En Blanc Para “If it had been a white settlement, no person would have dared to flood the property, without paying compensation before flooding took place.” - H. J. Bury, Department of Indian Affairs, March 16, 1937 I. INTRODUCTION [ 1 ] The Lac Seul First Nation [LSFN] claims that Canada breached its treaty with the LSFN, the Indian Act , RS 1927, c 84, and its fiduciary duties and obligations.

As a consequence, the LSFN claims damages from Canada for losses caused to it and its members as a result of the flooding of a part of Reserve No. 28 [Reserve or LSFN Reserve] following the construction of a dam at Lower Ear Falls [the Ear Falls Storage Dam ] where Lac Seul drains into the English River. [ 2 ] In 1929, the Ear Falls Storage Dam was completed. Over the next few years the water level of Lac Seul was raised to a maximum high-water level of 1,172 feet – an increase of some 10 feet above its pre-dam normal level.

The lake remains flooded today and is likely to continue to be flooded as the water stored behind the Ear Falls Storage Dam is used to support hydroelectric power generating stations downstream on the English River in Ontario and on the Winnipeg River in Manitoba. [ 3 ] On the English River, in Ontario, four hydroelectric generating stations were developed after the Ear Falls Storage Dam was completed: Ear Falls (1929-30), Manitou Falls (1956), Caribou Falls (1958), and the Lac Seul Generating Station (2009). Currently, there are six hydroelectric generating stations on the Winnipeg River in Manitoba.

When the Ear Falls Storage Dam was built at the outlet of Lac Seul, there were three generating stations in operation on the Winnipeg River: Pinawa (1906 – 1951), Pointe du Bois (1911), and Great Falls (1923). Four more generating stations were built in Manitoba after the Ear Falls Storage Dam was completed: Seven Sisters (1931), Slave Falls (1931), Pine Falls (1951), and MacArthur Falls (1954). [ 4 ] The LSFN Reserve borders a part of the north shore of Lac Seul. The LSFN consists of approximately 2,700 members.

About one- third of the members live on the Reserve in three communities: Kejick Bay and Whitefish Bay, both of which are located on Lac Seul, and Frenchman’s Head, which is located on Lost Lake. [ 5 ] As a consequence of the flooding, the parties agree that 11,304 acres of the LSFN Reserve land is now under water. With the

flooding, the LSFN lost the use and enjoyment of this portion of its Reserve. The flooding had other impacts on the LSFN including lost houses, lost wild rice fields, and the separation by water of two of its communities, Kejick Bay and Whitefish Bay. [ 6 ] Canada took no steps then or subsequently to legally authorize the " “taking” " through flooding of these Reserve lands. Moreover, no compensation was paid to the LSFN relating to the flooded lands or consequent damages suffered until November 17, 1943.

A sum the LSFN says was too little and too late paid. [ 7 ] The LSFN in its Statement of Claim, claims damages from Canada for the loss of Reserve lands, for the loss of use of Reserve lands, for the loss of use of hunting, fishing and harvesting rights in its traditional territory, and for what are described as " “avoidable losses” " relating, among other things, to the destruction of gardens, hay lands, farm crops, wild rice crops, timber, houses, cabins and other buildings, and for the destruction and desecration of graves. [ 8 ] It is fair to say that the theory of the Plaintiffs’ case has changed during the 25 years of this litigation; indeed, it changed during the course of the trial.

The claim as it related to non-Reserve lands and many of the " “avoidable losses” " claims was not pursued in closing submissions. [ 9 ] The principal claim of the LSFN is summarized in its counsel’s opening statement as follows: " “[T]he main issue is whether Canada was obliged as the band’s fiduciary to obtain a royalty or a rental or some other form of return on the investment that Canada forced the band to make in this project by taking its land.” " [ 10 ] In closing, LSFN counsel quantified the claims advanced by the LSFN as follows: " “[E]quitable compensation for a loss of opportunity for hydroelectric benefits, past present and future in the amount of $506.6 million” " and also " “avoidable [on Reserve] losses, including erosion, timber, community infrastructure in the amount of $40.0 million.” " The LSFN also seeks " “a declaration that their legal interests in the flooded lands and the freeboard area has not been encumbered or extinguished.” " Lastly, the LSFN seeks an award of punitive damages and its costs. [ 11 ] Canada defended the main action and commenced third party claims against both Ontario and Manitoba for contribution and indemnity, pursuant to the terms of the Lac Seul Conservation Act , 18-19 Geo V, c 32 (Canada) and

An Act Respecting Lac Seul Storage , 18 Geo V, c 12 (Ontario). Both Ontario and Manitoba, in addition to defending the third party claims, defended the main action. [ 12 ] The action was tried in Ottawa over many days. All but two of the 24 witnesses called by the parties were expert witnesses. In addition to the oral evidence and facts agreed upon by the parties, 8,347 documents were entered as exhibits at trial. The event giving rise to the litigation happened long ago and therefore it is not surprising that many of these documents are historical archival records.

Others are of more recent origin, including hundreds of pages of expert reports. [ 13 ] The parties called historians, foresters, erosion specialists, hydrologists, economists, appraisers, and others to be qualified as expert witnesses. Each was so qualified by the Court, in terms described below.

It is not possible, given the extensive factual matrix detailed by the exhibits and witness testimony, to summarize all of the events that took place prior to and following the Ear Falls Storage Dam construction, the evidence tendered relating to the losses suffered, the quantification of those losses, or the extensive expert reports. [ 14 ] I assure the parties that I have read and considered all of the evidence relied on by the parties in support of their submissions in this action.

I will not summarize the evidence of each of the witnesses; rather, I will outline the facts as I have found them, and where necessary, will explain the rationale for my findings. II. THE WITNESSES A. The Plaintiffs’ Witnesses Chief Clifford Bull [ 15 ] Chief Bull gave evidence as to the membership of the LSFN, and the geography of the LSFN Reserve. He described a number of flooding effects including tree stumps in the water, boating accidents due to boats hitting stumps in the water, people falling through the ice due to the unpredictability of the water, and the absence of wild rice.

He also testified about his trapping and the effects the flooding had on muskrat and beaver populations. He outlined the research that preceded this claim, and its timing. He testified that the LSFN submitted a claim in Canada’s Specific Claims Process on September 24, 1985, regarding the flooding of its Reserve. [ 16 ] He testified about an agreement the LSFN entered into with Ontario Power Generation [OPG] in November 2006, regarding the new generating station, the Lac Seul Generating Station that came on line in 2009, located next to the generating station built in 1929 at the Ear Falls Storage Dam.

The description of the OPG facilities in the agreement does not include the Ear Falls Storage Dam which belongs to Ontario. The agreement speaks to $11.6 million in compensation OPG has agreed to pay the LSFN. It also provides that OPG offer LSFN an opportunity to purchase an equity position of 25%. Chief Bull testified that the LSFN borrowed over $4 million to invest in the opportunity. The agreement contains releases but excludes Reserve lands or any impacts caused by the Ear Falls Storage Dam.

He testified that the limited partnership agreement between OPG and LSFN was made effective in December 2008, and that since 2009 when the Lac Seul Generating Station went into operation, LSFN has received $3.8 million in revenue. [ 17 ] The Chief also testified about other agreements the LSFN entered into regarding mining and forestry. David Gordon [ 18 ] David Gordon is a LSFN band member and was its Chief from 2002 to 2006. He is currently the LSFN Housing Manager, and was the project manager for the Whitefish Bay Road and Bridge Project and the Kejick Bay Causeway Project. He explained that Kejick

Bay became an island when the flooding occurred but that previously Kejick Bay and Whitefish were connected. He stated that the purpose of the road and the causeway was to connect the communities for the health and safety of the residents. [ 19 ] He testified about the contributions to these projects made by the LSFN and Indigenous and Northern Affairs Canada [INAC]. The parties are agreed that in 2009, the Kejick Causeway between Kejick Bay Island and the Reserve mainland was completed for a total cost of $4,538,000 with INAC paying $3,038,000 and the LSFN paying approximately $1,500,000.

They also agree that the Whitefish Bay Road and Bridge were completed in 2009 for a total cost of $2,379,930 with INAC paying $1,043,600, the LSFN paying approximately $250,000, and the remainder coming from other sources. [ 20 ] Mr. Gordon testified that the funding could have been used for other infrastructure projects had the communities not been separated by the flooding. [ 21 ] Mr. Gordon was Chief of the LSFN when negotiations began for the OPG agreement described by Chief Bull and Mr. Gordon spoke to his involvement and his understanding of its purpose. [ 22 ] Like Chief Bull, Mr.

Gordon testified about his trapping and the effects the flooding had on muskrat and beaver populations. Gwynneth C. D. Jones [ 23 ] Gwynneth Jones was qualified as " “a historian having expertise with respect to the

interpretation of the interaction between the Canadian government and Aboriginal Peoples based on historical records.” " She provided a lengthy report and testimony covering the period 1871 to 1943, concerning the construction of the Ear Falls Storage Dam and the flooding of the LSFN Reserve. [ 24 ] She also provided a second report and gave testimony concerning water power development on the Bow River in Alberta. This evidence spanned the period from 1903 to 1947, and focused specifically on the relationship between the power developers and the Stoney Indian Band on Reserves 142, 143, and 144.

These projects and the financial arrangements with that First Nation are relied upon by the LSFN as a precedent of what Canada ought to have obtained to protect the interests of the LSFN. Trevor E. Falk [ 25 ] Mr. Falk was qualified an expert witness, being a hydraulic engineer, both by training and experience, and having experience with the water level control at both Lac Seul and Lake of the Woods.

It was further accepted by the Court that he has knowledge and experience of hydroelectric generation generally and, more particularly, with respect to the facility or facilities that use the water coming from Lac Seul. [ 26 ] Mr. Falk gave evidence generally regarding the water level and the control of the water level of Lac Seul and the role played in that by the Lake of the Woods Control Board.

The portions of his report describing lakeshore erosion was found by the Court not to be admissible evidence, as he has no expertise in that area. [ 27 ] He testified as to the water levels of Lac Seul in the years between 1929 and 1934, and the natural, ordinary high-water level of the lake prior to and after the construction of the Ear Falls Dam.

He explained the effect of wind and waves on the lake on the shoreline and testified that it was his opinion that the affected Reserve lands would include more than the lands up to the high-water level of 1,172 feet; it would also include the five vertical feet above that level referred to as the " “freeboard” " area. P.M. (Patt) Larcombe [ 28 ] There was an objection from Ontario, supported by Canada, to the qualification of Ms. Larcombe as an expert witness.

After a lengthy voir dire and an adjournment to consider the objection, the Court ruled that she would be accepted as an expert: See Southwind v Canada , 2016 FC 1132 . [ 29 ] Ms. Larcombe was qualified as an expert witness in cultural geography with a specialty in: (1) aboriginal traditional livelihood loss of use valuation; and (2) evaluating impacts on First Nations’ livelihood and living conditions resulting from industrial and hydro development projects.

She was permitted to provide an expert opinion on loss of use of the LSFN’s traditional economy, in relation to losses it experienced on Reserve lands and traditional territory as a result of the construction of the Ear Falls Storage Dam and flooding of Lac Seul, specifically with respect to: (

a) decreased opportunity and success in LSFN’s traditional harvesting practices; (

b) lost opportunity to harvest wild rice for human nutritional needs and income; (

c) decreased opportunity and success in trapping aquatic furbearer species; (

d) lost opportunity to grow vegetable products for human nutritional needs; and (

e) lost opportunity to feed cattle that were maintained for human nutritional needs. She was also permitted to provide factual historical evidence relating to interment sites of the LSFN that were lost or damaged by the flooding . [ 30 ] Ms. Larcombe provided her opinion on the losses suffered by the LSFN. Her terms of reference were to first prepare a report examining the loss of opportunity over time for the members of the LSFN to harvest or to earn a livelihood from the component of the traditional territory that was impacted by the impoundment of Lac Seul. Second, she examined avoidable losses. Ms.

Larcombe developed nominal dollar value assessments for the loss of use from some point after 1929 to 2012. These values were gross values. Third, Ms. Larcombe was asked to form an opinion on which of the losses would have been experienced on the Reserve versus those experienced off the Reserve. [ 31 ] She examined six loss of use areas: hay for livestock, food from gardens, trapping income, food from wildlife, food and income from manomim (wild rice), and food from fishing.

She opined that the sum of annualized nominal dollars for these losses for the period 1929 to 2012 was $9,277,853 on-Reserve, and $15,559,824 off-Reserve. Her loss estimates were subsequently used by other witnesses called by the Plaintiffs to provide evidence on the value today of the losses suffered in the period since 1929. [ 32 ] However, as discussed below, in the end her evidence was largely irrelevant to the claim as in closing argument counsel conceded

" “that Larcombe is not the appropriate measure of damages in this case.” " Greg W. Scheifele [ 33 ] Mr. Scheifele was qualified as an expert in forestry, ecology, and environmental planning; however, his testimony was restricted to the contents of his expert reports, which were more circumscribed than his areas of expertise. [ 34 ] Mr. Scheifele provided evidence on timber losses caused by the flooding of Lac Seul. Additionally, he provided his opinion on the costs of clearing the timber and brush in the flooded areas as clearing was not done prior to the flooding of Lac Seul.

He testified that the nominal value of the loss of timber revenue through dues to the LSFN was $66,081.48. He also testified that the estimated cost of clearing the 8,920 acres of woodland on the shoreline of the LSFN Reserve to the 1,172-foot level would have been $767,800.00 in 1929. He testified that this figure would be somewhat larger in light of the parties’ subsequent agreement on the flooded acreage. James R. (Northcote) Gilles [ 35 ] Mr.

Gilles was qualified as an expert witness " “to provide opinion evidence generally on the energy sector with particular expertise in hydroelectric power utilities and economic models related thereto, and specifically on the valuation of hydroelectric economic benefits resulting from the flooding of Lac Seul for hydroelectric development.” " [ 36 ] Mr. Gillis was asked by the LSFN to analyze the hydroelectric generation benefits and to apply First Nation precedents to provide to the Court his opinion of what a reasonable sharing in a " “modern context” " might look like. [ 37 ] Mr.

Gillis stated that the storage created by the Ear Falls Storage Dam was a critical piece of infrastructure as it was " “massively beneficial” " to the hydroelectric potential that hadn’t yet been developed and to the downstream facilities that had been developed. He examined the Bow River Stoney First Nation precedent, the letter of March 11, 1968, from E. B.

Easson, Secretary, Ontario Hydro to the Minister of Lands and Forests, Ontario, which provided estimates of the annual value of electricity gained from storage of water in three- foot increments on Lac Seul, and the Columbia River Treaty between Canada and the United States of America, all with a view to opining on shared benefits of power storage. [ 38 ] Mr. Gilles, in addition to his first report dated January 31, 2014, provided a second report dated June 15, 2015.

His analysis " “yielded an estimate of $408 million as being the best estimate of a minimum, reasonable revenue sharing arrangement with the Lac Seul First Nation commensurate with the benefits that the Lac Seul Conservation Dam provided to downstream facilities.” " He described that estimate as " “both conservative and reasonable.” " Rob Rabichuk [ 39 ] Mr. Rabichuk is a chartered accountant.

He was accepted as " “an expert witness to give opinion evidence, generally, on the accounting of Indian trust accounts, and specifically regarding the historic revenue and expenditures in the Lac Seul First Nation trust accounts.” " [ 40 ] Mr. Rabichuk examined the Indian Affairs trust records of the LSFN and expenditure coding documents. He grouped the expenditures into community infrastructure; health and welfare; other; status memberships; and distribution to individuals.

He stated that these were selected to assist Professor Hosios, an economist called by the LSFN, who uses three categories in his analysis: savings, investment, and consumption. He examined the records for the period from the fiscal year ending 1925 to the fiscal year ending 2011. Although the LSFN has two trust accounts: a capital account, which is like a savings account and includes all the sales of land and proceeds for non-renewable resources, and a revenue/interest account, which is like a chequing account and includes everything else, for the purposes of the report, Mr.

Rabichuk grouped all of the spending together. [ 41 ] Mr. Rabichuk concluded that for the period 1925 through 2011, LSFN total revenue was $1,582,645.95 and total expenditures were $1,442,051.80. The expenditures were broken down as Community Infrastructure, $409,295.39 or 25.9%; Health and Welfare, $162,161.35 or 10.2%; Status and Membership, $6,461.52 or 0.4%; Other, $756,739.33 or 47.8%; and Distributions to Individuals, $107,394.21 or 6.8%. Norris Wilson [ 42 ] Mr.

Wilson was qualified as an expert in the valuation of land and improvements, and found qualified to give opinion evidence as to whether the analysis, opinions and conclusions of Duncan Bell (an expert called by Canada and Ontario) are appropriate and reasonable. He was specifically limited to doing so within the standards applicable to technical reviews as provided for in the Canadian Uniform Standards of Professional Appraisal Practice and cautioned that he was not to give opinions of value. [ 43 ] Mr. Wilson testified to three errors he found in the land valuation report of Mr.

Bell: (1) he failed to correctly apply the principle of highest and best use, (2) he used the direct comparison approach, and (3) he failed to make findings and assumptions consistent with the historical record. Mr. Wilson offered the opinion that the highest and best use of the flooded Reserve lands at the effective date " “is for flooding and storage of water in connection with the hydroelectric project at Lac Seul” " and that the failure of Mr. Bell to use this resulted in an " “unsupported estimate of value.” " Arthur Hosios [ 44 ] Arthur Hosios is a professor of economics at the University of Toronto.

He was qualified as an expert to give opinion evidence on macro and microeconomics, and in particular on applied microeconomics, and with expertise in the calculation of the present value of First Nations’ compensation.

[ 45 ] Professor Hosios’ objective in his report [the Hosios Report] was to estimate equitable compensation for the valuation date (2012 or 2016) for losses experienced by the LSFN as a consequence of the flooding of Reserve lands and some traditional territories in 1929. He used a retrospective approach to model equitable compensation. He explained that his report was his attempt to arrive at a value for the equitable compensation from an economic view based on the Ontario Court of Appeal judgment in Whitefish Lake Band of Indians v Canada (Attorney General) , 2007 ONCA 744 [ Whitefish ].

His analysis will be discussed and considered in more detail below. Marcel Deveau & H. James Hawken [ 46 ] Mr. Deveau and H. James Hawken of exp Services Inc. submitted a joint report entitled " “Erosion Repair Costing Study” " [the exp Report]. [ 47 ] Mr.

Deveau was accepted as an " “expert to give opinion evidence generally, on coastal geology, shoreline erosion and protection, and specifically, for the appropriate protection measures to mitigate erosion of Lac Seul.” " He was not qualified to give evidence with respect to the specific reasons for any soil erosion at Lac Seul. [ 48 ] He testified that they identified some 50 sites constituting approximately 14.5 kilometres of shoreline on the Reserve as requiring erosion protection, and four riprap design solutions were created to protect those sites from erosion.

The number of sites was later reduced following receipt of the report from Canada’s erosion expert, Peter Zuzek. A costing was done for this proposed work. Mr. Deveau was responsible for the shoreline protection design concepts. [ 49 ] Mr. Hawken was qualified as an expert to give opinion evidence generally on civil engineering project management relating to water resources and specifically on design and costing of shoreline protection on Lac Seul to mitigate erosion issues. [ 50 ] Mr.

Hawken stated that he was tasked with identifying the most significant susceptible shorelines that were eroding, and to make preliminary designs to protect those areas along with the estimated cost to carry out the protective designs. [ 51 ] Mr. Hawken testified that after changes in the initial report, some 11.3 km of shoreline was proposed to be protected at a cost of $28.1 million, including contingencies and a management fee. B. Canada’s Witnesses Betsey Baldwin [ 52 ] Dr.

Baldwin is a historian and was qualified " “as an expert in Canadian Aboriginal history including Treaty 3, and government policy towards Aboriginal peoples.” " [ 53 ] She prepared and spoke to her report, the title of which is descriptive of the scope of her evidence: A History of the Lac Seul Storage Project, Flooding on the Lac Seul Indian Reserve No. 28, and Related Compensation to the Lac Seul Indian Band, 1873 to 1943 . In addition to her own report, she spoke and responded to the report prepared by James R. Gilles, and the two reports of Gwynneth C. D. Jones. Gwen Reimer [ 54 ] Dr.

Reimer has a Doctorate in Anthropology with particular expertise in the sub-disciplines of cultural anthropology and ethno history, and she has knowledge of the way of life of the Ojibwe. She was qualified as " “an expert to review and provide an opinion on the methodological approach used by Patt Larcombe to value losses of the Lac Seul First Nation occasioned by the flooding of Lac Seul, and in particular, to offer an opinion as to the accuracy, reliability, validity, and integrity of the data and analysis in that report.” " [ 55 ] Dr. Reimer reviewed and replied to the technical reports by Patt Larcombe.

She also went beyond Ms. Larcombe’s technical report to provide a broader anthropological perspective to contextualize the valuation losses in terms of changes, adaptations and dynamics of culture, economy, and environment, particularly in the post-flood period. She also looked at sources that were relevant to the LSFN’s traditional land area. Dr. Reimer emphasized that she did not assess or calculate alternative loss valuations. She only assessed the evidence upon which Ms. Larcombe calculated losses. [ 56 ] There were three main themes that framed Dr. Reimer’s analysis.

First, she considered that her review and approach to the documentation was within a context of change. The post-flood period is an 80-year period of time in which she notes that there were economic, environmental, social, and cultural changes. She asserts that losses and cumulative losses were not occurring in a static human or natural environment. Second, she observes that multiple factors are generally behind change over a long period of time and she considered that flooding was not necessarily the sole factor in changes and losses. Third, she assessed valuations according to all the available evidence.

Duncan Bell [ 57 ] Mr. Bell was a witness called jointly by Canada and Ontario. The Court qualified Mr. Bell " “as a real estate appraiser with expertise in the appraisal of historical land values generally, and in particular, is qualified to give opinion evidence as to the value of land located on the First Nations Reserve 28 as of April 1, 1929, April 1, 1934, and April 1 1943 and to give opinions of value concerning property improvement located on and near the Reserve as well as on the accuracy of historical valuations completed in and around the effective dates as described in his report.” " [ 58 ] Mr.

Bell stated that waterfront property was generally of greater value than non-waterfront property and he therefore used two different estimated values per acre to reflect this. It was his opinion that the average effective price per acre of the flooded LSFN land was $1.29 in 1929, $1.06 in 1934, and $1.24 in 1943. He estimated the value of the 93 affected LSFN buildings at $24,648.00

Peter Zuzek [ 59 ] Mr.

Zuzek was " “qualified as an expert geoscientist and coastal geomorphologist with particular expertise in coastal geology, investigating historical shoreline changes, assessing erosion rates, investigating the effects of water level fluctuations on erosion, evaluating the need for shoreline protection and the effects of shoreline protection, including ecological effects.” " He was further " “qualified to give specific evidence on the question of shoreline erosion at Lac Seul, before and after the construction and operation of the Ear Falls Dam and any potential remediation requirements.” " [ 60 ] It was the opinion of Mr.

Zuzek that the pre-dam erosion rate on Lac Seul was similar to the post-dam erosion rate. He reached this conclusion because: (1) the geology is the same, (2) the wave climate is similar, (3) the bench sequence at the pre-dam lake level provided evidence that these sites were also eroding in the pre-dam era, and (4) the COSMOS model was able to simulate the post-dam erosion rate and create a bench on the nearshore and retreat the bank in a horizontal direction to a very close rate to what was measured. [ 61 ] While Mr.

Zuzek agreed with the statement in the exp Report that some of the sites identified were eroding, it was his opinion that they were eroding in the pre-dam era at a similar rate. He described erosion as a natural process and stated that the flooding at Lac Seul essentially moved the location of the erosion from the pre-dam water level to a higher location up the slope to the current water level range. He asserted that the flooding has not changed the erosion rate – it has just relocated where that erosion is happening. Matthew Lacompte [ 62 ] Mr.

Lacompte was qualified " “as an expert to give opinion evidence generally on the history and management of Indian trust fund accounts, and specifically on the historic expenditures in the Lac Seul First Nation trust fund accounts.” " [ 63 ] He analyzed the expenditures and income listed in the LSFN capital and interest accounts separately for the period 1902 to 2012. [ 64 ] His analysis of the capital account showed the following for expenditures by category and percentage of the total: band property, 36.4%; forestry, 27.9%; transfers and enfranchisement, 15.8%; distribution, 8.4%; adjustments, 7.8%; unknown, 2%; roads, bridges, waterworks 1.3%; relief, 0.1%; farming and education 0.0%; and three categories of miscellaneous – miscellaneous professional services 0.1%; miscellaneous damages 0.3%; and miscellaneous casual labour 0.0%. [ 65 ] His analysis of the interest account showed the following for the expenditures from it: band property 29.4%; relief and rations 21.5%; salaries and wages 9%; housing and wells 6.7%; interest distribution 4.5%; car expenses 4.4%; medical 4%; adjustments 2.7%; education 2.7%; unknown 1.9%; loans to members 1.3%; transfers and enfranchisements 0.7%; agriculture 0.5%; roads, bridges, and waterworks 0.4%; refunds 0.0%; miscellaneous expenditures - cultural enrichment 5.2%; hunting and fishing 3.7%; grants 1.4%; and recreation and celebrations 0.2%.

Robert Sandy [ 66 ] Mr. Sandy was called jointly by Canada and Ontario. Mr. Sandy is a Chartered Accountant with experience in the quantification of economic losses, specifically in the forest industry and he was qualified to give specific evidence on the quantification of the LSFN economic losses, if any, from the alleged failure to clear the Reserve’s foreshore. [ 67 ] Mr.

Sandy assumed that if the Crown had cleared the shoreline prior to flooding Lac Seul it would have paid the clearing costs to parties other than the LSFN and that there would have been no direct economic benefit to the LSFN as they would not have been paid to do the work. [ 68 ] In reply to Mr. Scheifele, Mr. Sandy offered first that Mr. Scheifele did not identify what the disadvantages were or the quantum of the disadvantages to the LSFN for the Crown’s failure to clear the shoreline.

Second, he observed that the Crown’s alleged saving of the estimated clearing costs on the Lac Seul clearing project do not relate to the losses that either were or were not suffered by the LSFN. Third, he disagreed with Mr. Scheifele regarding the clearing costs that would have been incurred by the Crown if the project had gone ahead. In his view, the cost to Canada would have been significantly less than Mr. Scheifele stated. Cliff Hamal [ 69 ] Mr.

Hamal was qualified " “as an expert witness to provide opinion evidence generally on the electricity industry including its markets, planning, structure and operations, with particular expertise in the economics of the development, operation, production, pricing, valuation and modelling of electric generation projects in the electricity market including hydroelectric projects.” " Moreover, he was qualified " “to provide specific evidence on the valuation of any hydroelectric economic benefits resulting from the flooding of Lac Seul or hydroelectric development.” " [ 70 ] Mr.

Hamal offered evidence on the development and history of hydroelectricity in Ontario. He did a critical examination of the reports prepared by Mr. Gillis and described his conclusions as to the value to the LSFN neither reasonable nor conservative. He also examined the alleged comparators including the Bow River developments with the Stoney Indian Band and the Columbia River Treaty and took the view that none were comparable to the situation of the LSFN in 1929 at Lac Seul. Laurence Booth and Eric Kirzner [ 71 ] Mr. Booth and Mr. Kirzner prepared a joint report [the Booth-Kirzner Report] that provided an economic

interpretation of Whitefish and used that

interpretation as a framework for bringing forward monies to estimate the value today of compensation for the breach in the past. [ 72 ] The Court qualified both Mr. Booth and Mr. Kirzner in the same language: " “an expert witness to provide opinion evidence with

respect to the application of financial and economic theory to the valuation of compensation in the present day for losses incurred in the past, with particular expertise in the calculation of current value of First Nations losses based on the 2007 decision of " " the Ontario Court of Appeal in " " Whitefish " " Lake Band of Indians.” " C. Ontario’s Witnesses Alan McCullough [ 73 ] Mr. McCullough was accepted " “as an expert in Canadian history, including the interactions of the federal and provincial governments and Aboriginal people based on historical records.” " [ 74 ] Mr.

McCullough prepared and filed a report entitled: Historical Narrative concerning the Lac Seul First Nation Claim with Respect to Flooding on Lac Seul Reserve No. 28 (and Off-Reserve Interests) as a result of the Construction of the Lower Ear Falls Dam . His report and evidence covered the period from the signing of Treaty 3 in 1873 to payment made to the LSFN in 1943. Fred Lazar and Eliezner Prisman [ 75 ] Mr. Lazar and Mr.

Prisman filed a joint report [the Lazar-Prisman Report] entitled Estimating Alleged Economic Losses of the Lac Seul First Nation As a Result of the Construction of the Ear Fall’s Dam in 1929 . [ 76 ] Mr. Lazar was qualified as " “an expert witness to give opinion evidence on macro and micro economics including labour economics and the application of that expertise to the calculation of First Nations’ compensation.” " Mr.

Prisman was qualified as " “an expert witness to provide opinion evidence with respect to the application of financial and economic theory to the valuation of past losses, and to bring those values forward to the trial date and express them as compensation.” " III. ASSESSMENT OF THE WITNESSES [ 77 ] The parties, as noted, called many expert witnesses.

Each was qualified to provide his or her opinion on relevant subject-matter and to offer an assessment of the relevant report prepared by the opposite party’s responding expert. [ 78 ] The Court found that there was little disagreement, if any, among the three historians: Ms. Jones, Dr. Baldwin, and Mr. McCullough. The differences in their reports were based on the focus each took to the many relevant events, rather than the events themselves. [ 79 ] There was substantial disagreement between the erosion experts – Marcel Deveau and James Hawken for the LSFN and Peter Zuzek for Canada.

For reasons provided later, the Court preferred but does not necessarily adopt all of the evidence of Mr. Zuzek. [ 80 ] There were also differences in the analysis done of the LSFN trust accounts by Rob Rabichuk and Matthew Lacompte. Mr. Lacompte looked at each of the two accounts separately, unlike Mr. Rabichuk, and carried out a far more nuanced and detailed examination than Mr. Rabichuk. Mr. Rabichuk’s analysis left more than 45% of the accounts with no specific information or analysis, whereas Mr. Lacompte categorized all of the expenditures with precision.

For these reasons, had this evidence been useful, the more detailed and thorough analysis done by Mr. Lacompte would have been preferred and given more weight. In the end, given the Court’s view of the assessment of the 1929 loss today, the evidence from the band’s accounts was not necessary or helpful. [ 81 ] The Court had the benefit of three reports from economists: the Hosios Report, the Booth-Kirzner Report, and the Lazar-Prisman Report. Each offered an approach to estimating the losses incurred in 1929 or thereafter to today’s value.

Each took as the basis of the report, the decision of the Ontario Court of Appeal in Whitefish . Their evidence, to the extent necessary, will be examined after the Court sets out the approach to assessing equitable damages in this case. [ 82 ] There was a fundamental disagreement in the opinions of the land appraisers: Norris Wilson and Duncan Bell, which rested on their differences in the highest and best use of the acreage of the Reserve to be flooded. For reasons discussed below, I prefer the evidence of Mr. Bell. [ 83 ] I prefer the evidence of Mr. Hamal to that of Mr. Gilles. Like Mr.

Hamal, I found that Mr. Gilles’s conclusions as to the value of the LSFN land to the Lac Seul Storage Project were neither reasonable nor conservative. As is discussed below, I do not accept his comparisons of the Lac Seul Storage Project with the Bow River sites development with the Stoney Indian Band and the Columbia River Treaty. Unlike Mr. Gilles, I find none of these circumstances are comparable to the situation of the LSFN in 1929, at Lac Seul. [ 84 ] I accept most of Mr. Sandy’s criticisms of Mr. Scheifele’s estimation of the cost to clear the foreshore of Lac Seul.

I also accept that whatever that cost would have been does not assist in determining the loss to the LSFN from the failure to clear the timber. The cost of clearing is not a fair and just basis to assess equitable compensation owed to the LSFN.

What is required is an examination of the consequences to the LSFN arising from the failure to clear the foreshore. [ 85 ] Generally, I found all of the expert witnesses, with one exception, to be honest and forthright in giving evidence and approached the task with a genuine desire to assist the Court in the matter at hand. [ 86 ] The one exception was Patricia (Patt) Larcombe, called by the Plaintiffs who described her as a loss of use expert. Her qualifications as an expert were vigorously challenged by Canada and Ontario. [ 87 ] As noted earlier, after a lengthy voir dire , the Court accepted Ms.

Larcombe as an expert witness as described in my Order at 2016 FC 1132 . However, having now had the benefit of hearing her testify, I agree with Canada that " “there are serious credibility problems

with Ms. Larcombe’s expert opinion, and that her models should be given no weight.” " [ 88 ] I found Ms. Larcombe to be an argumentative witness. I found her to be an advocate for the First Nation rather than an independent expert providing evidence to assist the Court. For example, she refused to reasonably consider any evidence that suggested that band members continued to harvest after the flooding of Lac Seul. Appendix 5 to Canada’s written submissions sets out fourteen illustrations of such behaviour.

A clear and repeated behaviour was her outright refusal to accept the obvious when it ran counter to her opinion. For example, rather than admit that the band’s purchase of " “seed potatoes” " showed that the LSFN was still engaged in gardening (a position contrary to what she expressed), she insisted that all that it showed was that the band purchased seed potatoes; she testified that they may have eaten them, not planted them. In my view, it is obvious that these seed potatoes were bought to be planted; otherwise, why not buy table potatoes.

In addition to her refusal to admit the obvious, and her willingness, as in the example given, to engage in unsupported speculation (that they ate seed potatoes), leads me to have little faith in her opinion evidence. [ 89 ] There were other examples of her testimony that was similarly troubling to the Court. Dr. Gwen Reimer, an expert ethno-historian called by Canada to review and provide an opinion on the methodological approach used by Ms.

Larcombe to value losses of the LSFN occasioned by the flooding and, in particular, to offer an opinion as to the accuracy, reliability, validity, and integrity of the data and analysis in that report, provided compelling evidence of the deficiencies of Ms. Larcombe’s work. Ms. Reimer’s evidence was that for each of Ms. Larcombe’s models … there is publically available evidence to challenge or contradict some of the assumptions in Ms. Larcombe’s report.

And omissions or dismissal of that kind of contradictory evidence raises doubts about her methodology and her conclusions. [ 90 ] I agree with Canada’s submissions that all too often the data underlying Ms. Larcombe’s loss models were based on " “generalized opinions and information” " rather than data specific to the LSFN.

I further agree that " “she appeared to pick numbers with no evidentiary basis to establish permanent ‘losses’.” " As one illustration of this, when she was unable to find any data on moose being harvested by the LSFN post-1929, she testified that " “not having any concrete numbers to rely on, I relied on my own expert opinion.” " However, she has no expertise at all to opine about the moose harvest of the LSFN. Her alleged expert opinion is mere speculation and quite worthless as an aid to the Court.

For these reasons, her evidence is suspect and unhelpful, and I give it no weight. [ 91 ] In the end, even the LSFN distanced itself from her evidence. In closing, counsel stated: " “We agree that Larcombe is not the appropriate measure of damages in this case.” " As noted earlier, counsel submitted that her evidence reflected the special role of the Reserve and off-Reserve lands to the way of life of the LSFN. But none of this required the extensive report she prepared, most of which dealt with her calculation of the losses she says the LSFN suffered. IV.

APPROACH [ 92 ] I propose to address the issues in these Reasons in the following manner. I will first set out the background to the decision to build the Ear Falls Storage Dam and the events that transpired thereafter. This background is taken largely from the reports and testimony of three expert historians called by the parties: Gwynneth Jones called by the Plaintiffs, Dr. Betsey Baldwin, called by Canada, and Alan McCullough, called by Ontario. These experts’ reports totalled nearly 1,000 pages outlining in minute detail the events from before the creation of Treaty 3 to about 1990.

They referenced thousands of historical documents which accounted for most of the 8,347 exhibits at trial. There is almost no disagreement among these historians on the " “big picture” " although each, from time to time, had a slightly different focus or point of view. [ 93 ] Following a

summary of the facts that I have found based on the historical outline and relevant legislative provisions, I will examine the legal obligations and role of Canada vis-à-vis the LSFN.

There is no dispute that Canada had and still has a fiduciary duty to the band. [ 94 ] I shall next discuss the content of the Crown’s duty to First Nations generally and to the LSFN in the context of the Lac Seul Storage Project. [ 95 ] I will turn then to a discussion of the nature of equitable compensation and the principles to be front of mind when assessing it. [ 96 ] Prior to examining whether Canada met its legal duties to the LSFN in the context of the Lac Seul Storage Project, I will examine what options were available to Canada in 1929 vis-à-vis the LSFN regarding that project. [ 97 ] I will turn next to examine what would have occurred in 1929 vis-à-vis the LSFN had Canada fulfilled its duties to the band. [ 98 ] The value of the flooded Reserve land and the " “avoidable losses” " claimed for lost timber dues, erosion, and community infrastructure will then be examined.

Following which I will examine what I describe as " “livelihood losses” " of the band. [ 99 ] After summarizing the losses which I find to be proven, I will examine the amount paid to the LSFN in 1943, and specifically analyze whether the deductions taken from the gross amount were appropriate such that Canada ought to be given credit for them. [ 100 ] I will turn next to an examination of the evidence of the three reports from the economists and discuss the appropriate method to assess damages today for past losses. [ 101 ] The claim by the LSFN for an award of punitive damages and the declaration it seeks in this action will then be examined. [ 102 ] I will next examine the defence of laches raised by Canada (and the provinces). [ 103 ] Lastly, I will turn next to the third party claims against Ontario and Manitoba, and the specific defences each has raised.

V. HISTORICAL BACKGROUND The Treaty and the Reserve [ 104 ] In 1873 Canada negotiated and signed Treaty No. 3 with representatives of the " “Saulteaux Tribe of the Ojibbeway Indians at the Northwest Angle on the Lake of the Woods.” " The LSFN was not originally a signatory to Treaty 3, but on July 9, 1874, signed an adhesion agreeing to its terms. [ 105 ] The First Nations under Treaty 3 surrendered approximately 55,000 square miles of land in what would become Northwestern Ontario and Southeastern Manitoba.

The promises made by Canada to the members of the First Nations in return for their agreement to surrender their lands included two promises relevant to this litigation: 1 .

That Canada would " “lay aside Reserves for farming lands” " and also to " “lay aside and Reserve for the benefit of the said Indians, to be administered and dealt with for them by Her Majesty’s Government of the Dominion of Canada, in such a manner as shall seem best, other Reserves of land in the said territory hereby ceded.” " The Reserve land was not to " “exceed in all one square mile for each family of five, or in that proportion for larger or smaller families.” " 2 .

First Nations were promised the right to continue hunting and fishing (and possibly other unspecified activities), subject to regulation made by Canada, on their traditional territories so long as these remained Crown lands. [ 106 ] In 1875 Canadian government officials met with representatives of the LSFN to select the land which they wished to occupy as a Reserve. In 1883 A. H. Vaughan surveyed the LSFN Reserve. On the plan of the survey it is marked that the area of the Reserve is 49,000 acres (76.5 square miles). In his report on the survey Mr.

Vaughan noted that, although the band was entitled to 84 square miles (53,760 acres) based on its population, he had in fact enclosed a considerable extent in excess of 84 square miles in order to compensate for the worthless part of the Reserve. He did not specify how much additional land he had included but in 1929 it was found that the Reserve is 66,276 acres. [ 107 ] Treaty 3 contained specific provisions relating to the possibility that Reserve land could be appropriated, leased or sold and these are germane to this litigation.

The Treaty provided: It is further agreed between Her Majesty and Her said Indians that such sections of the Reserves above indicated as may at any time be required for Public Works or buildings of what nature soever may be appropriated for that purpose by Her Majesty's Government of the Dominion of Canada , due compensation being made for the value of any improvements thereon. … … also that the aforesaid Reserves of lands, or any interest or right therein or appurtenant thereto, may be sold, leased or otherwise disposed of by the said Government for the use and benefit of the said Indians, with the consent of the Indians entitled thereto first had and obtained . [emphasis added] [ 108 ] It is not disputed that the appropriation and other disposition clauses of Treaty 3 are binding on the LSFN and Canada.

It is the position of the LSFN that no legal appropriation was in fact ever made by Canada. Canada does not dispute that but describes its actions as a de facto expropriation. I will return to explore this later. [ 109 ] Following the establishment of the western boundary of the province of Ontario, Canada and Ontario began negotiations to confirm the reserves that Canada had established in Treaty 3. Two contentions by Ontario complicated the negotiations.

First, Ontario argued that based on the First Nations’ population in the Treaty 3 area, more land had been allocated for reserves than was called for by the terms of the Treaty. Second, Ontario argued that a higher proportion of reserve land had been selected in Ontario than in Manitoba based on the proportion of land surrendered in Ontario and Manitoba. [ 110 ] In 1915, Ontario confirmed the LSFN Reserve along with the other Treaty 3 reserves by provincial legislation and transferred title to Canada in trust for the First Nations.

As part of Ontario’s confirmation of the Treaty 3 reserves, Canada gave compensation to Ontario of $20,672, calculated at $1 per acre for the 20,672 acres in excess of the treaty land entitlement formula. The total figure for this " “excess acreage” " was negotiated between Ontario and Canada based on the Treaty 3 population as a whole. The records of the agreement did not identify excess or deficient acres on particular reserves.

Both Ontario and Canada proceeded at that time on the assumption that Lac Seul Indian Reserve No 28 covered 49,000 acres. [ 111 ] In 1929, Ontario discovered the acreage shown on the 1884 survey plan of the Lac Seul Reserve to be 66,000 acres and not the 49,000 as stated by Mr. Vaughan. This was confirmed by the Department of Indian Affairs. This figure was later adjusted to 66,276 acres based on a re-measurement of the plans.

Since the Reserve had been confirmed in 1915 to be 49,000 acres, the issue of these 17,276 " “excess” " acres became an issue between Ontario and Canada and became a point of negotiation when determining the compensation to be paid to the LSFN for flooding damages on the Reserve. The LSFN Way of Life [ 112 ] Reports and correspondence from the late 1800s and early 1900s include references to some of the activities of the LSFN. Their principal means of livelihood was hunting and trapping in the winter and fishing in the summer. There is also reference to trading furs and other paid employment.

The LSFN were reported to grow potatoes, corn, onion, cabbages, carrots, turnips, barley, and wheat. They

raised cattle and other livestock; however, by 1928, there was no cattle reported in the Savanne Agency, of which the LSFN was a part. The Reserve contained hay land on which the livestock grazed and which the band cultivated. Band members also gathered berries and harvested wild rice.

By 1928, LSFN members had built houses, outbuildings, and a schoolhouse. [ 113 ] In 1916, Indian Agent McKenzie described the means of livelihood in the Savanne Agency: The following are the chief occupations of these Indians: working for the Hudson’s Bay Company as canoeman and freighters, in lumber camps, on railroads, hunting, fishing, and as guides to tourists, attending to their gardens and potato patches, berry and wild rice picking.

Any of the Indians who have cattle take fairly good care of them; there are only a few who have any stock. [ 114 ] The LSFN also generated revenue from selling the rights to the timber on the Reserve. In 1919, the LSFN surrendered to Canada the right to harvest the merchantable timber on the Reserve. The timber on the Reserve was licensed to two operators: the southern portion to Keewatin Lumber Company in 1920, and the northern portion to Charles W. Cox in 1926.

The licensees were required to pay an initial bid (a " “bonus” " or " “stumpage payment” " ) to the band, as well as annual ground rent, licence fee, and dues for the amount of timber cut. The payments were deposited by Canada to the LSFN’s trust fund account. Payments were made periodically to band members with the consent of the Department of Indian Affairs. [ 115 ] Prior to the flooding, as is described in more detail below, the Chief of the LSFN, the Indian Agent, and the Department of Indian Affairs all recognized that the LSFN’s livelihood would be impacted by the flooding of Lac Seul.

The Lac Seul Storage Project [ 116 ] The Government of Canada was interested in maximizing the potential for hydroelectric developments on the Winnipeg River in Manitoba in order to provide power to the City of Winnipeg. The City of Winnipeg was an important economic centre for western Canada and Winnipeg required power to develop and expand. Providing more hydroelectric power generating facilities on the English and Winnipeg Rivers required a greater head of water, an increased water flow, and a more constant water flow.

What was required was a large water reservoir upstream. [ 117 ] The Lac Seul Storage Project would provide the water reservoir necessary to permit power generation for the City of Winnipeg and Northwestern Ontario. It involved the construction of the Ear Falls Storage Dam on the English River in Ontario. Downstream, the English River flows westward and joins the Winnipeg River.

Upstream, the English River is fed by Lac Seul and other smaller lakes in Northwestern Ontario. [ 118 ] Lac Seul and the English River form a part of the Winnipeg River watershed as does the Lake of the Woods; however, both are located in Ontario. Additionally, Lake of the Woods and some of its tributaries border Minnesota.

As a result, Lake of the Woods was subject to the 1909 Boundary Waters Treaty and managed by a joint body, the International Joint Commission. [ 119 ] The Lake of the Woods water levels were raised twice: first, with the building of the Rollerway Dam in 1887, which was built for the benefit of navigation; and, second, with the building of the Norman Dam in 1899, which was built with the intent of generating power. [ 120 ] On February 24, 1925, Canada and the United States signed the Convention and Protocol for regulating the level of the Lake of the Woods, which was based on the International Joint Commission report.

The convention provided that the level of the Lake of the Woods would be regulated to provide " “… the most advantageous use of the waters thereof and of the waters flowing into and from the lake on each side of the boundary…” " Within the normal range, the regulation would be the responsibility of the Canada based Lake of the Woods Control Board [LWCB]; beyond that range, it would become the responsibility of an international Lake of the Woods Control Board.

Following the damming of the English River and flooding of Lac Seul, the regulation of water levels in Lac Seul become the responsibility of the LWCB. [ 121 ] The great natural storage of Lac Seul was first mentioned in the files of Canada’s Department of the Interior in 1911 in relation to maintaining the Winnipeg River’s headwaters.

In 1911, Canada established the Dominion Water Power Branch within the Department of the Interior and the investigation of the Winnipeg River was an important focus for it. [ 122 ] In 1914, the Dominion Water Power Branch Superintendent instructed the Manitoba Hydrographic Survey to undertake a reconnaissance survey of the English River " “with a view to studying its power possibilities.” " The survey did not, however, proceed immediately. [ 123 ] In 1915, the Dominion Water Power Branch prepared a report entitled Report on the Winnipeg River Power and Storage Investigations , which noted the water storage potential of Lac Seul for hydroelectric development.

John T. Johnston, the Assistant Director and Chief Hydraulic Engineer of the Dominion Water Power Branch wrote as follows at page 121: Lac Seul is the largest lake in the basin. While little information has as yet been collected by the engineers of the Dominion Water Power Branch with respect to its adaptability to use as a storage reservoir, and the extent of flooding which would be involved at various storage depths, it is at least certain that limited storage is available. Throughout the following, 10 feet has been considered as the limit permissible. [ 124 ] Mr.

Johnston noted that if Lac Seul were raised up to 10 feet in order to store runoff and manage the volume and flow downstream, the undeveloped power sites on the English River could increase their power potential by 233 percent. The storage on Lac Seul would similarly increase the power potential on the lower Winnipeg River. He also noted that the regulation of Lac Seul could be coordinated with that of the Lake of the Woods to ensure a stable flow year-round. [ 125 ] Also in 1915, the Dominion Water Power Branch Superintendent provided further instructions to the Manitoba Hydrographic

Survey with respect to the pending Lac Seul and English River reconnaissance survey. The field work was to include investigating and documenting a " “suitable dam site at the outlet of Lac Seul,” " reconnaissance of the shoreline to ascertain " “the limits to which the lake surface may be raised and the flooding effects at different limits,” " and " “[t]he effect of such raising of the surface level upon any existing buildings, structures or interests.” " [ 126 ] The Manitoba Hydrographic Survey carried out this preliminary field work at Lac Seul in the summer of 1915.

Chief John Akewance of the LSFN became aware of the Manitoba Hydrographic Survey field work, and wrote to Indian Agent R. S. McKenzie in 1915 outlining his concerns with respect to damages to the hay land and timber if the water were raised. These concerns were forwarded to Indian Affairs in a letter from Indian Agent McKenzie to J. D. McLean, Secretary, Indian Affairs. Indian Affairs was unaware of the investigations being undertaken, notwithstanding that it was a part of the Department of the Interior. [ 127 ] The Secretary of Indian Affairs, J. D.

McLean wrote to the Ontario Hydrographic Survey (crossed out and restated as the Ontario Hydro Electric Power Company) to relay the concerns of the Chief of the LSFN and ask whether there was anything of this nature planned. If there were plans to raise the water, Secretary McLean inquired about compensation for the band for their losses. Secretary McLean also replied to the Indian Agent, assuring him that the Manitoba Hydrographic Survey had " “no intention to raise the level of the water of Lac Seul” " and that he had written a letter to the Ontario Hydrographic Survey on the subject.

The Chief Engineer of the Hydro Electric Power Commission of Ontario [HEPCO] replied to the Department of Indian Affairs on September 1, 1915, confirming that the Manitoba Hydrographic Survey carried out reconnaissance work in the Lac Seul area, but that no action of any kind was to be taken.

On September 8, 1915, Secretary McLean relayed the crux of HEPCO’s letter to Indian Agent McKenzie, stating that " “there is no present intention to raise the waters of Lac Seul.” " [ 128 ] The results of the reconnaissance work were published in a report dated March 1, 1916, prepared by the Manitoba Hydrographic Survey for the Dominion Water Power Branch entitled Report on the Storage Possibilities of Lac Seul , which examined the storage potential of Lac Seul for hydroelectric development. It posed two options for storage and noted potential damages.

It observed that " “[a]ny scheme involving the raising of Lac Seul level would create a certain amount of flooding, principally at the mouth of the root river , where land of a muskeg nature would be affected and within Indian Reserve No. 28 where a considerable amount of hay land would be flooded” " . Specifically, the author stated that on the Reserve, hay land and bushland would be affected as well as Chief Akwance’s shed. [ 129 ] On March 23, 1917, John T. Johnston of the Dominion Water Power Branch wrote to his superior summarizing the Manitoba Hydrographic Survey’s report.

He recommended that the land up to 1,170 feet should be patented and flowage rights should be secured up to 1,175 feet. It was Mr. Johnston’s view that such a reservation should be made before settlement and other interests were developed on Lac Seul. [ 130 ] As a consequence, on May 1, 1917, Canada made a formal recommendation to Ontario for: The reservation to the provincial Crown of all rights to the elevation 1170 and the reservation of flowage rights from 1170 to 1175 on the lake and on the river below down to the location of the proposed dam.

The reservation to the provincial Crown of all rights to the construction of power or storage dams at the possible sites at Upper and Lower Ear Falls and at Manitou Falls, until such time as the most favourable site of the storage dam is finally located, and until the policy under which the dam is to be operated after construction is determined. [ 131 ] Thomas W. Gibson, Ontario’s Deputy Minister of Mines, who had received this request for the reservation, followed with a memo to file dated June 15, 1917.

In the memo, he noted that the Minister of Mines had instructed him " “to preserve the status quo until further instructions from him; no applications for power rights, etc., to be dealt with without reference to the Minister.” " [ 132 ] There was no further correspondence on this topic until July 5, 1919, when Canada wrote to Mr. Gibson to remind him of Canada’s request.

In the Minister’s response, he inquired about the progress on arrangements with the Hudson’s Bay Company and Indian Affairs with respect to " “lands bordering on Lac Seul in which they are interested and which the scheme of storage contemplates flooding.” " In response to his letter, the Dominion Water Power Branch’s A. M. Beale wrote to his Director, J. B. Challies, to note that he had contacted the Department of Indian Affairs’ Chief Surveyor, Samuel Bray, who advised of " “the usual procedure” " for attaining flooding rights: 1.

A contour survey of the shores of the reserve, preferably one enclosing the contour by a series of straight courses monumented at points of deflection, should be made. 2. A definite offer of compensation for the lands and improvements to be acquired divided into: (

a) Lands alone. (

b) Improvements, detailing in every case the Indian owning these improvements. If after negotiation the offer is accepted on behalf of the Indians, or amended and so accepted, the amount of compensation agreed upon is deposited with the Minister of Finance for the use of the band of Indians and the land is surrendered. [ 133 ] Again, in 1921, Canada wrote to Ontario urging action on Canada’s request to reserve the flooding rights around Lac Seul. No response from Ontario has been found. [ 134 ] In August 1921, the Dominion Water Power Branch’s District Engineer at Winnipeg, C. H.

Attwood, completed a report entitled Report on the Storage Possibilities of Lac Seul-English River, Ontario . In the report, Mr. Attwood recommended a maximum elevation of 1,170 or 1,172 feet above mean sea level. He ultimately recommended a maximum of 1,172 feet plus one foot " “for flood, wind effect and seepage.” "

[ 135 ] On November 15, 1922, Canada, Ontario, and Manitoba signed a tripartite agreement " “as a working basis for the regulation of the English and Winnipeg rivers” " . With respect to Lac Seul, the tripartite agreement contained the following provision: With regard to storage on Lac Seul, it is agreed that if the power interests in Manitoba or their administrative agency desire storage on Lac Seul, they shall immediately notify the Government of Ontario to this effect.

In the event of such notification the Government of Ontario shall undertake not to permit the construction of any development which would later be destroyed, wholly or in part, by the creation of this storage, and shall agree to grant flooding rights, on Crown Lands affected, under the customary conditions, including recompense for timber destroyed, and the usual rental for water powers which may be wholly or partially destroyed incidental to the construction of the said works .

Further, the power interests benefited shall be prepared, when required by the Government of Ontario, to pay the said Government an amount to be ascertained by the Control Board, sufficient to pay the difference between the cost of power feasible of development at Pelican Falls and the cost of a similar amount of power to be developed at some other possible site designated by the Government of Ontario and delivered at Sioux Lookout at a distribution voltage.

It is agreed that whatever storage scheme may be worked out covering Lac Seul shall be under the jurisdiction of the Lake of the Woods Control Board, the cost of the same to be borne by the power interests as and when benefited. [emphasis added] [ 136 ] The LSFN was kept in the dark with respect to the investigations and arrangements being made for the storage reservoir at Lac Seul.

In January 1924, correspondence between Indian Agent Frank Edwards and Indian Affairs Headquarters detailed the concerns of Chief Paul Thomas of the LSFN following a meeting between them, including destruction of hay lands, Indian gardens, possibly houses, timber on low lying parts of the Reserve, some of the burial grounds and the cemetery, and thousands of muskrats. [ 137 ] Indian Agent Edwards told the Department of Indian Affairs that he had " “ assured the Chief our Department would look into the matter, and protect their interests as far as possible” " [emphasis added].

These concerns were reiterated in a letter from J. D. McLean, the Assistant Deputy and Secretary of the Department of Indian Affairs, to the Ontario Department of Lands and Forests and to the Director of the Dominion Water Power Branch. [ 138 ] On February 15, 1924, J. B. Challies of the Dominion Water Power Branch responded to Mr.

McLean’s letter stating that " “[n]othing definite has as yet been arranged… but whenever the subject does arise for definite action the matter will be taken up fully with your Department ” " [emphasis added]. [ 139 ] In 1924 and 1925, plans with respect to the Lac Seul Storage Project progressed.

Among other developments, there were surveys carried out at Ear Falls, and Dominion District Engineer, Attwood, prepared a report entitled Estimated Cost of Developing Storage on Lac Seul, English River . [ 140 ] The discovery of gold at Red Lake northwest of Lac Seul sparked Ontario’s interest in hydroelectric power at Ear Falls as several private interests had inquired about the prospect of developing Ear Falls for power generation in 1925 and 1926.

While Ontario found that the development would be beneficial for Northwestern Ontario by increasing the total power available, Ontario would not have undertaken the development for its own benefit. The inquiries of private interests led representatives from Manitoba, Ontario, and Canada to meet in early 1927, to ensure that Manitoba’s interests in the English River were being protected.

The Manitoba interests agreed to pay a fair share of a dam if it were built and controlled publicly. [ 141 ] In 1927, Ontario led investigations of the power potential of Lac Seul and possible resulting damages. [ 142 ] In January 1928, representatives of Canada (the Water Power Branch), Manitoba, Ontario, HEPCO, the City of Winnipeg, and " “Manitoba power interests” " met and reached an agreement in principle regarding the financing, ownership and regulation of the Lac Seul dam and related storage and power developments. [ 143 ] Shortly after this meeting, L.V.

Rorke of Ontario’s Ministry of Lands and forests wrote a memorandum to his Deputy Minister recommending that Ontario reserve surface and flowage rights up to 1,175 feet. He explained that this was " “… 2 or 3 feet above what will be the maximum water level when the dam is built, but it is advisable to reserve this extra for seepage.” " [ 144 ] On January 24, 1928, upon reading a news story on the Lac Seul Storage Agreement, Indian Agent Frank Edwards wrote to the Department of Indian Affairs reiterating his concerns with respect to the damage to Lac Seul Reserve.

He received the following response from Indian Affairs: I have your letter of the 24th instant regarding the damages which would ensue to the Indian reserve on Lac Seul if that lake were used as a storage basin and in reply beg to say that when this matter was under consideration before, the Department was advised that when the subject arises for definite action the matter will be taken up fully with this Department . [emphasis added] [ 145 ] One month later, on February 24, 1928, the Federal Minister of Interior, the Ontario Minister of Lands and Forest, and the Premier of Manitoba signed the Lac Seul Storage Agreement [the Agreement].

Essentially, the Agreement provided that a dam would be built at Lower Ear Falls at the outlet of Lac Seul, that the dam would be owned, controlled, and operated by Ontario, and that the LWCB would have full power and authority to regulate and control the outflow of Lac Seul by means of the dam in accordance with the principles laid down in the concurrent legislation relating to the regulation and control of the outflow of the waters of Lac Seul. [ 146 ] The Agreement contained the following provisions of note: WHEREAS the Crown in the right of the Province of Ontario is the owner of the lands under and bordering on Lac Seul… and also of all ungranted lands under and bordering on the rivers and waters flowing into and out of said lake in the Province of Ontario, and the water powers and water power sites connected therewith;

AND WHEREAS the Crown in the right of the Dominion of Canada is the owner of all ungranted lands under the waters of the Winnipeg River in the Province of Manitoba and the water powers and water power sites connected therewith and has leased certain of such power sites to companies and others who have developed the same in whole or in part; AND WHEREAS there are a number of water powers and water power sites at the outlet of Lac Seul and upon the English and Winnipeg Rivers between that lake and the Provincial Boundary between the Provinces of Ontario and Manitoba, all of which powers are vested in the Crown in the right of the Province of Ontario and none of which has as yet been developed; AND WHEREAS it is desirable to construct a regulating dam at Lower Ear Falls at the outlet of Lac Seul for the purpose of increasing the capacity of the power plants already erected and that may hereafter be erected on the Winnipeg River in the Province of Manitoba; AND WHEREAS the erection of a dam at Lower Ear Falls will facilitate the development of power at that point, and be of advantage in the development of power at other power sites on the waters flowing out of Lac Seul between Lower Ear Falls and said Provincial Boundary; AND WHEREAS Canada has requested Ontario to erect a dam at the location sand for the purposes aforesaid, and has offered to contribute towards the cost of the construction and maintenance of the same, and Ontario has agreed so to do subject to the terms, stipulations, conditions and reservations hereinafter contained; … 2.

Ontario shall construct a dam for the purposes of conservation, regulation and power at Lower Ear Falls at the outlet of Lac Seul on lands owned by … Ontario which said dam shall be absolutely owned, controlled and operated by Ontario… 3. The said dam shall be of concrete construction with proper stop logs or other control and so designed as to permit a storage range in Lac Seul of approximately twelve feet or such reasonable variation therefrom as the Engineer shall determine. … 5.

Three-fifths of the capital cost of said dam shall be paid and borne by Canada and two-fifths by Ontario, said proportions being approximately equivalent to the difference in the mean water elevation between said Provincial Boundary and Lake Winnipeg, and between the present mean water level of Lac Seul and the said Provincial Boundary. … 7. After the said dam has been completed and put in operation the total interest on the capital cost apportioned to and contributed by Ontario… shall be paid annually at the rate of five per centum per annum by Canada to Ontario… … 10.

The cost of maintenance and operation of said dam shall by wholly paid by Canada until powers on said waters have been developed and put to use. As such powers are developed and put to use Ontario shall pay that proportion of two-fifths of the cost of such maintenance and operation that the head so developed and used…bears to the total developable head thereon… … 12.

As soon as the lands over which flooding or other privileges are required have been determined Ontario shall withdraw the same from sale, location or staking under “The Public Lands Act” or “The Mining Act of Ontario ” or otherwise, but nothing herein contained shall limit or restrict the right of Ontario to develop or grant such lands or utilize or deal with the same in any manner that may be thought proper, provided the storage and regulation of water by said dam is not improperly interfered with. … 16.

Nothing herein contained shall by implication or otherwise be considered as a covenant or guarantee by Ontario, with reference to the level at which said waters will be kept or the flow of said waters as intended and neither Canada or Manitoba shall have any recourse or claim for damages against Ontario by reasons or on account of the construction of the said dam or the operation thereof… … 18.

Notwithstanding anything herein contained the Lake of the Woods Control Board… shall have full power and authority to regulate and control the outflow of Lac Seul by means of said dam in accordance with the principles laid down in the concurrent legislation relating to the regulation and control of the outflow of the waters of Lac Seul… … 20. It is understood and declared that all contributions by Canada hereunder… are subject to the right of Canada to be reimbursed therefor by tolls or dues levied or imposed on water powers developed or hereafter developed in Manitoba… …

23. This agreement shall not become valid and effective until it has been confirmed by

an Act of Parliament of Canada and

an Act of the legislature of Ontario nor until the Act of the Parliament of Canada entitled “The Lake of the Woods Regulation Act 1921”… has been repealed… [ 147 ] " “Capital costs” " is defined in the Agreement as including, among other things, " “the cost of acquiring flooding privileges or other necessary easements” " and " “compensation for timber, buildings and improvements, including Ontario Crown Lands, Indian Lands and lands owned by private individuals.” " [ 148 ] The Agreement required legislative action by both Canada and Ontario.

On April 3, 1928, the required provincial legislation, the Lac Seul Conservation Act , 1928 , 18-19 George V, c 12, received Royal Assent, and on June 11, 1928, the required Federal legislation, Lac Seul Conservation Act, 1928 , 18-19 George V, c 32, received Royal Assent. Both were proclaimed in effect as of June 30, 1928. [ 149 ] The construction of the dam was contracted by Ontario to Morrow & Beatty, Limited on a cost-plus basis. [ 150 ] In April 1928, Ontario Surveyor-General, L. V.

Rorke, wrote to the Anglican Church Missionary Society, Hudson’s Bay Company, Deputy Minister of Railways and Canals, Backus-Brooks Company, and Spanish River Pulp and Paper Mills, all of whom had land interests that would possibly be affected by the construction and operation of the dam. He informed them of the agreement between Canada and Ontario to construct a dam at the outlet of Lac Seul for conservation purposes and that it was proposed to raise the normal level of the waters in Lac Seul some 10 to 12 feet. [ 151 ] On May 29 1928, L.V.

Rorke notified the Department of Indian Affairs that an agreement was made " “for the building of a conservation and control dam at Ear Falls on the English River at the outlet of Lac Seul” " and indicated that the water levels would be raised approximately 12 feet above normal water levels. He asked the Department to prepare contour maps of the affected land so that timber cruisers could estimate the damages to timber and land. The Impact of the Project on the LSFN Reserve and Other Properties [ 152 ] In response, to the correspondence from L. V.

Rorke, the Department of Indian Affairs stated that the local Indian Agency had warned that " “the raising of waters of Lac Seul will occasion very considerable damage to Lac Seul reserve, not only to timber but also to hay lands, rice field, houses and gardens.” " Indian Affairs also requested that Mr. Ror

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