## Facts

- The Musqueam Indian Band held reserve lands near Vancouver, British Columbia.
- In the late 1950s, a golf club sought to lease part of the reserve to expand its course.
- Because the Band could not lease reserve land directly, the Band surrendered 162 acres to the federal Crown under the Indian Act for the purpose of leasing to the club.
- Federal officials represented that the Band would receive a profitable long-term rental with rent reviews tied to fair market value.
- The surrender document did not include the lease terms described to the Band.
- After the surrender, federal officials negotiated and executed a lease on materially less favorable terms than those presented at the surrender meeting.
- The Crown did not return to the Band for approval of the revised terms and withheld material information from the Band and from an appraiser assessing rent adequacy.
- The executed lease provided rent substantially below fair market value over a long term with limited adjustment mechanisms.
- The Band learned the actual lease terms years later after reviewing federal records and then sued for damages.

## Issues

1. Whether the Crown owes a legally enforceable fiduciary duty to an Indian band when reserve land is surrendered to the Crown for leasing to a third party.
2. Whether the Crown breached that duty by concluding a lease on materially worse terms without the Band’s informed approval and by withholding material information.
3. What measure of damages is appropriate for the breach.

## Decision

- The Supreme Court of Canada allowed the Band’s appeal and set aside the Federal Court of Appeal’s dismissal.
- The Court held the Crown owed a fiduciary obligation in dealing with the surrendered reserve land and that the obligation was enforceable in courts, not merely political or moral.
- The Court found the Crown breached its fiduciary obligation by obtaining, without consultation, a substantially less valuable lease than the Band had been led to expect.
- The Court reinstated the trial judgment and damages award.
- On remedy, the Court accepted an equitable compensation approach measuring the Band’s actual loss, including the lost opportunity value of reasonably available alternative uses or terms, assessed as of trial.

## Legal Principles

- Aboriginal title and reserve interests are sui generis property interests, including the feature that such interests are inalienable except to the Crown.
- Where statutory and structural features place the Crown in control of surrendered reserve lands and the Indigenous group is dependent on the Crown to transact with third parties, equity treats the Crown as owing fiduciary obligations in exercising that discretion.
- The Crown must act in the best interests of the surrendering band when disposing of surrendered reserve land and must not materially depart from the band-approved purpose or terms without informed approval.
- A fiduciary breach may arise from negotiating or concluding materially inferior terms, failing to disclose material information, and failing to seek the beneficiaries’ approval for material changes.
- Breach of the Crown’s fiduciary duty can result in equitable compensation measured by actual loss, including foregone economic opportunities.

## Conclusion

The Court recognized a judicially enforceable fiduciary duty owed by the Crown when it takes surrendered reserve land to deal with it on a band’s behalf, held that undisclosed and unauthorized substitution of materially inferior lease terms breaches that duty, and affirmed an equitable compensation remedy based on the band’s resulting losses.


Guerin v. The Queen, [1984] 2 S.C.R. 335 (Can.)