On November 27, 2024, the SCC released its decision in Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan. This decision considers the interpretation of tripartite agreements for on-reserve police services for the Pekuakamiulnuatsh First Nation (the "Nation") in Mashteuiatsh, Quebec. The agreements contained clauses allowing for the renewal of the agreements over time to ensure the police force was maintained.
While funding was provided by both the governments of Canada and Quebec for the police service, the funding was inadequate to properly maintain the service. The Nation was required to assume the service's operating deficits and then brought a claim against the Crown for reimbursement for the deficits. The claim was based both on breach of contract under private law and on a breach of the principle of the honour of the Crown under public law.
The trial judge dismissed the Nation's claim and found that the principle of the honour of the Crown did not apply. The Quebec Court of Appeal set aside the trial judge's judgment and ordered Canada and Quebec to pay their respective shares of the total deficit based on a breach of the contract law principle of good faith and a failure to uphold the honour of the Crown. Canada paid the amount awarded by the Court of Appeal, while Quebec appealed the decision to the SCC.
The Court, with Justice Côté in dissent, found that Quebec's actions were both not in keeping with the private law principle of good faith or the public law obligation to act honourably. Justice Côté would have restored the trial judgment, holding that the principles of good faith and the honour of the Crown do not allow a court to disregard contractual clauses and impose obligations that are inconsistent with the express terms of the contract.
As was noted in the majority's decision, this case calls for the Court to develop, "for the first time, a methodology for determining whether contractual undertakings given by a government to an Indigenous group that are not constitutional in nature may be subject to the principles of Aboriginal law, and more specifically to the honour of the Crown."
When does the Honour of the Crown apply to Contracts between the Crown and Indigenous Groups?
The Court began its analysis by noting that while both the duties of good faith and the honour of the Crown are principles that "may not be derogated from by contract", they have distinct bases on which they rest.
The duty of good faith is a general contractual law duty which would apply to the Crown when it enters into any contract with an Indigenous group. The principle of the honour of the Crown, however, does not apply to the performance of every contract and is not an implied contractual obligation. The Court clarified that, for example, "simple commercial contracts between a government and an Indigenous entity would not necessarily engage the principle of the honour of the Crown."
The SCC noted that the principle of the honour of the Crown would apply "only in the performance of contracts between the State and Indigenous groups that are intended to foster the modern‐day reconciliation of pre‐existing Indigenous societies with the Crown's historic assertion of sovereignty...".
The SCC then set out a two-part test for when the honour of the Crown may be engaged by a contract between the Crown and an Indigenous group:
- The contract in question must be entered into by the Crown and an Indigenous group by reason and on the basis of the group's Indigenous difference, which reflect its distinctive philosophies, traditions, and cultural practices; and
- The contract must relate to an Indigenous right of self-government, whether the right is established or is the subject of a credible claim.
Where a contract between the Crown and an Indigenous group does attract an obligation for the Crown to act honourably, the Court noted that the obligation imposes a duty to perform the agreements with "honour and integrity", which is a standard of conduct that is "higher than in the context of an ordinary contractual relationship."
Specifically, the Court set out that this obligation to act with honour and integrity means that the Crown must avoid even the appearance of sharp dealing, must "come to the negotiating table with an open mind and with the goal of engaging in genuine negotiations with a view to entering into an agreement", it should not attempt to coerce or unilaterally impose an outcome, and it cannot "change its position for the sole purpose of delaying or ending negotiations." The duty also extends to the Crown's performance of its obligations under the contract once it has been entered into.
What is the remedy for breach of the honour of the Crown in a contractual context?
The Court noted that the remedies for a breach of a private law contractual obligation, such as the duty of good faith, are corrective in nature and meant to place the aggrieved party in the position it would have been in but for the fault committed by the other party. The remedies for the breach of the public law principle of the honour of the Crown are instead concerned with restoring the honour of the Crown and fostering the goal of reconciliation.
Citing its decision in Restoule, the Court did state that a breach of the obligations flowing from the honour of the Crown does make available a full range of remedies, including damages. The appropriate remedy will vary with the circumstances of each case. In this case, the SCC found that a monetary award of damages in the amount determined by the Court of Appeal should be upheld.
With its decision in Pekuakamiulnuatsh Takuhikan, the SCC has established a new test for the application of the public law principle of the honour of the Crown to agreements between the Crown and Indigenous groups, and provided further commentary on the appropriate remedies that can flow from a breach of the honour of the Crown.
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