Proceedings of the Standing Senate Committee on
Aboriginal Peoples
Issue 27 - Evidence, April 27, 1999 (morning sitting)
OTTAWA, Tuesday, April 27, 1999
The Standing Senate Committee on Aboriginal Peoples met this day at 9:00 a.m. to consider Bill C-49, an Act providing for the ratification and the bringing into effect of the Framework Agreement on First Nation Land Management.
Senator Charlie Watt (Chairman) in the Chair.
[English]
The Chairman: Senators, our first witness is Dr. Jon Kesselman who represents the Musqueam/Salish Park Residents' Association.
Please proceed.
Dr. Jon Kesselman, Musqueam/Salish Park Residents' Association: I appreciate the opportunity to appear here today to share my analysis of Bill C-49. To this matter I bring the perspective of a leaseholder who has lived for nine years on the Musqueam reserve in Vancouver. I have been an active participant for most of that period in the limited means available for leaseholder input to the band government. In addition, I am a professional economist specializing in tax and income security policies.
To supplement my presentation here, I have brought for distribution to interested committee members a chronology of the leaseholder experience on the Musqueam reserve from 1991, when the bands assumed taxation and governance powers, up to the present. I believe that experience on the ground is essential for understanding the real implications of the proposed legislation. The experience of Musqueam leaseholders is one that should raise serious concerns over the impact of certain aspects of the proposed First Nations Land Management Act.
My comments will focus on the expropriation provisions of Bill C-49, particularly as they relate to the position of Canadians with leasehold interests on reserves. However, I do recognize two other important areas requiring close review and likely amendments. These are the matter of processes for consultations by First Nations with surrounding jurisdictions, and the issues of property rights of native people living on reserves. Undoubtedly, you will hear about these matters from other witnesses.
It is regrettable, in my view, that the federal government has pushed ahead with Bill C-49 despite the growing opposition of various groups. The bill was formally opposed by the Union of B.C. Indian chiefs, the United Native Nations of B.C. and the Native Women's Association of Canada, based on concerns over native women's rights and expropriation powers. A group of native women from the Squamish nation in B.C., a signatory band, have strongly opposed the bill, as has the outgoing chief of the Musqueam nation, another signatory band.
Leaseholders on various reserves who learned about the bill only belatedly have reacted with alarm at the powers of expropriation that might be wielded over them. In the public perception, the bill's expropriation powers could affect every leasehold family, not just those on the reserves of the initial signatory bands. In B.C., fully one-third of the 60,000 residents of Indian reserves are non-native, the great majority of them leaseholders. Many additional leaseholders can be found on Indian reserves across the country, not the least in Ontario. The fact that only 14 bands of the more than 600 in Canada wish to be initial parties to the act should also give pause to any unconsidered support for the bill.
I would now like to explain why the expropriation powers in Bill C-49 have aroused such widespread and vocal opposition. Expropriation is a standard tool in the arsenal of governments, needed on occasion for the orderly provision of public facilities and public works. Why should we get excited over the granting of expropriation powers to First Nation governments that might choose to exercise it? Is it that First Nation governments are to be less trusted than other more conventional governments? No. I do not believe that anyone is suggesting that to be the case. Is it that there is something inherently different about a First Nation government from a federal, provincial or municipal government in terms of their objectives and mandates? That, I think, would be getting to the heart of the matter.
Moreover, the specific provisions for expropriation within Bill C-49 have major defects of due process and fairness that need to be addressed, and they could easily be remedied if there is a will to do so.
When a conventional government in Canada, by which I mean a municipal, provincial or federal government, expropriates property it is to pursue the construction of public facilities or to implement some other public purpose. These governments do not expropriate land when its value has risen in order to capture that increased value through development or resale and thereby deprive the owner of the increased value. Instead, the government will usually approve a change in zoning or land use to permit the owner to realize the increased land value, so long as the changed use is consistent with the public interest and not adverse to the private interests of adjoining landowners. The government does obtain a share of the increased land value through an increase of the property taxes and taxes on capital gains when the land or property is sold.
However, the government does not expropriate the land itself and deprive the property owner of the full increase in the land value. If we allowed that to happen, a fundamental underpinning for investment, real estate and property development would be removed.
How did the preceding cannons of governmental behaviour apply in the First Nations context as envisioned by Bill C-49? According to clause 28, a signatory band may:
(1) ...expropriate any interest in its first nation land that, in the opinion of its council, is necessary for community works or other first nation purposes.
In reading this passage I would emphasize the phrases "in the opinion of its council" and "other first nation purposes." In simple language, this means that any purpose that any band council believes to promote any goals chosen by that First Nation constitutes legitimate grounds for the expropriation of any interest in lands.
While we might normally expect that a First Nation newly assigned powers of expropriation would be limited to the range of public works that we associate with conventional governments, the wording of the bill is in fact broader than this, including any imaginable purpose that may occur to a band council.
The Minister of Indian Affairs and Northern Development has taken pains to stress that the expropriation powers of bands, under Bill C-49 will be circumscribed to purely public non-commercial purposes. As cited in The Vancouver Sun of February 3, Ms Stewart has stated that bands:
...will only be able to expropriate in cases where the general public interest is being met, such as through construction of roads, schools or community centres. First Nations won't be allowed to abuse the section by using it to redevelop the land for financial gain....It's not about economic return.
With respect, the minister's assertion is not supported by the actual wording of the current bill which allows for an almost unlimited range of "first nation purposes" as valid grounds for expropriation. Even if the minister believes her narrower interpretation to be correct, she could not enforce it once the First Nations Land Management Act were passed into law, nor could any future minister deny to bands the powers granted them in the legislation.
It is disturbing that Mr. Bob Watts, ADM with INAC testified before this committee on April 14 that Bill C-49 "...will provide First Nations with the ability to react quickly to business decisions affecting land management." I stress his reference to "business decisions," not community or public works.
The assertion that Bill C-49's expropriation powers will be limited to public works is also contradicted by the announced intentions of one of the signatory bands, the Squamish Nation. In his testimony before this committee on December 2 last, Harold Calla, Squamish Director of Finance and council member, referred to the potential of the land management act in helping the Squamish nation to unlock commercial value in the $1 billion of property that it owns. It is clear that many other First Nations across Canada, and particularly in B.C., with the impending settlement of sweeping land claims, envisage their land as a key platform for economic development.
Undoubtedly, this will involve instances of expropriation of existing interests in their lands in order to assemble lots of land needed for major redevelopment. In the case of the Squamish Nation, there have been rumoured plans for the redevelopment of their Mission Reserve in North Vancouver that could involve displacing significant numbers of band members from their homes. This I cite to illustrate why band members at the grass roots level are concerned about the expropriation provisions.
Why should First Nations not be allowed to redevelop their lands as they see fit to pursue an economic development strategy, including, where necessary, their access to expropriation powers? There are two answers to this important question. One relates to equity and the other relates to the incentives needed for economic development.
In terms of equity, giving First Nations the power of expropriation over native residents and leasehold interests in their lands fundamentally changes the balance of power, and therefore the market value of those existing interests. It is an uncompensated taking of value from the current interest holders, regardless of whether expropriation power is exercised quickly, later or never. Introducing the possibility of being expropriated by a band council decision in itself reduces the value of the certificate of possession or the leasehold interest.
Obviously, the magnitude of this reduction in value will hinge substantially on the precise terms under which expropriations can be undertaken. Given the terms of the current draft of Bill C-49, one would expect that the impact on interest holders' property value to be severe.
Experience of residential leaseholders on the Musqueam reserve serves to reinforce these concerns. Prior to 1988, when the Indian Act was amended to allow bands to assume powers of property taxation and local governance, the leasehold homes on the reserve, and even those with ongoing annual lease payments, had market values virtually the same as physically identical freehold homes located off-reserve on the pricey west side of Vancouver.
After the Musqueam Band assumed taxes and governing powers, and especially as property taxes on Musqueam soared relative to those in Vancouver, the leasehold homes became progressively more depressed in their market values. The Chart on page 8 of the handout today reflects that change.
As of last November, even the leasehold homes with fully pre-paid leases and 75 years to run sold for about 45 per cent less than their off-reserve counterparts. This occurred before all of the publicity about the lease rental dispute for the non-pre-paid leaseholds on the reserve and publicity about Bill C-49. Today, the pre-paid leaseholds cannot be sold at even distress prices. This experience illustrates how sensitive the housing market is to uncertainties and risks, and that will only become compounded if Bill C-49 is passed in its current form.
The expropriation provisions of the bill seem almost calculated to drive leasehold values on reserves further into the basement. Consider the position of a home purchaser who is comparing homes for sale both off reserve and on reserve. If he buys the reserve leasehold, he will know that, under the terms of Bill C-49, his newly acquired home could be expropriated with, at most, 30 days' notice with a value essentially set by the band, and that any appeal procedure would also be governed by the band.
He might expect to be compensated at fair market value for such an expropriation, but what will that value be? If homebuyers fear that an expropriation could be sprung upon them at any time with virtually no notice, why would they take the risk of buying an on-reserve leasehold? Even if they got fair market value, that value would be depressed by the concern over expropriation. They would not be compensated for all the costs in time, search, moving, property transfer taxes, legal and mortgage fees, et cetera, associated with finding, purchasing and moving to another home.
If growing numbers of homebuyers remove themselves from the market for on-reserve leaseholds, the prices of those properties will spiral downward. An expedient band could then choose to expropriate the land at their greatly depressed market values.
The vicious dynamic I have just described is grossly unfair, not only to current holders of interests in land on reserves, but it would also undermine any hope of making First Nations lands an attractive resource for economic development. What financier, investor property developer or commercial party would want to make new investments in a long-term leasehold on reserve land if they could be expropriated on short notice for almost any reason chosen by the band council? Clearly, if the leasehold land were to rise in value, because of population growth, urbanization or other economic development, the existing leaseholder would have reason to fear that the First Nation would expropriate their interest in the land in order to claim the increased value for itself. Alternatively, the First Nation government could use the threat of expropriation as a lever to extract increased leaseholds payments from the existing leasee.
For these reasons, easy expropriation, which may seem favourable to First Nation governments, will in fact undercut their ability to find financing and equity partners for the broad range of development purposes that they might otherwise attract. Easy expropriation provisions are not only unfair to existing and future interest holders in Indian lands, but they are also detrimental to the long-term economic prospects of First Nations peoples themselves.
To resolve the cited inequities and inefficiencies inherent in the expropriation provisions of the bill, two types of amendments are needed. First, the clause 28(1) expropriation powers must be clearly limited to specified Public Works and community facilities. This would best be achieved by enumerating the allowable types of purposes that would justify expropriation. Excluded from the allowable purposes should be any development containing any commercial, industrial, residential or other revenue-generating component. Provision should also be made to prevent a First Nation government from expropriating interests in land for a specified public purpose and later converting that land to any form of commercial, industrial or residential uses unless there is additional compensation to the previous interest holder.
The need to restrict the purposes that can justify a First Nations' expropriation, and making them stronger and more explicit than those applying to conventional governments arises from the hybrid role of First Nations as governments and potential developers. This role inherently involves a conflict of interest. It also arises from the exclusion of non-native lessees from voting and other rights in First Nations government.
A band council that can make decisions to expropriate is totally without political accountability to the non-native leaseholders who may be expropriated. This is unlike the situation with a municipal council or provincial legislature that, on occasion, may expropriate.
Excluding properties from expropriation when a First Nation wishes to pursue any commercial development does not prevent it from bargaining, as an equal, the terms on which it will buy out an existing interest holder. With this provision, prospective investors and developers will have the confidence to enter into new agreements with First Nations, knowing that they can be displaced in the future only through balanced and mutually agreed by-outs.
Even if the preceding critical matter is properly addressed through amendment, Bill C-49 still contains technical defects in its expropriation provisions that also require amendment. For example, clause 28 (5) of the bill states that:
A first nation shall pay fair compensation to the holder of an expropriated interest and, in determining that compensation, the first nation shall take into account the rules set out in the Expropriation Act.
The provision that the process and principles for determining amounts of fair compensation shall "take into account the rules" of the Expropriation Act is extremely loose and flexible. To confirm this interpretation, I would quote the testimony before this committee on April 14, 1999, by Mr. Kerry Kipping, the INAC lead person on Bill C-49. In his own words, he said:
In terms of how expropriation will be done, the First Nations will provide those rules and procedures but they will be using the federal Expropriation Act as a guide in doing those.
I would stress his words "as a guide."
Honourable senators, for First Nations to use the Expropriation Act only as a guide in setting up their own rules and procedures for expropriations compensation, objections and appeals is not nearly good enough. I would suggest that the drafters of Bill C-49's expropriation provisions were either surprisingly unschooled in their understanding of the expropriation process or they were intending to provide band councils with radically expanded discretion over the conduct of expropriations. It is not my place to divine which of these is the case, nor do we need to understand their motives in order to see that this approach is seriously mistaken.
The laws and jurisprudence on expropriations in Canada have evolved over generations, descending from the needs created by the British railway boom in the mid-19th century.
I have with me a legal reference text on the topic of expropriations in Canada. It is more than 600 pages and cites the statutes -- literally hundreds of cases -- and procedural matters related to the act of expropriating, notice and appeal procedures, and the many complexities of valuation that arise in the real world. The latter include established principles that would give considerable comfort to leaseholders on First Nations lands, such as value based on highest and best use of a property, the reinstatement principle and disturbance damages, the home-for-a-home provisions and their application to leasehold interests.
In contrast, Bill C-49, clauses 28, subclauses (3) through (6), describe these matters in four brief sentences along with their loose reference to the Expropriation Act. The bill calls for 30 days or less of notice to be given to an interest holder when they are being expropriated by band council, and provides that disputes over compensation be resolved by the First Nation itself. The only proper, prudent and equitable way to address these matters is to strike the cited four subclauses of the bill and replace them with a new subclause that would simply state, "Any expropriation by a First Nation and all related matters of compensation, notice periods, procedures, rules, and appeals, shall be governed strictly by the provisions of the Expropriation Act." Truly, what more does the act need to state?
Let me now summarize my analysis of the deficiencies in Bill C-49's expropriation provisions and my proposed remedies.
A First Nation government differs fundamentally from other governments in Canada in that it is the ultimate owner, via the Crown, of all reserve land. No freeholds exist on reserve land. Many First Nations also differ in that they envision their lands as their ultimate resource for future economic development. Hence, First Nations wear multiple hats simultaneously as land owner, land developer and governing agent, creating intractable conflicts of interest. Moreover, First Nation governments exclude from the right to vote or hold office all non-band leaseholders, thus removing their political accountability to a large group that would be subject to expropriation.
As a consequence, the power to expropriate by First Nations' governments must be strictly limited to public works and community facilities without any commercial component. This amendment to the bill would only make explicit what the current Minister of Indian Affairs and Northern Development asserts is already implicit in the wording of the bill.
We must not discard the wisdom and experience of more than a century of legal thinking and jurisprudence on matters of expropriation. We should scrap the attempt to reinvent concepts related to expropriation for First Nation purposes which, in the end, can only lend themselves to mischief and bind all aspects of the expropriation process, compensation and appeals under Bill C-49 strictly to the Expropriation Act.
With these simple, sensible and straightforward amendments, leaseholders would be assured, native residents would be assured, and assurance would also be given to the financiers, investors and businesses who are needed to partner with First Nations for land-based economic development.
Honourable senators, by making these amendments to the bill, you could turn a situation of fear and distrust into a positive future for all the concerned parties.
The Chairman: Thank you very much for your presentation. We are now open for questions.
Senator Ghitter: Dr. Kesselman, I am sympathetic to some of the things you have said and not to others.
By way of comment on the graph that you showed us, it has always been my understanding that leasehold interests have less value than freehold interests. That is not surprising. In the marketplace, if one is acquiring a leasehold interest, it will not be at the same value as a freehold interest. The graph that you have provided to us states somewhat the obvious. Perhaps your situation in Musqueam is different. If it is, please help me on that.
Mr. Kesselman: A leasehold interest is generally acknowledged by real estate experts to have a value virtually 100 per cent of a freehold interest when there is 99 years to run on the lease. This is confirmed by real world experience. There is a leasehold development on land held by the University of B.C. where they have sold housing units. They are 99 year leases and they attract the full value of a freehold property.
The situation I am comparing in that particular graph, is between fully pre-paid leaseholds interests on the Musqueam reserve and freehold interests off the reserve. When a leasehold interest has a long time to run, such as 99 years, 80 years, or 75 years, they are still worth and valued at nearly as much as a freehold interest.
You can approach this through financial discounting formulas. Based on reasonable economic assumptions, you can see that, with 75 years to run -- and, that is where the pre-paid leaseholds on Musqueam were as of last year -- a leasehold interest has a value of 98 per cent or 98.5 per cent of a freehold interest. It is only when you get into the last 30, 20, l0 or 5 years, that the value falls sharply. That has to do with discounting and the future value of money. In the graph, you can see that, prior to 1988, the leasehold properties on the Musqueam reserve -- and here I am taking the pre-paid leaseholds -- sold virtually at the same value as properties that the B.C. assessment authority identified as being physically equivalent in property lot size, structural size, age, et cetera, to the freehold properties off the reserve. They sold for the same prior to the inauguration of Musqueam governance taxation assessments and the many, many difficult disputes that we have had and that are ongoing. I am referring here to things unrelated to the lease dispute that affects only one-third of the leaseholds on Musqueam.
These are matters that would be of interest to all senators because you have been conducting other hearings on aboriginal self-governance. There has also been some discussion of hearings on taxation powers. On Musqueam, we have the experience. We have found that, unless there are proper legal constraints on property assessment procedures, on appeal procedures, on taxation rates, et cetera, we are opening a can of worms as has been opened already on Musqueam and as we are starting to see on some of the other reserves in B.C. with taxation powers.
Senator Ghitter: Do all the leases that are still in existence there all have over 75 years to run? I thought many were shorter.
Mr. Kesselman: There are two subdivisions. There is the one in which I live, where the leases were pre-paid at the outset by the developer and by the first purchaser of the lease-hold. That section, which is two-thirds of the properties, has now 74 years to run. The other subdivision, which was developed first and therefore has a shorter period, has approximately 65 years to run.
Senator Ghitter: You have suggested amendments that relate to expropriation and your desire to be bound by the federal Expropriation Act.
Clause 4 of the bill states:
The Framework Agreement is hereby ratified and brought into effect in accordance with its provisions.
What if the bands in Canada agreed to include your amendments in the framework agreement, rather than the necessity of going through with an amendment to the bill?Would that satisfy you?
Mr. Kesselman: Speaking on behalf of the Musqueam and Salish Park leaseholders, they would not be happy.
Senator Ghitter: Why?
Mr. Kesselman: They believe that the key constraints and principles must be in the legislation itself. A framework agreement could be modified over time. Also, other signatories can join the land management powers after an initial period of four years. Those new signatories may have different framework agreements. Why is it difficult to make amendments where they are clearly justified and needed? Why use a backdoor approach that does not have the security of being embedded in the legislation?
Senator Ghitter: The "framework agreement," as it exists at the time the legislation is passed, is the framework agreement that is ratified by this bill, so any amendments would have to be brought before Parliament for changes to be made.
Mr. Kesselman: I cannot speak to that. I am not skilled in parliamentary ways, but I know how all of my neighbours would react to that, They would not be satisfied, perhaps unreasonably.
Senator St. Germain: Since the committee indicated it was not prepared to travel, last week Senator Lawson and I took upon ourselves to meet with about 20 to 25 leasehold residents of Musqueam and Salish Park who are all concerned about Bill C-49. Do you have any documented proof you can supply to the committee, about why the people we met with indicated that they cannot sell their houses? They told us that they, literally, could not give them away. They told us of a house that sold for $130,000, but which was purchased for some $600,000 dollars.
I realize, Mr. Chairman, that we are dealing with two issues. First, we have the bill and, second, we have the human factor and the realities of the world we dealing with. Is there any documented proof in regards to how real estate values have dropped as a result of the recent lease changes on the Musqueam reserve with the introduction of Bill C-49?
Mr. Kesselman: You could not untangle the various factors that have affected the market for leaseholds on the Musqueam reserve today. There are the lease disputes, the lease rental disputes, Bill C-49, taxation issues, et cetera. Realtors have advised their clients to take their homes off the market, because they would be wasting their time trying to market them with all the current publicity relating to Bill C-49, and the lease dispute.
This advice has even been given to homeowners in the Salish Park subdivision which has fully pre-paid leases and therefore is only affected by the spill over of the publicity, plus Bill C-49, plus ongoing disputes with the band over taxation, over property assessments, and over interference by the band in their own assessment appeal board.
If you want evidence of how the taxation regime on Musqueam, and the property assessment regime, and the whole governance relations between bands and leaseholders affects property values, I would suggest that you look at my handout. That graph goes back to 1980. It shows you the situation before and after this change in governance. Formerly, under the terms of their leases, leaseholders paid their property taxes directly to the City of Vancouver and received their public services directly from the City of Vancouver. Those properties were valued as if they were freehold property holders off the reserve.
However, you see the gap widening after 1988 when amendments to the Indian Act were made. That was followed, in 1990, by the application of the Musqueam Band for these powers and there was the introduction of by-laws giving them assessment powers for property taxation and decisions regarding local expenditures. The gap continued to widen over time until it reached a 45 per cent gap, discount, for fully pre-paid leases. This is prior to the last figure given in that graph, which is for 1996 since I prepared this for a different purpose and before the introduction of Bill C-49. It was also before the lease dispute came into the open and the appeal court reversed the trial court's decision and set these astronomical rents.
That is the important evidence. As I said, we cannot untangle the effect of Bill C-49, from the lease dispute. They are both in the public eye, and any realtor in the lower mainland area is aware of them. Most of them will not touch the properties, and they advise their clients to look elsewhere. That will continue to be the case until all of these matters are resolved.
Senator Lawson: In attending this meeting with the homeowners, I could not believe I was in British Columbia, Canada. We heard the types of horror stories you might expect to hear in countries with "tin-pot" dictators who seize the land, turf the people out, and allow them no appeal. We heard about the decision to change the taxation rules so that taxes would no longer be collected by the City of Vancouver but rather by the Musqueam Band, and how that decision was made without notifying the homeowners. We heard stories about members on the band's taxation advisory board who try to dismiss cases, overrule decisions and overturn decisions.
I was appalled at the serious, grave injustice that has been done to these people. We heard about a couple, aged 83 and 85, who do not know where they will turn.They paid $600,000 for their home and they cannot give it away.
There have been only two property sales since all this hit the press. Those sales were made to members of the band and, I might add, at sharply discounted prices.
We heard from a lady who came from South Africa and who had been exposed to the horrors that took place in that country. When she and her husband came to this country, they wanted to help the native people and live on leased land. Now her husband has gone, and she cannot give the property away.
We heard from one man who paid $650,000 for property, about 27 years ago. He said that he was prepared to give them the damn house away, but he was told that he and his estate would be held responsible for the balance of the lease. Other people find themselves in the situation where they do not have $2 million set aside to pay off the balance of the lease, and they cannot sell their property to anyone.
The Chairman: Perhaps you would pose your question.
Senator Lawson: I will get to it. These are the things we need to hear about. There is no point in us being here if we can't talk about the issues.
In my experience in other jurisdictions, leased property has a depreciating value, because lending institutions will not give a 30-year mortgage unless there is at least 10 more years of the lease left beyond that. It depreciates sharply, which is contrary to the decision of the appeal court.
In most other jurisdictions, during that period when values are depreciating, tax appeals are made to the county or the city. In my own case, during a three-year period, the taxes were reduced on two occasions. In this instance, you have the reverse: rapidly plummeting prices and taxes being doubled. The change of jurisdiction was made without consent.
I agree with what you say about expropriation. All the assurance from the minister is absolute nonsense. There is no point in the minister telling us that all of this taxation income will be spent on roads or other infrastructure. This money will be used for whatever economic purpose the tribe deems fit, and it certainly has a right to do that. I do not quarrel with their right to do it. However, they should stop trying to deceive the people by telling them that it will not happen. It will happen. This is a serious problem that has to be dealt with.
I agree with your excellent presentation. We have a desperate situation that should never exist in Canada, and it should not continue without corrections or amendments being made to prevent it from happening in the future.
Senator Chalifoux: I think we are looking at two separate issues here, and we are missing the point. We are studying Bill C-49 and the issues related to that. We are talking about leases that were signed 30 years ago. That is, absolutely, another issue and it should not be raised in this committee because we are considering Bill C-49.
In correspondence to the committee, you identify the band expropriation powers set out in clause 28 as the primary area of concern for your association. Your letter expresses concern that bands may use their powers of expropriation for community works or other First Nations' purposes under clause 28(1) in order to exploit higher valued land uses. You also take issue with the notice period for expropriation, and argue that compensation amounts and rules should be bound by the Expropriation Act.
First, I would like your explanation of what you mean when you state that giving the First Nations this power of expropriation could result in "mischief." What do you mean by the use of that word?
Second, would you please describe in more detail what purposes you believe may be deemed by the First Nation to be "other First Nation purposes"?
Mr. Kesselman: The reference to the potential mischief that could be conducted under the very broad purposes of expropriation refers to the notion of self-serving actions by bands where they would be taking value away from either band members with certificates of possession, or from long-term leaseholders, both of whom have property value in their leasehold. I have distinguished this action from what conventional governments do, that is, they expropriate land for public works, schools, roads, et cetera. They do not do it in order to deprive a private individual of value in land.
As to your second question of what purposes I imagine First Nations might include in this broad phrase "First Nations' purposes," I have spelled out in detail that that could include commercial, industrial and revenue generating types of developments which are not standard for federal, provincial and municipal governments in a primarily market-oriented economy. That fact makes the setting very different from how expropriation is used by these conventional governments.
There may be other First Nations' purposes. The signatory bands, perhaps, should come forward and let us know are what their priorities. Can they cite specific situations where expropriation would be used, beyond public works? We should discuss them in the open and include them explicitly. After we have heard what they are, we could make an assessment of whether they serve the public interest, and whether they are fair to existing interest holders in reserve lands.
The onus is not on me to say what those other purposes would be, but rather on the First Nations. They should let us know what is being contemplated beyond economic development. We have heard from the Squamish Band and we have heard from Bob Watts, an ADM with the Department of Indian Affairs and Northern Development that business activities and commercial development are high on their priority list.
Senator Chalifoux: Has your association ever met with chief and council?
Mr. Kesselman: I met, along with three other elected leaseholders, between early 1992 and early 1998, on a somewhat irregular monthly basis, with representatives of the band on an entity called the Musqueam Taxation Advisory Council. It is an advisory input to the band from the leaseholders.
Early in that period, when I was chairing that Musqueam Tax Advisory Council, I sought a meeting with chief and council, when Wendy Grant was chief. They allowed me to meet with them for a short time. After I spoke to them about the concerns of leaseholders -- this was back in 1992 -- I was told by the chief and council that they really did not want to hear from me any more. They did not want to hear from the leaseholders and have us waste the time of their band council meetings.
I can only say that, despite an enormous amount of time, effort, goodwill and high hopes by the leaseholders, the experience on the Musqueam Taxation Advisory Council has been an abject failure. The band recognized it as well because it stopped calling meetings of this council. We have not had a meeting since April of 1998.
We have done what we could. The band has not been receptive to the concerns of leaseholders and wants to be in the driver's seat.
Senator Chalifoux: You speak of the previous council. Have you attempted to meet with the new chief and council on this very issue, on Bill C-49, and to express your concerns regarding your leases that were signed 30 years ago? I want to deal with Bill C-49. Did your group try to meet with the new chief and council?
Mr. Kesselman: Yes, we have tried to do that. The president of the residents' association attempted to get through to the chief. You simply cannot get through to him. You cannot get through on the phone. You cannot find him. He avoids the press. Our president spoke with one of the band council members about our concerns, and that was the end of it. That was the extent of it.
Our door has always been open. Unfortunately, that has not been true on the other side.
Senator Chalifoux: You are telling us that there has been no communication between chief and council and your organization?
Mr. Kesselman: There has been communication by the president of the residents' association with one member of council who was willing to meet with him on an off-the-record basis.
Senator Chalifoux: You are saying that we need to examine the expropriation provisions of this bill.
Mr. Kesselman: Absolutely.
Senator Chalifoux: Do you not agree that the Expropriation Act would supersede this act?
Mr. Kesselman: That is not the belief of the leaseholders. The language is loose. If the Expropriation Act were to supersede what is in the current draft of Bill C-49, why would you have subclauses such as 28(3) dealing with a notice period; subclause 28(4) dealing with expropriated interests becoming free of encumbrance; and subclause 28(6) dealing with how disputes over compensation shall be determined according the system for the resolution of such disputes established by a First Nation in accordance with the framework agreement?
The Expropriation Act is full of the wisdom of experience, history and jurisprudence on proper procedures. Why would these proposed provisions be necessary? As we have said, we know that act shall be taken into account. You may get a legal opinion that is stronger than common language would suggest. However, it does not give the comfort that the leaseholders or many bands members need.
You must remember, Bill C-49 is a matter of great concern to a number of band members, certainly on the Squamish reserve. On The Musqueam reserve, probably very few bands members know about Bill C-49 even though Musqueam is a signatory to the framework agreement. The outgoing chief, who stepped down in early January of this year, is now speaking out in opposition to the expropriation provisions of this bill. I sat with her in front of a CBC TV camera last week where she strongly expressed opposition to these expropriation provisions.
What does this tell us? Elements of two of the 14 signatory bands, the two to whom I am closest, have great qualms about the proposed expropriation provisions contained in this bill.
Senator Chalifoux: You talked about conventional governments. Do you not think that the Musqueam Band Council, with their elected leaders, would not behave in similar way to municipally elected representatives who are members of a municipal government?
Mr. Kesselman: Certainly, we know that the band does not practise the principles of universal franchise. The majority of adults on the Musqueam reserve who are not bands members, cannot vote, and cannot run for band council. In other words, they cannot actively participate in their local government. We know that is different. It is true on every reserve in Canada under the terms of the Indian Act. I am not blaming the bands for that, per se.
In my prepared brief I have stated that many First Nations have aspirations of economic development with which I am in full support. However, combining the hats of being the government, and the owner of the land, and the regulator, and the appeal process, flies in the face of all western tradition on the issue of the separation of powers and on issues of conflict of interest. That makes them very different.
The City of Vancouver does not own 100 per cent of the land in the Vancouver area. I would be surprised if they own, in terms of parks and school board properties, more than 2 or 3 per cent. They do not expropriate for commercial purposes. It is a totally different situation, in my view.
Senator Johnson: Thank you for appearing before us today. This is not an easy issue. It has many complexities.
I come from Manitoba. There are 14 signatories to Bill C-49 and one is from my province. I have not had one letter or comments on this other than expressions of support.
I think there may be a lot of hypothetical drama surrounding this issue, that is, that leasehold values are diminished because, under the framework agreement and Bill C-49, the Musqueam First Nation might expropriate these leasehold interests at some future date.
The Musqueam First Nation argued in court for a much higher, current land value than the tenants argued for. If the Musqueam First Nation planned to devalue the leasehold interests, and expropriate these interests for necessary community purposes, why would the Musqueam argue in court for a high, current land value instead of the low value argued by in court by the tenants?
Mr. Kesselman: The answer is quite clear. The terms of the lease, as a default, sets the annual rental payments as 6 per cent of the current value of the land as if it were in an undeveloped state -- without all the servicing, et cetera. Therefore, by arguing for a higher value, 6 per cent of a higher value gives them this $28,000 to $38,000 a year in the view of the appeal court which accepts the higher value that the council for the band was supporting. Why not get what you can? This is how economic self-interest works. This is true of all of us. I am an economist, and I do not fault anyone for it.
Senator Johnson: That is not necessarily something that will be a problem, is it?
Mr. Kesselman: Under these terms, if a band such as the Musqueam were to assume these expropriation powers and then decided to expropriate any or all of the leasehold properties, what values would be placed on them for this so-called "fair compensation"? Would they be the very high values that have been rendered in that court decision? Would they be the even higher values the band uses to assess our properties for their collection of taxes from us on our properties? Would they be the market values, which have been going down the drain?
Senator Johnson: My next question has to do with the B.C. Real Estate Association. On its website, it attributes the problem at Musqueam to the fact that many recent purchasers of leasehold interests paid too much to previous tenants by not properly taking into account the 1995 rent review provisions of the lease. It attributes no blame to Musqueam or Bill C-49.
If the B.C. Real Estate Association does not attribute any land value decrease of these leasehold interests to Bill C-49, and if the Federal Court of Appeal found the leasehold interests to be of a high value, why have the tenants made statements publicly that these leases have a low value?
Mr. Kesselman: They have a low value because no one will buy them. You cannot give them away. They do not have a value of even one-dollar. I would not say, necessarily -- and here we are talking about the leaseholds with the ongoing payments -- that Bill C-49 is the major contributor there. It is hard to sort out these matters. Public awareness of Bill C-49 came about only in January of this year, perhaps late January. The appeal court's decision raising the rental award came about only a few days before Christmas of last year. These developments followed rapidly on each other.
However, prior to either of those events becoming major media matters, prices for the other subdivision with the pre-paid leases have been going down relative to comparable off-reserve properties. That started slowly in 1988, but the discount has been getting larger and larger over the years with the experience of soaring taxes being imposed by the Musqueam Band. They are allowed to do that under by-laws approved by the Minister of Indian affairs. However, that does not make them fair or right.
Senator Johnson: There have been reports that some of the tenants have not paid their rent since 1995. In spite of being in arrears and in violation of the lease, it appears the Musqueam has not taken any action to evict the tenants. If the allegations are true that the Musqueam want to gain back control of the land occupied by tenants, why would the Musqueam not evict these tenants whose rents are in arrears?
The Chairman: We are already 15 minutes over the limit. Please, keep the topic short.
Senator Johnson: It is my last question. Like everyone else, I am trying to understand the situation in the limited amount of time we have to deal with legislation. The witness has not had an opportunity to complete his answer.
Is there anything else you would like to add? It is enlightening for many of us who do not come from B.C. We were dealing with Bill C-49, but now we are dealing with this other issue as well. If you have anything further to say, please say it.
Mr. Kesselman: The Musqueam experience is not restricted to these unique factors in the lease that affect one-third of the leaseholds, it is the experience with taxation assessments, and local governments by a First Nation government with a group of disenfranchised residents. The whole process is one that is disturbing and one on which this committee should hear from many witnesses not only from Musqueam but also from West Bank and many of the other reserves before you give carte blanche for further moves toward aboriginal self-government. Let us learn from our history to date, before we commit further problems.
Senator Wilson: Was your organization consulted during the drafting of the framework agreement? If so, what was the response? Does any dispute resolution vehicle exist in that framework agreement? If not, from where do you think it should come?
Mr. Kesselman: The leasehold residents of the Musqueam reserve were never advised or informed of the existence of the First Nations land management bill at any time -- not in 1993, not in 1996 and not in 1998. We were not advised either by the Musqueam Band, despite these somewhat irregular monthly meetings ending in April of last year, or by any of our elected representatives, or by our federal Department of Indian Affairs and Northern Development. We did not know about this until we happened to hear about Bill C-49, and that was only in January of this year.
Senator Wilson: What do you have to say about the second part of the question concerning a dispute resolution mechanism?
Mr. Kesselman: There is no formal such mechanism. The Tax Advisory Council has broken down. It did not work much at all when it was operating. There is no such mechanism. Our only formal area of appeal is with respect to property assessments, namely, the Musqueam Board of Review. We have had a terrible problem there. The band hires independent professionals to hear appeals to individual property assessments. However, in their most recent hearings, all the members appointed by the band resigned in protest. Their letters of resignation and the minutes of the board made it clear that the band had been interfering with their independent operation. When the band reappointed that board with a new set of people, the leaseholders lost every one of their appeals.
Unfortunately, we have now been brought to Federal Court on the issue of apprehension of bias because of the band's actions with respect to its supposedly independent board of review. The history goes on and on. Unfortunately, it is not a happy one.
The Chairman: Thank you very much for your presentation. Unfortunately, we have run out of time because we must hear another witness at this time.
Senator St. Germain: This is an extremely important issue.
The Chairman: I realize that. You will have a chance to hear people from the same area. They will be here next week.
Senator St. Germain: The belief is that this is anti-native, but this is not anti-native. The federal government, the Liberals and the Progressive Conservatives, turned over leasing authority and taxation authority, and any difficulties in that regard are now being compounded by the introduction of Bill C-49. There is a problem. As Senator Chalifoux has said, the leasing, the taxation and the court decision on the valuation of the land is but one issue.
The Chairman: We must hear from the other witness at this time. I am sorry.
Senator St. Germain: It is time that British Columbia is heard. I am fed up with decisions being made in central Canada. The bureaucrats here on the left admitted that the wording had been changed.
The Chairman: As I mentioned to you, senator, next week the people from British Columbia will be appearing here again and we will have a full chance to hear what they have to say at that time.
Senator St. Germain: I hope so.
The Chairman: Thank you very much.
Our next witness is Mr. Brian Wallace. Please proceed.
Mr. Brian J. Wallace, Q.C. , Lawson, Lundell, Lawson & McIntosh: Mr. Chairman, probably the only thing about my presentation which will be unique in substance is to describe my client and their relationship to the reserve on which they operate and the perspective they bring to this debate.
I have provided a document to each member of the committee containing an executive summary and a 10-page brief. Five points are outlined in the brief and we have very specific recommendations with respect to each of those points.
My client is Continental Lime Ltd, a manufacturer of limestone. It quarries this product and processes it at the Pavilion reserve in the interior of British Columbia. It does so pursuant to a lease from the federal government which it obtained in 1974.
The reference earlier to the fact that we are not talking about old leases but today's Bill C-49 is pertinent here because we are talking about a change of the rules regulating a lease which was entered into and investments that were made 25 years ago.
Continental Lime does not, in general, have any difficulty with, in fact, it encourages this development. Because it is an industrial operation in a particular locale, it is useful for it to be able to deal directly with the people most directly concerned with its operation. A lot of that is provided for now in its lease, but it is considered a positive step by my client that the land management regime will bring this closer to home. It does, however, have some serious concerns with some of the provisions.
This is not about lack of faith in the Pavilion reserve or band members. Continental Lime enjoys an excellent reputation with its landlord, and 27 of its 35 employees are bands members.
Finally, in terms of generalities, the Pavilion band is not a signatory of the Framework Agreement on First Nation Land Management. Interest has been expressed, apparently, but it is open to the band to become a signatory of that framework agreement and bring itself within the provisions of Bill C-49 by doing so.
These concerns are about the law that governs relationships, not about any lack of faith in the people with whom Continental Lime is dealing.
Our first point, on page 3 of the submission, concerns the substantive issue, that is, the purposes for which expropriation may take place. The words in the federal Expropriation Act allow expropriation to take place for public works or other public purposes. Under the Nisga'a Final Agreement, the Nisga'a government's expropriation powers are also limited to "public purposes and public works."
Under Bill C-49, there are two departures from that conventional, well-understood language.
The first is that the text have been changed from an objective one to a subjective one by adding the words "in the opinion of council," so that the bands may expropriate any interest in its First Nation land that "in the opinion of council" is necessary for community works.
The second change relates to the text, "or other First Nation purposes." Why are we here bringing in a new term which will inevitably require to be interpreted when there is a long history of conventional wording that makes it clear that expropriation can only take place for a public or a community purpose?
We have had assurances by the minister, and I understand legal opinions have been written, suggesting that it makes no difference, that "First Nation purpose" must be a public purpose itself. If that is the case, why not use the well-understood language?
If I were to go to court seeking to interpret this bill, and I were arguing that the right to expropriate is for a broader purpose than a public purpose, I would refer to clause 6(1) (e) of Bill C-49 and I would note that among the things which a land code must include are requirements for accountability to First Nations' members for the management of the First Nation land, and moneys derived from First Nation land. Clearly, it is anticipated that First Nation land can give rise to economic return, and in that case it seems to me that that might be helpful to someone wishing a very broad interpretation of "First Nation purpose."
Why not use the well-understood language?
By contrast, Bill C-49 also deals with expropriation from the band by the federal government for its purposes. Frankly, those words are far more restrictive than any conventional expropriation statute. It must not only be simply for public purposes, but also for use of a federal department or agency, and only where the expropriation is justifiable and necessary for a federal public purpose which serves the national interest. There are additional provisions which require that the expropriation must be to the most limited extent possible, and if there is any alternative to expropriating First Nations land for the purpose, that alternative is to be preferred.
It is interesting that within one bill there are two departures from the conventional language of expropriation purpose -- one to one extreme, and one to the other, and I suggest that anyone interpreting those will seek to suggest that it was intended that "First Nation purpose" is much broader than "public purpose."
On page 4, I set out a proposed solution which is simply to revert to the Expropriation Act language, "for community works and other public purposes."
The second point also deals with expropriation and it relates to uncertainty over the determination and payment of fair compensation. Under traditional expropriation statutes there is more protection as to the timing of payment and the determination of fair compensation.
There is no clear appeal process set out in Bill C-49 whereas, again, by contrast, there is a very clear process set out with respect to the federal government's power to expropriate, under Bill C-49, aboriginal First Nation land.
On the procedural side as well, you have just a very vague few sentences on the subject with respect to the protection of third party interests on First Nation land and a very carefully worded, tight procedure for the ability of the federal government to expropriate from a First Nation.
As was mentioned earlier, the reference to the Expropriation Act uses the expression "based on the Expropriation Act." Again, those are not words that are intended to be binding. By comparison, the Sechelt Indian Band Self-Government Act requires the band to apply the Expropriation Act, and that is our simple suggestion for the procedural issues that arise under the current reading of Bill C-49. Why not simply use the well-understood conventional procedures which would replace the words, "take into account the rules set out in the Expropriation Act," and substitute therefore the words, "adopt and apply the rules for determining value and payment of compensation set out in the Expropriation Act"?
One particular clause of the bill on procedure is subclause 28(4) which provides:
An expropriated interest becomes the property of the first nation free of any previous claim or encumbrance.
I work in this area, and I have never seen words like that before in an expropriation statute. In my experience, expropriations of any interest in land, whether it is a mortgage, a sublease or whatever, is all dealt with in the normal expropriation process. Is this intended to allow a First Nation to take the leasehold and avoid having to pay for a mortgage on that leasehold interest? It is not an expression which adds anything, in my submission, to the rights under expropriation and, in my view, if it is not necessary it should be removed because people will, of course, try to put meaning to it and I suggest that it may produce an unfairness. It is unnecessary, and I suggest it should be deleted.
All of the issues I have raised and which are set out in more detail in the submission, raise a level of uncertainty. As I said at the outset, this is not about lack of faith in particular bands or people today. We are talking about what the law governing future actions will be, and this law, as I indicated in my submission, will create unnecessary uncertainty. By doing so it becomes as detrimental to those who would benefit from First Nations land, within the First Nation, as it would to the third-party leasehold interest holders. Because of that uncertainty, there will be less development and economic activity which could benefit both parties.
The third point I raise is dealt with on page 6. The bill will also provide, and in general we are in complete agreement with this, that the First Nation has the right to manage its own land. The bill gives extensive land management and regulatory powers, respecting environmental issues, use, possession, and so on, all of which are very good. It also provides, and I think this is a positive thing, that it should not have environmental rules that are, for example, less onerous than the surrounding provincial and federal regulations. I have no difficulty with that.
The difficulty lies in the lack of ceiling as to how onerous these regulations can be. The uncertainty that is created by that is a fear that, under the guise of regulation, there would be a prohibition against activities for which the lands were properly committed to use by a lease signed many years ago, on the basis of which significant investment has been made. There is a fear that regulatory powers could be used as an effective expropriation technique by prohibiting the very use for which the lands were leased.
We are suggesting that, by way of amendment, the issue be corrected by adding a requirement that the powers of regulation do not impose standards or regulations that are substantially more stringent than the equivalent provincial laws.
Let me give you an example of how this actually works on the Pavilion reserve today. Continental Lime Ltd. operates a limestone quarry and a processing plant. Obviously, it is required to meet environmental standards. Under the lease, the environmental standards it is required to meet are the provincial environmental standards. They have been introduced into the lease specifically as being the standard that applies. Continental Lime is required to meet the same standards as any other industrial operation in the province of British Columbia. Provincial environmental inspectors inspect it for that purpose. Band environmental inspectors, under the terms whereby Continental Lime occupies this land, also inspect it. It is not as if there will be a loophole here.
We are not suggesting that the band not have environmental standards. By all means, it should and I agree again with the concept that they should be at least as stringent as those pertaining to the surrounding area. Our proposed wording would allow that to be included in the land management agreement.
The fourth specific point I wish to make is that, under Bill C-49, Canada, unilaterally, is absolving itself of any liability it committed itself to in the documents it signed over the years by way of leases on these properties. I would suggest that that unilateral act is an anathema, as well. Our solution, with respect to leases and commitments that Canada has already made, is that Canada should, like anyone else who enters a lease, be required to live up to its obligations and accept any liabilities that arise from the legal commitments it made.
Finally, I have an overall provision, which I think is far reaching. It is my fallback position. With respect to the first two issues -- both the procedure and the substance of expropriation -- in my submission, the best course of action is to make small amendments to the bill. With respect to the third and fourth points that I raise -- environmental and land management regulation and the existence of current federal government liability -- the most effectively approach would be by grandparenting existing interests. Whatever is done in the future, whatever commitments Canada makes in the future, can be done so as long as everyone knows the rules.
The final general position I have is a blanket approach to dealing with all of these things, including the first two, namely, the expropriation related issues, would be to grandparent existing leasehold interests. That, in my respectful position, is a fallback position. The better view would be to limit the expropriation rights to those that are comparable to other conventional governments.
Senator Andreychuk: Thank you for your brief. I found it interesting and noteworthy that you support land management within reserves by First Nations. I think that is commendable for Continental Lime, which you represent, to be taking that view.
Bill C-49 was intended to allow First Nations to finally manage their own lands which was the real obligation made by the Government of Canada many years ago. I am impressed that you have approached your evidence here with that as a basic principle to be accomplished. Am I correct in that assessment?
Mr. Wallace: Yes. Nothing we are proposing seriously detracts from the principle that land management should be as close to home as possible.
Senator Andreychuk: Would you be in a position to know whether Continental Lime, when it dealt with the Government of Canada, was aware that it was on reserve lands? Was there any discussion by the Government of Canada that it was in fact a trustee for First Nations when it entered into those negotiations?
Mr. Wallace: I have the lease here. It is quite clear, as is pointed out at the start of the lease, that the lands described are reserve lands within the meaning of the Indian Act. There was no question that both parties knew what they were doing in terms of the nature of the land.
Senator Andreychuk: I am inclined to agree that a lot of the difficulty that seems to exist in British Columbia is as a result of the negotiations that took place between the Government of Canada and the leaseholders. That was compounded by the fact that the federal government turned over the taxation and management to First Nations without contemplating the effect on third-party leaseholders. Your answer is either to grandfather them or, at a minimum, that the Government of Canada accept its liability, and the scenario will play out.
Mr. Wallace: As has become obvious this morning -- and, not surprisingly -- there are a number of issues relating to third party interests on First Nation land which are part of the policy issues and the political issues that senators are required to consider.
One of the advantages of my client's position is that it is not coloured by any other issues. There are no issues relating to adverse lease conditions that were entered into some time ago. There is no issue that we are raising with respect to First Nation's taxation. This submission is only about Bill C-49 and about the powers that it will give to the First Nation.
I am not sure if that answers your question.
Senator Andreychuk: That is exactly what I meant. What you are doing in your brief is simply saying that, in order to make it more effective for First Nations, and for anyone in the future who may deal with them, certain amendments for better certainty should be made.
Mr. Wallace: "Certainty" is exactly what is this is about.
Senator St. Germain: Thank you, Mr. Wallace, for appearing before us this morning and providing us with your excellent material.
In spite of the fact that some of my colleagues believe that there has been an overreaction in B.C., financial institutions have backed away from providing financing for some of the projects which involve real estate on existing reserves. Do you see Bill C-49 impacting upon your client and similar clients in the same way if it were to proceed as it is drafted?
If I were giving a legal opinion with respect to the impact that Bill C-49, if passed, had on a financial institution, I would make the observations about uncertainty that I have made here this morning. No lender or potential investor is happy with uncertainty. It is in everyone's interest to keep the playing field as level as possible. Bill C-49 actually helps, in some regard, in moving management closer to home but, using words which are untested will, inevitably, create difficulties.
As to why there is an issue in B.C., but not in other places, I do not know the answer to that. I have come to the conclusion, not as a result of any rhetoric or what I have read in the press, that the reason it is an issue in British Columbia may well be because of heightened awareness arising from the situation, which is unrelated, respecting the Musqueam leases. It is not surprising that more people are aware of this in British Columbia.
However, people are not always aware of what happens in Ottawa. Although the parliamentary process is a public one, it does not always get the press that one would hope. For example, when the Indian taxation regime in the Indian Act came into effect, I was not aware of it until it was a fait accompli, even though I am a lawyer and deal in property taxation frequently. It did not cross my horizon until the act was in force. In my view, it is it not surprising that there will be a public issue in some places and not in others.
Senator St. Germain: You pointed out in your presentation this morning, that we all support the fact that we would like our aboriginal people to take control of their own destiny; and this is the first step. However, they may get what they are asking for and that may be the most dangerous aspect.
In British Columbia, this is a time bomb because of the existence of native politics on the Musqueam reserve; the issue of leases; the federal government's involvement; and court decisions.
As a lawyer, would you, in good conscience, recommend to a client, if Bill C-49 is passed as it is drafted, that they should enter into an agreement to lease a property for the purposes of business?
Mr. Wallace: I do not make economic decisions or give economic advice to my clients, but I would certainly tell them what I think the risks that arise from this are. I would tell them about the risks under any other circumstance. This is just another layer. I would not give them the final economic advice.
Far more important is the fact that people making decisions now can make them with Bill C-49, if that becomes the law, in front of them. People who made decisions 30 years ago to invest considerable amounts of moneys in industrial operations or residences on reserves did it without knowledge of Bill C-49. This is somewhat changing the rules as things go along, and that is very serious in my view.
Senator Chalifoux: Thank you for your excellent presentation. I certainly appreciate your comments and your recommendations. I am sure they will be heard and considered.Where is the Pavilion First Nation located in B.C.?
Mr. Wallace: It is very close to Lillooet. It is where the Harvey Lake road meets the Fraser Canyon. It is a wonderful part of the world.
Senator Chalifoux: I know, I have been there, but did not know that the Pavilion reserve was there. What is your opinion on the self-government aboriginal nations are striving for today? Times have changed. Years ago, our people did not have the proper education. Of course, and that is changing dramatically. I have met the leaders of these 14 signatory nations, and they are all very well educated, as well as being good politicians and good legislators. They are all looking forward to the passage of Bill C-49. Do you think passage of Bill C-49 would assist these legislators in handling their property and their constituents as well as any other MLA or MP in this country?
Mr. Wallace: We are here dealing with law and not individuals. My concern is with respect to the uncertainty of the law. I believe that Bill C-49, in general, is good legislation, because it puts the responsibility for managing the resource where it belongs, namely, with the people who will benefit from its management. The principle is unassailable. However, making it as broad as it is will create unnecessary uncertainty.
Bill C-49 is a good proposal, but we must put some common bench marks in place so that people can avoid litigation and uncertainty in the future.
One of the tensions arises from the fact that there are, by definition, two classes of residents or occupants in reserves: Those who have the franchise; and those who do not. You have a situation where those who have the franchise can adversely affect those who do not. This heightens the seriousness of uncertainty.
Senator Ghitter: Thank you for your brief because it took us out of the Musqueam situation and made us look at the proposed legislation in a broader context, and I think that is very important.
I should like to hear your views with respect to purposes and value. You have stated your support for the bill. What I like about this bill is that it will allow control to be in the hands of our native peoples in their own land. If that control extended to their desire, from an economic point of view, to acquire lands, which is a step beyond your definition, for municipal purposes. If they wish, for economic purposes, to expropriate your clients' quarry, and assuming there was certainty in the legislation, should they not be allowed to do so?
Mr. Wallace: That would be a departure from our traditions. If a band wishes to acquire an economic entity or land for development, which they do not currently control, then they should negotiate for that purchase as would anyone else. To give them power over the potential vendor is to give an unfair advantage to one party in an economic transaction, which is not justified.
Senator Ghitter: It has always been my understanding that in matters of expropriation the value is determined by a compensation board or similar tribunal, and that the value refers to value at the time of the filing of the Notice of Expropriation. I understood from Doctor Kesselman this morning that, if the land were to be expropriated for economic purposes, a different value would be placed on it. For example, the use for which that land was intended by the expropriating party, not the use for which it was being used. Which value, as indicated by law, is the value that the expropriation board would have to apply?
Mr. Wallace: One of the difficulties I have relates to how a tribunal might determine value. One of the difficulties with Bill C-49 is that the independence of the tribunal is not guaranteed.
Senator Ghitter: I am assuming that we made those changes. Let us assume that the federal Expropriation Act applies.
Mr. Wallace: The standard starts with fair market value. There may be more, depending on its value to the current interest holder. That is probably the best way to describe it.
If land has development potential, which is not currently being exploited, that value, presumably, would be reflected in its fair market value because someone who wants to buy it would be aware that it had that potential. Obviously, if it required a change in zoning in order to have that future exploitation, and the change in zoning was in the hands of the person expropriating it, there is an issue because that maybe a value that could not accrue to the current owner. Tribunals are sympathetic to that kind of leverage and tend to go to the higher end of fair market value when that sort of circumstance arises.
For an industrial operation, the land has a value to the person who wishes to acquire it, and to the expropriating body for whatever use it has in mind. Let us say that it is pivotal to my client's operation. That client would either have to get out of this business altogether or go and find an alternative source of supply which is more remote with higher transportation costs, and so on. There is what is called "value to owner," which gives this particular property a special value to the current interest holder. An expropriation tribunal will recognize and compensate for that value as well.
Senator Ghitter: In summary, if a band were expropriating and wanted to turn land which was previously zoned for residential use into an industrial park, are you suggesting, that the leasehold interests which is being expropriated should receive value based on the industrial park or the residential area?
Mr. Wallace: Only if that potential development was a value that was inherent in the land. There is no crisp, scientific answer to this. It would depend very much on the facts.
There is a famous Toronto case where the property did not have the zoning for which it was to be used, but the court recognized it anyway because of the likelihood that it would get that zoning. There are many cases of potential use forming part of the estimation of value.
Senator Lawson: Let me add my congratulations on the constructive presentation you have made this morning. At the outset I would point out that my name, "Lawson," is not associated with your firm.
However, one part of your presentation causes me grave concern. When the minister's staff was here, I asked, on the issue of expropriation, whether there was a provision in the legislation for an independent appeal by someone who felt injured or aggrieved by the expropriation. That could be your client or a native. I was assured that there was an independent procedure.
In your presentation you state that the problem is amplified by the lack of a clear appeal procedure in Bill C-49. Bill C-49 requires a First Nation to create a process to resolve disputes, but it does not require that the process be independent of the First Nation.
We listened to Mr. Kesselman describe a situation this morning where they had a taxation board the members of which consistently made decisions in favour of the Indian group and not the person who was complaining. This situation is rather frightening for people who may be caught in it. Are you suggesting that there is a way to guarantee that there will not be this lack of independence?
Mr. Wallace: Again, it is not necessary to invent a new procedure. There is one in the Expropriation Act which provides that requirement for such independence. My simple solution is to avoid that. I have heard it suggested that there is an appeal process -- by taking it to judicial review. It could end up in the federal court. However, when you take that sort of route you find yourself, at each stage of the appeal, with less and less to argue about. The subsequent appeal courts cannot find facts, for example. It is very important that the process be transparent, understood, and independent from the first step, not the ultimate appeal.
Senator Lawson: The obvious solution is to substitute the language found in the Expropriation Act.
Mr. Wallace: We already have it. It is well recognized and it has been interpreted for years.
The Chairman: On behalf of the members of the committee, I wish to thank you for your presentation.
The committee adjourned.