Genaille v. Peters First Nation

2022 BCSC 1890 Genaille v. Peters First Nation

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Genaille v. Peters First Nation, 2022 BCSC 1890 Date: 20221028 Docket: S1611436 Registry: Vancouver Between: Andrew Genaille on his own behalf and in his individual capacity as a member of the Peters Indian Band and Lisa Genaille on her own behalf and in her individual capacity as a member of the Peters Indian Band Plaintiffs And Norma Webb in her individual capacity and in her representative capacity as Chief of the Peters Indian Band, Victoria Peters in her individual capacity and in her representative capacity as Councillor of the Peters Indian Band, and Leanne Peters in her individual capacity and in her representative capacity as Councillor of the Peters Indian Band Defendants And Norma Webb, in her individual capacity, Victoria Peters, in her individual capacity, and Leanne Peters, in her individual capacity Defendants by way of Counterclaim Before: The Honourable Justice Lamb Reasons for Judgment Counsel for the Plaintiffs: D. Wu C. North Counsel for the Defendants: S. Ashcroft Place and Dates of Trial: Vancouver, B.C. February 22-25, 2022 February 28-March 4, 2022 March 7, 8, 2022 Place and Date of Judgment: Vancouver, B.C. October 28, 2022 Table of Contents Introduction.. 4 Background.. 6 Band governance. 6 Kinder Morgan.. 8 KPMG financial review.. 8 Missing documents. 9 Outside consultants. 9 History of proceedings..

10 Credibility and reliability.. 12 The law of fiduciary duty.. 15 Issues.. 19 a) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by employing themselves as band employees and deciding on their own remuneration?. 20 b) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by paying themselves to attend meetings?. 25 c) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by reimbursing themselves for expenses?. 28 d) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by deciding entitlement to band funds and program funding?. 30 e) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by spending band funds received from the Mutual Benefits Agreement with Kinder Morgan?. 34 f) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by hiring Mark Peters, nephew of Chief Norma Webb and Victoria Peters, as the CEO of the band's main economic development company without considering other candidates?. 35 2. If the defendants breached their fiduciary duty to band members or breached the Financial Administration Law, what is the appropriate remedy?. 36 Conclusion..

41 Introduction [1] Peters First Nation is a small band consisting of 72 members. The members of the band are descendants of one nuclear family, which means all band members are related. Peters First Nation has one main reserve and two smaller reserves located east of Chilliwack, B.C. [2] The plaintiffs and defendants are members of Peters First Nation. Plaintiffs Andrew and Lisa Genaille are siblings. Their mother, Frances Genaille, is first cousin of defendants Chief Norma Webb and Victoria Peters. Chief Webb and Victoria Peters are sisters; defendant Leanne Peters is their niece. [3] Chief Norma Webb is the current Chief, Victoria Peters is a current councillor, and Leanne Peters is a former councillor of Peters First Nation. The plaintiffs allege that the defendants breached their fiduciary duty to members of the band by reaping personal gains and giving benefits to their immediate families without complying with conflict of interest protocols. The plaintiffs identify the following specific concerns: · the defendants held paid employment positions with the band in addition to their elected positions; · the defendants were paid to attend meetings that they scheduled; and · Victoria Peters determined which band members were entitled to various program benefits and disbursed band funds without clear guidelines or transparency. [4] The plaintiffs say that the defendants' breach

of fiduciary duty is not confined to a single transaction or payment but rather arises from their systematic failure to follow their own conflict of interest bylaw or any conflict of interest guidelines when deciding to pay themselves and reward their family members. The plaintiffs say that the defendants exercised this spending power in a way that amounted to self-dealing and prevented all band members from having equal access to program funds. [5] The defendants acknowledge that they owe a fiduciary duty to the band, but they deny breaching that duty. The defendants say they could not have breached their fiduciary duty because they acted in the best interest of the First Nation when making decisions on how to spend band funds. Further, the defendants say that the Court should adopt a flexible approach in reviewing their conduct due to the small size of the band and exigencies created by the COVID-19 pandemic and other circumstances. The defendants justify the manner in which they were paid by saying the band had always done things that way until consultants recommended a different remuneration structure. [6] The defendants frame the issue to be decided as "whether there was a calculated and deliberate misuse of the band's funds by, and for the benefit of, the defendants". The defendants assert that the plaintiffs have failed to prove that even one dollar was misspent. [7] In

my view, the defendants' position fails to respond to the issues raised by the pleadings and the legal framework that applies to the allegations raised. The plaintiffs object to the defendants' process for allocating funds rather than objecting to any discrete payment. The overriding issue I must decide is whether the defendants spent band funds in compliance with the "no conflict" rule and the "no profit" rule, the two most fundamental obligations of fiduciaries: Louie v. Louie, 2015 BCCA 247 [Louie] at para. 23. [8] The defendants - particularly Victoria Peters - have spent many hours working for and on behalf of Peters First Nation, including negotiating with Kinder Morgan to bring much-needed financial benefits to the band. However, the defendants' hard work and stated good intentions do not necessarily equate to meeting their fiduciary duty to the band and its members. [9] The issues I must decide are as follows: 1. Did the defendants breach their fiduciary duty to band members by: a) employing themselves as band employees and setting their own remuneration; b) paying themselves to attend meetings; c) reimbursing themselves for expenses; d) determining entitlement to band funds and program funding; e) spending band funds received pursuant to the Mutual Benefits Agreement with Kinder Morgan; or f) hiring Mark Peters, nephew of Chief Norma Webb and Victoria Peters, as the

Chief Executive Officer ("CEO") of the band's main economic development company without competition? [10] I must also decide whether any of this conduct breached the band's Financial Administration Law. Finally, I must determine an appropriate remedy if the defendants breached their fiduciary duty or the band's Financial Administration Law. [11] Before turning to these issues, I will outline some general background facts, comment on the credibility of key witnesses, and review the law of fiduciary duty and the band's Financial Administration Law as it applies in this context. Background Band governance [12] Peters First Nation is a "band" as defined in s. 2(1) of the Indian Act, R.S.C. 1985, c. I-5. The band is governed by a Chief and two councillors who are elected every two years. The band controls and manages its own finances: s. 69, Indian Act; Indian Band Revenue Moneys Order, SOR/90-297. [13] Defendant Victoria Peters was first elected to council in 1988. She has been re-elected to consecutive terms since then, except for a two-year term from 2004 to 2006. [14] In 1989, Frances Genaille (the plaintiffs' mother) was hired by the band to work in the band office. At the time, the council was comprised of Chief Frank Peters (Frances Genaille's father), Victoria Peters, and Clifford Peters (Victoria Peters' father). Frances Genaille worked for the band until she was dismissed

by the council in December 2016. [15] In 2007, defendant Chief Norma Webb was first elected Chief. She has been re-elected and served in that position continuously since then. [16] In January 2011, defendant Leanne Peters was elected councillor. She was re-elected in 2013 and 2015 but decided not to seek re-election in January 2017. [17] For the relevant time frame, Victoria Peters was primarily responsible for band finances. As band social worker and Community Health Representative, she decided who would receive benefits under programs funded by Indigenous Services Canada and First Nations Health Authority. Chief and council would informally discuss and decide entitlement to benefits paid to band members from band funds. Victoria Peters effectively decided how administrative expenses would be reimbursed to the defendants and others. Victoria Peters, with assistance from Frances Genaille, prepared the band's financial records for the annual audit, including deciding retrospectively how to allocate expenditures among various programs and sources of funding. The band did not prepare an annual budget in advance. Instead, their outside bookkeeper would prepare a "budget" once the year's income was received and expenditures were incurred and tallied. [18] Victoria Peters controlled how band funds were actually disbursed. Only Victoria Peters and Chief Webb had cheque-signing

authority on band bank accounts. Chief Webb demonstrated very little understanding or knowledge of program details and was often unable to explain why she was paid pursuant to various programs. I am satisfied that Chief Webb generally signed cheques as directed by Victoria Peters, and she sometimes, if not often, signed blank cheques at Victoria Peters' request. Chief Webb did not exercise effective control over band expenditures. Kinder Morgan [19] The defendants emphasize that Peters First Nation was very poor before the band entered into a Letter of Understanding in July 2014 and eventually a Mutual Benefits Agreement with Kinder Morgan Canada Inc. and Trans Mountain Pipeline L.P. to allow the Trans Mountain Pipeline project to run through Peters First Nation reserve. [20] After a series of information meetings, band members voted by slim majority in favour of approving council's signing of the Mutual Benefits Agreement with Kinder Morgan, effective January 2016. The plaintiffs and some other band members were strongly opposed to the agreement. [21] After signing the Mutual Benefits Agreement, the band created an economic development entity, Peters First Nation 3 Feathers Limited Partnership, to take advantage of economic opportunities created by the Kinder Morgan pipeline. Mark Peters, nephew of Chief Webb and Victoria Peters, was hired as CEO of Peters First Nation 3

Feathers Development Corporation, the general partner of the limited partnership. Mark Peters was the only person considered for the position. KPMG financial review [22] In May 2017, the plaintiffs reported concerns about the band's financial management to the Assessment and Investigative Services Branch of Indigenous Services Canada. Indigenous Services Canada, the band's primary source of funds before the Mutual Benefits Agreement, retained KPMG Forensic Inc. to perform a financial review to determine whether funds advanced to Peters First Nation by Indigenous Services Canada for the fiscal years 2013 - 2014 and 2014 - 2015 were used for their intended purpose. KPMG prepared an interim report dated January 9, 2019 and a final report dated August 18, 2020. [23] The final KPMG report was admitted into evidence at trial, though not for proof of the opinions it contained. The final report was admissible as evidence of prior statements made by the defendants and other witnesses. James Edwards, founder and lead consultant of Leo Consulting Inc., drafted a response to the KPMG report on behalf of the Chief and council (which was filed at trial), and the final report provided context for the response. Finally, the final report was admissible to show the defendants' knowledge regarding issues identified by KPMG and recommendations made to strengthen governance and financial controls,

which may be relevant to determining the appropriate remedy. Missing documents [24] KPMG's review was limited by the lack of supporting documents for many of the band's expenditures. The defendants allege that the missing documents were removed from the band office in late 2016 by Andrew Genaille and Frances Genaille or alternatively that they were part of audit records stored by Frances Genaille at her home. [25] In an attempt to recover the documents that the defendants say are missing, Peters First Nation filed a petition on November 18, 2016 against Andrew Genaille and Frances Genaille for return of band property. The petition was changed into an action (the "Documents Action"). An injunction issued in the Documents Action resulted in Frances Genaille's returning some documents that she had stored in her home when she was a band employee. Otherwise, Andrew Genaille and Frances Genaille deny that they removed band documents from the band office, and Frances Genaille says that audit records were returned to the band before the Documents Action was filed. The Documents Action has been discontinued as against Frances Genaille and is ongoing but dormant as against Andrew Genaille. [26] In December 2016, Peters First Nation terminated Frances Genaille's employment, at least in part due to issues raised by the Documents Action. Outside consultants [27] In 2016 or 2017, the band

hired consultants to provide administrative and governance assistance and training. [28] In early 2019, Peters First Nation retained James Edwards and his company to assist with communications and to provide governance training and guidance for Chief and council. Mr. Edwards was initially retained to advise Chief and council on a communications strategy to inform band members about the interim KPMG report. On June 5, 2019, the scope of this retainer expanded when Mr. Edwards was hired as interim Chief Administrative Officer and Senior Finance Officer for the band, with the goals of developing policies and recruiting then training staff. Mr. Edwards recommended various structural and governance changes before his contract ended on March 31, 2020. Only some of Mr. Edwards' recommendations have been implemented by Chief and council. History of proceedings [29] The plaintiffs filed this action on December 9, 2016. The original notice of claim: · alleged that the defendants breached their fiduciary duties by appointing themselves and each other to paid positions with the band and by distributing Kinder Morgan funds inappropriately; · pleaded that band council acted without authority and breached the band's Financial Administration Law (set out below); and · alleged that the defendants restricted the plaintiffs' access to documents. [30] In their response to civil claim, the

defendants admitted that Victoria Peters had been the "Band Manager" since 2006 and that Chief Webb was janitor for the band. The defendants pleaded that they had fulfilled their fiduciary duty owed to the plaintiffs and Peters First Nation. The defendants denied breaching the Financial Administration Law or acting without authority. [31] In February 2020, the plaintiffs filed an amended notice of civil claim which added allegations that the defendants had: · used their positions on council to enrich themselves and family members through unauthorized transfer of band funds; · appointed themselves and their immediate family members without competition to multiple paid positions with the band; · overcompensated themselves and their immediate family members for work allegedly done for the band; · paid themselves for meeting with Kinder Morgan without disclosing those payments; · paid themselves bonuses from Kinder Morgan funds that exceeded the distribution to band members; and · never declared a real or perceived "Personal Gain" or conflict of interest in accordance with the Financial Administration Law. [32] Among other relief sought in the amended notice of civil claim, the plaintiffs sought a declaration that each of the defendants was liable for breach of fiduciary duty, an order that the defendants disgorge to the band all unauthorized payments, and an accounting of

expenditures of band revenue from January 1, 2014 to present. In closing submissions, the plaintiffs acknowledged that an accounting is not likely to be productive without the missing documents. [33] In their amended response to civil claim, the defendants alleged that significant job positions with the band were posted and that all adult members of Peters First Nation were given opportunities for employment and contracting positions with the band, subject to being qualified. The defendants denied that Mark Peters was appointed to the position of "Chief Executive Officer of the Band", in answer to a specific allegation in the amended notice of civil claim. The defendants denied receiving a bonus from the Kinder Morgan funds but admitted being paid to attend meetings with Kinder Morgan. Credibility and reliability [34] The key witnesses at trial were the three defendants, Frances Genaille, and James Edwards. The plaintiffs and two band members who testified had limited direct evidence related to the allegations that the defendants systemically failed to comply with their fiduciary duties owed to the band and its members. [35] In assessing the credibility of the witnesses, I have considered the relevant principles summarized by Justice Dillon in Bradshaw v. Stenner, 2010 BCSC 1398, aff'd 2012 BCCA 296, leave to appeal to SCC ref'd, 35006 (7 March 2013) at para.

186. The reliability or accuracy of a witness's testimony depends on the witness's ability to observe, recall and recount: Concord Pacific Acquisitions Inc. v. Oei, 2019 BCSC 1190 at para. 79. [36] James Edwards was an independent and objective witness. He generally presented his evidence in a straightforward way. His observations regarding the defendants' conduct were balanced and fair, even though his working relationship with the defendants deteriorated over time and his contract was eventually terminated before the band implemented all of his recommended changes. [37] Frances Genaille was a reluctant but important witness. She was reluctant in part because she and her cousin Victoria Peters were once very close friends, and her evidence was damaging to the defence. Her reluctance was also likely due to the fact that she anticipated cross-examination that confirmed she received many of the same payments for attending meetings and for reimbursement of expenses as the defendants did. Frances Genaille also received program funding that she had some difficulty justifying. For example, she received Indigenous Service Canada funding under a program intended to support families for what she said was the cost of movie rentals and baking supplies purchased while looking after Victoria Peters' children; it was not clear that such expenses would fall within any of the approved

categories for benefits. Frances Genaille's discomfort and vague answers when she tried to explain some payments suggested that she recognized that she might not have been entitled to all of the program funds that Victoria Peters paid to her. [38] Frances Genaille was an important witness because, as the long-time band administrator, she attended many meetings with the defendants, assisted with band bookkeeping and annual audit preparation, and was able to provide direct evidence regarding how program benefits were allocated. She confirmed the observations of others including James Edwards about how band business was conducted. [39] The important difference between Frances Genaille and the defendants is that she was a band employee and not a council member who owed fiduciary duties. [40] As for the defendants, I am left with serious doubts regarding the reliability of much of their evidence about how band funds and program funding were allocated. [41] For example, when questioned about specific payments or reimbursements they received, the defendants repeatedly stated that they could not respond without seeing supporting documentation that was unavailable, allegedly because Andrew Genaille and Frances Genaille took or retained such documentation. However, Victoria Peters could not explain the lack of supporting documentation for expenditures made after Frances Genaille's

employment was terminated in December 2016: There is no reason why Frances Genaille would possess band documents created after she was no longer employed by the band. [42] While it is understandable that the defendants might not recall the details about some payments, their inability to explain so many payments was surprising. Further, the defendants repeatedly suggested that band expenditures must have been misallocated to the wrong program or source of funding whenever it appeared they may have received program funding for which they were not eligible. I accept that it is possible that payments were inadvertently misallocated when Victoria Peters and Frances Genaille spent hours each year end allocating a year's worth of band cheques before providing them to their bookkeeper prior to the annual audit. However, as detailed later in these reasons, I also find that sometimes the defendants were paid because funding was available rather than because they earned such payment. [43] Further, even before documents allegedly went missing, the defendants were not diligent about keeping supporting documents for expenses. The band's auditor commented on the lack of sufficient documentation for payment of expenses in December 2015, though no significant changes were made in how they documented expenses until the band hired James Edwards in 2019. [44] The defendants feel aggrieved by this

lawsuit, which was filed by family members with whom Victoria Peters was once very close. While their upset may be understandable, at times, their emotional response interfered with their objectivity and in turn the reliability of their evidence. [45] Each of the defendants tried to abdicate their responsibility by suggesting repeatedly that Frances Genaille made decisions about band spending or hiring. I reject the defendants' evidence that Frances Genaille helped determine funding eligibility other than for the education program that she was paid to administer: Victoria Peters' job titles and cheque-signing authority were consistent with her financial decision-making authority for most programs and benefits funded by Indigenous Services Canada and First Nations Health Authority. In any event, Victoria Peters was responsible for funding decisions after Frances Genaille's employment was terminated in December 2016. Further, band members knew to approach Victoria Peters - not Frances Genaille - with their requests for funding. [46] The defendants were particularly keen to blame Frances Genaille for travel expenses for three retreats that did not actually happen and for which the defendants and Frances Genaille reimbursed the band when KPMG identified this discrepancy as part of their review. Although Frances Genaille may have calculated travel expenses for herself and the

defendants for retreats and other functions, I find that she did so on instruction from council as part of her administrative role. [47] Finally, I am concerned that the defendants discussed their anticipated evidence and collaborated to offer consistent stories. The defendants repeatedly testified about what they did or observed collectively rather than recounting their personal actions or observations. For example, all three defendants testified that they watched surveillance video footage that implicated Frances Genaille and Andrew Genaille in the alleged removal of documents from the band office (though Chief Webb did not initially include Andrew Genaille when recounting the event); however, the surveillance video has never been disclosed even though it supposedly led to the Documents Action. I remain skeptical that the video ever existed. [48] In making findings of fact, I have factored in my concerns about the reliability of the defendants' evidence. The law of fiduciary duty [49] The defendants acknowledge that the Chief and band council owe a fiduciary duty to their band and band members: Gilbert v. Abbey, [1992] 4 C.N.L.R. 21 at 3, 1992 CanLII 921 (B.C.S.C.). The "members of the band are vulnerable to abuse by the fiduciary", and "a fiduciary undertakes not to allow his or her interest to conflict with the duty that he or she has undertaken": Gilbert at 3. [50] The

British Columbia Court of Appeal recognized that a fiduciary "is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict": Louie at para. 23, citing with approval Bray v. Ford [1896] AC 44 (H.L.) at 51. These guidelines are described as the "no conflict" rule and the "no profit" rule. [51] When assessing whether a fiduciary has breached the "no conflict" rule, "the subjective motivations of the fiduciary, the absence of actual harm to the beneficiary, and even whether the fiduciary in fact profited, are irrelevant": Louie at para. 26. [52] Once a plaintiff establishes a prima facie conflict of interest, the onus shifts to the defendants to show they were acting in the best interest of Peters First Nation: Louie at para. 21. [53] The "no profit" rule specifically recognizes an exception to allow band councils and other fiduciaries to make decisions regarding their own remuneration, but only if express guidelines allow such an exception and those guidelines are strictly complied with, often with the requirement that the guideline be published to the members of the group affected: Louie at para. 24. [54] In this case, the only express guideline governing spending by Peters First Nation council is found in the Financial Administration Law, passed on November 26, 2015. The preamble to

the Financial Administration Law recognizes that Peters First Nation council has "fiduciary responsibilities which include the management and protection of all Peters Band property, including Peters Band funds, in the best interests [of] its members and for future generations". [55] The Financial Administration Law defines the duties of members of council as follows: Article 7: Council Member Duties Each member of Council must, in exercising his or her responsibilities and powers and performing his and her functions: i. act honestly and in good faith and in the best interests of the Peters Band; ii. exercise the care, diligence and skill of a reasonably prudent person; and iii. ensure that there is fair and equitable access and treatment for the Membership to the programs and resources of the Peters Band for which they qualify. [56] Article 8 of the Financial Administration Law also prohibits Chief, council and any band employee from using their office or position for "Personal Gain" to the detriment of Peters First Nation. "Personal Gain" is defined in Article 4 as "a financial benefit for an individual Peters Band employee or Council member, or for the members of his or her immediate family". Each council member is required to disclose to council any "real or perceived" Personal Gain that they or any council member might receive as a result of a band council or employee

decision. If a council decision might result in a council member or their immediate family receiving a Personal Gain, then that council member is required to make disclosure of their financial interest and withdraw from any council discussions or vote relating to the matter. [57] The plaintiffs say that "immediate family" should include nieces and nephews. Giving the term its ordinary meaning and reading it in context, I find the term "immediate family" includes at least spouse, children, and siblings of a council member but not a niece or nephew. Legislation setting out conflict of interest rules, such as the Financial Administration Law, must be given a broad and liberal interpretation consistent with its purpose: Schlenker v. Torgrimson, 2013 BCCA 9 at paras. 38-39, citing with approval Re Moll and Fisher, 96 D.L.R. (3d) 506, 1979 CanLII 2020 (O.N.S.C.) at 509. The term "immediate family" is not defined in the Financial Administration Law. The plaintiffs say the term should be interpreted in accordance with Chief Webb's admission at her examination for discovery, i.e., that "immediate family" includes nieces and nephews. Chief Webb changed her position at trial, apparently after giving the issue more thought, and said the term should not include nieces and nephews. Chief Webb's spontaneous response on discovery rather than her evidence at trial probably better reflects her

understanding of the intent of the Financial Administration Law, which she helped enact; however, her understanding is not particularly instructive when she also admitted that the defendants do not follow the Financial Administration Law, which she considers to be aspirational rather than binding. Despite what Chief Webb may have understood, I find "immediate family" does not include niece or nephew. [58] Chief and council did not establish regulations, procedures or policies to administer the Financial Administration Law, as authorized by the bylaw. In particular, Chief and council did not establish any regulations or policies that would allow them to confer a financial benefit on the entire council. In particular, the band did not enact any regulations or policies to set compensation for serving as Chief and council or to reimburse them for travel and other expenses. [59] The defendants admitted that they owe a fiduciary duty to the band and band members. However, they tried to limit the scope of that duty by arguing that "governments will owe a fiduciary duty only in limited and special circumstances": Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24 at para. 37; Blueberry River First Nation v. Laird, 2020 BCSC 1615 [Blueberry River] at paras. 259-260. In my view, Blueberry River does not assist the defendants in the case at bar. In Blueberry River, Justice

Macintosh recognized at para. 271 that band councillors may breach their fiduciary duty by engaging in the type of conduct alleged in the amended notice of civil claim: [a] claim for breach of fiduciary duty in the context of indigenous government has only been found to succeed in instances of self-dealing, misappropriation and serious, unsanctioned conflicts of interest. [60] In this case, the plaintiffs have alleged self-dealing and serious, unsanctioned conflicts of interest. [61] The defendants also tried to paint this action as a political dispute between two factions fighting for control of Peters First Nation and argued that "political disagreement does not constitute a breach of fiduciary duty": Gadwa v. Joly, 2018 FC 568 at para.

41. In my view, the defendants' efforts to impugn the plaintiffs' motives for pursuing this claim served only to distract from the real issue, which is whether the defendants' conduct breached the fiduciary duty they owed to band members. [62] The defendants argued that if Peters First Nation was better off as a result of their leadership then they have not breached their fiduciary duty even if they contravened the "no conflict" and "no profit" rule. The defendants point to the financial benefits that flowed from the Mutual Benefits Agreement as an example of how they improved the fortunes of the band. The defendants offered no authority for this argument. Louie and other cases make it clear that it is the impugned conduct rather than the outcome that determines whether or not a breach of fiduciary of duty is proven. [63] Finally, the defendants argued that the defendants' fiduciary duty must be considered in the context of the small First Nation they serve and the impact of the COVID-19 pandemic. The COVID-19 pandemic has no significance to events that occurred prior to March 2020, which is the time frame on which this lawsuit largely focused. [64] As for size of the band, courts have recognized that it may not be appropriate to apply strict rules regarding conflicts of interest to a small band where many members of band and council are related: Assu v. Chickite, [1999] 1 C.N.L.R. 14 at para. 53, 1998 CanLII 3974 (B.C.S.C.). However, this flexibility pre-supposes that the council members did not receive any direct personal benefit: Assu at para.

57. There is no authority for applying conflict of interest rules less strictly in the context of allegations that the defendant received direct personal benefit as a result of decisions they made. [65] That said, the First Nations Governance Handbook[1], a resource available to the defendants, recognizes the challenge of avoiding conflicts in a smaller band. The Handbook suggests that this challenge is best met by having written policies on remuneration, reimbursement of expenses, and entitlement to funding. The Handbook also recommends hiring staff who are not on council to apply the written policies. One academic recommends that council compensation be set by an independent party or confirmed by band members[2]. Issues [66] With this factual background and within this legal framework, I will address the following issues: 1. Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by: a) employing themselves as band employees and setting their own remuneration; b) paying themselves to attend meetings; c) reimbursing themselves for expenses; d) determining entitlement to band funds and program funding; e) spending band funds received pursuant to the Mutual Benefits Agreement with Kinder Morgan; or f) hiring Mark Peters, nephew of Chief Norma Webb and Victoria Peters, as the CEO of the band's main economic development company without competition?

2. If the defendants breached their fiduciary duty to band members or breached the Financial Administration Law, what is the appropriate remedy? a) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by employing themselves as band employees and deciding on their own remuneration? [67] The defendants say that it is not uncommon for band council members to work as band staff in smaller First Nations. They say that they should not be expected to know that there were better practices without being told so by experts like James Edwards. The defendants emphasize that neither their primary funders (Indigenous Services Canada and First Nations Health Authority), nor their outside bookkeeper nor their auditor raised any concerns about the defendants holding staff positions in addition to serving as Chief and councillors. Further, they say that Peters First Nation did not have the funds to hire employees, which is why the defendants continued with the long-standing practice within the band of subsidizing small honoraria for elected officials with paid band staff positions and meeting fees. [68] I am satisfied that the defendants breached their fiduciary duty to Peters First Nation and the Financial Administration Law by employing themselves as band staff: They gave themselves a financial benefit in the absence of a clear guideline or

approval by band members, contrary to the "no conflict" and "no profit" rules; and they failed to establish that their employment was in the best interest of the band. The fact that this practice was followed by previous Peters First Nation Chiefs and councillors does not excuse these defendants' breach of their fiduciary duty and breach of the Financial Administration Law. [69] Before James Edwards changed the band's compensation structure in 2019, Chief Webb received an honorarium of $800 per month, and the other defendants received honoraria of $400 per month as councillors. In addition, each of the defendants held paid staff positions with the band: a) Chief Norma Webb was the band's janitor; b) Victoria Peters was the band's Community Health Representative, National Native Alcohol and Drug Abuse Program worker, health director, band manager, bookkeeper, and social worker; and c) Leanne Peters became back-up Indian Registration Administrator and did administrative tasks in 2017; she took over as band administrator and Indian Registration Administrator when Frances Genaille was fired in December 2016. [70] Band council appointed the defendants to these positions without competition, in some cases many years ago, and the defendants continued to employ themselves as band staff. I reject the defendants' evidence that Frances Genaille appointed them to some of these positions:

Chief and council exercised their authority to hire, to continue employment, and to set and pay staff wages. On the other hand, as band administrator, Frances Genaille lacked the authority to hire employees. Although she sometimes identified herself as "Band Administrator" (the capitalized first letters designating a position that generally involves operational decision-making authority), Frances Genaille was in effect "band administrator" for Peters First Nation, i.e., she performed administrative tasks for and at the direction of band council. Due to her long tenure, Frances Genaille knew how to run the band office; however, decision-making authority rested with and was exercised by the defendants as Chief and council. [71] The defendants received financial benefit from their staff positions with Peters First Nation. For example, in 2015, Victoria Peters was paid $3100 monthly by the band as salary for the following positions: · $1200 as Community Health Representative and social worker; · $1200 as Native Alcohol and Drug Abuse Program worker; · $300 as bookkeeper; and · $400 as band manager. [72] James Edwards recommended that Victoria Peters reduce the number of salaried positions she held with the band. As a result, she is now paid $2300 bi-weekly as the band's health director. Her overall compensation has been reduced, because she is no longer paid meeting fees for

council work. [73] For the band's fiscal years 2013-2014 to 2015-2016, Victoria Peters earned more as a band employee than the other defendants did. Chief Webb's salary as band janitor was $100 per month. Leanne Peters earned $15 per hour when she started performing administrative tasks for the band, and she received an annual stipend of $900 as Indian Registration Administrator. [74] Other remuneration paid to the defendants was based on available funding rather than services performed. For example, when the defendants recognized in early 2015 that they had not used funding available through a new health planning program for the 2013-2014 fiscal period, Chief Webb received $6000 and Victoria Peters received $8001 in February 2015 for health management planning allegedly done between March 2013 and March 2014. Victoria Peters testified that she, Chief Webb and Frances Genaille met numerous times to discuss how to better Peters First Nation. However, it appears likely that Chief Webb and Victoria Peters paid themselves "health planning" honoraria in February 2015 because there was funding available to be spent rather than to compensate them for work done or meetings attended. Health planning management honoraria paid in subsequent years, primarily to Victoria Peters, do not explain or justify the lump sum payments made in February 2015. [75] Some of the paid staff positions

required little day-to-day effort. For example, as Native Alcohol and Drug Abuse Program worker, Victoria Peters was responsible for helping band members with drug and alcohol addictions to find appropriate assistance and resources. Victoria Peters could only recall helping one band member since she assumed the position in 1996, yet she was paid a monthly salary for this position for more than 20 years. [76] By setting their own compensation, the defendants were in a conflict. None of the defendants declared a conflict when their salaries were discussed or set, though I note there was little evidence about that process. Peters First Nation did not prepare an annual budget. Salaries for staff positions were apparently set by Chief and council after they consulted with similar bands to find out what they paid for the same positions, though there were no documents or meeting minutes to show how and when such decisions were made. [77] In the face of this prima facie conflict of interest, the defendants failed to meet the onus on them to demonstrate that they acted in the best interest of the band by employing themselves to fill most of the available band staff positions. Victoria Peters justified employing the defendants by saying that the band could not hire others to do these jobs for the small salary available (for example, $300 per month for the bookkeeper role). The defendants

emphasized that the financial means of the band were limited before the Kinder Morgan Mutual Benefits Agreement. However, before James Edwards reorganized the band's compensation structure and recommended posting for available staff positions, the defendants took no steps to try to employ anyone other than themselves and Frances Genaille for staff positions. [78] The defendants suggested that there were no other qualified candidates to fill the available positions. Victoria Peters did complete some training in 1996 for the band social worker and Community Health Representative positions; however, I am not prepared to conclude that no other band member was qualified for any band staff position, in particular the janitor position filled by Chief Webb and the administrative role filled by Leanne Peters, when these positions had never been posted nor expressions of interest solicited. [79] COVID-19 complicated the hiring of a new Band Administrator to take over band operations, apparently leaving Victoria Peters to perform many of the roles she previously held; however, COVID-19 does not excuse the defendants' pre-pandemic failure to take any steps to determine whether there were others within or outside the band who might be suitable band employees. [80] I am satisfied that the defendants failed to post staff positions and consider others for possible employment because they

viewed their staff salary as part of their remuneration for serving on council. They felt entitled to fill band staff positions because previous council members had engaged in a similar practice. However, the fact that others did it in the past does not excuse the defendants' breach of fiduciary duty. [81] Further, I am satisfied that the defendants understood by at least early 2019, based on the KPMG report and advice from James Edwards, that they were in a conflict of interest by taking on both band council and band staff roles. In answer to the first draft of the KPMG report, the defendants acknowledged in April 2019 that "the issues related to real or potential conflicts of interest are of significant concern". [82] I find that the defendants breached their fiduciary duty to band members by employing themselves and setting their own salaries, and they breached the band's Financial Administration Law by failing to declare a conflict of interest. Based on the evidence at trial, Chief Webb and Victoria Peters committed these breaches at least from April 2013 until James Edwards recommended a reorganization in 2019. Leanne Peters committed these breaches in 2016, her last year on council. As noted above, the First Nations Governance Handbook offers suggestions for avoiding this conflict of interest. b) Did the defendants breach their fiduciary duty to band members or breach the

Financial Administration Law by paying themselves to attend meetings? [83] The defendants say that they continued with the long-standing practice within Peters First Nation of subsidizing small honoraria for elected officials with meeting fees. The defendants say the meetings were necessary, particularly meetings with Kinder Morgan. [84] By paying themselves to attend meetings and by setting the rates for such attendances in the absence of a clear guideline or approval by band members, the defendants breached the band's Financial Administration Law and their fiduciary duties to the band. The fact that this practice may have been followed by previous Chiefs and councils does not excuse these defendants from fulfilling their fiduciary duties to members of Peters First Nation. There was no express guideline that allowed the defendants to pay themselves to attend meetings, and they did not obtain approval from band members to pay themselves to attend meetings. [85] There was an inherent conflict of interest when the defendants decided how often to set meetings and when they set their compensation for attending meetings. Chief and council failed to recognize this conflict, failed to declare it, and failed to follow the Financial Administration Law. In his testimony, James Edwards highlighted this conflict by noting the risk that council might schedule additional meetings to increase

their own remuneration. To avoid this risk, James Edwards recommended a new compensation regime (which they adopted) that did not pay Chief and council to attend meetings. [86] The defendants profited by receiving payments for attending meetings, and they decided what qualified as a meeting. Before James Edwards' retainer, there were no regularly scheduled council meetings: Meetings were convened when Chief and council determined there was a need to meet, and the defendants would be paid for each meeting they scheduled. There were no guidelines as to what constituted a "meeting" that would result in payment to the defendants, either in terms of duration, subject matter or attendees. The defendants were compensated for meeting with each other to discuss "band business". There were no objective criteria to discern when a discussion among the defendants might qualify as a compensable meeting. As part of their testimony, the defendants tried to suggest that Frances Genaille was responsible for setting meetings. I accept that, as part of her administrative duties, Frances Genaille was responsible for coordinating the availability of meeting attendees and scheduling meetings on instructions from the defendants. However, authority to set a compensable meeting rested with Chief and council. [87] Chief and councillors were generally paid $500 for full-day meetings and $200 for meetings

that did not last a full day. Leanne Peters testified that $200 was paid for a meeting that lasted two to four hours and that $500 was paid for meetings of four hours or more; however, she acknowledged on cross-examination that there was no written policy to this effect and that she had come up with this rule of thumb after thinking about how long meetings generally lasted. None of the other witnesses (including the other defendants) suggested such a guideline existed, and James Edwards was not aware of any such guideline. I do not accept that this guideline, derived by Leanne Peters long after the meetings were held, establish that council considered or followed this or any other guidelines when they paid themselves to attend meetings. [88] The amount paid to attend meetings was not always clear. On April 30, 2015, Victoria Peters was issued a $3000 cheque for three health director honoraria and another $3000 cheque for three health management honoraria. Victoria Peters testified that these payments would have been for meetings, though she could recall no details (duration, attendees, or subject matter) without supporting documents that were missing. The cheque stub description suggests that she attended three meetings, though there was no evidence of a different pay scale for this type of meeting. When she was cross-examined on being paid to attend health meetings when she

also received a salary as health director, Victoria Peters said that she should have allocated those meeting fees to "community health planning" instead of "health director". The vague description and inaccurate notation for these payments leaves it unclear how many meetings Victoria Peters attended, how much she was paid for attending each meeting, and whether she was paid additional fees to attend meetings that she would be expected to attend in her role as health director. [89] In some cases, the defendants were paid in advance for meetings. For example, in late April 2016, Chief Webb and Victoria Peters were paid in advance for health planning meetings that they apparently intended to have with each other in the months that followed. This practice highlights the conflict of interest inherent in the defendants' paying themselves to attend meetings they decided to convene. [90] The Letter of Understanding with Kinder Morgan provided $125,000 of funding for "engagement" between Peters First Nation and Kinder Morgan, most of which was paid to the defendants and Frances Genaille for attending meetings. Some of these meetings were with each other or with the band's lawyer to discuss the Kinder Morgan negotiations, i.e., meetings that Kinder Morgan representatives did not attend. Again, the defendants determined what qualified as a compensable meeting. [91] The defendants failed

to meet the onus on them to demonstrate that they acted in the best interest of Peters First Nation by paying themselves to attend meetings. The defendants failed to establish that they acted in the best interests of the band when exercising their unfettered discretion to decide what constituted a meeting and what the rate of pay would be. The defendants' justification for paying themselves to attend meetings did not demonstrate this compensation scheme was in the band's best interest. For example, Victoria Peters explained meeting payments by saying: · that things had always been done that way; · that things were done this way "so it wouldn't confuse the bookkeeper"; · that meetings were held because meetings were necessary; and · that meetings brought a lot of funds to Peters First Nation. [92] None of these justifications show that meeting fees were in the band's best interest. While I accept that the defendants' negotiations with Kinder Morgan led to the Mutual Benefits Agreement and ultimately resulted in financial benefits for Peters First Nation, I am not satisfied that it was in the band's best interest for the defendants to pay themselves to attend Kinder Morgan and other meetings. [93] Based on the evidence at trial, I find that the defendants paid themselves to attend meetings in breach of their duties from at least April 2013 until James Edwards reorganized the

compensation structure for Chief and council in 2019. c) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by reimbursing themselves for expenses? [94] The defendants say that there was no evidence that band funds were misused when they were paid for expenses. They rely on James Edwards' view that there was no "intentional obfuscation or exaggeration of expenses". However, I find that the defendants breached the Financial Administration Law and their fiduciary duty to the band by receiving a financial benefit in the form of payment for travel and telephone expenses. [95] Council exercised full discretion to approve expense payments to themselves. As the person with the band's chequebook, Victoria Peters had effective control over payment of expenses. Significantly, there were no written policies or guidelines to constrain the exercise of council's discretion to pay expenses to themselves, subject only to any comments from the band's auditors. [96] Although the plaintiffs do not take issue with any particular expense payment to the defendants, they highlighted the lack of controls and accountability in respect of expense payments generally. These concerns are justified. [97] Without supporting documentation or a clear explanation for why certain expense payments were made, I am left with doubt as to whether all of the

expense payments to the defendants were appropriate, either in kind or amount. When asked about cheque stubs showing expense payments, the defendants were often unable to explain the reason why they were paid certain amounts; in order to respond, they said they needed to see the supporting documents that were allegedly taken by Frances Genaille or Andrew Genaille. However, even before the alleged removal of band documents in late 2016, the defendants were aware or should have been aware of the poor record-keeping and absence of controls for band expense payments: · Following the audit of the 2015 financial statements, the band's auditor reported their view that the expense approval process and supporting documentation was weak and that reimbursement of expenses lacked sufficient approval and supporting documentation; however, the defendants did not change expense payment processes before 2019. · When he worked for the band, James Edwards found clear gaps in internal controls and a lack of supporting documents for payment of expenses. · KPMG repeated this concern in its initial report; in their response to KPMG's initial report, the defendants acknowledged a lack of internal controls. [98] The alleged document theft in late 2016 does not account for the lack of supporting documents for expense payments made after that date. [99] Other expense payments received by the defendants

are questionable because they were not reimbursement for amounts paid out of pocket but rather lump sum payments to the defendants for certain categories of expenses. For example, both Victoria Peters and Chief Webb received a lump sum of $300 per month for "local travel": Neither was able to explain how that figure was derived, though Victoria Peters justified it by saying that she did lots of driving to Hope and Chilliwack on band business. I am not able to determine whether $300 was a reasonable amount or an appropriate benefit for the Chief or councillor. As another example, Chief Webb received lump sums of $150, $200 and $250 per month for telephone expenses in 2014-2015 without any attempt to correlate the lump sum to the actual amount she paid for her telephone. For nine months, Leanne Peters received $150 per month for telephone expenses without any correlation to her actual phone bill. Victoria Peters decided to pay these lump sum amounts, and the other defendants implicitly endorsed these payments. [100] By paying themselves for expenses without an express guideline or approval of the membership, I find that the defendants breached their fiduciary duty and the Financial Administration Law. [101] The defendants may have received other financial benefits through reimbursement of expenses that were not reasonably related to band business, including meals, but I am not

able to make such findings without the missing supporting documentation. d) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by deciding entitlement to band funds and program funding? [102] I find that the defendants, and in particular Victoria Peters, acted in a conflict by deciding their own entitlement to band funds and program funding. The defendants breached their fiduciary duty and the Financial Administration Law by granting themselves funding under the Family Assistance program in the absence of a clear guideline or approval by band members. Victoria Peters, as band social worker and health director, breached the Financial Administration Law by approving program funding for herself in the absence of a clear guideline. [103] The percentage of program funding that was paid to the defendants raises questions about whether access to program funds was equitable for all band members, and some payments to the defendants were not clearly justifiable. The defendants say that the plaintiffs have not detailed any damages suffered as a result of alleged inequitable access to services. However, proof of a detriment to the band is irrelevant if the defendants acted in conflict: Louie at paras. 26 - 27. [104] In closing submissions, the defendants acknowledged that they decided on program funding requests without guidelines and

by exercising their discretion. Peters First Nation received funding from Indigenous Services Canada for various social services programs and band administration. The band also received funding from Health Canada for various First Nation Health Authority programs. Victoria Peters decided who would receive payments for programs funded by Indigenous Services Canada and First Nation Health Authority (aside from education funding when Frances Genaille was responsible for that portfolio). Family Assistance benefits were funded from the band's own revenues and were disbursed to cover needs not covered by Indigenous Services Canada or First Nation Health Authority programs. Chief and council decided who would receive Family Assistance benefits, generally during informal discussions rather than formal council meetings. [105] Despite her evidence to the contrary, I find that Victoria Peters, as social worker and health director, breached the Financial Administration Law when she received a financial benefit by allocating program funding to herself. Victoria Peters testified that certain program funding decisions that resulted in payments to her were made by Frances Genaille. However, I prefer the evidence of Frances Genaille on this issue, in part because it remained unchanged by cross-examination. Cross-examination revealed weaknesses in Victoria Peters' evidence regarding program

funding she received: She repeatedly avoided answering questions directly, and some of the evidence she gave at trial was different from the evidence she gave on examination for discovery. Further, Victoria Peters held the positions that gave her authority to allocate program funding; on the other hand, aside from the education portfolio she managed, Frances Genaille was an administrative assistant. I am satisfied that Victoria Peters was attempting to deflect responsibility for program funding payments that were specifically questioned in the KPMG report by suggesting Frances Genaille approved those payments. Based on Victoria Peters' job titles and her control of the band's chequebook, I find it difficult to accept that she deferred to Frances Genaille when it came to allocating program funding. [106] The defendants each received financial benefits through the Family Assistance program. The defendants decided their own eligibility for these payments without declaring a conflict of interest as required by the Financial Administration Law. They breached their fiduciary duty to the band by paying themselves a benefit in the absence of an express guideline entitling them to do so. [107] At all material times, Peters First Nation had no policy to establish how a program administrator such as Victoria Peters or Chief and council might receive program funding for which they

qualified. To avoid such conflicts, James Edwards recommended that staff be hired to administer program funding. [108] As with expenses, it is difficult to determine whether any of the defendants received program funding for which they were not entitled due to the lack of supporting documents for cheques they received. As with expenses, the defendants were often not able to explain why they received certain program funds. Chief Webb conceded that she was not familiar with most Indigenous Services Canada and First Nations Health Authority programs under which she received payments. Leanne Peters also deferred to Victoria Peters on any question of eligibility for program funding. [109] Although each of the cheque stubs was coded to identify under which program a payment was made, this coding was unreliable. As noted above, coding was done at year end rather than at the time the payment was made. It is unsurprising that this retrospective record-keeping may have resulted in errors. Further, I am satisfied that, in some cases, a cheque would be coded to correspond to the program that had adequate funding to cover the disbursed funds rather than to the program for which the expenditure most closely aligned. This inaccurate coding and flawed internal bookkeeping are further consequences of the inadequate internal controls and poor financial management procedures identified by

KPMG. [110] In her capacity as the band's social worker and health director, Victoria Peters failed to ensure "that there is fair and equitable access and treatment" for band members to programs and resources for which they qualify, as required by Article 7 of the Financial Administration Law. Victoria Peters failed to determine or establish eligibility guidelines for programs and services, and she failed to notify band members of such guidelines. I do not accept Victoria Peters' evidence that programs were offered to all members of Peters First Nation. I accept that band members were generally unaware of available programs and simply approached Victoria Peters with a request for funding whenever they incurred an extraordinary expense and left it up to her to determine whether funding might be available. [111] One example of inequitable access to services is the questionable payments authorized by Victoria Peters to Chief Webb under the Homemakers program. Victoria Peters explained that this program provided funding to pay for homemaking services for a band member recovering from a health condition. Chief Webb was the only band member who received payments under the Homemakers program in the 2014-2015 and 2015-2016 fiscal years, always in $300 increments. Victoria Peters testified that Chief Webb received these payments because she needed homemaking services after surgery;

however, Chief Webb did not confirm that she received or required such services. When KPMG questioned Chief Webb about these payments, she could not recall providing any homemaking services to band members in that time frame. Under cross-examination, Chief Webb said that she received homemaker payments for helping out Leanne Peters by taking care of her children and doing some light housekeeping for her. Chief Webb acknowledged she wrote to Indigenous Services Canada in February 2022 and offered this new explanation in order to be consistent with similar evidence she gave on discovery in late October 2021. These inconsistencies suggest that Chief Webb received homemaker benefits when she did not qualify for such benefits and demonstrate at the very least that she received funds to which no other band member had access. [112] Based on the evidence at trial, I find that Victoria Peters breached the Financial Administration Law from at least April 2013 onward. e) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by spending band funds received from the Mutual Benefits Agreement with Kinder Morgan? [113] I find that Victoria Peters breached her fiduciary duty to the band and the Financial Administration Law by receiving honoraria and travel expenses from funds paid to the band pursuant to the Mutual Benefits Agreement with

Kinder Morgan. By way of response, the defendants say the expenditure of Kinder Morgan funding is documented in Peters First Nation's financial books and records and audited financial statements. The defendants' submission ignores Victoria Peters' conflict of interest and the fact that she profited from her position as councillor by receiving such payments. [114] I accept James Edwards' evidence that Victoria Peters received honoraria and travel expenses from Kinder Morgan funds. Such payments were not approved by band members, and there was no clear guideline that authorized such payments. There was no clear evidence regarding approval for such payments, though I am satisfied they were authorized by Chief and council. [115] The defendants failed to meet the onus on them to establish that such payments to Victoria Peters were in the best interest of the band. The defendants' evidence about how Kinder Morgan funds were spent was far from clear, and there were limited financial documents in evidence to assist. According to Victoria Peters, the balance of Kinder Morgan's initial installment under the Mutual Benefits Agreement (after an initial distribution to band members) remains in the band's bank account. However, the band's 2016 financial statement suggests that all but $130,000 from the balance of the initial installment was spent on administrative expenses in the fiscal

period ending March 31, 2016. According to Victoria Peters, the final Kinder Morgan installment received in the 2017 fiscal year remains in the band's bank account. However, the band's 2017 financial statement suggests that approximately half of the second installment was spent on administrative expenses in the fiscal period ending March 31, 2017. Victoria Peters was not able to explain the discrepancy between her understanding of what happened to the Kinder Morgan funds and the financial statements. Based on James Edwards' testimony, I find it is more likely than not that at least some of those administrative expenses were paid to Victoria Peters. f) Did the defendants breach their fiduciary duty to band members or breach the Financial Administration Law by hiring Mark Peters, nephew of Chief Norma Webb and Victoria Peters, as the CEO of the band's main economic development company without considering other candidates? [116] The plaintiffs allege that the defendants breached their fiduciary duty to band members by hiring Mark Peters, nephew of Chief Webb and Victoria Peters, to be CEO of Peters First Nation 3 Feathers Development Corporation. However, neither Chief Webb nor Victoria Peters received any personal benefit from hiring Mark Peters, and I am not satisfied that they were in a conflict when they decided to hire him or that they breached their fiduciary duties.

However, the defendants breached their obligation under the Financial Administration Law to provide equal access. [117] The plaintiffs further allege that the defendants breached their fiduciary duty to act in the best interests of the band by hiring someone to be in charge of the band's main economic development company when they knew that person was planning to "self-deal". This allegation is rooted in Mark Peters' plan to set up a separate company to sub-contract with the economic development company and allow himself to profit personally. Mark Peters did not follow through on any such plan, and it is not clear on the evidence whether he abandoned that plan before or after he was hired as CEO. I am not able to find a breach of fiduciary duty on this basis. [118] The defendants did not breach the Financial Administration Law by hiring "immediate family", as that term does not include Mark Peters as nephew of Chief Webb and Victoria Peters. On the other hand, the defendants did breach the equitable access principle set out in Article 7 of the Financial Administration Law by awarding a substantial job directly to Mark Peters. Article 7 required Chief and council to "ensure that there is fair and equitable access and treatment for the Membership to the programs and resources of the Peters Band for which they qualify". The defendants appointed Mark Peters to the CEO position and

approved a generous compensation package without advertising the position within the band or making any effort to determine whether any other band member was qualified for the position. [119] In final argument, the defendants said that they were acting in their capacity as directors of Peters First Nation 3 Feathers Development Corporation when they hired Mark Peters as CEO, which they say meant there was no fiduciary duty owed to Peters First Nation and its members in respect of a corporate decision. This defence was not pleaded, and it is not necessary to consider it in light of my other findings.

2. If the defendants breached their fiduciary duty to band members or breached the Financial Administration Law, what is the appropriate remedy? [120] Having found the defendants breached their fiduciary duty and the Financial Administration Law, I must now determine the appropriate remedy. [121] Based on the way the case was advanced and the limitations in the evidence (including the lack of documents to substantiate various payments), I am satisfied that declaratory relief is appropriate for both types of breaches. Further, I am prepared to order disgorgement of certain funds as set out below. Finally, the defendants failed to change their practices even after acknowledging the conflicts of interest identified by KPMG. In these circumstances, I am satisfied that an award of punitive damages is warranted. The court endeavours to achieve an equitable result when determining a remedy for breach of fiduciary duty. The Supreme Court of Canada has repeatedly stated that "[e]quitable remedies are always subject to the discretion of the court": Strother v. 346920 Canada Inc., 2007 SCC 24 at para. 74, citing Wewaykum Indian Band v. Canada, 2002 SCC 79 at para. 107; Hodgkinson v. Simms, [1994] 3 S.C.R. 377 at 444, 1994 CanLII 70; Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 at 587-89, 1991 CanLII 52; and Côté v. Rancourt, 2004 SCC 58 at paras. 9-14. I have borne these

principles in mind in fashioning a remedy in this case. [122] The way the case was presented makes it difficult to determine how much the defendants' profited from their breach of fiduciary duties. The plaintiffs reasonably focused on the process by which the defendants decided to pay themselves rather than trying to identify all inappropriate payments. As a result, it is difficult to determine whether any particular payment was made as a result of their breach of fiduciary duty or whether it was legitimate. There is authority for the proposition that, where a breach of fiduciary duty is proven, the onus shifts to the defendants to establish which payments are unassailable; however, in this case, the absence of key supporting documents for many of the payments makes proving the validity of each individual payment difficult. [123] The source of funds paid to the defendants further complicates determination of the appropriate remedy. Indigenous Services Canada and First Nations Health Authority funded many of the payments received by the defendants, including band staff salaries, some meeting payments, and program benefits. It is not clear on the evidence that the band would have received these funds directly had they not been paid to the defendants or that benefits would have been paid to other band members had Victoria Peters not paid the benefits to herself and the other

defendants or whether this money would have been clawed back by the funding agencies if it had not been used for a specific purpose. Further, the final KPMG report leaves open the possibility that Indigenous Services Canada may seek to recoup some funds from the defendants. [124] I am satisfied that it remains open and appropriate to grant declaratory relief with respect to breaches of the bylaw. It is not clear that other relief is available. Article 14 of the Financial Administration Law gives Chief and council authority to adopt a regulation establishing penalty provisions for breach of the bylaw; however, none has been adopted. [125] In the circumstances of this case, I am satisfied that declaratory relief is an appropriate remedy for both the breaches of fiduciary duty and the breaches of the Financial Administration Law. Although the conduct has already occurred, granting declaratory relief will have practical utility: It will emphasize to the defendants (as well as to current and subsequent Peters First Nation band councils) the importance of fiduciary duties and compliance with the bylaw, and it will guide their future conduct: Interfor Corporation v. Mackenzie Sawmill Ltd., 2022 BCCA 228 at para. 25; British Columbia Civil Liberties Association v. Canada (Attorney General), 2019 BCCA 228 at para.

267. Declaratory relief may encourage the band to draft qualification guidelines for Family Assistance benefits and express guidelines to allow payment of financial benefits to those on council, neither of which currently exists. Declaratory relief will encourage the defendants who continue to serve on council to ensure all band members have equal access to programs in accordance with s. 7 of the Financial Administration Law. Further, declaratory relief will encourage council to ensure that the remaining Kinder Morgan funds are spent in accordance with council's fiduciary duties and the Financial Administration Law. [126] As a result, I declare as follows: [127] The defendants breached their fiduciary duty to band members and they breached the Financial Administration Law by i. employing themselves as band employees and setting their own remuneration; ii. paying themselves to attend meetings; iii. paying themselves lump sum amounts for travel and telephone expenses; and iv. determining their own entitlement to Family Assistance funding. [128] In addition, I declare as follows: v. Victoria Peters breached the Financial Administration Law by determining her own entitlement to program funding; vi. Victoria Peters breached her fiduciary duty to band members and she breached the Financial Administration Law by receiving honoraria and travel expenses from funds received by the band

pursuant to the Mutual Benefits Agreement with Kinder Morgan; and vii. the defendants breached the Financial Administration Law by hiring Mark Peters as CEO of Peters First Nation 3 Feathers Development Corporation without giving other band members an opportunity to apply for the position. [129] The plaintiffs acknowledged in closing submissions, and I agree, that there is little practical utility in ordering an accounting when the supporting documents for cheques issued to the defendants are not available. [130] Making a fair and equitable order for disgorgement in this case is challenging. It is clear that the defendants received significant financial benefits over the years they were on council; what is not so clear is what profit they received as a result of their breach of fiduciary duty for the reasons outlined above. Further, I am not satisfied that it would be fair to order disgorgement to the band of funds that may properly belong to Indigenous Services Canada or First Nations Health Authority. On the other hand, if the defendants had not paid themselves meeting fees and other amounts from Kinder Morgan funds, the band would still have those funds. [131] As a result, I am prepared to order disgorgement of the meeting fees, honoraria and expenses paid to the defendants from band funds received from Kinder Morgan under the Letter of Understanding and Mutual Benefits

Agreement. In making this order, I have considered the fact that the defendants were paid to attend far more meetings than Kinder Morgan documented in their annual reports, which suggests that many of these meetings were internal rather than with Kinder Morgan and highlights the problem inherent in the defendants' deciding what constituted a compensable meeting. These Kinder Morgan meeting fees were not transparent, and band members were not aware that the defendants received them. The same can be said about honoraria and expenses paid to Victoria Peters from the Memorandum of Understanding funds. In my view, the payments to the defendants from Kinder Morgan funds are similar to the bonuses that the Court of Appeal ordered disgorged in Louie. [132] Finally, I agree that it is appropriate to award punitive damages against each of the defendants because the actions of the defendants are "purposefully repugnant to the [band's] best interests" and their conduct was motivated by their own self-interest: Mark Ellis, Fiduciary Duties in Canada, s. 26.22, quoted with approval in McLachlin J.'s (as she then was) minority judgment in Norberg v. Wynrib, [1992] 2 S.C.R. 226 at 299, 1992 CanLII 65. While punitive damages are awarded only in exceptional circumstances, I am satisfied that the defendants' "misconduct [ ] represents a marked departure from the ordinary standards of decent behaviour": Whiten v. Pilot Insurance Co., 2002 SCC 18 at para.

36. The defendants ignored the advice in the First Nations Governance Handbook, which offered strategies for avoiding conflicts of interest. The defendants resisted implementing policies recommended by outside consultants for avoiding conflicts of interest. The defendants' conduct lacked transparency: Most of council's financial decisions were made in camera with no minutes kept. [133] The plaintiffs sought the following punitive damage awards: viii. $50,000 against Victoria Peters; ix. $25,000 against Chief Webb; and x. $10,000 against Leanne Peters. [134] I am satisfied that it is appropriate to make punitive damages awards in the amounts suggested by the plaintiffs. An award of punitive damages is rational in this case because compensatory damages (in this case, the amount to be disgorged) will not achieve objectives of retribution, deterrence, and denunciation: Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 at para.

87. These awards will provide effective deterrence to these defendants and will encourage adherence to fiduciary duties and the Financial Administration Law going forward. The difference in amount between the three defendants reflects their different levels of culpability. It is appropriate that the highest award of punitive damages be made against Victoria Peters, as she had effective control over the band's finances and directed most decision-making on financial matters. Chief Webb, with her many years of experience, ought to have exercised greater fiscal control and recognized that the Financial Administration Law was more than aspirational. Leanne Peters spent the least amount of time on council and was the least morally culpable of the three defendants. [135] In the amended notice of civil claim, the plaintiffs sought an order that each defendant be fined $2000 under s. 102 of the Indian Act for breach of the Financial Administration Law. The plaintiffs did not pursue that remedy in final submissions. I am satisfied that such a remedy is not available in these circumstances. Conclusion [136] In summary, the following relief is granted: b. I declare that the defendants breached their fiduciary duty to band members and the Financial Administration Law as outlined in paragraphs 125 and 126 of these reasons for judgment. c. I decline to order an accounting. d. I order that the

defendants disgorge to Peters First Nation meeting fees, honoraria and expenses paid to the defendants from band funds received from Kinder Morgan under the Letter of Understanding and Mutual Benefits Agreement. e. I order that punitive damages be paid to Peters First Nation in the following amounts: i. $50,000 by Victoria Peters; ii. $25,000 by Chief Norma Webb; and iii. $10,000 by Leanne Peters. [137] With respect to the amount to be disgorged, a referral is made to the Registrar to conduct an inquiry and to assess the amount of meeting fees, honoraria and expenses paid to the defendants from band funds received from Kinder Morgan under the Letter of Understanding and Mutual Benefits Agreement, and for a certificate to be prepared pursuant to Rule 18-1(2) (the "Assessment"). I direct that the parties schedule a Pre-Hearing Conference before the Registrar before the Assessment is set for hearing. I direct that the Assessment should take place on or before March 31, 2023. [138] The plaintiffs are entitled to costs, subject to any offers or other matters that may affect costs. The parties may arrange with court scheduling in the next 30 days to make submissions before me on any costs issues arising from these orders. "Lamb J." [1] First Nations Governance Handbook: A Resource Guide for Effective Councils, Published under the authority of the Minister of Indian Affairs and Northern Development, Ottawa, 2003. [2] Aboriginal Law in Canada by Jack Woodward K.C. (2022) at para 7.732.