Spending Band Money: When To Seek Legal Advice On Council Remuneration, Including Bonuses

It is well known that First Nations / Band Councils owe fiduciary duties to their Nation and members. This duty generally arises whenever a Council makes a discretionary decision that will affect its Nation or its members. For example, when a Council makes a decision regarding spending, saving, or investing "Indian moneys", it must do so carefully and in a manner that satisfies its underlying fiduciary duties.

In a somewhat similar manner, directors owe fiduciary duties to their companies. Although these relationships offer some guidance on Council's obligations associated with its fiduciary duties, the two entities - a First Nation and a company - have fundamental differences. For example, directors only owe fiduciary duties to their company; not to the company's shareholders, bondholders, or employees. Conversely, Councils have duties to act in the best interests of both their members and their Nation - which duties can occasionally conflict. The matter is further complicated by the different types of "Indian moneys" under the Indian Act - including:

capital moneys, that are derived from the sale of capital assets; revenue moneys, that are moneys collected, received or held by the Crown for the use and benefit of a band; settlement moneys derived from a resolved land claim or litigation with the Crown; own income, derived from the Band's own commercial activities; and damages, from successful litigation. Each category of "Indian moneys" may involve different decisions, different decision-makers, and different obligations.

In light of this complexity, it is critical that Councils seek legal advice when making difficult decisions regarding band moneys. Seeking such advice reveals a prudent approach to governance that reflects the careful attention that a fiduciary, such as a Council, owes its beneficiaries.

The question of remuneration commonly arises with respect to Council's decisions on spending "Indian moneys". The BC Court of Appeal carefully considered this matter in Louie v. Louie, 2015 BCCA 247.

In that case, the Lower Kootenay Indian Band had received $125,000 from the Regional District as compensation for the use of a road crossing one of its reserves. A few days later, the Band Council held a meeting, part of which was private. During the closed (private) meeting, the Councillors decided to pay themselves $5,000 each as a "retroactive honorarium" for their work as members of Council.

The decision to pay the $5,000 honorariums...