![FNs’ Business Revenue: When you Should Distrust the Trust National Aboriginal Business Opportunities Conference Osoyoos, BC September 14-15, 2010 Facilitator: Merle Alexander [email_address] W: +16046414935 C:+16043158569](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Mca When To Distrust The Trust V3
- 2. FNs’ Business Revenue: When you Should Distrust the Trust National Aboriginal Business Opportunities Conference Osoyoos, BC September 14-15, 2010 Facilitator: Merle Alexander [email_address] W: +16046414935 C:+16043158569
Notes de l'éditeur
- An aboriginal trust can be drafted for success or failure. Each aboriginal community is different. Precedents cannot be relied on to cut corners or save on legal costs. Where that happens, trusts fail due to an inability to meet the community’s needs and goals over time and implementation difficulties. Aboriginal trusts reflect the unique objectives of each community with respect to economic development, social projects and other matters. These objectives change over time, and trusts must be drafted to provide flexibility in order to remain relevant to communities. Trusts fail when they are drafted without regard to the objectives of communities over time, when they are difficult to implement or create conflict in the community. Given the diverse range of interests affected by the trust agreement, the instrument must be drafted by experts in trust and aboriginal law, with input from tax lawyers and knowledge of relevant governance models.
- When improperly drafted, trusts can be overly restrictive on FNs, requiring that the comply with certain common law and statutory rules and relinquishing determination of some matters to the discretion of the BC courts. For example, at common law, if a trust does not provide an amendment power , the beneficiaries of a trust may vary the terms of the trust if they have legal capacity and are the only persons entitled to the trust property. However, in Aboriginal trusts, the trust is framed to also benefit unborn persons, minors and adults lacking capacity. If proper amendment terms are not included in the argeement, the FN may be required to apply to the court for variation pursuant to the Trust and Settlement Variation Act, such that the court and not the FN decides whether a variation is acceptable. In at least one case, the Provincial Public Guardian and Trustee opposed a FN’s variation application, and the court rejected the application. See McLeod Lake Indian Band Trust Agreement (Re), 2010 BCSC 1158. Similarly, at common law, if a trust does not provide for a successor trustee, such a successor is appointed pursuant to provincial legislation. In cases in which hereditary chiefs or other traditional models are used, provincial legislation may not provide an adequate successorship model. For example, in Gitga'at Development Corp. et al v. Hill et al, 2007 BCCA 158, when two Hereditary Chiefs died, the shares they held in trust did not pass to the new Hereditary Chiefs.
- Trusts are designed such that the trust capital and income may be used for certain defined purposes, such as economic development purposes, community projects or social purposes. Each time the community requires funds for one of the purposes, it must request them from the trustee, who is obligated to ensure that the request conforms with the stated purposes and that the process (BCR, community approval) required for the approval of the request has been followed. Ensuring that trust property is used for the purpose outlined in the trust document inevitably requires a trustee to say “no” at some point. The trustee can therefore perform a positive role as a gatekeeper and add checks-and-balances to a community’s governance model. The existence of a trustee can also result in adversarial relations between band councils and trustees or communities and trustees. The separation of power between council and the trustees creates a risk of dissension, especially if the trustees control more capital than the democratically-elected council. This can be especially true where the trustees are community members, in which case the trust structure can inadvertently create a second council. Disagreement within the community as to the terms of the trust or the decisions of the trustees can result in division within the community and law suits. See Prophet River FN Band v. Rath (BC Supreme Court, Vancouver Registry, 2010) where the community is claiming that the Chief and Council, and others, breached their duties in setting up a community trust, including by chief and council accepting $800,000 payment while the remaining community members received only $800/month.
- Trusts are designed such that the trust capital and income may be used for certain defined purposes, such as economic development purposes, community projects or social purposes. Each time the community requires funds for one of the purposes, it must request them from the trustee, who is obligated to ensure that the request conforms with the stated purposes and that the process (BCR, community approval) required for the approval of the request has been followed. Ensuring that trust property is used for the purpose outlined in the trust document inevitably requires a trustee to say “no” at some point. The trustee can therefore perform a positive role as a gatekeeper and add checks-and-balances to a community’s governance model. The existence of a trustee can also result in adversarial relations between band councils and trustees or communities and trustees. The separation of power between council and the trustees creates a risk of dissension, especially if the trustees control more capital than the democratically-elected council. This can be especially true where the trustees are community members, in which case the trust structure can inadvertently create a second council. Disagreement within the community as to the terms of the trust or the decisions of the trustees can result in division within the community and law suits. See Prophet River FN Band v. Rath (BC Supreme Court, Vancouver Registry, 2010) where the community is claiming that the Chief and Council, and others, breached their duties in setting up a community trust, including by chief and council accepting $800,000 payment while the remaining community members received only $800/month.