Interpreting the Exemption of Creditors’ Remedies on Reserves

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Wednesday, May 3, 2023
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This blog post is part of a series on “SCC Decisions and more” written by CIAJ’s collaborator James Hendry. Read all his posts here.

The Ontario Court of Appeal recently had to choose between interpreting a provision of the Indian Act protecting Indian reserve property from creditors’ remedies (subject to exceptions for leasehold interests and conditional sales contracts) and one that might have opened up more commercial possibilities for Indigenous entrepreneurs though putting Indian property at greater risk. The clear, crisp reasons of Tulloch CJO in Bogue v. Miracle (here) offered a definitive answer to the intriguing question of whether the Supreme Court of Canada had created a “commercial mainstream” limiting the creditors’ remedy exemption from creditors in the course of normal business.

Tulloch CJO observed that the Supreme Court of Canada had authoritatively recognized the long-standing policy purpose of protecting Indians’ reserve land and chattels there from predations of government taxation and creditors’ seizures (Indian Act ss. 87 and 89). This policy dated back at least to the Proclamation of 1763 (here) prohibiting colonists from dispossessing Indians from their “Indian lands and personal property”. But he noted that the Court qualified this interpretation of these protections by saying that they were not meant to confer an economic benefit on Indians but functioned to protect their “entitlements” (paras. 23-5).

He then quickly decided that a receivership fell within the prohibited class of creditors’ remedies.

The Court of Appeal held that a non-Indian creditor was precluded from having a receiver appointed by a court to collect a commercial debt from an Indian debtor’s business on an Indian reserve. Tulloch CJO held that the applications judge had incorrectly concluded that McLachlin CJ had recognized a “commercial mainstream” exception to the creditors’ remedies exemption in McDiarmid Lumber (paras. 16–19). He agreed that the Supreme Court recognized a “commercial mainstream” exception, but only for the provision in the Indian Act which deemed property given to Indians “under a treaty or agreement” to be on-reserve no matter where the property was situated (s. 90(1)) but never in respect of the creditors’ remedies exemption (s. 89)(para. 34).

While expressing concern about the commercial handicap this created for Indians seeking credit for on-reserve businesses, the Court of Appeal stuck with the colonial protective policy of the Indian Act in its text and jurisprudence, cautiously leaving any change in policy to the Parliamentary process (para. 44-5).

What is the “commercial mainstream” under consideration here?

The “commercial mainstream” exception to the creditors’ remedies exemption discussed in Bogue needs some clarification. The Supreme Court referred to the “commercial mainstream” as those normal business transactions presumably under general provincial law where the property involved is not on a reserve and therefore subject to the creditors’ remedies exemption (Mitchell, Indian Act s. 88). But the scope of the “commercial mainstream” seems to have been influenced by the Supreme Court’s interpreting the purpose of the exemptions from taxation and creditors’ remedies to protect their entitlements relating to reserve lands, but not to confer a commercial advantage on Indians (para. 24, citing Mitchell and Williams).

But Tulloch CJO disagreed with the applications judge who defined the “commercial mainstream” focusing only on the Supreme Court’s progressive narrowing of the provision that deems property given to Indians to fulfill treaty and related commitments to be on reserve land no matter where it actually is and not the creditors’ remedy exemption (s. 90(1)). However, each of these says something about the scope of the “commercial mainstream.” For example, the Supreme Court held that the deeming provision applied only to property given to Indians by the federal Crown, thus widening the “commercial mainstream” to include commercial dealings with the provincial Crown (Mitchell). The Supreme Court later narrowed the deeming clause to funds related to treaty entitlements alone, rather than all the moneys paid for public welfare on reserve under a Comprehensive Funding Agreement for band programs in an off-reserve bank, presumably leaving some funds for use in the “commercial mainstream” (McDiarmid here). But the sanctity of the creditors’ remedy exemption was never in doubt.

More recently, the Supreme Court defined the “commercial mainstream” further by rejecting the “creative” argument that an Indian’s term deposit in a bank on a reserve was not subject to the creditors’ remedies exemption simply because interest accrued from commercial activity off-reserve (Bastien para. 54).

One commentator writes that the Supreme Court in McDiarmid erroneously presumed that it was promoting self-government by this narrow interpretation, and correctly notes that tinkering with this policy can hardly be seen as nation-to-nation law-making (here, p. 702).


First Nations can now resume governance over their own lands. The Framework Agreement on First Nation Land Management (here) allows subscribing First Nations to take their lands out from under the Indian Act with a community-authorized land code, but preserves the creditors’ remedies exemption and continuing the on-reserve leaseholds exception to that protection (clauses 15.1-.2). The Framework Agreement legislation was revised last December to fully implement the Agreement (here). About one third of First Nations are involved in this self-governance project that will allow them economic development of their lands.

The modern treaty process promises First Nation flexibility in securing business credit on their lands. For example, under the modern Nisga’a Treaty, the First Nation has opted to allow its citizens to take fee simple in Nisga’a residential lands and to mortgage a small percentage of that land. The Nisga’a Lisims Government notes that this is a complete departure from the way many other First Nations deal with land transfers under the Indian Act and that it is controversial, but remains confident that their citizens’ commitment to their land will make it a success (here).

Tulloch CJO left the creditors’ remedy exemption to the Parliamentary process. The Framework Agreement process and the take-up by about a third of First Nations so far shows that this is a matter to be worked out by First Nations locally to balance their need to protect their land and use it to pursue their economic interests.

About the author

James Hendry

James Hendry

James Hendry was called to the Ontario Bar in 1981. He was in private practice until 1984 when he joined the Canadian Human Rights Commission as counsel providing legal advice and litigation services, appearing at all levels of court, including the Supreme Court of Canada. In 1989, he was recruited by the Department of Justice. He was General Counsel in the Human Rights Law Section until 2011, specializing in civil Charter social policy advice and equality rights, and interpreting and designing human rights legislation. He was Research Director with the Canadian Human Rights Act Review Panel and a Visiting Scholar at Harvard Law School on a Canada-U.S. Fulbright Scholarship. He publishes extensively on Canadian and comparative constitutional issues and has lectured in Canada, Spain, South Africa, the United States, and Hong Kong. He taught Constitutional Law and Charter at the University of Ottawa, Faculty of Law and currently co-teaches a course on “Writing for Social Justice.” He designed and presented lecture series on the Charter, International Human Rights and Aboriginal Rights at Carleton University. He was the Editor in Chief of the Federated Press Charter and Human Rights Litigation journal from 1993 to 2016. He was founding Editor in Chief of the PKI Global Justice Journal, now published by Queen’s Law (2017 to 2022).