Anderson v. Alberta: Supreme Court of Canada Clarifies When First Nations can be Awarded Advance Costs in Litigation

On March 18, 2022, the Supreme Court of Canada issued an important decision for First Nations seeking legal redress for harms caused to their lands and resources. In Anderson v. Alberta, 2022 SCC 6 (“Anderson”), the Court clarified the test for establishing entitlement to an advance costs award in cases involving First Nation governments seeking to challenge infringements of their s. 35 rights. While the clarification offered by the Court is likely to be helpful in future cases, the test that must be met remains quite stringent, and we anticipate that gathering and presenting the evidence necessary will, itself, be a costly undertaking.

The Facts

The Beaver Lake Cree Nation (“Beaver Lake”) and its members are beneficiaries under Treaty No. 6. The Treaty recognizes that Beaver Lake and its members have rights to hunt, fish and trap on their traditional lands. In 2008, Beaver Lake sued the governments of Canada and Alberta claiming that the Crown “improperly allowed lands traditionally used by Beaver Lake Cree Nation to be ‘taken up’ for industrial and resource development” purposes, which compromised its ability to pursue its traditional way of life. Beaver Lake sought various declarations of right, injunctions and damages or equitable compensation for the impacts associated with this industrial and resource development activity.

From the filing of the claim in 2008 through to 2018, there were numerous preliminary court proceedings in this matter, with associated costs. This led Beaver Lake to bring a motion seeking an order requiring the defendants to pay advance costs to allow them to proceed with the litigation. The First Nation estimated that the costs of pursing this litigation to the end would be $5 million. At the time it brought this motion, Beaver Lake had already spent approximately $3 million on legal fees, and there were 120 trial days set down commencing in January 2024.

The Motion for Advanced Costs

Beaver Lake argued that the costs to pursue this litigation were beyond what it could afford and asked the case management judge to issue an award of advance costs.

The framework for assessing claims for advance costs in cases involving public interest litigants was set down by the Supreme Court of Canada in British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 (“Okanagan”). According to that test, an applicant seeking advance costs must establish that:

  • it is impecunious;
  • its claim is prima facie meritorious; and
  • the claim raises issues of public importance.

The central issue that the case management judge was required to address in this case was whether Beaver Lake could demonstrate impecuniosity, meaning that it “genuinely cannot afford to pay for the litigation”.

Lower Court Decisions

The case management judge (Alberta Court of Queen’s Bench) found that Beaver Lake’s financial situation had improved in recent years, and that it was not under any imminent threat of insolvency or third party or co-management. The evidence showed that Beaver Lake had been able to spend $3 million in legal fees for the litigation (averaging $300,000 per year) to that point. After reviewing the evidence as to Beaver Lake’s resources, the case management judge concluded that Beaver Lake had access to more than $3 million in unrestricted funds that could potentially fund the litigation.  However, she also noted the evidence which indicated that Beaver Lake is an impoverished community with substantial deficits in housing and infrastructure and many pressing needs. The case management judge concluded that Beaver Lake had demonstrated that it was impecunious because it “cannot fund the litigation at the rate required to bring it to trial.” In the result, the case management judge awarded advance costs, noting that the First Nation should not have to “choose between pursuing this litigation and attempting to provide for the basic necessities of life.” The Order granted by the case management judge required Canada and Alberta to each contribute $300,000 annually to the credit of Beaver Lake’s legal fees until the trial was concluded or the litigation was otherwise resolved.

Both Canada and Alberta appealed that decision to the Alberta Court of Appeal (Court of Appeal). The Court of Appeal allowed the appeals and set aside the order issued by the case management judge. They found that the case management judge had erred in finding that Beaver Lake was impecunious. In their view, the finding that Beaver Lake had access to $3 million in unrestricted funds was conclusive of the issue. In addition, the Court of Appeal also allowed Canada to bring fresh evidence showing that Beaver Lake had recently received $2.97 million in settlement of a specific claim. In light of this evidence, the Court of Appeal found that Beaver Lake in fact had at least $6 to 7 million available to it to fund the litigation. The Court of Appeal concluded that the advance costs order issued by the case management judge was unreasonable because it failed to adequately balance the parties’ interests, the quantum of the award was not justified on the record and the order did not include adequate procedural controls.

Beaver Lake appealed that decision to the Supreme Court of Canada.

Supreme Court of Canada Decision

The Supreme Court reviewed and reaffirmed many first principles with respect to advance cost awards from earlier cases, including Okanagan and Little Sisters Book and Art Emporium v. Canada (Commissioner of Customs and Revenue), 2007 SCC 2 (“Little Sisters”). While the Court acknowledged that access to justice is an important policy consideration underlying advance costs awards, concerns about access to justice must be considered with and weighed against other important factors [paras 20-21]. The Court sums up its prior caselaw with respect to advance costs awards in this way:

[23] Where, therefore, an applicant seeks to have its litigation funded by the public purse, courts must be mindful of the constraints of their institutional role. Those constraints necessarily confine a court’s discretion to grant such an award to narrow circumstances (Okanagan, at para 41). It must be a “last resort” (Little Sisters, at paras 36, 41, 71 and 73), reserved for the “rare and exceptional” case (Okanagan, at para 1) and where, again, to refrain from awarding advance costs would be to participate in an injustice.

The Court further reaffirmed that the three elements of the test set down in Okanagan must be met before an award of advance costs will be issued. However, meeting those three elements does not automatically entitle an applicant to such an award. Where impecuniosity, a meritorious claim and issues of public importance can all be shown, a court still retains residual discretion to decide whether, having considered all relevant circumstances, an award of advance costs is warranted (or whether there are other ways of facilitating the hearing of the case). [para 24]

First Nation Context and the Relevance of Reconciliation

In cases where First Nation governments seek to enforce and protect their s. 35 rights, the Court acknowledged the importance of the principle of reconciliation. In the view of the Court, “[w]here litigation raises novel issues concerning the interpretation of Aboriginal and treaty rights and the infringement of those rights, this may have significant weight in a court’s analysis of the public importance branch of the advance costs test and the exercise of its residual discretion.” [para 26] By way of example, the Court noted that a court may be more inclined to allow an award of advance costs in cases where the Crown has employed tactics to delay the resolution of the applicant’s claim, citing Hagwilget Indian Band v. Canada (Minister of Indian Affairs and Northern Development), 2008 FC 574, as an example. [para 26]

In assessing whether a First Nation applicant can meet the impecuniosity branch of the Okanagan test, the Court noted that “a court must respectfully account for the broader context in which First Nations governments such as Beaver Lake make financial decisions” noting that “[p]romoting institutions and processes of Indigenous self-governance fosters a positive, mutually respectful long-term relationship between Indigenous and non-Indigenous communities, thereby furthering the objective of reconciliation.” The Court went on to note that, in the context of the impecuniosity analysis, “this means that the pressing needs of a First Nation should be considered from the perspective of its government that sets its priorities and is best situated to identify its needs.” [para 27]

Assessing Whether a First Nation Meets the Impecuniosity Requirement

Beaver Lake, as well as some of the intervening parties, urged the Court to revisit and revise the impecuniosity requirement from Okanagan. However, the Supreme Court refused to do so. Instead, citing its earlier decisions, the Court confirmed that an applicant seeking an advance costs award must show that it “genuinely cannot afford to pay for the litigation”, that “the litigation would be unable to proceed if the order were not made” or that, “it [would] be impossible to proceed otherwise before advance costs will be ordered.” [para 30] In other words, the test is a stringent one! What this case required the Court to decide was how that test should be applied in a case such as this one, where a First Nation government is pursuing a s. 35 claim (i.e., public interest litigation) and has access to financial resources that could be used to fund the litigation but which it says must be otherwise allocated.

The parties before the Court agreed that, to assess whether a First Nation government genuinely cannot afford to pay for litigation, a court must also consider “the broader context in which that government makes financial decisions, including its competing spending commitments, restrictions on the uses of its resources, and fiduciary and good governance obligations.” The Court recognized that a First Nation government may genuinely need to allocate some or all of its resources to priorities other than litigation. [para 32]

Importantly, the Court acknowledged that “access to justice is of particular importance in the context of s. 35 litigation” and also recognized that, “in some cases, the dire financial circumstances of a First Nation government applicant may be the very result of the alleged interference with its constitutional rights at issue in in the litigation.” [para 35] However, this reality did not justify the kinds of revisions to the test set out in Okanagan that some of the parties suggested. In fact, the Court noted that Okanagan itself involved a s. 35 claim by a First Nation government applicant.

Confirming what had already been stated in R. v. Ipeelee, 2012 SCC 13, [2012] 1 S.C.R. 433, at para. 60, in the context of criminal sentencing, the Court noted that courts considering advance costs motions can take judicial notice of matters that may be relevant to understanding a First Nation government’s financial situation and spending priorities. [para 36]

Clarifying the test previously set down in Okanagan, the Court held that “it would be open to a court to decide that a First Nation government is impecunious when its prioritization of “pressing needs”, properly understood, has left it unable to fund public interest litigation.” [para 38] [emphasis added] The Court considered this approach to not only be consistent with prior cases in which the Okanagan test for impecuniosity had been applied in the context of a First Nation government seeking to assert s. 35 rights, but to also reflect the approach taken by the lower courts in this matter. The Supreme Court affirmed that, “an applicant genuinely cannot afford to pay for the litigation where, and only where, it cannot meet its pressing needs while also funding the litigation. And, as we explain further below, where the applicant is a First Nation government, pressing needs must be understood from the perspective of the First Nation government.” [para 40]

The Supreme Court went on to hold that, in assessing whether a First Nation government has sufficient resources to pay for the litigation after meeting its pressing needs, a court must have a sufficient evidentiary record before it to:

  • identify the applicant’s pressing needs;
  • determine what resources are required to meet those needs;
  • assess the applicant’s resources (both assets and income); and
  • identify the estimated cost of funding the litigation. [para 41]

The nature and “granularity” of evidence that will be required will vary, depending on the circumstances. The Court noted that “[d]etailed proof of an applicant’s pressing needs and the extent to which they are unfunded, and estimated litigation costs, may be required to ensure accountability over the expenditure of public funds. At the same time, it must not be prohibitively expensive to establish impecuniosity.” [para 41] [emphasis added]

The Court indicated that, “[w]here an applicant has access to financial resources that could potentially be used to pay for the litigation, it bears the onus of proving that it genuinely cannot afford to pay for the litigation because it must commit those resources to address other pressing needs.” [para 42 – emphasis added] The Court offered the following elaboration as to what kinds of expenses might represent “pressing needs”:

[43] There can be no question that expenditures on basic necessities of life, including adequate housing, a safe water supply, and basic health and education services, rise to the level of addressing a pressing need. Spending to improve standards of living, for example, to provide enhanced health and education services or to promote cultural survival, may also qualify.

Consistent with the statements made by the Court about how the concept of reconciliation applies in this context, the Court stated that a court required to identify the pressing needs of a First Nation government “may have regard to what that government has prioritized in the past as indicated, for example, by records of Crown consultation, of negotiations with the Crown for funding, by band council resolutions requesting access to capital and revenue moneys, and in records of internal departmental or other meetings dealing with its budgeting and priorities.” Even projects which do not, on their face, appear to address “pressing needs” (e.g., allocating funds to construct a skating rink or to promote the First Nation’s culture) may be shown to do so if the evidence supports the importance or pressing nature of such projects to the particular community.

The Court cited the following examples of earlier cases where First Nation governments had succeeded in establishing impecuniosity:

 

  • In Hagwilget Indian Band v. Canada (Minister of Indian Affairs and Northern Development), 2008 FC 574, [2008] 3 C.N.L.R. 136, litigation between the applicant band and Canada had persisted for 20 years, leaving the band “with virtually no resources” (para. 12). It was manifest to the court that the band could not pursue the litigation without advance costs, since its funding was closely controlled by the government, it had been unsuccessful in obtaining other sources of funding, it owed counsel over $140,000, ran deficits, had no available credit, and had to close its band council offices for over three weeks due to lack of funding (paras. 12‑14).

 

  • In Keewatin Ontario (Minister of Natural Resources) (2006), 32 C.P.C. (6th) 258 (Ont SCJ), the record established that securing funding from individual members was impractical, virtually all funding came from the federal and provincial governments and was earmarked for specific priorities, the band ran deficits in successive years, the majority of its members were unemployed, lacked adequate housing and an adequate water supply, and other sources of funding had been explored but were inadequate to fund the litigation. (para. 108).

Application of the Clarified Test for Showing Impecuniosity to this Case

The Court determined that the evidence presented to the case management judge here was insufficient to allow her to come to a conclusion on the issue of impecuniosity or to determine the amount of advance costs required to enable Beaver Lake to pursue the litigation. [para 54] For these reasons, and because the fresh evidence presented to the Court of Appeal showed that Beaver Lake’s financial circumstances had changed since its initial application, the Court remitted the matter back to the Alberta Court of Queen’s Bench for a new hearing, so that the issue of impecuniosity could be decided in accordance with the Court’s reasons. [para 54]

The Court explained where and how the evidence presented was inadequate and suggested the kinds of additional evidence that would be helpful to the case management judge. In a nutshell, the evidence must allow the judge to “understand the extent to which Beaver Lake must commit its present and future resources to pressing needs instead of the litigation, quantify the estimated cost of the litigation, and determine whether Beaver Lake has any surplus resources to finance the litigation in whole or in part.” [para 68] [emphasis added]

The Court also further clarified the nature and terms of an advance costs award, noting that such awards must be carefully crafted and structured in such a way as to set limits on the rates and hours of legal services and “cap the award at an appropriate global amount.” The award should also “build in judicial oversight to allow the court to ‘closely monitor the parties’ adherence to its dictates.” The court explains that it is because an award of advance costs in cases such as this involve expenditures from “the public purse” that this level of scrutiny is required. [para 28]

While this decision helps to clarify the test that a First Nation government must meet to establish entitlement to advance costs in the context of s. 35 litigation, and the kind of evidence required, we do not read this decision as making it any easier for First Nation governments to satisfy the Okanagan test. If anything, the clarifications offered by the Court confirm that meeting the impecuniosity branch of the Okanagan test will be an onerous and, ironically, somewhat costly endeavour.