St. Mary's Indian Band v. Cranbrook (City) [1997] 2 S.C.R. 657: Indians -- Reserves -- Definition of "reserve" amended to include "designated lands" released or surrendered "otherwise than absolutely" -- Reserve lands surrendered at market value for airport but with the proviso that land would revert to reserve if not used for public purposes -- Whether lands surrendered for airport "designated lands" -- Whether common law real property principles apply to surrender of Indian reserve lands

Present: Lamer C.J. and La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Indians -- Reserves -- Definition of "reserve" amended to include "designated lands" released or surrendered "otherwise than absolutely" -- Reserve lands surrendered at market value for airport but with the proviso that land would revert to reserve if not used for public purposes -- Whether lands surrendered for airport "designated lands" -- Whether common law real property principles apply to surrender of Indian reserve lands -- Indian Act, R.S.C. 1952, c. 149, ss. 2(1) "reserve", "surrendered lands", 37(1), 38(1), (2) -- Indian Act, R.S.C., 1985, c. I-5, ss. 2(1) "designated lands", "reserve", 37(1), (2), 38(1), (2), 83(1)(a).

In 1966 the appellants surrendered part of their reserve for full market value to the Federal Crown for use as a municipal airport and subject to the stipulation that it would revert to the band if it ceased to be used for public purposes. The Indian Act limits a band's property tax power to interests of land "in the reserve", but in 1988 the Kamloops Amendments amended the Indian Act to provide that certain forms of surrendered land -- land surrendered "otherwise than absolutely" -- would be brought within the legal definition of reserve. The appellants levied property taxes in 1992 on the ground that the stipulation to the surrender made the transfer "otherwise than absolut[e]" with the result that the surrendered land fell within the "designated lands" category of the reserve.

When the respondent refused to pay, the band successfully sued but the judgment at trial was reversed on appeal. The Attorney General of Canada was granted intervener status because the band claimed taxes from it under identical circumstances but in a separate action.

The central question before this Court was whether the appellants' surrender was made "otherwise than absolutely" such that these surrendered lands now fall within the definition of "designated lands" under the current Indian Act. This required the Court to consider whether the sui generis nature of native land rights means that common law real property principles do not apply to the surrender of the Indian reserve lands under the provisions of the Indian Act.

Held: The appeal should be dismissed.

Given the sui generis nature of native land rights, the Court must go beyond the usual restrictions of the common law (which would embrace the minutiae of the language in the surrender documents and traditional distinctions between determinable limitations and conditions subsequent) and look more closely at the respective intentions of the band and the Crown when the lands were surrendered.

The appellants intended to part with the land on an absolute basis. First, the band surrendered the land for sale. Second, the band entered into negotiations with the Crown upon the full understanding that the impugned lands were to be sold for use as an airport. Third, in return for its surrender, the Crown paid the appellants the full market value of the land. The mere fact that the band included a rider in its surrender does not necessarily mean that the surrender was other than absolute. "Absolute" and "conditional" are not mutually exclusive terms -- either conceptually or under the scheme of the Indian Act. A key element of both the 1952 and 1988 versions of the Indian Act is that they expressly provide that a surrender can be both absolute and conditional.

The Kamloops Amendments created a two-tier system of surrenders which was intended to clarify the status of reserve lands surrendered for lease primarily for purposes of taxation. Surrenders for lease fall within the definition of "designated lands" and surrenders for sale remain beyond the definition of reserve. The broad phrase "otherwise than absolutely" allows for other limited forms of surrenders (such as a right of way) to be considered designated land and yet ensures that other forms of permanent surrenders, be they conditional or unconditional (such as an exchange or gift) remain beyond the notion of reserve land. The definition of "designated lands" therefore does not capture the airport lands.

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