Supreme Court of Canada –  S.C.R. 93
The Canadian Crown can retain the amount paid by a company in exchange for a land surrendered by Indians, even after termination of the contract.
The interests of an Indian band were impacted in this case. However, as in numerous other cases pleaded before the entrenchment of the Charter in the Constitution, the band was not a party to the litigation.
Canada is entitled to retain the amount paid (unanimous decision).
Between: Dimensional Investments Ltd.
And: the Crown of Canada
In 1959, Dimensional Investments Ltd., land speculators, had planned the acquisition of particular Indian lands which had been surrendered to the Crown by the Sarnia band of Indians for the purposes of their sale pursuant to ss. 37 to 41 of the Indian Act. The arrangement was confirmed by an agreement, executed for the Crown and the appellant. Each page of the agreement was signed by the solicitor for the Indian band.
The agreement provided that the total sale amounted to $6,521,946 to be disbursed in instalments over a period of two years. In addition, individual Indians were to be paid an amount of $323,763.63 on the execution of the agreement.
Providing that the company was not in default under the agreement, it had to opportunity to acquire additional portions of the land in exchange for additional payments (evaluated based on the area and location of the property).
Default of payment and dispute
In 1961, the company failed to make the last payment despite the 30-day notice given by the Minister pursuant to the agreement. The agreement provided that any default would terminate the agreement and any rights pursuant to it.
Of the amount already paid by Dimensional Investments ($1,350,000), $375,000 was paid to individual Indians by the Crown and no less than $975,000 of the payment continued to be in the possession of the Crown as trustee for the Indian band.
Since Dimensional Investments held no more rights to the surrendered Indian lands, it turned to the Court for the reimbursement of the amount already paid to the Crown.
Dimensional Investments: The Crown could not hold back the amounts paid as liquidated damages since, despite the clear terms of the agreement, the provisions with regard to the liquidated damages are not a good estimation of the damages suffered by the Crown due to breach of the agreement. The company further argued that it was “unconscionable” for the Crown to end the company’s rights to the land while retaining the amounts which remained in its (the Crown’s) hands.
The Crown: It was not an unconscionable penalty for the Crown to keep the money paid given the particular facts of the case.
Exchequer Court of Canada (1966): The Court rejected the company’s arguments.
Cartwright, Abbott, Martland, Ritchie, Hall
The agreement stipulates that time is an essential condition and that any default would terminate the Dimensional Investments’ rights. The Crown should keep the total amount paid pursuant to the agreement, as an assessment of liquidated damages under s. 48 of the Exchequer Court Act.
Even in the absence of s. 48, the provision in the agreement cannot constitute an unconscionable penalty considering the circumstances: Dimensional Investments were land speculators and they made the purchase through a front company that did not have the $6.5 million at which the lands were valued.
The Crown was part of a high-risk venture and could not anticipate the exact amount of damages if the other party did not fulfill its obligations.