McDiarmid Lumber Ltd. v. God’s Lake First Nation

Supreme Court of Canada – [2006] 2 S.C.R. 846

Manitoba FundingIndian ActSeizure

The Court gives a strict meaning to the exemptions from seizure and garnishment contained in the Indian Act. The funds of a Comprehensive Funding Arrangement, by which the federal finances the Band, are not exempted.


Are the funds from a CFA between an Indian band and the federal government deemed situated on a reserve, thus exempting them from seizure under sections 89 and 90 of the Indian Act?


No, because the CFA is not “an agreement with the Crown”, nor are the funds physically situated on reserve (6 against 3).


Between: God’s Lake First Nation a.k.a. God’s Lake Band

And: McDiarmid Lumber Ltd.

Interveners: Canada, Assembly of First Nations and Manitoba Keewatinook Ininew Okimowin


God’s Lake Reserve is located 1,037 kilometres northeast of Winnipeg and is only accessible by air or ice in winter. The only employers on the reserve are the Band Council and small businesses. Because of its remote location, it is difficult for the Band to fully participate in the off-reserve market economy. The Band receives all of its funds through the comprehensive funding arrangement (CFA hereafter) which enables it to provide services to its 1,289 members: education, post-secondary allocation, social services, etc.


In 1909, the God’s Lake Indian Band became part of Treaty No. 5, thus extinguishing all of its land claims. In exchange, the Crown agreed to the maintaining of traditional activities on surrendered lands and provided annuities and financing for the Band’s schools. In 2003, God’s Lake First Nation entered into the CFA with the federal government to acquire funds to deliver and maintain its programs and services to Band members, in an amount of $8.9 million annually. Most of this was allocated to the Band’s education system and social services. One of the program requirements was that the funds be managed by a third party. Since there was no financial institution on the reserve, the Band chose to mandate Peace Hills Trust Company in Winnipeg to manage and maintain its bank accounts. Meanwhile, the Band had contracted McDiarmid Lumber Ltd. for the purchase of construction supplies and services throughout the years and had failed to pay $621,000 as of 2003. The Band agreed to a consent judgement under which God’s Lake First Nation was given 11 months to elaborate a payment plan.

In 2004, when the delay expired, McDiarmid served a notice of garnishment of the accounts in Winnipeg in the amount of $1,223,000. God’s Lake First Nation petitioned the Senior Master of the Court of Queen’s Bench in Manitoba to have the notice quashed


God’s Lake First Nation: There is a sufficient link between the funds and the reserve to exclude all seizure.

Decision of the lower courts

The Senior Master of the Court of Queen’s Bench of Manitoba (2004): The CFA funds held by the Peace Hills Trust Company in Winnipeg are exempt from seizure.

Court of Queen’s Bench of Manitoba (2004): The monies received through the CFA are protected from garnishment by McDiarmid Lumber Ltd. because of the strong connection between the funds and the Band’s occupancy of reserve lands, thus making them Indian private property.

Court of Appeal of Manitoba (2005): The protection of sections 89 and 90 of the Indian Act cannot be applied to the CFA funds. When applying the Williams test, the majority found that the funds are not situated on a reserve, thus making them available for garnishment by McDiarmid Lumber Ltd. The funds provided by the CFA cannot be considered Indian private property within the scope of section 90 since the CFA concerned areas are not covered by Treaty No. 5. There is no connection between the God’s Lake members’ treaty rights and the CFA.

Reasons for Judgement


McLachlin, Bastarache, LeBel, Deschamps, Charron, Rothstein


The God’s Lake First Nation’s argument based on the “connecting factors” test is rejected and distinguished from Williams. First, the exception of section 89 of the Indian Act can only be applied to Indian private property physically located on reserve, which is not the case here. Second, the Williams test was elaborated for the application of section 87, which concerned taxation; therefore it cannot be used to restrict the seizure of Indian private property located off reserve. Finally, Parliament’s intention was to limit the exemption to benefits flowing from treaties.

To apply the exemption of section 90, meaning the protection from garnishment, the source of the funds must be an agreement with the Crown. Here, “agreement” is understood as a surrender of an Indian band’s traditional lands to the Crown in exchange for privileges, such as annuities and funding for public services. It also includes supplementary agreements detailing the Crown’s obligations and modern treaties.

The CFA is not an agreement in the sense of section 90, since it includes the Crown’s annuities and other funds given by the government to help God’s Lake First Nation achieve self-sufficiency and increase its living standards, without any segregation between the two. Only the portion relating to the Crown’s treaty obligations is protected from garnishment under section 90. Since this cannot be distinguished from the general funding, the bank account can be seized in whole.


Even though Indians receive fiscal exemptions for their personal goods (salaries, property, vehicles) located on reserve, this does not encourage economic development. Local entrepreneurs have difficulty obtaining credit because non-Indian debtors have limited ability to enforce their securities. To an extent, McDiarmid reaffirmed the necessity of a credit regime with enforceable rights for both parties to help entrepreneurs (debtors) collect assets while giving their creditors an incentive by reducing the risks (Wandzura, 2007: 4).

But for Aboriginal groups and leaders, the recourse to garnishment could hamper bands’ abilities to provide quality services in matters of housing, education and social services because they do not always have the opportunity to deposit the funds in an on-reserve financial institution (2005: 1). As for the argument that giving non-Indian creditors the right to garnish the band’s funds used for public services if the bank account is located off-reserve would increase First Nations’ participation in the market economy, some found it unrealistic since most reserves are located outside of urban centres (Paraskevas, 2006: 1).

The Department of Indian Affairs and Northern Development (DIAND) still employs CFAs to annually transfer funds to communities without self-government agreements. The band must spend the money in specific budget areas determined by DIAND. The requirement of a Third Party Manager and Co-manager has also been kept (DIAND, 2009).

In late 2009, the government of Canada released its Federal Framework for Aboriginal Economic Development designed to bring new economic opportunities to First Nations in a free market economy, in following the spirit of the McDiarmid decision. The policy emphasizes the need for investments by the private sector in First Nations’ projects and for entrepreneurial leadership in Aboriginal communities. As for the federal government, it wants to increase the communities’ accountability when managing their programs, to invest in human capital linked to such programs and to adopt a whole-of-government approach to economic development by involving more departments. As part of the strategy, Aboriginal entrepreneurs will be given easier access to credit (DIAND, 2009).

Related Cases

Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85

Williams v. Canada, [1992] 1 S.C.R. 877


-. 2005. “Top court to rule on band’s dispute with lumber company,” in CanWest News, August 19.

Department of Indian Affairs and Northern Development. 2009. Comprehensive Funding Arrangement National Model for Use with First Nations and Tribal Councils for 2009/2010. On-line. Retrieved on March 2, 2010.

Government of Canada. 2009. Federal Framework for Aboriginal Economic Development. On-line. Retrieved on March 2, 2009.

Paraskevas Joe. 2006. “Supreme court gives business right to garnish First Nations funding,” in Winnipeg Free Press, December 21.

Wandzura Anita G. 2007. “The Enforcement of Security Interests Against the Personal Property of First Nations Persons on a Reserve,” in Ottawa Law Review 39: 1-21.

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