Benedict v. Ohwistha Capital Corp., 2014 ONCA 80

• Judge: Feldman, MacFarland and Strathy, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 05, 2013
• Jurisdiction: Ontario
• Citations: 2014 ONCA 80;(2014), 315 O.A.C. 96 (CA)

Benedict v. Ohwistha Capital Corp. (2014), 315 O.A.C. 96 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. JA.038

Lloyd Benedict (respondent) v. Ohwistha Capital Corporation (appellant)

(C53282; 2014 ONCA 80)

Indexed As: Benedict v. Ohwistha Capital Corp.

Ontario Court of Appeal

Feldman, MacFarland and Strathy, JJ.A.

January 29, 2014.

Summary:

Section 89(1) of the Indian Act prohibited an Indian from granting security on any of his or her real or personal property on the reserve except to another Indian. Section 89(2) allowed a person who had sold a chattel to an Indian but retained title or the right to possession, to exercise his rights against the chattel even if the chattel was on the reserve. Benedict (an Indian who resided on a reserve) sought a business loan of $125,000 from the Ohwistha Capital Corporation (OCC). The loan was structured as a conditional sale of chattels. Benedict sold certain chattels that he owned to OCC, who then sold them back to Benedict by conditional sale. Under the fiction of paying for those chattels, OCC loaned Benedict the $125,000. When Benedict defaulted on the loan, OCC seized the chattels from Benedict's property on the reserve. Benedict, relying on s. 89(1), denied OCC's right to do so and sued for damages. OCC argued that the transaction was saved by s. 89(2).

The Ontario Superior Court, in a decision reported at [2011] O.T.C. Uned. 18, found OCC liable for conversion. The court held that OCC's seizure of the chattels contravened s. 89(1) and was not allowed under s. 89(2). OCC appealed.

The Ontario Court of Appeal dismissed the appeal.

Creditors and Debtors - Topic 2252

Seizure or attachment of debtor's property - Exemptions - Indians - [See Indians, Inuit and Metis - Topic 821 ].

Indians, Inuit and Métis - Topic 821

Personal or legal rights - Property exempt from alienation - General - Section 89(1) of the Indian Act prohibited an Indian from granting security on any of his or her real or personal property on the reserve except to another Indian - Section 89(2) allowed a person who had sold a chattel to an Indian but retained title or the right to possession, to exercise his rights against the chattel even if the chattel was on the reserve - Benedict (an Indian who resided on a reserve) sought a business loan of $125,000 from the Ohwistha Capital Corporation (OCC) - The loan was structured as a conditional sale of chattels - Benedict sold certain chattels that he owned to OCC, who then sold them back to Benedict by conditional sale - Under the fiction of paying for those chattels, OCC loaned Benedict the $125,000 - When Benedict defaulted on the loan, OCC seized the chattels from Benedict's property on the reserve - Benedict, relying on s. 89(1), denied OCC's right to do so and sued for damages - OCC argued that the transaction was saved by s. 89(2) - The trial judge found OCC liable for conversion, holding that its seizure of the chattels contravened s. 89(1) and was not allowed under s. 89(2) - The Ontario Court of Appeal dismissed OCC's appeal - The purpose of s. 89(1) was to protect aboriginals from being exploited by non-aboriginals and losing their on-reserve property - It also had a significant discriminatory effect on the ability of aboriginals to access credit - If it was possible to interpret s. 89(2) so as to mitigate this effect and to facilitate access to credit, it might be appropriate to do so - However, it could not be done where the transaction under scrutiny could not come within s. 89(2) because it was effectively a sham - That could give rise to the very abuses the legislation was designed to prevent.

Cases Noticed:

Mitchell and Milton Management Ltd. v. Peguis Indian Band et al., [1990] 2 S.C.R. 85; 110 N.R. 241; 67 Man.R.(2d) 81, refd to. [para. 15].

McDiarmid Lumber Ltd. v. God's Lake First Nation et al., [2006] 2 S.C.R. 846; 356 N.R. 1; 212 Man.R.(2d) 7; 389 W.A.C. 7; 2006 SCC 58, refd to. [para. 16].

Statutes Noticed:

Indian Act, R.S.C. 1985, c. I-5, sect. 89(1), sect. 89(2) [para. 4].

Authors and Works Noticed:

Canada, Royal Commission of Aboriginal Peoples Report, Restructuring the Relationship (1996), vol. 2, pp. 906, 907 [para. 19]; 916, 917 [para. 21]; 927 [para. 22].

Counsel:

Charlene Desrochers, for the appellant;

Graeme A. Hamilton and Donald R. Fiske, for the respondent.

This appeal was heard on June 5, 2013, before Feldman, MacFarland and Strathy, JJ.A., of the Ontario Court of Appeal. Feldman, J.A., delivered the following judgment for the court on January 29, 2014.