OTTAWA - The government's decision to have an outside manager handle finances for an embattled Ontario reserve was illegal, the Federal Court ruled Wednesday.

The ruling comes after Attawapiskat First Nation legally challenged the government's decision to appoint a consultant during the midst of a housing crisis at the reserve located along the shores of James Bay.

In its decision, the court said the government's "remedy" to resolve Attawapiskat's housing crisis - the third party manager - was "unreasonable" and "contrary to law."

"While the AFN (Attawapiskat) were having trouble addressing the housing crisis, what they lacked was not the ability to manage their finances, in which case a TPM (third party manager) may have been an appropriate and reasonable remedy," the ruling states.

The NDP and Liberals now say the feds owe Attawapiskat an apology.

"They blamed the leadership and removed a democratically elected band council," said Charlie Angus, the NDP MP for the area. "That decision shows that these guys are not only ruthless, but they are incompetent on this file."

The government, who removed the third party manager from his post in April, said it will examine the ruling.
"We are disappointed with the court's decision and will review it to determine the appropriate next steps," said Jason MacDonald, a spokesman for Aboriginal Affairs Minister John Duncan.

This winter, Prime Minister Stephen Harper raised concerns about "results" in the community because he said $90 million had been spent there since he came to office.

But Wednesday's court ruling said the government did not "produce evidence of mismanagement or incorrect spending" at Attawapiskat. It also said the $90 million figure could not be "related exclusively to the funds made available for housing repair or reconstruction."

Spence maintains her community is still suffering because several community members live in temporary housing units.

Results of a separate government-ordered audit reviewing reserve spending from 2005 to November 2011 are expected soon.