Citation:2006TCC144
Date: 20060307
Docket: 2001-3004(IT)G
BETWEEN:
LAWRENCE HOULE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bell, J.
ISSUES
[1] The issues are:
1. Whether
the employment income the Appellant received from Stony Mountain Correctional
Institution and Aboriginal Legal Services of Winnipeg in his 1995, 1996, 1997,
1998 and 1999 taxation years was exempt from taxation pursuant to paragraph
81(1)(a) of the Income Tax Act (“Act”) on the basis
that it was personal property of an Indian situated on a reserve within the
meaning of section 87 of the Indian Act; and
2. Whether
the Appellant has an aboriginal or treaty right protected by section 35 of the Constitution
Act, 1982, which has been infringed by the Minister taxing his employment income
received in those taxation years and, if so, whether that infringement can be
justified.
[2] The Respondent
filed and served a Notice of Motion for:
1. an
order pursuant to Rules 58(1)(b), 65 and 4(1) of the Tax Court of Canada
Rules (General Procedure) striking out part of paragraph 7, paragraphs 10
and 14 and part of paragraph 15 of the Notice of Appeal and the related
particulars;
2. an order
granting such further and other relief as this Honourable Court considers just;
and
3. an order
granting the respondent costs of this motion in any event.
The ground for the motion is stated
as:
That the paragraphs disclose no
reasonable grounds for appeal as it is plain and obvious that the alleged
aboriginal right, characterized as it is in the negative, is not cognizable in
the jurisprudence.
[3] Section 19.2 of the
Tax Court of Canada Act reads as follows:
(1) If the constitutional validity,
applicability or operability of an Act of Parliament or its regulations is in
question before the Court, the Act or regulations shall not be judged to be
invalid, inapplicable or inoperable unless notice has been served on the
Attorney General of Canada and the attorney general of each province in
accordance with subsection (2).
(2) The notice must be served at least
10 days before the day on which the constitutional question is to be argued,
unless the Court orders otherwise.
(3) The Attorney General of Canada and the attorney general of each province are
entitled to notice of any appeal to the Federal Court of Appeal made in respect
of the constitutional question.
(4) the Attorney General of Canada and the attorney general of each province are
entitled to adduce evidence and make submissions to the Court in respect of
constitutional question.
(5) If the Attorney General of Canada
or the attorney general of a province makes submissions, that attorney general
is deemed to be party to the proceedings for the purpose of any appeal in
respect of the constitutional question.
The Respondent, at the hearing,
withdrew the aforesaid Notice of Motion.
[4] Respondent’s
counsel stated that he had sent a letter on December 19, 2005 to the Appellant with
respect to giving appropriate notice of the constitutional issue and stated
that the Appellant had said that he had not given such notice.
[5] Counsel referred to
Bekker v. R., 2004 DTC 6404 in which the Federal Court of Appeal said:
This Court
will not entertain a constitutional challenge in the absence of a Notice being
served on the Attorney General of Canada and on each Attorney General of the
Provinces … Such Notice is not a mere formality or technicality that can be
ignored or that the Court can relieve a party of the obligation to comply with:
see R. v. Fisher (1996), 96 D.T.C. 6291 (Fed. C.A.),
where this Court ruled that the Notice must be given in every case in which the
constitutional validity or applicability of a law is brought in question in the
manner described in section 57, including proceedings before the Tax Court
governed by the Informal Procedure. Indeed, a judge cannot, proprio motu,
raise a constitutional issue without giving a notice to the Attorney General:
see R. v. Campbell, [1997] 3 S.C.R. 3 (S.C.C.).
[6] Counsel then said
that this case was held in abeyance for another appeal, namely Benoit v.
Canada, 2003 F.C.A. 236 respecting Treaty Number 8. This was described in
the Federal Court of Appeal judgment as having been signed between the Crown
and the Cree and Dene peoples in 1899 and included a promise to the Aboriginal
signatories that they would not have any taxation imposed upon them at any time
for any reason. Counsel advised the Court that the Federal Court of Appeal
determined that there was no such Treaty ground and that the Supreme Court of
Canada had denied an appeal of that decision.
[7] Upon receiving a
letter on behalf of the Respondent requesting the setting of a Case Management
Conference to deal with pleadings and procedure involving the Notice of Appeal,
a hearing was held in Winnipeg, Manitoba, on July 19, 2005. This Court, by Order dated July 25, 2005 ordered that the
Appellant was required to amend his Notice of Appeal no later than August 19,
2005, that the Respondent could file an Amended Reply to the Notice of Appeal
no later than September 19, 2005 and if either party:
… desires to lead oral history evidence
at the trial, the parties shall serve a detailed summary of the oral history
evidence on the other party no later than September 30, 2005.
The Notice of Appeal was not amended, and accordingly
there was no need to amend the Reply to the Notice of Appeal. Further, there
was no summary of oral history as ordered by the Court.
[8] On the basis of the
foregoing authority I concluded that the Appellant could not proceed with an
argument respecting the Constitution Act matter referred to above. The
Appellant said that he had no dispute with that conclusion.
FACTS
[9] The Appellant, who
represented himself, stated that he performed counselling services, including
traditional ceremonies, medicine ceremonies, sweat lodge ceremonies and vision
quest ceremonies in the Stony Mountain Correctional Institution (“Stony Mountain”) at Stony Mountain, Manitoba, and at the
Aboriginal Ganootamaage Justice Services (“Aboriginal Services”) in Winnipeg. He stated that he had
been hired by and paid by the federal government, that the aboriginal inmates
for whom he performed services were from reserves in Manitoba and that they formed about 54
percent of the 600 inmates at Stony Mountain. He said that Stony Mountain was not on a reserve.
[10] The Appellant said
that he was not paid on a reserve by the federal government, that he lived at
Stony Mountain and in Winnipeg, outside reserves, and
that no income tax was withheld by the government on the amounts paid to him.
ANALYSIS AND CONCLUSION
[11] Section 87 of the Indian
Act reads as follows:
87. (1) Notwithstanding any other Act
of Parliament or any Act of the legislature of a province, but subject to
section 83, the following property is exempt from taxation, namely,
(a) the interest of an Indian or a band in reserve lands or
surrendered lands; and
(b) the personal property of an Indian or a band situated on
a reserve.
(2) No Indian or band is subject to taxation in respect of
the ownership, occupation, possession or use of any property mentioned in
paragraph (1)(a) or b) or is otherwise subject to taxation in
respect of any such property.
(3) No succession duty, inheritance tax or estate duty is
payable on the death of any Indian in respect of any property mentioned in
paragraphs (1)(a) or (b) or the succession thereto if the
property passes to an Indian, nor shall any such property be taken into account
in determining the duty payable under the Dominion Succession Duty Act,
chapter 89 of the Revised Statutes of Canada, 1952, or the tax payable under
the Estate Tax Act, chapter E-9 of the Revised Statutes of Canada, 1970,
on or in respect of other property passing to an Indian.
(emphasis added.)
[12] Section 81 of the Income
Tax Act reads:
81. (1) There shall not be included in
computing the income of a taxpayer for a taxation year,
(a) an
amount that is declared to be exempt from income tax by any other enactment of
Parliament, other than an amount received or receivable by an individual that
is exempt by virtue of a provision contained in a tax convention or agreement
with another country that has the force of law in Canada; …
[13] In Mitchell v. Peguis Indian
Band, [1990] 2 S.C.R. 85, La Forest, J., at 131 stated that:
In summary, the historical record makes it clear
that ss. 87 and 89 of the Indian Act, the sections to which the deeming
provision of s. 90 applies, constitute part of a legislative "package"
which bears the impress of an obligation to native peoples which the Crown has
recognized at least since the signing of the Royal Proclamation of
1763. From that time on, the Crown has always acknowledged that it
is honour-bound to shield Indians from any efforts by non-natives to
dispossess Indians of the property which they hold qua Indians, i.e., their
land base and the chattels on that land base.
It is also important to underscore the corollary
to the conclusion I have just drawn. The fact that the modern-day
legislation, like its historical counterparts, is so careful to underline that
exemptions from taxation and distraint apply only in respect of personal
property situated on reserves demonstrates that the purpose of the legislation
is not to remedy the economically disadvantaged position of Indians by
ensuring that Indians may acquire, hold, and deal with property in the
commercial mainstream on different terms than their fellow citizens. An
examination of the decisions bearing on these sections confirms that Indians
who acquire and deal in property outside lands reserved for their use, deal
with it on the same basis as all other Canadians.
(emphasis added.)
He quoted with
approval the following passage from Leonard v. R. In Right of British Columbia, [1984] 52
B.C.L.R. 389 at 395:
It
is a reasonable interpretation of the section to say that a tax exemption on
the personal property of an Indian will be confined to the place where the
holder of such property is expected to have it, namely on the lands which an
Indian occupies as an Indian, the reserve. Indians who surrender
their lands to non-Indians on lease give up the right to occupation, and when
they own or possess personal property on those surrendered lands I think that
they are in no different position than any other citizen.
[14] La Forest, J. further said,
at 132:
But I would reiterate that in the absence of
a discernible nexus between the property concerned and the occupancy of reserve
lands by the owner of that property, the protections and privileges of ss. 87
and 89 have no application.
I draw attention to these decisions by way of
emphasizing once again that one must guard against ascribing an overly broad
purpose to ss. 87 and 89. These provisions are not intended to
confer privileges on Indians in respect of any property they may acquire and
possess, wherever situated. Rather, their purpose is simply to insulate the
property interests of Indians in their reserve lands from the intrusions
and interference of the larger society so as to ensure that Indians are not
dispossessed of their entitlements. … The Alberta Court of Appeal … captures
the essence of the matter when it states, … in reference to s. 87,
that: "In its terms the section is intended to prevent
interference with Indian property on a reserve."
(emphasis added.)
[15] In Williams
v. Canada, [1992] 1 S.C.R. 877 at a unanimous Supreme Court of Canada
described the following method of determining where employment income is
situated:
The first step is to identify the various
connecting factors which are potentially relevant. These factors should then be
analyzed to determine what weight they should be given in identifying the
location of the property, in light of three considerations: (1) the
purpose of the exemption under the Indian Act; (2) the type of property
in question; and (3) the nature of the taxation of that
property. The question with regard to each connecting factor is
therefore what weight should be given that factor in answering the question
whether to tax that form of property in that manner would amount to the erosion
of the entitlement of the Indian qua Indian on a reserve.
Before stating the foregoing,
the Court said:
… it would be dangerous to balance connecting
factors in an abstract manner, divorced from the purpose of the exemption under
the Indian Act. A connecting factor is only relevant in so
much as it identifies the location of the property in question for the purposes
of the Indian Act.
[16] In Bell et al v. The
Queen, 2000 DTC 6365 (F.C.A.), the Federal
Court of Appeal stated that at 6370:
As this Court said in Folster v. The Queen,
97 DTC 5315, at page
5323, in a context of employment income, the connecting factor that best
indicates whether the personal property in question is within the commercial
mainstream or not is the nature of the employment and the circumstances
surrounding it. In other words, the character of this particular form of
property cannot be appreciated for the purpose of the section 87 tax exemption “without
reference to the circumstances in which it was earned”, such as the residence
of the taxpayer, the place where the work was done and the nature of the
benefit to the Reserve: …
[17] In Desnomie v. Canada, [2000] F.C.J. No. 528, the
Federal Court of Appeal affirmed the Tax Court’s decision that the relevant
connecting factors to be considered respecting employment income are:
(1) residence of
employer;
(2) residence of
employee;
(3) where the
work was performed;
(4) where the
employee was paid; and
(5)
the nature
of the services performed or the special circumstances in which they were
performed.
In that case the Court noted
that the trial judge said the underlying question to be answered was:
… would taxation of this income adversely affect
the property interest of the appellant qua Indian, or would it simply
serve to confer an economic benefit not available to others?
[18] Having regard to the
aforestated authorities and tests, the Appellant cannot succeed in his appeal.
He did not reside on a reserve, his employer was not located on a reserve, Stony Mountain, a penitentiary, is
not located on a reserve. The Appellant’s work was performed at Stony Mountain and at Aboriginal Services,
not on a reserve. Further, the Appellant’s bank account was not on a reserve
and he was not paid on a reserve.
[19] The Appellant was very
emotional at the end of the hearing when he perceived that he might not be
successful in this appeal. Although no evidence was presented to the Court
respecting any advice given to or received by him respecting non-taxability, he
seemed to have the expectation that no tax in respect of his employment income
would be exigible. However, he simply cannot meet the requisite test for
exemption from tax. In the circumstances, if he seeks to pursue what is referred
to as the “Fairness Package” under section 220 of the Act, I recommend,
having regard to the circumstances and the substantial amount of tax payable
and the years of the assessment under appeal, that the Minister of National
Revenue waive penalties and interest, the imposition of which appears to be of
great hardship to the Appellant.
[20] The appeal is dismissed.
Signed at Ottawa, Canada, this 7th day of
March, 2006.
"R.D. Bell"
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