Citation: 2011 TCC 162
Date: 20110324
Dockets:
2007-2533(IT)I, 2007-1330(IT)I
2007-1323(IT)I, 2007-964(IT)I
2007-819(IT)I, 2007-54(IT)I
BETWEEN:
DENISE DAVAD, GLORIA RUBY DREGER,
MARINA ELLIOTT, GERTRUDE JACKO,
TRACEY KING, EMIL KWANDIBENS,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
The Appellants Denise
Davad, Gloria Ruby Dreger, Marina Elliott, Gertrude Jacko, Tracey King and Emil
Kwandibens, unless otherwise indicated, worked at all relevant times at Miziwe
Biik Aboriginal Employment and Training (“Miziwe Biik”), a training and
employment placement services centre located in Toronto and providing services to
aboriginals
in the Greater Toronto Area (“GTA”).
[2]
From January 8 to
May 30, 2008, Emil Kwandibens worked at Aboriginal Legal Services of Toronto
(“ALST”), a legal services organization located in Toronto
and providing legal services to an aboriginal client base. From July 21 to
December 31, 2008, Emil Kwandibens worked at the Ontario Federation of
Indian Friendship Centres (“OFIFC”) also located in Toronto.
[3]
The Appellants were not
directly employed by Miziwe Biik. This was also the case for Emil Kwandibens while
he worked at ALST and OFIFC. Each Appellant had signed an employment agreement
with Roger Obonsawin, who carried on a placement business operating under the
name of Native Leasing Services (“NLS”). NLS assigned the Appellants to perform
duties for the aforementioned organizations under the direction and control of those
organizations’ management.
[4]
The principal issue in
these appeals is whether the employment income received by the Appellants from
NLS is exempt from income tax. Secondary tax issues were also raised in some of
the appeals. Counsel for all parties agreed that the resolution of these
secondary issues was entirely dependent on the outcome with regard to the main
issue. They presented no arguments on these secondary points. Therefore, the
secondary issues will be disposed of in the same manner as the main issue,
without specific reasons.
Factual Background
[5]
Each Appellant is
recognized as an “Indian” for the purposes of the Indian Act. They are also
all members of a First Nation.
[6]
The evidence shows that
the centre of vital interests of each Appellant was the GTA at all relevant
times. That is where the Appellants maintained their principal economic and
personal ties. The Appellants, with the exception of Emil Kwandibens, owned or
leased real property only in the GTA. Emil Kwandibens’ principal place of
residence was also Toronto, but he maintained a secondary dwelling on
a First Nation reserve, which he used on quarterly visits to the reserve.
[7]
The evidence also shows
that the Appellants maintained some cultural and family ties with band members
residing on First Nation reserves. These relationships were maintained through
visits to reserves two or three times per year. In the case of Emil Kwandibens,
his visits to a First Nation reserve appear to have been more frequent, perhaps
as many as six a year. The evidence was, however, imprecise on this particular
point.
[8]
The parties submitted a
Statement of Agreed Facts pertaining to NLS and Mr. Obonsawin and their
relationship with the Appellants and the First Nations. A summary of
facts substantially identical to the Statement of Agreed Facts was presented
and considered in a number of other appeals decided by this Court. It is therefore pointless
for me, in the absence of anything new on the subject, to summarize this
evidence insofar as it concerns NLS.
[9]
The fresh as amended
notices of appeal filed by the Appellants describe Miziwe Biik and its
activities in the following terms:
Formerly known as the Greater Toronto Aboriginal Management Board,
Miziwe Biik Aboriginal Employment and Training was created in 1991 to meet the
unique training and employment needs of aboriginal peoples. Miziwe Biik
provides the Greater Toronto Area’s Aboriginal community with
training initiatives and employment services in a supportive environment in
which people can affirm their native identities and develop to their full
potential. Miziwe Biik counsels Toronto urban native people on careers and
paths and opportunities, works with employers to secure employment
opportunities and delivers federal and provincial training programs.
Services provided by Miziwe Biik include employment counselling, assistance
with cover letter and resume writing, a computer resource centre, referrals to
employment supports network, health and other Aboriginal agencies, information
about living in Toronto, and
information about training, education and wage subsidies.
[Emphasis added.]
[10]
The evidence shows that
this is an accurate description of that organization and the services it offers
to aboriginals residing on a permanent or temporary basis in the GTA. The
testimonial evidence revealed that Miziwe Biik’s clients would often contact it
as soon as they arrived in Toronto because it was well known in aboriginal
communities that Miziwe Biik was the place where counselling, training and
other services could be obtained to facilitate the transition to living and
working in the GTA for aboriginals moving there from elsewhere in Canada. The
testimonial evidence of Denise Davad reveals that Miziwe Biik provides much
more than employment and training services to its aboriginal clients living in
the GTA. She testified that Miziwe Biik would provide its clients with
assistance in obtaining housing, childcare and a wide range of social and
cultural services adapted for delivery to aboriginals living in the GTA.
[11]
Some of the Appellants
testified that the aboriginal clients using Miziwe Biik’s services did not
always plan to permanently live and work in Toronto.
They could return to live on reserves once they acquired work skills that could
be put to productive use in their communities. The witnesses could not specify
the percentage of Miziwe Biik clients that returned to live on reserves
apparently because Miziwe Biik did not keep statistics on this. It was revealed
that Miziwe Biik did keep statistics on the success of its placement activities
and records of the nature and identity of the employers. These statistics and
records were not introduced in evidence by the Appellants. I draw the inference
that this information was not provided because it was not helpful to the
Appellants’ appeals and that substantially all of Miziwe Biik’s placements were
with employers located off‑reserve and principally in the GTA. This
inference is consistent with the following vision statement in the Miziwe Biik
2003/04 Annual Report:
Vision Statement
At Miziwe Biik Aboriginal Employment and Training, we believe that
securing a job is crucial to becoming a full participating member of the
community. A job is a passport to self-sufficiency. It brings pride, dignity, a
better quality of life and hope for the future.
We know that Aboriginal people in Toronto face
many barriers when attempting to join the work force. We are committed to
breaking down those barriers by providing Native people with access to training
programs and employment services, and by entering into partnerships within the
Aboriginal community and non-Aboriginal community.
[Emphasis added.]
[12]
It is also consistent
with the objects of Miziwe Biik stated in its letters patent as follows:
The objects of the Corporation are as follows:
1. to provide an equitable process for
responding to human resource development needs for persons in the Greater Toronto aboriginal community;
2. to assist in achieving self-determination for
persons in the Greater Toronto aboriginal community by providing support
for human resource recruitment, training, employment, education and community
development activities, while maintaining the aboriginal identity of such
persons;
3. to ensure that the mechanisms and processes
by which the services which the Corporation provides, or assists in providing,
are managed, operated, implemented and arranged through the infrastructures existing
within the Greater Toronto aboriginal community;
4. to undertake pro-active measures to improve
human resource recruitment, training and employment of members of the Greater
Toronto aboriginal community which are available as a result of employment
equity initiatives;
5. to determine the needs and priorities of the
labour force existing from time to time within the Greater Toronto aboriginal
community and to inform persons in the Greater Toronto area in general of such
needs and priorities, including workers, business persons, employers and
prospective employers by holding discussions and conferences and disseminating
information, whether by way of newsletter or otherwise;
6. to assess and approve employment service,
labour market operations and related human resource development plans and
programs which may exist from time to time for the training and development of persons
in the Greater Toronto aboriginal community;
7. to ensure that persons and organizations in
the Greater Toronto aboriginal community are aware of the Corporation’s
application process, priorities, policies, time frames, operations and other
relevant information which may be required for the Corporation to be of
valuable service to them;
8. to develop and establish appropriate criteria
for the provision by the Corporation of financial assistance and other services
to qualifying persons and organizations in the Greater Toronto aboriginal
community, including workers, business persons, employers and prospective
employers;
9. to ensure that the eligibility requirements
for programs and services provided by the Corporation reflect the needs of the
Greater Toronto aboriginal community;
10. to provide business development services in
order to assist aboriginal persons to establish new business ventures;
11. to communicate and liaise with persons in the
Greater Toronto area, whether aboriginal or non-aboriginal, and government
bodies, commissions, agencies and committees, whether specifically established
to assist aboriginal persons or otherwise;
and for such other complementary purposes not
inconsistent with these objects.
[Emphasis
added.]
[13]
Finally, the inference
is not inconsistent with what is shown by the list of Miziwe Biik’s community
partners,
which are all recognized to be employers based in the GTA and with which Miziwe
Biik arranged subsidized employment training programs for its clients. NLS
placed its employees directly with some of these community partners. The
appeals of some NLS employees who were placed with these same community
partners have been considered by this Court in a number of prior decisions.
[14]
The fresh as amended
notice of appeal filed on behalf of Emil Kwandibens describes ALST and its
activities as follows:
ALST is a non-profit organization that serves Canada’s largest urban Aboriginal
community. ALST was established February 21, 1990 to provide Aboriginal
individuals equitable treatment in the justice system, access to legal and
related resources within the justice system as well as an understanding of the
system and their options. ALST’s main [purpose] is to strengthen the capability
of the citizens of Aboriginal communities to handle legal issues, and offer the
community culturally based legal alternatives. They try to create a community
that deals with legal issues in a respectful, assertive and constructive way.
ALST provides several programs that assist Aboriginal individuals
who come who require legal assistance. These programs include a community legal
aid clinic, a Courtworker program and assistance in the Gladue Courts. ALST
also provides a Community Council Program, which is a criminal diversion
program for Aboriginal offenders – adult and youth – who
live in Toronto. The program
takes Aboriginal offenders out of the criminal justice system and brings them
before members of the Aboriginal community.
[15]
Testimonial and
documentary evidence presented in Robinson v. The Queen, decided by my
colleague Rowe D.J., was presented as evidence regarding ALST in these appeals. Emil Kwandibens
also testified on this point, and his testimony confirmed the accuracy of the foregoing
description of ALST.
[16]
The parties produced a
Statement of Agreed Facts on OFIFC
and its activities, the salient parts of which read as follows:
The Ontario Federation of Indian Friendship Centres
Incorporation
1. The Ontario Federation of Indian Friendship Centres (“OFIFC”), formerly called
the Federation of Indian Friendship Centres of Ontario, was established on
July 9, 1971 under the Ontario Corporations Act. It is a
not-for-profit private corporation.
2. The OFIFC is a provincial Aboriginal
organization representing the collective interests of twenty-nine member
Friendship Centres located in towns and cities throughout the province of Ontario.
3. The OFIFC administers a number of programs and
services to member Friendship Centres, urban Aboriginal Service providers and a
few First Nations in the following areas: employment, justice, children and
youth, addictions and mental health, seniors, disabled, diabetes education,
culture, recreation, healthy babies, pre-natal, fetal alcohol spectrum
disorder, education, training, sensitivity awareness, healing and wellness,
government liaison, and policy and research.
[Footnotes
omitted.]
[17]
The fresh as amended
notices of appeal filed on behalf of Emil Kwandibens, Denise Davad, Tracey King
and Gloria Ruby Dreger describe their duties while they were working at Miziwe
Biik as follows:
· client intake and employment counselling; [except Tracey King]
· providing employment counselling to clients, as well as assistance
in the identification of their employment and training needs;
· referrals to specific employment opportunities and training
programs;
· providing continued counselling to, and follow-up of clients placed
in employment training;
· outreach to Native Community;
· facilitating workshops for Employment Skills, Resumes, Interviewing;
· responsible for inputting client information. [except Tracey King]
[18]
The testimonial
evidence of these witnesses confirmed that substantially all of these services
and those described in paragraphs 19 and 20 below were performed by the
Appellants from Miziwe Biik facilities in the GTA and that these descriptions
of their duties are accurate.
[19]
The fresh as amended
notice of appeal filed on behalf of Gertrude Jacko describes her duties as
follows:
· publishing bi-weekly employment newsletter: OPPORTUNITIES;
· researching job postings;
· marketing the newsletter;
· networking with other native agencies;
· maintained database of subscribers and mail out.
[20]
The fresh as amended
notice of appeal filed on behalf of Marina Elliott describes her duties as
follows:
From 1998 to April 1, 1999 the Appellant performed the duties
of an Administrative Assistant. These duties included:
· preparing and typing various correspondence, reports and forms on a
timely basis;
· maintaining and updating job boards, resource material, resource
library and other public notice boards;
· answering incoming calls and making the appropriate referrals or
taking messages;
· receiving, recording and directing to appropriate staff all
incoming/outgoing mail, facsimile, couriers, etc.;
· photocopy and collate documents for distribution to staff;
· providing assistance to staff and clients when needed.
Starting April 1, 1999 the Appellant performed the duties of a
Finance Administrator. These duties included:
· performing bookkeeping, monthly financial reports, banking,
cashflows/budgets;
· maintaining personal records of staff;
· attending board meetings and taking minutes;
· payroll deposits;
· preparing financial reports to funders.
[21]
In the case of Emil
Kwandibens, his duties at ALST and OFIFC are accurately described in the fresh
as amended notice of appeal filed on his behalf, as follows:
While placed at ALST the Appellant performed the duties of a
Community Council Liaison. The Community Council is a criminal diversion
program for Aboriginal offenders – adult and youth – who
live in Toronto. The project
takes Aboriginal offenders out of the criminal justice system and brings them
before members of the Aboriginal community. The duties of a Case Worker
include:
· maintaining a case load of clients;
· reviewing Council decisions with each client upon completion of
their Community Council hearing;
· providing necessary referrals to appropriate agencies/resources;
· acting as a liaison between referral sources and Community Council
Program in order to assist clients successfully comply with Council decisions;
· assisting clients in crisis on an as-needed basis;
· supervising and assisting individual clients with their Community Council
work;
· maintaining detailed case files on each client;
· liaising with all other staff persons at ALST on behalf of clients;
· maintaining and assisting the Program Coordinator and Director with
the inputting and maintenance of the statistical database;
· maintaining and preparing reports, forms and documents as required;
· attending and facilitating Community Council hearings as needed and
directed;
· reporting to the Program Coordinator and Program Director on a daily
basis;
· becoming very familiar with the dominant justice system and
endeavour to learn on an ongoing basis, the concepts of traditional Aboriginal
Justice;
· attending conferences and gatherings and speaking publicly about the
Community Council Program;
· assisting Program staff in the planning and hosting of advisory
committee meetings, annual retreats and client honouring ceremony.
While placed at OFIFC the Appellant performed the duties of an
Aboriginal Sport and Recreation Program Trainer. These duties included:
· promoting a philosophy of Aboriginal culture and community
development that encourages healthy lifestyles through sport, recreation, and
fitness;
· through consultation with the Friendship Centres’ programs, develop
an ongoing analysis of the training and educational needs;
· developing an inventory of resources which would assist in
responding to the development of the training requirements;
· developing an effective training manual;
· ensuring the effective coordination of Friendship Centres’ staff
training;
· conducting an evaluation of all completed Program training;
· conducting training sessions with all Friendship Centres;
· participating actively as a member of the OFIFC training team;
· maintaining regular and effective verbal and written communications
with the Training Director;
· maintaining current knowledge, skills, attitudes and values
regarding new and developing training concepts;
· developing appropriate materials and visual aids to assist in
achieving the above;
· maintaining ongoing communications with Native and Non-Native
organizations/ services, to ensure exchanges, information sharing, etc.
Analysis
[22]
Subsection 81(1) of the
Income Tax Act (“ITA”), insofar as it is relevant to these
appeals, reads as follows:
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;
. . .
[23]
The statutory exemption
claimed by the Appellants in these appeals is set out in paragraph 87(1)(b)
of the Indian Act as follows:
87(1) Notwithstanding any other Act of Parliament or any Act of the
legislature of a province, but subject to section 83 and section 5 of the First
Nations Fiscal and Statistical Management Act, the following property is
exempt from taxation:
. . .
(b) the personal property of an Indian or a band situated on
a reserve.
[24]
A determination of
whether an Indian’s employment income falls within the statutory exemption, in
light of the factual findings of the Court, must be based on what has come to
be known as the “connecting factors” test or analysis (hereinafter referred to
as the “connecting factors test”) initially established by the Supreme Court of
Canada in Williams v. Canada, [1992] 1 S.C.R. 877, and further
considered, refined and applied to employment income by the Federal Court of
Appeal in the following cases: Canada v. Folster, [1997] 3 F.C. 269; Southwind
v. The Queen, 98 DTC 6084; Amos et al. v. The Queen, 98 DTC 1740; Bell
et al. v. The Queen, 2000 DTC 6365; Desnomie v. R., [2000] 3 C.T.C.
6; Monias v. R., [2001] 3 C.T.C. 244; The Queen v. Shilling,
2001 FCA 178; Canada v. Akiwenzie, 2003 FCA 469; Horn v. Canada,
2008 FCA 352.
[25]
Counsel for the Appellants
indicated at the outset of the hearing that he would not be disputing that the
connecting factors test is to be applied for the purposes of section 87 of the Indian
Act. Nonetheless, the Appellants submit that the section 87 exemption
applies when the test is properly applied to their circumstances.
[26]
Counsel for the Appellants
argues that the case law establishes that the connecting factors test is a flexible
one that allows different weight to be given to the relevant factors depending
on the particular facts and circumstances of the case. I do not dispute this proposition
as a general statement only. Counsel further contends that the case law also establishes
that the location of the employer is a relevant factor as well. Again, I do not
disagree with this proposition as a general statement only.
Location or Residence of the Employer
[27]
The Appellants submit
that the residence of the employer has been recognized as an important
connecting factor in the case law. The suggestion is made that because NLS, the
direct employer of the Appellants in the instant cases, is resident on the Six
Nations reserve, the Appellants’ employment income should be found to be
situated on a reserve after proper weight is given to this factor.
[28]
I agree that the
location of the employer is one of the connecting factors that I must weigh in
considering the evidence. However, the facts concerning NLS and Mr. Obonsawin
submitted in the Statement of Agreed Facts have been reviewed in a number of
cases involving appellants living and working in an urban environment in
circumstances very similar to those described in the factual background as
summarized above.
[29]
I adopt the observations
of my colleague Woods J. in Hester v. The Queen, who disposes of
the argument as follows:
26 As for facts concerning NLS and Mr. Obonsawin, the
parties submitted an agreed statement of facts. Most of the relevant facts have
been reviewed in other cases, notably in Horn, and it is not necessary
for me to review them again here.
27 Based on the evidence before me, the facts in these
appeals do not warrant a different outcome than that reached in Shilling
and Horn.
. . .
29 I would note in particular the following comments of the
Federal Court of Appeal in Shilling:
[62] In this case, only the location of the employer’s head
office connects the respondent’s employment income to a reserve, and there is
no evidence to justify giving this factor the significant weight that the
learned Trial Judge attached to it. On the other hand, the location and nature
of the employment, which have been held to be generally the most important
factors in a connecting factors analysis in employment income cases, as well as
the respondent’s place of residence, indicate that Ms. Shilling’s
employment income was situated off-reserve.
[63] The factors connecting the employment income with an off‑reserve
location outweigh those connecting it with a reserve. Therefore, Ms. Shilling’s
employment income for 1995 and 1996 is not situated on a reserve and is not
exempt from taxation under paragraph 87(1)(b) of the Indian Act.
30 The Horn decision is also relevant because it
filled in some evidentiary gaps regarding NLS that were missing in Shilling.
Based on the larger evidentiary record concerning NLS, Horn concludes
that the relationship with NLS is not a strong connecting factor. Reproduced
below is a brief excerpt from the trial court decision in Horn by Phelan
J. (2007 FC 1052, 2007 DTC 5589).
[96] The benefits of NLS to the Six Nations Reserve are not
overwhelming but are real. The majority of the administrative staff were
members of the Six Nations, some of whom lived on the reserve. NLS paid rent to
the reserve as well. However, these expenditures for rent and salary/benefit
were modest amounts globally (approximately $240,000) and only a small
percentage of NLS’s gross income (approximately 2%).
[97] Therefore, while NLS’s location is on the Six Nations
Reserve, these other circumstances indicate that this factor is not
particularly weighty. It is of almost little weight to Horn as she is not a
member of the Six Nations nor does her band at Kahnawake receive any direct
benefits from NLS’s location on the Six Nations Reserve.
[30]
Little weight should be
given to the location of the employer in the instant appeals because the evidence
shows that the employment relationship between the Appellants and NLS was bare
minimum. Each Appellant was assigned to work at the organizations mentioned
earlier, which were all located in the GTA, under the direction and supervision
of those organizations’ personnel. Denise Davad confirmed in her testimony that
her employment relationship with NLS was terminated in 2006 and that she became
a direct employee of Miziwe Biik, with no changes in her duties, functions, benefits
or anything else, other than the fact that her employment income was now treated
as taxable and Miziwe Biik collected and remitted all statutory payroll
deductions.
Residence of the Appellants
[31]
None of the Appellants
lived on a reserve. The centre of their vital interests at all relevant times
was the GTA. The Appellants visited their reserves much in the same way that other
taxpayers may, on vacations or on statutory holidays, return to the communities
where they were born or raised. For example, it is common knowledge, although
less true in recent times, that many Newfoundlanders move out West to find
employment in the oil and mining industries but return to the communities where
family members live to take part in family activities, renew acquaintances and
reimmerse themselves in the communities that form part of their heritage as
Newfoundlanders. These Canadians generally reside and pay taxes where they
work, although they maintain strong social and cultural ties with the
communities of their birth. The frequency of Emil Kwandibens’ visits to a First
Nation reserve may have been greater than those of the other Appellants, but
this is not sufficient to situate his employment income on the reserve that he
visited and on which he had a secondary dwelling made available to him.
Nature and Location of and Circumstances Surrounding
the Work
[32]
Each Appellant reported
to work and lived in the GTA. There is little evidence to suggest that the
Appellants performed any of their work directly on, or for the benefit of, a
reserve. The nature of their work was to provide employment placement,
training, legal and other social services to aboriginals living in the GTA. As
stated in the Shilling case above:
51 . . . As the Trial Judge found, merely because
the nature of employment is to provide services to Indians does not connect
that employment to an Indian reserve as a physical place.
[33]
The Respondent brought
a motion to have Denise Davad’s appeal dismissed for the 2006 taxation year on
the grounds that she filed her notice of appeal prematurely with this Court. I
do not have to decide this preliminary matter because in any event I would
dismiss her appeal for that year for the substantive reasons set out above.
[34]
For these reasons, the
appeals of the Appellants are all dismissed without costs.
Signed at Ottawa, Ontario, this 24th day of March 2011.
"Robert J. Hogan"
Email this Content