Date:
20121024
Docket: A-309-11
Citation: 2012 FCA 266
CORAM: PELLETIER
J.A.
DAWSON J.A.
STRATAS
J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Appellant
and
LAWRENCE ABRAHAM, WALLACE
ABRAHAM, WALTER ABRAHAM, ANTHONY ALEXANDER, HENRY BOUBARD, RICHARD BOUCHIE,
NEIL BOULETTE, GEORGE BRUYERE, DANIEL BUNN, JASON BUNN, JOSEPH BUNN, EVA MARIE
COURCHENE, HAROLD COURCHENE (DECEASED), JASON COURCHENE, JONATHON COURCHENE,
LARRY COURCHENE, REINIE COURCHENE, WAYNE COURCHENE, BARRY FONTAINE, CURTIS
FONTAINE, FELIX FONTAINE (DECEASED), GEORGE FONTAINE, HARRY FONTAINE, KEITH
FONTAINE, NELSON FONTAINE, NORMAN FONTAINE, PETER FONTAINE (DECEASED), RONALD
FONTAINE, WILFRED LEO FONTAINE (DECEASED), BRADLEY FOUNTAIN, BRIAN DOUGLAS
FOUNTAIN (DECEASED), DOUGLAS FOUNTAIN (DECEASED), MARK FOUNTAIN, ADRIAN
GUIMOND, ALLAN GUIMOND, NORBERT GUIMOND, RANDAL PAUL GUIMOND, TERRY GUIMOND,
DARRIN HATHER, ARTHUR HENDERSON, CHRIS HENDERSON, DONALD HENDERSON, FLOYD
HENDERSON, JOHN HENDERSON, ALLAN HOUSTON, CLIFFORD HOUSTON, EDGAR HOUSTON, RAYMOND
HOUSTON, VINCENT KUZDAK, HAROLD LAVADIER, ROGER LUSTY, KELVIN PAKOO, MARK
PAKOO, NEIL PAKOO, RODERICK PAKOO, JOHN GLEN SANDERS, LEE GLENN SANDERSON,
JAMES SETTE, HANK SIEGAL, WALTER SOUKA, JASON STARR, JOSEPH STRONGQUILL,
DOUGLAS SWAMPY, RICHARD SWAMPY, KELLY ZACHARIAS
Respondents
REASONS
FOR JUDGMENT
STRATAS J.A.
[1]
This
is an appeal from the judgment dated June 1, 2011 of the Federal Court (per
Justice Campbell): 2011 FC 638.
[2]
The
Federal Court quashed a decision of a delegate of the Minister (the “Delegate”)
under subsection 152(4.2) of the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.). The Delegate had exercised her discretion against reassessing the
respondents’ 1985-1998 tax returns.
[3]
The
respondents had asked the Delegate for those reassessments, relying upon
section 87 of the Indian Act, R.S.C. 1985, c. I-5 – an exemption
applicable in some circumstances to aboriginal peoples and/or their
property. They sought reassessments to exempt employment income they earned in
those years at a pulp mill.
[4]
The
Federal Court reviewed the Delegate’s decision on the standard of review of
correctness and quashed it, finding that the respondents were entitled, at all
times, to the section 87 exemption.
[5]
For
the reasons set out below, I would allow the appeal and restore the Delegate’s
decision. The applicable standard of review of the Delegate’s decision is
reasonableness and the Delegate’s decision is reasonable.
A. Facts
(1) Background
[6]
The
respondents are all Sagkeeng Band members who were employed at the Tembec Pulp
Mill in Pine Falls, Manitoba.
[7]
The
Band members have a long history of employment at the mill. In 1926, based on a
promise that Band members would be employed in the mill, the Band surrendered
lands for the purposes of building the mill. The mill was built and, consistent
with the promise, Band members have worked in the mill until its closure.
(2) The
respondents’ requests for reassessment under subsection 152(4.2) of the Income
Tax Act
[8]
In
2003, the respondents asked the Minister to issue reassessments for every
taxation year back to 1985, recalculating their tax on the basis that their
employment income from the mill was exempt under section 87 of the Indian
Act. The request for reassessment concerning the more recent taxation years
fell within the normal reassessment period. The request for reassessment
concerning the earlier taxation years fell outside of the normal reassessment
period. For those years, subsection 152(4.2) of the Income Tax Act, as
it read at the time, applied.
[9]
Subsection
152(4.2) of the Income Tax Act is part of the taxpayer relief sections
of the Act. As can be seen from the text of subsection 152(4.2), set out below,
the Minister has the discretion to reassess an individual after the expiration
of the normal reassessment period for a year, if the individual requests the
reassessment to reduce the tax payable or permit a claim for a tax refund for
that year. When the Minister exercises that discretion in the taxpayer’s
favour, the taxpayer is relieved from the usual requirement that a request for
a reassessment can only be made within a particular period of time.
[10]
Subsection
152(4.2) (the version enacted in S.C. 1994, c. 7, the relevant version in this
case) provides as follows:
|
152. (4.2)
Notwithstanding subsections (4), (4.1) and (5), for the purpose of
determining, at any time after the expiration of the normal reassessment
period for a taxpayer who is an individual (other than a trust) or a
testamentary trust in respect of a taxation year,
(a) the amount of any refund
to which the taxpayer is entitled at that time for that year, or
(b) a reduction of an amount
payable under this Part by the taxpayer for that year,
the
Minister may, if application therefor has been made by the taxpayer,
(c) reassess tax, interest or
penalties available under this Part by the taxpayer in respect of that year,
and
(d) redetermine the amount of
tax, if any, deemed by subsection 119(2), 120(2), 120.1(4), 122.2(1),
122.5(3), 127.1(1), 144(9) or 210.2(3) or (4) of this Act or subsection
122.4(3) of the Income Tax Act, chapter 148 of the Revised Statutes of
Canada, 1952, as it applied to taxation years ending before 1991, to have
been paid on account of the taxpayers tax under this Part for that year.
|
152. (4.2) Malgré les
paragraphes (4), (4.1) et (5), pour determiner à un moment donné après la fin
de la période normale de nouvelle cotisation applicable à un contribuable –
particulier, autre qu’une fiducie, ou fiducie testamentaire – pour une année
d’imposition le remboursement auquel le contribuable a droit à ce moment pour
l’année ou la réduction d’un montant payable pay le contribuable pour l’année
en vertu de la présente partie, le minister peut, sur demande di
contribuable:
a)
établir
de nouvelles cotisations concernant l’impôt, les interest ou les pénalités
payables par le contribuable pour l’année en vertu de la présente partie;
b)
déterminer
de nouveau l’impôt qui est repute, en application des paragraphes 119(2),
120(2), 120.1(4), 122.2(1), 122.5(3), 127.1(1), 144(9) ou 210.2(3) ou (4) de
la présente loi ou du paragraphe 122.4(3) de la Loi de l’impôt sur le
revenue, chapitre 148 des Statuts révisés du Canada de 1952, dans sa version
applicable aux années d’imposition se terminant avant 1991, avoir été payé au
titre de l’impôt du contribuable pour l’année en vertu de la présente partie.
|
[11]
The
basis for the respondents’ requests in 2003 for reassessments for every
taxation year back to 1985 was section 87 of the Indian Act. In their
view, while in every year from 1985 they had paid tax on income from employment
at the mill, that income was exempt from taxation under that section.
[12]
Section
87 of the Indian Act provides as follows:
|
87. 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:
(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.
|
87. (1) Nonobstant toute autre loi fédérale ou
provinciale, mais sous réserve de l’article 83 et de l’article 5 de la Loi
sur la gestion financière et statistique des premières nations, les
biens suivants sont exemptés de taxation:
a) le droit
d’un Indien ou d’une bande sur une réserve ou des terres cédées;
b) les
biens meubles d’un Indien ou d’une bande situés sur une réserve.
(2) Nul Indien ou bande n’est assujetti à une
taxation concernant la propriété, l’occupation, la possession ou l’usage d’un
bien mentionné aux alinéas (1)a) ou b) ni autrement soumis
à une taxation quant à l’un de ces biens.
(3) Aucun
impôt sur les successions, taxe d’héritage ou droit de succession n’est
exigible à la mort d’un Indien en ce qui concerne un bien de cette nature ou
la succession visant un tel bien, si ce dernier est transmis à un Indien, et
il ne sera tenu compte d’aucun bien de cette nature en déterminant le droit
payable, en vertu de la Loi fédérale sur les droits successoraux,
chapitre 89 des Statuts revisés du Canada de 1952, ou l’impôt payable, en
vertu de la Loi de l’impôt sur les biens transmis par décès,
chapitre E-9 des Statuts revisés du Canada de 1970, sur d’autres biens
transmis à un Indien ou à l’égard de ces autres biens.
|
(3) Related proceedings in
the Tax Court and this Court: the Boubard case
[13]
Roughly
at the same time the respondents were pursuing their request for reassessments
on the basis of section 87 of the Indian Act, some of them were parties in
Boubard v. Canada, 2008 TCC 133, aff’d 2008 FCA 392. At issue in Boubard
was whether the respondents’ employment income from the mill was exempt from
taxation in the 2000-2002 taxation years by virtue of section 87 of the Indian
Act. The respondents succeeded.
[14]
After
Boubard, the 2000-2002 taxation years were resolved; those taxation
years before 2000 remained in issue in the subsection 154(4.2) request.
(4) The
administrative decisions
[15]
The
respondents’ request was considered through two levels of consideration.
Ultimately, on November 12, 2009, the Delegate decided that the respondents
were entitled to taxpayer relief under subsection 152(4.2) for the 1999
taxation year and following, but not for the 1985-1998 taxation years.
[16]
The
detailed basis for her decision will be outlined below. Broadly speaking, she
was not satisfied that the Minister would have exempted the respondents’
employment income from tax under section 87 of the Indian Act in the
1985-1998 taxation years.
(5) Proceedings
in the Federal Court
[17]
As
mentioned above, the Federal Court quashed the Delegate`s decision. The
Federal Court reviewed the Delegate’s decision on the standard of review of
correctness. It found that the respondents were entitled, at all times, to the
section 87 exemption and so they were entitled to reassessments in all of the
taxation years in issue.
B. Analysis
(1) The
standard of review
[18]
On
appeal from the Federal Court’s disposition of the application for judicial
review, this Court`s task is to determine whether the Federal Court judge
correctly determined the standard of review and applied it properly: Canada
Revenue Agency v. Telfer, 2009 FCA 23.
[19]
Relying
on the legal nature of the question before the Delegate, the Federal Court
found that the standard of review was correctness.
[20]
The
respondents submit that the Federal Court chose the proper standard of review.
They submit that the Delegate’s decision should be reviewed under the
correctness standard of review.
[21]
The
respondents base their submission on a parsing of the task performed by the
Delegate under subsection 152(4.2) of the Income Tax Act. They submit
that the Delegate’s decision involved two different steps.
● The
first step was an assessment of the state of the law under section 87 of the Indian
Act in each year during the period in question. The aim of this step was
to assess whether the respondents were entitled to the tax exemption. This was
mainly a question of interpreting the state of the jurisprudence under section
87.
● The
second step was whether relief should be given under section 87 of the Indian
Act. This was mainly a discretionary step.
[22]
The
respondents submit that what is truly in issue in this case is the first step.
They say that step involved only legal interpretation. Accordingly, in their
submission, the standard of review is correctness.
[23]
In
adopting correctness as the standard of review, the Federal Court found that
the question before the Delegate was the respondents’ legal entitlement to
relief under section 87 of the Indian Act. As this was a legal question,
the correctness standard applied (at paragraph 13).
[24]
I
disagree with the Federal Court. I do not accept that the question before the
Delegate was the respondents’ legal entitlement to relief under section 87 of
the Indian Act.
[25]
I
also disagree with the respondents. I do not accept that the Delegate’s
decision should be parsed into two different steps for the purposes of
determining the standard of review.
[26]
Subsection
152(4.2) of the Income Tax Act does not give the respondents an
entitlement to relief. Instead, it only gives them a right to ask the Minister
to exercise his discretion to reassess after the expiration of the normal
reassessment period.
[27]
It
must be recalled that under subsection 152(8) of the Income Tax Act, in
the absence of a reassessment following a timely objection or a successful
appeal, an assessment is final and binding. Later, the taxpayer may discover an
error in the assessment, but it is too late – the taxpayer has no entitlement
to have the error corrected. Rather, recourse is to be had under subsection
152(4.2) of the Income Tax Act – a request, not for an entitlement, but
for an exercise of discretion. There is nothing in subsection 152(4.2) that
requires the Minister to exercise his discretion in favour of the taxpayer if
the taxpayer would be entitled to a tax benefit if he or she claimed within the
regular reassessment period. In the words of this Court in Lanno v. Canada (Customs and Revenue Agency), 2005 FCA 153 at paragraph 6, “[t]he granting of
relief is discretionary, and cannot be claimed as of right.”
[28]
In
Armstrong v. Canada, 2006 FCA 119 at paragraph 29, this Court has held
that the discretionary assessment of the Minister under subsection 152(4.2) is
a broad one – whether a reassessment is warranted or appropriate in the
circumstances.
[29]
Parsing
the subsection into two parts, a legal part and a discretionary part, as the
respondents urge transforms the decision under subsection 152(4.2) from a
single one of broad discretion into a two-part decision, one of legal
entitlement and one of discretion. That is contrary to the above analysis and
the thrust of this Court’s decisions in Armstrong and Lanno.
[30]
In
addition, even if it were acceptable to bifurcate the Minister’s task under
subsection 152(4.2) of the Income Tax Act into two steps, the first
step, the supposedly legal step, is not a pure question of law. It is a
question of mixed fact and law. In this case, the Delegate had to interpret the
state of the law under section 87 of the Indian Act and assess how it
applied to the factual circumstances of the respondent.
[31]
Seen
in this way, subsection 152(4.2) of the Income Tax Act is like any other
section that vests a broad discretion in a decision-maker, a discretion founded
upon legal and factual matters. Here, the Minister (or, in this case, the
Delegate) must, in the words of section 71 of Information Circular
07-1-Taxpayer Relief Provisions, be “satisfied that such a refund or
reduction would have been made if the return or request had been filed on time”
– this is the component in the discretion that has some legal content – and may
take into account a number of other factors, many of which are also enumerated
in the Information Circular.
[32]
Normally,
exercises of discretion of this sort are subject to reasonableness review: Halifax (Regional Municipality) v. Nova Scotia (Human Rights Commission),
2012 SCC 10, [2012] 1 S.C.R. 364 at paragraph 27; Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at paragraph 53.
[33]
Consistent
with these Supreme Court decisions, this Court has twice adopted the
reasonableness standard in reviewing exercises of discretion under subsection
152(4.2) of the Income Tax Act: Lanno, supra at paragraph
7; Hoffman v. Canada (Attorney General), 2010 FCA 310 at paragraph 5.
Where the jurisprudence has already determined “in a satisfactory manner the
degree of deference to be accorded with regard to a particular category of
question,” the issue of standard of review is settled: Dunsmuir, supra
at paragraph 62. In my view, the above analysis confirms that Lanno and Hoffman
have satisfactorily determined the standard of review for exercises of
discretion under subsection 152(4.2) of the Income Tax Act.
[34]
The
respondents submit that this Court’s decision in Bozzer v. Canada (Attorney General), 2011 FCA 186 is directly on point and requires that a
correctness standard be adopted in this case. Bozzer is
distinguishable. It concerned the interpretation of a different provision,
subsection 220(3.1) of the Income Tax Act. As well, the precise issue in
Bozzer was the meaning of the ten year limitation period set out in that
subsection. That was a pure question of law, not an issue of discretion.
[35]
The
respondents have not cited any authority from this Court or from the Supreme
Court of Canada suggesting that an exercise of discretion such as subsection
152(4.2) that is based on a broad array of circumstances, one of which has a
legal component, is, by virtue of the presence of that legal component, subject
to correctness review.
[36]
Therefore,
for the foregoing reasons, I conclude that the standard of review in this case
is reasonableness.
(2) The
meaning of reasonableness review
[37]
In
light of the submissions made before us, however, more must be said about what
the reasonableness standard of review means in a case such as this.
[38]
Before
us, the Minister submitted that reasonableness is a deferential standard and so
the Court can interfere only rarely in a case such as this. However, the
respondents argued that there is a significant legal component to the
Delegate’s decision: whether on the law the Minister could have been satisfied
at various times that respondents’ employment income from the mill was exempt
from tax under section 87 of the Indian Act. As we have seen, the
respondents suggested that this legal component meant that the Delegate’s
decision was to be reviewed using the correctness standard, a submission I have
rejected. But does this significant legal component in the decision affect in
some way our assessment of the reasonableness of the Delegate’s decision under
subsection 152(4.2)?
[39]
Some
words offered in answer to this question may provide helpful guidance in future
cases. Discretionary decisions are frequently made under subsection 152(4.2)
and elsewhere in the Income Tax Act. Many of those decisions involve the
exercise of discretion with a significant legal component. The argument before
us revealed some uncertainty as to how reasonableness should be analyzed in
such a case. This uncertainty should be resolved for the benefit of future
cases.
[40]
Further,
reasonableness review is assuming greater and greater prominence in Canadian administrative
law, and so any clarification of its meaning will yield significant dividends.
Where, as here, the opportunity presents itself, we should do what we can to
transform reasonableness review from a vague and impressionistic notion into a tangible
and practical tool.
[41]
As
is well-known, reasonableness is concerned “mostly with the existence of
justification, transparency and intelligibility within the decision-making
process.” But reasonableness “is also concerned with whether the decision falls
within a range of possible, acceptable outcomes which are defensible in respect
of the facts and law.” The discussion of a “range of possible, acceptable
outcomes” recognizes that decision-makers “have a margin of appreciation within
[that] range.” See Dunsmuir, supra at paragraph 47.
[42]
Reasonableness is a single standard of review. But asserting
that there is a range of possible, acceptable outcomes begs the question as to
how narrow or broad the range should be in a particular case. As the majority
of the Supreme Court said in Canada (Citizenship and Immigration) v.
Khosa, 2009 SCC 12, [2009]
1 S.C.R. 339 at paragraph 59, while “[r]easonableness is a single standard,” it “takes its colour from the
context.”
[43]
That context affects the breadth of the ranges. The Supreme Court has
confirmed that the range of acceptable and rational solutions depends on “all
relevant factors” surrounding the decision-making: Catalyst Paper Corp. v.
North Cowichan (District), 2012 SCC 2, [2012] 1 S.C.R. 5 at paragraphs
17-18 and 23; Halifax (Regional Municipality), supra at paragraph 44.
[44]
For
example, where the decision-maker is considering a discretionary matter that is
based primarily on factual and policy matters having very little legal content,
the range of possible, acceptable outcomes open to the decision-maker can be
expected to be quite broad. As a practical matter, the breadth of the range in
that sort of case means that it will be relatively difficult for a party applying
for judicial review of the decision to show that it falls outside of the range.
[45]
In
other cases, however, the situation might be different. For example, where the
decision-maker is considering a discretionary matter that has greater legal
content, the range of possible, acceptable outcomes open to the decision-maker
might be narrower. Legal matters, as opposed to factual or policy matters,
admit of fewer possible, acceptable outcomes.
[46]
A
good example of the constraining effect of legal matters when assessing the
reasonableness of a discretionary decision can be found in Canada (Attorney General) v. Almon Equipment Limited, 2010 FCA 193. In that case, the
tribunal made a discretionary decision concerning remedies. The Court found
that the standard of review of this discretionary decision was reasonableness.
However, the discretion was not one where factual and policy-matters
predominated. The tribunal was acting under a statutory provision requiring it
to consider a list of factors when exercising its remedial discretion. Only
those exercises of discretion based on the statutory list of factors could be
said to be within the “range of possible, acceptable outcomes.” The tribunal
did not consider some of the statutory factors at all. As a result, this Court
found the tribunal’s discretionary decision to be unreasonable. For a similar approach,
see Stemijon
Investments Ltd. v. Canada (Attorney General), 2011 FCA 299 at paragraph 43.
[47]
In
Mills v. Ontario (Workplace Safety and Insurance Appeals Tribunal), 2008
ONCA 436, 237 O.A.C. 71, the Court of Appeal for Ontario adopted the same
framework for analyzing the reasonableness standard. Rouleau J.A., writing for
the Court, acknowledged that the standard of reasonableness embodied a single
standard, that of deference, and that “[i]t is not necessary or
appropriate to…assess the degree of deference within the reasonableness
standard” (at paragraph 18). This being said, the size of the range of outcomes
available to the decision-maker may be broad or narrow, depending on the
circumstances (at paragraph 22):
Applying the reasonableness
standard will now require a contextual approach to deference where factors such
as the decision-making process, the type and expertise of the decision-maker,
as well as the nature and complexity of the decision will be taken into
account. Where, for example, the decision-maker is a minister of the Crown and
the decision is one of public policy, the range of decisions that will fall
within the ambit of reasonableness is very broad. In contrast, where there is
no real dispute on the facts and the tribunal need only determine whether an
individual breached a provision of its constituent statute, the range of
reasonable outcomes is, perforce, much narrower.
[48]
A
number of Supreme Court decisions are consistent with the above analysis of
when the range of possible, acceptable outcomes is narrow or broad under the
reasonableness standard. In the case of matters involving statutory
interpretation, the Supreme Court has often articulated the range of possible,
acceptable outcomes open to the administrative decision-maker in a narrow way, likely
because of the specificity of the particular statutory provisions in issue:
see, e.g., British Columbia (Workers’ Compensation Board) v. Figliola,
2011 SCC 52, [2011] 3 S.C.R. 422, Canada (Canadian Human Rights Commission)
v. Canada (Attorney General), 2011 SCC 53, [2011] 3 S.C.R. 471; Alberta (Education) v.
Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37.
Where the legal component in the decision is smaller, and where factual
appreciation, specialized understandings and policies predominate, the Supreme
Court has often articulated the range of possible, acceptable outcomes open to
the administrative decision-maker in a broad way: see, e.g., Nor-Man Regional
Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59, [2011]
3 S.C.R. 616;
Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador
(Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708; Halifax (Regional
Municipality), supra.
[49]
This
foregoing analysis suggests that although the reasonableness standard applies
in this case, the legal aspects involved in the Delegate’s decision tend to
narrow the range of possible, acceptable outcomes. If, for example, the
Delegate were to take an unacceptable view of the legalities, that might take
her discretion outside of the range of possible, acceptable outcomes and render
it unreasonable.
[50]
In
the end, however, despite the narrowness of the range of possible, acceptable
outcomes available to the Delegate, I conclude that her exercise of discretion
under subsection 152(4.2) of the Income Tax Act in this case fell within
the range. It was reasonable.
(3) Applying
the reasonableness standard of review: the Delegate’s exercise of discretion was
reasonable
[51]
Certain
features of the Delegate’s decision lead to the conclusion that her decision
was reasonable.
– I –
[52]
In
making her decision, the Delegate closely followed the relevant Information
Circular, Information Circular 07-1-Taxpayer Relief Provisions, and
reached an outcome that was consistent with it. As is well-known, Information
Circulars such as this have the legal status as policies or guidelines, not
laws.
[53]
It
would be open to a party to argue that the Delegate has misinterpreted subsection
152(4.2) of the Income Tax Act or that the Information Circular is
inconsistent with subsection 152(4.2), such that the Delegate’s reliance on the
Information Circular is contrary to law. But the respondents do not make these
arguments in this case.
[54]
Compliance
by an administrative decision-maker with unchallenged policy statements and
guidelines has been taken to be an indicator – not a conclusive one – of
reasonableness: Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817 at paragraph 72 (“a useful indicator of
what constitutes a reasonable interpretation of the power conferred by the
section”); Herman v. Canada (Citizenship and Immigration), 2010 FC 629; Khoja
v. Canada (Citizenship and Immigration), 2010 FC 142. Similarly, on
occasion, a decision’s unexplained deviation from policy statements and
guidelines can raise concerns about its reasonableness: Kane v. Canada (Attorney General),
2011 FCA 19 at paragraphs 44-56.
[55]
Therefore,
for the purposes of this case, compliance with the standards set out in the
Information Circular – unchallenged in this case – can be taken as an indicator
that the Delegate was, in the words of Dunsmuir, supra, acting
within a range of acceptability and defensibility under subsection 152(4.2) of
the Income Tax Act. The following analysis shows that the Delegate did
comply with the Information Circular.
[56]
Under
paragraph 71 of the Information Circular, the Delegate’s task was first to be
“satisfied that…a refund or reduction would have been made if the return or
request had been filed or made on time.” The Delegate asked herself that very
question.
[57]
Also
relevant are paragraphs 73, 87 and 88 of the Information Circular.
Broadly speaking, these provisions prevent persons seeking reassessment after
the normal deadlines have expired from taking advantage of later changes in the
law or its application. These provisions read as follows:
73.…The ability of the CRA to allow an adjustment to
amounts for a statute-barred tax year should not be used as a means to have
issues reconsidered…[where the individual] chose not to challenge the issues
through the normal objection/appeals processes….
87. CRA policy does not allow for the reassessment
of a statute-barred return if the request is made as a result of a court
decision (for more information, see Information Circular 75-7R3, Reassessment
of a Return of Income). Requests made to reassess a statute-barred return based
only on the successful appeal by another taxpayer will not be granted under
subsection 152(4.2).
88. Similarly, knowledge of another taxpayer’s
negotiated settlement to resolve an objection, or another taxpayer’s consent to
judgment on an appeal, will not be extended to permit a reassessment of a
taxpayer’s statute-barred return under subsection 152(4.2), if the taxpayer has
chosen not to protect his or her right of objection or appeal.
[58]
The
Delegate followed these provisions of the Information Circular. In her reasons
for decision, she stated:
The CRA policy also states that the taxpayer relief
provisions are not an acceptable substitute for the retroactive application of
an adverse decision of a court where the taxpayer has not protected his or her
right of objection or appeal.
[59]
For
completeness, I would add that there is no suggestion that the Delegate
fettered her discretion by using the Information Circular in the way she did.
In the circumstances of this case, her compliance with the Information Circular
is an indication that her decision was reasonable.
– II –
[60]
The
Delegate then assessed whether, in the words of paragraph 71 of the Information
Circular, she was “satisfied that…a refund or reduction would have been made if
the return or request had been filed or made on time.” This entailed an
examination of the case law concerning section 87 of the Indian Act. She
looked at each taxation year, assessed what the state of the law under section
87 was at that time, and asked whether the respondents would be entitled to a
reduction of tax in that year in light of the state of the law in that year.
[61]
This
methodology
of conducting a year-by-year examination of the state of the law is supported
by the wording of subsection 152(4.2) of the Income Tax Act. If the
Delegate adopted a methodology that were contrary to subsection 152(4.2), her
exercise of discretion would fall outside the range of legal acceptability and
defensibility. But that is not the case here.
– III –
[62]
Following
that methodology, the Delegate proceeded to assess the state of the law.
[63]
For
each of the respondents’ taxation years 1985 to 1991, the Delegate concluded
that she was not satisfied that the respondents’ income from employment at the
mill would have been exempt from tax under section 87 of the Indian Act.
This was primarily due to the Supreme Court of Canada`s 1983 decision in Nowegijick
v. The Queen, [1983] 1 S.C.R. 29.
[64]
The
Delegate’s reasoning was as follows:
In January 1983, the Supreme
Court of Canada rendered its decision in the Nowegijick court case. In
this case, the location of the employment income was found to be where the
employer resided. If the individual was paid from the employer’s head office,
and the employer’s head office was located on reserve lands, then the
employment income would be considered tax exempt. Prior to this, the CRA
policy based on IT-62 [Cancelled by Special Release to IT-297R dated July 15, 1995]
required that the duties be performed directly on the reserve in order for the
earned income to be tax exempt. Due to the discrepancy between the CRA policy
and the Nowegijick decision, the Federal government issued Remission
Order P.C. 1985-2446. The Remission Order granted a remission of tax on any
employment income earned for duties performed on a reserve for the years 1983
to 1992. As the income that your clients earned from the Mill does not meet the
conditions of the remission order or the circumstances set out in Nowegijick,
their income would not have been accepted as tax exempt during 1983 to 1991.
[65]
There
is nothing in this reasoning or the record of this case that would make the
outcome the Delegate reached – an exercise of discretion against reassessment
in each of the years 1985 to 1991 – unreasonable.
[66]
In
fact, in my view, this reasoning is unassailable. It supports the view that in
each of the taxation years 1985 to 1991, the Minister would not have been
“satisfied that…a refund or reduction would have been made if the return or
request had been filed or made on time.”
[67]
Next,
the Delegate considered the respondents’ 1992 to 1998 taxation years. Here, in
her view, the Supreme Court of Canada decision in Williams v.
Canada,
[1992] 1 S.C.R. 877 was key.
[68]
The
Delegate’s reasoning was as follows:
In 1992, the Supreme
Court of Canada rendered its decision in the Williams case. The Supreme
Court stated that it was important to consider whether the activity generating
the income was “intimately connected to” the reserve, or whether it was more
appropriate to consider it as a part of the “commercial mainstream.” Based on Williams,
a connecting factors test was developed on 1994 and used to determine if income
should be considered exempt. During the 1993 through 1998 tax years, the
connecting factors and the weight to be accorded to them in respect to the situs
of employment income was evolving and was not settled.
[69]
The
Delegate’s view of Williams is well-founded, as is her view that it was
uncertain how the Williams test would play out on the respondents’ facts
during the 1992 to 1998 taxation years.
[70]
Examining
the Williams test and the facts, the Delegate in effect concluded, in
the words of paragraph 71 of the Information Circular, that she would not have
been “satisfied that…a refund or reduction would have been made if the return
or request had been filed or made on time.”
[71]
I
cannot say that there is anything in the Delegate’s reasoning or the record of
this case that would make the outcome she reached – an exercise of discretion
against reassessment in each of the years 1992 to 1998 – unreasonable.
[72]
Finally,
the Delegate examined the respondents’ taxation years from 1999 onwards. On
this, she examined the applicable law and found that the Minister would have
been satisfied that the respondents would have received a refund or reduction
if the return or request had been filed or made on time. Her reasons were as
follows:
In terms of employment income
with similar circumstance to those involved in your clients’ situation, it was
settled in 1999 by the Federal Court of Appeal in the Amos case. In
1998, the income would not have been accepted as tax exempt given the Tax Court
of Canada decision in Amos in June 22, 1998.
In 2007, the Federal Court of Canada rendered its
decision in the Wyse case. It agreed with the Minister’s decision that
the applicants’ employment income would not have been accepted as tax exempt
prior to 1999.
[73]
In
my view, these reasons are well-founded on the applicable jurisprudence the
Delegate cites. But due to the brevity of the reasons, they require
explanation.
[74]
In
2008, this Court decided Boubard, supra. As explained above, in Boubard
this Court found that section 87 of the Indian Act applied to the
respondents’ situation in the 2000-2002 taxation years and exempted their
employment income from the mill. In Boubard, this Court upheld the
decision of the Tax Court, which found the respondents’ circumstances to be “on
all fours” with the decision of this Court in Amos v. Canada, [1999] 4 CTC 1, 1999 D.T.C. 5333.
[75]
In
Amos, this Court acknowledged the difficult and uncertain state of the
law concerning section 87 of the Indian Act: “[W]e recognize the
difficulties faced by the Tax Court in trying to apply the various factors said
by existing cases to be relevant in determining the situs of income for
the purpose of section 87” (at paragraph 2). This is substantial support for
the Delegate’s view that the law concerning section 87 was too uncertain prior
to 1999 for the Minister to have been satisfied that section 87 would have been
applied to the respondents’ situation.
[76]
In
Amos, this Court found that section 87 did exempt the income in
question. It reversed the Tax Court’s decision in 1998 that denied the section
87 exemption.
[77]
Finally,
in 2007, the Federal Court decided Wyse v. Minister of National Revenue,
2007 FC 535. At paragraph 98, the Federal Court stated:
Third,
during the applicants [sic] taxation years 1993 through 1998, the
connecting factors appropriate and the weight to be accorded to them in respect
to the situs of employment income was evolving and was not settled. In
terms of employment income, it was settled in 1999 by the Federal Court of
Appeal in Amos, above. [emphasis in original]
This is further support
for the Delegate’s view that the law concerning section 87 was too uncertain before
1999 for the Minister to have been satisfied that section 87 would have applied
to the respondents’ situation.
[78]
In
light of this analysis of the case law and examining the Delegate’s reasons, I
cannot say that there is anything in her reasoning or the record of this case
that would make the outcome she reached – an exercise of discretion against
reassessment in each of the years prior to 1999 – unreasonable.
– IV –
[79]
One
final submission of the respondents concerning the reasonableness of the
Delegate’s decision remains to be considered.
[80]
The
respondents, and for that matter the Federal Court as well, suggested that the
respondents should get the benefit of section 87 of the Indian Act as it
is interpreted today.
[81]
I
disagree. The respondents’ submission and the Federal Court’s holding are
against the wording of subsection 152(4.2). On the reading of subsection
152(4.2) adopted by the Delegate in her decision and in the Information
Circular, a retrospective examination of the state of the law at various times is
required.
[82]
Further,
the respondents’ submission and the Federal Court holding would undercut the
objective of subsection 152(4.2), as expressed in paragraphs 73, 87 and 88 of
the Information Circular (unchallenged in this case), that persons seeking
reassessment after the normal deadlines have expired should not be able to take
advantage of later changes in the law or its application.
[83]
Therefore,
I conclude that the Delegate’s decision is reasonable.
C. Proposed
Disposition
[84]
For
the foregoing reasons, I would allow the appeal, set aside the judgment of the
Federal Court, and restore the Delegate’s decision dated November 12, 2009,
with costs throughout.
"David Stratas"
PELLETIER J.A. (Concurring
reasons)
[85]
I
have read the reasons of my colleague Stratas J.A. and I agree with them, save
for paragraphs 37 to 50 which, in my view, go beyond what we are required to
answer in order to dispose of this case.
"J.D. Denis
Pelletier"
“I
agree
Eleanor R. Dawson J.A.”
Email this Content