Citation: 2013 TCC 264
Date: 20130821
Docket: 2008-101(IT)G
BETWEEN:
WINSTON BLACKMORE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Campbell J.
INTRODUCTION
AND OVERVIEW
[1]
All appeals that come
before me in this Court have something in common: they all have their own unique
issue or set of issues that need resolving. That is the reason they are before
this Court. Each appeal will have its own novel history in finding its way to
this Court. The difference, between these present appeals and other appeals, is
that the Appellant, Winston Blackmore, and the community of Bountiful bring
with them a lengthy history involving media attention from newspaper to
television coverage.
[2]
Although there have
been many controversies and much media attention surrounding the Appellant, the
community of Bountiful, and their practice of polygamy, those debates have no
bearing on the ultimate decision I must make in respect to the tax status of
the Appellant and his followers in Bountiful.
[3]
These appeals address
the question of who is liable to pay the tax assessed against the Appellant: is
it the Appellant himself or the members of the Bountiful community? The answer
to this question depends on the application of a relatively self-contained and
obscure provision which, until these appeals, was unknown to many tax
practitioners. This is the first time that this Court, or any Canadian court,
has considered section 143 of the Income Tax Act (the “Act”).
[4]
The outcome of these
appeals is entirely dependent upon whether the Appellant and the community of Bountiful can bring themselves within section 143. Although the Appellant was audited and
reassessed pursuant to subsection 15(1), paragraph 6(1)(a) and section 5
of the Act to add additional income of approximately $1.8 million, he
objected to the reassessments on the basis that section 143 ought to apply. So
how would section 143 apply to lessen or erase the Appellant’s tax liability?
[5]
Section 143 is located
in Division F of Part I of the Act, which is titled “Special Rules Applicable
in Certain Circumstances”. It affords separate tax treatment to those communal
religious organizations that can bring their community within the statutory
definition of “congregation” contained in subsection 143(4). The term
“congregation” is employed in the opening words of the provision:
143(1)
Communal organizations. Where a congregation, or
one or more business agencies of the congregation, carries on one or more
businesses for purposes that include supporting or sustaining the
congregation’s members or the members of any other congregation, the following
rules apply:
[…]
“Business Agency” is also a defined term and, if it is
a corporation that carries on business within the community on behalf of the
members, the congregation must own the capital stock of the corporation
throughout a calendar year. The Appellant’s argument is that he meets all four
tests of the definition of “congregation” and that the shares of J.R. Blackmore
& Sons Ltd. (the “Company”) held in the names of the Appellant, Kevin, Guy
and Richard Blackmore, were beneficially owned on behalf of the members of the
congregation.
[6]
If the Appellant’s
position is correct, and section 143 applies, it will have far-reaching
implications for not only the Appellant, but also the members of Bountiful. The provision will operate to deem the existence of an inter vivos
trust which would be superimposed upon the community. This means that, for tax
purposes, all of the assets and property of the congregation, or of any
business agency of the congregation, are deemed to be the assets and property
of the deemed trust. Consequently, any income from property or business
activities of the congregation will be deemed to be the income of the deemed
trust. Since business agencies of the congregation are deemed to have acted as
agents of the deemed trust in all congregational matters, their income from
business activities will also be deemed to be income of the trust.
[7]
Subsection 143(2) then
permits a qualifying congregation to make an election to have its income
allocated among the members of the congregation. The election, to make a deemed
distribution of the income of the congregation among its members, means that
the income will be taxed in the hands of its members. Of course, if the income
were to be left in the deemed trust, it would be subject to tax at the highest
marginal rate applicable to individual taxpayers but, where it can be allocated
equally among community members, those individual taxpayers will be subject to
their personal graduated tax rates and exemptions.
[8]
If section 143 applies
in these appeals, the Appellant’s tax burden would be shifted to the members of
Bountiful. The Company, in that instance, would be viewed as an agent of the
community or an extension of the congregation, holding its assets, property and
income for the benefit of the entire congregation and its members. Allocation
of income across the qualifying membership in a community recognizes the lack
of personal ownership of property and assets, which would be in accordance with
the intent and purpose of section 143, and would eliminate any potential for
double taxation that would occur with assessments pursuant to subsections 15(1)
and 6(1) of the Act.
[9]
For the Appellant’s
argument to be successful, the community of Bountiful must meet the exhaustive
definition of “congregation” contained in subsection 143(4) of the Act.
This Court must first establish the parameters of each of the four facets of
the definition. Whether the community of Bountiful meets each test requires
findings of fact as to how it operated in the years under appeal, as well as an
examination of the history and doctrines of Mormonism, an area that this Court
would ordinarily not be analyzing. In this respect, expert testimony was
essential. As one would expect in debating matters of religious doctrine, some
of the expert testimony was inconclusive, while not all experts agreed in
respect to portions of the issues in question.
[10]
This is an unusual tax
case in this Court, not only in the facts, but also in the religious
implications, the unique application of this provision and the potential tax
treatment that applies to the community that qualifies as a “congregation.”
THE APPELLANT’S PERSONAL INCOME TAX FILINGS AND THE
REASSESSMENTS
[11]
The Appellant reported
total income in each of the years under appeal as follows:
|
Taxation
Year
|
Description of
Income
|
Amount
Reported
|
|
2000
|
Employment income from J.R. Blackmore & Sons Ltd.
Business income
Total
|
$15,915
5,000
$20,915
|
|
2001
|
Employment income from J.R. Blackmore & Sons Ltd.
Business income
Total
|
$26,578
5,000
$31,578*
|
|
2002
|
Employment income from J.R. Blackmore & Sons Ltd.
Interest
Dividend income from J.R. Blackmore & Sons Ltd.
Total
|
$30,424
66
14,000
$44,490
|
|
2003
|
Employment income from J.R. Blackmore & Sons Ltd.
Employment income from Bountiful Elementary
Total
|
$18,677.50
1,000
$19,677.50
|
|
2004
|
Employment income from J.R. Blackmore & Sons Ltd.
Interest
Total
|
$16,194
64
$16,258
|
|
2006
|
Employment income from Kootenay Preservers Ltd.
Interest
Total
|
$39,000
53
$39,053
|
|
* $31,578 is the amount of reported taxable income for the
2001 taxation year (para 39 of the Further Further Amended Notice of Appeal
and admitted by the Respondent at para 1 of the Reply to the Further Further
Amended Notice of Appeal). The Respondent, however, quoted this amount as
$31,363 at para 32(h) of the Reply.
|
[12]
As a result of a Canada
Revenue Agency (“CRA”) employer compliance audit of the Company, the Appellant
was reassessed and the following total amounts were added to the Appellant’s
income:
|
Summary of Reassessments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsection 15(1)
|
|
Section 5
|
Paragraph 6(1)(a)
|
|
2000
|
$277,395
|
*
|
|
|
|
|
2001
|
$527,751
|
*
|
|
|
|
|
2002
|
$235,537
|
*
|
$25,468
|
|
|
|
2003
|
$174,111
|
*
|
$40,953
|
$241,527
|
|
|
Summary of Reassessments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsection 15(1)
|
|
Section 5
|
Paragraph 6(1)(a)
|
|
2004
|
$153,681
|
|
|
$179,945
|
|
|
2006
|
nil
|
|
nil
|
nil
|
Assessed as filed
|
|
|
|
|
|
|
|
|
Totals
|
$1,368,475
|
|
$66,421
|
$421,472
|
|
|
|
|
|
|
|
|
|
* these amounts were assessed a gross
negligence penalty under subsection 163(2) of the Act and section 34
of the B.C. Income Tax Act.
|
[13]
Gross negligence
penalties, on the amounts assessed pursuant to subsection 15(1) of the Act,
were also added, in respect to the 2000, 2001, 2002 and 2003 taxation years.
THE LEGISLATIVE HISTORY OF SECTION 143
[14]
Section 143 of the Act
was enacted in response to litigation by some Hutterite colonies and to the
eventual Federal Court of Appeal decision in Wipf v Canada, [1975] FC
162 (FCA), respecting this litigation. Bill C-11 of the 30th Parliament, 3rd
session, 26 Elizabeth II, 1977, repealed the then section 143, which dealt
with steam and energy corporations, and replaced it with the current section
that addresses “communal organizations”. The new provision is applicable to 1977
and subsequent taxation years and taxed communities that could come within this
provision by superimposing a deemed trust over the communities’ activities and
providing an option whereby a community could elect how income would be
attributed to its members.
[15]
In Wipf v The Queen,
73 DTC 5558 (FCTD), the litigation concerning the Hutterites arose when some of
those colonies refused to be bound by an agreement that other Hutterite
colonies had reached with the government of Canada respecting how such colonies
would be taxed. After those colonies (all members of the Darius‑Leut
Hutterian communities), that were in disagreement, challenged their
assessments, the Tax Review Board, in 1972, affirmed the assessments issued by
the Minister of National Revenue (the “Minister”) in regard to their earned
income. That decision was appealed to the Federal Court – Trial Division in
1973. The Federal Court held that the total profits from a colony’s business
activities should be apportioned in equal shares among its members,
notwithstanding that they had assigned or deposited their share with the
colony’s leadership as its trustee or their corporation. The Court concluded
that the members earned income through the colony’s farming activities, despite
evidence adduced that no colony members had any income, property of any type or
money from government sources. In reaching its conclusion, the Federal
Court – Trial Division referred to numerous articles contained in the
Constitution of the colony’s incorporation provisions.
[16]
The Appellants, at the
Federal Court – Trial Division in Wipf, at paragraph 16,
argued that “… the individual members of each colony because of their
renunciation of private property and the right to compensation for their labours
had no earnings, and, therefore, no taxable income,” in contrast to other
Hutterite colonies that had reached an agreement with government on how they
would be taxed.
[17]
The Federal Trial
Court’s decision was appealed and reversed by the Federal Court of Appeal in
favour of the Hutterite plaintiffs. It was argued that, since any distribution
of profits was on a needs basis, not a specified percentage, and not on a per
capita basis, members earned no income. The Court held that neither the
colony’s farming activities, nor the profits, belonged to the individual
members but were attributable to the trustee or the corporation of each colony,
as the case may be. Thurlow J.A., at paragraph 7, was of the opinion that the
profits of the business operations of a community were not the property of any
particular member at any point in their relationship with their community. Ryan
J.A. and Smith D.J.A. were of the view that the charter of the incorporated
communities and the memorandum of the unincorporated communities governed the
various support benefits of the members that could be considered as income in
respect of services rendered (paras 19-20). The Court ordered the Minister to
reassess on the basis that the members’ income was either the value of the
subsistence they received from the trustees of the communities or that the
members had no taxable income. Unfortunately, the practicalities of determining
the value to be assigned to such benefits were not addressed.
[18]
On appeal to the
Supreme Court of Canada, the government’s appeal was dismissed from the bench
in two lines delivered by Chief Justice Laskin: “We do not need to hear you Mr.
Matheson. We agree with the judgment of the Federal Court of Appeal and this
appeal is, accordingly, dismissed with costs.” ([1976] SCJ No. 125).
[19]
As a result of this
line of cases and the method of property ownership utilized by Hutterites,
Parliament introduced the new section 143 in 1977 to address the issue of
taxation of communal religious organizations. Support for this can be found in
the debates and proceedings in both the House of Commons and the Senate. While
the House of Commons Committee of the Whole and the Standing Committee on
Finance, Trade and Economic Affairs was silent on Bill C-11’s treatment of the
Hutterites, the Senate Standing Committee on Banking, Trade and Commerce heard
evidence which directly addressed the treatment of Hutterites (30th Parliament,
3rd session, No. 2 (November 9, 1977)).
[20]
Additional evidence, demonstrating
that this provision was enacted to address the special circumstances of the
Hutterites, can be found in the Senate Committee’s address from counsel for the
Lehrerleut Hutterian Brethren on the Hutterites’ way of life (30th Parliament,
3rd session, No. 9 (November 30, 1977)). It is interesting to note that the
opinion expressed by counsel, as well as the Advisor to the Committee, was that
the new legislation was crafted to target only the Hutterites, although the
wording of the provision might also allow Amish to benefit in certain
circumstances. Further evidence, that it was drafted to address taxation of the
Hutterite communities, can be found in statements of the then Minister of
Finance, The Honourable Jean Chrétien, in addressing questions put to him, that
Hutterite communities were required to be on time in filing elections and
paying taxes under the new section 143 if they wished to benefit from its
income allocation scheme (30th Parliament, 3rd session, No. 12 (November 30,
1977)).
[21]
There have been several
amendments to section 143 of the Act since its enactment. In 2000, the
definition of “congregation” was modified and structured (c.19, subsection 41)
to incorporate all characteristics ascribed to the term “congregation” to the
definition contained in subsection 143(4). Previously, that part of the four‑pronged
test presently referred to as “(b) that adheres to the practices and
beliefs of, and operates according to the principles of, the religious
organization of which it is a constituent part,” was originally the sole
characteristic of the term “congregation.” The 2000 amendment placed it as the
second of the present four elements to the definition of “congregation” in
subsection 143(4). The other amendments made since 1994 do not affect the
application of the section as it applies to the present appeals.
PRELIMINARY AND PRIMARY ISSUES
[22]
The primary issue is
whether the community of Bountiful meets the definition of “congregation”
pursuant to subsection 143(4) of the Act, namely, whether the members of
the community:
(a) live and work together;
(b) adhere to the practices
and beliefs of and operate according to the principles of the religious
organization of which it is a constituent part;
(c) do not permit any of
the members to own any property in their own right; and
(d) require the members to
devote their working lives to the activities of the congregation.
[23]
The final issue is
whether the Appellant is liable for gross negligence penalties pursuant to
subsection 163(2) of the Act in respect to the 2000 through 2003
taxation years.
[24]
There are two
preliminary matters that must be addressed before I begin an analysis of
section 143 of the Act and, in particular, a determination of the
meaning of “congregation” pursuant to subsection 143(4). First, how the
statutory interpretive principles are to be applied to section 143 and second,
the scope of judicial notice to be accorded the jurisprudence and textbooks
relating to the Hutterites, comprise the two preliminary issues.
A. Statutory Interpretation
[25]
Counsel for the
Appellant argued for a liberal interpretation of section 143. Counsel for the
Respondent, in contrast, argued that a more restrictive reading of the
provision should be applied by this Court because of its legislative history
and the Parliamentary intention in enacting section 143 in light of the Wipf
decisions concerning Hutterite communities.
[26]
Counsel for the
Appellant correctly structured his submissions by adopting the current approach
taken by the Supreme Court of Canada decision in Canada Trustco Mortgage Co.
v Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, and initially set out in Markevich
v Canada, 2003 SCC 9, [2003] 1 S.C.R. 94. Generally, that approach is a
combination of a textual, contextual and purposive analysis of a provision, with
the words of the provision read in their entire context and in their grammatical
and ordinary meaning harmoniously with the scheme and object of the Act
as a whole and the intention of Parliament (E.A. Driedger, Construction of
Statutes, 2nd ed. 1983 and Markevich, at p. 87).
[27]
However, if the “… words
of a provision are precise and unequivocal, the ordinary meaning of the words
play a dominant role in the interpretive process. …” (Canada Trustco,
para 10), allowing taxpayers to rely on the clear meaning of a provision where
applicable.
[28]
The Supreme Court of
Canada in Placer Dome Canada Ltd. v Ontario (Minister of Finance), 2006
SCC 20, [2006] 1 S.C.R. 715, elaborated upon these interpretive principles and
stated, at paragraph 23:
The interpretive approach is thus informed by
the level of precision and clarity with which a taxing provision is drafted.
Where such a provision admits of no ambiguity in its meaning or in its
application to the facts, it must simply be applied. Reference to the purpose
of the provision "cannot be used to create an unexpressed exception to
clear language": see P. W. Hogg, J. E. Magee and J. Li, Principles of Canadian Income Tax Law (5th ed. 2005), at
p. 569; Shell Canada Ltd. v. Canada, [1999] 3 S.C.R.
622. Where, as in this case, the provision admits of more than one reasonable
interpretation, greater emphasis must be placed on the context, scheme and
purpose of the Act. Thus, legislative purpose may not be used to supplant clear
statutory language, but to arrive at the most plausible interpretation of an
ambiguous statutory provision.
[29]
In other words, if the
text of a provision is clear and precise, a textual interpretation governs and
that is the end of the matter. If it is not clear and precise, in that more
than one reasonable interpretation could emerge, then one must resort to a
unified approach encompassing context and purpose in order to ascertain the
meaning.
[30]
The definition of
“congregation” involves a four-pronged test, subject to the requirement that
all of the four elements of the test must be met for section 143 to be
applicable. The word “congregation” is immediately followed by the word “means”
as opposed to the word “includes,” indicating that Parliament intended the
definition to be an exhaustive one. Counsel for the Respondent rightly pointed
out that Parliament has ascribed a definition to the term “congregation” in
subsection 143(4) which is distinct, not only from its ordinary meaning but
also, from the undefined meaning given to it elsewhere in the Act.
Therefore, the definition in subsection 143(4) is clearly specific to that provision.
[31]
Counsel for the
Respondent submitted that the definition of “congregation” does not permit more
than one reasonable interpretation and that, even if there is ambiguity,
explicit or latent, the Hutterite colonies should be considered the “gold
standard” against which any other “congregation” must be compared. Therefore,
contextual and purposive analysis would not reveal any ambiguities.
[32]
I disagree with this
submission. Although I do agree that the enactment of section 143 is directly
and historically related to Hutterite colonies and the Wipf decisions,
concerning those colonies, nowhere in the provision does the word “Hutterite”
appear. If Parliament had intended that group to be the “gold standard,” it
would have said so. While the Hutterites may be considered as an example of a
group falling within this provision, the text of section 143 of the Act
potentially applies to any religious group that can qualify as a
“congregation.”
[33]
The very wording of
this provision contemplates its application to other communal groups that can
bring themselves within the ambit of the four-pronged test. The words used in
each of these four elements are neither clear nor precise. In fact, this was
evident in the submissions from both the Appellant and Respondent respecting the
first element of the test: do the members live and work together. If the
preceding four words (which I have emphasized) are clear and self-explanatory,
it should have been an easy task for both parties, or one of them, to commence
submissions with a precise definition and then explain how the facts supported
their position. Neither party did that. Where wording is unclear, it will be
essential to look to context and purpose for guidance. None of the elements of
the definition of “congregation” are clear and unequivocal and it will be
imperative, therefore, that when I discuss each of the elements of this test, I
apply a textual, contextual and purposive approach in my analysis. In this
vein, I must consider what I can use in establishing ‘context’ in these
appeals, particularly as it relates to legislative record and Parliamentary
history connected to section 143 and the line of Hutterite cases that led to
the enactment.
[34]
Prior to the 1990’s,
the Courts have generally hesitated in using Parliamentary history, such as
Hansard, advisory reports, or debates. Since then, however, numerous Supreme
Court of Canada decisions have cited Parliamentary history in its reasons.
Despite this, the Court has been cautionary in its use of such material:
…
Provided that the court remains mindful of the limited reliability and weight
of Hansard evidence, it should be admitted as relevant to both the background
and the purpose of legislation. …
(R. v Morgentaler, [1993] 3 S.C.R. 463, at p.
484)
[35]
Pierre-André Côté in The
Interpretation of Legislation in Canada, (4th ed., Carswell, 2011), at
pp. 465-466, summarizes this view as follows:
Approaching
the question from the perspective of weight rather than admissibility, a choice
unanimously approved by doctrine, side-steps the often sterile debate on
admissibility and enables the courts to access information that allows them to
render more enlightened decisions, while preserving their right to determine
the weight to be given to such information. While the door is open, the judge
should prudently hold on to the doorknob.
In addition, according to Pierre-André Côté, at page
579, judicial interpretation can be considered when dealing with legislative
context:
Paragraph
1: Judicial interpretation as context
The
courts assume the legislature to have been aware of judicial decisions made
prior to the statute’s enactment. Such decisions can thus be deemed part of the
context of the legislation, and therefore relevant to its interpretation.
Imagine
an area which has never been the subject of legislation, but which has been
dealt with in one or more court decisions. If the legislature subsequently uses
a term to which the courts have given a precise meaning in a particular
context, it is deemed to have been aware of the meaning and to have had no
intention of changing it:
When an Act of Parliament uses
a word which has received a judicial construction it presumably uses it in the
same sense.
(FN: Per
Lord Loreburn, North British Railway v. Budhill Coal & Sandstone,
[1910] A.C. 116, 127, a passage cited by Pigeon J. in Howarth v. National
Parole Board, [1976] 1 S.C.R. 453, 473.)
More
generally, judicial decisions can explain the purpose of legislative
intervention and, as such, constitute an important element of the context. A
legislative modification can be considered to be an expression of the intent to
set aside a judicial interpretation, to consecrate it legislatively, or to
legislate as to its consequences. … (Certain footnotes omitted.)
[36]
Consequently, it would
be appropriate to consider the judicial decisions in respect to those Hutterite
cases as they pertain to the enactment of section 143 and as part of the
legislative context. This leads me to the second preliminary matter respecting
the parameters of judicial notice and to what extent this Court can take notice
of certain findings of fact from those decisions.
B. Judicial Notice
[37]
Judicial notice is an
important issue because its application has the potential of sidestepping the
usual requirements of proof in a court of law, with the result that the rules
of admissibility may be lowered. If a fact is accorded judicial notice, then it
will not be subjected to the usual burden of proof or, ultimately, to cross‑examination.
[38]
“Judicial notice” has
been defined as follows:
19.13 Judicial notice is the acceptance by a court or judicial tribunal,
in a civil or criminal proceeding, without the requirement of proof, of the
truth of a particular fact or state of affairs. Facts which are (a) so
notorious as not to be the subject of dispute among reasonable persons, or (b)
capable of immediate and accurate demonstration by resorting to readily
accessible sources of indisputable accuracy, may be noticed by the court
without proof of them by any party. The practice of taking judicial notice
of facts is justified. It expedites the process of the courts, creates
uniformity in decision-making and keeps the courts receptive to societal
change. Furthermore, the tacit judicial notice that surely occurs in every
hearing is indispensable to the normal reasoning process. (Emphasis added.)
(Sopinka, Lederman and Bryant, The Law of Evidence
in Canada, Butterworths, 3rd ed.)
[39]
One of the two criteria
cited in the foregoing passage must be met in order for a fact to be given
judicial notice. These are commonly referred to as the “Morgan criteria” (E.M. Morgan in “Judicial Notice” (1943-1944), 57 Harv.
L. Rev. 269). It is a narrow approach to judicial notice but one that has
been affirmed by the Supreme Court of Canada in two decisions: R v Find,
2001 SCC 32, [2001] 1 SCR 863 and R v Spence, 2005 SCC 71, [2005] 3
SCR 458.
[40]
Binnie J., on behalf of the Court
in Spence, at paragraph 60, stated that “… the permissible scope of
judicial notice should vary according to the nature of the issue under consideration”
(quoting Professor Kenneth Culp Davis, Administrative Law Treatise (2nd
ed. 1980) vol. 3, at p. 139). He elaborated on this principle at paras 61-63:
61 To
put it another way, the closer the fact approaches the dispositive issue, the
more the court ought to insist on compliance with the stricter Morgan
criteria. Thus in Find, the Court’s consideration of alleged juror
bias arising out of the repellant nature of the offences against the accused
did not relate to the issue of guilt or innocence, and was not “adjudicative”
fact in that sense, but nevertheless the Court insisted on compliance with the
Morgan criteria because of the centrality of the issue, which was hotly
disputed, to the disposition of the appeal. While some learned commentators
seek to limit the Morgan criteria to adjudicative fact (see,
e.g., Paciocco and Stuesser, at p. 286; McCormick, at p. 316), I
believe the Court’s decision in Find takes a firmer line. I
believe a review of our jurisprudence suggests that the Court will start with
the Morgan criteria, whatever may be the type of “fact” that is sought to be
judicially noticed. The Morgan criteria represent the gold standard and,
if satisfied, the “fact” will be judicially noticed, and that is the end of the
matter.
62 If
the Morgan criteria are not satisfied, and the fact is “adjudicative” in
nature, the fact will not be judicially recognized, and that too is the
end of the matter.
63 It
is when dealing with social facts and legislative facts that the Morgan
criteria, while relevant, are not necessarily conclusive. There are
levels of notoriety and indisputability. Some legislative “facts” are
necessarily laced with supposition, prediction, presumption, perception and
wishful thinking. Outside the realm of adjudicative fact, the limits of
judicial notice are inevitably somewhat elastic. Still, the Morgan criteria
will have great weight when the legislative fact or social fact approaches the
dispositive issue. …
[41]
In these passages from Spence,
the Supreme Court of Canada drew a distinction between three kinds of facts:
(a) adjudicative facts,
that is, facts relating to the matter being litigated;
(b) legislative facts, that
is, those facts relating to legislative or judicial policy; and
(c) social facts, that is,
those facts relating to the fact-finding process that constitute the evidence
that is defined as social science research used to construct the contextual
background in resolution of the issue.
[42]
How the courts apply
the Morgan criteria to these three different categories of fact will ultimately
depend on how close the facts are to the centre of the issue to be resolved: “…
the closer the fact approaches
the dispositive issue, the more the court ought to insist on compliance with
the stricter Morgan criteria.” (Spence, at para 61). As noted by the
Court, at paragraph 63 of Spence, when dealing with legislative and
social facts, the application of the Morgan criteria will not be necessarily conclusive.
A court can be more elastic and less rigid when drawing upon social and
legislative facts. In summary, when considering such facts, a court must keep
in mind several key questions:
(a) how close is a “fact”
to the dispositive issue;
(b) would a reasonable
person accept such a “fact” for the particular purpose for which it is to be
used; and
(c) what is the potential
reliability of the “fact,” which increases relative to the closeness of that
fact to the disposition of the matter.
[43]
Respondent Counsel
requested that I take judicial notice of facts from Hutterite cases that led to
the enactment of section 143, as well as the recent British Columbia reference
case, Reference re: Criminal Code of Canada (B.C.), 2011 BCSC 1588,
[2011] BCJ No. 2211, commonly referred to as the “B.C. Polygamy Reference Case”.
The Appellant agreed with the Respondent’s Submissions regarding the doctrine
of judicial notice for gleaning facts from other court decisions (Transcript,
pp. 3340-3342). In addition, the Respondent sought to rely upon excerpts from
two books: The Hutterites in North America, (Rod A. Janzen and Max
Stanton, Johns Hopkins University Press, Baltimore, 2010) and The Secret
Lives of Saints: Child Brides and Lost Boys in Canada’s Polygamous Mormon Sect (Daphne
Bramham, Random House Canada, Toronto, 2008). The Appellant submits that any
facts from the excerpts of these books were not introduced as evidence in the
present appeals and that, since the excerpts do not meet the strict Morgan
criteria, they cannot be introduced in oral submissions to bolster the
Respondent’s position. In particular, Appellant Counsel objected to this Court
placing reliance on the text, The Secret Lives of Saints, whose author
had been present throughout a majority of the court proceedings in these
appeals as a member of the media.
[44]
Appellant Counsel referred
this Court to the Prince Edward Island Superior Court decision in Holland v
Prince Edward Island Regional Administrative Unit No. 4 School Board,
[1986] PEIJ No. 41, with respect to comments made in that decision on the
admissibility and evidentiary value of textbook evidence and scientific
treatises. At page 35 of that decision, the Court stated:
…
While doubtless deserving of great weight among the practitioners of the
discipline which concerns itself with such matters, the same reliance cannot be
placed upon them for probative purposes before the Court.
Appellant Counsel pointed out that the P.E.I.
reference decision relied upon a 1914 decision, Rex v Anderson (1914), 5
WWR 1052 (Alta SC). At page 36, reliance was placed upon the following quote
from the reasons in Anderson:
… The opinion of an eminent author may be, and in many
cases is, as a matter of fact entitled to more weight than that of the sworn
witness, but the fact is that if his opinion is put in in (sic) the form
of a treatise there is no opportunity of questioning and ascertaining
whether any expression might be subject to any qualification respecting a
particular case. A witness would not be qualified as an expert if his
opinions were gained wholly from the opinions of others, …
(Emphasis added)
[45]
I turn now to the
application of these principles to the Hutterite cases, including the more
recent B.C. Polygamy Reference Case, the Hutterite textbooks and finally the text,
The Secret Lives of Saints.
[46]
The Hutterite cases
and, in particular, those referred to as the Wipf decisions, are part of
the contextual background relating to the enactment of section 143.
Because the four elements of the test in the definition of “congregation” are
anything but clear and unambiguous, in interpreting and applying this
provision, reference to the legislative context is imperative. Respondent Counsel
referred the Court to Parliamentary debates, in both the House of Commons and the
Senate, in which direct references were made to Hutterite communities in discussions
on the enactment of section 143 (Respondent’s Written Submissions, p. 84,
paras 414-416). Appellant Counsel has also acknowledged that the section was
drafted in response to the litigation by the Hutterite communities (Appellant’s
Written Submissions, para 43) and agreed that this Court could take judicial
notice of findings of fact from these decisions.
[47]
The Wipf
decisions may be helpful in characterizing the type of communities that
Parliament had in mind that could qualify as “congregations” pursuant to
section 143. Although I agree with Appellant Counsel’s submissions that
formality of documentation in respect to congregations is not an essential
requirement of this section, it is interesting to note that the clauses of the
Memorandum of Association referred to in the Wipf decisions are almost
identical to those cited in a United States court case dealing with the
taxation of Hutterite colonies that were part of an incorporated church in
South Dakota (Hofer v United States, 64 Ct. Cl. 672 (1928)). This is an
indicator of the notoriousness of certain facts of Hutterite lifestyle, such as
the practice of communal living, their attitude toward property ownership and
the level of devotion that is expected of members (Wipf, at para 10).
[48]
I am more cautious in my
approach to fully endorsing an application of judicial notice to the B.C. Polygamy
Reference Case. Respondent Counsel pointed out that the reasons of Bauman J.
in that decision contain a history of Bountiful (Respondent’s Written Submissions,
p. 93, para 449). It was also submitted that, when a fact forms part of the
“contextual milieu”, the strict test in Spence need not be applied
(Respondent’s Written Submissions, p. 141, para 630). Generally, this Court may
take judicial notice of many facts relating to Bountiful, especially if they
are of a more general nature. However, there are obvious risks in taking notice
of facts that may have been contested during the hearing in another case.
Although I am dealing with the same community as Bauman J. dealt with in the B.C.
Polygamy Reference Case, there are entirely different questions under
consideration in the appeals before me and the resulting fact-finding process
will necessarily be different in that it will take into account the particular
facts as they relate to the particular issues before me. In addition, there may
be ample testimony from witnesses that were before me in respect to particular
contested matters, without the necessity of resorting to evidence given by
witnesses in the B.C. Polygamy Reference Case. These were two separate cases,
with two separate judicial hearings and their own distinct issues.
Consequently, I conclude that this Court may take judicial notice of the B.C. Polygamy
Reference Case for general background facts, if necessary, but only if those
facts are non-controversial. An example of this would be the history of Bountiful.
[49]
However, where the
Appellant raised concerns over facts that could be considered controversial, I
do not intend, nor do I think it is necessary, to rely on facts from the B.C. Polygamy
Reference Case. For example, Respondent Counsel relied on findings of fact from
that case which were, according to the Respondent, irreconcilable with the
notion of a community whose members lived and worked together. A polygamous
community like Bountiful could never qualify under section 143, the Respondent
argued, because it could never sustain itself as a community. In this respect,
the Respondent referenced findings of fact from the B.C. Polygamy Reference Case
respecting “trafficking of girls” and the “lost boys” phenomenon. Appellant
Counsel questioned the methods employed in the B.C. Polygamy Reference Case to
arrive at the conclusions of trafficking of girls across the border and also
pointed out that no evidence was presented to this Court concerning the “lost
boys” phenomenon. Whether the issues are relevant or, as the Appellant
contends, irrelevant, to whether the community lived and worked together, I do
not intend to place reliance on such findings of fact from the B.C. Polygamy
Reference Case except where they are clearly general in nature and non‑controversial.
[50]
The third source which
Respondent Counsel asked this Court to consider was the Hutterite textbook, The
Hutterites in North America, particularly where it describes how the
Hutterite communities operated and then, as the “gold standard” community, how
that contrasts with the community of Bountiful. Appellant Counsel argued that
the facts presented in this textbook were untested and that they did not meet
the Morgan criteria for judicial notice. Notwithstanding the Appellant’s
argument opposing the Respondent’s use of excerpts from this text, in its own
submissions, Appellant Counsel referred to excerpts from Hutterite Society
(Hostetler, John A., Johns Hopkins University Press, 1974, 1997, p. 198), a
textbook which depicts Hutterite lifestyle and their attitude toward property
(Appellant’s Written Submissions, para 43, FN 19 and para 104, FN 44).
[51]
In deciding whether to
strictly apply the Morgan criteria to those textbook excerpts, as Appellant
Counsel suggested, it must be remembered that the issues before me are in
respect to the community of Bountiful and not a Hutterite community. Therefore,
since these “social facts” are not dispositive of the issues, in my view the
criteria need not be applied strictly. However, both Appellant and Respondent
Counsel agreed that section 143 was enacted in response to the Wipf
decisions concerning the Hutterite communities. Consequently, the bar to having
the excerpts be judicially noticed remains higher than for other social facts
that could be judicially noticed. According to Binnie J., “… the Morgan
criteria will have great weight when the legislative fact or social fact
approaches the dispositive issue.” (Spence, at para 63). Clearly, the
manner in which Hutterites conduct their lives is not so notorious or generally
accepted that it would be readily verifiable.
[52]
In fact, this is
consistent with my ruling on the limits I placed on the expert testimony of
Dr. Cragun as a result of his voire dire. Even with extensive
reading on the Hutterite communities, visiting a Hutterian colony and meeting
with Dr. John Friesen, an expert on Hutterites, Dr. Cragun admitted
to only a “working knowledge” of Hutterites (Transcript, Examination in Chief
of Dr. Cragun, p. 1624). As such, the manner in which the Hutterites
conduct themselves could not be considered as “capable of immediate and
accurate demonstration by resort to readily accessible sources of indisputable
accuracy.”
[53]
I do not intend to take
judicial notice of excerpts from this textbook because it contains facts too
close to the dispositive issues and it does not meet the test set out by the
Supreme Court of Canada in Spence. In addition, reference to this text
may not be necessary because resort may be had in respect to the general and
non‑controversial facts of Hutterite life from the jurisprudence referred
to, and to the factual information contained in the Articles of Incorporation
of the Hutterite Church, as discussed in the Wipf decisions.
[54]
Although Bauman J.
referenced Daphne Bramham’s text, The Secret Lives of Saints, in the B.C.
Polygamy Reference Case, which adds weight to the fact that it could be
judicially noticed, I have concluded that the social facts from this book could
be central to the issues in the appeals before me. Therefore, the Morgan
criteria should be applied strictly and neither of the tests is met. For
example, this Court should rely on facts presented in evidence respecting the
physical location of the community members in determining whether they live and
work together rather than “facts” from texts submitted only during oral
submissions by Counsel.
C. Summary of Preliminary Issues
[55]
The approach to be
taken in an analysis of the issues under section 143 of the Act requires
a textual, contextual and purposive interpretation. While the Hutterites are
not the “gold standard” for this provision, they are an example of a group that
Parliament had in mind when the provision was enacted. Therefore, it will be
appropriate, where necessary, to consider the judicial decisions in the Wipf
jurisprudence as those pertain to the enactment of section 143, together with
legislative background and content. The B.C. Polygamy Reference Case will also
be used where those reasons provide potentially useful background facts. Such
reliance can only occur where the facts are general in nature and
non-controversial.
[56]
This Court cannot take
judicial notice of excerpts from either of the texts on Hutterites or Bountiful because they contain facts too close to the dispositive issues in these appeals,
necessitating that the Morgan criteria be strictly applied with the result that
neither test is met.
THE EVIDENCE
[57]
Unlike the majority of
tax cases, the primary issues do not involve questions of tax at all but,
instead, focus on religious doctrines, principles, beliefs, and practices,
particularly as they relate to the broad tradition of Mormonism, episcopal
polity and apostolic succession. Many terms, such as “The Priesthood Work”, “United
Effort Plan” or “United Effort Plan Trust”, “Law of Consecration” and “Tithing”
were either completely new to me or I had no working knowledge of them. It was
essential that the testimony of the experts be capable of providing assistance
to this Court in a complex and specialized area in order to properly understand
the evidence being presented and the issues to be decided.
A. The Witnesses
[58]
Nine witnesses,
including three experts, testified over a four-week period. The lay witnesses
included Winston Blackmore, Estanislao “Stan” Oziewicz, Journalist with the Globe
and Mail, and individuals who either resided or had resided in Bountiful. All three experts were subjected to extensive one-to-two day voir dires.
I restricted all of the experts, to a greater or lesser degree, and set well‑defined
parameters to be followed in providing their evidence. (The oral reasons which
I delivered following each voire dire will be published and accompany
the within reasons to assist in understanding how and why I confined their
testimony, particularly as their evidence related to Bountiful.)
[59]
I limited the
Appellant’s expert, Dr. William John Walsh, to testimony in respect to the
broader and underlying doctrines, history and principles of the Mormon faith.
He was not permitted to give evidence concerning the community of Bountiful. The Respondent’s first expert, Dr. Ryan Cragun, specializes in the sociology of
religion, with a particular emphasis on Mormonism, including Mormon
fundamentalism. I accepted Dr. Cragun’s expert testimony as it related to his
specialities: the sociology of religion, Mormonism, its history, doctrine,
beliefs, practices and principles and, specifically, to his expertise in the
FLDS and LDS branches of the Mormon faith. He was not permitted to give expert
evidence on Hutterites or their faith, nor on the community of Bountiful. The Respondent’s second expert witness, Dr. Randall Balmer, was permitted to
give expert testimony as it related to his professed speciality of American
religious history, with specialised knowledge in polity, as it related to
Mormon religious organizations, traditions, history, beliefs and principles.
B. The Bountiful Site: Layout and History
[60]
The community of Bountiful is made up of several physical localities, with the main site being in Lister, British Columbia. Bountiful does not exist on a map and it is really the colloquial name given
primarily to Lister. It is located in the south-eastern part of British Columbia, adjacent to the United States border. The Bountiful site was settled in
the mid-1940s by the Appellant’s father’s nephew, Harold Blackmore. Eventually,
the Appellant’s father, Raymond Blackmore, became leader of the community.
[61]
According to the
Appellant’s evidence, there were also a number of other properties, where
members resided, in Yahk, Canyon, Creston and Cranbrook. Corporate worksites in
British Columbia and Alberta, although not physically located within the
Bountiful site, were also considered by the Appellant to be part of the
community of Bountiful.
[62]
In 2000, Lister was
comprised of several legal lots plus a cemetery (Transcript, Examination in
Chief of Winston Blackmore, p. 70). Three lots were registered in the name
of the Bountiful Elementary/Secondary School Society, three lots (including the
cemetery lot, the Appellant’s parents’ 210 acres and Harold Blackmore’s
original 80 acre parcel) in the name of the United Effort Plan Trust (the “UEP
Trust”), one in Guy Blackmore’s name and one lot in the name of the Appellant
and one of his sisters (Transcript, Examination in Chief of Winston Blackmore, pp.
70-71 and 80-84). The Appellant described Bountiful proper as containing
approximately 750 to 800 acres in total. There are about 55 houses located
within the main site, about 50 of those on UEP Trust lands as of the year 2000
(Transcript, Examination in Chief of Winston Blackmore, pp. 88 and 144).
Numerous other parcels of property, however, were owned by the Company, the
Appellant or other members of the community in such areas as Yahk, Canyon and Kitchener, all within 50 kilometres of each other. The Appellant testified that zoning and
density population regulations prompted growth in these other areas.
[63]
The community owned 5
or 6 homes on a 45 acre parcel in Canyon, located adjacent to Lister. Although
originally in the name of Dalmon Oler, it was transferred to the Bountiful
Elementary/Secondary School Society to avoid bank foreclosure against Mr. Oler
and his business.
[64]
Property was initially
purchased in Yahk because the Company had started logging operations in that
area in the 1980s. Eventually, two adjacent parcels, 15 kilometres from
Lister, were purchased for residential use by Guy and Kevin Blackmore using
Company funds.
[65]
Property in Kitchener, used initially by the Company as an equipment repair centre, was used temporarily
by Kevin Blackmore for a residence.
[66]
In addition, the
Company owned or leased property, throughout north‑eastern British Columbia and into Alberta, for work crews working on the corporate logging operations,
as well as their families who also resided there periodically.
[67]
At various times, the
Appellant owned properties in Lister, Creston, Ryan Station, Kitchener and
Trail, together with properties in Alberta located at Crowsnest Pass, Calgary and Coleman. A house was located on each of the properties in Calgary and
Coleman. Some of these properties were subject to mortgages. Some were held
jointly with other community members and, through the years, some have been
transferred or sold.
[68]
The property in Cranbrook was acquired in July, 1990 and has been encumbered by two mortgages. In 2005,
this property was transferred to the Appellant’s first and only wife recognized
by law, Jane Blackmore, as part of a division and equalization of assets
pursuant to the terms of a separation and divorce settlement between them. It
is interesting to note that their separation agreement contained no reference
to any interest that this property may have been subjected to in respect to
trust considerations in respect to the United Effort Plan (“UEP”), the UEP
Trust, J.R. Blackmore Trust or Blackmore Trust. In fact, none of the properties,
which were either mortgaged, transferred or sold during the years under appeal,
contained any disclosure respecting the existence of any trust arrangements on
behalf of the community members in regard to any community entity such as the
UEP or UEP Trust. This was also true for lands which the Company owned.
C. Religion: Mormonism, the LDS and the FLDS Churches
[69]
The Appellant was
excommunicated from the mainstream Church (LDS) because he and his followers
continued polygamy - the practice of plural marriages - which was relinquished
by the mainstream Church in 1890.
[70]
The Appellant became
Bishop of the community in 1984 and named the community ‘Bountiful’. Although
his father had also been excommunicated, the Appellant was baptized as a member
of the mainstream Church because his father had continued to follow the
original teachings of Joseph Smith Jr., the founding prophet. Smith had his
“first vision” in New York in 1820 and, in 1823, Mormons believe that he had a
further revelation informing him of the existence of “golden plates”. In 1827,
Smith was permitted to dig up these tablets and, eventually, they were
translated into the Book of Mormon, which was first published in 1830.
The Church of Christ was organized around this event and eventually, in 1838,
the name was changed to the Church of Jesus Christ of Latter-day Saints (LDS).
In 1832, he was confirmed in his role within the Church as “President of the Office
of the High Priesthood”. While imprisoned, Smith was murdered by a mob that
stormed the jail in Illinois in 1844. After his death, it was unclear which of
several potential successors would succeed as next head of the Church. The
majority followed Brigham Young as the next head of the LDS. However, a number
of groups claimed prophetic authority after Smith’s death, including
Strangites, who followed James Strang, the Church of Christ and the Reorganized
Church of Jesus Christ of Latter Day Saints, known today as the Community of
Christ, whose founders included Smith’s widow and her son.
[71]
The only individual
that can receive revelations in respect of the Church is its President (Dr.
Balmer’s Expert Report, paras 4-8).
[72]
As Dr. Balmer’s Expert
Report notes, at paragraph 9, “The investment of revelatory authority in the
office of president of the Church of Jesus Christ of Latter-day Saints is
significant…”. He notes, at paragraphs 10 to 12, that most Christian religious
groups are organized into one of three forms of ‘polity’ or organization:
(a) congregational polity,
where authority is vested in the local congregation;
(b) presbyterian polity,
which is a form of representative government where local congregations elect
representatives; and
(c) episcopal polity, where
bishops govern.
[73]
At paragraph 13, Dr.
Balmer explains episcopal authority, within which the LDS falls, in the
following manner:
13. Episcopal polity is government by bishops, a principle
that rests on the notion of apostolic succession. In the Roman Catholic Church,
for example, the pope derives his authority from centuries of apostolic
succession dating to St. Peter, the first bishop of Rome and one of Jesus’
apostles. In episcopal polity, authority devolves from one bishop to another by
virtue of apostolic succession. …
[74]
Mormons are thus organized
as episcopal and governed by bishops and their authority must derive from an
unbroken line of apostolic succession tracing itself back to Joseph Smith, the
founding prophet.
[75]
Tension with
non-Mormons existed due to their insularity and their practice of plural
marriages. After Joseph Smith was killed, and facing outside pressure and mounting
legal issues over the practice of polygamy, a Manifesto was proclaimed in 1890
which outlawed plural marriages.
[76]
In Salt Lake City,
Utah, at a general conference on October 6, 1890, Wilford Woodruff, the then
fourth President of and prophet of the LDS Church, issued the Woodruff
Manifesto, which prohibited the practice of polygamy or plural marriage within
the LDS Church. A second Manifesto, in 1904, stipulated that those persisting
in the practice would be excommunicated. Those members that continued the
practice of polygamy, subsequent to these Manifestos, broke away from the LDS Church in 1935 over the LDS Church’s disavowal of this practice. Under the leadership of
Leroy S. Johnson, they eventually became known as “The Work” or “The Priesthood
Work” and eventually, as it is now referred to, the Fundamentalist Church of
Jesus Christ of Latter-day Saints (FLDS). The FLDS Church has approximately
10,000 members. They congregated primarily in Hilldale, Utah and Colorado City, Arizona, as well as Bountiful, British Columbia. There are other groups as
well within the Mormon fundamentalists, such as the Apostolic United Brethren
(the Allred Group) and the Latter Day Church of Christ (the Kingston Group).
Independent groups of Mormon fundamentalists exist as well, which are not
associated with any organized group.
[77]
According to Dr.
Balmer, the FLDS Church is without apostolic legitimacy because the split from
the mainstream LDS Church severed the line of succession dating back to Joseph
Smith, the founding prophet. The Appellant, however, in cross-examination,
testified that he does not believe that his line of authority is corrupted in
any way because of the split or that other groups’ claims to a line of
authority is any more valid than his claim. He also testified that he remained
a member of the Church of Jesus Christ of Latter-Day Saints, as it was founded
by Joseph Smith Jr., but not a member of the LDS Church (Transcript, Cross‑examination
of Winston Blackmore, pp. 488 and 502-503).
[78]
In 1991, under its then
President, Rulon Jeffs, the FLDS Church was incorporated. Rulon Jeffs was
President of the Church until 2002 and, during that period, the Appellant
reported to him as his “priesthood head.” On May 29, 2002, the Appellant, who
had been a Trustee of the UEP Trust, was removed as a Trustee and, on
June 2, 2002, he was also removed as Bishop of Bountiful. The Appellant
stated that he believed Rulon Jeffs was being manipulated during this time by
his son, Warren Jeffs, although it was Warren Jeffs who actually excommunicated
the Appellant in 2003.
[79]
On succeeding his
father as President of the FLDS Church, Warren Jeffs appointed Jim Oler as
Bishop of Bountiful. The Appellant was officially excommunicated in 2003 and
declared apostate (“someone … who abandoned the foundation principles of the
Mormon faith.” - Transcript, Cross-examination of Winston Blackmore, p. 502) by
the FLDS Church for refusing to acknowledge Warren Jeffs as President and
prophet of the FLDS Church.
D. Community Composition, Beliefs and
Practices
[80]
In 2002, Bountiful split into 2 groups, each consisting of approximately 450 individuals. One group
followed the teachings of Warren Jeffs, based out of Utah. That group followed
James Oler as Bishop and head of Bountiful. The remaining group followed the
Appellant, who had installed Duane Palmer as the community’s Bishop after the
split. This split pitted family members against one another and, as I
understood from the evidence of the Appellant and other witnesses, that rift
still exists today, with one group not associating or speaking with the other.
[81]
Prior to the split in
2002, the Appellant had approximately 20 plural wives. He testified that 8 or 9
of these wives left him and the community at the time of the split. The
Appellant’s plural or “celestial” wives, together with his approximately
67 children (the Appellant was unsure of the total number – Transcript, Cross‑examination
of Winston Blackmore, p. 324), lived in a cluster of homes consisting of 7 or 8
buildings within Bountiful. One of those buildings contained a laundry,
apartment, large industrial kitchen and dining area capable of seating 175 to
200 people (Transcript, Examination in Chief of Winston Blackmore, p. 211). The
Appellant stated that this kitchen was open to the members of Bountiful for
their use. Another building consisted of a 6-bedroom residence that originally
belonged to the Appellant’s father. However, the Appellant did not reside with
any of his plural wives and families in the years under appeal. Instead, he
resided, along with his mother, in a basement apartment unit within a duplex in
Bountiful. The upstairs apartment was occupied by one of his plural wives.
[82]
Many of the males in Bountiful, as well as a few of the women, worked for the Company. Wages were paid by
determining the needs and basic necessities of particular groups of people
within the community.
[83]
According to the
evidence of Marjorie Johnson, Marlene Palmer and Miriam Oler, a central
principle of their faith was the concept of “priesthood head,” stemming from
the priesthood authority traced directly back to the founding prophet, Joseph
Smith Jr. Since priesthood authority passes only through male lines (with one
exception which Dr. Cragun noted as being the Community of Christ which allowed
women to receive priesthood in the 1970s - Transcript, Examination in Chief of
Dr. Cragun, p. 2080), these witnesses acknowledged either their father, or once
they became one of many plural wives, their husband as their “priesthood head”.
Once male members reached 12 years of age, provided they were deemed worthy,
they would be allowed to receive the priesthood. There are two types of priesthood,
Aaronic Priesthood and Melchizedek Priesthood, both terms drawn from passages
in the Old Testament. Aaronic Priesthood stems from Aaron, the brother of
Moses, and the priestly duties in respect to his lineage. Mormons believe that
Melchizedek was the high priest to Abraham (Transcript, Examination in Chief of
Dr. Cragun, pp. 2082-83).
[84]
There are different
levels or ranks within both priesthoods. The Aaronic Priesthood is the lower of
the two priesthoods and, if a male transitions through all the ranks, he will
go on to the Melchizedek Priesthood, where the highest level is that of
Apostle. It is from the rank of the Apostles that a prophet or President of the
Church is chosen. When Dr. Cragun was asked whether the foregoing schemata
existed in the FLDS Church as well as the LDS Church, he testified that it
depended on the time period. However, he stated that the FLDS Church uses the Aaronic Priesthood and parts of the Melchizedek Priesthood (Transcript,
Examination in Chief of Dr. Cragun, pp. 2083-2084).
[85]
The Appellant stated
that 12-year-old males could become deacons within the Aaronic Priesthood,
graduate to teachers at age 14 and to priests at age 16. The Appellant was
baptized and ordained an Aaronic priest at 16 years of age and, soon after, an
elder. Eventually, in 1984, he was ordained a High Priest and Bishop of Bountiful by Leroy S. Johnson, then President of The Priesthood Work.
[86]
Some of the members
were educated outside the community and, when they returned, they offered their
services freely to the members, but sometimes they would also work outside Bountiful for wages. The Appellant cited the example of his first wife, Jane Blackmore,
who was trained as a midwife/nurse and worked within and outside Bountiful. Until the house and property in Calgary was sold, it was used to provide a
residence to several members who were pursuing studies in Calgary.
[87]
Bountiful, like many communities, held a variety of
social events, including rodeos, hockey games and barbeques. Unlike other
communities, however, a number of practices were unique to Bountiful. Tithing,
one of the early practices of the Mormon Church, was practiced and administered
by the Appellant. This practice of tithing, along with the “Law of Consecration,”
are part of a larger religious program called the “United Order,” meaning that
all members live in such a way that a community has all things in common. The
Law of Consecration requires the consecration of time, talents and property to
the church. The experts disagreed, however, on the extent to which the Law of
Consecration exists as an actual practice among Mormons. The ideal of members
living together was referred to as the United Effort Plan while the vehicle to
obtain that objective was referred to as the United Effort Plan Trust, the
land-holding entity.
[88]
Originally, if
individuals wished to join the United Order or, as the Appellant referred to
it, the Order of Zion (Transcript, Examination in Chief of Winston Blackmore,
p. 124), they were required to transfer all their property to the Church and
were given back only enough to meet their needs. In addition, they were
expected to contribute at least 10 per cent of their income back to the
community. In lieu of tithing, some members contributed labour (Transcript, Examination
in Chief of Marlene Palmer, p. 1349). According to the Appellant’s evidence,
the funds from this practice were used to pay for such items as funeral
expenses for members or to cover medical emergencies that might necessitate
travel to a hospital facility. Miriam Oler testified that there was no
obligation that she or her partner consecrate property to the UEP Trust, but
that she was required to “tithe” 10 per cent of her income (Transcript, Examination
in Chief of Miriam Oler, p. 2829).
[89]
The community also
engaged in “famine calls”, another event unique to Bountiful, where, for a
period of 3 months, the members were called upon to rely on their stored and
canned food supplies or to just simply live on less and to contribute as much
cash as they were able. The Appellant would forward it on to Rulon Jeffs, the
President of the FLDS Church. He also described these as “cash calls”. Famine
calls were also promoted as a means of raising money for community projects or
to pay property taxes. However, according to the evidence of Miriam Oler, one
such call arose in order to build a community storehouse, but it was never
built (Transcript, Examination in Chief of Miriam Oler, p. 2842). It does not
appear from the evidence that any accounting for the funds was given to the
members or that records were kept in respect to the tithing practice or the
famine/cash calls.
E. UEP Trust
[90]
The UEP Trust was
established on November 9, 1942 in Utah. Its primary purpose, according to
Exhibit R-5, was for charitable and philanthropic objects. To accomplish those
goals, the Trust could engage in legitimate business ventures (Exhibit R-5, p.
4). To this end, Trustees were permitted to hold legal title to all property
with the power to manage, dispose and otherwise control that property (Exhibit
R-5, p. 3). The Trust also had the authority to fix salaries and other
compensatory matters and the power to declare dividends (Exhibit R-5, pp. 5
and 6).
[91]
The Appellant was made
a Trustee on February 25, 1986. On November 3, 1988, an Amended and Restated
Declaration of Trust of the UEP Trust was created which proclaimed that
additional property had been added, with more expected to come, to the Trust
and to the Trustees as “consecrations” (Exhibit R-5, p. 2). As a result of the
split within the community over Warren Jeff’s leadership in 2002, the Appellant
was removed as a Trustee of the UEP Trust. In 2005, a Utah district court
concluded that all of the Trustees would be removed as they had committed a
breach of trust in protecting and segregating the trust assets. The court
appointed a special fiduciary, Bruce Wisan (Exhibit R-5, pp. 2 to 9).
[92]
During the years under
appeal, three parcels of land in Lister were held by the Trustees of the UEP
Trust. These lands had been acquired in 1987. Until his removal in 2002, the
Appellant would have been one of these Trustees. When the court appointed the
special fiduciary, all of the property held by the UEP Trust, including the
three parcels in Lister, was removed and transferred from the Trust to the
special fiduciary. The documentation referred to the UEP Trust as holding the
beneficial ownership of the property (Exhibit R-4 and R‑5). According to
the evidence of Marlene Palmer and Miriam Oler, no discussion of UEP Trust
property ever occurred between the Appellant and the members, nor did they ever
see documentation or records concerning these Trust properties.
[93]
On cross-examination,
when the Appellant was asked if he had ever consecrated any property to the
Trust, he stated that, “Any property that has been in my name, I have held for
the United Effort Plan Trust.” When asked to clarify, he agreed that neither he
nor the Company had ever actually signed over ownership of any real property to
the Trust (Transcript, Cross-examination of Winston Blackmore, p. 574).
F. J.R. Blackmore & Sons Ltd.
[94]
The Company was
incorporated on May 14, 1980. The shareholders were David Kevin Blackmore,
Richard Blackmore, Richard Guy Blackmore and the Appellant. Winston Blackmore
was able to sign cheques solely on behalf of the Company, but otherwise cheques
required the signatures of two of the shareholders (Transcript, Cross-examination
of Winston Blackmore, pp. 428-430).
[95]
During the relevant
period, the Company conducted a variety of activities at different locations.
Those included:
(a) logging operations in
Ryan Station in Yahk, Fernie, Canmore, Coleman and Grassy (where 2000 acres
were logged), all in Alberta;
(b) post treatment, peeling
and fencepost manufacturing in plants at Sparwood, Caven Creek, Lumberton,
Cranbrook (where a major pressure‑treating site for fence posts was
located) and, in Alberta, at Sundre (where a major processing site for the
company’s post wood was located) and, in Idaho, at Bonner’s Ferry; and
(c) farming activities on
land leased from the Lower Kootenay First Nation at Creston Flats.
The major repair site for engines, transmissions and
other parts and equipment was located at Kitchener, British Columbia. Logging
operations were also conducted in Windermere, Radium, Findlay Lavington and
Canal Flats, all in British Columbia (Transcript, Examination in Chief of
Winston Blackmore, pp. 44-45 and 157-178). Because many of these worksites were
located at a distance from Bountiful, housing for workers was established. Some
sites contained a house, trailer, camps or rental units. The Sundre, Alberta site, for example, contained a house, trailers and rental housing to accommodate
the mill workers (Transcript, Examination in Chief of Winston Blackmore,
p. 158 and Examination in Chief of Ken Oler, pp. 954-989). Since
Sundre is located 550 to 570 kilometres from Lister, or approximately 6.5 to 7.5
hours’ drive, it was essential to maintain these accommodations. The 20 to 25
workers at Sundre might be able to return to Lister once every second week
(Transcript, Cross-examination of Winston Blackmore, pp. 453-459, Examination
in Chief of Ken Oler, pp. 956-957 and Cross-examination of Ken Oler, pp. 1006-1007).
Marlene Palmer testified that she cooked at the Lumberton camp, which was
approximately 100 kilometres from Lister. At both Kitchener and Caven Creek,
houses were maintained at each site or in close proximity.
[96]
In the years under
appeal, 55 to 60 individuals were employed by the Company and these numbers
increased by 30 to 40 more during summer periods. The majority of employees
came from within the community, although a few outside workers were employed.
The Company also hired school children during summers to perform a variety of
tasks. Children, 12 to 14 years old, counted posts for bundles, hauled post
bundles, greased machinery, drove tractors, participated in cattle roundups and
brandings and oversaw grain augers, loader practice and skidder clean-up
(Transcript, Cross-examination of Winston Blackmore, pp. 422-424). The older
children, 15 to 17 years old, operated the heavier equipment.
[97]
The amount of wages paid
to the Company’s employees was established by the Appellant (Transcript, Examination
in Chief of Ken Oler, p. 959). Both Marlene Palmer and Marjorie Johnson worked in
the Company office and earned biweekly income between $500 and $700. Marlene
Palmer’s salary increased until, in 2006, she was earning $700 biweekly. Miriam
Oler testified that, when her partner, Chance Quinton, started working for the
Company, he was single and he received cheques of $1,100 monthly which he
signed back to the Appellant in exchange for $80 to $100 per month (Transcript,
Examination in Chief of Miriam Oler, pp. 2787-2788). However, when he and Ms.
Oler became a couple, his wages increased and he was retaining all of his wages
for his personal use (Cross-examination of Miriam Oler, pp. 2906-2907). The
children earned about $2 per hour because they would sign their paycheques to the
Appellant who would return smaller amounts to them in cash (Transcript, Cross-examination
of Winston Blackmore, pp. 426 and 431-433).
[98]
During the years under
appeal, the Company had an outside accounting firm complete its returns and
assist in preparation of financial statements, bank balancing and GST
calculations. These outside accountants visited the corporate office at least
twice monthly. Until 2005, Marlene Palmer was responsible for the day-to-day
bookkeeping activities.
[99]
The Company owned a
number of properties, both before and during the years under appeal, and
acquired properties in Kitchener, Cranbrook and Creston between 1996 and 2002.
In 1996, property was purchased in Kitchener for $110,000; in 1997, a property
at Lumberton Road in Cranbrook for $117,600 and subsequently mortgaged in the
amount of $1.4 million; in 1998, two properties at Lumberton Road in Cranbrook
for $610,000 and $8,000, with one property later mortgaged for $650,000; and,
in 1998, property purchased in Creston (Exhibits R‑4 and R-5). The
Appellant and several others acted as guarantors on the mortgages. The Lumberton Road properties were transferred in 2006 for the purchase price of $900,000
(Exhibit R-6).
[100]
The Company also
maintained a United States bank account located at Bonner’s Ferry (Transcript, Examination
in Chief of Winston Blackmore, p. 281) and owned personal property, including a
1973 Cessna aircraft which was purchased for $165,000 (Exhibit R-4). In several
years, director’s resolutions were passed in which dividends were issued to
shareholders, including the Appellant.
[101]
The Company filed a
notice of intention to make a proposal in bankruptcy in 2005. However, in its
statement listing assets and liabilities plus creditors, it made no reference
to any type of trust arrangement, including any reference to the UEP Trust,
that would affect any of its property or holdings.
G. Other Companies
[102]
Other companies also
operated within Bountiful, some of them in the context of providing support for
the Company’s operations. When the Company went through bankruptcy after the
2002 split, members formed other companies to take over the operations and
activities formerly conducted by the Company. The Company’s assets were
dispersed as much as possible to these new companies and to community members.
H. Personal Property
[103]
Several witnesses testified
that there was no prohibition against members owning personal property in their
own names and dealing with it as they saw fit. They could have separate bank
accounts, own vehicles (for example, Marjorie Johnson testified that she
purchased a minivan in 2003 and owned it for three years (Transcript, Examination
in Chief of Marjorie Johnson, pp. 1092 and 1097)), pursue business interests
with their own incorporated companies and own the usual household furnishings.
Some had credit cards, lines of credit, bank loans and there was some lending
of money between members with terms of repayment.
COURT’S ANALYSIS: THE MEANING OF “CONGREGATION”
Introduction and Preliminary Remarks
[104]
Can Bountiful be
considered the type of communal religious organization which Parliament had in
mind when section 143 was enacted? The answer to this question is dependant
upon whether it meets all of the tests of the statutory definition of
the term “congregation” set out in subsection 143(4):
“congregation” -- "congregation" means a community, society or body of individuals, whether or not incorporated,
(a) the members of which live and work together,
(b) that adheres to the practices and beliefs of, and operates according to the principles of, the religious organization of which it is a constituent part,
(c) that does not permit any of its members to own any property in their own right, and
(d) that requires its members to devote their working lives to the activities of the congregation;
(Emphasis added)
If Bountiful meets this definition, its members, as
well as the Appellant, may avail themselves of the special tax treatment
provided in this provision.
[105]
If, as the Appellant
argues, Bountiful meets all four of the above tests (a) through (d),
the assessed tax liability may be effectively shifted from the Appellant and
distributed among the members of Bountiful by the imposition of a deemed trust.
The community of Bountiful could elect a deemed distribution of its income for
tax purposes on an annual basis to and among the members. The Respondent’s position
is that Bountiful does not meet any of the four tests of the definition of “congregation”
and, consequently, the personal assessment of the Appellant should be upheld.
[106]
In analyzing each test,
I will apply the conclusions I reached under the “Preliminary and Primary
Issues” section, that is: (1) interpreting the statutory provision according to
a textual, contextual and purposive approach; and (2) where necessary, judicial
notice and utilization of the jurisprudence contained in the Hutterite cases
and the B.C. Polygamy Reference Case.
[107]
While the wording
utilized in subsection 143(4) is of a general nature and without prior
interpretation by this Court or any other, it is nonetheless strict in that it
contains language which is both exhaustive (use of the word “means”) and
conjunctive (use of the word “and”). Because all four tests of subsection
143(4) must be met by a community for it to receive this special form of tax
treatment, it implies that Parliament had a particular form of “congregation”
in mind when the provision was enacted.
[108]
The definition of
“congregation” in subsection 143(4) uses non-technical language. The correct
interpretative approach in dealing with this provision is a unified textual,
contextual and purposive approach. The preamble, to the listing of the four
elements of the definition, contains the following wording:
“congregation”
means a community, society or body of individuals, whether or not
incorporated, … (Emphasis added)
By using the word “means” as opposed to the word
“includes,” Parliament has indicated that the definition is meant to be
exhaustive or, in other words, that it contains the entire meaning within the
scope of the words. It is also clear from the preamble that, while it may be
helpful, articles of incorporation are not an essential precondition for a
community, society or body of individuals to bring itself within the parameters
of section 143. The term “congregation” has been assigned a specific definition
for the purposes of section 143 in contrast to the ordinary meaning assigned to
it in everyday usage and the definition generally ascribed to it in jurisprudence
for the purposes of paragraph 8(1)(c) of the Act.
[109]
The Federal Court of
Appeal in Small and McRae v MNR (also referred to as Zylstra Estate v
MNR), 97 DTC 5124, held that the view taken by the trial court judge in
defining the parameters of “congregation” for the purposes of paragraph 8(1)(c)
was too restrictive. Bowman J. (as he was then) commented in Kraft v The
Queen, 99 DTC 693, at paragraph 36, that the trial court’s view of
“congregation” for the purpose of paragraph 8(1)(c) in Zylstra
was unduly limiting
… in that it fails to recognize the variety of ways in which
people may come together to worship God, or the disparity in belief, background
and motivation that may exist among the members of the heterogeneous group that
may make up an assemblage which the term ‘congregation’ encompasses. …
For the purposes of paragraph 8(1)(c), Canada Revenue
Agency Bulletin IT-141R (Consolidated), has also broadly interpreted the term
“congregation”:
15. A “congregation” is not defined by any particular
church structure, by territorial boundaries nor by the number of people
gathered in one place. It is an assemblage or gathering of persons to whom a
minister provides spiritual counseling, advice, illumination and inspiration. A
group of students assembled for academic instruction is not a congregation.
Persons who meet the status test do not need to be in charge of a single, fixed
congregation. They can serve multiple congregations. Congregations can be of a
diverse and fluid makeup and require neither voluntary attendance nor
homogeneity of religious belief. Chaplains in hospitals, jails, the armed
forces and other such organizations are generally considered to minister to
congregations.
A. Live and Work Together
Do the members of the community of Bountiful live and
work together?
1. The Appellant’s Submissions
[110]
Appellant Counsel
suggested that:
… Parliament
drew a connection between the social and familial aspects of congregants’ lives
and their livelihoods and their membership in the congregation. In short,
Parliament denoted a community in which group identity is completely integrated
into the lives and livelihoods of community members.
(Appellant’s Written Submissions, para 39,
bullet 2).
Appellant Counsel submitted that Bountiful forms a
“coherent, identifiable group” that “treats insiders very differently from
outsiders” and that members are “bound together by their religion” which “is the
core of the identity of community members.” (Appellant’s Written Submissions,
para 58).
[111]
Appellant Counsel reviewed
the evidence from the perspective of: (a) socialization, friendships,
residences and worship; (b) marriage and familial relationships; (c) education;
and (d) livelihood.
[112]
There is an inward
focus with respect to socialization with limited outside contact.
… [M]embers
situate their residences among properties held by members of the group; [and]
even where residences are physically located away from the main community site,
socialization continues to occur within the group to the exclusion of outsiders;
…
(Appellant’s Written Submissions, para
109(a)).
[113]
Marriages occur by
placement between church members, the majority of which are polygamous in
nature. This forms “… the basic unit for administration of property within the
group.” (Appellant’s Written Submissions, para 109(b)).
[114]
Bountiful educates its members within its own
education facilities, except where professional designations require outside
schooling.
[115]
Concerning the
distribution of homes, members lived in family units, were told when and where
to move and would frequently trade residences.
[116]
Permanent residences
were as close to the main site as zoning permitted. Temporary residences were
situate at Company work locations in south-eastern British Columbia or just
over the border in Alberta. Regardless of whether or not a permanent or
temporary residence was located on the main site, the critical criterion for
members remained participation in the Church. Community members socialized,
worshipped and interacted with other members to the exclusion of non‑members
wherever their residences happened to be physically located (Appellant’s
Written Submissions, para 160).
[117]
Appellant Counsel cited
other instances that were indicative of communal living such as: (a) community
food storage; (b) Sunday meals held at the “Kitchen House”; (c) some communal
property, for example, milk was given to members whenever it was available; and
(d) organization of social events for members without interaction with
outsiders.
[118]
With respect to how the
community worked together, members donated time and labour to community projects
and participated in “work days” which were held on Saturdays.
[119]
The Company, until its
bankruptcy, was the main community employer with operations primarily in
forestry and agriculture.
2. The Appellant’s Position
[120]
According to Appellant
Counsel, community members share and trade properties and are insular in nature
based on how they socialize with each other, educate their own members,
familial living arrangements at the direction of the Church head, placement
marriages, livelihood through community employers and worship to the exclusion
of outsiders. Community and Church membership are fully integrated and,
consequently, the Appellant submitted that the members meet the first test of
subsection 143(4) in that they live and work together.
3. The Respondent’s
Submissions
[121] The Respondent’s argument is that not all
members of Bountiful live and work together in close proximity because they reside
in a number of communities and worksites scattered throughout British Columbia,
Alberta and the United States. The Company engaged in logging operations in
various locations, some sites being up to 550 to 570 kilometres from the main
site in Lister.
[122]
The Respondent
summarized its position in the following manner:
The Act is practical and not spiritual or theoretical.
For the fisc, “living together” requires cohabitation in the same place at the
same time. “Working together” requires working on common projects at the same
place at the same time. …
(Respondent’s Written
Submissions, para 463)
[123]
Relying on the
Hutterites as the “gold standard”, the Respondent reviewed how Hutterite
communities operate. Hutterite colonies typically consist of approximately 100
individuals. All colonies belong to one of three Hutterite branches or leuts
and all leuts are part of the Hutterian Brethren Church. When colonies become
larger than 100 members, to operate effectively, they break away from the
“mother” colony to form a “daughter” colony. Each colony lives together within
defined boundaries and works together in a largely agricultural setting to
support their colony (Wipf at paras 2-3). Ritchie J. made the
following comments in Hofer v Hofer, [1970] S.C.R. 958 at 969, (cited in Hutterian Brethren Church of Wilson v The Queen, 79 DTC 5474, at para 20):
I
am satisfied … that the hutterite religious faith and doctrine permeates the
whole existence of the members of any Hutterite Colony and in this regard I
adopt the language which the learned trial judge employed in the course of his
reasons for judgment where he said:
To a Hutterian the whole life is the Church. The
colony is a congregation of people in spiritual brotherhood. The tangible
evidence of this spiritual community is the secondary or material community
around them. They are not farming just to be farming – it is the type of
livelihood that allows the greatest assurance of independence from the
surrounding world. The minister is the spiritual and temporal head of the
community.
[124]
The Respondent provided
numerous examples of community members who did not work together as required by
subsection 143(4):
(a) some members received
training and eventually worked outside Bountiful;
(b) some community members
operated various businesses which provided services to both members and
non-community members and if the business was incorporated, the shares were not
subject to any trust arrangements in respect to other community members; and
(c) the Company employed
some individuals from outside the community.
4. The Respondent’s Position
[125]
The Respondent
constructed the meaning of “living and working together” based on legislative
context and intent. Emphasis was placed on the inclusion and placement of the
conjunction “and” between the words “live” and “work,” suggesting a link
between these two concepts that would not exist in non-communal organizations.
[126] Counsel for the Respondent summed up its
argument as follows:
… People who reside in different homes, different
towns, different provinces and even different countries don’t “live together”
even if they share family ties and beliefs. People who work in different towns,
different provinces and even different countries don’t “work together” even if
they share family ties and beliefs.
(Respondent’s Written Submissions, para 463)
5. Analysis
[127]
The first element of
the definition of “congregation” (“the members of which [must] live and work
together”) is short and, at first reading, appears on its face to lend itself
readily to a straightforward interpretation. However, that is not the case.
[128]
The three fundamental
words in this element of the definition are “live”, “work” and “together”. The
word “and” is used by Parliament to unite the two verbs “live” and “work” so
that members of a congregation must engage in both aspects to qualify. One
without the other will not suffice for the purposes of this test.
[129]
The ordinary meaning of
“live”, when used as a verb, is defined in The Oxford English Dictionary,
http://www.oed.com, as:
8.
a. To make one’s home, have one’s abode, dwell,
reside. Usu. with adverb phrase indicating the place or other inhabitants. Also
(colloq.) in extended use of things: to be situated, to have their place.
[130]
The ordinary meaning of
“work”, when used as a verb, is defined in Webster’s Ninth New Collegiate Dictionary,
1985 as:
1. activity in which one exerts strength or faculties to do or
perform something:
a: sustained physical or mental effort to overcome obstacles and
achieve an objective or result
b: the labor, task, or duty that is one’s accustomed means of
livelihood
c: a specific task, duty, function, or assignment often being a part
or phase of some larger activity
[131]
The word “together”,
when used as an adverb, as it is in this section, is defined also in Webster’s
as:
1.
a: in or into one place, mass, collection, or group
b:
in a body: as a group
2.
a: in or into contact
b:
in or into association or relationship
…
4. a: by
combined action
5. a: with
each other
b:
as a unit
[132]
Similarly, The
Oxford English Dictionary, Second edition,
Volume XVIII Thro-Unelucidated, Clarendon Press, Oxford, 1989, defines “together” as:
1. a. Into
one gathering, company, mass or body
…
2. a. In one
assembly, company, or body; in one place
b. Of two
persons or things: In each other’s company; in union or contact
3. In
reference to a single thing.
a. With union
or combination of parts or elements; into or in a condition of unity; so as to
form a connected whole.
…
4. At the
same time, at once, simultaneously. (Usually connoting ‘in combination or
association’).
5. Without
intermission, continuously, consecutively, uninterruptedly, ‘running’, ‘on
end’. (In reference to time, less commonly to space).
6. In concert
or co-operation; with unity of action; unitedly; conjointly.
[133]
Although the word
“together”, when used as an adverb, may have numerous meanings, generally as it
would relate, in the ordinary generic sense, to section 143, the following
phrases might be used to describe Parliament’s use of the word “together”:
·
in contact with each
other
·
in proximity
·
in each other’s company
·
assembled in one place
·
at one time
·
in or by combined
action or effort
·
in one place, mass,
collection or group
The word “together” implies that the actions of “live”
and “work” are completed by a combined action in each other’s company, in one
place at the same time.
[134]
When used as an adverb,
as it is in paragraph 143(4)(a), it is meant to qualify the meaning of
the two verbs “live” and “work”, that is, it is meant to provide information
about or answer questions in respect to the manner, place, time, frequency and
other circumstances surrounding the activity, or activities in the case of this
provision, which are denoted by employment of the verbs.
[135]
According to the
dictionary definitions, the word “together” qualifies or describes the
circumstances of the verb “live” by denoting that members are to “reside, dwell
or cohabit” or “make their home or dwelling in a particular place” in “one
place” or “assembled in one place,” “in each other’s company” and “in contact
with each other.” The word “together,” in describing the verb “work,” denotes
members that “do labour” or “are employed as a means of earning a livelihood”
or are “exerting themselves physically or mentally in order to do, make, or
accomplish something” and, again, referring to doing such tasks “together,”
that is, “in one place” or “assembled in one place,” “in each other’s company”
and “in contact with each other.”
[136]
Based on a textual
reading of the requirement to live and work together and taking into account
the ordinary and plain meaning of the words “live,” “work” and “together,”
Parliament intended that members of a congregation would live and work in one
place, at the same time. The ordinary meaning implies that members are together
most, if not all, of the time. When they are not working together, they are
living together. Thus, “assembled in one place,” “in each other’s company” and
“at one time” would be applicable in the context of section 143. The use of the
words “and” plus “together” dictates that members must live and work in close
physical proximity within a defined area that has easily identifiable
boundaries.
[137]
Paragraph 143(4)(a)
is indirectly related to the wording contained in paragraph 143(4)(d), since
members are required by virtue of paragraph 143(4)(d) “to devote their
working lives to the activities of the congregation.” It follows that they must
be attached to the land or closely tied to a particular place as a consequence
of those activities. The requirement of devotion to activities implies a
geographical limit to the potential geographical spread of members.
Consequently, the land, on which they live and work together, must necessarily
be adjacent, contiguous or at a minimum readily and easily accessible to
members in order for those members to realistically be able to devote their
working lives to the activities of the congregation, as required pursuant to
paragraph 143(4)(d).
[138]
Since “live and work
together” means that members are together most, if not all, of the time, the
standard that members must meet to qualify under paragraph 143(4)(a) is
high. If the interpretation is widened to any degree, then it runs the risk of
being reduced to the general notion of “operating in an integrated manner” or
“living communally,” which, by the very nature of its wording, Parliament
clearly did not intend. If, hypothetically, members, or some of them, work at a
distance from where they live, that distance must be short enough that they are
not prevented on a daily, ongoing basis from devoting their working lives to
the activities of the congregation.
[139]
Finally, with respect
to a textual approach, there is no specific reference to Hutterites anywhere in
the provision, as I noted in the “Preliminary and Primary Issues” section. The
Respondent repeatedly referred to the Hutterites as the “gold standard” for
applying section 143. Any religious group, including a Hutterite colony, that
meets the definition of “congregation” in this section, may bring itself within
section 143. However, Hutterite colonies may be examined and compared in
respect to details on their structure, how they expand, how they function and
how much they document in their articles of incorporation because judicial
notice of jurisprudence on these colonies may be utilized.
[140]
The Hutterites are an
essential part of the legislative history of section 143. The manner, in which
Hutterite colonies operate, makes them separate from the broader society and,
as such, they receive, as a group, the unique tax treatment afforded under section
143. In this context, it is reasonable to rely on and draw from the existing
jurisprudence as a basis of comparing Bountiful members to Hutterite colonies
in respect to “living and working together.” Hutterite groups do not operate
under normal rules of private property. The business agencies of the
congregation must have an objective of supporting or sustaining the community.
Paragraph 143(4)(a) imports, by its very wording, that the very nature
of a congregation shall be self-supporting and self-sustaining and suggests
that it was Parliament’s underlying purpose in enacting this provision.
Arguably, the more “together” a community actually is, the more self-sustaining
it can be.
[141]
The Hutterite colonies
illustrate the concepts of independence and self‑sufficiency, as they are
inwardly focussed, living together in a bounded space, but when their numbers
grow and expand, generally to a maximum of 100 members, the colonies
spread outward and new colonies form. They do so in a modular way. The new
colonies will continue, like the mother colonies, to be inwardly focussed,
operate independently from the outside world, live communally within defined
boundaries, shun individualism and private property ownership and work together
in a largely agricultural setting to support their colony (Wipf, at
paras 2-3).
[142]
Based on the
interpretation I have given to paragraph 143(4)(a), the most immediate
and striking observation is how far-flung the residences of Bountiful, whether
permanent or temporary, are located. Although the main site of Lister, together
with several other areas, Canyon and Yahk, as well as Kitchener for a short
period of time, constituted the locations for the primary residences of members,
they were still up to 50 kilometres apart. The evidence supported that some
members also lived in the community of Cranbrook (Exhibit R-4, Tab 6 and
Exhibit R-5, Tab 94). Alan Oler attended church in Bountiful but lived in Arrow
Creek, a 10 to 15 minute drive from Bountiful (Transcript, Examination in Chief
of Miriam Oler, pp. 2854-2855). Beyond the cluster of homes, schools, barns and
trailers located at Lister, members resided in various sites in British Columbia and Alberta, some up to several hundred kilometres away from the main site.
Based on these facts, not all of the members of Bountiful “live together.”
[143]
Nor can it be said that
the members work together. The worksites were widely distributed over areas in British Columbia and Alberta, as well as Bonner’s Ferry in Idaho. One of the Appellant’s
wives, Ruth Lane, commuted regularly from Bountiful to Bonner’s Ferry in the United States, where she was employed by the Company. In many instances, the distances were
too great for members to commute on a daily or any other type of regular basis.
The evidence was that some were in closer proximity and individuals could
return to Bountiful proper every weekend but some members, due to distance,
could not return except every second weekend. It was also clear from the
evidence that some family members would accompany the work crews to remote logging
work locations and reside there in residences provided by the Company. In these
instances, the workers and their families would be “living and working” at many
different locations far removed from Bountiful itself.
[144]
The Appellant, in fact,
encouraged community members to work outside of the community, which is in
direct contradiction to the requirement of paragraph 143(4)(a).
According to the evidence of Stan Oziewicz, who visited Bountiful and published
an article in the Globe and Mail newspaper in December of 2002, the
Appellant told him at that time that members were “… encouraged to live and
work off Church property and about half of them do.” (Transcript, Examination
in Chief of Stan Oziewicz, p. 1202). In other instances, some of the female
members worked in hospitals outside Bountiful as nurses and midwives. The
Appellant encouraged boys in Bountiful to obtain Alberta residency in order to secure
their trucking licenses at the age of 18 (Transcript, Examination in Chief of
Marlene Palmer, p. 1341). Some of the members lived in Calgary, Alberta for
periods of time attending university, while Ken Oler testified that he worked
in Creston for his father’s tractor dealership until he was 25 years old (Transcript,
Cross‑examination of Ken Oler, pp. 1013-1015). David Oler worked for a
number of dairy farms in the Creston Valley. Some members had their own
incorporated companies that provided services and products, not only for
members, but for non-community members. There was no restriction placed on
these practices.
[145]
The only conclusion to
draw from the evidence of the witnesses was that the members did not work
together because not all members worked exclusively within the context of the
community. The facts support my conclusion that there was no intention for the
community to be living and working together in close proximity on a continual
basis in accordance with the legislative intent of this provision. In addition,
although less relevant to my conclusion, the fact that companies in Bountiful freely provided services and products outside the community indicates that the
boundaries between the community and the outside world were fluid. Along with
being spatially fragmented, there is apparent widespread business engagement
with the outside world. This goes against the underlying principle that capital
and income are communal. Although a community might, out of necessity, have
some minor dealings with outsiders and still meet my definition of “live and
work together,” the extent of the practice in Bountiful removes the community
further from the parameters I have placed on paragraph 143(4)(a).
[146]
Although I do not
accept Respondent Counsel’s argument that Hutterite colonies are the “gold
standard,” the legislative history and the jurisprudence leading up to the
enactment of section 143 have a foundational basis grounded in Hutterian
lifestyle. This is the only community that we know Parliament had in mind when
the provision was enacted. Looking at the information provided generally in the
caselaw respecting Hutterites, it is undisputed that the members in Bountiful do not live and work together in the same manner that Hutterites do. Hutterites
live and work in geographically defined areas and in close proximity in
accordance with the definitions of “live,” “work” and “together” which I have
ascribed to them. This is accomplished to a large extent by division of the
colonies, where each new colony mirrors the mother colony. Hutterites focus
their attention on agriculture as a livelihood for community members, as this
no doubt contributes to the colony retaining its homogenous quality and
independence from the outside world. They live communally in barrack-type
establishments.
… Their
physical needs such as for clothing, food, shelter, medical and dental
attention, equipment, tools and all other necessities were provided by the
colony through its officers or trustees. …
(Wipf (FCTD), at p. 5562).
The evidence supports that Bountiful does have some components
of communality. However, overall, it does not resemble the rigid structure
typical of Hutterite colonies. Bountiful members live in a number of locations
across provinces and into the United States and not in a singularly-defined and
closed geographical location as Hutterites do. Members may work and live
occasionally with their families in remote worksites while members of Hutterite
colonies work “together” primarily at farming activities.
[147]
While my use of
Hutterite structure is based on factual background from other jurisprudence and
is meant to serve as an example of the type of community Parliament intended in
enacting section 143, it should be noted that the Respondent did not provide
any admissible expert evidence with respect to Hutterite communities. While Dr.
Cragun made reference to Hutterite communities in his Expert Report, I
concluded that he was not qualified to give expert testimony on that particular
subject matter with respect to “… the lifestyle of Hutterite colonies or of
Bountiful or to draw comparisons between them” (Transcript, voir dire
decision on Dr. Cragun, p. 1945).
[148]
The community did not
work together on a consistent basis. Bountiful members were engaged in a
variety of business activities and, while many members were employed by the
Company, others operated independent businesses. To support the position that
the community worked together, the Appellant pointed to the example of “work
days” held on Saturdays, when the members were not otherwise employed and were
available to donate their time and labour to community projects. There were
also other instances of members donating time and labour to community projects when
required. While work days may be indicative of a practice in Bountiful for members
to “work together” at particular times, it is insufficient to conclude, in
light of all of the evidence to the contrary, that the community worked
together as contemplated by paragraph 143(4)(a), that is, working
together in close proximity and on a continual and consistent basis.
[149]
Evidence, provided by
the Appellant, respecting family configurations, that is, how members
configured their living arrangements as well as how the community organized
around goods, are not determinative factors and will be less relevant to
whether Bountiful meets the definition of “congregation,” that is, being in
close proximity within a defined area. There were numerous examples throughout
the evidence of family configurations within Bountiful: the Appellant’s
personal living arrangements of residing with his mother and not any of his
plural wives; Miriam Oler did not regularly reside with her father, Dalmon
Oler, who visited that family one night per week; and Marjorie Johnson, one of
the Appellant’s plural wives, who never lived with the Appellant. However,
there is nothing in subsection 143(4) that would indicate precisely how
community members might be expected to arrange their living situation or what
type of family configuration might be required to comply with the provision.
[150]
In addition, although
communal production and consumption of food are likely consequences of living
and working together, it is not an explicit requirement of paragraph 143(4)(a).
Many examples of this were provided throughout the evidence: most households
had their own kitchens; the Appellant’s large house had its own kitchen
facilities which members occasionally used, particularly for Sunday dinner;
famine calls were promoted as a means of raising funds; some members had their
own personal gardens; some crops were sold abroad; and beef cattle were sold
commercially. Bountiful members ate together in the Kitchen House on Sundays
after church services, but the evidence supported that most residences had
their own kitchens and their own food storage the majority of the time. Again,
while not determinative on its own, such facts support my finding that the
community did not “live together.”
[151]
Aside from a
comparative analysis between life on the ground in Bountiful and the Hutterite
colonies, based on a textual, contextual and purposive approach and the
attributes which I have concluded are necessary to defining “live and work
together,” Bountiful cannot be characterized as the type of coherent, identifiable
group that Parliament had in mind to receive this specialized type of tax
treatment. Although it is bound together by its religion and is a community
that is both patriarchal, hierarchal and functions communally in many facets,
Bountiful falls short of the test contained in paragraph 143(4)(a)
because it is unable to bring itself within the “live and work together” framework
which Parliament intended this provision to take. Bountiful appears to be
socially integrated and insular in nature but members do not live and work
together in the manner in which I have defined these words. It is my conclusion
that this test is meant to be applied strictly and in accordance with my
interpretation, which is both narrow and confined. Bountiful is too dispersed
and fragmented to qualify as one of the specific types of community that
Parliament envisioned in enacting section 143, which the Hutterite example
confirms.
[152]
Before leaving this
section, I want to briefly address several points which both the Respondent and
the Appellant made in submissions. The Appellant approached his analysis of
communality in Bountiful by reference to a framework that does not emanate from
the legislative text. This framework of “socialization, familial relationships,
education and livelihood” does not originate from any pertinent doctrinal
source either. The Appellant focussed on what might be construed as the
purported spirit or purpose of the requirement to “live and work together”
which, from the Appellant’s perspective, appears to be “live and work together
in an integrated way” rather than “live and work together.” “Live and
work together” implies that members are together at all times both in respect
to living and working. It implies a high standard and it is, in fact, a very
high one for communities to meet for the purposes of coming within this
provision.
[153]
However, that does not
mean that it is an impossible standard to meet and, because of the special tax
treatment that can be afforded such a community that meets it, the
interpretation to be applied must be narrow and well defined. If the standard
is widened so that a community like Bountiful, where its members are spread out
geographically in respect to both the living and working aspect, then arguably
the meaning of “live and work together” would be reduced to a more general
notion of “operating in an integrated way or fashion” or “living communally.”
Such an interpretation would allow a geographical spread, like that of
Bountiful, which goes directly against the intent of Parliament and the plain
and ordinary meaning of the requirement to “live and work together,” which I
have concluded should be assigned to it.
[154]
In respect to the
Respondent’s submissions on the parameters of the meaning of “live and work
together,” the suggestion that “[p]eople who reside in different homes, different
towns, different provinces and even different countries don’t “live together””
(Respondent’s Written Submissions, para 463) is unreasonable and too narrow.
While living in different countries, provinces and towns will be fatal to
meeting this requirement, living in different homes, according to the meaning I
have assigned to “live” and “work together” should not and will not be fatal.
[155]
My second comment is in
respect to the Respondent’s reliance on the two phenomena associated with
polygamous communities: “lost boys” and “trafficked girls.” While such
phenomena may be indicative of the potential for such communities to be
unstable, they do not address the issue of “living and working together.”
Rather, these two phenomena deal more specifically with the issue of community
composition, namely, who is in and who is out in terms of members. More
importantly, there was very little evidence given at the hearing respecting
these two phenomena. The only reference was in respect to Marlene Palmer’s son,
Clayton, who was banished from the community as a teenager by the Appellant
(Transcript, Cross-examination of Marlene Palmer, p. 1520). The Respondent
referred to the “lost boys” phenomenon in argument only and cited the B.C. Polygamy
Reference Case and Daphne Bramham’s book, The Secret Lives of Saints.
There was no evidence in respect to trafficking of girls provided at the
hearing and the Respondent again relied on expert evidence given in the B.C. Polygamy
Reference Case. Consequently, I rejected any reference or reliance on these two
phenomena in my approach and analysis to paragraph 143(4)(a).
B. Adherence to Practices and Beliefs
Does the community of Bountiful adhere to the
practices and beliefs of and operate according to the principles of the
religious organization of which it is a constituent part?
[156]
An analysis of this
second part of the test is largely dependant upon the boundaries that I define
in respect to the meaning and scope of the term “religious organization.” Such
a framework lays the foundation in which this Court must determine, firstly, to
which religious organization the community of Bountiful forms a constituent
part in respect to both the pre and post 2002 split of the community and,
secondly, whether the community adheres to the practices, beliefs and
principles of that religious organization.
[157]
Unlike my analysis of
the first element, (a), of subsection 143(4), this second component will
incorporate, to a greater extent, the evidence of the experts. However,
although none of the experts were permitted to testify on life in Bountiful, briefly again I confined the testimony of each expert to the following:
(a) Dr. John Walsh, the
Appellant’s expert witness, was permitted to give testimony on the history,
principles and doctrine of Mormonism, but not on daily life in Bountiful;
(b) Dr. Ryan Thomas Cragun,
the Respondent’s first expert witness, was permitted to give testimony on the
LDS and FLDS Church branches and particular concepts such as consecration and
tithing. He was not permitted to give evidence on Hutterites; and
(c) Dr. Randall Balmer, the
Respondent’s second expert witness, was permitted to give testimony on “polity,”
the history of Mormonism and Mormon religious organization and fundamentalist
groups.
1. The Appellant’s Submissions
[158]
Appellant Counsel’s
approach to the term “religious organization” is that it imposes few
requirements and should be liberally interpreted. According to the Appellant, the
community of Bountiful meets the second component of the definition set out in
paragraph 143(4)(b) because, pre the 2002 split, it is a part of
Mormonism and the FLDS Church, also known as The Priesthood Work. After the
2002 split, Bountiful may be a part of three possible religious organizations:
Mormonism, the FDLS Church, or the community of Bountiful itself, as led
by the Appellant and including the other religious groups that viewed
Mr. Blackmore as their spiritual leader (Appellant’s Written Submissions, para
84).
Pre-Split period, January 1,
2000 to November, 2002
[159]
Although Appellant
Counsel proposed two possibilities in respect to religious organizations that
Bountiful could be a part of, Mormonism and the FLDS Church, they were
described as “… alternatives but they are not mutually exclusive … There’s
overlap between them.” (Transcript, Appellant’s Oral Submissions, p. 3027).
[160]
Dr. Walsh’s view was
that Mormonism is a religious organization, within which subgroups exist, and
that Bountiful was a part of Mormonism during the pre‑2002 split period.
Members of the community were organized as Mormons because they believed that
Joseph Smith Jr. was a prophet of the Lord and that the Book of Mormon was the
word of God (Dr. Walsh’s Expert Report, p. 7, para 5).
[161]
Appellant Counsel also
relied on Dr. Balmer’s comments to support this view. He described Mormonism as
“… a larger, more generic entity.” (Transcript, Cross-examination of Dr. Balmer,
p. 2717). Counsel argued, therefore, that Bountiful was part of “the broad
stroke” religious organization of Mormonism (Transcript, Appellant’s Oral
Submissions, p. 3034).
[162]
The second proposed possibility,
for which Bountiful could be a constituent part, is the FLDS Church. This group had been a part of the mainstream Mormon Church but, because this group
continued their practice of polygamy after it had been outlawed by the
mainstream Mormons, they were excommunicated.
[163]
Dr. Walsh is of the
view that Bountiful has a close tie historically with the FLDS Church because of their belief in Joseph Smith’s teachings and their practice of polygamy and
communal living (Dr. Walsh’s Expert Report, p. 15, para 24).
[164]
Although Dr. Balmer did
not directly address the pre-split period and despite his testimony that the
Appellant had severed his ties with the FLDS Church, Appellant Counsel pointed
out that Dr. Balmer’s testimony was to the effect that the FLDS Church was a
religious organization to which Bountiful could be a part. (Transcript, Examination
in Chief of Dr. Balmer, pp. 2601-2602). Appellant Counsel argued that
Dr. Cragun’s testimony also supported a conclusion that the FLDS Church was a religious organization, of which Bountiful could be a part.
Post-Split, November 2002
onwards
[165]
After the leadership
crisis in Bountiful and the split in 2002, with some members following the
teachings of Warren Jeffs and the remaining members following the spiritual
leadership of the Appellant, Counsel suggested three possible religious
organizations for which that segment of Bountiful, led by the Appellant, could
be a constituent part:
(a) Mormonism;
(b) the FLDS; or
(c) a religious
organization led by the Appellant, including other religious groups who viewed
the Appellant as their spiritual head.
[166]
Appellant Counsel
applied the same argument here to support that Bountiful was a constituent part
of the religious organization, Mormonism, as he had in recommending it as a
viable choice in the pre-split period. The members remained followers of the early
teachings of Joseph Smith, the prophet, practicing both polygamy and communal
living and continued to identify themselves as Mormons within the larger
framework of Mormonism.
[167]
As the second
alternative option, Appellant Counsel suggested that the community of Bountiful continued to be part of the religious organization, the FLDS Church, after the community split, even though Warren Jeffs purported to excommunicate the
Appellant from the FLDS Church in February, 2003. The Appellant, as leader of
Bountiful, continued the early Priesthood Work begun in the 1930s and the
teachings of Joseph Smith Jr., even though Warren Jeffs appropriated the name
FLDS. The Appellant also continued as leader of some of the FLDS branches in
the United States.
[168]
Appellant Counsel
compared the period of leadership upheaval in 2002 to the period following the
death of Joseph Smith in 1844, where several claimants asserted leadership
claims. Appellant Counsel argued that similarly both the Appellant and Warren
Jeffs claimed to be leaders of the true continuation of the FLDS Church.
[169]
Counsel relied on Dr.
Balmer’s testimony, respecting the legitimacy of competing leadership claims
within an organization governed by apostolic succession, to support this
argument. Consequently, according to the expert testimony, there may be
multiple legitimate claimants to succession within a religious organization.
The Appellant had a legitimate claim of succession upon the death of Rulon
Jeffs, as one of only a handful of individuals that had been ordained as a high
priest within the FLDS Church.
Thus,
in the same way that Brigham Young, James Strang and others claimed the right
to succeed Joseph Smith, both Winston Blackmore and Rulon (sic – should
be Warren) Jeffs claimed the right to succeed Rulon Jeffs. Dr. Balmer
recognized the legitimacy of such claims in the context of an organization
governed by apostolic succession, and that all had legitimate claims to be part
of the organization. …
(Appellant’s Written Submissions, para 94)
[170]
The third alternative possibility,
according to the Appellant’s submissions, is that Bountiful, along with other
groups in the United States, comprise a religious organization, of which they
are constituent parts, with Winston Blackmore as their spiritual leader.
2. The Appellant’s
Position
[171] The community of Bountiful is a constituent
part of Mormonism, the FLDS or the community of Bountiful itself, together with
several groups in the United States who follow the spiritual leadership of the
Appellant. Any of these choices are possible because the term “religious
organization” as defined in the Act has no particular requirements,
other than needing,
“an
organization … that adheres to beliefs … that include a belief in the existence
of a supreme being.” [Further], [i]t is the belief in the existence of a
supreme being that makes the organization in question a religious
organization. Beyond that, the definition … imposes no requirements, other than
it be an organization.
(Appellant’s Written Submissions, para 63).
…the
requirement that a communal organization be a religious communal organization,
is simply intended to ensure that the groups to which section 143 applies are bona
fide in their commitment to a communal lifestyle and have some degree of
permanence.
(Appellant’s Written Submissions, para 51).
3. The Respondent’s Submissions
[172]
The Respondent rejected
the Appellant’s three proposed possibilities respecting religious organizations
to which Bountiful might be a constituent part, both before and after the 2002
split, because none of them meet the definition of “religious organization,”
contained in the Act.
[173]
The Respondent concentrated
on the various components of the wording in paragraph 143(4)(b), relying
primarily on the Expert Reports and testimony of Dr. Cragun and Dr.
Balmer.
[174]
According to Dr.
Cragun, there were only four possible “religious organizations” that Bountiful could be a part of:
1. The
Church of Jesus Christ of Latter-day Saints (“LDS Church”) based in Salt Lake City, Utah, U.S.A.
2. The
Fundamentalist Church of Jesus Christ of Latter-day Saints (“FLDS Church”)
based in Colorado City, Arizona.
3. The
broad tradition of “Mormonism.”
4. Independent
Mormon fundamentalists.
(Dr. Cragun’s Expert Report, p. 10, para 21)
[175]
The Respondent
submitted that, based on the evidence, Bountiful belongs in Dr. Cragun’s fourth
category – independent Mormon fundamentalist group - comprised of the
Appellant’s extended polygamous family. According to Dr. Cragun’s
testimony, there are two types of independent Mormon groups, those that
practice polygamy (fundamentalists) and those which do not. Those that practice
polygamy,
… are
typically individual families. Some may be in communication with or even, on
occasion, visit with some of the organized groups above. Others may not. The
primary characteristic that distinguishes independent Mormon fundamentalists
from the organized Mormon fundamentalists is that they do not share a belief in
the same authority structure as the organized groups.
(Dr. Cragun’s Expert Report, p. 19, para
50).
[176]
According to the
Respondent, Bountiful cannot be part of the first category on Dr. Cragun’s list,
the LDS Church, because that church disavowed the practice of polygamy in 1890.
In addition, the Appellant did not claim to be a part of the LDS Church and he acknowledged that his forefathers had been excommunicated from the LDS Church because they continued to practice polygamy.
[177]
The Respondent argued
that Bountiful is not a part of the FLDS Church either, especially after the
community split in 2002. Dr. Cragun noted that the community split resulted
from a dispute pertaining to leadership within the church involving the
identity of the true prophet. Those members of Bountiful who followed the
Appellant’s leadership did not accept Warren Jeffs as the prophet of the FLDS Church. As Dr. Cragun noted:
… Disagreement
over who is the prophet or who has the authority to be the prophet is a major disagreement.
…
(Dr. Cragun’s Expert Report, pp. 13-14, para
32).
[178]
The Respondent relied
on Dr. Balmer’s Expert Report and evidence to argue that, prior to the
2002 split, the FLDS Church was “without apostolic legitimacy.” Mormonism is
defined by episcopal polity, that is, it is governed by bishops. As Dr. Balmer
noted, “… authority derives from a line of apostolic succession that … extends
in an unbroken line back to Joseph Smith Jr., whom Mormons believe to be the “latter-day”
prophet.” (Dr. Balmer’s Expert Report, p. 10, para 19). The Appellant
claims his line of authority back to Joseph Smith Jr. through Leroy S. Johnson.
However, when Johnson broke away from the LDS Church over the issue of
polygamy, that line of priestly authority was ruptured (Respondent’s Written Submissions,
para 547).
[179]
The Respondent relied
on Dr. Balmer’s Expert Report to support its position that the FLDS is a
splinter group that cannot claim apostolic succession authority, either pre or
post the split in 2002, due to their continued practice of polygamy
(Respondent’s Written Submissions, paras 553-554). This disrupted the line of
authority after the First and Second Manifestos which disavowed polygamy. According
to Dr. Balmer, therefore, the FLDS Church is without apostolic legitimacy,
making the Appellant twice removed from any claim to authority, because first, his
alleged ordination came from a splinter group, the FLDS, and second, he was
excommunicated from the FLDS in 2002 (Dr. Balmer’s Expert Report, p. 13, para
26 and p. 17, para 42).
[180]
While some groups - most
notably, the Strangites (which held a letter suggesting Smith had designated
James Strang as his successor), the Church of Christ and the Reorganized Church
of Jesus Christ of Latter Day Saints (known as the Community of Christ, whose
founders included Joseph Smith’s widow and her son) – may be able to claim
direct apostolic authority (or direct mandate or direct connection, as Dr.
Balmer referred to it in his testimony - Transcript, Examination in Chief of
Dr. Balmer, p. 2596) directly to Joseph Smith Jr., the Appellant is unable
to make a similar claim to a direct line of succession.
[181]
With respect to the
third category in Dr. Cragun’s list, the Respondent submitted that, since
Mormonism is a religious tradition and not a religious organization, Bountiful cannot claim to be a constituent part of Mormonism.
[182]
Noting that the
Appellant’s testimony was not consistent in respect to which religious
organization he claims Bountiful to be a part of, the Respondent submitted that
Bountiful, at best, could be part of the fourth category in Dr. Cragun’s
list, independent Mormon fundamentalists.
4. The Respondent’s
Position
[183] Bountiful was potentially a part of the FLDS Church prior to the 2002 split. However, relying on Dr. Balmer’s expert testimony,
FLDS is not a religious organization and the definition in paragraph 143(4)(b)
is therefore not met. Nor can Bountiful be part of the LDS Church because that church disavowed polygamy, which Bountiful members still practice, and finally,
it is not part of Mormonism because that is a tradition, not a religious
organization. At best, Bountiful may be a community of independent Mormon
fundamentalists, consisting of the Appellant and his extended family, but it is
not a “constituent part” of any religious organization as contemplated by the Act.
[184]
The Respondent reviewed
various definitions that can be applied to “organization,” emphasizing that a
religious organization is considered “the whole” and must be “… comprised of
more than one community, each of which meets the definition of “congregation”.”
(Respondent’s Written Submissions, para 525). The term “constituent part” used
in paragraph 143(4)(b) implies that “… a stand alone community cannot
meet the definition of congregation [because] a community cannot be a
constituent part of itself.” (Respondent’s Written Submissions, para 526).
5. Analysis
[185]
This component of the
test requires an interpretation of the type of religious groups that Parliament
envisioned coming within the parameters of section 143 when it was enacted. The
scope of the term “religious organization,” from the perspective of a textual,
contextual and purposive approach, must also be reviewed.
[186]
In order to structure
my analysis “from the ground up,” I will focus first on the text found in
subsection 143(4)(b). I believe there are six questions, structured in
the following manner, that need to be addressed in order to reach a conclusion
as to whether Bountiful is a constituent part of a religious organization:
(a) What is an organization?
(b) What is a religious organization?
(c) What is the meaning of “constituent
part” in this context?
(d) What religious
organization might the community of Bountiful be a constituent part of?
(e) What are the
practices, beliefs and principles of that religious organization?
(f) Does the community of Bountiful adhere to those practices and beliefs and do they operate by the principles of
that religious organization?
[187]
The term “religious
organization” is defined in the Act as:
“religious
organization” - “religious organization” means an organization, other than
a registered charity, of which a congregation is a constituent part, that
adheres to beliefs, evidenced by the religious and philosophical tenets of the
organization, that include a belief in the existence of a supreme being.
The definition includes the following characteristics:
(a) it is an organization, other than a
registered charity;
(b) the congregation is a constituent part of
the organization;
(c) the organization
adheres to beliefs, evidenced by the religious and philosophical tenets of the
organization; and
(d) those beliefs must include a belief in
the existence of a supreme being.
The Respondent conceded that the members of Bountiful share “a belief in the existence of a supreme being” (Respondent’s Written Submissions,
para 519). However, the first criterion of the definition of “religious
organization” requires that the community of Bountiful be identified as an “organization.”
[188]
Both the Appellant and the
Respondent suggested dictionary definitions of “organization” as the term is
not defined in the Act. The Appellant’s proposed definitions are
particularly relevant:
(a) Oxford English
Dictionary: a systematic arrangement for a definite purpose; and
(b) Black’s Law
Dictionary: a body of persons (such as a union or corporation) formed for a
common purpose.
(Appellant’s Written Submissions, para 65)
[189]
Dr. Walsh relied on the
dictionary meaning of “organization” when discussing this term.
[190]
Dr. Cragun defined
“organization” in sociological terms as follows: “… a collective of people who
identify with one another and who work together for a common purpose.” (Dr.
Cragun’s Expert Report, p. 9, para 18, citing Scott, W. Richard. 2004.
“Reflections on a Half-Century of Organizational Sociology.” Annual Review
of Sociology 30(1):1-21.)
[191]
In his direct
testimony, Dr. Cragun made the following remarks concerning “organizations,”
pointing out the distinction between religious traditions and religious
organizations:
… So sociologists,
as we approach the idea of an organization, we're looking for a group of people
with a sense of identity and coherence. They feel like they belong
together, right? They have some sense of connection. There's a
structure to it, right, so organizations have a sense of structure, and that
typically includes some notion of who belongs and who doesn't belong.
So you can have relatively clear boundaries as to who is a member of the
organization and who is not a member of the organization. And of course
they're together for a reason, whatever that reason may be. So they've got
some shared goal or interest towards which they're working.
A religious
organization, then, would be an organization based on that sociological
definition, that includes some component of the supernatural, some
belief towards the supernatural that would generally be shared by the
members of that organization, right? So we would have the Mormon
tradition, which would refer to the collective beliefs and those
ideas, and then under that tradition, that umbrella of Mormonism, we
would have specific religious organizations. (Emphasis
added.)
(Transcript, Examination in Chief of Dr. Cragun, pp.
1953-1954).
[192]
Dr. Balmer used the
term “organization” in the sense of “polity” or governance:
First,
it says something about the polity (organization) of the Latter-day Saints.
Most Christian groups are organized into one of three forms of polity: congregational,
presbyterian, and episcopal. (I have intentionally rendered these in
the lower case; although it is tempting to identify each with the denominations
that use the names, the words – and the polities to which they refer – are more
generic.)
(Dr. Balmer’s Expert Report, p. 7, para 10)
Congregational
polity vests authority in the local congregation. …
(Dr. Balmer’s Expert Report, p. 7, para 11)
Presbyterian
polity is a form of representative government, when
the local congregation elects representatives. …
(Dr. Balmer’s Expert Report, p. 8, para 12)
Episcopal polity is government by bishops, a principle that rests on the
notion of apostolic succession. …
(Dr. Balmer’s Expert Report, p. 8, para 13)
[193]
When asked in direct
examination what he meant by “religious organization,” Dr. Balmer made the
following comments, in which he also references religious tradition:
A I
would take religious organization to be the institutional embodiment of a
particular group of people who would fit under the larger rubric of a religious
tradition.
Q And what
do you mean by "institutional embodiment"?
A This would
be how they are organized or the polity of that particular group, how it
understands itself in terms of organization and governance.
(Transcript, Examination in Chief of Dr. Balmer, p.
2586)
[194]
When used in a judicial
or legislative context, the word “organization” is generally preceded by a
qualifier that alludes to an entity’s purpose. In the context of the Act,
aside from religious organizations, there are “charitable organizations,” which
devote substantially all of their resources to the charitable activities and
purposes which they conduct (paragraph 149.1(1)(a) of the Act). I
could not locate any judicial commentary on the word “organization” as it is
used in the context of charities. Outside the Act, there are numerous
examples, such as “criminal organization,” used in the Criminal Code, R.S.C.
1985, c C-46, or the Immigration and Refugee Protection Act, S.C. 2001,
c. 27, which speaks of “organized criminality.” In dealing with this last
quoted Act, O’Reilly J. of the Federal Court, Trial Division, in Thanaratnam
v Canada (Minister of Citizenship and Immigration), 2004 FC 349, at paragraph
31, describes “… some characteristics of an organization …” as “… identity,
leadership, a loose hierarchy and a basic organizational structure …”.
[195]
The meaning of
“organization,” therefore, will be highly dependent upon the context within
which it is to be employed.
[196]
In addition to the general
dictionary definitions of “organization” and the expert interpretations, although
neither party offered a comprehensive definition of the phrase “constituent
part,” I consider this component, “that a congregation be a constituent part of
a religious organization,” to be an essential aspect of the definition.
[197]
The word “constituent”
is used as an adjective in the text of paragraph 143(4)(b). The Concise
Oxford Dictionary of Current English (8th edition, 1992, Clarendon Press-Oxford)
defines “constituent” as follows:
composing
or helping to make up a whole.
[198]
The Oxford English
Dictionary (2nd edition, 1989, Clarendon Press-Oxford) contains the
following definitions:
1. That constitutes or makes a thing what it is; formative, essential;
characteristic, distinctive.
2. That jointly constitute, compose, or make up. Of a single element:
That goes to compose or make up; component.
…
[199]
If a congregation is a
“part” which makes up a whole, or simply “goes to compose or make up” a
religious organization, this implies that there will be other “parts.” From a
textual perspective, on a plain reading, there will be other congregations that
are also “constituent parts” of the religious organization. However, is it
possible to have only one congregation that is a constituent part of a broader
organization? For example, if Hutterite congregations disbanded, except for one
that belonged to the Hutterian Brethren Church, would not that sole remaining congregation
still qualify as a constituent part of the broader religious organization?
Although this is potentially one interpretation, it is less compelling in light
of the reality of the Hutterite example, which precipitated the enactment of
the provision. Consequently, in determining which religious organization
Bountiful is or was a constituent part of, I adopt the view that there will be
other congregations which form part of the greater whole.
[200]
Although not the “gold
standard,” the Hutterites provide a clear illustration of how this provision
can and should be applied: there are multiple Hutterite colonies, all of which
“make up” or “comprise” the greater whole, the Hutterian Brethren Church. While the Hutterian Brethren Church is an incorporated body, section 143 does not
explicitly require incorporation of religious organizations. Realistically,
however, it may be difficult for a religious organization that is
unincorporated to meet the criteria of this provision. It certainly raises the
bar in respect to evidentiary hurdles that must be overcome. Without precise
articles of incorporation or memorandum of association, identifying the
relevant religious organization, there must be a broader inquiry into the
nature and circumstances of a community seeking to qualify under the umbrella
of section 143. Essentially then, such an inquiry must determine the religious
and philosophical tenets of the organization, that is part of the greater
religious tradition, the community’s practices, beliefs and principles and
whether those correspond and complement the religious and philosophical tenets
of the religious organization of which the community is purportedly a
constituent part.
[201]
I believe there are
five possibilities, based on the parties’ submissions, for which the community
of Bountiful may belong:
(a) The Church of Jesus
Christ of Latter-day Saints or “Mormonism” generally;
(b) the LDS Church;
(c) the FLDS Church, both pre and post the
2002 split;
(d) the FLDS Church pre the 2002 split and an independent group of Mormon fundamentalists post the 2002
split; or
(e) an independent group of
Mormon fundamentalists who are not a constituent part of a religious
organization.
[202]
After reviewing all of
the evidence that was before me, I have concluded that members of the community
of Bountiful are not members of any religious organization but are a group of
independent Mormon fundamentalists. I will address each of the five
possibilities in the order that I listed them:
The Church of Jesus Christ of Latter-day Saints or
“Mormonism” generally
[203]
Dr. Walsh contends that
“The Church of Jesus Christ of Latter-day Saints” has a broader religious
meaning as opposed to its colloquial association to the Salt Lake City, Utah church – the mainstream LDS Church. Dr. Walsh’s position is that:
…congregations
and sub-organizations that fall under the umbrella of The Church of Jesus
Christ of Latter-day Saints claim either exclusive use of this term for themselves,
or seek to deny the usage of this term to specific groups. A prime example is
the LDS Church. […] Essentially, disagreements about the use of The Church of
Jesus Christ of Latter-day Saints to describe a religious organization,
sub-organization or congregation is a fight over who is in favour with God and
who is not; who has legitimate priesthood authority and who does not; …
(Dr. Walsh’s Expert Report, pp. 6-7, para
3).
Consequently, Dr. Walsh believes that The Church of
Jesus Christ of Latter-day Saints is a religious organization that is distinct
from the mainstream LDS Church and encompasses “… all those organizations that
believe they are legitimate successors to the priesthood authority of Joseph
Smith …” (Dr. Walsh’s Expert Report, p. 5, para 1). Therefore, Dr. Walsh
contends that Bountiful is part of the religious organization known as
Mormonism.
[204]
Both Dr. Cragun and Dr.
Balmer disagreed with Dr. Walsh’s conclusions. Dr. Cragun’s expert opinion
is that “Mormonism” is not a parent religious organization, as Dr. Walsh
suggests, but that it is a religious “tradition” under which religions can
be included. Dr. Cragun disagrees with Dr. Walsh’s opinion that there is an
organization called “The Church of Jesus Christ of Latter-day Saints” that is
separate from the mainstream LDS Church. Dr. Cragun contends that Dr. Walsh’s position
is misleading and incorrect. Dr. Cragun pointed out that Dr. Walsh contradicted
his own position, which he advanced in his Expert Report and testimony, in two
prior sworn affidavits of March 3, 2010 and June 7, 2010 (Exhibit R-6, Tab 127
and Exhibit R-6, Tab 128, respectively). In those affidavits, Dr. Walsh
describes Mormonism as a term encompassing the Christian religious, cultural and
institutional traditions associated with the LDS Church, established by Joseph
Smith Jr. on April 6, 1830. According to Dr. Cragun, this description,
contained in Dr. Walsh’s prior affidavits, as opposed to his statements in
the Expert Report before me, is an accurate statement of Mormonism being a
religious tradition as opposed to a religious organization.
[205]
Dr. Cragun, at paragraph
43 of his Expert Report, describes the “Mormon” tradition as,
… a
loose set of beliefs and practices that a group of religious organizations have
in common. […] A “religious organization” can be part of a “religious
tradition” or a “family of religions,” but a “religious tradition” cannot be a
“religious organization.”
[206]
Dr. Cragun concludes,
at paragraph 44 of his Expert Report, that any claim that Mormonism is a
“religious organization,” as Dr. Walsh contends in his Expert Report,
…
intentionally conflates a “religious tradition” with a “religious
organization.” In my opinion such a claim is disingenuous and unsustainable.
[207]
Dr. Balmer also
disagreed with the position taken by Dr. Walsh that a religious organization
called The Church of Jesus Christ of Latter-day Saints has a separate and
distinct existence apart from the LDS Church. He stated, at paragraph 37
of his Expert Report, that if Dr. Walsh meant instead to refer to “the Mormon
Church” or “Mormonism” as the religious organization to which Bountiful was a
part:
… To
make such a case, and given the episcopal polity of the Church of Jesus Christ
of Latter-day Saints, you would have to be able to demonstrate an unbroken line
of apostolic authority extending back to Joseph Smith Jr. Because of its
persistent practice of polygamy, which was forbidden by Wilford Woodruff, the
LDS prophet, in 1890, the FLDS cannot do so. Nor can Mr. Blackmore credibly
make any such claim, both because of his “ordination” through the FLDS (which
is not the Church of Jesus Christ of Latter-day Saints) and because he
no longer has any standing in the FLDS. Therefore, even if we acknowledged the
apostolic legitimacy of the FLDS Church – a status emphatically denied by the
Church of Jesus Christ of Latter-day Saints – Mr. Blackmore is twice removed
from apostolic legitimacy.
[208]
I accept the testimony
of both Dr. Cragun and Dr. Balmer and I conclude that Mormonism is not a
religious organization but that it is a religious tradition in much the same
way as we understand Christianity to be a religious tradition. This is in
accordance with the testimony of both of these experts. It would also appear
that this is the widely-held view of most scholars in this field. I also
believe Dr. Walsh’s position, as presented in his Expert Report and in his
testimony, to be suspect in light of the contrary viewpoint he adopted in prior
affidavits sworn in 2010. I reject Dr. Walsh’s position which is, at best,
incorrect and, at worst, misleading to this Court. He clearly substituted the
correct term “the religious tradition of Mormonism” in his affidavits for the
incorrect term “The Church of Jesus Christ of Latter-day Saints” in his Expert
Report and in his testimony before me in these appeals.
[209]
The purpose of the
provision, which requires that a congregation be a constituent part of a
religious organization, is to ensure that it applies to groups that are clearly
part of a wider and well-established organization that shares a common purpose.
Even if I did have any evidence to support a finding that “Mormonism” is a
religious organization, as opposed to a tradition, it would lead to an
interpretation of this provision which would be overly broad and contrary to
Parliament’s intent. Such a finding would permit the umbrella of Mormonism to
potentially shelter a diverse array of groups and individuals, all adhering to
different but not shared beliefs based on divergent religious and philosophical
tenets. Some groups practice polygamy, while others do not. Such different
practices arguably make these groups radically different from one another,
nullifying the possibility that they belong to the same religious organization.
Such groups do not share the requisite “common purpose” or “common interests,”
whatever those happen to be.
[210]
Consequently, I
conclude that Bountiful is not a part of the The Church of Jesus Christ of
Latter-day Saints, as Dr. Walsh incorrectly used that term and related it to
Mormonism generally, because neither are religious organizations and, in fact,
Mormonism is a religious tradition, following the definition given to it by Dr.
Cragun.
The LDS Church
[211]
I cannot accept that Bountiful is a part of the mainstream LDS Church either and, most importantly, the
Appellant has never claimed that Bountiful was a part of the LDS Church. My conclusion is based on the following:
(i) There was a split
within the LDS Church with the issuance of the Woodruff Manifesto in 1890 which
disavowed the practice of polygamy. This led to the split between the LDS Church and Mormon fundamentalists, who continued the practice of polygamy, with the LDS Church excommunicating members who continued the practice. Dr. Cragun noted that
the LDS Church today continues to disavow any connection to Mormon
fundamentalists or groups that continue to practise polygamy, as Bountiful does.
(ii) The beliefs and
principles of the LDS Church do not require its members to live and work
together or to devote their working lives to the activities of their community
or prohibit the members from owning property (Dr. Cragun’s Expert Report, p.
12, para 28). This is in direct opposition to the requirements of the Act
and what the Appellant is claiming.
[212]
The Appellant never
claimed that he is part of the Church of Jesus Christ of Latter Day Saints,
either generic Mormonism or the LDS Church. At paragraph 3 of his Further,
Further Amended Notice of Appeal, he stated that he belongs to the FLDS Church but not to the FLDS Church that Warren Jeffs leads. After the 2002 split, he
referred to his group as a “subset” of the group pre-2002 split. While he
referred to having associations with other like-minded communes in the United States, he did not adduce evidence respecting the particulars of these groups and whether
they might meet the definition of “congregation” so that Bountiful could be
considered a constituent part of a religious organization comprised of such congregations.
The FLDS Church, both pre and post the 2002
split; and/or the FLDS Church pre the 2002 split and an independent group of
Mormon fundamentalists post the 2002 split
[213]
Is Bountiful a member
of the FLDS Church before and/or after the split of the community in 2002? This
split in Bountiful occurred over a disagreement as to whether Warren Jeffs was
the prophet of the FLDS Church. The Appellant was excommunicated from the FLDS Church in mid-2002. About equal numbers followed the Appellant, while the remaining
members of Bountiful followed Warren Jeffs, who appointed a leader for his
followers in the community. As pointed out by Dr. Cragun in his Expert Report,
at paragraph 32,
…
Disagreement over who is the prophet or who has the authority to be the prophet
is a major disagreement. […] As the Bountiful group no longer shared a key
belief with the other members of the FLDS Church they could not be a
constituent part of the FLDS Church after 2002.
[214]
In indicating the
serious nature and consequences of excommunication and apostasy in the Mormon
tradition, Dr. Cragun, at paragraph 33, stated that “… [m]embers who are
excommunicated are considered to be completely cut off from the religious
organization from which they were excommunicated.” Consequently, it would be
difficult to conclude that the portion of Bountiful led by the Appellant was a
constituent part of the FLDS Church after the 2002 split, even if the Church is
a religious organization, because the Appellant’s group no longer shared a
basic belief that other members of the FLDS Church retained: that Warren Jeffs
was the succeeding and legitimate prophet and priesthood head of the FLDS
Church.
[215]
Dr. Cragun’s view of
Bountiful, in respect to the intact community pre the 2002 split, seems to be
that it was part of a religious organization or at least a larger religious
group, which is the FLDS Church (Dr. Cragun’s Expert Report, para 30). However,
Dr. Balmer’s view, from an historical perspective, questioned the very
legitimacy of the FLDS Church. Since Mormonism is episcopal in polity, that is,
governed by bishops, the line of priesthood authority is very important and any
disagreement respecting the legitimate authority of the prophet amounts to a
major disagreement.
[216]
Dr. Balmer’s opinion is
that the Appellant is “twice removed” from the LDS Church because the line of
priesthood authority was twice ruptured in respect to the Appellant’s claims: first,
by Leroy S. Johnson, founder of the FLDS Church and then second, when the
Appellant was excommunicated from the FLDS Church in 2002. Since episcopal polity
requires an unbroken line of authority or succession, Bountiful, both pre and
post the 2002 split, can make no legitimate claim to such succession. To
conclude otherwise would ignore the foundational belief of apostolic
succession. Without that, the Appellant cannot stake a claim to an unbroken
line of apostolic succession in a religious organization, when it is governed
by the principle of episcopal polity.
[217]
Dr. Balmer also
disagreed with Dr. Walsh’s position on the notion of self‑identification
of members of Bountiful with members of the LDS Church. Dr. Balmer’s
opinion is that consistency of beliefs and styles of worship would be
insufficient to establish affiliation. As Dr. Balmer succinctly pointed out at
paragraph 28:
…
The typical response to such a claim is that just as sleeping in a garage
doesn’t make you an automobile, so too merely having someone assert that she or
he is a Mormon – or a Catholic or a Presbyterian or a Chevrolet – doesn’t make
it so.
[218]
There are divergent
opinions between Dr. Cragun and Dr. Balmer on the status of the membership of Bountiful in the FLDS Church prior to the 2002 split. However, it is important to note
that each of them approaches that issue from a different perspective (Dr.
Cragun’s being a sociological perspective and Dr. Balmer’s being an
historical perspective).
[219]
Neither Dr. Cragun nor
Dr. Balmer was entirely clear in his Expert Report or his testimony as to
whether the FLDS Church is a religious organization or not. Neither made a
definitive statement. Dr. Cragun, at paragraph 30 of his Expert Report, states
that the FLDS Church is a “religious group” prior to the excommunication of
Winston Blackmore in 2002, but that it would not meet the definition of
“religious organization” as outlined in the Act. However, I limited
Dr. Cragun from giving testimony on his interpretation of section 143. At
the conclusion of paragraph 30, he summarizes his view but couches his language
such that it remains ambiguous:
…
it is doubtful that even prior to 2002 the individuals living in Bountiful were a “constituent part” or a “religious organization,” since the FLDS Church is unlikely to meet the criteria of a “religious organization.”
Then, at paragraph 41 of his Expert Report, he
mentions, almost as an aside, that the FLDS would, in fact, meet the criteria
of “religious organization” while Mormonism would not. This contradicts his
statements at paragraph 30. Contrary to the Appellant’s contention, that Dr.
Cragun’s testimony supported a conclusion that the FLDS Church is a religious
organization, Dr. Cragun suggested that it was “similar to the religious
organization” described in the Act but that it did not meet the
definition in the Act as it was not organized in the same fashion as
Hutterite colonies (Dr. Cragun’s Expert Report, para 30, emphasis added).
[220]
Dr. Balmer is also
nebulous in his Expert Report and testimony when he discusses this issue. He
makes it clear, however, that this area is a contentious, or at least uncertain,
one among scholars.
[221]
Neither expert directly
provided the Court with what I consider a concise and unambiguous statement on
this issue and I surmise that it may be, in part, because it is shrouded with
the issue of polygamy, which is the proverbial “elephant in the room” that no
one wants to confront.
[222]
Dr. Balmer’s Expert
Report and testimony give the clear impression, however, that the FLDS Church would not qualify as a legitimate religious organization because the line of
apostolic succession was broken due to the group’s continued practice of
polygamy. Throughout his Expert Report, he never refers to the FLDS as a
“religious organization” but, instead, as a “splinter group.”
[223]
To determine the status
of Bountiful prior to the 2002 split, it is essential to ascertain whether or
not the FLDS Church is a religious organization pursuant to subsection 143(4).
For the purposes of the Act, I do not believe that the FLDS Church can qualify as a religious organization. If I adopt the broader interpretation that
the Appellant gives to “religious organization,” then it would be possible for
me to conclude that the FLDS Church is, in fact, a religious organization for
which Bountiful is a constituent part. The Appellant’s proposed definition of
“religious organization” would identify it as an organization where its members
believe in a supreme being (Appellant’s Written Submissions, para 63). However,
such an interpretation ignores other key elements of the definition, namely,
that there must be “constituent parts” to the organization, as well as an
adherence to particular identifiable beliefs. If “constituent part” were to be
interpreted loosely to mean simply “connected to,” then perhaps the FLDS Church could still qualify as a religious organization. However, based on the
interpretation which I believe should be applied to “constituent part,” I
reject the Appellant’s proposed looser interpretation because it is not in line
with what I believe Parliament intended, namely, that there should be other
congregations that are components or “constituent parts” of a greater whole,
the religious organization.
[224]
Dr. Cragun testified as
to the serious consequences that result from excommunication. Dr. Balmer’s
opinion was that, when Leroy S. Johnson broke from the LDS Church over the practice of polygamy, he ruptured the line of priestly authority resulting in
the FLDS Church being an illegitimate apostolic entity. This is in line with
Dr. Cragun’s comments on the seriousness of excommunication. Dr. Balmer, at
paragraph 25 of his Expert Report, notes that:
According
to the official doctrine and the repeated pronouncements of the Church of Jesus
Christ of Latter-day Saints, therefore, anyone involved in polygamous unions in
(sic) not a member of the Church of Jesus Christ of Latter-day
Saints.
Such a radical departure from the mainstream church,
as occurred with the FLDS Church, would support a conclusion that it lacks
legitimacy as a religious organization, because essentially, in simplistic
terms, the group that refers to itself as the FLDS no longer adheres to the
beliefs and principles of the mainstream religious organization.
[225]
Is it possible, then,
for the FLDS Church to be a “re-constituted religious organization” with its
own beliefs to which its members adhere? I think not because there must be much
more than a mere name to a group that “self-identifies” as a religious
organization. There must be a common purpose and some broader sense of an
identifiable, collective group making up the larger qualifying organization. On
the evidence, the FLDS appears to be a loose association of divergent groups,
rather than the structured religious organization envisioned in the Act.
For the FLDS Church to qualify as a religious organization as defined in the Act,
these divergent groups would need to meet the criteria of “congregations” and,
based on the evidence, they do not.
[226]
Even if I determined
that the FLDS Church is a religious organization, another damaging argument
against concluding that Bountiful could be a part of the FLDS Church is that I have very little evidence to support that Bountiful members themselves strongly
identified with the FLDS Church as a religious organization. Although some of
the lay witnesses identified themselves and the community as members and part
of the FLDS Church pre the 2002 split, the Appellant made multiple statements
and attempts to disassociate himself and Bountiful from the FLDS Church, noting
that he had nothing in common with them and had not signed a membership form
when the Church was “officially organized” in 1991 (Transcript, Examination in
Chief of Winston Blackmore, p. 134). The Appellant described his group as “…
fundamentalists, like every group under the name FLDS is radically different
one from the other because they take their authority from whoever happens to be
in charge of the particular group.” (Respondent’s Read-ins, Examination for
Discovery of Winston Blackmore, March 11, 2010, Questions and Answers 821-822,
p. 148). This echoes other statements made by the Appellant concerning the
fragmented nature of the FLDS as a group and the independence of the subgroups
which might identify with the FLDS. This negates any adherence to common
practices, beliefs and principles of a religious organization.
Summary of Conclusions on the Application
of Paragraph 143(4)(b)
[227]
In summary, a textual, contextual
and purposive reading of section 143 suggests that Parliament intended this
provision to apply to established, definable religious organizations with an
underlying common purpose. Based on the expert evidence, Mormonism is not a
religious organization, to which Bountiful could be a part, because Mormonism
is a tradition.
[228]
The community of Bountiful cannot be a part of the religious organization, the mainstream LDS Church because the members do not follow the beliefs of the LDS Church. They practice
polygamy which the LDS Church has disavowed.
[229]
I would characterize
the FLDS Church as an off-shoot group that identifies as Mormons and whose
members practice polygamy. Yet it is precisely that practice that distinguishes
them as a group that also disqualifies them from classifying as members of the
mainstream Mormon religious organization, namely the LDS Church. In addition,
the Appellant’s comments, respecting the separate nature of his group and other
such groups, negate the theory that they might form a group or systemic
arrangement bound together by a common purpose or goal, as canvassed in the definitions
of “organization” in the within reasons.
[230]
Where experts have
difficulty agreeing on the precise boundaries of the FLDS Church as a
“religious organization,” and where Dr. Cragun seems to contradict himself,
based on the evidence as a whole and the Appellant’s statements on his
membership in the FLDS Church, I prefer to follow Dr. Balmer’s view that the
FLDS Church is not a religious organization because the lines of priesthood
authority have been broken. I, therefore, conclude that the FLDS Church does not meet the definition intended by Parliament in subsection 143(4) of the Act.
At most, the community of Bountiful consists of an independent group of fundamentalist
Mormons who cannot bring themselves within the parameters I have established
for this part of the definition of “congregation.”
C. Ownership of Property
Does the community of Bountiful prohibit any of its
members from owning any property in their own right?
[231]
To satisfy this
component of the definition of “congregation,” the evidence must support a
finding that a prohibition exists in Bountiful against members owning any
property in their own right. My conclusion is that the text of this third prong
of the definition is clearer and less ambiguous than the other three. Although
the Appellant suggested an innovative interpretation pertaining to “beneficial ownership,”
that approach is not compelling as it would require this Court to read far more
into this component of the definition than is apparent on its face.
1. The Appellant’s Submissions
[232]
The Appellant provided
no factual basis for how Bountiful prohibits its members from owning property
in their own right. Instead, Appellant Counsel suggested an interpretation of
paragraph 143(4)(c) that supports the community’s particular set of
property norms and then relies on those facts to support that particular
interpretation.
[233]
According to Appellant
Counsel, the members of Bountiful were prohibited from owning property in their
own right because:
(a) the majority of members did not hold
title to real property;
(b) title to real property
was allocated in whatever way was advantageous to the community and
concentrated in the hands of a few at the top of the religious hierarchy;
(c) title to personal
property was more widely distributed, but subject to the condition that use of
both real and personal property was at the pleasure of church leaders;
(d) risk was distributed across the
community as a whole; and
(e) control over property was situated
within church leadership.
(Appellant’s Written Submissions, para 240)
[234]
Appellant Counsel does
not believe Parliament intended ownership “in their own right” to denote “legal
ownership” but, instead, that Parliament intended it to mean “beneficial
ownership” that does not include all of the incidents of ownership, being possession,
use, risk and control.
[235]
According to Appellant
Counsel, the evidence demonstrates that the congregants’ rights in respect to
property do not include complete rights of possession, use, risk and control.
The interpretation of paragraph 143(4)(c) must be given enough scope to
accommodate different community property practices, as even the rule against
private property ownership in Hutterite colonies is relative and contextual,
rather than absolute (Appellant’s Written Submissions, para 104).
[236]
Members of Bountiful do not treat property according to “normal” capitalist behavioural norms but,
instead, their relationship to property is governed by doctrinal principles
which have been interpreted by fundamentalist Mormons as communitarian in
nature (Appellant’s Written Submissions, para 111).
[237]
The practice of both
“consecration” and “tithing” are part of a larger religious mission or
principle called the “United Order,” meaning members live in such a way that a
community can share all things in common and equally (Transcript, Examination
in Chief of Winston Blackmore, pp. 139-140). According to the Appellant, these
practices amount to communal property practices that comply with paragraph
143(4)(c). The United Order is generally understood to be the goal,
while the Law of Consecration is the means of achieving that goal. Doctrinally,
Bountiful members were required to consecrate all of their time, talents and
property to the church. Although there was no specific directive for members to
convey all of their property to a particular entity, it was imperative that
they consecrate their life and property to the United Effort Plan in the sense
that this Plan is the underlying idea or concept of communal living for the UEP
Trust (Appellant’s Written Submissions, para 242).
[238]
Appellant Counsel argued
that the totality of the evidence supports the existence of the Law of
Consecration in Bountiful. In this regard, Dr. Walsh emphasized the importance
of “stewardship” for Mormons, that is, the doctrine that requires each member
to use every possession they have for the good of the community and to share
with less fortunate members.
[239]
The community practices
that support this communal approach to property ownership include the
following: tithing and the UEP Trust, both mechanisms used to achieve the
United Order; distribution of homes among members at the direction of church
leaders; and famine calls.
[240]
Examples of other behaviours
that exemplified a communal approach to property included:
·
Members engaged in
organized but unpaid “work days” for various community projects.
·
The Company paid wages
and benefits on a needs basis rather than time worked, tasks completed, or
minimum wage standard.
·
Some of the 95 vehicles
owned by the Company were used by both employees and non-employees of the
Company. Credit cards in the name of the Appellant were given to Company
employees to purchase fuel and parts but then paid for by the Company.
·
No savings or RRSPs
were kept or required, given the lifestyle of the community.
·
The Appellant felt that
he did not have control over lands in his name and that, if directed to do so
by the church president in the pre-split period, he would have transferred the
lands to the UEP Trust.
·
Land title and transfer
documents merely show that members held legal title and, from time to time,
transferred that legal title.
·
When members received
directions in respect to their property, they would comply with those
directions and do as requested.
2. The Appellant’s
Position
[241] In his submissions, Appellant Counsel
suggested that Parliament had used “… an intentionally nebulous concept that
allows for some flexibility …” with respect to the wording in paragraph 143(4)(c)
(Transcript, Appellant’s Oral Submissions, p. 3016). Since many of the terms
contained in section 143 have no technical meaning, the provision should be
liberally interpreted. Parliament chose to describe the operative ownership
rules within a congregation in the negative and by a descriptor, “in their own
right,” that has no single, precise or technical meaning in the context of tax
or property law.
[242]
Within the context of
tax law, the most relevant types of ownership are legal and beneficial
ownership. It is beneficial ownership, with its attendant four core incidents
of possession, use, risk and control, that usually determines tax consequences
(Appellant’s Written Submissions, paras 99 and 100). Where members of a
community do not possess all four incidents of beneficial ownership, they do
not have ownership “in their own right” (Transcript, Appellant’s Oral
Submissions, p. 3053).
[243]
Other than not engaging
in ordinary capitalist property practices, the provision does not impose any
other requirements. Control over assets was exercised for the benefit of the
community and, as a matter of doctrine, members were required to consecrate
their time, talents and property to the church (Transcript, Appellant’s Oral
Submissions, p. 3078) in order to achieve the utopian good of the United Order.
The Appellant suggested that the subjective religious belief of Bountiful
members, to do all things for the good of the community and to be ready to give
up possession, the use and the control of an asset when requested by a
religious leader, is sufficient to meet the test set out in paragraph 143(4)(c).
Therefore, Bountiful members were religiously and doctrinally prohibited from
owning property in their own right (Transcript, Appellant’s Oral Submissions,
pp. 3079 and 3082).
3. The Respondent’s Submissions
[244]
According to the
Respondent, there is no evidence of any prohibition against members owning
property in their own right in either the practices of the community itself or
in the doctrines and practices of either the LDS or FLDS Churches. The UEP
Trust does not own all of the real property in Bountiful. There are many
examples of private property ownership among members, such as financial
obligations, personal bank accounts, bank loans, trailers, vehicles, insurance,
wages and personal possessions.
[245]
The Respondent pointed
out that members of Bountiful were not prohibited from owning property, such as
vehicles or bank accounts. No documentation existed to support that any
property, registered in members’ names personally, was being held on behalf of
the UEP Trust.
[246]
The Respondent pointed
to the property owned by community members and actions taken with respect to
that property to support its position that private ownership of property was
permitted in Bountiful.
4. The Respondent’s Position
[247]
The Respondent relied
on the broad definition of “property,” contained in subsection 248(1) of the Act,
and applied it to interpret this provision.
[248]
The Respondent also
made the following observations respecting this provision:
…
the Act does not require that members of the subject community actually
own no property in their own right. The Act only requires that the community
does not permit it. Second, the language “does not permit” used by Parliament
is strong. The private ownership of property must actually be prohibited, not
merely discouraged or something less than outright prohibition.
(Respondent’s Written Submissions, p. 97, para 467)
[249]
It was the Respondent’s
position that there is no evidence of any prohibition against private ownership
in either the LDS or the FLDS Church or their doctrines and practices and there
is no requirement that members consecrate all their property to the UEP Trust
or the church. Rather, members of Bountiful are expected to tithe 10 per cent
of their income to the community. As well, the UEP Trust accounts for only some
of the property ownership in Bountiful.
5. Analysis
[250] The wording of paragraph 143(4)(c)
is the most straightforward of the four components of the definition of
“congregation”:
…
“congregation” means a community, society or body of individuals, whether or
not incorporated,
[…]
(c) that does not permit any of its
members to own any property in their own right, and
[…] (Emphasis added)
[251]
Even if the Appellant
had produced sufficient evidence to establish compliance with the other three
components of the definition of “congregation,” based on the evidence before
me, he could not bring himself and the community of Bountiful within the ambit
of this third component because there was no prohibition by the community
against members owning property.
[252]
The plain language
contained, for the most part, in paragraph 143(4)(c) requires that the
community itself, in some tangible form, prohibits or “does not permit”
property ownership by its members. It is evidence of a prohibition by the
community that is required because the wording in (c) does not
require that members actually do not own property.
[253]
While the meaning of
“in their own right” may not be immediately obvious, the intention of
Parliament is otherwise straightforward: a congregation envisioned by paragraph
143(4)(c) must have a prohibition against members owning property. In
fact, the test is a strict one for a congregation to satisfy. The prohibition
by a community does not permit any members to own any property.
Anything less than an absolute prohibition will not comply with the wording in
(c). Without otherwise relying on the Hutterite example, as the
Respondent suggested, the clear and obvious text of this third criterion
requires cogent evidence that concretely establishes a practice or doctrine
within a community that unequivocally “does not permit” or “prohibits” the
members from owning any property.
[254]
The strictness of this
test suggests a straightforward meaning to the word “property,” contained in
paragraph 143(4)(c), such as the definition suggested by the Respondent
and contained in subsection 248(1) of the Act. This definition, absent a
contrary indication, is meant to apply throughout the Act. Since there
is no contrary intention contained in subsection 143(4), it is this definition
that should apply. It is a broad and encompassing definition which includes “…
property of any kind whatever whether real or personal or corporeal or incorporeal.”
It makes no distinction between “beneficial ownership” and bare “legal title”,
as the Appellant suggested.
[255]
The Appellant’s contention
that the phrase “in their own right” equates to “beneficial ownership” has no
basis in either the Act or the provision itself. Further, there is
absolutely nothing to indicate that Parliament had “beneficial ownership” in
mind when it employed the words “in their own right.” It must be assumed that
Parliament used the words or phrases that it intended to use and, if it
intended that beneficial ownership could be easily substituted in place of “in
their own right,” it would have so stated, or, at the very least, used the
phrases in the alternative in paragraph 143(4)(c).
[256]
I see no logical
connection between these two phrases “beneficial ownership” and “in their own
right.” The Appellant’s argument was that, because members are always subject
to directives by Winston Blackmore in respect to their property, including
being requested to move residences and to divest themselves of their property
if so directed, then they cannot be beneficial owners, as they do not enjoy all
of the four common incidents of such ownership: possession, use, risk and
control. Because they do not have the full incidents of beneficial ownership, they
are essentially prohibited as members of Bountiful from owning property “in
their own right” (where “beneficial ownership” equates to “in their own
right”).
[257]
The Appellant made the
link by relying on two Tax Court of Canada cases which, in the Appellant’s
submissions, used the phrase “in their own right”:
…
ambiguously to denote actions taken in respect of property for the sole benefit
of the actor or actions taken by one person in their sole discretion and
without consideration for the position of other persons, as well as to
differentiate ‘normal’ ownership within the mainstream economy from ownership
of on-reserve property.
(Appellant’s Written Submissions, para 98)
[258]
The jurisprudence
respecting “beneficial ownership,” upon which the Appellant is relying, relates
to disputes over the meaning of “beneficial owner” in the context of the
application of International Tax Treaties (see Carter v The Queen, 99
DTC 585 (TCC) and Akiwenzie v The Queen, 2003 TCC 68, 2003 DTC 235). In
those cases, the phrase “beneficial owner” was referenced as it appeared in a
particular tax convention. Further, all of this jurisprudence, as well as other
jurisprudence cited by the Appellant, originated in the period subsequent to
the enactment of section 143 (Williams v The Queen, 2005 TCC 558; Prévost
Car Inc v The Queen, 2008 TCC 231; and Velcro Canada Inc v The Queen,
2012 TCC 57).
[259]
The Appellant is asking
that this Court make a giant leap with respect to this third criterion by
substituting the words “beneficial ownership” for “in their own right” and then
attributing a meaning to the term “beneficial ownership” through unrelated
jurisprudence. Such an interpretation would unjustifiably broaden the wording
of paragraph 143(4)(c) and attribute a different meaning to the term “property.”
This is beyond the intent of Parliament in enacting this provision.
[260]
It is clear that other
judicial uses of the phrase “in their own right” have not ascribed any
particular or technical meaning to it. The phrase appears to indicate, in a
general sense, the share of ownership of an asset:
(a) in Agricultural
Credit Corp of Saskatchewan v Haryett, [1995] SJ No. 611 (QB), the Court referred to the sale of lands
whether owned in their own right or as joint tenants;
(b) in Condominium Plan Number
CDE 13442 v Adler, Furman & Associates Ltd, [1983] AJ No. 290 (QB), the
Court stated that the Appellants became registered owners of the said lands
in their own right; and
(c) in C.H. v M.H.,
1997 ABCA 263 (CanLII), the Court, in summing up the claim of M.H., stated that
certain legal entities were capable of holding property in their own names
and in their own right.
[261]
In interpreting the
phrase “in their own right,” Martin, J.A. in Re Immigration Act and Munshi
Singh, 1914, 6 WWR 1347 (BCCA), noted, at paragraph 45, that the words
“possess in (his) own right” means “… nothing more nor less than his own money.”
[262]
There is no judicial or
legislative source that would support this Court substituting the term
“beneficial ownership” for “in their own right.” The plain and ordinary wording
of paragraph 143(4)(c) does not permit a reconstruction of the meaning
of property as suggested by the Appellant. The phrase “does not permit” is
clear statutory language which contains an absolute and unequivocal statement.
It becomes even more “absolute and unequivocal” by the use of the word “any”
before the words “of its members” and the word “property.” There is no judicial
or legislative support for interpreting “in their own right” in any way other
than in the general sense of “on their own account.”
[263]
The next question is
whether, within the boundaries of the statutory interpretation which I have
just outlined, the community of Bountiful “prohibits” or “does not permit” its
members from owning any property? Such an absolute prohibition must be clearly
established in the evidence, either by way of documentary evidence, such as
articles of incorporation referencing the prohibition, or through the
practices, doctrine and principles existing on the ground in Bountiful.
[264]
The Appellant suggested
that the evidence that established this prohibition consisted of: the
community’s practice of exchanging or swapping residences; the practice of
tithing; the famine calls; and members following directives from religious
leaders respecting their property. The inference from this evidence, according
to the Appellant, was that property was normally held for the benefit of the
community of Bountiful. However, such an inference fails to meet the language
of “does not permit” contained in paragraph 143(4)(c). An “inference” is
insufficient and the evidence contains nothing to support a finding that there
was an actual prohibition by the community against its members owning any
property. Further, there is no evidence to support that such a broader prohibition
exists in either the mainstream LDS Church or the FLDS Church, even if I had
concluded that Bountiful was a constituent part of these organizations,
pursuant to paragraph 143(4)(b).
[265]
While Parliament did
not include a specific requirement that a congregation be incorporated, the
prohibition must otherwise be clearly evident and discernable from religious
doctrine and practices within the community where no articles of incorporation,
containing such a prohibition, exist. The Hutterite example demonstrates how a
plain reading of “does not permit” is expressly manifested in Articles of Incorporation.
This prohibition against members of Hutterite colonies owning property is
referenced in the Wipf decisions. The Hutterian practice of community of
goods, coupled with the prohibition, is explicitly contained in their Articles
of Incorporation. It is logical to assume, therefore, that Parliament had an
explicit prohibition in mind when it enacted section 143. The community of Bountiful does not have Articles of Incorporation, but the prohibition by the community
requires that it be, at the very least, easily evident in the religious
doctrine and community practices. Even the Articles of Incorporation for the
Company contain no express prohibition against members of Bountiful owning
property or that corporate assets are impressed with a trust arrangement on
behalf of the members. Nor is there any prohibition contained in either the
1942 Declaration of Trust or the 1998 Amended and Restated Declaration of the
UEP. In the 1942 Declaration of Trust document, only the current trustees, not community
members generally, were to be considered beneficiaries of the consecrated trust
property. The 1998 Amended and Restated Declaration anticipates further
consecrations of property to the Trust but contains no stipulation that members
were subject to a prohibition against owning property in their own right. When
members consecrated property to the Trust, they did not always become
beneficiaries of the Trust, even though they might be continuing to live on the
consecrated land.
[266]
Comparing property
ownership in Bountiful to that of Hutterite colonies provides context to
subsection 143(4). In Bountiful, not all real property was conveyed to the UEP
Trust. Real property was registered in the names of the Appellant,
the Company, in some members of the Appellant’s family and in the UEP Trust.
The evidence indicated that Bountiful members owned various personal property,
such as bank accounts, lines of credit, GICs, vehicles, trailers and credit
cards. They had financial obligations to banks respecting their property. They
obtained and paid for their own insurance. Ken Oler gave evidence that he
deposited his earnings into personal accounts, but that no one in the community
gave him directives on how he had to deal with these monies. Marlene Palmer
testified that she had a personal line of credit, credit cards, vehicles and,
at one point, she had a 50 per cent interest in real property located on the Pitt River Road. Miriam Oler also stated that she owned similar assets. The evidence
supported that the members owned their personal property outright and that, in
most instances, the Appellant did not give directives to the members respecting
those items.
[267]
Between 1988 and 2001,
the Appellant, either alone or with other individuals, acquired property
locally in Bountiful and as far away as Creston, Kitchener and Calgary. Some of these properties were mortgaged. Some were sold. There was no evidence
submitted that these transactions were subject to any type of trust
arrangements on behalf of the members of Bountiful. In addition, the
Appellant’s divorce settlement from his first and only legal wife and the
transfer of real property to her contained no evidence of any trust imposed on
the Appellant’s assets. Nor was there any evidence of trust arrangements in
respect to the property held by the Company. There were no minutes or
documentation that any shareholders held property in trust for the benefit of
community members. There was no documentation that the Company acted as an
agent on behalf of the community. The Company owned property in its own name,
obtained mortgage financing and transferred properties. When the Company filed
a notice of intention to make a proposal in bankruptcy, the documentation
contained no references to UEP, UEP Trust, the J.R. Blackmore Trust or the
Blackmore Trust.
[268]
The Appellant never
advised banks or lenders that he or the Company held property as trustees for
the community (Transcript, Cross-examination of Winston Blackmore, pp.
595-596). Aside from the Company accountants, the Appellant did not account for
funds that the Company expensed. Neither Marlene Palmer nor Miriam Oler were
aware of or saw any records that the Appellant kept concerning property being held
in trust for the community of Bountiful (Transcript, Examination in Chief of
Marlene Palmer, p. 1284 and Examination in Chief of Miriam Oler, p. 2826).
Neither the Appellant nor the Company have ever transferred property to the UEP
Trust (Transcript, Cross-examination of Winston Blackmore, pp. 574‑575).
There is no mandatory requirement to consecrate property nor is there a
prohibition of ownership of property contained in the Book of Mormon, the
Doctrine and Covenants or The Pearl of Great Price (Respondent’s Written
Submissions, para 239).
[269]
If one returns to the
definition of property contained in subsection 248(1), it includes property “of
any kind” whether real or personal. The evidence is replete with examples of
members owning property. In fact, the very examples of tithing and famine calls,
that the Appellant cites to support an alleged prohibition against property
ownership in Bountiful, support the opposite conclusion. If the practice is one
of community of goods and prohibition against members owning assets, then it
would be logical that practices such as tithing and famine calls would not be
required. Nothing would remain for members to tithe 10 per cent of their income
or contribute to famine calls if their goods were consecrated to the community
in accordance with an express community prohibition against property ownership
by members. Even without making a comparison to Hutterite colonies, the
evidence overwhelmingly points to a lack of the type of prohibition contained
in the language of paragraph 143(4)(c).
[270]
Neither is there any
express prohibition in the religious doctrine and principles of the LDS and FLDS Churches.
[271]
Dr. Walsh explained
that consecrating all of one’s property meant making it available if and when
it was called for by church leaders (Transcript, Examination in Chief of John
Walsh, p. 890) but that it did not necessarily mean that property would be
legally conveyed to the church.
[272]
However, as Dr. Cragun
pointed out at paragraph 60 of his Expert Report, efforts to fully enact the
Law of Consecration were, in practical terms, problematic for communities to
implement. Although not successful, according to Dr. Cragun, it remains a
component of Mormonism, but not a practice that members of the LDS Church follow today. Instead, the current practice of tithing, where members are
required to donate 10 per cent of their annual income to the religion, rather
than consecrating all their property, is followed by members.
[273]
Dr. Walsh testified
that the LDS Church does not allow its members to own property separate and
apart from the purpose and activities of the community. Dr. Cragun
criticized this statement because he testified there is no such prohibition in
Mormon belief and doctrine or in the original teachings of Joseph Smith Jr.
Dr. Cragun also criticized Dr. Walsh’s statement that all Mormons are
required to consecrate everything they have to the Kingdom of God. Since the Law of Consecration was never adopted by the majority of members of the LDS Church, it was never, therefore, in full effect.
[274]
According to Dr.
Cragun, the Law of Consecration has been implemented differently in the FLDS Church. In 1942, the FLDS Church attempted to live the Law of Consecration by creating
the UEP Trust. It acted as a holding company for administering real property that
was contributed to the Trust by some members. The UEP Trust and the FLDS Church are separate entities, with the Trust being administered by a Board of
Trustees. According to Dr. Cragun, “… [i]ndividual members of the FLDS Church have no say in how the UEP is administered,” (Dr. Cragun’s Expert Report,
para 66) and members were not required to deed all their property to the Trust.
[275]
I have reviewed the
Expert Reports and testimony of Dr. Cragun and Dr. Walsh and I accept Dr.
Cragun’s over that of Dr. Walsh. Dr. Cragun’s critique of Dr. Walsh’s
statements was thorough. His statements were fully supported through footnoted
scholarly articles and references. Many of Dr. Walsh’s assertions were not
similarly supported. Dr. Cragun testified as to the history of the Law of
Consecration within the LDS Church and concluded that the law has been
effectively suspended as a practice of the mainstream church. There is no
explicit prohibition or statement to that effect in Mormon doctrine, scripture
or early teachings preventing private property ownership. Although the Law of
Consecration has been implemented differently in the FLDS Church, neither the
1942 Declaration of Trust nor the 1998 Amended and Restated Declaration of
Trust contain an explicit or implied prohibition against private ownership of
property by its members.
[276]
When considering paragraph
143(4)(c) in a purposive manner, it appears that the prohibition against
private property ownership is part of the “raison d’être” of this provision.
That is, it is meant to provide exceptional blanket coverage in respect to tax
treatment of particular groups that can bring its members within this section.
One of the primary reasons, that members of such groups would not be taxed in
the same manner as other taxpayers in the country, is that they do not operate
pursuant to the ordinary and usual rules of private property ownership. If,
however, individuals are free to obtain and sell or otherwise dispose of
property, whether real or personal, then it is logical that they would be and
expect to be taxed in the same manner as other Canadian taxpayers. Allowing a
group, that does not explicitly prohibit private ownership of property of any
kind, to benefit from the application of section 143 would be contrary to, and
in direct contravention of, the purpose for which this section was enacted.
[277]
In summary, the facts
do establish that Bountiful has developed its own unique relationship to property
ownership. It encompasses a set of practices that are in opposition to what we
think of as being in sync with ordinary capitalist norms. The members of Bountiful have permitted Winston Blackmore to provide directives respecting where they
reside and the manner in which some of their personal resources are to be
utilized within the community. However, this unique relationship to their
property does not satisfy the strict test of paragraph 143(4)(c). The
language in paragraph 143(4)(c) requires an explicit prohibition
contained in either articles of incorporation, religious doctrine or practices,
rather than an implicit prohibition gained entirely through a fact-based inquiry.
This is in line with the principles of statutory interpretation and
administrative efficiency.
[278]
The community of
Bountiful exhibits a “communal” approach to some aspects of their property, but
it is not “communal” in the sense envisioned by the Act and,
specifically, this provision; that is, Bountiful does not explicitly prohibit
private ownership of property by all of its members, in either its practices or
in its religious doctrine and principles or in any existing articles of
incorporation.
D. Devotion of Working Lives to Activities of
the Congregation
Does the community of Bountiful require its members to
devote their working lives to the activities of the congregation?
1. The Appellant’s Submissions
[279]
According to Appellant
Counsel, religious doctrine required members of Bountiful, both pre and post the
2002 split, to devote their working lives to the activities of the community.
Community custom and the evidence of the lay witnesses supported the
Appellant’s position that members were required to pursue a livelihood within
the community’s social and business structures. In practice, this religious
doctrine was supported because the Company was the main employer of members of
the community; the children were groomed from an early age to participate in
the community’s labour force; the expectation for members, including children, was
to devote their time and labour to work on community projects, particularly on
community work days; and the wage structure utilized by the Company.
[280]
Appellant Counsel
suggested that paragraph 143(4)(d) is satisfied because of two key
characteristics that distinguish fundamentalist Mormons from mainstream
Mormons: first, the practice of polygamy and, second, community members live
communally. The Appellant relied on Dr. Walsh’s testimony that communal living
is prevalent among fundamentalist Mormons because they adhere strictly to the
teachings of Joseph Smith Jr. This included the practice of polygamy, which is
conducive to communal living (Appellant’s Written Submissions, para 218;
Exhibit A-9, para 21). Dr. Walsh expressed this same view in the B.C. Polygamy
Reference Case (Exhibit R-6, Tab 129, p. 31).
[281]
The Company was the
main employer in Bountiful and most male members worked for the Company. The
Appellant described the Company as the “business arm of our church”
(Transcript, Examination in Chief of Winston Blackmore, p 31) and Ken Oler
described the Company as the “church company” that
… provided
employment for the community … and to help doing whatever it needed to provide
infrastructure and things for the community.
(Transcript, Examination in Chief of Ken
Oler, p. 939).
[282]
The Appellant also
testified that the workers for the Company were “everybody from the community”
(Transcript, Examination in Chief of Winston Blackmore, p. 69).
[283]
Other companies also
operated within Bountiful, some of them in the context of providing support for
the Company’s operations.
2. The Appellant’s Position
[284]
The Company was the
primary community employer. There were exceptions to this, such as employing
outsiders, members working for outside employers and providing products and
services to outsiders, but they were infrequent occurrences. Although the
Respondent placed emphasis on these exceptions to support its position, Appellant
Counsel argued that this reliance was inappropriately placed because of the
Respondent’s comparison of the community of Bountiful to the Hutterite
communities.
3. The Respondent’s Submissions
[285]
The Respondent
emphasized that paragraph 143(4)(d) contains the word “requires,” which means
members of Bountiful must be required to support the activities of the
community. It will not satisfy this fourth element of the definition of
“congregation” if the members felt morally compelled to work to support
community activities but were not actually required to do so. As well, members
of Bountiful were able to and encouraged to engage in economic activities
outside the community.
4. The Respondent’s Position
[286]
The evidence does not
support a conclusion that there was a requirement of devotion to community
activities within Bountiful. In fact, the evidence supports that members were
encouraged to seek work elsewhere.
[287]
In addition, Bountiful does not meet the Hutterite standard of commitment to the community. The
Respondent cited Article 40 of the Act to Incorporate the Hutterian Brethren
Church as illustrating the sort of requirement that section 143 envisions:
Each
and every member of a congregation or community shall give and devote all his
or her time, labor, services, earnings and energies to that congregation or
community, and the purposes for which it is formed, freely, voluntarily and
without compensation or reward of any kind whatsoever, other than herein
expressed.
(Respondent’s Written Submissions, p. 108, para 505;
also cited in Wipf)
[288]
Further, Hutterite
communities are agrarian. In The Budget Plan 1999, Finance
Minister Martin stated: “Hutterite colonies carry on farming and other related
businesses in Western Canada as “communal organizations.”” (The Budget Plan
1999, Tabled in the House of Commons February 16, 1999, p. 202, cited in
Respondent’s Written Submissions, para 507).
5. Analysis
[289]
The analysis of this
fourth part of the definition of “congregation” and its application to the
facts is more straightforward than the preceding three parts of the definition,
particularly in light of the approach taken in the analysis of these first
three parts.
[290]
The evidence adduced at
the hearing was not fully supportive of the position of either the Appellant or
the Respondent. My conclusion will be largely dependant upon whether I apply a
restrictive or more liberal interpretation to paragraph 143(4)(d). On
the evidence, it is possible to find that there was a “general expectation” of
devotion of members’ working lives to the activities of the community. Whether
that general expectation translates into a “requirement” as contemplated by the
wording contained in paragraph 143(4)(d) is dependant upon how strictly
this particular criterion is interpreted and applied. While either
interpretation is reasonable, a restrictive interpretive approach is in keeping
with the narrower approach which I adopted in my analysis of the first three components,
(a) through (c), of the definition of “congregation.”
[291]
While the Respondent
looked at the meaning of the word “require” in its ordinary sense: “to lay down
as an imperative, to demand or insist on, to instruct or command” (Respondent’s
Written Submissions, para 504, citing The Oxford Pocket Dictionary, 7th
ed., Clarendon Press, Oxford, 1985), there are actually several words within (d)
that may be interpreted in a number of ways: “devote,” “working lives,” and “activities
of the congregation.” However, the word “requires” will be the most
determinative.
[292]
The phrase “… to devote
their working lives to the activities of the congregation” implies that members
of a community are entirely committed to the community. According to The Oxford
English Dictionary (Second Edition, Vol. IV, 1989), the definition of the
verb “devote” is “[t]o appropriate by, or as if by, a vow; to set apart or
dedicate solemnly or formally; to consecrate.” In Webster’s New World
Dictionary (Second Edition, 1984), “devote” is defined as: “to give up
oneself or one’s time, energy etc. to some purpose, activity or person.” These
dictionary definitions suggest that “devote” implies that an individual is
dedicating their working life entirely to some specific purpose, akin to a formal
vow. When viewed in conjunction with the first component (a) of
subsection 143(4), that is, that members live and work together, component (d)
indicates that the work of the community members should be devoted to the
community as a unit.
[293]
The fact that paragraph
143(4)(d) specifies “activities of the congregation” further implies
that the working lives of community members are committed to the congregation
on a regular, consistent and customary basis. “Activity” is defined in the The
Oxford Dictionary (http://oxforddictionaries.com) as: “the condition in
which things are happening or being done.” Therefore, the working lives of
members are not simply committed to the congregation in the abstract but,
rather, are devoted to the pursuit of its ongoing daily activities.
[294]
The placement of the word
“requires” in paragraph 143(4)(d) implies that the “devotion” to the
activities of the congregation is an obligatory condition demanded by
authority. The Respondent suggested that the restrictive approach should be
utilized in interpreting (d). This would mean that the community should
have explicit requirements that community members devote their working lives to
the activities of the congregation.
[295]
Such a restrictive
interpretation is reasonable on a plain reading of the text, as well as a
broader contextual and purposive reading of section 143. A level of
organization or institutionalization is implied within both the definitions of
“congregation” and “religious organization,” that is, a congregation adheres to
particular beliefs and those beliefs are in accordance with the tenets of a
religious organization, which will be composed of more than one congregation.
Being a religious organization requires a common purpose shared by member
congregations and that purpose would likely be located in some written form. If
that written form does not exist, then something akin to it would be required
in its religious doctrinal sources and evidenced in the day-to-day practices of
the community members.
[296]
Therefore, where this Court
determined that the prohibition against property ownership must be explicit, as
grounded in the text of the provision, as well as the Hutterite example
suggests, then it is a matter of consistency to require that 143(4)(d)
also be explicit. Such an interpretation is supported by the Hutterite example,
where a similar requirement is contained in the Articles of Incorporation of
the Act to Incorporate the Hutterian Brethren Church. Also, a
restrictive interpretation of (d) is in harmony with the general policy
objectives of simplicity and administrative efficiency. If the requirement in (d)
is explicit, it will be easier to identify than a fact-based inquiry of the evidence.
[297]
A restrictive approach
to interpreting (d) will mean that Bountiful cannot satisfy the fourth
component (d) of subsection 143(4). As noted by the Respondent, the
requirement set out in (d) is not a facet of Mormonism, whether the
reference is to the LDS Church or the FLDS Church. Dr. Cragun confirmed this in
his Expert Report:
There
is no scriptural commandment in Mormonism that directs members of the community
to dedicate their entire working lives to the community. …
(Dr. Cragun’s Expert Report, p. 28, para
73).
[298]
According to Dr.
Cragun, in Mormon temple ceremonies, members make a promise to dedicate “their
lives” to their religion. However, he stated that this “promise” is not
followed as a practice in either the LDS Church or the FLDS Church (Dr. Cragun’s Expert Report, para 73). Members of Bountiful are free to work outside
their community and accept wages for doing so. The evidence did not provide
exact numbers or percentages of the proportion of members who were engaged by
outside employers. The Appellant suggested the numbers were small and occurred only
as the exception to the rule that most members worked for the Company. However,
the evidence clearly established that not all members work for the Company or
other Bountiful corporations and there is no requirement to do so; that, except
for the practice of tithing, wages earned are the members’ personal property,
not the community’s; that members were encouraged to tithe 10 per cent of their
personal income to the community but that this practice was an expectation
only, and not an essential requirement; and that the Appellant encouraged his
children to do a “good job,” not for the community but “for the businesses that
hire them” (Exhibit R-6, Tab 121, p. 3). These practices are in direct contrast
to those of Hutterite colonies, where there is no ownership of property, no
member receives individual wages and everything is shared communally.
[299]
Dr. Walsh was of the
view that a requirement exists for members to devote their working lives to the
activities of the congregation. In support of his opinion, he stated that the fundamental
tenets of the LDS Church require its members to build together a holy
community, that Mormon scripture commands congregants to flee the world and
gather in a place of safety and that the Law of Consecration requires members
to consecrate themselves, their time and talents toward building the Kingdom of
God, with their entire working lives devoted to that end (Dr. Walsh’s Expert
Report, pp. 4-5, para 5). Dr. Walsh cited passages from the Doctrine and
Covenants of the prophet, Joseph Smith, in support of his view that the Law of
Consecration is an essential Mormon doctrine and practice that anticipates that
congregants will spend their entire working lives in building the congregation
and global religious organization (Dr. Walsh’s Expert Report, pp. 19-20, paras
37-38).
[300]
While Dr. Cragun agreed
with Dr. Walsh’s view that the Law of Consecration is part of a temple ceremony
introduced by Joseph Smith Jr., he stated that few Mormons practice or are
required to live the Law of Consecration. In addition, the implementation of
the Law of Consecration by the FLDS Church, using the UEP Trust vehicle, was
not in accordance with the description of the law as preached by Joseph Smith
Jr.
[301]
In reviewing the quotes
of Dr. Walsh from the Doctrine and Covenants, I remain unconvinced that those
passages contain a specific requirement as envisioned in paragraph 143(4)(d).
Those passages are not particularly clear, but they do not contain an explicit
requirement that members devote their working lives to the activities of the
congregation. It may be that the Law of Consecration is a Mormon equivalent to
this requirement but, despite Dr. Walsh’s opinion, I do not see it as being an
obvious equivalent.
[302]
At the beginning of my
analysis on component (d) of subsection 143(4), I referenced two
potential interpretative approaches. The second, more liberal approach, would
interpret “requires” in a broader manner so that it would emphasize a “general
expectation” that members devote their working lives to the activities of the
congregation. This approach is in line with the Appellant’s interpretation.
[303]
Appellant Counsel’s
submissions on (d) were also intertwined with their submissions on
whether the community members of Bountiful live and work together – paragraph
143(4)(a). The Appellant’s submissions were collapsed, consequently,
into a general interpretation of “communal organizations,” rather than (a)
and (b) being interpreted and applied separately.
[304]
The Appellant’s view,
which has credence given the testimony, is that the facts supported that most
members worked for the Company, or were expected to, and therefore they were
required to devote their working lives as stipulated in (d). Further,
there were multiple witnesses who confirmed that members were prepared from a
young age to work for the Company. If a liberal approach to the interpretation
of (d) is adopted, this factual evidence would be sufficient to conclude
that, in practice, there was a general expectation that members devote their
working lives to the activities of the congregation.
[305]
If the communal
practices are interpreted in this manner, it also supports a conclusion that
the working lives of community members are intertwined with the activities of
the Company. However, it is unclear from the evidence whether the “activities
of the Company” encompasses the “activities of the congregation.” The Company’s
operations were directed primarily, if not solely, by the Appellant, who was
also one of the shareholders. There was conflicting evidence respecting the
degree to which the Company was a “community company.” In fact, dividends were
declared and paid to shareholders, including the Appellant. The only evidence
that the dividends found their way back into the community was the Appellant’s
evidence that they were “pumped back” into Bountiful. There was no other
corroborating evidence to support the Appellant’s testimony. Evidence suggested
that children, who worked in the summer for the Company, were paid by cheque
but then cashed it and returned most of the funds to the Appellant. Some of the
evidence suggested, therefore, that, even if the members of Bountiful were
expected to devote their working lives to the community, it could be argued
that their efforts were contributing solely to the Company, as opposed to the
“activities of the congregation,” as required by (d).
[306]
My rejection of a more
liberal interpretative approach to (d) is in conformity with the
restrictive approach I adopted in my analysis of (a), (b) and (c),
the first three components of the definition of “congregation.” For example, if
component (a) of the definition (“living and working together”) means
members must live and work within close proximity, then, in accordance with
that restrictive interpretative approach, component (d) must mean that
members devote their working lives to the activities of the congregation in a
more straightforward, daily, ongoing sense, as opposed to a general expectation
to devote their working lives to the activities of the congregation in a more
general sense.
[307]
While members were, in fact,
encouraged to work or obtain secondary education outside the community, there
was a general expectation that, if individuals were part of the community, then
one’s working life would include contributing towards the activities of the
community by working in the Company activities. However, the text of component
(d) implies that such a requirement must be explicit and ongoing. The
Hutterite example, as exemplified in their Articles of Incorporation and in the
facts cited in the Wipf jurisprudence, confirms this interpretative
approach.
[308]
The facts in these
appeals do not support the existence of an explicit requirement, by the
congregation, either within the community of Bountiful itself, the LDS Church, the FLDS Church or Mormonism generally, for members to devote their working lives
to the activities of the community. While two of the experts, Dr. Cragun and
Dr. Walsh, disagreed on this point, I prefer Dr. Cragun’s expert opinion over
that of Dr. Walsh. Dr. Walsh does not identify many of the sources for his
opinion and I do not agree with his analysis of the content of passages of the
Doctrine and Covenants of Joseph Smith Jr.
[309]
In applying the more
restrictive interpretative approach to component (d) of subsection
143(4), and particularly to the word “requires,” I conclude that the members of
Bountiful are not formally required to devote their working lives to the
activities of the congregation. While there may exist an informal expectation
among members to generally devote their working lives, there is no explicit
requirement to do so.
PENALTIES
[310]
The Appellant was also
assessed gross negligence penalties in the amount of $148,983 pursuant to
subsection 163(2) of the Act in respect to the 2000, 2001, 2002 and 2003
taxation years.
[311]
In contrast to the other
issues in these appeals, where the Appellant bears the burden of proof, the
Minister has the onus to show that the evidence supporting the application of
penalties outweighs the evidence against the imposition of the penalties.
[312]
Unlike section 143,
there is an abundance of jurisprudence with respect to the application of gross
negligence penalties levied pursuant to subsection 163(2).
[313]
In Venne v The Queen,
84 DTC 6247, Strayer J., at page 6256, made the following comments
respecting the term “gross negligence”:
… 'Gross negligence' must be taken to involve greater
neglect than simply a failure to use reasonable care. It must involve a high
degree of negligence tantamount to intentional acting, an indifference as to
whether the law is complied with or not. …
[314]
The application of
gross negligence penalties is a question of fact. Caselaw has established a
number of factors which, although not an exhaustive list, may act as guidelines
in determining whether the imposition of gross negligence penalties is appropriate
in the circumstances of an appeal. Some of those factors include: a taxpayer’s
education, background experience, apparent intelligence, magnitude of the
omission in relation to the income declared and the opportunity to detect the
error. In DeCosta v the Queen, 2005 DTC 1436, Bowman C.J. (as he was
then), at paragraph 11, stated:
…
No single factor predominates. Each must be assigned its proper weight in the
context of the overall picture that emerges from the evidence.
[315]
When a taxpayer appeals
penalties assessed under subsection 163(2), the Minister must show that:
(a) the Appellant made a false statement of
omission in the returns; and
(b) the Appellant knew or
the circumstances were such that he ought to have known about the false
statement or omission and that it was not the result of a simple oversight or a
misunderstanding of the law.
Because this provision is penal in nature, in applying
the above test to the evidence, if a taxpayer’s conduct is consistent with two
reasonable explanations, one justifying penalties and one not, then the
taxpayer should receive the benefit of the doubt and the penalties deleted.
[316]
Both the Appellant and
the Respondent relied on an “all or nothing” argument in addressing the issue
of penalties. The Appellant suggested that penalties should simply “fall away”
if Bountiful was successful in meeting the definition of congregation contained
in subsection 143(4). The Respondent submitted that the false statement or
omission consisted of the Appellant’s receipt of corporate benefits, while
controlling the Company’s finances, when those benefits were far in excess of
the income he reported. The Respondent argued that, since the Appellant had not
contested the assessed tax liability but, rather, submitted that this liability
should be shared by all of the members of the community, he is barred from
disputing those penalties that were based on his failure to properly report the
income and shareholder benefits. The Respondent also submitted that the
Appellant’s argument, that the income and benefits should be distributed among
community members through a deemed trust provided for in section 143, does not
constitute a credible explanation for the failure to properly report those
amounts in his returns.
[317]
The Respondent bears the
burden of proof, but its adopted approach does not follow the proper
application of the two-part test for penalties outlined previously. While the
Respondent submitted evidence respecting the first part of the test for the
application of penalties, that is, the existence of a false statement or
omission in the Appellant’s returns, instead of addressing the second part of
the test directly, the Respondent simply and incorrectly submitted that the
Appellant cannot dispute those penalties because he did not dispute the underlying
assessed tax liability.
[318]
While the Respondent’s
submissions on this issue did not explicitly mirror the legal test as I have
outlined it, the Respondent did provide relevant facts that satisfy both steps
(a) and (b) of the test. The evidence established that the Appellant was the
directing mind of the Company, controlled the corporate finances, was the only
shareholder that had sole signing authority on cheques and had control over the
corporate books and records. Consequently, the Appellant knew or was in a
position that he ought to have known that he was receiving benefits from the
Company which were substantially in excess of the amounts of income reported in
his tax returns. This demonstrates that the Appellant’s involvement in, and
knowledge of, the business affairs leads to a conclusion that a false statement
or omission was made in his tax returns for the 2000 to 2003 taxation years,
pointing to a material discrepancy between the unreported income and benefits
and the income reported.
[319]
Did the Appellant know
that he had made false statements or omissions in his returns or do
circumstances exist that would support a conclusion that he ought to have
known? Although there was no direct evidence that would lead me to conclude
that the Appellant knowingly made these false statements or omissions in his
returns, there is abundant evidence that supports my conclusion that he ought
to have known that he was misrepresenting his income. In addition, some of the
evidence could lead to a conclusion that there was an apparent intention on the
Appellant’s part to conceal facts surrounding his income tax affairs. The
Appellant was in charge of the Company operations and made the final decisions
on corporate matters. The Appellant was aware that the Company was funding his
personal expenses. He testified that he provided corporate credit cards to
family and community members. The payments on these credit cards were made by
the Company. He reviewed his tax returns before they were filed. It is reasonable
to expect a certain level of fiscal competency on the Appellant’s part in his
capacity to properly deal with tax matters, given his position as directing
mind of the Company’s business endeavours and leader of the community of Bountiful. Corporate records and books were kept in a locked office cabinet and it was
only the Appellant that had access to them. According to the evidence of
Marlene Palmer, the Appellant would not interact with CRA officers during the
audit. Also, according to her testimony, the Appellant declined to follow her
suggestion that the community properly organize itself as a church organization.
She attributed his refusal to not wanting to disclose information concerning amounts
that he was receiving from the Company.
[320]
The Appellant does not
argue that he never received the unreported income and benefits from the
Company but, rather, that to the extent that he did receive those amounts, he
received them in his capacity as a beneficiary of the congregation and not as
an employee or shareholder of the Company (Further, Further Amended Notice of
Appeal, para 72). According to Appellant Counsel, when the Appellant filed his
returns, he was not aware of section 143. This was specifically addressed in
the Appellant’s testimony:
Q. And
so when did you first learn of this provision of the Income Tax Act?
A. I
learned about it when I came to Vancouver and talked to you about my appeals.
Q. So
that was following the reassessments?
A. Yes,
it was.
Q. So
Section 143, one of its effects is to superimpose a trust. So I take it that
that deemed trust, you never filed any returns on its behalf?
A.
No, we didn’t.
Q. And
what about after you learned of the existence of Section 143? Did that deemed
trust ever file a return after that?
A. We
filed -- not a return but we filed the ten-year clause of -- that we were a
congregation. Well, something under that sort of thing.
Q. That
was an election?
A. An
election. We filed an election, two elections actually, I think.
(Transcript, Examination in Chief of Winston
Blackmore, pp. 58-59)
If the Appellant had been filing returns on the
assumption that section 143 applied to his personal circumstances, as well as
to the community of Bountiful, then I might have taken a different approach to
the imposition of penalties in these appeals.
[321]
Appellant Counsel
submitted that, if the Appellant was successful in arguing that Bountiful could
fall within section 143, then income inclusions which resulted from the
reassessments would “fall away” and, consequently, so would the penalties. Counsel
also submitted that, since the assessments were incorrect at law, penalties
should not apply, as they are “simplistic and unwarranted” (Appellant’s Written
Submissions, para 336). The Appellant did not raise any other defences to the
imposition of penalties. The Appellant’s arguments on section 143 have not been
successful and this leaves him with little to offer by way of explanation for
why he filed his returns as he did. For example, there was no evidence adduced
respecting any attempt by the Appellant to communicate with CRA regarding his
particular filing position. In Therrien v The Queen, [2002] 3 CTC 2141,
the Appellant was found to be careless and imprudent but, because he had taken
steps to verify the legitimacy of the plan he engaged in, Tardif J. held that
this did not warrant the imposition of gross negligence penalties because his
behaviour did not amount to gross negligence.
[322]
A failure to obtain
sufficient advice when a taxpayer’s filing position may be precarious, or even
fraudulent, will be a factor in determining the degree of a taxpayer’s
negligence (Chénard v The Queen, 2012 TCC 211, 2012 DTC 1195). At one
point in his testimony, when asked about a particular corporate dividend paid
to him by the Company, the Appellant replied:
… I
always had my financials done by an accounting firm. That was on their
recommendation and I don’t recall what it was from.
(Transcript, Examination in Chief of Winston
Blackmore, p. 32)
[323]
Interestingly, the converse
of the Appellant’s position on penalties would be that, if he were not
successful in arguing that Bountiful can bring itself within section 143, the
reassessed amounts would stand and so would the penalties. The Appellant had no
other explanation for the discrepancies in the reported amounts and the
reassessed amounts. Thus, there is “… no hypothesis that is inconsistent with
that advanced by the respondent …” (Farm Business Consultants Inc v The
Queen, 95 DTC 200, at p. 206).
[324]
As the person in control
of the day-to-day operations and activities of the Company from which he
received the benefits, the Appellant ought to have known that false statements
or omissions had been made in his returns. He knew the benefits were paid to
him because he was the Company’s directing mind and was the only shareholder
that could sign cheques without a second shareholder co‑signing. From
this it can be inferred that he would have directed the payment of those
amounts. He controlled the corporate books and records and the evidence
suggested he was the only individual that could access them. The discrepancies
in each taxation year between the amounts reported in his returns and the
amounts reassessed are significant. No explanation was provided for these
improper filings. Although he reported taxable income in amounts of $20,915,
$31,578, $44,424 and $19,677 respectively in his 2000, 2001, 2002 and 2003
income tax returns, he was assessed shareholder benefits of $277,395, $527,751,
$235,537 and $174,111 in those years respectively, as well as additional amounts
of employment income of $25,467 in the 2002 taxation year, $40,953 in the 2003
taxation year pursuant to section 5 and employment benefits in the amount of
$241,526 for the 2003 taxation year pursuant to paragraph 6(1)(a). While
the Company employed an outside accountant, he/she was not a witness at the
hearing, but it would appear from the evidence that the Appellant controlled
the information that was supplied to the accountant. As Bowman C.J. (as he was
then) stated in DeCosta, at paragraph 12:
… I
do not think it can be said that the appellant can nonchalantly sign his return
and turn a blind eye to the omission of an amount that is almost twice as much
as that which he declared. So cavalier an attitude goes beyond simple
carelessness.
[325]
The term “wilful
blindness” has also been used to describe circumstances amounting to gross
negligence. In relying on the Federal Court of Appeal decision in Villeneuve
v Canada, 2004 FCA 20, Favreau J. in Brochu v The Queen, 2011 TCC
75, 2011 DTC 1149, had the following comments, at paragraph 20, respecting
“wilful blindness”:
Since Villeneuve,
the issue is no longer confined to determining whether a taxpayer was aware of
the specialist's negligence and whether he or she was indifferent, but also
includes cases where the taxpayer blindly trusts the person preparing the
return. In this case, even though the appellant had no intentional and
deliberate knowledge of Ms. Tremblay's errors, she was still wilfully blind.
The Appellant ought to have known that
ignoring the astronomical magnitude of the differences between the reported
income/benefits and the amount of benefits assessed, ranging from 884 per cent
to 1,326 per cent, over a number of years, would attract some type of tax consequences.
This is the type of “cavalier attitude” discussed in DeCosta. It is
behaviour reflective of an indifference as to whether there is or is not
compliance with the law. The Appellant headed a community and a company that
had business activities in a number of locations in British Columbia, Alberta and the United States. However, even if he had no such business experience and
background, I would still conclude that, due to the staggering amounts of
unreported income and benefits, he was grossly negligent in ignoring these
amounts over a number of years. Therefore, I must conclude that the Appellant’s
actions exceed simple carelessness and that he wilfully misrepresented the true
state of the Company’s activities so that gross negligence penalties are justified.
CONCLUSION
[326] These appeals introduced unique and novel
legal and factual issues that are not normally before this Court.
[327]
The issues centered
around section 143 of the Act, which provides special tax treatment to
those religious communal congregations that operate within cultural and
property norms distinct from the mainstream milieu.
[328]
To be eligible for this
tax treatment, a community must satisfy all of the four tests set out in the
definition of “congregation” established by Parliament. Any community that
meets these four criteria may seek this specialized tax treatment.
[329]
My conclusion is that
the community of Bountiful does not meet any of the four criteria,
despite some innovative and thought-provoking arguments by Appellant Counsel.
[330]
Even if the Appellant
had been successful in meeting the four tests, he failed to provide any
indication of how the provision would be applied to Bountiful in terms of who
would qualify as members of the congregation at the end of each taxation year.
It becomes a question of “who is in and who is out” as a member of the
community in respect to each taxation year in order to ascertain the group to
which such tax treatment might apply.
[331]
With respect to
penalties, I conclude that the Respondent satisfied its onus and that the
Appellant was grossly negligent and therefore responsible for the imposition of
the assessed penalties. Being unsuccessful in the issues in these appeals, the
Appellant offered little explanation in respect to why he made such massive
misstatements in his income reporting in tax returns for successive years.
[332]
Finally, I want to
thank all Counsel for the amount of preparation they so obviously put into
these appeals. Their knowledge of the unique religious concepts and principles
was evident throughout their presentation of this case. I also commend each Counsel
for the professional courtesy they displayed toward the Court staff, the media
and each other.
[333]
Lastly, I thank the
media for abiding by the rules that I established at the outset of the hearing
in respect to their presence within my courtroom.
[334]
The appeals from the
assessments made under the Income Tax Act for the 2000, 2001, 2002,
2003, 2004 and 2006 taxation years are dismissed.
[335]
The parties shall have
sixty days from the date of my reasons to submit written submissions on costs,
if they cannot otherwise reach an agreement on this matter.
Signed at Summerside, Prince Edward Island, this 21st day
of August 2013.
“Diane Campbell”
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