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Citation:2005TCC257
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Date: 20050419
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Docket: 1999-724(IT)G
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BETWEEN:
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WILLIAM GIGUERE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
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Dockets: 1999-725(IT)G
1999-4628(IT)G
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AND BETWEEN:
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CLARA GIGUERE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellants, Clara Giguere
(through her litigation guardian, David Giguere) and William
Giguere, are appealing reassessments made under the Income Tax
Act by the Minister of National Revenue for the taxation
years 1994, 1995, 1996 and in the case of Clara Giguere only,
1998. The Appellants, operating as sole proprietorships, are
engaged in hauling logs and pulpwood in Northern Ontario. The
Minister reassessed the Appellants' business income on the
basis that because the business activities did not take place
"on a reserve", the income therefrom was not
exempt from taxation under paragraph 87(1)(b) of the
Indian Act. The appeals were heard on common evidence at
Sudbury, Ontario.
[2] In their Amended Notices of
Appeal, the Appellants identified the following issues to be
decided:
23. Is the business income
of an Indian-owned business with its head office on an Indian
reserve that deals primarily with a business located off the
reserve but whose products are removed from Crown Lands, tax
exempt?
24. Does the
Indians' understanding of their right to utilize resources at
the time of the Robinson-Huron Treaty negotiations coincide with
the present use of these resources on Crown Landin
the Robinson-Huron Treaty area?
25. Does the existence
of this understanding act to make Crown Lands where the
appellants work "as a reserve" for purpose of an
exemption under s.87 of the Indian Act?
[3] Notwithstanding the language used
in the issues set out above, it is agreed by the parties that the
Appellants are not challenging the Minister's reassessments
on the basis of treaty or aboriginal rights. Expressed then, in
terms of the relevant provisions of the Indian Act and the
Income Tax Act governing the Appellants' tax
liability, the only issue is whether the Appellants' income
from their trucking businesses was "the personal property of
an Indian situated on a reserve" within the meaning of
paragraph 87(1)(b) of the Indian Act and paragraph
81(1)(a) of the Income Tax Act:
[4] Paragraph 87(1)(b) of the
Indian Act reads as follows:
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Property exempt from taxation
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87.(1) Notwithstanding any other Act of
Parliament or any Act of the legislature of a province, but
subject to section 83, the following property is exempt
from taxation, namely,
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...
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(b) the personal property of an Indian or a band
situated on a reserve.
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...
[5] Paragraph 81(1)(a) of the
Income Tax Act reads as follows:
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Amounts not included in income
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81.(1) There shall not be included in computing
the income of a taxpayer for a taxation year,
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Statutory exemptions
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(a) an amount that is declared to be exempt from
income tax by any other enactment of Parliament, other than
an amount received or receivable by an individual that is
exempt by virtue of a provision contained in a tax
convention or agreement with another country that has the
force of law in Canada.
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...
[6] The Appellants' opening
position is that because of what they describe as their
family's history of logging on the Crown land from which they
were hauling logs between 1994 and 1998, the Crown land is (in
the Appellants' words) "as a reserve" and
therefore comes within the meaning of "on a reserve" in
paragraph 87(1)(b) of the Indian Act. In
support of this argument, David Giguere and William Giguere
recounted in their testimony what they knew of the history of
their family's involvement in the logging industry on the
Crown land. They testified that since as early as 1827, the
Giguere family has lived on the Robinson-Huron Treaty land in
Northern Ontario where they have been involved in the logging
industry. Initially, they worked as log drivers bringing logs
down the river to the mills.
[7] Sometime in the 1930's, the
family lost its Indian status when the Appellant William
Giguere's grandfather, Joseph Giguere, had to leave the
Thessalon Reserve to find work. It was his son Norman Giguere,
Clara Giguere's husband, who first established the current
trucking business in 1973, operating as Norman Giguere Trucking.
Originally set up off the Thessalon Reserve, Norman Giguere
Trucking moved its operation in October 1992 to a lot on the
Thessalon Reserve. The business address of Norman Giguere
Trucking was changed to the Thessalon Reserve and the Appellants
set about building an office and a garage and had fuel tanks
installed. The businesses' books and records were kept in the
office; the trucks used in the businesses were housed, maintained
and fuelled on the reserve. Although by that time the Giguere
family had regained its Indian status, they were still living off
the reserve on farmland immediately adjacent and owned by Clara
Giguere.
[8] In September 1993, Norman Giguere
passed away and Norman Giguere Trucking was taken over by Clara
Giguere operating as Clara Giguere Trucking. At all times
relevant these appeals, Clara Giguere Trucking and William
Giguere Trucking were operating as sole proprietors engaged in
hauling logs and pulpwood by truck from the Crown land extending
north of the Thessalon Reserve to the mills at Sault Ste. Marie,
Espanola and Thessalon. Until 1998 when her illness prevented the
continued operation of Clara Giguere Trucking, it was managed by
Clara's eldest son, David Giguere. During the taxation
years in question, Clara Giguere Trucking had as many as seven
trucks and employed approximately eight people, both status and
non-status Indians. As manager, David Giguere travelled the
short distance from his off-reserve residence at the Giguere
family farm to the Thessalon Reserve to carry out his duties
at the office; he spent three days a week organizing the trucking
routes and drivers, ordering parts as required and doing
administrative work. In 1997, David Giguere and Clara
Giguere moved from the family farm to a lot on the Thessalon
Reserve, only two doors down from the Giguere family office and
garage.
[9] The business of the sole
proprietorship William Giguere Trucking had no employees or
additional trucks; it was limited to William Giguere driving his
own truck. Until October 1995 when William and his family took up
residence on the Thessalon First Nation, he travelled daily the
10 miles from his residence at Little Rapids to the
Thessalon Reserve to pick up his truck from the Giguere family
garage. After hauling logs from the Crown land to the mills, he
returned the vehicle each evening to the reserve. William's
wife did his bookkeeping and during this period, this task
required her to spend a few hours one day a week at the Giguere
family office; after they moved to the reserve, she carried on
her bookkeeping duties in an office in their home.
[10] The Giguere brothers further testified
that the original boundaries of the reserve included a much
larger area than do the current ones; they put in evidence a
map[1] illustrating
the reserve's current area measuring approximately 2 miles by
2 miles, and its earlier configuration of 10 miles by 10
miles.
[11] The Crown's response to the
Appellants' broad interpretation of "on a reserve"
is that this Court is bound by the meaning given to that phrase
by the Supreme Court of Canada in R. v. Lewis[2]. Under the heading
"The General Principles of Interpretation of Enactments
Dealing with Indians" and writing for the full Court,
Iacobucci, J. stated at page 955:
The phrase "on the reserve" found within the
Indian Act should receive the same construction wherever
used throughout the Indian Act. This is consistent with
the view of this Court in Thomson v. Canada (Deputy
Minister of Agriculture), [1992] 1 S.C.R. 385. In that
decision, Cory J. at p. 400 stated that "[u]nless the
contrary is clearly indicated by the context, a word should be
given the same interpretation or meaning whenever it appears in
an act".
After citing paragraph 87(1)(b) of the Indian
Act, Iacobucci, J. concluded at page 958:
Therefore, a contextual analysis and an examination of the
French version lead me to conclude that the words "on the
reserve" cannot be understood as extending beyond the actual
boundaries of a given reserve.
[12] In view of these words, it is not open
to this Court to expand the meaning of "on a reserve"
to include Crown lands some 60 miles north of the
Thessalon Reserve, whether measured from its current or
former boundaries. Nor do I see how the Giguere family's
history of logging, in one form or another, on the Crown land,
even if accepted as fact, could operate to convert that land into
the equivalent of "on a reserve" within the meaning of
paragraph 87(1)(b) of the Indian Act.
Accordingly, the Appellants' first argument must fail.
[13] Notwithstanding the off-reserve aspects
of the Appellants' business, however, it remains to consider
whether the income generated from it may still be said to be
"personal property of an Indian situated on as
reserve". In making this determination, the Court must be
guided by the Supreme Court of Canada's decision in
Williams v. Canada[3]. In Williams, the Supreme Court
established criteria to replace the test first used in
Nowegijick v. Canada[4] and which had, as its focus, the
residence of the debtor. At page 892, Gonthier, J., writing for
the full Court, explained what has become known as the
"connecting factors" analysis:
The approach which best reflects these concerns is one which
analyzes the matter in terms of categories of properties and
types of taxation. For instance, connecting factors may have
different relevance with regard to unemployment insurance
benefits than in respect of employment income, or pension
benefits. The first step is to identify the various connecting
factors which are potentially relevant. These factors should then
be analyzed to determine what weight they should be given in
identifying the location of the property, in light of three
considerations: (1) the purpose of the exemption under the
Indian Act; (2) the type of property in question; and (3)
the nature of the taxation of that property. The question with
regard to each connecting factor is therefore what weight should
be given that factor in answering the question whether to tax
that form of property in that manner would amount to the erosion
of the entitlement of the Indian qua Indian on a
reserve.
[14] In 1998, the Federal Court of Appeal
applied the Williams approach in Southwind v.
Canada[5]. Linden, J.A. upheld the decision of the
judge of the Tax Court of Canada that the business income of
the Appellant Mr. Southwind, an Indian resident on a reserve but
working off-reserve cutting timber some 40 weeks per year was not
property situated "on a reserve" within the meaning of
paragraph 87(1)(b) of the Indian Act:
[15] In reaching this conclusion, he
considered the following connecting factors: "... (1) the
off-reserve residence of the debtor, Morrell Logging;
(2) the appellant's residence on the reserve; (3) the
place where the appellant's income was paid, which ...
was the bank used by Morrell Logging; (4) and the off-reserve
locations where the appellant engaged in the "income earning
process."[6]
Linden, J.A. then went on to express his preference for the
Crown's "more complex set of factors":
(1) the location of
the business activities;
(2) the locations of
the customers (debtors) of the business;
(3) where decisions
affecting the business are made;
(4) the type of
business and the nature of the work;
(5) the place where
the payment is made;
(6) the degree to
which the business is in the commercial mainstream;
(7) the location of
a fixed place of business and the location of the books and
records; and
(8) the residence of
the business' owner.
[16] The Southwind facts are very
close to the Appellants' situation, the essential distinction
being that unlike Mr. Southwind, the Appellants returned daily
from their off-reserve business activities to their business
premises on the reserve. Accordingly, the Southwind
factors are useful in analyzing whether there exists, on the
facts of this particular case, a connection between the
Appellants' admittedly off-reserve business activities and
the Thessalon Reserve so as to render their business income
exempt from taxation under section 87.
(1) the location of the
business activities;
[17] Since 1992, the business address of
Clara Giguere Trucking and William Giguere Trucking David
Giguere has been the Thessalon Reserve. However,
David Giguere testified that "the biggest percentage of
work [of Clara Giguere Trucking] was done off the
reserve". In his direct evidence, William Giguere stated
that the "trucking was done off-reserve on Crown land"
and later that "the majority of the business [of William
Giguere Trucking] was carried out on Crown land". Even in
their Amended Notices of Appeal, the Appellants describe
themselves as "... an Indian-owned business ... that deals
primarily with a business located off the reserve ...".[7] The on-reserve
business activities were limited to providing a place to park the
trucks when not in use, and to repair and fuel them as required.
And, as was the case in Southwind, the books and records
of the Appellants' business were maintained at the business
office on the reserve. In the case of Clara Giguere Trucking,
that required David Giguere's presence at the office five to
six hours per day, three days per week; for William Giguere
Trucking, William Giguere's wife devoted, on average, three
to four hours one day per week at the business office and later
in their home office on the Thessalon Reserve. I am of the
view that this aspect of the Gigueres' business was merely
ancillary to the Appellants' primary off-reserve business
activities. Accordingly, I am satisfied that the business
activities of Clara Giguere Trucking and William Giguere Trucking
occurred off the Thessalon Reserve.
(2) the location of the
customers (debtors) of the business;
[18] Between 1994 and 1998, the Appellants
had really only one customer, Meakin Forest. William Giguere
testified that he "hauls for Meakin Forest mainly, 99% [of
the time]". According to the evidence of David Giguere,
Meakin Forest is a logging company, "not a reserve-based
business", with its head office in
Sault Ste. Marie engaged in the business of cutting
timber on the Crown lands north of the Thessalon Reserve for
processing in the mills in Sault Ste. Marie, Espanola and
Thessalon. Clearly, Meakin Forest, the customer of Clara Giguere
Trucking and William Giguere Trucking, was not on the Thessalon
Reserve.
(3) where the decisions
affecting the business are made;
[19] The nature of the work of Clara Giguere
Trucking and William Giguere Trucking required decisions
affecting the business to be made both at the off-reserve
job sites and at the Giguere family's office and garage on
the Thessalon Reserve. When performing services for Meakin
Forest on Crown land and delivering the logs to their specified
destinations, decisions were made at locations other than the
reserve. On the administrative side, David Giguere testified that
as manager, he also made decisions on the reserve scheduling
trucks and drivers, ordering parts and so on at the Giguere
family office. The "decisions affecting the business"
were made off-reserve and on-reserve in the same
proportions the primary business activity and the ancillary
business activity bear to the total business activity; from this
it follows that the business decision-making occurred primarily
off the reserve.
(4) the type of business
and the nature of the work;
[20] The type of business the Appellants
were engaged in and the nature of their work required them to
perform their primary business activities at off-reserve sites
i.e., the logs they picked up for their customer, Meakin Forest,
were located on Crown land; the locations to which those logs
were delivered for Meakin Forest are not on reserve land. Only
the ancillary administrative and maintenance duties were
conducted on the Thessalon Reserve.
(5) the place where the
payment is made;
[21] There is little evidence on this point
beyond the fact that Meakin Forest paid the Appellants for their
services by company cheque every two weeks based on the number of
loads hauled. Accordingly, I give no weight to this factor either
for or against the Appellants' position.
(6) the degree to which the
business is in the commercial mainstream;
[22] As a preliminary comment, I share the
discomfort expressed by counsel for the Appellants and for the
Crown with the term "commercial mainstream", which
seems to imply that Indian-run businesses are by definition
outside Canada's "commercial mainstream". In
seeking clarification of the proper interpretation of this term,
I was directed by the words of Linden, J.A. in Recalma
v. Canada[8], where he stated at page 406:
...the concept of "commercial mainstream" is
not a test for determining whether property is situated on a
reserve; it is merely an aid to be used in evaluating the various
factors being considered. It is by no means determinative. The
primary reasoning exercise is to decide, looking at the
connecting factors and keeping in mind the purpose of the
section, where the property is situated, that is, whether the
income earned was "integral to the life of the
Reserve", whether it was "intimately connected" to
that life, and whether it should be protected to prevent the
erosion of the property held by Natives qua Natives.
[23] In the present case, the primary
business activity involved picking up logs from non-reserve land
and hauling them for a non-reserve customer between sites also
not located on reserve land. On such facts, I cannot conclude
that the income earned from Clara Giguere Trucking and William
Giguere Trucking was "integral to the life of the
Reserve" or "intimately connected" to that life.
There is no evidence to support the submission of counsel for the
Appellants that to tax the Gigueres' income from hauling logs
from Crown land to Sault Ste. Marie, Espanola and Thessalon
amounts "to the erosion of the entitlement of the
Indian qua Indian on a reserve"[9].
(7) the location of a fixed
place of business and the location of the books and records;
[24] The business office and garage for
Clara Giguere Trucking and William Giguere Trucking were
located on the Thessalon Reserve at all material times. For the
reasons set out above, however, this is not sufficient to
outweigh the fact that the primary business activities were
carried out off the reserve.
(8) the residence of the
business owner.
[25] William Giguere became resident on the
Thessalon Reserve in October 1995; Clara Giguere and David
Giguere, in 1997. Thus, for some of the relevant period, 1994 to
1998, the Appellants were not resident on the reserve. This is
not particularly significant as even if the Appellants had lived
on the Thessalon Reserve for the entire period, that in itself
would not outweigh the other factors pointing to a lack of
connection between the businesses and the reserve.
[26] To summarize, the business activities
of William Giguere and Clara Giguere were such that they could
only be accomplished off-reserve, almost completely in a context
not "integrated into reserve life" as described in
Recalma: their customer, Meakin Forest, was located
off the reserve. The decisions affecting their business were
primarily made off the reserve. Although their fixed place of
business where the books and records were kept was on the
Thessalon Reserve, this aspect of their business was only
ancillary to the primary off-reserve nature of the
business. The Appellants were resident on the reserve for
approximately half of the taxation years in question.
[27] In Recalma, Linden, J.A. cited
the trial judge's conclusion in Southwind that
"... [w]here business income is involved, most weight
was placed on where the work was done and where the source of
income was situated."[10] In the present case, the work was done and the
source of income was situated off the reserve, factors which
weigh heavily in favour of the conclusion that the income from
Clara Giguere Trucking and William Giguere Trucking was not
"the personal property of an Indian situated on a
reserve" so as to be tax exempt under paragraph
87(1)(b) of the Indian Act. It must also be born in
mind that as in all tax appeals, it is the Appellants who have
the onus of proving wrong the assumptions upon which the Minister
based his reassessments. I am not satisfied that they have
discharged this burden. Accordingly, the appeals are dismissed,
with costs to the Respondent.
Signed at Ottawa, Canada this 19th day of April, 2005.
Sheridan, J.
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