Citation: 2010TCC52
Date: 20100127
Docket: 2008-2715(IT)I
BETWEEN:
DONALD T. ROBERTS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] Donald Roberts
is an Indian under section 2 of the Indian Act. In 2004, he was working
as a commercial fisherman in the coastal waters of British Columbia.
He did not report his fishing income for that year on the basis that it was
exempt from taxation by operation of paragraph 87(1)(b) of the Indian
Act and paragraph 81(1)(a) of the Income Tax Act. The
Minister of National Revenue reassessed to include his earnings from fishing in
his 2004 income.
Preliminary
Matter
[2] Mr. Roberts
represented himself at the hearing and along with his wife, Arlene Roberts,
testified on his own behalf. My impression was that he also drafted his Notice
of Appeal. It does not conform to the usual format and apart from the statement
on the last page that he was “… a coastal sea and river Fisherman …”, the
Notice of Appeal contains few allegations of fact. Instead, it catalogues
snippets, from various sources, of legal opinions and historical review
regarding, among other things, the traditional use by Indians of the waters
where Mr. Roberts fished. This, together with certain representations made by
Mr. Roberts during the hearing led to the inference that he intended to
challenge the constitutionality of the Income Tax Act and/or the Indian
Act. After hearing the submissions of Mr. Roberts and counsel for the
Respondent on this point, including the affidavit of Pamela Then, I was
satisfied that if, indeed, it had been Mr. Roberts’s intention to launch a
constitutional challenge, he had not served a Notice of Constitutional Question
on the Attorneys General of Canada and the provinces as required under section
19.2 of the Tax Court of Canada Act. In these circumstances, I ruled[1], on the basis of Bekker v. Her Majesty the Queen[2] and Dumont
v. Her Majesty the Queen[3], that it was not open to Mr. Roberts to make that
argument at the hearing of his appeal and proceeded to hear the case on the
sole issue of whether Mr. Roberts’s fishing income in 2004 was exempt from
taxation.
Legislation
[3] Throughout his
testimony, Mr. Roberts described himself as a self-employed “commercial
fisherman”. As such, unless the exemption under paragraph 87(1)(b) of
the Indian Act applies, the profits realized from the fish caught[4] are business income under section 9 of the Income
Tax Act. Paragraph 87(1)(b) of the Indian Act must be
read in conjunction with paragraph 81(1)(a) of the Income Tax Act:
Indian Act
87. (1) Notwithstanding
any other Act of Parliament or any Act of the legislature of a province, but
subject to section 83 and section 5 of the First Nations Fiscal and
Statistical Management Act, the following property is exempt from taxation;
(a) the
interest of an Indian or a band in reserve lands or surrendered lands; and
(b) the
personal property of an Indian or a band situated on a reserve.
Income Tax
Act
81(1) Amounts
not included in Income.
There shall
not be included in computing the income of a taxpayer for a taxation year,
(a) Statutory exemptions - 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;
Jurisprudence
– The Connecting Factors Test
[4] In Williams
v. Canada[5] the Supreme Court of Canada established the
“connecting factors test” to determine whether unemployment insurance benefits
received by an Indian taxpayer amounted to property of an Indian situated on a
reserve. Following that decision, in Southwind v. Minister of National
Revenue[6], the Federal Court of Appeal further refined the
connecting factors as they apply to business income earned by an Indian:
(l) the
location of the business activities,
(2) the
location 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, (As noted above although
this is listed as a factor, the question will be whether the connecting factors
lead to a conclusion that Mr. Roberts's business was 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.[7]
[5] Of these
factors, the Federal Court of Appeal held in Recalma v. Her Majesty the
Queen[8] that the most weight should be given to where the
work was done and where the source of income was located[9].
[6] Turning, then,
to the present case, notwithstanding the vagueness of the Notice of Appeal, Mr.
Roberts’ testimony provided a clear, credible and detailed explanation of his
commercial fishing activities in 2004. He began by showing on large maps[10] which he had brought along for that purpose, the
location of the areas where he was fishing in 2004. He noted that while these
are identified by the Department of Fisheries as Areas 3, 4 and 12, both he and
the members of his community know them by their traditional Indian names.
Pointing out these locations, Mr. Roberts said he spent most of his time in
Areas 3 and 4, located off the coast of Prince Rupert, and occasionally in Area
12, situated much farther south, closer to Vancouver. While acknowledging that neither the city of Prince Rupert
nor these waters are reserves, Mr. Roberts told the Court that he viewed them
as traditional fishing grounds.
[7] In 2004, Mr.
Roberts lived on the Kitsumkalum Reserve near Port Essington,
approximately 70 kilometers from Prince
Rupert, British Columbia. He maintained a business office in his home and kept
his records there. He stored much of his fishing gear on the reserve, including
nets, various tools and about $10,000 worth of electronic equipment used on his
boat, the Ocean Stalker. When not fishing, he worked on the reserve
repairing nets and maintaining other equipment as well as planning and
preparing for fishing expeditions. There was a post office on the reserve where
Mr. Roberts received some cheques in payment for his catch. Because it was too
large to navigate the channel to Port Essington, the Ocean Stalker, was
moored in Prince Rupert.
[8] The Department
of Fisheries issued fishing licences to Mr. Roberts and the Kitsumkalum band.
It also determined where and when fishing could be carried on in British Columbia’s
coastal waters. When on the reserve, Mr. Roberts accessed such information via
the internet and when at sea, by radio communication.
[9] Thus, on days
when the Department of Fisheries announced an opening for fishing in a
particular area, Mr. Roberts would make the 70-kilometer drive from Port
Essington to Prince Rupert to set out in the Ocean Stalker. Once at sea,
he would revise the fishing plan, as required, depending on the weather, tides,
navigating conditions and where the fish were running. The fish were sometimes
dressed on the boat, depending on the quantity caught and price on any given
day.
[10] Dressed or not,
all of the fish Mr. Roberts caught were delivered directly to Ocean Fisheries
Limited and Sea Fresh Fish (referred to collectively as “Ocean”). Mr. Roberts
said the head office of Ocean Fisheries Limited was in Vancouver; he did not
know where Sea Fresh Fish was located but in any event, there is no evidence
that either of them had offices on Mr. Roberts’s or any other reserve. He
delivered the fish to Ocean’s packing boats in the waters off Prince Rupert
or to their packing plants on shore.
[11] Mr. Roberts had
an arrangement with Ocean whereby the company would maintain records of the
amounts due to him for the fish as well as his expenses in respect of the
catch. Mr. Roberts was pleased with this practice because it meant he got this
aspect of his accounting done “for free” and it relieved him of the burden of
having to do it himself. These payment records were maintained off reserve,
most likely at the plant in Prince Rupert.
Analysis
[12] In my view, when
these facts are considered in light of the factors listed above, the evidence
falls short of establishing the necessary connection between Mr. Roberts’s
fishing income and his reserve.
1. Location of a Fixed Place of
Business, Location of Books and Records, and Residence of the Business Owner
[13] There is no
question that Mr. Roberts lived on a reserve and maintained a business office
and equipment-storage facilities there. These factors clearly establish a
connection between his business and the reserve.
2. Type of Business and Nature of
the Work, Location of Business Activities and Customers, and Where Business
Decisions Made
[14] It is equally
beyond dispute that Mr. Roberts was in the business of commercial fishing.
While certain aspects of that business were carried on at the reserve, the core
of the business was the catching of fish aboard the Ocean Stalker in the
off-reserve coastal waters of British
Columbia. But for that activity, the
on-reserve tasks of net repair, expedition planning and records keeping would
not have been necessary.
[15] The fish caught
never made the 70-kilometer journey back to the reserve; they were taken
directly from the sea to the fish packing boats or plants in Prince Rupert.
Thus, the product of the business; its largest and most important piece of
equipment, the Ocean Stalker, and its only customers were all located
off‑reserve.
[16] As for business
decisions, certainly, some of these were made on reserve. I accept completely
Mr. Roberts evidence that a lot of thought and preparation goes into a
commercial fishing expedition and that this occurred when he was on the
reserve; however, decisions were also made on the Ocean Stalker. While
the on‑reserve preparation was crucial to his success, so, too, was his
capacity, while at sea, to interpret new information regarding fishing and
weather conditions and to adjust his plans accordingly.
[17] Given the
importance placed in Recalma on where the work of the business was done
and the location of the source of the income it generated, the evidence
pertaining to these factors points strongly to a lack of connection between the
business and the reserve.
3. Place
of Payment
[18] Ocean paid Mr.
Roberts for his catch, off the reserve, in its Prince Rupert office by directly
crediting his account for the amount due. Indeed, he chose, for reasons of
convenience and good fiscal management, to have Ocean perform bookkeeping work
that he could have done himself in his on-reserve office. However, he also
received some payments by cheques at the post office on the reserve.
[19] Given the little
weight accorded in the jurisprudence to the location of payment, this factor
is, at best, neutral but if pressed, I would say that it leans more in the
direction of a lack of connection to the reserve.
4. Degree to which Business was
Integral to Life on the Reserve or “In the Commercial Mainstream”
[20] In the recent
decision of Horn v. R.[11] the Federal Court of Appeal reiterated the principle
in Recalma that “… whether employment income is earned in the
"commercial mainstream" is a conclusion to be drawn from an
examination of the connecting factors, and not a reason in itself for
concluding that employment income is not situated on a reserve …”[12] Mr. Roberts’ contended that because the Kitsumkalum
band had traditionally fished (commercially or otherwise) in Areas 3, 4 and 12
and still thought of them in terms of their native place names and traditional
uses, the business activity was connected to the reserve. First of all, apart
from Mr. Roberts’ assertions to that effect, there was no evidence of the
historical or traditional use of Areas 3, 4 and 12. Even if there had been, it
would not, in itself, have been sufficient under the connecting factors test to
convert the work of a commercial fisherman in off‑reserve waters into a
business that is integral to the life of a reserve[13].
[21] Mr.
Roberts was, by his own admission, a “commercial fisherman”, meaning he was
engaged in the business of catching fish for profit in British Columbia’s
coastal waters. Just like any other Canadian involved in that pursuit, he was
obliged to conform to the requirements of the Department of Fisheries,
including obtaining a fishing licence, respecting boundaries of designated
fishing areas and adhering to quota, size and species directives for the fish
caught. The fact is he fished in non-reserve waters and sold his catch to
non-Indian, off-reserve customers.
[22] There were similar facts in the Ballantyne
case cited above. In concluding that the taxpayers’ fishing income was not
exempt from taxation, Webb, J. quoted the following passage from Walkus
(sub nom Bell) v. Minister of National Revenue[14] in response to an argument similar to that made by Mr.
Roberts:
45 The
short answer to the appellants' contention is, in my view, that it runs
contrary to the decisions of the Supreme Court of Canada in Williams and
Mitchell, supra, where the Court held that those Indians who acquire, hold and
deal with property "in the commercial mainstream" must do so on the
same terms as their fellow citizens. Happily or not, in our modern society and
context, income obtained from commercial fishing in the commercial mainstream
is taxable. Section 87 of the Act ought not to be given an expansive scope by
ascribing an overly broad purpose to it: see Union of New Brunswick Indians v.
New Brunswick (Minister of Finance) (1998, 227 N.R. 92 (S.C.C.), at page 115
(S.C.C.); see also R. v. Lewis, [1996] 1 S.C.R. 921 (S.C.C.) where the phrase
"on the reserve" was given a narrow interpretation as the Court held
that it did not mean "adjacent to", but in or within the boundaries
of the Reserve, and that it should receive the same construction wherever used
within the Act.
46 In
the end, I am satisfied, as the Tax Court judge was, that the appellants'
property, derived from commercial fishing with a private company in the
commercial mainstream had, to use the words of La Forest J. in Mitchell, supra,
at page 137, no "immediate and discernable nexus to the occupancy of
reserve lands".
[23] The same
conclusion must be drawn in the present case. As counsel for the Respondent
correctly submitted, the phrase “on a reserve” has been construed very narrowly[15] to mean “in or within the boundaries of a reserve”. I
am persuaded by her carefully researched and well-presented argument that the
Minister correctly assessed Mr. Roberts’ 2004 income; accordingly, the
appeal is dismissed.
Signed at Ottawa, Canada, this 27th
day of January, 2010.
“G. A. Sheridan”
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