Date: 19980601
Dockets: 95-1267-IT-G; 95-1268-IT-G; 95-1270-IT-G;
95-1272-IT-G; 95-1279-IT-G; 95-1280-IT-G; 95-1281-IT-G;
95-1282-IT-G; 95-1283-IT-G; 95-1284-IT-G; 95-1285-IT-G;
95-1288-IT-G; 95-1289-IT-G; 95-1290-IT-G; 95-2135-IT-G
BETWEEN:
JOHNSON BELL, HARRY BELL, ROBERT WALKUS SENIOR, PATRICK
CHARLIE, CORRINE WALKUS, BRIAN WALKUS, DOREEN WALKUS, ROBERT E.
CHARLIE, ALVIN WALKUS, RAYMOND E. CLAIR, JOYE WALKUS, HENRY
WALKUS, LLOYD J. WALKUS, JAMES WALKUS, CHANTAL CHARLIE,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowie, J.T.C.C.
[1] By agreement of the parties, the appeals of these 15
Appellants were heard together on common evidence. The appeals
are from assessments for income tax for the years 1986, 1987,
1988 and 1989.[1]
The description of the facts which follows is as they existed
during the years under appeal. Some of these facts have changed
since 1989, but to the extent that they have, it is not relevant
to the disposition of the appeals.
[2] Each of the Appellants was employed by James Walkus
Fishing Co. Ltd. (the company) during the years in question, and
each of them claims that his or her income from the company is
not subject to taxation by reason of
paragraph 81(1)(a) of the Income Tax Act[2] and paragraph
87(1)(b) of the Indian Act.[3]
Income Tax Act
81(1) There shall not be included in computing the income of a
taxpayer for a taxation year,
(a) an amount that is declared to be exempt from income
tax by any other enactment of the Parliament of Canada, 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;
Indian Act
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,
(a) the interest of an Indian or a band in reserve
lands or surrendered lands; and
(b) the personal property of an Indian or a band
situated on a reserve.
(2) No Indian or band is subject to taxation in respect of the
ownership, occupation, possession or use of any property
mentioned in paragraph (1)(a) or (b) or is
otherwise subject to taxation in respect of any such
property.
The Appellants
[3] All of the Appellants are status Indians within the
definition of that term in the Indian Act.[4] They are members of the
Gwa’Sala-Nakwaxda’xw Band (the Band), which is
located on a reserve at Port Hardy (the Reserve), in the
northeast part of Vancouver Island. The Band has some 565
members, living in 106 homes, and is part of the Kwakiutl Nation.
It is one of three Bands located at Port Hardy, each of
which has its own reserve. For many years the principal activity
of most of the members of the Band has been fishing. There was no
evidence, however, of any history of a commercial fishery in the
area, other than that of the company.
[4] The Appellant James Walkus is the founder and sole
shareholder, sole director, and president of the company. He has
fished since 1955, when he was 16 years old. In 1974 he
incorporated the company to engage in the business of commercial
fishing on Canada’s west coast. He has been exceptionally
successful, and has built his business steadily to become one of
the largest and most prosperous fishing companies in British
Columbia. In addition to managing the business affairs of the
company and overseeing the maintenance of the vessels and nets,
he is captain of the fishing boat Pacific Joye, and in
that capacity takes an active part in the company’s fishing
operations. His income is derived both from his ownership
interest in the company, and from his share of the catch of the
Pacific Joye. It is not disputed that James Walkus is an
influential member of the Band, one of the leading citizens in
the area, and a generous contributor to many worthy causes.
[5] Doreen Walkus is the wife of James Walkus. They were
married in 1962, and she has fished with him every year since
then. She purchases supplies for the Pacific Joye, cooks
for the crew while at sea, and works as a hand on the boat when
necessary. She also helps with the net mending between fishing
seasons. She derives income both from her share of the catch of
the Pacific Joye, and from management fees paid to her by
the company. The evidence did not reveal the nature of her
management activities. In the period from 1986 to 1989 they had a
home at Nanoose Bay, near Nanaimo, and one at Peel Street in Port
Hardy. Neither of these homes was on an Indian reserve.
[6] The other Appellants are, or were during the years under
appeal, all employed by the company, some as the skippers of
fishing vessels, and the others as hands on the vessels. Many of
them worked at mending the company’s nets when the fleet
was not at sea. Their incomes were derived from their portions of
the crews’ share of the catch of the boats on which they
worked, together with pay on an hourly basis for such additional
work as net mending.
[7] Brian Walkus and Henry Walkus are the two oldest children
of James and Doreen Walkus. At the relevant time, each of them
was skipper of one of the company’s vessels, and they both
lived in Nanaimo. The two younger children, Lloyd Walkus and Joye
Walkus, were both attending school in Alberta during the years
under appeal, but worked on the company’s boats during
their summer vacation period. All four children began to work on
the boats at a very early age, and have done so ever since.
Neither Lloyd nor Joye lived on the Reserve. All four of them
received their pay cheques from the company at its office on the
Reserve, as will be described later.
[8] Robert Charlie has fished almost all his life. During the
years under appeal he was skipper of one of the company’s
vessels, the Eliza Joye, and also was in charge of
overseeing the company’s net repair operations. He did not
live on the Reserve, but he did pick up his cheques from the
company’s office on the Reserve.
[9] Chantal Charlie was born in France, and became a status
Indian when she married Robert Charlie in 1974. She started to
work for the company as a cook on the Eliza Joye in about
1980. Later she also became secretary to James Walkus, and in
that capacity her duties included picking up the mail and
receiving telephone messages, reviewing bills from some of the
suppliers, and preparing and mailing cheques in payment of them.
During the years under appeal she did the payroll for the company
employees who were status Indians, as is described later. She
also spent several weeks per year working on the boat skippered
by her husband, during which time someone else performed the
secretarial duties. She was paid on the basis of $15.00 per hour
for her office work, in addition to her share of the catch of the
Eliza Joye. She did not live on the Reserve during the
relevant time period, but she did receive her pay cheques at the
company’s office on the Reserve.
[10] Patrick Charlie worked for the company as a deck hand and
as a skiff man from 1983 to 1994. He also worked one or two weeks
per year mending nets for the company at the net loft. He lived
on the Reserve during the relevant time period, and he received
his pay cheques at the office on the Reserve.
[11] Alvin Walkus worked for the company as a deck hand during
the years 1988 and 1989. He also did some net mending at the net
loft. He has lived on the Reserve since 1963, and he picked up
his pay cheques from the company’s office on the
Reserve.
[12] Raymond Clair worked for the company as a beach man
between 1988 and 1995. He also lived on the Reserve, and picked
up his cheques at the office on the Reserve.
[13] Harry Bell began work for the company in 1989 as a deck
hand and mending nets. He lived on the Reserve during the
relevant time period, and he picked up his pay cheques at the
office on the Reserve.
[14] Johnson Bell worked for the company as a deck hand during
the period from 1986 to 1989. He also did some net mending. He
lived on the Reserve, and he picked up his pay cheques at the
company office on the Reserve.
[15] Neither Robert Walkus Sr. nor Corrine Walkus was
available to give evidence at the trial. However, it is agreed
between the parties that they each worked for the company during
the years under appeal as a crew member on one of the vessels,
and that they both received their pay cheques by picking them up
at the company office on the Reserve. Robert Walkus Sr. lived on
the Reserve; Corrine Walkus did not.
The Company
[16] The company has been extremely successful. By 1986 it had
grown to the point where it owned six boats; by 1989 it had 15.
In those years it was engaged in fishing for salmon, herring and
halibut. It had a total of six salmon and ten herring licenses in
1986, and 22 and 14 respectively in 1989. By the time of the
trial in 1997 it had 14 vessels, ranging in size from 34’
to 80’. The Pacific Joye is a 75’ vessel
with a crew of six. The other vessels also have a permanent
skipper, and a crew of between five and eight additional hands.
The crews are hired by the skippers of the vessels, but James
Walkus encourages them to hire members of the Band, and students,
to the extent possible. During the years under appeal the company
had about 100 employees in total, including two full-time
mechanics. At any given time during the period covered by these
appeals between 12 and 18 of these employees were status Indians;
the remainder were not. There was no evidence to suggest that the
duties of the native and the non-native crew members were
different in any way, or that they were carried out
differently.
[17] The fleet’s home port is Port Hardy, and when the
vessels are there they dock at the municipal wharf, which is
located a short distance from the Reserve, and close to the
premises of Seafood Products Company (SPC), which is the firm to
which almost all of the fleet’s catch is sold. The
vessels’ port of registry under the Canada Shipping
Act is Nanaimo, which, although several hundred kilometres
south of Port Hardy, is the closest port at which they may be
registered.[5]
[18] Apart from the vessels and the nets, the company’s
other major physical asset is its share of the net loft where the
nets are checked, repaired and stored when they are not in use.
Nets may be as large as 225 fathoms by 45 fathoms, so a very
large area is required to work on them and to house them. The
company, together with the three Port Hardy Indian Bands,
purchased a former Beaver Lumber store to use as a net loft. The
company paid $300,000 for its share. The net loft is located in
Port Hardy, but not on any of the reserves.
Method of Remuneration
[19] Remuneration of both the crew and the company depends, of
course, on the sale of the fish caught. Fishing is strictly
regulated by the federal government, which issues licenses and
determines, according to the run of the fish, when and where the
licensees may fish. In the waters off Canada’s west coast
there are five different species of salmon. These are fished at
different times, but in general the salmon fishing begins each
year about the middle of July, and continues until the end of
November. The herring season is between late February and
mid-April. Fishing may be opened and closed by directive of the
Department of Fisheries and Oceans (DFO), and it is important for
boats to be in position to take advantage of an opening as soon
as it is announced, and to keep in touch with the processors, for
it is through them that information as to openings is
disseminated by DFO.
[20] The company sells its herring and salmon catch almost
exclusively to SPC; its halibut is generally sold to the buyer
paying the highest price. SPC not only purchases the catch, but
in many ways it acts as an agent and a banker for the company.
When the boats return to Port Hardy the catch is unloaded at
SPC’s dock, where its employees grade and weigh it,
calculate its value according to the prevailing price, and then
calculate the respective shares of the catch payable to the
company and to the crew members. The crew, including the skipper,
share 7/11 of the total value of the catch; the company, as owner
of the boat and the net, is entitled to the remaining 4/11. The
company’s share is credited to it in the books of SPC. The
shares of the crew members were, prior to the years under appeal,
paid to them directly by SPC, by cheques which were distributed
at the SPC office. At the beginning of 1986, or just prior, this
system was changed, so that the shares of crew members who are
status Indians are paid in a lump sum to the company, which then
issues its own cheques, net of deductions, to those crew members.
I shall say more about this later. In conjunction with this
payroll function, SPC made the necessary deductions and
remittances for income tax, unemployment insurance and the
Canada Pension Plan.
[21] SPC also made payments directly to various suppliers on
behalf of the company for such things as insurance premiums,
licenses, fuel and supplies for the vessels. On at least one
occasion it made payment for a new vessel on the company’s
behalf. When requested, it would wire cash to the company’s
banks in Nanaimo and Port Hardy. SPC maintains a
fisherman’s ledger for the company (and for its other
suppliers) in which the various transactions and the
company’s credit or debit balance are recorded. Generally
speaking, the company will be in a debit position with SPC early
in the year, until the landing of the salmon catches in the
second half of the year, when the situation is reversed.
Food Fishing
[22] All, or almost all, of the Appellants took part each year
in the native food fishery. James Walkus, through the company,
donated the use of the vessels and nets, as well as the cost of
operating them. He and the other Appellants donated their time to
man the boats, and to land the catch. Food fishing takes place
two, three or four times each summer for sockeye salmon, and two,
three or four times each fall for chum salmon. The fishing takes
place while the season is closed to commercial fishing, and on
the basis that the catch will only be used by native people for
food and ceremonial purposes. No part of the catch may be sold
commercially. On each occasion the duration of the fishery is
several days. Upon the return of the boats to Port Hardy, the
catch is taken to the SPC wharf and unloaded. All members of the
Band are free to take sufficient fish to meet their requirements
for food. Any fish left, after satisfying the needs of the Band
members for food and ceremonial purposes, is given to the members
of the neighbouring bands.
[23] The company received no remuneration of any kind for the
use of its vessels and nets, and the captains and crews received
no remuneration for their labour. The Band members paid nothing
for the fish they acquired. The use of the vessels and the nets,
the cost of operating them, and the efforts of the captains and
crews were in the nature of a gift to the community at large, for
which no reward was sought or given. The value of the catch
varied from year to year depending on its size and the prevailing
price of salmon, but during the years under appeal it was in the
magnitude of $75,000 to $125,000.
The Office on the Reserve
[24] Prior to 1986 the company had no permanent office of its
own. The registered office under the Company Act of
British Columbia was at various times listed as the office of its
solicitors in Nanaimo, or as the home address of James and Doreen
Walkus, either in Nanaimo or Port Hardy. No doubt James Walkus at
various times attended to company business, either in person or
by telephone, from his home, at his lawyer’s office, at his
accountant’s office, at the offices of SPC, on the
Pacific Joye, in his car, at the wharf in Port Hardy, at
the net loft, and occasionally in Vancouver and Victoria. The
company’s accounting functions were, in part, performed by
SPC at its offices, and, in part, at the office of
Mr. Braithwaite, the accountant who had been retained by the
company since 1977. Mr. Braithwaite maintained the books of
account and prepared financial statements and income tax and
corporate returns. One room of the house at Nanoose Bay was used
as an office by James Walkus, and there were some company records
there, and some in the Peel Street house at Port Hardy.
[25] In about 1984 Mr. Braithwaite advised Mr. Walkus that
there was a potential tax advantage to be obtained if the company
established an office on the Reserve, and if it paid the status
Indian employees there. The only office space available within
the Reserve was an unused room about 10 feet square in the
building which houses the Band Council offices. James Walkus
arranged to rent it, beginning in December 1995, for $175.00 per
month, a sum which he negotiated at arms’ length with the
Band Council. Chantal Charlie was engaged as a secretary to work
there.[6] The
office was furnished with a desk and chair, a filing cabinet, a
photocopier, and a telephone. A computer was purchased from Radio
Shack, but it appears that it was never used during the years
under appeal, but simply remained in the office in its original
box. Some records were moved to the office from
Mr. Braithwaite’s office in Nanaimo, but they seem for
the most part to have been historical records that were simply
kept there for convenient storage. Chantal Charlie worked in the
office part-time, about 12 hours per week, when she was not
away fishing as part of the crew of the Eliza Joye. During
the fishing season she was replaced in the office by a temporary
secretary. She was paid an hourly wage for her office work, in
addition to her share of the catch from fishing.
[26] The method of paying crew shares to the employees who
were status Indians was changed in 1986. I find that to have been
done as a result of the advice given by Mr. Braithwaite. SPC
continued to issue individual cheques to the non-status employees
as before, but instead of issuing individual cheques to the
status Indian employees, it issued one cheque to the company for
the aggregate of their shares. This cheque was deposited in the
bank by Chantal Charlie, who then prepared individual cheques
drawn on the company’s account for the status Indian
employees. These cheques were picked up by them from her at the
office on the Reserve. The evidence was not clear as to how these
cheques were cashed; certainly there was no evidence that the
employees were able to cash them on the Reserve, and I should
think it likely that they either deposited them to their own
accounts, or presented them for payment, at the bank. The bank
branch at Port Hardy is not located on any of the reserves
there.
[27] Chantal Charlie had little other involvement with the
company’s finances, except for maintaining a synoptic
ledger to record the transactions which she processed. This she
did in accordance with instructions she received from
Mr. Braithwaite at the time he set up the system. From time
to time she would consult by telephone with him or one of his
staff if she required advice. Mr. Braithwaite went to Port
Hardy three or four times each year, and on those occasions he
would meet with Chantal Charlie at the office to review the
bookkeeping.
[28] Chantal Charlie and James Walkus together had cheque
signing authority. The evidence was unclear as to the frequency
with which James Walkus visited the office, but he certainly went
there from time to time to sign cheques, and, infrequently, to
meet with Mr. Braithwaite. He often picked up the company’s
copy of the reconciliation of the fisherman’s ledger from
SPC and took it to the office to review. He also reviewed bills
from suppliers there, as did Robert Charlie, who was
responsible for checking the invoices for supplies relating to
the mending of nets.
The Law
[29] I should make it clear at this point that the only
dispute in this case is whether the income that the Appellants
derived from their work for the company, and in the case of James
Walkus from his ownership of the company, is “situated on a
reserve”, within the meaning of paragraph 87(1)(b)
of the Indian Act.
[30] The application of paragraph 87(1)(b) of the
Indian Act to exempt the income of status Indians from
taxation pursuant to the Income Tax Act emerged with the
judgment of the Supreme Court of Canada in Nowegijick v. The
Queen.[7] It
reached full flower in that Court’s judgment in Williams
v. The Queen,[8] a case involving the question whether or not
unemployment insurance benefits received by the taxpayer were
entitled to the exemption. In that case the Court rejected the
notion that the question might be answered so simply as by
applying the conflict of laws rules which determine the
situs of a debt. Instead, it found that the proper
approach is for the Court to identify all of the
“connecting factors” which may be relevant to the
determination of the location of the transaction giving rise to
the income which the Minister seeks to tax, and then to analyze
these to determine what weight they should each be given, having
regard to the purpose of the exemption provided for in paragraph
87(1)(b), the type of property in question, and the nature
of the taxation of it. That analysis is to proceed in accordance
with the following directive found in the Supreme Court’s
judgment in Williams:[9]
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.
[31] This formulation of the appropriate approach to the
analysis derives from the reasons for judgment of La Forest J.,
concurred in on this point by five other members of the Court, in
Mitchell v. Peguis Indian Band,[10] wherein he concludes, following a
thorough review of the history underlying sections 87 to 90 of
the Indian Act, and the jurisprudence surrounding them,
that the purpose of the exemptions contained there is, as it was
paraphrased by Gonthier J. in Williams:[11]
... to preserve the entitlements of Indians to their reserve
lands and to ensure that the use of their property on their
reserve lands was not eroded by the ability of governments to
tax, or creditors to seize. The corollary of this conclusion was
that the purpose of the section was not to confer a general
economic benefit upon the Indians.
The Connecting Factors
[32] I turn now to a consideration of the various connecting
factors in this case. Mr. Little argued that great weight should
be given in this case to the nature of the income earning
activity, because of the tradition of fishing as a way of life
among the coastal Indians of British Columbia. As he described
it, the fishing done by these Appellants has an intimate
connection with the Reserve, and with the traditional way of life
of the Band. However, as I have noted above, there was no
evidence before me of any tradition, or history, of a commercial
fishery prior to 1974, when James Walkus incorporated the
company. Nor is the fishing done by the company peculiarly a
native Indian activity; the great majority of its employees are
not natives.
[33] The other factors to which Mr. Little would have me
attach great weight are the residence of the debtor, which is to
say the company for which the Appellants work, and the place of
payment of the remuneration, which he characterizes as being the
office on the Reserve where the Appellants, or at least those
other than James and Doreen Walkus, picked up the cheques for
their shares of the catch. The evidence was silent as to exactly
where and how James Walkus and Doreen Walkus received their
income from the company, and as to where and how the others
negotiated their cheques.
[34] As to the residence of the company, a great deal of the
evidence led for the Appellants was intended to establish that it
resided on the Reserve. The cross-examination of counsel
for the Respondent was intended to establish that it did not. The
Appellants’ position is that the company should be
considered to be situate on the Reserve because its boats are
docked as close to the Reserve as is possible (there being no
dock available on the Reserve itself), the fishing takes place
from a port close to the Reserve, and the company has an office
on the Reserve, where it keeps at least some of its corporate
records and does some of its business.
[35] For the Respondent it is argued that the most important
of the connecting factors are the place where the work is done,
the nature and purpose of the employment which gives rise to the
income, the circumstances surrounding that employment, and the
residence of the employees. The following factors are said by
counsel for the Respondent to be of less significance: the
residence of the employer, the location at which the employees
pick up their cheques, and the location of the bank on which
those cheques are drawn.
Analysis of the Connecting Factors
i) the nature of the employment
[36] In my view the most important factors bearing upon the
result in this case are the nature of the employment, and the
manner in which it is carried out. Nothing about those factors
suggests to me that any of the Appellants in this case, if taxed
on the income, would tend to be deprived of property which they
hold qua Indian. There is no evidence that the fishing
activity of the company which gives rise to the incomes of the
Appellants has any close connection with the Reserve, or any
historic, social or cultural connection with either the Band or
the Reserve. So far as the company is concerned, there is no
evidence before me to show that it carries on its business in a
way that is different from fishing companies that are owned and
operated by non-Indian interests. The Appellants represent
only a small proportion of the work force of the company. Of a
total of about 100 employees, only 12 to 18 were status
Indians during the relevant time period.
[37] The company’s fishing activity, other than the food
fishery, is a commercial activity, pure and simple. The catch is
sold in the open market to SPC, a processor which is a subsidiary
of a large national food processing firm. The catch thus enters
directly into the mainstream of commerce, indistinguishable from
the catches of any of the other fishing companies, Indian-owned
or non-Indian-owned, which become part of the Canadian food
supply.
[38] Mr. Little in his argument put great emphasis on the food
fishing activity of the company, and of these individual
Appellants, as lending an Indian identity to the income here in
question. That is not, in my view, a consideration which should
weigh heavily, if at all, in the balance. The food fishery no
doubt has its roots in the traditions of the coastal Indian
people, although there is scant evidence of that before me in
this case. If income were to derive from this food fishery, then
perhaps a sound argument could be made for the exemption of that
income pursuant to paragraph 87(1)(b), provided that a
proper evidentiary base were laid. That is not the case here,
however. It is clear from the evidence that none of the income to
which these appeals relate, nor any income whatsoever, is derived
by the Appellants or the company from their food fishing
activities. Indeed, the food fishery costs the company money, and
the Appellants time and labour, for which they receive no
recompense. The fishing which gives rise to the income with which
these appeals are concerned takes place at a different time from
the food fishery, and is unconnected to it. The catch does not go
to sustain the Band, but into the mainstream of commerce through
the sale of it to SPC and other processors.
ii) location
[39] The fact that the work is performed at a location away
from the Reserve is not of itself determinative of anything.
Indeed, the work could only be done away from the Reserve,
because that is where the fish are. In both Nowegijick[12] and
Folster[13] work done away from the reserve by an Indian was held
to give rise to exempt income. Nowegijick was decided
principally on the rather narrow basis of where the payor, and
therefore the liability for wages, was situated. The same result
might well have been arrived at in that case by the application
of the “connecting factors” analysis developed later
in Williams. In Folster the work was done near to
but not on the reserve, at a hospital which had a significant
historical and cultural connection to the reserve and to the
Band. It had originally been situated on the reserve, but was
rebuilt at a location just outside the reserve boundary after
being destroyed by fire. The Federal Court of Appeal found the
precise location of the hospital to be a less important factor
than the historic significance of the hospital in the life of the
Band. No such special connection exists in the present case. The
paid work of the Appellants, as opposed to the food fishery, is
of no peculiar benefit to the Band. There is no connection
between the paid work done by the Appellants and either the
Reserve or the Band. To exempt their income would simply be to
give them an economic advantage over the other employees of the
company who work alongside them.
iii) residence of the Appellants
[40] The place of residence of the Appellants is not, in my
view, an important consideration in this case. Mr. Little took
the position in argument that it is an important factor for the
Appellants other than James Walkus. I am unable to see why he
should be singled out in this way. He and his wife did not live
on the Reserve during the years in issue. They had two
residences, and split their time between them. One was at Nanoose
Bay, near Nanaimo, a long way from the Reserve. They spent more
time there than at their house on Peel Street in Port Hardy.
It too is not on the Reserve. They also spent 100 or more nights
per year aboard the Pacific Joye, either fishing or in
anticipation of the opening of a fishing season.
[41] If I understood the argument correctly, it is that the
fact that James Walkus did not live on the Reserve should be
offset by his important leadership role in the affairs of the
Band, and his generous contributions to the Band, and to a great
many worthy causes in Port Hardy and on the Reserve. Neither his
leadership role nor his generosity can be questioned. Virtually
all of the witnesses spoke of these in glowing terms, and they
were not challenged. He himself gave evidence of them
reluctantly. I am sure that he is as modest about these aspects
of his life as he is generous in giving his time and money.
Nevertheless, I do not see how either his leadership role in the
Indian community or his generosity can serve to recharacterize
his income for the purposes of the section 87 analysis. The issue
here is the character of his income, not how he chooses to spend
it, or how he spends his leisure time. A great many people,
native and non-native, give generously of their time and money to
charity, but this does not provide a basis to exempt their
incomes from taxation. The Income Tax Act makes specific
provisions for deductions for charitable donations, and both
James Walkus and his company have had the benefit of those
deductions.
[42] Nor do I see a rational reason to differentiate between
those Appellants who live on the Reserve, and those who do not.
Most of them live in the small community of Port Hardy, very
close to one another. It would be puzzling indeed if some of them
were to be subject to income tax, and some were not, simply on
the basis of their street address. As Gonthier J. put it in
Williams:[14]
A connecting factor is only relevant in so much as it
identifies the location of the property in question for the
purposes of the Indian Act. In particular categories of
cases, therefore, one connecting factor may have much more weight
than another. It would be easy in balancing connecting factors on
a case by case basis to lose sight of this.
It would distort the analysis in such a case as this to
differentiate among the Appellants on the basis of the part of
the town in which they happen to live.
iv) the residence of the employer
[43] This case exemplifies the reason that it is inappropriate
to apply a test of situs developed for other purposes to
govern the operation of section 87 of the Indian Act. The
place of residence of the company was the subject of much
attention by counsel at the trial. They relied variously on the
place of registry of the head office, the place where the
accounting and other records are kept, the place of registry of
the vessels, the place at which the boats are docked when not at
sea, the place where the fish are caught, the place where the
fish are sold, the place where the nets are mended and stored,
and the place where James Walkus is most often to be found
exercising management and control. Mr. Little, of course, relied
heavily upon the office in the Band Office building as
establishing a situs on the Reserve. In my view there is
not much assistance to be had from any of those elements in
characterizing the incomes of the Appellants.
[44] It was argued by Ms. Yoshida for the Respondent that the
situs of this company at any given moment is where
Mr. Walkus is, because, from a practical point of view, he
is the company. This submission has merit. The major corporate
decisions are certainly taken by Mr. Walkus. I heard no
evidence to suggest that he made many of them at the 10’ by
10’ office on the Reserve. It is not, in my view, very
useful to consider in fine detail where the various corporate
functions are carried out. To the extent that it is relevant at
all, it does not seem to me to assist the Appellants. The only
corporate activities that take place on the Reserve are those
carried out in the small office located there; they are few, and
for the most part not of a management nature. For reasons that I
shall come to shortly, I consider that office, and the few
activities carried on there, not to be connecting factors to
which I should give significant weight.
v) the place at which the employees are paid
[45] Mr. Little put great emphasis on the fact that the
employees, or at least those other than James and Doreen Walkus,
picked up their cheques at a location on the Reserve. This, he
said, was important in fixing the location of their incomes on
the Reserve for the purposes of section 87. Ms. Yoshida suggests
that neither this nor the location of the bank on which the
cheques are drawn should be given much weight.
[46] The place at which the person is paid can only be of use
in the analysis to the extent that it is a factor which genuinely
gives some indication of the answer to the underlying question,
“would taxation of this income adversely affect the
property interest of the Appellant qua Indian, or would it
simply serve to confer an economic benefit not available to
others?” I do not see how the answer to this question can
be different simply because the employee picks up the cheque at
an office on the Reserve, rather than at the office of SPC a few
blocks away, as was the former practice. Nothing of significance
has changed, in terms of the interests which section 87 is meant
to protect. To conclude otherwise would be to take a simplistic,
rigid and mechanical approach to a complex question which calls
for “a sophisticated analysis of a series of
factors”.[15] As Gonthier J. said in the passage from
Williams which I have cited above “[a] connecting
factor is only relevant in so much as it identifies the location
of the property in question for the purposes of the
Indian Act.” (emphasis added). The delivery
of the cheques at the office on the Reserve, rather than at the
office of SPC, does not in my view assist the Appellants in this
case.
[47] I am confirmed in this by the fact that the office in the
Band Office building was clearly created, not for any purpose
related to the operation of the Indian Act, or the
identity of the Appellants as Indians, but, on the advice of Mr.
Braithwaite for the purpose of providing a tax advantage to the
company and its employees. Its purpose has nothing to do with the
property of an Indian qua Indian, and everything to do
with securing an economic advantage. To accept it as a
significant connecting factor would be to permit the
“manipulation and abuse” against which the Supreme
Court warns in Williams.[16]
The Office Work of Chantal Charlie
[48] I was advised that the Minister, in reassessing the
Appellant Chantal Charlie, treated her income from the
office work which she did on the Reserve as being exempt under
paragraph 87(1)(b). No issue is before me, therefore, with
respect to that part of her income, and so I express no opinion
as to the correctness of the position that the Minister has
taken.
Conclusion
[49] In my view a proper analysis of the connecting factors in
the present case, focusing on the purpose behind section 87 of
the Indian Act, as it has been explained by the Supreme
Court of Canada in Mitchell and in Williams, leads
to the conclusion that the income which the Appellants received
from the company in the years under appeal was not situated on
the Reserve, and that they are therefore not entitled to the
benefit of the exempting provision in paragraph 87(1)(b).
The appeals are dismissed.
[50] At the conclusion of the trial both counsel agreed that I
should make no disposition with respect to costs until they had
the opportunity to read these reasons, and to make submissions.
If counsel are able to agree as to the appropriate Order they may
so advise the Registrar. Otherwise, counsel for the Respondent
shall have 20 days from the receipt of these reasons to deliver a
written submission, and counsel for the Appellant shall have 20
days to reply to it.
Signed at Ottawa, Canada, this 1st day of June, 1998.
"E.A Bowie"
J.T.C.C.
APPENDIX A
APPELLANT YEAR(S) UNDER APPEAL
Johnson Bell 1988
Harry Bell 1989
Robert Walkus Senior 1988 and 1989
Patrick Charlie 1987 and 1988
Corrine Walkus 1987, 1988 and 1989
Brian Walkus 1987, 1988 and 1989
Doreen Walkus 1986, 1987, 1988 and 1989
Robert E. Charlie 1987, 1988 and 1989
Alvin Walkus 1988 and 1989
Raymond E. Clair 1988 and 1989
Joye Walkus 1987 and 1989
Henry Walkus 1987, 1988 and 1989
Lloyd J. Walkus 1987 and 1989
James Walkus 1986, 1987, 1988 and 1989
Chantal Charlie 1987, 1988 and 1989
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